<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 13, 1997
REGISTRATION NO. 333-30213
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
------------------
PRE-EFFECTIVE
AMENDMENT NO. 3
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------
LEUKOSITE, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 2834 04-3173859
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
215 FIRST STREET
CAMBRIDGE, MA 02142
(617) 621-9350
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------
CHRISTOPHER K. MIRABELLI, PH.D.
CHAIRMAN OF THE BOARD OF DIRECTORS,
PRESIDENT AND CHIEF EXECUTIVE OFFICER
LEUKOSITE, INC.
215 FIRST STREET
CAMBRIDGE, MA 02142
(617) 621-9350
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
------------------
WITH COPIES TO:
<TABLE>
<S> <C>
JUSTIN P. MORREALE, ESQ. STEVEN D. SINGER, ESQ.
JULIO E. VEGA, ESQ. VIRGINIA KINGSLEY KAPNER, ESQ.
BINGHAM, DANA & GOULD LLP HALE AND DORR LLP
150 FEDERAL STREET 60 STATE STREET
BOSTON, MA 02110 BOSTON, MA 02109
(617) 951-8000 (617) 526-6000
</TABLE>
------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
================================================================================
<PAGE> 2
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED AUGUST 13, 1997
PROSPECTUS
- ----------------
2,500,000 SHARES
LOGO
COMMON STOCK
All of the 2,500,000 shares of Common Stock offered hereby are being sold
by the Company. Prior to this offering, there has been no public market for the
Common Stock of the Company. It is currently estimated that the initial public
offering price will be between $8.00 and $10.00 per share. See "Underwriting"
for a discussion of the factors to be considered in determining the initial
public offering price. The Company expects to incur significant additional
operating losses over the next several years. See "Risk Factors -- Limited
Operating History; History of Losses and Expectation of Future Losses;
Uncertainty of Future Profitability." The Common Stock has been approved for
quotation on the Nasdaq National Market under the symbol LKST.
------------------
THE SHARES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" COMMENCING ON PAGE 5.
------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<TABLE>
<S> <C> <C> <C>
===================================================================================================
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC DISCOUNT(1) COMPANY(2)
- ---------------------------------------------------------------------------------------------------
Per Share........................ $ $ $
- ---------------------------------------------------------------------------------------------------
Total(3)......................... $ $ $
===================================================================================================
</TABLE>
(1) See "Underwriting" for indemnification arrangements with the several
Underwriters.
(2) Before deducting expenses payable by the Company estimated at $600,000.
(3) The Company has granted to the Underwriters a 30-day option to purchase up
to 375,000 additional shares of Common Stock solely to cover
over-allotments, if any. If all such shares are purchased, the total Price
to Public, Underwriting Discount and Proceeds to Company will be
$ , $ and $ , respectively. See "Underwriting."
------------------
The shares of Common Stock are offered by the several Underwriters subject
to prior sale, receipt and acceptance by them, and subject to the right of the
Underwriters to reject any order in whole or in part and certain other
conditions. It is expected that certificates for such shares will be available
for delivery on or about , 1997, at the offices of the agent of
Hambrecht & Quist LLC in New York, New York.
HAMBRECHT & QUIST UBS SECURITIES
, 1997
<PAGE> 3
LOGO
------------------
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE MARKET PRICE OF THE COMMON
STOCK, INCLUDING BY ENTERING STABILIZING BIDS, EFFECTING SYNDICATE COVERING
TRANSACTIONS OR IMPOSING PENALTY BIDS. FOR A DESCRIPTION OF THESE ACTIVITIES,
SEE "UNDERWRITING."
------------------
LEUKOSITE and the Company's logo are trademarks of the Company. This
Prospectus also includes trademarks of companies other than LeukoSite.
<PAGE> 4
[Appearing in a two-page foldout is the following.]
[Next to a graphic which illustrates LDP-03 activity appears the following
caption:]
LDP-O3
LDP-03 is being developed to use the immune system to destroy
cancerous leukocytes while leaving intact stem cells.
[Next to a graphic which illustrates LDP-01 activity appear the following
captions:]
LDP-O1 (Stroke)
LDP-01 is being developed to prevent activated leukocytes from
causing continuing damage following ischemic stroke.
LDP-O1 (Kidney)
LDP-01 is being developed to prevent continuing ischemic damage by
activated leukocytes following kidney transplantation using cadaver
organs.
[Next to a graphic which illustrates LDP-02 activity appears the following
caption:]
LDP-O2
LDP-02 is being developed to arrest the overactivity of a subset of
leukocytes responsible for inflammatory bowel diseases.
[Next to a graphic which illustrates the blocking of eosinophil recruitment
appears the following caption:]
Asthma
LeukoSite is working with Roche Bioscience to prevent the harmful
accumulation of eosinophils in the lung.
[Next to a graphic which illustrates the human body and various organs appears
the following caption:]
CCR3 Antagonist
Asthma
Allergic hypersensitivity
MCP-1 Antagonist
Atherosclerosis
Rheumatoid arthritis
IL-8 Antagonist
Myocardial infarction
CCR1 Antagonist
Rheumatoid Arthritis
Multiple Sclerosis
Psoriasis
CXCR3 Antagonist
Rheumatoid Arthritis
Multiple Sclerosis
Psoriasis
CCR5 Antagonist
HIV-1 infection and inflammatory diseases
[Beta]7 Integrin Receptor Antagonist
Inflammatory Bowel Disease
[Next to a graphic which illustrates the bone marrow and the production of
leukocytes and radiates mature leukocytes to the other graphics appear the
following captions:]
LeukoSite is pioneering novel treatments to block or destroy
leukocytes while sparing normal functions of the immune system.
LeukoSite is working with pharmaceutical partners to selectively
interrupt the disease causing actions of certain leukocytes.
The Company's products are currently in research and preclinical and clinical
development. None of the Company's products has been submitted for regulatory
approval. There can be no assurance that any products will be successfully
developed, receive necessary regulatory approvals or, if such approvals are
received, that any product candidate will be marketed successfully.
[Appearing on the facing page of the fold out with the stabilization
legend is the Company's logo.]
------------------
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE MARKET PRICE OF THE COMMON
STOCK, INCLUDING BY ENTERING STABILIZING BIDS, EFFECTING SYNDICATE COVERING
TRANSACTIONS OR IMPOSING PENALTY BIDS. FOR A DESCRIPTION OF THESE ACTIVITIES,
SEE "UNDERWRITING."
------------------
LEUKOSITE and the Company's logo are trademarks of the Company. This
Prospectus also includes trademarks of companies other than LeukoSite.
<PAGE> 5
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and the Consolidated Financial Statements and Notes thereto
appearing elsewhere in this Prospectus. The Common Stock offered hereby involves
a high degree of risk. See "Risk Factors."
THE COMPANY
LeukoSite, Inc. ("LeukoSite" or the "Company") is a leader in the discovery
and development of therapeutics based upon the biology of leukocytes (white
blood cells), with potential applications in cancer and inflammatory, autoimmune
and viral diseases. The Company's technologies and expertise in leukocyte
biology facilitate the discovery and development of novel and proprietary drugs
that destroy or block the disease-causing actions of leukocytes. The Company has
one product candidate that has completed Phase II clinical trials, two product
candidates that are expected to begin human clinical trials by early 1998, and
seven small molecule drug discovery programs.
In a properly functioning immune system, leukocytes rid the body of
infectious organisms and repair damage to tissues and organs. However,
leukocytes can also cause or exacerbate disease processes when their growth is
uncontrolled, resulting in malignant diseases such as lymphomas and leukemias,
or when they are abnormally recruited into tissues, resulting in autoimmune or
inflammatory diseases. In addition, disease can also result when viruses such as
HIV attach to, invade and destroy leukocytes.
LeukoSite focuses on distinct cell surface molecules found on leukocytes
and their roles in disease. The Company is developing monoclonal antibodies and
small molecule drugs that selectively deplete leukocytes or block specific
leukocyte recruitment pathways controlled by chemokines and their receptors as
well as by integrins and adhesion molecules. LeukoSite believes that these drugs
will have a high degree of specificity and reduced side effects compared to
existing anti-cancer, anti-inflammatory, immunosuppressive and anti-viral
therapies.
The Company expects to initiate late stage clinical trials of its lead
product candidate, LDP-03, in 1998. LDP-03 is a humanized monoclonal antibody to
the leukocyte antigen CAMPATH, which was licensed by the Company after reviewing
data from Phase I and II clinical trials showing activity in the treatment of
chronic lymphocytic leukemia. The Company has entered into a joint venture with
Ilex Oncology, Inc. ("Ilex") for the clinical development and commercialization
of LDP-03. Under the terms of the agreement with Ilex, LeukoSite and Ilex will
generally share equally in any profits from the sales of LDP-03 and in all
future research, development, clinical and commercialization costs. The
Company's second product candidate, LDP-01, is a humanized anti-integrin
monoclonal antibody that inhibits early leukocyte recruitment and inflammation
resulting from reperfusion injury. The Company intends to initiate two Phase
I/IIa clinical studies of LDP-01 in the United Kingdom in early 1998, one for
kidney transplantation and a second for thrombotic stroke. The Company's third
product candidate, LDP-02, is a humanized monoclonal antibody to the a4b7
integrin and is being developed for the treatment of inflammatory bowel disease,
such as Crohn's disease and ulcerative colitis. The Company intends to initiate
a Phase I/IIa study of LDP-02 in the United Kingdom in early 1998.
To date, the Company has also generated six chemokine-receptor drug
discovery targets that are the subject of collaborations with pharmaceutical
companies for small molecule drug discovery and development. The Company has
collaboration agreements with Warner-Lambert Company ("Warner-Lambert"), Roche
Bioscience and Kyowa Hakko Kogyo Co. Ltd. As of June 30, 1997, the Company had
received $8.4 million under these collaborations for research funding and
license fees and will be entitled to receive $13.0 million of additional funding
that is not subject to the achievement of milestones. In addition, in the event
that a product is successfully developed and commercialized under each of the
collaborations, LeukoSite will be entitled to receive up to $44.3 million in
development and commercialization milestone payments, as well as royalties
associated with product sales. As of June 30, 1997, Warner-Lambert had invested
$9.0 million and Roche Finance Ltd had invested $3.0 million in equity of the
Company.
The Company's executive offices are located at 215 First Street, Cambridge,
Massachusetts 02142, and its telephone number is (617) 621-9350.
3
<PAGE> 6
THE OFFERING
<TABLE>
<S> <C>
Common Stock offered by the Company................... 2,500,000 shares
Common Stock to be outstanding after the offering..... 8,702,791 shares(1)
Use of proceeds....................................... To fund research and development
programs and for working capital and
general corporate purposes. See "Use
of Proceeds."
Nasdaq National Market symbol......................... LKST
</TABLE>
SUMMARY CONSOLIDATED FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
FOR THE PERIOD FOR THE PERIOD
FROM INCEPTION FROM INCEPTION
(MAY 1, 1992) SIX MONTHS (MAY 1, 1992)
THROUGH YEARS ENDED DECEMBER 31, ENDED JUNE 30, THROUGH
DECEMBER 31, ------------------------------------- --------------------- JUNE 30,
1992 1993 1994 1995 1996 1996 1997 1997
-------------- ------- ------- ------- ------- ----------- ------- --------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF
OPERATIONS DATA:
Revenues.................... $-- $ -- $ -- $ 450 $ 3,674 $ 524 $ 2,275 $ 6,399
Operating expenses.......... 129 2,044 5,782 7,917 9,873 4,420 6,186 31,931
Interest income (expense),
net....................... -- (19) 148 (10) 177 63 212 508
----- ------- ------- ------- ------- ------- ------- --------
Net loss (2)................ $ (129) $(2,063) $(5,634) $(7,477) $(6,022) $(3,833) $(3,699) $(25,024)
===== ======= ======= ======= ======= ======= ======= ========
Pro forma net loss per
common share (2).......... $ (1.04) $ (.59)
======= =======
Shares used in computing pro
forma net loss per common
share (2)................. 5,770 6,290
======= =======
</TABLE>
<TABLE>
<CAPTION>
JUNE 30, 1997
--------------------------------------------
PRO FORMA
ACTUAL PRO FORMA(3) AS ADJUSTED(4)
-------- ------------ --------------
<S> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash, cash equivalents and marketable securities...................... $ 11,649 $ 11,649 $ 31,974
Working capital....................................................... 6,771 6,771 27,620
Total assets.......................................................... 14,784 14,784 34,585
Long-term obligations, net of current portion......................... 1,123 1,123 1,123
Redeemable convertible preferred stock................................ 25,221 -- --
Deficit accumulated during development stage.......................... (25,512) (25,512) (25,512)
Stockholders' equity (deficit)........................................ (16,759) 8,462 28,787
</TABLE>
- ------------------------------
(1) Based on the number of shares outstanding as of July 31, 1997. Excludes (i)
an aggregate of 947,272 shares of Common Stock issuable upon exercise of
stock options outstanding as of July 31, 1997 at a weighted average exercise
price of $3.89 per share and (ii) an aggregate of 84,145 shares of Common
Stock issuable upon exercise of warrants outstanding as of July 31, 1997, at
a weighted average exercise price per share of $4.10. See "Capitalization,"
"Management -- Amended and Restated 1993 Stock Option Plan" and Note 10 of
Notes to Consolidated Financial Statements.
(2) Computed as described in Note 2(b) of Notes to Consolidated Financial
Statements.
(3) Presented on a pro forma basis to give effect to the automatic conversion
upon the closing of this offering of all outstanding shares of the Company's
Preferred Stock into an aggregate of 5,087,935 shares of Common Stock
(assuming an initial public offering price of $9.00 per share).
(4) As adjusted to reflect the sale of 2,500,000 shares of Common Stock offered
by the Company hereby at an assumed initial public offering price of $9.00
per share and the receipt of the estimated proceeds therefrom. See "Use of
Proceeds" and "Capitalization."
------------------------------
Except in the Consolidated Financial Statements of the Company or as
otherwise noted, all information in this Prospectus: (i) assumes no exercise of
the Underwriters' over-allotment option; (ii) reflects a one-for-4.1 reverse
stock split of the Common Stock effected on August 8, 1997; (iii) reflects the
conversion upon the closing of this offering of all outstanding shares of the
Company's Preferred Stock into 5,087,935 shares of Common Stock (assuming an
initial public offering price of $9.00 per share); (iv) reflects the conversion
upon the closing of this offering of all outstanding warrants to purchase shares
of Preferred Stock into warrants to purchase 84,145 shares of Common Stock; and
(v) reflects the amendment of the Company's Restated Certificate of
Incorporation on August 8, 1997. See "Capitalization," "Description of Capital
Stock," "Underwriting" and Notes to Consolidated Financial Statements.
4
<PAGE> 7
RISK FACTORS
This Prospectus contains forward-looking statements that involve risks and
uncertainties. Actual results could differ materially from those discussed in
the forward-looking statements as a result of certain factors, including those
set forth below and elsewhere in this Prospectus. The following risk factors
should be considered carefully in addition to the other information in this
Prospectus before purchasing the shares of Common Stock offered hereby.
Early Stage of Product Development; Absence of Developed Products. The
Company's research and development programs are at an early stage of
development, and the Company does not expect that any drugs resulting from its
or its collaborative partners' research and development efforts will be
commercially available for several years, if at all. The Company has not
optimized any small molecule lead compound or selected any small molecule drug
candidates. Any drug candidates developed by the Company will require
significant additional research and development efforts, including extensive
preclinical (animal and in vitro) and clinical testing as well as regulatory
approval to begin testing in humans. The Company has limited experience in
conducting preclinical trials and no experience in conducting clinical trials.
Furthermore, the results obtained in preclinical trials are not necessarily
indicative of results that will be obtained in later stages of preclinical
development or in human clinical testing. In addition, the Company's potential
drug candidates will be subject to the risks of failure inherent in the
development of pharmaceutical products. These risks include the possibilities
that no drug candidate will be found safe or effective, or will otherwise meet
applicable regulatory standards or receive the necessary regulatory clearances.
There can be no assurance that these drug candidates, if safe and effective,
will be developed into commercially viable drugs, will be economical to
manufacture or produce on a large scale, will be successfully marketed or will
achieve customer acceptance. Furthermore, the Company's potential drug
candidates are subject to the risks that the proprietary rights of third parties
will preclude the Company from marketing such drugs or that third parties will
market superior or equivalent drugs. The failure to develop safe, commercially
viable drugs would have a material adverse effect on the Company's business,
financial condition and results of operations. The Company's potential drug
candidates are also subject to the risk of delays in development resulting from
various factors, many of which are beyond the control of the Company. The
Company expects to incur significant additional operating losses over the next
several years and expects cumulative losses to increase substantially due to
expanded research and development efforts and other product development
activities. Furthermore, the Company is relying on its collaborative partners to
fund a substantial portion of its research operations over the next several
years. Failure by the Company to continue to fund product development activities
at anticipated levels would result in delays in product development. See
"-- Dependence on Collaborative Partners," and "-- Limited Operating History;
History of Losses and Expectation of Future Losses; Uncertainty of Future
Profitability." The Company's product candidates are subject to extensive and
rigorous government regulation. Delays in receipt of regulatory approvals or
failure to receive such approvals at all would have a material adverse effect on
the Company's business, financial condition and results of operations. See
"-- Impact of Extensive Government Regulation." The Company is dependent on
third parties for the manufacture of its product candidates. Delays in
production of such product candidates would delay the Company's preclinical and
clinical trials which could have a material adverse effect on the Company's
business, financial condition and results of operations. See "-- Reliance on
Contract Manufacturers; Lack of Manufacturing Experience."
Dependence on Collaborative Partners. A key element of the Company's
strategy is to accelerate certain of its drug discovery and development programs
and to fund its capital requirements, in part, by entering into collaboration
agreements with major pharmaceutical companies. The Company has entered into
collaboration agreements with Warner-Lambert, Roche Bioscience and Kyowa. Under
their collaboration agreements with the Company, the Company's collaborative
partners have the right, but are not obligated, to conduct preclinical and
clinical trials of compounds developed during the collaboration with the Company
and to develop and commercialize any drug candidates resulting from the
collaborations. The collaboration agreements allow the Company's collaborative
partners
5
<PAGE> 8
significant discretion in electing whether to pursue the development of any
potential drug candidates. As a result, the Company cannot control the amount
and timing of resources dedicated by the Company's collaborative partners to
their respective collaborations with the Company. The Company's receipt of
revenues from drug development milestones or royalties on sales under the
collaboration agreements is dependent upon the activities and the development,
manufacturing and marketing resources of its collaborative partners. There can
be no assurance that such partners will pursue the development and
commercialization of compounds resulting from the collaboration, that any such
development or commercialization would be successful or that the Company would
derive any revenue from such arrangements. Moreover, certain drug candidates
discovered by the Company may be competitive with its partners' drugs or drug
candidates. Accordingly, there can be no assurance that the Company's
collaborative partners will proceed with the development of LeukoSite's drug
candidates or that they will not pursue their existing or alternative
technologies in preference to LeukoSite's drug candidates. There can be no
assurance that the interests of the Company will continue to coincide with those
of its collaborative partners, that some of the Company's collaborative partners
will not develop independently or with third parties drugs that compete with
drugs of the types contemplated by the Company's collaboration agreements, or
that disagreements over rights or technology or other proprietary interests will
not occur. Disagreements between the Company and its collaborative partners
could lead to delays in research or in the development and commercialization of
certain product candidates, or could require or result in litigation or
arbitration, which could be time-consuming and expensive. Any of these factors
could have a material adverse effect on the Company's business, financial
condition and results of operations.
The Company is relying on its collaborative partners to fund a substantial
portion of its research operations over the next several years. Although each of
the collaboration agreements may be extended past its initial term, there can be
no assurance that these contracts will be extended or renewed, or that any
renewal, if made, will be on terms favorable to the Company. Each of the
collaboration agreements is terminable by either party upon breach by the other
party. Moreover, each of the collaboration agreements with Warner-Lambert may be
terminated at any time and for any reason upon six months written notice. The
collaboration with Kyowa may be terminated after April 1998 with 60 days notice.
Consequently, there can be no assurance that any of the collaboration agreements
will remain in effect for their expected term. If any of the collaborative
partners terminates or breaches its agreement with the Company, or otherwise
fails to conduct its collaborative activities in a timely manner, the
development or commercialization of any drug candidate or research program under
the collaboration agreement with such partner could be delayed, terminated, or
the Company may be required to undertake unforeseen additional responsibilities
or to devote unbudgeted additional resources to such development or
commercialization. In addition, there have been a significant number of recent
consolidations among pharmaceutical companies. Such consolidations involving the
companies with which the Company is collaborating could result in the diminution
or termination of, or delays in, the development or commercialization of drug
candidates or research programs under the collaboration agreements. The
termination or expiration of research provisions of any of the Company's
collaboration agreements, the failure by any of the Company's collaborative
partners to provide research and development funding, or the merger or
consolidation of any of the Company's collaborative partners could have a
material adverse effect on the Company's business, financial condition and
results of operations. See "Business--Collaboration Agreements."
Limited Operating History; History of Losses and Expectation of Future
Losses; Uncertainty of Future Profitability. The Company has a limited history
of operations. The Company has incurred a net operating loss every year since
its inception in May 1992, and has an accumulated deficit of approximately $25.5
million through June 30, 1997. The Company expects to incur significant
additional operating losses over the next several years and expects cumulative
losses to increase substantially due to expanded research and development
efforts, preclinical and clinical trials and the funding of development
activities under the joint venture with Ilex. In the next few years, the
Company's revenues are expected to be limited to any research support payments
it may receive under the collaboration agreements and any amounts received under
other research or drug development
6
<PAGE> 9
collaborations that the Company may establish. There can be no assurance,
however, that the Company will be able to establish any additional collaborative
relationships on terms acceptable to the Company or maintain in effect the
current collaboration agreements or achieve the milestones thereunder that are
required for the Company to receive funds from its current collaborative
partners. The Company's ability to generate revenue or achieve profitability is
dependent in part on its or its collaborative partners' ability to complete the
development of drug candidates successfully, to obtain regulatory approvals for
the drug candidates and to manufacture and commercialize any resulting drugs.
The Company will not receive revenues or royalties from commercial sales for a
number of years, if ever, and any royalties may be subject to reduction under
certain circumstances. Failure to receive significant revenues or achieve
profitable operations would impair the Company's ability to sustain operations.
There can be no assurance that the Company will ever successfully identify,
develop, commercialize, manufacture and market any products, obtain required
regulatory approvals or achieve profitability. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Liquidity and Capital
Resources."
Substantial Additional Financing Requirements; Uncertainty of Available
Funding. The Company will require substantial additional funds in order to
finance its drug discovery and development programs, fund operating expenses,
pursue regulatory clearances, develop manufacturing, marketing and sales
capabilities and prosecute and defend its intellectual property rights. The
Company depends upon its collaborative partners for research funding. As of June
30, 1997, the Company had received approximately $8.4 million for research and
development under its collaboration agreements. There can be no assurance that
the Company will continue to receive funding under its existing collaboration
agreements, or that existing and potential collaboration agreements will be
sufficient to fund the Company's operating expenses. See "Dependence on
Collaborative Partners."
The Company believes that the net proceeds of this offering, together with
its existing capital resources, interest income and revenue from the
collaboration agreements, will be sufficient to fund its currently planned
operating expenses and capital requirements through early 2000. However, there
can be no assurance that such funds will be sufficient to meet the Company's
operating expenses and capital requirements during such period. The Company's
actual cash requirements may vary materially from those now planned and will
depend upon numerous factors, including the results of the Company's research
and development and collaboration programs, the timing and results of
preclinical and clinical trials, the timing and costs of obtaining regulatory
approvals, the progress of the milestone and royalty producing activities of the
Company's collaborative partners, the level of resources that the Company
commits to the development of manufacturing, marketing and sales capabilities,
the cost of filing, prosecuting, defending and enforcing patent claims and other
intellectual property rights, the ability of the Company to maintain existing
and establish new collaboration agreements with other companies, the
technological advances and activities of competitors and other factors.
The Company will need to raise substantial additional capital to fund its
operations. The Company intends to seek such additional funding through public
or private financing or collaboration or other arrangements with collaborative
partners. If additional funds are raised by issuing equity securities, further
dilution to existing stockholders may result and future investors may be granted
rights superior to those of existing stockholders. There can be no assurance,
however, that additional financing will be available from any sources or, if
available, will be available on acceptable terms. If adequate funds are not
available, the Company may be required to delay, reduce the scope of or
eliminate one, more or all of its development programs or to obtain funds by
entering into arrangements with collaborative partners or others that require
the Company to issue additional equity securities or to relinquish rights to
certain technologies or drug candidates that the Company would not otherwise
issue or relinquish in order to continue independent operations. See "Use of
Proceeds" and "Management's Discussion and Analysis of Financial Condition and
Results of Operation--Liquidity and Capital Resources."
Impact of Extensive Government Regulation. The Company's products under
development are subject to extensive and rigorous regulation by the federal
government, principally the Food and Drug Administration ("FDA"), and by state
and local governments. If these products are marketed abroad, they also are
subject to export requirements and to regulation by foreign governments. The
applicable
7
<PAGE> 10
regulatory clearance process, which must be completed prior to the
commercialization of a product, is lengthy and expensive. There can be no
assurance that the Company will be able to obtain necessary regulatory approvals
on a timely basis, if at all, for any of its products under development, and
delays in receipt or failure to receive such approvals, the loss of previously
received approvals, or failure to comply with existing or future regulatory
requirements could have a material adverse effect on the Company's business,
financial condition and results of operations.
The Federal Food, Drug, and Cosmetic Act (the "FDC Act") and the Public
Health Service Act (the "PHS Act") govern or influence the development, testing,
manufacture, labeling, storage, approval, advertising, promotion, sale and
distribution of most FDA-regulated products in the United States. Failure to
comply with the applicable FDA regulatory requirements can result in sanctions
being imposed on the Company (or its collaborative partners and contract
manufacturers), including warning letters, fines, product recalls or seizures,
injunctions, refusals to permit products to be imported into or exported out of
the United States, FDA refusal to grant premarket approval of products and/or to
allow the Company to enter into government supply contracts, withdrawals of
previously approved marketing applications and criminal prosecutions.
Product development and approval to meet FDA regulatory requirements takes
a number of years, involves the expenditure of substantial resources and is
uncertain. Many products that initially appear promising ultimately do not reach
the market because they are not found to be safe or effective or cannot meet the
FDA's other regulatory requirements. In addition, there can be no assurance that
the current regulatory framework will not change or that additional regulations
will not arise at any stage of the Company's product development that may affect
approval, delay the submission or review of an application or require additional
expenditures by the Company.
It is uncertain if and when the Company, independently or with its
collaborative partners, will submit any marketing applications for any of its
monoclonal antibodies or small molecular antagonists under development for any
indications. There can be no assurance that any studies will be completed or, if
completed, will demonstrate that the products are safe and effective for their
intended uses, or that required approval will be granted by FDA on a timely
basis, or at all, for any of these products for any studied indications. Failure
of the Company to obtain marketing approval of any of its products on a timely
basis, or at all, would have a material adverse effect on the Company's
business, financial condition and results of operations. See
"Business--Government Regulation."
All of the Company's product candidates will require FDA and foreign
government approvals for commercialization, none of which have been obtained.
The Company and Ilex are required to file an IND with the FDA before beginning
clinical trials of LDP-03 in the United States. See "Business -- LeukoSite's
Drug Development Programs -- LDP-03 (CAMPATH-1H)." The Company intends to
commence trials of its LDP-01 and LDP-02 product candidates in the United
Kingdom and to continue to perform preclinical and clinical trials abroad,
subject to receipt of required United Kingdom regulatory approvals. There can be
no assurance that as a result of a request from the FDA or otherwise, the
Company would not be required to repeat certain or all of such trials in the
United States, which would increase the time and expense required to obtain
approval. See "Business--Government Regulation--Foreign Requirements."
The effect of government regulation may be to delay marketing of the
Company's products under development for a considerable or indefinite time,
impose costly procedural requirements upon the Company's activities and furnish
a competitive advantage to larger companies or companies more experienced in
regulatory affairs. Delays in obtaining governmental regulatory approval could
adversely affect the Company's marketing strategy as well as the Company's
ability to generate revenue from commercial sales.
If regulatory approval is obtained, the Company will be required to comply
with a number of post-approval requirements, including reporting certain adverse
reactions, if any, to the FDA, post-marketing testing and surveillance to
monitor the safety and efficacy of the Company's product candidates and
complying with advertising and promotional labeling requirements. In addition,
8
<PAGE> 11
facilities and procedures used in the manufacture of the Company's product
candidates must comply with Good Manufacturing Practices ("GMP") prescribed by
the FDA. Both before and after approval is obtained, violations of regulatory
requirements may result in various adverse consequences, including the
suspension or termination of clinical trials, delays in approving or refusal to
approve a product, the withdrawal of an approved product from the market,
seizures of product, and/or the imposition of injunctions, criminal penalties
and/or civil penalties against the manufacturer and/or license holder.
In addition to the applicable FDA requirements, if the Company attempts to
sell its products overseas, the Company will be subject to foreign regulatory
requirements governing clinical trials, approvals and product sales. Whether or
not FDA approval has been obtained, approval of a product by the comparable
regulatory authorities of foreign countries must be obtained prior to the
commencement of marketing of the product in those countries. The approval
process varies from country to country and the time required may be longer or
shorter than that required for FDA approval. There can be no assurance that any
foreign country will approve any of the Company's product candidates on a timely
basis, if at all, or that if the Company receives such approval, that it will be
able to market products for the indications that the Company desires or that it
will be able to comply with post-approval restrictions.
The Company is subject to numerous federal, state and local laws and
regulations relating to such matters as safe working conditions, manufacturing
practices, environmental protection, fire hazard control, the experimental use
of animals and the disposal of hazardous or potentially hazardous substances.
There can be no assurance that the Company will not be required to incur
significant costs to comply with such laws and regulations in the future or that
such laws or regulations will not have a material adverse effect upon the
Company's business, financial condition and results of operations. See
"Business--Government Regulation."
Uncertainties Relating to Patents and Proprietary Rights. The Company's
success will depend in part on its ability to obtain United States and foreign
patent protection for its drug candidates and processes, preserve its trade
secrets and operate without infringing the proprietary rights of third parties.
Considerable importance is placed on obtaining patent and trade secret
protection for significant new technologies, products and processes. There can
be no assurance that any patents will issue from any of the patent applications
owned by, or licensed to, the Company. Further, there can be no assurance that
any rights the Company may have under issued patents will provide the Company
with sufficient protection against competitive products or otherwise cover
commercially valuable products or processes. Legal standards relating to the
validity of patents covering pharmaceutical and biotechnological inventions and
the scope of claims made under such patents are still developing. There is no
consistent policy regarding the breadth of claims allowed in biotechnology
patents. The patent position of the Company is highly uncertain and involves
complex legal and factual questions. There can be no assurance that any existing
or future patents issued to, or licensed by, the Company will not subsequently
be challenged, infringed upon, invalidated, found to be unenforceable or
circumvented by others. In addition, patents may have been granted, or may be
granted, covering products or processes that are necessary or useful to the
development of the Company's drug candidates. If the Company's drug candidates
or processes are found to infringe upon the patents, or otherwise impermissibly
utilize the intellectual property of others, the Company may be required to
obtain licenses from third parties to utilize the patents or proprietary rights
of others. There can be no assurance that the Company will be able to obtain
such licenses on acceptable terms, or at all. In such event, the Company's
development, manufacture and sale of such drug candidates could be severely
restricted or prohibited. There has been significant litigation in the
pharmaceutical and biotechnology industry regarding patents and other
proprietary rights. If the Company becomes involved in litigation regarding its
intellectual property rights or the intellectual property rights of others, the
potential cost of such litigation and the potential damages that the Company
could be required to pay could be substantial.
9
<PAGE> 12
The Company's product candidates LDP-01, LDP-02 and LDP-03 are recombinant
humanized, complementarity determining region ("CDR")-grafted, monoclonal
antibodies. The Company is aware that patents have been issued in the United
States to third parties which relate to processes for producing recombinant
antibodies, compositions useful in the production of recombinant antibodies,
CDR-grafted humanized antibodies, processes for producing CDR-grafted humanized
antibodies and compositions useful in the production of CDR-grafted humanized
antibodies. Patents have also been granted to these parties in Europe, but the
European patents have been opposed by third parties. The Company may be required
to seek licenses under these patents for its humanized antibody products.
The Company is also aware of patents which have been issued to a third
party in the United States and Europe variously relating to "chimeric"
immunoglobulins and immunoglobulin chains, processes for production of such
chimeric molecules and compositions useful in the production of chimeric
molecules. The European patent has been opposed by third parties. Assuming that
the European patent survives in current form, the Company, based on the analysis
of Hamilton, Brook, Smith & Reynolds, P.C., the Company's patent counsel,
believes that, properly construed, the United States and European patent claims
do not cover the Company's LDP-01, LDP-02 or LDP-03 product candidates.
The Company is also aware of patents which have been issued to third
parties in the United States and/or Europe variously relating to certain
modified humanized immunoglobulins, methods of producing modified humanized
immunoglobulins, compositions useful in the production of modified humanized
immunoglobulins and methods of use of modified humanized immunoglobulins. The
European patents in these areas have also been opposed by third parties. The
Company, based on the analysis of Hamilton, Brook, Smith & Reynolds, P.C., the
Company's patent counsel, believes that, properly construed, the U.S. patent
claims do not cover the Company's LDP-01 and LDP-03 product candidates, and that
no valid claim of the European patents covers the Company's LDP-01 and LDP-03
product candidates. The Company is uncertain about the scope of the claims which
have issued in the United States and is uncertain whether these claims, when
properly construed, cover LDP-02. If it is determined that they do encompass
LDP-02, the Company will likely be required to seek a product license.
The Company is also aware of other third party published applications
relating to altered antibodies, methods of use of altered antibodies and methods
of production of altered antibodies. To the Company's knowledge, neither these
applications nor possible unpublished counterpart applications have proceeded to
grant in Europe or have issued as U.S. patents. There can be no assurance that
the Company may not be required to seek a license to some or all of the patents
which might issue from these patent applications.
The Company may be required to seek or choose to seek licenses to some or
all of these or other patents in order to develop and commercialize certain
product candidates or potential products incorporating the Company's technology
in the United States, Europe and other markets. There can be no assurance that
such licenses, if required, will be available to the Company, or that if they
are available, they can be obtained on commercially acceptable terms, and the
failure to do so could have a material adverse effect on the Company. In the
absence of required licenses, the patent owners may obtain an injunction, which
could prevent the manufacture, sale and use of the Company's products, with
material adverse effects on the Company. In addition, assuming such patents are
valid and enforceable, the Company can provide no assurances that if enforcement
actions were brought by the patent owners against the Company that such actions
would be resolved in the Company's favor. The Company may also choose to
challenge the validity of one or more patents or patent claims. Any such action
or challenge could result in substantial costs to the Company and diversion of
Company resources and could have a material adverse effect on the Company.
Moreover, there can be no assurance that the Company would be successful
defending against an infringement action or in challenging any such patents or
patent claims, and the failure to do so could have a material adverse effect on
the Company. If the Company does not obtain required licenses, it could
encounter delays in product development while it attempts to design around the
patents, or it could find that the development, manufacture or sale of products
requiring such licenses could be foreclosed.
10
<PAGE> 13
Litigation, which could result in substantial costs to the Company, may be
necessary to enforce any patents issued or licensed to the Company or to
determine the scope and validity of third party proprietary rights. Some of the
Company's competitors have, or are affiliated with companies having,
substantially greater resources than the Company, and such competitors may be
able to sustain the costs of complex patent litigation to a greater degree and
for longer periods of time than the Company. Uncertainties resulting from the
initiation and continuation of any patent or related litigation could have a
material adverse effect on the Company's business, financial condition and
results of operations. An adverse outcome in connection with an infringement
proceeding brought by a third party could subject the Company to significant
liabilities, require disputed rights to be licensed from third parties or
require the Company to cease using the disputed technology, any of which could
have a material adverse effect on the Company's business, financial condition or
results of operations. If another party or parties file or have filed patent
applications in the United States that claim technology also claimed by the
Company, the Company may have to participate in interference proceedings
declared by the Patent and Trademark Office to determine priority of invention.
Participation in such proceedings could result in substantial costs to the
Company. The Company could incur substantial costs as a result of such
proceedings, whether or not the eventual outcome is favorable to the Company, or
results in a determination that an opposing party is entitled to the patent, or
results in another unfavorable result.
In addition to patent protection, the Company relies on trade secrets,
proprietary know-how and technological advances which it seeks to protect, in
part, by confidentiality agreements with its collaborative partners, employees
and consultants. There can be no assurance that these confidentiality agreements
will not be breached, that the Company would have adequate remedies for any such
breach, or that the Company's trade secrets, proprietary know-how and
technological advances will not otherwise become known or be independently
discovered by others. See "Business--Patents and Proprietary Rights."
Intense Competition. The biotechnology and pharmaceutical industries are
intensely competitive. Competitors of the Company in the United States and
elsewhere are numerous and include, among others, major, multinational
pharmaceutical and chemical companies, specialized biotechnology firms and
universities and other research institutions. Many of these competitors have
greater financial and other resources, including larger research and development
staffs and more effective marketing and manufacturing organizations, than the
Company. Acquisitions of competitors by large pharmaceutical companies or others
could enhance financial, marketing and other resources available to such
competitors. In addition, academic and government institutions have become
increasingly aware of the commercial value of their research findings, and such
institutions are now more likely to enter into exclusive licensing agreements
with commercial enterprises, including competitors of the Company, to market
commercial products. There can be no assurance that the Company's competitors
will not succeed in developing or licensing on an exclusive basis technologies
and drugs that are more effective or less costly than any which are being
developed by the Company or which would render the Company's technology and
future drugs obsolete and noncompetitive. The Company's competitors may succeed
in obtaining FDA or other regulatory approvals for drug candidates before the
Company. Companies that commence commercial sale of their drugs before their
competitors may achieve a significant competitive advantage, including certain
patent and FDA marketing exclusivity rights that would delay the Company's
ability to market certain products. There can be no assurance that drugs
resulting from the Company's research and development efforts, or from the joint
efforts of the Company and its collaborative partners, if approved for sale,
will be able to compete successfully with competitors' existing products or
products under development. See "Business -- Competition."
Rapid Technological Change. Biotechnology and related pharmaceutical
technology have undergone and are subject to rapid and significant change. The
Company expects that the technologies associated with the Company's research and
development will continue to develop rapidly, and the Company's future success
will depend in large part on its ability to maintain a competitive position with
respect to these technologies. Rapid technological development by the Company or
others may result in compounds, products or processes becoming obsolete before
the Company recovers any
11
<PAGE> 14
expenses it incurs in connection with developing such products. There can be no
assurance that the Company's approach to drug discovery will be viable or that
it will achieve market acceptance or that it will not be superseded by other
drug discovery techniques.
Reliance on Contract Manufacturers; Lack of Manufacturing Experience. The
Company is dependent on third parties for the manufacture of its product
candidates and is aware of only a limited number of manufacturers which it
believes have the ability and capability to manufacture the Company's drug
candidates for preclinical and clinical trials. The Company is currently in the
final stages of discussions with a contract manufacturer for the production of
LDP-03 for some or all of the Company's clinical trial production. The Company
has also been relying on the Therapeutic Antibody Centre ("TAC") for the
manufacture of LDP-01 and LDP-02 for preclinical testing and intends to employ
the manufacturing capability of the TAC through early clinical trials. If the
Company were required to transfer manufacturing processes to other third-party
manufacturers, it could experience significant delays in supply. Delays in
production would delay the Company's preclinical and clinical trials which could
have a material adverse effect on the Company's business, financial condition
and results of operations. There can be no assurance that the Company will be
able to enter into satisfactory arrangements with contract manufacturers or that
such parties will be able to meet the Company's needs with respect to timing,
quantity or quality. If, at any time, the Company is unable to maintain, develop
or contract for manufacturing capabilities on acceptable terms, the Company's
ability to conduct preclinical and clinical trials with the Company's drug
candidates will be adversely affected, resulting in delays in the submission of
drug candidates for regulatory approvals. See "Business--Manufacturing and
Supply."
The Company's collaborative partners generally have the exclusive right to
manufacture products resulting from the collaborations. The Company has no
experience in, and currently lacks the facilities and personnel to, manufacture
products in accordance with GMP as prescribed by the FDA or to produce an
adequate supply of compounds to meet future requirements for preclinical and
clinical trials. See "Business--Collaboration Agreements."
Reliance upon the Therapeutic Antibody Centre. The Company has an
exclusive research and license agreement with the TAC. As a part of the
agreement, the Company employs the TAC's manufacturing capabilities and
established network of clinical investigators to perform early stage clinical
trials on certain monoclonal antibodies being developed by the Company for
therapeutic use. By leveraging the TAC's established antibody manufacturing
infrastructure and network of clinical investigators, the Company is able to
obtain a source of supply for its monoclonal antibody requirements and to
commence early clinical trials in the United Kingdom with respect to its
monoclonal antibodies without having to make costly investments in manufacturing
infrastructure and personnel. If the Company's collaborative relationship with
the TAC were to terminate or if the TAC were otherwise unable to supply the
Company with monoclonal antibodies, the Company would have to incur significant
costs and suffer delays in commencing and completing early clinical trials.
There can be no assurance that the Company will have the resources required to
do so.
In addition, the Company believes that its access to the resources of the
TAC will enable the Company to commence and complete early phase clinical trials
in the United Kingdom more rapidly and that this in turn may accelerate the
commencement of clinical trials in the United States if the FDA accepts the
results of any such United Kingdom clinical trials in support of an application
to commence such clinical trials in the United States. However, there can be no
assurance that any results obtained by the Company in any clinical trials in the
United Kingdom will be satisfactory to the FDA or be accepted by the FDA as the
basis for the Company to commence clinical trials in the United States. If such
results are not satisfactory to the FDA, the Company may be required to repeat
certain or all of such trials in the United States, which would increase the
time and expense to obtain approvals relating to such drug candidates in the
United States.
Risks Associated with Ilex Joint Venture. The Company has entered into a
joint venture with Ilex for the development and commercialization of LDP-03 for
chronic lymphocytic leukemia. As part of
12
<PAGE> 15
the joint venture, the Company is obligated to provide up to $5 million in
funding during the next two years. There can be no assurance that the Company
will have the cash available or will desire to maintain its commitment to the
joint venture. In the event that LeukoSite fails for any reason to make a
required capital contribution to the joint venture, Ilex may gain control of the
management of the joint venture and become entitled to a greater share of the
profits derived from product sales of LDP-03. There can also be no assurance
that Ilex will have the cash available or will desire to maintain its commitment
to the joint venture. In the event that Ilex fails for any reason to make a
required capital contribution to the joint venture, the Company may be required
to make additional capital contributions to the joint venture to maintain the
desired level of development activities by the joint venture. There can be no
assurance that the Company will be able to compensate for any failure by Ilex to
make any capital contribution or that the joint venture would be able to
continue operations with lesser funding. In addition, after the earlier of a
change in control (as defined therein) of Ilex or the Company or October 2,
2000, either company has the right to purchase the other company's ownership of
the joint venture in the event of an unresolved deadlock. As a result, there can
be no assurance that the Company will ever be able to recoup its investment in
the joint venture. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and "Business--Collaboration
Agreements--Ilex."
No Assurance of Market Acceptance. There can be no assurance that any
drugs successfully developed by the Company, independently or with its
collaborative partners, if approved for marketing, will achieve market
acceptance. The degree of market acceptance of any drugs developed by the
Company will depend on a number of factors, including the establishment and
demonstration of clinical efficacy and safety, their potential advantage over
existing therapies and reimbursement policies of government and third-party
payors. There can be no assurance that physicians, patients or the medical
community in general will accept and utilize any drugs that may be developed by
the Company independently or with its collaborative partners.
Dependence on Key Personnel and Consultants. The Company is highly
dependent upon the efforts of its senior management, scientific team and
consultants, including the members of its Scientific Advisory Board. The loss of
the services of one or more of these individuals might impede the achievement of
the Company's objectives. Because of the specialized scientific nature of the
Company's business, the Company is highly dependent upon its ability to attract
and retain qualified scientific and technical personnel and consultants. There
is intense competition among major pharmaceutical and chemical companies,
specialized biotechnology firms and universities and other research institutions
for qualified personnel and consultants in the areas of the Company's
activities. There can be no assurance that the Company will be able to continue
to attract or retain the qualified personnel and consultants necessary for the
development of its business. The failure to recruit or retain key scientific and
technical personnel and consultants could adversely affect the Company's
business, financial condition and results of operations. See
"Business--Employees," "--Scientific Advisory Board" and "Management--Executive
Officers and Directors."
Lack of Marketing and Sales Capability and Experience. The Company has not
yet invested in the development of marketing or sales capabilities. The Company
has no experience in marketing pharmaceutical products. The Company has granted
marketing rights to its collaborative partners with respect to drugs developed
through the collaboration agreements. In addition, the Company may seek to
collaborate with third parties to market those drugs developed by the Company
independent of any drug development collaboration or may seek to market and sell
such drugs directly. If the Company seeks to collaborate with a third party,
there can be no assurance that an agreement can be reached on acceptable terms.
If the Company seeks to market and sell such drugs directly, the Company will
need to hire additional personnel skilled in marketing and sales as it develops
drugs with commercial potential. There can be no assurance that the Company will
be able to acquire, or establish third-party relationships to provide, any or
all of these capabilities. See "Business--Collaboration Agreements."
Dependence on Management of Growth. The Company's success will depend on
the expansion of its operations, such as conducting clinical trials and gaining
regulatory approvals, and the management of these expanded operations. The
Company also must successfully manage multiple additional
13
<PAGE> 16
collaboration relationships. There can be no assurance that the Company will be
successful in managing its expansion and meeting the staffing and administrative
requirements that additional collaboration relationships will bring. Failure to
achieve these goals could have a material adverse effect on the Company's
business, financial condition and results of operations. See
"Business--LeukoSite's Drug Development Programs" and "--Employees."
Uncertainties Related to Pharmaceuticals Pricing and Third Party
Reimbursement. The successful commercialization of, and the interest of
potential collaborative partners to invest in, the development of the Company's
drug candidates will depend substantially on reimbursement of the costs of the
resulting drugs and related treatments at acceptable levels from government
authorities, private health care insurers and other organizations, such as
health maintenance organizations ("HMOs") and pharmacy benefits management
companies. There can be no assurance that reimbursement in the United States or
elsewhere will be available for any drugs the Company may develop or, if
available, will not be decreased in the future, or that reimbursement amounts
will not reduce the demand for, or the price of, the Company's drugs, thereby
adversely affecting the Company's business. If reimbursement is not available or
is available only to limited levels, there can be no assurance that the Company
will be able to obtain collaborative partners to manufacture and commercialize
its drugs, or would be able to obtain a sufficient financial return on its own
manufacture and commercialization of any future drugs.
Third-party payors are increasingly challenging the prices charged for
medical products and services. Also, the trend toward managed health care in the
United States and the concurrent growth of organizations such as HMOs, which can
control or significantly influence the purchase of health care services and
products, as well as legislative proposals to reform health care or reduce
government insurance programs, may result in lower prices for pharmaceutical
products. The cost containment measures that health care providers are
instituting, including practice protocols and guidelines and clinical pathways,
and the effect of any health care reform, could materially adversely affect the
Company's ability to sell any of its drugs, even if successfully developed and
approved. Furthermore, in certain foreign markets, pricing or profitability of
prescription pharmaceuticals is subject to government control. In the United
States there have been, and the Company expects that there will continue to be,
a number of federal and state proposals to implement similar government control.
The Company is unable to predict what additional legislation or regulation, if
any, relating to the health care industry or third-party coverage and
reimbursement may be enacted in the future or what effect such legislation or
regulation would have on the Company's business.
Exposure to Product Liability Claims and Limited Availability of
Insurance. The Company's business exposes it to potential liability risks that
are inherent in the testing, manufacturing and marketing of pharmaceutical
products. The use of the Company's drug candidates in clinical trials may expose
the Company to product liability claims and possible adverse publicity. These
risks will expand with respect to the Company's drug candidates, if any, that
receive regulatory approval for commercial sale. Product liability insurance for
the biotechnology industry is generally expensive, if available at all. The
Company does not have product liability insurance but intends to obtain such
coverage if and when its drug candidates are tested in clinical trials conducted
by the Company. However, such coverage is becoming increasingly expensive and
there can be no assurance that the Company will be able to obtain insurance
coverage at acceptable costs or in a sufficient amount, if at all. A successful
product liability claim or series of claims brought against the Company could
have a material adverse effect on the Company's business, financial condition
and results of operations.
Control by Management and Existing Stockholders. Upon completion of this
offering, the Company's officers, directors and principal stockholders and their
affiliates will own or control approximately 60% of the Company's outstanding
Common Stock. As a result, these stockholders, acting together, will have the
ability to control most matters requiring approval by the stockholders of the
Company, including the election of the Company's Board of Directors, the
adoption of charter amendments, and the approval of mergers and acquisitions and
other extraordinary corporate transactions. Such a concentration of ownership
may have the effect of delaying or preventing a
14
<PAGE> 17
change of control of the Company, including transactions in which the
stockholders might otherwise receive a premium for their shares over their
current market prices. See "Principal Stockholders."
No Prior Public Market, Stock Price Volatility. Prior to this offering
there has been no public market for any of the Company's securities.
Accordingly, there can be no assurance that an active trading market will
develop after this offering or that the Common Stock offered hereby will not
decline below the initial public offering price. The initial public offering
price will be determined by negotiations between the Company and the
Underwriters. See "Underwriting." The market price of the Company's securities
is likely to be highly volatile and there has been a history of significant
volatility in the market price for shares of other companies in the
biotechnology field. Announcements of technological innovations, new commercial
products, preclinical and clinical trials by the Company or its competitors,
other evidence of the safety or efficacy of products of the Company or its
competitors, governmental regulations and developments, health care legislation,
developments relating to patents or proprietary rights of the Company or its
competitors, including litigation, fluctuations in the Company's operating
results, market conditions for biotechnology stocks in general and other factors
may have a significant effect on the market price of the Company's Common Stock.
In particular, the realization of any of the risks described in these "Risk
Factors" could have a material adverse effect on the market price of the
Company's Common Stock. See "Underwriting."
Possible Adverse Impact of Shares Available for Future Sale. Future sales
of substantial amounts of Common Stock (including shares issued upon the
exercise of outstanding options and warrants) in the public market after this
offering or the prospect of such sales could adversely affect the market price
of the Common Stock and may have a material adverse effect on the Company's
ability to raise any necessary capital to fund future operations. Upon
completion of this offering, the Company will have 8,702,791 shares of Common
Stock outstanding. The 2,500,000 shares offered hereby will be freely tradable
without restriction or further registration under the Securities Act of 1933, as
amended (the "Securities Act"), except for any shares held by "affiliates" of
the Company within the meaning of the Securities Act which will be subject to
the resale limitations of Rule 144 promulgated under the Securities Act ("Rule
144"). The remaining 6,202,791 shares are "restricted" securities that may be
sold only if registered under the Securities Act, or sold in accordance with an
applicable exemption from registration, such as Rule 144. The officers and
directors of the Company, each person known by the Company to beneficially own
more than 5% of the Common Stock and certain other stockholders, who together
hold 6,202,791 shares of Common Stock, and options to purchase an additional
947,272 shares of Common Stock, have agreed not to sell directly or indirectly,
any Common Stock without the prior written consent of Hambrecht & Quist LLC for
a period of 180 days from the date of this Prospectus (the "Lock-up
Agreements"). Commencing on the expiration of the Lock-up Agreements, 659,289
shares of Common Stock will be eligible for sale in the public market, subject
to compliance with Rule 144. In addition, holders of 5,981,716 shares of Common
Stock will be entitled to certain registration rights with respect to such
shares. If such holders, by exercising their registration rights, cause a large
number of shares to be registered and sold in the public market, such sales
could have a material adverse effect on the market price of the Common Stock. In
addition, any demand of such holders to include such shares in Company-initiated
registration statements could have an adverse effect on the Company's ability to
raise needed capital. See "Description of Capital Stock--Registration Rights"
and "Shares Eligible for Future Sale."
Potential Anti-Takeover Effect of Certain Charter and By-Law
Provisions. Pursuant to the Company's Restated Certificate of Incorporation
(the "Restated Certificate of Incorporation"), special meetings of stockholders
may be called only by the Chairman of the Board of Directors, the President, a
majority of the Board of Directors of the Company or holders of 20% or more of
the then outstanding shares of capital stock of the Company. The Company has
agreed to give each of the entities affiliated with HealthCare Investment
Corporation, who will collectively own approximately 23% of the Company's shares
of Common Stock after the closing of this offering, the right to call a special
meeting of stockholders so long as they collectively hold 15% of the then
outstanding shares of capital stock of the Company. In addition, the Restated
Certificate of Incorporation authorizes the Board of Directors
15
<PAGE> 18
to issue preferred stock and to determine its rights and preferences in order to
eliminate delays associated with a stockholder vote on specific issuances. The
Company has no present plans to issue any shares of preferred stock. The
Restated Certificate of Incorporation also provides for specific procedures for
director nominations by stockholders and submission of other proposals for
consideration at stockholder meetings. These provisions may have the effect of
deterring hostile takeovers or delaying or preventing changes in control or
management of the Company, including transactions in which stockholders might
otherwise receive a premium for their shares over then-current market prices.
Certain provisions of Delaware law applicable to the Company could also delay or
make more difficult a merger, tender offer or proxy contest involving the
Company, including Section 203 of the Delaware General Corporation Law (the
"DGCL"), which prohibits a Delaware corporation from engaging in any business
combination with any stockholder owning 15% or more of Company's outstanding
voting stock ("interested stockholder") for a period of three years from the
date a stockholder becomes an interested stockholder unless certain conditions
are met. These provisions could also limit the price that investors might be
willing to pay in the future for shares of Common Stock. See "Description of
Capital Stock--Delaware Law and Certain Charter and By-Law Provisions."
Broad Management Discretion in Use of Proceeds. The Company's management
will have broad discretion to allocate the proceeds of this offering to uses
that it believes are appropriate. There can be no assurance that the proceeds of
this offering can or will be invested to yield a positive return. See "Use of
Proceeds."
Immediate and Substantial Dilution. The initial public offering price is
substantially higher than the net tangible book value per share of the currently
outstanding Common Stock. Purchases of shares of Common Stock offered hereby
will therefore suffer immediate and substantial dilution in net tangible book
value of $5.68 per share. The dilution will be increased to the extent that the
holders of outstanding options or warrants to purchase Common Stock at prices
below the initial public offering price exercise such options or warrants. See
"Dilution."
Absence of Dividends. The Company has never declared or paid cash
dividends and does not intend to declare or pay any cash dividends in the
foreseeable future. See "Dividend Policy."
16
<PAGE> 19
USE OF PROCEEDS
The net proceeds to the Company from the sale of the 2,500,000 shares of
Common Stock offered by the Company hereby at an assumed initial public offering
price of $9.00 per share are estimated to be approximately $20,325,000
($23,464,000 if the Underwriters' over-allotment option is exercised in full).
The Company intends to use the net proceeds for research and development,
working capital and general corporate purposes. The Company expects to expand
its proprietary research, drug discovery and drug development activities,
including the further development of its leukocyte-based platform technologies
and its proprietary product development programs in cancer and inflammatory,
autoimmune and viral diseases. The Company also expects to spend funds to
recruit and employ additional scientific and technical staff and to increase
capabilities in the area of preclinical and clinical testing. Further, the
Company plans to expand its facilities to accommodate these additional staff, as
well as to support additional activities with collaborative partners. The
Company also may spend funds on clinical development activities for its
proprietary product candidates. The Company may use a portion of its available
cash to acquire technologies or products under its strategy to continue to
broaden its platform technologies. The Company may use a portion of its
available cash to acquire or invest in companies complementary to its business.
The Company is not currently in any negotiations with respect to any such
acquisitions or investments. The amounts actually expended for each purpose may
vary significantly depending upon numerous factors including the progress of the
Company's research and development programs, the results of preclinical studies
and clinical trials, the timing of regulatory approvals, technological advances
and determinations as to commercial potential of the Company's product
candidates. Pending application as described above, the Company intends to
invest the net proceeds of this offering in investment-grade, interest bearing
securities.
The Company believes that the net proceeds of this offering, together with
its existing capital resources, interest income and revenue from the
collaboration agreements, will be sufficient to fund its currently planned
operating expenses and capital requirements through early 2000. However, there
can be no assurance that such funds will be sufficient to meet the Company's
operating expenses and capital requirements during such period. The Company's
actual cash requirements and may vary materially from those now planned and will
depend upon numerous factors, including the results of the Company's research
and development and collaboration programs, the timing and results of
preclinical and clinical trials, the timing and costs of obtaining regulatory
approvals, the progress of the milestone and royalty producing activities of the
Company's collaborative partners, the level of resources that the Company
commits to the development of manufacturing, marketing and sales capabilities,
the cost of filing, prosecuting, defending and enforcing patent claims and other
intellectual property rights, the ability of the Company to maintain existing
and establish new collaboration agreements with other companies, the
technological advances and activities of competitors and other factors.
The Company's management will have broad discretion to allocate proceeds of
this offering to uses that it believes are appropriate. There can be no
assurance that the proceeds of this offering can or will be invested to yield a
positive return.
DIVIDEND POLICY
To date, the Company has neither declared nor paid any cash dividends on
shares of its Common Stock. The Company currently intends to retain its earnings
for future growth and, therefore, does not anticipate paying any cash dividends
in the foreseeable future.
17
<PAGE> 20
CAPITALIZATION
The following table sets forth the capitalization of the Company as of June
30, 1997, (i) on an actual basis; (ii) on a pro forma basis as described in Note
1 below; and (iii) on a pro forma basis as adjusted to give effect to the sale
by the Company of the 2,500,000 shares of Common Stock offered hereby at an
assumed initial public offering price of $9.00 per share and the application of
the estimated proceeds therefrom. This table should be read in conjunction with
the Consolidated Financial Statements of the Company and the Notes thereto
included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
JUNE 30, 1997
-------------------------------------------
PRO FORMA
ACTUAL PRO FORMA(1) AS ADJUSTED(1)(2)
-------- ------------ -----------------
(IN THOUSANDS)
<S> <C> <C> <C>
Current portion of capital lease obligations........... $ 468 $ 468 $ 468
======== ======== =======
Capital lease obligations, net of current portion...... $ 778 $ 778 $ 778
-------- -------- -------
Redeemable convertible preferred stock, $.01 par value;
21,667,199 shares authorized and 16,746,346 shares
issued and outstanding, actual; no shares authorized,
issued or outstanding, pro forma and pro forma as
adjusted............................................. 25,221 -- --
-------- -------- -------
Stockholders' equity:
Preferred Stock, $.01 par value; no shares
authorized, issued or outstanding, actual;
5,000,000 shares authorized and no shares issued
and outstanding, pro forma and pro forma as
adjusted........................................ -- -- --
Convertible Preferred Stock, $.01 par value;
2,250,000 shares authorized, issued and
outstanding, actual; no shares authorized,
issued or outstanding, pro forma and pro forma
as adjusted..................................... 23 -- --
Common Stock, $.01 par value; 25,000,000 shares
authorized; 1,095,241 shares issued and
outstanding, actual; 6,183,176 shares issued and
outstanding, pro forma; and 8,683,176 shares
issued and outstanding, pro forma as
adjusted(3)..................................... 11 62 87
Additional paid-in capital........................ 8,720 33,913 54,213
Deficit accumulated during the development
stage........................................... (25,512) (25,512) (25,512)
-------- -------- -------
Total stockholders' equity (deficit)......... (16,759) 8,462 28,787
-------- -------- -------
Total capitalization.................... $ 9,240 $ 9,240 $29,565
======== ======== =======
</TABLE>
- ------------------------------
(1) Presented on a pro forma basis to give effect to (i) the automatic
conversion upon the closing of this offering of all outstanding shares of
the Company's Preferred Stock into an aggregate of 5,087,935 shares of
Common Stock (assuming an initial public offering price of $9.00 per share),
and (ii) the amendment of the Company's Restated Certificate of
Incorporation on August 8, 1997.
(2) As adjusted to give effect to the sale of the 2,500,000 shares of Common
Stock offered pursuant to this offering at an assumed initial public
offering price of $9.00 per share, after deducting the estimated
underwriting discount and offering expenses payable by the Company. See "Use
of Proceeds" and "Capitalization."
(3) Excludes (i) the sale subsequent to June 30, 1997 of 19,615 shares of Common
Stock upon the exercise of stock options and the receipt of approximately
$17,178 in net proceeds therefrom, (ii) an aggregate of 947,272 shares of
Common Stock issuable pursuant to stock options outstanding as of July 31,
1997 at a weighted average exercise price per share of $3.89, (iii) 84,145
shares of Common Stock issuable pursuant to warrants outstanding as of July
31, 1997, at a weighted average exercise price per share of $4.10 and (iv)
shares of Common Stock issuable pursuant to warrants outstanding as of July
31, 1997 that will expire unexercised upon the consummation of this
offering. See "Management--Amended and Restated 1993 Stock Option Plan" and
Note 10 of Notes to Consolidated Financial Statements.
18
<PAGE> 21
DILUTION
As of June 30, 1997, the Company had a pro forma net tangible book value of
approximately $7,938,000 or $1.28 per share of Common Stock. Pro forma net
tangible book value represents the amount of total tangible assets, less total
liabilities divided by 6,183,176, the number of shares of Common Stock, after
giving effect to the conversion of all outstanding shares of the Company's
Preferred Stock into an aggregate of 5,087,935 shares of Common Stock upon the
closing of this offering (assuming an initial public offering price of $9.00 per
share). Without taking into account any other changes in pro forma net tangible
book value after June 30, 1997, other than to give effect to the receipt by the
Company of the net proceeds from the sale of the 2,500,000 shares of Common
Stock offered by the Company hereby at an assumed initial public offering price
of $9.00 per share, the pro forma net tangible book value of the Company as of
June 30, 1997, would have been approximately $28,787,000 or $3.32 per share.
This represents an immediate increase in pro forma net tangible book value of
$2.04 per share to existing stockholders and an immediate dilution in pro forma
net tangible book value of $5.68 per share to new investors. The following table
illustrates this per share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share......... $ 9.00
Pro forma net tangible book value per share before the
offering............................................. $ 1.28
Increase per share attributable to new investors........ 2.04
Pro forma net tangible book value per share after the
offering............................................. 3.32
------
Dilution per share to new investors..................... $ 5.68
======
</TABLE>
The following table summarizes, on a pro forma basis as of June 30, 1997,
the differences between existing stockholders and the new investors with respect
to the number of shares of Common Stock purchased from the Company, the total
consideration paid and the average price per share paid:
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
-------------------- ---------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
--------- ------- ----------- ------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders......... 6,183,176 71% $33,826,925 60% $5.47
New investors................. 2,500,000 29% 22,500,000 40% 9.00
--------- --- ----------- ---
Total..... 8,683,176 100% $56,326,925 100%
========= === =========== ===
</TABLE>
The foregoing tables exclude the sale subsequent to June 30, 1997 of 19,615
shares of Common Stock upon the exercise of stock options and the receipt of
approximately $17,178 in net proceeds therefrom. In addition, other than as
noted above, the foregoing tables assume the exercise of no outstanding stock
options or warrants after July 31, 1997. At July 31, 1997, options to purchase
262,759 shares of Common Stock were exerciseable at a weighted average price of
$1.50 per share, and warrants to purchase 84,145 shares of Common Stock were
exercisable at a weighted average price of $4.10 per share. To the extent these
options or warrants are exercised, there will be further dilution to new
investors. See "Management--Amended and Restated 1993 Stock Option Plan,"
"Certain Transactions," "Description of Capital Stock--Warrants" and Note 11 of
Notes to Consolidated Financial Statements.
19
<PAGE> 22
SELECTED CONSOLIDATED FINANCIAL DATA
The selected consolidated balance sheet data set forth below, as of
December 31, 1995 and 1996, and the consolidated statements of operations data
for each of the three years in the period ended December 31, 1996, are derived
from the Company's Consolidated Financial Statements which have been audited by
Arthur Andersen LLP, independent public accountants, and which are included
elsewhere in this Prospectus. The selected consolidated financial data as of
December 31, 1992, 1993 and 1994 and for the period from inception (May 1, 1992)
to December 31, 1992 and for the year ended December 31, 1993, are derived from
the Company's consolidated financial statements not included in this Prospectus,
all of which have been audited by Arthur Andersen LLP, independent public
accountants. The selected financial data as of June 30, 1997 and for the six
months ended June 30, 1996 and 1997 and for the period from inception (May 1,
1992) to June 30, 1997 are derived from the Company's unaudited consolidated
financial statements which are included elsewhere in this Prospectus and which
include, in the opinion of the Company, all adjustments (consisting only of
normal recurring adjustments) that are necessary for a fair presentation of its
financial position and the results of its operations for those periods.
Operating results for the six months ended June 30, 1997 are not necessarily
indicative of the results that may be expected for the fiscal year ending
December 31, 1997. The selected consolidated financial data should be read in
conjunction with, and are qualified by reference to, "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and the Company's
Consolidated Financial Statements and Notes thereto.
<TABLE>
<CAPTION>
FOR THE PERIOD FOR THE PERIOD
FROM INCEPTION FROM INCEPTION
(MAY 1, 1992) SIX MONTHS (MAY 1,1992)
THROUGH YEARS ENDED DECEMBER 31, ENDED JUNE 30, THROUGH
DECEMBER 31, ------------------------------------- ------------------------ JUNE 30,
1992 1993 1994 1995 1996 1996 1997 1997
-------------- ------- ------- ------- ------- ----------- ----------- --------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF
OPERATIONS DATA:
Revenues:
Corporate collaborations... $ -- $ -- $ -- $ 250 $ 3,591 $ 524 $ 2,070 $ 5,911
Government grants.......... -- -- -- 200 83 -- 205 488
----- ------- ------- ------- ------- ------- ------- --------
-- -- -- 450 3,674 524 2,275 6,399
----- ------- ------- ------- ------- ------- ------- --------
Operating expenses:
Research and development... 41 1,540 5,056 7,051 8,502 3,925 5,451 27,641
General and
administrative........... 88 504 726 866 1,371 495 735 4,290
----- ------- ------- ------- ------- ------- ------- --------
Total operating
expenses............... 129 2,044 5,782 7,917 9,873 4,420 6,186 31,931
----- ------- ------- ------- ------- ------- ------- --------
Interest income (expense),
net........................ -- (19) 148 (10) 177 63 212 508
----- ------- ------- ------- ------- ------- ------- --------
Net loss..................... $ (129) $(2,063) $(5,634) $(7,477) $(6,022) $(3,833) $(3,699) $(25,024)
===== ======= ======= ======= ======= ======= ======= ========
Pro forma net loss per common
share(1)................... $ (1.04) $ (.59)
======= =======
Shares used in computing pro
forma net loss per common
share(1)................... 5,770 6,290
======= =======
</TABLE>
<TABLE>
<CAPTION>
AS OF JUNE 30, 1997
AS OF DECEMBER 31, --------------------------------------------------
----------------------------------------------- PRO FORMA
1992 1993 1994 1995 1996 ACTUAL PRO FORMA(2) AS ADJUSTED(2)(3)
----- ------- ------- -------- -------- ----------- -------------- -------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET
DATA:
Cash, cash equivalents
and marketable
securities............ $ -- $ 3,002 $ 7,504 $ 1,734 $ 9,384 $ 11,649 $ 11,649 $ 31,974
Working capital......... (128) 2,398 5,061 439 7,226 6,771 6,771 27,620
Total assets............ 1 3,687 10,932 4,538 11,874 14,784 14,784 34,585
Long-term obligations,
net of current
portion............... -- 320 1,319 1,583 1,230 1,123 1,123 1,123
Redeemable convertible
preferred stock....... -- 4,874 11,782 13,733 20,913 25,221 -- --
Deficit accumulated
during the development
stage................. (129) (2,192) (7,826) (15,303) (21,324) (25,512) (25,512) (25,512)
Stockholders' equity
(deficit)............. (128) (2,151) (4,776) (12,161) (12,581) (16,759) 8,462 28,787
</TABLE>
- ------------------------------
(1) Computed as described in Note 2(b) of Notes to Consolidated Financial
Statements.
(2) Presented on a pro forma basis to give effect to the automatic conversion
upon the closing of this offering of all outstanding shares of the Company's
Preferred Stock into an aggregate of 5,087,935 shares of Common Stock
(assuming an initial public offering price of $9.00 per share). Excludes the
sale subsequent to June 30, 1997 of 19,615 shares of Common Stock upon the
exercise of stock options and the receipt of approximately $17,178 in net
proceeds therefrom.
(3) As adjusted to reflect the sale of 2,500,000 shares of Common Stock offered
pursuant to this offering at an assumed initial public offering price of
$9.00 per share, after deducting the estimated underwriting discount and
offering expenses payable by the Company. See "Use of Proceeds" and
"Capitalization."
20
<PAGE> 23
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion of the financial condition and results of
operations of the Company should be read in conjunction with the Consolidated
Financial Statements and the related Notes thereto included elsewhere in this
Prospectus. Except for the historical information contained herein, the
discussion in this Prospectus contains certain forward-looking statements that
involve risks and uncertainties, such as statements of the Company's plans,
objectives, expectations and intentions. The cautionary statements made in this
Prospectus should read as being applicable to all related forward-looking
statements wherever they appear in the Prospectus. The Company's actual results
could differ materially from those discussed here. Factors that could cause or
contribute to such differences include those discussed in "Risk Factors," as
well as those discussed elsewhere herein.
OVERVIEW
The Company is a leader in the discovery and development of therapeutics
based upon the biology of leukocytes with potential applications in cancer and
inflammatory, autoimmune and viral diseases. The Company's technologies and
expertise in leukocyte biology facilitate the discovery and development of novel
and proprietary drugs that destroy or block the disease-causing actions of
leukocytes. The Company's funding has consisted of proceeds from private
placements of equity securities and receipts from collaboration agreements and
capital leases. The Company has not received any revenues from the sale of
products to date and does not expect to generate such revenues for at least the
next several years. The Company has experienced operating losses since its
inception and expects that the additional activities required to develop and
commercialize its products will result in further operating losses for at least
the next several years. As of June 30, 1997, the Company had an accumulated
deficit of approximately $25.5 million.
In 1994, 1995 and 1996, the Company entered into collaboration agreements
with Warner-Lambert for the discovery and development of drugs that inhibit the
action of the MCP-1, IL-8 and CCR5 receptors. In July 1996, the Company entered
into a collaboration agreement with Roche Bioscience for the discovery and
development of a drug to block the binding of the CCR3 receptor. In April 1997,
the Company entered into a collaboration agreement with Kyowa for the discovery
and development of a drug to inhibit the action of the CXCR3 and CCR1 receptors.
As of June 30, 1997, the Company had received approximately $8.4 million in
funding and license fee payments under these collaborations and will be entitled
to receive approximately $13.0 million of additional funding that is not subject
to the achievement of milestones (assuming each collaboration remains in effect
for its full term). In addition, in the event that a product is successfully
developed and commercialized under each of the collaborations, LeukoSite will be
entitled to receive up to approximately $44.3 million in development and
commercialization milestone payments, as well as royalties associated with the
sale of products. As of June 30, 1997, Warner-Lambert had invested $9.0 million
and Roche Finance Ltd had invested $3.0 million in equity of the Company. As of
June 30, 1997, the Company had recorded a portion of amounts received in respect
of its collaboration agreements as deferred revenue.
RESULTS OF OPERATIONS
Six Months Ended June 30, 1997 and 1996
Revenues. Revenues during the six month period ended June 30, 1997 were
$2,275,000 compared to $524,000 during the comparable period in 1996. This
increase was the result of greater research funding from corporate
collaborations with Warner-Lambert, Roche Bioscience and Kyowa and from Small
Business Innovation Research ("SBIR") grants.
Research and development. Research and development expenses were
$5,451,000 during the six months ended June 30, 1997 compared to $3,925,000
during the comparable period in 1996. This increase was primarily due to an
increase in preclinical development expenditures and to a lesser extent to an
increase in staffing and supplies associated with the Company's drug development
21
<PAGE> 24
programs. The Company expects research and development spending to increase over
the next several years as the Company further expands its discovery and
development programs.
General and administrative. General and administrative expenses were
$736,000 for the six months ended June 30, 1997 compared to $495,000 during the
comparable period in 1996. The increase was primarily due to an increase in
staffing and expenses associated with financing and corporate partnering
activities. These expenses will likely increase in future periods to support the
projected growth of the Company.
Interest income (expense), net. Interest income (expense), net was
$211,000 for the six months ended June 30, 1997 and $63,000 for the
corresponding period in 1996. This increase was primarily due to an increase in
interest income resulting from greater cash balances available for investment as
a result of the Company's preferred stock financings completed in 1996 and 1997.
Net loss. The net loss was $3,700,000 during the six months ended June 30,
1997 and $3,833,000 during the comparable period in 1996. The net loss remained
relatively unchanged as revenues increased on pace with expenditures.
Years Ended December 31, 1996 and 1995
Revenues. Revenues were $3,674,000 in 1996 compared to $450,000 in 1995.
Revenues in 1996 resulted from the collaboration agreements with Warner-Lambert
and Roche Bioscience and from SBIR grants. Revenues in 1995 were the result of a
license fee from Warner-Lambert and SBIR funding.
Research and development. Research and development expenses were
$8,502,000 during 1996 and $7,051,000 in 1995. The increase in research and
development expenses was primarily due to an increase in staffing and supplies
and preclinical development expenditures.
General and administrative. General and administrative expenses were
$1,371,000 in 1996 and $866,000 in 1995. The increase was primarily due to an
increase in financing activities as well as an increase in staffing and expenses
associated with corporate partnering activities.
Interest income (expense), net. Interest income (expense), net was
$177,000 in 1996 and an expense of $10,000 in 1995. This change was primarily
due to greater cash balances available for investment generating greater
interest income in 1996 combined with a comparable level of interest expense in
both years.
Net loss. The net loss was $6,022,000 during 1996 and $7,477,000 during
1995. The net loss decreased in 1996 as revenues generated from corporate
partners increased in 1996.
Years Ended December 31, 1995 and 1994
Revenues. Revenues were $450,000 in 1995. The Company had no revenue in
1994. Revenues in 1995 resulted from the collaboration agreements with
Warner-Lambert and SBIR funding.
Research and development. Research and development expenses were
$7,051,000 during 1995 and $5,056,000 in 1994. The increase in research and
development expenses was primarily due to an increase in staffing and expenses
associated with the Company's expansion into new facilities and to a lesser
extent to increases in supplies and preclinical development expenditures.
General and administrative. General and administrative expenses were
$866,000 in 1995 and $726,000 in 1994. The increase was primarily due to an
increase in staffing and expenses associated with the Company's expansion into
new facilities.
Interest income (expense), net. Interest income (expense), net was an
expense of $10,000 in 1995 and income of $148,000 in 1994. This change was
primarily due to greater interest expense incurred in 1995 as a result of
additional capital leases.
Net loss. The net loss was $7,477,000 during 1995 and $5,634,000 during
1994. The increased net loss was a result of increased expenditures to support
the Company's internal research programs, offset in part by revenue from
collaborations in 1995.
22
<PAGE> 25
LIQUIDITY AND CAPITAL RESOURCES
Since its inception, the Company's operations have been funded primarily
through private placements of preferred stock, which have raised approximately
$33.3 million, license fees and sponsored research, which have generated
approximately $8.4 million, and capital lease obligations, which have raised
approximately $2.8 million. The Company has used cash to fund operating losses
of approximately $25.0 million, the investment of approximately $2.2 million in
equipment and leasehold improvements and the repayment of approximately $1.8
million of capital lease obligations. In the years ended December 31, 1995 and
1996 and the six months ended June 30, 1997, the Company's capital expenditures
totaled approximately $40,000, $185,000 and $406,000, respectively. The Company
had no significant commitments as of June 30, 1997 for capital expenditures and
expects to expend approximately $450,000 for capital equipment over the next
twelve months. At June 30, 1997, the Company had on hand cash, cash equivalents
and marketable securities of approximately $11.6 million and working capital of
approximately $6.8 million.
The Company has entered into sponsored research and consulting agreements
with certain hospitals, academic institutions and consultants, requiring
periodic payments by the Company. Aggregate minimum funding obligations under
these agreements, which include certain cancellation provisions, total
approximately $527,000, which includes funding commitments of approximately
$276,000 and $220,000 in 1997 and 1998, respectively. The Company has also
entered into an agreement to contribute $3.0 million towards funding the
construction and equipping a research center for the TAC. The Company has paid
$1.8 million of the commitment as of June 30, 1997. The additional commitment is
funded in semi-annual installments of $250,000.
In April 1997, the Company and Ilex entered into a joint venture whereby
the parties formed a limited partnership to develop and commercialize LDP-03 for
the treatment of chronic lymphocytic leukemia. The partners are required to make
contributions each time the partnership requires working capital. LeukoSite and
Ilex will generally share equally in profits from the sales of LDP-03 and in all
research, development, clinical and commercialization costs. The capital
requirements of the joint venture consist of clinical development and
commercialization costs. LeukoSite and Ilex estimate that research, development
and clinical costs will be approximately $10.0 million over the next two years.
The joint venture expires in 2017, but provides for either partner, after the
earlier of a change in control (as defined therein) of the other partner or
October 2, 2000, to purchase the other partner's ownership of the joint venture
in the event of an unresolved deadlock.
The Company believes that the net proceeds of this offering, together with
its existing capital resources, interest income and revenue from the
collaboration agreements, will be sufficient to fund its currently planned
operating expenses and capital requirements through early 2000. However, there
can be no assurance that such funds will be sufficient to meet the Company's
operating expenses and capital requirements during such period. The Company's
actual cash requirements may vary materially from those now planned and will
depend upon numerous factors, including the results of the Company's research
and development and collaboration programs, the timing and results of
preclinical and clinical trials, the timing and costs of obtaining regulatory
approvals, the progress of the milestone and royalty producing activities of the
Company's collaborative partners, the level of resources that the Company
commits to the development of manufacturing, marketing and sales capabilities,
the cost of filing, prosecuting, defending and enforcing patent claims and other
intellectual property rights, the ability of the Company to maintain existing
and establish new collaboration agreements with other companies, the
technological advances and activities of competitors and other factors.
The Company will need to raise substantial additional capital to fund its
operations. The Company intends to seek such additional funding through public
or private financing or collaboration or other arrangements with collaborative
partners. There can be no assurance, however, that additional financing will be
available from any sources or, if available, will be available on acceptable
terms. See "Risk Factors--Substantial Additional Financing Requirements;
Uncertainty of Available Funding."
23
<PAGE> 26
BUSINESS
THE COMPANY
LeukoSite is a leader in the discovery and development of therapeutics
based upon the biology of leukocytes with potential applications in cancer and
inflammatory, autoimmune and viral diseases. The Company's technologies and
expertise in leukocyte biology facilitate the discovery and development of novel
and proprietary drugs that destroy or block the disease-causing actions of
leukocytes. The Company has one product candidate that has completed Phase II
clinical trials, two product candidates that are expected to begin human
clinical trials by early 1998, and seven small molecule drug discovery programs.
In a properly functioning immune system, leukocytes rid the body of
infectious organisms and repair damage to tissues and organs. However,
leukocytes can also cause or exacerbate disease processes when their growth is
uncontrolled, resulting in malignant diseases such as lymphomas and leukemias,
or when they are abnormally recruited into tissues, resulting in autoimmune or
inflammatory diseases. In addition, disease can also result when viruses such as
HIV attach to, invade and destroy leukocytes.
LeukoSite focuses on distinct cell surface molecules found on leukocytes
and their roles in disease. The Company is developing monoclonal antibodies and
small molecule drugs that selectively deplete leukocytes or block specific
leukocyte recruitment pathways controlled by chemokines and their receptors as
well as by integrins and adhesion molecules. LeukoSite believes that these drugs
will have a high degree of specificity and reduced side effects compared to
existing anti-cancer, anti-inflammatory, immunosuppressive and anti-viral
therapies.
The Company expects to initiate late stage clinical trials for its lead
product candidate, LDP-03, in 1998 to support licensure of the product. LDP-03
is a humanized monoclonal antibody to the leukocyte antigen CAMPATH, which was
licensed by the Company after reviewing data from Phase I and II clinical trials
showing activity in the treatment of chronic lymphocytic leukemia ("CLL"). The
Company has entered into a joint venture with Ilex Oncology, Inc. ("Ilex") for
the clinical development and commercialization of LDP-03. Under the terms of the
agreement with Ilex, LeukoSite and Ilex will generally share equally in any
profits from the sales of LDP-03 and in all future research, development,
clinical and commercialization costs. The Company's second product candidate,
LDP-01, is a humanized anti-integrin monoclonal antibody that inhibits early
leukocyte recruitment and inflammation resulting from reperfusion injury. The
Company intends to initiate two Phase I/IIa clinical studies of LDP-01 in the
United Kingdom in early 1998, one for kidney transplantation and a second for
thrombotic stroke. The Company's third product candidate, LDP-02, is a humanized
monoclonal antibody to the (LOGO)4B7 integrin and is being developed for the
treatment of inflammatory bowel disease, such as Crohn's disease and ulcerative
colitis. The Company intends to initiate a Phase I/IIa study of LDP-02 in the
United Kingdom in early 1998.
To date, the Company has also generated six chemokine-receptor drug
discovery targets that are the subject of collaborations with pharmaceutical
companies for small molecule drug discovery and development. The Company has
collaboration agreements with Warner-Lambert Company ("Warner-Lambert"), Roche
Bioscience and Kyowa Hakko Kogyo Co. Ltd. ("Kyowa"). As of June 30, 1997, the
Company had received $8.4 million under these collaborations for research
funding and license fees and will be entitled to receive $13.0 million of
additional funding that is not subject to the achievement of milestones
(assuming each collaboration remains in effect for its full term). In addition,
in the event that a product is successfully developed and commercialized under
each of the collaborations, LeukoSite will be entitled to receive up to $44.3
million in development and commercialization milestone payments, as well as
royalties associated with product sales. As of June 30, 1997, Warner-Lambert had
invested $9.0 million and Roche Finance Ltd had invested $3.0 million in equity
of the Company.
The Company was incorporated in Delaware in May 1992. Since inception, the
Company has been engaged in research and development activities in connection
with its drug discovery and development programs.
24
<PAGE> 27
BACKGROUND
Overview of Leukocyte and Immune System Biology
The human immune system protects the body against infection by bacteria,
viruses and parasites. Leukocytes are formed in the bone marrow, mature in
lymphatic tissue and are transported throughout the body by the bloodstream.
Endothelial cells, which comprise the inner lining of blood vessels, act as
gatekeepers allowing circulating leukocytes to enter surrounding tissue when
needed. Leukocytes, in a healthy immune response, eliminate pathogens without
damaging host cells.
Leukocyte Maturation. Hematopoietic (blood-forming) stem cells in the bone
marrow produce precursor cells that mature into circulating leukocytes.
Neutrophils, eosinophils and basophils, which are types of mature leukocytes,
are normally formed only in the bone marrow and are stored there until they are
needed. The other types of leukocytes (lymphocytes and monocytes), mature in
other organs, including the lymph nodes, spleen, thymus, tonsils and gut. During
the process of maturation and storage, leukocytes differentiate into more
defined functional subtypes, after which they are released into the circulatory
system. As they mature, leukocytes undergo complex changes including the
appearance and disappearance of molecules or receptors on their outer membrane.
Proteins and other biomolecules produced in the body bind to these receptors
which in turn signal the leukocytes to respond in specific ways. If the
leukocyte maturation process does not occur normally, uncontrolled and rapid
proliferation of certain types of leukocytes may lead to malignant diseases such
as leukemias and lymphomas.
Leukocyte Recruitment. Circulating leukocytes leave the bloodstream and
migrate into tissues via a complex set of pathways and molecular interactions.
This process is a fundamental part of the human immune system and provides a way
for leukocytes to be recruited to areas of infection or damaged tissue. The
sequential steps that lead to the recruitment of leukocytes from the blood
vessel into tissues begin when selectins, expressed by endothelial cells,
momentarily tether passing leukocytes causing them to roll along the vessel
wall. If the leukocytes encounter chemokines, a type of chemical signal
emanating from an inflammation site, receptors on the surface of the tethered
leukocytes will then bind to the chemokines, initiating a series of changes
within the leukocytes. Among the changes is the enhanced activity of adhesion
receptors called integrins. In the final step, the integrins on the surface of
the leukocytes bind to complementary structures called adhesion molecules
located on the vessel wall. Once attached, the leukocytes change shape, squeeze
through the vessel wall and migrate to the area of increased chemokine
concentration at the site of inflammation.
The process of leukocyte recruitment requires precise regulation. It is
essential that the body has exact signals as to when, where and with which type
of leukocyte to respond. In many inflammatory and autoimmune diseases, these
signals operate at the wrong place or time, leading to improper recruitment and
resulting in tissue damage from the release of inflammatory substances, such as
cytokines, growth factors and oxygen radicals.
Chemokines and Chemokine Receptors. Chemokines are a family of proteins
produced in many different tissues. The expression of chemokines is increased in
response to infection or very early stages of inflammation. Chemokine receptors
are members of the G protein-coupled family of receptors located on the outer
membrane of the cell and translate a variety of signals from the outside to the
inside of the cell. Chemokines bind to these chemokine receptors and activate
leukocytes, causing them to migrate toward the source of the chemokine molecule
(that is, movement out of the bloodstream and into tissues). Each subset of
leukocytes (for example, eosinophils, monocytes, lymphocytes and neutrophils)
has distinct types of chemokine receptors that respond to only certain
chemokines. Through this discriminating mechanism, the body can control and
selectively recruit certain types of leukocytes to mediate an inflammatory
process. In addition, certain viruses, such as HIV-1, may use chemokine
receptors as a homing mechanism to bind to and infect leukocytes.
Integrins and Adhesion Molecules. Integrins and adhesion molecules provide
another degree of control over leukocyte recruitment pathways. Integrins are a
family of proteins comprised of a series of
25
<PAGE> 28
alpha and beta chains that bind to distinct receptors, called adhesion
molecules, found on endothelial and other types of cells. Adhesion molecules
attract only those leukocytes that have matching integrin molecules and allow
for the selective transfer of these leukocytes through the endothelial layer
into tissues. A subset of adhesion molecules called addressins is expressed only
on certain tissues in response to infection or damage.
THE LEUKOSITE APPROACH: LEUKOCYTE SPECIFIC DRUGS
LeukoSite is researching and developing drugs to destroy or block the
disease-causing actions of leukocytes. The Company's technology and expertise
provide the platform for the identification of novel and proprietary
anti-cancer, anti-inflammatory and anti-viral drugs.
LeukoSite's goal is to discover and develop effective and safe therapeutic
drugs that target specific types of leukocyte pathways. Most available drugs
that regulate the immune response lack specificity for disease. For example,
steroids not only block inflammation but also suppress a variety of necessary
immunologic functions. Such non-specific drugs may produce profound universal
immunosuppression and can have other side effects. The targets for the Company's
discovery and development programs include chemokines, leukocyte cell surface
molecules (including chemokine receptors and integrins) and adhesion molecules.
This technology provides the basis for the discovery of drugs that work by
destroying specific types of leukocytes or blocking the recruitment of specific
types of leukocytes into diseased tissues.
Selective Depletion of Leukocytes. Therapeutic drugs that can selectively
eliminate certain leukocytes while sparing hematopoietic stem cells may be
useful for the treatment of certain blood cancers and as therapies to reduce
rejection of transplanted bone marrow and organs. For example, LDP-03, a
humanized lymphocyte-depleting monoclonal antibody, is directed against the CD52
surface antigen expressed on lymphocytes but not on hematopoietic stem cells.
Unlike fludarabine and other traditional cytotoxic chemotherapies used to treat
lymphomas and leukemias, LDP-03 does not deplete leukocyte-generating
hematopoietic stem cells.
Selective Blockade of Leukocyte Receptor and Recruitment Pathways. Many
inflammatory and autoimmune diseases may be caused by dysfunctional
chemokine/receptor and integrin/adhesion molecule pathways. LeukoSite has
identified a number of these pathways that appear to cause specific inflammatory
diseases. The technology platform developed at LeukoSite allows it to discover,
clone and characterize novel chemokines, chemokine receptors, integrins and
adhesion molecules for the discovery of disease-specific therapeutics.
STRATEGY
LeukoSite's objective is to exploit its strength in the field of leukocyte
biology to develop, acquire and commercialize proprietary new drugs.
Exploit Expertise in Leukocyte Biology. Based on its understanding of
leukocyte biology and the role of leukocytes in disease, LeukoSite plans to
continue to identify targets and to generate small molecules and monoclonal
antibodies through internal and external programs. The Company, through its
proprietary expertise in leukocyte biology, has one product candidate that has
completed Phase II clinical trials, two product candidates that are expected to
begin human clinical trials by early 1998, and seven small molecule drug
discovery programs. LeukoSite plans to continue to discover, develop and acquire
related products and technologies to supplement its scientific expertise, drug
development capability and product portfolio.
Leverage Corporate Partnerships. LeukoSite has entered into collaboration
agreements with Warner-Lambert, Roche Bioscience and Kyowa. These collaborations
are designed to build LeukoSite's infrastructure and expertise by funding
research at LeukoSite and by giving the Company access to extensive and
complementary small molecule screening libraries and drug development expertise.
In addition, these collaborations are expected to speed discovery and
development of drug
26
<PAGE> 29
candidates through the efforts of dedicated research staffs at the partners'
facilities. The goal of each collaboration is the commercialization of drugs to
treat large patient populations.
Employ Monoclonal Antibodies as Drug Candidates and as Tools. LeukoSite
uses monoclonal antibodies to chemokines, chemokine receptors, integrins and
adhesion molecules to measure the presence of target ligands and receptors in
models of inflammatory and immune system diseases. Monoclonal antibodies that
block target ligands and receptors demonstrate the relevance of leukocyte
pathways in disease and may also become drug candidates. The Company believes
that monoclonal antibodies are well-suited for acute inflammatory indications,
certain cancers and for accessible targets, such as those on the outside of
cells and in the bloodstream. LeukoSite has generated large collections of
monoclonal antibodies to various receptors as part of its research and
development programs. In addition, the Company is currently developing three
humanized monoclonal antibodies (LDP-01, LDP-02 and LDP-03) as therapeutic
products. Moreover, monoclonal antibodies can be used as tools to speed the
development of small molecule drugs. As a result of its work on the monoclonal
antibody LDP-02 for the treatment of inflammatory bowel disease, LeukoSite
identified a key target implicated in the disease and has initiated the b7
integrin receptor small molecule antagonist development program.
Develop Small Molecule Antagonist Drugs. LeukoSite's small molecule
programs utilize proprietary assays to screen large numbers of test compounds
that bind to chemokine or integrin receptors and block their biological
function. The Company has used the libraries of its partners as well as its own
to search for leads. Once a lead is identified, the Company and its
collaborators employ medicinal and combinatorial chemistry to design and
synthesize potent and selective product candidates. In addition, LeukoSite uses
information about the structure of receptors, ligands and compounds in
computer-assisted molecular models to identify the cell surface locations of
these receptors and to assist in the design of lead drug candidates. The Company
has six small molecule discovery programs in screening and lead optimization:
CCR3 Antagonist, MCP-1 Antagonist, IL-8 Antagonist, CCR1/CXCR3 Antagonist, CCR5
Antagonist and b7 Integrin Receptor Antagonist.
Utilize Non-human Primates for Rapid Proof of Principle. Early in the
development process, LeukoSite rigorously tests the pharmacological rationale
for its drugs in progressively complex and relevant models of human disease.
Researchers at the Company administer monoclonal antibodies and small molecule
drugs to non-human primates in established models of inflammatory and autoimmune
disease. Such models validate biological targets, are important indicators of
safety and toxicity profiles, and provide important insight into human
therapeutic applications of potential drugs. LeukoSite's veterinary pathologists
are experienced in the use of monoclonal antibody immunotherapy in non-human
primates.
Minimize Investment in Manufacturing and Development
Infrastructure. LeukoSite's strategy is to dedicate its resources to
leukocyte-based drug discovery and development, an area in which the Company
believes it has a competitive advantage. The Company plans to outsource or
jointly pursue certain high cost activities associated with its drug development
programs, such as manufacturing and clinical development. LeukoSite has a senior
management team in place with experience in planning and managing these
strategic relationships.
In-license Technologically-related Products. The Company intends to
opportunistically in-license products that are based upon leukocyte biology to
supplement its product pipeline. LeukoSite has acquired rights to LDP-03, a
lymphocyte-depleting drug, which has been tested extensively in multiple human
clinical trials in several different indications. Based on its review of the
data, LeukoSite in-licensed LDP-03 and has entered into a joint venture with
Ilex to develop and commercialize LDP-03 for use in the treatment of CLL.
27
<PAGE> 30
LEUKOSITE'S DRUG DEVELOPMENT PROGRAMS
LeukoSite currently has three drugs in human clinical or late preclinical
development. These monoclonal antibody programs are based on leukocyte
selectivity and tissue specificity.
<TABLE>
<CAPTION>
COMMERCIALIZATION
DRUG CANDIDATES STATUS RIGHTS
- ----------------------------------- ----------------------------------- ---------------
<S> <C> <C>
Leukocyte Antigens
LDP-03 (ANTI-CAMPATH MAB)
Chronic lymphocytic leukemia Completed Phase II
LeukoSite/Ilex
Joint Venture
Integrin/Adhesion Molecules
LDP-01 (ANTI-b2 MAB)
Kidney transplant Phase I/IIa clinical trials in the
United Kingdom to begin in 1997 LeukoSite(1)
Thrombotic stroke Phase I/IIa clinical trials in the
United Kingdom planned in early LeukoSite(1)
1998(2)
Myocardial infarction Preclinical development completed
LeukoSite(1)
LDP-02 (ANTI-b7 MAB)
Inflammatory bowel disease Preclinical development in
progress(2) LeukoSite(1)
</TABLE>
- ------------------------
(1) LeukoSite currently retains all rights to these programs. The Company may
seek to enter into development and marketing agreements for some or all of
these programs.
(2) A Phase I/IIa clinical trial pursuant to a CTX is expected to commence in
the United Kingdom in early 1998. See "Business--Government Regulation."
LDP-03 (CAMPATH-1H)
LeukoSite's lead product candidate, LDP-03, is a humanized monoclonal
antibody to the leukocyte antigen CAMPATH, which the Company is developing
jointly with Ilex for the treatment of chronic lymphocytic leukemia ("CLL"). The
Company recently licensed LDP-03 from the British Technology Group ("BTG") after
reviewing data from Phase I and II clinical trials conducted by Burroughs
Wellcome ("BW") showing activity in the treatment of patients with CLL. LDP-03
combats CLL by selectively depleting lymphocytes while sparing hematopoietic
stem cells. This selective depletion permits the body to retain needed
hematopoietic stem cells that are the precursors to, and repopulate the blood
with, leukocytes and preserve normal immune function. LDP-03 binds to the
antigen CD52, which is expressed almost exclusively on lymphocytes and which is
not expressed on hematopoietic stem cells, and destroys the lymphocytes. By
attacking the antigen CD52 and its lymphocytes, LDP-03 is more selective than
currently approved drugs for lymphomas and leukemias which indiscriminately
deplete rapidly-dividing cells, including both lymphocytes and hematopoietic
stem cells.
LDP-03 was originally tested by BW under license from BTG for a broad range
of indications, including autoimmune diseases such as rheumatoid arthritis,
non-Hodgkin's lymphoma, CLL and solid organ and bone marrow transplantations. BW
discontinued the trials after the data from rheumatoid arthritis patients
suggested that the degree of lymphocyte depletion was too great for chronic
therapy. In addition, BW's data from non-Hodgkin's lymphoma patients indicated
that there may be increased risk of opportunistic infection and that the drug's
efficacy was insufficient for first line stand-alone therapy. BW notified the
FDA that it had discontinued all development of CAMPATH-1H and that no further
enrollment into the two FDA-authorized Phase I/II CAMPATH-1H clinical trials
would occur. BW informed the FDA that, based on preliminary results from certain
of the non-Hodgkin's lymphoma
28
<PAGE> 31
clinical studies, the drug's toxicity of greatest concern was infection and
there was little improvement in efficacy to offset this concern.
Studies involving 64 of the 75 patients with CLL and related prolymphocytic
leukemia who participated in the BW trials have been publicly reported. Three of
the four studies exclusively address patients who were refractory to, or who had
relapsed following, chemotherapy. All responses were evaluated according to
National Cancer Institute criteria, which define complete remission as the
absence of all clinically detectable disease for at least eight weeks, while a
partial remission is defined as 50% or greater reduction of detectable disease
for at least eight weeks. Major responses include complete and partial
remissions.
In a study of 29 refractory or relapsing patients with CLL published in the
Journal of Clinical Oncology in April 1997 by Osterborg et al., one patient (3%)
had a complete remission and eleven patients (38%) had partial remissions,
representing a total of twelve major responses (41%). Another study of seven
fludarabine-resistant CLL patients published in the British Journal of
Hematology in September 1996 by Dyer et al reported one complete remission (14%)
and two partial remissions (28%) for a total of three major responses (42%). A
thirteen patient study presented at the American Society of Hematology Annual
Meeting in December 1995 by Rai et al in fludarabine-resistant CLL patients
reported three complete remissions (23%) and six partial remissions (46%)
totaling nine major responses (69%). A study of fifteen patients with previously
treated prolymphocytic leukemia, accepted for publication in the Journal of
Clinical Oncology, reports nine patients with complete remissions (60%) and two
patients with partial remissions (13%) totaling eleven patients with major
responses (73%).
CLL patients are presently treated with chlorambucil and fludarabine as
first-line or second-line therapy. Despite this course of treatment, all
patients not dying of other causes eventually relapse. No approved therapy is
available to treat patients who fail therapy with fludarabine. Based on the data
from the clinical trials, the Company believes that LDP-03 may be effective for
symptomatic CLL patients who have failed the current standard of care and second
line therapies. The Company believes that there are approximately 56,000 CLL
patients in the United States, of which fewer than half receive treatment. The
Company estimates that in 1996 approximately 5,000 patients died with CLL.
LeukoSite entered into a joint venture with Ilex Oncology, a drug
development company with expertise in the clinical development and registration
of oncology drugs, for the clinical development and commercialization of LDP-03.
Several members of the senior management of Ilex have had direct experience in
the development of fludarabine for treating CLL before joining Ilex. The joint
venture is currently in negotiations with a contract drug manufacturing company
for the manufacture of material to be used for clinical trials and
commercialization. See "Collaboration Agreements -- Ilex."
Based on the BW Phase I and II clinical trial data from approximately 75
patients with relapsing or refractory CLL treated with LDP-03, the Company and
Ilex expect to file applications with U.S. and European regulatory agencies in
1998 to begin a multi-center late stage clinical trial in 50 to 100 previously
treated CLL patients to support licensure of the product. Patient responses will
be evaluated based on the National Cancer Institute criteria and other
parameters defined by the Company. There can be no assurance that the FDA would
permit the Company to initiate late stage clinical trials for LDP-03 in CLL
patients solely on the basis of the BW Phase I and II clinical trial data.
LDP-01 (anti-b2 mAb)
LeukoSite is developing LDP-01, a humanized monoclonal antibody to the b2
integrin on leukocytes for the prevention of post-ischemic reperfusion injury
such as that resulting from organ transplantation, stroke and myocardial
infarction. The Company believes that LDP-01 blocks the attachment of b2
integrins to their adhesion molecules and limits the recruitment of leukocytes
involved in the inflammatory process at multiple tissue sites. The b2 integrin
receptor on the surface of leukocytes interacts with specific adhesion molecules
on the surface of endothelial cells lining blood vessels. This interaction is
essential for leukocytes to migrate into tissues and organs.
29
<PAGE> 32
Upon the reestablishment of blood flow following transplantation of organs
from cadaver donors, leukocytes are recruited to the transplanted organ
resulting in tissue injury, organ dysfunction and potentially graft loss.
Methods that inhibit leukocyte recruitment following ischemic injury, such as
the blockade of b2 integrins, could be therapeutically beneficial to patients
with ischemic disease and to patients receiving organ transplants from cadavers.
The use of LDP-01 in the treatment of kidney transplant patients may result in a
reduction in the time for the transplanted graft to function and may enhance
graft survival. According to the United Network of Organ Sharing ("UNOS"), there
were approximately 11,000 kidney transplants performed in 1996, of which 70%
involved the use of cadaver organs. The Company intends to initiate a Phase
I/IIa clinical trial in 1997 in the United Kingdom to determine the safety,
efficacy and pharmacokinetics of LDP-01 for the reduction of post-ischemic
reperfusion injury and delayed graft function in patients receiving cadaver
kidney transplants. If the Company's anticipated study is supportive, it intends
to pursue an IND filing in the United States.
Stroke is the irreversible loss of brain cells following ischemia, the
interruption of blood flow depriving the brain of blood and oxygen. Further
damage to brain cells occurs as the result of reperfusion injury by leukocytes
when blood flow is reestablished. By inhibiting the recruitment of leukocytes,
LDP-01 may decrease the degree of reperfusion tissue damage and the extent of
the disability, and could significantly reduce the inpatient and rehabilitation
costs associated with this condition. The Company intends to initiate a Phase
I/IIa clinical trial in early 1998 in the United Kingdom to determine the
safety, efficacy and pharmacokinetics of LDP-01 for the reduction of reperfusion
tissue damage associated with ischemic stroke. If the Company's anticipated
study is supportive, it intends to pursue a IND filing in the United States.
The Company has also completed pre-clinical testing of LDP-01 for
myocardial infarction. If the Company's anticipated Phase I/IIa study in stroke
is supportive, the Company will consider pursuing an IND filing for myocardial
infarction in the United States.
Preclinical trials demonstrate that LDP-01 can block attachment of
leukocytes to endothelial cells and inhibit their inflammatory activities. In
two models of inflammation in chimpanzees, LDP-01 blocked the recruitment of
neutrophils, monocytes and lymphocytes and prevented inflammation. LDP-01 has
been administered to three patients in clinical studies sponsored by the
Therapeutic Antibody Centre ("TAC"): two for the treatment of vasculitis, an
inflammation of blood vessels, and one for the treatment of polymyositis, a
severe muscle disease resulting in the weakening of limb and trunk muscles. The
results in these patients provided clinical data that LDP-01 inhibited the
further recruitment of leukocytes into inflamed tissue.
LDP-02 (anti-b7 mAb)
LeukoSite is developing LDP-02, a humanized monoclonal antibody to the a4b7
integrin receptor on leukocytes. LDP-02 is being evaluated for the treatment of
inflammatory bowel disease, which includes ulcerative colitis and Crohn's
disease, chronic disorders characterized by inflammation and ulceration of the
intestines. Ulcerative colitis causes bleeding and inflammation of the mucosal
lining of the colon and rectum, while Crohn's disease is an inflammation that
extends deeper into all layers of the intestinal wall, and frequently involves
both the small and large intestine. Preclinical studies in rodents and non-human
primates have implicated the a4b7 integrin subset of leukocytes as major
contributors to the process of inflammatory bowel disease. LDP-02 is currently
in late preclinical development, and the Company intends to initiate a Phase
I/IIa study in the United Kingdom in early 1998.
The Company evaluated the murine homologue of LDP-02 before it was
humanized and demonstrated pharmacologic activity in three non-human primate
models of inflammatory bowel disease, including the colitic cotton-top tamarin
monkey. The Company believes that this model represents the most clinically
useful model of ulcerative colitis. In this model, when systematically
administered, the murine homologue of LDP-02 was found to be efficacious in
rapidly resolving diarrhea and in inhibiting the localization of leukocytes to
the colonic mucosa.
Current therapy for inflammatory bowel disease includes the administration
of steroids which can broadly suppress the immune system. Published data
indicate that in 1994 there were approximately
30
<PAGE> 33
300,000 Crohn's disease patients and 250,000 ulcerative colitis patients in the
United States. Based on published reports, the total annual medical cost in 1990
in the United States was estimated to be between $1.0 and $2.0 billion for
Crohn's disease patients and between $400 and $600 million for ulcerative
colitis. LeukoSite will seek to develop intravenous and subcutaneous
formulations of LDP-02 for the treatment and management of severe exacerbations
of inflammatory bowel disease.
LEUKOSITE RESEARCH AND DRUG DISCOVERY PROGRAMS
LeukoSite currently has seven research and discovery programs. These
chemokine and integrin targeted programs are based on the selective blockade of
specific chemokine, chemokine receptor or integrin controlled leukocyte pathways
or functions.
<TABLE>
<CAPTION>
COLLABORATIVE
DRUG CANDIDATE STATUS PARTNER
- -------------------------------- -------------------------------- --------------------
<S> <C> <C>
Chemokine/Chemokine Receptor
CCR3 ANTAGONIST
Asthma Allergic Small molecule screening and
hypersentitivity lead generation and optimization
Roche Bioscience(1)
MCP-1 ANTAGONIST
Atherosclerosis Rheumatoid Small molecule screening and
arthritis lead generation and optimization
Warner-Lambert(2)
IL-8 ANTAGONIST
Myocardial infarction Small molecule screening and
small molecule and mAb lead Warner-Lambert(2)
generation
CCR1 ANTAGONIST
Rheumatoid arthritis Multiple Small molecule and mAb lead
sclerosis Psoriasis generation and optimization
Kyowa(3)
CXCR3 ANTAGONIST
Rheumatoid arthritis Multiple Small molecule and mAb lead
sclerosis Psoriasis generation and optimization
Kyowa(3)
CCR5 ANTAGONIST
HIV-1 infection and Small molecule screening and
inflammatory diseases lead generation
Warner-Lambert(4)
Integrin/Adhesion Molecules
b7 INTEGRIN RECEPTOR ANTAGONIST
Inflammatory bowel disease Small molecule lead optimization
--(5)
</TABLE>
- ------------------------------
(1) Roche Bioscience has worldwide exclusive rights under the collaboration
agreement to market products.
(2) Warner-Lambert has worldwide exclusive rights under the collaboration
agreement to market products.
(3) Kyowa has exclusive rights in Asia under the collaboration agreement and
options in the rest of the world to market products related to these
targets.
(4) Warner-Lambert has an option for the exclusive right under the collaboration
agreement to market products in the United States and Europe.
(5) LeukoSite retains all rights to this program.
CCR3 Receptor Antagonist
LeukoSite is engaged in the discovery and development of an orally
available, small molecule antagonist to block eosinophil recruitment and
function for the treatment of asthma and allergies. Data in animal models and in
humans suggest that eosinophils, and their recruitment to the lung and other
tissues and organs, play a significant role in the pathogenesis of asthma and
other allergies. The
31
<PAGE> 34
Company, in connection with several of its academic collaborators, has
identified the principal eosinophil chemokine receptor, CCR3, filed a patent
application on the gene that encodes for the receptor and the therapeutic
applications of it and has developed a program to discover an antagonist to
block the CCR3 receptor and the recruitment of eosinophils to respiratory tract
tissue. The Company believes that a drug which blocks the detrimental effects of
eosinophil recruitment will reduce the inflammation that contributes to asthma
and allergies.
In July 1996, LeukoSite entered into an agreement with Roche Bioscience for
the Company's CCR3 antagonist program. Roche Bioscience is currently screening
its compound library against the Company's targets. LeukoSite is entitled to
receive payments from Roche Bioscience in the form of licensing fees, research
support and milestone payments and royalties on worldwide product sales
resulting from this collaboration. Roche Bioscience will be responsible for and
provide financial support for the preclinical and clinical development of
products resulting from this collaboration and will have worldwide exclusive
rights under the collaboration agreement to market products. See "Collaboration
Agreements--Roche Bioscience."
MCP-1 Receptor Antagonist
LeukoSite is engaged in the discovery and development of an orally
available, small molecule antagonist to the MCP-1 receptor for the treatment of
chronic inflammatory and autoimmune diseases. The chemokine MCP-1 recruits
monocytes and T cells from the bloodstream to tissues. MCP-1 activates monocytes
and T cells by binding to its receptor on the leukocyte cell membranes, often
resulting in damage to surrounding tissues and irretrievable loss of normal
function. The blockade of the MCP-1 interaction with its receptor may be an
effective approach for the treatment of chronic inflammatory and autoimmune
diseases in which monocytes and T cells play key roles. In preclinical studies,
LeukoSite and others have shown that MCP-1 is associated with the inflammatory
processes exhibited in rheumatoid arthritis and atherosclerosis.
LeukoSite entered into a collaboration agreement with Warner-Lambert in
September 1994 to discover and develop small molecule antagonists to MCP-1 and
its receptor. This collaborative effort has identified inhibitors to the MCP-1
receptor which have demonstrated pharmacological activity in animal models of
inflammatory disease. This collaboration entered into a second contractual stage
in April 1996 with the objective of optimizing the pharmacological profile of
these inhibitors and identifying a clinical development candidate.
Warner-Lambert is responsible for the worldwide clinical development of an MCP-1
antagonist derived from the collaboration, and it is anticipated that the
clinical development program will focus on the treatment of atherosclerosis and
rheumatoid arthritis.
Warner-Lambert has worldwide exclusive rights under the collaboration
agreement to develop and market products resulting from the collaboration.
LeukoSite is entitled to receive royalties on product sales. This collaboration
provides for additional sponsored research payments to be made by Warner-Lambert
to LeukoSite and for payments to be made upon the achievement of certain
specified milestones. See "Collaboration Agreements--Warner-Lambert."
IL-8 Receptor Antagonist
LeukoSite is engaged in the discovery and development of an orally
available, small molecule antagonist to the IL-8 chemokine receptor for the
treatment of diseases involving tissue injury that result from post-ischemic
reperfusion injury. Myocardial infarction results when blood flow to a region of
the heart is blocked as a result of a coronary artery becoming occluded. This
blockage results in injury to and death of heart tissue in the affected region.
A significant portion of the tissue injury and death is thought to be caused by
neutrophil-mediated inflammatory damage. IL-8 is a potent and selective
chemokine protein that causes the recruitment and activation of neutrophils,
which are responsible for subsequent inflammation and post-ischemic reperfusion
injury. The Company's program is directed at the discovery and development of
drugs which inhibit the binding of IL-8 to its
32
<PAGE> 35
receptor in order to block the recruitment of neutrophils and to prevent the
resulting inflammation and reperfusion injury.
In July 1995, LeukoSite entered into a collaboration agreement with
Warner-Lambert to discover and optimize lead candidates using LeukoSite's IL-8
receptor-based technology by screening Warner-Lambert's compound library.
Warner-Lambert is responsible for the development and commercialization of
products derived from this collaboration. LeukoSite currently intends to pursue
an IL-8 receptor antagonist for post-ischemic reperfusion tissue injury
resulting from myocardial infarction. Warner-Lambert has worldwide exclusive
rights under the collaboration agreement to develop and market products
resulting from this collaboration. LeukoSite is entitled to receive royalties on
product sales. This collaboration provides for additional sponsored research
payments to be made by Warner-Lambert to LeukoSite and for payments to be made
upon the achievement of certain specified milestones. See "Collaboration
Agreements--Warner-Lambert."
CXCR3 Receptor Antagonist and CCR1 Receptor Antagonist
LeukoSite is engaged in the discovery and development of orally available,
small molecule antagonists and monoclonal antibodies to block the leukocyte
recruitment pathways controlled by chemokine receptors CXCR3 and CCR1. Ligands
for the receptors, specifically the chemokines IP-10 and RANTES, play key roles
in recruiting T cells and monocytes to sites of inflammation. LeukoSite is
studying the role these receptors play in inflammation with a combination of
tools including monoclonal antibodies. Based upon knowledge of the cells which
express these receptors, small molecule antagonists may be of therapeutic value
in the treatment of chronic inflammatory and autoimmune disease.
In April 1997, LeukoSite entered into a collaboration agreement with Kyowa
to discover small molecule antagonists and monoclonal antibody drugs that block
these chemokine receptors. Kyowa has the exclusive rights under the
collaboration agreement to develop and market products resulting from this
collaboration in Asia and an option for rights under the collaboration agreement
in the rest of the world. LeukoSite will be entitled to research support and
milestone payments and future royalties based on product sales. See
"Collaboration Agreements--Kyowa Hakko Kogyo."
CCR5 Receptor Antagonist
LeukoSite is engaged in the discovery and development of an orally
available, small molecule antagonist to the chemokine receptor CCR5. Such a drug
may be useful in the treatment of patients infected with HIV and as a therapy
for certain inflammatory and autoimmune diseases. The CCR5 receptor binds three
different chemokines and is found on lymphocytes and macrophages. The location
of this receptor and its presence on lymphocytes and macrophages suggest that
blocking it would have anti-inflammatory effects. Recent in vitro data indicate
that drugs that block CCR5 may inhibit the replication and growth of the HIV
virus. Furthermore, reports of individuals who are resistant to HIV link a
deletion in the CCR5 gene and a lack of CCR5 expression to their resistance to
the disease. LeukoSite and its collaborators have reported on the molecular
mechanism by which the virus binds to the CCR5 receptor and facilitates the
entry of HIV-1 into leukocytes.
In November 1996, LeukoSite entered into a collaboration agreement with
Warner-Lambert to discover and optimize small molecule lead candidates using
LeukoSite's CCR5 receptor-based technology by screening Warner-Lambert's
compound library. LeukoSite currently intends to pursue a CCR5 receptor
antagonist for HIV-1 and a distinct receptor antagonist for chronic
inflammation. Warner-Lambert has an option for the exclusive right under the
collaboration agreement to develop and commercialize products derived from the
collaboration in North America and Europe. In the event that this option is
exercised, LeukoSite will be entitled to receive payments upon the achievement
of milestones. LeukoSite is entitled to receive royalties on product sales.
LeukoSite retains commercialization rights under the collaboration agreement in
Asia.
33
<PAGE> 36
Outside its collaboration with Warner-Lambert, the Company has generated
monoclonal antibodies to the CCR5 receptor. These antibodies block strains of
HIV from binding to and infecting human leukocytes. The Company is currently
evaluating these antibodies in preclinical studies to determine future clinical
plans. See "Collaboration Agreements--Warner-Lambert."
b7 Integrin Receptor Small Molecule Antagonist
LeukoSite is engaged in the discovery and development of a small molecule
antagonist to the a4b7 integrin receptor present on gut-homing T lymphocytes.
The goal of this program is to identify a potent orally-active agent for
patients with inflammatory bowel disease. In contrast to LDP-02, which is
intended to treat acute flares of inflammatory bowel disease, daily
administration of the oral b7 integrin receptor antagonist is intended for
patients with mild to moderate inflammatory bowel disease in need of chronic
therapy.
LeukoSite believes that it has a strong rationale for the discovery and
development of small molecule b7 integrin receptor antagonists as a result of
observations that monoclonal antibodies to the a4b7 integrin and its receptor,
mucosal addressin cell adhesion molecule ("MAdCAM"), produced significant
improvements in animal models of inflammatory bowel disease. LeukoSite has made
a significant advance in its program by cloning the human gene for MAdCAM, which
was disclosed in a United States patent application filed on September 1, 1995.
As a result of this advance, LeukoSite has obtained important structural
information in the design of active b7 antagonists. The Company screens its own
library as well as libraries from the combinatorial chemistry company, Oxford
Asymmetry, Ltd. in connection with this program. Under the terms of this
agreement, LeukoSite retains all rights under the agreement to commercialize
drugs which result from the program between LeukoSite and Oxford Asymmetry, Ltd.
The Company has developed a high throughput b7:MAdCAM cell-based adhesion assay.
Using this assay to screen compounds, LeukoSite has identified several active
compounds and is investigating the design of optimal drug candidates.
The Company has an agreement with Genzyme Corporation which provides
LeukoSite with access to more than 800,000 compounds to screen in its high
throughput assays. After screening is complete, should there be any active
compounds, Leukosite and Genzyme will negotiate the terms of a collaboration for
the research, development and commercialization of drug candidates.
COLLABORATION AGREEMENTS
As a key part of its business strategy, LeukoSite pursues collaboration
agreements with pharmaceutical companies, hospitals, manufacturers and other
organizations to combine the Company's drug discovery capabilities with the
collaborators' research, drug development, manufacturing, marketing and
financial resources. LeukoSite has existing collaboration agreements with
several pharmaceutical companies, contract manufacturers and medical research
institutions, and intends to continue to seek collaboration agreements with
additional third parties. The Company structures its collaborations around
specified targets, such as chemokines and chemokine receptors or integrins and
adhesion molecules, or around targeted objectives, such as the manufacture of a
certain monoclonal antibody or small molecule. This approach enables LeukoSite
to exploit its drug discovery technologies while retaining flexibility to pursue
additional collaborations.
As of June 30, 1997, LeukoSite had received $8.4 million under these
collaborations for research funding and license fees and will be entitled to
receive $13.0 million of additional funding that is not subject to the
achievement of milestones (assuming each collaboration remains in effect for its
full term). In addition, in the event that a product is successfully developed
and commercialized under each of the Warner-Lambert, Roche Bioscience and Kyowa
collaboration agreements, LeukoSite will be entitled to receive up to $44.3
million in development and commercialization milestone payments, as well as
royalties associated with product sales. As of June 30, 1997, Warner-Lambert had
invested $9.0 million and Roche Finance Ltd had invested $3.0 million in equity
of the Company.
34
<PAGE> 37
LeukoSite's principal existing collaborations are as follows:
Warner-Lambert
LeukoSite has entered into three collaboration agreements with
Warner-Lambert. In September 1994, LeukoSite and Warner-Lambert entered into a
drug discovery collaboration to discover and market small molecule antagonists
to the MCP-1 chemokine and its receptor (the "MCP-1 Agreement"). In July 1995,
LeukoSite and Warner-Lambert entered into a drug discovery collaboration to
discover and market small molecule antagonists to the IL-8 chemokine and its
receptor (the "IL-8 Agreement"). During the research term, Warner-Lambert may
become obligated under both agreements to make milestone payments to the
Company. The IL-8 Agreement and the MCP-1 Agreement are terminable by either
party at any time and for any reason upon six months' written notice. Upon
termination, each party retains a non-exclusive license to use all technology
arising from the respective collaboration, and an exclusive royalty-free license
to make and sell products incorporating such technology. If any product is
successfully commercialized under the collaboration, LeukoSite is entitled to
receive royalties on product sales. In the event that the initial public
offering price is less than $12.30 per share, Warner-Lambert will receive a
credit against such royalties. Assuming an initial public offering price of
$9.00 per share, the approximate amount of such credit would be $2.1 million.
In November 1996, LeukoSite and Warner-Lambert entered into a one-year
exclusive drug discovery collaboration to screen and characterize antagonists to
the CCR5 chemokine receptor (the "CCR5 Agreement"). The CCR5 Agreement
contemplates two phases: the initial research phase, and a second phase which
would involve the negotiation of a new collaboration agreement similar to the
MCP-1 and IL-8 Agreements described above. If a compound is discovered with
antiviral activity that selectively inhibits a CCR5 mechanism, Warner-Lambert
has the option to make a payment to LeukoSite or to terminate the CCR5
Agreement. If Warner-Lambert were to terminate the CCR5 Agreement, the Company
would have exclusive ownership rights with respect to all compounds discovered
thereunder. At the end of the initial term, if the parties do not agree to
continue the collaboration, either party has the right to exploit the research
results, and if either party successfully commercializes a compound derived from
a lead compound identified during the collaboration, it is obligated to pay the
other party a royalty.
Roche Bioscience
In April 1996, LeukoSite entered into a two-year collaboration agreement
with Roche Bioscience to research and discover small molecule antagonists and/or
monoclonal antibodies to the CCR3 receptor and other eosinophil recruitment
mechanisms (the "CCR3 Agreement"). Roche Bioscience is obligated under the CCR3
Agreement to provide funding to the Company to support (i) a team of
scientist-employees of the Company, (ii) humanization of monoclonal antibodies
to CCR3 and (iii) additional research if the parties mutually agree to extend
the CCR3 Agreement to a third year. In conjunction with the CCR3 Agreement, the
parties also entered into a license agreement (the "CCR3 License Agreement"),
whereby Roche Bioscience is granted the exclusive right to make and sell
products developed under the collaboration in exchange for a noncreditable
license fee. The CCR3 License Agreement also provides that milestone payments
shall be made by Roche to LeukoSite for monoclonal antibody products and for
non-monoclonal antibody products, each payment triggered by the successful
achievement by the Company of a discrete phase in the clinical trial of any such
product. In addition, LeukoSite is entitled to receive royalties on product
sales.
Kyowa Hakko Kogyo
In April 1997, LeukoSite entered into a two-year collaboration agreement
with Kyowa to research and discover small molecule antagonists to the CCR1 and
CXCR3 chemokine receptors (the "CCR1 Agreement"). Under the CCR1 Agreement,
Kyowa is obligated to provide to the Company with research funding payments and
an additional payment if Kyowa elects to extend the term of the agreement for a
period beyond its initial term. After the first year of the collaboration, Kyowa
may
35
<PAGE> 38
terminate its obligation upon 60 days' notice, upon which Kyowa's funding
obligation to the Company also terminates. In connection with the CCR1
Agreement, the parties also entered into a licensing agreement (the "CCR1
License Agreement"), pursuant to which Kyowa retains an exclusive license to
make and sell products developed through the collaboration in Asia. This
exclusive license may be extended worldwide if Kyowa enters into a sublicense
agreement upon specified terms. Until the license becomes worldwide, the Company
retains the exclusive right to make and sell products utilizing Kyowa-patented
technology in geographic regions outside of Asia. Under the CCR1 License
Agreement, Kyowa may become obligated to make milestone payments to the Company
based upon the identification of a drug candidate and the stage of such
candidate in clinical trials. Additional milestone payments are triggered if a
second drug target is identified through the collaboration. In addition,
LeukoSite is entitled to receive royalties on product sales.
Ilex
In May 1997, LeukoSite and Ilex entered into a joint venture whereby the
parties formed a limited partnership to develop and commercialize LDP-03 for the
treatment of chronic lymphocytic leukemia, pursuant to an agreement of limited
partnership and a license agreement between the LeukoSite/Ilex partnership and
LeukoSite. The partners are required to make contributions each time the
partnership requires working capital. The development and commercialization
activities of the joint venture will be managed with equal control by each
party. LeukoSite and Ilex will generally share equally in profits from the sales
of LDP-03 and in all research, development, clinical and commercialization
costs. LeukoSite and Ilex estimate that research, development and clinical costs
will be approximately $10 million over the next two years. The joint venture
expires in 2017, but provides for either partner, after the earlier of a change
in control (as defined therein) of the other partner or October 2, 2000, to
purchase the other partner's ownership of the joint venture in the event of an
unresolved deadlock. In addition, in the event that one party is unable or
unwilling to fulfill its funding obligations to the joint venture, then in
certain circumstances, the party that funds the joint venture shall gain control
of the management of the joint venture, subject to certain catch-up rights of
the other party.
Therapeutic Antibody Centre
In October 1994, LeukoSite, the University of Oxford and the U.K. Medical
Research Council ("MRC") entered into a collaboration agreement to jointly
construct and operate the TAC, a pharmaceutical discovery, testing and
manufacturing center. Under the terms of the collaboration, MRC and LeukoSite
contribute toward funding the cost of staffing, equipment, facility construction
and other operating expenses of the TAC. The Company retains an exclusive
worldwide right to license technology discovered at the TAC in exchange for
royalties payable to the University of Oxford and MRC. The collaboration expires
five years after the TAC is fully operational.
Other Collaboration Agreements
In addition, the Company has collaboration agreements in effect with The
Imperial College of Science, Technology of Medicine, Lynxvale, Ltd., Oxford
Asymmetry, Ltd., the National Heart and Lung Institute, the Theodor Kocher
Institute and the University of Oxford.
PATENTS AND PROPRIETARY RIGHTS
The Company's intellectual property strategy is to protect its processes
and compositions of matter by, among other things, filing patent applications in
the United States and other key markets. LeukoSite has eleven pending U.S.
patent applications and has filed four international patent applications under
the Patent Cooperation Treaty ("PCT"). In addition, LeukoSite has in-licensed
seven U.S. patents, nine U.S. patent applications, three foreign patents and 10
foreign patent applications.
36
<PAGE> 39
In addition, LeukoSite has an exclusive license from British Technology
Group Limited ("BTG") under United States and foreign patents and patent
applications, variously covering certain humanized antibodies against the
CAMPATH antigen, pharmaceutical compositions, host cells useful in the
production of such antibodies, processes of producing such antibodies and
medical uses of such antibodies. The Company also has a non-exclusive sublicense
from BTG under additional U.S. and foreign patents and patent applications,
including U.S. patents which cover a method of treating a human suffering from a
disease or disorder, such as a cancer or a T cell-mediated disorder.
The Company's product candidates LDP-01, LDP-02 and LDP-03 are recombinant
humanized, complementarity determining region ("CDR")-grafted, monoclonal
antibodies. The Company is aware that patents have been issued in the United
States to third parties which relate to processes for producing recombinant
antibodies, compositions useful in the production of recombinant antibodies,
CDR-grafted humanized antibodies, processes for producing CDR-grafted humanized
antibodies and compositions useful in the production of CDR-grafted humanized
antibodies. Patents have also been granted to these parties in Europe, but the
European patents have been opposed by third parties. The Company may be required
to seek licenses under these patents for its humanized antibody products.
The Company is also aware of patents which have been issued to a third
party in the United States and Europe variously relating to "chimeric"
immunoglobulins and immunoglobulin chains, processes for production of such
chimeric molecules and compositions useful in the production of chimeric
molecules. The European patent has been opposed by third parties. Assuming that
the European patent survives in current form, the Company, based on the analysis
of Hamilton, Brook, Smith & Reynolds, P.C., the Company's patent counsel,
believes that, properly construed, the United States and European patent claims
do not cover the Company's LDP-01, LDP-02 or LDP-03 product candidates.
The Company is also aware of patents which have been issued to third
parties in the United States and/or Europe variously relating to certain
modified humanized immunoglobulins, methods of producing modified humanized
immunoglobulins, compositions useful in the production of modified humanized
immunoglobulins and methods of using of modified humanized immunoglobulins. The
European patents in these areas have also been opposed by third parties. The
Company, based on the analysis of Hamilton, Brook, Smith & Reynolds, P.C., the
Company's patent counsel, believes that, properly construed, the U.S. patent
claims do not cover the Company's LDP-01 and LDP-03 product candidates, and that
no valid claim of the European patents covers the Company's LDP-01 and LDP-03
product candidates. The Company is uncertain about the scope of the claims which
have issued in the United States and is uncertain whether these claims, when
properly construed, cover LDP-02. If it is determined that they do encompass
LDP-02, the Company will likely be required to seek a product license.
The Company is also aware of other third party published applications
relating to altered antibodies, methods of use of altered antibodies and methods
of production of altered antibodies. To the Company's knowledge, neither these
applications nor possible unpublished counterpart applications has proceeded to
grant in Europe or has issued as U.S. patents. There can be no assurance that
the Company will not be required to seek a license to some or all of the patents
which might issue from these patent applications.
The Company may be required to seek or choose to seek licenses to some or
all of these or other patents in order to develop and commercialize certain
product candidates or potential products incorporating the Company's technology
in the United States, Europe and other markets. There can be no assurance that
such licenses, if required, will be available to the Company, or if available,
will be obtainable on commercially acceptable terms, and the failure to obtain
such licenses could have a material adverse effect on the Company. In the
absence of required licenses, the patent owners may obtain an injunction, which
could prevent the manufacture, sale and use of the Company's products, with
material adverse effects on the Company. In addition, assuming such patents are
valid and enforceable, the Company can provide no assurances that, if
enforcement actions are brought by the patent owners against the Company, such
actions would be resolved in the Company's favor. The Company may also choose to
challenge the validity of one or more patents or patent claims. Any such action
or challenge could result in substantial costs to the Company and diversion of
Company
37
<PAGE> 40
resources and could have a material adverse effect on the Company. Moreover,
there can be no assurance that the Company would be successful in defending
against an infringement action or in challenging any such patents or patent
claims, and the failure to do so could have a material adverse effect on the
Company. If the Company does not obtain any required license, it could encounter
delays in product development while it attempts to design around the patents, or
it could find that the development, manufacture or sale of products requiring
such licenses could be foreclosed.
Patent law, as it relates to inventions in the pharmaceutical and
biotechnology fields, is still evolving and involves complex legal and factual
questions for which legal principles are not firmly established. Moreover,
because (i) patent applications in the United States are maintained in secrecy
until patents issue, (ii) patent applications in certain other countries
generally are not published until more than eighteen months after the earliest
priority date claimed, (iii) publication of technological developments in the
scientific or patent literature often lags behind the date of such developments
and (iv) searches of prior art may not reveal all relevant prior inventions, the
Company cannot be certain that it was the first to invent the subject matter
covered by its patent applications or that it was the first to file patent
applications for such inventions. Accordingly, there can be no assurance that
patents will be granted with respect to any of the Company's pending patent
applications or with respect to any patent applications filed by the Company in
the future. Similarly, the Company cannot be certain that the inventors of the
subject matter covered by applications which the Company has licensed were the
first to invent, or that the applicants of applications licensed by the Company
were the first to file. Accordingly, there can be no assurance that patents will
be granted with respect to any of the Company's pending licensed patent
applications or with respect to any future applications subject to a license.
The commercial success of the Company will depend in part on not infringing
patents or proprietary rights of others. There can be no assurance that the
Company will be able to obtain a license to any third party technology it may
require to conduct its business or that, if obtainable, such technology can be
licensed at a reasonable cost. Failure by the Company to obtain a license to
technology that it may require to utilize its technologies or commercialize its
products may have a material adverse effect on the Company's business, operating
results and financial condition. In some cases, litigation or other proceedings
may be necessary to defend against or assert claims of infringement, to enforce
patents issued to the Company, to protect trade secrets, know-how or other
intellectual property rights owned by the Company, or to determine the scope and
validity of the proprietary rights of third parties. Any potential litigation
could result in substantial costs to and diversion of resources by the Company
and could have a material adverse effect on the Company's business, operating
results and financial condition. There can be no assurance that any of the
Company's issued or licensed patents would ultimately be held valid or that
efforts to assert or defend any of its patents, trade secrets, know-how or other
intellectual property rights would be successful. An adverse outcome in any such
litigation or proceeding could subject the Company to significant liabilities,
require the Company to cease using the subject technology or require the Company
to license the subject technology from the third party, all of which could have
a material adverse effect on the Company's business, financial condition and
results of operations.
Much of the Company's technology and many of its processes are dependent
upon the knowledge, experience and skills, which are not patentable, of key
scientific and technical personnel. To protect its rights to and to maintain the
confidentiality of trade secrets and proprietary information, the Company
requires employees, Scientific Advisory Board members and consultants to execute
confidentiality and invention assignment agreements upon commencement of a
relationship with the Company. These agreements prohibit the disclosure of
confidential information outside the Company and require disclosure and
assignment to the Company of certain ideas, developments, discoveries and
inventions made by employees, advisors and consultants. There can be no
assurance, however, that these agreements will not be breached or that the
Company's trade secrets or proprietary information will not otherwise become
known or developed independently by others.
38
<PAGE> 41
GOVERNMENT REGULATION
Overview of FDA Regulations. Non-biological drugs and biological drugs,
including the Company's products under development, are subject to extensive and
rigorous regulation by the federal government, principally the FDA, and by state
and local governments. If these products are marketed abroad, they also are
subject to export requirements and to regulation by foreign governments. The
applicable regulatory clearance process, which must be completed prior to the
commercialization of a product, is lengthy and expensive. There can be no
assurance that the Company will be able to obtain the necessary regulatory
approvals on a timely basis, if at all, for any of its products under
development, and delays in receipt for failure to receive such approvals, the
loss of previously received approvals, or failure to comply with existing or
future regulatory requirements could have a material adverse effect on the
Company's business, financial condition and results of operations.
The FDC Act and the PHS Act govern or influence the development, testing,
manufacture, labeling, storage, approval, advertising, promotion, sale and
distribution of most FDA-regulated products in the United States. Failure to
comply with the applicable FDA regulatory requirements could result in sanctions
being imposed on the Company (or its collaborative partners and contract
manufacturers), including warning letters, fines, product recalls or seizures,
injunctions, refusals to permit products to be imported into or exported out of
the United States, FDA refusal to grant premarket approval of products and/or to
allow the Company to enter into government supply contracts, withdrawals of
previously approved marketing applications and criminal prosecutions.
FDA requirements for the Company's products under development vary
depending upon whether the product is a non-biological drug or biological drug.
Depending on the nature of the product, the Company's products under development
will be regulated as either non-biological drugs under the FDC Act or as
biological drugs under the FDC Act and the PHS Act. The Company believes that
its monoclonal antibody products currently in human clinical or late preclinical
development (i.e., LDP-03, LDP-01 and LDP-02) will be regulated by the FDA as
biological drugs. Because of the early research and development stages of its
small molecule antagonist program, the Company is uncertain as to whether
products under development in its small molecule antagonist program will be
regulated as non-biological drugs or biological drugs.
Regulation of Non-biological Drugs and Biological Drugs. Non-biological
drugs and biological drugs are subject to some of the same laws and regulations.
Ultimately, however, they are approved under different regulatory frameworks,
with non-biological drugs being approved under the FDC Act and biological drugs
being approved under the PHS Act. Product development and approval within either
regulatory framework takes a number of years, involves the expenditure of
substantial resources and is uncertain. Many non-biological drugs and biological
drugs that initially appear promising ultimately do not reach the market because
they are not found to be safe or effective or cannot meet the FDA's other
regulatory requirements. In addition, there can be no assurance that the current
regulatory framework will not change or that additional regulations will not
arise at any stage of the Company's product development that may affect
approval, delay the submission or review of an application or require additional
expenditures by the Company.
The activities required before a new non-biological drug or biological drug
can be marketed in the United States primarily begin with preclinical testing.
Preclinical tests include laboratory evaluation of product chemistry and other
characteristics and animal studies to assess the potential safety and efficacy
of the product as formulated. Many preclinical studies are regulated by the FDA
under the current Good Laboratory Practice ("GLP") regulations. Violations of
these regulations can, in some cases, lead to invalidation of the studies,
requiring such studies to be replicated if the data are to be submitted to the
FDA in support of a marketing application.
The entire body of preclinical development work necessary to administer
investigational non-biological drugs and biological drugs to human volunteers or
patients is summarized in an investigational new drug ("IND") application
submitted to the FDA. FDA regulations provide that human clinical trials may
begin 30 days following submission of an IND application, unless the FDA advises
39
<PAGE> 42
otherwise or requests additional information, clarification or additional time
to review the application. There is no assurance that the submission of an IND
will eventually allow a company to commence clinical trials. Once trials have
commenced, the FDA may stop the trials, or particular types of trials, by
placing a "clinical hold" on such trials because of concerns about, for example,
the safety of the product being tested. Such holds can cause substantial delay
and in some cases may require abandonment of a product.
Clinical testing involves the administration of the investigational
non-biological drug or biological drug to healthy human volunteers or to
patients under the supervision of a qualified principal investigator, usually a
physician, pursuant to an FDA reviewed protocol. Each clinical study is
conducted under the auspices of an Institutional Review Board ("IRB") at each of
the institutions at which the study will be conducted. An IRB will consider,
among other things, ethical factors, the safety of human subjects and the
possible liability of the institution. Human clinical trials typically are
conducted in three sequential phases, but the phases may overlap. Phase I trials
consist of testing the product in a small number of patients or normal
volunteers, primarily for safety, in one or more dosages, as well as
characterization of a drug's pharmacokinetic and/or pharmacodynamic profile. In
Phase II, in addition to safety, the efficacy of the product is evaluated in a
patient population. Phase III trials typically involve additional testing for
safety and clinical efficacy in an expanded population at geographically
dispersed sites. A clinical plan, or "protocol," accompanied by the approval of
an IRB, must be submitted to the FDA prior to commencement of each clinical
trial. All patients involved in the clinical trial must provide informed consent
prior to their participation. The FDA may order the temporary or permanent
discontinuance of a clinical trial at any time for a variety of reasons,
particularly if safety concerns exist. These clinical studies must be conducted
in conformance with the FDA's bioresearch monitoring regulations.
A company seeking FDA approval to market a new non-biological drug (in
contrast to biological drug) must file a new drug application ("NDA") with the
FDA pursuant to the FDC Act. In addition to reports of the preclinical and
clinical trials conducted under the FDA-approved IND application, the NDA
includes information pertaining to the preparation of the drug substance,
analytical methods, drug product formulation, detail on the manufacture of
finished products and proposed product packaging and labeling. In addition to
reports of the preclinical and clinical trials conducted under the
FDA-authorized IND application, the marketing application includes evidence of
the product's safety, purity, potency, and efficacy.
The FDA has established procedures designed to expedite the development,
evaluation and marketing of therapies intended to treat persons with cancer,
AIDS or other life-threatening and severely-debilitating illnesses, especially
when no satisfactory alternative therapy exists. Sponsors of such products may
request to meet with the FDA-reviewing officials early in the drug development
process to review and reach agreement on the design of necessary preclinical and
clinical studies. The term "life-threatening" is defined by FDA to mean: (1)
diseases or conditions where the likelihood or death is high unless the course
of the disease is interrupted; and (2) diseases or conditions with potentially
fatal outcomes, where the endpoint of clinical trial analysis is survival.
"Severely-debilitating" is defined by the FDA to mean diseases or conditions
that cause major irreversible morbidity. Treatment of patients with an
experimental non-biological or biological drug also may be allowed under a
Treatment IND before general marketing begins and pending FDA approval. Charging
for an investigation product also may be allowed under a Treatment IND to
recover certain costs of development if various requirements are met. There can
be no assurance that any of the Company's products under development will
qualify for expedited review or for treatment use.
Traditionally, a company seeking FDA approval to market a biological drug
(in contrast to a non-biological drug) is required to file a product license
application ("PLA"), and an establishment license application ("ELA") with the
FDA pursuant to the PHS Act before commercial marketing of a biological drug.
Recently, however, the FDA amended the biological drug regulations to eliminate
the ELA requirements for specified biotechnology and synthetic biological drugs
subject to licensing under the PHS Act, including, but not limited to,
monoclonal antibody products for in vivo use. For
40
<PAGE> 43
these specified products, in place of the ELA a company is required to prepare
and submit additional information for inclusion in a single biologics license
application ("BLA"). The Company believes that its monoclonal antibody products
will be subject to licensing under the BLA process, but there can be no
assurance that the FDA will determine that the Company's monoclonal antibody
products meet the agency's criteria for regulation under the BLA process.
Submission of a NDA, PLA, ELA or BLA does not assure FDA approval for
marketing. The application review process generally takes one to three years to
complete, although reviews of non-biological drugs and biological drugs for
life-threatening diseases may be accelerated or expedited. However, the process
may take substantially longer if, among other things, the FDA has questions or
concerns about the safety and/or efficacy of a product.
Since 1992, non-biological and biological drugs have been subject to the
Prescription Drug User Fee Act of 1992 ("PDUFA"). PDUFA requires that companies
submitting marketing applications for such products pay fees in connection with
review of the applications. In return, the FDA has committed to reviewing a
certain percentage of the applications within certain timeframes. For example,
in its Fiscal Year 1996 report on PDUFA, the FDA reported that 95 percent of
PLAs, BLAs and NDAs received in Fiscal Year 1995 were reviewed within 12 months
of application submission. FDA's PDUFA performance goal in Fiscal Year 1996 was
to complete its review of 70 percent of such applications within 12 months. In
Fiscal Year 1997, the FDA has committed to reaching an approval, disapproval or
additional-data-required decision on 90 percent of PLAs, BLAs and NDAs within 12
months of application submission. PDUFA is scheduled to expire on September 30,
1997. Although the Congress is considering legislation to extend PDUFA for an
additional period of time, there can be no assurance that the extension will be
enacted. Failure of the Congress to extend PDUFA or the imposition of other
requirements could have a significant adverse affect on the FDA's timeframe for
reviewing marketing applications.
In general, in order to approve a non-biological or biological drug, the
FDA requires at least two properly conducted, adequate and well-controlled
clinical studies demonstrating efficacy with sufficient levels of statistical
assurance. In the case of approval of a biological drug, one properly conducted,
adequate and well-controlled clinical study may suffice. The FDA, however,
recently proposed a new initiative under which the agency can determine that a
non-biological or biological drug is effective for a new use without requiring
data from two new clinical trials. However, additional information may be
required. For example, the FDA also may request long-term toxicity studies or
other studies relating to product safety or efficacy. Notwithstanding the
submission of such data, the FDA ultimately may decide that the NDA, PLA or BLA
does not satisfy its regulatory criteria for approval and disapprove the
application. Finally, the FDA may require additional clinical tests following
NDA, PLA or BLA approval to confirm safety and efficacy (Phase IV clinical
trials).
In addition, the FDA may, in some circumstances, impose restrictions on the
use of the non-biological drug or biological product that may be difficult and
expensive to administer. Product approval may be withdrawn if compliance with
regulatory requirements are not maintained or if problems occur after the
product reaches the market. The FDA requires reporting of certain safety and
other information that becomes known to a manufacturer of an approved
non-biological drug or biological product.
The product testing and approval process is likely to take a substantial
number of years and involves expenditure of substantial resources. There can be
no assurance that any approval will be granted on a timely basis, or at all. The
FDA also may require postmarket testing and surveillance to monitor the record
of the product and continued compliance with regulatory requirements. Upon
approval, a prescription non-biological drug or biological product may only be
marketed for the approved indications in the approved dosage forms and at the
approved dosage. Adverse experiences with the product must be reported to the
FDA.
Among the requirements for product approval is the requirement that the
prospective manufacturer conform to the FDA's current Good Manufacturing
Practices ("GMP") regulations, as supple-
41
<PAGE> 44
mented by the regulations pertaining to biological drugs. In complying with the
GMP regulations, manufacturers must continue to expend time, money and effort in
product record keeping and quality control to assure that the product meets
applicable specifications and other requirements. The FDA periodically inspects
manufacturing facilities in the United States and abroad in order to assure
compliance with applicable GMP requirements. Failure of the Company or the
Company's contract manufacturer to comply with the FDA's GMP regulations or
other FDA regulatory requirements could have a significant adverse effect on the
Company's business, financial condition and results of operations.
Under the Orphan Drug Act, a sponsor of a marketing application may seek to
obtain a seven-year period of marketing exclusivity for a non-biological or
biological drug intended to treat a rare disease or condition (i.e., a disease
or condition that occurs in fewer than 200,000 patients). Before a product can
receive marketing exclusivity associated with orphan product status, it must
receive orphan product designation. If a product is designated as an orphan drug
or biologic by the FDA and it is the first FDA approved application of the
specified indication, the sponsor receives seven years of marketing exclusivity.
The Company intends to seek FDA orphan product designation for LDP-03 for the
treatment of chronic lymphocytic leukemia. Even if such designation is sought,
the FDA may not grant it. Moreover, even if the Company does receive orphan
product designation for LDP-03 or any of its other products under development,
other companies also may receive orphan designation and obtain the FDA marketing
approval before the Company obtains such approval. If another company obtains
marketing approval first and receives seven-year marketing exclusivity, the
Company would not be permitted by the FDA to market the Company's product in the
United States during the exclusivity period. In addition, the Company could
incur substantial costs in asserting any rights to prevent such uses it may have
under the Orphan Drug Act. If the Company receives seven-year marketing
exclusivity, FDA may rescind the period of exclusivity under certain
circumstances, including failure of the Company to assure a sufficient quantity
of the drug.
Foreign requirements. In addition to the applicable FDA requirements, if
the Company attempts to sell its products overseas, the Company will be subject
to foreign regulatory authorities governing clinical trials, approvals and
product sales. Whether or not FDA approval has been obtained, approval of a
product by the comparable regulatory authorities of foreign countries must be
obtained prior to the commencement of marketing of the product in those
countries. The approval process varies from country to country and the time
required may be longer or shorter than that required for FDA approval. The
export of unapproved products also is subject to FDA regulation. Under certain
conditions, however, an unapproved non-biological or biological drug may be
exported to any country if the product complies with the laws of that country
and has valid marketing authorization in Australia, Canada, Israel, Japan, New
Zealand, Switzerland, South Africa, or in any country in the European Union
("EU") or the European Economic Area.
In Europe, the clinical trial approval process varies from country to
country, ranging from simple notification of intent to conduct a clinical trial
to a complete and lengthy approval process. The Company's success in obtaining
FDA approval of an IND application does not ensure clinical trial approval in
Europe, which must be pursued individually in each country in which the Company
intends to conduct clinical trials. The clinical trial approval process in the
United Kingdom (also referred to as the CTX process), where the Company intends
to conduct clinical trials beginning in 1997, is a rigidly time-limited process
depending upon acceptance by the regulatory authority in the United Kingdom of
an information summary containing details regarding the chemistry, pharmacy and
toxicology of the drug compressed into a 50-60 page document. Approval by the
regulatory authority in the United Kingdom, which must be given or refused
within 35 days, gives the applicant broad freedom to conduct trials in different
centers within the pre-agreed conditions of a usage guideline.
Unlike the highly individual approach to approval of clinical trials which
varies in Europe from country to country, the product registration system in the
EU combined with those of other European nations have been harmonized. After
1998, all non-biological and biological products which are to be marketed in
more than one EU member state must be approved either through the centralized or
42
<PAGE> 45
decentralized (mutual recognition) procedure. Use of the centralized process is
compulsory for biotechnology products, such as the Company's monoclonal antibody
products, and is available upon request for other innovative new products. The
centralized procedure involves the submission of an application to a central
authority, the European Agency for the Evaluation of Medicinal Products ("EMEA")
based in London, evaluation of the application by two of the member states
appointed as Rapporteurs and agreement by all other member states through the
decision of a delegate committee, the Committee on Proprietary Medicinal
Products ("CPMP"). The process is rigidly time-limited. In general, the total
time required for product approval ranges between one and two years. Product
approval permits the applicant to commercialize the product with a single set of
indications and contraindications throughout the European market.
Preconceived attitudes toward acceptable indications for a particular
non-biological or biological drugs may vary among member states and those
indications agreed upon by the CPMP may represent the compromise that could be
agreed upon by all members. Therefore, there can be no assurance that the
indications for use for which the Company initially seeks marketing approval
will be the same as those that are finally approved by the CPMP. In addition,
there can be no assurance that the CPMP will accept the same clinical end points
as the FDA in proving efficacy. Other applicants have found it necessary to
reassess their clinical trial results to satisfy different criteria before they
could obtain a consensus favorable opinion from the CPMP, even though the FDA
already had granted approval for marketing the product in the United States.
There can be no assurance that any application the Company submits to the EMEA
will be approved on a timely basis, or at all, and failure of the Company to
obtain marketing authorization in Europe for any of its products could have a
significant adverse effect on the Company's business, financial condition and
results of operations.
Other Regulations. The Company is subject to numerous federal, state and
local laws and regulations relating to such matters as safe working conditions,
manufacturing practices, environmental protection, fire hazard control, the
experimental use of animals and the disposal of hazardous or potentially
hazardous substances. There can be no assurance that the Company will not be
required to incur significant costs to comply with such laws and regulations in
the future or that such laws or regulations will not have a materially adverse
effect upon the Company's business, financial condition and results of
operations.
MANUFACTURING AND SUPPLY
The Company currently has no manufacturing facilities or staff for clinical
or commercial production of any monoclonal antibodies or small molecule
antagonists. The Company intends to rely initially on third parties to
manufacture certain of its product candidates for development, preclinical and
clinical trials and commercialization, if any. The monoclonal antibodies LDP-01
and LDP-02 will be manufactured for preclinical and early clinical trials in
collaboration with the TAC. The TAC has the capacity to produce these monoclonal
antibodies in sufficient quantity and of sufficient quality to support these
trials. The Company is currently in the final stages of discussions with a
contract manufacturer for the production of LDP-03 for some or all of the
Company's clinical trial production.
The Company expects that its collaborative partners will manufacture
products for clinical development and commercialization. Under the Company's
collaboration agreements with Warner-Lambert, Roche Bioscience and Kyowa, the
collaborative partners have the exclusive right under the collaboration
agreements to manufacture products that result from their programs.
COMPETITION
The biotechnology and pharmaceutical industries are intensely competitive
and subject to rapid and significant technological change. Competitors of the
Company in the United States and elsewhere are numerous and include, among
others, major multinational pharmaceutical and chemical companies, specialized
biotechnology firms and universities and other research institutions. While the
Company believes that several of the drugs which may result from its research
and development efforts
43
<PAGE> 46
may be utilized in combination with existing drugs to treat specific diseases
(such as LDP-01 used in conjunction with t-PA or heparin and LDP-03 used in
conjunction with or following fludarabine), there can be no assurance that
patients, physicians or manufacturers of such existing drugs will view any of
the drugs that may be developed by the Company as complementary rather than
competitive. Many of the Company's potential competitors have greater financial
and other resources, including larger research and development staffs and more
effective marketing and manufacturing organizations, than the Company or its
collaborative partners. Acquisitions of competing companies and potential
competitors by large pharmaceutical companies or others could enhance the
financial, marketing and other resources available to such competitors. As a
result of academic and government institutions becoming increasingly aware of
the commercial value of their research findings, such institutions are more
likely to enter into exclusive licensing agreements with commercial enterprises,
including competitors of the Company. There can be no assurance that the
Company's competitors will not succeed in developing technologies and drugs that
are more effective or less costly than any which are being developed by the
Company or which would render the Company's technology and future drugs obsolete
or noncompetitive.
In addition, some of the Company's competitors have greater experience than
the Company in conducting preclinical and clinical trials and obtaining FDA and
other regulatory approvals. Accordingly, the Company's competitors may succeed
in obtaining FDA or other regulatory approvals for drug candidates more rapidly
than the Company. Companies that complete clinical trials, obtain required
regulatory agency approvals and commence commercial sale of their drugs before
their competitors may achieve a significant competitive advantage. There can be
no assurance that drugs resulting from the Company's research and development
efforts, or from the joint efforts of the Company and its collaborative
partners, will be able to compete successfully with competitors' existing
products or products under development or that they will obtain regulatory
approval in the United States or elsewhere.
EMPLOYEES
As of June 30, 1997, the Company had 54 full-time employees, of whom 19
hold Ph.D. or M.D. degrees. Of the Company's total work force, 44 are engaged in
research and development activities and 10 are engaged in business development,
finance and administration. None of the Company's employees is represented by a
collective bargaining agreement, nor has the Company experienced work stoppages.
The Company believes that relations with its employees are good.
SCIENTIFIC ADVISORY BOARD
The Company has established a Scientific Advisory Board ("SAB") to advise
on scientific and medical matters. The members of the SAB, collectively, have
considerable experience in the area of immunology and of the principal molecules
and disease targets of interest to the Company. The SAB meets as a group at
least one time per year and individual members meet with LeukoSite on an ad hoc
basis several times per year. All of the Company's SAB members have entered into
consulting agreements with the Company and have either purchased shares of
Common Stock or been granted options to purchase Common Stock.
The members of LeukoSite's SAB are:
Timothy A. Springer, Ph.D. is the Founder of LeukoSite and Chairman of the
SAB. Dr. Springer is the Latham Family Professor, Harvard Medical School,
Department of Pathology and at the Center for Blood Research. He is an expert on
the molecular and cellular pathways involved in leukocyte recruitment and
adhesion. Dr. Springer received his Ph.D. in Biochemistry and Molecular Biology
from Harvard University. In recognition of Dr. Springer's important contribution
to this area of medical science, he was elected to membership in the National
Academy of Sciences.
Eugene C. Butcher, M.D. is the Vice Chairman of the SAB and an Associate
Professor of Pathology at Stanford University Medical Center and a Staff
Physician at the Palo Alto Veterans Association
44
<PAGE> 47
Medical Center. Dr. Butcher's expertise is in the molecular and cellular
processes which are involved in lymphocyte homing and recruitment. He consults
with the Company on scientific matters pertaining to the recruitment of
lymphocytes to mucosal tissue, and in particular the role of SS7 integrins and
mucosal addressin cell adhesion molecules (MAdCAM). Dr. Butcher received his
M.D. from Washington University School of Medicine.
Michael B. Brenner, M.D. is the K. Frank Austen Professor of Medicine at
Harvard Medical School and Brigham and Women's Hospital. Dr. Brenner is an
expert in and consults with the Company on the biology of T cells found in skin
and in the mucosal lining of the gastrointestinal tract. Dr. Brenner received
his M.D. from Vanderbilt University School of Medicine.
Bruce Ganem, Ph.D. is the Franz and Elisabeth Roessler Professor of
Chemistry and former Chairman of the Chemistry Department at Cornell University.
Dr. Ganem is a prominent chemist and consults with the Company in the fields of
organic synthesis and natural products chemistry. Dr. Ganem received his Ph.D.
in Organic Chemistry from Columbia University.
Craig Gerard, M.D., Ph.D. is an Associate Professor of Pediatrics at
Harvard Medical School and Children's Hospital/Brigham and Women's Hospital. Dr.
Gerard consults with the Company on the biochemistry, regulation and function of
G protein-coupled chemokine receptors and has a clinical specialty in genetic
lung diseases. Dr. Gerard received his M.D. degree from the Bowman Gray School
of Medicine and his Ph.D. in Chemistry from the University of California at San
Diego.
Martin Hemler, Ph.D. is an Associate Professor of Pathology at Harvard
Medical School and the Dana-Farber Cancer Institute. Dr. Hemler is a leader in
the field of SS1 integrins, molecules on activated leukocytes that are important
in adhesion to the endothelium and to the extracellular matrix and consults with
the Company on its integrin programs. Dr. Hemler received his Ph.D. in
Biological Chemistry from the University of Michigan.
Steven L. Kunkel, Ph.D. is a Professor of Pathology at the University of
Michigan. Dr. Kunkel is an expert on the molecular basis of inflammation and
consults with the Company on its chemokine programs. Dr. Kunkel received his
Ph.D. in Microbiology/Immunology from Kansas University.
Herman Waldmann, M.D., Ph.D., F.R.S. is a Professor of Pathology at the
University of Oxford. Dr. Waldmann is a Fellow of the Royal Society and an
expert on immunological tolerance. He consults with the Company on matters
relating to monoclonal antibodies and their use. Dr. Waldmann received his Ph.D.
in Pharmacology and Therapeutics and his M.D. from Cambridge University.
Timothy Williams, Ph.D. is a Professor of Applied Pharmacology at the
Imperial College of Science, Technology and Medicine. Dr. Williams is widely
known for his work on the molecular and cellular processes of inflammation, and
he consults with the Company on eosinophil recruitment and chemokines. Dr.
Williams received his Ph.D. in Pharmacology from University College, London.
Another key consultant to the Company is:
Daniel Podolsky, M.D. is a Professor of Medicine at Harvard Medical School
and Chairman of Gastroenterology at Massachusetts General Hospital. Dr. Podolsky
is an expert on the clinical management and research of inflammatory bowel
disease and consults with the Company on its inflammatory bowel disease program.
Dr. Podolsky received his M.D. from Harvard University.
FACILITIES
The Company's administrative and research and development facility is
located in Cambridge, Massachusetts. This 23,500 square foot facility is leased
for a term which expires in 1999. An additional 770 square feet of laboratory
and office space will become subject to the lease by December 1, 1997.
45
<PAGE> 48
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The executive officers and directors of the Company, and their ages as of
June 30, 1997, are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------------------------- --- -------------------------------------------
<S> <C> <C>
Christopher K. Mirabelli, Ph.D............. 42 Chairman of the Board of Directors,
President and Chief Executive Officer
Augustine Lawlor........................... 40 Vice President, Corporate Development and
Chief Financial Officer
Walter Newman, Ph.D........................ 52 Vice President, Research and Discovery
Lee Brettman, M.D.......................... 50 Vice President, Pharmaceutical Development:
Clinical Development and Medical Affairs
Douglas Ringler, V.M.D..................... 40 Vice President, Pharmaceutical Development:
Preclinical Development and Laboratory
Operations
Jay Luly, Ph.D............................. 40 Vice President, Drug Discovery
Catherine Bingham(1)....................... 31 Director
John W. Littlechild(2)..................... 45 Director
Martin Peretz, Ph.D.(2).................... 57 Director
Mark Skaletsky(1).......................... 49 Director
Christopher T. Walsh, Ph.D................. 53 Director
</TABLE>
- ------------------------------
(1) Member of Audit Committee of the Board of Directors.
(2) Member of Compensation Committee of the Board of Directors.
Dr. Mirabelli has served as Chairman of the Board of Directors, President
and Chief Executive Officer since July 1993. Dr. Mirabelli was a founder of Isis
Pharmaceuticals, Inc., a biotechnology company, where he served as Executive
Vice President from 1992 to 1993, Senior Vice President of Research and
Preclinical Development from 1991 to 1992, and Vice President of Research from
1989 to 1991. From 1981 to 1989, Dr. Mirabelli served in various positions at
SmithKline & French Laboratories, most recently as Director of Molecular
Pharmacology. Dr. Mirabelli received his B.S. in Biology from the State
University of New York at Fredonia and his Ph.D. in Pharmacology from Baylor
College of Medicine.
Mr. Lawlor has served as Vice President, Corporate Development and Chief
Financial Officer since February 1997. From 1995 to 1997, he served as Chief
Financial Officer at Alpha-Beta Technology, Inc., a biotechnology company. From
1993 to 1995, Mr. Lawlor served as Chief Financial Officer at BioSurface
Technology, a biotechnology company. From 1989 to 1995, he served as Chief
Financial Officer at Armstrong Pharmaceuticals, Inc., a biotechnology company.
Mr. Lawlor received his B.A. from the University of New Hampshire and his
M.P.P.M. from the Yale School of Organizational Management.
Dr. Newman has served as Vice President, Research and Discovery since June
1996. Dr. Newman served the Company as Senior Director, Research from 1994 to
1996, and as a Director, Research from 1993 to 1994. From 1986 to 1993, he
served as Chief Scientist at Otsuka America Pharmaceuticals, a biotechnology
company, and leader of the Endothelial Cell Biology Group. Dr. Newman received
both his B.A. in Chemistry and his Ph.D. in Immunochemistry from Columbia
University.
Dr. Brettman has served as Vice President of Pharmaceutical Development:
Clinical Development and Medical Affairs since June 1996. From 1995 to 1996, he
served the Company as Senior Director, Clinical Development of the Company. From
1993 to 1995, Dr. Brettman served as Head of Clinical Research at Vertex
Pharmaceuticals, Inc., a biotechnology company. From 1990 to 1993, he served
first
46
<PAGE> 49
as Associate Director of the Anti-Infectives Group at the Robert Wood Johnson
Pharmaceutical Research Institute and then as the Director of Anti-infectives
Research at Schering Plough Company, a pharmaceutical company. Dr. Brettman
received his B.S. in Biology from the Massachusetts Institute of Technology and
his M.D. from Baylor College of Medicine.
Dr. Ringler has served as Vice President of Pharmaceutical Development:
Preclinical Development, Laboratory Operations and Experimental Therapies since
June 1996. Dr. Ringler served the Company as Senior Director, Preclinical
Development from 1994 to 1996, and Director of Experimental Therapeutics from
1993 to 1994. From 1985 to 1993, he served in various positions at Harvard
Medical School, including Associate Professor and Chairman of the Division of
Comparative Pathology. Dr. Ringler received both his B.A. in Biology and his
V.M.D. from the University of Pennsylvania.
Dr. Luly has served as Vice President, Drug Discovery since June 1997. From
1996 to 1997, Dr. Luly served as Director, Immunoregulation Research and
research fellow at Abbott Laboratories, a health care company. From 1993 to
1995, Dr. Luly served as senior project leader and research fellow at Abbott
Laboratories. From 1990 to 1993, he served as project leader and associate
research fellow at Abbott Laboratories. Dr. Luly received his B.S. from the
University of Illinois and his Ph.D. in Organic Chemistry from the University of
California, Berkeley.
Ms. Bingham has served as a Director since September 1994. Since 1991, Ms.
Bingham has served as a Partner at Schroder Ventures, a venture capital
management company. Ms. Bingham received her first class degree in Biochemistry
from the University of Oxford and her M.B.A. from Harvard Business School.
Mr. Littlechild has served as a Director since the Company's incorporation.
Since 1992, Mr. Littlechild has served as a general partner of HealthCare
Partners III L.P. and HealthCare Partners IV L.P., the general partner,
respectively, of each of HealthCare Ventures III L.P. and HealthCare Ventures IV
L.P., and as a principal of HealthCare Investment Corporation LLC, a venture
capital management company. He is a member of the Board of Directors of Orthofix
International N.V., a medical devices company, Diacrin Inc., a biotechnology
company, and Virus Research Institute, Inc., a biotechnology company. Mr.
Littlechild received his B.Sc. from the University of Manchester and his M.B.A.
from Manchester Business School.
Dr. Peretz has served as a Director since September 1993. Since 1974, Dr.
Peretz has served as the Editor-in-Chief of The New Republic, and has been a
faculty member of the Social Studies Department at Harvard University since
1965. He is Co-Chairman of the Board of Directors of The Street.com, a financial
daily on the World Wide Web. He serves on the Board of Directors of nine mutual
funds managed by the Dreyfus Corporation. Dr. Peretz received his B.A. in
History from Brandeis University and his Ph.D. in Government from Harvard
University.
Mr. Skaletsky has served as a Director since December 1996. Since May 1993,
Mr. Skaletsky has served as President and Chief Executive Officer of GelTex
Pharmaceuticals, Inc., a biotechnology company. Previously, he served as
Chairman and Chief Executive Officer of Enzytech, Inc., and Opta Food
Ingredients, Inc., each a biotechnology company. Mr. Skaletsky also served as
President and Chief Operating Officer of Biogen, Inc., a biotechnology company.
He is a member of the Board of Directors of Isis Pharmaceuticals, Inc., a
biotechnology company. Mr. Skaletsky is currently serving as president of the
Massachusetts Biotechnology Council and is a member of the Board of Directors of
the Biotechnology Industry Organization. Mr. Skaletsky received his B.S. in
Finance from Bentley College.
Dr. Walsh has served as a Director since January 1996. Since 1991, Dr.
Walsh has served as Hamilton Kuhn Professor of Biological Chemistry and
Molecular Pharmacology at Harvard Medical School. From 1987 to 1995, he was
Chairman of the Harvard Medical School Biological Chemistry and Molecular
Pharmacology Department. Dr. Walsh received his A.B. in Biology from Harvard
University and his Ph.D. in Life Sciences from Rockefeller University.
47
<PAGE> 50
BOARD OF DIRECTORS
All directors hold their positions until the annual meeting of stockholders
at which their respective successors are elected and qualified. Executive
officers of the Company are elected annually by the Board of Directors and serve
at the discretion of the Board of Directors or until their successors are duly
elected and qualified.
The Board of Directors has appointed an Audit Committee and a Compensation
Committee. The Audit Committee reviews the scope and results of the annual audit
of the Company's financial statements conducted by the Company's independent
accountants, the scope of other services provided by the Company's independent
accountants, proposed changes in the Company's financial and accounting
standards and principles, and the Company's policies and procedures with respect
to its internal accounting, auditing and financial controls, and makes
recommendations to the Board of Directors on the engagement of the independent
accountants, as well as other matters which may come before it or as directed by
the Board of Directors. The Compensation Committee administers the Company's
compensation programs, including the Stock Option Plan, and performs such other
duties as may from time to time be determined by the Board of Directors.
DIRECTOR COMPENSATION
Dr. Walsh and Mr. Skaletsky each have received $2,500 and a stock option
grant of 9,756 shares of Common Stock as compensation for service on the Board
of Directors. No other director has received compensation for service on the
Board of Directors.
Following this offering, Non-Employee Directors will receive a fee of
$5,000 for each year of service on the Board of Directors and will be reimbursed
for expenses incurred in connection with their attendance. In addition, each
year, each Non-Employee Director will be granted automatically a stock option
exercisable for 2,000 shares of Common Stock, as described below under "Amended
and Restated 1993 Stock Option Plan."
48
<PAGE> 51
EXECUTIVE COMPENSATION
The following table sets forth certain information with respect to the
annual and long-term compensation paid by the Company during the fiscal year
ended December 31, 1996 to the Chief Executive Officer and its other three most
highly compensated executive officers (the "Named Executive Officers") whose
1996 compensation exceeded $100,000:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS(4)
ANNUAL COMPENSATION ------------
------------------------------------------------- SECURITIES
OTHER ANNUAL UNDERLYING
NAME AND PRINCIPAL POSITION SALARY($)(1) BONUS($)(2) COMPENSATION($)(3) OPTIONS(#)
- -------------------------------------- ------------ ----------- ------------------ ------------
<S> <C> <C> <C> <C>
Christopher K. Mirabelli.............. $222,000 $39,960 $8,097 50,914
President, Chief Executive
Officer and Chairman of the Board of
Directors
Walter Newman......................... 140,000 16,800 6,355 38,109
Vice President,
Research and Discovery
Douglas Ringler....................... 115,417 16,100 2,111 43,475
Vice President,
Pharmaceutical Development:
Preclinical Development and
Laboratory Operations
Lee Brettman.......................... 175,000 17,500 6,446 20,426
Vice President,
Pharmaceutical Development:
Clinical Development and
Medical Affairs
</TABLE>
- ------------------------------
(1) Salary includes amounts, if any, deferred pursuant to the Company's 401(k)
Plan, and excludes bonus paid in 1996 for fiscal year 1995.
(2) Bonus amounts were accrued for fiscal 1996, but were not paid until the
first quarter of 1997.
(3) Other Annual Compensation consists of health and life insurance premiums
paid by the Company on behalf of the Named Executive Officer.
(4) The Company has no long-term compensation plan that includes long-term
incentive payments.
49
<PAGE> 52
The following table sets forth certain information with respect to grants
of stock options under the Company's Stock Option Plan to the Named Executive
Officers during the year ended December 31, 1996.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL
REALIZABLE
VALUE AT ASSUMED
INDIVIDUAL GRANTS ANNUAL RATE OF
----------------------------------------------------------- STOCK PRICE
NUMBER PERCENT OF TOTAL APPRECIATION FOR
OF SECURITIES OPTIONS GRANTED OPTIONS TERM(2)
UNDERLYING TO EMPLOYEES IN EXERCISE EXPIRATION -----------------
NAME: OPTIONS(1) FISCAL YEAR PRICE $/SH DATE 5% 10%
- ------------------------------ ------------- ----------------- ---------- ---------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Christopher K. Mirabelli...... 36,910 11.38% $5.125 4/22/06 $40,767 $87,792
14,004 4.32 6.15 12/16/06 18,560 39,970
Walter Newman................. 19,436 5.99 5.125 4/22/06 21,466 46,229
18,673 5.76 6.15 12/16/06 24,249 53,297
Douglas Ringler............... 19,200 5.92 5.125 4/22/06 21,206 45,668
24,275 7.48 6.15 12/16/06 32,174 69,287
Lee Brettman.................. 3,620 1.12 5.125 4/22/06 3,999 8,612
16,806 5.18 6.15 12/16/06 22,274 47,968
</TABLE>
- ------------------------------
(1) Represents incentive stock options granted under the Stock Option Plan to
each of the individuals listed above on April 22, 1996 and December 16,
1996. Each option becomes exercisable in four equal annual installments, and
has a maximum term of 10 years from the date of grant, subject to earlier
termination in the event of the optionee's cessation of service with the
Company. All of these options are exercisable during the holder's lifetime
only by the holder; they are exercisable by the holder only while the holder
is an employee of the Company and for certain limited periods of time
thereafter in the event of termination of employment.
(2) Amounts represent hypothetical gains that could be achieved for the
respective options if exercised at the end of the option term. These gains
are based upon assumed appreciation rates of five percent and ten percent in
the fair market value of shares of Common Stock from the fair market value
on the date of grant, which rates are set by the Securities and Exchange
Commission and compounded annually from the date the respective options were
granted to their expiration date. The gains shown are net of option exercise
prices, but do not include deductions for taxes or other expenses associated
with the exercises. Actual gains, if any, are dependent on the performance
of the Common Stock and the date on which the option is exercised. There can
be no assurance that the amounts reflected will be achieved or will
otherwise be indicative of the actual amounts received, if any.
50
<PAGE> 53
The following table sets forth information with respect to (i) the number
of unexercised options held by the Named Executive Officers as of December 31,
1996 and (ii) the value of unexercised in-the-money options (options for which
the fair market value of the Common Stock exceeds the exercise price) as of
December 31, 1996.
OPTION EXERCISES IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
SHARES VALUE OPTIONS AT OPTIONS AT
ACQUIRED ON REALIZED DECEMBER 31, 1996(#) DECEMBER 31, 1996($)(1)
NAME EXERCISE(#) ($)(1) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- --------------------------- ----------- -------- ------------------------------- --------------------------
<S> <C> <C> <C> <C>
Christopher K. Mirabelli... 10,975 57,371 28,048/87,500 $146,425/$229,083
Walter Newman.............. -- -- 6,097/44,207 31,875/51,797
Douglas Ringler............ 20,549 119,318 0/54,416 0/79,493
Lee Brettman............... -- -- 6,097/38,719 30,750/95,961
</TABLE>
- ------------------------------
(1) Based on the fair market value of the Common Stock as of December 31, 1996,
of $6.15 per share, as determined by the Company's Board of Directors, less
the aggregate exercise price.
AMENDED AND RESTATED 1993 STOCK OPTION PLAN
The Stock Option Plan provides for the grant of options to purchase shares
of Common Stock to officers, employees and directors of and consultants to the
Company. The maximum number of shares of Common Stock that may be issued
pursuant to the Stock Option Plan is 1,500,000. The Stock Option Plan was
adopted by the Board of Directors and the stockholders of the Company on
September 21, 1993. The Stock Option Plan was amended and restated by the Board
of Directors on April 14, 1997, in order to increase the number of shares of
Common Stock to its current level and to provide the rights set forth below,
which amendment was approved by the stockholders of the Company as of June 25,
1997.
The Stock Option Plan will be administered by the Compensation Committee
which is presently comprised of John Littlechild and Martin Peretz. The
Compensation Committee will select participants (other than for the automatic
grants to Non-Employee Directors referred to below) and, in a manner consistent
with the terms of the Stock Option Plan, determine the number and duration of
the options to be granted and the terms and conditions of the option agreements.
In addition, each Non-Employee Director will receive, each year that such person
serves as a director, an option to purchase 2,000 shares of Common Stock at fair
market value on the date of grant. The Compensation Committee has the right to
alter, amend or terminate the Stock Option Plan at any time but any such
alteration, amendment or termination will not adversely affect options
previously granted.
The Stock Option Plan provides for grants of stock options intended to
qualify for preferential tax treatment (the "Incentive Stock Options") under
Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"), and
nonstatutory stock options that do not qualify for such treatment. All employees
of the Company are eligible for stock options under the Plan in amounts and at
prices determined by the Compensation Committee, provided that, in the case of
Incentive Stock Options, the exercise price will not be less than 100% of the
fair market value of the Common Stock on the date of grant, or not less than
110% of the fair market value of the Common Stock on the grant date if the
optionee owns, directly or indirectly, more than 10% of the total combined
voting power of all classes of stock. No participant in the Stock Option Plan
may in any year be granted stock options with respect to more than 500,000
shares of Common Stock.
Under the Stock Option Plan, the Compensation Committee may establish with
respect to each option granted such vesting provisions as it determines to be
appropriate or advisable. In general, options granted under the Stock Option
Plan have a ten-year term, and such options vest or have
51
<PAGE> 54
vested over four-year periods at various rates. Unexercised options
automatically terminate upon the termination of a holder's relationship with the
Company. In addition, the Stock Option Plan includes a provision adjusting the
number of shares of Common Stock available for grant, the number of shares of
Common Stock subject to outstanding awards thereunder and the per share exercise
price thereof in the event of any stock dividend, stock split, recapitalization,
merger or certain other events.
The Stock Option Plan provides that each outstanding option will
immediately become fully exercisable upon a "Change in Control" of the Company,
as defined in the Stock Option Plan. A "Change in Control" includes the
acquisition by any third party (as hereinafter defined), directly or indirectly,
of more than 25% of the Common Stock outstanding at the time, without the prior
approval of the Company's Board of Directors. A "third party" for purposes of
the foregoing means any person other than the Company or a subsidiary or
employee benefit plan or trust maintained by the Company or any of its
subsidiaries together with any of such person's "affiliates" and "associates" as
defined in Rule 12b-2 under the Securities Exchange Act of 1934, as amended.
As of June 30, 1997, an aggregate of 966,891 shares of Common Stock were
subject to outstanding stock options granted under the Stock Option Plan. As of
June 30, 1997, options to purchase 228,465 shares of Common Stock were
exercisable at prices ranging from $.04 to $7.18 per share.
1997 EMPLOYEE STOCK PURCHASE PLAN
In April 1997, the Board adopted the 1997 Employee Stock Purchase Plan (the
"Stock Purchase Plan"), which enables eligible employees to acquire shares of
the Company's Common Stock through payroll deductions. The Stock Purchase Plan
is intended to qualify as an "employee stock purchase plan" under Section 423 of
the Code. Offerings under the Stock Purchase Plan are planned to commence on
January 1 and end on December 31 of each year. The initial offering period is
intended to commence upon January 1, 1998 and to end on December 31, 1998,
unless otherwise determined by the Board. During the offering period, an
eligible employee may select a rate of payroll deduction up to 10% of his or her
compensation up to an aggregate total payroll deduction not to exceed $10,000 in
any offering period. The purchase price for the Company's Common Stock purchased
under the Stock Purchase Plan is 85% of the lesser of the fair market value of
the shares on the first day or the last day of the offering period. A total of
150,000 shares of Common Stock have been reserved for issuance under the Stock
Purchase Plan.
401(K) PLAN
The Company has implemented a retirement savings plan (the "401(k) Plan"),
which covers all full-time employees. Pursuant to the 401(k) Plan, an employee
may elect to reduce his or her current compensation by up to 15% (subject to
certain overall dollar limits) and have the amount of such reduction contributed
to the 401(k) Plan. The 401(k) Plan allows employees to make certain tax-
deferred voluntary contributions. The 401(k) Plan is intended to qualify under
Section 401 of the Code, so that contributions by employees, and earned income
thereon, are not taxable to employees until withdrawn from the 401(k) Plan. The
administrator of the 401(k) Plan will invest each employee's account at the
direction of each such employee, who can choose among certain investment
alternatives provided.
EMPLOYMENT AGREEMENTS
The Company has no employment agreements currently in effect between it and
its employees.
COMPENSATION COMMITTEE INTERLOCKS
The Compensation Committee is responsible for determining salaries,
incentives and all other forms of compensation for directors and officers of the
Company. The Compensation Committee also administers various incentive
compensation and benefit plans, including the Stock Option Plan and Stock
Purchase Plan. The members of the Compensation Committee of the Board of
Directors are
52
<PAGE> 55
John W. Littlechild and Martin Peretz, neither of whom is an employee of the
Company. Mr. Littlechild is a general partner of the general partner of
HealthCare Ventures, III, L.P., and HealthCare Ventures, IV, L.P., each a
venture fund and a principal stockholder of the Company. Dr. Peretz may be
deemed to beneficially own the shares held by I.S. Partners, L.P., a venture
capital firm and a principal stockholder of the Company. See "Principal
Stockholders" and "Certain Transactions."
53
<PAGE> 56
CERTAIN TRANSACTIONS
In June 1994, the Company sold an aggregate of 5,000,000 shares of Series A
Convertible Preferred Stock (convertible into 1,219,512 shares of Common Stock)
at a purchase price of $1.00 per share ($4.10 per share on an as-converted
basis) to a group of existing investors, including HealthCare Ventures III, L.P.
("HCV III"), HealthCare Ventures IV, L.P. ("HCV IV") and I.S. Partners, L.P.
("I.S. Partners").
In September 1994, the Company sold an aggregate of 1,666,667 shares of
Series B Convertible Preferred Stock (convertible into 406,504 shares of Common
Stock) at a purchase price of $1.20 per share ($4.92 per share on an
as-converted basis) to a group of new and existing investors, including Schroder
Ventures International Life Science Fund L.P. 1, Schroder Ventures International
Life Sciences Trust, Schroders Incorporated and I.S. Partners.
In November 1994, the Company entered into a Research, Development and
Marketing Agreement with Warner-Lambert relating to the Company's MCP-1 program.
In connection with such agreement, the Company issued and sold 1,000,000 shares
of Series C Convertible Preferred Stock (convertible into 243,902 shares of
Common Stock) at a purchase price of $3.00 per share ($12.30 per share on an
as-converted basis) to Warner-Lambert Company.
In May 1995, the Series A Common Stock, which was owned by Dr. Springer and
his affiliates, automatically converted pursuant to its terms into 893,782
shares of Common Stock.
In July 1995, the Company entered into a Research, Development and
Marketing Agreement with Warner-Lambert Company relating to the Company's IL-8
program and amended the Research, Development and Marketing Agreement relating
to the MCP-1 program.
In September 1995, the Company sold an aggregate of 1,481,482 shares of
Series D Convertible Preferred Stock (convertible into 361,337 shares of Common
Stock) at a purchase price of $1.35 per share ($5.54 per share on an
as-converted basis) to a group of new and existing investors, including HCV III,
HCV IV, I.S. Partners, Schroder Ventures International Life Science Fund L.P. 1,
Schroder Ventures International Life Sciences Trust, Schroders Incorporated and
Francis H. Spiegel, Jr.
In January 1996, the Company sold 625,000 shares of Series E Convertible
Preferred Stock (convertible into 152,439 shares of Common Stock) at a purchase
price of $4.00 per share ($16.40 per share on an as-converted basis) to
Warner-Lambert.
In February 1996, the Company sold an aggregate of 910,188 shares of Series
F Convertible Preferred Stock (convertible into 221,997 shares of Common Stock)
at a purchase price of $3.00 per share ($12.30 per share on an as-converted
basis) to a group of new and existing investors, including HCV III, HCV IV, I.S.
Partners, Schroder Ventures International Life Science Fund L.P. 1, Schroder
Ventures International Life Sciences Trust, Schroders Incorporated and Lombard
Odier & Cie.
In April 1996, the Company sold 625,000 shares of Series E Convertible
Preferred Stock (convertible into 152,439 shares of Common Stock) at a purchase
price of $4.00 per share ($16.40 per share on an as-converted basis) to
Warner-Lambert.
In June 1996, the Company sold an aggregate of 728,147 shares of Series F
Convertible Preferred Stock (convertible into 194,608 shares of Common Stock) at
a purchase price of $3.00 per share ($12.30 per share on an as converted basis)
to a group of existing investors, including HCV III, HCV IV, I.S. Partners,
Schroder Ventures International Life Science Fund L.P. 1, Schroder Ventures
International Life Sciences Trust, Schroders Incorporated and Lombard Odier &
Cie.
In July 1996, the Company entered into a Research Collaboration and License
Agreement with Roche Bioscience relating to the Company's CCR3 Antagonist
program. In connection with such agreement, Roche Bioscience made a $1.5 million
license fee payment.
In December 1996, the Company sold 857,143 shares of Series G Convertible
Preferred Stock (convertible into 401,142 shares of Common Stock) at a purchase
price of $3.50 per share ($7.47 on an
54
<PAGE> 57
as-converted basis) to Roche Finance Ltd. If the initial public offering price
varies within the estimated range, the number of shares of Common Stock issuable
upon the conversion of the Preferred Stock is subject to adjustment from a
maximum of 451,284 shares of Common Stock (in the event that the initial public
offering price is $8.00 per share) to a minimum of 361,027 shares of Common
Stock (in the event that the initial public offering price is $10.00 per share).
The pricing of this offering outside the estimated range will further affect the
number of shares of Common Stock into which the Preferred Stock is convertible.
In January 1997, the Company granted Augustine Lawlor, Vice President,
Corporate Development and Chief Financial Officer, an incentive stock option to
purchase 89,633 shares of Common Stock at an exercise price of $6.15, the fair
market value of the Common Stock on the date of grant.
In March through June 1997, the Company sold an aggregate of 1,102,719
shares of Series G Convertible Preferred Stock (convertible into 493,319 shares
of Common Stock) at a purchase price of $3.50 per share ($6.75 on an
as-converted basis) to a group of new and existing investors, including Schroder
Ventures International Life Sciences Fund L.P. 1, Schroder Ventures
International Life Sciences Trust, Schroders Incorporated and Warner-Lambert. If
the initial public offering price varies within the estimated range, the number
of shares of Common Stock issuable upon the conversion of the Preferred Stock is
subject to adjustment from a maximum of 546,273 shares of Common Stock (in the
event that the initial public offering price is $8.00 per share) to a minimum of
450,956 shares of Common Stock (in the event that the initial public offering
price is $10.00 per share). The pricing of this offering outside the estimated
range will further affect the number of shares of Common Stock into which the
Preferred Stock is convertible.
In June 1997, the Company granted Jay Luly, Vice President, Drug Discovery,
an incentive stock option to purchase 85,366 shares of Common Stock at an
exercise price of $7.18, the fair market value of the Common Stock on the date
of grant.
In June 1997, the Company entered into an agreement with Warner-Lambert
pursuant to which (i) Warner-Lambert terminated all of its equity anti-dilution
rights in connection with Company's initial public offering and (ii)
Warner-Lambert agreed to reduce the number of shares of Common Stock into which
its shares of Series G Preferred Stock would be converted upon consummation of
the Company's initial public offering. In exchange for Warner-Lambert's
agreement to so reduce certain of its equity rights in the Company, the Company
agreed to reduce the amount of certain of the royalties due to the Company by
Warner-Lambert in connection with sales of products developed pursuant to any of
the research collaborations between the Company and Warner-Lambert, and the
Company also agreed in principle to waive its right to co-promote such products
under certain circumstances. In the event that the initial public offering price
is less than $12.30 per share, Warner-Lambert will receive a credit against such
royalties. Assuming an initial public offering price of $9.00 per share, the
approximate amount of such credit would be $2.05 million.
For a description of certain transactions and certain employment and other
arrangements between the Company and certain of its directors and executive
officers, see "Management Director Compensation" and "Executive Compensation."
The Company believes that the securities issued in the transactions
involving the Company described above were sold by the Company at their then
fair market value and that the terms of the transactions described were no less
favorable than the Company could have obtained from unaffiliated third parties.
The Company has adopted a policy, effective following the consummation of
this offering, that all future transactions between the Company and its
officers, directors and affiliates must (i) be approved by a majority of the
disinterested members of the Company's Board of Directors and (ii) be on terms
no less favorable to the Company than could be obtained from unrelated third
parties. In addition, this policy requires that any loans by the Company to its
officers, directors or other affiliates be for bona fide business purposes only.
55
<PAGE> 58
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of the Company's Common Stock as of June 30, 1997, giving effect to
the conversion of all outstanding shares of the Company's Preferred Stock into
an aggregate of 5,087,935 shares of Common Stock by (i) each person known to the
Company to be the beneficial owner of more than 5% of the shares of Common
Stock, (ii) each director of the Company, (iii) each of the Named Executive
Officers and (iv) all current directors and executive officers as a group.
<TABLE>
<CAPTION>
PERCENT OWNED
SHARES ------------------------
BENEFICIALLY BEFORE THE AFTER THE
NAMES AND ADDRESS OF BENEFICIAL OWNER OWNED(1) OFFERING OFFERING
- ----------------------------------------------------------- ------------ ---------- ---------
<S> <C> <C> <C>
Entities Affiliated with HealthCare Investment
Corporation(2)........................................... 1,999,380 32.3% 23.0%
Twin Tower at Metro Park
379 Thornall Street
Edison, New Jersey 08837
Timothy Springer(3)........................................ 767,121 12.4% 8.8%
Center for Blood Research
200 Longwood Avenue
Boston, Massachusetts 02115
I.S. Partners, L.P......................................... 736,330 11.9% 8.5%
c/o Clark Estates
30 Wall Street
New York, New York 10005
Warner-Lambert Company..................................... 618,466 10.0% 7.1%
201 Tabor Road
Morris Plains, New Jersey 07950
Entities Affiliated with Schroders PLC(4).................. 423,949 6.9% 4.9%
120 Cheapside
London EC2V 6DS
England
Roche Finance Ltd.......................................... 401,141 6.5% 4.6%
c/o Hoffmann-La Roche, Ltd.
124 Grensacherstrasse
CH-4002 Basel
Switzerland
Lombard Odier & Cie........................................ 400,896 6.5% 4.6%
Toedistrasse 36
CH8027
Zurich, Switzerland
John W. Littlechild(5)..................................... 1,999,380 32.3% 23.0%
Martin Peretz(6)........................................... 736,330 11.9% 8.5%
Catherine Bingham(7)....................................... 423,949 6.9% 4.9%
Christopher K. Mirabelli(8)................................ 146,485 2.3% 1.7%
Christopher T. Walsh....................................... 3,937 * *
Mark Skaletsky............................................. 0 * *
Walter Newman(9)........................................... 38,394 * *
Douglas Ringler(10)........................................ 28,395 * *
Lee Brettman(11)........................................... 7,003 * *
All current directors and executive officers
as a group (11 persons)(12).............................. 3,383,873 54.0% 38.6%
</TABLE>
- ------------------------------
* Less than 1%.
56
<PAGE> 59
(1) Beneficial ownership is determined in accordance with Rule 13d-3(d)
promulgated by the Securities and Exchange Commission under the Securities
and Exchange Act of 1934, as amended. Shares of Common Stock issuable
pursuant to options, warrants and convertible securities, to the extent
such securities are currently exercisable or convertible within 60 days of
June 30, 1997, are treated as outstanding for computing the percentage of
the person holding such securities but are not treated as outstanding for
computing the percentage of any other person. Unless otherwise noted, each
person or group identified possesses sole voting and investment power with
respect to shares, subject to community property laws where applicable.
Shares not outstanding but deemed beneficially owned by virtue of the right
of a person or group to acquire them within 60 days are treated as
outstanding only for purposes of determining the number of and percent
owned by such person or group.
(2) Includes shares held by HealthCare Ventures III, L.P. ("HCV III") and
HealthCare Ventures IV, L.P. ("HCV IV").
(3) Includes shares held by Dr. Springer's wife and the Springer Family Trust.
Dr. Springer disclaims beneficial ownership of all shares owned by his wife
and beneficial ownership of the shares owned by the Springer Family Trust
except to the extent of his proportional interest.
(4) Includes shares held by Schroder Ventures International Life Sciences Fund
L.P. 1, Schroder Ventures International Life Sciences Fund L.P. 2, Schroder
Ventures International Life Sciences Trust, Schroders Incorporated,
Schroder Venture Managers Limited as Investment Manager for the Schroder
Ventures International Life Sciences Fund Co-Investment Scheme (together,
the "Schroder Group").
(5) Includes shares held by HCV III and HCV IV. Mr. Littlechild, a director of
the Company, is a general partner of the general partner of each of HCV III
and HCV IV. Mr. Littlechild shares voting and investment control with
respect to the shares owned by HCV III and HCV IV. Mr. Littlechild may be
deemed to beneficially own the shares held by HCV III and HCV IV although
he disclaims beneficial ownership except to the extent of his proportional
ownership interests.
(6) Includes shares held by I.S. Partners, L.P. Dr. Peretz, a director of the
Company, may be deemed to beneficially own the shares held by I.S. Partners
although he disclaims beneficial ownership except to the extent of his
proportionate ownership interest.
(7) Includes shares held by the Schroder Group. Ms. Bingham may be deemed to
beneficially own the shares held by the Schroder Group although she
disclaims beneficial ownership except to the extent of her proportionate
ownership interest.
(8) Includes 55,569 shares of Common Stock which Dr. Mirabelli has the right to
acquire within 60 days of June 30, 1997 upon the exercise of stock options.
(9) Includes 14,005 shares of Common Stock which Dr. Newman has the right to
acquire within 60 days of June 30, 1997 upon the exercise of stock options.
Includes shares held by the Newman Family Trust. Dr. Newman disclaims
beneficial ownership of all shares owned by the Newman Family Trust.
(10) Includes 7,848 shares of Common Stock which Dr. Ringler has the right to
acquire within 60 days of June 30, 1997 upon the exercise of stock options.
(11) Includes 7,003 shares of Common Stock which Dr. Brettman has the right to
acquire within 60 days of June 30, 1997 upon the exercise of stock options.
(12) Includes 84,425 shares of Common Stock which the directors and officers
have the right to acquire within 60 days of June 30, 1997 upon the exercise
of stock options.
57
<PAGE> 60
DESCRIPTION OF CAPITAL STOCK
Upon the completion of this offering, the Company will be authorized to
issue 25,000,000 shares of Common Stock, $0.01 par value per share, of which
8,702,791 shares will be issued and outstanding, and 5,000,000 shares of
undesignated Preferred Stock, $0.01 par value per share, of which no shares will
be issued and outstanding.
COMMON STOCK
Upon the closing of this offering, the Company's Restated Certificate of
Incorporation (the "Restated Certificate of Incorporation") will authorize the
issuance of up to 25,000,000 shares of Common Stock, $0.01 par value per share.
Holders of Common Stock are entitled to one vote for each share held on all
matters submitted to a vote of stockholders and do not have cumulative voting
rights. Accordingly, holders of a majority of the shares of Common Stock
entitled to vote in any election of directors may elect all of the directors
standing for election. Holders of Common Stock are entitled to receive ratably
such dividends, if any, as may be declared by the Board of Directors out of
funds legally available therefor and subject to any preferential dividend rights
of any then outstanding Preferred Stock. Upon the liquidation, dissolution or
winding up of the Company, the holders of Common Stock are entitled to receive
ratably the net assets of the Company available after the payment of all debts
and other liabilities and subject to any liquidation preference of any then
outstanding Preferred Stock. Holders of Common Stock have no preemptive,
subscription, redemption or conversion rights. The outstanding shares of Common
Stock are, and the shares offered by the Company in this offering will be, when
issued and paid for, fully paid and nonassessable.
As of July 31, 1997, there were 6,202,791 shares of Common Stock
outstanding held by 67 stockholders (after giving effect to the automatic
conversion of all outstanding shares of Preferred Stock into an aggregate of
5,087,935 shares of Common Stock effective upon the closing of this offering).
If the initial public offering price varies within the estimated range, the
number of shares of Common Stock issuable upon the conversion of the Preferred
Stock is subject to adjustment from a maximum of 5,191,031 shares of Common
Stock (in the event that the initial public offering price is $8.00 per share)
to a minimum of 5,005,457 shares of Common Stock (in the event that the initial
public offering price is $10.00 per share). The pricing of this offering outside
the estimated range will further affect the number of shares of Common Stock
into which the Preferred Stock is convertible.
PREFERRED STOCK
Upon the closing of this offering, the Restated Certificate of
Incorporation will have an authorized class of undesignated preferred stock
consisting of 5,000,000 shares, $0.01 par value per share. The Board of
Directors will be authorized, subject to any limitations prescribed by law,
without further stockholder approval, to issue from time to time shares of
preferred stock in one or more series. Each such series of preferred stock shall
have such number of shares, designations, preferences, voting powers,
qualifications and special or relative rights or privileges as shall be
determined by the Board of Directors, which may include, among others, dividend
rights, voting rights, redemption and sinking fund provisions, liquidation
preferences, conversion rights and preemptive rights.
The rights of the holders of Common Stock will be subject to, and may be
adversely affected by, the rights of holders of any preferred stock that may be
issued in the future. Such rights may include voting and conversion rights which
could adversely affect the holders of Common Stock. Satisfaction of any dividend
preferences of outstanding preferred stock would reduce the amount of funds
available, if any, for the payment of dividends on Common Stock. See "Dividend
Policy." Holders of preferred stock would typically be entitled to receive a
preference payment in the event of a liquidation, dissolution or winding up of
the Company before any payment is made to the holders of Common Stock.
Additionally, the issuance of preferred stock could have the effect of making it
more difficult for a third party to acquire, or of discouraging a third party
from attempting to acquire, a majority of the
58
<PAGE> 61
outstanding voting stock of the Company. The Company has no present plans to
issue any shares of preferred stock.
WARRANTS
As of July 31, 1997, there were outstanding warrants exercisable for up to
84,145 shares of Common Stock (after giving effect to the conversion of all
outstanding warrants to purchase shares of the Company's Series A Preferred
Stock into warrants for shares of Common Stock which will occur upon the closing
of this offering). Such warrants have expiration dates of five years from the
closing of this offering and have a weighted average exercise price equal to
$4.10. The holders of the warrants are entitled to certain registration rights
in respect of the shares of Common Stock issuable upon exercise of their
respective warrants. See "Registration Rights."
REGISTRATION RIGHTS
Certain persons and entities have rights with respect to the registration
of Common Stock under the Securities Act. Immediately after the closing of this
offering, those rights will cover approximately 5,981,716 shares of Common Stock
(the "Registrable Shares"). In general, in the event that the Company proposes
to register any shares of Common Stock under the Securities Act for its own
account or the account of other stockholders at any time or times, subject to
certain exceptions, the Company must, upon the written request of a holder of
Registrable Shares, use its best efforts to cause to be registered under the
Securities Act all of the Registrable Shares requested to be registered,
provided, however, that the Company is not required to register Registrable
Securities in excess of the amount, if any, of Common Stock which the principal
underwriter of an underwritten offering shall agree to include in such offering.
The holders of 5,981,716 of the Registrable Shares will also have the right to
require the Company to prepare and file from time to time a registration
statement under the Securities Act with respect to their Registrable Shares,
provided that such holders may not exercise such right more than twice with
respect to a registration statement on Form S-1 or more than two times in any
calendar year with respect to a registration statement on Form S-3. Upon receipt
of any such request from such holders, the Company will be required to use its
best efforts to effect such registration, subject to certain conditions and
limitations.
DELAWARE LAW AND CERTAIN CHARTER AND BY-LAW PROVISIONS
The Company is subject to the provisions of Section 203 of the Delaware
General Corporation Law (the "DGCL"). Subject to certain exceptions, Section 203
prohibits a publicly held Delaware corporation from engaging in a "business
combination" with an "interested stockholder" for a period of three years after
the date of the transaction in which the person became an interested
stockholder, unless the interested stockholder attained such status with the
approval of the Board of Directors or unless the business combination is
approved in a prescribed manner. A "business combination" includes certain
mergers, asset sales and other transactions resulting in a financial benefit to
the interested stockholder. Subject to certain exceptions, an "interested
stockholder" is a person who, together with his or her affiliates and
associates, owns, or within three years prior did own, 15% or more of the
corporation's voting stock.
The Restated Certificate of Incorporation and Amended and Restated By-Laws
(the "By-Laws") provide that, effective upon the consummation of this offering,
any action required or permitted to be taken by the stockholders of the Company
may be taken only at duly called annual or special meetings of the stockholders,
and that special meetings may be called only by the Chairman of the Board of
Directors, the President, a majority of the Board of Directors of the Company or
holders of 20% or more of the then outstanding shares of capital stock of the
Company. These provisions may also discourage another person or entity from
making a tender offer for the Company's Common Stock, because such person or
entity, even if it acquired all or a majority of the outstanding voting
securities of the Company, would be able to take action as a stockholder (such
as electing new directors or approving a merger) only at a duly called
stockholders meeting, and not by written consent.
59
<PAGE> 62
The Company's Restated Certificate of Incorporation and By-Laws provided
that, effective upon the consummation of this offering, for nominations for the
Board of Directors or for other business to be properly brought by a stockholder
before a meeting of stockholders, the stockholder must first have given timely
notice thereof in writing to the Secretary of the Company. To be timely, a
notice of nominations or other business to be brought before a stockholders
meeting must be delivered not less than 50 days prior to such stockholders
meeting, provided that in the event that less than 55 days' notice or prior
public disclosure of the date of the meeting is given or made to stockholders, a
notice of nominations or other business to be brought before such stockholders
meeting must be delivered within 7 days following the day on which such notice
of the date of the stockholders meeting was given or such public disclosure was
made. The notice must contain, among other things, certain information about the
stockholder delivering the notice and, as applicable, background information
about each nominee or a description of the proposed business to be brought
before the meeting.
The DGCL provides generally that the affirmative vote of a majority of the
shares entitled to vote on any matter is required to amend a corporation's
certificate of incorporation or by-laws, unless the corporation's certificate of
incorporation or by-laws, as the case may be, requires a greater percentage. The
Company's Restated Certificate of Incorporation requires the affirmative vote of
the holders of at least 75% of the outstanding voting stock of the Company to
amend or repeal any of the foregoing provisions, or to reduce the number of
authorized shares of Common Stock and Preferred Stock. A 75% vote is also
required to amend or repeal any of the foregoing By-Law provisions. Such 75%
stockholder vote would in either case be in addition to any separate class vote
that might in the future be required pursuant to the terms of any Preferred
Stock that might be outstanding at the time any such amendments are submitted to
stockholders. The By-Laws may also be amended or repealed by a majority vote of
the Board of Directors.
The foregoing provisions could have the effect of making it more difficult
for a third party to acquire, or of discouraging a third party from attempting
to acquire control of the Company.
The Company's Restated Certificate of Incorporation contains certain
provisions permitted under the DGCL relating to the liability of directors.
These provisions eliminate a director's personal liability for monetary damages
resulting from a breach of fiduciary duty, except in certain circumstances
involving certain wrongful acts, such as the breach of a director's duty of
loyalty or acts or omissions that involve intentional misconduct or a knowing
violation of law. These provisions do not limit or eliminate the rights of the
Company or any stockholder to seek non-monetary relief, such as an injunction or
rescission, in the event of a breach of a director's fiduciary duty. These
provisions will not alter a director's liability under federal securities laws.
The Company's Restated Certificate of Incorporation and By-Laws also contain
provisions indemnifying the directors and officers of the Company to the fullest
extent permitted by the DGCL. The Company believes that these provisions will
assist the Company in attracting and retaining qualified individuals to serve as
directors.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Company's Common Stock is American
Stock Transfer and Trust Company.
60
<PAGE> 63
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of this offering, the Company will have outstanding
8,702,791 shares of Common Stock (9,077,791 shares if the Underwriters'
over-allotment option is exercised in full). Of these shares, the 2,500,000
shares sold in this offering will be freely tradeable without restriction or
further registration under the Securities Act unless purchased by "affiliates"
of the Company as that term is defined in Rule 144. The remaining 6,202,791
shares outstanding upon completion of this offering will be "restricted
securities" as that term is defined under Rule 144 (the "Restricted Shares").
Sales of Restricted Shares in the public market, or the availability of such
shares for sale, could adversely affect the market price of the Common Stock.
The executive officers, directors, employees and other stockholders of the
Company who beneficially own an aggregate of 6,202,791 shares of Common Stock
outstanding prior to this offering have agreed that they will not, without the
prior written consent of Hambrecht & Quist LLC, offer, sell or otherwise dispose
of any shares of Common Stock, options or warrants to acquire shares of Common
Stock or securities exchangeable for or convertible into shares of Common Stock
owned by them for a period of 180 days after the date of this Prospectus (the
"Lock-Up Period"). See "Underwriting."
Upon expiration of the Lock-Up Period, approximately 659,289 Restricted
Shares held by non-affiliates will be eligible for sale in the public market
without restriction pursuant to Rule 144(k) under the Securities Act and
approximately 3,980,257 Restricted Shares held by affiliates and approximately
417,541 Restricted Shares held by non-affiliates will be so eligible subject to
compliance with the volume limitations of Rule 144 described below. The
remaining 924,629 Restricted Shares may be sold pursuant to Rule 144 only after
they have been fully paid for and held for at least one year from the later of
the date of issuance by the Company or acquisition from an affiliate (which
dates do not occur until after the expiration of the Lock-Up Period).
Beginning 90 days after the date of this Prospectus, certain shares issued
or issuable upon exercise of options granted by the Company prior to the date of
this Prospectus will also be eligible for sale in the public market pursuant to
Rule 701 under the Securities Act. In general, Rule 701 permits resales of
shares issued pursuant to certain compensatory benefit plans and contracts
commencing 90 days after the issuer becomes subject to the reporting
requirements of the Securities and Exchange Act of 1934, as amended, in reliance
upon Rule 144 but without compliance with certain restrictions, including the
holding period requirements, contained in Rule 144. If all the requirements of
Rule 701 are met, upon expiration of the Lock-Up Period an aggregate of 221,075
shares of Common Stock currently outstanding, and an additional 947,272 shares
of Common Stock issuable upon exercise of currently outstanding options will be
eligible for sale pursuant to such rule.
In general, under Rule 144 as currently in effect, a person (or persons
whose shares are aggregated) who beneficially owned Restricted Shares for at
least one year, including persons who may be deemed "affiliates" of the Company,
would be entitled to sell within any three-month period a number of shares that
does not exceed the greater of one percent of the number of shares of Common
Stock then outstanding or the average weekly trading volume of the Common Stock
during the four calendar weeks preceding the filing of a Form 144 with respect
to such sale. Sales under Rule 144 are also subject to certain manner of sale
provisions and notice requirements and to the availability of current public
information about the Company. In addition, a person who is not deemed to have
been an affiliate of the Company at any time during the 90 days preceding the
sale, and who has beneficially owned for at least two years the shares proposed
to be sold, would be entitled to sell such shares under Rule 144(k) without
complying with the manner of sale, public information, volume limitation or
notice provisions of Rule 144.
The Company is unable to estimate accurately the number of Restricted
Shares that will be sold under Rule 144 since this will depend in part on the
market price for the Common Stock, the personal circumstances of the sellers and
other factors.
Rule 144A under the Securities Act would permit, subject to certain
conditions, the sale by the current holders of Restricted Shares of all or a
portion of their shares to certain "qualified institutional buyers," as defined
in Rule 144A.
61
<PAGE> 64
The Company intends to file a Form S-8 registration statement under the
Securities Act to register all shares of Common Stock issuable under the Stock
Option Plan. That registration statement is expected to be filed approximately
180 days after the date of this Prospectus and is expected to become effective
immediately upon filing. Shares covered by such registration statement will be
eligible for resale in the public market after the effective date of such
registration statements, subject to Rule 144 limitations applicable to
affiliates and to the Lock-Up Period, if applicable.
In addition, upon completion of this offering, the holders of 5,981,716
shares of Common Stock will be entitled to certain rights with respect to
registration of such shares under the Securities Act. Registration of such
shares under the Securities Act would result in such shares becoming freely
tradeable without restriction under the Securities Act (except for shares
purchased by affiliates of the Company) immediately upon the effectiveness of
such registration. See "Description of Capital Stock--Registration Rights."
Prior to this offering, there has been no public market for the Common
Stock and no predictions can be made as to the effect, if any, that public sales
of shares or the availability of shares for sale will have on the market price
prevailing from time to time. Nevertheless, sales of substantial amounts of
Common Stock in the public market, or the perception that such sales could
occur, could have an adverse impact on the market price.
62
<PAGE> 65
UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement, the
Underwriters named below, through their Representatives, Hambrecht & Quist LLC
and UBS Securities LLC, have severally agreed to purchase from the Company the
following respective number of shares of Common Stock:
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITERS SHARES
-------------------------------------------------------------------------- ---------
<S> <C>
Hambrecht & Quist LLC.....................................................
UBS Securities LLC........................................................
---------
Total........................................................... 2,500,000
=========
</TABLE>
The Underwriting Agreement provides that the obligations of the
Underwriters are subject to certain conditions precedent, including the absence
of any material adverse change in the Company's business and the receipt of
certain certificates, opinions and letters from the Company, its counsel and
independent auditors. The nature of the Underwriters' obligation is such that
they are committed to purchase all shares of Common Stock offered hereby if any
of such shares are purchased.
The Underwriters propose to offer the shares of Common Stock directly to
the public at the initial public offering price set forth on the cover page of
this Prospectus and to certain dealers at such price less a concession not in
excess of $ per share. The Underwriters may allow and such dealers may
reallow a concession not in excess of $ per share to certain other
dealers. After the initial public offering of the shares, the offering price and
other selling terms may be changed by the Representatives of the Underwriters.
The Underwriters have informed the Company that the Underwriters do not intend
to confirm sales of Common Stock offered hereby to accounts over which they
exercise discretionary authority.
The Company has granted the Underwriters an option, exercisable no later
than 30 days after the date of this Prospectus, to purchase up to 375,000
additional shares of Common Stock at the initial public offering price, less the
underwriting discount, set forth on the cover page of this Prospectus. To the
extent that the Underwriters exercise this option, each of the Underwriters will
have a firm commitment to purchase approximately the same percentage thereof
which the number of shares of Common Stock to be purchased by it shown in the
above table bears to the total number of shares of Common Stock offered hereby.
The Company will be obligated, pursuant to the option, to sell such shares to
the Underwriters to the extent the option is exercised. The Underwriters may
exercise such option only to cover over-allotments made in connection with the
sale of shares of Common Stock offered hereby.
Certain persons participating in this offering may overallot or effect
transactions which stabilize, maintain or otherwise affect the market price of
the Common Stock at levels above those which might otherwise prevail in the open
market, including by entering stabilizing bids, effecting syndicate covering
transactions or imposing penalty bids. A stabilizing bid means the placing of
any bid or effecting of any purchase, for the purpose of pegging, fixing or
maintaining the price of the Common Stock. A syndicate covering transaction
means the placing of any bid on behalf of the underwriting syndicate or the
effecting of any purchase to reduce a short position created in connection with
the offering. A penalty bid means an arrangement that permits the Underwriters
to reclaim a selling concession from a syndicate member in connection with the
offering when shares of Common Stock sold by the syndicate member are purchased
in syndicate covering transactions. Such transactions may be effected on the
Nasdaq Stock Market, in the over-the-counter market, or otherwise. Such
stabilizing, if commenced, may be discontinued at any time.
63
<PAGE> 66
The offering of the shares is made for delivery when, as and if accepted by
the Underwriters and subject to prior sale and to withdrawal, cancellation or
modification of the offering without notice. The Underwriters reserve the right
to reject an order for the purchase of shares in whole or in part.
The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act, and to contribute
to payments the Underwriters may be required to make in respect thereof.
The executive officers, directors, employees and other stockholders of the
Company, who beneficially own an aggregate of 6,202,791 shares of Common Stock
outstanding prior to this offering, have agreed that they will not, without the
prior written consent of Hambrecht & Quist LLC, offer, sell or otherwise dispose
of any shares of Common Stock, options or warrants to acquire shares of Common
Stock or securities exchangeable for or convertible into shares of Common Stock
owned by them during the 180 day period following the date of this Prospectus.
The Company has agreed that it will not, without the prior written consent of
Hambrecht & Quist LLC, offer, sell or otherwise dispose of any shares of Common
Stock, options or warrants to acquire shares of Common Stock during the 180 day
period following the date of this Prospectus, except that the Company may issue
shares upon the exercise of options granted prior to the date hereof, and may
grant additional options under its stock option plans, provided that, without
the prior written consent of Hambrecht & Quist LLC, such additional options
shall not be exercisable during such period.
Prior to the offering, there has been no public market for the Common
Stock. The initial public offering price for the Common Stock will be determined
by negotiation among the Company and the Representatives. Among the factors to
be considered in determining the initial public offering price are prevailing
market and economic conditions, certain financial information of the Company,
market valuation of other companies engaged in activities similar to the
Company, estimates of the business potential and prospects of the Company, the
present state of the Company's business operation, the Company's management and
other factors deemed relevant. The estimated initial public offering price set
forth on the cover page of this Prospectus is subject to change as a result of
market conditions and other factors.
LEGAL MATTERS
The validity of the shares of Common Stock offered hereby and certain legal
matters will be passed on for the Company by Bingham, Dana & Gould LLP, Boston,
Massachusetts. Justin P. Morreale, a partner at Bingham, Dana & Gould LLP, is
the Secretary of the Company. Certain legal matters will be passed on for the
Underwriters by Hale and Dorr LLP, Boston, Massachusetts.
EXPERTS
The audited consolidated financial statements of the Company as of December
31, 1995 and 1996 and for each of the three years in the period ended December
31, 1996, have been audited by Arthur Andersen LLP, independent public
accountants, as stated in their report with respect thereto and are included
herein in reliance upon the authority of said firm as experts in giving said
reports.
The statements in this Prospectus under the captions "Risk
Factors--Uncertainties Relating to Patents and Proprietary Rights" and
"Business--Patents and Proprietary Rights" have been reviewed and approved by
Hamilton, Brook, Smith & Reynolds, P.C., patent counsel to the Company, as
experts on such matters, and are included herein in reliance upon that review
and approval.
64
<PAGE> 67
ADDITIONAL INFORMATION
A Registration Statement on Form S-1, including amendments thereto,
relating to the Common Stock offered by the Company has been filed with the
Securities and Exchange Commission (the "Commission"), Washington, D.C. 20549.
This Prospectus does not contain all of the information set forth in the
Registration Statement and the exhibits and schedules thereto. Statements
contained in this Prospectus as to the contents of any contract or any other
document referred to are not necessarily complete, and in each instance
reference is made to the copy of such contract or document filed as an exhibit
to the Registration Statement, each such statement being qualified in all
respects by such reference. For further information with respect to the Company
and the Common Stock offered hereby, reference is made to the Registration
Statement and to the exhibits and schedules thereto. A copy of the Registration
Statement may be inspected by anyone without charge at the Commission's
principal office in Washington, D.C., and copies of all or any part thereof may
be obtained from the Public Reference Section of the Commission, 450 Fifth
Street, NW., Washington, DC. 20549, upon payment of certain fees prescribed by
the Commission. The Commission maintains a World Wide Web site that contains
reports, proxy and information statements and other information regarding
registrants that file electronically with the Commission. The address of the
Commission's World Wide Web site is http://www.sec.gov.
65
<PAGE> 68
LEUKOSITE, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Public Accountants........................................... F-2
Consolidated Balance Sheets as of December 31, 1995, 1996 and June 30, 1997
(Unaudited)...................................................................... F-3
Consolidated Statements of Operations for the Years Ended December 31, 1994, 1995
and 1996, for the Six Months Ended June 30, 1996 and 1997 (Unaudited) and for the
Period from Inception (May 1, 1992) to June 30, 1997 (Unaudited)................. F-4
Consolidated Statements of Stockholders' Equity (Deficit) for the Period from
Inception (May 1, 1992) to December 31, 1996, for the six months ended June 30,
1997 (Unaudited) and Pro Forma June 30, 1997 (unaudited)......................... F-5
Consolidated Statements of Cash Flows for the Years Ended December 31, 1994, 1995
and 1996, for the Six Months Ended June 30, 1996 and 1997 (Unaudited) and for the
Period from Inception (May 1, 1992) to June 30, 1997 (Unaudited)................. F-6
Notes to Consolidated Financial Statements......................................... F-7
</TABLE>
F-1
<PAGE> 69
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To LeukoSite, Inc.:
We have audited the accompanying consolidated balance sheets of LeukoSite,
Inc. (a Delaware corporation in the development stage) and subsidiary as of
December 31, 1995 and 1996, and the related consolidated statements of
operations, stockholders' equity (deficit) and cash flows for each of the three
years in the period then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of LeukoSite,
Inc. and subsidiary as of December 31, 1995 and 1996, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1996, in conformity with generally accepted accounting principles.
Boston, Massachusetts /s/ Arthur Andersen LLP
March 4, 1997 (except for the matter
discussed in Note 9(a), as to which the
date is August 8, 1997)
F-2
<PAGE> 70
LEUKOSITE, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
PRO FORMA
DECEMBER 31, DECEMBER 31, JUNE 30, JUNE 30,
1995 1996 1997 1997
------------ ------------ ------------ ------------
(UNAUDITED)
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents........................... $ 1,734,188 $ 4,430,507 $ 6,620,171 $ 6,620,171
Marketable securities............................... -- 4,953,902 5,028,374 5,028,374
Other current assets................................ 87,509 153,779 321,802 321,802
----------- ----------- ------------ ------------
Total current assets......................... 1,821,697 9,538,188 11,970,347 11,970,347
----------- ----------- ------------ ------------
Property and equipment, at cost:
Laboratory furniture, fixtures and equipment........ 1,867,903 2,209,222 2,443,448 2,443,448
Leasehold improvements.............................. 1,700,025 1,792,989 2,045,703 2,045,703
Office furniture, fixtures and equipment............ 174,061 268,254 274,786 274,786
----------- ----------- ------------ ------------
3,741,989 4,270,465 4,763,937 4,763,937
Less--Accumulated depreciation and amortization..... 1,053,149 1,962,009 (2,502,008) (2,502,008)
----------- ----------- ------------ ------------
2,688,840 2,308,456 2,261,929 2,261,929
Other assets.......................................... 27,526 27,526 551,772 551,772
----------- ----------- ------------ ------------
Total assets................................. $ 4,538,063 $11,874,170 $ 14,784,048 $ 14,784,048
=========== =========== ============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable.................................... $ 83,419 $ 118,018 $ 175,729 $ 175,729
Accrued expenses.................................... 647,481 1,044,080 1,908,891 1,908,891
Deferred revenue.................................... -- 261,250 2,425,000 2,425,000
Deferred rent, current portion...................... -- 104,357 221,051 221,051
Current portion of capital lease obligations........ 652,090 784,168 468,288 468,288
----------- ----------- ------------ ------------
Total current liabilities.................... 1,382,990 2,311,873 5,198,959 5,198,959
----------- ----------- ------------ ------------
Deferred rent, net of current portion................. 336,231 466,078 344,493 344,493
----------- ----------- ------------ ------------
Capital lease obligations, less current portion....... 1,246,998 763,621 778,436 778,436
----------- ----------- ------------ ------------
Commitments and contingencies (Notes 3, 7, 12 and 14)
Redeemable convertible preferred stock, $.01 par
value--
Authorized--21,667,199 shares
Issued and outstanding--13,148,149 shares at
December 31, 1995, 15,643,627 shares at December
31, 1996, 16,746,346 shares at June 30, 1997 and
no shares pro forma............................... 13,732,798 20,913,405 25,220,911 --
----------- ----------- ------------ ------------
Stockholders' equity (deficit):
Preferred stock $.01 par value--
Authorized--5,000,000 shares
Issued and outstanding--no shares................. -- -- -- --
Convertible preferred stock $.01 par value--
Authorized--2,250,000 shares
Issued and outstanding--1,000,000 shares at
December 31, 1995, 2,250,000 shares at December
31, 1996 and at June 30, 1997 and no shares pro
forma........................................... 10,000 22,500 22,500 --
Common stock, $.01 par value--
Authorized--25,000,000 shares
Issued and outstanding--1,041,099 shares at
December 31, 1995, 1,086,590 shares at December
31, 1996, 1,095,241 shares at June 30, 1997 and
6,183,176 shares pro forma...................... 10,411 10,866 10,952 61,831
Additional paid-in capital.......................... 3,121,267 8,710,149 8,720,235 33,912,767
Deficit accumulated during the development stage.... (15,302,632) (21,324,322) (25,512,438) (25,512,438)
----------- ----------- ------------ ------------
Total stockholders' equity (deficit)......... (12,160,954) (12,580,807) (16,758,751) 8,462,160
----------- ----------- ------------ ------------
Total liabilities and stockholders' equity
(deficit).................................. $ 4,538,063 $11,874,170 $ 14,784,048 $ 14,784,048
=========== =========== ============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-3
<PAGE> 71
LEUKOSITE, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
SIX MONTHS ENDED INCEPTION
YEAR ENDED DECEMBER 31, JUNE 30, (MAY 1, 1992)
--------------------------------------- ------------------------- THROUGH
1994 1995 1996 1996 1997 JUNE 30, 1997
----------- ----------- ----------- ----------- ----------- --------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Corporate collaborations.... $ -- $ 250,000 $ 3,591,000 $ 523,500 $ 2,070,024 $ 5,911,024
Government grants........... -- 200,000 82,770 -- 205,422 488,192
----------- ----------- ----------- ----------- ----------- ------------
Total revenues...... -- 450,000 3,673,770 523,500 2,275,446 6,399,216
----------- ----------- ----------- ----------- ----------- ------------
Operating expenses:
Research and development.... 5,055,447 7,051,287 8,502,187 3,924,628 5,451,437 27,641,324
General and
administrative........... 726,084 865,311 1,370,538 495,274 735,562 4,289,842
----------- ----------- ----------- ----------- ----------- ------------
Total operating
expenses.......... 5,781,531 7,916,598 9,872,725 4,419,902 6,186,999 31,931,166
----------- ----------- ----------- ----------- ----------- ------------
Loss from
operations........ (5,781,531) (7,466,598) (6,198,955) (3,896,402) (3,911,553) (25,531,950)
Interest income............... 205,735 219,510 378,924 172,139 294,794 1,098,963
Interest expense.............. (58,215) (229,665) (201,659) (109,157) (83,357) (591,451)
----------- ----------- ----------- ----------- ----------- ------------
Net loss............ $(5,634,011) $(7,476,753) $(6,021,690) $(3,833,420) $(3,700,116) $ (25,024,438)
=========== =========== =========== =========== =========== ============
Pro forma net loss per common
share....................... $ (1.04) $ (.59)
=========== ===========
Shares used in computing pro
forma net loss per common
share....................... 5,770,089 6,290,299
=========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE> 72
LEUKOSITE, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
CONVERTIBLE SERIES A
PREFERRED STOCK COMMON STOCK COMMON STOCK
---------------------- --------------------- --------------------- ADDITIONAL
NUMBER $.01 NUMBER $.01 NUMBER $.01 PAID-IN
OF SHARES PAR VALUE OF SHARES PAR VALUE OF SHARES PAR VALUE CAPITAL
---------- --------- --------- --------- --------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
ISSUANCE OF COMMON STOCK................ -- $ -- -- $ -- 804,878 $ 8,049 $ (7,629)
Net loss.............................. -- -- -- -- -- -- --
--------- ------- -------- ------- --------- ------- ----------
BALANCE, DECEMBER 31, 1992.............. -- -- -- -- 804,878 8,049 (7,629)
Issuance of common stock.............. -- -- -- -- 121,951 1,220 3,780
Conversion of common stock to Series A
common stock........................ -- -- 804,878 8,049 (804,878) (8,049) --
Preferred stock warrants issued in
connection with lease obligations... -- -- -- -- -- -- 35,000
Net loss.............................. -- -- -- -- -- -- --
--------- ------- -------- ------- --------- ------- ----------
BALANCE, DECEMBER 31, 1993.............. -- -- 804,878 8,049 121,951 1,220 31,151
Issuance of Series C convertible
preferred stock, net of issuance
costs of $47,691.................... 1,000,000 10,000 -- -- -- -- 2,942,309
Exercise of stock options............. -- -- -- -- 9,451 94 1,344
Preferred stock warrants issued in
connection with lease obligations... -- -- -- -- -- -- 55,500
Net loss.............................. -- -- -- -- -- -- --
--------- ------- -------- ------- --------- ------- ----------
BALANCE, DECEMBER 31, 1994.............. 1,000,000 10,000 804,878 8,049 131,402 1,314 3,030,304
Conversion of Series A common stock to
common stock........................ -- -- (804,878) (8,049) 893,782 8,938 88,450
Exercise of stock options............. -- -- -- -- 15,915 159 2,513
Net loss.............................. -- -- -- -- -- -- --
--------- ------- -------- ------- --------- ------- ----------
BALANCE, DECEMBER 31, 1995.............. 1,000,000 10,000 -- -- 1,041,099 10,411 3,121,267
Issuance of Series E convertible
preferred stock, net of issuance
costs of $40,434.................... 1,250,000 12,500 -- -- -- -- 4,947,066
Exercise of stock options............. -- -- -- -- 45,491 455 31,816
Value ascribed to guaranteed rate of
return on redeemable convertible
preferred stock..................... -- -- -- -- -- -- 610,000
Net loss.............................. -- -- -- -- -- -- --
--------- ------- -------- ------- --------- ------- ----------
BALANCE, DECEMBER 31, 1996.............. 2,250,000 22,500 -- -- 1,086,590 10,866 8,710,149
Exercise of stock options
(unaudited)......................... -- -- -- -- 8,651 86 10,086
Net loss (unaudited).................. -- -- -- -- -- -- --
Accretion of redeemable convertible
preferred stock dividends
(unaudited)......................... -- -- -- -- -- -- --
--------- ------- -------- ------- --------- ------- ----------
BALANCE, JUNE 30, 1997 (UNAUDITED)...... 2,250,000 22,500 -- -- 1,095,241 10,952 8,720,235
Conversion of convertible preferred
stock (unaudited)................... (2,250,000) (22,500) -- -- 548,780 5,488 17,012
Conversion of redeemable convertible
preferred stock (unaudited)......... -- -- -- -- 4,539,155 45,391 25,175,520
--------- ------- -------- ------- --------- ------- ----------
PRO FORMA BALANCE, JUNE 30, 1997
(UNAUDITED)........................... -- $ -- -- $ -- 6,183,176 $61,831 $33,912,767
========= ======= ======== ======= ========= ======= ==========
<CAPTION>
DEFICIT
ACCUMULATED
DURING
DEVELOPMENT
STAGE TOTAL
------------ ------------
<S> <<C> <C>
ISSUANCE OF COMMON STOCK................ $ -- $ 420
Net loss.............................. (128,634) (128,634)
------------ ------------
BALANCE, DECEMBER 31, 1992.............. (128,634) (128,214)
Issuance of common stock.............. -- 5,000
Conversion of common stock to Series A
common stock........................ -- --
Preferred stock warrants issued in
connection with lease obligations... -- 35,000
Net loss.............................. (2,063,234) (2,063,234)
------------ ------------
BALANCE, DECEMBER 31, 1993.............. (2,191,868) (2,151,448)
Issuance of Series C convertible
preferred stock, net of issuance
costs of $47,691.................... -- 2,952,309
Exercise of stock options............. -- 1,438
Preferred stock warrants issued in
connection with lease obligations... -- 55,500
Net loss.............................. (5,634,011) (5,634,011)
------------ ------------
BALANCE, DECEMBER 31, 1994.............. (7,825,879) (4,776,212)
Conversion of Series A common stock to
common stock........................ -- 89,339
Exercise of stock options............. -- 2,672
Net loss.............................. (7,476,753) (7,476,753)
------------ ------------
BALANCE, DECEMBER 31, 1995.............. (15,302,632) (12,160,954)
Issuance of Series E convertible
preferred stock, net of issuance
costs of $40,434.................... -- 4,959,566
Exercise of stock options............. -- 32,271
Value ascribed to guaranteed rate of
return on redeemable convertible
preferred stock..................... -- 610,000
Net loss.............................. (6,021,690) (6,021,690)
------------ ------------
BALANCE, DECEMBER 31, 1996.............. (21,324,322) (12,580,807)
Exercise of stock options
(unaudited)......................... -- 10,172
Net loss (unaudited).................. (3,700,116) (3,700,116)
Accretion of redeemable convertible
preferred stock dividends
(unaudited)......................... (488,000) (488,000)
------------ ------------
BALANCE, JUNE 30, 1997 (UNAUDITED)...... (25,512,438) (16,758,751)
Conversion of convertible preferred
stock (unaudited)................... -- --
Conversion of redeemable convertible
preferred stock (unaudited)......... -- 25,220,911
------------ ------------
PRO FORMA BALANCE, JUNE 30, 1997
(UNAUDITED)........................... $(25,512,438) $ 8,462,160
============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE> 73
LEUKOSITE, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
SIX MONTHS INCEPTION
YEAR ENDED DECEMBER 31, ENDED JUNE 30, (MAY 1, 1992)
---------------------------------------- ------------------------- THROUGH
1994 1995 1996 1996 1997 JUNE 30, 1997
----------- ----------- ------------ ----------- ----------- --------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net loss............................ $(5,634,011) $(7,476,753) $ (6,021,690) $(3,833,420) $(3,700,116) $(25,024,438)
Adjustments to reconcile net loss to
net cash used in operating
activities--
Stock compensation expense........ 86,058 3,281 -- -- -- 89,339
Depreciation and amortization..... 261,249 774,146 908,860 450,000 539,999 2,491,784
Changes in operating assets and
liabilities--
Other current assets.......... (124,143) 76,530 (66,270) (57,923) (168,023) (321,802)
Accounts payable and accrued
expenses.................... 1,139,006 (809,953) 431,198 35,567 922,522 2,651,322
Deferred revenue.............. -- -- 261,250 511,250 2,163,750 2,425,000
Deferred rent................. 27,407 308,824 234,204 118,576 (4,891) 565,544
----------- ----------- ------------ ----------- ----------- ------------
Net cash used in operating
activities.............. (4,244,434) (7,123,925) (4,252,448) (2,775,950) (246,759) (17,123,251)
----------- ----------- ------------ ----------- ----------- ------------
Cash flows from investing activities:
Investment in marketable
securities........................ (3,797,645) (1,458,329) (11,741,504) (3,759,041) (4,953,064) (21,950,542)
Proceeds from maturities of
marketable securities............. 1,797,474 3,458,500 6,787,602 -- 4,878,592 16,922,168
Purchases of property and
equipment......................... (974,502) (40,283) (184,549) (22,797) (405,981) (2,192,541)
Decrease (increase) in other
assets............................ 7,500 (436) -- -- (524,246) (551,772)
----------- ----------- ------------ ----------- ----------- ------------
Net cash provided by (used
in) investing
activities.............. (2,967,173) 1,959,452 (5,138,451) (3,781,838) (1,004,699) (7,772,687)
----------- ----------- ------------ ----------- ----------- ------------
Cash flows from financing activities:
Principal payments on capital
leases............................ (148,588) (558,280) (695,226) (311,006) (388,556) (1,790,650)
Net proceeds from notes payable..... -- -- -- -- -- 2,086,312
Proceeds from redeemable convertible
preferred stock, net of issuance
costs............................. 6,907,860 1,950,908 7,790,607 4,851,717 3,819,506 23,256,599
Exercise of stock options........... 1,438 2,672 32,271 23,075 10,172 51,973
Issuance of convertible preferred
stock, net of issuance costs...... 2,952,309 -- 4,959,566 4,959,566 -- 7,911,875
----------- ----------- ------------ ----------- ----------- ------------
Net cash provided by
financing activities.... 9,713,019 1,395,300 12,087,218 9,523,352 3,441,122 31,516,109
----------- ----------- ------------ ----------- ----------- ------------
Net increase (decrease) in cash and
cash equivalents.................... $ 2,501,412 $(3,769,173) $ 2,696,319 $ 2,965,564 $ 2,189,664 $ 6,620,171
Cash and cash equivalents, beginning
of period........................... 3,001,949 5,503,361 1,734,188 1,734,188 4,430,507 --
----------- ----------- ------------ ----------- ----------- ------------
Cash and cash equivalents, end of
period.............................. $ 5,503,361 $ 1,734,188 $ 4,430,507 $ 4,699,752 $ 6,620,171 $ 6,620,171
=========== =========== ============ =========== =========== ============
Supplemental cash flow information:
Cash paid during the period for
interest.......................... $ 51,887 $ 193,197 $ 201,659 $ 109,158 $ 83,357 $ 805,066
=========== =========== ============ =========== =========== ============
Supplemental disclosure of noncash
investing and financing activities:
Property and equipment purchased
under capital lease obligations... $ 1,614,765 $ 435,301 $ 343,927 $ 70,143 $ 87,491 $ 2,811,174
=========== =========== ============ =========== =========== ============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-6
<PAGE> 74
LEUKOSITE, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS)
(1) THE COMPANY
LeukoSite, Inc. (the "Company") was incorporated on May 1, 1992. The
Company is engaged in the development of a new class of proprietary
immunomodulatory therapeutics for the treatment of inflammatory and autoimmune
diseases.
The Company is in the development stage and is devoting substantially all
of its efforts toward product research and development and raising capital.
Management anticipates that all future revenues will be derived from products
under development or those developed in the future. Principal risks to the
Company include the successful development and marketing of products to obtain
profitable operations, dependence on collaborative partners, the ability to
obtain adequate financing to fund future operations, United States Food and Drug
Administration clearance and regulation, dependence on key individuals and
competition from substitute products and larger companies.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the reporting
period. Actual results could differ from those estimates.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Pro Forma Presentation
The unaudited pro forma consolidated balance sheet as of June 30, 1997
reflects the automatic conversion of all outstanding shares of redeemable
convertible preferred stock and convertible preferred stock into 5,087,935
shares of common stock (assuming an initial public offering price of $9.00 per
share) to occur upon the closing of the Company's proposed initial public
offering.
(b) Interim Financial Statements
The accompanying consolidated balance sheet as of June 30, 1997, the
consolidated statements of operations, cash flows for the six months ended June
30, 1996 and 1997 and for the period from inception (May 1, 1992) to June 30,
1997 and the consolidated statement of changes in stockholder equity (deficit)
for the period ended June 30, 1997 are unaudited, but, in the opinion of
management, have been prepared on a basis substantially consistent with the
audited financial statements and include all adjustments, consisting of only
normal recurring adjustments, necessary for a fair presentation of the results
of these interim periods. The results of the six months ended June 30, 1997 are
not necessarily indicative of the results to be expected for the entire year.
(c) Principles of Consolidation
The accompanying consolidated financial statements include the accounts of
the Company and its wholly owned subsidiary. All material intercompany accounts
and transactions have been eliminated in consolidation.
(d) Cash Equivalents and Marketable Securities
Cash equivalents are highly liquid investments with original maturities of
less than three months. Marketable securities consist of U.S. government agency
securities with original maturities of greater than three months. The Company
accounts for cash equivalents and marketable securities in accordance with
Statement of Financial Accounting Standards (SFAS) No. 115, Accounting for
Certain Investments in Debt and Equity Securities. In accordance with SFAS No.
115, the Company has classified its investments as held-to-maturity. These
investments that the Company has the positive intent and ability to hold to
maturity, which consist of cash equivalents and marketable securities, are
reported at amortized cost, which approximates fair market value. As of June 30,
1997, there were no material
F-7
<PAGE> 75
LEUKOSITE, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS)
unrealized gains or losses on any investments. All investments mature within one
year and the average maturity of the Company's marketable securities was
approximately 6.3 months at June 30, 1997.
(e) Depreciation and Amortization
The Company provides for depreciation and amortization using the
straight-line method by charges to operations in amounts estimated to allocate
the cost of property and equipment over their estimated useful lives as follows:
<TABLE>
<CAPTION>
ESTIMATED
ASSET CLASSIFICATION USEFUL LIVES
------------------------------------------------------- -------------
<S> <C>
Laboratory furniture, fixtures and equipment........... 4-5 Years
Leasehold improvements................................. Life of lease
Office furniture, fixtures and equipment............... 4-5 Years
</TABLE>
(f) Revenue Recognition
Substantially all of the Company's revenues are derived from corporate
collaborative research arrangements and government grants. Corporate
collaboration revenues and government grants, which are not subject to achieving
development milestones, are recognized on a straight-line basis over the period
of the contract, which approximates when work is performed and costs are
incurred. Revenues which are earned upon the achievement of development
milestones are recognized when the milestones are achieved and payment is due.
License fee revenue represents technology transfer fees received for rights to
certain technology of the Company. License fees are recognized as revenue as
earned. Deferred revenue represents payments received in advance of revenue
recognition.
(g) Research and Development
All research and development costs are expensed as incurred. Research and
development expenses in the accompanying consolidated statements of operations
include funded and unfunded expenses.
(h) Disclosure of Fair Value of Financial Instruments
The Company's financial instruments consist mainly of cash and cash
equivalents, marketable securities, accounts payable and redeemable convertible
preferred stock. The carrying amounts of these financial instruments approximate
fair value due to the short-term nature of these instruments.
(i) Pro Forma Net Loss per Common Share
Pro forma net loss per common share is based on the pro forma weighted
average number of common and common equivalent shares outstanding during the
period, assuming the automatic conversion of all outstanding shares of
redeemable convertible preferred stock and convertible preferred stock into
5,087,935 shares of common stock to occur upon the consummation of the Company's
proposed initial public offering. Pursuant to the requirements of the Securities
and Exchange Commission Staff Accounting Bulletin No. 83, common and common
equivalent shares issued during the 12 months immediately prior to the date of
the initial filing of the Company's registration statement have been included in
the calculation of weighted average number of common shares outstanding for all
periods presented using the treasury stock method and the proposed initial
F-8
<PAGE> 76
LEUKOSITE, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS)
public offering price of $9.00 per share. Historical net loss per share has not
been presented as it is not meaningful.
(3) RESEARCH, LICENSE AND CONSULTING AGREEMENTS
The Company has entered into various research, license and consulting
agreements to support its research and development activities. These agreements
generally expire over several years. Certain of such agreements contain
provisions for future royalties to be paid on sales of products developed under
the agreements. The Company also has commitments to fund research and
development under arrangements discussed in Notes 7 and 14.
Future minimum commitments under research, license and consulting
agreements at December 31, 1996 are approximately as follows:
<TABLE>
<S> <C>
1997.............................................. $457,000
1998.............................................. 70,000
</TABLE>
(4) WARNER-LAMBERT AGREEMENTS
The Company and Warner-Lambert Company (Warner) have entered into research,
development and marketing agreements to share expertise in the discovery and
development of compounds that inhibit the action of MCP-1 and IL-8 and to
research and market applications thereof.
The agreement for developing the MCP-1 technology was executed in September
1994 and amended in July 1995 (the MCP-1 Agreement). Under the MCP-1 Agreement,
the Company and Warner are working to screen and select compounds for further
development. In conjunction with the MCP-1 Agreement, Warner agreed to purchase
preferred stock at a predetermined share price and to fund a portion of the
Company's research expenses for the next three years. Warner purchased
$3,000,000 of Series C convertible preferred stock in 1995 and $5,000,000 of
Series E convertible preferred stock in 1996.
The agreement for developing the IL-8 technology was executed in July 1995
(the IL-8 Agreement). Under the IL-8 Agreement, the Company and Warner are
working to screen and select compounds for further development. In connection
with the IL-8 Agreement, Warner paid the Company $250,000 for the grant of a
license to the technology and made a $1 million equity investment in the Series
G preferred stock in March 1997.
The Company receives quarterly research funding under the MCP-1 and IL-8
Agreements. As of June 30, 1997, the Company had received $1,285,000 in research
support under the MCP-1 and IL-8 Agreements. The MCP-1 and IL-8 Agreements also
contain milestone payments payable to the Company beginning upon the designation
of a product candidate for development. In addition, under the MCP-1 and IL-8
Agreements, Warner will pay royalties as a percentage of sales, as defined, for
certain products developed under the agreements. Warner has waived its
antidilution rights relating to the Series C, E and G preferred stock it holds
in exchange for a credit against future royalties, if any become payable, under
the MCP-1 and IL-8 Agreements and the Kyowa Hakko Kogyo Agreement discussed in
Note 6. Assuming an initial public offering price of $9.00 per share, the
approximate amount of such credit is $2,050,000. The MCP-1 and IL-8 Agreements
can be terminated by either party with six months' written notice or for cause,
as defined.
F-9
<PAGE> 77
LEUKOSITE, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS)
(5) ROCHE BIOSCIENCE AGREEMENT
In July 1996, the Company entered into an agreement with Roche Bioscience
(Roche) for the development of a drug to block the binding of eotoxin. As part
of this agreement, Roche will make payments to the Company in the form of
licensing fees, research support and milestone payments and royalties on
world-wide sales of products resulting from the collaboration. As of June 30,
1997, the Company had received $4,125,000, in licensing and research support
payments from Roche. Roche will be responsible for preclinical and clinical
development of products and will have worldwide exclusive rights to market
products.
(6) KYOWA HAKKO KOGYO AGREEMENT
In April 1997, the Company entered into a collaboration agreement with
Kyowa Hakko Kogyo (Kyowa) to discover and develop small molecule antagonists and
monoclonal antibody drugs to CXCR3 and CCR1. Kyowa will have exclusive rights to
develop and market products resulting from this collaboration in Japan and Asia
and has an option for rights in the rest of the world. The Company is entitled
to research support and payments and milestones, as well as royalties based on
net sales, as defined. As of June 30, 1997, the Company has received $3,000,000
of research funding of which the Company has deferred recognizing as revenue
$2,250,000.
(7) ILEX AGREEMENT
In May 1997, the Company and Ilex Oncology, Inc. (Ilex) entered into a
joint venture whereby the parties formed a limited partnership to develop and
commercialize LDP-03 for the treatment of chronic lymphocytic leukemia, pursuant
to an agreement of limited partnership and a license agreement between the
Company/Ilex partnership and the Company. The partners are required to make
contributions each time the partnership requires working capital. The
development and commercialization activities of the joint venture will be
managed with equal control by each party. The Company and Ilex will generally
share equally in profits from the sales of LDP-03 and in all future research,
development, clinical and commercialization costs. The Company and Ilex estimate
that research, development and clinical costs will be approximately $10.0
million over the next two years. The joint venture expires in 2017, but provides
for either partner, after the earlier of a change in control (as defined
therein) of the other partner or October 2, 2000, to purchase the other
partner's ownership of the joint venture in the event of an unresolved deadlock.
In addition, in the event that one party is unable or unwilling to fulfill its
funding obligations to the joint venture, then in certain circumstances, the
party that funds the joint venture shall gain control of the management of the
joint venture, subject to certain catch-up rights of the other party.
The Company accounts for its investment in the joint venture under the
equity method of accounting. There was no significant activity in the joint
venture for the period from inception of the joint venture (May 1997) through
June 30, 1997. The Company had no investment in the joint venture at June 30,
1997.
(8) CAPITAL LEASE
In 1993, the Company entered into a master lease agreement for the sale and
leaseback or lease of up to $2,250,000 of laboratory and office equipment and
leasehold improvements. At December 31, 1996, the Company had acquired
approximately $2,130,000 of laboratory and office equipment and leasehold
improvements under the lease agreement. The Company also has an obligation to
purchase $750,000 of leasehold improvements at the expiration of the lease term
for 15% of its original cost. The Company has issued warrants for the purchase
of 210,000 shares of Series A redeemable convertible preferred stock at an
exercise price of $1.00 per share to the lessors under the master lease
agreement (see Note 11(b)).
F-10
<PAGE> 78
LEUKOSITE, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS)
In 1994, the Company entered into a second master equipment lease agreement
for the lease of up to $750,000 of laboratory and office equipment. At December
31, 1996, the Company had acquired approximately $730,000 of equipment under the
lease. The leased equipment reverts back to the lessor at the end of the lease
term or the Company may purchase all of the equipment for fair market value,
which will not be less than 10% or more than 20% of the cost of the equipment.
On January 18, 1996, this agreement was amended to provide an additional
$300,000 of lease availability. On March 14, 1997, the Company entered into
another lease agreement for the lease of up to $1,200,000 of laboratory and
office equipment of which $450,000 may be utilized for leasehold improvements.
As of June 30, 1997, $1,168,000 is available under this lease commitment.
Future minimum lease payments under these lease agreements at December 31,
1996 are as follows:
<TABLE>
<CAPTION>
AMOUNT
----------
<S> <C>
Year Ending December 31,
1997.............................................. $ 911,796
1998.............................................. 593,201
1999.............................................. 182,368
2000.............................................. 32,285
----------
Total..................................... 1,719,650
Less--Amount representing interest................ 171,861
----------
Present value of future lease payments.... 1,547,789
Less--Amounts due within one year................. 784,168
----------
Amounts due after one year................ $ 763,621
==========
</TABLE>
(9) CAPITAL STOCK
(a) Stock Split and Amendment to Charter
On August 8, 1997, the Company amended its Restated Certificate of
Incorporation, which included a 1-for-4.10 reverse stock split of the Company's
common stock and a change in the par value of the Company's common stock to $.01
per share. Accordingly, all share and per share amounts of common stock for all
periods presented have been retroactively adjusted to reflect the reverse stock
split and change in par value. Upon completion of the Company's initial public
offering, the Company will be authorized to issue 25,000,000 shares of common
stock, $.01 par value, and 5,000,000 shares of preferred stock, $.01 par value.
(b) Series A Common Stock
On May 5, 1995, the Series A common stock automatically converted into
893,782 shares of common stock, which represented approximately 20% of the total
number of shares of common stock then outstanding on a fully-diluted basis. The
Company recognized a compensation charge of $89,339, which represents the fair
market value, as determined by the Company's Board of Directors, of the
additional shares issued on May 5, 1995.
F-11
<PAGE> 79
LEUKOSITE, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS)
(10) PREFERRED STOCK
(a) Redeemable Convertible Preferred Stock
As of June 30, 1997, the Company's Board of Directors authorized 21,667,199
shares of $.01 par value redeemable convertible preferred stock. As discussed in
Note 9(a), on August 8, 1997 the Company amended its charter that changed the
authorized capital stock of the Company.
Redeemable convertible preferred stock activity since inception is as
follows:
<TABLE>
<CAPTION>
SERIES A SERIES B SERIES D SERIES F
NUMBER CARRYING NUMBER CARRYING NUMBER CARRYING NUMBER
OF SHARES VALUE OF SHARES VALUE OF SHARES VALUE OF SHARES
---------- ---------- --------- ---------- --------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Issuance of Series A preferred stock,
net of issuance costs of $125,970....... 5,000,000 $4,874,030 -- $ -- -- $ -- --
---------- ---------- --------- ---------- --------- ---------- ---------
Balance, December 31, 1993.............. 5,000,000 4,874,030 -- -- -- -- --
Issuance of Series A preferred stock,
net of issuance costs of $18,769........ 5,000,000 4,981,231 -- -- -- -- --
Issuance of Series B preferred stock,
net of issuance costs of $73,371........ -- -- 1,666,667 1,926,629 -- -- --
---------- ---------- --------- ---------- --------- ---------- ---------
Balance, December 31, 1994.............. 10,000,000 9,855,261 1,666,667 1,926,629 -- -- --
Issuance of Series D preferred stock,
net of issuance costs of $49,093........ -- -- -- -- 1,481,482 1,950,908 --
---------- ---------- --------- ---------- --------- ---------- ---------
Balance, December 31, 1995.............. 10,000,000 9,855,261 1,666,667 1,926,629 1,481,482 1,950,908 --
Issuance of Series F preferred stock,
net of issuance costs of $34,838........ -- -- -- -- -- -- 1,638,335
Issuance of Series G preferred stock,
net of issuance costs of $90,000........ -- -- -- -- -- -- --
Value ascribed to guaranteed rate of
return on redeemable convertible
preferred stock......................... -- -- -- -- -- -- --
---------- ---------- --------- ---------- --------- ---------- ---------
Balance, December 31, 1996.............. 10,000,000 9,855,261 1,666,667 1,926,629 1,481,482 1,950,908 1,638,335
Issuance of Series G preferred stock,
net of issuance costs of $40,000........ -- -- -- -- -- -- --
Accretion of redeemable convertible
preferred stock dividend................ -- -- -- -- -- -- --
---------- ---------- --------- ---------- --------- ---------- ---------
Balance, June 30, 1997.................. 10,000,000 $9,855,261 1,666,667 $1,926,629 1,481,482 $1,950,908 1,638,335
========== ========== ========= ========== ========= ========== =========
<CAPTION>
SERIES G
CARRYING NUMBER CARRYING
VALUE OF SHARES VALUE
---------- --------- ----------
<S> <C> <C> <C>
Issuance of Series A preferred stock,
net of issuance costs of $125,970....... $ -- -- $ --
---------- ------- ----------
Balance, December 31, 1993.............. -- -- --
Issuance of Series A preferred stock,
net of issuance costs of $18,769........ -- -- --
Issuance of Series B preferred stock,
net of issuance costs of $73,371........ -- -- --
---------- ------- ----------
Balance, December 31, 1994.............. -- -- --
Issuance of Series D preferred stock,
net of issuance costs of $49,093........ -- -- --
---------- ------- ----------
Balance, December 31, 1995.............. -- -- --
Issuance of Series F preferred stock,
net of issuance costs of $34,838........ 4,880,607 -- --
Issuance of Series G preferred stock,
net of issuance costs of $90,000........ -- 857,143 2,910,000
Value ascribed to guaranteed rate of
return on redeemable convertible
preferred stock......................... -- -- (610,000)
---------- ------- ----------
Balance, December 31, 1996.............. 4,880,607 857,143 2,300,000
Issuance of Series G preferred stock,
net of issuance costs of $40,000........ -- 1,102,719 3,819,506
Accretion of redeemable convertible
preferred stock dividend................ -- -- 488,000
---------- ------- ----------
Balance, June 30, 1997.................. $4,880,607 1,959,862 $6,607,506
========== ======= ==========
</TABLE>
F-12
<PAGE> 80
LEUKOSITE, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS)
The rights and preferences of the redeemable convertible preferred stock
are as follows:
Voting
Preferred stockholders are entitled to the number of votes equal to the
number of shares of common stock into which each share of preferred stock is
then convertible.
Dividends
In certain events, including liquidation, dissolution or winding up of the
Company, the holders of Series A, Series B, Series D, Series F, and Series G
redeemable convertible preferred stock are entitled to $1.00, $1.20, $1.35,
$3.00, and $3.50 per share, respectively, plus 10% per annum per share, plus any
declared but unpaid dividends before any distribution may be made to other
stockholders. If the assets of the Company are insufficient to permit payment in
full to the holders of preferred stock, the assets of the Company which are
available for distribution shall be distributed in proportion to the full
preferential amount to which each such holder is entitled. Series A, Series B,
Series D, Series F, and Series G stockholders also are entitled to share ratably
in amounts available for distribution to Series C and Series E convertible
preferred and common stockholders subject to certain defined maximum amounts.
Conversion
Conversion is at the option of the holder and is mandatory upon an initial
public offering. Each share of preferred stock is convertible into .24390 share
of common stock at any time, subject to certain antidilutive adjustments. The
number of shares of common stock into which certain outstanding shares of Series
G would be converted into shall be the greater of (i) the Series G minimum
conversion shares and (ii) .24390. The Series G minimum conversion shares is
obtained by dividing the Series G original purchase price by the special
applicable conversion price. The special applicable conversion price shall mean
that if the closing of a designated public offering, as defined, occurs at any
time on or prior to the first anniversary of the original issuance date, an
amount equal to the designated offering price less a twenty-five percent (25%)
discount from such designated public offering price. The discount percentage
increases over time.
The Company also has a separate agreement with certain Series G
shareholders whereby their shares will be converted into common stock based on a
specific return on their original investment, as defined. The Company has
recorded the value attributed to the guaranteed rate of return (based on an
original investment of $3,000,000, an annual rate of return of 33% and an
estimated period of approximately 7.5 months before conversion into common
stock) as additional paid in capital and will be accreting it as a preferred
stock dividend over the estimated period that the stock is outstanding. The
Company has recorded $488,000 of such accretion through June 30, 1997.
Redemption
At the request of the holders of a majority of each series, the Company
shall redeem up to 25% of the preferred stock commencing on January 1, 1998,
September 1, 1999, September 12, 2000, February 29, 2001 and December 20, 2001
for Series A, Series B, Series D, Series F and Series G, respectively. Each year
thereafter, upon the anniversary of the respective series' redemption date, up
to 25% of the remaining preferred stock may be redeemed, subject to certain
limitations. The redemption price per share for the Series A, Series B, Series
D, Series F and Series G shall be $1.00, $1.20, $1.35, $3.00 and $3.50,
respectively, plus all declared but unpaid dividends thereon.
F-13
<PAGE> 81
LEUKOSITE, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS)
Right of First Refusal
The Company's Series A, B, D, F and G preferred stockholders have a right
of first refusal to purchase any new securities offered by the Company. In each
case, this right of first refusal terminates upon the closing of an initial
public offering of the Company's common stock.
Warrants
In connection with the issuance of the Company's Series G redeemable
convertible preferred stock, the Company granted warrants to purchase up to
7,317 shares of common stock. The total warrants issued and the exercise price
will be determined once the Company completes a designated public offering, as
defined, after December 20, 2000. The warrants shall become exercisable only if
the Company's initial public offering occurs after the fourth anniversary of the
first closing (December 20, 1996). If the Company's initial public offering
occurs on or prior to the fourth anniversary, the warrants shall become null and
void. The warrants are exercisable beginning on the later of (i) the date of the
first public offering, as defined, after December 20, 2000, or (ii) the date of
closing in connection with, or expiration of, the underwriters' overallotment
option in connection with the public offering. The warrants expire on the
earlier of (i) the date of closing of the first designated public offering, as
defined, provided the closing occurs on or prior to December 20, 2000, or (ii)
December 20, 2003.
(b) Convertible Preferred Stock
The Company's convertible preferred stock consists of the following:
In November 1994, the Company sold 1,000,000 shares of Series C convertible
preferred stock, which resulted in proceeds of $3,000,000.
In January 1996, the Company issued 625,000 shares of Series E convertible
preferred stock, which resulted in proceeds of $2,500,000.
In April 1996, the Company sold 625,000 shares of Series E convertible
preferred stock, which resulted in proceeds of $2,500,000.
The rights and preferences of the Company's Series C and Series E
convertible preferred stock are as follows:
Voting
The Company's Series C and E preferred stockholders are entitled to the
number of votes equal to the number of shares of common stock into which each
share of preferred stock is then convertible.
Dividends
The Company's Series C and E preferred stockholders are entitled to receive
dividends when and as declared by the Board of Directors.
Liquidation Rights
In certain events, including liquidation, dissolution or winding up of the
Company, the Company's Series C and Series E preferred stockholders are entitled
to $3.00 and $4.00 per share, respectively, plus any declared but unpaid
dividends before any distribution may be made to common stockholders. The
F-14
<PAGE> 82
LEUKOSITE, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS)
Company's Series A, Series B, Series D and Series F redeemable convertible
preferred stockholders also share ratably in amounts available for distribution
to Series C and Series E convertible preferred and common stockholders subject
to certain defined maximums.
Conversion
Each share of the Company's Series C and E preferred stock is convertible
into .24390 share of common stock at any time, subject to certain antidilutive
adjustments. As discussed in Note 4, the Series C and E stockholders have waived
their antidilution rights in exchange for a credit against future royalties that
may become payable to the Company.
(11) STOCK OPTIONS AND WARRANTS
(a) Stock Options
The Company has adopted the 1993 Stock Option Plan (the "Plan") under which
it may grant both incentive stock options and nonstatutory stock options. The
Plan provides for the granting of options to purchase up to 1,500,000 shares of
common stock. As of June 30, 1997, 453,602 shares are available for future grant
under the Plan.
During 1993, the Company granted a stock option to purchase 135,000 shares
of Series A redeemable convertible preferred stock at $1.00 per share pursuant
to a stock restriction agreement with a consultant. Upon conversion of the
Series A redeemable convertible preferred stock into common stock as discussed
in Note 2(a), the option holder will be entitled to purchase 32,927 shares of
common stock at an exercise price of $4.10 per share. This option expires on the
earlier of November 2, 2003 or five years from the effective date of the
Company's initial public offering.
F-15
<PAGE> 83
LEUKOSITE, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS)
The Company had the following common stock option activity from inception
(May 1, 1992) through June 30, 1997:
<TABLE>
<CAPTION>
OPTION
NUMBER OF PRICE WEIGHTED AVERAGE
SHARES PER SHARE EXERCISE PRICE
--------- ----------- ----------------
<S> <C> <C> <C> <C>
Balance, December 31, 1992.................. -- $ -- $ --
Granted................................... 256,707 .04- .62 .45
------- --------- ------
Balance, December 31, 1993.................. 256,707 .04- .62 .45
Granted................................... 176,917 .04- .94 .90
Exercised................................. (9,451) .04- .62 .16
Canceled.................................. (3,659) .04- .72 .21
------- --------- ------
Balance, December 31, 1994.................. 420,514 .04- .94 .66
Granted................................... 74,756 1.00- 1.19 1.07
Exercised................................. (15,915) .04- .94 .16
Canceled.................................. (10,579) .04- 1.00 .25
------- --------- ------
Balance, December 31, 1995.................. 468,776 .04- 1.19 .74
Granted................................... 324,356 1.19- 6.15 5.37
Exercised................................. (45,491) .04- 1.19 .70
Canceled.................................. (15,212) .82- 5.13 2.30
------- --------- ------
Balance, December 31, 1996.................. 732,429 .04- 6.15 2.75
Granted................................... 284,170 6.15- 7.18 6.81
Exercised................................. (8,651) .04- 5.13 1.72
Canceled.................................. (41,057) .70- 7.18 3.20
------- --------- ------
Balance, June 30, 1997...................... 966,891 $ .04- 7.18 $ 3.89
======= ========= ======
Exercisable June 30, 1997................... 228,465 $ .04- 7.18 $ .70
======= ========= ======
</TABLE>
In October 1995, the Financial Accounting Standards Board (FASB) issued
SFAS No. 123, Accounting for Stock-Based Compensation. SFAS No. 123 requires the
measurement of the fair value of stock options or warrants to be included in the
statement of operations or disclosed in the notes to financial statements. The
Company has determined that it will continue to account for stock-based
compensation for employees under Accounting Principles Board Opinion No. 25 and
elect the disclosure-only alternative under SFAS No. 123. The Company has
computed the pro forma disclosures required under SFAS No. 123 for options
granted in 1995 and 1996 using the Black-Scholes option pricing model prescribed
by SFAS No. 123. The weighted average assumptions used for the years ended
December 31, 1995 and 1996 are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------
1995 1996
----------- -----------
<S> <C> <C>
Risk free interest rate................................... 5.63%-7.79% 5.54%-6.83%
Expected dividend yield................................... 0% 0%
Expected life............................................. 7 Years 7 Years
Expected volatility....................................... 35% 35%
</TABLE>
The Black-Scholes option-pricing model was developed for use in estimating
the fair value of traded options which have no vesting restrictions and are
fully transferable. In addition, option-pricing models require the input of
highly subjective assumptions including expected stock price volatility.
F-16
<PAGE> 84
LEUKOSITE, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS)
Because the Company's employee stock options have characteristics significantly
different from those of traded options, and because changes in the subjective
input assumptions can materially affect the fair value estimate, in management's
opinion, the existing models do not necessarily provide a reliable single
measure of the fair value of its employee stock options.
The total value of the options granted during the years ended 1995 and 1996
was computed as approximately $40,000 and $867,000, respectively. Of these
amounts approximately $4,000 and $99,000 would be charged to operations for the
years ended December 31, 1995 and 1996, respectively. The remaining amount would
be amortized over the related vesting periods. The resulting pro forma
compensation expense may not be representative of the amount to be expected in
future years as pro forma compensation expense may vary based upon the number of
options granted.
The pro forma net loss and pro forma net loss per common share presented
below have been computed assuming no tax benefit. The effect of a tax benefit
has not been considered since a substantial portion of the stock options granted
are incentive stock options and the Company does not anticipate a future
deduction associated with the exercise of these stock options. The pro forma
effect of SFAS No. 123 for the years ended December 31, 1995 and 1996 is as
follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------------------------------------------
1995 1996
--------------------------- ---------------------------
AS REPORTED PRO FORMA AS REPORTED PRO FORMA
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net loss...................... $(7,476,753) $(7,480,575) $(6,021,690) $(6,121,057)
=========== =========== =========== ===========
Pro forma net loss per common
share....................... $ (1.04) $ (1.06)
=========== ===========
</TABLE>
(b) Warrants
In conjunction with the Company's master lease agreement (see Note 8), the
Company issued warrants for the purchase of 210,000 shares of Series A
redeemable convertible preferred stock at an exercise price of $1.00 per share.
Upon conversion of the Series A redeemable convertible preferred stock into
common stock as discussed in Note 2(a), the warrantholder will be entitled to
purchase 51,220 shares of common stock at an exercise price of $4.10 per share.
The warrants are fully exercisable and expire on December 13, 2003 or five years
from the effective date of an initial public offering of stock by the Company,
whichever occurs first. The value assigned to the warrants, $90,500, is being
accounted for as debt discount and is being amortized over the lease period.
(12) OPERATING LEASE
In December 1994, the Company entered into an operating lease for its
office and research facilities. The lease expires in December 1999 with an
option to renew for two additional five-year terms. The Company has received
certain rent concessions during the initial term of the lease. Rent expense is
being recognized ratably over the term of the lease. Deferred rent included in
the accompanying consolidated balance sheet represents the difference between
cash paid to date and rent expense recognized to date. Rent expense for 1994,
1995 and 1996 amounted to approximately $329,000, $503,000 and $459,000,
respectively. Rent expense for the six months ended June 30, 1996 and 1997
amounted to approximately $222,000 and $236,000, respectively.
F-17
<PAGE> 85
LEUKOSITE, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS)
Future minimum rental payments at December 31, 1996 are as follows:
<TABLE>
<CAPTION>
AMOUNT
----------
<S> <C>
Year Ending December 31,
1997................................................. $ 592,000
1998................................................. 804,000
1999................................................. 717,000
----------
$2,113,000
==========
</TABLE>
(13) INCOME TAXES
The Company follows the provisions of SFAS No. 109, Accounting for Income
Taxes, whereby a deferred tax asset or liability is measured by the enacted tax
rates that would be in effect when any differences between the financial
statement and tax bases of assets or liabilities reverse. The Company has
elected to defer certain research and development costs as defined in the
Internal Revenue Code. As of December 31, 1996, the Company has available
deferred research and development costs of approximately $15,669,000, net
operating loss carryforwards of approximately $2,433,000 and research and
development credit carryforwards of approximately $500,000 to reduce future
federal income taxes, if any. The net operating loss and credit carryforwards
expire beginning in the year 2007 and are subject to review and possible
adjustment by the Internal Revenue Service. Due to the uncertainty related to
the realization of future tax return benefits of the deferred tax assets, a full
valuation allowance has been provided.
<TABLE>
<CAPTION>
1995 1996
---------- ----------
<S> <C> <C>
Operating loss carryforwards................ $ 94,000 $ 973,000
Tax credit carryforwards.................... 357,000 500,000
Start-up costs.............................. 491,000 465,000
Development costs........................... 5,068,000 6,492,000
Nondeductible accruals...................... 70,000 191,000
Depreciation................................ 273,000 94,000
---------- ----------
6,353,000 8,715,000
Less--Valuation allowance................... 6,353,000 8,715,000
---------- ----------
$ -- $ --
========== ==========
</TABLE>
The United States Tax Reform Act of 1986 contains provisions that may limit
the Company's net operating loss and credit carryforwards available to be used
in any given year in the event of significant changes in the ownership interests
of significant stockholders. The Company has completed numerous financings since
its inception and has incurred ownership changes, as defined in the Tax Reform
Act of 1986. The Company believes that the ownership changes will not
significantly impact its ability to utilize its net operating loss and tax
credit carryforwards.
(14) LEUKOSITE (U.K.) LIMITED
In 1994, the Company formed a wholly owned subsidiary, LeukoSite U.K.
Limited ("LeukoSite UK"). LeukoSite UK was incorporated for the purpose of
entering into a research agreement to fund research activity in the United
Kingdom. An agreement has been established whereby LeukoSite UK will contribute
$3,000,000 towards funding the construction, equipping and the operations of a
F-18
<PAGE> 86
LEUKOSITE, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS)
research center in the UK. The Company has paid and charged to operations
$1,750,000 of such commitment as of June 30, 1997, and the balance will be paid
in six-month intervals of $250,000 each. It is expected that the Company will
fund most of the cash requirements of LeukoSite UK.
(15) ACCRUED EXPENSES
Accrued expenses in the accompanying consolidated balance sheets consist of
the following:
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1995 1996 1997
-------- ---------- ----------
<S> <C> <C> <C>
Payroll and payroll related............. $274,898 $ 338,441 $ 262,905
Consulting and contract research........ 153,631 314,595 428,101
Legal fees.............................. 17,903 62,832 303,852
Other................................... 201,049 328,212 914,033
-------- ---------- ----------
$647,481 $1,044,080 $1,908,891
======== ========== ==========
</TABLE>
(16) NEW ACCOUNTING STANDARD
In March, 1997, the Financial Accounting Standards Board issued SFAS No.
128, Earnings per Share. SFAS No. 128 is required for fiscal years ending after
December 15, 1997 and early adoption is not permitted. The adoption of SFAS No.
128 is not expected to have a material effect on the Company's net loss per
share.
F-19
<PAGE> 87
============================================================
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR THE UNDERWRITERS.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN
OFFER TO BUY TO ANY PERSON IN ANY JURISDICTION IN WHICH SUCH AN OFFER OR
SOLICITATION WOULD BE UNLAWFUL OR TO ANY PERSON TO WHOM IT IS UNLAWFUL. NEITHER
THE DELIVERY OF THIS PROSPECTUS NOR ANY OFFER OR SALE MADE HEREUNDER SHALL,
UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN
THE AFFAIRS OF THE COMPANY OR THAT INFORMATION CONTAINED HEREIN IS CORRECT AS OF
ANY TIME SUBSEQUENT TO THE DATE HEREOF.
------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary......................... 3
Risk Factors............................... 5
Use of Proceeds............................ 17
Dividend Policy............................ 17
Capitalization............................. 18
Dilution................................... 19
Selected Consolidated Financial Data....... 20
Management's Discussion and Analysis of
Financial Condition and Results of
Operations............................... 21
Business................................... 24
Management................................. 46
Certain Transactions....................... 54
Principal Stockholders..................... 56
Description of Capital Stock............... 58
Shares Eligible for Future Sale............ 61
Underwriting............................... 63
Legal Matters.............................. 64
Experts.................................... 64
Additional Information..................... 65
Index to Financial Statements.............. F-1
</TABLE>
------------------
UNTIL , 1997 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER OR NOT PARTICIPATING
IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN
ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS
UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
============================================================
============================================================
2,500,000 SHARES
LOGO
COMMON STOCK
-------------------
PROSPECTUS
-------------------
HAMBRECHT & QUIST
UBS SECURITIES
, 1997
============================================================
<PAGE> 88
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
Expenses of the Registrant in connection with the issuance and distribution
of the securities being registered, other than the underwriting discount and
commissions, are estimated as follows:
<TABLE>
<S> <C>
SEC Registration Fee.................................................... $ 8,713
NASD Fees............................................................... 3,375
Nasdaq National Market Listing Fees..................................... 43,000
Printing and Engraving Expenses......................................... 75,000
Legal Fees and Expenses................................................. 275,000
Accountants' Fees and Expenses.......................................... 75,000
Expenses of Qualification Under State
Securities Laws, Including Attorneys' Fees......................... 10,000
Transfer Agent and Registrar's Fees..................................... 10,000
Miscellaneous Costs..................................................... 99,912
--------
Total.............................................................. $600,000
========
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law empowers a Delaware
corporation to indemnify its officers and directors and certain other persons to
the extent and under the circumstances set forth therein.
The Restated Certificate of Incorporation and the Amended and Restated
By-Laws of the Company, copies of which are filed herein as Exhibit 3.3 and 3.4,
provide for advancement of expenses and indemnification of officers and
directors of the Registrant and certain other persons against liabilities and
expenses incurred by any of them in certain stated proceedings and under certain
stated conditions to the fullest extent permissible under Delaware law.
Section of the Underwriting Agreement between the Registrant and the
Underwriters, a copy of which is filed herein as Exhibit 1.1, will provide for
indemnification by the Registrant of the Underwriters and each person, if any,
who controls any Underwriter, against certain liabilities and expenses, as
stated therein, which may include liabilities under the Securities Act of 1933.
The Underwriting Agreement also provides that the Underwriters shall similarly
indemnify the Registrant, its directors, officers and controlling persons, as
set forth therein.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
Described below is information regarding all unregistered securities of the
Company sold by the Company within the past three years. The share and per share
amounts set forth below have been adjusted to reflect the Company's one-for-4.1
reverse Common Stock split effected on August 8, 1997.
From its incorporation (May 1992) to June 1997, the Company has entered
into stock option agreements with certain employees, officers and consultants to
the Company pursuant to the Company's Amended and Restated 1993 Stock Option
Plan, as amended, covering approximately 1,046,619 shares of its Common Stock,
of which 79,508 shares of Common Stock have been issued by the Company upon
exercise of such stock options. The purchase price under the options is $0.041
to $7.175 based on the fair market value of the Common Stock on the date of
grant. These grants and sales
II-1
<PAGE> 89
were made in reliance upon Rule 701 promulgated under the Securities Act and are
deemed to be exempt transactions as sales of an issuer's securities pursuant to
a written plan or contract relating to the compensation of such individuals and
upon Section 4(2) of the Securities Act as transactions not involving any public
offering.
In June 1994, the Company issued and sold an aggregate of 5,000,000 shares
of Series A Convertible Preferred Stock (convertible into 1,219,512 shares of
Common Stock) at a purchase price of $1.00 per share ($4.10 per share on an
as-converted basis) to HealthCare Ventures III, L.P., HealthCare Ventures IV,
L.P., I.S. Partners, L.P. and Everest Trust. The issuance and sales of such
shares of Series A Convertible Preferred Stock were made in reliance upon Rule
506 of Regulation D promulgated under the Securities Act and Section 4(2) of the
Securities Act.
In September 1994, the Company issued and sold an aggregate of 1,666,667
shares of Series B Convertible Preferred Stock (convertible into 406,504 shares
of Common Stock) at a purchase price of $1.20 per share ($4.92 per share on an
as-converted basis) to Schroder Ventures International Life Science Fund L.P. 1,
Schroder Ventures International Life Science Fund L.P. 2, Schroder Ventures
International Life Sciences Trust, Schroders Incorporated, Schroder Venture
Managers Limited as investment manager for the Schroder Ventures International
Life Sciences Fund Co-Investment Scheme, I.S. Partners, L.P. and Everest Trust.
The issuance and sales of such shares of Series B Convertible Preferred Stock
were made in reliance upon Rule 506 of Regulation D promulgated under the
Securities Act and Section 4(2) of the Securities Act.
In November 1994, the Company issued and sold 1,000,000 shares of Series C
Convertible Preferred Stock (convertible into 243,902 shares of Common Stock) at
a purchase price of $3.00 per share ($12.30 per share on an as-converted basis)
to Warner-Lambert Company. The issuance and sale of such shares of Series C
Convertible Preferred Stock were made in reliance upon Section 4(2) of the
Securities Act.
In September 1995, the Company issued and sold an aggregate of 1,481,482
shares of Series D Convertible Preferred Stock (convertible into 361,337 shares
of Common Stock) at a purchase price of $1.35 per share ($5.54 per share on an
as-converted basis) to HealthCare Ventures III, L.P., HealthCare Ventures IV,
L.P., Schroder Ventures International Life Science Fund L.P. 1, Schroder
Ventures International Life Science Fund L.P. 2, Schroder Ventures International
Life Sciences Trust, Schroders Incorporated, Schroder Venture Managers Limited
as investment manager for the Schroder Ventures International Life Sciences Fund
Co-Investment Scheme, I.S. Partners, L.P., Everest Trust, Hudson Trust and
Francis H. Spiegel, Jr. The issuance and sales of such shares of Series D
Convertible Preferred Stock were made in reliance upon Rule 506 of Regulation D
promulgated under the Securities Act and Section 4(2) of the Securities Act.
In January 1996, the Company issued and sold 625,000 shares of Series E
Convertible Preferred Stock (convertible into 152,439 shares of Common Stock) at
a purchase price of $4.00 per share ($16.40 per share on an as-converted basis)
to Warner-Lambert Company. The issuance and sale of such shares of Series E
Convertible Preferred Stock were made in reliance upon Section 4(2) of the
Securities Act.
In February 1996, the Company issued and sold an aggregate of 910,188
shares of Series F Convertible Preferred Stock (convertible into 221,997 shares
of Common Stock) at a purchase price of $3.00 per share ($12.30 per share on an
as-converted basis) to HealthCare Ventures III, L.P., HealthCare Ventures IV,
L.P., I.S. Partners, L.P., Schroder Ventures International Life Science Fund
L.P. 1, Schroder Ventures International Life Science Fund L.P. 2, Schroder
Ventures International Life Sciences Trust, Schroders Incorporated, Schroder
Venture Managers Limited as investment manager for the Schroder Ventures
International Life Sciences Fund Co-Investment Scheme, I.S. Partners, L.P.,
Everest Trust, Hudson Trust, Francis H. Spiegel, Jr., Christopher T. Walsh and
Lombard Odier & Cie. The issuance and sales of such shares of Series F
Convertible Preferred Stock were made in reliance upon Rule 506 of Regulation D
promulgated under the Securities Act and Section 4(2) of the Securities Act.
II-2
<PAGE> 90
In April 1996, the Company issued and sold 625,000 shares of Series E
Convertible Preferred Stock (convertible into 152,439 shares of Common Stock) at
a purchase price of $4.00 per share ($16.40 per share on an as-converted basis)
to Warner-Lambert Company. The issuance and sale of such shares of Series E
Convertible Preferred Stock were made in reliance upon Section 4(2) of the
Securities Act.
In June 1996, the Company issued and sold an aggregate of 728,147 shares of
Series F Convertible Preferred Stock (convertible into 194,608 shares of Common
Stock) at a purchase price of $3.00 per share ($12.30 per share on an
as-converted basis) to HealthCare Ventures III, L.P., HealthCare Ventures IV,
L.P., I.S. Partners, L.P., Schroder Ventures International Life Science Fund
L.P. 1, Schroder Ventures International Life Science Fund L.P. 2, Schroder
Ventures International Life Sciences Trust, Schroders Incorporated, Schroder
Venture Managers Limited as investment manager for the Schroder Ventures
International Life Sciences Fund Co-Investment Scheme, I.S. Partners, L.P.,
Everest Trust, Hudson Trust, Christopher T. Walsh and Lombard Odier & Cie. The
issuance and sales of such shares of Series F Convertible Preferred Stock were
made in reliance upon Rule 506 of Regulation D promulgated under the Securities
Act and Section 4(2) of the Securities Act.
In December 1996, the Company sold 857,143 shares of Series G Convertible
Preferred Stock (convertible into 401,142 shares of Common Stock) at a purchase
price of $3.50 ($7.47 on an as-converted basis) to Roche Finance Ltd. If the
initial public offering price varies within the estimated range, the number of
shares of Common Stock issuable upon the conversion of the Preferred Stock is
subject to adjustment from a maximum of 451,284 shares of Common Stock (in the
event that the initial public offering price is $8.00 per share) to a minimum of
361,027 shares of Common Stock (in the event that the initial public offering
price is $10.00 per share). The pricing of this offering outside the estimated
range will further effect the number of shares of Common Stock into which the
Preferred Stock is convertible. The issuance and sales of such shares of Series
G Convertible Preferred Stock were made in reliance on Reg. Rule 506 of
Regulation D promulgated under the Securities Act and Section 4(2) of the
Securities Act.
In March through June 1997, the Company sold an aggregate of 1,102,719
shares of Series G Convertible Preferred Stock (convertible into 493,319 shares
of Common Stock) at a purchase price of $3.50 ($6.75 on an as-converted basis)
to a group of new and existing investors, including Schroder Ventures
International Life Sciences Fund L.P. 1, Schroder Ventures International Life
Sciences Fund L.P. 2, Schroder Ventures International Life Sciences Trust,
Schroders Incorporated, Schroder Ventures Managers Limited, as Investment
Manager for the Schroder Ventures International Life Sciences Fund Co-Investment
Scheme, S.R. One, Ltd., New Day Investment Partnership, L.P., WPG Life Sciences
Fund, L.P., WPG Institutional Life Sciences, L.P., Warner-Lambert Company, James
Cramer, Dr. Barbara Schildkrout, The Springer Family Trust and Daniel Kisner. If
the initial public offering price varies within the estimated range, the number
of shares of Common Stock issuable upon the conversion of the Preferred Stock is
subject to adjustment from a maximum of 546,273 shares of Common Stock (in the
event that the initial public offering price is $8.00 per share) to a minimum of
450,956 shares of Common Stock (in the event that the initial public offering
price is $10.00 per share). The pricing of this offering outside the estimated
range will further effect the number of shares of Common Stock into which the
Preferred Stock is convertible. The issuance and sales of such shares of Series
G Convertible Preferred Stock were made in reliance on Reg. Rule 506 of
Regulation D promulgated under the Securities Act and Section 4(e) of the
Securities Act.
No Underwriters were engaged in connection of any of foregoing sales of
securities.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits:
<TABLE>
<CAPTION>
EXHIBITS
- ---------
<C> <S>
1.1 Proposed Form of Underwriting Agreement.
*3.1 Restated Certificate of Incorporation of the Registrant.
</TABLE>
II-3
<PAGE> 91
<TABLE>
<CAPTION>
EXHIBITS
- ---------
<C> <S>
*3.2 Form of Certificate of Amendment to the Restated Certificate of Incorporation of
the Registrant (to be filed with the State of Delaware prior to the effectiveness
of the Registration Statement).
*3.3 Form of Restated Certificate of Incorporation of the Registrant (to be filed with
the State of Delaware upon the closing of the Offering).
*3.4 Amended and Restated By-Laws of the Registrant, as amended to date.
*4.1 Specimen certificate for shares of Common Stock.
*4.2 Description of Capital Stock (contained in the Restated Certificate of
Incorporation of the Registrant, filed as Exhibit 3.3).
5 Opinion of Bingham, Dana & Gould LLP, with respect to the legality of the shares
being registered.
10.1 Consulting Agreement, dated January 22, 1993, between the Registrant and Timothy
Springer.
+10.2 License Agreement, dated June 15, 1993, between the Registrant and the Center for
Blood Research, Inc.
+10.3 License Agreement, dated as of January 2, 1995, between the Registrant and Stanford
University.
+10.4 (a) The Research, Development and Marketing Agreement, dated September 30, 1994,
between the Registrant and Warner-Lambert Company, as amended by First Amendment to
the Research, Development and Marketing Agreement, dated as of July 1, 1995.
(b) The Research, Development and Marketing Agreement, dated July 1, 1995, between
the Registrant and Warner-Lambert Company.
+10.5 License Agreement, dated March 15, 1995, between the Registrant and Lynxvale Ltd.
10.6 Service Agreement, dated as of March 9, 1995, between the Registrant and MRC
Collaborative Centre.
+10.7 License Agreement, dated March 25, 1996, between the Registrant and Children's
Medical Center Corporation.
+10.8 (a) License Agreement, dated January 31, 1996, between the Registrant and The
Imperial College of Science, Technology & Medicine, Imperial Exploitation Limited.
(b) Research Agreement, dated March 14, 1996, between the Registrant and The
Imperial College of Science, Technology & Medicine, Imperial Exploitation Limited.
+10.9 Research Collaboration and License Agreement, dated July 12, 1996, between the
Registrant and Roche Bioscience.
+10.10 Agreement for the construction and operation of a Therapeutic Antibody Centre
within the University of Oxford, dated October 6, 1994, among the University of
Oxford, The Medical Research Council, the Registrant and LeukoSite Limited.
+10.11 License Agreement between the Registrant and British Technology Group Limited.
+10.12 Letter Agreement, dated September 30, 1996, between the Registrant and The Wellcome
Foundation Limited.
10.13 Material Release Agreement, dated September 30, 1996, between the Registrant and
The Wellcome Foundation Limited.
+10.14 Letter Agreement, dated October 7, 1996, between the Registrant and Warner-
Lambert/Parke-Davis.
+10.15 Research Collaboration and License Agreement, dated April 24, 1997, between the
Registrant and Kyowa Hakko Kogyo Co. Ltd.
+10.16 Agreement, dated September 25, 1996, between the Registrant and Oxford Asymmetry
Limited.
+10.17 (a) Agreement of Limited Partnership of L&I Partners, L.P.
(b) License Agreement, dated May 2, 1997, between L&I Partners, L.P. and the
Registrant.
*10.18 Lease agreement for portion of 215 First Street, Cambridge, MA, dated June 8, 1994,
between the Registrant and Robert A. Jones and K. George Najarian, as Trustees for
Athenaeum Realty Nominee Trust.
*10.19 Master Lease Agreement, dated December 13, 1993, between the Registrant and
Comdisco, Inc.
</TABLE>
II-4
<PAGE> 92
<TABLE>
<CAPTION>
EXHIBITS
- ---------
<C> <S>
*10.20 (a) Warrant, dated December 13, 1993, between the Registrant and Comdisco, Inc.
(b) Warrant, dated December 13, 1993, between the Registrant and Comdisco, Inc.
*10.21 Master Equipment Lease, dated as of October 3, 1994, between the Registrant and
Phoenix Leasing Incorporated.
*10.22 Senior Loan and Security Agreement, dated March 14, 1997, between the Registrant
and Phoenix Leasing Incorporated.
*10.23 Amended and Restated 1993 Stock Option Plan.
*10.24 1997 Employee Stock Purchase Plan.
*10.25 (a) Series C Convertible Preferred Stock Purchase Agreement, dated as of November
8, 1994, between the Registrant and Warner-Lambert Company.
(b) Series E Convertible Preferred Stock Purchase Agreement, dated as of January 3,
1996, between the Registrant and Warner-Lambert Company.
(c) Amendment, Modification and Conversion Agreement, dated June 26, 1997, between
the Registrant and Warner-Lambert Company.
*10.26 Second Amended and Restated Stockholders' Agreement, dated December 20, 1996, by
and among the Registrant and parties signatory thereto, as amended.
*10.27 Deed of Assumption, dated June 16, 1997, among the University of Oxford, the
Medical Research Council, LeukoSite, Inc. and LeukoSite (U.K.) Limited.
*10.28 Letter Agreement, dated June 26, 1997, between the Registrant and HealthCare
Ventures III, L.P. and HealthCare Ventures IV, L.P.
*11.1 Computation of Income Per Share.
*21.1 Subsidiary of the Registrant.
23.1 Consent of Bingham, Dana & Gould LLP (included in Exhibit 5).
23.2 Consent of Arthur Andersen LLP.
23.3 Consent of Hamilton, Brook, Smith & Reynolds, P.C.
*24.1 Power of Attorney.
*27.1 Financial Data Schedule.
</TABLE>
- ------------------------------
* Previously filed.
** To be filed by amendment.
+ Confidential Treatment requested as to certain portions.
(b) Financial Statement Schedules:
All financial statement schedules have been omitted because either they are
not required, are not applicable, or the information is otherwise set forth in
the Financial Statements and notes thereto.
ITEM 17. UNDERTAKINGS
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions described in Item 14 above, or
otherwise, the Registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
II-5
<PAGE> 93
The undersigned registrant hereby undertakes:
(1) To provide the Underwriters at the closing specified in the
Underwriting Agreement certificates in such denominations and registered in
such names as required by the Underwriters to permit prompt delivery to
each purchaser.
(2) That for purposes of determining any liability under the
Securities Act of 1933, the information omitted from the form of prospectus
filed as part of this registration statement in reliance upon Rule 430A and
contained in a form of prospectus filed by the registrant pursuant to Rule
424(b)(1) or (4), or 497(h) under the Securities Act shall be deemed to be
part of this registration statement as of the time it was declared
effective.
(3) That for the purpose of determining any liability under the
Securities Act of 1933, each post-effective amendment that contains a form
of prospectus shall be deemed to be a new registration statement relating
to the securities offered therein, and the offering of such securities at
that time shall be deemed to be the initial bona fide offering thereof.
II-6
<PAGE> 94
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Amendment No. 3 to the registration statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Cambridge, Commonwealth of Massachusetts, on this 13th day of August, 1997.
LEUKOSITE, INC.
By: /s/ CHRISTOPHER K. MIRABELLI
------------------------------------
Christopher K. Mirabelli
Chairman of the Board of Directors,
President and Chief Executive
Officer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 3 to the registration statement has been signed below by the following
persons in the capacities and on
August 13, 1997.
<TABLE>
<CAPTION>
SIGNATURE TITLE
- ---------------------------------------- ------------------------------------
<C> <S> <C>
/s/ CHRISTOPHER K. MIRABELLI Chairman of the Board of Directors,
- ---------------------------------------- President and
Christopher K. Mirabelli Chief Executive Officer
(Principal Executive Officer)
/s/ AUGUSTINE LAWLOR Vice President, Corporate
- ---------------------------------------- Development and Chief
Augustine Lawlor Financial Officer (Principal
Financial and Accounting
Officer)
* Director
- ----------------------------------------
Catherine Bingham
* Director
- ----------------------------------------
John W. Littlechild
* Director
- ----------------------------------------
Martin Peretz
* Director
- ----------------------------------------
Mark Skaletsky
* Director
- ----------------------------------------
Dr. Christopher T. Walsh
</TABLE>
*By:
/s/ CHRISTOPHER K. MIRABELLI
- ---------------------------------
Attorney-in-Fact
II-7
<PAGE> 95
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBITS
- --------
<C> <S>
1.1 Proposed Form of Underwriting Agreement.
*3.1 Restated Certificate of Incorporation of the Registrant.
*3.2 Form of Certificate of Amendment to the Restated Certificate of Incorporation of the
Registrant (to be filed with the State of Delaware prior to the effectiveness of the
Registration Statement).
*3.3 Form of Restated Certificate of Incorporation of the Registrant (to be filed with
the State of Delaware upon the closing of the Offering).
*3.4 Amended and Restated By-Laws of the Registrant, as amended to date.
*4.1 Specimen certificate for shares of Common Stock.
*4.2 Description of Capital Stock (contained in the Restated Certificate of Incorporation
of the Registrant, filed as Exhibit 3.3).
5 Opinion of Bingham, Dana & Gould LLP, with respect to the legality of the shares
being registered.
10.1 Consulting Agreement, dated January 22, 1993, between the Registrant and Timothy
Springer.
+10.2 License Agreement, dated June 15, 1993, between the Registrant and the Center for
Blood Research, Inc.
+10.3 License Agreement, dated as of January 2, 1995, between the Registrant and Stanford
University.
+10.4 (a) The Research, Development and Marketing Agreement, dated September 30, 1994,
between the Registrant and Warner-Lambert Company, as amended by First Amendment to
the Research, Development and Marketing Agreement, dated as of July 1, 1995.
(b) The Research, Development and Marketing Agreement, dated July 1, 1995, between
the Registrant and Warner-Lambert Company.
+10.5 License Agreement, dated March 15, 1995, between the Registrant and Lynxvale Ltd.
10.6 Service Agreement, dated as of March 9, 1995, between the Registrant and MRC
Collaborative Centre.
+10.7 License Agreement, dated March 25, 1996, between the Registrant and Children's
Medical Center Corporation.
+10.8 (a) License Agreement, dated January 31, 1996, between the Registrant and The
Imperial College of Science, Technology & Medicine, Imperial Exploitation Limited.
(b) Research Agreement, dated March 14, 1996, between the Registrant and The
Imperial College of Science, Technology & Medicine, Imperial Exploitation Limited.
+10.9 Research Collaboration and License Agreement, dated July 12, 1996, between the
Registrant and Roche Bioscience.
+10.10 Agreement for the construction and operation of a Therapeutic Antibody Centre within
the University of Oxford, dated October 6, 1994, among the University of Oxford, The
Medical Research Council, the Registrant and LeukoSite Limited.
+10.11 License Agreement between the Registrant and British Technology Group Limited.
+10.12 Letter Agreement, dated September 30, 1996, between the Registrant and The Wellcome
Foundation Limited.
10.13 Material Release Agreement, dated September 30, 1996, between the Registrant and The
Wellcome Foundation Limited.
+10.14 Letter Agreement, dated October 7, 1996, between the Registrant and Warner-
Lambert/Parke-Davis.
+10.15 Research Collaboration and License Agreement, dated April 24, 1997, between the
Registrant and Kyowa Hakko Kogyo Co. Ltd.
+10.16 Agreement, dated September 25, 1996, between the Registrant and Oxford Asymmetry
Limited.
+10.17 (a) Agreement of Limited Partnership of L&I Partners, L.P.
(b) License Agreement, dated May 2, 1997, between L&I Partners, L.P. and the
Registrant.
</TABLE>
<PAGE> 96
<TABLE>
<CAPTION>
EXHIBITS
- --------
<C> <S>
*10.18 Lease agreement for portion of 215 First Street, Cambridge, MA, dated June 8, 1994,
between the Registrant and Robert A. Jones and K. George Najarian, as Trustees for
Athenaeum Realty Nominee Trust.
*10.19 Master Lease Agreement, dated December 13, 1993, between the Registrant and
Comdisco, Inc.
*10.20 (a) Warrant, dated December 13, 1993, between the Registrant and Comdisco, Inc.
(b) Warrant, dated December 13, 1993, between the Registrant and Comdisco, Inc.
*10.21 Master Equipment Lease, dated as of October 3, 1994, between the Registrant and
Phoenix Leasing Incorporated.
*10.22 Senior Loan and Security Agreement, dated March 14, 1997, between the Registrant and
Phoenix Leasing Incorporated.
*10.23 Amended and Restated 1993 Stock Option Plan.
*10.24 1997 Employee Stock Purchase Plan.
*10.25 (a) Series C Convertible Preferred Stock Purchase Agreement, dated as of November 8,
1994, between the Registrant and Warner-Lambert Company.
(b) Series E Convertible Preferred Stock Purchase Agreement, dated as of January 3,
1996, between the Registrant and Warner-Lambert Company.
*10.26 Second Amended and Restated Stockholders' Agreement, dated December 20, 1996, by and
among the Registrant and parties signatory thereto, as amended.
*10.27 Deed of Assumption, dated June 16, 1997, among the University of Oxford, the Medical
Research Council, LeukoSite, Inc. and LeukoSite (U.K.) Limited.
*10.28 Letter Agreement, dated June 26, 1997, between the Registrant and HealthCare
Ventures III, L.P. and HealthCare Ventures IV, L.P.
*11.1 Computation of Income Per Share.
*21.1 Subsidiary of the Registrant.
23.1 Consent of Bingham, Dana & Gould LLP (included in Exhibit 5).
23.2 Consent of Arthur Andersen LLP.
23.3 Consent of Hamilton, Brook, Smith & Reynolds, P.C.
*24.1 Power of Attorney.
*27.1 Financial Data Schedule.
</TABLE>
- ------------------------------
* Previously filed.
** To be filed by amendment.
+ Confidential Treatment requested as to certain portions.
<PAGE> 1
LEUKOSITE, INC.
2,500,000 SHARES
COMMON STOCK
UNDERWRITING AGREEMENT
----------------------
_________ __, 1997
HAMBRECHT & QUIST LLC
UBS SECURITIES LLC
as Representatives of the Several Underwriters
c/o Hambrecht & Quist LLC
One Bush Street
San Francisco, CA 94104
Ladies and Gentlemen:
LeukoSite, Inc., a Delaware corporation (herein called the Company),
proposes to issue and sell 2,500,000 shares of its authorized but unissued
Common Stock, $0.01 par value per share (herein called the Common Stock), such
shares of Common Stock being herein called the Underwritten Stock). The Company
proposes to grant to the Underwriters (as hereinafter defined) an option to
purchase up to 375,000 additional shares of Common Stock (herein called the
Option Stock and with the Underwritten Stock herein collectively called the
Stock). The Common Stock is more fully described in the Registration Statement
and the Prospectus hereinafter mentioned.
The Company hereby confirms the agreements made with respect to the
purchase of the Stock by the several underwriters, for whom you are acting,
named in Schedule I hereto (herein collectively called the Underwriters, which
term shall also include any underwriter purchasing Stock pursuant to Section
3(b) hereof). You represent and warrant that you have been authorized by each of
the other Underwriters to enter into this Agreement on its behalf and to act for
it in the manner herein provided.
1. REGISTRATION STATEMENT. The Company has filed with the Securities and
Exchange Commission (herein called the Commission) a registration statement on
Form S-1 (No. 333-30213), including the related Preliminary Prospectus, for the
registration under the Securities Act of 1933, as amended (herein called the
"Securities Act"), of the Stock. Copies of such registration statement and of
each amendment thereto, if any, including the related Preliminary Prospectus
(meeting the
<PAGE> 2
requirements of Rule 430A of the Rules and Regulations of the Commission)
heretofore filed by the Company with the Commission have been delivered to you.
The term "Registration Statement" as used in this Agreement shall mean
such registration statement, including all exhibits and financial statements,
all information omitted therefrom in reliance upon Rule 430A and contained in
the Prospectus referred to below, in the form in which it became effective and
any registration statement filed pursuant to Rule 462(b) of the Rules and
Regulations of the Commission with respect to the Stock (herein called a Rule
462(b) registration statement), and, in the event of any amendment thereto after
the effective date of such registration statement (herein called the Effective
Date), shall also mean (from and after the effectiveness of such amendment) such
registration statement as so amended, including any Rule 462(b) registration
statement. The term "Prospectus" as used in this Agreement shall mean the
prospectus relating to the Stock first filed with the Commission pursuant to
Rule 424(b) and Rule 430A or (if no such filing is required) as included in the
Registration Statement, and, in the event of any supplement or amendment to such
prospectus after the Effective Date, shall also mean (from and after the filing
with the Commission of such supplement or of the effectiveness of such
amendment) such prospectus as so supplemented or amended. The term "Preliminary
Prospectus" as used in this Agreement shall mean each preliminary prospectus
included in such registration statement prior to the time it becomes effective.
For purposes of this Agreement, all references to the Registration Statement,
any Preliminary Prospectus, the Prospectus or any amendment or supplement to any
of the foregoing shall, if applicable, be deemed to include the copy filed with
the Commission pursuant to its Electronic Data Gathering, Analysis and Retrieval
system ("EDGAR").
The Registration Statement has been declared effective under the
Securities Act, and no post-effective amendment to the Registration Statement
has been filed as of the date of this Agreement. The Company has caused to be
delivered to you copies of each Preliminary Prospectus and has consented to the
use of such copies for the purposes permitted by the Securities Act.
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
(a) The Company hereby represents and warrants as follows:
(i) The Company and LeukoSite (U.K.) Limited (the
"Subsidiary") have been duly organized and are validly existing as a corporation
in good standing under the laws of its jurisdiction of incorporation and have
full corporate power and authority to own, lease or operate their respective
properties and conduct their respective business as described in the
Registration Statement and the Prospectus and as currently being conducted. The
Company and its Subsidiary are duly qualified as a foreign corporation and in
good standing in all jurisdictions in
- 2 -
<PAGE> 3
which the character of the property owned or leased or the nature of the
business transacted by it makes qualification necessary (except where the
failure to be so qualified would not have a material adverse effect on the
business, properties, operations, condition (financial or otherwise), results of
operations, income or business prospects of the Company and the Subsidiary,
taken as a whole). The [Ilex Partnership] (the "Ilex Partnership") has been duly
organized, is validly existing under the laws of its jurisdiction of
organization and has full power and authority under the instrument pursuant to
which it was formed, to carry on its business as described in the Prospectus.
The outstanding shares of capital stock of the Subsidiary have been duly
authorized and validly issued, are fully paid and nonassessable and are owned
directly by the Company free and clear of all liens, encumbrances and security
interests; and no options, warrants or other rights to purchase, agreements or
other obligations to issue or other rights to convert any obligations into
shares of capital stock or ownership interests in any such subsidiary are
outstanding. Fifty percent of the ownership interests in the Ilex Partnership
are owned by the Company free and clear of all liens, encumbrances and security
interests. Other than the Subsidiary, the Ilex Partnership and the Therapeutic
Antibody Centre (U.K.) as described in the Prospectus, the Company does not own,
directly or indirectly, any shares of stock or any other equity or long-term
debt securities of any corporation or have any equity interest in any firm,
partnership, joint venture, association or other entity. Complete and correct
copies of the Certificate of Incorporation and of the ByLaws of the Company and
all amendments thereto have been delivered to the Representatives, and except as
set forth in the exhibits to the Registration Statement, no changes therein will
be made subsequent to the date hereof and prior to the Closing Date or, if
later, the Option Closing Date.
(ii) Since the respective dates as of which information is
provided in the Registration Statement and the Prospectus, there has been no
material adverse change or, to its knowledge, any development for which the
Company has a reasonable basis to believe may result in a prospective material
adverse change in the business, properties operations, financial condition,
results of operations, income or business prospects of the Company and its
Subsidiary taken as a whole, whether or not arising from transactions in the
ordinary course of business, other than as set forth in the Registration
Statement and the Prospectus (a "Material Adverse Effect") and since such dates,
except in the ordinary course of business, neither the Company nor its
Subsidiary has entered into any material transaction not referred to in the
Registration Statement and the Prospectus.
(iii) The Commission has not issued any order preventing or
suspending the use of any Preliminary Prospectus or the Prospectus, nor
instituted proceedings for that purpose. The Registration Statement and the
Prospectus comply, and on the Closing Date (as hereinafter defined) and any
later date on which Option Stock is to be purchased, the Prospectus will comply
in all material respects with the provisions of the Securities Act and the rules
and
- 3 -
<PAGE> 4
regulations of the Commission thereunder. On the Effective Date and on the
Closing Date and any later date on which Option Stock may be purchased, neither
the Registration Statement nor any amendment thereto, and neither the Prospectus
nor any supplements thereto, contained or will contain any untrue statement of a
material fact or omitted or will omit to state any material fact required to be
stated therein or necessary in order to make the statements therein not
misleading; provided, however, that none of the representations and warranties
in this subparagraph (iii) shall apply to statements in, or omissions from, the
Registration Statement or the Prospectus made in reliance upon and in conformity
with information herein or otherwise furnished in writing to the Company by or
on behalf of the Underwriters for use in the Registration Statement or the
Prospectus. There are no contracts or documents of the Company which would be
required by the Securities Act or by the rules and regulations of the Commission
to be filed as exhibits to the Registration Statement, which have not been so
filed.
(iv) The capitalization of the Company is, and upon
consummation of the transactions contemplated hereby will be, as set forth in
the Prospectus under the caption "Capitalization"; the outstanding shares of
Common Stock of the Company have been duly authorized and validly issued and are
fully paid and non-assessable; the capital stock of the Company conforms to the
description thereof in the Registration Statement under the caption "Description
of Capital Stock"; the Stock is duly and validly authorized, is duly and validly
issued, fully paid and non-assessable and conforms to the description thereof in
the Prospectus; and there are no outstanding options, warrants or other rights
granted to or by the Company to purchase shares of Common Stock or other
securities of the Company, or any subsidiary, other than as described in the
Prospectus; and, to the best knowledge of the Company, no such option, warrant
or other right has been granted to any person, the exercise of which would cause
such person to own more than five percent of the Common Stock outstanding
immediately after the offering other than as described in the Prospectus. No
person or entity holds a right to require or participate in a registration under
the Securities Act of shares of Common Stock of the Company which right has not
been waived by the holder thereof as of the date hereof with respect to the
registration of shares pursuant to the Registration Statement, and except as set
forth in the Prospectus, no person holds a right to require registration under
the Securities Act of shares of Common Stock of the Company at any other time.
No person or entity has a right of participation with respect to the sale of
shares of the Stock by the Company. No further approval or authority of the
stockholders or the Board of Directors of the Company is required for the
issuance and sale of the stock contemplated herein.
(v) The Company now holds and at the Closing Date and any
later Option Closing Date, as the case may be, will hold, all licenses,
certificates, approvals and permits from all state, United States, foreign and
other regulatory authorities, including but not limited to the United States
Food and Drug
- 4 -
<PAGE> 5
Administration (the "FDA") and any foreign regulatory authorities performing
functions similar to those performed by the FDA, that are material to the
conduct of the business of the Company (as such business is currently conducted)
and its Subsidiary, except for such licenses, certificates, approvals and
permits the failure of which to hold would not have a Material Adverse Effect,
all of which are valid and in full force and effect (and there is no proceeding
pending or, to the knowledge of the Company, threatened which may cause any such
license, certificate, approval or permit to be withdrawn, cancelled, suspended
or not renewed); neither the Company nor the Subsidiary is in violation of its
corporate charter or by-laws, or in default in the performance or observance of
any provision of any obligation, agreement, covenant or condition contained in
any bond, debenture or in any contract, indenture, mortgage, loan agreement,
joint venture or other agreement or instrument to which the Company or the
Subsidiary is a party or by which it or any of its properties is bound or, to
the best of the Company's knowledge, is in violation of any law, order, rule,
regulation, writ, injunction or decree of any government, governmental
instrumentality or court, domestic or foreign, including, but not limited to,
the FDA. All of the descriptions in the Registration Statement and Prospectus of
the legal and governmental proceedings by or before the FDA or any foreign,
state or local government body exercising comparable authority are true,
complete and accurate in all material respects.
(vi) Except as described in the Prospectus, the Company
owns, or possesses adequate license rights to, all patents, patent rights,
inventions, trade secrets, licenses, know-how, proprietary techniques, including
processes, formulas, trademarks, service marks, tradenames, copyrights and other
intellectual property (collectively, the "Intellectual Property") necessary to
the conduct of its business as now conducted, as described in the Registration
Statement and the Prospectus and as proposed to be conducted. All such patents,
patent rights, licenses, trademarks, service marks and copyrights are (i) valid
and enforceable, and (ii) not being infringed by any third parties which
infringement could, whether singly or in the aggregate, materially and adversely
affect the business, properties, operations, condition (financial or otherwise),
results of operations, income or business prospects of the Company, as presently
being conducted or as proposed to be conducted in the Prospectus. The Company
has no knowledge of any facts which would preclude it from having rights to its
patent applications referenced in the Registration Statement and the Prospectus.
The Company has no knowledge that it lacks or will be unable to obtain any
rights or licenses to use any of the Intellectual Property necessary to conduct
the business now conducted or proposed to be conducted by it as described in the
Registration Statement and the Prospectus, except as described in the
Registration Statement and the Prospectus. The Registration Statement and the
Prospectus describes accurately and fairly the Company's rights with respect to
the Intellectual Property. The Company has duly and properly filed or caused to
filed with the U.S. Patent and Trademark Office (the "PTO") and applicable
foreign and international patent authorities all patent applications owned
- 5 -
<PAGE> 6
by the Company and described or referred to in the Prospectus and the
Registration Statement and believes it has complied with the PTO's duty of
candor and disclosure for each of the patent applications described or referred
to in the Registration Statement and the Prospectus, the Company is unaware of
any facts which would preclude the grant of a patent from each of the patent
applications described or referred to in the Registration Statement and
Prospectus; and the Company has no knowledge of any facts which would preclude
it from having clear title to its patent applications described or referred to
in the Registration Statement and Prospectus. The Company has no knowledge of,
nor has it received any notice of, infringement of or conflict with asserted
rights of others with respect to any Intellectual Property which, singly or in
the aggregate, is, or is reasonably likely to be, the subject of an unfavorable
decision, ruling or finding that could materially and adversely affect the
business, properties, operations, condition (financial or otherwise), results of
operations, income or business prospects of the Company, as now conducted or as
proposed to be conducted in the Registration Statement and the Prospectus.
(vii) The Company has full power and authority (corporate
and otherwise) to enter into this Agreement and to perform the transactions
contemplated hereby. This Agreement has been duly authorized, executed and
delivered by the Company and is a valid and binding agreement on the part of the
Company, enforceable against the Company in accordance with its terms. The
performance of this Agreement and the consummation of the transactions herein
contemplated will not result in a breach or violation of any of the terms and
provisions of, or constitute a default under, (i) any indenture, mortgage, deed
of trust, loan agreement or other material agreement or instrument to which the
Company or the Subsidiary is a party or by which the property of the Company or
the Subsidiary is bound, (ii) the corporate charter or by-laws of the Company or
the Subsidiary, or (iii) (assuming the making of all filings required under Rule
424(b) or Rule 430A and the due qualification of the Stock for public offering
by the Underwriters under state and foreign securities laws) any law, statute or
any order, rule or regulation of any court or governmental agency or body having
jurisdiction over the Company or the Subsidiary or over the properties of the
Company or the Subsidiary.
(viii) Except as set forth in the Prospectus, there is not
any action, suit or proceeding, at law or in equity, or governmental proceeding
pending, nor to the Company's knowledge, threatened, against the Company or the
Subsidiary before any court or administrative agency, or of which any property
or assets of the Company or the Subsidiary is subject which, if determined
adversely to the Company or the Subsidiary, would materially adversely affect
the business, properties, operations, condition (financial or otherwise),
results of operations, income or business prospects of the Company and the
Subsidiary taken as a whole, or prevent consummation of the transactions
contemplated hereby; and to the best of the Company's knowledge, no such
proceedings are threatened or contemplated.
- 6 -
<PAGE> 7
There are no statutes, rules, regulations, agreements, contracts, leases or
documents that are required to be described in the Registration Statement or the
Prospectus, or to be filed as an exhibit to the Registration Statement by the
Act or by the Rules and Regulations that have not been accurately described in
all material respects in the Registration Statement or Prospectus or filed as
exhibits to the Registration Statement.
(ix) Arthur Andersen LLP (the "Accountants") who have
examined the financial statements, together with the related schedules and
notes, of the Company filed with the Commission as part of the Registration
Statement, which are included in the Prospectus, are independent public
accountants within the meaning of the Act and the Rules and Regulation. The
consolidated financial statements of the Company and the Subsidiary, together
with the related schedules and notes as set forth in the Registration Statement,
present fairly the consolidated financial position, results of operations and
cash flows of the Company and the Subsidiary, at the indicated dates and for the
respective periods to which they apply. All financial statements, together with
the related schedules and notes, filed with the Commission as part of the
Registration Statement, have been prepared in accordance with generally accepted
accounting principles as in effect in the United States consistently applied
throughout the periods involved and all adjustments necessary for a fair
presentation of results for such periods have been made. The selected and
summary financial and statistical data included in the Registration Statement
present fairly the information shown therein and have been compiled on a basis
consistent with the financial statements presented therein. No other financial
statements or schedules are required by the Act or by the Rules and Regulations
to be included in the Registration Statement.
(x) The Company and the Subsidiary have each filed all
federal, state and foreign income, franchise and other tax returns which have
been required to be filed (or have filed extensions therefor or obtained any
required extensions in connection therewith), and have paid all taxes indicated
by said returns and all assessments received by them or any of them to the
extent that such taxes have become due and are not being contested in good
faith.
(xi) Each approval, consent, order, authorization,
designation, declaration or filing by or with any United States regulatory,
administrative or other governmental body necessary in connection with the
execution and delivery by the Company of this Agreement and the consummation by
the Company of the transactions herein contemplated (except (i) such additional
steps as may be required by the National Association of Securities Dealers, Inc.
(the NASD), (ii) as may be necessary to make the Registration Statement
effective (and to maintain such effectiveness) and to qualify the Stock for
public offering by the Underwriters under state and foreign securities laws, or
(iii) filings required under Rule 424(b) or Rule 430(A)) has been obtained or
made and is in full force and effect.
- 7 -
<PAGE> 8
(xii) Except as set forth in the Prospectus, (i) the Company
and the Subsidiary have good and marketable title to all of the properties and
assets reflected in the financial statements (or as described in the
Registration Statement) hereinabove described, subject to no lien, mortgage,
pledge, charge or encumbrance of any kind except those reflected in such
financial statements (or as described in the Registration Statement) or which
are not material in amount, (ii) the agreements to which the Company is a party
described in the Prospectus are valid agreements, enforceable against the
Company in accordance with their terms, except as enforcement may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent
conveyance or other similar laws relating to or affecting creditors' rights
generally or by general equitable principles, and, to the Company's knowledge,
the other contracting party or parties thereto are not in material breach or
default under any of such agreements, and (iii) the Company has valid and
enforceable leases for the properties described in the Prospectus as leased by
it, and such leases conform in all material respects to the description thereof,
if any, set forth in the Registration Statement. Except as set forth in the
Prospectus, the Company owns or leases all such properties as are necessary to
its operations as now conducted or proposed to be conducted.
(xiii) Neither the Company nor the Subsidiary is involved in
any material labor dispute nor, to the knowledge of the Company, is any such
dispute threatened.
(xiv) The Company confirms as of the date hereof that it is
in compliance with all provisions of Section 1 of laws of Florida, Chapter
92-198, An Act Relating to Disclosure of Doing Business with Cuba, and the
Company further agrees that if it commences engaging in business with the
government of Cuba or with any person or affiliate located in Cuba after the
date the Registration Statement becomes or has become effective with the
Commission or with the Florida Department of Banking and Fiance (the
"Department"), whichever date is later, or if the information reported or
incorporated by reference in the Prospectus, if any, concerning the Company's
business with Cuba or with any person or affiliate located in Cuba changes in
any material way, the Company will provide the Department notice of such
business or change, as appropriate, in a form acceptable to the Department.
(xv) The Company is familiar with the Investment Company Act
of 1940, as amended, and has in the past conducted its affairs in such a manner
to ensure that the Company was not and is not an "investment company" or a
company "controlled" by an "investment company" within the meaning of the
Investment Company Act of 1940, as amended, and the rules and regulations
thereunder.
- 8 -
<PAGE> 9
(xvi) The Company maintains a system of internal accounting
controls sufficient to provide reasonable assurances that (i) transactions are
executed in accordance with management's general or specific authorizations,
(ii) transactions are recorded as necessary to permit preparation of financial
statements in conformity with GAAP and to maintain accountability for assets,
(iii) access to assets is permitted only in accordance with management's general
or specific authorization, and (iv) the recorded accountability for assets is
compared with existing assets and reasonable and appropriate action is taken
with respect to any differences.
(xvii) The Company maintains insurance of the types and in
the amounts adequate for its business and consistent with insurance coverage
maintained by similar companies in similar businesses, including, but not
limited to, insurance covering clinical trial liability and real and personal
property owned or leased against theft, damage, destruction, acts of vandalism
and all other risks customarily insured against, all of which insurance is in
full force and effect.
(xviii) The Company and the Subsidiary are conducting their
respective businesses in compliance with all the laws, rules and regulations of
the jurisdictions in which they are conducting their respective businesses,
including, but not limited to, the laws, rules and regulations administered or
promulgated by the FDA.
(xix) The Company has not incurred any liability for a fee,
commission, or other compensation on account of the employment of a broker or
finder in connection with the transactions contemplated by this Agreement other
than the underwriting discounts and commissions contemplated hereby.
(xx) The Common Stock is, or will be concurrent with the
effectiveness of the Registration Statement, registered pursuant to Section
12(g) of the Exchange Act. The Stock has been duly authorized for quotation on
the National Association of Securities Dealers, Inc. Automated Quotation System
National Market System ("Nasdaq National Market"), subject to notice of
issuance. The Company has taken no action designed to, or likely to have the
effect of, terminating the registration of the Common Stock under the Exchange
Act or delisting the Common Stock from the Nasdaq National Market, nor has the
Company received any notification that the Commission or the Nasdaq National
Market is contemplating such registration or listing.
(xxi) Neither the Company nor, to its knowledge, any of its
officers, directors or affiliates has taken, and at the Closing Date and at any
later Option Closing Date, neither the Company nor, to its knowledge, any of its
officers, directors or affiliates will have taken, directly or indirectly, any
action which has
- 9 -
<PAGE> 10
constituted, or might reasonably be expected to constitute, the stabilization or
manipulation of the price of sale or resale of the Stock.
(xxii) The Company has not distributed and will not
distribute prior to the later of (i) the Closing Date or any Option Closing
Date, as the case may be, and (ii) completion of the Distribution of the Stock,
any offering material in connection with the offering and sale of the Stock
other than any Preliminary Prospectus, the Prospectus, the Registration
Statement and other materials, if any, permitted by the Act.
3. PURCHASE OF THE STOCK BY THE UNDERWRITERS.
(a) On the basis of the representations and warranties and
subject to the terms and conditions herein set forth, the Company agrees to
issue and sell 2,500,000 shares of the Underwritten Stock to the several
Underwriters, and each of the Underwriters agrees to purchase from the Company
the respective aggregate number of shares of Underwritten Stock set forth
opposite its name in SCHEDULE I. The price at which such shares of Underwritten
Stock shall be sold by the Company and purchased by the several Underwriters
shall be $10.00 per share. The obligation of each Underwriter to the Company
shall be to purchase from the Company that number of shares of the Underwritten
Stock which represents the same proportion of the total number of shares of the
Underwritten Stock to be sold by each of the Company pursuant to this Agreement
as the number of shares of the Underwritten Stock set forth opposite the name of
such Underwriter in SCHEDULE I hereto represents of the total number of shares
of the Underwritten Stock to be purchased by all Underwriters pursuant to this
Agreement, as adjusted by you in such manner as you deem advisable to avoid
fractional shares. In making this Agreement, each Underwriter is contracting
severally and not jointly; except as provided in paragraphs (b) and (c) of this
Section 3, the agreement of each Underwriter is to purchase only the respective
number of shares of the Underwritten Stock specified in SCHEDULE I.
(b) If for any reason one or more of the Underwriters shall fail
or refuse (otherwise than for a reason sufficient to justify the termination of
this Agreement under the provisions of Section 8 or 9 hereof) to purchase and
pay for the number of shares of the Stock agreed to be purchased by such
Underwriter or Underwriters, the Company shall immediately give notice thereof
to you, and the non-defaulting Underwriters shall have the right within
twenty-four (24) hours after such default to purchase, or procure one or more
other Underwriters to purchase, in such proportions as may be agreed upon
between you and such purchasing Underwriter or Underwriters and upon the terms
herein set forth, all or any part of the shares of the Stock which such
defaulting Underwriter or Underwriters agreed to purchase. If the non-defaulting
Underwriters fail so to make such arrangements with respect to all such shares
and portion, the number of shares of the Stock which each non-defaulting
Underwriter is otherwise obligated to purchase under this Agreement
- 10 -
<PAGE> 11
shall be automatically increased on a pro rata basis to absorb the remaining
shares and portion which the defaulting Underwriter or Underwriters agreed to
purchase; provided, however, that the non-defaulting Underwriters shall not be
obligated to purchase the shares and portion which the defaulting Underwriter or
Underwriters agreed to purchase if the aggregate number of such shares of the
Stock exceeds 10% of the total number of shares of the Stock which all
Underwriters agreed to purchase hereunder. If the total number of shares of the
Stock which the defaulting Underwriter or Underwriters agreed to purchase shall
not be purchased or absorbed in accordance with the two preceding sentences, the
Company shall have the right, within 24 hours next succeeding the 24-hour period
above referred to, to make arrangements with other underwriters or purchasers
satisfactory to you for purchase of such shares and portion on the terms herein
set forth. In any such case, you or the Company shall have the right to postpone
the Closing Date determined as provided in Section 5 hereof for not more than
seven business days after the date originally fixed as the Closing Date pursuant
to said Section 5 in order that any necessary changes in the Registration
Statement, the Prospectus or any other documents or arrangements may be made. If
neither the non-defaulting Underwriters nor the Company shall make arrangements
within the 24-hour periods stated above for the purchase of all the shares of
the Stock which the defaulting Underwriter or Underwriters agreed to purchase
hereunder, this Agreement shall be terminated without further act or deed and
without any liability on the part of the Company to any non-defaulting
Underwriter and without any liability on the part of any non-defaulting
Underwriter to the Company. Nothing in this paragraph (b), and no action taken
hereunder, shall relieve any defaulting Underwriter from liability in respect of
any default of such Underwriter under this Agreement.
(c) On the basis of the representations, warranties and covenants
herein contained, and subject to the terms and conditions herein set forth, the
Company hereby grants an option to the several Underwriters to purchase,
severally and not jointly, the Option Stock at the same price per share as the
Underwriters shall pay for the Underwritten Stock. Said option may be exercised
only to cover over-allotments in the sale of the Underwritten Stock by the
Underwriters and may be exercised in whole or in part at any time (but not more
than once) on or before the 30th day after the date of this Agreement upon
written or telegraphic notice by you to the Company setting forth the aggregate
number of shares of the Option Stock as to which the several Underwriters are
exercising the option. If the option granted hereby is exercised in part, the
Option Stock to be sold shall be purchased by the Underwriters on a pro rata
basis from the Company as selling Option Stock. Delivery of certificates for the
shares of Option Stock, and payment therefor, shall be made as provided in
Section 5 hereof. The number of shares of the Option Stock to be purchased by
each Underwriter shall be the same percentage of the total number of shares of
the Option Stock to be purchased by the several Underwriters as such Underwriter
is purchasing of the Underwritten Stock, as adjusted by you in such manner as
you deem advisable to avoid fractional shares.
- 11 -
<PAGE> 12
4. OFFERING BY UNDERWRITERS.
(a) The terms of the initial public offering by the Underwriters
of the Stock to be purchased by them shall be as set forth in the Prospectus.
The Underwriters may from time to time change the public offering price after
the closing of the initial public offering and increase or decrease the
concessions and discounts to dealers as they may determine.
(b) The information set forth in the last paragraph on the front
cover page and under "Underwriting" in the Registration Statement, any
Preliminary Prospectus and the Prospectus relating to the Stock (insofar as such
information relates to the Underwriters) constitutes the only information
furnished by the Underwriters to the Company for inclusion in the Registration
Statement, any Preliminary Prospectus, and the Prospectus, and you on behalf of
the respective Underwriters represent and warrant to the Company that the
statements made therein are correct.
5. DELIVERY OF AND PAYMENT FOR THE STOCK.
(a) Delivery of certificates for the shares of the Underwritten
Stock and the Option Stock (if the option granted by Section 3(c) hereof shall
have been exercised not later than 7:00 a.m., San Francisco time, on the date
two business days preceding the Closing Date), and payment therefor, shall be
made at the office of Bingham, Dana & Gould LLP, 150 Federal Street, Boston,
Massachusetts 02110 at 7:00 a.m., San Francisco time, on the [fourth] business
day after the date of this Agreement, or at such time on such other day, not
later than seven full business days after such [fourth] business day, as shall
be agreed upon in writing by the Company and you. The date and hour of such
delivery and payment (which may be postponed as provided in Section 3(b) hereof)
are herein called the Closing Date.
(b) If the option granted by Section 3(c) hereof shall be
exercised after 7:00 a.m., San Francisco time, on the date two business days
preceding the Closing Date, and on or before the 30th day after the date of this
Agreement, delivery of certificates for the shares of Option Stock, and payment
therefor, shall be made at the office of Bingham, Dana & Gould LLP, 150 Federal
Street, Boston, Massachusetts 02110 at 7:00 a.m., San Francisco time, on the
[third] business day after the exercise of such option.
(c) Payment for the Stock purchased from the Company shall be
made to the Company or its order, by one or more certified or official bank
check or checks in next day funds (and the Company agrees not to deposit any
such check in the bank on which drawn until the day following the date of its
delivery to the Company). Such payment shall be made upon delivery of
certificates for the Stock to you for the respective accounts of the several
Underwriters against receipt therefor
- 12 -
<PAGE> 13
signed by you. Certificates for the Stock to be delivered to you shall be
registered in such name or names and shall be in such denominations as you may
request at least one business day before the Closing Date, in the case of
Underwritten Stock, and at least one business day prior to the purchase thereof,
in the case of the Option Stock. Such certificates will be made available to the
Underwriters for inspection, checking and packaging at the offices of Lewco
Securities Corporation, 2 Broadway, New York, New York 10004 not less than one
full business day prior to the Closing Date or, in the case of the Option Stock,
by 3:00 p.m., New York time, on the business day preceding the date of purchase.
It is understood that you, individually and not on behalf of the
Underwriters, may (but shall not be obligated to) make payment to the Company
for shares to be purchased by any Underwriter whose check shall not have been
received by you on the Closing Date or any later date on which Option Stock is
purchased for the account of such Underwriter. Any such payment by you shall not
relieve such Underwriter from any of its obligations hereunder.
6. FURTHER AGREEMENTS OF THE COMPANY. The Company covenants and agrees as
follows:
(a) The Company will (i) prepare and timely file with the
Commission under Rule 424(b) a Prospectus containing information previously
omitted at the time of effectiveness of the Registration Statement in reliance
on Rule 430A, and (ii) not file any amendment to the Registration Statement or
supplement to the Prospectus of which you shall not previously have been advised
and furnished with a copy or to which you shall have reasonably objected in
writing or which is not in compliance in all material respects with the
Securities Act or the rules and regulations of the Commission.
(b) The Company will promptly notify each Underwriter in the
event of (i) the request by the Commission for amendment of the Registration
Statement or for supplement to the Prospectus or for any additional information,
(ii) the issuance by the Commission of any stop order suspending the
effectiveness of the Registration Statement, (iii) the institution or notice of
intended institution of any action or proceeding for that purpose, (iv) the
receipt by the Company of any notification with respect to the suspension of the
qualification of the Stock for sale in any jurisdiction, or (v) the receipt by
the Company of notice of the initiation or threatening of any proceeding for
such purpose. The Company will make every reasonable effort to prevent the
issuance of such a stop order and, if such an order shall at any time be issued,
to obtain the withdrawal thereof at the earliest possible moment.
(c) The Company will (i) on or before the Closing Date, deliver
to you a signed copy of the Registration Statement as originally filed and of
- 13 -
<PAGE> 14
each amendment thereto filed prior to the time the Registration Statement
becomes effective and, promptly upon the filing thereof, a signed copy of each
post-effective amendment, if any, to the Registration Statement (together with,
in each case, all exhibits thereto unless previously furnished to you), and will
also deliver to you, for distribution to the Underwriters, a sufficient number
of additional conformed copies of each of the foregoing (but without exhibits)
so that one copy of each may be distributed to each Underwriter, (ii) as
promptly as possible deliver to you and send to the several Underwriters, at
such office or offices as you may designate, as many copies of the Prospectus as
you may reasonably request, and (iii) thereafter from time to time during the
period in which a prospectus is required by law to be delivered by an
Underwriter or dealer, likewise send to the Underwriters as many additional
copies of the Prospectus and as many copies of any supplement to the Prospectus
and of any amended prospectus, filed by the Company with the Commission, as you
may reasonably request for the purposes contemplated by the Securities Act. The
copies of the Registration Statement, any Preliminary Prospectus or Prospectus
and each amendment or supplement thereto furnished to the Underwriters will be
identical to the electronically transmitted copies thereof filed with the
Commission pursuant to EDGAR, except to the extent permitted by Regulation S-T.
(d) If at any time during the period in which a prospectus is
required by law to be delivered by an Underwriter or dealer any event relating
to or affecting the Company, or of which the Company shall be advised in writing
by you, shall occur as a result of which it is necessary, in the opinion of
counsel for the Company or of counsel for the Underwriters, to supplement or
amend the Prospectus in order to make the Prospectus not misleading in the light
of the circumstances existing at the time it is delivered to a purchaser of the
Stock, the Company will forthwith prepare and file with the Commission a
supplement to the Prospectus or an amended prospectus so that the Prospectus as
so supplemented or amended will not contain any untrue statement of a material
fact or omit to state any material fact necessary in order to make the
statements therein, in the light of the circumstances existing at the time such
Prospectus is delivered to such purchaser, not misleading. If, after the initial
public offering of the Stock by the Underwriters and during such period, the
Underwriters shall propose to vary the terms of offering thereof by reason of
changes in general market conditions or otherwise, you will advise the Company
in writing of the proposed variation, and, if in the opinion either of counsel
for the Company or of counsel for the Underwriters such proposed variation
requires that the Prospectus be supplemented or amended, the Company will
forthwith prepare and file with the Commission a supplement to the Prospectus or
an amended prospectus setting forth such variation. The Company authorizes the
Underwriters and all dealers to whom any of the Stock may be sold by the several
Underwriters to use the Prospectus, as from time to time amended or
supplemented, in connection with the sale of the Stock in accordance with the
applicable provisions of the Securities Act and the applicable rules and
regulations thereunder for such period.
- 14 -
<PAGE> 15
(e) Prior to the filing thereof with the Commission, the Company
will submit to you, for your information, a copy of any post-effective amendment
to the Registration Statement and any supplement to the Prospectus or any
amended prospectus proposed to be filed.
(f) The Company will cooperate, when and as requested by you, in
the qualification of the Stock for offer and sale under the securities or blue
sky laws of such jurisdictions as you may designate and, during the period in
which a prospectus is required by law to be delivered by an Underwriter or
dealer, in keeping such qualifications in good standing under said securities or
blue sky laws; provided, however, that the Company shall not be obligated to
file any general consent to service of process or to qualify as a foreign
corporation in any jurisdiction in which it is not so qualified. The Company
will, from time to time, prepare and file such statements, reports, and other
documents as are or may be required to continue such qualifications in effect
for so long a period as you may reasonably request for distribution of the
Stock.
(g) During a period of five years commencing with the date
hereof, the Company will furnish to you, and to each Underwriter who may so
request in writing, copies of all periodic and special reports furnished to
stockholders of the Company and of all information, documents and reports filed
with the Commission (including any Report on Form SR required by Rule 463 of the
Commission under the Securities Act).
(h) Not later than the 45th day following the end of the fiscal
quarter first occurring after the first anniversary of the Effective Date, the
Company will make generally available to its securityholders an earnings
statement in accordance with Section 11(a) of the Securities Act and Rule 158
thereunder, and covering a twelve-month period beginning after the effective
date of the Registration Statement, and will advise you in writing when such
statement has been made available.
(i) The Company agrees to pay all costs and expenses incident to
the performance of their obligations under this Agreement, including all costs
and expenses incident to (i) the preparation, printing and filing with the
Commission and the National Association of Dealers, Inc. (the "NASD") of the
Registration Statement, any Preliminary Prospectus and the Prospectus, (ii) the
furnishing to the Underwriters of copies of any Preliminary Prospectus and of
the several documents required by paragraph (c) of this Section 6 to be so
furnished, (iii) the printing of this Agreement and related documents delivered
to the Underwriters, (iv) the preparation, printing and filing of all
supplements and amendments to the Prospectus referred to in paragraph (d) of
this Section 6, (v) the furnishing to you and the Underwriters of the reports
and information referred to in paragraph (g) of this Section 6, (vi) the listing
of the Stock on the Nasdaq National Market, (vii) the printing and issuance of
- 15 -
<PAGE> 16
stock certificates, including the transfer agent's fees and (viii) all other
fees and expenses incident to their performance hereunder not otherwise
specifically provided in this Agreement.
(j) The Company agrees to reimburse you, for the account of the
several Underwriters, for blue sky fees and related disbursements (including
counsel fees and disbursements and cost of printing memoranda for the
Underwriters) paid by or for the account of the Underwriters or their counsel in
qualifying the Stock under state securities or blue sky laws and for filing fees
incident to the review of the offering by the NASD.
(k) The provisions of paragraphs (i) and (j) of this Section are
intended to relieve the Underwriters from the payment of the expenses and costs
which the Company hereby agrees to pay and shall not affect any agreement which
the Company may make, or may have made, for sharing any such expenses or costs.
(l) The Company hereby agrees that, without the prior written
consent of Hambrecht & Quist LLC on behalf of the Underwriters, the Company will
not, for a period of 180 days following the effective date of the Registration
Statement, (i) sell, offer, contract to sell, make any short sale, pledge,
transfer, grant any option to purchase or otherwise dispose of, directly or
indirectly, any shares of Common Stock (including any stock appreciation right
or similar right with an exercise or conversion privilege at a price related to,
or derived from the market price of the Common Stock) or any securities
convertible into or exchangeable or exercisable for shares of Common Stock owned
directly by the undersigned or with respect to which the undersigned has the
power of disposition (including, without limitation, shares of Common Stock
which the undersigned may be deemed to beneficially own in accordance with the
rules and regulations promulgated under the Exchange Act), (ii) file a
registration statement covering any of its shares of capital stock, or (iii)
engage in any hedging transaction with respect to any shares of Common Stock
that may have an impact on the market price of the Common Stock, whether any
such transaction is to be settled by delivery of Common Stock or such other
securities, in cash or otherwise. The foregoing sentence shall not apply to (A)
the Stock to be sold to the Underwriters pursuant to this Agreement, (B) shares
of Common Stock issued by the Company upon the exercise of options granted under
the stock option plans of the Company (the "Option Plans"), all as described in
footnote 1 to the table under the caption "Capitalization" in the Preliminary
Prospectus, and (C) options to purchase Common Stock granted under the Option
Plans.
(m) If at any time during the 25-day period after the
Registration Statement becomes effective any rumor, publication or event
relating to or affecting the Company shall occur as a result of which in your
reasonable opinion the market price for the Stock has been or is likely to be
materially affected
- 16 -
<PAGE> 17
(regardless of whether such rumor, publication or event necessitates a
supplement to or amendment of the Prospectus), the Company will, after written
notice from you advising the Company to the effect set forth above, forthwith
prepare, consult with you concerning the substance of, and disseminate a press
release or other public statement, reasonably satisfactory to you, responding to
or commenting on such rumor, publication or event.
(n) The Company will in the future conduct its affairs in such a
manner to ensure that the Company will not be an "investment company" or a
company "controlled" by an "investment company" within the meaning of the
Investment Company Act of 1940, as amended, and the rules and regulations
thereunder.
7. INDEMNIFICATION AND CONTRIBUTION.
(a) The Company agrees to indemnify and hold harmless each
Underwriter and each person (including each partner or officer thereof) who
controls any Underwriter within the meaning of Section 15 of the Securities Act
from and against any and all losses, claims, damages or liabilities, joint or
several, to which such indemnified parties or any of them may become subject
under the Securities Act, the Exchange Act, or the common law or otherwise, and
the Company agrees to reimburse each such Underwriter and controlling person for
any legal or other expenses (including, except as otherwise hereinafter
provided, reasonable fees and disbursements of counsel) incurred by the
respective indemnified parties in connection with defending against any such
losses, claims, damages or liabilities or in connection with any investigation
or inquiry of, or other proceeding which may be brought against, the respective
indemnified parties, in each case arising out of or based upon (i) any untrue
statement or alleged untrue statement of a material fact contained in the
Registration Statement (including the Prospectus as part thereof and any Rule
462(b) registration statement) or any post-effective amendment thereto
(including any Rule 462(b) registration statement), or the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, or (ii) any untrue
statement or alleged untrue statement of a material fact contained in any
Preliminary Prospectus or the Prospectus (as amended or as supplemented if the
Company shall have filed with the Commission any amendment thereof or supplement
thereto) or the omission or alleged omission to state therein a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading; provided, however,
that (1) the indemnity agreement of the Company contained in this paragraph (a)
shall not apply to any such losses, claims, damages, liabilities or expenses if
such statement or omission was made in reliance upon and in conformity with
information furnished as herein stated or otherwise furnished in writing to the
Company by or on behalf of any Underwriter for use in any Preliminary Prospectus
or the Registration Statement or the Prospectus or any such
- 17 -
<PAGE> 18
amendment thereof or supplement thereto, and (2) the indemnity agreement
contained in this paragraph (a) with respect to any Preliminary Prospectus shall
not inure to the benefit of any Underwriter from whom the person asserting any
such losses, claims, damages, liabilities or expenses purchased the Stock which
is the subject thereof (or to the benefit of any person controlling such
Underwriter) if at or prior to the written confirmation of the sale of such
Stock a copy of the Prospectus (or the Prospectus as amended or supplemented)
was not sent or delivered to such person and the untrue statement or omission of
a material fact contained in such Preliminary Prospectus was corrected in the
Prospectus (or the Prospectus as amended or supplemented) unless the failure is
the result of noncompliance by the Company with paragraph (c) of Section 6
hereof. The indemnity agreement of the Company contained in this paragraph (a)
and the representations and warranties of the Company contained in Section 2
hereof shall remain operative and in full force and effect regardless of any
investigation made by or on behalf of any indemnified party and shall survive
the delivery of any payment for the Stock.
(b) Each Underwriter severally agrees to indemnify and hold
harmless the Company, each of its officers who signs the Registration Statement
on his own behalf or pursuant to a power of attorney, each of its directors,
each other Underwriter and each person (including each partner or officer
thereof) who controls the Company or any such other Underwriter within the
meaning of Section 15 of the Securities Act, from and against any and all
losses, claims, damages or liabilities, joint or several, to which such
indemnified parties or any of them may become subject under the Securities Act,
the Exchange Act, or the common law or otherwise and to reimburse each of them
for any legal or other expenses (including, except as otherwise hereinafter
provided, reasonable fees and disbursements of counsel) incurred by the
respective indemnified parties in connection with defending against any such
losses, claims, damages or liabilities or in connection with any investigation
or inquiry of, or other proceeding which may be brought against, the respective
indemnified parties, in each case arising out of or based upon (i) any untrue
statement or alleged untrue statement of a material fact contained in the
Registration Statement (including the Prospectus and any Rule 462(b)
registration statement as part thereof) or any post-effective amendment thereto,
including any Rule 462(b) registration statement, or the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, or (ii) any untrue
statement or alleged untrue statement of a material fact contained in any
Preliminary Prospectus or the Prospectus (as amended or as supplemented if the
Company shall have filed with the Commission any amendment thereof or supplement
thereto) or the omission or alleged omission to state therein a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading, if such statement or
omission was made in reliance upon and in conformity with information furnished
as herein stated or otherwise furnished in writing to the Company by or on
behalf of such indemnifying Underwriter for use in the Registration Statement or
the
- 18 -
<PAGE> 19
Prospectus or any such amendment thereof or supplement thereto. The indemnity
agreement of each Underwriter contained in this paragraph (b) shall remain
operative and in full force and effect regardless of any investigation made by
or on behalf of any indemnified party and shall survive the delivery of and
payment for the Stock.
(c) Each party indemnified under the provision of paragraphs (a)
and (b) of this Section 7 agrees that, upon the service of a summons or other
initial legal process upon it in any action or suit instituted against it or
upon its receipt of written notification of the commencement of any
investigation or inquiry of, or proceeding against it, in respect of which
indemnity may be sought on account of any indemnity agreement contained in such
paragraphs, it will promptly give written notice (herein called the Notice) of
such service or notification to the party or parties from whom indemnification
may be sought hereunder. No indemnification provided for in such paragraphs
shall be available to any party who shall fail so to give the Notice if the
party to whom such Notice was not given was unaware of the action, suit,
investigation, inquiry or proceeding to which the Notice would have related and
was prejudiced by the failure to give the Notice, but the omission so to notify
such indemnifying party or parties of any such service or notification shall not
relieve such indemnifying party or parties from any liability which it or they
may have to the indemnified party for contribution or otherwise than on account
of such indemnity agreement. Any indemnifying party shall be entitled at its own
expense to participate in the defense of any action, suit or proceeding against,
or investigation or inquiry of, an indemnified party. Any indemnifying party
shall be entitled, if it so elects within a reasonable time after receipt of the
Notice by giving written notice (herein called the Notice of Defense) to the
indemnified party, to assume (alone or in conjunction with any other
indemnifying party or parties) the entire defense of such action, suit,
investigation, inquiry or proceeding, in which event such defense shall be
conducted, at the expense of the indemnifying party or parties, by counsel
chosen by such indemnifying party or parties and reasonably satisfactory to the
indemnified party or parties; provided, however, that (i) if the indemnified
party or parties reasonably determine that there may be a conflict between the
positions of the indemnifying party or parties and of the indemnified party or
parties in conducting the defense of such action, suit, investigation, inquiry
or proceeding or that there may be legal defenses available to such indemnified
party or parties different from or in addition to those available to the
indemnifying party or parties, then counsel for the indemnified party or parties
shall be entitled to conduct the defense to the extent reasonably determined by
such counsel to be necessary to protect the interests of the indemnified party
or parties, and (ii) in any event, the indemnified party or parties shall be
entitled to have counsel chosen by such indemnified party or parties participate
in, but not conduct, the defense. If, within a reasonable time after receipt of
the Notice, an indemnifying party gives a Notice of Defense and the counsel
chosen by the indemnifying party or parties is reasonably satisfactory to the
indemnified party or parties, the indemnifying party or parties will not be
liable under paragraphs (a) through (c) of this Section 7 for any legal or other
expenses
- 19 -
<PAGE> 20
subsequently incurred by the indemnified party or parties in connection with the
defense of the action, suit, investigation, inquiry or proceeding, except that
(A) the indemnifying party or parties shall bear the legal and other expenses
incurred in connection with the conduct of the defense as referred to in clause
(i) of the proviso to the preceding sentence, and (B) the indemnifying party or
parties shall bear such other expenses as it or they have authorized to be
incurred by the indemnified party or parties. If, within a reasonable time after
receipt of the Notice, no Notice of Defense has been given, the indemnifying
party or parties shall be responsible for any legal or other expenses incurred
by the indemnified party or parties in connection with the defense of the
action, suit, investigation, inquiry or proceeding.
(d) If the indemnification provided for in this Section 7 is
unavailable or insufficient to hold harmless an indemnified party under
paragraph (a) or (b) of this Section 7, then each indemnifying party shall, in
lieu of indemnifying such indemnified party, contribute to the amount paid or
payable by such indemnified party as a result of the losses, claims, damages or
liabilities referred to in paragraph (a) or (b) of this Section 7 (i) in such
proportion as is appropriate to reflect the relative benefits received by each
indemnifying party from the offering of the Stock or (ii) if the allocation
provided by clause (i) above is not permitted by applicable law, in such
proportion as is appropriate to reflect not only the relative benefits referred
to in clause (i) above but also the relative fault of each indemnifying party in
connection with the statements or omissions that resulted in such losses,
claims, damages or liabilities, or actions in respect thereof, as well as any
other relevant equitable considerations. The relative benefits received by the
Company on the one hand and the Underwriters on the other shall be deemed to be
in the same respective proportions as the total net proceeds from the offering
of the Stock received by the Company and the total underwriting discount
received by the Underwriters, as set forth in the table on the cover page of the
Prospectus, bear to the aggregate public offering price of the Stock. Relative
fault shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by each
indemnifying party and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such untrue statement or
omission.
The parties agree that it would not be just and equitable if contributions
pursuant to this paragraph (d) were to be determined by pro rata allocation
(even if the Underwriters were treated as one entity for such purpose) or by any
other method of allocation which does not take into account the equitable
considerations referred to in the first sentence of this paragraph (d). The
amount paid by an indemnified party as a result of the losses, claims, damages
or liabilities, or actions in respect thereof, referred to in the first sentence
of this paragraph (d) shall be deemed to include any legal or other expenses
reasonably incurred by such indemnified party in connection with investigation,
preparation to defend or defense against any action
- 20 -
<PAGE> 21
or claim which is the subject of this paragraph (d). Notwithstanding the
provisions of this paragraph (d), no Underwriter shall be required to contribute
any amount in excess of the underwriting discount applicable to the Stock
purchased by such Underwriter. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. The Underwriters' obligations in this paragraph (d) to
contribute are several in proportion to their respective underwriting
obligations and not joint.
Each party entitled to contribution agrees that upon the service of a
summons or other initial legal process upon it in any action instituted against
it in respect of which contribution may be sought, it will promptly give written
notice of such service to the party or parties from whom contribution may be
sought, but the omission so to notify such party or parties of any such service
shall not relieve the party from whom contribution may be sought from any
obligation it may have hereunder or otherwise (except as specifically provided
in paragraph (c) of this Section 7).
(e) The Company will not, without the prior written consent of
each Underwriter, settle or compromise or consent to the entry of any judgment
in any pending or threatened claim, action, suit or proceeding in respect of
which indemnification may be sought hereunder (whether or not such Underwriter
or any person who controls such Underwriter within the meaning of Section 15 of
the Securities Act or Section 20 of the Exchange Act is a party to such claim,
action, suit or proceeding) unless such settlement, compromise or consent
includes an unconditional release of such Underwriter and each such controlling
person from all liability arising out of such claim, action, suit or proceeding.
8. TERMINATION. This Agreement may be terminated by you at any time
prior to the Closing Date by giving written notice to the Company if after the
date of this Agreement trading in the Common Stock shall have been suspended, or
if there shall have occurred (i) any material adverse change in or affecting the
business, properties, operations, condition (financial or otherwise), results of
operations, income or business prospects of the Company and the Subsidiary,
whether or not arising in the ordinary course of business, (ii) the engagement
in hostilities or an escalation of major hostilities by the United States or the
declaration of war or a national emergency by the United States on or after the
date hereof, (iii) any outbreak of hostilities or other national or
international calamity or crisis or change in economic or political conditions
if the effect of such outbreak, calamity, crisis or change in economic or
political conditions in the financial markets of the United States would, in the
Underwriters' reasonable judgment, make the offering or delivery of the Stock
impracticable, (iv) suspension of trading in securities generally or a material
adverse decline in the value of securities generally on the New York Stock
Exchange, the American Stock Exchange, the NASD Automated Quotation System or
the Nasdaq
- 21 -
<PAGE> 22
National Market, or limitation on prices (other than limitations on hours or
numbers of days of trading) for securities on either such exchange or system,
(v) the enactment, publication, decree or other promulgation of any federal or
state statute, regulation, rule or order of, or commencement of any proceeding
or investigation by, any court, legislative body, agency or other governmental
authority which in the Underwriters' reasonable opinion materially and adversely
affects or will materially or adversely affect the business or operations of the
Company, (vi) declaration of a banking moratorium by either federal or New York
State authorities, or (vii) the taking of any action by any federal, state or
local government or agency in respect of its monetary or fiscal affairs which in
the Underwriters' reasonable opinion has a material adverse effect on the
securities markets in the United States. If this Agreement shall be terminated
pursuant to this Section 8, there shall be no liability of the Company to the
Underwriters, and no liability of the Underwriters to the Company; provided,
however, that in the event of any such termination the Company agrees to
indemnify and hold harmless the Underwriters from all costs or expenses incident
to the performance of the obligations of the Company under this Agreement,
including all costs and expenses referred to in paragraphs (i) and (j) of
Section 6 hereof.
9. CONDITIONS OF UNDERWRITERS' OBLIGATIONS. The obligations of the
several Underwriters to purchase and pay for the Stock shall be subject to the
performance by the Company of all their respective obligations to be performed
hereunder at or prior to the Closing Date or any later date on which Option
Stock is to be purchased, as the case may be, and to the following further
conditions:
(a) The Registration Statement shall have become effective; and
no stop order suspending the effectiveness thereof shall have been issued and no
proceedings therefor shall be pending or threatened by the Commission.
(b) The legality and sufficiency of the sale of the Stock
hereunder and the validity and form of the certificates representing the Stock,
all corporate proceedings and other legal matters incident to the foregoing, and
the form of the Registration Statement and of the Prospectus (except as to the
financial statements contained therein), shall have been approved at or prior to
the Closing Date by Hale and Dorr LLP, counsel for the Underwriters.
(c) You shall have received, at no cost to you, on the Closing
Date and on any later Option Closing Date, as the case maybe, the opinions of
(i) Bingham, Dana & Gould, LLP, corporate counsel for the Company, (ii)
Hamilton, Brook, Smith & Reynolds, P.C., patent counsel to the Company, and
(iii) Hogan & Hartson, regulatory counsel to the Company, each dated the Closing
Date or such later Option Date, covering the matters set forth in Annex A hereto
addressed to the Underwriters and with reproduced copies of signed counterparts
thereof for each of the Representatives.
- 22 -
<PAGE> 23
(d) You shall be satisfied that (i) as of the Effective Date, the
statements made in the Registration Statement and the Prospectus were true and
correct in all material respects and neither the Registration Statement nor the
Prospectus omitted to state any material fact required to be stated therein or
necessary in order to make the statements therein, respectively, not misleading,
(ii) since the Effective Date, no event has occurred which should have been set
forth in a supplement or amendment to the Prospectus which has not been set
forth in such a supplement or amendment, (iii) since the respective dates as of
which information is given in the Registration Statement in the form in which it
originally became effective and the Prospectus contained therein, there has not
been any material adverse change or any development involving a prospective
material adverse change in or affecting the business, properties, operations,
condition (financial or otherwise), results of operations, income or business
prospects of the Company and its subsidiaries as a whole, whether or not arising
from transactions in the ordinary course of business, and, since such dates,
except in the ordinary course of business, neither the Company nor any of its
subsidiaries has entered into any material transaction not referred to in the
Registration Statement in the form in which it originally became effective and
the Prospectus contained therein, (iv) neither the Company nor any of its
subsidiaries has any material contingent obligations which are not disclosed in
the Registration Statement and the Prospectus, (v) there are not any pending or
known threatened legal proceedings to which the Company or any of its
subsidiaries is a party or of which property of the Company or any of its
subsidiaries is the subject which are material and which are not disclosed in
the Registration Statement and the Prospectus, (vi) there are not any
franchises, contracts, leases or other documents which are required to be filed
as exhibits to the Registration Statement which have not been filed as required,
(vii) the representations and warranties of the Company herein are true and
correct in all material respects as of the Closing Date or any later date on
which Option Stock is to be purchased, as the case may be, and (viii) there has
not been any material change in the market for securities in general or in
political, financial or economic conditions from those reasonably foreseeable as
to render it impracticable in your reasonable judgment to make a public offering
of the Stock, or a material adverse change in market levels for securities in
general (or those of companies in particular) or financial or economic
conditions which render it inadvisable to proceed.
(e) You shall have received on the Closing Date and on any later
date on which Option Stock is purchased a certificate, dated the Closing Date or
such later date, as the case may be, and signed by the Chief Executive Officer,
the Chairman of the Board and the Chief Financial Officer of the Company,
stating that the respective signers of said certificate have carefully examined
the Registration Statement in the form in which it originally became effective
and the Prospectus contained therein and any supplements or amendments thereto,
and that the statements included in clauses (i) through (vii) of paragraph (d)
of this Section 9 are true and correct.
- 23 -
<PAGE> 24
(f) You shall have received from Arthur Andersen LLP a letter or
letters, addressed to the Underwriters and dated the Closing Date and any later
date on which Option Stock is purchased, confirming that they are independent
public accountants with respect to the Company within the meaning of the
Securities Act and the applicable published rules and regulations thereunder and
based upon the procedures described in its letter delivered to you concurrently
with the execution of this Agreement (herein called the Original Letter), but
carried out to a date not more than three business days prior to the Closing
Date or such later date on which Option Stock is purchased (i) confirming, to
the extent true, that the statements and conclusions set forth in the Original
Letter are accurate as of the Closing Date or such later date, as the case may
be, and (ii) setting forth any revisions and additions to the statements and
conclusions set forth in the Original Letter which are necessary to reflect any
changes in the facts described in the Original Letter since the date of the
Original Letter or to reflect the availability of more recent financial
statements, data or information. The letters shall not disclose any change, or
any development involving a prospective change, in or affecting the business or
properties of the Company or any of its subsidiaries which, in your sole
judgment, makes it impractical or inadvisable to proceed with the public
offering of the Stock or the purchase of the Option Stock as contemplated by the
Prospectus.
(g) You shall have received from Arthur Andersen LLP a letter
stating that their review of the Company's system of internal accounting
controls, to the extent they deemed necessary in establishing the scope of their
examination of the Company's financial statements as of and as at December 31,
1996, did not disclose any weakness in internal controls that they considered to
be material weaknesses.
(h) You shall have been furnished evidence in usual written or
telegraphic form from the appropriate authorities of the several states, or
other evidence satisfactory to you, of the qualification referred to in
paragraph (f) of Section 6 hereof.
(i) Prior to the Closing Date, the Stock to be issued and sold by
the Company shall have been duly authorized for inclusion on the Nasdaq National
Market upon official notice of issuance.
(j) On or prior to the Closing Date, you shall have received from
all directors, officers, and beneficial holders of the outstanding Common Stock,
agreements, in form reasonably satisfactory to Hambrecht & Quist LLC, stating
that without the prior written consent of Hambrecht & Quist LLC on behalf of the
Underwriters, such person or entity will not, for a period of 180 days after the
effective date of the Registration Statement, (i) sell, offer, contract to sell,
make any short sale, pledge, transfer, grant any option to purchase or otherwise
dispose of, directly or indirectly, any shares of Common Stock (including any
stock appreciation
- 24 -
<PAGE> 25
right or similar right with an exercise or conversion privilege at a price
related to, or derived from the market price of the Common Stock) or any
securities convertible into or exchangeable or exercisable for shares of Common
Stock owned directly by the undersigned or with respect to which the undersigned
has the power of disposition (including, without limitation, shares of Common
Stock which the undersigned may be deemed to beneficially own in accordance with
the rules and regulations promulgated under the Exchange Act), or (ii) engage in
any hedging transaction with respect to any shares of Common Stock that may have
an impact on the market price of the Common Stock, whether any such transaction
is to be settled by delivery of Common Stock or such other securities, in cash
or otherwise.
All the agreements, opinions, certificates and letters mentioned above or
elsewhere in this Agreement shall be deemed to be in compliance with the
provisions hereof only if Hale and Dorr LLP, counsel for the Underwriters, shall
be satisfied that they comply in form and scope.
In case any of the conditions specified in this Section 9 shall not be
fulfilled, this Agreement may be terminated by you by giving notice to the
Company. Any such termination shall be without liability of the Company to the
Underwriters and without liability of the Underwriters to the Company; provided,
however, that (i) in the event of such termination, the Company jointly and
severally agree to indemnify and hold harmless the Underwriters from all costs
or expenses incident to the performance of the obligations of the Company under
this Agreement, including all costs and expenses referred to in paragraphs (i)
and (j) of Section 6 hereof, and (ii) if this Agreement is terminated by you
because of any refusal, inability or failure on the part of the Company to
perform any agreement herein, to fulfill any of the conditions herein, or to
comply with any provision hereof other than by reason of a default by any of the
Underwriters, the Company will reimburse the Underwriters severally upon demand
for all out-of-pocket expenses (including reasonable fees and disbursements of
counsel) that shall have been incurred by them in connection with transactions
contemplated hereby.
10. CONDITIONS OF THE OBLIGATION OF THE COMPANY. The obligation of the
Company to deliver the Stock shall be subject to the conditions that (a) the
Registration Statement shall have become effective, and (b) no stop order
suspending the effectiveness thereof shall be in effect and no proceedings
therefor shall be pending or threatened by the Commission.
In case either of the conditions specified in this Section 10 shall not be
fulfilled, this Agreement may be terminated by the Company by giving notice to
you. Any such termination shall be without liability of the Company to the
Underwriters and without liability of the Underwriters to the Company; provided,
however, that in the event of any such termination the Company jointly and
severally agree to indemnify and hold harmless the Underwriters from all costs
or expenses incident to the
- 25 -
<PAGE> 26
performance of the obligations of the Company under this Agreement, including
all costs and expenses referred to in paragraphs (i) and (j) of Section 6
hereof.
11. REIMBURSEMENT OF CERTAIN EXPENSES. In addition to their other
obligations under Section 7 of this Agreement, the Company hereby agrees to
reimburse on a quarterly basis the Underwriters for all reasonable legal and
other expenses incurred in connection with investigating or defending any claim,
action, investigation, inquiry or other proceeding arising out of or based upon
any statement or omission, or any alleged statement or omission, described in
paragraph (a) of Section 7 of this Agreement, notwithstanding the absence of a
judicial determination as to the propriety and enforceability of the obligations
under this Section 11 and the possibility that such payments might later be held
to be improper; provided, however, that (i) to the extent any such payment is
ultimately held to be improper, the persons receiving such payments shall
promptly refund them and (ii) such persons shall provide to the Company, upon
request, reasonable assurances of their ability to effect any refund, when and
if due.
12. PERSONS ENTITLED TO BENEFIT OF AGREEMENT. This Agreement shall
inure to the benefit of the Company and the several Underwriters and, with
respect to the provisions of Section 7 hereof, the several parties (in addition
to the Company and the several Underwriters) indemnified under the provisions of
said Section 7, and their respective personal representatives, successors and
assigns. Nothing in this Agreement is intended or shall be construed to give to
any other person, firm or corporation any legal or equitable remedy or claim
under or in respect of this Agreement or any provision herein contained. The
term "successors and assigns" as herein used shall not include any purchaser, as
such purchaser, of any of the Stock from any of the several Underwriters.
13. NOTICES. Except as otherwise provided herein, all communications
hereunder shall be in writing or by facsimile and, if to the Underwriters, shall
be mailed, telegraphed or delivered to Hambrecht & Quist LLC, One Bush Street,
San Francisco, California 94104; and if to the Company, shall be mailed,
telegraphed or delivered to it at its office, 215 First Street, Cambridge,
Massachusetts 02142, Attention: President. All notices given by facsimile shall
be promptly confirmed by letter.
14. MISCELLANEOUS. The reimbursement, indemnification and contribution
agreements contained in this Agreement and the representations, warranties and
covenants in this Agreement shall remain in full force and effect regardless of
(a) any termination of this Agreement, (b) any investigation made by or on
behalf of any Underwriter or controlling person thereof, or by or on behalf of
the Company or its respective directors or officers, and (c) delivery and
payment for the Stock under this Agreement; provided, however, that if this
Agreement is terminated
- 26 -
<PAGE> 27
prior to the Closing Date, the provisions of paragraphs (l) and (m) of Section 6
hereof shall be of no further force or effect.
This Agreement may be executed in two or more counterparts, each of which
shall be deemed an original, but all of which together shall constitute one and
the same instrument.
This Agreement shall be governed by, and construed in accordance with, the
laws of the Commonwealth of Massachusetts.
Please sign and return to the Company in care of the Company the enclosed
duplicates of this letter, whereupon this letter will become a binding agreement
among the Company and the several Underwriters in accordance with its terms.
Very truly yours,
LEUKOSITE, INC.
By:
---------------------------------
Christopher K. Mirabelli
President
The foregoing Agreement
is hereby confirmed and
accepted as of the date
first above written.
HAMBRECHT & QUIST LLC
UBS SECURITIES LLC
By Hambrecht & Quist LLC
By:
--------------------------
Managing Director
Acting on behalf of the several
Underwriters, including themselves,
named in Schedule I hereto.
- 27 -
<PAGE> 28
SCHEDULE I
UNDERWRITERS
NUMBER OF
SHARES
TO BE
UNDERWRITERS PURCHASED
------------ ---------
Hambrecht & Quist LLC.....................................
UBS Securities LLC........................................
Total 2,500,000
=========
- 28 -
<PAGE> 29
ANNEX A
1. OPINION OF BINGHAM, DANA & GOULD LLP
------------------------------------
The Underwriters will request Bingham, Dana & Gould LLP to provide the
following opinions:
(i) Each of the Company and LeukoSite (U.K.) Limited has been duly
incorporated and is validly existing as a corporation in good standing under the
laws of the jurisdiction of its incorporation, is duly qualified to transact
business and in good standing in each of the jurisdictions listed on SCHEDULE A
hereto, and has full corporate power and authority to own or lease its
properties and conduct its business as described in the Registration Statement;
all of the issued and outstanding capital stock of LeukoSite (U.K.) Limited has
been duly authorized and validly issued and is fully paid and non-assessable,
and is owned of record by the Company to such counsel's knowledge free and clear
of all liens, encumbrances and security interests and, to such counsel's
knowledge, no options, warrants or other rights to purchase, agreements or other
obligations to issue or other rights to convert any obligations into shares of
capital stock or ownership interests in LeukoSite (U.K.) Limited are
outstanding; the Ilex Partnership has been duly organized, is validly existing
under the laws of its jurisdiction of organization and has full power and
authority under the instrument pursuant to which it was formed, to carry on its
business as described in the Prospectus and to own, lease and operate its
properties;
(ii) The Company has authorized and outstanding capital stock as set forth
under the caption "Capitalization" in the Prospectus; the outstanding shares of
its Common Stock, have been duly authorized and validly issued and are fully
paid and non-assessable; the certificates evidencing the Stock delivered to the
Representatives for the several accounts of the Underwriters are in due and
proper form under Delaware law, and when duly countersigned by the Company's
transfer agent and registrar and delivered to you or upon your order against
payment of the agreed consideration therefor in accordance with the provisions
of the Underwriting Agreement, the Stock represented thereby will be duly
authorized and validly issued, fully paid and non-assessable; proper corporate
proceedings have been taken validly to authorize such authorized capital stock;
all of the outstanding shares of such capital stock (including the Underwritten
Stock) have been duly and validly issued and are fully paid and nonassessable;
any Option Stock purchased after the Closing Date when issued and delivered to
and paid for by the Underwriters as provided in the Underwriting Agreement, will
have been duly and validly issued and fully paid and nonassessable; no
preemptive rights of, or right of refusal in favor of, securityholders exist
with respect to the Stock, or the issue and sale thereof, pursuant to the
Amended and restated Certificate of Incorporation or Bylaws of the Company;
A-1
<PAGE> 30
and, to such counsel's knowledge, there are no contractual preemptive rights or
rights of first refusal or rights of co-sale which exist and that have not been
waived with respect to the issue and sale of the Stock;
(iii) The Registration Statement has become effective under the Securities
Act and, to such counsel's knowledge, (A) no stop order suspending the
effectiveness of the Registration Statement or suspending or preventing the use
of the Prospectus is in effect, and (B) no proceedings for that purpose have
been instituted or are pending or contemplated by the Commission;
(iv) The Registration Statement and the Prospectus (except as to the
financial statements and schedules and other financial and statistical data
contained therein, as to which such counsel need express no opinion), comply as
to form in all material respects with the requirements of the Securities Act and
with the applicable rules and regulations of the Commission thereunder;
(v) Such counsel have no reason to believe that the Registration Statement
(except as to the financial statements and schedules and other financial and
statistical data contained or incorporated by reference therein, as to which
such counsel need not express any opinion or belief) at the Effective Date
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading, or that the Prospectus (except as to the financial statements
and schedules and other financial [and statistical] data contained or
incorporated by reference therein, as to which such counsel need not express any
opinion or belief) as of its date or at the Closing Date (or any later date on
which Option Stock is purchased), contained or contains any untrue statement of
a material fact or omitted or omits to state a material fact necessary in order
to make the statements therein, in light of the circumstances under which they
were made, not misleading;
(vi) The information required to be set forth in the Registration Statement
in answer to Items 9, 10 (insofar as it relates to such counsel), 11(c), and
11(m) of Form S-1, and in the Section entitled "Shares Eligible for Future Sale"
is to such counsel's knowledge accurately and adequately set forth therein in
all material respects or no response is required with respect to such Items, and
the description of the Company's stock option plans and the options granted and
which may be granted thereunder and the options granted otherwise than under
such plans set forth in the Prospectus accurately and fairly presents the
information required to be shown with respect to said plans and options to the
extent required by the Securities Act and the applicable rules and regulations
of the Commission thereunder;
(vii) Such counsel does not know of any agreements, franchises, contracts,
leases or documents which in the opinion of such counsel are of a character
required
A-2
<PAGE> 31
to be described in the Registration Statement or the Prospectus or to be filed
as exhibits to the Registration Statement which are not described and filed as
required;
(viii) Such counsel does not know of any legal proceedings pending or
threatened against the Company required to be described in the Prospectus which
are not described as required;
(ix) The Underwriting Agreement has been duly authorized, executed and
delivered by the Company;
(x) To such counsel's knowledge, there is no action, suit or proceeding, at
law or in equity, pending against the Company before any court or administrative
agency;
(xi) No approval, consent, order, authorization, designation, declaration
or filing by or with any United States federal or state regulatory,
administrative or other governmental body is necessary in connection with the
execution and delivery by the Company of the Underwriting Agreement and the
consummation of the transactions therein contemplated (except (a) such as have
been obtained under the Securities Act, (b) such additional steps as may be
required by the NASD and (c) as may be necessary to make the Registration
Statement effective (and to maintain such effectiveness) and qualify the Stock
for public offering by the Underwriters, under state and foreign securities
laws);
(xii) The Company is not, and upon consummation of the transactions
contemplated by the Underwriting Agreement and application of the net proceeds
from the sale of the Stock as set forth under the caption "Use of Proceeds" in
the Prospectus, will not be, an "investment company" within the meaning of the
Investment Company Act of 1940, as amended, and the rules and regulations
thereunder;
(xiii) The issue and sale by the Company of the shares of Stock to be sold
by the Company as contemplated by the Underwriting Agreement will not conflict
with, or result in a breach of, the Restated Certificate of Incorporation or
Bylaws of the Company or any of its subsidiaries or any agreement or instrument
listed as an Exhibit to the Registration Statement or any applicable law or
regulation, or so far as is known to such counsel, any order, writ, injunction
or decree, of any jurisdiction, court or governmental instrumentality;
(xiv) Except as set forth in the Registration Statement and Prospectus, to
the knowledge of such counsel, no holders of shares of Common Stock or other
securities of the Company have registration rights with respect to securities of
the Company; and to the knowledge of such counsel, all holders of securities of
the Company having rights to the registration of securities of the Company,
because of the filing of
A-3
<PAGE> 32
the Registration Statement by the Company have waived such rights or such rights
have expired by reason of lapse of time following notification of the Company's
intent to file the Registration Statement;
(xv) Assuming the Underwriters purchased such Stock in good faith and
without notice of any adverse claim within the meaning of Section 8-302 of the
Uniform Commercial Code as in effect in the Commonwealth of Massachusetts, the
Underwriters will have acquired good and valid title in such Stock free of any
adverse claim.
(xvi) The Stock has been duly authorized for inclusion in the Nasdaq
National Market.
In addition to the matters set forth above, counsel rendering the
foregoing opinion shall also include a statement to the effect that nothing has
come to the attention of such counsel that leads them to believe that the
Registration Statement (except as to the financial statements, including the
notes and schedules thereto, and the other financial, accounting and statistical
data contained therein) at the Effective Date (but after giving effect to
changes incorporated pursuant to Rule 430A under the Act) contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements therein not misleading, or
that the Prospectus (except as to the financial statements, including the notes
schedules thereto, and the other financial, accounting and statistical data
contained therein), as of its date or at the Closing Date (or any later date on
which Option Stock is purchased), contained or contains any untrue statement of
a material fact or omitted or omits to state a material fact necessary in order
to make the statements therein, in light of the circumstances under which they
were made, not misleading. With respect to such statement, such counsel may
state that their belief is based upon the procedures set forth therein, but is
without independent check or verification.
---------------------------------------------------
Counsel rendering the foregoing opinion may as to questions of law not
involving the laws of the United States or of the Commonwealth of Massachusetts
or the General Corporation Law of the State of Delaware, assume, without
independent inquiry, that such laws are the same as those of the Commonwealth of
Massachusetts, except in the case of the opinion rendered in paragraph (i) as to
subsidiaries organized outside of the United States of America, in which case
such counsel may only rely upon opinions of local counsel satisfactory in form
and scope to counsel for the Underwriters. Copies of any opinions so relied upon
shall be delivered to the Representatives and to counsel for the Underwriters
and the foregoing opinion shall also state that counsel knows of no reason the
Underwriters are not entitled to rely upon the opinions of such local counsel.
A-4
<PAGE> 33
2. OPINION OF HAMILTON, BROOK, SMITH & REYNOLDS, P.C.
--------------------------------------------------
Hamilton, Brook, Smith & Reynolds, P.C. shall indicate that they served as
counsel to the Company with respect to its patents and proprietary rights, and
shall opine that:
The statements in the Registration Statement and the Prospectus under
the captions "Risk Factors -- Uncertainties Relating to Patents and
Proprietary Rights" and "Business -- Patents and Proprietary Rights" to the
best of such counsel's knowledge and belief, are accurate and complete
statements or summaries of the matters therein set forth. Nothing has come
to such counsel's attention that causes them to believe that the
above-described portions of the Registration Statement and the Prospectus
contain any untrue statement of material fact or omit to state a material
fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
To the best of such counsel's knowledge and belief, other than
proceedings (except interference proceedings) of the Patent and Trademark
Office and foreign patent offices, there are no legal or governmental
proceedings pending relating to patent rights, trade secrets, trademarks,
service marks or other proprietary information or materials of the Company.
Also, to the best of such counsel's knowledge and belief, no such
proceedings are threatened or contemplated by governmental authorities or
others.
Such counsel does not know of any contracts or other documents,
relating to the Company's patents, patent applications, trade secrets,
trademarks, trademark applications, service marks or other proprietary
information or materials, of a character required to be filed as an exhibit
to the Registration Statement or required to be described in the
Registration Statement or the Prospectus, that are not filed or described
as required.
To the best of such counsel's knowledge, the Company is not infringing
or otherwise violating any patents, trade secrets, trademarks, service
marks, or other proprietary information or materials of others, and to the
best of such counsel's knowledge and belief, there are no infringements by
others of any of the Company's patents, trade secrets, trademarks, service
marks, or other proprietary information or materials which in such
counsel's judgment could affect materially the use thereof by the Company,
and no claim or claims in any patent application owned or licensed to the
Company would be infringed by the activities of others if such claim or
claims were issued. Except as described in the Prospectus, such counsel is
not aware of any patent applications of others which, if issued in the form
available to such counsel,
A-5
<PAGE> 34
would be infringed by the activities or proposed activities of the Company,
as described in the Prospectus.
Such counsel has no knowledge of any facts which would preclude the
Company from having valid license rights or clear title to the patents
referenced in the Prospectus. Such counsel has no knowledge that the
Company lacks or will be unable to obtain any rights or licenses to use all
patents and other material intangible property and assets necessary to
conduct the business now conducted or proposed to be conducted by the
Company as described in the Prospectus, except as described in the
Prospectus. Counsel is unaware of any facts which form a basis for a
finding of unenforceability or invalidity of any of the Company's patents
and other material intangible property and assets.
Subject to any disclosure to the contrary in the Prospectus, such
counsel is not aware of any material fact with respect to the patent
applications of the Company presently on file that (a) would preclude the
issuance of patents with respect to such applications or (b) would lead
such counsel to conclude that such patents, when issued, would not be valid
and enforceable in accordance with applicable regulations.
In addition, such counsel shall state that although they have not
verified the accuracy or completeness of the statements contained in the
Prospectus, nothing has come to the attention of such counsel that caused
them to believe that, at the time the Registration Statement became
effective, or at the Closing Date or any later Option Closing Date, as the
case may be, the Prospectus (i) under the caption "Risk Factors --
Uncertainties Relating to Patents and Proprietary Rights" and (ii) under
the caption "Business -- Patents and Proprietary Rights," contained any
untrue statement of a material fact or omitted to state a material fact
necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading.
Such counsel may advise you that, in rendering their opinion, they
have relied on certain factual representations of the Company and that they
have not independently verified the accuracy and completeness of such
representations.
3. OPINION OF HOGAN & HARTSON
--------------------------
Hogan & Hartson shall indicate that they served as counsel to the
Company with respect to its regulatory matters, and shall opine that:
(i) The statements under the captions "Risk Factors -- Impact of Extensive
Government Regulation" and "Business -- Impact of Extensive Government
A-6
<PAGE> 35
Regulation" in the Prospectus, insofar as such statements purport to summarize
applicable provisions of the FDA Act and the regulations promulgated thereunder,
in existence on the date of the Prospectus, have been reviewed by such counsel
and in all material respects are accurate summaries of the provisions purported
to be summarized under such captions in the Prospectus;
(ii) The FDA statutes and regulations summarized under the captions "Risk
Factors -- Impact of Extensive Government Regulation" and "Business -- Impact of
Extensive Government Regulation" in the Prospectus are the FDA statutes and
regulations that are material to the Company's business as described in the
Prospectus;
(iii) Although such counsel has not independently verified the accuracy and
completeness of the statements contained in the Registration Statement and the
Prospectus, no facts have come to the attention of such counsel that would lead
it to believe that either the above-listed portions of the Registration
Statement at the Effective Date or at the applicable Closing Date contains or
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary in order to make the statements
therein not misleading or that the comparable portions of the Prospectus as of
its date and at the applicable Closing Date contains or contained any untrue
statement of a material fact or omitted or omits to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
A-7
<PAGE> 36
A-8
<PAGE> 1
Exhibit 5
BINGHAM, DANA & GOULD LLP
150 FEDERAL STREET
BOSTON, MASSACHUSETTS 02110-1726
TEL: 617.951.8000
FAX: 617.951.8736
August 13, 1997
LeukoSite, Inc.
215 First Street
Cambridge, MA 02142
Dear Ladies and Gentlemen:
We have acted as counsel for LeukoSite, Inc., a Delaware
corporation (the "Company"), in connection with the registration under the
Securities Act of 1933, as amended (the "Act"), of 2,500,000 shares and an
additional 375,000 shares which may be offered by the Company in order to cover
over-allotments, if any, of Common Stock, par value $0.01 per share of the
Company (the "Shares"), pursuant to a Registration Statement on Form S-1 (as
amended, the "Registration Statement"), initially filed with the Securities
Exchange Commission on June 27, 1997.
We have reviewed the corporate proceedings of the Company with
respect to the authorization of the issuance of the Shares. We have also
examined and relied upon originals or copies, certified or otherwise identified
or authenticated to our satisfaction, of such corporate records, instruments,
agreements or other documents of the Company, and certificates of officers of
the Company as to certain factual matters, and have made such investigation of
law and have discussed with officers and representatives of the Company such
questions of fact, as we have deemed necessary or appropriate as a basis for the
opinions hereinafter expressed. In our examination, we have assumed the
genuineness of all signatures, the conformity to the originals of all documents
reviewed by us as copies, the authenticity and completeness of all original
documents reviewed by us in original or copy form and the legal competence of
each individual executing any document.
We have also assumed that an Underwriting Agreement
substantially in the form of Exhibit 1.1 to the Registration Statement, by and
among the Company and the underwriters named therein (the "Underwriting
Agreement"), will have been duly executed and delivered pursuant to the
authorizing resolutions of the Board of Directors of the Company and that the
Shares will be sold and transferred only upon the payment therefor as provided
in the Underwriting Agreement. We have further assumed that the
<PAGE> 2
LeukoSite, Inc.
August 13, 1997
Page 2
registration requirements of the Act and all applicable requirements of state
laws regulating the sale of securities will have been duly satisfied.
This opinion is limited solely to the Delaware General
Corporation Law as applied by courts located in Delaware.
Based upon and subject to the foregoing, we are of the opinion
that the Shares have been duly authorized, and when delivered and paid for in
accordance with the provisions of the Underwriting Agreement, will be validly
issued, fully paid and non-assessable.
We hereby consent to the filing of this opinion as an exhibit
to the Registration Statement and to the reference to this firm under the
heading "Legal Matters" in the Registration Statement.
Very truly yours,
/s/ BINGHAM, DANA & GOULD LLP
<PAGE> 1
EXHIBIT 10.1
LEUKON, INC.
CONSULTING AGREEMENT
THIS CONSULTING AGREEMENT, entered into as of this 22nd day of January,
1993 (this "Agreement"), is between Leukon, Inc., a Delaware corporation
(hereinafter called the "Company"), and Timothy A. Springer, of Cambridge,
Massachusetts (hereinafter called the "Consultant").
1. Consulting Services.
(a) Subject to and upon the terms and conditions set forth in this
Agreement, the Company hereby retains the Consultant, and the Consultant
hereby agrees, during the term of this Agreement, to serve as Chairman of
the Scientific Advisory Board of the Company and to provide to the Company
such consulting and technical advisory services as may be required by the
Company from time to time. Such services shall be rendered exclusively to
the Company in the healthcare field except that such services shall not
include (i) operational or managerial responsibilities, (ii)
responsibilities, or service as a member of the Board of Directors of the
Company (although Consultant shall, during the term of this Agreement,
receive all notices of meetings of such Board of Directors and may, at his
option, observe at such meetings), or (iii) Clinical Research as defined
in the Harvard University ("Harvard") Faculty of Medicine Policy on
Conflicts of Interest and Commitment dated March 22, 1990 (the "Harvard
Conflicts Policy"), or (iv) the conduct of research externally that would
ordinarily be conducted within or for Harvard or the Center for Blood
Research, Inc. and/or its for profit subsidiary CBR Laboratory, Inc., both
hereinafter the "CBR", or (v) research conducted at or utilizing the
resources or facilities of Harvard, the CBR or any other
Harvard-affiliated institution, including such research and services for
third parties through CBR (which may be rendered to commercial, for profit
companies, or others) which, now, or at any time, sponsor, or have
sponsored research, or work with CBR and/or Harvard in the healthcare
field or otherwise.
In rendering consulting services hereunder, the Consultant shall act
solely as an independent contractor and this Agreement shall not be
construed to create any employee/employer relationship between the
Consultant and the Company.
<PAGE> 2
-2-
It is understood and agreed that Consultant is an employee of CBR
and has and will have existing and future obligations to CBR, including
rendering services, and assigning rights to certain inventions,
developments and discoveries (whether patentable or not), which
obligations shall not be diminished by anything in this agreement.
(b) During the term of this Agreement, the Consultant agrees to
devote up to, but no more than, two (2) days per month to the performance
of consulting services hereunder, including attendance at meetings of the
Company's Scientific Advisory Board; provided, however, that he shall not
be required to devote more time than is permitted by the policies or
regulations of Harvard or the CBR. If such policies or regulations are
amended or later determined to permit less than two days per month of
services hereunder there shall be an appropriate reduction in the
compensation payable to the Consultant hereunder. If in connection with
the performance of the services, the Consultant is required to travel for
over one hour to or from a metropolitan area where the Consultant does not
reside, time spent in travel shall be considered to be time spent
performing services. Services performed by Consultant as the Chairman of
the Scientific Advisory Board in addition to preparation for and
attendance at meetings shall also be considered to be time spent
performing services hereunder.
(c) The Consultant shall provide his consulting services hereunder
at such times and locations as are mutually agreed upon by the Consultant
and the Company; provided, however, that such times and locations shall
not interfere with Consultant's obligations to Harvard and the CBR, the
principal employer of the Consultant.
(d) The Company recognizes that the Consultant's activities are or
will be subject to the rules and regulations of Harvard and the CBR, now
or in the future, and the Company agrees that the Consultant shall be
under no obligation to perform services hereunder if such performance
would conflict with such rules and regulations, or constitute a Category I
activity under the Harvard Conflicts Policy. The Consultant's obligations
under this Agreement shall be subject to his compliance with such rules
and regulations, and, in the event of a conflict, such rules and
regulations shall control. In the event such rules and regulations shall
in the Company's opinion substantially interfere with the performance of
services by the Consultant hereunder, the Company
<PAGE> 3
-3-
may terminate this Agreement upon ninety (90) days notice to the
Consultant. Subject to the obligations of Section 10, the Consultant shall
not be restricted in his ability to publish or formally present research
results, or provide expert commentary on any subject relating to his
activities for Harvard or the CBR.
(e) The Consultant shall not serve on or participate in any way with
respect to the scientific advisory board of any other company or consult
or become an officer or employee of any other for profit company without
the prior written consent of the Board of Directors of the Company except
for such participation or consulting as may be required by Consultant's
obligations to CBR. The Board of Directors may condition any consent upon
a reduction in the Consulting Fee (as defined below) with respect to any
payments received by the Consultant for such other activities.
2. Freedom to Contract. The Consultant represents that he is free to
enter into this Agreement, he has not made and will not make (except as may be
contemplated by Section 1 (d)) any agreements in conflict with this Agreement,
and he will not disclose to the Company, or use for the Company's benefit, any
trade secrets or confidential information which is the property of any other
party. Without limiting the generality of the foregoing, the Consultant shall
have no obligation to disclose to the Company, and shall not use for the
Company's benefit, any information relating to or arising out of his research
conducted at Harvard or the CBR, or utilizing the funds, personnel, facilities,
materials or other resources of Harvard or the CBR, until such information has
been published; provided, however, that the Consultant shall have an obligation
to disclose to the Company, and shall use for the Company's exclusive benefit,
any and all such information to the extent that the Company shall be legally
entitled to the exclusive use of such information pursuant to any license
granted by Harvard or the CBR to the Company.
3. Compensation.
(a) So long as the Consultant is providing consulting services to
the Company under this Agreement, the Company agrees to pay the Consultant
a consulting fee in the amount of $100,000.00 per year (the "Consulting
Fee"), subject to possible adjustment as provided in this Section, Section
1(b) and (e), payable in equal monthly installments. The Consulting Fee
shall be the exclusive form of compensation by the Company to the
Consultant regarding services rendered to the Company by the Consultant.
Beginning on January 1, 1994, the Consulting Fee shall be adjusted
<PAGE> 4
-4-
upward by the same percentage as the percentage increase in the "Consumer
Price Index for Urban Wage Earners and Clerical Workers for the City of
Boston - All Items - Series A" published by the Bureau of Labor
Statistics, United States Department of Labor, or any index which may in
the future be submitted in place of such index (the "Index"), from the
index figure for the month of January, 1993 to the index for the month of
January, 1994. For each successive year, the Consulting Fee shall be
adjusted in the same manner, that is, by the percentage by which the
Consumer Price Index for January of that year exceeds the index for the
preceding January.
(b) The Company hereby acknowledges that the Consultant has been
rendering consulting services to the Company since August 3, 1992, and,
within ten (10) days of the Effective Date (as defined in Section 6) of
this Agreement, agrees to compensate the Consultant for such consulting
services, in accordance with Section 3(a) above, to the same extent as if
the Consultant had rendered such consulting services after the Effective
Date.
(c) The Company will not withhold any tax or Social Security
payments due from the Consultant to any governmental taxing authority. The
Consultant hereby agrees that he will timely pay all taxes and fees upon
the compensation he is paid by the Company.
4. Expenses. The Company shall reimburse the Consultant for any actual
expenses incurred by the Consultant while rendering services under this
Agreement so long as such expenses are reasonable and necessary, appropriately
documented, and, where feasible, approved in advance by the Company.
5. Representation of Consultant. The Consultant hereby represents and
warrants to the Company that he has provided a copy of this Agreement to the CBR
and the CBR has not objected to his entering into and performing this Agreement,
that he will file a copy with Harvard in accordance with the Harvard Conflicts
Policy and that the terms of this Agreement and the services contemplated
hereunder do not conflict with any of the Consultant's current or anticipated
obligations to, or with any of the policies, procedures or regulations of,
Harvard or the CBR.
6. Term. This Agreement shall take effect as of the date hereof (the
"Effective Date") and, unless sooner terminated pursuant to Sections 7 or 1(d)
hereof or renewed as set forth below, shall expire two years from the Effective
Date. Unless either the Company or the Consultant gives
<PAGE> 5
-5-
written notice at least sixty (60) days prior to the initial or any successive
expiration date, the term of this Agreement shall be automatically extended for
successive renewal terms of one year each.
7. Termination.
(a) This Agreement (i) shall terminate immediately upon the
Consultant's death, (ii) may be terminated by either the Company or the
Consultant upon the permanent disability of the Consultant by giving
written notice of such termination to the other party and (iii) may be
terminated by the Company by giving written notice to the Consultant if
the Company and CBR do not, within ninety (90) days of the Effective Date,
enter into one or more written license agreements satisfactory to the
Company relating to the technology and inventions of Dr. Springer.
(b) This Agreement may be terminated by the Consultant, by giving
written notice of such termination to the Company, in the event that
HealthCare Investment Corporation ("HealthCare") and/or Dr. Martin Peretz
("Dr. Peretz"), and/or other investors or designees who may participate
with them, fail to make the first of two $5,000,000.00 installments as
contemplated by the terms of that certain Term Sheet, dated December ,
1992, relating to the Company's proposed Convertible Preferred Stock
Financing.
(c) This Agreement may be terminated immediately by the Company or
the Consultant for Cause at any time during the initial term of this
Agreement (or during any renewal term) by giving the other party written
notice of such termination. For purposes of this Agreement, the meaning of
the term "Cause" shall include, but not be limited to, dishonesty,
embezzlement, theft, fraudulent misconduct, any use of an illegal
substance, or any breach of this Agreement which remains uncured 30 days
after the breaching party receives written notice of such breach from the
nonbreaching party. If the Company gives notice of termination or
non-renewal pursuant to Section 6 hereof, it shall be treated as a
termination without Cause (unless the notice of termination specifically
provides that it is a for Cause termination). If the Consultant terminates
this Agreement on account of a material (uncured) breach by the Company,
it shall be treated as a termination without Cause.
8. Agreement not to Compete. Except as otherwise provided below, during
the term of this Agreement and for a period of one (1) year thereafter, the
Consultant shall not, directly or indirectly, engage or participate in any way
in any business, commercial activity or commercial
<PAGE> 6
-6-
enterprise which competes or is competitive with any product, process or service
that (in the case of a termination, at the date of termination) the Company is
researching, developing, marketing, licensing or selling or that the Company is
intending within two (2) years from the date of termination to research,
develop, market, license or sell; provided, however, that nothing in this
Section 8 shall be construed to limit the ability of the Consultant to conduct
research or engage in research-related activities for or administered by Harvard
and the CBR; and provided, however, that the holding by the Consultant of any
investment in the equity of a publicly traded entity (registered under
(Section)12(g) of the Securities Exchange Act of 1934 and traded on a recognized
national securities exchange or the NASDAQ National Market System) shall not be
deemed to be a violation of this section if such investment does not constitute
over one percent (1%) of all of the equity of such entity. The Consultant also
shall not solicit any other employee, customer, supplier, or franchisee of, or
consultant or adviser to, the Company to terminate such party's relationship
with the Company during the term of this Agreement and for a period of one (1)
year thereafter. The time periods provided for in this section shall be extended
for a period of time in which the Consultant is in violation of any provision of
this section. Notwithstanding anything in this Agreement to the contrary
(including, without limitation, the provisions of Section 13 hereof), the
provisions of this Section 8 shall not be applicable from and after any
termination of this Agreement pursuant to Section 7(b) hereof.
9. Inventions; Assignments. Except to the extent that the Consultant's
employer, Harvard or the CBR now or in the future, may have pre-existing or
superior rights by reason of such employment and/or by agreement, all
inventions, improvements, developments, ideas, names, patents, trademarks,
copyrights, and innovations (including all data and records pertaining thereto),
whether or not reduced to writing, which the Consultant may, either alone or
with others and whether or not during working hours or by the use of facilities
of the Company, originate, make or conceive, at any time during the term of this
Agreement and for a period of twelve (12) months thereafter, and which arise out
of or are based upon any services rendered hereunder and/or any Confidential
Information of the Company shall be the exclusive property of the Company. The
Consultant agrees to give the Company prompt written notice of any such
invention, improvement, development, idea, name, patent, trademark, copyright or
innovation and agrees to execute such instruments of transfer, assignment,
conveyance or confirmation and such other documents (including, without
limitation, patent applications) as the Company may reasonably request to
transfer, confirm and perfect in the Company all legally protectable rights in
any such invention,
<PAGE> 7
-7-
improvement, development, idea, name, patent, trademark, copyright or
innovation. By this Agreement the Consultant hereby irrevocably constitutes and
appoints during the period commencing on the Effective Date and ending three
years following the date of termination of the Consultant's services for any
reason the Company as his attorney-in-fact for the purpose of executing, in the
Consultant's name and on his behalf, such instruments or other documents as may
be necessary to transfer, confirm and perfect all rights which the Company may
have or be entitled to assert under this Section 9. In no event, however, shall
the Consultant's obligations hereunder relate to any right, title or interest
the Consultant may have in inventions, discoveries, developments, methods and
processes (whether or not patentable or copyrightable or constituting trade
secrets) conceived, made or discovered by the Consultant (whether alone or with
others) that the Consultant is now or may in the future be legally required to
assign to Harvard or the CBR pursuant to the rules and regulations of Harvard or
the CBR or to assign to third parties in connection with employment by Harvard
or CBR.
10. Confidential Information.
(a) The Consultant acknowledges that all information disclosed to or
acquired by the Consultant relating directly or indirectly to the present
or contemplated business of the Company (including, without limitation,
any information of the Company relating to DNA sequences and derivatives
thereof, assays, vectors, calls, antibodies, other biological and/or
chemical substances, formulations, techniques, processes, methodology,
equipment, data, reports, know-how, technology, computer software, sources
of supply, information regarding patent position, products, business
plans, or customer lists), as well as such other information as may be
designated by the Company as confidential (all of the foregoing
information being hereinafter referred to, collectively, as "Confidential
Information"), is a valuable, special, and unique asset of the Company and
is to be held in trust by the Consultant for the Company's sole benefit.
Without limiting the generality of the foregoing, the Consultant hereby
acknowledges and agrees that Confidential Information shall include any
and all inventions, know-how, technology, processes, techniques,
methodology, information and intellectual property licensed by one or more
written license agreements to the Company by Harvard and/or the CBR,
provided however that, the restrictions as to non-disclosure and non-use
of such information shall be controlled only by the terms of such license
agreement or agreements. Except as otherwise provided in Section 10(b) or
(c) hereof, the Consultant
<PAGE> 8
-8-
shall not, at any time during or after the term of this Agreement, use for
himself or others, or disclose or communicate to any person for any
reason, any Confidential Information without the prior written consent of
the Company; provided, however, that the Consultant may use Confidential
Information with respect to his services hereunder.
(b) The Consultant's obligations under Section 10(a) hereof not to
use, disclose or communicate Confidential Information shall not apply to
any Confidential Information which (i) is or becomes publicly known under
circumstances involving no breach by the Consultant of this Agreement,
(ii) was generally known by the Consultant prior to the date hereof, (iii)
was or is disclosed to the Consultant by a third party who is not under
any obligation of confidentiality to the Company, and/or (iv) was or is
approved for release by written authorization of an authorized
representative of the Company; provided, however, that clauses (ii) and
(iii) above in this Section 10(b) shall in no event exempt the Consultant
from the restrictions imposed by Section 10(a) hereof on the use,
disclosure and communication of Confidential Information with respect to
any Confidential Information which relates to the subject matter of any
license granted to the Company by Harvard and/or the CBR.
(c) The Consultant agrees to submit to the Company in sufficient
time to enable the Company to ascertain whether a manuscript to be
published (orally or in writing) contains Confidential Information and/or
discloses a potentially patentable invention to which the Company has
rights an early draft of such manuscript if such manuscript contains
information regarding any area of the business or contemplated business of
the Company. The Consultant shall cooperate with the Company in this
respect, and shall delete from the manuscript, any Confidential
Information as requested by the Company and shall assist the Company as
requested by the Company in filing for patent protection (prior to
publication of such manuscript) for any inventions in and to which the
Company has rights. Notwithstanding the foregoing, the obligations of the
Consultant under this Section 10(c) shall not apply to the publication of
information relating to inventions, discoveries, development, methods and
processes that the Consultant is not required to assign to the Company.
11. Return of Documents. All originals, copies and summaries of manuals,
memoranda, notes, notebooks, records, reports, plans, drawings, and other
documents or items of any kind concerning any matters
<PAGE> 9
-9-
affecting or relating to the present or contemplated business of the Company,
whether or not they contain Confidential Information, are and shall continue to
be the property of the Company, and all of such documents or items, other than
material belonging to Harvard or the CBR, in the actual or potential possession
or control of the Consultant shall be delivered to the Company by the Consultant
immediately upon termination of this Agreement.
12. Unique Nature of Agreement; Specific Enforcement. The Company and
the Consultant agree and acknowledge that the rights and obligations set forth
in this Agreement are of a unique and special nature and that the Company is,
therefore, without an adequate legal remedy in the event of the Consultant's
violation of any of the covenants set forth in this Agreement. The Company and
the Consultant agree, therefore, that, in addition to all other rights and
remedies, at law or in equity or otherwise (including termination of the
Consultant's consultancy), that may be available to the Company, each of the
covenants made by the Consultant under this Agreement shall be specifically
enforceable in equity.
13. Survival. The provisions of Sections 8, 9, 10, 11 and 15 hereof
shall survive the termination of this Agreement.
14. Miscellaneous.
14.1. Entire Agreement. This Agreement represents the entire Agreement of
the parties with respect to the arrangements contemplated hereby. No prior
agreement, whether written or oral, shall be construed to change, amend, alter,
repeal or invalidate this Agreement. This Agreement may be amended only by a
written instrument executed in one or more counterparts by the parties.
14.2. Waiver. No consent to or waiver of any breach or default in the
performance of any obligations hereunder shall be deemed or construed to be a
consent to or waiver of any other breach or default in the performance of any of
the same or any other obligations hereunder. Failure on the part of either party
to complain of any act or failure to act of the other party or to declare the
other party in default, irrespective of the duration of such failure, shall not
constitute a waiver of rights hereunder and no waiver hereunder shall be
effective unless it is in writing, executed by the party waiving the breach or
default hereunder.
14.3. Assignment. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and assigns. This
Agreement may be assigned by the Company to a successor
<PAGE> 10
-10-
of its business to which this Agreement relates (whether by purchase or
otherwise). The Consultant may not assign or transfer any or all of his rights
or obligations under this Agreement.
14.4. Disputes and Costs. In case of any dispute hereunder, the parties
will submit to the exclusive jurisdiction and venue of any court of competent
jurisdiction sitting in Suffolk County, Massachusetts, and will comply with all
requirements necessary to give such court jurisdiction over the parties and the
controversy. Each party waives any right to a jury trial and to claim or recover
punitive damages.
14.5. Severability. All headings and subdivisions of this Agreement are
for reference only and shall not affect its interpretation. In the event that
any provision of this Agreement should be held unenforceable by a court of
competent jurisdiction, such court is hereby authorized to amend such provision
so as to be enforceable to the fullest extent permitted by law, and all
remaining provisions shall continue in full force without being impaired or
invalidated in any way.
14.6. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the Commonwealth of Massachusetts.
14.7. Notices. All notices and other communications hereunder shall be
delivered or sent by registered or certified mail, return receipt requested,
hand delivery or confirmed telecopy addressed to each party at the address set
forth below, or to such other address as such party may designate in writing to
the other:
If to the Consultant:
Dr. Timothy A. Springer
The Center for Blood Research
200 Longwood Avenue
Boston, Massachusetts 02115
Fax: 617-278-3232
with a copy simultaneously to:
Winthrop G. Minot, Esq.
Ropes & Gray
One International Place
Boston, Massachusetts 02110
Fax: 617-951-7050
<PAGE> 11
-11-
If to the Company:
John W. Littlechild, Vice Chairman
HealthCare Investment Corp.
840 Memorial Drive
Cambridge, Massachusetts 02139
Fax: 617-491-6310
with a copy simultaneously to:
Justin P. Morreale, Esq.
Bingham, Dana & Gould
150 Federal Street
Boston, Massachusetts 02110
Fax: 617-951-8736
15. To the extent permitted by law, the Company shall indemnify and hold
the Consultant harmless from and against expenses (including reasonable
attorneys' fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by him in connection with any threatened, pending or
completed action, suit or proceeding (whether civil, criminal, administrative or
investigative) to which he becomes a party or is threatened to be made a party
by reason of any status, service, action or failure to act on his part in his
capacity as Chairman of the Scientific Advisory Board of the Company, as a
consultant hereunder to, or an agent or promoter of, or otherwise on behalf of
the Company, whether before or after the date hereof. The Consultant shall not,
without the prior written consent of the Company, settle an action, suit or
proceeding as to which the Company has undertaken to indemnify the Consultant.
The Company shall not unreasonably withhold payment of expenses incurred by the
Consultant in the defense of an action, suit or proceeding subject to this
Section 15 or of amounts paid in settlement of such an action, suit or
proceeding in accordance with this Section 15. Without limiting or expanding the
foregoing, the Company shall indemnify and hold the Consultant harmless from any
expenses (including reasonable attorneys' fees), judgments, fines and amounts
paid in settlement actually and reasonably incurred by him as a result of
product liability claims arising from the use by the Company of any inventions
transferred by the Consultant to the Company or services rendered to the Company
by the Consultant hereunder. The Consultant agrees to promptly notify the
Company of any claim or action subject to the indemnification provisions of this
Section 15 and to cooperate with the Company in the defense thereof. The Company
shall have the right to settle any such claim for which the Consultant is to be
fully indemnified.
<PAGE> 12
-12-
The provisions of this Section 15 shall not apply to the extent the Consultant
has been finally determined by a court of competent jurisdiction to have acted
with gross negligence or willful misconduct with respect to the action or
failure to act with respect to which indemnification is being sought hereunder.
IN WITNESS WHEREOF, the parties have signed this Consulting Agreement as
of the date written above as a sealed instrument.
LEUKON, INC.
By:______________________________
Title:
_________________________________
Timothy A. Springer
<PAGE> 1
CONFIDENTIAL TREATMENT EXHIBIT 10.2
LICENSE AGREEMENT
THIS AGREEMENT, effective as of June 15, 1993 (EFFECTIVE DATE) between the
Center for Blood Research, Inc. ("CBR") having a place of business at 800
Huntington Ave., Boston, MA 02115 and Leukon, Inc., a corporation having an
address at c/c HealthCare Investment Corp., 840 Memorial Drive, Cambridge,
Massachusetts 02139 ("LEUKON").
NOW THEREFORE, in consideration of the faithful performance of the
covenants herein contained, the parties hereto agree as follows:
1. DEFINITIONS
1.1 The term "AFFILIATE" as applied to LEUKON shall mean any company or
other legal entity other than LEUKON in whatever country organized, controlling,
controlled by or under common control with LEUKON. The term "control" means at
least a 40% possession, direct or indirect, of the powers to direct or cause the
direction of the management and policies whether through the ownership of voting
securities, by contract or otherwise.
1.2 "IMPROVEMENT INVENTION(S)" shall mean any inventions or discoveries
which names Dr. Timothy Springer as an inventor or co-inventor for which a
patent application owned by CBR is filed within three years from the date of
this Agreement and which enhance, substitute for or are useful with the
products, procedures or processes described in PATENT RIGHTS and which would
infringe any claim of a pending and/or issued patent or patent application which
is
<PAGE> 2
-2-
then or may become included in the PATENT RIGHTS, except those as to which CBR
is or in the future may be obligated to license to a third party as a result of
the third party funding Dr. Timothy Springer's research.
1.3 "NET SALES" means the total received by LEUKON from sale, transfer or
use of PRODUCT less transportation charges separately billed and insurance
separately billed, sales taxes, use taxes, excise taxes, value added taxes,
customs duties or other imposts, normal and customary quantity and cash
discounts (to the extent allowed), allowances and credits on account of
rejection or return of PRODUCTS an rebates to the extent allowed, with respect
to disallowed reimbursements. In the event that a PRODUCT includes, a component
which has therapeutic and prophylactic activity ("Active Component(s)") covered
by a VALID CLAIM of a PATENT RIGHT (Patented Component(s)) and Active
Component(s) not covered by a VALID CLAIM of a PATENT RIGHT (Unpatented
Component(s)) (such PRODUCT being a Combined Product), then NET SALES shall be
the amount which is normally received by LEUKON from a sale of the Patented
Component(s) when sold separately in an arm's-length transaction with an
unaffiliated third party. If the Patented Component(s) are not sold separately,
then NET SALES upon which a royalty is paid shall be the NET SALES of the
Combined Product multiplied by a fraction, the numerator of which is the cost
for producing the Patented Components and the denominator of which is the cost
for producing the Combined Product.
If a sale is made other than at arm's-length, then NET SALES shall be
calculated on the basis of what would have been received if the sale was made at
arm's-length.
<PAGE> 3
-3-
No deductions shall be made for commissions paid to individuals whether
they be with independent sales agencies or regularly employed by LEUKON and on
its payroll, or for cost of collections.
PRODUCT shall be considered "sold" when shipped, transferred, billed out
or invoiced, whichever occurs first.
1.4 "OTHER PRODUCT(S)" means a product or process or service other than a
THERAPEUTIC PRODUCT.
1.5 The term "PATENT RIGHT(s)" shall mean the patent applications of
Appendix A and any United States patent application directed to an IMPROVEMENT
INVENTION and the inventions described and claimed therein and including any
division, continuation, or continuation-in-part thereof and any foreign patent
application or equivalent corresponding thereto and any Letters Patent or the
equivalent thereof issuing thereon or reissue or reexamination or extension
thereof.
1.6 The term "PRODUCT" shall mean any article, composition, apparatus,
substance, chemical, material, method, process or service which is covered by
PATENT RIGHTS, and includes both THERAPEUTIC PRODUCT and OTHER PRODUCT.
1.7 The term "SUBLICENSEE" shall mean any non-AFFILIATE third party
licensed by LEUKON to make, have made, use or sell any product or use any
process under PATENT RIGHTS.
1.8 "THERAPEUTIC PRODUCT" means a product or process or service for the
treatment and/or prevention of a disease.
1.9 The term "VALID CLAIM" shall mean a claim of an issued patent which
has not lapsed or become abandoned or been declared invalid or unenforceable by
a court of competent or an administrative
<PAGE> 4
-4-
agency from which no appeal can be or is taken or a claim of a pending patent
application which is maintained in good faith and further provided that the
application, including the pendency of any parent applications which supports
the claim, has not been pending for more than seven years.
1.10 The use herein of the plural shall include the singular, and the use
of the masculine shall include the feminine.
2. LICENSES
2.1(a) CBR hereby grants to LEUKON and LEUKON accepts, subject to the
terms and conditions hereof, a sole and exclusive, worldwide, royalty-bearing
license, in, under and to PATENT RIGHTS, as well as a royalty bearing
non-exclusive license under any IMPROVEMENT INVENTIONS not covered by PATENT
RIGHTS to make, have made, use, sell and have sold PRODUCTS and to use methods
and processes under PRODUCTS. Such license shall include the right to grant
sublicenses thereto. LEUKON may extend such rights and licenses to AFFILIATES
These rights are granted subject to the rights of the U. S. Government under
Public Laws 96-517 and 98-620. All sublicenses shall be subject to CBR's
approval of the entity being sublicensed which approval shall not be
unreasonably withheld. If CBR does not provide a written reasonable objection to
the entity being sublicensed within ten (10) days after notice thereof, such
entity shall be conclusively deemed as having been approved by CBR.
(b) LEUKON agrees to forward to CBR a copy of any and all fully executed
sublicense agreements and any agreements which extend a license hereunder to
AFFILIATES, and further agrees to forward to CBR
<PAGE> 5
-5-
annually a copy of such reports received by LEUKON from its SUBLICENSEES during
the preceding twelve (12) month period under the sublicenses as shall be
pertinent to a royalty accounting or an accounting of progress on PRODUCT to the
CBR under said sublicense agreements.
(c) Any PRODUCTS which are subject to obligations under Public Laws 96-517
or 98-620 and which are intended for sale in the United States shall be
manufactured substantially in the United States.
2.2 The above licenses to sell any PRODUCT for which a royalty paid under
this Agreement include the right of LEUKON, AFFILIATES, and SUBLICENSEES to
grant to the purchaser thereof the right to use and/or resell such purchased
PRODUCT without payment of a further royalty under patents licensed herein.
2.3 (omitted)
2.3(a) Taking into account the complexity, and stage of development of the
PRODUCT and the science related thereto, LEUKON shall select and use reasonable
efforts and diligence under the circumstances to research, develop and then
commercialize a selected PRODUCT. The efforts of a SUBLICENSEE, collaborator
and/or an AFFILIATE shall be considered as efforts of LEUKON. LEUKON shall
provide written reports to CBR as to its activities under this paragraph which
reports shall be given to CBR each January 1 and July 1 during the term of this
agreement.
(b) In the event that CBR reasonably believes that LEUKON is not making
reasonable efforts under the circumstances to research, develop and then
commercialize a PRODUCT selected by LEUKON
<PAGE> 6
-6-
pursuant to Paragraph 2.4(a) then CBR shall provide written notice to LEUKON
which specifies CBR's basis for such belief and what additional efforts CBR
believes should be made by LEUKON. Upon receipt of such written notice, CBR and
LEUKON shall enter into good faith negotiations in order to reach mutual
agreement as to what efforts by LEUKON shall satisfy the requirements of this
Paragraph 2.4, and if such mutual agreement is not reached within ninety (90)
days after receipt of such written notice, then the parties agree to submit to
arbitration pursuant to Paragraph 10.9 to determine the efforts which should be
exerted by LEUKON. Thereafter, LEUKON shall exert the efforts determined by the
parties or in such arbitration.
(c) If LEUKON fails to exert the efforts determined by the parties or in
such arbitration, CBR's sole and exclusive remedy for LEUKON's failure to meet
such efforts is for the licenses granted hereunder to be terminated provided
however, that instead of termination, the sole and exclusive remedy shall be
conversion of the exclusive right and license to a non-exclusive license if as
of such time LEUKON has invested at least $500,000 in the research and/or
development of PRODUCT and continues with the research and development of
PRODUCT. The termination and/or conversion shall take effect sixty (60) days
after written notice by CBR to LEUKON unless such failure is cured prior to the
end of such period.
2.4 CBR acknowledges that LEUKON is in the business of developing,
manufacturing and selling of medical processes and products and nothing in this
Agreement shall be construed as restricting such business or imposing on LEUKON
the duty to market, and/or sell and
<PAGE> 7
-7-
exploit PRODUCT for which royalties are due hereunder to the exclusion of or in
preference to any other product or process.
2.5 LEUKON shall have sole discretion for making all decisions relating to
the commercialization and marketing of PRODUCT.
2.6 If in the calendar year 1998 or any calendar year thereafter LEUKON
and/or its AFFILIATES and/or SUBLICENSEES, and/or collaborators have not
expended at least * for such calendar year with respect to research and/or
development of PRODUCT and the total royalties due and payable under this
Agreement for such calendar year are not equal to at least *, then LEUKON shall
pay CBR the amount by which * exceeds such royalties for the calendar year,
which, if due, shall be payable on the last royalty payment date for such
calendar year.
3. ROYALTIES
3.1(a) LEUKON or its AFFILIATES shall pay CBR as a total royalty for each
PRODUCT one of the following:
(1) * of the NET SALES of all THERAPEUTIC PRODUCTS and * of the NET
SALES of all OTHER PRODUCTS sold by LEUKON or its AFFILIATES,
provided that in the country where the PRODUCT is sold, the PRODUCT
is covered by a VALID CLAIM of a PATENT RIGHT under which LEUKON is
licensed by CBR; or
(2) * of royalties (or the value of consideration provided in lieu of
royalties) received by LEUKON or its AFFILIATES from a SUBLICENSEE
for all
* Confidential treatment requested: material has been omitted and filed
separately with the Commission.
<PAGE> 8
-8-
PRODUCTS covered by a VALID CLAIM of a PATENT RIGHT licensed to
LEUKON.
(3) In the event that LEUKON's license is non-exclusive and any other
person or entity is also granted a license under PATENT RIGHTS at a
royalty less than that of this Agreement, then LEUKON's royalty
under this Agreement shall be reduced to such lower royalty. CBR
shall promptly notify LEUKON of the granting of any such other
license and the royalties thereunder.
(b) Only one royalty shall be due and payable for a specific PRODUCT and
irrespective of the number of patents included within PATENT RIGHTS which are
applicable to such PRODUCT.
3.2 In the event that royalties are to be paid by LEUKON to a party who is
not an AFFILIATE of LEUKON for any PRODUCT ("Other Royalties") for which
royalties are also due to CBR pursuant to Section 3.1, then the royalties to be
paid to CBR by LEUKON pursuant to Section 3.1 shall be reduced by the amount of
such Other Royalties, but in no event shall the royalties under Section 3.1 be
reduced by more than *.
3.3 LEUKON shall keep, and shall cause each of its AFFILIATES and
SUBLICENSEES to keep, full and accurate books of account containing all
particulars that may be necessary for the purpose of calculating all royalties
payable to CBR. Such books of account shall be kept at their principal place of
business and, with all necessary supporting data shall, during all reasonable
times for the three (3) years next following the end of the calendar year to
which each shall pertain be
* Confidential treatment requested: material has been omitted and filed
separately with the Commission.
<PAGE> 9
-9-
open for inspection by CBR or their designee upon reasonable notice during
normal business hours at CBR's expense for the sole purpose of verifying royalty
statements or compliance with this Agreement.
3.4 With quarterly payments, LEUKON shall deliver to CBR a full and
accurate accounting to include at least the following information:
(a) Quantity of each PRODUCT subject to royalty sold (by country) by
LEUKON, and its AFFILIATES;
(b) Total Net Sales for each PRODUCT subject to royalty (by country);
(c) Total royalties payable to CBR;
(d) Royalties received from SUBLICENSEES.
3.5 In each year the amount of royalty due shall be calculated quarterly
as of March 31, June 30, September 30 and December 31 and shall be paid
quarterly within the sixty days next following such date, every such payment
shall be supported by the accounting prescribed in Paragraph 3.4 and shall be
made in United States currency. Whenever for the purpose of calculating
royalties conversion from any foreign currency shall be required, such
conversion shall be at the rate of exchange thereafter published in the Wall
Street Journal for the business day closest to the applicable March 31, June 30,
September 30, or December 31, as the case may be.
3.6 If the transfer of or the conversion into United States dollars of any
remittance due hereunder is not lawful or possible in any country, such
remittance shall be made by the deposit thereof in the currency of the country
to the credit and account of CBR or their nominee in any
<PAGE> 10
-10-
commercial bank or trust company located in that country, prompt notice of which
shall be given to CBR.
3.7 Any tax required to be withheld by LEUKON under the laws of any
foreign country for the account of CBR, shall be promptly paid by LEUKON for and
on behalf of CBR to the appropriate governmental authority, and LEUKON shall use
its best efforts to furnish CBR with proof of payment of such tax. Payments to
CBR shall be net of any such payments of taxes.
4. INFRINGEMENT
4.1 With respect to any PATENT RIGHT under which LEUKON is exclusively
licensed pursuant to this Agreement, LEUKON or its SUBLICENSEE shall have the
right to prosecute in its own name and/or in the name of CBR and at LEUKON's own
total cost and expense (except as provided in Section 4.2) any infringement of
such patent, so long as such license is exclusive at the time of the
commencement of action. Before LEUKON or its SUBLICENSEES commences an action
with respect to any infringement of such patents, LEUKON shall give careful
consideration to the views of CBR. CBR shall have the right to assign PATENT
RIGHTS to LEUKON in the event that LEUKON desires to initiate an infringement
action with respect to such PATENT RIGHTS, and after such assignment LEUKON
shall remain obligated to make royalty payments as provided in Article 3. In
addition, with respect to any such infringement action initiated by LEUKON in
which LEUKON designates CBR as a party plaintiff, LEUKON shall indemnify CBR
with respect to any costs or counsel fees awarded against CBR in such action.
<PAGE> 11
-11-
4.2 If LEUKON or its SUBLICENSEE elects to commence an action as described
above, LEUKON may reduce the royalty due to CBR earned under the patent subject
to suit by * the amount of the expenses and costs of such action, including
attorneys' fees, but in no event shall any royalty be reduced by more than *. In
the event that such expenses and costs exceed the amount of royalties withheld
by LEUKON for any calendar year, LEUKON may to that extent reduce the royalties
due to CBR from LEUKON in succeeding calendar years.
4.3 Recoveries or reimbursements from such action shall first be applied
to reimburse LEUKON for litigation costs not paid from royalties (if any), and
then to reimburse CBR for royalties withheld. Any remaining recoveries or
reimbursements shall be divided between the parties as follows.
(a) (i) If the amount is lost profits, LEUKON shall receive an
amount equal to the damages the court determines LEUKON has suffered as a
result of the infringement less the amount of any royalties that would
have been due CBR on sales of PRODUCTS lost by LEUKON as a result of the
infringement had LEUKON made such sales; and
(ii) CBR shall receive an amount equal to the royalties it would
have received if such sales had been made by LEUKON; or
(b) As to awards other than lost profits, seventy-five percent (75%)
to LEUKON and twenty-five percent (25%) to CBR.
4.4 In the event that LEUKON and its SUBLICENSEE, if any, elect not
to exercise their right to prosecute an infringement of the
* Confidential treatment requested: material has been omitted and filed
separately with the Commission.
<PAGE> 12
-12-
PATENT RIGHTS pursuant to the above paragraphs or do not bring an infringement
lawsuit within six months notice from CBR of infringement, CBR may do so at its
own expense, controlling such action and retaining all recoveries therefrom.
4.5 In the event that litigation against LEUKON is initiated by a
third-party charging LEUKON with infringement of a patent of the third party as
a result of the manufacture, use or sale by LEUKON of PRODUCT, LEUKON shall
promptly notify CBR in writing thereof. LEUKON'S costs as to any such defense
shall be fully creditable against running royalties due and payable to CBR under
Paragraph 3.1(a), but in no event shall any royalty be reduced by more than *.
5. PATENTS
5.1(a) LEUKON shall reimburse CBR for any patent expenses it has incurred
and will incur in the preparation, filing, prosecution and maintenance of PATENT
RIGHTS. The amount of patent expenses to be reimbursed to CBR for patent
expenses incurred as of the EFFECTIVE DATE shall be *, plus the
additional unbilled expenses Incurred for filing a PCT application as authorized
by CBR prior to the EFFECTIVE DATE.
(b) CBR shall promptly advise LEUKON in writing of each IMPROVEMENT
INVENTION disclosed to CBR.
(c) CBR shall use best reasonable efforts to file, prosecute and maintain
patent applications and patents which are PATENT RIGHTS at LEUKON's cost and
expense with patent counsel selected by CBR and reasonably acceptable to LEUKON
and shall consult with and request Its patent counsel to keep LEUKON advised
with respect thereto.
* Confidential treatment requested: material has been omitted and filed
separately with the Commission.
<PAGE> 13
-13-
(d) In the event LEUKON is not interested in acquiring rights to
IMPROVEMENT INVENTION or in continuing prosecution or maintenance of any patent
or patent application in PATENT RIGHTS, LEUKON shall advise CBR of such fact in
writing at least one month before CBR, at its own expense may then file,
prosecute, maintain or continue such patent(s) or patent applications in any
country where LEUKON elects not to file, prosecute, maintain or continue and
such patent applications and patents shall not be included with the rights
licensed to LEUKON pursuant to paragraph 2.1 of this Agreement and CBR shall be
free to license such patent to any other party.
5.3 With respect to any PATENT RIGHTS CBR shall instruct its patent
attorneys to provide, each patent application, office action, response to office
action, request for terminal disclaimer, and request for reissue or
reexamination of any patent issuing from such application to LEUKON sufficiently
prior to the filing of such application, response or request to allow for review
and comment by LEUKON.
5.4 CBR shall use reasonable best efforts to prevent any PATENT RIGHTS
licensed to LEUKON under this Agreement from lapsing or becoming abandoned
without the prior written consent of LEUKON.
6. WARRANTIES
6.1 CBR and LEUKON warrants and represents to the other that it owns all
right, title and interest in and to PATENT RIGHTS; has the full right and
authority to enter into this Agreement, and that it is not aware of any
impediment which would inhibit its ability to perform the terms and conditions
imposed on it by this Agreement.
<PAGE> 14
-14-
6.2 CBR covenants, warrants and represents that as of this date, to the
best of its knowledge, it owns all right, title and interest in and to PATENT
RIGHTS; it has the right to grant the licenses and rights granted hereunder;
that the granting of such rights and licenses does not require the consent of a
third party; and that there are no outstanding agreements, assignments or
encumbrances inconsistent with the provisions of this Agreement that it is not
aware of any claim which has been made or threatened with respect to CBR owning
all right, title and interest in PATENT RIGHTS.
6.3 CBR BY THIS AGREEMENT MAKES NO REPRESENTATION OR WARRANTIES AS TO THE
PATENTABILITY AND/OR BREADTH OF THE INVENTIONS AND/OR DISCOVERIES INVOLVED IN
PATENT RIGHTS; THE VALIDITY OF THE PATENT RIGHTS; OR THAT SUCH PATENT RIGHTS MAY
BE EXPLOITED BY LEUKON, ITS AFFILIATES OR SUBLICENSEES WITHOUT INFRINGING OTHER
PATENTS.
6.4 CBR EXPRESSLY DISCLAIMS ANY AND ALL IMPLIED OR EXPRESS WARRANTIES AND
MAKES NO EXPRESS OR IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS FOR ANY
PARTICULAR PURPOSE OF THE INVENTION, PROCESSES OR PRODUCTS LICENSED UNDER THIS
AGREEMENT.
7. INDEMNIFICATION
7.1(a) LEUKON shall indemnify, defend and hold harmless CBR and its
trustees, officers, medical and professional staff, employees, and agents and
their respective successors, heirs and assigns (the "Indemnitees"), against any
third-party claims, liability, damage, loss, or
<PAGE> 15
-15-
expense (including reasonable attorneys' fees and expenses of litigation)
incurred by or imposed upon the Indemnitees or any one of them in connection
with any third-party claims, suits, actions, demands or judgments (i) arising
out of the design, production, manufacture, sale, use in commerce, lease, or
promotion by LEUKON or by a SUBLICENSEE, AFFILIATE or agent of LEUKON, of any
PRODUCT, process or service relating to, or developed pursuant to, this
Agreement or (ii) arising out of any other activities to be carried out by
LEUKON pursuant to this Agreement;
(b) LEUKON's indemnification under (a) above shall not apply to any
liability, damage, loss or expense to the extent that it is attributable to the
negligent activities or willful misconduct of the Indemnitees;
(c) CBR shall notify LEUKON promptly of any claim or threatened claim
under this Section 7 and shall fully cooperate with all reasonable requests of
LEUKON with respect thereto; and
(d) LEUKON agrees, at its own expense, to provide attorneys reasonably
acceptable to CBR to defend against any actions brought or filed against any
party indemnified hereunder with respect to the subject of indemnity contained
herein, whether or not such actions are rightfully brought and LEUKON shall have
the right to control the defense thereof LEUKON shall have the right to control
the settlement or compromise of any such claim or action to the extent that
LEUKON satisfies such claim or action.
7.2(a) At such time as any PRODUCT is being commercially distributed or
sold (other than for research purposes or for the purpose of obtaining
regulatory approvals) by LEUKON, or by an AFFILIATE,
<PAGE> 16
-16-
SUBLICENSEE or agent of LEUKON (hereinafter "Other Seller"), LEUKON shall itself
or in the alternative shall ensure that Other Seller either (i) at its sole cost
and expense, procure(s) and maintains) comprehensive general liability insurance
in amounts not less than $2,000,000 per incident and $2,000,000 annual aggregate
and naming the Indemnitees as additional insureds or (ii) pay(s) for the
procurement and maintenance by CBR of insurance in the amounts and in the form
set forth in this paragraph. Such comprehensive general liability insurance
shall provide (i) product liability coverage and (ii) broad form contractual
liability coverage for LEUKON's indemnification under Paragraph 7.1 of this
Agreement. LEUKON shall ensure that if LEUKON or the Other Seller elects to
self-insure all or part of the limits described above (including deductibles or
retentions which are in excess of $250,000 annual aggregate) such self-insurance
program must be acceptable to CBR and the Risk Management Foundation. The
minimum amounts of insurance coverage required under this Paragraph 7.2 shall
not be construed to create a limit of LEUKON's liability with respect to its
indemnification under Paragraph 7.1 of this Agreement. At such time, or at any
time LEUKON can request that CBR ascertain whether Risk Management Foundation
has in effect Uniform Indemnification and Insurance Provisions more favorable
than those of this Agreement, in which event LEUKON and CBR shall amend this
Agreement to include such more favorable provisions.
(b) LEUKON shall provide CBR with written evidence of such insurance upon
request of CBR. LEUKON shall provide CBR with written notice of at least thirty
(30) days prior to the cancellation,
<PAGE> 17
-17-
nonrenewal or material change in such insurance; if LEUKON or Other Seller does
not obtain replacement insurance providing comparable coverage within such
thirty (30) day period, LEUKON will agree to suspend sales of all PRODUCTS in
any country for which there is no insurance, or HARVARD shall have the right to
terminate this Agreement effective at the end of such thirty (30) day period by
written notice to LEUKON.
(c) LEUKON shall itself maintain, or shall ensure that Other Seller
maintains or that payments are made for the maintenance by CBR of, as the case
may be, such comprehensive general liability insurance beyond the expiration or
termination of this Agreement during (i) the period that any PRODUCT is being
commercially distributed or sold (other than for research purposes or the
purpose of obtaining regulatory approvals) by Other Seller and (ii) a reasonable
period after the period referred to in (c)(i) above which shall in no event be
less than ten (10) years. The obligations of (c)(ii) above can be satisfied by
the purchase of insurance by LEUKON or a third party which covers claims made
during such period of (c)(ii) above for PRODUCT or PROCESS commercially
distributed or sold by LEUKON or Other Seller during the period referred to in
(c)(i) above.
8. TERMINATION
8.1 Except as otherwise specifically provided herein and unless sooner
terminated pursuant to this Agreement, this Agreement and the licenses and
rights granted thereunder shall remain in full force and effect for the life of
PATENT RIGHTS. Upon the expiration of the last to
<PAGE> 18
-18-
expire PATENT RIGHT, LEUKON shall have a fully paid-up, non-cancellable license.
8.2 LEUKON shall have the right to terminate this Agreement and/or its
license under one or more PATENT RIGHTS in one or more countries upon sixty (60)
days prior written notice.
8.3 Upon material breach of any material provision of this Agreement by a
party to this Agreement, in the event the breach is not cured within sixty (60)
days after written notice to the breaching party by the other party, in addition
to any other remedy it may have, the other party at its sole option may
terminate this Agreement. In the event that LEUKON disputes the termination and
initiates legal proceedings in this respect, this Agreement shall not be
terminated until there is a final decision in such proceedings that this
Agreement has been terminated from which no appeal can be or is taken.
8.4 Upon any termination of this Agreement LEUKON shall have the option to
finish any manufacturing work-in-progress and to sell any completed inventory of
a PRODUCT under the license granted by this Agreement which remains on hand as
of the date of the termination provided that LEUKON pays to CBR the royalties
applicable to said subsequent sales in accordance with the same terms and
conditions as set forth in this Agreement.
8.5 In the event that this Agreement is terminated for any reason
whatsoever, upon the written request of a SUBLICENSEE if such SUBLICENSEE is not
otherwise in default, a sublicense granted under this Agreement shall be
assignable to CBR and CBR and the sublicense shall remain in full force and
effect as a direct license from CBR in
<PAGE> 19
-19-
accordance with the terms and conditions thereof. At the request of LEUKON, CBR
agrees to confirm in writing its obligations under this Paragraph to a
SUBLICENSEE.
8.6 Upon termination of this Agreement for any reason, nothing herein
shall be construed to release either party from any obligation that matured
prior to the effective date of such termination.
9. ASSIGNMENT; SUCCESSORS
9.1 This Agreement shall not be assignable by either of the parties
without the prior written consent of the other party (which consent shall not be
unreasonably withheld), except that either party without the consent of the
other may assign this Agreement to an AFFILIATE or to a successor in interest of
all or substantially all of the portion of the business to which this Agreement
relates.
9.2 Subject to the limitations on assignment herein, this Agreement shall
be binding upon and inure to the benefit of said successors in interest and
assigns of LEUKON and CBR. Any such successor or assignee of a party's interest
shall expressly assume in writing the performance of all the terms and
conditions of this Agreement to be performed by said party.
10. PROVISIONS
10.1 The relationship between CBR and LEUKON is that of independent
contractors. CBR and LEUKON are not joint venturers, partners, principal and
agent, master and servant, employer or employee, and have no relationship other
than as independent contracting parties. CBR shall not have the power to bind or
obligate LEUKON in any manner
<PAGE> 20
-20-
Likewise, LEUKON shall have no power to bind or obligate CBR in any manner.
10.2 This Agreement sets forth the entire agreement and understanding
between the parties as to the rights and licenses granted under this Agreement
and supersedes all prior agreements in this respect. There shall be no
amendments or modifications to this Agreement, except by a written document
which is signed by both parties.
10.3 This Agreement shall be construed and enforced in accordance with the
laws of the Commonwealth of Massachusetts without reference to its choice of law
principles.
10.4 The headings in this Agreement have been inserted for the convenience
of reference only and are not intended to limit or expand on the meaning of the
language contained in the particular article or section.
10.5 Any delay in enforcing a party's rights under this Agreement or any
waiver as to a particular default or other matter shall not constitute a waiver
of a party's right to the future enforcement of its rights under this Agreement,
excepting only as to an expressed written and signed waiver as to a particular
matter for a particular period of time.
10.6 LEUKON shall not use the name of CBR nor any adaptation thereof in
any advertising, promotional or sales literature with respect to PRODUCT without
prior written consent obtained from CBR, in each case except that LEUKON may
state that it is licensed by CBR under one or more of the patents and/or
applications comprising the PATENT RIGHTS.
10.8 Notices. Any notices given pursuant to this Agreement shall be in
writing and shall be deemed delivered upon the earlier of (i) when received at
the address set forth below (including telefax or personal
<PAGE> 21
-21-
delivery), or (ii) three (3) business days after mailed by certified or
registered mail in the United States malls, postage prepaid and properly
addressed, with return receipt requested. Notices shall be delivered to the
respective parties as indicated:
To LEUKON: Leukon, Inc.
c/o HealthCare Investment Corp.
840 Memorial Drive
Cambridge, MA 02139
Attn: CEO
To CBR: The Center for Blood Research
800 Huntington Avenue
Boston, MA 02115
10.9 Any matter or disagreement under Paragraph 2.3 which this Agreement
specifically specifies is to be resolved by arbitration shall be submitted to a
mutually-selected single arbitrator to so decide any such matter or
disagreement. The arbitrator shall conduct the arbitration in accordance with
the then applicable Rules of the American Arbitration Association, unless the
parties agree otherwise. If the parties are unable to mutually select an
arbitrator, the arbitrator shall be selected In accordance with the procedures
of the American Arbitration Association The decision and award rendered by the
arbitrator shall be final and binding. Judgment upon the award may be entered in
any court having jurisdiction thereof Any arbitration pursuant to this section
shall be held in Boston, MA, or such other place as may be mutually agreed upon
in writing by the parties.
10.10 If any provisions of this Agreement are or become invalid, are ruled
illegal by any court of competent jurisdiction or are deemed unenforceable under
then current applicable law from time to time in
<PAGE> 22
-22-
effect during the term hereof, it is the intention of the parties that the
remainder of this Agreement shall not be affected thereby provided that a
party's rights under this Agreement are not materially affected. It is further
the intention of the parties that in lieu of each such provision which is
invalid, illegal, or unenforceable, there be substituted or added as part of
this Agreement a provision which shall be as similar as possible in economic and
business objectives as intended by the parties to such invalid, illegal or
unenforceable provision. but shall be valid, legal and enforceable. In the event
a party's rights are materially affected as a result of a change in this
Agreement under this Section 10.8 such party may terminate this Agreement.
<PAGE> 23
-23-
IN WITNESS WHEREOF, the parties hereto intending to be bound, have set
their hand and seal.
LEUKON, INC. CENTER FOR BLOOD RESEARCH, INC.
BY [signature appears here] BY [signature appears here]
---------------------------- ----------------------------
Fred S. Rosen, M.D.
TITLE TITLE
------------------------- -------------------------
President
DATE: DATE
------------------------- --------------------------
<PAGE> 1
CONFIDENTIAL TREATMENT EXHIBIT 10.3
LICENSE AGREEMENT
Effective as of January 2, 1995 ("Effective Date"), THE BOARD OF TRUSTEES OF THE
LELAND STANFORD JUNIOR UNIVERSITY, a body having corporate powers under the laws
of the State of California ("STANFORD"), and LeukoSite, Inc., a Delaware
corporation, having a principal place of business at 215 First Street,
Cambridge, MA 02142 ("LICENSEE"), agree as follows:
1. BACKGROUND
1.1 STANFORD has certain rights to biological material known as Antibodies
to Human B7 integrin ("Biological Material[s]") developed in the
laboratory of Eugene Butcher and described in Stanford Docket
S93-116.
1.2 STANFORD desires to have products of the Biological Material(s) marketed
at the earliest possible time in order that such products may be available
for public use and benefit.
1.3 LICENSEE wishes to acquire a license to said Biological Material(s) to
make, use, and sell Licensed Product(s) in the Licensed Field of Use.
1.4 Biological Material(s) was developed in the course of research supported
by the National Institutes of Health.
2. DEFINITIONS
2.1 "Biological Material(s)" means those materials included in Exhibit A. This
Exhibit may be amended from time to time by mutual consent of LICENSEE and
STANFORD.
2.2 "Licensed Field of Use" means all human therapeutic, prophylactic or
diagnostic uses.
2.3 "Licensed Territory" means worldwide.
2.4 "Licensed Product(s)" means any product in the Licensed Field of Use
containing, derived from, or made using Biological Material(s).
<PAGE> 2
2.5 "Exclusive" means that STANFORD will not grant other licenses to
Biological Material(s) described in Exhibit A.
2.6 "Non-exclusive" means that after a period of fifteen (15) years STANFORD
may grant other licenses to Biological Material(s) described in Exhibit A
according to paragraph 3.1.
2.7 "Net Sales" means the gross revenue derived by LICENSEE from Licensed
Product(s), less the following items but only insofar as they actually
pertain to the disposition of such Licensed Product(s) by LICENSEE, are
included in such gross revenue, and are separately billed:
(a) Import, export, excise and sales taxes, and custom duties, and
(b) Costs of transportation, insurance and packing;
(c) Credit for returns, rebates, allowances, or trade or customary
quantity or cash discounts;
(d) Disallowed reimbursements.
It is recognized that Licensed Products may be sold in combination 'with
other Therapeutically Active Substances (hereinafter referred to as
"Combination Products"). "Therapeutically Active" shall mean biologically
active in achieving a clinical therapeutic objective in concert with, or
supplementary to, a Licensed Product. In determining the Net Sales of
Combination Products, Net Sales shall first be calculated in accordance
with the definition of Net Sales in this Paragraph 2.7 and then multiplied
by the percentage value of the Licensed Product contained in the
Combination Product, such percentage value being the quotient obtained by
dividing (a) the current market value of the Licensed Product by (b) the
sum of the separate current market values of the Licensed Product and the
other components which are contained in the Combination Product. The
current market value of each Therapeutically Active substance and of the
Licensed Product shall be for a quantity comparable to that contained in
the Combination Product and of the same class, purity and potency. When no
current market value is available for a component other than the Licensed
Product of a Combination Product, LICENSEE shall calculate a hypothetical
market value for such component, allocating the same proportions of costs,
-2-
<PAGE> 3
overhead and profit as are then allocated to similar components make by
LICENSEE and having a ascertainable market value. If, however, the parties
determine that the above formula does not adequately and fairly reflect
the contribution of each component in a particular combination Product,
then the parties shall negotiate in good faith a modification of the
formula for the determination of Net Sales of that Combination Product.
In the event that a Licensed Product is incorporated into a service for
treating or diagnosing a patient, Net Sales for the Licensed Product for
the purpose of determining royalties under this Agreement shall be based
only on the Monetary Value of the Licensed Product used as part of such
service
For purposes of this Section, Monetary Value shall be the price of the
Licensed Product as sold by LICENSEE in arm's length transactions with
third parties, apart from any services for treating or diagnosing a
patient; regardless of whether such Licensed product was produced form
materials which were originally supplied by such third party. If no such
sales have taken place, Monetary Value of Licensed Product shall be the
price at which such Licensed Product would have been sold to a third
party, as agreed to by LICENSEE and STANFORD. If after sixty (60) days the
parties do not agree to such price the parties will submit such to binding
arbitration as set forth in Article 13 of this Agreement.
2.8 "Sub licensee" means any non-Affiliate third parry licensed by LICENSEE to
make, have made, use or sell any Licensed Product(s).
2.9 "Prior License Agreement" means License Agreement between STANFORD and
LICENSEE, effective date December 9, 1993.
2.10 "Exclusive Period" means the period beginning on the Effective Date and
ending fifteen (15) years thereafter.
3. GRANT
3.1 STANFORD hereby grants, and LICENSEE accepts, a license in the Licensed
Field of Use and Licensed Territory to make, have made and use Biological
Materials, and to make, have made, use, and sell Licensed Product(s). Said
license shall be an Exclusive license during the Exclusive Period and
includes the right "to grant sub license(s) during the Exclusive Period.
Thereafter, said license shall be fully-paid and Non-exclusive, unless
-3-
<PAGE> 4
sooner terminated according to Article 11 hereunder.
3.2 STANFORD reserves the right to supply any or all of Biological Material(s)
to academic research scientists, subject to limitation of use by such
scientists for research purposes and restriction from further
distribution.
4. GOVERNMENT RIGHTS
This Agreement is subject to all of the terms and conditions of Title 35
United States Code Sections 200 through 204, including an obligation that
Licensed Product(s) sold or produced in the United States be "manufactured
substantially in the United States," and LICENSEE agrees to take all
reasonable action necessary on its part as licensee to enable STANFORD to
satisfy its obligation thereunder, relating to Biological Material(s).
5. ROYALTIES
5.1 LICENSEE agrees to pay to STANFORD a non creditable, non refundable
license issue royalty of *. Upon receipt of payment, STANFORD shall send
Biological Material(s) to LICENSEE. Except for a Sub licensee, LICENSEE
shall not transfer Biological Material(s) to any third party without prior
written consent from STANFORD, which consent shall not be unreasonably
withheld or delayed.
5.2 LICENSEE shall pay license maintenance royalties of * on January 2, 1996,
and * on every January 2 thereafter through January 2, 2010. Said payments
are non refundable except that they are fully creditable against earned
royalties.
5.3 All payments to STANFORD shall be in U.S. Dollars, net of any non-U.S.
taxes.
5.4 In addition, during the Exclusive Period LICENSEE shall pay STANFORD an
earned royalty of * on Net Sales of Licensed Product(s) sold by LICENSEE
if the Licensed Product(s) are for therapeutic use, and * on Net Sales of
Licensed Product(s) sold by LICENSEE if the Licensed Product(s) are for
diagnostic use. Earned royalty payments shall be
*Confidential treatment requested: material has been omitted and filed
separately with the Commission.
-4-
<PAGE> 5
made as follows:
(a) Annually, for the preceding year ending on December 31 until annual
volume of Net Sales reaches *; and
(b) Quarterly thereafter.
5.5 If with respect to any Licensed Product(s) a royalty would be due under
Paragraph 5.4 of this Agreement and also under the Prior License
Agreement, only one royalty payment shall be due. Said royalty shall be
paid as follows: * on Net Sales of Licensed Product(s) if the Licensed
Product(s) are for therapeutic use, and * on Net Sales of Licensed
Product(s) if the Licensed Product(s) are for diagnostic use.
5.6 In the event that royalties are to be paid by LICENSEE to a third party
for Licensed Product(s) for which royalties are also due to STANFORD
pursuant to Paragraphs 5.4 or 5.5 (hereinafter referred to as "Other
Royalties"), then the royalties to be paid to STANFORD by LICENSEE
pursuant to Paragraph 5.4 or 5.5 shall be reduced by the amount of such
Other Royalties, but in no event shall the royalties under Paragraphs 5.4
or 5.5 be reduced by more than *.
6. SUBLICENSE(S)
6.1 LICENSEE may grant sub license(s) during the Exclusive Period, which sub
license(s) may extend beyond the Exclusive Period.
6.2 Any sublicense(s) granted by LICENSEE under this Agreement shall be
subject and subordinate to terms and conditions of this Agreement, except:
(a) Sub license terms and conditions shall reflect that any
sublicensee(s) shall not further sub license; and
(b) The earned royalty rate specified in the sublicense(s) may be at
higher rates than the rates in this Agreement.
Any such sub license(s) also shall expressly include the provisions of
Articles
*Confidential treatment requested: material has been omitted and filed
separately with the Commission.
-5-
<PAGE> 6
7, 8 and 9 for the benefit of STANFORD and provide for the transfer of all
obligations, including the payment of royalties specified in such
sublicense(s), to STANFORD or its designee, in the event that this
Agreement is terminated. At LICENSEE's request, Stanford agrees to
negotiate in good faith modification of royalties due from sublicensing if
such modification is deemed necessary to further the development of
Licensed Product(s).
6.3 LICENSEE agrees to provide STANFORD a copy of any sub license(s) granted
pursuant to this Article 6.
6.4 Product sales by sub licensees shall be considered to be sales by LICENSEE
under this agreement and LICENSEE shall pay earned royalties as specified
in Paragraph 5.4.
7. ROYALTY REPORTS, PAYMENTS, AND ACCOUNTING
7.1 Earned Royalty Payment and Report - Beginning with the first sale of a
Licensed Product, LICENSEE shall make written reports (even if there are
no sales) and earned royalty payments to STANFORD within sixty (60) days
of the reporting period of Paragraph 5.4 herein. This report shall state
the number, description, and aggregate Net Sales of Licensed Product(s)
during such completed period, and resulting calculation pursuant to
Paragraph 5.4 or 5.5 of earned royalty payment due STANFORD. Concurrent
with the making of each such report, LICENSEE shall include payment due
STANFORD of royalties for the period covered by such report.
7.2 Accounting - LICENSEE agrees to keep and maintain records for a period of
three (3) years showing the manufacture, sale, use, and other disposition
of products sold or otherwise disposed of under the license herein
granted. Such records will include general ledger records showing cash
receipts and expenses, and records which include production records,
customers, serial numbers and related information in sufficient detail to
enable the royalties payable hereunder by LICENSEE to be determined.
LICENSEE further agrees to permit its books and records to be examined by
STANFORD through an independent certified accountant from time to time,
upon reasonable notice during normal business hours and no more than once
each calendar year, to the extent necessary to verify reports provided for
in Paragraph 7.1. Such examination is to be made by STANFORD or its
designee, at the expense of STANFORD, except in the event that the results
-6-
<PAGE> 7
of the audit reveal" an underreporting of royalties due STANFORD of five
percent (5%) or more, in any calendar year, then the audit costs shall be
paid by LICENSEE.
8. NEGATION OF WARRANTIES
8.1 STANFORD represents that it owns the Biological Materials and has the
right to grant the licenses of this Agreement; it has not entered into any
agreement which is inconsistent with the rights and licenses granted to
LICENSEE under this Agreement.
8.2 Nothing in this Agreement shall be construed as:
(a) A warranty or representation that anything made, used, sold, or
otherwise disposed of under any license granted in this Agreement is
or will be free from infringement of patents, copyrights, and
trademarks of third parties;
(b) Conferring rights to use in advertising, publicity, or otherwise
any trademark or the name of "STANFORD"; or
(c) Granting by implication, estoppel, or otherwise any licenses or
rights under patents of STANFORD.
8.3 Except as expressly set forth in this Agreement, STANFORD MAKES NO
REPRESENTATIONS AND EXTENDS NO WARRANTIES OF ANY KIND, EITHER EXPRESS OR
IMPLIED. THERE ARE NO EXPRESS OR IMPLIED WARRANTIES OF MERCHANTABILITY OR
FITNESS FOR A PARTICULAR PURPOSE, OR THAT THE USE OF THE LICENSED
PRODUCT(S) WILL NOT INFRINGE ANY PATENT, COPYRIGHT, OR TRADEMARK, OR OTHER
RIGHTS OR ANY OTHER EXPRESS OR IMPLIED WARRANTIES.
8.4 LICENSEE agrees that nothing in this Agreement grants LICENSEE any express
or implied license or right under or to:
(a) U.S. Patent No. 4,237,224, "Process for Producing Biologically
Functional Molecular Chimeras"; U.S. Patent No. 4,468,464 and
U.S. Patent No. 4,740,470, both entitled, "Biologically
Functional Molecular
-7-
<PAGE> 8
Chimeras," (collectively known as the Cohen/Boyer patents) or
reissues thereof; or
(b) U.S. Patent 4,656,134, "Amplification of Eucaryotic Genes," or
any patent application corresponding thereto.
9. INDEMNITY
9.1 LICENSEE agrees to indemnify, hold harmless, and defend STANFORD and
Stanford Health Services and their respective trustees, officers,
employees, students, and agents against any and all claims for death,
illness, personal injury, property damage, and improper business practices
arising out of the manufacture, use, sale, or other disposition of
Biological Material or Licensed Product(s) by LICENSEE or Sublicensee(s),
or their customers.
9.2 STANFORD will not be liable for any indirect, special, consequential, or
other damages whatsoever, whether grounded in tort (including negligence),
strict liability, contract or otherwise. STANFORD will not have any
responsibilities or liabilities whatsoever with respect to Licensed
Products(s).
9.3 LICENSEE will at all times comply, through insurance or self-insurance,
with all statutory workers' compensation and employers' liability
requirements covering any and all employees with respect to activities
performed under this Agreement.
9.4 In addition to the foregoing, LICENSEE will maintain for itself or for
STANFORD, during the term of this Agreement and starting as of the time
and as set forth below with respect to Licensed Product(s) or Licensed
Process(es), Comprehensive General Liability Insurance, including Products
Liability Insurance, with reputable and financially secure insurance
carrier(s) to cover the activities of LICENSEE and its sublicensee(s)
under this Agreement. Such insurance will be written to cover claims
incurred, discovered, manifested, or made during or after the expiration
of this Agreement. At STANFORD's request, LICENSEE will furnish a
Certificate of Insurance evidencing primary coverage and requiring thirty
(30) days prior written notice of cancellation or material change to
STANFORD. All such insurance of LICENSEE shall be primary coverage;
insurance of STANFORD "4 or Stanford Health Services shall be excess and
noncontributory. At the time that Licensed Product(s) or Licensed
Process(es) is to be used in humans
-8-
<PAGE> 9
LICENSEE shall obtain and maintain insurance having a liability limit in
an amount agreed to by STANFORD and LICENSEE not to exceed Five Million
Dollars ($5,000,000) and will include STANFORD, Stanford Health Services,
their trustees, directors, officers, employees, students, and agents as
additional insureds. The Indemnification by LICENSEE shall not be limited
to their insurance coverage. Additionally, STANFORD agrees to negotiate in
good faith the reduction or elimination of such insurance coverage as of
the time that LICENSEE has a Net Worth which would be reasonably
acceptable for satisfying LICENSEE's indemnification obligations under
this Agreement. At the time of such negotiations and annually thereafter
after entering into such an agreement LICENSEE shall provide to STANFORD
audited financial statements. As claims or incidents occur, LICENSEE
agrees to maintain or restore the liability limit to the agreed amount.
10. STANFORD NAMES AND MARKS
LICENSEE agrees not to identify STANFORD in any promotional advertising or
other promotional materials to be disseminated to the public or any
portion thereof or to use the name of any STANFORD faculty member,
employee, or student or any trademark, service mark, trade name, or symbol
of STANFORD or the Stanford Health Services, or that is associated with
either of them, without STANFORD's prior written consent. Nothing in this
Article 10 shall prevent LICENSEE from identifying STANFORD in connection
with any financing, filing with a government agency, or where such
identification is required by law, rule or regulation.
11. TERMINATION
11.1 LICENSEE may terminate this Agreement by giving STANFORD notice in writing
at least ninety (90) days in advance of the Effective Date of termination
provided that LICENSEE shall thereupon cease use and sale of Biological
Material(s) and any Licensed Product(s).
11.2 STANFORD may terminate this Agreement if LICENSEE is in breach of any.
provision hereof; and LICENSEE fails to remedy any such breach within
sixty (60) days after written notice thereof by STANFORD.
-9-
<PAGE> 10
11.3 Surviving any termination are:
(a) Any cause of action or claim of LICENSEE or STANFORD, accrued or
to accrue, because of any breach by the other party;
(b) Payment of accrued royalties; and
(c) The provisions of Articles 7, 8 and 9.
11.4 Concurrent with notice of termination by either LICENSEE or STANFORD,
LICENSEE shall destroy all Biological Material(s) and Licensed Product(s)
in its possession, and shall provide written evidence of said destruction.
11.5 Upon termination of this Agreement LICENSEE, at its option, shall be
entitled to sell any completed inventory of a Licensed Product(s) as if
licensed by this Agreement which remains on hand as of the date of the
termination, so long as LICENSEE pays to STANFORD the royalties applicable
to said subsequent sales in accordance with the same terms and conditions
as set forth in this Agreement.
11.6 In the event that this Agreement and/or the rights and licenses granted
under this Agreement to LICENSEE is terminated, any sub license granted
under this Agreement shall remain in full force and effect as a direct
license between STANFORD and the Sub licensee under the terms and
conditions of the sub license agreement, subject to the Sub licensee
agreeing to be bound to STANFORD under such terms and conditions within
thirty (30) days after STANFORD provides written notice to the Sub
licensee of the termination of LICENSEE's rights and licenses under this
Agreement.
12 ASSIGNMENT
12.1 This Agreement shall not be assignable by either of the parties without
prior written consent of the other party except that LICENSEE, without the
consent of STANFORD, may assign this Agreement to an Affiliate or to a
transferee or a successor in interest of all or substantially all of the
portion of the business to which}Y this Agreement relates.
12.2 Subject to the limitations on assignment herein, this Agreement shall be
binding upon and inure to the benefit of said successors in interest and
-10-
<PAGE> 11
assigns of LICENSEE and STANFORD. Any such successor or assignee of a
party's interest shall expressly assume in writing the performance of all
the terms and conditions of this Agreement to be performed by said party-
13. MISCELLANEOUS
13.1 Arbitration - Any controversy arising under or related to this Agreement,
and any disputed claim by either party against the other under this
Agreement shall be settled by arbitration in accordance with the Licensing
Agreement Arbitration Rules of the American Arbitration
Association.
13.2 Termination Report - LICENSEE also agrees to make a written report to
STANFORD within ninety (90) days after the date of termination of this
Agreement, stating in such report the number, description, and Net Sales
of all products made, sold, or otherwise disposed of and upon which
royalties are payable hereunder but which were not previously reported to
STANFORD.
13.3 Notices - All notices under this Agreement shall be deemed to have been
fully given when done in writing and deposited in the United States mail,
registered or certified, and addressed as follows:
To STANFORD: Office of Technology Licensing
Stanford University
900 Welch Road, Suite 350
Palo Alto, CA 94304-1850
Attention: Director
To LICENSEE: LeukoSite, Inc.
215 First Street
Cambridge, MA 02142
Attention: President
Either party may change its address upon written notice to the other
party.
13.4 None of the terms of this Agreement can be waived except by the written
-11-
<PAGE> 12
consent of the party waiving compliance.
13.5 This Agreement shall be governed by the laws of the State of California
applicable to agreements negotiated, executed, and performed wholly within
California.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement in duplicate
originals by their duly authorized officers or representatives.
THE BOARD OF TRUSTEES OF THE LELAND
STANFORD JUNIOR UNIVERSITY
Signature /s/ Katharine Ku
Name: Katharine Ku
Title: Director, Technology Licensing
Date: January 12, 1995
LEUKOSITE, INC.
Signature /s/ Chris Mirabelli
Name: C.K. Mirabelli
Title: CEO and Chairman
Date: January 20, 1995
-12-
<PAGE> 1
CONFIDENTIAL TREATMENT EXHIBIT 10.4(a)
RESEARCH, DEVELOPMENT AND MARKETING AGREEMENT
Research, Development and Marketing Agreement, dated as of September 30th,
1994 between LEUKOSITE, INC., a Delaware corporation ("LeukoSite"), located at
800 Huntington Avenue, Boston, Massachusetts 02115, and WARNER-LAMBERT COMPANY,
a Delaware corporation ("Warner"), located at 201 Tabor Road, Morris Plains, New
Jersey 07950.
WITNESSETH:
WHEREAS, LeukoSite and Warner each has certain expertise in the discovery
and development of compounds that inhibit the action of MCP-1 (the "Field"); and
WHEREAS, Warner and LeukoSite each wishes to enter into a collaborative
effort to share such expertise, to develop new expertise in the Field, to
research together potential applications thereof and, if successful, to market
certain of such applications (the "Collaboration");
NOW, THEREFORE, in consideration of the foregoing premises and the mutual
promises, covenants and conditions contained herein, LeukoSite and Warner agree
as follows:
ARTICLE A
DEFINITIONS
The following capitalized terms shall have the following meanings for
purposes of this Agreement:
"Affiliate" shall mean any corporation, association or other entity which
directly or indirectly controls, is controlled by or is under common control
with the party in question. As used herein the term "control" means control with
possession of the power to direct, or cause the direction of, the management and
policies of a corporation, association or other entity.
"Background Technology" shall mean individually and collectively Warner
Background Technology and LeukoSite Background Technology.
"Budgeted Detail Effort" shall mean for each party for each calendar year
each party's Selling Percentage of the Budgeted Total Detail Effort, or with
respect to LeukoSite, a lower percentage of the Budgeted Total Detail Effort
elected by LeukoSite for the calendar year pursuant to Section 6.1.
<PAGE> 2
2
"Budgeted Total Detail Effort" shall mean for each calendar year the total
number of Details for Warner-LeukoSite Product in the Designated Co-Promotion
Territory as budgeted by the Marketing Committee or in the case where the sales
force sells other than through Details, the total selling efforts of the sales
force each party for such calendar year.
"Collaboration Technology" shall mean individually and collectively Warner
Collaboration Technology and LeukoSite Collaboration Technology.
"Co-Promotion Countries" shall mean, subject to Section 6.10, the United
States of America, Mexico, the Commonwealth of Canada and their respective
territories and possessions, including the Commonwealth of Puerto Rico.
"Cost of Goods" means for experimental, clinical and commercial supplies
of Warner-LeukoSite Product the fully allocated manufacturing cost (determined
in a reasonable manner consistent with Warner's normal internal accounting
practices and in accordance with generally accepted accounting principles
("GAAP") which includes (i) direct and indirect labor (salaries, wages and
employee benefits); (ii) direct and indirect materials; (iii) operating costs of
building and equipment used in connection with the manufacture of
Warner-LeukoSite Product; (iv) allocated depreciation and repairs and
maintenance; (v) quality and in-process control; (vi) any charges for
obsolescence, out of date product, spoilage, scrap or rework costs; (vii)
royalties paid to third parties (except royalties in respect of rights that a
party hereto currently has an interest in or could have an interest in pursuant
to any currently existing agreements) and (viii) the net cost or credit of any
value added taxes paid with respect to the manufacture of Warner-LeukoSite
Product. To the extent that manufacturing of Warner-LeukoSite Product or any
component thereof is performed for Warner by a third party (which is not an
Affiliate of Warner), amounts paid to such third party in connection with the
manufacturing of Warner-LeukoSite Product or any component thereof shall be
added to the aggregate amount of the applicable hereinabove items (i) through
(viii).
"Designated Co-Promotion Country" shall mean with respect to each
Warner-LeukoSite Product each Co-Promotion Country designated under Section 4.1
as to which LeukoSite retains marketing rights.
"Detail" shall mean a sales presentation by a professional sales
representative to a target physician or other person involved in prescribing or
influencing drug usage of a Warner-LeukoSite Product in which the primary
purpose is to discuss the benefits and features of such Warner-LeukoSite Product
in order to encourage a sale of such Product.
<PAGE> 3
3
"Detail Effort" shall mean with respect to a party, and for any calendar
year, the actual number of Details given by its sales force for such calendar
year or in the case where the sales force sells other than through Details the
selling efforts of the party performed by its sales force for such calendar
year.
"Development" shall mean the conduct of all preclinical, clinical,
chemical synthesis, formulation, stability, assays and validation, testing and
development in accordance with then current Good Laboratory, Clinical and
Manufacturing Practices or other designated quality standards in connection with
any Development Candidate or Product insofar as the same are reasonably
necessary to obtain marketing approval by the relevant regulatory authorities
for a Product's first approved indication in any country (including studies
required to be performed after approval as a condition of approval) and the
costs of preparation, filing and submission of regulatory filings in Designated
Co-Promotion Countries.
"Development Candidate" shall have the meaning set forth in Section 4.1.
"Development Committee" shall have the meaning set forth in Section 2.3.
"Effective Date" shall mean the date of this Agreement first stated above.
"FDA" shall mean the United States Food and Drug Administration.
"LeukoSite Background Technology" shall mean all technology, inventions,
information, data, know-how, compounds, materials and substances (whether or not
patented or patentable) which relate to or are potentially useful as an MCP-1
Inhibitor or is an MCP-1 Inhibitor and/or techniques for the discovery,
screening, design, synthesis, delivery, development, testing, use, manufacture
or sale of MCP-1 Inhibitors which exists as of the Effective Date which is
either owned by LeukoSite or which is licensed to LeukoSite and as to which
LeukoSite has a right to sublicense or otherwise transfer.
"LeukoSite Collaboration Technology" shall mean all technology,
inventions, information, data, know-how, compounds, materials and substances
(whether or not patented or patentable) which is either owned by LeukoSite
(alone or together with Warner) or which is licensed to LeukoSite and as to
which LeukoSite has a right to sublicense or otherwise transfer, and which is
conceived or reduced to practice pursuant to the Stage 1 Research Plan or
pursuant to the Stage 2 Research Plan or pursuant to development of a LeukoSite
Product or a Warner-LeukoSite Product.
<PAGE> 4
4
"LeukoSite Product" shall have the meaning set forth in Section 4.1.
"LeukoSite's Share of Profit" shall have the meaning set forth in
Section 8.1.
"Management Committee" shall have the meaning set forth in Section 2.1.
"Marketing Committee" shall have the meaning set forth in Section 2.4.
"Marketing Expense" shall mean to the extent approved by the Marketing
Committee all costs and expenses incurred by Warner (including without
limitation, the salaries, commissions, bonuses, transportation, meals, lodging,
benefits and healthcare insurance expenses of appropriate employees) associated
with launch, advertising and sales promotion (including, without limitation,
expenses related to promotional publications, space or time in various media,
direct mail campaigns, samples, if any, advertising agency fees and other
promotional activities), the cost of product samples, Phase IV Studies,
Pharmacoeconomic Studies, Phase V Studies, and any other clinical studies not
reasonably necessary to obtain marketing approval by the relevant regulatory
authorities for a Product's first approved indication in any country, in each
case determined in accordance with Warner's normal internal accounting practices
and GAAP.
"Market Price" shall mean the average exchange closing price for
LeukoSite's Common Stock during the five business days beginning on the day that
work is initiated on the Stage 2 Research Plan or the Revised Stage 1 Research
Plan, as the case may be.
"MCP-1 Inhibitor" means a compound(s) other than an antibody(ies) which
inhibits the action of MCP-1.
"Net Sales" shall mean the gross amount invoiced for sales of a Product to
non-affiliated commercial customers after deduction of the following items: (i)
trade, quantity and cash discounts ; (ii) credits, rebates, chargeback rebates,
fees, reimbursements or similar payments granted or given to wholesalers and
other distributors, buying groups, healthcare insurance carriers, governmental
agencies and other institutions provided that such will not grant a preference
or otherwise favor other product(s) of Warner or LeukoSite, as the case may be
based on the fact LeukoSite is entitled to royalties or a share of co-promotion
rights; (iii) credits or allowances to the extent allowed for rejection or
return of such Product previously sold; (iv) allowance for bad debt expense in
accordance
<PAGE> 5
5
with Warner's normal internal accounting practices and generally accepted
accounting principles ("GAAP"); (v) any tax, tariff, duty or other governmental
charge (other than an income tax) levied on the sale, transportation or delivery
of such Product and borne by the seller thereof; (vi) payments or rebates paid
in connection with state or federal Medicare, Medicaid or similar programs; and
(vii) any charge for freight or insurance to the extent separately invoiced.
"Patent Rights" shall mean, with respect to LeukoSite or Warner, all
United States and foreign patents owned in whole or in part or licensed to
LeukoSite or Warner, respectively, as to which a sublicense can be granted, at
any time during the Term of this Agreement, which would be infringed by the
manufacture, use or sale of a Product or which would be infringed by activities
to be performed by the parties under the Stage 1 and/or Stage 2 Research Plan
including all United States and foreign patents and patent applications
(including, without limitation, all reissues, extensions, substitutions,
confirmations, registrations, revalidations, additions, continuations,
continuations-in-part, and divisions thereof). Excluded from "Patent Rights" are
compounds that Warner identifies as having anti-inflammatory activity
independent of LeukoSite.
"Pharmacoeconomic Studies" shall mean clinical studies designed with the
primary intention of developing pharmacoeconomic data.
"Phase IV Studies" shall mean clinical studies designed to enhance sales
for an approved indication, but shall not include Pharmacoeconomic Studies.
"Phase V Studies" shall mean clinical studies directed for approval of
additional indications, new dosages or other line extensions.
"Products" shall mean Warner Products, LeukoSite Products,
Warner-LeukoSite Products and/or any product derived from or based on Warner
Collaboration Technology as to which LeukoSite has rights under Section 1.4(a),
as applicable.
"Research Cost" shall mean the aggregate amount of costs incurred by
Leuko-Site to perform research under the Stage 2 Research Plan determined in a
reasonable manner and consistent with normal internal accounting practices and
GAAP.
"Research Committee" shall have the meaning set forth in Section 2.2.
<PAGE> 6
6
"Revised Stage 1 Research Plan" shall have the meaning set forth in
Section 1.4(c).
"Sales Cost" with respect to each of Warner and LeukoSite for any
applicable period shall equal the aggregate amount of expenses incurred by such
party for maintaining its sales force (including the costs set forth below) for
Warner-LeukoSite Product in the Designated Co-Promotion Countries. The costs
shall include but not be limited to salary, commissions, bonuses,
transportation, meals, lodging, benefits and health care insurance expenses for
the sales force, and sales force management and support in the Designated
Co-Promotion Countries, all only as it relates to Warner-LeukoSite Product but
specifically excluding any cost or expense included in Marketing Expenses, in
each case determined in accordance with the parties' normal internal cost
accounting practices and GAAP.
"Selling Percentage" with respect to any calendar year shall mean for
LeukoSite * or such lower percentage selected by LeukoSite under Section 4.2 and
for Warner shall mean the difference between one hundred percent (100%) and
LeukoSite's Selling Percentage.
"Stage 1" shall mean the period of research under the Stage 1 Research
Plan, which period terminates as set forth in Section 1.3
"Stage 1 Research Plan" shall mean the research plan attached hereto as
Exhibit 1.
"Stage 2 Research Plan" shall have the meaning set forth in Section 1.4(b)
or 1.4(c), whichever is applicable.
"Stage 2 Lead Compound" shall mean a compound that in accordance with
standards established by the Management Committee is sufficiently promising to
warrant termination of Stage 1 and initiation of work under the Stage 2 Research
Plan.
"Term of Co-Promotion" for a Warner-LeukoSite Product shall mean, in each
Designated Co-Promotion Country, the period beginning when such Warner-LeukoSite
Product is first sold in such country and lasting until the Warner-LeukoSite
Product will no longer be sold in the applicable Designated Co-Promotion
Country. For the purpose of this definition only, a Warner-LeukoSite Product
does not include a "generic" form of a Warner-LeukoSite Product which is not
covered by a Patent Right.
*Confidential treatment requested: material has been omitted and filed
separately with the Commission.
<PAGE> 7
7
"Term of this Agreement" shall mean from the Effective Date until this
Agreement is terminated pursuant to its terms.
"Term of the Stage 1 Research Collaboration" shall have the meaning set
forth in Section 1.3.
"Total Profit" shall mean with respect to a Warner-LeukoSite Product, Net
Sales minus the sum of (i) the Cost of Goods, (ii) Marketing Expenses and (iii)
the cost of distribution. For the purposes of this definition only,
Warner-LeukoSite Product does not include a "generic" form of a Warner-LeukoSite
Product which is not covered by a Patent Right.
"Warner Background Technology" shall mean all technology, inventions,
information, data, know-how, compounds, materials and substances (whether or not
patented or patentable) which relate to or are potentially useful as an MCP-1
Inhibitor or is an MCP-1 Inhibitor and/or techniques for the discovery,
screening, design, synthesis, delivery, development, testing, use, manufacture
or sale of for MCP-1 Inhibitors which exists as of the Effective Date which is
either owned by Warner or which is licensed to Warner and as to which Warner has
a right to sublicense or otherwise transfer. Excluded from "Warner Background
Technology" is Warner's high volume screening technology and compounds that
Warner identifies as having anti-inflammatory activity independent of LeukoSite.
"Warner Collaboration Technology" shall mean all technology, inventions,
information, data, know-how, compounds and materials, substances (whether or not
patented or patentable) which is either owned by Warner (alone or together with
LeukoSite) or which is licensed to Warner and as to which Warner has a right to
sublicense or otherwise transfer), which is conceived or reduced to practice
pursuant to the Stage 1 Research Plan or Stage 2 Research Plan or pursuant to
development of a Warner Product or Warner-LeukoSite Product.
"Warner LeukoSite-Product" shall have the meaning set forth in Section
4.2.
"Warner Product" shall have the meaning set forth in Section 4.1.
<PAGE> 8
8
ARTICLE I
RESEARCH PROGRAM
1.1 Undertaking and Scope. Each party agrees to use its best efforts to
perform the activities detailed in the Stage 1 Research Plan attached hereto as
Exhibit 1 in a professional and timely manner. During Stage 1, LeukoSite will
use its best efforts at its cost (including the cost of any royalties or other
amounts owed to third parties by LeukoSite) to develop and transfer to Warner
(i) a receptor-ligand screen for MCP-1 Inhibitors, and (ii) an MCP-1 triggered
cell based screen for MCP-1 Inhibitors. During Stage 1, Warner will use its best
efforts, utilizing its high volume screening technology, at its cost (including
the cost of any royalties or other amounts owed to third parties by Warner) to
screen substantially all of its compound library with such screens provided by
LeukoSite. Pursuant to the Stage 1 Research Plan, during Stage 1, LeukoSite will
use its best efforts, at its cost, to conduct in vitro and in vivo
characterization of the compounds identified as blocking MCP-1 activity in such
screens.
Notwithstanding the foregoing, Warner may withhold from the Collaboration
any compound that it identifies as possessing anti-inflammatory activity
independent of LeukoSite. Such compounds are excluded from the Collaboration and
Warner may pursue development and marketing of such compounds independently of
this Agreement and LeukoSite.
1.2 Personnel and Resources. Each party agrees to commit the personnel,
facilities, expertise and other resources necessary to perform its obligations
under this Agreement in accordance with its terms; provided, however, that
neither party warrants that the Collaboration will achieve any of the research
objectives contemplated by the parties. Each party agrees to use its best
efforts to assure the complete and prompt exchange of Background Technology,
Collaboration Technology and the results of all activities conducted pursuant to
the Stage 1 Research Plan, the Revised Stage 1 Research Plan and/or the Stage 2
Research Plan. The scientific priorities and direction of the parties'
respective staff under the Stage 1 Research Plan, the Revised Stage 1 Research
Plan and under the Stage 2 Research Plan will be determined by the Management
Committee.
1.3 Term of the Stage 1 Research Collaboration. Activities under the Stage
1 Research Plan, as the same may be amended or expanded from time to time but
only by mutual agreement of the parties, shall commence as of the Effective Date
and, unless terminated earlier by either party pursuant to the terms of this
Agreement or extended by mutual agreement of the parties, shall end upon
designation by the Management Committee of a Stage 2 Lead Compound, but in no
event will such activities continue after the later of (i) 18 months after the
Effective Date or (ii) 15 months after development and transfer
<PAGE> 9
9
by LeukoSite to Warner of either (a) a receptor-ligand screen for MCP-1
Inhibitors or (b) an MCP-1 triggered cell based screen for MCP-1 Inhibitors
that, in either case, is suitable for Warner to mass screen its compound library
(such period being referred to herein as the "Term of the Stage 1 Research
Collaboration").
1.4 Stage 2 Collaboration Options. Promptly after termination or
expiration of Stage 1, but in no event later than thirty (30) days thereafter,
Warner will elect to proceed under one of the following options:
a. Option 1. Warner may terminate this Agreement. In such event, Warner
will grant to LeukoSite a perpetual, royalty-free (except as stated in this
Section below), worldwide, exclusive license (with the right to sublicense) in
the Warner Collaboration Technology (including but not limited to any product
which is identified in the Stage 1 Research as a potential inhibitor of the
action of MCP-1 (a "Stage 1 Product") and any Patent Rights based thereon,
solely for use in the field of chemokine modulation. In addition, Warner will
grant a non-exclusive license under Patent Rights not based on Warner
Collaboration Technology to the extent required to exploit Warner Collaboration
Technology and any patent rights based thereon solely for use in the field of
chemokine modulation. Notwithstanding the foregoing, Warner will retain a
perpetual, royalty-free, worldwide interest in Warner Collaboration Technology
and Patent Rights of Warner based thereon to make, use or sell any product or
process (i) for use outside the field of chemokine modulation or (ii) discovered
after the Term of the Stage 1 Research and which is within the field of
chemokine modulation and which is not derived from or based on LeukoSite
Background Technology, provided that in each case such product is not identical
to a product which is being actively pursued by LeukoSite or any one of its
licensees. LeukoSite shall pay Warner a royalty of * of worldwide Net Sales of
any Stage 1 Product (or any product which results from research by or on behalf
of LeukoSite directed to such Stage 1 Product or any other compound provided by
Warner to LeukoSite pursuant to the Stage 1 Research) sold by LeukoSite or its
sublicensee and/or any product sold by LeukoSite or its sublicensee, which is
covered by a Warner Patent Right licensed to LeukoSite under this Section, in
each case for the period set forth in Section 5.6(d).
In the event that at any time after exercise of Option 1, Warner desires
to exercise Option 2 with respect to a Stage 1 Product under the terms and
conditions of this Agreement, Warner shall notify LeukoSite in writing, and if
LeukoSite is not actively researching, developing, marketing or selling, such
Stage 1 Product and has not granted rights to such Stage 1 Product to any third
party, then Option 2 shall be considered to be exercised by Warner.
*Confidential treatment requested: material has been omitted and filed
separately with the Commission.
<PAGE> 10
10
b. Option 2. Warner and LeukoSite may agree to continue collaborative
research in the Field pursuant to a mutually acceptable expanded research plan
("Stage 2 Research Plan"). Warner will provide funding to LeukoSite for * of
LeukoSite's Research Cost of performing work under the Stage 2 Research Plan
from initiation of such work until three years thereafter and 100% of
LeukoSite's Research Cost under the Stage 2 Research Plan after the expiration
of the three-year period, which amount shall be paid quarterly in advance with a
reconciliation at the end of the year such that LeukoSite receives for the
calendar year the applicable percentage of such Research Cost for the calendar
year. In no event will LeukoSite be required to perform (nor shall Warner be
required to fund) activities under the Stage 2 Research Plan which would require
support for more than five (5) persons per year; provided, however, that in all
events LeukoSite will be reimbursed only for work approved by the Management
Committee. Upon the later of (i) January 2, 1996 and (ii) 2 weeks after
initiation of work under the Stage 2 Research Plan, Warner will purchase $5
Million of capital stock (Preferred if at the time of purchase LeukoSite has not
completed its initial public offering (the "IPO"), and Common if the IPO has
been completed by such time), upon terms substantially similar to those of the
Preferred Stock Purchase Agreement dated the date of this Agreement, at (i)
$4.00 per share if at the time of initiation of work under the Stage 2 Research
Plan LeukoSite has not yet completed its IPO or (ii) 125% of the Market Price
for LeukoSite's Common Stock at the time of initiation of work under the Stage 2
Research Plan if at such initiation LeukoSite has completed its IPO. In the
event that any such sale and purchase shall be of shares of Preferred Stock of
LeukoSite, the terms of such shares of Preferred Stock shall be identical to the
terms of LeukoSite's Series C Convertible Preferred Stock, except that (i) such
shares of Preferred Stock shall be from a separate, newly-created series of
Preferred Stock and (ii) unless otherwise agreed to by the parties, the
liquidation preference of such shares of Preferred Stock shall be equal to the
purchase price per share paid by Warner for such shares of Preferred Stock. If
LeukoSite completes an initial public offering of Common Stock for its own
account at a public offering price per share of less than $4.00 (subject to
adjustment from and after the date hereof upon each stock dividend, stock split,
reverse stock split or other similar event), taking into account the fair market
value of any warrants or other rights issued as units with the Common Stock sold
in any such initial public offering, Warner will be issued additional Common
Stock, promptly after the initial public offering is completed, at no cost to
Warner, in an amount sufficient to make Warner's average price per share of
capital stock of LeukoSite then owned by Warner equal to the public offering
price per share of the Common Stock issued in any such initial public offering.
* Confidential treatment requested: material has been omitted and filed
separately with the Commission.
<PAGE> 11
11
If LeukoSite does not initiate research under the Stage 2 Research Plan
(or similar plan of research) or after initiating research under the Stage 2
Research Plan LeukoSite terminates such research and such failure to initiate
research or such termination results other than as a result of a breach by
Warner, in such event, by written notice from Warner to LeukoSite Warner may
terminate LeukoSite's right to participate in such Stage 2 research. If such
right is terminated by Warner in accordance with the preceding sentence, any
compound which is or becomes the subject of the Stage 2 Research Plan (or
similar plan of research) as an MCP-1 Inhibitor (or as an inhibitor for a
chemokine other than MCP-1 pursuant to Option 4) shall become a Warner Product
subject to the terms and conditions of this Agreement.
c. Option 3. Warner and LeukoSite may agree to continue collaborative
research outside of the Field pursuant to a mutually acceptable research plan
("Revised Stage 1 Research Plan"), and the parties will revise this Agreement to
expand the definitions of "Field", "Background Technology", and "Collaboration
Technology" consistent therewith. Upon the later of (i) January 2, 1996 and (ii)
2 weeks after initiation of work under the Revised Stage 1 Research Plan, Warner
will purchase $3 Million of LeukoSite capital stock (Preferred if at the time of
purchase the IPO has not been completed, and common if the IPO has been
completed by such time), upon terms substantially similar to those of the
Preferred Stock Purchase Agreement dated the date of this Agreement, at (i)
$3.00 per share if at the time of initiation of work under the Revised Stage 1
Research Plan LeukoSite has not yet completed its IPO or (ii) 125% of the Market
Price for LeukoSite's Common Stock at the time of initiation of work under the
Revised Stage 1 Research Plan if at such initiation LeukoSite has completed its
IPO. In the event that any such sale and purchase shall be of shares of
Preferred Stock of LeukoSite, the terms of such shares of Preferred Stock shall
be identical to the terms of LeukoSite's Series C Convertible Preferred Stock,
except that (i) such shares of Preferred Stock shall be from a separate,
newly-created series of Preferred Stock and (ii) unless otherwise agreed to by
the parties, the liquidation preference of such shares of Preferred Stock shall
be equal to the purchase price per share paid by Warner for such shares of
Preferred Stock. If LeukoSite completes an initial public offering of Common
Stock for its own account at a public offering price per share of less than
$3.00 (subject to adjustment from and after the date hereof upon each stock
dividend, stock split, reverse stock split or other similar event), taking into
account the fair market value of any warrants or other rights issued as units
with the Common Stock sold in any such initial public offering. Warner will be
issued additional Common Stock, promptly after the initial public offering is
completed, at no cost to Warner, in an amount sufficient to make Warner's
average price per share of capital stock of LeukoSite then owned by Warner
<PAGE> 12
12
equal to the public offering price per share of the Common Stock issued in any
such initial public offering. Upon the 18 month anniversary of initiation of
work under the Revised Stage 1 Research Plan pursuant to this "Option 3," Warner
will elect to proceed under "Option 1" (i.e. terminate this Agreement and
license Collaboration Technology to LeukoSite) or under "Option 2" (i.e. expand
research and purchase $5 Million of LeukoSite capital stock).
d. Option 4. In the event that during Stage 1 or Stage 2, a compound has
been identified as an MCP-1 Inhibitor and such compound also has activity as an
inhibitor for a chemokine other than MCP-1, and Warner notifies Leukosite in
writing that Warner desires to optimize that non-MCP-1 activity instead of MCP-1
under Option 2 the parties shall proceed under Option 2 (with appropriate
expansion to the definitions of "Field", Background Technology, Collaboration
Technology and similar terms hereof) with respect to such compound for such
activity unless within thirty (30) days thereafter LeukoSite elects in writing
not to proceed under Option 2. If LeukoSite elects in writing not to continue
with collaborative research with respect thereto (or is prevented from
continuing such collaborative research with respect thereto because of
conflicting third party obligations), in such event, such compound shall become
a Warner Product subject to the terms and conditions of this Agreement, except
that no license is granted by LeukoSite under Section 5.1 to such Warner Product
to the extent that LeukoSite is prohibited from granting licenses under its
Patent Rights which are not Background Technology with respect to such Warner
Product as an inhibitor of a chemokine other than MCP-1 by an agreement with a
third party. As a result of such compound becoming a Warner Product under this
Option 4 upon the later of (i) January 2, 1996 or (ii) two weeks after LeukoSite
elects in writing not to continue such collaborative research Warner will
purchase $1 Million of LeukoSite capital stock (Preferred if at the time of
purchase the IPO has not been completed, and common if the IPO has been
completed by such time), upon terms substantially similar to those of the
Preferred Stock Purchase Agreement dated the date of this Agreement, at (i)
$3.00 per share if at the time of purchase LeukoSite has not yet completed its
IPO or (ii) 125% of the Market Price for LeukoSite's Common Stock at the time of
purchase if at such time of purchase LeukoSite has completed its IPO. In the
event that any such sale and purchase shall be of shares of Preferred Stock of
LeukoSite, the terms of such shares of Preferred Stock shall be identical to the
terms of LeukoSite's Series C Convertible Preferred Stock, except that (i) such
shares of Preferred Stock shall be from a separate, newly-created series of
Preferred Stock and (ii) unless otherwise agreed to by the parties, the
liquidation preference of such shares of Preferred Stock shall be equal to the
purchase price per share paid by Warner for such shares of Preferred Stock. If
LeukoSite completes an initial public offering of Common Stock for its own
<PAGE> 13
13
account at a public offering price per share of less than $3.00 (subject to
adjustment from and after the date hereof upon each stock dividend, stock split,
reverse stock split or other similar event), taking into account the fair market
value of any warrants or other rights issued as units with the Common Stock sold
in any such initial public offering. Warner will be issued additional Common
Stock, promptly after the initial public offering is completed, at no cost to
Warner, in an amount sufficient to make Warner's average price per share of
capital stock of LeukoSite then owned by Warner equal to the public offering
price per share of the Common Stock issued in any such initial public offering.
In the event that Option 2 or Option 3 has been previously exercised and
the stock purchase completed pursuant thereto, Warner shall not be required to
purchase stock pursuant to this Option 4. In addition, if stock is purchased
under this Option 4, and Option 2 or 3 is subsequently exercised, the amount of
stock that Warner will be required to purchase the first time that Warner
exercises such Option 2 or 3 will be reduced by $1,000,000.
1.5 Rights to Background Technology and Collaboration Technology. Subject
to the terms and conditions of this Agreement each party hereby grants and
agrees to grant to the other a non-exclusive, worldwide, royalty-free license to
use such party's Background Technology and Collaboration Technology for research
and development of an MCP-1 Inhibitor under the Stage 1 Research Plan and under
the Stage 2 Research Plan and as to LeukoSite for development of a LeukoSite
Product and as to Warner for development of a Warner Product and/or
Warner-LeukoSite Product. In addition, to the extent permitted by agreements
with third parties, LeukoSite hereby agrees to grant to Warner a non-exclusive,
world-wide, royalty-free license to make and use all data, information and
inventions (whether or not patentable) related to cell based assays developed by
or on behalf of LeukoSite alone or with one or more collaborators, and promptly
to disclose the existence of the same to Warner, for research and development of
an MCP-1 Inhibitor under the Stage 1 Research Plan, under the Stage 2 Research
Plan for development of a Warner Product and/or Warner-LeukoSite Product.
1.6 Collaboration Expenses. Subject to the terms of Section 1.4(b) and
Article IV, each party shall bear the costs and expenses of work done pursuant
to the Collaboration at its laboratories and its affiliated laboratories.
1.7 Exclusivity. Until termination of, or a determination not to initiate
activities under, the Stage 1 Research Plan, the Revised Stage 1 Research Plan
and the Stage 2 Research Plan, neither LeukoSite nor Warner will undertake any
research or development of MCP-1 Inhibitors except pursuant to this
<PAGE> 14
14
Agreement. Notwithstanding the foregoing, LeukoSite may undertake research and
development, alone or with one or more third parties, on antibodies against
MCP-1 or its receptor for inhibiting the action of MCP-1 and may undertake
activities alone or with a third party or grant rights to a third party to test
or screen a compound for inhibition of MCP-1 as part of a program to research
and develop a compound as a non-MCP-1 inhibitor and/or may grant rights to a
third party under Background Technology with respect to an MCP-1 inhibitor,
provided that such program and/or such MCP-1 inhibitor is a direct result of
identification of a compound as an inhibitor of a chemokine other than MCP-1.
Until September 30, 1995, LeukoSite agrees not to permit any third party, nor to
use on behalf of any third party, a cell-based, receptor-mediated signal
transduction assay (i.e. a mammalian cell line utilizing a C-C chemokine
receptor coupled to a G-protein linked readout) as a primary screen for the
purpose of identifying a small molecule inhibitor of a C-C chemokine function in
T-cells and/or monocytes.
1.8 Third Party Collaborations. LeukoSite agrees that it will not assist
any third party, nor permit any third party to use any of its technology, data,
information or inventions (whether or not patentable), in connection with the
research, development or commercialization of any compound that has a similar
structure to a compound that at the later of (i) the time of discovery of such
third party's compound or (ii) the date that LeukoSite is to become first
involved in the research or development or commercialization of such third party
compound is the subject of active research, development or commercialization by
Warner or one of its licensees under this Agreement. The foregoing shall apply
only for so long as such compound remains subject to active research,
development, clinical development or commercialization by Warner or one of its
licensees under this Agreement.
ARTICLE II
MANAGEMENT COMMITTEE; RECORDS AND REPORTS
2.1 Management Committee. Promptly after the Effective Date, Warner and
LeukoSite will each appoint 3 representatives to a management committee (the
"Management Committee"). The Warner representatives on such committee will
together have only one vote and the LeukoSite members on such committee will
together have only one vote. The Management Committee will meet promptly after
the Effective Date to prepare such procedures and mechanisms as may be necessary
for the operation of the Management Committee, the Research Committee and the
Development Committee(s) to assure the most efficient conduct of the
Collaboration. Thereafter, the Management Committee will meet
<PAGE> 15
15
quarterly or as otherwise mutually agreed. The Management Committee will assure
that agendas and minutes are prepared for each of its meetings. The personnel,
facilities, expertise and other resources of each party to be used in
performance of the Collaboration shall be established by the Management
Committee. The Management Committee will have the authority to designate Stage 2
Lead Compounds and Development Candidates pursuant to Section 4.1 and will have
the other rights and responsibilities specifically set forth in this Agreement.
The Management Committee will have the authority to resolve disputes among the
members of the Research Committee and among the members of any Development
Committee. All actions taken and decisions made by the Management Committee
shall be by unanimous agreement. If the Management Committee fails to reach
unanimous consent on any matter, the matter will be resolved by the senior
officer of Warner's pharmaceutical business with the advice of LeukoSite's
President. A party may change any of its appointments to the Management
Committee at any time upon giving written notice to the other party. The
Management Committee does not itself have the authority to amend this Agreement
in any manner that would require the separate approval of authorized officers of
the respective parties.
2.2 Research Committee. Warner and LeukoSite will each appoint up to 4
representatives to a research committee (the "Research Committee"), which will
oversee the pre-clinical aspects of the Collaboration; except that such
responsibilities will pass to the Development Committee in the case of a
Warner-LeukoSite Product, to Warner in the case of a Warner Product and to
LeukoSite in the case of a LeukoSite Product. The Warner representatives on such
committee will together have only one vote and the LeukoSite members on such
committee will together have only one vote. The Research Committee will meet
quarterly, or more frequently if mutually agreed, and will report to the
Management Committee. Warner's and LeukoSite's initial representatives to the
Research Committee will be appointed by each of them promptly after the
Effective Date. The Research Committee will be responsible for recommending
compounds to be designated Development Candidates. All actions taken and
decisions made by the Research Committee will be by unanimous agreement. The
Management Committee will resolve disputes among the members of the Research
Committee. A party may change any of its appointments to the Research Committee
at any time upon giving written notice to the other party.
2.3 Development Committee. Warner and LeukoSite will each appoint up to 4
representatives to one or more development committees (the "Development
Committee(s)"), which will oversee the pre-clinical and clinical development of
each Warner-LeukoSite Product. A separate Development Committee will be
established for each Warner-LeukoSite Product promptly after a Development
<PAGE> 16
16
Candidate is designated a Warner-LeukoSite Product. The Warner representatives
on such committee will together have only one vote and the LeukoSite members on
such committee will together have only one vote. All actions taken and decisions
made by the Development Committee will be by unanimous consent. Warner will have
primary responsibility for interfacing with all regulatory agencies worldwide in
connection with the relevant Warner-LeukoSite Product. LeukoSite will be invited
to attend all regulatory meetings and will be kept fully apprised of all
regulatory interactions. The Management Committee will resolve disputes among
the members of any Development Committee. A party may change any of its
appointments to any Development Committee at any time upon giving written notice
to the other party.
2.4 Marketing Committee. Each party will appoint four members to one or
more marketing committees (the "Marketing Committee(s)"), which will oversee the
marketing and promotion of each Warner-LeukoSite Product in each Designated
Co-Promotion Country. A separate Marketing Committee will be formed for each
Warner-LeukoSite Product promptly after completion of phase II clinical studies
of such Warner-LeukoSite Product. The Warner representatives on such committee
will together have only one vote and the LeukoSite members on such committee
will together have only one vote. Decisions of the Marketing Committee will be
by unanimous consent and disputes relating thereto will be resolved in
accordance with Section 12.4. A party may change any of its appointments to any
Marketing Committee at any time upon giving written notice to the other party.
2.5 Meetings. The Management Committee, the Research Committee, the
Development Committees and the Marketing Committees may meet by telephone or in
person at such times as are agreeable to the members of each such committee.
Attendance at meetings shall be at the respective expense of the participating
parties. Warner and LeukoSite shall alternate the right to determine the
location of each meeting, with LeukoSite determining the location of the first
meeting of each committee. A quorum for the conduct of business at each meeting
shall require the attendance of at least one Warner member and at least one
LeukoSite member.
<PAGE> 17
17
ARTICLE III
PATENTS, KNOW-HOW, RIGHTS AND INVENTIONS
3.1 Rights to Inventions. Ownership of Collaboration Technology shall be
determined in accordance with United States laws of inventorship. The owner (the
"Inventor") of any patentable Collaboration Technology (an "Invention") shall
have the right, at its option and expense, to prepare, file and prosecute
worldwide in its own name any patent applications with respect to any Invention
owned by it and to maintain any patents issued. In connection therewith, the
non-Inventor party agrees to cooperate with the Inventor at the Inventor's
expense in the preparation and prosecution of all such patent applications and
in the maintenance of any patents issued. This obligation shall survive the
expiration or termination of this Agreement.
3.2 Joint Inventions. Collaboration Technology jointly invented by
LeukoSite and Warner will be jointly owned by them; however, Warner will have
the rights and responsibilities of the "Inventor" as described in this Article
III in respect of any such patentable, jointly owned Collaboration Technology
and LeukoSite shall have the rights and responsibilities of a non-Inventor
therein. Warner shall pay all expenses in connection with the preparation,
filing and prosecution of patent applications that claim patentable, jointly
owned Collaboration Technology and maintain, enforce and protect all patents
issuing thereon. Warner shall from time to time notify LeukoSite of the amount
of its out-of-pocket expenses in connection with the foregoing and LeukoSite
shall promptly thereafter pay Warner 50% of the out-of-pocket expenses incurred
by Warner. At LeukoSite's option, such payments to Warner may be delayed and to
the extent so delayed, such payments may be credited by Warner against
milestone, royalty or co-promotion payments to be made by Warner to LeukoSite
hereunder, regardless of which Product such payments relate to, but in no event
may any such payment to LeukoSite be reduced by more than 30% as a result of
this provision.
3.3 Protection of Patent Rights. (a) The Inventor shall keep the other
party currently informed of all steps to be taken in the preparation,
prosecution and maintenance of all of its patents and patent applications now or
hereafter existing which claim such Invention and shall furnish the other party
with copies of patents and applications, amendments thereto and other related
correspondence relating to such Invention to and from patent offices and permit
the other party to offer its comments thereon before the Inventor makes a
submission to a patent office which could materially affect the scope or
validity of the patent coverage that may result. The non-Inventor party shall
offer its
<PAGE> 18
18
comments promptly. LeukoSite and Warner shall each promptly notify the other of
any infringement and/or unauthorized use of an Invention that comes to its
attention.
(b) The non-Inventor party may request in writing that the Inventor take
specific, reasonable actions to (i) prepare, file or prosecute patent
applications in the United States of America and all other countries of the
world with respect to an Invention, (ii) maintain any patents issued with
respect to an Invention, (iii) protect against abandonment of a patent or
application which claims an Invention or (iv) obtain a discontinuance of an
infringement or unauthorized use of such patent or application. If such actions
are not undertaken within thirty days of the Inventor's receipt of such written
request and timely pursued thereafter, the Inventor shall permit, and the
non-Inventor party at its option and expense may undertake, such actions in the
name and on behalf of the Inventor. The party not undertaking such actions shall
fully cooperate with the other party and shall provide to the other party
whatever documents that may be needed in connection therewith. The party not
undertaking such actions may require a suitable indemnity against all damages,
costs and expenses and impose such other reasonable conditions as such party's
advisors may require.
(c) If either party commences any actions or proceedings (legal or
otherwise) pursuant to this Section, it shall prosecute the same vigorously at
its expense and shall not abandon or compromise them or fail to exercise any
rights of appeal without giving the other party the right to take over their
conduct at its own expense. The party finally conducting legal actions or
proceedings against an alleged infringer or other party shall be entitled to any
damages or costs awarded against such infringer or other party, provided,
however, that if Warner initiates such action to protect a Warner Product or
Warner-LeukoSite Product, then the amount of the award less applicable legal
expenses incurred by Warner will be considered Net Sales of the applicable
Warner or Warner-LeukoSite Product, and if LeukoSite initiates such action to
protect a LeukoSite Product, the amount of the award less applicable legal
expenses incurred by LeukoSite shall be considered Net Sales of the applicable
LeukoSite Product
3.4 Allegations of Infringement by Third Parties. In the event that Warner
or LeukoSite receives notice that any action by either of them under this
Agreement is alleged to be a violation of the patent or other intellectual
property rights of a third party, it shall immediately notify the other party to
this Agreement. The Management Committee shall promptly determine an appropriate
response and course of action. In the case of a Warner-LeukoSite Product Warner
will control any defense, and the costs thereof (including any damages, costs or
expenses resulting from any action) shall be borne by Warner.
<PAGE> 19
19
In the case of a Warner Product or a LeukoSite Product the control and costs of
defense (including any damages, costs or expenses resulting from any action)
will be borne by Warner or LeukoSite, respectively.
ARTICLE IV
DESIGNATION OF DEVELOPMENT CANDIDATES AND MARKETING
RIGHTS
4.1 Designation of Development Candidate. Each chemokine inhibitor which
is the subject of a Stage 2 Research Plan (including modifications of such
inhibitors), will be designated a "Development Candidate", if ever, upon the
declaration by the Management Committee that such compound satisfies Warner's
then current, internal standards for a "lead compound." LeukoSite shall have the
right to request that the Management Committee designate such a chemokine
inhibitor as a Development Candidate if LeukoSite reasonably believes that there
is sufficient biological and chemical data to initiate pre IND studies in
accordance with Good Laboratory Practices. In the event that such compound is
not designated as a Development Compound by the Management Committee within one
year after such request by LeukoSite, then such compound shall automatically be
designated and shall become a Development Candidate subject to the terms and
conditions of this Agreement. Within one month after designation of a
Development Candidate, Warner will notify LeukoSite in writing whether it elects
to pursue marketing rights in such Development Candidate pursuant to this
Agreement. Forty-five (45) days after Warner provides to LeukoSite in writing
its non-binding, best estimate of the costs for Development of the Development
Candidate, LeukoSite shall notify Warner in writing whether or not LeukoSite
will exercise marketing rights therein in the U.S. and any of the other
Co-Promotion Countries and designate each such other Country. Upon such exercise
of marketing rights by LeukoSite the Development Candidate shall become a
"Warner-LeukoSite Product". If LeukoSite fails to exercise marketing rights
within the stated period the Development Candidate shall become a "Warner
Product". If Warner fails to exercise marketing rights for a Development
Candidate within the stated period, the Development Candidate shall become a
"LeukoSite Product".
4.2 Warner-LeukoSite Product. For each Warner-LeukoSite Product,
pre-clinical and clinical Development thereof will be pursued jointly under the
direction of the Development Committee to the extent necessary or desirable for
regulatory approval in each Designated Co-Promotion Country. The preparation,
filing and prosecution of Investigational New Drug Applications, New Drug
Applications and other regulatory filings required to be filed with the
<PAGE> 20
20
FDA and its foreign equivalents in regard to any Warner-LeukoSite Product will
be in the name of and at the responsibility of Warner, subject, in the case of
Designated Co-Promotion Countries, to the advice of LeukoSite. The costs
incurred by Warner or LeukoSite (and approved by the Development Committee) in
the preparation, filing and submission of such regulatory filings in Designated
Co-Promotion Countries and all costs of Development related to regulatory
approvals in such countries (not including the costs of Pharmacoeconomic Studies
incurred after initiation of the Term of Co-Promotion, Phase IV Studies, Phase V
Studies or any other clinical studies not reasonably necessary for authorization
by relevant regulatory authorities to sell such Product for its first approved
indication in each country), will be borne 70% by Warner and 30% by LeukoSite
(whether incurred by Warner or LeukoSite), retroactive to the date the
Warner-LeukoSite Product was designated a Development Candidate. LeukoSite
within its sole discretion at the time of designation of a Development Candidate
as a Warner-LeukoSite Product may elect to pay less than thirty percent (30%) of
such costs of Development but in no event less than twenty percent (20%)
thereof. LeukoSite may not thereafter change the percentage of Development costs
borne by it without Warner's consent. Neither party warrants that any regulatory
filings will actually be filed or, if filed, will be approved. All such costs
shall be paid/reimbursed on a current basis. Cost of Development shall mean the
following insofar as they are reasonably charged directly to Development of the
Product: salaries, fringe benefits, overtime, chemicals, lab supplies, animals
and other direct charges, all at actual cost plus an overhead allocation of 25%
(cost X 1.25). In addition, costs of Development will also include actual costs
for travel (other than costs relating to committee meetings referred to in
Section 2.5), experimental products (experimental product cost is the actual,
direct cost of manufactured drug for clinical trial and stability purposes),
clinical studies performed by investigators under contract with Warner or
LeukoSite, toxicology studies performed by outsiders under contract with Warner
or LeukoSite and out-of-pocket costs for other outside professional services all
to the extent that the same are approved by the Development Committee and
supported by invoices and actual payments.
4.3 Warner-Product. Subject to Sections 4.5, 4.6 and 4.7 Warner may pursue
Development and commercialization of a Warner Product at its direction. All
costs of Development of a Warner Product will be borne by Warner from the date
of such election.
4.4 LeukoSite Product. LeukoSite may pursue Development and
commercialization of a LeukoSite Product at its direction. All costs of
Development of a LeukoSite Product will be borne by LeukoSite from the date of
such election.
<PAGE> 21
21
4.5 Warner agrees to use at least that level of effort that it employs for
its other products of similar scientific and commercial promise to develop,
obtain regulatory approval for and to market and sell in each country each
Warner Product and each Warner-LeukoSite Product and to continue to market and
sell in each country each Warner Product and each Warner-LeukoSite Product (in
each case by itself or through one or more Affiliates or licensees).
4.6 Warner agrees to promptly notify LeukoSite in writing if at any time
Warner does not intend to continue to: develop and/or obtain regulatory approval
for and/or market and sell any Warner Product or Warner-LeukoSite Product (in
each case by itself or through one or more Affiliates or licensees).
4.7 In the event that Warner does not meet its obligations under Section
4.5 with respect to any Warner Product or any Warner-LeukoSite Product in any
country(ies) or Warner provides LeukoSite with notice pursuant to Section 4.6
with respect to any Warner-LeukoSite Product or Warner Product with respect to
any country(ies), such Warner Product and/or Warner-LeukoSite Product in such
country(ies), upon written notice from LeukoSite to Warner, shall become a
LeukoSite Product.
4.8 In the event that any Warner Product or Warner-LeukoSite Product
becomes a LeukoSite Product in any country(ies), Warner shall transfer to
LeukoSite any and all information, data, technology and know-how related to the
development, manufacture and sale of such Warner Product and/or Warner LeukoSite
Product. In addition, to the extent allowed by law, Warner shall permit
LeukoSite to refer to and use any regulatory filings and/or information
contained therein to obtain approval for marketing and sale by LeukoSite or its
sublicensees or agents of such Warner and/or Warner-LeukoSite Product and to the
extent permitted by law Warner shall transfer to and/or permit LeukoSite and/or
its agents or sublicensees to operate under any regulatory approval or
regulatory application with respect to such Warner Product and/or
Warner-LeukoSite Product in such country(ies).
4.9 Upon sixty (60) days prior written notice, LeukoSite may terminate
LeukoSite's obligation to fund Development of any Warner-LeukoSite Product in
the Designated Co-Promotion Countries, in which case, upon sending of such
notice, such Warner-LeukoSite Product shall become a Warner Product, provided,
however, that LeukoSite will be obligated to continue its Development efforts
and pay its share of the costs with respect to such Product until the expiration
of such notice period.
<PAGE> 22
22
4.10 Upon six (6) months prior written notice by Warner to LeukoSite,
Warner may terminate its obligation to pursue a Warner-LeukoSite Product in any
country and upon sending of such notice such Warner-LeukoSite Product shall
become a LeukoSite Product in such country, however, Warner shall be obligated
to continue its Development efforts and pay its share of the costs with respect
to such Warner-LeukoSite Product in such country until the expiration of the
first 60 days of such six (6) month period. At the request of LeukoSite Warner
will continue its Development efforts with respect to such Warner-LeukoSite
Product for the remainder of such six month period, provided that LeukoSite
reimburses Warner for the costs of such effort promptly after Warner invoices
such costs.
4.11 In the event a Warner Product or a Warner-LeukoSite Product becomes a
LeukoSite Product, and for so long as Warner is manufacturing such product for
its own purposes, Warner agrees to manufacture and supply to LeukoSite such
LeukoSite Product to the extent that Warner is able to do so without adversely
affecting its requirements therefor upon terms and conditions and profit margins
which are customary in the industry for a supplier of products of such type.
4.12 No earlier than one year after a product becomes a LeukoSite Product,
Warner can request in writing that such LeukoSite Product become a Warner
Product, or in the case where such LeukoSite Product was originally a
Warner-LeukoSite Product that such LeukoSite Product become a Warner-LeukoSite
Product, subject to the terms and conditions of this Agreement, and if LeukoSite
is not actively researching, developing, marketing or selling such LeukoSite
Product and has not granted rights thereto to a third party, such LeukoSite
Product shall become a Warner Product or a Warner-LeukoSite Product, as the case
may be, subject to the terms and conditions of this Agreement.
ARTICLE V
LICENSES AND ROYALTIES
5.1 Grant by LeukoSite. Except as provided in Section 1.4(d), LeukoSite
hereby grants and agrees to grant to Warner under the Patent Rights of LeukoSite
and under LeukoSite Collaboration Technology and LeukoSite Background Technology
(i) exclusive, worldwide licenses to the limited extent necessary to make, have
made, use and sell (with the right to sublicense) each Warner Product and each
Warner-LeukoSite Product outside of the Designated Co-Promotion Countries, (ii)
exclusive licenses to the limited extent necessary to
<PAGE> 23
23
make or have made each Warner-LeukoSite Product in the Designated Co-Promotion
Countries and (iii) co-exclusive licenses (non-sublicensable and shared only
with LeukoSite) to the limited extent necessary to use and sell each
Warner-LeukoSite Product in the Designated Co-Promotion Countries pursuant to
the terms of this Agreement.
5.2 Grant by Warner. Warner hereby grants and agrees to grant to LeukoSite
under the Patent Rights of Warner and under Warner Collaboration Technology and
Warner Background Technology (i) exclusive, worldwide licenses to the limited
extent necessary to make, have made, use and sell (with the right to sublicense)
each LeukoSite Product and (ii) co-exclusive licenses (non-sublicensable and
shared only with Warner) to the limited extent necessary to use and sell each
Warner-LeukoSite Product in the Designated Co-Promotion Countries pursuant to
the terms of this Agreement.
5.3 (a) Warner agrees that Warner will not use or grant rights to use
Warner compounds identified as MCP-1 Inhibitors using the screens referred to in
Section 1.1 for an MCP-1 Inhibitor and will not use or grant rights to use
LeukoSite Background Technology or LeukoSite Collaboration Technology except for
(i) activities under the Stage 1 Research Plan, (ii) activities under the
Revised Stage 1 Research Plan, (iii) activities under the Stage 2 Research Plan,
and/or (iv) activities with respect to development, marketing, sale, manufacture
or use of a Warner Product and/or a Warner-LeukoSite Product for which payments
are to be made to LeukoSite under this Agreement.
(b) LeukoSite agrees that LeukoSite will not use or grant rights to use
Warner compounds identified as MCP-1 Inhibitors using the screens referred to in
Section 1.1 as an MCP-1 Inhibitor and will not use or grant rights to use Warner
Background Technology or Warner Collaboration Technology except for (i)
activities under the Stage 1 Research Plan, (ii) activities under the Revised
Stage 1 Research Plan, (iii) activities licensed under the Stage 2 Research
Plan, (iv) activities licensed to LeukoSite pursuant to Section 1.4(a) and/or
(v) activities with respect to development, marketing, sale, manufacture or use
of a LeukoSite Product for which payments are to be made to Warner under this
Agreement.
5.4 Warner and LeukoSite each acknowledges and agrees to the extent that
it is granted a right or license under this Agreement as a sublicensee such
sublicense is subject to the terms and conditions of the agreement under which
the sublicense is granted. Warner or LeukoSite, as a sublicensee, will perform
the obligations (other than payment obligations) which are applicable to a
sublicensee pursuant to the agreement under which the sublicense is granted.
<PAGE> 24
24
No such sublicense shall be granted until LeukoSite has expressly notified
Warner in writing of the obligations of such sublicense and Warner has
acknowledged that it will perform such obligations.
5.5 Manufacturing. (a) Warner will notify LeukoSite if Warner and its
Affiliates elect not to manufacture the active ingredient of any Warner Product
or Warner-LeukoSite Product. In such event, LeukoSite may offer to perform such
manufacturing. Warner, in its reasonable judgment, may elect to have LeukoSite
or a third party perform such manufacturing.
(b) LeukoSite will notify Warner if LeukoSite and its Affiliates elect not
to manufacture the active ingredient of any LeukoSite Product. In such event,
Warner may offer to perform such manufacturing. LeukoSite, in its reasonable
judgment, may elect to have Warner or a third party perform such manufacturing.
(c) The reasonable judgment of a party choosing a manufacturer shall
include issues such as price, competence, reliability and experience of the
proposed manufacturer.
5.6 Royalties. (a) Warner will pay LeukoSite one of the following
royalties on worldwide Net Sales of Warner Products, whichever is applicable:
(i) If LeukoSite does not timely elect to pursue marketing rights to
the Development Candidate under Section 4.1 or if a Warner-LeukoSite Product
becomes a Warner Product prior to LeukoSite paying its designated share of
Development Costs under Section 4.2 up to and including acceptance by the FDA of
the relevant IND, the applicable royalty rate will be ** of worldwide Net Sales.
(ii) If LeukoSite pays its designated share of Development Costs
under Section 4.2 up to and including the acceptance by the FDA of the relevant
IND, but thereafter revokes its marketing rights such that the Warner-LeukoSite
Product becomes a Warner Product, the applicable royalty rate will be * of
worldwide, annual Net Sales up to ************; ** of worldwide, annual Net
Sales from above ************ to ************ and ** of worldwide, annual Net
Sales above ************.
(iii) If LeukoSite pays its designated share of Development Costs
under Section 4.2 up to and including completion of all Phase II clinical
studies reasonably deemed necessary by the Management Committee for regulatory
approval to market the Product in the United States of America, but thereafter
* Confidential treatment requested: material has been omitted and filed
separately with the Commission.
<PAGE> 25
25
revokes its marketing rights such that the Warner-LeukoSite Product becomes a
Warner Product, the applicable royalty rate will be ** of worldwide, annual Net
Sales up to ************; ** of worldwide, annual Net Sales from above ****
******* to ************ and *** of worldwide, annual Net Sales above ****
*******.
(iv) For Warner Products, which become Warner Products under Section
1.4(b) and/or Section 1.4(d), the applicable royalty will be ** of worldwide Net
Sales up to ************ and ** of worldwide Net Sales above ************.
(b) Warner will pay LeukoSite the following royalties on Net Sales of all
Warner-LeukoSite Products sold outside of the Designated Co-Promotion Countries
for which LeukoSite has paid its designated share of Development Costs under
Section 4.2 up to and including NDA approval in the United States: ** of such
annual Net Sales up to ************ and *** of such annual Net Sales above ****
*******.
(c) LeukoSite will pay Warner one of the following royalties on worldwide
Net Sales of LeukoSite Products, whichever is applicable:
(i) The applicable royalty rate will be ** of the worldwide Net
Sales, except as provided in 5.6(c)(ii) below;
(ii) If Warner pays its designated share of Development Costs under
Section 4.2 up to and including filing of the relevant IND, but thereafter
revokes its marketing rights, the applicable royalty rate will be ** of
worldwide, annual Net Sales up to ************ and ** of worldwide, annual Net
Sales above ************.
(d) The royalties set forth in this Section will be payable on a Product
by Product and country by country basis for a period of ten (10) years from
first commercial sale in a country as part of nationwide introduction of the
Product. If at the expiration of such ten (10) year period, a Product(s) is sold
in a country(ies) and such Product(s) where manufactured, used or sold infringes
a Patent Right, then the royalty shall continue with respect to such Product(s)
in such country(ies) until expiration of such Patent Right.
(e) As used herein, "Annual Net Sales" shall mean Net Sales in a calendar
year.
* Confidential treatment requested: material has been omitted and filed
separately with the Commission.
<PAGE> 26
26
5.7 Currency of Payment. All payments to be made under this Agreement
shall be made in United States dollars in the United States to a bank account
designated by the party to be paid. Royalties earned shall first be determined
in the currency of the country in which they are earned and then converted to
its equivalent in United States currency. The buying rates of exchange for the
currencies involved into the currency of the United States quoted by Citibank
(or its successor in interest) in New York, New York at the close of business on
the last business day of the quarterly period in which the royalties were earned
shall be used to determine any such conversion.
5.8 Payment and Reporting. The royalties due under Section 5.6 shall be
paid quarterly, within sixty (60) days after the close of each calendar quarter,
or earlier if possible (i.e., on or before the last day of each of the months of
May, August, November and February) immediately following each quarterly period
of each year in which such royalties are owed. With each such quarterly payment,
the payor shall furnish the payee a royalty statement (the "Royalty Statement"),
setting forth on a country-by-country basis the total number of units of each
Product made, used and/or sold hereunder for the quarterly period for which the
royalties are due.
5.9 Records. The royalty paying party shall keep accurate books and
accounts of record in connection with the manufacture, use and/or sale by or for
it of all products in sufficient detail to permit accurate determination of all
figures necessary for verification of royalty obligations set forth in this
Article V. Such records shall be maintained for a period of 3 years from the end
of each year in which sales occurred. The payee, at its expense, through a
certified public accountant, shall have the right to access such books and
records for the sole purpose of verifying the Royalty Statements; such access
shall be conducted after reasonable prior notice by the payee to the payor
during the payor's ordinary business hours and shall not be more frequent than
once during each calendar year. Said accountant shall not disclose to the payee
or any other party any information except that which should properly be
contained in a royalty report required under this Agreement. In the event that
there has been an underreporting of royalties of ten percent (10%) or greater
over the full period reviewed by such accountants, then the cost of such
accountants shall be paid by the payor. Any underpaid royalties shall be paid
within thirty (30) days after notice of the underpayment.
5.10 Taxes Withheld. Any income or other tax that one party hereunder, its
Affiliates or sublicensees is required to withhold (the "Withholding Party") and
pay on behalf of the other party hereunder (the "Withheld Party") with respect
to the royalties or other amounts payable under this Agreement shall be
<PAGE> 27
27
deducted from and offset against said royalties or other amounts prior to
remittance to the Withheld Party; provided, however, that in regard to any tax
so deducted, the Withholding Party shall give or cause to be given to the
Withheld Party such assistance as may reasonably be necessary to enable the
Withheld Party to claim exemption therefrom or credit therefor, and in each case
shall furnish the Withheld Party proper evidence of the taxes paid on its
behalf.
5.11 Computation of Royalties. All sales of LeukoSite Products between
LeukoSite and any of its Affiliates and sublicensees with the intent of resale
by such Affiliates and sublicensees shall be disregarded for purposes of
computing royalties under this Article V, but in such instances royalties shall
be payable only upon commercial sales to unlicensed third parties by the
Affiliates and sublicensees. Nothing herein contained shall obligate LeukoSite
to pay Warner more than one royalty on any unit of a LeukoSite Product. All
sales of Warner Products or Warner-LeukoSite Products between Warner and any of
its Affiliates and sublicensees with the intent of resale by such Affiliates and
sublicensees shall be disregarded for purposes of computing royalties under this
Article V, but in such instances royalties shall be payable only upon commercial
sales to unlicensed third parties by the Affiliates and sublicensees. Nothing
herein contained shall obligate Warner to pay LeukoSite more than one royalty on
any unit of a Warner Product or Warner-LeukoSite Products.
5.12 Licenses to Affiliates. Each party shall, at the other party's
request, sign license and/or royalty agreements in respect of Warner Products,
LeukoSite Products or Warner-LeukoSite Products not being co-promoted by the
parties hereunder directly with the other party's Affiliates and sublicensees in
those situations where such agreements would not decrease the amount of
royalties or other amounts which would be owed hereunder. Such agreements shall
contain the same language as contained herein with appropriate changes in
parties and territory. No such license and/or royalty agreement will relieve
Warner or LeukoSite, as the case may be, of its obligations hereunder, and such
party will guarantee the obligations of its Affiliate or sublicensee in any such
agreement. Royalties and other amounts received directly from one party's
Affiliates and sublicensees shall be credited towards such party's obligations
hereunder.
5.13 Milestone Payments.
(a) Warner will pay LeukoSite the following amounts the first time that
each of the following milestones is achieved:
(i) Designation of a Development
Candidate as a Warner Product
<PAGE> 28
28
or a Warner-LeukoSite Product...........*
(ii) Acceptance by the FDA of an IND (or its equivalent in Japan or
in each of the United Kingdom, France, Italy, Germany and
Spain hereinafter such five countries being collectively "EU")
for a Warner Product or a Warner-LeukoSite
Product...............................*
(iii) Acceptance for filing by the FDA of an NDA (or its equivalent
in EU or Japan) for a Warner Product or a Warner-LeukoSite
Product..............................*
(iv) Approval by the FDA of an NDA (or its equivalent in EU or
Japan) for a Warner Product or a Warner-LeukoSite
Product.....................*
(v) Approval by the FDA of an NDA (or its equivalent in EU or
Japan) for a second Warner Product or Warner-LeukoSite
Product...........*
(b) LeukoSite will pay Warner * each time that an NDA (or its equivalent
in EU or Japan) is granted for a LeukoSite Product.
5.14 Pre-existing Milestone/Royalty Obligations. Certain research
activities to be performed hereunder and the manufacture, use or sale of
Products hereunder may require payments to unaffiliated third parties. Such
payments in respect of rights that a party hereto currently has an interest in
or could have an interest in pursuant to any currently existing agreements will
be borne by such party. All other such payments will be borne by (i) Warner in
the case of a Warner Product or a Warner-LeukoSite Product sold outside of the
Designated Co-Promotion Countries, (ii) LeukoSite in the case of a LeukoSite
Product, and (iii) as a "Cost of Goods" in the case of Warner-LeukoSite Products
sold in the Designated Co-Promotion Countries. Each party hereto will disclose
such payment obligations to the other party hereto prior to designation of the
subject compound as a Development Candidate.
*Confidential treatment requested: material has been omitted and filed
separately with the Commission.
<PAGE> 29
29
ARTICLE VI
CO-PROMOTION OF WARNER-LEUKOSITE PRODUCTS
6.1 Marketing and Marketing Plans. Each Warner-LeukoSite Product will be
marketed in each country with one label and will bear one or more trademarks
owned by Warner. Advertising and promotional material in respect of each
Warner-LeukoSite Product in each Designated Co-Promotion Country (including any
Product labeling or packaging inserts to the extent permitted by law and
approved by the Marketing Committee) will include LeukoSite's name and address,
the size and placement of which will be determined by the Marketing Committee.
The Marketing Committee will be responsible for developing and approving
marketing plans and the advertising and other promotional materials to be used
in co-promoting each Warner-LeukoSite Product in each Designated Co-Promotion
Country. Warner will be responsible, with LeukoSite's advice in the case of
Designated Co-Promotion Countries, for seeking acceptance of each
Warner-LeukoSite Product on formularies, if applicable, and for all other
negotiations with managed care organizations and other institutional purchasers.
The Marketing Committee shall coordinate and implement the marketing and
detailing strategies, tactics, joint sales force training program and sales
forecasts, and post-approval clinical studies for Warner-LeukoSite Product, and
Budgeted Total Detail Effort for each calendar year for the Warner-LeukoSite
Product in the Designated Co-Promotion Countries (hereinafter, collectively,
the "Business Plan").
The Marketing Committee shall develop a Business Plan for each calendar
year in which Warner-LeukoSite Product will be sold in the Designated
Co-Promotion Countries.
The annual Business Plan shall contain the responsibilities of each party
and shall establish the Budgeted Detail Effort for each party for the subsequent
calendar year; provided, however, that in each calendar year LeukoSite shall not
be required to accept (without LeukoSite's consent) nor shall it be entitled to
undertake (without Warner's consent) a Budgeted Detail Effort greater than its
Selling Percentage of the Budgeted Total Detail Effort. The Marketing Committee
shall also establish a semi-annual or annual forecast of (i) Marketing Expenses
and; (ii) the number and position of Details and specific professionals to be
targeted by the Details (broken down on a monthly or quarterly basis) to be made
by each party's sales force during such calendar year.
<PAGE> 30
30
For each calendar year, within thirty (30) days after establishment of the
Budgeted Total Detail Effort for the calendar year, LeukoSite by written notice
and within its sole discretion, may elect a Budgeted Detail Effort for such
calendar year which is less than LeukoSite's Selling Percentage of the Budgeted
Total Detail Effort and the Budgeted Detail Effort of LeukoSite for the calendar
year shall be decreased in accordance with such election with, at Warner's
option (i) a corresponding increase in the Budgeted Detail Effort of Warner (ii)
a corresponding decrease in the Budgeted Total Detail Effort or (iii) a
combination of (i) and (ii). In addition, in the event LeukoSite elects such a
reduced Budgeted Detail Effort, LeukoSite shall pay to Warner the increased
Sales Cost incurred by Warner to the extent that the Budgeted Detail Effort for
Warner is increased to greater than Warner's percentage of the Budgeted Total
Detail Effort prior to such election by LeukoSite. Such increased Sales Cost
shall be determined by dividing the total Sales Cost of Warner by the Detail
Effort for Warner for the calendar year and multiplying such number by the
difference between the Budgeted Detail Effort of LeukoSite and the Detail Effort
of LeukoSite for the calendar year.
Either party may in any calendar year make Details in excess of the
Budgeted Detail Effort without the written agreement of the other. However,
absent such agreement, a party shall not receive compensation for such excess
Details.
Each party shall keep track of the number and position of Details by its
representatives in accordance with its normal internal reporting procedures.
Within thirty (30) days after the last day of each calendar month, each party
shall submit to the other party, a report with respect to the number of Details
performed by such party's representatives during such calendar month. At the
request of either party, but not more than once a year by such party, a special
external audit of the Detail effort of both parties with respect to
Warner-LeukoSite Product shall be performed, the cost of which shall be paid by
the requesting party; provided if such external audit reveals that in any
calendar year the non-requesting party performed less than ninety percent (90%)
(after taking into account the offset described in the immediately following
proviso) of the Details that such non-requesting party reported to the
requesting party as being performed in such calendar year such that there is a
shortfall in excess of ten percent (10%), then such non-requesting party shall
reimburse the requesting party for the full cost of such audit; provided further
that if in any calendar year the audit reveals that both parties failed to
perform one hundred percent (100%) of the Details that each such party reported
to the other party as being performed in such year, then the requesting party's
percentage point shortfall shall be subtracted from the non-requesting party's
percentage point
<PAGE> 31
31
shortfall for purposes of making the calculation in the immediately preceding
proviso.
The Marketing Committee shall develop the training program for the
respective sales forces. The parties agree to utilize such training program to
assure a consistent, focused promotional strategy and message. Under the
supervision of the Marketing Committee, each party shall train its own field
sales force. Warner shall be responsible for all costs associated with training
the field forces of both parties in accordance with such training program,
including costs of materials, expenses, launch meetings and ongoing training and
shall reimburse LeukoSite for its costs and expenses associated therewith. All
of Warner's costs associated with training the field forces of both parties
(including the amount reimbursed to LeukoSite) shall be deemed Marketing
Expenses.
In the event a decision is made by the Marketing Committee to sample the
Warner-LeukoSite Product, Warner shall supply all samples for use in connection
with the sampling of Warner-LeukoSite Product. The Marketing Committee shall
develop a sampling strategy. Such samples shall be considered and treated as
Marketing Expenses.
6.2 Promotional Materials. LeukoSite may disseminate only those
promotional and advertising materials for Warner-LeukoSite Products that have
been provided or approved for use by the Marketing Committee. Warner shall
supply LeukoSite quantities of promotional materials needed by LeukoSite to
exercise its co-promotion rights under this Agreement. LeukoSite shall not, and
shall cause its employees, representatives and agents not, to make any claims or
representations in respect of the Warner-LeukoSite Products that have not been
approved by Warner.
6.3 No Delegation. Each party may use only its own employees or the
employees of one or more of its subsidiaries in the course of marketing
Warner-LeukoSite Products in the Designated Co-Promotion Countries under this
Agreement.
6.4 Returns. Warner shall be responsible for handling all returns relating
to Warner-LeukoSite Products. Any Warner-LeukoSite Product returned to LeukoSite
shall be shipped by it to the address designated by Warner with shipping costs
authorized by Warner to be paid by Warner.
6.5 Orders. All customer orders for Warner-LeukoSite Products shall be
received and executed in each country by Warner. LeukoSite shall transmit any
such orders that it receives to Warner no later than the following business day.
<PAGE> 32
32
6.6 Samples. Each of the parties will keep accurate records as to the
distribution of samples, and comply with all applicable laws, rules and
regulations dealing with the distribution of samples.
6.7 Completion of Sales. All sales of Warner-LeukoSite Products will be
completed, distributed, accounted for, billed and booked by Warner at prices
established by Warner, provided, however, that Warner will not grant a
preference to or otherwise favor other products of Warner over Warner-LeukoSite
Products or Warner Products based on the fact LeukoSite is entitled to royalties
or a share of Co-promotion rights.
6.8 Exchange of Marketing Information. From time-to-time Warner will
develop call lists, schedules and other appropriate information for the purpose
of determining the physicians and other persons involved in the drug purchase
decision-making process to whom LeukoSite and Warner will Detail each
Warner-LeukoSite Product in the Designated Co-Promotion Countries. The parties
agree to cooperate in finding an inexpensive and expeditious way to provide a
call list and other information indicating the identity of those physicians and
other persons involved in the decision-making process regarding the purchase of
pharmaceuticals. The parties will establish a method of confirming when Details
have been made in the Designated Co-Promotion Countries so that, among other
things, LeukoSite's and Warner's Detail Effort can be calculated.
6.9 Termination of Co-Promotion Countries. LeukoSite may, upon one month
written notice, remove one or more countries from the Designated Co-Promotion
Countries. In such event, LeukoSite will no longer have any rights to co-promote
the Warner-LeukoSite Product in such country, but instead will be entitled to
receive the royalty referred to in Section 5.6 in respect of Net Sales in such
country.
6.10 During the Term of Co-Promotion for the Designated Co-Promotion
Countries, Warner shall be responsible for:
(i) manufacturing (or having manufactured), packaging, labeling,
warehousing and distributing Warner-LeukoSite Product.
(ii) maintaining, as reasonably possible and based on the business
judgment of the Marketing Committee, such inventory and stock levels of raw
materials, packaging components and finished Warner-LeukoSite Product as are
required to maintain an appropriate customer service level.
<PAGE> 33
33
(iii) providing adequate samples, training materials, territory
sales reports and promotional materials for both parties' field sales forces.
(iv) providing customer service activities and medical information
services.
6.11 Warner warrants that any Warner-LeukoSite Product manufactured by
Warner or a third party (i) shall be manufactured for sale in the Designated
Co-Promotion Countries in conformance with all applicable federal, state and
local statutes, ordinances and regulations (including, without limitation, the
Federal Food Drug and Cosmetic Act (FD&C) and the regulations thereunder such as
current good manufacturing practices), as the same may be amended from time to
time, (ii) at the time of shipment by Warner shall not be adulterated or
misbranded within the meaning of the FD&C, and (iii) at the time of shipment by
Warner shall not be a product which would violate any section of the FD&C if
introduced into interstate commerce.
6.12 LeukoSite and Warner shall not have any right with respect to
co-promotion in a Designated Co-Promotion Country of a "generic" form of a
Warner-LeukoSite Product which is not covered by a Patent Right.
ARTICLE VII
FDA
7.1 Side Effects. Each party shall advise the other as promptly as
reasonably practical by telefax or overnight delivery service addressed to the
attention of its Vice President, International Regulatory Affairs and Drug
Safety and Surveillance (or, in LeukoSite's case, the party with similar
responsibilities), of any unexpected side effect, adverse reaction or injury
which has been brought to that party's attention at any place and which is
alleged to have been caused by a Warner-LeukoSite Product. Warner shall have all
rights and responsibility timely to report such side effects, adverse reaction
or injury to regulatory authorities and others as appropriate.
7.2 Regulatory and other Inquiries. Upon being contacted by the FDA or any
drug regulatory agency for any regulatory purpose pertaining to this Agreement
or to a Warner-LeukoSite Product, LeukoSite and Warner shall immediately notify
and consult with one another and Warner shall provide a response as it deems
appropriate. Warner shall have sole right and responsibility for responding to
all inquiries to Warner or LeukoSite regarding
<PAGE> 34
34
the benefits, side effects and other characteristics of Warner-LeukoSite
Products.
7.3 Product Recall. In the event that Warner or LeukoSite determines that
an event, incident or circumstance has occurred which may result in the need for
a recall or other removal of any Warner-LeukoSite Product, or any lot or lots
thereof, from the market in any Designated Co-Promotion Country, it shall advise
and consult with the other party with respect thereto. Warner shall make the
final determination to recall or otherwise remove the Warner-LeukoSite Product
or any lot or lots thereof from the market. Warner and LeukoSite shall share the
costs and expenses of such recall or removal in each Designated Co-Promotion
Country, including without limitation expenses and other costs or obligations to
third parties, the cost and expense of notifying customers and costs and
expenses associated with shipment of the recalled Product from a customer to
either Warner or LeukoSite. Such costs shall be shared in proportion to their
average shares of Total Profit during the two years preceding the giving of
notice of recall to customers.
ARTICLE VIII
DETERMINATION OF CO-PROMOTION PAYMENTS
8.1 Determination of LeukoSite's Compensation. LeukoSite's share of profit
("LeukoSite's Share of Profit") in respect of sales of each Warner-LeukoSite
Product in a Designated Co-Promotion Country will equal Total Profit actually
received in respect of sales in such country multiplied by * in respect of such
country or such lower percentage selected by LeukoSite pursuant to Section 4.2,
or such percentage as provided in Section 8.4(b).
8.2 Payment and Reporting. Within thirty (30) days after the close of each
calendar quarter, or earlier if possible, during the Term of Co-Promotion in
each Designated Co-Promotion Country (i.e. on or before the last day of each of
the months of June, September, December and March), Warner shall furnish to
LeukoSite a statement (the "Profit Statement") setting forth, on a country by
country basis, Total Profit of each Warner-LeukoSite Product, and all data on
which those figures were based and the calculations used in determining them. If
LeukoSite's Share of Profit is a positive number, Warner will submit such amount
to LeukoSite with the Profit Statement. If LeukoSite's Share of Profit is a
negative number, LeukoSite will submit such amount to Warner within 30 days of
its receipt of such Profit Statement. If the Term of Co-Promotion in a
particular Co-Promotion Country ends during an accounting quarter, the amounts
due hereunder shall be based upon an appropriate proration. Warner
* Confidential treatment requested: material has been omitted and filed
separately with the Commission.
<PAGE> 35
35
will provide LeukoSite monthly sales reports in respect of sales of
Warner-LeukoSite Products in each relevant Co-Promotion Country if and when they
become available. Such reports may contain estimated data and will not be
binding for any purpose whatsoever.
8.3 Records. Warner and LeukoSite shall each keep accurate books and
accounts of record in connection with the manufacture, use and/or sale by or for
it of the Warner-LeukoSite Products in sufficient detail to permit accurate
determination of all figures necessary for verification of compensation
hereunder. Warner and LeukoSite shall maintain such records for a period of
three (3) years after the end of the year in which they were generated. At such
party's expense, a party, through a certified public accountant, shall have the
right to access the books and records of the other party for the sole purpose of
verifying such statements; such access shall be conducted after reasonable prior
written notice to the party, during ordinary business hours and not more
frequently than once during each calendar year.
8.4(a) In the event that in any calendar year, a party performs at least
sixty percent (60%) of its Budgeted Detail Effort for the calendar year but does
not perform at least ninety percent (90%) of its Budgeted Detail Effort for the
calendar year and the other party does perform at least ninety percent (90%) of
its Budgeted Detail Effort for the calendar year, then such party shall pay to
the other party an amount equal to the increased Sales Cost incurred by the
other party as a result of the party's shortfall in its Budgeted Detail Effort.
Such increased Sales Cost shall be determined by dividing the total Sales Cost
of the other party for the calendar year by the Detail Effort for the other
party for the calendar year and multiplying such number by the difference
between the Budgeted Detail Effort for the deficient party for the calendar year
and the Detail Effort for the deficient party for the calendar year. If both
parties perform less than ninety percent (90%) of their Budgeted Detail Effort
then the shortfall in the Detail Effort of each party shall be calculated and
the difference between them shall also be calculated. The party with the greater
shortfall shall pay the increased Sales Cost to the other party as calculated
above based on the difference between the respective shortfalls. The amount owed
under this Section shall be paid within sixty (60) days after the end of the
calendar year.
(b) In the event that in any calendar year, a party performs less than
sixty percent (60%) of its Budgeted Detail Effort for the calendar year and the
other party performs at least ninety percent (90%) of its Budgeted Detail Effort
for the calendar year, if such party is LeukoSite, LeukoSite's Share of Profit
shall be decreased and if such party is Warner, LeukoSite's Share of Profit
shall be increased, with LeukoSite's Share of Profit (i) in the case where
LeukoSite is
<PAGE> 36
36
such party being the actual Detail Effort of LeukoSite for the calendar year
divided by the Budgeted Total Detail Effort for the calendar year multiplied by
the Total Profit and (ii) in the case where Warner is such party, being the
Total Profit multiplied by a fraction where such fraction is the difference
between one (1) and a fraction having as a numerator Warner's actual Detail
Effort for the calendar year and as a denominator the Budgeted Total Detail
Effort for the calendar year.
ARTICLE IX
CONFIDENTIALITY
9.1 Confidentiality. (a) Except as specifically permitted hereunder, each
party hereby agrees to hold in confidence and not use on behalf of others (or on
behalf of itself outside the Collaboration) all data, samples, technical and
economic information (including the economic terms hereof), commercialization,
clinical and research strategies and know-how provided by the other party (the
"Disclosing Party") during the Term of this Agreement and all data, results and
information developed pursuant to the Collaboration and owned solely by the
other party (collectively the "Confidential Information"), except that the term
"Confidential Information" shall not include:
(i) Information that is or becomes part of the public domain through no
fault of the non-Disclosing Party or its Affiliates; and
(ii) Information that is obtained after the date hereof by the
non-Disclosing Party or one of its Affiliates from any third party that is
lawfully in possession of such Confidential Information and not in violation of
any contractual or legal obligation to the Disclosing Party with respect to such
Confidential Information; and
(iii) Information that is known to the non-Disclosing Party prior to
disclosure by the Disclosing Party, as evidenced by the non-Disclosing Party's
written records; and
(iv) Information that is necessary or advantageous to both parties to be
disclosed to any governmental authorities or pursuant to any regulatory filings,
provided that in such case the non-Disclosing Party notifies the Disclosing
Party reasonably in advance of such disclosure and cooperates with the
Disclosing Party to minimize the scope and content of such disclosure; and
<PAGE> 37
37
(v) Information that is required to be disclosed pursuant to any relevant
law or regulation or under order of a court of competent jurisdiction, provided
that in such case the non-Disclosing Party notifies the Disclosing Party
reasonably in advance of such disclosure and cooperates with the Disclosing
Party to minimize the scope and content of such disclosure.
(b) The obligations of this Section 9.1 shall survive for five years
following the expiration or termination of this Agreement except to the extent
required by any obligations of confidentiality to a third party that are
disclosed to the non-disclosing party prior to termination of this Agreement.
9.2 Publicity. All publicity, press releases and other announcements
relating to this Agreement or the transactions contemplated hereby shall be
reviewed in advance by and subject to the approval of both parties; except that
such review and approvals shall not be required for any announcement that
discloses the existence of this Agreement without disclosing any of its material
terms. Notwithstanding the foregoing, to the extent required by applicable law,
rule or regulation or in connection with filings with regulatory agencies or the
offering of securities, including but not limited to the SEC, a party may file
this Agreement and/or disclose the contents of this Agreement without the
approval of the other party, provided that the other party is provided with the
opportunity to review and comment on such disclosure and further provided that
such disclosure shall be limited to the minimum amount of information and
distribution required by such law, rule, regulation or filing.
9.3 Publication. The parties shall cooperate in appropriate publication of
the results of research and development work performed pursuant to this
Agreement, but subject to the predominating interest to obtain patent protection
for any patentable subject matter. To this end, it is agreed that prior to any
public disclosure of any such results, the party proposing disclosure shall send
the other party a copy of the information to be disclosed, and shall allow the
other party 15 days from the date of receipt in which to determine whether the
information to be disclosed contains subject matter for which patent protection
should be sought prior to disclosure. If notification is not received during the
15 day period, the party proposing disclosure shall be free to proceed with the
disclosure. If due to a valid business reason or a belief by the nondisclosing
party that the disclosure contains subject matter for which a patentable
invention should be sought, then prior to the expiration of the 15 day period,
the nondisclosing party shall so notify the disclosing party, who shall then
delay public disclosure of the information for an additional period of up to 2
months to permit the preparation and filing of a patent application on the
subject matter to be disclosed or other action to be taken. The party proposing
disclosure shall
<PAGE> 38
38
thereafter be free to publish or disclose the information. The determination of
authorship for any paper shall be in accordance with accepted scientific
practice. Nothing in this Section will be construed to allow either party to
disclose the Confidential Information of the other party in any publication or
other disclosure without the express written consent of such other party.
ARTICLE X
REPRESENTATIONS AND WARRANTIES
10.1 Legal Authority. Each party represents and warrants to the other that
it has the legal power, authority and right to enter into this Agreement and to
perform its respective obligations set forth herein.
10.2 No Conflicts. Each party represents and warrants that as of the date
of this Agreement it is not a party to any agreement or arrangement with any
third party or under any obligation or restriction, including pursuant to its
Certificate of Incorporation or By-Laws, which in any way limits or conflicts
with its ability to fulfill any of its obligations under this Agreement.
10.3 Others Bound. Each party represents and warrants that anyone
performing services under this Agreement on its behalf shall be bound by all
of the conditions of this Agreement.
10.4 Survival. The foregoing representations and warranties shall survive
the execution, delivery and performance of this Agreement, notwithstanding any
investigation by or on behalf of either party.
10.5 Disclaimer. Except as otherwise expressly stated herein, Warner
hereby disclaims any warranty expressed or implied as to any LeukoSite Product
manufactured by or for, used, sold or placed in commerce by or on behalf of
LeukoSite. Except as otherwise expressly stated herein, LeukoSite hereby
disclaims any warranty expressed or implied as to any Warner Product and/or any
Warner-LeukoSite Product manufactured by or for, used, sold or placed in
commerce by or on behalf of Warner in a Non-Designated Co-Promotion Country.
<PAGE> 39
39
ARTICLE XI
TERMINATION
11.1 Termination. In the event of a material breach of the provisions of
this Agreement described below, the breaching party shall have ninety days after
receipt of written notice from the non-breaching party to cure such breach,
which period shall be sixty (60) days in the case of a failure to make a payment
when due.
(a) In the event of an uncured material breach of Article I, the
non-breaching party may terminate this Agreement.
(b) In the event of an uncured material breach of Article V by Warner in
regard to a Warner Product or Warner-LeukoSite Product, LeukoSite may
immediately (i) terminate the licenses granted by it pursuant to Section 5.1 in
respect of such Product and (ii) require Warner to grant LeukoSite an exclusive
(even as to Warner), worldwide license under the Patent Rights, Background
Technology and Collaboration Technology relating to such Product and owned or
controlled by Warner to the extent necessary to make, have made, use or sell
such Product. In such event such Warner Product or Warner-LeukoSite Product
shall be a LeukoSite Product for the purposes of this Agreement.
(c) In the event of an uncured material breach of Article V by LeukoSite
in regard to a LeukoSite Product, Warner may immediately (i) terminate the
licenses granted by it pursuant to Section 5.2 in respect of such Product and
(ii) require LeukoSite to grant Warner an exclusive (even as to LeukoSite),
worldwide license under the Patent Rights, Background Technology and
Collaboration Technology to the extent necessary to make, have made, use or sell
such Product. Such LeukoSite Product shall be a Warner Product for the purposes
of this Agreement.
(d) In the event of an uncured material breach of Article VI or VIII by
Warner in regard to a Warner-LeukoSite Product, LeukoSite may immediately (i)
terminate the licenses granted by it pursuant to Section 5.1 in respect of such
Product and (ii) require Warner to grant it an exclusive (even as to Warner),
worldwide license under the Patent Rights, Background Technology and
Collaboration Technology to the extent necessary to make, have made, use or sell
such Product. In such event, such Product will be a LeukoSite Product for
purposes of this Agreement.
<PAGE> 40
40
(e) In the event of an uncured material breach of Article VI or a payment
provision of Article VIII or of Section 4.2 by Leukosite with respect to a
Warner-LeukoSite Product, Warner may immediately terminate the marketing rights
of Leukosite with respect to such Warner-Leukosite Product.
11.2 Effect of Bankruptcy. If either party files a voluntary petition in
bankruptcy, is adjudicated a bankrupt, makes a general assignment for the
benefit of creditors, admits in writing that it is insolvent or fails to
discharge within 15 days an involuntary petition in bankruptcy filed against it,
then (a) this Agreement shall immediately terminate and (b) the licenses granted
to such party hereunder shall immediately terminate.
11.3 Termination By Either Party Other Than For Cause. Either party may
terminate this Agreement at any time for any reason upon 6 months written
notice. In such event, the terminating party shall immediately pay all amounts
that are then due hereunder and the other party shall have a non-exclusive,
worldwide, license to all Collaboration Technology as well as an exclusive,
royalty-free worldwide license to the extent necessary to make, have made, use
and sell all Products.
11.4 Remedies. In the event of any breach of any provision of this
Agreement, in addition to the termination rights set forth herein, each party
shall have all other rights and remedies at law or equity to enforce this
Agreement.
ARTICLE XII
GENERAL PROVISIONS
12.1 Indemnification. Warner and LeukoSite each agrees to indemnify and
hold harmless the other party and its Affiliates and their respective employees,
agents, officers, directors and permitted assigns (such party's "Indemnified
Group") from and against any claims, judgments, expenses (including reasonable
attorneys' fees), damages and awards (collectively a "Claim") arising out of or
resulting from (i) its negligence or misconduct in regard to any Product, (ii) a
breach of any of its representations or warranties hereunder or (iii) the
manufacture, use or sale of a Warner Product or a Warner-LeukoSite Product (in
the case of Warner) or a LeukoSite Product (in the case of LeukoSite), except to
the extent that such Claim arises out of or results from the negligence or
misconduct of a party seeking to be indemnified and held harmless or the
negligence or misconduct of a member of such party's Indemnified Group. An
indemnified party shall promptly give notice to the indemnifying party of any
<PAGE> 41
41
information from which it should reasonably conclude an incident has occurred
that could give rise to a Claim, and in the event a Claim is made or a suit is
brought, all indemnified parties shall assist the indemnifying party and
cooperate in the gathering of information with respect to the time, place, and
circumstances and in obtaining the names and addresses of any injured parties
and available witnesses. The failure to give the notice referred to in the
preceding sentence shall not relieve a party of its indemnification obligations,
except to the extent such failure prejudices the ability of the indemnifying
party to defend against such claim. No indemnified party shall, except at its
own cost, voluntarily make any payment or incur any expense in connection with
any such Claim or suit without the prior written consent of the indemnifying
party. Each indemnified party shall permit the indemnifying party to assume the
defense of any claim. The obligations set forth in this Section shall survive
the expiration or termination of this Agreement.
12.2 Assignment/Change of Control. (a) This Agreement is not assignable by
either party without the prior written consent of the other party. To the extent
that assignment is permitted this Agreement shall be binding upon and inure to
the benefit of the parties' successors, legal representatives and assigns.
Notwithstanding the foregoing, (i) Warner may assign this Agreement to any of
its subsidiaries or any entity succeeding to a majority of its Parke-Davis
business or substantially all of the business to which this Agreement is related
and (ii) LeukoSite may assign this Agreement to any of its subsidiaries or to
any entity succeeding to substantially all of its pharmaceutical business or
substantially all of the business to which this Agreement is directed. In no
event will any assignment relieve the assigning party of its obligations
hereunder. No assignment shall take effect until the assignee notifies the
non-assigning party of such assignment and the assignee agrees to be bound by
all the terms, conditions and obligations of this Agreement.
(b) In the event of (i) a merger, consolidation, plan of exchange or other
reorganization of LeukoSite in which LeukoSite is not the surviving party and
the surviving party is an entity which does not presently control or is not
presently under common control with LeukoSite and such surviving entity is in
the pharmaceutical industry and has total annual sales at such time in excess of
$500 million, or any other transaction or series of transactions that result in
an entity (together with such entity's Affiliates) controlling LeukoSite and
such entity does not presently control or is not presently under common control
with LeukoSite and such surviving entity is in the pharmaceutical industry and
has total annual sales at such time in excess of $500 million or (ii) the
assignment by LeukoSite of this Agreement to any entity succeeding to
substantially all of LeukoSite's pharmaceutical business or substantially all of
the business to
<PAGE> 42
42
which this Agreement is related and such entity is an entity which does not
presently control or is not presently under common control with LeukoSite and
such entity is in the pharmaceutical industry and has total annual sales in
excess of $500 million, then Warner may terminate LeukoSite's right to
co-promote all Warner-LeukoSite Products hereunder. In such event, LeukoSite or
the surviving entity, or the assignee, as the case may be, will be entitled to
receive (or obligated to pay) LeukoSite's Share of Profit of each
Warner-LeukoSite Product in the Designated Co-Promotion Countries, except that
in calculating Total Profit, the Selling Expenses of Warner shall also be
deducted from Net Sales.
12.3 Non-Waiver. The waiver by either of the parties of any breach of any
provision hereof by the other party shall not be construed to be a waiver of any
succeeding breach of such provision or a waiver of the provision itself.
12.4 Submission to Senior Officers for Dispute Resolution. The parties
recognize that the collaborative research program under this Agreement and the
development and commercialization of Development Candidates will require the
resolution of certain issues in the future. In the event the Management
Committee or any Marketing Committee is unable to resolve a dispute under this
Agreement or come to unanimous agreement on terms mutually acceptable to both
parties, either party may have the dispute referred to the senior officer of
Warner's pharmaceutical business for good faith resolution. Such senior officer
shall confer with LeukoSite's President prior to resolving such dispute. The
resolution of the dispute pursuant to this Section shall be final and binding on
the parties.
12.5 Governing Law. This Agreement shall be construed and interpreted in
accordance with the laws of the Commonwealth of Massachusetts, other than those
provisions governing conflicts of law.
12.6 Partial Invalidity. If and to the extent that any court or tribunal
of competent jurisdiction holds any of the terms or provisions of this
Agreement, or the application thereof to any circumstances, to be invalid or
unenforceable in a final nonappealable order, the parties shall use their best
efforts to reform the portions of this Agreement declared invalid to realize the
intent of the parties as fully as practicable, and the remainder of this
Agreement and the application of such invalid term or provision to circumstances
other than those as to which it is held invalid or unenforceable shall not be
affected thereby, and each of the remaining terms and provisions of this
Agreement shall remain valid and enforceable to the fullest extent of the law.
<PAGE> 43
43
12.7 Notice. Any notice to be given to a party under or in connection with
this Agreement shall be in writing and shall be (i) personally delivered, (ii)
delivered by a internationally recognized overnight courier or (iii) delivered
by certified mail, postage prepaid, return receipt requested to the party at the
address set forth below for such party:
To Warner: To LeukoSite:
Senior Vice President, Christopher K. Mirabelli,
Research and Development Ph.D.
Parke-Davis Pharmaceutical Chairman of the Board and
Research, Chief Executive Officer
Warner-Lambert Company LeukoSite, Inc.
2800 Plymouth Road 800 Huntington Avenue
Ann Arbor, MI 48105 Boston, MA 02115
with a copy to: with a copy to:
Vice President and Elliot Olstein, Esq.
General Counsel Carella, Byrne, Bain, Gilfillan,
Warner-Lambert Company Cecchi, Stewart & Olstein
201 Tabor Road 6 Becker Farm Road
Morris Plains, NJ 07950 Roseland, NJ 07068
or to such other address as to which the party has given notice thereof. Such
notices shall be deemed given upon receipt.
12.8 SAB Attendance. During the Term of this Agreement, Warner will be
entitled to have a representative attend (but not vote at) all meetings of
LeukoSite's Scientific Advisory Board ("SAB"). Warner will be provided notices,
meeting minutes and all material made available to SAB members generally at the
same time as such SAB members. Warner will recuse itself from that portion of
any meeting, and will not be provided material related to, confidential
information of third parties who object to Warner's inclusion. Prior to
attending any such SAB meeting, Warner will sign a confidentiality agreement by
which Warner will agree to maintain in confidence all information, data and
materials received as a result of such attendance and not to use same for any
research, development, manufacture or sale of any product or process (except to
the extent permitted by this Agreement).
<PAGE> 44
44
12.9 Headings. The headings appearing herein have been inserted solely for
the convenience of the parties hereto and shall not affect the construction,
meaning or interpretation of this Agreement or any of its terms and conditions.
12.10 No Implied Licenses or Warranties. No right or license under any
patent application, issued patent, know-how or other proprietary information is
granted or shall be granted by implication. All such rights or licenses are or
shall be granted only as expressly provided in the terms of this Agreement.
Neither party warrants the success of any clinical or other studies undertaken
by it.
12.11 Force Majeure. No failure or omission by the parties hereto in the
performance of any obligation of this Agreement shall be deemed a breach of this
Agreement, nor shall it create any liability, if the same shall arise from any
cause or causes beyond the reasonable control of the affected party, including,
but not limited to, the following, which for purposes of this Agreement shall be
regarded as beyond the control of the party in question: acts of God; acts or
omissions of any government; any rules, regulations, or orders issued by any
governmental authority or by any officer, department, agency or instrumentality
thereof; fire; storm; flood; earthquake; accident; war; rebellion; insurrection;
riot; invasion; strikes; and lockouts or the like; provided that the party so
affected shall use its best efforts to avoid or remove such causes or
nonperformance and shall continue performance hereunder with the utmost dispatch
whenever such causes are removed.
12.12 Survival. The representations and warranties contained in this
Agreement as well as those rights and/or obligations contained in the terms of
this Agreement which by their intent or meaning have validity beyond the term of
this Agreement shall survive the termination or expiration of this Agreement.
12.13 Entire Agreement. This Agreement, together with the Preferred Stock
Purchase Agreement dated the date hereof, constitute the entire understanding
between the parties with respect to the subject matter contained herein and
supersede any and all prior agreements, understandings and arrangements whether
oral or written between the parties relating to the subject matter hereof.
12.14 Amendments. No amendment, change, modification or alteration of the
terms and conditions of this Agreement shall be binding upon either party unless
in writing and signed by the party to be charged.
<PAGE> 45
45
12.15 Independent Contractors. It is understood that both parties hereto
are independent contractors and engage in the operation of their own respective
businesses, and neither party hereto is to be considered the agent or partner of
the other party for any purpose whatsoever. Neither party has any authority to
enter into any contracts or assume any obligations for the other party or make
any warranties or representations on behalf of the other party.
12.16 Counterparts. This Agreement may be executed in counterparts, each
of which shall be deemed an original and both of which together shall constitute
one and the same instrument.
12.17 In the event that there is a conflict between the text of this
Agreement and Exhibit 1, the text of this Agreement shall control.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized officers as of the date first above written.
LEUKOSITE, INC. WARNER-LAMBERT COMPANY
By:[signature appears here] By:[signature appears here]
---------------------------- ----------------------------
Name: Name:
Title: Title:
<PAGE> 46
FIRST AMENDMENT
TO RESEARCH, DEVELOPMENT AND MARKETING AGREEMENT
First Amendment dated as of July 1, 1995 ("Amendment") to the Research,
Development and Marketing Agreement dated as of September 30, 1994 (the
"Agreement") between LEUKOSITE, INC., a Delaware corporation ("LeukoSite"), and
WARNER-LAMBERT COMPANY, a Delaware corporation ("Warner").
W I T N E S S E T H:
WHEREAS, LeukoSite and Warner wish to amend the Agreement as set forth
herein,
NOW, THEREFORE, the parties hereby agree as follows:
1. Definitions. Capitalized terms used but not defined herein shall
have the meanings set forth in the Agreement. The following definition is
hereby added to Article A of the Agreement:
"'IL-8 Agreement' shall mean the Research, Development and Marketing
Agreement dated as of July 1, 1995 between LeukoSite and Warner."
In addition, the following definitions are hereby revised as follows:
"Co-Promotion Countries". The reference to "Section 6.10" found
in the definition of Co-Promotion Countries is hereby changed to "Section
6.09".
"Market Price". The language ", or the five business days preceding
Warner's stock purchase under Section 1.4(d)" is hereby inserted after the
phrase "Revised Stage 1 Research Plan" found in the definition of Market Price.
"Net Sales". The language ", as the case may be based on the fact
that LeukoSite is entitled to royalties" found in the definition of Net Sales is
hereby deleted and replaced by the language ", as the case may be, if such
preference is based on the fact LeukoSite or Warner, as the case may be, is
entitled to royalties".
2. Stock Purchase. Warner agrees to purchase * of capital stock of
LeukoSite on January 3, 1996, which stock shall be Preferred Stock at * per
share (subject to adjustment from and after the date hereof upon each stock
dividend, stock split, reverse stock split or other similar event) if at such
date LeukoSite has not completed its IPO, and Common Stock at * of the
* Confidential treatment requested: material has been omitted and filed
separately with the Commission.
<PAGE> 47
47
Market Price if the IPO has been completed by such date. In the event that any
such purchase shall be of shares of Preferred Stock of LeukoSite, the terms of
such shares of Preferred Stock shall be identical to the terms of LeukoSite's
Series C Convertible Preferred Stock, except that (i) such shares of Preferred
Stock shall be from a separate, newly-created series of Preferred Stock and (ii)
unless otherwise agreed to by the parties, the liquidation preference of such
shares of Preferred Stock shall be equal to the purchase price per share paid by
Warner for such shares of Preferred Stock. If LeukoSite completes an IPO of
Common Stock for its own account at a public offering price per share of less
than * (subject to adjustment from and after the date hereof upon each stock
dividend, stock split, reverse stock split or other similar event), taking into
account the fair market value of any warrants or other rights issued as units
with the Common Stock sold in any such initial public offering, Warner will be
issued additional Common Stock, promptly after the IPO is completed, at no cost
to Warner, in an amount sufficient to make Warner's average price per share of
capital stock of LeukoSite purchased pursuant to this Section and then owned by
Warner equal to the public offering price per share of the Common Stock issued
in any such IPO.
3. Section 1.3. The following language found in Section 1.3 is hereby
deleted:
", but in no event will such activities continue after the later of
(i) 18 months after the Effective Date or (ii) 15 months after development and
transfer by LeukoSite to Warner of either (a) a receptor-ligand screen for MCP-1
Inhibitors or (b) an MCP-1 triggered cell based screen for MCP-1 Inhibitors
that, in either case, is suitable for Warner to mass screen its compound
library".
Such deleted language is hereby replaced with the phrase ", but in no event
later than May 7, 1996".
4. Section 1.4(a). The following sentence is hereby added following
the third sentence of Section 1.4(a):
"The licenses granted in the preceding two sentences shall not
include any Warner Collaboration Technology (as defined herein), Patent Rights
(as defined herein) or other patent rights insofar as any of the same are also
"Warner Collaboration Technology" (as defined in the IL-8 Agreement) or "Patent
Rights" (as defined in the IL-8 Agreement) and licensed to LeukoSite under the
IL-8 Agreement unless and until the IL-8 Agreement is terminated pursuant to
Section 1.4(a) thereof."
* Confidential treatment requested: material has been omitted and filed
separately with the Commission.
<PAGE> 48
48
5. Section 1.4(d). The following sentence is added as a new paragraph
at the end of Section 1.4(d) of the Agreement:
"Notwithstanding the foregoing, this Section 1.4(d) shall not
apply to inhibitors of IL-8. In the event that Warner identifies a compound
hereunder that it wishes to optimize for IL-8 activity, it shall do so pursuant
to the IL-8 Agreement."
6. Section 1.4(e). The following new Section is hereby added to the
Agreement:
"1.4(e). "Equity Reduction. The total dollar amount of LeukoSite
capital stock that Warner may be required to purchase (and LeukoSite may be
required to sell) pursuant to Sections 1.4(b), 1.4(c) and/or 1.4(d) shall be
reduced by an amount of * in the aggregate, to be applied to the first and each
successive such purchase until such amount is exhausted.
7. Section 1.5. The language "the Stage 1 Research Plan, under the
Stage 2 Research Plan for development of a Warner Product" found in the final
sentence of Section 1.5 is hereby deleted and replaced by the language "the
Stage 1 Research Plan or the Stage 2 Research Plan, or for development of a
Warner Product".
8. Section 1.7. The word "LeukoSite" is hereby inserted before the
phrase "Background Technology" in the second sentence of Section 1.7.
9. Split Protection Clarification. The parenthetical "(subject to
adjustment from and after the date hereof upon each stock dividend, stock split,
reverse stock split or other similar event)" is hereby added (i) after the
phrase "$4.00 per share" found in the fourth sentence of Section 1.4(b), (ii)
after the phrase "$3.00 per share" found in the second sentence of Section
1.4(c) and (iii) after the phrase "$3.00 per share" found in the third sentence
of Section 1.4(d)."
10. Price Protection Clarification. The language "Warner's average price
per share of capital stock of LeukoSite then owned by Warner" is hereby deleted
and replaced with the phrase "Warner's average price per share of capital stock
of LeukoSite purchased pursuant to this Section and then owned by Warner" in
each of the following places: (i) the final sentence of the first paragraph of
Section 1.4(b), (ii) the penultimate sentence of Section 1.4(c) and (iii) the
final sentence of the first paragraph of Section 1.4(d). In addition, the
parties hereby make the same deletion in Section 3.2 of the Series C Preferred
Stock Purchase Agreement dated November 8, 1994 by and among the parties,
* Confidential treatment requested: material has been omitted and filed
separately with the Commission.
<PAGE> 49
49
and hereby replace it with the language "Warner's average price per share of
capital stock of the Company purchased pursuant to this Agreement and then owned
by the Investor".
11. Section 1.7. The language "grant rights to a third party under
Background Technology" found in the final sentence of Section 1.7 is hereby
deleted and replaced with the language "grant rights to a third party under
LeukoSite Background Technology".
12. Section 3.2. The language "payments to be made by Warner to
LeukoSite hereunder, regardless of which Product such payments relate to," found
in the final sentence of Section 3.2 is hereby deleted and replaced with the
language "payments to be made by Warner to LeukoSite hereunder or pursuant to
the IL-8 Agreement, regardless of which Product (as defined herein or in the
IL-8 Agreement) such payments relate to".
IN WITNESS WHEREOF, the parties have signed this Amendment as of the first
date set forth above.
WARNER-LAMBERT COMPANY
By: [signature appears here]
---------------------------
Name:
Title:
LEUKOSITE, INC.
By: [signature appears here]
---------------------------
Name:
Title:
<PAGE> 1
CONFIDENTIAL TREATMENT EXHIBIT 10.4(b)
RESEARCH, DEVELOPMENT AND MARKETING AGREEMENT
Research, Development and Marketing Agreement, dated as of July 1, 1995
between LEUKOSITE, INC., a Delaware corporation ("LeukoSite"), located at 215
First Street, Cambridge, MA 02142, and WARNER-LAMBERT COMPANY, a Delaware
corporation ("Warner"), located at 201 Tabor Road, Morris Plains, New Jersey
07950.
WITNESSETH:
WHEREAS, LeukoSite and Warner each has certain expertise in the
discovery and development of compounds that inhibit the action of IL-8 (the
"Field"); and
WHEREAS, Warner and LeukoSite each wishes to enter into a collaborative
effort to share such expertise, to develop new expertise in the Field, to
research together potential applications thereof and, if successful. to market
certain of such applications (the "Collaboration");
NOW, THEREFORE, in consideration of the foregoing premises and the
mutual promises, covenants and conditions contained herein, LeukoSite and Warner
agree as follows:
ARTICLE A
DEFINITIONS
The following capitalized terms shall have the following meanings for
purposes of this Agreement:
"Affiliate" shall mean any corporation, association or other entity
which directly or indirectly controls, is controlled by or is under common
control with the party in question. As used herein the term "control" means
control with possession of the power to direct, or cause the direction of. the
management and policies of a corporation, association or other entity.
"Background Technology" shall mean individually and collectively Warner
Background Technology and LeukoSite Background Technology.
"Budgeted Detail Effort" shall mean for each party for each calendar
year each party's Selling Percentage of the Budgeted Total Detail Effort, or
with respect to LeukoSite, a lower percentage of the Budgeted Total Detail
Effort elected by LeukoSite for the calendar year pursuant to Section 6.1.
<PAGE> 2
2
"Budgeted Total Detail Effort" shall mean for each calendar year the
total number of Details for Warner-LeukoSite Product in the Designated
Co-Promotion Territory as budgeted by the Marketing Committee or in the case
where the sales force sells other than through Details, the total selling
efforts of the sales force of each party for such calendar year.
"Collaboration Technology" shall mean individually and collectively
Warner Collaboration Technology and LeukoSite Collaboration Technology.
"Co-Promotion Countries" shall mean, subject to Section 6.9, the United
States of America, Mexico, the Commonwealth of Canada and their respective
territories and possessions, including the Commonwealth of Puerto Rico.
"Cost of Goods" means for experimental, clinical and commercial
supplies of Warner-LeukoSite Product the fully allocated manufacturing cost
(determined in a reasonable manner consistent with Warner's normal internal
accounting practices and in accordance with generally accepted accounting
principles ("GAAF)) which includes (i) direct and indirect labor (salaries,
wages and employee benefits); (ii) direct and indirect materials; (iii)
operating costs of building and equipment used in connection with the
manufacture of Warner-LeukoSite Product; (iv) allocated depreciation and repairs
and maintenance; (v) quality and in-process control; (vi) any charges for
obsolescence, out of date product, spoilage, scrap or rework costs; (vii)
royalties paid to third parties (except royalties in respect of rights that a
party hereto currently has an interest in or could have an interest in pursuant
to any currently existing agreements) and (viii) the net cost or credit of any
value added taxes paid with respect to the manufacture of Warner-LeukoSite
Product. To the extent that manufacturing of Warner-LeukoSite Product or any
component thereof is performed for Warner by a third party (which is not an
Affiliate of Warner), amounts paid to such third parry in connection with the
manufacturing of Warner-LeukoSite Product or any component thereof shall be
added to the aggregate amount of the applicable hereinabove items (i) through
(viii).
"Designated Co-Promotion" Country' shall mean with respect to each
Warner-LeukoSite Product each Co-Promotion Country designated under Section 4.1
as to which LeukoSite retains marketing rights.
"Detail" shall mean a sales presentation by a professional sales
representative to a target physician or other person involved in prescribing or
influencing drug usage of a Warner-LeukoSite Product in
<PAGE> 3
3
which the primary purpose is to discuss the benefits and features of such
Warner-LeukoSite Product in order to encourage a sale of such Product.
"Detail Effort" shall mean with respect to a party, and for any
calendar year, the actual number of Details given by its sales force for such
calendar year or in the case where the sales force sells other than through
Details the selling efforts of the party performed by its sales force for such
calendar year.
"Development" shall mean the conduct of all preclinical, clinical,
chemical synthesis, formulation, stability, assays and validation, testing and
development in accordance with then current Good Laboratory, Clinical and
Manufacturing Practices or other designated quality standards in connection with
any Development Candidate or Product insofar as the same are reasonably
necessary to obtain marketing approval by the relevant regulatory authorities
for a Product's first approved indication in any country (including studies
required to be per-formed after approval as a condition of approval) and the
costs of preparation, filing and submission of regulatory filings in Designated
Co-Promotion Countries.
"Development" Candidate" shall have the meaning set forth in Section
4.1.
"Development Committee" shall have the meaning set forth in Section
2.3.
"Effective Date" shall mean the date of this Agreement first stated
above.
"FDA" shall mean the United States Food and Drug Administration.
"IL-8 Inhibitor" shall mean a compounds) other than antibody(ies) which
inhibits the action of IL-8.
"LeukoSite Background Technology" shall mean all technology,
inventions, information, data, know-how, compounds, materials and substances
(whether or not patented or patentable) which relate to or are potentially
useful as an IL-8 Inhibitor or is an IL-8 Inhibitor and/or techniques for the
discovery, screening, design, synthesis, delivery, development, testing, use,
manufacture or sale of IL-8 Inhibitors which exists as of the Effective Date
which is either owned by LeukoSite or which is licensed to LeukoSite and as to
which LeukoSite has a right to sublicense or otherwise transfer.
<PAGE> 4
4
"LeukoSite Collaboration Technology" shall mean all technology,
inventions, information, data, know-how, compounds, materials and substances
(whether or not patented or patentable) which is either owned by LeukoSite
(alone or together with Warner) or which is licensed to LeukoSite and as to
which LeukoSite has a right to sublicense or otherwise transfer, and which is
conceived or reduced to practice pursuant to the Stage 1 Research Plan or
pursuant to the Stage 2 Research Plan or pursuant to development of a LeukoSite
Product or a Warner-LeukoSite Product.
"LeukoSite Product" shall have the meaning set forth in Section 4.1.
"LeukoSite's Share of Profit" shall have the meaning set forth in
Section 8.1.
"Management Committee" shall have the meaning set forth in Section 2.1.
"Marketing Committee" shall have the meaning, set forth in Section 2.4.
"Marketing Expense" shall mean to the extent approved by the Marketing
Committee all costs and expenses incurred by Warner (including without
limitation. the salaries, commissions, bonuses, transportation. meals, lodging,
benefits and healthcare insurance expenses of appropriate employees) associated
with launch, advertising and sales promotion (including, without limitation,
expenses related to promotional publications, space or time in various media,
direct mail campaigns, samples, if any, advertising agency fees and other
promotional activities), the cost of product samples, Phase IV Studies,
Pharmacoeconomic Studies, Phase V Studies, and any other clinical studies not
reasonably necessary to obtain marketing approval by the relevant regulatory
authorities for a Product's first approved indication in any country, in each
case determined in accordance with Warner's normal internal accounting practices
and GAAP.
"Market Price" shall mean the average exchange closing price for
LeukoSite's Common Stock during the five business days beginning, on the day
that work is initiated on the Stage 2 Research Plan or the five (5) business
days preceding Warner's stock purchase under Section 1.4(c), as the case may
be.
<PAGE> 5
5
"MCP-1 Agreement" shall mean the Research, Development and Marketing
Agreement, dated as of September 30, 1994 between LeukoSite and Warner.
"Net Sales" shall mean the gross amount invoiced for sales of a Product
to non-affiliated commercial customers after deduction of the following items:
(i) trade, quantity and cash discounts; (ii) credits, rebates, chargeback
rebates. fees. reimbursements or similar payments granted or given to
wholesalers and other distributors, buying groups, healthcare insurance
carriers. governmental agencies and other institutions provided that such will
not grant a preference or otherwise favor other product(s) of Warner or
LeukoSite, as the case may be, if such preference is based on the fact LeukoSite
or Warner, as the case may be, is entitled to royalties or a share of
co-promotion rights; (iii) credits or allowances to the extent allowed for
rejection or return of such Product previously sold, (iv) allowance for bad debt
expense in accordance with Warner's normal internal accounting practices and
GAAP; (v) any tax, tariff, duty or other governmental charge (other than an
income tax) levied on the sale, transportation or delivery of such Product and
borne by the seller thereof, (vi) payments or rebates paid in connection with
state or federal Medicare, Medicaid or similar programs; and (vii) any charge
for freight or insurance to the extent separately invoiced.
"Patent Rights" shall mean, with respect to LeukoSite or Warner, all
United States and foreign patents owned in whole or in part or licensed to
LeukoSite or Warner, respectively, as to which a sublicense can be granted, at
any time during the Term of this Agreement, which would be infringed by the
manufacture, use or sale of a Product or which would be infringed by activities
to be performed by the parties under the Stage 1 and/or Stage 2 Research Plan
including all United States and foreign patents and patent applications
(including, without limitation, all reissues, extensions, substitutions,
confirmations, registrations, revalidations, additions, continuations,
continuations-in-part, and divisions thereof). Excluded from "Patent Rights" are
compounds that Warner identifies as having anti-inflammatory activity
independent of LeukoSite.
"Pharmacoeconomic Studies" shall mean clinical studies designed with
the primary intention of developing pharmacoeconomic data.
"Phase IV Studies" shall mean clinical studies designed to enhance
sales for an approved indication, but shall not include Pharmacoeconomic
Studies.
<PAGE> 6
6
"Phase V Studies" shall mean clinical studies directed for approval of
additional indications, new dosages or other line extensions.
"Products" shall mean Warner Products, LeukoSite Products,
Warner-LeukoSite Products and/or any product derived from or based on Warner
Collaboration Technology as to which LeukoSite has rights under Section 1.4(a),
as applicable.
"Research Cost" shall mean the aggregate amount of costs incurred by
LeukoSite to perform research under the Stage 2 Research Plan determined in a
reasonable manner and consistent with normal internal accounting practices and
GAAP.
"Research" Committee" shall have the meaning set forth in Section 2.2.
"Sales Cost" with respect to each of Warner and LeukoSite for any
applicable period shall equal the aggregate amount of expenses incurred by such
party for maintaining its sales force (including the costs set forth below) for
Warner-LeukoSite Product in the Designated Co-Promotion Countries. The costs
shall include but not be limited to salary, commissions, bonuses.
transportation, meals, lodging, benefits and health care insurance expenses for
the sales force, and sales force management and support in the Designated
Co-Promotion Countries, all only as it relates to Warner-LeukoSite Product but
specifically excluding any cost or expense included in Marketing Expenses, in
each case determined in accordance with the parties' normal internal cost
accounting practices and GAAP.
"Selling Percentage" with respect to any calendar year shall mean for
LeukoSite * or such lower percentage selected by LeukoSite under Section 4.2 and
for Warner shall mean the difference between one hundred percent (100%) and
LeukoSite's Selling Percentage.
"Stage 1" shall mean the period of research under the Stage I Research
Plan, which period terminates as set forth in Section 1.3
"Stage 1 Research Plan" shall mean the research plan attached hereto as
Exhibit 1.
"Stage 2 Research Plan" shall have the meaning set forth in Section
1.4(b).
"Stage 2 Lead Compound" shall mean a compound that in accordance with
standards established by the Management Committee is
* Confidential treatment requested: material has been omitted and filed
separately with the Commission.
<PAGE> 7
7
sufficiently promising to warrant termination of Stage 1 and initiation of work
under the Stage 2 Research Plan.
"Term of Co-Promotion" for a Warner-LeukoSite Product shall mean, in
each Designated Co-Promotion Country, the period beginning when such
Warner-LeukoSite Product is first sold in such country and lasting until the
Warner-LeukoSite Product will no longer be sold in the applicable Designated
Co-Promotion Country. For the purpose of this definition only, a
Warner-LeukoSite Product does not include a "generic" form of a Warner-LeukoSite
Product which is not covered by a Patent Right.
"Term of this Agreement" shall mean from the Effective Date until this
Agreement is terminated pursuant to its terms.
"Term of the Stage 1 Research Collaboration" shall have the meaning set
forth in Section 1.3.
"Total Profit" shall mean with respect to a Warner-LeukoSite Product,
Net Sales minus the sum of (i) the Cost of Goods, (ii) Marketing Expenses and
(iii) the cost of distribution. For the purposes of this definition only,
Warner-LeukoSite Product does not include a "generic" form of a Warner-LeukoSite
Product which is not covered by a Patent Right.
"Warner Background Technology" shall mean all technology, inventions,
information, data, know-how, compounds, materials and substances (whether or not
patented or patentable) which relate to or are potentially useful as an IL-8
Inhibitor or is an IL-8 Inhibitor and/or techniques for the discovery,
screening, design, synthesis, delivery, development, testing, use, manufacture
or sale of IL-8 Inhibitors which exists as of the Effective Date which is either
owned by Warner or which is licensed to Warner and as to which Warner has a
right to sublicense or otherwise transfer. Excluded from "Warner Background
Technology" is Warner's high volume screening technology and compounds that
Warner identifies as having anti-inflammatory activity independent of LeukoSite.
"Warner Collaboration Technology" shall mean all technology,
inventions, information, dam, know-how, compounds, materials and substances
(whether or not patented or patentable) which is either owned by Warner (alone
or together with LeukoSite) or which is licensed to Warner and as to which
Warner has a right to sublicense or otherwise transfer), which is conceived or
reduced to practice pursuant to the Stage 1 Research Plan or Stage 2 Research
Plan or pursuant to development of a Warner Product or Warner-LeukoSite Product.
<PAGE> 8
8
"Warner-LeukoSite Product" shall have the meaning set forth in Section
4.1.
"Warner Product" shall have the meaning set forth in Section 4.1.
ARTICLE I
RESEARCH PROGRAM
1.1 Undertaking and Scope. Each party agrees to use its best efforts to
perform the activities detailed in the Stage I Research Plan attached hereto as
Exhibit 1 in a professional and timely manner. During Stage 1, LeukoSite will
use its best efforts at its cost (including the cost of any royalties or other
amounts owed to third parties by LeukoSite) to develop and transfer to Warner a
receptor-ligand screen for IL-8 Inhibitors and (ii) cells containing an IL-8
receptor useful in creating an IL-8 triggered cell based screen for IL-8
Inhibitors. During Stage 1, Warner will use its best efforts, utilizing its high
volume screening technology, at its cost (including the cost of any royalties or
other amounts owed to third parties by Warner) to screen substantially all of
its compound library with such screen provided by LeukoSite. Pursuant to the
Stage 1 Research Plan, during Stage 1, LeukoSite will use its best efforts, at
its cost, to conduct in vitro and in vivo characterization of the compounds
identified as blocking IL-8 activity in such-screen.
Notwithstanding the foregoing, Warner may withhold from the
Collaboration any compound that it identifies as possessing anti-inflammatory
activity independent of LeukoSite. Such compounds are excluded from the
Collaboration and Warner may pursue development and marketing of such compounds
independently of this Agreement and LeukoSite.
1.2 Personnel and Resources. Each party agrees to commit the personnel,
facilities, expertise and other resources necessary to perform its obligations
under this Agreement in accordance with its terms; provided, however, that
neither party warrants that the Collaboration will achieve any of the research
objectives contemplated by the parties. Each party agrees to use its best
efforts to assure the complete and prompt exchange of Background Technology,
Collaboration Technology and the results of all activities conducted pursuant to
the Stage 1 Research Plan, the Revised Stage 1 Research Plan and/or the Stage 2
Research Plan. The scientific priorities and direction of the parties'
respective staff under the Stage 1 Research Plan, the Revised Stage 1 Research
Plan and under the Stage 2 Research Plan will be determined by the Management
Committee.
<PAGE> 9
9
1.3 Term of the Stage 1 Research Collaboration. Activities under the
Stage 1 Research Plan, as the same may be amended or expanded from time to time
but only by mutual agreement of the parties, shall commence as of the Effective
Date and, unless terminated earlier by either party pursuant to the terms of
this Agreement or extended by mutual agreement of the parties, shall end upon
designation by the Management Committee of a Stage 2 Lead Compound, but in no
event will such activities continue after the later of (i) January 3, 1997 or
(ii) 15 months after development and transfer by LeukoSite to Warner of a
receptor-ligand screen for IL-8 Inhibitors that is suitable for Warner to mass
screen its compound library (such period being referred to herein as the "Term
of the Stage 1 Research Collaboration").
1.4 Stage 2 Collaboration Options. Promptly after termination or
expiration of Stage 1, but in no event later than thirty (30) days thereafter,
Warner will elect to proceed under one of the following options:
a. Option 1. Warner may terminate this Agreement. In such event, Warner
will grant to LeukoSite a perpetual, royalty-free (except as stated in this
Section below), worldwide, exclusive license (with the right to sublicense) in
the Warner Collaboration Technology (including but not limited to any product
which is identified in the Stage 1 Research as a potential inhibitor of the
action of IL-8 (a "Stage 1 Product")) and any Patent Rights based thereon,
solely for use in the field of chemokine modulation. In addition, Warner will
grant a non-exclusive license under Patent Rights not based on Warner
Collaboration Technology to the extent required to exploit Warner Collaboration
Technology and any patent rights based thereon solely for use in the field of
chemokine modulation. The licenses granted in the preceding two sentences shall
not include any Warner Collaboration Technology (as defined herein), Patent
Rights (as defined herein) or other patent rights insofar as any of the same are
also "Warner Collaboration Technology" (as defined in the MCP-1 Agreement) or
"Patent Rights" (as defined in the MCP-1 Agreement) and licensed to LeukoSite
under the MCP-1 Agreement unless and until the MCP-1 Agreement is terminated
pursuant to Section 1.4(a) thereof. Notwithstanding the foregoing, Warner will
retain a perpetual, royalty-free, worldwide interest in Warner Collaboration
Technology and Patent Rights of Warner based thereon to make, use or sell any
product or process (i) for use outside the field of chemokine modulation or (ii)
discovered after the Term of the Stage 1 Research and which is within the field
of chemokine modulation and which is not derived from or based on LeukoSite
Background Technology, provided that in each case such product is not identical
to a product which is being actively pursued by LeukoSite or any one of its
licensees. LeukoSite shall pay Warner a
<PAGE> 10
10
royalty of * of worldwide Net Sales of (i) any Stage 1 Product (or any
product which results from research by or on behalf of LeukoSite directed to
such Stage 1 Product or any other compound provided by Warner to LeukoSite
pursuant to the Stage 1 Research) sold by LeukoSite or its sublicensee and (ii)
any product sold by LeukoSite or its sublicensee that is covered by a Warner
Patent Right licensed to LeukoSite under this Section, in each case for the
period set forth in Section 5.6(d).
In the event that at any time after exercise of Option 1, Warner
desires to exercise Option 2 with respect to a Stage 1 Product under the terms
and conditions of this Agreement, Warner shall notify LeukoSite in writing, and
if LeukoSite is not actively researching, developing, marketing or selling, such
Stage 1 Product and has not granted rights to such Stage 1 Product to any third
party, then Option 2 shall be considered to be exercised by Warner.
b. Option 2. Warner and LeukoSite may agree to continue collaborative
research in the Field pursuant-to a mutually acceptable expanded research plan
("Stage 2 Research Plan'). Warner will provide funding to LeukoSite for * of
LeukoSite's Research Cost of performing work under the Stage 2 Research Plan
from initiation of such work until three years thereafter and 100% of
LeukoSite's Research Cost under the Stage 2 Research Plan after the expiration
of the three-year period, which amount shall be paid quarterly in advance with a
reconciliation at the end of the year such that LeukoSite receives for the
calendar year the applicable percentage of such Research Cost for the calendar
year. In no event will LeukoSite be required to perform (nor shall Warner be
required to fund) activities under the Stage 2 Research Plan which would require
support for more than five (5) persons per year: provided, however, that in all
events LeukoSite will be reimbursed only for work approved by the Management
Committee. Upon the later of (i) January 3, 1997 and (ii) 2 weeks after
initiation of work under the Stage 2 Research Plan, Warner will purchase $1
Million of capital stock (Preferred if at the time of purchase LeukoSite has not
completed its initial public offering (the "IPO"), and Common if the IPO has
been completed by such time), upon terms substantially similar to those of the
Preferred Stock Purchase Agreement dated November 8, 1994 at (i) $5.00 per share
(subject to adjustment from and after the date hereof upon each stock dividend,
stock split, reverse stock split or other similar event if at the time of
initiation of work under the Stage 2 Research Plan LeukoSite has not yet
completed its IPO or (ii) 125% of the Market Price for LeukoSite's Common Stock
at the time of initiation of work under the Stage 2 Research Plan if at such
initiation LeukoSite has completed its IPO. In the event that any such sale and
purchase shall be of shares of Preferred Stock of LeukoSite, the terms of such
shares of Preferred Stock shall be identical to the terms of
* Confidential treatment requested: material has been omitted and filed
separately with the Commission.
<PAGE> 11
11
LeukoSite's Series C Convertible Preferred Stock, except that (i) such shares of
Preferred Stock shall be from a separate, newly-created series of Preferred
Stock and (ii) unless otherwise agreed to by the parties, the liquidation
preference of such shares of Preferred Stock shall be equal to the purchase
price per share paid by Warner for such shares of Preferred Stock. If LeukoSite
completes an initial public offering of Common Stock for its own account at a
public offering price per share of less than $5.00 (subject to adjustment from
and after the date hereof upon each stock dividend, stock split, reverse stock
split or other similar event), taking into account the fair market value of any
warrants or other rights issued as units with the Common Stock sold in any such
initial public offering, Warner will be issued additional Common Stock, promptly
after the initial public offering is completed, at no cost to Warner, in an
amount sufficient to make Warner's average price per share of capital stock of
LeukoSite purchased pursuant to this Section and then owned by Warner equal to
the public offering price per share of the Common Stock issued in any such
initial public offering.
If LeukoSite does not initiate research under the Stage 2 Research Plan
(or similar plan of research) or after initiating research under the Stage 2
Research Plan LeukoSite terminates such research and such failure to initiate
research or such termination results other than as a result of a breach by
Warner, in such event, by written notice from Warner to LeukoSite, Warner may
terminate LeukoSite's right to participate in such Stage 2 research. If such
right is terminated by Warner in accordance with the preceding sentence, any
compound which is or becomes the subject of the Stage 2 Research Plan (or
similar plan of research) as an IL-8 Inhibitor (or as an inhibitor for a
chemokine other than IL-8 pursuant to Option 3) shall become a Warner Product
subject to the terms and conditions of this Agreement.
c. Option 3. In the event that during Stage 1 or Stage 2, a compound
has been identified as an IL-8 Inhibitor and such compound also has activity as
an inhibitor for a chemokine other than IL-8, and Warner notifies Leukosite in
writing that Warner desires to optimize that non-IL-8 activity instead of IL-8
under Option 2 the parties shall proceed under Option 2 (with appropriate
expansion to the definitions of "Field", "Background Technology", "Collaboration
Technology" and similar terms hereof) with respect to such compound for such
activity unless within thirty (30) days thereafter LeukoSite elects in writing
not to proceed under Option 2. If LeukoSite elects in writing not to continue
with collaborative research with respect thereto (or is prevented from
continuing such collaborative research with respect thereto because of
conflicting third party obligations), in such event, such compound shall
<PAGE> 12
12
become a Warner Product subject to the terms and conditions of this Agreement,
except that no license is granted by LeukoSite under Section 5.1 to such Warner
Product to the extent that LeukoSite is prohibited from granting licenses under
its Patent Rights which are not Background Technology with respect to such
Warner Product as an inhibitor of a chemokine other than IL-8 by an agreement
with a third party. As a result of such compound becoming a Warner Product under
this Option 3 upon the later of (i) January 3, 1997 or (ii) two weeks after
LeukoSite elects in writing not to continue such collaborative research Warner
will purchase $1 Million of LeukoSite capital stock (Preferred if at the time of
purchase the IPO has not been completed, and common if the IPO has been
completed by such time), upon terms substantially similar to those of the
Preferred Stock Purchase Agreement dated November 8, 1994, at (i) $5.00 per
share (subject to adjustment from and after the date hereof upon each stock
dividend, stock split, reverse stock split or other similar event) if at the
time of purchase LeukoSite has not yet completed its IPO or (ii) 125% of the
Market Price for LeukoSite's Common Stock at the time of purchase if at such
time of purchase LeukoSite has completed its IPO. In the event that any such
sale and purchase shall be of shares of Preferred Stock of LeukoSite, the terms
of such shares of Preferred Stock shall be identical to the terms of LeukoSite's
Series C Convertible Preferred Stock, except that (i) such shares of Preferred
Stock shall be from a separate, newly-created series of Preferred Stock and (ii)
unless otherwise agreed to by the parties, the liquidation preference of such
shares of Preferred Stock shall be equal to the purchase price per share paid by
Warner for such shares of Preferred Stock. If LeukoSite completes an initial
public offering of Common Stock for its own account at a public offering price
per share of less than $5.00 (subject to adjustment from and after the date
hereof upon each stock dividend, stock split, reverse stock split or other
similar event), taking into account the fair market value of any warrants or
other rights issued as units with the Common Stock sold in any such initial
public offering, Warner will be issued additional Common Stock, promptly after
the initial public offering is completed, at no cost to Warner, in an amount
sufficient to make Warner's average price per share of capital stock of
LeukoSite purchased pursuant to this Section and then owned by Warner equal to
the public offering price per share of the Common Stock issued in any such
initial public offering.
In the event that Option 2 has been previously exercised and the stock
purchase completed pursuant thereto, Warner shall not be required to purchase
stock pursuant to this Option 3. In addition, if stock is purchased under this
Option 3, and Option 2 is subsequently exercised, the amount of stock that
Warner will be required to purchase the first time that Warner exercises such
Option 2 will be reduced by $1,000,000.
<PAGE> 13
13
Notwithstanding the foregoing, this Section 1.4(c) shall not apply to
inhibitors of MCP-1. In the event that Warner identifies a compound hereunder
that it wishes to optimize for MCP-1 activity, it shall do so pursuant to the
MCP-1 Agreement.
1.5 Rights to Background Technology and Collaboration Technology.
Subject to the terms and conditions of this Agreement each party hereby grants
and agrees to grant to the other a non-exclusive, worldwide, royalty-free
license to use such party's Background Technology and Collaboration Technology
for research and development of an IL-8 Inhibitor under the Stage 1 Research
Plan and under the Stage 2 Research Plan and as to LeukoSite for development of
a LeukoSite Product and as to Warner for development of a Warner Product and/or
Warner-LeukoSite Product. In addition, to the extent permitted by agreements
with third parties, LeukoSite hereby agrees to grant to Warner a non-exclusive,
world-wide, royalty-free license to make and use all data, information and
inventions (whether or not patentable) related to cell based assays developed by
or on behalf of LeukoSite alone or with one or more collaborators, and promptly
to disclose the existence of the same to Warner, for research and development of
an IL-8 Inhibitor under the Stage 1 Research Plan or the Stage 2 Research Plan
or for development of a Warner Product and/or Warner-LeukoSite Product.
1.6 Collaboration Expenses. Subject to the terms of Section 1.4(b) and
Article IV, each party shall bear the costs and expenses of work done pursuant
to the Collaboration at its laboratories and its affiliated laboratories.
1.7 Exclusivity. Until termination of, or a determination not to
initiate activities under, the Stage 1 Research Plan, and the Stage 2 Research
Plan, neither LeukoSite nor Warner will undertake any research or development of
IL-8 Inhibitors except pursuant to this Agreement. Notwithstanding the
foregoing, LeukoSite may undertake research and development, alone or with one
or more third parties, on antibodies against IL-8 or its receptor for inhibiting
the action of IL-8 and may undertake activities alone or with a third party or
grant rights to a third party to test or screen a compound for inhibition of
IL-8 as part of a program to research and develop a compound as a non-IL-8
inhibitor and/or may grant rights to a third party under LeukoSite Background
Technology with respect to an IL-8 inhibitor, provided that such program and/or
such IL-8 inhibitor is a direct result of identification of a compound as an
inhibitor of a chemokine other than IL-8.
<PAGE> 14
14
1.8 Third Party Collaborations. LeukoSite agrees that it will not
assist any third party, nor permit any third party to use any of its technology,
data, information or inventions (whether or not patentable), in connection with
the research, development or commercialization of any compound that has a
similar structure to a compound that at the later of (i) the time of discovery
of such third party's compound or (ii) the date that LeukoSite is to become
first involved in the research or development or commercialization of such third
party compound is the subject of active research, development or
commercialization by Warner or one of its licensees under this Agreement. The
foregoing shall apply only for so long as such compound remains subject to
active research, development, clinical development or commercialization by
Warner or one of its licensees under this Agreement.
ARTICLE II
MANAGEMENT COMMITTEE; RECORDS AND REPORTS
2.1 Management Committee. Promptly after the Effective Date, Warner and
LeukoSite will each appoint 3 representatives to a management committee (the
"Management Committee"). The Warner representatives on such committee will
together have only one vote and the LeukoSite members on such committee will
together have only one vote. The Management Committee will meet promptly after
the Effective Date to prepare such procedures and mechanisms as may be necessary
for the operation of the Management Committee, the Research Committee and the
Development Committee(s) to assure the most efficient conduct of the
Collaboration. Thereafter, the Management Committee will meet quarterly or as
otherwise mutually agreed. The Management Committee will assure that agendas and
minutes are prepared for each of its meetings. The personnel, facilities,
expertise and other resources of each party to be used in performance of the
Collaboration shall be established by the Management Committee. The Management
Committee will have the authority to designate Stage 2 Lead Compounds and
Development Candidates pursuant to Section 4.1 and will have the other rights
and responsibilities specifically set forth in this Agreement. The Management
Committee will have the authority to resolve disputes among the members of the
Research Committee and among the members of any Development Committee. All
actions taken and decisions made by the Management Committee shall be by
unanimous agreement. If the Management Committee fails to reach unanimous
consent on any matter, the matter will be resolved by the senior officer of
Warner's pharmaceutical business with the advice of LeukoSite's President. A
party may change any of its appointments to the Management Committee at any time
upon giving
<PAGE> 15
15
written notice to the other party. The Management Committee does not itself have
the authority to amend this Agreement in any manner that would require the
separate approval of authorized officers of the respective parties.
2.2 Research Committee. Warner and LeukoSite will each appoint up to 4
representatives to a research committee (the "Research Committee"), which will
oversee the pre-clinical aspects of the Collaboration; except that such
responsibilities will pass to the Development Committee in the case of a
Warner-LeukoSite Product, to Warner in the case of a Warner Product and to
LeukoSite in the case of a LeukoSite Product. The Warner representatives on such
committee will together have only one vote and the LeukoSite members on such
committee will together have only one vote. The Research Committee will meet
quarterly, or more frequently if mutually agreed, and will report to the
Management Committee. Warner's and LeukoSite's initial representatives to the
Research Committee will be appointed by each of them promptly after the
Effective Date. The Research Committee will be responsible for recommending
compounds to be designated Development Candidates. All actions taken and
decisions made by the Research Committee will be by unanimous agreement. The
Management Committee will resolve disputes among the members of the Research
Committee. A party may change any of its appointments to the Research Committee
at any time upon giving written notice to the other party.
2.3 Development Committee. Warner and LeukoSite will each appoint up to
4 representatives to one or more development committees (the "Development
Committee(s)"), which will oversee the pre-clinical and clinical development of
each Warner-LeukoSite Product. A separate Development Committee will be
established for each Warner-LeukoSite Product promptly after a Development
Candidate is designated a Warner-LeukoSite Product. The Warner representatives
on such committee will together have only one vote and the LeukoSite members on
such committee will together have only one vote. All actions taken and decisions
made by the Development Committee will be by unanimous consent. Warner will have
primary responsibility for interfacing with all regulatory agencies worldwide in
connection with the relevant Warner-LeukoSite Product. LeukoSite will be invited
to attend all regulatory meetings and will be kept fully apprised of all
regulatory interactions. The Management Committee will resolve disputes among
the members of any Development Committee. A party may change any of its
appointments to any Development Committee at any time upon giving written notice
to the other party.
<PAGE> 16
16
2.4 Marketing Committee. Each party will appoint four members to one or
more marketing committees (the "Marketing Committee(s)"), which will oversee the
marketing and promotion of each Warner-LeukoSite Product in each Designated
Co-Promotion Country. A separate Marketing Committee will be formed for each
Warner-LeukoSite Product promptly after completion of phase II clinical studies
of such Warner-LeukoSite Product. The Warner representatives on such committee
will together have only one vote and the LeukoSite members on such committee
will together have only one vote. Decisions of the Marketing Committee will be
by unanimous consent and disputes relating thereto will be resolved in
accordance with Section 12.4. A party may change any of its appointments to any
Marketing Committee at any time upon giving written notice to the other party.
2.5 Meetings. The Management Committee, the Research Committee, the
Development Committees and the Marketing Committees may meet by telephone or in
person at such times as are agreeable to the members of each such committee.
Attendance at meetings shall be at the respective expense of the participating
parties. Warner and LeukoSite shall alternate the right to determine the
location of each meeting, with LeukoSite determining the location of the first
meeting of each committee. A quorum for the conduct of business at each meeting
shall require the attendance of at least one Warner member and at least one
LeukoSite member.
ARTICLE III
PATENTS, KNOW-HOW, RIGHTS AND INVENTIONS
3.1 Rights to Inventions. Ownership of Collaboration Technology shall
be determined in accordance with United States laws of inventorship. The owner
(the "Inventor") of any patentable Collaboration Technology (an "Invention")
shall have the right, at its option and expense, to prepare, file and prosecute
worldwide in its own name any patent applications with respect to any Invention
owned by it and to maintain any patents issued. In connection therewith, the
non-Inventor party agrees to cooperate with the Inventor at the Inventor's
expense in the preparation and prosecution of all such patent applications and
in the maintenance of any patents issued. This obligation shall survive the
expiration or termination of this Agreement.
3.2 Joint Inventions. Collaboration Technology jointly invented by
LeukoSite and Warner will be jointly owned by them; however, Warner will have
the rights and responsibilities of the "Inventor" as described in
<PAGE> 17
17
this Article III in respect of any such patentable, jointly owned Collaboration
Technology and LeukoSite shall have the rights and responsibilities of a
non-Inventor therein. Warner shall pay all expenses in connection with the
preparation, filing and prosecution of patent applications that claim
patentable, jointly owned Collaboration Technology and maintain, enforce and
protect all patents issuing thereon. Warner shall from time to time notify
LeukoSite of the amount of its out-of-pocket expenses in connection with the
foregoing and LeukoSite shall promptly thereafter pay Warner 50% of the
out-of-pocket expenses incurred by Warner. At LeukoSite's option, such payments
to Warner may be delayed and to the extent so delayed, such payments may be
credited by Warner against milestone, royalty or co-promotion payments to be
made by Warner to LeukoSite hereunder or pursuant to the MCP-1 Agreement,
regardless of which Product (as defined herein and/or in the MCP-1 Agreement)
such payments relate to, but in no event may any such payment to LeukoSite be
reduced by more than 30% as a result of this provision.
3.3 Protection of Patent Rights. (a) The Inventor shall keep the other
party currently informed of all steps to be taken in the preparation,
prosecution and maintenance of all of its patents and patent applications now or
hereafter existing which claim such Invention and shall furnish the other party
with copies of patents and applications, amendments thereto and other related
correspondence relating to such Invention to and from patent offices and permit
the other party to offer its comments thereon before the Inventor makes a
submission to a patent office which could materially affect the scope or
validity of the patent coverage that may result. The non-Inventor party shall
offer its comments promptly. LeukoSite and Warner shall each promptly notify the
other of any infringement and/or unauthorized use of an Invention that comes to
its attention.
(b) The non-Inventor party may request in writing that the Inventor
take specific, reasonable actions to (i) prepare, file or prosecute patent
applications in the United States of America and all other countries of the
world with respect to an Invention, (ii) maintain any patents issued with
respect to an Invention, (iii) protect against abandonment of a patent or
application which claims an Invention or (iv) obtain a discontinuance of an
infringement or unauthorized use of such patent or application. If such actions
are not undertaken within thirty days of the Inventor's receipt of such written
request and timely pursued thereafter, the Inventor shall permit, and the
non-Inventor party at its option and expense may undertake, such actions in the
name and on behalf of the Inventor. The party not undertaking such actions shall
fully
<PAGE> 18
18
cooperate with the other party and shall provide to the other party whatever
documents that may be needed in connection therewith. The party not undertaking
such actions may require a suitable indemnity against all damages, costs and
expenses and impose such other reasonable conditions as such party's advisors
may require.
(c) If either party commences any actions or proceedings (legal or
otherwise) pursuant to this Section, it shall prosecute the same vigorously at
its expense and shall not abandon or compromise them or fail to exercise any
rights of appeal without giving the other party the right to take over their
conduct at its own expense. The party finally conducting legal actions or
proceedings against an alleged infringer or other party shall be entitled to any
damages or costs awarded against such infringer or other party, provided,
however, that if Warner initiates such action to protect a Warner Product or
Warner-LeukoSite Product, then the amount of the award less applicable legal
expenses incurred by Warner will be considered Net Sales of the applicable
Warner or Warner-LeukoSite Product, and if LeukoSite initiates such action to
protect a LeukoSite Product, the amount of the award less applicable legal
expenses incurred by LeukoSite shall be considered Net Sales of the applicable
LeukoSite Product.
3.4 Allegations of Infringement by Third Parties. In the event that
Warner or LeukoSite receives notice that any action by either of them under this
Agreement is alleged to be a violation of the patent or other intellectual
property rights of a third party, it shall immediately notify the other party to
this Agreement. The Management Committee shall promptly determine an appropriate
response and course of action. In the case of a Warner-LeukoSite Product Warner
will control any defense, and the costs thereof (including any damages, costs or
expenses resulting from any action) shall be borne by Warner. In the case of a
Warner Product or a LeukoSite Product the control and costs of defense
(including any damages, costs or expenses resulting from any action) will be
borne by Warner or LeukoSite, respectively.
ARTICLE IV
DESIGNATION OF DEVELOPMENT CANDIDATES AND MARKETING RIGHTS
4.1 Designation of Development Candidate. Each chemokine inhibitor
which is the subject of a Stage 2 Research Plan (including modifications of such
inhibitors), will be designated a "Development Candidate", if ever, upon the
declaration by the Management Committee
<PAGE> 19
19
that such compound satisfies Warner's then current, internal standards for a
"lead compound." LeukoSite shall have the right to request that the Management
Committee designate such a chemokine inhibitor as a Development Candidate if
LeukoSite reasonably believes that there is sufficient biological and chemical
data to initiate pre IND studies in accordance with Good Laboratory Practices.
In the event that such compound is not designated as a Development Compound by
the Management Committee within one year after such request by LeukoSite, then
such compound shall automatically be designated and shall become a Development
Candidate subject to the terms and conditions of this Agreement. Within one
month after designation of a Development Candidate, Warner will notify LeukoSite
in writing whether it elects to pursue marketing rights in such Development
Candidate pursuant to this Agreement. Forty-five (45) days after Warner provides
to LeukoSite in writing its non-binding, best estimate of the costs for
Development of the Development Candidate, LeukoSite shall notify Warner in
writing whether or not LeukoSite will exercise marketing rights therein in the
U.S. and any of the other Co-Promotion Countries and designate each such other
Country. Upon such exercise of marketing rights by LeukoSite the Development
Candidate shall become a "Warner-LeukoSite Product". If LeukoSite fails to
exercise marketing rights within the stated period the Development Candidate
shall become a "Warner Product". If Warner fails to exercise marketing rights
for a Development Candidate within the stated period, the Development Candidate
shall become a "LeukoSite Product".
4.2 Warner-LeukoSite Product. For each Warner-LeukoSite Product,
pre-clinical and clinical Development thereof will be pursued jointly under the
direction of the Development Committee to the extent necessary or desirable for
regulatory approval in each Designated Co-Promotion Country. The preparation,
filing and prosecution of Investigational New Drug Applications, New Drug
Applications and other regulatory filings required to be filed with the FDA and
its foreign equivalents in regard to any Warner-LeukoSite Product will be in the
name of and at the responsibility of Warner, subject, in the case of Designated
Co-Promotion Countries, to the advice of LeukoSite. The costs incurred by Warner
or LeukoSite (and approved by the Development Committee) in the preparation,
filing and submission of such regulatory filings in Designated Co-Promotion
Countries and all costs of Development related to regulatory approvals in such
countries (not including the costs of Pharmacoeconomic Studies incurred after
initiation of the Term of Co-Promotion, Phase IV Studies, Phase V Studies or any
other clinical studies not reasonably necessary for authorization by relevant
regulatory authorities to sell such Product for its first approved
<PAGE> 20
20
indication in each country), will be borne 70% by Warner and 30% by LeukoSite
(whether incurred by Warner or LeukoSite), retroactive to the date the
Warner-LeukoSite Product was designated a Development Candidate. LeukoSite
within its sole discretion at the time of designation of a Development Candidate
as a Warner-LeukoSite Product may elect to pay less than thirty percent (30%) of
such costs of Development but in no event less than twenty percent (20%)
thereof. LeukoSite may not thereafter change the percentage of Development costs
borne by it without Warner's consent. Neither party warrants that any regulatory
filings will actually be filed or, if filed, will be approved. All such costs
shall be paid/reimbursed on a current basis. Cost of Development shall mean the
following insofar as they are reasonably charged directly to Development of the
Product: salaries, fringe benefits, overtime, chemicals, lab supplies, animals
and other direct charges, all at actual cost plus an overhead allocation of 25%
(cost X 1.25). In addition, costs of Development will also include actual costs
for travel (other than costs relating to committee meetings referred to in
Section 2.5), experimental products (experimental product cost is the actual,
direct cost of manufactured drug for clinical trial and stability purposes),
clinical studies performed by investigators under contract with Warner or
LeukoSite, toxicology studies performed by outsiders under contract with Warner
or LeukoSite and out-of-pocket costs for other outside professional services all
to the extent that the same are approved by the Development Committee and
supported by invoices and actual payments.
4.3 Warner Product. Subject to Sections 4.5, 4.6 and 4.7 Warner may
pursue Development and commercialization of a Warner Product at its direction.
All costs of Development of a Warner Product will be borne by Warner from the
date of such election.
4.4 LeukoSite Product. LeukoSite may pursue Development and
commercialization of a LeukoSite Product at its direction. All costs of
Development of a LeukoSite Product will be borne by LeukoSite from the date of
such election.
4.5 Warner agrees to use at least that level of effort that it employs
for its other products of similar scientific and commercial promise to develop,
obtain regulatory approval for and to market and sell in each country each
Warner Product and each Warner-LeukoSite Product and to continue to market and
sell in each country each Warner Product and each Warner-LeukoSite Product (in
each case by itself or through one or more Affiliates or licensees).
<PAGE> 21
21
4.6 Warner agrees to promptly notify LeukoSite in writing if at any
time Warner does not intend to continue to: develop and/or obtain regulatory
approval for and/or market and sell any Warner Product or Warner-LeukoSite
Product (in each case by itself or through one or more Affiliates or licensees).
4.7 In the event that Warner does not meet its obligations under
Section 4.5 with respect to any Warner Product or any Warner-LeukoSite Product
in any country(ies) or Warner provides LeukoSite with notice pursuant to Section
4.6 with respect to any Warner-LeukoSite Product or Warner Product with respect
to any country(ies), such Warner Product and/or Warner-LeukoSite Product in such
country(ies), upon written notice from LeukoSite to Warner, shall become a
LeukoSite Product.
4.8 In the event that any Warner Product or Warner-LeukoSite Product
becomes a LeukoSite Product in any country(ies), Warner shall transfer to
LeukoSite any and all information, data, technology and know-how related to the
development, manufacture and sale of such Warner Product and/or Warner LeukoSite
Product. In addition, to the extent allowed by law, Warner shall permit
LeukoSite to refer to and use any regulatory filings and/or information
contained therein to obtain approval for marketing and sale by LeukoSite or its
sublicensees or agents of such Warner and/or Warner-LeukoSite Product and to the
extent permitted by law Warner shall transfer to and/or permit LeukoSite and/or
its agents or sublicensees to operate under any regulatory approval or
regulatory application with respect to such Warner Product and/or
Warner-LeukoSite Product in such country(ies).
4.9 Upon sixty (60) days prior written notice, LeukoSite may terminate
LeukoSite's obligation to fund Development of any Warner-LeukoSite Product in
the Designated Co-Promotion Countries, in which case, upon sending of such
notice, such Warner-LeukoSite Product shall become a Warner Product, provided,
however, that LeukoSite will be obligated to continue its Development efforts
and pay its share of the costs with respect to such Product until the expiration
of such notice period.
4.10 Upon six (6) months prior written notice by Warner to LeukoSite,
Warner may terminate its obligation to pursue a Warner-LeukoSite Product in any
country and upon sending of such notice such Warner-LeukoSite Product shall
become a LeukoSite Product in such country, however, Warner shall be obligated
to continue its Development efforts and pay its share of the costs with respect
to such Warner-LeukoSite Product in such country until the expiration of the
first 60 days of such six (6) month period. At the request of LeukoSite Warner
will
<PAGE> 22
22
continue its Development efforts with respect to such Warner-LeukoSite Product
for the remainder of such six month period, provided that LeukoSite reimburses
Warner for the costs of such effort promptly after Warner invoices such costs.
4.11 In the event a Warner Product or a Warner-LeukoSite Product
becomes a LeukoSite Product, and for so long as Warner is manufacturing such
product for its own purposes, Warner agrees to manufacture and supply to
LeukoSite such LeukoSite Product to the extent that Warner is able to do so
without adversely affecting its requirements therefor upon terms and conditions
and profit margins which are customary in the industry for a supplier of
products of such type.
4.12 No earlier than one year after a product becomes a LeukoSite
Product, Warner can request in writing that such LeukoSite Product become a
Warner Product, or in the case where such LeukoSite Product was originally a
Warner-LeukoSite Product that such LeukoSite Product become a Warner-LeukoSite
Product, subject to the terms and conditions of this Agreement, and if LeukoSite
is not actively researching, developing, marketing or selling such LeukoSite
Product and has not granted rights thereto to a third party, such LeukoSite
Product shall become a Warner Product or a Warner-LeukoSite Product, as the case
may be, subject to the terms and conditions of this Agreement.
ARTICLE V
LICENSES AND ROYALTIES
5.1 Grant by LeukoSite. Except as provided in Section 1.4(c), LeukoSite
hereby grants and agrees to grant to Warner under the Patent Rights of LeukoSite
and under LeukoSite Collaboration Technology and LeukoSite Background Technology
(i) exclusive, worldwide licenses to the limited extent necessary to make, have
made, use and sell (with the right to sublicense) each Warner Product and each
Warner-LeukoSite Product outside of the Designated Co-Promotion Countries, (ii)
exclusive licenses to the limited extent necessary to make or have made each
Warner-LeukoSite Product in the Designated Co-Promotion Countries and (iii)
co-exclusive licenses (non-sublicensable and shared only with LeukoSite) to the
limited extent necessary to use and sell each Warner-LeukoSite Product in the
Designated Co-Promotion Countries pursuant to the terms of this Agreement.
5.2 Grant by Warner. Warner hereby grants and agrees to grant to
LeukoSite under the Patent Rights of Warner and under Warner
<PAGE> 23
23
Collaboration Technology and Warner Background Technology (i) exclusive,
worldwide licenses to the limited extent necessary to make, have made, use and
sell (with the right to sublicense) each LeukoSite Product and (ii) co-exclusive
licenses (non-sublicensable and shared only with Warner) to the limited extent
necessary to use and sell each Warner-LeukoSite Product in the Designated
Co-Promotion Countries pursuant to the terms of this Agreement.
5.3 (a) Warner agrees that Warner will not use or grant rights to use
Warner compounds identified as IL-8 Inhibitors using the screens referred to in
Section 1.1 for an IL-8 Inhibitor and will not use or grant rights to use
LeukoSite Background Technology or LeukoSite Collaboration Technology except for
(i) activities under the Stage 1 Research Plan, (ii) activities under the Stage
2 Research Plan, and/or (iii) activities with respect to development, marketing,
sale, manufacture or use of a Warner Product and/or a Warner-LeukoSite Product
for which payments are to be made to LeukoSite under this Agreement.
(b) LeukoSite agrees that LeukoSite will not use or grant rights to use
Warner compounds identified as IL-8 Inhibitors using the screens referred to in
Section 1.1 as an IL-8 Inhibitor and will not use or grant rights to use Warner
Background Technology or Warner Collaboration Technology except for (i)
activities under the Stage 1 Research Plan, (ii) activities licensed under the
Stage 2 Research Plan, (iii) activities licensed to LeukoSite pursuant to
Section 1.4(a) and/or (iv) activities with respect to development, marketing,
sale, manufacture or use of a LeukoSite Product for which payments are to be
made to Warner under this Agreement.
5.4 Warner and LeukoSite each acknowledges and agrees to the extent
that it is granted a right or license under this Agreement as a sublicensee such
sublicense is subject to the terms and conditions of the agreement under which
the sublicense is granted. Warner or LeukoSite, as a sublicensee, will perform
the obligations (other than payment obligations) which are applicable to a
sublicensee pursuant to the agreement under which the sublicense is granted. No
such sublicense shall be granted until LeukoSite has expressly notified Warner
in writing of the obligations of such sublicense and Warner has acknowledged
that it will perform such obligations.
5.5 Manufacturing. (a) Warner will notify LeukoSite if Warner and its
Affiliates elect not to manufacture the active ingredient of any Warner Product
or Warner-LeukoSite Product. In such event, LeukoSite may
<PAGE> 24
24
offer to perform such manufacturing. Warner, in its reasonable judgment, may
elect to have LeukoSite or a third party perform such manufacturing.
(b) LeukoSite will notify Warner if LeukoSite and its Affiliates elect
not to manufacture the active ingredient of any LeukoSite Product. In such
event, Warner may offer to perform such manufacturing. LeukoSite, in its
reasonable judgment, may elect to have Warner or a third party perform such
manufacturing.
(c) The reasonable judgment of a party choosing a manufacturer shall
include issues such as price, competence, reliability and experience of the
proposed manufacturer.
5.6 Royalties and Other Compensation. (a) Warner will pay LeukoSite one
of the following royalties on worldwide Net Sales of Warner Products, whichever
is applicable:
(i) If LeukoSite does not timely elect to pursue marketing rights to
the Development Candidate under Section 4.1 or if a Warner-LeukoSite Product
becomes a Warner Product prior to LeukoSite paying its designated share of
Development Costs under Section 4.2 up to and including acceptance by the FDA of
the relevant IND, the applicable royalty rate will be * of worldwide Net Sales.
(ii) If LeukoSite pays its designated share of Development Costs under
Section 4.2 up to and including the acceptance by the FDA of the relevant IND,
but thereafter revokes its marketing rights such that the Warner-LeukoSite
Product becomes a Warner Product, the applicable royalty rate will be * of
worldwide, annual Net Sales up to $100 Million; * of worldwide, annual Net
Sales from above $100 Million to $250 Million and * of worldwide, annual Net
Sales above $250 Million.
(iii) If LeukoSite pays its designated share of Development Costs under
Section 4.2 up to and including completion of all Phase II clinical studies
reasonably deemed necessary by the Management Committee for regulatory approval
to market the Product in the United States of America, but thereafter revokes
its marketing rights such that the Warner-LeukoSite Product becomes a Warner
Product, the applicable royalty rate will be * of worldwide, annual Net Sales
up to $100 Million; * of worldwide, annual Net Sales from above $100 Million to
$250 Million and * of worldwide, annual Net Sales above $250 Million.
(iv) For Warner Products, which become Warner Products under Section
1.4(b) and/or Section 1.4(c), the applicable royalty will be * of
* Confidential treatment requested: material has been omitted and filed
separately with the Commission.
<PAGE> 25
25
worldwide, annual Net Sales up to $100 Million and * of worldwide, annual Net
Sales above $100 Million.
(b) Warner will pay LeukoSite the following royalties on Net Sales of
all Warner-LeukoSite Products sold outside of the Designated Co-Promotion
Countries for which LeukoSite has paid its designated share of Development Costs
under Section 4.2 up to and including NDA approval in the United States: * of
such annual Net Sales up to $100 Million and * of such annual Net Sales above
$100 Million.
(c) LeukoSite will pay Warner one of the following royalties on
worldwide Net Sales of LeukoSite Products, whichever is applicable:
(i) The applicable royalty rate will be 3% of the worldwide
Net Sales, except as provided in 5.6(c)(ii) below;
(ii) If Warner pays its designated share of Development Costs
under Section 4.2 up to and including filing of the relevant IND, but thereafter
revokes its marketing rights, the applicable royalty rate will be * of
worldwide, annual Net Sales up to $100 Million and * of worldwide, annual Net
Sales above $100 Million.
(d) The royalties set forth in this Section will be payable on a
Product by Product and country by country basis for a period of ten (10) years
from first commercial sale in a country as part of nationwide introduction of
the Product. If at the expiration of such ten (10) year period, a Product(s) is
sold in a country(ies) and such Product(s) where manufactured, used or sold
infringes a Patent Right, then the royalty shall continue with respect to such
Product(s) in such country(ies) until expiration of such Patent Right.
(e) As used herein, "Annual Net Sales" shall mean Net Sales in a
calendar year.
(f) In addition to royalties, Warner shall pay to LeukoSite the sum of
* upon execution of this Agreement.
5.7 Currency of Payment. All payments to be made under this Agreement
shall be made in United States dollars in the United States to a bank account
designated by the party to be paid. Royalties earned shall first be determined
in the currency of the country in which they are earned and then converted to
its equivalent in United States currency. The buying rates of exchange for the
currencies involved into the currency of the United States quoted by Citibank
(or its successor in interest) in
* Confidential treatment requested: material has been omitted and filed
separately with the Commission.
<PAGE> 26
26
New York, New York at the close of business on the last business day of the
quarterly period in which the royalties were earned shall be used to determine
any such conversion.
5.8 Payment and Reporting. The royalties due under Section 5.6 shall be
paid quarterly, within sixty (60) days after the close of each calendar quarter,
or earlier if possible (i.e., on or before the last day of each of the months of
May, August, November and February) immediately following each quarterly period
of each year in which such royalties are owed. With each such quarterly payment,
the payor shall furnish the payee a royalty statement (the "Royalty Statement"),
setting forth on a country-by-country basis the total number of units of each
Product made, used and/or sold hereunder for the quarterly period for which the
royalties are due.
5.9 Records. The royalty paying party shall keep accurate books and
accounts of record in connection with the manufacture, use and/or sale by or for
it of all products in sufficient detail to permit accurate determination of all
figures necessary for verification of royalty obligations set forth in this
Article V. Such records shall be maintained for a period of 3 years from the end
of each year in which sales occurred. The payee, at its expense, through a
certified public accountant, shall have the right to access such books and
records for the sole purpose of verifying the Royalty Statements; such access
shall be conducted after reasonable prior notice by the payee to the payor
during the payor's ordinary business hours and shall not be more frequent than
once during each calendar year. Said accountant shall not disclose to the payee
or any other party any information except that which should properly be
contained in a royalty report required under this Agreement. In the event that
there has been an underreporting of royalties of ten percent (10%) or greater
over the full period reviewed by such accountants, then the cost of such
accountants shall be paid by the payor. Any underpaid royalties shall be paid
within thirty (30) days after notice of the underpayment.
5.10 Taxes Withheld. Any income or other tax that one party hereunder,
its Affiliates or sublicensees is required to withhold (the "Withholding Party")
and pay on behalf of the other party hereunder (the "Withheld Party") with
respect to the royalties or other amounts payable under this Agreement shall be
deducted from and offset against said royalties or other amounts prior to
remittance to the Withheld Party; provided, however, that in regard to any tax
so deducted, the Withholding Party shall give or cause to be given to the
Withheld Party such assistance as may reasonably be necessary to enable the
Withheld Party
<PAGE> 27
27
to claim exemption therefrom or credit therefor, and in each case shall furnish
the Withheld Party proper evidence of the taxes paid on its behalf.
5.11 Computation of Royalties. All sales of LeukoSite Products between
LeukoSite and any of its Affiliates and sublicensees with the intent of resale
by such Affiliates and sublicensees shall be disregarded for purposes of
computing royalties under this Article V, but in such instances royalties shall
be payable only upon commercial sales to unlicensed third parties by the
Affiliates and sublicensees. Nothing herein contained shall obligate LeukoSite
to pay Warner more than one royalty on any unit of a LeukoSite Product. All
sales of Warner Products or Warner-LeukoSite Products between Warner and any of
its Affiliates and sublicensees with the intent of resale by such Affiliates and
sublicensees shall be disregarded for purposes of computing royalties under this
Article V, but in such instances royalties shall be payable only upon commercial
sales to unlicensed third parties by the Affiliates and sublicensees. Nothing
herein contained shall obligate Warner to pay LeukoSite more than one royalty on
any unit of a Warner Product or Warner-LeukoSite Products.
5.12 Licenses to Affiliates. Each party shall, at the other party's
request, sign license and/or royalty agreements in respect of Warner Products,
LeukoSite Products or Warner-LeukoSite Products not being co-promoted by the
parties hereunder directly with the other party's Affiliates and sublicensees in
those situations where such agreements would not decrease the amount of
royalties or other amounts which would be owed hereunder. Such agreements shall
contain the same language as contained herein with appropriate changes in
parties and territory. No such license and/or royalty agreement will relieve
Warner or LeukoSite, as the case may be, of its obligations hereunder, and such
party will guarantee the obligations of its Affiliate or sublicensee in any such
agreement. Royalties and other amounts received directly from one party's
Affiliates and sublicensees shall be credited towards such party's obligations
hereunder.
5.13 Milestone Payments.
(a) Warner will pay LeukoSite the following amounts the first time that
each of the following milestones is achieved:
(i) Designation of a Development
Candidate as a Warner Product
or a Warner-LeukoSite Product................$*
* Confidential treatment requested: material has been omitted and filed
separately with the Commission.
<PAGE> 28
28
(ii) Acceptance by the FDA of an IND (or its equivalent in
Japan or in each of the United Kingdom, France,
Italy, Germany and Spain hereinafter such five
countries being collectively "EU") for a Warner
Product or a Warner-LeukoSite
Product....................................$*
(iii) Acceptance for filing by the FDA of an NDA (or its
equivalent in EU or Japan) for a Warner Product or a
Warner-LeukoSite
Product....................................$*
(iv) Approval by the FDA of an NDA (or its equivalent in
EU or Japan) for a Warner Product or a Warner-
LeukoSite Product..........................$*
(v) Approval by the FDA of an NDA (or its equivalent in
EU or Japan) for a second Warner Product or
Warner-LeukoSite Product ................$*
(b) LeukoSite will pay Warner $* each time that an NDA (or its
equivalent in EU or Japan) is granted for a LeukoSite Product.
5.14 Pre-existing Milestone/Royalty Obligations. Certain research
activities to be performed hereunder and the manufacture, use or sale of
Products hereunder may require payments to unaffiliated third parties. Such
payments in respect of rights that a party hereto currently has an interest in
or could have an interest in pursuant to any currently existing agreements will
be borne by such party. All other such payments will be borne by (i) Warner in
the case of a Warner Product or a Warner-LeukoSite Product sold outside of the
Designated Co-Promotion Countries, (ii) LeukoSite in the case of a LeukoSite
Product, and (iii) as a "Cost of Goods" in the case of Warner-LeukoSite Products
sold in the Designated Co-Promotion Countries. Each party hereto will disclose
such payment obligations to the other party hereto prior to designation of the
subject compound as a Development Candidate.
*Confidential treatment requested: material has been omitted and filed
separately with the Commission.
<PAGE> 29
29
ARTICLE VI
CO-PROMOTION OF WARNER-LEUKOSITE PRODUCTS
6.1 Marketing and Marketing Plans. Each Warner-LeukoSite Product will
be marketed in each country with one label and will bear one or more trademarks
owned by Warner. Advertising and promotional material in respect of each
Warner-LeukoSite Product in each Designated Co-Promotion Country (including any
Product labeling or packaging inserts to the extent permitted by law and
approved by the Marketing Committee) will include LeukoSite's name and address,
the size and placement of which will be determined by the Marketing Committee.
The Marketing Committee will be responsible for developing and approving
marketing plans and the advertising and other promotional materials to be used
in co-promoting each Warner-LeukoSite Product in each Designated Co-Promotion
Country. Warner will be responsible, with LeukoSite's advice in the case of
Designated Co-Promotion Countries, for seeking acceptance of each
Warner-LeukoSite Product on formularies, if applicable, and for all other
negotiations with managed care organizations and other institutional purchasers.
The Marketing Committee shall coordinate and implement the marketing
and detailing strategies, tactics, joint sales force training program and sales
forecasts, and post-approval clinical studies for Warner-LeukoSite Product, and
Budgeted Total Detail Effort for each calendar year for the Warner-LeukoSite
Product in the Designated Co-Promotion Countries (hereinafter, collectively, the
"Business Plan").
The Marketing Committee shall develop a Business Plan for each calendar
year in which Warner-LeukoSite Product will be sold in the Designated
Co-Promotion Countries.
The annual Business Plan shall contain the responsibilities of each
party and shall establish the Budgeted Detail Effort for each party for the
subsequent calendar year; provided, however, that in each calendar year
LeukoSite shall not be required to accept (without LeukoSite's consent) nor
shall it be entitled to undertake (without Warner's consent) a Budgeted Detail
Effort greater than its Selling Percentage of the Budgeted Total Detail Effort.
The Marketing Committee shall also establish a semi-annual or annual forecast of
(i) Marketing Expenses and; (ii) the number and position of Details and specific
professionals to be targeted by the Details (broken down on a monthly or
quarterly basis) to be made by each party's sales force during such calendar
year.
For each calendar year, within thirty (30) days after establishment of
the Budgeted Total Detail Effort for the calendar year, LeukoSite by written
notice and within its sole discretion, may elect a Budgeted Detail
<PAGE> 30
30
Effort for such calendar year which is less than LeukoSite's Selling Percentage
of the Budgeted Total Detail Effort and the Budgeted Detail Effort of LeukoSite
for the calendar year shall be decreased in accordance with such election with,
at Warner's option (i) a corresponding increase in the Budgeted Detail Effort of
Warner (ii) a corresponding decrease in the Budgeted Total Detail Effort or
(iii) a combination of (i) and (ii). In addition, in the event LeukoSite elects
such a reduced Budgeted Detail Effort, LeukoSite shall pay to Warner the
increased Sales Cost incurred by Warner to the extent that the Budgeted Detail
Effort for Warner is increased to greater than Warner's percentage of the
Budgeted Total Detail Effort prior to such election by LeukoSite. Such increased
Sales Cost shall be determined by dividing the total Sales Cost of Warner by the
Detail Effort for Warner for the calendar year and multiplying such number by
the difference between the Budgeted Detail Effort of LeukoSite and the Detail
Effort of LeukoSite for the calendar year.
Either party may in any calendar year make Details in excess of the
Budgeted Detail Effort without the written agreement of the other. However,
absent such agreement, a party shall not receive compensation for such excess
Details.
Each party shall keep track of the number and position of Details by
its representatives in accordance with its normal internal reporting procedures.
Within thirty (30) days after the last day of each calendar month, each party
shall submit to the other party, a report with respect to the number of Details
performed by such party's representatives during such calendar month. At the
request of either party, but not more than once a year by such party, a special
external audit of the Detail effort of both parties with respect to
Warner-LeukoSite Product shall be performed, the cost of which shall be paid by
the requesting party; provided if such external audit reveals that in any
calendar year the non-requesting party performed less than ninety percent (90%)
(after taking into account the offset described in the immediately following
proviso) of the Details that such non-requesting party reported to the
requesting party as being performed in such calendar year such that there is a
shortfall in excess of ten percent (10%), then such non-requesting party shall
reimburse the requesting party for the full cost of such audit; provided further
that if in any calendar year the audit reveals that both parties failed to
perform one hundred percent (100%) of the Details that each such party reported
to the other party as being performed in such year, then the requesting party's
percentage point shortfall shall be subtracted from the non-requesting party's
percentage point shortfall for purposes of making the calculation in the
immediately preceding proviso.
<PAGE> 31
31
The Marketing Committee shall develop the training program for the
respective sales forces. The parties agree to utilize such training program to
assure a consistent, focused promotional strategy and message. Under the
supervision of the Marketing Committee, each party shall train its own field
sales force. Warner shall be responsible for all costs associated with training
the field forces of both parties in accordance with such training program,
including costs of materials, expenses, launch meetings and ongoing training and
shall reimburse LeukoSite for its costs and expenses associated therewith. All
of Warner's costs associated with training the field forces of both parties
(including the amount reimbursed to LeukoSite) shall be deemed Marketing
Expenses.
In the event a decision is made by the Marketing Committee to sample
the Warner-LeukoSite Product, Warner shall supply all samples for use in
connection with the sampling of Warner-LeukoSite Product. The Marketing
Committee shall develop a sampling strategy. Such samples shall be considered
and treated as Marketing Expenses.
6.2 Promotional Materials. LeukoSite may disseminate only those
promotional and advertising materials for Warner-LeukoSite Products that have
been provided or approved for use by the Marketing Committee. Warner shall
supply LeukoSite quantities of promotional materials needed by LeukoSite to
exercise its co-promotion rights under this Agreement. LeukoSite shall not, and
shall cause its employees, representatives and agents not, to make any claims or
representations in respect of the Warner-LeukoSite Products that have not been
approved by Warner.
6.3 No Delegation. Each party may use only its own employees or the
employees of one or more of its subsidiaries in the course of marketing
Warner-LeukoSite Products in the Designated Co-Promotion Countries under this
Agreement.
6.4 Returns. Warner shall be responsible for handling all returns
relating to Warner-LeukoSite Products. Any Warner-LeukoSite Product returned to
LeukoSite shall be shipped by it to the address designated by Warner with
shipping costs authorized by Warner to be paid by Warner.
6.5 Orders. All customer orders for Warner-LeukoSite Products shall be
received and executed in each country by Warner. LeukoSite shall transmit any
such orders that it receives to Warner no later than the following business day.
<PAGE> 32
32
6.6 Samples. Each of the parties will keep accurate records as to the
distribution of samples, and comply with all applicable laws, rules and
regulations dealing with the distribution of samples.
6.7 Completion of Sales. All sales of Warner-LeukoSite Products will be
completed, distributed, accounted for, billed and booked by Warner at prices
established by Warner, provided, however, that Warner will not grant a
preference to or otherwise favor other products of Warner over Warner-LeukoSite
Products or Warner Products based on the fact LeukoSite is entitled to royalties
or a share of Co-promotion rights.
6.8 Exchange of Marketing Information. From time-to-time Warner will
develop call lists, schedules and other appropriate information for the purpose
of determining the physicians and other persons involved in the drug purchase
decision-making process to whom LeukoSite and Warner will Detail each
Warner-LeukoSite Product in the Designated Co-Promotion Countries. The parties
agree to cooperate in finding an inexpensive and expeditious way to provide a
call list and other information indicating the identity of those physicians and
other persons involved in the decision-making process regarding the purchase of
pharmaceuticals. The parties will establish a method of confirming when Details
have been made in the Designated Co-Promotion Countries so that, among other
things, LeukoSite's and Warner's Detail Effort can be calculated.
6.9 Termination of Co-Promotion Countries. LeukoSite may, upon one
month written notice, remove one or more countries from the Designated
Co-Promotion Countries. In such event, LeukoSite will no longer have any rights
to co-promote the Warner-LeukoSite Product in such country, but instead will be
entitled to receive the royalty referred to in Section 5.6 in respect of Net
Sales in such country.
6.10 During the Term of Co-Promotion for the Designated Co-Promotion
Countries, Warner shall be responsible for:
(i) manufacturing (or having manufactured), packaging,
labeling, warehousing and distributing Warner-LeukoSite Product.
(ii) maintaining, as reasonably possible and based on the
business judgment of the Marketing Committee, such inventory and stock levels of
raw materials, packaging components and finished Warner-LeukoSite Product as are
required to maintain an appropriate customer service level.
<PAGE> 33
33
(iii) providing adequate samples, training materials,
territory sales reports and promotional materials for both parties' field sales
forces.
(iv) providing customer service activities and medical
information services.
6.11 Warner warrants that any Warner-LeukoSite Product manufactured by
Warner or a third party (i) shall be manufactured for sale in the Designated
Co-Promotion Countries in conformance with all applicable federal, state and
local statutes, ordinances and regulations (including, without limitation, the
Federal Food, Drug, and Cosmetic Act (FD&C) and the regulations thereunder such
as current good manufacturing practices), as the same may be amended from time
to time, (ii) at the time of shipment by Warner shall not be adulterated or
misbranded within the meaning of the FD&C, and (iii) at the time of shipment by
Warner shall not be a product which would violate any section of the FD&C if
introduced into interstate commerce.
6.12 LeukoSite and Warner shall not have any right with respect to
co-promotion in a Designated Co-Promotion Country of a "generic" form of a
Warner-LeukoSite Product which is not covered by a Patent Right.
ARTICLE VII
FDA
7.1 Side Effects. Each party shall advise the other as promptly as
reasonably practical by telefax or overnight delivery service addressed to the
attention of its Vice President, International Regulatory Affairs and Drug
Safety and Surveillance (or, in LeukoSite's case, the party with similar
responsibilities), of any unexpected side effect, adverse reaction or injury
which has been brought to that party's attention at any place and which is
alleged to have been caused by a Warner-LeukoSite Product. Warner shall have all
rights and responsibility timely to report such side effects, adverse reaction
or injury to regulatory authorities and others as appropriate.
7.2 Regulatory and other Inquiries. Upon being contacted by the FDA or
any drug regulatory agency for any regulatory purpose pertaining to this
Agreement or to a Warner-LeukoSite Product, LeukoSite and Warner shall
immediately notify and consult with one another and Warner shall provide a
response as it deems appropriate. Warner shall have sole right and
responsibility for responding to all inquiries to Warner
<PAGE> 34
34
or LeukoSite regarding the benefits, side effects and other characteristics of
Warner-LeukoSite Products.
7.3 Product Recall. In the event that Warner or LeukoSite determines
that an event, incident or circumstance has occurred which may result in the
need for a recall or other removal of any Warner-LeukoSite Product, or any lot
or lots thereof, from the market in any Designated Co-Promotion Country, it
shall advise and consult with the other party with respect thereto. Warner shall
make the final determination to recall or otherwise remove the Warner-LeukoSite
Product or any lot or lots thereof from the market. Warner and LeukoSite shall
share the costs and expenses of such recall or removal in each Designated
Co-Promotion Country, including without limitation expenses and other costs or
obligations to third parties, the cost and expense of notifying customers and
costs and expenses associated with shipment of the recalled Product from a
customer to either Warner or LeukoSite. Such costs shall be shared in proportion
to their average shares of Total Profit during the two years preceding the
giving of notice of recall to customers.
ARTICLE VIII
DETERMINATION OF CO-PROMOTION PAYMENTS
8.1 Determination of LeukoSite's Compensation. LeukoSite's share of
profit ("LeukoSite's Share of Profit") in respect of sales of each
Warner-LeukoSite Product in a Designated Co-Promotion Country will equal Total
Profit actually received in respect of sales in such country multiplied by * in
respect of such country or such lower percentage selected by LeukoSite pursuant
to Section 4.2, or such percentage as provided in Section 8.4(b).
8.2 Payment and Reporting. Within thirty (30) days after the close of
each calendar quarter, or earlier if possible, during the Term of Co-Promotion
in each Designated Co-Promotion Country (i.e. on or before the last day of each
of the months of June, September, December and March), Warner shall furnish to
LeukoSite a statement (the "Profit Statement") setting forth, on a country by
country basis, Total Profit of each Warner-LeukoSite Product, and all data on
which those figures were based and the calculations used in determining them. If
LeukoSite's Share of Profit is a positive number, Warner will submit such amount
to LeukoSite with the Profit Statement. If LeukoSite's Share of Profit is a
negative number, LeukoSite will submit such amount to Warner within 30 days of
its receipt of such Profit Statement. If the Term of Co-Promotion in a
particular Co-Promotion Country ends during an accounting quarter,
* Confidential treatment requested: material has been omitted and filed
separately with the Commission.
<PAGE> 35
35
the amounts due hereunder shall be based upon an appropriate proration. Warner
will provide LeukoSite monthly sales reports in respect of sales of
Warner-LeukoSite Products in each relevant Co-Promotion Country if and when they
become available. Such reports may contain estimated data and will not be
binding for any purpose whatsoever.
8.3 Records. Warner and LeukoSite shall each keep accurate books and
accounts of record in connection with the manufacture, use and/or sale by or for
it of the Warner-LeukoSite Products in sufficient detail to permit accurate
determination of all figures necessary for verification of compensation
hereunder. Warner and LeukoSite shall maintain such records for a period of
three (3) years after the end of the year in which they were generated. At such
party's expense, a party, through a certified public accountant, shall have the
right to access the books and records of the other party for the sole purpose of
verifying such statements; such access shall be conducted after reasonable prior
written notice to the party, during ordinary business hours and not more
frequently than once during each calendar year.
8.4(a) In the event that in any calendar year, a party performs at
least sixty percent (60%) of its Budgeted Detail Effort for the calendar year
but does not perform at least ninety percent (90%) of its Budgeted Detail Effort
for the calendar year and the other party does perform at least ninety percent
(90%) of its Budgeted Detail Effort for the calendar year, then such party shall
pay to the other party an amount equal to the increased Sales Cost incurred by
the other party as a result of the party's shortfall in its Budgeted Detail
Effort. Such increased Sales Cost shall be determined by dividing the total
Sales Cost of the other party for the calendar year by the Detail Effort for the
other party for the calendar year and multiplying such number by the difference
between the Budgeted Detail Effort for the deficient party for the calendar year
and the Detail Effort for the deficient party for the calendar year. If both
parties perform less than ninety percent (90%) of their Budgeted Detail Effort
then the shortfall in the Detail Effort of each party shall be calculated and
the difference between them shall also be calculated. The party with the greater
shortfall shall pay the increased Sales Cost to the other party as calculated
above based on the difference between the respective shortfalls. The amount owed
under this Section shall be paid within sixty (60) days after the end of the
calendar year.
(b) In the event that in any calendar year, a party performs less than
sixty percent (60%) of its Budgeted Detail Effort for the calendar year and the
other party performs at least ninety percent (90%) of its Budgeted Detail Effort
for the calendar year, if such party is LeukoSite,
<PAGE> 36
36
LeukoSite's Share of Profit shall be decreased and if such party is Warner,
LeukoSite's Share of Profit shall be increased, with LeukoSite's Share of Profit
(i) in the case where LeukoSite is such party being the actual Detail Effort of
LeukoSite for the calendar year divided by the Budgeted Total Detail Effort for
the calendar year multiplied by the Total Profit and (ii) in the case where
Warner is such party, being the Total Profit multiplied by a fraction where such
fraction is the difference between one (1) and a fraction having as a numerator
Warner's actual Detail Effort for the calendar year and as a denominator the
Budgeted Total Detail Effort for the calendar year.
ARTICLE IX
CONFIDENTIALITY
9.1 Confidentiality. (a) Except as specifically permitted hereunder,
each party hereby agrees to hold in confidence and not use on behalf of others
(or on behalf of itself outside the Collaboration) all data, samples, technical
and economic information (including the economic terms hereof),
commercialization, clinical and research strategies and know-how provided by the
other party (the "Disclosing Party") during the Term of this Agreement and all
data, results and information developed pursuant to the Collaboration and owned
solely by the other party (collectively the "Confidential Information"), except
that the term "Confidential Information" shall not include:
(i) Information that is or becomes part of the public domain through no
fault of the non-Disclosing Party or its Affiliates; and
(ii) Information that is obtained after the date hereof by the
non-Disclosing Party or one of its Affiliates from any third party that is
lawfully in possession of such Confidential Information and not in violation of
any contractual or legal obligation to the Disclosing Party with respect to such
Confidential Information; and
(iii) Information that is known to the non-Disclosing Party prior to
disclosure by the Disclosing Party, as evidenced by the non-Disclosing Party's
written records; and
(iv) Information that is necessary or advantageous to both parties to
be disclosed to any governmental authorities or pursuant to any regulatory
filings, provided that in such case the non-Disclosing Party notifies the
Disclosing Party reasonably in advance of such disclosure and
<PAGE> 37
37
cooperates with the Disclosing Party to minimize the scope and content of such
disclosure; and
(v) Information that is required to be disclosed pursuant to any
relevant law or regulation or under order of a court of competent jurisdiction,
provided that in such case the non-Disclosing Party notifies the Disclosing
Party reasonably in advance of such disclosure and cooperates with the
Disclosing Party to minimize the scope and content of such disclosure.
(b) The obligations of this Section 9.1 shall survive for five years
following the expiration or termination of this Agreement except to the extent
required by any obligations of confidentiality to a third party that are
disclosed to the non-disclosing party prior to termination of this Agreement.
9.2 Publicity. All publicity, press releases and other announcements
relating to this Agreement or the transactions contemplated hereby shall be
reviewed in advance by and subject to the approval of both parties; except that
such review and approvals shall not be required for any announcement that
discloses the existence of this Agreement without disclosing any of its material
terms. Notwithstanding the foregoing, to the extent required by applicable law,
rule or regulation or in connection with filings with regulatory agencies or the
offering of securities, including but not limited to the SEC, a party may file
this Agreement and/or disclose the contents of this Agreement without the
approval of the other party, provided that the other party is provided with the
opportunity to review and comment on such disclosure and further provided that
such disclosure shall be limited to the minimum amount of information and
distribution required by such law, rule, regulation or filing.
9.3 Publication. The parties shall cooperate in appropriate publication
of the results of research and development work performed pursuant to this
Agreement, but subject to the predominating interest to obtain patent protection
for any patentable subject matter. To this end, it is agreed that prior to any
public disclosure of any such results, the party proposing disclosure shall send
the other party a copy of the information to be disclosed, and shall allow the
other party 15 days from the date of receipt in which to determine whether the
information to be disclosed contains subject matter for which patent protection
should be sought prior to disclosure. If notification is not received during the
15 day period, the party proposing disclosure shall be free to proceed with the
disclosure. If due to a valid business reason or a belief by the nondisclosing
party that
<PAGE> 38
38
the disclosure contains subject matter for which a patentable invention should
be sought, then prior to the expiration of the 15 day period, the nondisclosing
party shall so notify the disclosing party, who shall then delay public
disclosure of the information for an additional period of up to 2 months to
permit the preparation and filing of a patent application on the subject matter
to be disclosed or other action to be taken. The party proposing disclosure
shall thereafter be free to publish or disclose the information. The
determination of authorship for any paper shall be in accordance with accepted
scientific practice. Nothing in this Section will be construed to allow either
party to disclose the Confidential Information of the other party in any
publication or other disclosure without the express written consent of such
other party.
ARTICLE X
REPRESENTATIONS AND WARRANTIES
10.1 Legal Authority. Each party represents and warrants to the other
that it has the legal power, authority and right to enter into this Agreement
and to perform its respective obligations set forth herein.
10.2 No Conflicts. Each party represents and warrants that as of the
date of this Agreement it is not a party to any agreement or arrangement with
any third party or under any obligation or restriction, including pursuant to
its Certificate of Incorporation or By-Laws, which in any way limits or
conflicts with its ability to fulfill any of its obligations under this
Agreement.
10.3 Others Bound. Each party represents and warrants that anyone
performing services under this Agreement on its behalf shall be bound by all of
the conditions of this Agreement.
10.4 Survival. The foregoing representations and warranties shall
survive the execution, delivery and performance of this Agreement,
notwithstanding any investigation by or on behalf of either party.
10.5 Disclaimer. Except as otherwise expressly stated herein, Warner
hereby disclaims any warranty expressed or implied as to any LeukoSite Product
manufactured by or for, used, sold or placed in commerce by or on behalf of
LeukoSite. Except as otherwise expressly stated herein, LeukoSite hereby
disclaims any warranty expressed or implied as to any Warner Product and/or any
Warner-LeukoSite Product manufactured by or for, used, sold or placed in
commerce by or on behalf of Warner in a Non-Designated Co-Promotion Country.
<PAGE> 39
39
ARTICLE XI
TERMINATION
11.1 Termination. In the event of a material breach of the provisions
of this Agreement described below, the breaching party shall have ninety days
after receipt of written notice from the non-breaching party to cure such
breach, which period shall be sixty (60) days in the case of a failure to make a
payment when due.
(a) In the event of an uncured material breach of Article I, the
non-breaching party may terminate this Agreement.
(b) In the event of an uncured material breach of Article V by Warner
in regard to a Warner Product or Warner-LeukoSite Product, LeukoSite may
immediately (i) terminate the licenses granted by it pursuant to Section 5.1 in
respect of such Product and (ii) require Warner to grant LeukoSite an exclusive
(even as to Warner), worldwide license under the Patent Rights, Background
Technology and Collaboration Technology relating to such Product and owned or
controlled by Warner to the extent necessary to make, have made, use or sell
such Product. In such event such Warner Product or Warner-LeukoSite Product
shall be a LeukoSite Product for the purposes of this Agreement.
(c) In the event of an uncured material breach of Article V by
LeukoSite in regard to a LeukoSite Product, Warner may immediately (i) terminate
the licenses granted by it pursuant to Section 5.2 in respect of such Product
and (ii) require LeukoSite to grant Warner an exclusive (even as to LeukoSite),
worldwide license under the Patent Rights, Background Technology and
Collaboration Technology to the extent necessary to make, have made, use or sell
such Product. Such LeukoSite Product shall be a Warner Product for the purposes
of this Agreement.
(d) In the event of an uncured material breach of Article VI or VIII by
Warner in regard to a Warner-LeukoSite Product, LeukoSite may immediately (i)
terminate the licenses granted by it pursuant to Section 5.1 in respect of such
Product and (ii) require Warner to grant it an exclusive (even as to Warner),
worldwide license under the Patent Rights, Background Technology and
Collaboration Technology to the extent necessary to make, have made, use or sell
such Product. In such event, such Product will be a LeukoSite Product for
purposes of this Agreement.
<PAGE> 40
40
(e) In the event of an uncured material breach of Article VI or a
payment provision of Article VIII or of Section 4.2 by Leukosite with respect to
a Warner-LeukoSite Product, Warner may immediately terminate the marketing
rights of Leukosite with respect to such Warner-Leukosite Product.
11.2 Effect of Bankruptcy. If either party files a voluntary petition
in bankruptcy, is adjudicated a bankrupt, makes a general assignment for the
benefit of creditors, admits in writing that it is insolvent or fails to
discharge within 15 days an involuntary petition in bankruptcy filed against it,
then (a) this Agreement shall immediately terminate and (b) the licenses granted
to such party hereunder shall immediately terminate.
11.3 Termination By Either Party Other Than For Cause. Either party may
terminate this Agreement at any time for any reason upon 6 months written
notice. In such event, the terminating party shall immediately pay all amounts
that are then due hereunder and the other party shall have a non-exclusive,
worldwide, license to all Collaboration Technology as well as an exclusive,
royalty-free worldwide license to the extent necessary to make, have made, use
and sell all Products.
11.4 Remedies. In the event of any breach of any provision of this
Agreement, in addition to the termination rights set forth herein, each party
shall have all other rights and remedies at law or equity to enforce this
Agreement.
ARTICLE XII
GENERAL PROVISIONS
12.1 Indemnification. Warner and LeukoSite each agrees to indemnify and
hold harmless the other party and its Affiliates and their respective employees,
agents, officers, directors and permitted assigns (such party's "Indemnified
Group") from and against any claims, judgments, expenses (including reasonable
attorneys' fees), damages and awards (collectively a "Claim") arising out of or
resulting from (i) its negligence or misconduct in regard to any Product, (ii) a
breach of any of its representations or warranties hereunder or (iii) the
manufacture, use or sale of a Warner Product or a Warner-LeukoSite Product (in
the case of Warner) or a LeukoSite Product (in the case of LeukoSite), except to
the extent that such Claim arises out of or results from the negligence or
misconduct of a party seeking to be indemnified and held harmless or the
negligence or misconduct of a member of such party's Indemnified Group. An
indemnified party shall promptly give notice to the indemnifying party
<PAGE> 41
41
of any information from which it should reasonably conclude an incident has
occurred that could give rise to a Claim, and in the event a Claim is made or a
suit is brought, all indemnified parties shall assist the indemnifying party and
cooperate in the gathering of information with respect to the time, place, and
circumstances and in obtaining the names and addresses of any injured parties
and available witnesses. The failure to give the notice referred to in the
preceding sentence shall not relieve a party of its indemnification obligations,
except to the extent such failure prejudices the ability of the indemnifying
party to defend against such claim. No indemnified party shall, except at its
own cost, voluntarily make any payment or incur any expense in connection with
any such Claim or suit without the prior written consent of the indemnifying
party. Each indemnified party shall permit the indemnifying party to assume the
defense of any claim. The obligations set forth in this Section shall survive
the expiration or termination of this Agreement.
12.2 Assignment/Change of Control. (a) This Agreement is not assignable
by either party without the prior written consent of the other party. To the
extent that assignment is permitted this Agreement shall be binding upon and
inure to the benefit of the parties' successors, legal representatives and
assigns. Notwithstanding the foregoing, (i) Warner may assign this Agreement to
any of its subsidiaries or any entity succeeding to a majority of its
Parke-Davis business or substantially all of the business to which this
Agreement is related and (ii) LeukoSite may assign this Agreement to any of its
subsidiaries or to any entity succeeding to substantially all of its
pharmaceutical business or substantially all of the business to which this
Agreement is directed. In no event will any assignment relieve the assigning
party of its obligations hereunder. No assignment shall take effect until the
assignee notifies the non-assigning party of such assignment and the assignee
agrees to be bound by all the terms, conditions and obligations of this
Agreement.
(b) In the event of (i) a merger, consolidation, plan of exchange or
other reorganization of LeukoSite in which LeukoSite is not the surviving party
and the surviving party is an entity which does not presently control or is not
presently under common control with LeukoSite and such surviving entity is in
the pharmaceutical industry and has total annual sales at such time in excess of
$500 million, or any other transaction or series of transactions that result in
an entity (together with such entity's Affiliates) controlling LeukoSite and
such entity does not presently control or is not presently under common control
with LeukoSite and such surviving entity is in the pharmaceutical industry and
has total annual sales at such time in excess of $500 million or (ii) the
assignment by LeukoSite of this Agreement to any entity succeeding to
substantially all
<PAGE> 42
42
of LeukoSite's pharmaceutical business or substantially all of the business to
which this Agreement is related and such entity is an entity which does not
presently control or is not presently under common control with LeukoSite and
such entity is in the pharmaceutical industry and has total annual sales in
excess of $500 million, then Warner may terminate LeukoSite's right to
co-promote all Warner-LeukoSite Products hereunder. In such event, LeukoSite or
the surviving entity, or the assignee, as the case may be, will be entitled to
receive (or obligated to pay) LeukoSite's Share of Profit of each
Warner-LeukoSite Product in the Designated Co-Promotion Countries, except that
in calculating Total Profit, the Selling Expenses of Warner shall also be
deducted from Net Sales.
12.3 Non-Waiver. The waiver by either of the parties of any breach of
any provision hereof by the other party shall not be construed to be a waiver of
any succeeding breach of such provision or a waiver of the provision itself.
12.4 Submission to Senior Officers for Dispute Resolution. The parties
recognize that the collaborative research program under this Agreement and the
development and commercialization of Development Candidates will require the
resolution of certain issues in the future. In the event the Management
Committee or any Marketing Committee is unable to resolve a dispute under this
Agreement or come to unanimous agreement on terms mutually acceptable to both
parties, either party may have the dispute referred to the senior officer of
Warner's pharmaceutical business for good faith resolution. Such senior officer
shall confer with LeukoSite's President prior to resolving such dispute. The
resolution of the dispute pursuant to this Section shall be final and binding on
the parties.
12.5 Governing Law. This Agreement shall be construed and interpreted
in accordance with the laws of the Commonwealth of Massachusetts, other than
those provisions governing conflicts of law.
12.6 Partial Invalidity. If and to the extent that any court or
tribunal of competent jurisdiction holds any of the terms or provisions of this
Agreement, or the application thereof to any circumstances, to be invalid or
unenforceable in a final nonappealable order, the parties shall use their best
efforts to reform the portions of this Agreement declared invalid to realize the
intent of the parties as fully as practicable, and the remainder of this
Agreement and the application of such invalid term or provision to circumstances
other than those as to which it is held invalid or unenforceable shall not be
affected thereby, and each of the remaining
<PAGE> 43
43
terms and provisions of this Agreement shall remain valid and enforceable to the
fullest extent of the law.
12.7 Notice. Any notice to be given to a party under or in connection
with this Agreement shall be in writing and shall be (i) personally delivered,
(ii) delivered by a internationally recognized overnight courier or (iii)
delivered by certified mail, postage prepaid, return receipt requested to the
party at the address set forth below for such party:
To Warner: To LeukoSite:
Senior Vice President, Christopher K. Mirabelli, Ph.D.
Research and Development Chairman of the Board and
Parke-Davis Pharmaceutical Chief Executive Officer
Research, LeukoSite, Inc.
Warner-Lambert Company 215 First Street
2800 Plymouth Road Cambridge, MA 02142
Ann Arbor, MI 48105
with a copy to: with a copy to:
Vice President and Elliot Olstein, Esq.
General Counsel Carella, Byrne, Bain, Gilfillan,
Warner-Lambert Company Cecchi, Stewart & Olstein
201 Tabor Road 6 Becker Farm Road
Morris Plains, NJ 07950 Roseland, NJ 07068
or to such other address as to which the party has given notice thereof. Such
notices shall be deemed given upon receipt.
12.8 SAB Attendance. During the Term of this Agreement, Warner will be
entitled to have a representative attend (but not vote at) all meetings of
LeukoSite's Scientific Advisory Board ("SAB"). Warner will be provided notices,
meeting minutes and all material made available to SAB members generally at the
same time as such SAB members. Warner will recuse itself from that portion of
any meeting, and will not be provided material related to, confidential
information of third parties who object to Warner's inclusion. Prior to
attending any such SAB meeting, Warner will sign a confidentiality agreement by
which Warner will agree to maintain in confidence all information, data and
materials received as a result of such attendance and not to use same for any
research, development, manufacture or sale of any product or process (except to
the extent permitted by this Agreement).
<PAGE> 44
44
12.9 Headings. The headings appearing herein have been inserted solely
for the convenience of the parties hereto and shall not affect the construction,
meaning or interpretation of this Agreement or any of its terms and conditions.
12.10 No Implied Licenses or Warranties. No right or license under any
patent application, issued patent, know-how or other proprietary information is
granted or shall be granted by implication. All such rights or licenses are or
shall be granted only as expressly provided in the terms of this Agreement.
Neither party warrants the success of any clinical or other studies undertaken
by it.
12.11 Force Majeure. No failure or omission by the parties hereto in
the performance of any obligation of this Agreement shall be deemed a breach of
this Agreement, nor shall it create any liability, if the same shall arise from
any cause or causes beyond the reasonable control of the affected party,
including, but not limited to, the following, which for purposes of this
Agreement shall be regarded as beyond the control of the party in question: acts
of god; acts or omissions of any government; any rules, regulations, or orders
issued by any governmental authority or by any officer, department, agency or
instrumentality thereof; fire; storm; flood; earthquake; accident; war;
rebellion; insurrection; riot; invasion; strikes; and lockouts or the like;
provided that the party so affected shall use its best efforts to avoid or
remove such causes or nonperformance and shall continue performance hereunder
with the utmost dispatch whenever such causes are removed.
12.12 Survival. The representations and warranties contained in this
Agreement as well as those rights and/or obligations contained in the terms of
this Agreement which by their intent or meaning have validity beyond the term of
this Agreement shall survive the termination or expiration of this Agreement.
12.13 Entire Agreement. This Agreement, together with the Preferred
Stock Purchase Agreement dated the date hereof, constitute the entire
understanding between the parties with respect to the subject matter contained
herein and supersede any and all prior agreements, understandings and
arrangements whether oral or written between the parties relating to the subject
matter hereof.
12.14 Amendments. No amendment, change, modification or alteration of
the terms and conditions of this Agreement shall be binding upon either party
unless in writing and signed by the party to be charged.
<PAGE> 45
45
12.15 Independent Contractors. It is understood that both parties
hereto are independent contractors and engage in the operation of their own
respective businesses, and neither party hereto is to be considered the agent or
partner of the other party for any purpose whatsoever. Neither party has any
authority to enter into any contracts or assume any obligations for the other
party or make any warranties or representations on behalf of the other party.
12.16 Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed an original and both of which together shall
constitute one and the same instrument.
12.17 In the event that there is a conflict between the text of this
Agreement and Exhibit 1, the text of this Agreement shall control.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized officers as of the date first above written.
LEUKOSITE, INC. WARNER-LAMBERT COMPANY
By: [signature appears here] By: [signature appears here]
Name: Name:
Title: Title:
<PAGE> 1
CONFIDENTIAL TREATMENT EXHIBIT 10.5
LICENSE AGREEMENT
This Agreement is effective March 15, 1995 ("EFFECTIVE DATE") by and
between Lynxvale Ltd., having an address at the Old Schools, Cambridge CB2, ITS,
England ("LYNXVALE"). and LeukoSite, Inc., a Corporation having offices at 213
First Street, Cambridge, MA 02142, USA ("LEUKOSITE").
WHEREAS, LEUKOSITE desires to obtain exclusive rights and licenses to
intellectual property relating to monoclonal antibodies developed in the
laboratory of Dr. Herman Waldmann at the University of Cambridge and to which
LYNXVALE has acquired rights; and
WHEREAS, LYNXVALE is willing to grant the exclusive rights and licenses
desired by LEUKOSITE.
NOW THEREFORE in consideration of the mutual promises and other good and
valuable consideration, the panties agree as follows:
SECTION 1 - DEFINITIONS.
The terms used in this Agreement have the following meaning:
1.1 The term "AFFILIATE" as applied to LEUKOSITE shall mean any company or
other legal entity other than LEUKOSITE in whatever country organized,
controlling, or controlled by LEUKOSITE. The term "control" means possession,
direct and indirect of the power to direct or cause the direction of the
management and policies whether through the ownership of voting securities, by
contract or otherwise.
1.2 The term "ANTIBODY(IES)" shall mean any and all antibodies and
fragments or portions thereof, including but not limited to, monoclonal
antibodies, chimeric antibodies, recombinant antibodies, humanized antibodies,
single chain antibodies and fragments and portions thereof.
1.3 The term "CELL LINE" shall mean any cell line which produces an
ANTIBODY
1.4 "INFORMATION" shall mean any data, formulas, process information or
other information applicable to LICENSED SUBJECT MATTER known to LYNXVALE
through an lNVESTIGATOR on the EFFECTIVE DATE and in and to which LYNXVALE
and/or INVESTIGATOR has a transferable right.
1.5 The term "INVESTIGATOR" means PRINCIPAL INVESTIGATOR, any other member
of the University of Cambridge professional staff, graduate
<PAGE> 2
-2-
student, undergraduate student, or employee of the University of Cambridge who
worked under the primary direction or supervision of PRINCIPAL INVESTIGATOR.
1.6 The term "LICENSED SUBJECT MATTER" shall mean the following ANTIBODY
which is owned by LYNXVALE and/or to which LYNXVALE has a transferable right:
Anti-CD18, and all other ANTIBODIES to which LEUKOSITE has exercised its option
under Section 2.1(b) and the CELL LINES which produce such ANTIBODIES.
1.7 The term "MATERIAL" shall mean any material or substance (other than
LICENSED SUBJECT MATTER) which is discovered, produced or derived by an
INVESTIGATOR and related to LICENSED SUBJECT MATTER and is in possession of
LYNXVALE through an INVESTIGATOR on the EFFECTIVE DATE and in and to which
LYNXVALE and/or an INVESTIGATOR has a transferable right.
1.8 "NET SALES PRICE" means the total received by LEUKOSITE or its
AFFILIATES, or its SUBLICENSEES from sale of PRODUCT, less transportation
charges and insurance, sales taxes, use taxes, excise taxes, value added taxes,
customs duties or other imposts, normal and customary quantity and cash
discounts, rebates granted, disallowed reimbursements, and allowances and credit
on account of rejection or return of PRODUCT
PRODUCT shall be considered "sold" when billed out or invoiced.
1.9 The term "PATENT RIGHT(S)" shall mean any patent application and
patent anywhere in the world including, but not limited to, those set forth in
Appendix A and any division, continuation, or continuation-in-part thereof and
any reissue or extension thereof, insofar as it contains one or more claims to
LICENSED SUBJECT MATTER, INFORMATION, or MATERIALS.
1.10 The term "PRINCIPAL INVESTIGATOR" shall mean Herman Waldmann, Ph.D.
1.11 The term "PRODUCT" shall mean any article, composition, apparatus,
substance, chemical, material, method, process or service which incorporates or
utilizes LICENSED SUBJECT MATTER, MATERIALS and/or INFORMATION, or the
manufacture, import, sale or use of which is covered by PATENT RIGHTS.
1.12 The term "SUBLICENSEE" shall mean any now AFFILIATE third party
licensed by LEUKOSITE to make, have made, import, use or sell any PRODUCT under
PATENT RIGHTS.
1.13 The term "VALID CLAIM" shall mean a claim of an issued patent
<PAGE> 3
-3-
which has not lapsed or become abandoned or been declared invalid or
unenforceable by a court of competent jurisdiction or an administrative agency
from which no appeal can be or is taken.
1.14 The use herein of the plural shall include the singular, and the use
of the masculine shall include the feminine.
SECTION 2- GRANTS.
2.1(a) LYNXVALE hereby grants to LEUKOSITE and LEUKOSITE hereby accepts
from LYNXVALE a world-wide and exclusive royalty bearing right and license under
PATENT RIGHTS, INFORMATION, MATERIALS and LICENSED SUBJECT MATTER to make, have
made, use and sell or have sold on its behalf PRODUCT, including the right to
sub license third parties. LEUKOSITE shall have the right to extend such license
to its AFFILIATES, who shall be bound by the same terms and obligations as set
forth herein.
(b) LEUKOSITE shall have an exclusive option to obtain a worldwide
sole and exclusive right and license under the terms and conditions set forth
herein with respect to the following ANTIBODIES and the CELL LINES which produce
such ANTIBODIES which are owned by LYNXVALE and/or to which LYNXVALE has a
transferable right: Anti-CD2, -CD4 (excluding YNB46. 1 and excluding NSM 47.2 in
the event the Welcome Foundation Ltd. exercises its option under an agreement
with LYNXVALE et al. dated 31 December, 1994), -CD3, -CD7, -CD8, -CD11(a),
- -CD16, CD23, -CD25, -CD45R, -CDw52 (more specifically YTH 361.10), -CD34, -CDS9,
- -CD66, -Class I, Class II and unique unclustered ANTIBODIES and the CELL LINES
which produce such ANTIBODIES. LEUKOSITE may exercise this option at any time
during the five (5) year period following the EFFECTIVE DATE, provided that if
during said five (5) year period LYNXVALE notifies LEUKOSITE that it has
received a bona fide offer to license any of the foregoing ANTIBODIES or CELL
LINES. LEUKOSITE shall have ninety (90) days from such notification to exercise
its option hereunder. LYNXVALE shall, upon request, provide LEUKOSITE with
documentary evidence of such offer. In the event LEUKOSITE fails to exercise its
option within the aforesaid ninety (90) days, LYNXVALE may license the
specifically requested ANTIBODIES and/or CELL LINES to the third party
requesting such license on terms which are not more favorable to the third party
than as set forth hereunder.
(c) LYNXVALE shall, as soon as practical after the EFFECTIVE DATE,
provide to LEUKOSITE any and all CELL LINES which are LICENSED SUBJECT MATTER
and all INFORMATION applicable to LICENSED SUBJECT MATTER.
2.2 LEUKOSITE agrees to forward to LYNXVALE a copy of any and all
<PAGE> 4
-4-
fully executed sublicense agreements.
2.3 The above licenses to sell any PRODUCT includes the right of
LEUKOSITE, its AFFILIATES, and SUBLICENSEES to grant to the purchaser thereof
the right to use and/or resell such purchased PRODUCT without payment of any
other royalty hereunder.
2.4 (a) Taking into account the complexity, and stage of development of
PRODUCTS and the science related thereto, LEUKOSITE shall use reasonable efforts
under the circumstances to research, develop and then commercialize a PRODUCT
which is LICENSED SUBJECT MATTER and shall keep LYNXVALE reasonably informed of
its efforts in this respect. The efforts of a SUBLICENSEE and/or an AFFILIATE
shall be considered as efforts of LEUKOSITE.
(b) In the event that LYNXVALE reasonably believes that LEUKOSITE is not
making reasonable efforts under the circumstances to research, develop and then
commercialize PRODUCTS pursuant to Paragraph 2.4(a) then LYNXVALE shall provide
written notice to LEUKOSITE which specifies LYNXVALE's basis for such belief and
what additional efforts LYNXVALE believes should be made by LEUKOSITE. Upon
receipt of such written notice, LYNXVALE and LEUKOSITE shall enter into good
faith negotiations in order to reach mutual agreement as to what efforts by
LEUKOSITE shall satisfy the requirements of this Paragraph 2.4, and if such
mutual agreement is not reached within ninety (90) days after receipt of such
written notice, then the parties agree to submit to arbitration pursuant to
Paragraph 10.2 10 determine the efforts which should be exerted by LEUKOSITE. In
such arbitration, in determining the efforts which should be exerted, the
arbitrator shall consider efforts exerted by LEUKOSITE up to the point of
arbitration, the current stage of technical development of the PRODUCT, the
resources and manpower available to LEUKOSITE; the potential market; and
regulatory and technical problems. Thereafter, LEUKOSITE shall exert the efforts
determined by the panties or in such arbitration.
(c) If LEUKOSITE fails to exert the efforts determined by the panties or
in such arbitration with respect to a PRODUCT, LYNXVALE's sole and exclusive
remedy for LEUKOSITE's failure to meet such efforts is for the licenses and
rights granted hereunder for the PRODUCT to be converted from an exclusive right
and license to a non-exclusive right and license at a royalty rate equal to
* the royalty rate due for an exclusive license hereunder.
2.5 Subject to Section 2.4, LEUKOSITE shall have sole discretion for
making all decisions relating to the commercialization and marketing of PRODUCT-
* Confidential treatment requested: material has been omitted and filed
separately with the Commission.
<PAGE> 5
-5-
SECTION 3 - PATENTS
3.1 After the EFFECTIVE DATE of this Agreement, LEUKOSITE shall bear the
cost and expense for the filing. prosecution and maintenance of any PATENT
RIGHTS under which LEUKOSITE retains an exclusive license hereunder.
3.2 With respect to any PATENT RIGHTS licensed to LEUKOSITE, each patent
application, office action, response to office action, request for terminal
disclaimer, and request for reissue or reexamination of any patent issuing from
such application shall be provided to LEUKOSITE sufficiently prior to the filing
of such application, response or request to allow for review and comment by
LEUKOSITE.
SECTION 4. ROYALTIES.
4.1(a) For each PRODUCT sold by LEUKOSITE or its AFFILIATES or
SUBLICENSEES LEUKOSITE shall pay LYNXVALE one of the following royalties:
(1) A royalty of * of the NET SALES PRICE of PRODUCTS (other than
PRODUCTS which are diagnostic products or service) so long as in
each case the PRODUCT, where sold shall infringe a VALID CLAIM of
any PATENT RIGHT which is licensed exclusively to LEUKOSITE in such
country, or
(2) A royalty of * of the NET SALES PRICE of PRODUCTS which are
diagnostic products or services so long as in each case the PRODUCT.
where sold shall. infringe a VALID CLAIM of any PATENT RIGHT which
is licensed exclusively to LEUKOSITE in such country; or
(3) * of all royalties and lump sum payments creditable against
royalties received from a SUBLICENSEE based on the sale in a country
by the SUBLlCENSEE of a PRODUCT which infringes a VALID CLAIM of a
PATENT RIGHT exclusively licensed to LEUKOSITE in such country,
(b) In the event that a PRODUCT includes both component(s) covered by a
VALID CLAIM of a PATENT RIGHT ("Patented Component(s)") and active component(s)
not covered by a VALID CLAIM of a PATENT RIGHT ("Unpatented Component(s)) (such
PRODUCT being a "Combined Product"), then NET SALES PRICE shall be the amount
which is normally received by LEUKOSITE or its
*Confidential treatment requested: material has been omitted and filed
separately with the Commission.
<PAGE> 6
-6-
AFFILIATES from a sale of the Patented Component(s) in an arm's-length
transaction with an unaffiliated third party. If the Patented Component(s) are
not sold separately, then NET SALES PRICE upon which a royalty is paid shall be
the NET SALES PRICE of the Combined Product multiplied by a fraction, the
numerator of which is the cost of producing the Patented Components and the
denominator of which is the cost for producing the Combined Product.
4.2 In the event that royalties are to be paid by LEUKOSITE to a party who
is not an AFFILIATE of LEUKOSITE for PRODUCT for which royalties are also due to
LYNXVALE pursuant to Paragraph 4.1 ("Other Royalties"), then the royalties to be
paid to LYNXVALE by LEUKOSITE pursuant to Paragraph 4.1 shall be reduced by *
any *.
4.3 LEUKOSITE shall keep, and shall cause each of its AFFILIATES and
SUBLICENSEES to keep, full and accurate books of account containing all
particulars that may be necessary for the purpose of calculating all royalties
payable to LYNXVALE. Such books of account shall be kept at their principal
place of business and, with all necessary supporting data shall, for the three
(3) years next following the end of the calendar year to which each shall
pertain, be open for inspection by LYNXVALE or its designee upon reasonable
notice during normal business hours at LYNXVALE's expense for the sole purpose
of verifying royalty statements or compliance with this Agreement, but in no
event more than once in each calendar year. All information and data offered
shall be used only for the purpose of verifying royalties and shall be treated
as LEUKOSITE confidential information and may not be disclosed to anyone nor
used for any purpose other than as set forth herein. In the event that such
inspection uncovers an underpayment of royalties of ten percent (10%) or more
for any one year period, LEUKOSITE shall bear the cost of such inspection.
4.4 With each semi-annual payment, LEUKOSITE shall deliver to LYNXVALE a
full and accurate accounting to include at least the following information:
(a) Quantity of each PRODUCT subject to royalty sold (by country) by
LEUKOSITE, and its AFFILIATES;
(b) Total receipts for each PRODUCT subject to royalty (by country);
(c) Total royalties payable to LYNXVALE
(d) Royalties received from SUBLICENSEES.
4.5 In each year the amount of royalty due shall be calculated
semi-
*Confidential treatment requested: material has been omitted and filed
separately with the Commission.
<PAGE> 7
-7-
annually as of June 30 and December 31 (each as being the last day of an
"ACCOUNTING PERIOD") and shall be paid semi-annually within the sixty days next
following such date, every such payment shall be supported by the accounting
prescribed in Paragraph 4.4 and shall be made in United States currency.
Whenever for the purpose of calculating royalties conversion from any foreign
currency shall be required, such conversion shall be at the rate of exchange
thereafter published in the Wall Street Journal for the last business day of the
applicable ACCOUNTING PERIOD, as the case may be.
4.6 If the transfer of or the conversion into United States Dollar
Equivalent of any remittance due hereunder is not lawful or possible in any
country, such remittance shall be made by the deposit thereof in the currency of
the country to the credit and account of LYNXVALE or its nominee in any
commercial bank or trust company located in that country, prompt notice of which
shall be given to LYNXVALE, LYNXVALE shall be advised in writing in advance by
LEUKOSITE and provide to LEUKOSITE a nominee, if so desired.
4.7 Any tax required to be withheld by LEUKOSITE under the laws of any
country for the account of LYNXVALE, shall be promptly paid by LEUKOSITE for and
on behalf of LYNXVALE to the appropriate governmental authority, and LEUKOSITE
shall use its best efforts to furnish LYNXVALE with proof of payment of such
tax. Any such tax actually paid on LYNXVALE's behalf shall be deducted from
royalty payments due LYNXVALE.
4.8 Only one royalty shall be due and payable to LYNXVALE for the
manufacture, use and sale of a PRODUCT irrespective of the number of patents or
claims thereof which cover the manufacture, use and sale of such PRODUCT.
SECTION 5 - INFRINGEMENT AND NONASSERTION.
5.1(a) If any of the PATENT RIGHTS under which LEUKOSITE is the licensee
is infringed by a third party, LEUKOSITE shall have the right and option but not
the obligation to bring an action for infringement, at its expense, against such
third party in the name of LYNXVALE and/or in the name of LEUKOSITE, and to join
LYNXVALE as a party plaintiff if required. LEUKOSITE shall promptly notify
LYNXVALE of any such infringement and shall keep LYNXVALE informed as to the
prosecution of any action for such infringement. No settlement, consent judgment
or other voluntary final disposition of the suit which adversely affects PATENT
RIGHTS may be entered into without the consent of LYNXVALE, which consent shall
not unreasonably be withheld or delayed.
(b) In the event that LEUKOSITE shall undertake the enforcement and/or
defense of the PATENT RIGHTS by litigation, LEUKOSITE may withhold up to *
of the royalties otherwise thereafter due LYNXVALE hereunder
*Confidential treatment requested: material has been omitted and filed
separately with the Commission.
<PAGE> 8
-8-
and apply the same toward reimbursement of its expenses, including reasonable
attorneys' fees, in connection therewith. Any recovery of damages by LEUKOSITE
for any such suit shall be applied First in satisfaction of any unreimbursed
expenses and legal fees of LEUKOSITE relating to the suit, and next toward
reimbursement of LYNXVALE for any royalties withheld and applied pursuant to
this Section 5. The balance remaining from any such recovery shall be considered
NET SALES PRICE for which a royalty shall be paid to LYNXVALE pursuant to
Paragraph 4.1.
5.2 In the event that LEUKOSITE elects not to pursue an action for
infringement, upon written notice to LYNXVALE by LEUKOSITE that an unlicensed
third party is an infringer of a VALID CLAIM of PATENT RIGHTS licensed to
LEUKOSITE, LYNXVALE shall have the right and option, but not the obligation at
its cost and expense to initiate infringement litigation and to retain any
recovered damages.
5.3 In the event that litigation against LEUKOSITE is initiated by a
third-party charging LEUKOSITE with infringement of a patent of the third party
as a result of the manufacture, use or sale by LEUKOSITE of PRODUCT covered by
PATENT RIGHTS, LEUKOSITE shall promptly notify LYNXVALE in writing thereof.
LEUKOSITE's costs as to any such defense shall be creditable against any and all
payments due and payable to LYNXVALE under Paragraph 4.1 of this Agreement but
no royalty payment after taking into consideration any such credit under this
Paragraph 5.3 shall be reduced by more than * .
5.4 In the event of a judgment in any suit in which a court of competent
jurisdiction rules that the manufacture, use or sale by LEUKOSITE of PRODUCT
covered by a PATENT RIGHT has infringed on a third-party's patent requiring
LEUKOSITE to pay damages or a royalty to said third party, or in the event of a
settlement of such suit requiring damages or royalty payments to be made,
payments due to LYNXVALE under Paragraph 4.1 of this Agreement arising from the
applicable PRODUCT shall be correspondingly reduced by * of the amounts
due under the requirement of such judgment or under the terms of such
settlement. In no case, however, shall the royalty payment after taking into
consideration any such reduction under this Paragraph 5.4 be reduced by more
than * .
5.5 LYNXVALE or any person or entity licensed by LYNXVALE)([VALE shall not
assert a patent or patent application of LYNXVALE against LEUKOSITE or its
AFFILIATES or SUBLICENSEES or their customers with respect to any PRODUCT for
which royalties are payable under the Agreement.
5.6 In any infringement suit either party may institute to enforce the
PATENT RIGHTS pursuant to this Agreement, the other party hereto shall, at the
request of the party initiating such suit, cooperate in all respects and, to the
extent possible, have its employees testify when requested and make available
relevant
* Confidential treatment requested: material has been omitted and filed
separately with the Commission.
<PAGE> 9
-9-
records, papers, information, samples, specimens, and the like. All reasonable
out-of-pocket costs incurred in connection with rendering cooperation shall be
paid by the party requesting such cooperates.
SECTION 6 - WARRANTIES AND COVENANTS.
6.1 Each of LYNXVALE and LEUKOSITE warrants and represents to the other
that it has the full right and authority to enter into this Agreement, and that
it is not aware of any impediment which would inhibit its ability to perform the
terms and conditions imposed on it by this Agreement.
6.2 LYNXVALE warrants and represents that to the best of its knowledge,
information and belief, it owns all right, tide and interest in and to LICENSED
SUBJECT MATTER, INFORMATION, MATERIALS and PATENT RIGHTS; it has the right to
grant the rights granted hereunder; that the granting of such rights does not
require the consent of a third party; and that there are and will be no
outstanding agreements, assignments or encumbrances inconsistent with the
provisions of this Agreement.
6.3 LYNXVALE covenants not to supply LICENSED SUBJECT MATTER, INFORMATION
and MATERIALS to any third party except as permitted by LEUKOSITE (which
permission shall not be unreasonably withheld) and shall not use same in humans
without the consent of LEUKOSITE. LEUKOSITE hereby consents to the distribution
of certain antibodies for research purposes only by Serotec which are supplied
by LYNXVALE under the License Agreement between them in effect on the EFFECTIVE
DATE.
SECTION 7 - INDEMNIFICATION.
7.1 Each party shall notify the other of any claim, lawsuit or other
proceeding related to PRODUCT, PATENT RIGHTS, MATERIALS, LICENSED SUBJECT MATTER
or INFORMATION. LEUKOSITE agrees that it will defend, indemnify and hold
harmless LYNXVALE and the University of Cambridge and their faculty members,
researchers, employees, officers, trustees and agents and each of them (the
"Indemnified Parties") from and against any and all third party claims, causes
of action and costs (including attorney's fees) of any nature made or lawsuits
or other proceedings filed or otherwise instituted against the Indemnified
Parties arising out of the design, manufacture, sale or use of PRODUCT by
LEUKOSITE or its licensees licensed hereunder except to the extent of the
negligence or willful misconduct of an Indemnified Party. LEUKOSITE will also
assume responsibility for all costs and expenses related to such claims and
lawsuits for which it is obligated to indemnify the Indemnified Parties pursuant
to this Paragraph 6.1 including, but not limited to, the payment of all
attorney's fees and costs of litigation or other defenses. LEUKOSITE shall have
the right to control the
<PAGE> 10
-10-
defense, settlement or compromise of any such claim.
SECTION 8 - ASSIGNMENT; SUCCESSORS.
8.1 This Agreement shall not be assignable by either of the parties
without the prior written consent of the other party (which consent shall not be
unreasonably withheld or delayed), except that LEUKOSITE without the consent of
LYNXVALE may assign this Agreement to an AFFILIATE or to a successor in interest
or transferee of all or substantially all of the portion of the business to
which this Agreement relates.
8.2 Subject to the limitations on assignment herein, this Agreement shall
be binding upon and inure to the benefit of said successors in interest and
assigns of LEUKOSITE and LYNXVALE. Any such successor or assignee of a party's
interest shall expressly assume in writing the performance of all the terms and
conditions of this Agreement to be performed by said party.
SECTION 9 - TERMINATION.
9.1 Except as otherwise specifically provided herein and unless sooner
terminated pursuant to Paragraph 9.2 or 9.3 of this Agreement, this Agreement
and the licenses and rights granted thereunder shall remain in full force and
effect until the expiration of the last to expire PATENT RIGHT, at which time
LEUKOSITE shall have a fully paid-up nonexclusive, non-cancelable license.
9.2 LEUKOSITE shall have the right to terminate this Agreement or any or
all of its licenses under one or more PATENT RIGHTS in one or more countries
upon sixty (60) days prior written notice.
9.3(a) Subject to Section 9.3(b), upon material breach of any material
provisions of this Agreement by either party to this Agreement, in the event the
breach is not cured within sixty (60) days after written notice to the breaching
party by the other party, in addition to any other remedy it may have, the other
party at its sole option may terminate this Agreement, provided that such other
party is not then in breach of this agreement In the event that a party in
breach disputes such termination and institutes legal action with respect
thereto, the Agreement shall not be terminated until there is a final court
decision in this respect from which no appeal can be or is taken.
(b) In the event that LYNXVALE is in breach of any material provision of
this Agreement, in the event that the breach is not cured within sixty (60) days
of written notice to LYNXVALE by LEUKOSITE, in addition to any other remedy it
<PAGE> 11
-11-
may have, LEUKOSITE may withhold any payment due to LYNXVALE under this
Agreement until such breach is cured such withholding of payments by LEUKOSITE
shall not constitute a breach of this Agreement.
9.4 Upon any termination of this Agreement LEUKOSITE shall have the option
but not the obligation to finish any work-in-progress and to sell any completed
inventory of a PRODUCT covered by this Agreement which remains on hand as of the
date of the termination, so long as LEUKOSITE pays to LYNXVALE the royalties
applicable to said subsequent sales in accordance with the same terms and
conditions as set forth in this Agreement.
9.5 In the event that the licenses granted to LEUKOSITE under this
Agreement are terminated, any granted sub-licenses shall remain in full force
and effect, provided that the SUBLICENSEE is not then in breach of its
sub-license agreement and the SUBLICENSEE agrees to be bound to LYNXVALE as a
licensor under the terms and conditions of the sub-license agreement. LYNXVALE,
upon request, shall acknowledge the applicability of this provision to a
SUBLICENSEE.
9.6 The obligations of Sections 6 and 7 and Paragraphs 9,4, 9.5, 9.6 and
9.7 shall survive any termination of this Agreement.
9.7 Upon termination of this Agreement for any reason, nothing herein
shall be construed to release either party from any obligation that matured
prior to the effective date of such termination.
SECTION 10 - GENERAL PROVISIONS.
10.1 The relationship between LYNXVALE and LEUKOSITE is that of
independent contractors. LYNXVALE and LEUKOSITE are not joint venturers,
partners, principal and agent, master and servant, employer or employee, and
have no relationship other than as independent contracting parties. LYNXVALE
shall have no power to bind or obligate LEUKOSITE in any manner. Likewise,
LEUKOSITE shall have no power to bind or obligate LYNXVALE in any manner.
10.2 Any matter or disagreement under Paragraph 2.4 which this Agreement
specifically specifies is to be resolved by arbitration shall be submitted to a
mutually selected single arbitrator to so decide any such matter or
disagreement. The arbitrator shall conduct the arbitration in accordance with
the Rules of the International Chamber of Commerce, unless the parties agree
otherwise. If the parties are unable to mutually select an arbitrator, the
arbitrator shall be selected in accordance with the procedures of the
International Chamber of Commerce. The decision and award rendered by the
arbitrator shall be final and binding. Judgment upon the award may be entered in
any court having jurisdiction thereof. Any arbitration pursuant to this section
requested by LYNXVALE shall be
<PAGE> 12
-12-
held in Boston, Mass. USA, and any arbitration requested by LEUKOSITE shall be
held in London, England or such other place as may be mutually agreed upon in
writing by the parties.
10.3 This Agreement sets forth the entire agreement and understanding
between the parties as to the subject matter thereof and supersedes all prior
agreements in this respect. There shall be no amendments or modifications to
this Agreement, except by a written document which is signed by both parties.
10.4 This Agreement shall be construed and enforced in accordance with the
law of England, without reference to its choice of law principles.
10.5 The headings in this Agreement have been inserted for the convenience
of reference only and are not intended to limit or expand on the meaning of the
language contained in the particular article or section.
10.6 Any delay in enforcing a party's rights under this Agreement or any
waiver as to a particular default or other matter shall not constitute a waiver
of a party's right to the future enforcement of its rights under this Agreement,
excepting only as to an expressed written and signed waiver as to a particular
matter for a particular period of time.
10.7 Notices. Any notices given pursuant to this Agreement shall be in
writing and shall be deemed delivered upon the earlier of (i) when received at
the address set forth below, or (ii) three (3) business days after mailed by
certified or registered mail postage prepaid and properly addressed, with return
receipt requested, or (iii) by facsimile as confirmed by certified or registered
mail. Notices shall be delivered to the respective parties as indicated or any
other address designated by a party to the other party in writing under the
notice provisions of this Section 10.7:
To LEUKOSITE: LEUKOSITE, INC.
215 First Street
Cambridge, MA 02142
Copy to: Elliot M. Olstein, Esq.
Carella, Byrne, Bain, Gilfillan,
Cecchi, Stewart & Olstein
6 Becker Farm Road
Roseland, N.J. 07068
<PAGE> 13
-13-
To LYNXVALE: LYNXVALE LTD.
20 Trumpington St.
Cambridge CB2, 1QA
United Kingdom
10.8 LEUKOSITE shall not use the name of LYNXVALE or the University of
Cambridge or of any staff member, employee student or any adaptation thereof in
any advertising, promotional or sales literature without the prior written
approval of LYNXVALE.
10.9 in the event a court or governmental agency of competent jurisdiction
holds any provision of this Agreement to be invalid, such holding shall have no
effect on the remaining provisions of this Agreement, and they shall continue in
full force and effect. Upon such holding, the parties shall, within a reasonable
period of time, determine whether the severed provision(s) detrimentally and
materially affect the obligations or performance of either or both parties. If
so affected, the parties shall, within a reasonable period of time, negotiate in
good faith to modify this Agreement to relieve such effects. If such
negotiations do not result in mutually agreeable modification to this Agreement,
either effected party may terminate this Agreement upon providing the other
party with thirty (30) days written notice of such termination.
10.10 This Agreement shall not create any rights including without
limitation third-party beneficiary rights, in any person or entity not a party
to this Agreement.
10.11 This Agreement may be signed in two or more counterparts, each such
counterpart shall be deemed an original and together shall constitute one and
the same Agreement.
<PAGE> 14
-14-
IN WITNESS WHEREOF, the parties have executed this Agreement in two or
more counterparts, each as an original and all together as one instrument as of
the date set forth above.
LYNXVALE: LYNXVALE LTD.
By: /s/ R.C. Jennings
Name: R.C. Jennings
Title: Director
LEUKOSITE: LEUKOSITE, INC.
By: /s/ Chris Mirabelli
Name: C.K. Mirabelli
Title CEO And Chairman
I, Herman Waldmann, Ph.D., have read this Agreement in its entirety and I
understand and consent to the terms herein.
/s/ Herman Waldman
HERMAN WALDMANN
<PAGE> 1
EXHIBIT 10.6
SERVICE AGREEMENT
This SERVICE AGREEMENT is entered into as of this ninth day of
March, 1995, by and between LeukoSite, Inc., a corporation organised the laws of
the State of Delaware, with principal offices at 215 First St., Cambridge,
Massachusetts, MA 02142, USA (hereinafter "LeukoSite") and MRC Collaborative
Centre, a company incorporated under the laws of England whose registered office
is situated at 1-3 Burtonhole Lane, London NW7 1AD U.K. ("MRC CC").
WHEREAS, LeukoSite is interested in having MRC CC perform certain
services for LeukoSite in connection with antibody humanization;
WHEREAS, MRC CC has the expertise and facilities and is
willing to perform such services for LeukoSite;
NOW THEREFORE, the parties mutually agree as follows:
1. Services
From time to time at the request of LeukoSite, MRC CC shall
provide antibody humanization services and deliver to LeukoSite
any resulting cell lines, constructs, sequencing information and
other information and data requested (collectively, the
"Services") in accordance with the Description of Services and
Budget for such Services attached hereto and made a part hereof
as Appendix A, or any other such description and budget
subsequently agreed to by the parties. MRC CC will use its best
endeavours to complete such Services in a timely fashion and in
accordance with all applicable laws, regulations and professional
standards prevailing in the UK.
<PAGE> 2
-2-
2. Term
This Agreement will commence on the date hereof and shall
continue in effect for a period of one year, subject to earlier
termination in accordance with the provisions of this Section.
The Agreement may be renewed upon mutual agreement of the
par-ties. Either party may terminate this Agreement upon ten (10)
days' written notice to the other party in the event of default
by the other party of its obligations under this Agreement,
unless such default is cured within such ten (10) day period.
Either party may terminate this agreement on thirty (30) days
prior written notice for any reason. Notwithstanding anything
herein to the contrary, Sections 4, 5, 7 and 8 hereof shall
survive expiration or termination of this Agreement for any
reason.
3. Payment
Payment for Services shall be as set forth in Appendix A .
Amounts so due shall be payable by LeukoSite within thirty (30)
days of receipt of an invoice from MRC CC upon completion of the
corresponding Services. MRC CC shall be responsible for all other
expenses incurred by it in fulfilling its obligations hereunder.
In the event of early termination by LeukoSite for any reason,
LeukoSite shall pay MRC CC for Services completed hereunder and,
in respect of Services not completed by MRC CC at the date of
termination, for expenses committed to perform such Services to
the date of termination.
<PAGE> 3
-3-
4. Confidential Information
MRC CC agrees to treat any materials ("Materials)" and any
confidential or proprietary information obtained from LeukoSite
or generated or created by MRC CC in the course of performing
Services under this Agreement, including the results of the
Services in so far as the foregoing relates to the subject matter
of the work contemplated or that subsequently agreed to under the
terms of this Agreement and anything derived therefrom,
(collectively, the "Information") as the confidential and
exclusive property of LeukoSite, and agrees not to disclose any
of the Information or disclose or distribute any Material to any
third party without first obtaining the written consent of
LeukoSite. MRC CC agrees that it will use any Information and any
Materials only for purposes of providing Services to LeukoSite
hereunder and for no other purpose without the written consent of
LeukoSite. MRC CC further agrees to take all practicable steps to
ensure that the Information and Materials will not be used by its
directors, officers or employees, except on like terms of
confidentiality as aforesaid, and will be kept fully-private and
confidential by them.
The above provisions of confidentiality shall not apply to that
part of the Information obtained from LeukoSite which MRC CC is
able to demonstrate by documentary evidence;
(a) was fully in MRC CC's possession prior or
receipt from LeukoSite; or
(b) was in the public domain at the time of
receipt from LeukoSite; or
<PAGE> 4
-4-
(c) became part of the public domain through no default
of MRC CC, its directors, officers or employees; or
(d) was lawfully received by MRC CC from some third
party having a right of further disclosure.
MRC CC agrees that, at LeukoSite's request, it shall return to
LeukoSite all parts of the Information provided by LeukoSite in
documentary form and any unused Materials and will return or
destroy any copies thereof made by MRC CC, its directors,
officers or employees, except that MRC CC may retain one copy of
the Information in its legal files, subject to the continuing
obligation of nondisclosure and nonuse hereunder.
Neither anything herein contained nor any delivery of Information
or a Material to one party shall be deemed to grant to that party
any rights or licenses under any patent applications or patents
or under any know-how, technology or inventions of the other.
5. Publicity
Except as required by law, neither party shall use the name of
the other party, nor of any employee of the other party, in
connection with any publicity, without the prior written approval
of the other party.
6. Independent Contractor
LeukoSite and MRC CC are independent parties and nothing in this
Agreement is intended or shall be deemed to create a partnership,
agency, employer/employee or joint venture relationship between
<PAGE> 5
-5-
the parties or between either party and any employee or agent of
the other party.
7. Intellectual Property
At LeukoSite's request, MRC CC shall assign to LeukoSite all of
MRC CC's rights to, and interests in Information including, but
not limited to, antibody designs and any antibodies derived
therefrom based upon any murine antibodies or complete, DNA
sequences thereof provided by LeukoSite to MRC CC(collectively,
'Murine Antibodies"). MRC CC further agrees to assist LeukoSite
in applying for patents for such antibodies and antibody designs
by providing any and all design specifications and documentation
for the work which MRC CC performs and other reasonable
assistance as appropriate.
Notwithstanding the foregoing, (i) MRC CC reserves all of its
rights with respect to antibody engineering techniques and
know-how used in performing the Services hereunder and (ii)
LeukoSite retains all of its rights to Murine Antibodies and to
all antibody designs and all antibodies derived therefrom under
the terms of this Agreement.
<PAGE> 6
-6-
8. Limitations
MRC CC makes no warranties, expressed or implied, as to any
matter whatsoever, including without limitations, the ownership,
merchantability, of fitness for a particular purpose of the
results of Services performed hereunder.
9. Notices
Any notices to be given hereunder shall be in writing and sent to
the address below by telecopy, with originals to follow
immediately thereafter by overnight mail or by first class mail,
and shall be effective upon receipt of the telecopy.
If to LeukoSite:
LeukoSite Inc.
215 First St.
Cambridge, MA 02142
U.S.A.
Attention: Director of Research
Tel. No: +1 (617) 621-9350
Fax No: +1 (617) 621-9349
If to MRC CC:
MRC Collaborative Centre
1 - 3 Burtonhole Lane
Mill Hill
London NW7 1AD
U.K.
Attention: Commercial Director
Tel. No: +44 (81) 906-3811
Fax No: +44 (81) 906-1394
<PAGE> 7
-7-
10. Entire Agreement
This Agreement sets forth the entire agreement of the parties
with respect to the subject matter contained herein, and may not
to modified or amended except by a written agreement executed by
the parties.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement through their duly authorized representatives.
MRC COLLABORATIVE CENTRE LEUKOSITE, INC.
By: /s/ [signature appears here] By: /s/ Chris Mirabelli
---------------------------- ------------------------
Title: Commercial Director Title: CEO and Chairman
---------------------------- ------------------------
Date: 11th April, 1995 Date: 9 March 1995
---------------------------- ------------------------
<PAGE> 1
CONFIDENTIAL TREATMENT EXHIBIT 10.7
CHILDREN'S MEDICAL CENTER CORPORATION - LEUKOSITE, INC.
LICENSE AGREEMENT
TABLE OF CONTENTS
PREAMBLE
ARTICLES:
<TABLE>
<S> <C>
I DEFINITIONS ..........................................
II GRANT ................................................
III DUE DILIGENCE ........................................
IV PAYMENTS .............................................
V PATENT PROSECUTION....................................
VI INFRINGEMENT .........................................
VII PRODUCT LIABILITY.....................................
VIII EXPORT CONTROLS.......................................
IX NON-USE OF NAMES......................................
X ASSIGNMENTS ..........................................
XI ARBITRATION ..........................................
XII TERMINATION ..........................................
XIII PAYMENTS, NOTICES AND OTHER...........................
COMMUNICATIONS .......................................
XIV MISCELLANEOUS PROVISIONS..............................
</TABLE>
<PAGE> 2
-2-
This Agreement is made and entered into this 25th day of March,
1996 (the Effective Date), by and between CHILDREN'S MEDICAL CENTER CORPORATION,
a corporation duly organized and existing under the laws of the Commonwealth of
Massachusetts and having its principal office at 300 Longwood Avenue, Boston,
Massachusetts, 02115, U.S.A. (hereinafter referred to as CMCC), and LeukoSite,
Inc. a corporation duly organized under the laws of Delaware and having its
principal office at 215 First Street, Cambridge, MA (hereinafter referred to as
LICENSEE).
WITNESSETH
WHEREAS, CMCC is either the owner or co-owner with Brigham and
Women's Hospital of 75 Francis Street, Boston, MA 02115 (hereinafter referred to
as BWH) and/or LICENSEE of certain "Patent Rights" (as later defined herein)
relating to inventions resulting from research funded by LICENSEE;
WHEREAS, CMCC has the right to grant licenses under said Patent
Rights, (subject only to a royalty-free, nonexclusive license heretofore granted
to the United States Government);
WHEREAS, CMCC and BWH desire to have the Patent Rights utilized
in the public interest and is willing to grant a license thereunder;
WHEREAS, LICENSEE has represented to CMCC, to induce CMCC to
enter into this Agreement, that LICENSEE is capable of the development,
production, manufacture, marketing and sale of products similar to the "Licensed
Product(s)" (as later defined herein) and/or the use of the "Licensed
Process(es)" (as later defined herein) and that it shall commit itself to a
thorough and diligent program of exploiting the Patent Rights so that public
utilization shall result therefrom; and
WHEREAS, LICENSEE desires to obtain a license under the Patent
Rights upon the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein, the parties hereto agree as follows:
<PAGE> 3
-3-
ARTICLE I -- DEFINITIONS
For the purpose of this Agreement, the following words and
phrases shall have the following meanings:
1.1 "LICENSEE" shall mean LeukoSite, Inc. and any Subsidiary of LeukoSite, Inc.
1.2 "Subsidiary" shall mean any corporation, company or other entity more than
fifty percent (50%) of whose voting stock is owned or controlled directly or
indirectly by LeukoSite, Inc.
1.3 "Patent Rights" shall mean all of the following CMCC intellectual property
rights by ownership and BWH rights conveyed by agency granted to CMCC by
agreement (Appendix A):
a. The United States and foreign patents and/or patent
applications listed in Appendix B;
b. United States and foreign patents issued from the applications
listed in Appendix B and from divisionals and continuations of these
applications;
c. Claims of U.S. and foreign continuation-in-part applications,
and of the resulting patents, which are directed to subject matter specifically
described in the U.S. and foreign applications listed in Appendix B;
d. Claims of all later filed foreign patent applications, and of
the resulting patents, which are directed to subject matter specifically
described in the United States patent and/or patent applications described in
(a), (b), or (c) above;
e. Any reissues and reexaminations of United States patents
described in (a), (b), (c), or (d) above.
1.4 A "Licensed Product" shall mean any product or part thereof which:
a. Is covered in whole or in part by an issued, unexpired claim
or a pending claim contained in the Patent Rights in any country.
b. Is manufactured by using a process which is covered in whole
or in part by an issued, unexpired claim or a pending claim contained in the
Patent Rights in any country.
<PAGE> 4
-4-
1.5 A "Licensed Process" shall mean any process which is covered in whole or in
part by an issued, unexpired claim or a pending claim contained in the Patent
Rights in any country.
1.6 "Net Sales Price" shall mean LICENSEE's gross billings for Licensed Products
produced hereunder less the sum of the following:
a. Discounts allowed in amounts customary in the trade;
b. Sales, tariff duties and/or use taxes directly imposed and
with reference to particular sales;
c. Outbound transportation and related transportation insurance
prepaid or allowed;
d. Amounts allowed or credited on returns; and
e. Rebates granted.
No deductions shall be made for commissions paid to individuals
whether they be with independent sales agencies or regularly employed by
LICENSEE and on its payroll, or for cost of collections. Licensed Products shall
be considered "sold" when billed out or invoiced.
1.7 "Field of Use" shall mean diagnostic and therapeutic products for the
diagnosis or treatment of human disease.
1.8 "Information" shall mean any data and information necessary or useful to
make, have made, use, lease and sell Licensed Products and to practice Licensed
Processes for the Field of Use to which CMCC has a transferable right on the
Effective Date.
ARTICLE II -- GRANT
2.1 a) CMCC hereby grants to LICENSEE the exclusive worldwide right and license
to make, have made, use, lease, offer for sale, and/or sell the Licensed
Products, and to practice the Licensed Processes for the Field of Use under
Patent Rights to the end of the term for which the Patent Rights are granted
unless sooner terminated according to the terms hereof; provided however, CMCC
and BWH shall retain a royalty-free, nonexclusive, irrevocable license to
practice the Patent Rights for noncommercial research purposes only and provided
further that
<PAGE> 5
-5-
LICENSEE may continue to make, have made, use, offer for sale, and/or sell
Licensed Products and Licensed Processes in the Field of Use without any further
obligation to CMCC after expiration of the term for which Patent Rights are
granted.
b) LICENSEE shall have the right to use Information to make, have
made, use, offer for sale, and/or sell Licensed Products and to practice
Licensed Processes for the Field of Use and CMCC will not license any party
exclusively with respect thereto.
2.2 Notwithstanding anything above to the contrary, the license granted
hereunder shall be subject to the rights of the United States government, if
any, under Public Laws 96-517, 97-226, and 98-620, codified at 35 U.S.C. sec.
200-212 and any regulations promulgated thereunder.
2.3 LICENSEE agrees that the manufacture of Licensed Products leased or sold in
the United States shall be in compliance with 35 U.S.C. 204.
2.4 In order to establish exclusivity for LICENSEE, CMCC hereby agrees that it
shall not grant any other license to make, have made, use, lease, offer for
sale, and/or sell Licensed Products or to utilize Licensed Processes for the
Field of Use during the period of time in which this Agreement is in effect.
2.5 LICENSEE shall have the right to enter into sublicensing agreements for the
rights, privileges, and licenses granted hereunder. Such sublicenses will remain
in full force and effect upon the expiration of LICENSEE's rights granted herein
as a direct license between sublicensee and CMCC, provided that the sublicensee
execute a licensing agreement with CMCC and providing the sublicensee assert in
writing to CMCC prior to the expiration of LICENSEE's rights granted hereunder
that it has the capability to perform under the license and is willing to assume
all of the obligations of LICENSEE under this agreement.
2.6 LICENSEE hereby agrees that every sublicensing agreement to which it shall
be a party and which shall relate to the rights, privileges and license granted
hereunder shall contain a statement setting forth the date upon which LICENSEE's
exclusive rights, privileges and license hereunder shall terminate.
2.7 LICENSEE agrees that any sublicense granted by it shall provide that the
obligations to CMCC of Articles II, VI, VII, VIII, IX, X, XI, XII,
<PAGE> 6
-6-
and XIV of this Agreement shall be binding upon the sublicensee as if it were a
party to this Agreement. LICENSEE further agrees to attach copies of these
Articles to sublicense agreements.
2.8 LICENSEE agrees to forward to CMCC a copy of any and all fully executed
sublicense agreements.
2.9 The license granted hereunder shall not be construed to confer any rights
upon LICENSEE by implication, estoppel or otherwise as to any technology not
specifically set forth herein.
ARTICLE III -- DUE DILIGENCE
3.1 LICENSEE shall use its best efforts, within reason, to bring one or more
Licensed Products or Licensed Processes to market through a thorough, and
diligent program for exploitation of the Patent Rights. Such diligence shall be
demonstrated in part by the following: (1) description of a program for the
utilization of the Patent Rights toward the commercialization of Licensed
Product(s), and presenting that program to CMCC representatives within twelve
(12) months of the execution of this Agreement; (2) in good faith endeavor to
adhere to that program and timeline until sale of the Licensed Product(s)
commence, and (3) annual reporting to CMCC of progress in the program and prompt
reporting of any deviations and reasons for deviation from it.
3.2 In the event that CMCC believes that LICENSEE is not in compliance with
Article 3.1 above, CMCC shall notify LICENSEE in writing of its belief and
recommend additional efforts to be undertaken by LICENSEE. Upon receipt of such
notice, CMCC and LICENSEE shall enter a good faith negotiation to determine the
efforts LICENSEE shall undertake to achieve compliance under 3.1 and if such
agreement is not reached within ninety (90) days of receipt of such notice, any
differences between the parties shall be resolved under Article XII. If LICENSEE
fails to exert the efforts determined by negotiation or arbitration, CMCC to a
material breach of this Agreement and CMCC's sole and exclusive remedy shall be
for the license granted hereunder to be converted from and exclusive right to a
nonexclusive right and license.
3.3 CMCC acknowledges that LICENSEE is in the business of developing products
and nothing in this Agreement shall be construed as imposing on LICENSEE the
duty to market or sell Licensed Product(s). Further, CMCC acknowledges that
LICENSEE shall have the sole
<PAGE> 7
-7-
responsibility for making all decisions relating to the commercialization and
marketing of Licensed Product(s).
ARTICLE IV -- PAYMENTS
4.1 For the rights, privileges and license granted hereunder, LICENSEE shall pay
to CMCC in the manner hereinafter provided to the end of the term of the Patent
Rights or until this Agreement shall be terminated as hereinafter provided:
a. A license fee equal to * which shall be deemed earned and due
immediately upon the execution of this Agreement.
b. A license maintenance payment equal to * which shall be due
on each of the ten (10) subsequent anniversaries of the Effective Date. When
the tenth payment is made, the license granted herein shall be fully paid up.
c. Where sublicenses have been granted, LICENSEE shall pay to
CMCC an additional payment equal to * within thirty (30) days of the execution
of each sublicense.
4.2 Payments shall be paid in United States dollars in Boston, Massachusetts.
ARTICLE V -- PATENT PROSECUTION
5.1 LICENSEE shall apply for, seek prompt issuance of, and maintain during the
term of this Agreement the Patent Rights set forth in Appendix B in countries of
its selection. The prosecution, filing and maintenance of all Patent Rights
shall be the primary responsibility of LICENSEE; provided, however, CMCC shall
have reasonable opportunities to advise LICENSEE and shall cooperate with
LICENSEE in such prosecution, filing and maintenance.
5.2 If LICENSEE decides to abandon efforts to obtain patent rights for any
Patent Right in any country, LICENSEE shall so notify CMCC at least one month
prior to the date upon which action is required to prevent abandonment of such
rights, Thereafter, LICENSEE's license for that Patent Right in the affect
country shall terminate and Hospital shall have
* Confidential treatment requested: material has been omitted and filed
separately with the Commission.
<PAGE> 8
-8-
the right to assume responsibility for the continued prosecution of such patent
rights at CMCC's expense.
ARTICLE VI -- INFRINGEMENT
6.1 LICENSEE shall inform CMCC promptly in writing of any alleged infringement
of the Patent Rights by a third party and of any available evidence thereof.
6.2 During the term of this Agreement, LICENSEE shall have the right, but shall
not be obligated, to prosecute at its own expense any such infringements of the
Patent Rights and, in furtherance of such right, LICENSEE hereby agrees that
CMCC may join LICENSEE as a party plaintiff in any such suit, without expense to
CMCC. The total cost of any such infringement action commenced or defended
solely by LICENSEE shall be borne by LICENSEE and LICENSEE shall keep any
recovery or damages for past infringement derived therefrom.
6.3 If within six (6) months after having been notified of any alleged
infringement, LICENSEE shall have been unsuccessful in persuading the alleged
infringer to desist and shall not have brought and shall not be diligently
prosecuting an infringement action, or if LICENSEE shall notify CMCC at any time
prior thereto of its intention not to bring suit against any alleged infringer,
then, and in those events only, CMCC shall have the right, but shall not be
obligated, to prosecute at its own expense any infringement of the Patent
Rights, and CMCC may, for such purposes, use the name of LICENSEE as party
plaintiff. No settlement, consent judgment or other voluntary final disposition
of the suit may be entered into without the consent of LICENSEE, which consent
shall not unreasonably be withheld.
6.4 In the event that a declaratory judgment action alleging invalidity or
non-infringement of any of the Patent Rights shall be brought against LICENSEE,
CMCC, at its option, shall have the right, within thirty (30) days after
commencement of such action, to intervene and share in the defense of the action
at its own expense.
6.5 In any infringement suit as either party may institute to enforce the Patent
Rights pursuant to this Agreement, the other party hereto shall, at the request
and the expense of the party initiating such suit, cooperate in all respects
and, to the extent possible, have its employees testify when requested and make
available relevant records, papers, information, samples, specimens, and the
like.
<PAGE> 9
-9-
6.6 LICENSEE, during the period of this Agreement, shall have the sole right in
accordance with the terms and conditions herein to sublicense any alleged
infringer for the Field of Use for future use of the Patent Rights.
ARTICLE VII -- INDEMNIFICATION, PRODUCT LIABILITY AND INSURANCE
7.1. Indemnification
a. LICENSEE shall indemnify, defend and hold harmless CMCC, BWH,
and their trustees, officers, medical and professional staff, employees, and
agents and their respective successors, heirs and assigns (the "Indemnitees"),
against any liability, damage, loss or expense (including reasonable attorney's
fees and expenses of litigation) incurred by or imposed upon the Indemnitees or
any one of them in connection with any claims, suits, actions, demands or
judgments arising out of any theory of product liability (including, but not
limited to, actions in the form of tort, warranty, or strict liability)
concerning any product, process or service made, used or sold by LICENSEE
pursuant to any right or license granted under this Agreement.
b. LICENSEE's indemnification under (a) above shall not apply to
any liability, damage, loss or expense to the extent that it is directly
attributable to the negligent activities, reckless misconduct or intentional
misconduct of the Indemnitees.
c. LICENSEE agrees, at its own expense, to provide attorneys
reasonably acceptable to CMCC to defend against any actions brought or filed
against any party indemnified hereunder with respect to the subject of indemnity
contained herein, whether or not such actions are rightfully brought.
d. This Section 7.1 shall survive expiration or termination of
this Agreement.
7.2. Insurance
a. Beginning at the time as any such product, process or service
is being commercially distributed or sold (other than for the purpose of
obtaining regulatory approvals) by LICENSEE or by a sublicensee, affiliate or
agent of LICENSEE, LICENSEE or sublicensee shall, at its
<PAGE> 10
-10-
sole cost and expense, procure and maintain comprehensive general liability
insurance in amounts not less than $2,000,000 per incident and $2,000,000 annual
aggregate and naming the Indemnitees as additional insureds. Such comprehensive
general liability insurance shall provide (i) product liability coverage and
(ii) broad form contractual liability coverage for LICENSEE's or sublicensee's
indemnification under Section 7.1 of this Agreement. If LICENSEE or sublicensee
elects to self-insure all or part of the limits described above (including
deductibles or retentions which are in excess of $250,000 annual aggregate) such
self-insurance program must be acceptable to CMCC and the Risk Management
Foundation of the Harvard Medical Institutions, Inc. The minimum amount of
insurance coverage required under this Section 7.2 shall not be construed to
create a limit of LICENSEE's liability with respect to its indemnification under
Section 7.1 of this Agreement.
b. LICENSEE or sublicensee shall provide CMCC with written
evidence of such insurance upon request of CMCC. LICENSEE or sublicensee shall
provide CMCC with written notice at lease fifteen (15) days prior to the
cancellation or non-renewal in such insurance; if LICENSEE or sublicensee does
not obtain replacement insurance providing comparable coverage within such
fifteen (15) day period, CMCC shall have the right to terminate this Agreement
effective at the end of such fifteen (15) day period without notice of any
additional waiting periods.
c. LICENSEE or sublicensee shall maintain such comprehensive
general liability insurance during (i) the period that any such product, process
or service is being commercially distributed or sold (other than for the purpose
of obtaining regulatory approvals by LICENSEE or by a sublicensee, affiliate or
agent of LICENSEE and (ii) a reasonable period after the period referred to in
(c) (i) above which in no event shall be less than five (5) years.
d. This Section 7.2 shall survive expiration or termination of
this Agreement.
ARTICLE VIII -- EXPORT CONTROLS
It is understood that CMCC is subject to United States laws and
regulations controlling the export of technical data, computer software,
laboratory prototypes and other commodities (including the Arms Export Control
Act, as amended and the Export Administration Act of 1979), and that its
obligations hereunder are contingent on compliance with
<PAGE> 11
-11-
applicable United States export laws and regulations. The transfer of certain
technical data and commodities may require a license from the cognizant agency
of the United States Government and/or written assurances by LICENSEE that
LICENSEE shall not export data or commodities to certain foreign countries
without prior approval of such agency. CMCC neither represents that a license
shall not be required nor that, if required, it shall be issued.
ARTICLE IX -- NON-USE OF NAMES
LICENSEE shall not use the names of the Children's Medical Center
Corporation, Brigham and Women's Hospital, nor of any of its employees, nor any
adaptation thereof, in any advertising, promotional or sales literature without
prior written consent obtained from CMCC in each case except that LICENSEE may
state that it is licensed by CMCC under one or more of the patents and/or
applications comprising the Patent Rights, and LICENSEE may comply with
disclosure requirements of all applicable laws relating to its business,
including United States and state security laws.
ARTICLE X -- ASSIGNMENT
This Agreement is not assignable and any attempt to do so shall
be void. However, in the event LICENSEE merges with another entity, is acquired
by another entity, or sells all or substantially all of its assets related to
the Patent Rights to another entity, LICENSEE may assign its rights and
obligations hereunder to, in the event of a merger or acquisition, the surviving
entity, and in the event of a sale, the acquiring entity, without Hospital's
consent so long as: (i) LICENSEE is not then in breach of this Agreement; (ii)
the proposed assignee has a net worth at least equivalent to the net worth
LICENSEE had as of the date of this Agreement; (iii) the proposed assignee has
available resources and sufficient scientific, business and other expertise to
satisfy LICENSEE's obligations hereunder; (iv) LICENSEE provides written notice
of the assignment to Hospital, together with documentation sufficient to
demonstrate the requirements set forth in subparagraphs (i) through (iii) above,
at least thirty (30) days prior to the effective date of the proposed
assignment; and (v) Hospital receives from the proposed assignee, in writing, at
least thirty (30) days prior to the effective date of the assignment: (aa)
reaffirmation of the terms of this Agreement; (bb) an agreement to be bound by
the terms of this Agreement; and (cc) an
<PAGE> 12
-12-
agreement to perform the obligations of LICENSEE under this Agreement.
ARTICLE XI -- ARBITRATION
11.1 Any and all claims, disputes or controversies arising under, out of, or in
connection with this Agreement, which have not been resolved by good faith
negotiations between the parties, shall be resolved by final and binding
arbitration in Boston, Massachusetts, under arbitration rules of the American
Arbitration Association then obtaining. The arbitrators shall have no power to
add to, subtract from or modify any of the terms or conditions of this
Agreement. Any award rendered in such arbitration may be enforced by either
party in either the courts of the Commonwealth of Massachusetts or in the United
States District Court for the District of Massachusetts, to whose jurisdiction
for such purposes CMCC and LICENSEE each hereby irrevocably consents and
submits.
11.2 Notwithstanding the foregoing, nothing in this Article shall be construed
to waive any rights or timely performance of any obligations existing under this
Agreement.
ARTICLE XII -- TERMINATION
12.1 If LICENSEE shall cease to carry on its business, this Agreement shall
terminate upon notice by CMCC.
12.2 Should LICENSEE fail to pay CMCC payments due and payable hereunder, CMCC
shall have the right to terminate this Agreement on thirty (30) days' notice,
unless LICENSEE shall pay CMCC within the thirty (30) day period, all such
payments and interest due and payable. Upon the expiration of the thirty (30)
day period, if LICENSEE shall not have paid all such payments and interest due
and payable, the rights, privileges and license granted hereunder shall
terminate.
12.3 Upon any material breach or default of this Agreement by LICENSEE, other
than those occurrences set out in Paragraphs 12.1 and 12.2 hereinabove, which
shall always take precedence in that order over any material breach or default
referred to in this Paragraph 12.3, CMCC shall have the right to terminate this
Agreement and the rights, privileges and license granted hereunder by ninety
(90) days' notice to LICENSEE. Such termination shall become effective unless
LICENSEE
<PAGE> 13
-13-
shall have cured any such breach or default prior to the expiration of the
ninety (90) day period.
12.4 LICENSEE shall have the right to terminate this Agreement in its entirety
or on a country-by-country basis at any time on six (6) months' notice to CMCC,
and upon payment of all amounts due CMCC through the effective date of
termination. In the event LICENSEE notifies CMCC of its intent to terminate in
any particular country, the parties will discuss LICENSEE's reasons for such
termination. After such discussion and in the event of termination all rights in
said country shall revert to CMCC.
12.5 Upon termination of this Agreement for any reason, nothing herein shall be
construed to release either party from any obligation that matured prior to the
effective date of such termination. LICENSEE and any sublicensee thereof may,
however, after the effective date of such termination, sell all Licensed
Products, and complete Licensed Products in the process of manufacture at the
time of such termination and sell the same, provided that LICENSEE shall pay to
CMCC the payments thereon as required by Article IV of this Agreement.
12.6 Upon termination of this Agreement for any reason during the exclusive
period, any sublicensee not then in default shall have the right to seek a
license from CMCC.
ARTICLE XIII -- PAYMENTS, NOTICES, AND OTHER COMMUNICATIONS
Any payment, notice or other communication pursuant to this
Agreement shall be sufficiently made or given on the date of the mailing if sent
to such party by certified first class mail, postage prepaid, addressed to it at
its address below or as it shall designate by written notice given to the other
party:
In the case of CMCC:
Director, Technology Transfer
Office of Research Administration
Children's Hospital
300 Longwood Avenue
Boston, MA 02115
<PAGE> 14
-14-
In the case of LICENSEE:
LeukoSite, Inc.
215 First Street
Cambridge, MA 02142
Attn: CEO
ARTICLE XIV -- MISCELLANEOUS PROVISIONS
14.1 This Agreement shall be construed, governed, interpreted and applied in
accordance with the laws of the Commonwealth of Massachusetts, U.S.A., except
that questions affecting the construction and effect of any patent shall be
determined by the law of the country in which the patent was granted.
14.2 The parties hereto acknowledge that this Agreement sets forth the entire
Agreement and understanding of the parties hereto as to the subject matter
hereof, and shall not be subject to any change or modification except by the
execution of a written instrument subscribed to by the parties hereto.
14.3 The provisions of this Agreement are severable, and in the event that any
provisions of this Agreement shall be determined to be invalid or unenforceable
under any controlling body of law, such invalidity or unenforceability shall not
in any way affect the validity or enforceability of the remaining provisions
hereof.
14.4 LICENSEE agrees to mark the Licensed Products sold in the United States
with all applicable United States patent numbers. All Licensed Products shipped
to or sold in other countries shall be marked in such a manner as to conform
with the patent laws and practice of the country of manufacture or sale.
14.5 The failure of either party to assert a right hereunder or to insist upon
compliance with any term or condition of this Agreement shall not constitute a
waiver of that right or excuse a similar subsequent failure to perform any such
term or condition by the other party.
<PAGE> 15
IN WITNESS WHEREOF, the parties have hereunto set their hands and
seals and duly executed this Agreement the day and year set forth below.
CHILDREN'S MEDICAL CENTER CORPORATION
By: [signature appears here]
------------------------------------------------
Name William New
Title Vice President, Research Administration
Date:
-------------------------
LEUKOSITE, INC.
By: [signature appears here]
------------------------------------------------
Name Christopher Mirabelli, Ph.D.
Title President and CEO
Date:
-------------------------
<PAGE> 1
CONFIDENTIAL TREATMENT EXHIBIT 10.8(a)
LICENCE AGREEMENT
(DOCUMENT IDENTIFICATION CODE: LEUKOSITE/IC/NHLI/0012/LICENCE)
THIS AGREEMENT (hereinafter called the "LICENCE AGREEMENT") is made effective
the Thirty First day of January, 1996 (hereinafter called the "EFFECTIVE DATE").
BY AND BETWEEN:
THE IMPERIAL COLLEGE OF SCIENCE, TECHNOLOGY & MEDICINE of Sherfield Building,
London SW7 2AZ, England (hereinafter called the "COLLEGE"); and
IMPERIAL EXPLOITATION LIMITED, a company organised under English law and having
a registered office at Sherfield Building, London SW7 2AZ, England (hereinafter
called the "LICENSOR");
OF THE FIRST PART,
AND:
LEUKOSITE INCORPORATED, a company organised under the laws of the state of
Delaware, United States of America, having a principal office at 215 First
Street, Cambridge, MA 02142, United States of America (hereinafter called the
"LICENCEE")
OF THE SECOND PART.
WITNESSETH:
A. WHEREAS, Timothy John Williams, Peter John Jose, David A.
Griffiths-Johnson and John Justin Hsuan (hereinafter called the
"INVENTORS"), have made certain discoveries and inventions in the
field of Eosinophil Chernotactic Cytokines (hereinafter called the
"INVENTION"); and
<PAGE> 2
-2-
B. WHEREAS, Timothy John Williams, Peter John Jose and David A.
Griffiths-Johnson as employees The National Heart & Lung Institute
of Dovehouse Street, London SW3 6LY, England (hereinafter "NHLI") at
the time of the making of the INVENTION have assigned their right,
title and interest in the invention to NHLI; and
C. WHEREAS, John Justin Hsuan as an employee of The Ludwig Institute
for Cancer Research formerly of Hedges House, 153-155 Regent Street,
London WIR 7FD, England (hereinafter the "LUDWIG") at the time of
the making of the INVENTION has assigned his right, title and
interest in the invention to LUDWIG; and
D. WHEREAS, applications have been filed in the United Kingdom and
other territories in the joint names of NHLI and LUDWIG for the
granting of letters patent relating to the said the INVENTION,
further described in Schedule A hereto (hereinafter all collectively
called the "PATENT APPLICATIONS"); and
E. WHEREAS, NHLI on August 1, 1995 ceased to be an independent legal
entity and became a constituent part of the COLLEGE; and
F. WHEREAS, Ludwig have by deed of assignment, appended hereto as
Schedule B, assigned its entire right, title and interest in and to
the INVENTION and the PATENT APPLICATIONS to the COLLEGE; and
G. WHEREAS, the COLLEGE has appointed the LICENSOR to act as its agent
for the purpose of granting Licences under the PATENT RIGHTS, as
hereinafter defined, relating to the INVENTION; and
H. WHEREAS, LICENSOR represents that COLLEGE is the true, sole and
rightful owner of the said INVENTION; and
I. WHEREAS, COLLEGE and LICENSOR desire that the INVENTION be developed
and made available to the public; and
J. WHEREAS, LICENCEE is willing to make a commitment to develop
products embodying the INVENTION for use by and for the general
public; and
K. WHEREAS, LICENCEE represents that it is engaged in the business of
research and development of products in fields related to the
INVENTION; and
<PAGE> 3
-3-
L. WHEREAS, LICENCEE is prepared to undertake a programme for the
development, manufacture and sale of LICENCED PRODUCTS, as
hereinafter defined, provided that LICENCEE is able to obtain a
Licence under the PATENT RIGHTS with exclusivity to protect its
investment in such programme; and
M. WHEREAS, LICENSOR recognises that LICENCEE requires such a Licence
in order to justify the investment in funding and personnel needed
to develop and market LICENCED PRODUCTS; and
N. WHEREAS, LICENCEE desires to obtain such a Licence under the PATENT
RIGHTS; and
O. WHEREAS, LICENSOR is willing to grant to LICENCEE such a Licence
under the PATENT RIGHTS;
NOW, THEREFORE, in consideration of the premises and the performance of the
covenants herein contained, IT IS AGREED AS FOLLOWS:
1 DEFINITIONS
For the purposes of this LICENCE AGREEMENT, and solely for such purposes, the
terms hereinafter set forth shall have the following respective meanings:
(a) "PATENT RIGHTS" shall mean rights to and in the PATENT APPLICATIONS
as identified in Schedule A hereof and in respect of letters patent,
Patent Co-operation Treaty applications, European Patent Convention
applications or applications under similar administrative
international conventions, patent applications in the listed or
designated countries, together with any divisional, continuation,
continuation-inpart, substitute, reissue, extension, supplementary
protection certificate or other application based thereon and all
letters patent resulting therefrom.
(b) "VALID CLAIM" shall mean a claim of an issued, unexpired patent
within the PATENT RIGHTS or a mutually agreed claim being prosecuted
in a pending application within the PATENT RIGHTS. A claim of an
issued, unexpired patent shall be presumed to be valid unless and
until it has been held to be invalid by a final judgement of a court
or administrative body of competent jurisdiction from which no
appeal can be or is taken. A claim being prosecuted in a pending
<PAGE> 4
-4-
application shall be presumed to be mutually agreed and valid unless
LICENSOR is notified by LICENCEE in writing that said claim should
no longer be regarded as such. For the purposes of royalty
determination and payment under Article 4 hereof, any mutually
agreed claim being prosecuted in a pending patent application shall
be deemed to be the equivalent of a valid claim of an issued,
unexpired patent.
(c) "CONTROL", "CONTROL(S)" or "CONTROLLED" shall refer to ownership of
at least fifty percent (50%) of the stock of a corporation or
Organisation entitled to vote upon election of directors thereof.
(d) "AFFILIATE" or "AFFILIATES" shall mean any company(ies),
corporations or organisation(s) which Ware) directly or indirectly
CONTROLLED by LICENCEE.
(e) "SUBLICENCEE" or "SUBLICENCEES" shall mean company(ies),
corporations or organisation(s) to whom or which the LICENSOR shall
Licence PATENT RIGHTS, LICENCED PRODUCTS, marketing rights, SALES
rights or any other form of right of whatsoever kind, rights to
which are conferred herein by the LICENSOR upon the LICENCEE.
(f) "SOLD", "SALE", "SALES", "SELL", "SELLING" and "SELLS" shall refer
to the act of selling or disposing of for value.
(g) "USE", "USES" and "USED" shall refer to the act of using for any
commercial purposes whatsoever.
(h) "SELLER" shall mean one who SELLS.
(i) "LICENCED PRODUCT" shall mean any product covered by a VALID CLAIM
of the PATENT RIGHTS or made by a method covered by a VALID CLAIM of
the PATENT RIGHTS or that is SOLD by LICENCEE. or an AFFILIATE under
conditions or circumstances which, if unlicenced, would amount to
infringement or contributory infringement or inducement of
infringement of the PATENT RIGHTS.
(j) "NET SALES VALUE" shall mean actual billings by the SELLER (LICENCEE
or AFFILIATE or SUBLICENCEE) for SALE of LICENCED PRODUCT less the
following deductions where they are factually applicable:
<PAGE> 5
-5-
(i) discounts, allowed and taken, in amounts customary in the
trade;
(ii) sales and/or use taxes and duties imposed upon and with
specific reference to particular SALES;
(iii) amounts allowed or credited on rejections or returns (not
exceeding the original billing) or retroactive price
reductions; and
(iv) outbound transportation prepaid or allowed.
No allowance or deduction shall be made for commissions or
collections, by whatever name known.
The NET SALES VALUE of any LICENCED PRODUCT that is USED by
LICENCEE or AFFILIATE or SUBLICENCEE or SOLD by LICENCEE or
AFFILIATE or SUBLICENCEE to any person, firm or corporation
controlling, controlled by, or under common control with LICENCEE
or an AFFILIATE or enjoying a special course of dealing with
LICENCEE or an AFFILIATE, shall be determined for the LICENCED
PRODUCT so USED or SOLD by reference to the NET SALES VALUE
thereof which would apply hereunder in an arm's length SALE to a
third party other than such person, firm or corporation.
(k) "FINAL PRODUCT FORM" shall mean a LICENCED PRODUCT in a dosage
form suitable for final usage by the administering physician or
other consumer.
(l) "BULK PRODUCT FORM" shall mean a LICENCED PRODUCT in a form other
than FINAL PRODUCT FORM.
(m) "LICENCED FIELD" shall mean the making or SELLING Of LICENCED
PRODUCT for therapeutic treatment of or diagnosis of disease in
humans employing such LICENCED PRODUCTS.
(n) "MARKETING AUTHORISATION" shall mean allowance granted by the
appropriate national body within a country to market and SELL
LICENCED PRODUCT for therapeutic use in the LICENCED FIELD.
2. LICENCE
LICENSOR hereby grants to LICENCEE and LICENCEE hereby accepts from LICENSOR,
upon the terms and conditions herein specified:
<PAGE> 6
-6-
(a) An exclusive, as hereinafter specified in Article 10 hereof, and
non-assignable Licence under the PATENT RIGHTS to make, to have
made, to USE and to SELL LICENCED PRODUCTS for use in the
LICENCED FIELD, including a Licence to USE processes covered by
the PATENT RIGHTS, in all countries in which the PATENT RIGHTS
are or shall be in effect and in their respective territories and
possessions, to the full end of their term or terms on a
country-by-country basis for which the PATENT RIGHTS are issued,
unless sooner terminated as hereinafter provided.
(b) The right to extend to its AFFILIATES and SUBLICENCEES the
Licence and rights granted pursuant to Article 2 hereof, provided
LICENCEE promptly notifies LICENSOR in writing of each such
extension.
(c) LICENCEE agrees to be responsible for the performance hereunder
by its AFFILIATES and SUBLICENCEES to which the Licence and
rights shall have been extended pursuant to Article 2 hereof.
(d) For the purposes of reporting and making payments of earned
royalties under this LICENCE AGREEMENT, the manufacture, SALE or
USE of LICENCED PRODUCTS by any AFFILIATE or SUBLICENCEE to which
the Licence and rights shall have been extended pursuant to
Article 2 hereof shall be considered the manufacture, SALE or USE
of such LICENCED PRODUCTS by LICENCEE; however, provided LICENCEE
shall so notify LICENSOR in advance thereof in writing, any such
AFFILIATE or SUBLICENCEE may make the pertinent reports and
royalty payments specified in Article 4 hereof directly to
LICENSOR on behalf of LICENCEE, otherwise, such reports and
payments on account of SALES or USES of LICENCED PRODUCTS by each
AFFILIATE or SUBLICENCEE shall be made by LICENCEE; and, in any
event, the SALES or USES of LICENCED PRODUCTS by each such
AFFILIATE or SUBLICENCEE shall be separately shown in the reports
to LICENSOR if such information is readily available to LICENCEE.
(e) No other, further or different Licence or right and, except as
expressly provided in Article 2 hereof, no further power to
subLicence is hereby granted or implied.
(f) LICENSOR grants to LICENCEE a sole and exclusive option to add to
the PATENT RIGHTS the entire right, title and interest of COLLEGE
or an affiliate, to any invention conceived solely by
<PAGE> 7
-7-
employees of COLLEGE or an affiliate or jointly with employees of
LICENCEE and/or another third party, or first actually reduced to
practice, on a programme of research support provided by LICENCEE
to COLLEGE or an affiliate thereof and mutually agreed at the
time of agreeing on the terms of a research agreement covering
said research as falling within the scope of this Article 2(f),
said option to continue for as long as such support is being
provided by LICENCEE and for three (3) months thereafter. Upon
written notice by LICENCEE, these rights to such inventions shall
automatically be added to the PATENT RIGHTS at no additional fee
or cost to LICENCEE and all other terms and conditions of this
LICENCE AGREEMENT shall apply; providing, however, that if any
LICENCED PRODUCT sold by LICENCEE or an affiliate is covered only
by a patent jointly owned by COLLEGE or an affiliate, the royalty
rate, milestone payments and all other payments due to LICENSOR
hereunder shall be reduced by fifty percent (50%).
(g) LICENSOR, COLLEGE and their AFFILIATES additionally grant
LICENCEE on a royalty free, paid-up, worldwide basis:
(i) a non-exclusive Licence to use all know-how, data
and other technical information relating to the
PATENT RIGHTS and/or developed under a programme of
research supported by LICENCEE; and
(ii) an exclusive right and Licence to receive, use
and/or sell all biological materials created by
LICENSOR, COLLEGE and their AFFILIATES and relating
to the PATENT RIGHT'S and/or created on a programme
of research supported by LICENCEE.
3. LICENCE ISSUE FEES
(a) LICENCEE shall pay to LICENSOR a Licence issue fee of * United
States Dollars * . * United States * of the Licence Issue Fee shall
be paid within thirty (30) days following execution and delivery of
this LICENCE AGREEMENT and payment of the remaining * United States
Dollars * of the Licence Issue Fee shall fall due on July 31, 1996.
(b) * of all Licence issue fees amounting to * United States Dollars *
shall be creditable once and once only against royalties payable
under this
* Confidential treatment requested: material has been omitted and filed
separately with the Commission.
<PAGE> 8
-8-
LICENCE AGREEMENT on SALES of LICENCED PRODUCT subject to a maximum
reduction in any royalties due in each quarterly reporting period of
* of the total due pursuant to Article 4 herein. Such reduction in
royalties shall continue until Licensor has reduced cumulative
royalties payable be the said * Hundred United States Dollars (*).
4. MILESTONE PAYMENTS, ROYALTIES, RECORDS AND REPORTS
(a) LICENCEE shall pay to LICENSOR a milestone payment of * United
States Dollars (*) on first entry of the each LICENCED PRODUCT into
its first phase I clinical trial anywhere in the world.
(b) LICENCEE shall pay to LICENSOR a milestone payment of * United
States Dollars (*) on first entry of the each LICENCED PRODUCT into
its first phase HI clinical trial anywhere in the world.
(c) LICENCEE shall pay to LICENSOR a milestone payment of * United
States Dollars (*) on first application for MARKETING AUTHORIZATION
for each LICENCED PRODUCT anywhere in the world.
(d) LICENCEE shall pay to LICENSOR a milestone payment of * United
States Dollars (*) on first issuance of MARKETING AUTHORIZATION for
each LICENCED PRODUCT anywhere in the world.
(e) * of all milestone payments for each LICENCED PRODUCT made pursuant
to Articles 4(a), 4(b), 4(c) and 4(d) herein shall be creditable
once and once only against royalties payable under this LICENCE
AGREEMENT on SALES of all LICENCED PRODUCTS subject to a maximum
reduction in any royalties due in each quarterly reporting period of
* of the total due pursuant to Article 4 herein. Such reduction in
royalties in respect of each LICENCED PRODUCT shall continue until
Licensor has reduced cumulative royalties payable by the * United
States Dollars (*) in respect of royalties due on each LICENCED
PRODUCT.
* Confidential treatment requested: material has been omitted and filed
separately with the Commission.
<PAGE> 9
-9-
(f) For the rights and privileges granted under this LICENCE
AGREEMENT, LICENCEE shall pay to LICENSOR, in the manner provided
herein, to the end of the term or terms of the PATENT RIGHTS or
until this LICENCE AGREEMENT is terminated as hereinafter
provided, earned royalties computed as a percentage of the NET
SALES VALUE of all LICENCED PRODUCTS that are made, USED or SOLD
by or for LICENCEE or AFFILIATES or SUBLICENCEES under this
LICENCE AGREEMENT; the percentage of NET SALES VALUE to be as
follows:
(i) * of the NET SALES VALUE of annual SALES of LICENCED
PRODUCTS SOLD for therapeutic use; and
(ii) * of the NET SALES VALUE of annual SALES of LICENCED
PRODUCTS SOLD for diagnostic use); and
(g) Earned royalty shall be paid pursuant to Article 4 hereof on all
LICENCED PRODUCTS made, SOLD or USED under this LICENCE
AGREEMENT; however, earned royalty shall be payable hereunder as
to a given LICENCED PRODUCT only when a Licence right granted
herein is utilised in the manufacture or SALE or USE thereof, and
the earned royalty payable on a given LICENCED PRODUCT made
hereunder shall not become due and owing until such LICENCED
PRODUCT is SOLD or USED.
Any LICENCED PRODUCT made under a Licence granted pursuant to
this LICENCE AGREEMENT prior to the termination or expiration of
the applicable PATENT RIGHTS and not SOLD or USED prior to the
termination or expiration of such PATENT RIGHTS shall be subject
to the payment of royalties hereunder when SOLD or USED, even
though such SALE or USE occurs after the termination or
expiration of all pertinent Licences or rights granted hereunder.
The earned royalty for any particular LICENCED PRODUCT shall be
due upon the first bona fide arm's length SALE or USE thereof and
any subsequent SALE or USE of such LICENCED PRODUCT by other than
LICENCEE or an AFFILIATE shall be royalty free.
(h) Notwithstanding the provisions of Article 4 hereof, in the case
of transfers or SALES of any LICENCED PRODUCT between LICENCEE,
AFFILIATES and SUBLICENCEES, one and only one royalty shall be
payable thereon and such royalty shall become
* Confidential treatment requested: material has been omitted and filed
separately with the Commission.
<PAGE> 10
-10-
payable upon the final SALE thereof to a third party or final USE
thereof by LICENCEE or AFFILIATE.
(i) LICENCEE shall keep full, true and accurate books of account
containing all particulars which are necessary for the purpose of
showing the amount payable to LICENSOR by way of royalty as
aforesaid or by way of any other provision hereunder. Said books
of account shall be kept at LICENCEE's principal place of
business. Said books and the supporting data shall be maintained
and kept open at all reasonable times, for three (3) years
following the end of the calendar year to which they pertain (and
access shall not be denied thereafter, if reasonably available),
to the inspection of an independent accountant retained by
LICENSOR and reasonably acceptable to LICENCEE for the purpose of
verifying LICENCEE's royalty statements, or LICENCEE's compliance
in other respects with this LICENCE AGREEMENT. Such inspections
shall not be conducted more than once per year. Names of
customers and other confidential information shall not be
disclosed to LICENSOR by such independent accountant. Such
accountant shall be retained at LICENSOR's sole expense, unless
during any such inspection a deficiency in payments to LICENSOR
of five percent (5%) or more is determined to exist in which
event LICENCEE shall within thirty (30) days reimburse LICENSOR
for the full expense of retaining such accountant, including but
not limited to professional and administrative fees, travel and
subsistence costs.
(j) LICENCEE within thirty (30) days after the first day of January,
April, July and October of each year shall deliver to LICENSOR a
true and accurate report, giving such particulars of the LICENCED
PRODUCTS made, USED and SOLD by LICENCEE and AFFILIATES and
SUBLICENCEES during the preceding three (3) months under this
LICENCE AGREEMENT as are pertinent to an accounting for royalty
under this LICENCE AGREEMENT. These shall include at least the
following, separately stated as to the LICENCED PRODUCTS in FINAL
PRODUCT FORM and those in BULK PRODUCT FORM:
(i) the quantity of LICENCED PRODUCTS invoiced by LICENCEE
and AFFILIATES and SUBLICENCEES during those three (3)
months and the billings therefor; and
(ii) the allowable deductions therefrom; and
(iii) the calculation of royalties thereon; and
(iv) the amount of LICENCED PRODUCTS USED or SOLD during
those three (3) months; and
<PAGE> 11
-11-
(v) the calculation of royalties thereon; and
(vi) the total royalties so calculated.
Simultaneously with the delivery of each such report, LICENCEE
shall pay to LICENSOR the royalty and any other payments due
under this LICENCE AGREEMENT for the period covered by such
report. If no royalties are due, it shall be so reported.
Royalties shall be paid to LICENSOR at LICENSOR's office
specified for the purposes of giving notice in Article 12 hereof.
(k) All amounts payable hereunder by LICENCEE to LICENSOR shall be
payable in United States Dollars. In the event any LICENCED PRODUCT
shall be SOLD by LICENCEE or an AFFILIATE or SUBLICENCEE for
currency other than United States Dollars, the earned royalty
payable as to such LICENCED PRODUCT under Article 4 hereof shall
first be determined in the currency for which the LICENCED PRODUCT
was SOLD and then converted into its equivalent in United States
Dollars, as follows:
(i) the average rate applicable to the transfer of funds
arising from royalty payments as established by the
exchange control authorities of the country of which the
currency of such funds is the national currency for the
accounting period for which payment is thus made; or
(ii) if there is no applicable rate so established, then the
average selling rate for United States Dollars as
published by leading commercial banks in the major city
of the country of which such foreign currency is the
national currency for such accounting period; or
(iii) if there is no rate so published, then the average
buying rate for such foreign currency as published by
leading United States banks for such accounting period.
If the law or regulations of any country shall at any time
operate to prohibit the transfer of funds therefrom to the United
Kingdom, LICENCEE shall have the right to pay royalties hereunder
on account of the SALES or USE in such country by depositing
local currency to the account of LICENSOR in a bank in such
country and notifying LICENSOR to such effect. LICENCEE shall
thereafter co-operate with LICENSOR by all lawful means to obtain
the lawful release of said funds to LICENSOR but shall have no
further responsibility therefor.
<PAGE> 12
-12-
(l) In the event that any payment required under this LICENCE AGREEMENT
shall be overdue, LICENCEE shall pay interest thereon at an annual
rate equivalent to the United Kingdom Clearing Bank Base Lending
Rate computed from the date when the payment became due; provided,
however, that if such rate shall be in excess of that allowed by
applicable law, then the highest rate permitted by law shall apply.
Payment shall be deemed to have been made when received by LICENCEE.
(m) In the event that royalties are to be paid by LICENCEE to a party
who is not an AFFILIATE of LICENCEE for LICENCED PRODUCT for which
royalties are also due to LICENSOR pursuant to Article 4(f) hereof
then the royalties to be paid to LICENSOR by LICENCEE pursuant to
Article 4(f) hereof shall be reduced by one-third of the amount of
such other royalties. In addition, in the event that the royalty
paid to LICENSOR is a significant factor in the return realised by
LICENCEE so as to diminish LICENCEE's capacity to respond to
competitive pressures in the market, LICENSOR agrees to consider a
reasonable reduction in the royalty paid to LICENSOR as to each such
LICENCED PRODUCT for the period during which such market condition
exists. Factors determining the size of the reduction will include
profit margin on LICENCED PRODUCT and on analogous products, prices
of competitive products, and LICENCEE's expenditures in LICENCED
PRODUCT development.
5. DILIGENCE
LICENCEE shall exercise reasonable diligence in developing, testing,
manufacturing, promoting, advertising and SELLING LICENCED PRODUCTS under this
LICENCE AGREEMENT. the course of such diligence LICENCEE shall, either directly
or through an AFFILIATE or SUBLICENCEE to which the Licence shall have been
extended pursuant to Article 2 hereof, take appropriate steps including the
following:
(a) Diligently upon entering into this LICENCE AGREEMENT, establish and
maintain a research and development programme or programmes in the
LICENCED FIELD, or continue to conduct an existing programme or
programmes, reasonably designed, funded and resourced to obtain
information useful in enabling LICENCEE or AFFILIATE to prepare and
file all necessary documentation, data and other evidence required
for MARKETING AUTHORISATION in at least the United States of
America, one country in Europe and Japan. Such submission shall in
the case of
<PAGE> 13
-13-
the United States of America be a New Drug Application (hereinafter
called a "NDA") or its equivalent with the Food and Drug
Administration of the United States Government.
(b) When sufficient technical and marketing data have been obtained in
the sole discretion of the LICENCEE, file with an appropriate and
properly empowered national regulatory authority for approval to
commence, conduct or continue clinical trials of LICENCED PRODUCTS
in the LICENCED FIELD in patients. Such filing shall in the case of
the United States of America be an Investigational New Drug
Application (hereinafter called an "IND").
(c) Proceed diligently following the granting of national approval to
commission and conduct such clinical trials, associated studies and
all other works as are reasonably deemed to be required for
subsequent inclusion in the filing for MARKETING AUTHORISATION for
such LICENCED PRODUCT.
(d) Providing the results of the clinical trials warrant it, and at the
sole discretion of the LICENCEE, proceed diligently to file
submissions for MARKETING AUTHORISATION in at least the United
States of America or one country in Europe or Japan of at least one
LICENCED PRODUCT in the LICENCED FIELD. Such submission in the case
of the United States of America shall be an NDA.
(e) After such submissions are filed, diligently prosecute such
submissions and file all necessary reports and respond to all
reasonable requests from the pertinent regulatory authorities for
information, data, samples, tests and the like; and exhaust all
administrative remedies reasonably available in instances of adverse
action by the pertinent regulatory authorities.
(f) In respect of all countries, proceed diligently following issue of
MARKETING AUTHORISATION as follows:
(i) use reasonable efforts to make and SELL LICENCED PRODUCT'S in
the LICENCED FIELD;
(ii) advertise, promote the SALE of and otherwise employ marketing
and sales technique reasonably designed to develop a public
demand for LICENCED PRODUCTS in the LICENCED FIELD and satisfy
such public demand;
(ii) upon reasonable written request of LICENSOR, furnish LICENSOR
with representative copies of all advertising,
<PAGE> 14
-14-
sales and promotional material relating to such LICENCED
PRODUCTS.
(g) In order to keep LICENSOR apprised of the progress of the
research and development programme or programmes submit progress
reports as to its activities in the LICENCED FIELD, the first
such report to be submitted one (1) year from the EFFECTIVE DATE
of this LICENCE AGREEMENT and further such reports to continue to
be submitted annually thereafter until the SALE of LICENCED
PRODUCTS within the LICENCED FIELD is approved and LICENCED
PRODUCTS are being marketed on a regular commercial basis in the
United States and such approval and marketing is reported in
writing to LICENSOR,
(h) Within three (3) years of the EFFECTIVE DATE of this LICENCE
AGREEMENT and every year thereafter until first SALE, LICENCEE
shall provide LICENSOR with the following:
(i) a written statement of LICENCEE's best estimate or
forecast of its projected annual SALES for each of the
first three (3) years of SALES of each product in each
country in which it intends to market a LICENCED
PRODUCT under this LICENCE AGREEMENT; and
(ii) a written statement of LICENCEE's forecast of the
anticipated marketing date in each country for each
such product that it intends to market as a LICENCED
PRODUCT, based upon the assumption that no unexpected
technical or regulatory problems will arise.
(i) Subject to necessary generally sequential performance of the acts
specified in Article 5 hereof, each of them is separately agreed
upon and performance of one of them shall not excuse
non-performance of another.
(j) Non-performance of this Article 5, or any subparagraph thereof,
shall be a breach of or default under this LICENCE AGREEMENT,
subject to LICENSOR's right to terminate this LICENCE AGREEMENT
pursuant to Article 6 hereof.
(k) LICENSOR agrees to maintain information in such reports in
confidence to the same extent that it maintains like information
of its own in confidence, subject to LICENSOR's obligation to
report information to LICENCEE.
<PAGE> 15
-15-
6. TERMINATION
(a) Subject to Article 12 hereof, if LICENCEE shall become bankrupt
or insolvent and/or if the business of LICENCEE shall be placed
in the hands of a Receiver, Assignee, or Trustee, whether by the
voluntary act of LICENCEE or otherwise, this LICENCE AGREEMENT
shall immediately terminate.
(b) Upon any material breach of or default under this LICENCE
AGREEMENT by LICENCEE, LICENSOR may terminate this LICENCE
AGREEMENT by forty-five (45) days written notice by registered
mail to LICENCEE. Said notice shall become effective at the end
of said period, unless during said period LICENCEE shall cure
such breach or default.
(c) LICENCEE may terminate this LICENCE AGREEMENT at any time on
three (3) months' written notice to LICENSOR.
(d) Upon termination of this LICENCE AGREEMENT for any reason, all
rights granted hereunder shall revert to LICENSOR for the benefit
of LICENSOR.
(e) LICENCEE's obligations to report to LICENSOR and to pay royalties
to LICENSOR as to any LICENCED PRODUCT made or USED under a
Licence or an immunity granted . pursuant to this LICENCE
AGREEMENT prior to termination or expiration of this LICENCE
AGREEMENT shall survive such termination or expiration and any
termination of this LICENCE AGREEMENT shall be subject to this
Article 6.
(f) Notwithstanding any other remedy provided for herein, if LICENCEE
shall not make the payment provided for herein, when due,
LICENSOR shall have the option, in its discretion, to terminate
the Licence and rights granted under this LICENCE AGREEMENT on
forty-five (45) days written notice to LICENCEE, whereupon the
Licence and rights granted under this LICENCE AGREEMENT shall be
terminated unless LICENCEE shall have made such payment to
LICENSOR within such forty-five (45) days from the date of such
notice.
(g) Upon any termination of this LICENCE AGREEMENT its provisions
shall continue in force and effect to the extent necessary to
effectuate any provision which by its terms clearly shall
continue beyond such termination.
<PAGE> 16
-16-
(h) Upon termination of this LICENCE AGREEMENT other than by expiry
of the PATENT RIGHTS, LICENCEE shall have no Licence to make or
USE LICENCED PRODUCTS.
7. ASSIGNMENT
This LICENCE AGREEMENT shall not be assigned by LICENCEE, except as part of a
sale or transfer of all or substantially all of LICENCEE's business and subject
to LICENSOR's right of termination as provided for in Article 6 herein, and, in
such event, only in its entirety and upon prior written approval by LICENSOR;
and, the term "LICENCEE" where used in this LICENCE AGREEMENT shall thereafter
mean such assignee of LICENCEE.
8. INFRINGEMENT
(a) LICENSOR agrees to enforce its patents within the PATENT RIGHTS
from infringement and sue infringers when in its sole judgement
such action may be reasonably necessary, proper and justified.
(b) Notwithstanding the provisions of Article 8(a) above, provided
LICENCEE shall have supplied LICENSOR with evidence comprising a
prima facie case of infringement of the PATENT RIGHTS by a third
party hereto SELLING significant quantities of products in
competition with LICENCEE's or an AFFILIATE's or a SUBLICENCEE's
SALE of LICENCED PRODUCTS hereunder, LICENCEE shall be entitled
to notify LICENSOR in writing requesting LICENSOR to take steps
to enforce the PATENT RIGHTS and LICENSOR shall within three (3)
months of the receipt of such written request either:
(i) cause said infringement to terminate (including
termination for whatever cause); or
(ii) initiate legal proceedings against the infringer; or
(iii) grant LICENCEE the right, at LICENCEE's sole expense,
to bring suit against the infringer for infringement of
the PATENT RIGHTS.
(c) In no event shall LICENCEE be entitled to invoke Article 8(b)
above with respect to more than two alleged infringers in any one
country listed with the PATENT RIGHTS at any given time even
though there be more than two such infringers in such country and
<PAGE> 17
-17-
the provisions of Article 8(b) hereof shall not come into effect
or continue in effect as to such country while LICENSOR is
carrying on any such legal proceeding against two such parties
therein.
(d) In the event either party hereto shall initiate or carry on legal
proceedings to enforce the PATENT RIGHTS against an alleged
infringer, as provided herein, the other party hereto shall fully
co-operate with the party initiating or carrying on such
proceedings.
(e) In the event LICENSOR shall institute suit or other legal
proceedings to enforce the PATENT RIGHTS, it shall have sole
control of such suit.
(f) In the event LICENCEE shall institute suit or other legal
proceedings under Article 8(b) above to enforce the PATENT
RIGHTS, LICENSOR shall be entitled to be represented by counsel
of its choosing, at its sole expense, and LICENCEE shall be
entitled to retain all damages. LICENCEE shall not discontinue or
settle any such proceedings brought by it without obtaining the
concurrence of LICENSOR, not to be unreasonably withheld, and
giving LICENSOR a timely opportunity to continue such proceedings
in its own name, under its sole control, and at its sole expense.
9. STATUS OF THE PATENT RIGHTS
(a) LICENSOR shall diligently maintain and prosecute the patent
applications filed within the PATENT RIGHT'S to obtain patents
thereon. LICENSOR does not represent or warrant that any such
patent will be obtained and LICENSOR shall in its sole discretion
be responsible for determining whether to abandon any or all of
said patent applications. Notwithstanding the aforementioned,
LICENSOR shall provide LICENCEE with adequate opportunity to
comment upon filing, maintenance and prosecution of the PATENT
RIGHTS and the opportunity to assume the maintenance and/or
prosecution of any part of the PATENT RIGHTS which LICENSOR
decides to abandon.
(b) LICENCEE shall on receipt of invoices from LICENSOR reimburse
LICENSOR for all reasonable costs incurred by LICENSOR in
prosecuting and maintaining the PATENT RIGHTS before
International and National Patent Offices. Such costs shall
include but not be limited to official fees, professional
services of patent agents and attorneys, renewal fees and
extension fees.
<PAGE> 18
-18-
(c) LICENSOR shall be responsible for maintaining the patents
obtained on the patent applications referred to in Article 9(a)
hereof.
(d) Subject to Article 9(a) hereof, nothing in this LICENCE AGREEMENT
shall be construed to require LICENSOR to file or prosecute any
patent application or to maintain any patent.
(e) LICENSOR will advise LICENCEE regularly of the status of all
patent applications and patents within the PATENT RIGHTS.
(f) Unless mutually agreed to in writing in advance, following
notification by LICENSOR of the deadline for entry of a patent
application under the PATENT RIGHTS, filed under the Patent
Co-operation Treaty into its National and Regional Phase,
LICENCEE shall give LICENSOR thirty (30) days written notice
should it wish to abandon seeking protection in any territories
designated or retrospectively designated in the Patent
Co-operation Treaty application.
(g) From the date of notification by LICENCEE of its wish to abandon
the seeking of patent protection pursuant to Article 9(f) hereof
all said applications shall cease to form a part of the PATENT
RIGHTS.
(h) From the date of notification by LICENCEE of its wish to abandon
the seeking of patent protection pursuant to Article 9(f) hereof
LICENSOR shall cease to have any obligation whatsoever under
rights embodied in said applications.
(i) LICENCEE shall co-operate with LICENSOR in seeking any extension
that is available or that becomes available in respect of the
term of any patent within the PATENT RIGHTS including any patent
that may issue on a patent application within the PATENT RIGHTS
and LICENCEE shall diligently advise LICENSOR in a timely manner
of approval by the Food and Drug Administration of the United
States of America to USE, SELL or market LICENCED PRODUCTS or any
other governmental approval obtained by or on behalf of LICENCEE
or an AFFILIATE or SUBLICENCEE that is pertinent to any such
extension and LICENCEE shall supply LICENSOR with any pertinent
information and data in its possession or control or that is in
the possession or control of any AFFILIATE or SUBLICENCEE of
LICENCEE and shall cooperate
<PAGE> 19
fully in assisting LICENSOR to obtain any such extension that it
may seek and LICENCEE shall supply LICENSOR in a timely manner
with any information and data and any supporting affidavits or
documents required to comply with 35 USC 156 Extension of Patent
Term (and any successor legislation) and any administrative rules
or regulation thereunder or required to comply with any
corresponding laws and regulations that are or shall be in effect
in any country within the PATENT RIGHTS, all without further
consideration. LICENCEE shall require its AFFILIATES and
SUBLICENCEES to comply with this Article 9.
10. EXCLUSIVITY
Subject to Articles 2, 6 and 12 hereof, the Licence and rights granted to
LICENCEE under Article 2 hereof shall be sole and exclusive to LICENCEE in each
country within the PATENT RIGHTS in that LICENSOR shall neither make nor SELL
LICENCED PRODUCTS nor grant another concurrently effective Licence for LICENCED
PRODUCTS for USE in the LICENCED FIELD under the pertinent PATENT RIGHTS, or any
of them, during the period extending from the EFFECTIVE DATE of this LICENCE
AGREEMENT until either:
(i) the end of the term or terms of the pertinent patents
in each country within the PATENT RIGHTS; or
(ii) termination of this LICENCE AGREEMENT; whichever is
first to occur.
11. NON-USE OF NAMES
(a) LICENCEE shall not use the name of any inventor of the PATENT
RIGHTS, or of any institution with which he has been or is
connected, or of LICENSOR, or any adaptation of any of them, in
any advertising, promotional or sales literature, without prior
written consent obtained from LICENSOR in each case, which shall
not be unreasonably withheld. LICENCEE shall require its
AFFILIATES and SUBLICENCEES to comply with this Article 11 to the
same extent that it applies to LICENCEE.
(b) LICENSOR shall not use the name of LICENCEE or its AFFILIATES or
its SUBLICENCEES or any adaptation thereof, in any advertising,
promotional or sales literature or in any press release without
prior written consent of LICENCEE in each case, which shall not
be unreasonably withheld.
<PAGE> 20
-20-
12. GENERAL
(a) This LICENCE AGREEMENT, including the Schedules hereto attached,
constitutes the entire agreement and understanding between the
parties as to the PATENT RIGHTS. All prior negotiations,
representations, agreements, contracts, offers and earlier
understandings of whatsoever kind, whether written or oral
between LICENSOR and LICENCEE in respect of the PATENT RIGHTS,
are superseded by, merged into, extinguished by and completely
expressed by this LICENCE AGREEMENT.
No aspect, part or wording of this LICENCE AGREEMENT may be
modified except by mutual agreement between the LICENSOR and
LICENCEE taking the form of an instrument in writing signed and
dated by duly authorised representatives of both LICENSOR and
LICENCEE.
(b) Any notice required or permitted to be given by this LICENCE
AGREEMENT shall be given by post-paid, first class, registered or
certified mail addressed to:
LEUKOSITE INC.
215 First Street, Cambridge, MA 02142
United States of America
(marked for attention of the Chief Executive Officer)
or
IMPERIAL EXPLOITATION LTD
Sherfield Building, London SW7 2AZ, England
(marked for attention of the Company Secretary)
Such addresses may be altered by notice so given. If no time
limit is specified for a notice required or permitted to be given
by this LICENCE AGREEMENT, the time limit therefor shall be ten
(10) full business days, not including the day of mailings
(c) This LICENCE AGREEMENT and its effect are subject to and shall be
construed and enforced in accordance with English law, except as
to any issue which by English law depends upon the validity,
scope or enforceability of any patent within the PATENT RIGHTS,
which issue shall be determined in accordance with the applicable
patent laws of the country of such patent.
<PAGE> 21
-21-
(d) LICENSOR and LICENCEE shall endeavour to settle amicably any
disputes arising under this LICENCE AGREEMENT. If the parties are
unable to settle any dispute by themselves, then any such dispute
arising in connection with this LICENCE AGREEMENT shall be
submitted first to alternative dispute resolution proceedings
and, if that fails, then such dispute shall be finally settled by
arbitration conducted in England, by and in accordance with the
rules then obtaining of the London Court of Arbitration and
judgement upon the award rendered may be entered in the highest
court of the forum having jurisdiction. The provisions of this
Article 12(d) shall not apply to any dispute or controversy as to
which any treaty or law prohibits settlement as contemplated
under this Article.
(e) Nothing in this LICENCE AGREEMENT shall be construed so as to
require the commission of any act contrary to law, and wherever
there is any conflict between any provision of this LICENCE
AGREEMENT or concerning the legal right of the parties to
contract and any statute, law, ordinance or treaty, the latter
shall prevail, but in such event the affected provisions of this
LICENCE AGREEMENT shall be curtailed and limited only to the
extent necessary to bring it within the applicable legal
requirements.
(f) Notwithstanding anything to the contrary in this LICENCE
AGREEMENT, nothing herein contained shall be construed as a
representation by LICENSOR that the PATENT RIGHTS can be or will
be used to prevent the importation by a third party hereto of a
product into or the SALE or USE by a third party hereto of a
product in any country within the PATENT RIGHTS where such
product shall have been placed in commerce under circumstances
which preclude the USE of the PATENT RIGHTS to prevent such
importation or SALE or USE by reason of any applicable law or
treaty.
(g) LICENCEE shall take all reasonable and necessary steps to
register this LICENCE AGREEMENT in any country where such is
required to permit the transfer of funds and/or payment of
royalties to LICENSOR hereunder or is otherwise required by the
government or law of such country to effectuate or carry out this
LICENCE AGREEMENT. Notwithstanding anything contained herein, but
subject to Article 12(e) hereof, LICENCEE shall not be relieved
of any of its obligations under this LICENCE AGREEMENT by any
failure to register this LICENCE AGREEMENT in any country, and,
specifically, LICENCEE shall not be relieved of its obligation
<PAGE> 22
-22-
to make any payment due to LICENSOR hereunder at LICENSOR's
address specified in Article 12(b) of this LICENCE AGREEMENT.
(h) It shall be the full and sole responsibility of LICENCEE and its
AFFILIATES and its SUBLICENCEES to use appropriate care in the
practice of any process and the manufacture and USE of any
product pursuant to any Licence or immunity granted hereunder and
LICENSOR shall have no right to control the manner in which or
the material with which or upon which any process Licenced
hereunder is practised and LICENSOR shall not be required to
provide any know-how or operating instructions or other
information with respect to any such process or product and
LICENSOR makes no representation or warranty whatsoever with
respect to any such process or product.
(i) Nothing in this LICENCE AGREEMENT shall be construed as a
representation or a warranty by LICENSOR as to the validity or
scope of any patent within the PATENT RIGHTS or that any process
practised or anything made, USED or SOLD under any Licence or
immunity granted under this LICENCE AGREEMENT is or will be free
from infringement of patents of third parties.
(j) LICENCEE agrees to indemnify and hold harmless INVENTORS,
LICENSOR, COLLEGE and their respective officers, directors,
employees and agents from and against any and all claims, damages
and liabilities asserted by third parties, both government and
private, arising from LICENCEE's and AFFILIATES' and
SUBLICENCEES' practice of any method covered by the PATENT RIGHTS
or manufacture, USE or SALE of LICENCED PRODUCTS or the USE
thereof by others including ultimate consumers.
(k) As used in this LICENCE AGREEMENT, singular includes the plural
and plural includes the singular, wherever so required by the
context. The headings appearing at the beginning of the numbered
Articles hereof have been inserted for convenience only and do
not constitute a part of this LICENCE AGREEMENT.
13. EFFECTIVE DATE AND TERM
This LICENCE AGREEMENT shall become effective on the day and year first above
written and shall, unless terminated earlier by one of the parties in accord
with its terms, expire concurrently with the expiration, invalidation or lapsing
of all issued patents within the PATENT RIGHTS
<PAGE> 23
-23-
and/or the abandonment of all pending patent applications within the PATENT
RIGHTS.
14. GOVERNMENT RIGHTS
(a) LICENCEE shall comply in all respects with the applicable
provisions of any applicable law, requirement, regulation or
determination by any Government relating to the PATENT RIGHTS and
shall provide LICENSOR with any information or report required to
comply with any such law, requirement, regulation or
determination.
(b) Any inconsistency between this LICENCE AGREEMENT and the
pertinent provisions of any law, requirement, regulation or
determination by a Government shall be resolved by conforming
this LICENCE AGREEMENT to such provisions of any such law,
requirement, regulation or determination.
(c) Any agreement or arrangement relating to the PATENT RIGHTS
between LICENCEE and any third party hereto shall be made
expressly subject to the terms and conditions of this Article 14
and LICENCEE shall require such other party to comply therewith
to the same extent that LICENCEE is required to comply.
(d) Any Licence or other right granted or to be granted pursuant to
this LICENCE AGREEMENT and any term of exclusivity applicable to
such Licence or right shall be subject to any and all applicable
governmental laws and regulations relating to compulsory
licensing.
15. TAXATION
(a) All payments due under this LICENCE AGREEMENT are quoted herein
as exclusive of any United Kingdom Value Added Tax or similar tax
which shall be payable, or shall become payable during the term
of this LICENCE AGREEMENT, in addition on rendering by LICENCEE
of an appropriate invoice.
(b) All payments under this LICENCE AGREEMENT are quoted herein as
exclusive of any Japanese withholding tax or similar tax in other
countries which shall be payable, or shall become payable during
the term of this LICENCE AGREEMENT, in addition on rendering by
LICENCEE of an appropriate invoice.
<PAGE> 24
-24-
IN WITNESS WHEREOF, the parties hereto have hereunto set their hands and duly
executed this LICENCE AGREEMENT on the date(s) indicated below, to be effective
the day and year first above written.
For and on Behalf of IMPERIAL EXPLOITATION LIMITED
By: /s/ Susan L. Jacobs
-------------------
Ms. Susan L. Jacobs
Title: Company Secretary
Date: 11 March 1996
-------------
For and on Behalf of IMPERIAL COLLEGE OF SCIENCE, TECHNOLOGY & MEDICINE
By /s/ David B. Thomas
-------------------
Dr. David B. Thomas
Title: Pro-Rector (Research Contracts)
Date: 11 March 1996
-------------
For and on Behalf of LEUKOSITE INCORPORATED
By: /s/ Chris K. Mirabelli
----------------------------
Dr. Christopher K. Mirabelli
Title: Chief Executive Officer
Date: March 25, 1996
--------------
<PAGE> 1
EXHIBIT 10.8(b)
RESEARCH AGREEMENT
(DOCUMENT IDENTIFICATION CODE:
LEUKOSITE/IC/NHLI/0012/RESEARCH)
THIS AGREEMENT (hereinafter called the "RESEARCH AGREEMENT") is made effective
the Fourteenth day of March, 1996 (hereinafter called the "EFFECTIVE DATE").
BY AND BETWEEN:
THE IMPERIAL COLLEGE OF SCIENCE, TECHNOLOGY & MEDICINE of Sherfield Building,
London SW7 2AZ, England (hereinafter called the "COLLEGE"); and
IMPERIAL EXPLOITATION LIMITED, a company organized under English law and having
a registered office at Sherfield Building, London SW7 2AZ, England (hereinafter
called "IMPEL");
OF THE FIRST PART,
AND:
LEUKOSITE INCORPORATED, a company organized under the laws of the state of
Delaware, United States of America, having a principal office at 215 First
Street, Cambridge, MA 02142, United States of America (hereinafter called the
"COMPANY")
OF THE SECOND PART.
WITNESSETH:
A. WHEREAS The COMPANY wishes to support a research programme to be
undertaken by the COLLEGE as defined in Schedule I annexed hereto
(hereinafter called the "RESEARCH PROGRAMME"); and
B. WHEREAS the COLLEGE is willing to accept such support from the COMPANY
and to undertake the RESEARCH PROGRAMME.
<PAGE> 2
-2-
NOW, THEREFORE, in consideration of the premises and the performance of the
covenants herein contained, IT IS AGREED AS FOLLOWS:
1. The COLLEGE will carry out the RESEARCH PROGRAMME under the supervision
of Professor T.J. Williams in its Department of Applied Pharmacology at
the National Heart & Lung Institute which is a constituent part of the
COLLEGE or such other member of its staff as shall be agreed by the
COMPANY, such agreement not to be unreasonably withheld.
2. The RESEARCH PROGRAMME will be undertaken from the EFFECTIVE DATE for a
period of one (1) year.
3. The COMPANY shall make payments to the COLLEGE according to Schedule 2
annexed hereto towards the costs of the RESEARCH PROGRAMME. The COLLEGE
shall undertake to use its best efforts to complete the work based on
the costs described in Schedule 2.
4. The COLLEGE shall submit progress reports on the RESEARCH PROGRAMME to
the COMPANY at six (6) months after the EFFECTIVE DATE and on
completion of the RESEARCH PROGRAMME.
5. Each party shall keep confidential any information that is received
from the other in the course of this AGREEMENT that is marked
"CONFIDENTIAL" and shall ensure that such confidential information is
disclosed only to those of its employees and students who require
access to such information for the purpose of carrying out the RESEARCH
PROGRAMME. In the event that either party discloses confidential
information to the other orally, it shall send to the other a written
record of such information, marked "CONFIDENTIAL", within fourteen (14)
days following disclosure. Such information shall be deemed to have
been disclosed in confidence from the time of disclosure.
The COLLEGE shall have the right to publish the results of the RESEARCH
PROGRAMME in accordance with normal academic practice subject only to
any reasonable delay required in order to protect the commercial value
of such results.
The provisions of this Clause 5 shall survive termination of this
AGREEMENT for any reason.
<PAGE> 3
-3-
6. The results of the RESEARCH PROGRAMME and all intellectual property
rights Therein (hereinafter referred to as the "RESULTS") shall be the
property of the COLLEGE. The COMPANY shall have the right to an option
to be granted an exclusive licence for any or all of the RESULTS. Such
option shall be exercisable in writing to the COLLEGE at any time up to
three (3) months following the date of receipt by the COMPANY Of the
progress report provided by the COLLEGE upon completion of the RESEARCH
PROGRAMME. The licence shall be effected by written amendment to and
under the terms of the licence agreement between the COLLEGE, IMPEL and
the COMPANY dated January 31, 1996; except that no licence issue fee
shall be payable by the COMPANY for such amendment.
The COMPANY shall have access to and the right to use information and
reagents generated as part of the RESEARCH PROGRAMME during the term of
this AGREEMENT. This right shall survive termination of this AGREEMENT
so long as this information or reagents do not constitute patentable
intellectual property.
The rights granted to the COMPANY pursuant to this Clause 6 shall
survive termination of this AGREEMENT for any reason other than breach
of this AGREEMENT by the COMPANY.
7. This AGREEMENT shall commence on EFFECTIVE DATE and shall remain in
full force and effect until completion of the RESEARCH PROGRAMME unless
terminated in accordance with the provisions of Clause 8.
8. Either party may terminate this AGREEMENT:
8.1 upon three (3) months written notice to the other; or
8.2 forthwith upon written notice to the other if the other commits a
breach of any of the terms of this AGREEMENT and such breach is
either irremediable or is not remedied within thirty days
following written notice of said breach requiring it to be
remedied.
9. No amendment to this AGREEMENT shall be valid until reduced to writing
and signed by an authorized signatory of each party.
10. This AGREEMENT shall not be assigned by the COMPANY, except as part of
a sale or transfer of all or substantially all of the COMPANY's
business.
<PAGE> 4
-4-
11. Any notice required or permitted to be given by this AGREEMENT shall be
given by post-paid, first class, registered or certified mail addressed
to:
LEUKOSITE INC.
215 First Street, Cambridge, MA 02142
United States of America
(marked for attention of the Chief Executive Officer)
or
IMPERIAL EXPLOITATION LTD
Sherfield Building, London SW7 2AZ, England
(marked for attention of the Company Secretary)
Such addresses may be altered by notice so given
12. This AGREEMENT shall be interpreted in accordance with the laws of
England and shall be subject to the jurisdiction of the English courts
sitting in England.
<PAGE> 5
-5-
IN WITNESS WHEREOF, the parties hereto have hereunto set their hands and duly
executed this AGREEMENT on the date(s) indicated below, to be effective the day
and year first above written.
For and on Behalf of IMPERIAL COLLEGE OF SCIENCE, TECHNOLOGY & MEDICINE
By: /s/ David B. Thomas
---------------------
Dr. David B. Thomas
Title: Pro-Rector (Research Contracts)
Date: 11 March 1996
---------------------
For and on Behalf of IMPERIAL EXPLOITATION LIMITED
By: /s/ Susan L. Jacobs
---------------------
Ms. Susan L. Jacobs
Title: Company Secretary
Date: 11 March 1996
---------------------
For and on Behalf of LEUKOSITE INCORPORATED
By: /s/ Chris Mirabelli
---------------------
Dr. Christopher K. Mirabelli
Title: Chief Executive Officer
Date: March 25, 1996
---------------------
<PAGE> 1
CONFIDENTIAL TREATMENT EXHIBIT 10.9
RESEARCH COLLABORATION AND LICENSE AGREEMENT
BETWEEN
ROCHE BIOSCIENCE
and
LEUKOSITE, INC.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
1. Definitions....................................................
2. Grant..........................................................
2.1 License..................................................
2.2 Third Party Agreements...................................
2.3 Sublicenses..............................................
2.4 Product Outside the Field of Research....................
3. Due Diligence and Worldwide Marketing..........................
3.1 Diligence................................................
3.2 Marketing Reports........................................
4. Confidential Information.......................................
4.1 Non-Disclosure...........................................
4.2 Non-Confidential Information.............................
4.3 Permitted Disclosure.....................................
5. Research Collaboration.........................................
5.1 Object...................................................
5.2 Collaboration Management Council.........................
5.2.1 Oversight.........................................
5.2.2 Membership........................................
5.2.3 Chair.............................................
5.2.4 Responsibilities..................................
5.3 Meetings.................................................
5.4 CMC Deadlock.............................................
5.5 Conduct of Research Collaboration........................
5.6 Visitation...............................................
5.7 Research Funding.........................................
5.7.1 RBS Funding at LKS................................
5.7.2 LKS Funding at LKS................................
5.7.3 RBS Funding at RBS................................
5.8 No Conflict With Research Collaboration..................
5.9 Title to Equipment.......................................
5.10 Term and Termination of the Research Collaboration.......
5.10.1 Research Term....................................
5.10.2 Termination by RBS...............................
5.11 Clinical and Regulatory Activity.........................
</TABLE>
<PAGE> 3
<TABLE>
<S> <C> <C>
6. Results of the Research Collaboration/Patents..................
6.1 Mutual Disclosure........................................
6.2 LKS Results..............................................
6.2.1 Title.............................................
6.2.2 Use...............................................
6.2.3 Patent Rights.....................................
6.3 Joint Results............................................
6.3.1 Title.............................................
6.3.2 Use...............................................
6.3.3 Patent Rights.....................................
6.4 RBS Results..............................................
6.4. 1 Title............................................
6.4.2 Use...............................................
6.4.3 Patent Rights.....................................
6.5 Publication..............................................
6.6 Infringement.............................................
7. Royalties and other Compensation
7.1 Royalties ..............................................
7.1.1 Amount............................................
7.1.2 Patent Protection.................................
7.1.3 Competitive Pressures.............................
7.1.4 Other Royalties...................................
7.1.5 Royalty Term......................................
7.1.6 Combination Product...............................
7.2 License Fee..............................................
7.3 Milestone Payments.......................................
7.3.1 Amounts...........................................
7.3.2 Replacement Product...............................
7.3.3 Termination.......................................
7.4 Records..................................................
7.5 Accounting Period........................................
8. Representations and Warranties.................................
8.1 Mutual Representations and Warranties....................
8.2 LKS Representations and Warranties.......................
8.3 Limitation...............................................
9. Indemnification................................................
9.1 LKS Indemnification......................................
9.1.1 Research Collaboration............................
9.1.2 Products Liability................................
9.2 RBS Indemnification......................................
9.3 Conditions to Indemnification............................
</TABLE>
-ii-
<PAGE> 4
<TABLE>
<S> <C> <C>
10. Assignment; Successors.........................................
10.1 Assignment..........................................
10.2 Successors..........................................
11. Force Majeure..................................................
</TABLE>
-iii-
<PAGE> 5
RESEARCH COLLABORATION AND LICENSE AGREEMENT
This Agreement is entered into on July 12, 1996 (the "Effective Date") by
and between SYNTEX (U.S.A.) INC., through its ROCHE BIOSCIENCE division
(hereinafter referred to as "RBS"), a Delaware corporation located at 3401
Hillview Avenue, Palo Alto, California 94304, and LEUKOSITE, INC., a Delaware
Corporation, located at 215 First Street, Cambridge, Massachusetts 02142
("LKS").
WHEREAS, RBS is a member of the Roche Group, which is an international
healthcare company which, among other things, develops, manufactures, markets
and sells pharmaceutical products for human healthcare throughout the world; and
WHEREAS, LKS is the owner or exclusive licensee of certain technology and
other proprietary know-how related to Products (as hereinafter defined); and
WHEREAS, RBS desires to obtain an exclusive right and license in and to
such technology and proprietary know-how to develop and sell Products in the
Territory (as hereinafter defined); and
WHEREAS, RBS desires to support additional research in the Field of
Research as hereinafter defined to be conducted by LKS; and
WHEREAS, LKS is willing to grant the exclusive right and license desired
by RBS and to conduct the research supported by RBS.
NOW, THEREFORE, in consideration of the mutual promises and other good and
valuable consideration, the parties agree as follows:
1. DEFINITIONS.
The terms used in this Agreement have the following meaning:
1.1 "Accounting Period" shall have the meaning set forth in Section
7.5.
1.2 "Adjusted Gross Sales" means the gross sales invoiced by RBS for the
Product(s) to Third Parties less deductions for returns (including withdrawals
and recalls), rebates (retroactive price reductions, including Medicaid and
similar types of rebates), volume (quantity) discounts,
<PAGE> 6
-2-
discounts granted at the time of invoicing, sales taxes and other taxes directly
linked to and included in the gross sales amount on a Product by Product basis
for the countries concerned (excluding income and similar taxes).
1.3 "Affiliate" as applied to either party shall mean any company or other
legal entity other than the party in question in whatever country organized,
controlling, controlled by or under common control with that party. The term
"control" means ownership or control, directly or indirectly, of at least fifty
percent (50%) of the outstanding stock, voting rights or the right entitled to
elect or appoint directors. Provided, however, Genentech, Inc., with offices
located at 460 Point San Bruno Boulevard, South San Francisco, California,
94080, and its subsidiaries shall not be considered an Affiliate of RBS unless
and until it is granted or extended rights under this Agreement upon written
notice by RBS to LKS.
1.4 "Agreement Year" shall mean the twelve month period beginning on the
date of execution of the Heads of Agreement, and each subsequent twelve (12)
month period thereafter.
1.5 "Background Patent Right(s)" shall mean the LKS United States patent
applications, including any division, continuation, or continuation-in-part
thereof and any foreign patent application or equivalent corresponding thereto
and any Letters Patent or the equivalent thereof issuing thereon or reissue,
re-examination or extension (including Supplemental Protection Certificates)
thereof, which are set forth in Appendix A attached hereto and made a part
hereof.
1.6 "Calendar Quarter" shall mean the period of three (3) consecutive
calendar months ending on March 31, June 30, September 30 or December 31, as the
case may be.
1.7 "CBR Agreement" means the License Agreement effective as of June 15,
1993 between the Center for Blood Research and LKS.
1.8 "CMC" shall have the meaning set forth in Section 5.2.
1.9 "CMCC Agreement" means the License Agreement dated March 25, 1996
between the Children's Medical Center Corporation and LKS.
1.10 "commercially reasonable and diligent efforts" means, unless the
Parties agree otherwise, those efforts consistent with the exercise of
<PAGE> 7
-3-
prudent scientific and business judgment, as applied to other products of
similar scientific and commercial potential within the relevant product lines of
RBS or, with respect to Section 5.5, LKS.
1.11 "Confidential Information" means all information and materials
received by either party from the other party pursuant to this Agreement and all
information and materials developed in the course of the Research Collaboration.
1.12 "FDA" shall mean the United States Food and Drug Administration.
1.13 "Field of Research" shall mean research with respect to chemokine
receptor-3 (CKR-3) or eosinophil recruitment including, but not limited to,
chemokines which interact with eosinophil chemokine receptors, their respective
eosinophil chemokine receptors and their eosinophil signaling proteins excluding
Monocyte Chemotactic Protein-1, Interleukin-8 receptors and leukocyte integrins
and their adhesion molecule counter receptors.
1.14 "First Commercial Sale" shall mean in each country of the Territory,
the first sale to a Third Party, in connection with the nationwide introduction
of any Product by RBS, its Affiliates or Sublicensees following marketing and/or
pricing approval by the appropriate governmental agency for the country in which
the sale is to be made and, when governmental approval is not required, the
first sale in that country in connection with the nationwide introduction of a
Product in that country.
1.15 "Flat Fee" shall have the meaning set forth in Section 13.2.
1.16 "FTE" means full time-equivalent qualified scientist employee.
1.17 "Heads of Agreement" shall mean the agreement between the parties
hereto entitled Heads of Agreement containing the basic terms of this Agreement
and executed on April 18, 1996.
1.18 "High Throughput Screening" or "HTS" shall mean a ligand-receptor
binding assay, that utilizes, for example, eotaxin chemokine as a ligand and the
CKR-3 protein as a receptor and can be used to screen the RBS compound library
to identify chemokine or chemokine receptor binding antagonists.
<PAGE> 8
-4-
1.19 "Imperial Agreement" means the License Agreement effective January
31, 1996 between The Imperial College of Science, Technology & Medicine and the
Imperial Exploitation Limited, on the one hand, and LKS, on the other hand.
1.20 "IND" shall mean an Investigational New Drug application as such term
is defined in the regulations of the FDA.
1.21 "Information" shall mean any data, formulas, process information or
other information produced solely or jointly by LKS or RBS which is developed in
and/or results from the Research Collaboration.
1.22 "Invention" shall mean any product, process, use, article of
manufacture, composition of matter conceived or first actually or constructively
reduced to practice, solely or jointly by LKS or RBS, which is developed in
and/or results from the Research Collaboration.
1.23 "Joint Patents Rights" shall have the meaning set forth in Section
6.3.1.
1.24 "Joint Results" shall have the meaning set forth in Section 6.3.1.
1.25 "LKS Patent Rights" shall have the meaning set forth in Section
6.2.1.
1.26 "LKS Results" shall have the meaning set forth in Section 6.2.1.
1.27 "Major Market(s)" shall mean each of North America (the United States
and Canada only), United Kingdom, Germany, France, and Japan.
1.28 "Material" shall mean any material or substance which is discovered,
produced or derived solely or jointly by LKS or RBS, which is developed in
and/or results from the Research Collaboration.
1.29 "NDA" shall mean a New Drug Application as such term is defined in
the regulations of the FDA.
1.30 "Net Sales" means the Adjusted Gross Sales less a lump sum deduction
of five percent (5%) of the Adjusted Gross Sales for those sales related
deductions which are not accounted for on a product-by-product basis (e.g.
outward freight, transportation insurance, packaging materials
<PAGE> 9
-5-
for dispatch of woods, custom duties, discounts granted later than at the time
of invoicing, cash discounts and other direct sales expenses).
1.31 "Other Royalties" shall have the meaning set forth in Section
7.1.4.
1.32 "Patent" means any United States patent application, including any
division, continuation, or continuation-in-part thereof and any foreign patent
application or equivalent corresponding thereto and any Letters Patent or the
equivalent thereof issuing thereon or reissue, re-examination or extension
(including Supplemental Protection Certificates) thereof.
1.33 "Patent Costs" means the fees and expenses paid to outside legal
counsel and other Third Parties, and filing, prosecution and maintenance
expenses, incurred in connection with the establishment and maintenance of
rights under Patents.
1.34 "Patent Rights" means individually and collectively Background Patent
Rights, LKS Patent Rights, RBS Patent Rights and Joint Patent Rights.
1.35 "Patent Protection" shall have the meaning set forth in Section
7.1.2.
1.36 "PLA" means a Product License Application as such term is defined by
the FDA.
1.37 "Product" shall mean any article, composition, apparatus, material,
method, process or service for therapeutic and diagnostic applications in humans
in the Field of Research, including, but not limited to, small molecules,
protein products, and gene therapy applications, which is or which incorporates
or utilizes an Invention, Invention, Results and/or Material or the manufacture,
import, sale, or use of which is covered by Patent Rights.
1.38 "RBS Patent Rights" shall have the meaning set forth in Section
6.4.1.
1.39 "RBS Patents" shall mean any United States patent application,
including any division, continuation, or continuation in part thereof and any
foreign patent application or equivalent corresponding thereto and any Letters
Patent or the equivalent thereof issuing thereon or reissue, re-examination or
extension (including Supplemental
<PAGE> 10
-6-
Protection Certificates) thereof, which is owned by or licensed by RBS and in
and to which RBS has a transferable interest during the term of this Agreement
insofar as it contains one or more claims to RBS Technology.
1.40 "RBS Results" shall have the meaning set forth in Section 6.4.1.
1.41 "RBS Technology" shall mean information and materials, including but
not limited to, pharmaceutical, chemical and biological products, technical and
non-technical data and information relating to the results of tests, assays,
methods, and processes, and drawings, plans, diagrams and specifications and/or
other documents containing such information and data owned by RBS or to which
RBS has a transferable interest on the Effective Date and/or prior to
termination of this Agreement and which are necessary for the manufacture, use
or sale of a Product.
1.42 "Reciprocal Royalties" shall have the meaning set forth in Section
13.8.3.
1.43 "Research" shall mean the research performed by LKS and RBS in
accordance with the Research Plan, as amended from time to time by agreement of
the parties.
1.44 "Research Collaboration" shall have the meaning set forth in
Section 5. 1.
1.45 "Research Plan" shall mean the written description of the research
program for the research collaboration, including, but not limited to, goals,
key decision points, timing to key decision points, resource commitments and
other details identified by the CMC for the first Agreement Year as set forth in
Appendix B attached hereto and made a part hereof, and for each subsequent
Agreement Year of the Research Collaboration.
1.46 "Research Term" shall have the meaning set forth in Section
5.10.1.
1.47 "Results" means, collectively, LKS Results, Joint Results, and RBS
Results.
1.48 "Royalty Term" shall have the meaning set forth in Section 7.1.5.
<PAGE> 11
-7-
1.49 "Sublicensee" shall mean any Third Party licensed by RBS to make,
have made, import, use or sell any Product.
1.50 "Territory" shall mean all countries of the world.
1.51 "Third Party(ies)" shall mean a person or entity who or which is
neither a party hereto nor an Affiliate of a party hereto.
1.52 "Third Party Agreement(s)" shall mean the CMCC Agreement, the
Imperial Agreement, and the CBR Agreement.
1.53 "Valid Claim" shall mean a claim of an issued patent which has not
lapsed or become abandoned or been declared invalid or unenforceable by a court
of competent jurisdiction or an administrative agency from which no appeal can
be or is taken.
1.54 The use herein of the plural shall include the singular, and the use
of the masculine shall include the feminine.
2. GRANT.
2.1 License. LKS hereby grants to RBS and RBS hereby accepts from LKS an
exclusive right and license under the Background Patents to make, have made, use
and sell Products in the Territory. In addition, the parties shall grant each
other the licenses for the Results as set forth in Section 6.
2.2 Third Party Agreements. To the extent information, inventions,
materials and/or Patents licensed to RBS under this Agreement are rights which
LKS has licensed from and under a Third Party Agreement(s), RBS understands and
agrees as follows:
(i) The rights licensed to RBS by LKS are subject to the terms,
limitations, restrictions and obligations of the Third Party Agreement(s).
(ii) RBS will comply with the terms, obligations, limitations and
restrictions of the Third Party Agreement(s) applicable to sublicensees
(excluding the financial provisions of such agreement). In particular Section
2.7 of the CMCC Agreement requires that Articles 2, 6, 7, 8, 9, 10, 11, 12 and
14 of that agreement be attached to any sublicense and such articles are
attached hereto and made a part hereof as Appendix C.
<PAGE> 12
-8-
2.3 Sublicenses.
2.3.1 Subject to Section 2.3.2, RBS shall be entitled to extend the
license granted herein to Affiliates and to sublicense Third Parties. In case of
a license which has been extended to Affiliates or sublicensed to a Sublicensee,
such Affiliates and Sublicensees shall be bound by all terms and conditions of
this Agreement. RBS shall advise LKS of any such extension to Affiliates or
sublicenses to Sublicensees and provide LKS with notice of any sublicense within
sixty (60) days of execution of such sublicense. The terms of the sublicense
shall comply with all the terms and conditions of this Agreement applicable to
sublicensees (excluding the financial provisions of this Agreement).
2.3.2 RBS shall guarantee and be responsible for the payment of all
royalties due and the making of reports under this Agreement by reason of sales
of any Products by its Affiliates and Sublicensees and their compliance with all
applicable terms of this Agreement. Performance or satisfaction of any
obligations of RBS under this Agreement by any of its Affiliates or Sublicensees
shall be deemed performance or satisfaction of such obligations by RBS.
2.4 Product Outside the Field of Research. If the Research Collaboration
develops a product which is specifically excluded from the Field of Research and
with respect to which LKS is prevented from working with RBS as a result of
other existing agreements and LKS is not prevented under the terms of any such
agreement from licensing such product to RBS (should LKS be determined to be an
inventor), then RBS will have exclusive rights to pursue such product
independently-, provided that if LKS is deemed under U.S. patent laws to be the
sole inventor, RBS shall pay to LKS a * royally on the Net Sales of such product
sold in the Territory by RBS, its Affiliates and Sublicensees. If LKS is not
deemed to be the sole inventor, RBS shall have no obligation to pay royalties on
such product.
3. DUE DILIGENCE AND WORLDWIDE MARKETING.
3.1 Diligence. RBS shall use commercially reasonable and diligent efforts
to develop and register Products and upon registration, continue to use its
commercially reasonable and diligent efforts to market and sell Products in each
Major Market, taking into account the scientific and commercial potential for
such Product or to sublicense the Products to Third Parties to do the same.
Subject to the terms of this Section 3, all aspects relating to the marketing
and sale of a Product shall be a business decision of RBS and its Affiliates.
Subject to the terms of this Section 3,
* Confidential treatment requested: material has been omitted and filed
separately with the Commission.
<PAGE> 13
-9-
RBS or its Affiliates may choose not to market, distribute, or license the
Product in a country based upon RBS' reasonable business judgment. The efforts
of an Affiliate shall be deemed to be the efforts of RBS.
3.2 Marketing Reports. RBS or its Affiliates shall provide written reports
to LKS on June 30th and December 31st of each year concerning the efforts being
made in accordance with this Section with respect to a Product in each country
of the Major Markets until launch of such Product in all Major Markets. The
report shall contain information about the timing of Product launch in such
countries. RBS or its Affiliates shall provide LKS with any additional
information reasonably requested by LKS in this respect. No more frequently than
once a year and upon LKS' request, RBS or its Affiliates shall also provide to
LKS, both prior to and after marketing a Product, a brief summary of the
marketing plans for each Product in the Major Markets and sales estimates for
each Product to be sold in each Major Market. In addition, RBS or its Affiliates
shall provide LKS with an overview of marketing activities and sales estimates
on a per Product basis for the remaining countries in the Territory.
4. CONFIDENTIAL INFORMATION.
4.1 Non-Disclosure. Each party shall have the right to refuse to accept
the other party's Confidential Information. Each party agrees not to disclose
and to maintain the Confidential Information in strict confidence, to cause all
of its Affiliates, sublicensees, agents, representatives and employees to
maintain the disclosing party's Confidential Information in confidence and not
to disclose any such Confidential Information to a third party without the prior
written consent of the disclosing party and not to use such Confidential
Information for any purpose other than as licensed under this Agreement.
4.2 Non-Confidential Information. The obligations of confidentiality
will not apply to information which:
(i) was known to the receiving party or generally known to the
public prior to its disclosure hereunder; or
(ii) subsequently becomes known to the public by some means other
than a breach of this Agreement;
(iii) is subsequently disclosed to the receiving party by a Third
Party having a lawful right to make such
<PAGE> 14
-10-
disclosure and who is not under an obligation of
confidentiality to the disclosing party;
(iv) is required by law, rule, regulation or bona fide legal
process to be disclosed, provided that the disclosing party
takes all reasonable steps to restrict and maintain
confidentiality of such disclosure and provides reasonable
notice to the non-disclosing party to allow the non-disclosing
party to take appropriate action to appeal such order; or
(v) is approved for release to the public by both parties.
4.3 Permitted Disclosure. The obligations of Section 4.1 notwithstanding,
either party may disclose the Confidential Information licensed hereunder, to
Third Parties who (i) need to know the same in order to secure regulatory
approval for the sale of Product, (ii) who need to know the same in order to
work towards the commercial development of Product, or (iii) who are approved by
other party, as the case may be; provided that such parties are bound by
obligations of confidentiality and non-use at least as stringent as set forth
herein, provided, further, that RBS may disclose Confidential Information
regarding clinical development, manufacturing, and marketing of any Product to
any Third Party at RBS's sole discretion; provided, further, that such
Confidential Information was developed solely by RBS or its Affiliates or
contractors or sublicensees and does not include Confidential Information
received from LKS.
5- RESEARCH COLLABORATION.
5.1 Object. During the Research Term, the parties shall establish a
research and pre-clinical development collaboration in the Field of Research
(the "Research Collaboration"). LKS agrees to conduct the Research to be
performed at LKS and RBS agrees to support and fund such Research at LKS in
accordance with the terms and conditions set forth below; [provided, however,
that RBS shall not require LKS to do any Research that would cause a significant
financial hardship to LKS. During the Research Term, neither LKS nor its
Affiliates shall conduct or fund or enter into any agreement with any
sublicensee or Third Party which provides for the conduct or funding of
research, development or commercialization of products directed toward the Field
of Research except pursuant to the terms of this Agreement, provided, however,
that LKS has the right to use CKR-3 and other technology described in the Field
of Research as it might pertain to research activities outside the
<PAGE> 15
-11-
Field of Research, e.g. discover of MCP-1, IL-8 or other non-eosinophil
chemokine receptor agonist or antagonist in which tests are done using CKR-3
technology in order to establish selectivity for the other targets and a lack of
activity against CKR-3, provided, further, that LKS has the right to conduct
research outside the Field of Research but if a biological target is identified
that has its primary activity directed towards eosinophil recuitment, such
target is part of this Agreement. "Primary activity" means the biological target
contributes to the pathology associated with eosinophil recruitment in asthma or
allergy either in humans or in animal models of such diseases.]
5.2 Collaboration Management Council
5.2.1 Oversight. The Research Collaboration will be overseen and
monitored by the Collaboration Management Council as described herein (the
"CMC").
5.2.2 Membership. Within ten (10) days of the date hereof, LKS and
RBS shall each appoint two (2) persons (or such other number of persons as the
parties may determine) to serve on the CMC. Such representatives will be
qualified, by reason of background and experience, to assess the scientific
progress of the Research Collaboration. Each party will have the right to change
its representation on the CMC upon written notice sent to the other.
5.2.3 Chair. The CMC will be co-chaired by one representative
of each party during the Research Term.
5.2.4. Responsibilities. The CMC will have authority to:
(i) review and approve the Research Plan for each
Agreement Year;
(ii) make recommendations retarding the performance of the
Research Collaboration and the conduct of the Research
pursuant thereto, and monitor performance thereunder;
(iii) modify the Research Plan;
(iv) review any and all proposed Publication[s] or
communication[s] relating to the Research Collaboration and
the results therefrom, in accordance with the procedure set
forth in this Section 5;
<PAGE> 16
-12-
(v) review any and all proposed filing of patent
application[s] in connection with the Research
Collaboration.
5.3 Meetings. The CMC will meet not less than two (2) times a year during
the term of the Research Collaboration, at locations and times to be determined
by the CMC, with the intent of meeting at alternating locations in Boston,
Massachusetts, and Palo Alto, California, with each Party to bear all travel and
related costs for its members, at such dates and times as agreed to by the
parties. At such meetings, the CMC will discuss the Research Plan and the
performance by each party under the Research Plan, evaluate the results thereof
and set priorities therefor. All decisions made or actions taken by the CMC will
be made unanimously by its members with the LKS members cumulatively having one
vote and the RBS members cumulatively having one vote each. The CMC will prepare
written minutes of each meeting and a written record of all decisions whether
made at a formal meeting or not. Such minutes will incorporate semi-annual
research reports prepared for the parties by LKS. A quorum for a meeting shall
require at least one LKS member and at least one RBS member.
5.4 CMC Deadlock. If there are issues on which the CMC cannot reach
agreement because of a Deadlock (as hereinafter defined), such matters will be
submitted to the president of LKS and the head of the Inflammatory Disease
Business Unit of RBS. In the event agreement cannot be reached at this level,
the Deadlock shall be resolved by RBS in its sole discretion. For the purpose of
this Section 5.4, "Deadlock" will mean, G) with respect to any matter considered
and voted upon by the CMC, that one party votes in favor of such matter and the
other party does not vote in favor of such matter or GO a quorum cannot be
established for the CMC to vote on a matter.
5.5 Conduct of Research Collaboration. Except as contemplated by the
Research Plan, the Research will be conducted by LKS at LKS's laboratories or
such other sites approved by the CMC. LKS will use all commercially reasonable
and diligent efforts to complete Research but in no event shall LKS be obligated
to provide research funding or perform Research beyond that funded by RBS and/or
as set forth in Section 5.7.2.
5.6 Visitation. Each party will permit duly authorized employees or
representatives of the other party to visit its facilities where the research is
conducted, at reasonable times and with reasonable notice.
<PAGE> 17
-13-
5.7 Research Funding
5.7.1.RBS Funding at LKS.
5.7.1.1 Primary Support Commitment. During the Research Term,
RBS will provide funding for the Research Collaboration at LKS in the amount of
* FTEs per year at LKS at a cost of * per FTE per year. This commitment will be
inclusive of all costs incurred by LKS or implementing the Research
Collaboration. Such funding shall be incorporated into the Research Plan:
5.7.1.2 Monoclonal Work. In the event that the CMC determines
at any time during the Research Term that the humanization of the monoclonal
antibody should be included in the Research Plan, RBS will also provide funding
not to exceed * to support (a) up to an additional * per FTE for up to twelve
(12) months and (b) an outside collaboration fee to support humanization of the
monoclonal antibody.
5.7.1.3 Third Year Funding. In the event funding for Research
is mutually agreed upon for a third Agreement Year, RBS will provide additional
support for Research at a cost of * per FTE not to exceed * for such year based
upon the Research Plan.
5.7.1.4 Payments. The support payments to LKS set forth in
this Section 5.7.1 shall be made by RBS to LKS for each Agreement Year during
the Research Term and shall be payable quarterly in advance, with the first
payment haying already been made on the execution date of the Heads of
Agreement. The next payment shall be due at the beginning of the next Calendar
Quarter beginning July 18, 1996.
5.7.2. LKS Funding at LKS. During the Research Term, LKS will
fund * FTEs per year at LKS in support of Research. Additionally, LKS will
collaborate with RBS to expedite establishment of HTS at RBS.
5.7.3. RBS Funding at RBS. During the Research Term, RBS will
support a minimum of * FTEs to conduct Research at RBS which may be increased
with time as outlined in the Research Plan.
5.8 No Conflict With Research Collaboration. LKS agrees that the funds to
support the Research Collaboration provided by RBS will be
* Confidential treatment requested: material has been omitted and filed
separately with the Commission.
<PAGE> 18
-14-
applied to the Research Collaboration and may not, without RBS prior written
approval, be used in support of any other research at LKS.
5.9 Title to Equipment. LKS will retain title to any equipment purchased
with funds provided by RBS under this Agreement. The intent is that the costs of
any such equipment will be included in the FTEs and not be a separate cost.
5.10 Term and Termination of the Research Collaboration.
5.10.1 Research Term. The Research Collaboration shall terminate on
the earlier of (i) two (2) years from the execution date of the Heads of
Agreement or (ii) the date on which a clinical development candidate is selected
by the CMC (the "Research Term"). Subject to Section 5.7.1.3, both parties will
have the option to extend the Research Term for additional one (1) year periods
upon mutually acceptable terms at the conclusion of the second Agreement Year,
5.10.2 Termination by RBS.
5.10.2.1 Failure to Establish HTS. RBS will have the option to
terminate the Research Collaboration if an HTS for the CKR-3 receptor-based
assay cannot be established at RBS. In the event RBS elects not to terminate the
Research Collaboration as provided herein, the Research Plan and the level of
Research Funding will be re-evaluated given the change in the focus and intent
of the Research Collaboration.
5.10.2.2 First Anniversary. RBS may terminate this Agreement
without cause on the first anniversary of the signing of the Heads of Agreement
upon thirty (30) days prior written notice to LKS. Upon such termination, RBS
will pay LKS a termination fee equal to three (3) months of additional Research
funding beyond such anniversary date.
5.10.2.3 Failure to Meet Proof of Concept. RBS may terminate
this Agreement, on or before the first anniversary of the Heads of Agreement,
upon thirty (30) days prior written notice to LKS, in the event RBS establishes
a decision point at in vivo proof of concept (e.g., LKS receptor-blocking
monoclonal antibodies ("mAbs") or small molecules) utilizing criteria and
conditions established by the CMC and such criteria and conditions for going
forward have not been met.
5.10.2.4 Breach by LKS. In the event of a material breach by
LKS of any of LKS's obligations and covenants, if such breach is
<PAGE> 19
-15-
not cured within sixty (60) days after written notice is given by RBS to LKS
specifying the breach, RBS may terminate the Research Collaboration and cease
funding hereunder upon the expiration of such sixty (60) day period; provided,
however, that this Agreement shall otherwise continue in full force and effect
and LKS's right to receive any unpaid balance otherwise committed by RBS as
support for Research hereof will become forfeited and no further payments with
respect to the Research Collaboration will be due to LKS by RBS except to the
extent that such funds are necessary to pay actual and non-cancelable
obligations of LKS accrued to that date.
5.10.2.5 Results of Termination by RBS. If RBS terminates the
Research Collaboration prior to the expiration of the Research Term pursuant to
Section 5.10.2.1., 5.10.2.2 or 5.10.2.3, this Agreement shall terminate and the
provisions of Section 13.8 shall apply.
5.10.3 Termination by LKS. In the event of a material breach by RBS
of any of RBS's obligations and covenants, if such breach is not cured within
sixty (60) days after written notice is given by LKS to RBS specifying the
breach, LKS may terminate this Agreement upon the expiration of such sixty (60)
day period and the provisions of Section 13.8 shall apply.
5.11 Clinical and Regulatory Activity. In accordance with the other terms
contained herein, RBS will, at its sole expense, conduct all clinical and
regulatory work in the Research Collaboration in order to obtain registration
for the Products being developed in the Research Collaboration. LKS may have ex
officio membership on RBS' International Program Team ("IPT") for a Product upon
the permission of the IPT, which shall be made in the IPT's sole discretion, and
may be permitted to attend key IPT committee meetings with respect to
development of Products, at the IPT's sole discretion with LKS bearing its own
costs.
5.12 Preclinical Development Activity. During the period from the end of
the Research Term and for so long as there are ongoing activities with respect
to the development of Products for Phase I Clinical Trials, Leukosite shall have
a representative on the RBS Project Team which coordinates such activities.
6. RESULTS OF THE RESEARCH COLLABORATION/PATENTS.
6.1 Mutual Disclosure. Any Result that either party believes may involve a
patentable invention or a preliminary finding of scientific
<PAGE> 20
-16-
significance will be promptly disclosed to the other party at the earliest
practicable time.
6.2 LKS Results.
6.2.1. Title. All right, title and interest in and to all Materials,
Information, and Inventions which are conceived and/or made by LKS employees
alone and any and all intellectual property rights based thereon including, but
not limited to, patent rights (the "LKS Patent Rights"), shall be owned by LKS
(individually and collectively "LKS Results").
6.2.2. Use. LKS shall grant RBS an exclusive license to the LKS
Results for use in the Field of Research or with any Product. LKS may license
the LKS Results outside the Field of Research; provided, however, that if the
LKS Results are exclusive to the Field of Research, LKS may not license the LKS
Results to any Third Party.
6.2.3. Patent Rights. LKS shall file, prosecute and maintain the
Background Patent Rights and LKS Patent Rights. RBS shall pay the Patent Costs
therefor to the extent such rights are not licensed outside the Field of
Research. If any such rights are licensed outside the Field of Research, RBS
shall only pay a pro-rata share of on-going Patent Costs and with respect to the
LKS Patent Rights, RBS will be reimbursed on a pro-rata basis for the Patent
Costs RBS has paid with respect to the LKS Patent Rights. The Patent Costs shall
be pro-rated by the number of additional licensees. If LKS, with respect to the
LKS Patent Rights decides, at any time, not to file or maintain an application
or a Patent as provided hereunder, it shall give RBS notice to this effect and
upon such notice RBS shall have the right, but not the obligation, to file and
maintain, such application or Patent, in its own name and at its own expense. If
RBS elects to file and maintain a Patent that LKS has declined to file or
maintain, LKS shall assign to RBS all rights in such application or Patent.
6.3 Joint Results.
6.3.1. Title. All right, title and interest in and to all Materials,
Information, and Inventions which are conceived and/or made by RBS employees and
LKS employees and any and all intellectual property rights based thereon
including, but not limited to, patent rights (the "Joint Patent Rights"), shall
be deemed to be joint inventions, in accordance with applicable law, and shall
be owned by both parties jointly (individually and collectively "Joint
Results").
<PAGE> 21
-17-
6.3.2. Use. RBS shall have the exclusive right to use the Joint
Results in the Field of Research. RBS may license to a Third Party in the Field
of Research to the extent necessary to make, have made or use the Products. Both
RBS and LKS may use the Joint Results outside the Field of Research. Neither
party may license to a Third Party for use outside the Field of Research without
the other party's prior written consent, which may not be unreasonably withheld
or delayed.
6.3.3. Patent Rights. RBS shall file and prosecute the Joint Patent
Rights and pay the Patent Costs therefor. If RBS decides, at any time, not to
file or maintain an application or a Patent as provided hereunder, it shall give
LKS notice to this effect and upon such notice LKS shall have the right, but not
the obligation, to file and maintain, such application or Patent, in its own
name and at its own expense. If LKS elects to file and maintain a Patent Right
on which RBS has declined to file or maintain, RBS shall assign to LKS all
rights in such application or Patent.
6.4 RBS Results.
6.4.1. Title. All right, title and interest in and to all Materials,
Information, and Inventions which are conceived and/or made by RBS employees
alone and any and all intellectual property rights based thereon including, but
not limited to, patent rights (the "RBS Patent Rights"), shall be owned by RBS
(individually and collectively "RBS Results").
6.4.2. Use. In addition to RBS's rights to sublicense the RBS
Results as set forth elsewhere in this Agreement, RBS may license the RBS
Results outside the Field of Research. LKS shall have exclusive rights to the
RBS Results only if RBS transfers such rights to LKS pursuant to Section 13.8
hereof.
6.4.3. Patent Rights. RBS shall file and prosecute the RBS Patent
Rights and pay the Patent Costs therefor. If RBS decides, at any time, not to
file or maintain an application or a Patent as provided hereunder, it shall give
LKS notice to this effect and upon such notice LKS shall have the right, but not
the obligation, to file and maintain, such application or Patent, in its own
name and at its own expense. If LKS elects to file and maintain such an
application, RBS shall assign to LKS all rights in such application or Patent.
<PAGE> 22
-18-
6.5 Publication. During the Research Term, there will be no publication of
the Results or other publications in the Field of Research by LKS or RBS, or any
employee of the parties unless the CMC has reviewed and approved the proposed
scientific publication concerning the Results. After termination of the Research
Term, if either party is going to publish in the Field of Research, the
publishing party shall provide such publication to the other party preferably
thirty (30) days but no later that two (2) weeks prior to submission for
publication to allow the other party time to determine whether any Confidential
Information should be deleted from the proposed publication.
6.6 Infringement
6.6.1. If any of the Patent Rights is infringed by a third party
with respect to the Products, the party which becomes aware of such infringing
activity shall promptly notify the other party of such activity. RBS shall have
the right and option but not the obligation to bring an action for infringement,
at its sole expense, against such third party in the name of LKS and/or in the
name of RBS, and to join LKS as a party plaintiff if required. RBS shall keep
LKS informed as to the prosecution of any action for such infringement. No
settlement, consent judgment or other voluntary final disposition of the suit
which adversely affects Patent Rights may be entered into without the consent of
LKS, which consent shall not unreasonably be withheld.
6.6.2. In the event that RBS shall undertake the enforcement and/or
defense of the Patent Rights by litigation any recovery of damages by RBS for
any such suit shall be applied first in satisfaction of any unreimbursed
expenses and legal fees of RBS relating . to the suit. The balance remaining
from any such recovery shall be divided equally between RBS and LKS.
6.6.3. In the event that RBS elects not to pursue an action for
infringement, upon written notice to LKS by RBS that an unlicensed third party
is an infringer of Patent Rights licensed to RBS, LKS shall have the right and
option, but not the obligation at its cost and expense to initiate infringement
litigation and to retain any recovered damages. LKS shall keep RBS informed as
to the prosecution of any action for such infringement.
6.6.4. In any infringement suit either party may institute to
enforce the Patent Rights pursuant to this Agreement, the other party hereto
shall, at the request of the party initiating such suit, cooperate in all
respects and, to the extent possible, have its employees testify when
<PAGE> 23
-19-
requested and make available relevant records, papers, information, samples,
specimens, and the like. All reasonable out-of-pocket costs incurred in
connection with rendering cooperation requested hereunder shall be paid by the
party requesting cooperation.
7 ROYALTIES AND OTHER COMPENSATION.
7.1 Royalties.
7.1.1. Amount. RBS shall pay to LKS on the Net Sales of
Products sold by RBS, its Affiliates and Sublicensees in the Territory royalties
as follows:
Non-Monoclonal Antibody Product
Where there is Patent Protection, as hereinafter defined, the
following royalties will be paid on Net Sales:
*% on the portion of aggregate annual worldwide Net Sales of up to
and including *
*% on the portion of aggregate annual worldwide Net Sales between
* and up to and including *
*% on the portion of aggregate annual worldwide Net Sales above *
Where there is No Patent Protection, as hereinafter defined, the
following royalties will be paid on Net Sales:
*% on the portion of Net Sales less than or equal to *
*% on the portion of aggregate annual worldwide Net Sales between *
and up to and including *
*% on the portion of aggregate annual worldwide Net Sales above *
Monoclonal Antibody Product
Where there is Patent Protection the following Royalties will be
paid on Net Sales:
*Confidential treatment requested: material has been omitted and filed
separately with the Commission.
<PAGE> 24
-20-
*% on Net Sales
Where there is No Patent Protection the following Royalties will be
paid on Net Sales:
*% on Net Sales
7.1.2. Patent Protection. For purposes of this Section, "Patent
Protection" shall mean that (i) the Product is covered by a Valid Claim of
Patent Rights in the country where sold or (ii) patents are not available in
such country and there is no significant competition for Product from the same
product sold by a competitor in the same country. "No Patent Protection" shall
mean that (i) the Product is not covered by a Valid Claim of Patent Rights in
the country where sold or (ii) patents are not available in such country and
there is significant competition for Product from the same product sold by a
competitor in the same country. If a Product is subsequently covered by a Valid
Claim of Patent Rights, from that point on, RBS shall pay royalties as a
patented Product.
7.1.3. Competitive Pressures. In the event the obligations of RBS
under the Agreement significantly diminish its or its Affiliates' capabilities
to respond to competitive pressures in a country, the parties agree to explore,
in good faith, steps to be taken to respond to such circumstances.
7.1.4. Other Royalties. In the case of Non-Monoclonal Antibody
Products and on a country by country basis, in the event that royalties are to
be paid by RBS to a party who is not an Affiliate of LKS, to make, use or sell
Product for which royalties are also due to LKS hereunder (such royalties to
such party are hereinafter "Other Royalties") and such Other Royalties are in
excess of three percent (3%) of Net Sales of Product, then the royalties to be
paid to LKS by RBS pursuant to this Agreement shall be reduced by onehalf of the
amount of such Other Royalties in excess of three percent (3%) of Net Sales of
Product, but at no time will LKS receive either less than a 4% royally on Net
Sales for such Products where there is Patent Protection or less than a 2.5%
royally on Net Sales for such Products where there is No Patent Protection.
7.1.5. Royalty Term. Royalties shall be paid as set forth above by
RBS, on a country by country, Product by Product, basis for a period of at least
ten (10) years in each country of the Territory from the date of First
Commercial Sale of such Product in each such country and if thereafter such
Product is covered by a Valid Claim of a Patent Right,
*Confidential treatment requested: material has been omitted and filed
separately with the Commission.
<PAGE> 25
-21-
such royalties shall be payable until the last to expire Patent Right in such
country.
7.1.6. Combination Product. In the event that a Product includes
both component(s) for which royalties are due hereunder ("Royally Bearing
Component(s)") and a component which is diagnostically useable or
therapeutically active alone or in a combination which does not require a
Royalty Bearing Component ('Non-Royalty Bearing Component(s)") (such Product
being a "Combined Product"), then Net Sales shall be the amount which is
normally received by RBS, its Affiliates or Sublicensees from a sale of the
Royalty Bearing Component(s) in an arm's length transaction with an unaffiliated
Third Party. If the Royally Bearing Component(s) are not sold separately, then
Net Sales upon which a royally is paid shall be the Net Sales of the Combined
Product multiplied by a fraction, the numerator of which is the inventory cost
for producing the Royally Bearing Components and the denominator of which is the
inventory cost for producing the Combined Product.
7.2 License Fee. RBS shall pay to LKS a non-refundable and non-creditable
license fee of * as follows: * which LKS acknowledges has already been paid on
the signing of the Heads of Agreement and * to be paid upon the establishment of
the HTS at RBS or the Effective Date, whichever is later.
7.3 Milestone Payments.
7.3.1. Amounts. RBS shall pay the following amounts upon the
occurrence of the following milestone events.
MILESTONE PAYMENTS:
Non-Monoclonal Antibody Product*
* to be paid to LKS for the first Product to receive IND approval.
* to be paid to LKS upon acceptance of the first Product into the Roche
Development Portfolio.
* to be paid to LKS for the first Product to receive approval of NDA or
equivalent.
(*e.g., protein, peptide, organic or inorganic small molecule, fusion
protein, gene therapy, etc.)
*Confidential treatment requested: material has been omitted and filed
separately with the Commission.
<PAGE> 26
-22-
Monoclonal Antibody Product
* to be paid to LKS upon RBS' decision to proceed with a humanized mAb.
* to be paid to LKS upon the successful humanization of the mAb.
* to be paid to LKS upon successful completion of Phase II clinical trials
permitting the Product to proceed to Phase III based upon demonstration of
safety and efficacy.
* to be paid to LKS upon the decision to proceed to Phase III clinical
trials.
* to be paid to LKS upon approval of a PLA or equivalent.
7.3.2. Replacement Product. Should a Product replace another Product
before such Product reaches the market, it shall, for the purpose of milestones,
enter at the next payable milestone.
7.3.3. Termination. Discontinuation of the Research Collaboration
pursuant to Section 5.10.2 and resulting termination of this Agreement will
terminate RBS and its Affiliates obligations to make any future milestone or
upfront payments.
7.4 Records. RBS shall keep, and shall cause each of its Affiliates and
Sublicensees to keep, full and accurate books of account containing all
particulars relevant to its sales of Products that may be necessary for the
purpose of calculating all royalties payable to LKS. Such books of account shall
be kept at their principal place of business and, with all necessary supporting
data shall, for the two (2) years next following the end of the calendar year to
which each shall pertain, be open for inspection by an independent certified
public accountant reasonably acceptable to RBS, upon at least thirty (30) days
prior written notice during normal business hours at LKS's expense for the sole
purpose of verifying royalty statements or compliance with this Agreement.
Results of such inspection shall be made available to both Parties. In the event
the inspection determines that royalties due LKS for any period have been
underpaid by * or more, then RBS shall pay for all costs of the inspection. In
all cases, RBS shall pay to LKS any underpaid royalties within thirty days (30)
of the date LKS delivers to RBS such accountant's written report so concluding
and with interest at the prime rate set forth
* Confidential treatment requested: material has been omitted and filed
separately with the Commission.
<PAGE> 27
-23-
in the Wall Street Journal, plus * . In the event that such examination
concludes that there has been an overpayment with respect to such amounts,
the excess shall be credited to RBS against future payments to LKS. All
information and data reviewed in the inspection shall be used only for the
purpose of verifying royalties and shall be treated as RBS Confidential
Information subject to the obligations of this Agreement. No audit by an agent
of LKS shall occur more frequently than once during any twelve (12) month
period.
7.5 Accounting Period. In each year the amount of royalty due shall be
calculated semi-annually as of the end of each June 30 and December 31 (each as
being the last day of an "Accounting Period") and shall be paid semi-annually
within the ninety (90) days next following such date. Every such payment shall
be supported by the accounting prescribed in Paragraph 7.6 and shall be made in
United States currency. Whenever for the purpose of calculating royalties,
conversion from any foreign currency shall be required, such conversion shall be
made as follows:
7.5.1. For RBS and its Affiliates:
For countries other than the United States, when calculating the
Adjusted Gross Sales, the amount of such sales in foreign currencies shall be
converted into Swiss Francs as computed in the central Roche's Swiss Francs
Sales Statistics for the countries concerned, using the average monthly rate of
exchange at the time for such currencies as retrieved from the Reuters System.
When calculating the royalties on Net Sales, such conversion shall be at the
average rate of the Swiss Franc to the United States currency as retrieved from
the Reuters System for the applicable Accounting Period. With respect to
royalties due on Net Sales in the United States, RBS shall report and have paid
to LKS such royalties in United States currency directly from one of its
Affiliates in the United States.
7.5.2. For a licensee in a country:
For countries other than the United States, when calculating the
Adjusted Gross Sales, the amount of such sales shall be reported by the Licensee
to Roche within thirty (30) days from the end of an Accounting Period, after
having converted each applicable monthly sales in foreign currency into the
United States currency using the average between the buying and selling rate of
exchange published in the Wall Street Journal (or some other source agreed upon
in writing by the
* Confidential treatment requested: material has been omitted and filed
separately with the Commission.
<PAGE> 28
-24-
parties for any particular country) for the last business day of each respective
month of the Accounting Period.
8 REPRESENTATIONS AND WARRANTIES.
8.1 Mutual Representations and Warranties. Each party represents and
warrants to the other party that: (i) it is free to enter into this Agreement;
(ii) in so doing, it will not violate any other agreement to which it is a
party; and (iii) it has taken all corporate action necessary to authorize the
execution and delivery of this Agreement and the performance of its obligations
under this Agreement.
8.2 LKS Representations and Warranties. LKS hereby represents and
warrants to RBS that:
(i) It is the owner of, or is the licensee of the Background
Patent Rights and Confidential Information related to Products which it has
licensed to RBS under this Agreement, and accordingly has the right to grant
licenses or sublicenses therefor;
(ii) It has not entered into any agreement with any Third Party
which is in conflict with the rights granted to RBS pursuant to this Agreement;
(iii) It has furnished RBS with the audited balance sheet of LKS as
of December 31, 1995 and the related audited income statement of LKS for the
year then ended, certified by LKS's independent public accountants. The audited
financial statements, including all notes thereto (if any), are complete and
accurate in all material respects, and present fairly the financial condition of
LKS as of the date and for the periods indicated;
(iv) It has furnished unaudited financial statements as of March
31, 1996, which statements are in accordance with the books and records of LKS,
and present fairly the financial condition of LKS as of the date and for the
periods indicated; and
(v) As of the Effective Date, LKS, without having made an
investigation, is not aware of any claim or demand, asserted or unasserted,
which it believes would have an adverse effect on the rights granted to RBS
hereunder.
8.3 Limitation. EXCEPT AS OTHERWISE EXPRESSLY SET FORTH IN THIS AGREEMENT
LKS MAKES NO REPRESENTATIONS
<PAGE> 29
-25-
OR EXTENDS ANY WARRANTIES OF ANY KIND, EITHER EXPRESS OR IMPLIED, INCLUDING, BUT
NOT LIMITED TO, WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE,
NON-INFRINGEMENT OR VALIDITY OF ANY LKS PATENT OR OTHER INTELLECTUAL PROPERTY
RIGHTS.
9- INDEMNIFICATION
9.1 LKS Indemnification.
9.1.1. Research Collaboration. LKS will defend, indemnify and hold
harmless RBS, its Affiliates and licensors and their employees, agents,
officers, trustees, shareholders and directors and each of them (the "RBS
Indemnified Parties") from and against any and all third party claims, causes of
action and costs (including reasonable attorney's fees) of any nature made or
lawsuits or other proceedings filed or otherwise instituted against the RBS
Indemnified Parties resulting from or arising out of LKS' activities under the
Research Collaboration or out of the research, testing, handling, storage, or
use of any chemical agents by LKS, its employees, agents or Affiliates (other
than those claims which result from the gross negligence or willful misconduct
of an RBS Indemnified Party); provided, however, that no indemnification from
LKS shall be applicable under this Section with respect to a claim or loss
related to Products liability except as set forth in Section 9.1.2 below.
9.1.2. Products Liability. To the extent a Product and rights
relating thereto are transferred from RBS to LKS, LKS will defend, indemnify and
hold harmless the RBS Indemnified Parties from and against any and all third
party claims, causes of action and costs (including reasonable attorney's fees)
of any nature made or lawsuits or other proceedings filed or otherwise
instituted against the RBS Indemnified Parties resulting from or arising out of
the manufacture, sale or use of any such Product by LKS, its Affiliates or its
Sublicensees (other than those claims which result from the gross negligence or
willful misconduct of an RBS Indemnified Party).
9.2 RBS Indemnification. RBS will defend, indemnify and hold harmless LKS,
its Affiliates and licensors and their employees, agents, officers, trustees,
shareholders and directors and each of them (the "LKS Indemnified Parties") from
and against any and all third party claims, causes of action and costs
(including reasonable attorney's fees) of any nature made or lawsuits or other
proceedings filed or otherwise instituted against the LKS Indemnified Parties
resulting from or arising out of this Agreement or out of the development,
testing, manufacture, handling,
<PAGE> 30
-26-
storage, use or sale of any Product by RBS, its Affiliates or its Sublicensees
(other than those claims which result from the gross negligence or willful
misconduct of an LKS Indemnified Party).
9.3 Conditions to Indemnification. A person or entity that intends to
claim indemnification under this Section 9 (the "Indemnitee") shall promptly
notify the indemnifying party (the "Indemnitor") of any loss, claim, damage,
liability or action in respect of which the Indemnitee intends to claim such
indemnification, and the Indemnitor shall assume the defense thereof with
counsel mutually satisfactory to the Indemnitee whether or not such claim is
rightfully brought; provided, however, that an Indemnitee shall have the right
to retain its own counsel, with the fees and expenses to be paid by the
Indemnitor if Indemnitor does not assume the defense, or if representation of
such Indemnitee by the counsel retained by the Indemnitor would be inappropriate
due to actual or potential differing interests between such Indemnitee and any
other person represented by such counsel in such proceedings. The indemnity
agreement in this Section shall not apply to amounts paid in settlement of any
loss, claim, damage, liability or action if such settlement is effected without
the consent of the Indemnitor, which consent shall not be withheld or delayed
unreasonably. The failure to deliver notice to the Indemnitor within a
reasonable time after the commencement of any such action, only if prejudicial
to its ability to defend such action, shall relieve such Indemnitor of any
liability to the Indemnitee under this Section, but the omission so to deliver
notice to the Indemnitor will not relieve it of any liability that it may have
to any Indemnitee otherwise than under this Section. The Indemnitee under this
Section, its employees and agents, shall cooperate FULLY with the Indemnitor and
its legal representatives in the investigations of any action, claim or
liability covered by this indemnification.
10. ASSIGNMENT; SUCCESSORS.
10.1 Assignment. This Agreement shall not be assignable by either of the
parties without the prior written consent of the other party (which consent
shall not be unreasonably withheld), except that either party without the
consent of the other party may assign this Agreement to an Affiliate or to a
successor in interest or transferee of all or substantially all of the portion
of the business to which this Agreement relates.
10.2 Successors. Subject to the limitations on assignment herein, this
Agreement shall be binding upon and inure to the benefit of said successors in
interest and assigns of the parties. Any such successor or
<PAGE> 31
-27-
assignee of a party's interest shall expressly assume in writing the performance
of all the terms and conditions of this Agreement to be performed by said party
and such Assignment shall not relieve the Assignor of any of its obligations
under this Agreement.
11. FORCE MAJEURE.
Neither party shall be liable to the other party for damages or loss
(other than with respect to payments due LKS hereunder) occasioned by failure of
performance by the defaulting party if the failure is occasioned by war, fire,
explosion, flood, strike or lockout, embargo, or any similar cause beyond the
control of the defaulting party, provided that the party claiming this exception
has exerted all reasonable efforts to avoid or remedy such event and provided
such event does not extend for more than six (6) months.
12. TERM.
Except as otherwise specifically provided herein and unless sooner
terminated as provided in this Agreement, this Agreement and the licenses and
rights granted hereunder shall remain in full force and effect until RBS's
obligations to pay royalties hereunder terminate. Upon termination of RBS's
obligation to pay royalties hereunder with respect to a specific country and
specific Product as to which RBS's license is then in effect and RBS's payment
of all such royalties, the license granted to RBS with respect to such country
and such Product pursuant to Section 2.1 shall be deemed to be fully paid and
RBS shall thereafter have a royalty-free right to use the Patent Rights to make,
have made, use and sell such Product in such country.
13. TERMINATION.
13.1 Failure to Develop. In the event RBS fails to use commercially
reasonable and diligent efforts to develop a Product to the point that an IND
for a Product can be approved by the FDA, then LKS at its option, may terminate
this Agreement. Following IND approval for a Product, RBS shall continue to use
commercially reasonable and diligent efforts to develop and register such
Product. In either event, however, RBS will have the right to terminate the
development of any Product after the expiration of the Research Term and such
termination will not result in a termination of this Agreement so long as RBS is
continuing the development of another Product under this Agreement. In such
event, LKS will not have rights to continue development of the Product so
terminated.
<PAGE> 32
-28-
13.2 Decision not to Market in the Major Markets. If, at any time, RBS
elects not to market or sublicense a Product in a Major Market, RBS may elect,
in its sole discretion, to (i) return all rights to such Product in such Major
Market to LKS or (ii) retain all rights to such Product in such Major Market
and, in addition to other compensation due LKS hereunder, RBS shall pay LKS a
flat fee equal to the royally based upon three peak years of projected sales in
such Market as determined by an independent market researcher, who shall be
mutually agreed upon between the parties (the "Flat Fee").
13.3 Failure to Market in a Major Market. In the event that, at any time,
a panel of arbitrators selected in accordance with Section 14.4 hereof
determines that RBS has not used commercially reasonable and diligent efforts to
market or sublicense a Product in a Major Market, then RBS shall (i) return all
rights to such Product in such Major Market to LKS or GO retain all rights to
such Product in such Major Market and, in addition to other compensation due LKS
hereunder, RBS shall PAY LKS the Flat Fee for such Product. In addition, under
both G) and GO, RBS shall pay LKS an additional fee equal to an amount to be
determined by a panel of arbitrators for the failure to use commercially
reasonable and diligent efforts.
13.4 Decision not to Market Worldwide. After approval of a Product, if RBS
terminates the marketing and sale of such Product by itself, its Affiliates, or
Sublicensees on a worldwide basis with the intent not to resume marketing or
sale of the Product within a reasonable time period (other than due to a Product
shortage or recall or any Force Majeure situation), either party may terminate
this Agreement upon thirty (30) days prior written notice.
13.5 Material Breach. Upon breach of any material provisions of this
Agreement by either party to this Agreement, in the event the breach is not
cured within sixty (60) days after written notice to the breaching party by the
other party, in addition to any other remedy it may have, the other party at its
sole option may terminate this Agreement, provided that such other party is not
then in breach of this Agreement.
13.6 Bankruptcy. Either party to this Agreement may, upon giving notice of
termination, immediately terminate this Agreement upon receipt of notice that
the other party has become insolvent or has suspended business in all material
respects hereof, or has consented to an involuntary petition purporting to be
pursuant to any reorganization or insolvency law of any jurisdiction, or has
made an assignment for the
<PAGE> 33
-29-
benefit of creditors or has applied for or consented to the appointment of a
receiver or trustee for a substantial part of its property.
13.7 Survival. The obligations of Sections 4, 8, 9, and 13, as well as
Sections 14.3 and 14.4 shall survive any termination of this Agreement.
13.8 Results of Termination.
13.8.1 Transfers and Licenses. In the event of termination under
Section 5.10.2.1, 5.10.2.2, 5.10.2.3, 13.1, 13.2, 13.3, or 13.4, or in the event
LKS terminates this Agreement pursuant to Section 5.10.3, 13.5, or 13.6, all
licenses and rights granted to RBS by LKS shall terminate forthwith and RBS
shall transfer or cause to be transferred to LKS RBS Results and all limitations
on LKS's rights to use or license the LKS Results and Joint Results shall cease.
In addition, in the case of a Product identified at the time of termination and
Products related thereto, RBS shall transfer to LKS RBS Technology and RBS
Patents that relate exclusively to such Product. To the extent that RBS
Technology and RBS Patents do not relate exclusively to such Product(s) but are
necessary to manufacture, use or sell such Product(s), RBS shall grant to LKS a
non-exclusive, worldwide, royalty-free (except as provided in Section 13.8.3)
sublicensable license to RBS Technology and RBS Patents for use solely in
manufacturing, using and selling such Product(s) and exclusive to LKS with
respect to the Products. In addition, in the event RBS' rights in a country are
terminated under Section 13.2 or 13.3, RBS shall also grant to LKS an exclusive,
royally-free (except as provided in Section 13.8.3) sublicensable license under
RBS Patents and RBS Technology to make, have made, use and sell Products in such
country. Notwithstanding the foregoing if RBS elects not to, or fails to use
commercially reasonable and diligent efforts to market or sublicense a Product
in the United Kingdom, France, or Germany, the rights that shall be returned to
LKS are the rights to market or sublicense a Product in all countries that are,
as of the date of the return of such right members of the European Union. LKS
shall pay all reasonable costs associated with transferring title to such
Product from RBS or its Affiliates to LKS. RBS shall provide reasonable
cooperation in transferring such registrations and other property to LKS and
thereafter shall charge LKS on an fully allocated cost basis for the additional
employee time. LKS shall have full responsibility for such Product after such
transfer. Nothing contained herein shall require RBS to transfer the original of
any data or all copies of such data that RBS is required by law, regulation, or
regulatory authority, to retain the original or a copy thereof.
<PAGE> 34
-30-
13.8.2 Post-Termination Access. If, on termination of the
Agreement, a Product has not yet been identified and LKS subsequently needs a
license under the RBS Technology or RBS Patents that were existing as of the
date of the termination in order to develop, manufacture, use, or sell a Product
that is a direct result of the Research Collaboration, RBS shall grant to LKS a
royalty-free license to such RBS Technology or RBS Patents that would be
necessary to develop, manufacture, use, or sell such Product. If, upon
termination of the Agreement, a Product has not yet been identified and LKS
subsequently needs a license under the RBS Technology or RBS Patents that were
existing as of the date of the termination in order to develop, manufacture,
use, or sell a Product that is not a direct result of the Research
Collaboration, RBS shall not unreasonably withhold a license to such RBS
Technology or RBS Patents that would be necessary to develop, manufacture, use,
or sell such Product. If upon termination of the Agreement, a Product has not
yet been identified, RBS and LKS shall agree at the time of termination what the
RBS Technology and RBS Patents developed during the Research Collaboration are.
Notwithstanding the provisions of Section 13.7, the provisions of this Section
13.8.2 shall survive for no more than five (5) years following the date of
termination of this Agreement.
13.8.3 Reciprocal Royalties. If a Product is commercialized by LKS or one
of its partners or sublicensees, after the transfer of such Product to LKS under
Section 13.2 or 13.4, royalties as set forth in Section 7.1 ("Reciprocal
Royalties") shall be payable to RBS on the Net Sales of such Product sold by LKS
or its Affiliates as follows. If the transfer to LKS occurs prior to an IND
filing then no royalties would be due to RBS, if such transfer occurs through
Phase I * of the Reciprocal Royalties would be due, if such transfer occurs
between Phase II and Phase 111, * of the Reciprocal Royalties would be due; if
such transfer occurs between Phase III and regulatory approval, * of the
Reciprocal Royalties would be due; and if thereafter * of the Reciprocal
Royalties would be due.
14. GENERAL PROVISIONS.
14.1 Independent Contractor. The relationship between LKS and RBS is that
of independent contractors. LKS and RBS are not joint venturers, partners,
principal and agent, master and servant, employer or employee, and have no
relationship other than as independent contracting parties. LKS shall have no
power to bind or obligate RBS in any manner. Likewise, RBS shall have no power
to bind or obligate LKS in any manner.
* Confidential treatment requested: material has been omitted and filed
separately with the Commission.
<PAGE> 35
-31-
14.2 Entire Agreement. This Agreement sets forth the entire agreement and
understanding between the parties as to the subject matter thereof and
supersedes all prior agreements in this respect. There shall be no amendments or
modifications to these Agreements, except by a written document which is signed
by both parties.
14.3 Governing Law. This Agreement shall be construed and enforced in
accordance with the laws of the laws of New York, U.S.A. without reference to
its choice of law principles.
14.4 Arbitration. Except for the right of either party to apply to a court
of competent jurisdiction for a Temporary Restraining Order to preserve the
status quo or prevent irreparable harm pending the selection and confirmation of
a panel of arbitrators, any dispute, controversy or claim arising out of or
relating to this Agreement, or the breach or termination thereof, shall be
settled by final and binding arbitration in accordance with the rules of the
American Arbitration Association then in effect. Judgment upon the award
rendered by the arbitrators may be entered in any court having jurisdiction
thereof. In any arbitration pursuant to this section, the award shall be
rendered by a majority of the members of a board of arbitration consisting of
three members, one being appointed by each party and the third, who shall be the
chairman of the panel, being appointed by mutual agreement of said two
party-appointed arbitrators. In the event of failure of said two arbitrators to
agree within sixty (60) days after the commencement of the arbitration
proceeding upon the appointment of the third arbitrator, the third arbitrator
shall be appointed by the AAA in accordance with the Rules. In the event that
either party shall fail to appoint an arbitrator within thirty (30) days after
the commencement of the arbitration proceeding, such arbitrator and the third
arbitrator shall be appointed by the AAA in accordance with the Rules. The place
of arbitration shall be New York City.
14.5 Headings. The headings in this Agreement have been inserted for the
convenience of reference only and are not intended to limit or expand on the
meaning of the language contained in the particular or section or paragraph.
14.6 No Waiver. Any delay in enforcing a party's rights under this
Agreement or any waiver as to a particular default or other matter shall not
constitute a waiver of a party's right to the future enforcement of its rights
under this Agreement, excepting only as to an expressed written and signed
waiver as to a particular matter for a particular period of time.
<PAGE> 36
-32-
14.7 Compliance with Laws. In conducting any activities under this
Agreement or in connection with the manufacture, use, or sale of Product, each
party shall comply with all applicable laws and regulations including, but not
limited to. current good laboratory practices as defined by the FDA.
14.8 Public Statements. Neither party shall use the name of the other
party in any public statement, prospectus, annual report, or press release
without the prior written approval of the other party, which may not be
unreasonably withheld or delayed, provided, however, that both parties shall
endeavor in good faith to give the other party a minimum of five business days
to review the such press release, prospectus, annual report, or other public
statement.
14.9 Notices. Any notices given pursuant to this Agreement shall be in
writing and shall be deemed delivered upon the earlier of (i) when received at
the address set forth below, or (ii) three (3) business days after mailed by
certified or registered mail postage prepaid and properly addressed, with return
receipt requested, or (iii) when sent, if sent, by facsimile, as confirmed by
certified or registered mail. Notices shall be delivered to the respective
parties as indicated:
If To LKS: LeukoSite, Inc.
215 First Street
Cambridge, Massachusetts 02142
Attn: CEO
Copy to: Carella, Byrne, Bain, Gilfillan, Cecchi,
Stewart & Olstein
6 Becker Farm Road Roseland, New Jersey
07068 Fax No. (201) 597-0250
Attn: Elliot M. Olstein, Esq.
If to RBS: Roche Bioscience, a division of Syntex
(U.S.A.) Inc.
3401 Hillview Avenue
Palo Alto, California 94304
Attn: VP, Business Development
Inflammatory Disease Business Unit
copy to: Syntex (U.S.A.) Inc.
3401 Hillview Avenue
Palo Alto, California 94304
Attn: Corporate Law Department
<PAGE> 37
-33-
14.10 Counterparts. This Agreement may be executed in any number of
separate counterparts, each of which shall be deemed to be an original, but
which together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date set
forth above.
LEUKOSITE, INC. SYNTEX (U.S.A.) INC.
By:/s/ Christopher Mirabelli By:/s/ James N. Woody
- ------------------------------- -----------------------------------
Christopher Mirabelli, Ph.D. James N. Woody, M.D., Ph.D.
President and CEO President
Appendix A - Patents Rights
Appendix B - Research Plan
Appendix C - CMCC Agreement
<PAGE> 1
CONFIDENTIAL TREATMENT EXHIBIT 10.10
DATED 6 October 1994
(1) THE UNIVERSITY OF OXFORD
(2) THE MEDICAL RESEARCH COUNCIL
(3) LEUKOSITE, INC.
(4) LEUKOSITE LIMITED
AGREEMENT
For the construction and operation of a
Therapeutic Antibody Centre
within the University of Oxford
MORRELL, PEEL & GAMLEN
-Solicitors-
1 St Giles Oxford OX1 3JR
<PAGE> 2
THIS AGREEMENT dated 6 October 1994 ("the Effective Date") is made
between:
(1) THE CHANCELLOR MASTERS AND SCHOLARS OF THE UNIVERSITY OF OXFORD whose
administrative offices are at Wellington Square, Oxford OV 2JD, England
("the University");
(2) THE MEDICAL RESEARCH COUNCIL of 20 Park Crescent, London W1 N4AL, England
("the MRC");
(3) LEUKOSITE, INC., a Delaware Corporation, whose principal place of business
is at 800 Huntington Avenue, Boston, Massachusetts MA 02115, USA
("LeukoSite (US)"); and
(4) LEUKOSITE LIMITED, an English Company which is a wholly-owned subsidiary
of Leukosite (US), and whose registered office is at 39 Victoria Street,
London SE1H 0EE, England ("LeukoSite (UK)".)
1 DEFINITIONS
In this Agreement, the following expressions shall have the following
meanings:
1.1 "LeukoSite" means LeukoSite (US) and LeukoSite (UK), jointly and
severally;
1.2 "the TAC" means the Therapeutic Antibody Centre which the University
intends to construct and operate an a site at the Churchill
Hospital, Oxford leased from The Oxford Radcliffe Hospital Trust:
set out in the First Schedule to this Agreement for illustration
purposes are a Site Location Plan and a drawing of possible layouts
for the floors of the Centre: the primary function of the Centre
will be the production of antibodies for use in clinical research;
1.3 "the Mobilization Date" means a date notified by the University to
LeukoSite (UK), being the date on which both the following
conditions are fulfilled:
1.3.1 the University obtains such permissions and consents as in the
reasonable opinion of the University are sufficient to enable
the work of constructing the TAC to begin on site; and
<PAGE> 3
1.3.2 the University enters into a binding agreement with The Oxford
Radcliffe Hospital Trust for the grant of a lease of the site
for the TAC to the University;
1.4 "the Research" means all research which is conducted in the TAC by
employees of the University, or under their direction and
supervision;
1.5 "Research Information" means data, formulae, process information
or other information developed in the course of the Research;
1.6 "Research Invention" means any process, use, article of manufacture
or composition of matter conceived or first actually or
constructively reduced to practice in the course of the Research;
1.7 "Research Material" means any material or substance which is
discovered, produced or derived in the course of the Research;
1.8 "the Technology Transfer Period" means the period of five (5) years
after the TAC becomes operational;
1.9 "Notified Discoveries" means Research Information, Research
Inventions and Research Material notified by the University to
LeukoSite (UK) under clause 3.2;
1.10 "the Pro Forma License" is set cut in the Second Schedule to this
Agreement;
1.11 "the Option Period" means the period beginning on the date of
notification of a Notified Discovery under clause 3.2 and ending on
whichever is the first to occur of twelve (12) months thereafter or
the service of a counter-notice by LeukoSite (UK) under clause 3.3:
the University will not unreasonably refuse a reasoned request from
LeukoSite (UK) for an extension of the twelve-(12)-month period in
relation to any individual Notified Discovery.
-2-
<PAGE> 4
2 FUNDING FOR THE TAC
2.1 The MRC will contribute * per annum throughout the Technology
Transfer Period towards the costs of staff, consumables, equipment,
indirect costs and other day-to-day running expenses of the TAC, and
* towards the cost of constructing and equipping the TAC. The exact
timing of capital payments within financial years is to be discussed
between the University and the MRC, but the intention is to front-
end load payments to 1995/96 or earlier, subject to written evidence
of expenditure; provided that, subject to written evidence of
expenditure, the entire capital contribution of the MRC will be
paid by the MRC by the end of its 1995/96 fiscal year.
2.2 The University has agreed with other parties for the payment by such
parties of further set sums towards the cost of constructing and
equipping the TAC.
2.3 The contributions by the MRC and the parties referred to in clause
2.2 will be subject to the University's acceptance of certain terms
and conditions of grant, but the University confirms and warrants to
LeukoSite (without prejudice to the second sentence of clause 3.4)
that such terms and conditions will not give either the MRC or the
other parties any claim to the ownership of Notified Discoveries.
2.4 LeukoSite (UK) will contribute the sum of three million United
States dollars (US $3,000,000) towards the cost of constructing and
equipping the TAC. Of this sum, $500,000 will be paid on the
Mobilization Date, and the balance will be paid at six-(6)-monthly
intervals thereafter by means of ten (10) installments, each of
$250,000.
2.5 Whenever a party is obliged to make a payment under the preceding
sub-clauses which attracts value-added, sales, use, excise or other
similar taxes or duties. the party under such obligation shall be
responsible for paying the taxes and duties.
2.6 Except as otherwise provided by the MRC's terms and conditions of
grant or by an agreement signed by or on behalf
-3-
* Confidential treatment requested: material has been omitted and filed
separately with the Commission.
<PAGE> 5
of the University, as between the parties to this Agreement the full
and unencumbered title to all equipment purchased or constructed
using funds provided by the other parties shall vest in the
University.
3 TRANSFER OF TECHNOLOGY TO LEUKOSITE
3.1 Performance by the University of this clause 3 is subject to and
conditional upon:
3.1.1 receipt by the University of the contributions and funds
which are referred to in clauses 2.1, 2.2 and 2.4;
3.1.2 the grant of an appropriate lease of the site for the TAC
by The Oxford Radcliffe Hospital Trust to the University;
and
3.1.3 the obtaining of all permissions and consents required for
the construction of the TAC.
The University will use all reasonable endeavours to secure the
lease, permissions and consents referred to in clauses 3.1.2 and
3.1.3; to procure the construction and equipping of the TAC in an
appropriate and timely manner; and to operate the TAC efficiently
and in accordance with good laboratory practice.
3.2 Throughout the Technology Transfer Period:
3.2.1 a written report shall be submitted by the University to
LeukoSite (UK) within ninety (90) days after the end of each
six (6) months following the date on which the TAC becomes
operational: such report shall itemize the Research
Information and Research Material generated during the
six-(6)-month period: the University may file additional
reports if and whenever the University prefers not to wait for
the end of a six-(6)-month period but instead to start time
running immediately under clause 3.5 with respect to any
particular Research Information or Research Material;
3.2.2 the University will use all reasonable endeavours to report
Research Inventions promptly to LeukoSite
-4-
<PAGE> 6
(UK), as and when such Inventions are made and documented.
3.3 If LeukoSite does not intend to exploit any Notified Discovery
commercially, LeukoSite (UK) shall inform the University promptly by
serving a counter-notice to that effect.
3.4 LeukoSite (US) shall have the right in accordance with clause 3.5 to
take a license over each Notified Discovery, on the terms of the Pro
Forma License, with such modifications (if any) as the parties may
agree. The royalties received by the University under each such
license are to be divided between the University and the MRC in
accordance with formulae which will be established by separate
agreement between those two parties.
3.5 During the Option Period:
3.5.1 LeukoSite is licensed to use the Notified Discovery for
evaluation purposes. No license is granted for any other
purpose, and LeukoSite will keep the Notified Discovery
confidential by using the same care and discretion to avoid
its disclosure to any third party as LeukoSite uses with
respect to strictly-confidential information of its own which
it does not wish to be disclosed to others; and
3.5.2 the University will not negotiate with or enter into any
agreement or arrangement with any third party for the
commercial exploitation of the Notified Discovery.
Should LeukoSite (UK) during the Option Period give the University
notice of LeukoSite's desire to exercise the right granted in clause
3.4, the parties will complete a license of the Notified Discovery
in the form of the Pro Forma License, utilizing the material
provided by the University in the notification under clause 3.2 in
order to complete the blanks in Paragraphs 1.3, 1.5 and 1.6 and
Appendix B. Should the parties be unable to agree any of the wording
for the blanks in Paragraphs 1.3, 1.5 and 1.6 and Appendix B by the
end of the Option Period, the issue or issues in dispute shall be
settled in London by an arbitrator. The arbitrator shall be a
barrister specializing in intellectual property law, who has no
prior association with either party, or who is otherwise
-5-
<PAGE> 7
acceptable to both parties. He shall be nominated for the purpose by
the then Chairman of the General Council of the Bar. The license
granted to LeukoSite in clause 3.5.1, and the obligation accepted by
the University in clause 3.5.2, will both be extended until the
arbitration is concluded and the license over the Notified Discovery
completed.
3.6 If LeukoSite (UK) serves a counter-notice on the University under
clause 3.3, or if by the end of the Option Period LeukoSite has
given no notice to the University of a wish to exercise the right
granted in clause 3.4:
3.6.1 LeukoSite shall at the University's election either -
3.6.1.1 return all materials and documentation for the
Notified Discovery to the University; or
3.6.1.2 destroy all materials and documentation, in which
event LeukoSite shall provide the University with
written certification of such destruction, signed by
authorized representatives of both LeukoSite (US) and
LeukoSite (UK);
3.6.2 the University shall be free to license the Notified Discovery
to third parties; provided that if the University purposes to
grant such a license to a third party, the University shall
notify LeukoSite; and LeukoSite shall have the right within
the period of thirty (30) days after such notification to
obtain a license on the terms offered to the third party.
4 LIMITATION OF LIABILITY
4.1 The University makes no representation or warranty that advice or
information given by any of its employees, students, agents or
appointees who work in the TAC, or the content or use of any
materials, works or information provided in connection with the
Research, will not constitute or result in infringement of
third-party rights.
4.2 The University accepts no responsibility for any use which may be
made of the results of the Research, nor for any
-6-
<PAGE> 8
reliance which may be placed on such results, nor for advice or
information given in connection with them.
4.3 Without prejudice to any right which the other parties may have to
claim against the University, each of the other parties to this
Agreement undertakes to make no claim against any employee, student,
agent or appointee of the University, being a claim which seeks to
enforce against any of them any liability whatsoever in connection
with this Agreement or its subject-matter.
4.4 The liability of any party for any breach of this Agreement, or
arising in any other way out of the subject-matter of this
Agreement, will not extend to any incidental or consequential
damages or losses including (without limitation) loss of profits.
4.5 The maximum liability of the University to each of the other parties
under or otherwise in connection with this Agreement or its
subject-matter shall not exceed a sum equal to the aggregate of all
moneys received by the University from both LeukoSite and the MRC
under clause 2, together with interest on the balance of such moneys
from time to time outstanding, accruing from day to day at the
Lloyds Bank PLC Base Rate from time to time in force and compounded
annually as at 31 December.
4.5 If any sub-clause of this clause 4 is held to be invalid or
unenforceable under any applicable statute or rule of law then it
shall be deemed to be emitted, and if as a result any party becomes
liable for loss or damage which would otherwise have been excluded
then such liability shall be subject to the remaining sub-clauses of
this clause 4.
5 DURATION AND TERMINATION
5.1 The period of this Agreement shall begin on the Effective Date.
Subject to the following sub-clauses of this clause 5, it shall then
continue throughout the Technology Transfer Period.
5.2 The University may terminate this Agreement by giving not less than
seven (7) days' written notice to all the other parties:
-7-
<PAGE> 9
5.2.1 if LeukoSite (US) makes an assignment for the benefit of its
creditors, files a petition for protection under the US
Bankruptcy Code, is adjudicated insolvent, or applies for a
receiver or trustee of any part of its property;
5.2.2 if any proceeding of a type described in clause 5.2.1 is
commenced against LeukoSite (US) and remains undismissed for a
period of thirty (30) days;
5.2.3 if LeukoSite (US) indicates its consent to any proceeding
of a type described in clause 5.2.1;
5.2.4 if LeukoSite (UK) suffers distress or execution, is the
subject of a petition for a bankruptcy order, goes or is put
into liquidation, has a receiver or administrative receiver
appointed over any substantial part of its business, or seeks
any form of protection against its creditors from any
competent court or tribunal.
Provided that the foregoing shall not be applicable in a case filed
under Chapter 11 of the United States Bankruptcy Code until the case
is converted to a Chapter 7 by a final non-appealable order.
5.3 If the University has not notified a Mobilization Date to LeukoSite
(UK) under clause 1.3 within the period of ninety (90) days after
the Effective Date, LeukoSite (US) and LeukoSite (UK) shall each
have the night to terminate this Agreement by giving not less than
seven (7) days' written notice to all the other parties. These
rights shall become exerciseable on and from the end of the
ninety-(90)-day period: they shall cease to be exerciseable if and
when a Mobilization Date is notified by the University to LeukoSite
(UK) under clause 1.3. Furthermore, if either LeukoSite (US) or
LeukoSite (UK) exercises its right under this subclause but the
University notifies a Mobilization Date during the seven-(7)-day
period of the notice from LeukoSite (US) or LeukoSite (UK), the
notice from LeukoSite (US) or (as the case may be) LeukoSite (UK)
shall be of no effect.
5.4 By giving ninety (90) days' written notice to all the other parties
of the intention to terminate, the University may
-8-
<PAGE> 10
terminate this Agreement for any material breach of this Agreement
by either the MRC or LeukoSite.
5.5 By means of similar notice, the MRC and LeukoSite (US) shall each
have the night to terminate this Agreement for any material breach
by the University.
5.6 Any notice under clauses 5.4 or 5.5 shall include a detailed
statement describing the nature of the breach. If the breach is
capable of being remedied and is remedied within the ninety-(90)-day
notice period, then the termination shall not take effect. If the
breach is of a nature such that it can be fully remedied but not
within the ninety-day notice period, then termination shall also not
be effective if the party involved begins to remedy the breach
within that period, and then continues diligently to remedy the
breach until it is remedied fully. If the breach is incapable of
remedy, then the termination shall take effect at the end of the
ninety day period in any event.
5.7 The expiration of the Technology Transfer Period, or the termination
of this Agreement under the preceding sub-clauses of this clause 5,
shall mean the termination, with effect from the expiry date or (as
the case may be) the effective date of termination, of the
obligations imposed on the parties under clauses 2.1 through 2.5 and
clause 3 (save only in relation to Notified Discoveries which have
been notified by the University to LeukoSite (UK) under clause 3.2
before the expiry date or the effective date of termination). The
remaining clauses shall survive the expiration of the Technology
Transfer Period and the termination of this Agreement, for whatever
reason. The duration of any licenses granted pursuant to clauses 3.4
and 3.5 shall be determined by the provisions for duration and
termination in each such license, and shall not be affected by the
operation of the termination clauses in this Agreement.
6 GENERAL
6.1 Clause headings are inserted in this Agreement for convenience only,
and they shall not be taken into account in the interpretation of
this Agreement.
-9-
<PAGE> 11
6.2 This Agreement shall not be assignable by any of the parties without
the prior written consent of all the other pates (which consent
shall not be unreasonably withheld or delayed), except that
LeukoSite without the consent of the other parties may assign this
Agreement to a successor in interest or transferee of all or
substantially all of the portion of the business to which the
Agreement relates.
6.3 Without prejudice to the University's other rights and remedies, if
LeukoSite (UK) fails to perform any of its obligations under this
Agreement, or commits any breach of those obligations, LeukoSite
(US) will indemnify the University against all losses, costs,
claims, demands and liabilities which may be incurred or suffered by
the University as a result of such non-performance or breach,
provided that LeukoSite (US) is promptly notified. LeukoSite (US)
shall then have the right to control the defense, settlement or
compromise of any such claim which is brought by a third party.
6.4 Subject to HM Treasury rules as they apply to Research Councils, if
another party to this Agreement fails to make any payment due to the
University under this Agreement then, without prejudice to the
University's other rights and remedies consequent upon breach of
this Agreement, the University may charge interest on the balance
outstanding, accruing from day to day at the rate of two per cent
(2%) per annum above the Lloyds Bank PLC Base Rate from time to time
in force and compounded annually as at 31 December.
6.5 If the performance by any party of any of its obligations under this
Agreement (other than an obligation to make payment) shall be
prevented by circumstances beyond its reasonable control, then such
party shall be excused from performance of that obligation for the
duration of the relevant event.
6.6 Unless such use is required by law, no party shall use the name of
any other party in any press release or product advertising, or for
any other commercial purpose, without that other party's prior
written consent; provided, however, that:
-10-
<PAGE> 12
6.6.1 publication of the sums received in the University's Annual
Report and similar publications shall not be regarded as a
breach of this clause;
6.6.2 the University will not unreasonably withhold consent to the
use of the University's name by LeukoSite in connection with a
financing.
6.7 Until further notice, the following shall be the parties'
representatives for the purpose of receiving invoices, payments,
statements, requests, notices and other documents under this
Agreement:
in the case of invoices, payments and statements addressed to
the University -.
The Administrator
Sir William Dunn School of Pathology,
University of Oxford
South Parks Road
OXFORD CX1 3RE
England;
in the case of requests, notices and other documents
addressed to the University -
The Director of the Research Services Office
University of Oxford
University Offices
Wellington Square
OXFORD OX1 2JD
England;
in the case of invoices, payments and statements
addressed to the MRC -
Helen Gadsden
Finance Division
The Medical Research Council
20 Park Crescent
LONDON W1N 4AL
England;
-11-
<PAGE> 13
in the case of requests, notices and other documents
addressed to the MRC -
The Head of the Technology Transfer Group
The Medical Research Council
20 Park Crescent
LONDON WIN 4AL
England;
in the case of LeukoSite (US) -
The President
LeukoSite, Inc.
800 Huntington Avenue
BOSTON Massachusetts MA 02115 USA;
in the case of LeukoSite (UK) -
The Managing Director
LeukoSite Limited
c/o Mark Andrew esq.
Messrs Bingham, Dana & Gould
39 Victoria Street
LONDON SCE1H OEE England.
6.3 Nothing in this Agreement shall create, imply or evidence any
partnership or joint venture between the parties or the relationship
between any of them of principal and agent.
6.9 This Agreement and its two (2) Schedules (which are incorporated
into and made a part of this Agreement) constitute the entire
agreement between the parties for the TAC. Any variation of this
Agreement shall be in writing and signed by authorized
representatives of all parties.
6.10 This Agreement shall be governed by English Law.
6.11 If any one or more clauses or sub-clauses of this Agreement would
result in this Agreement being prohibited pursuant to Article 85(l)
of the Treaty of Rome, then it or they shall be deemed to be
omitted. The parties shall uphold the remainder of this Agreement,
and shall negotiate an amendment which, as far as legally feasible,
maintains the economic balance between the parties.
-12-
<PAGE> 14
6.12 In entering into this Agreement the parties recognize that it is
impracticable to make provision for every contingency that may arise
in the course of performance. Accordingly, the parties declare it to
be their intention that this Agreement shall operate between them
with fairness and without detriment to the interests of any of them;
and if in the course of the performance of this Agreement unfairness
to any party is disclosed or anticipated, then all parties shall use
their best endeavors to agree upon such action as may be necessary
and equitable to remove the cause or causes of that unfairness.
AS WITNESS the hands of authorized signatories for the parties on the date
first mentioned above
THE SCHEDULES
1. Illustrative Site Location Plan and Layouts for the TAC
2. The Pro Forma License
-13-
<PAGE> 15
THE FIRST SCHEDULE
ILLUSTRATIVE SITE PLAN AND OTHER MATERIALS FOR THE TAC
(1) Site Location Plan
(2) Proposed Layouts
-14-
<PAGE> 16
THE SECOND SCHEDULE
THE PRO FORMA LICENSE
DATED 19( )
(1) THE UNIVERSITY OF OXFORD
(2) LEUKOSITE, INC.
LICENSE
of
(_______________________________________________________)
-15-
<PAGE> 17
This Agreement is effective ______________, 199(__) ("the EFFECTIVE DATE") by
and between The Chancellor, Masters and Scholars of the University of Oxford,
"UNIVERSITY"), whose administrative offices are at Wellington Square, Oxford,
CX1 2JD, England, and LeukoSite, Inc., a Delaware Corporation whose principal
place of business is at 800 Huntington Avenue, Boston, MA 02115, U.S.A.
("LEUKOSITE").
SECTION 1 - DEFINITIONS
The terms used in this Agreement have the following meaning:
1.1 The term "AFFILIATE" as applied to LEUKOSITE shall mean any company or
other legal entity other than LEUKOSITE in whatever country organised,
controlling, or controlled by, LEUKOSITE. The term "control" means
possession, direct and indirect, of the power to direct or cause the
direction of the management and policies whether through the ownership of
voting securities, by contract or otherwise.
1.2 The term "NET SALES PRICE" shall mean the total received by LEUKOSITE or
its AFFILIATES or its SUBLICENSEES from sale of PRODUCT, less
transportation charges and insurance. sales taxes, use taxes, excise
taxes, value added taxes, customs duties or other imposts, normal and
customary quantity and cash discounts, rebates granted, disallowed
reimbursements, and allowances and credit on account of rejection or
return of PRODUCT.
PRODUCT shall be considered "sold" when billed out or invoiced.
1.3 The term "PATENT RIGHT(S)" shall mean (__________________________________
_________________________________________________________________________
_________________________________________________________________________
_________________________________________________________________________
_________________________________________________________________________
_________________________________________________________________________)
1.4 The term "PRODUCT" shall mean any article, composition, apparatus,
substance, chemical, material, method, process or service which is,
incorporates or utilises LICENSED MATERIAL and / or LICENSED INFORMATION,
or the manufacture, import, sale or use of which is covered by PATENT
RIGHTS, copyrights, design rights, registered designs, topography (mask
work) rights, extraction rights or other identifiable and enforceable
intellectual property rights.
-16-
<PAGE> 18
1.5 The term "LICENSED INFORMATION" shall mean (_____________________________
________________________________________________________________________).
1.6 The term "LICENSED MATERIAL" shall mean (________________________________
________________________________________________________________________).
1.7 The term "SUBLICENSEE" shall mean any non-AFFILIATE third party licensed
by LEUKOSITE to make, have made, import, use or sell any PRODUCT.
1.8 The term "VALID CLAIM" shall mean a claim of an issued patent which has
not lapsed or become abandoned or been declared invalid or unenforceable
by a court of competent jurisdiction or an administrative agency from
which no appeal can be or is taken.
1.9 The use herein of the plural shall include the singular, and the use of
the masculine shall include the feminine.
SECTION 2 - LICENSED MATERIALS
2.1 For so long as LICENSED MATERIALS are licensed exclusively to LEUKOSITE
under this Agreement:
(a) UNIVERSITY shall use all reasonable endeavours to prevent the
distribution of LICENSED MATERIALS without LEUKOSITE's prior written
approval to for-profit entities or persons known to be employed
thereby or consulting or performing research therefor;
(b) When transferring LICENSED MATERIALS to not-for-profit entities or
persons known to be affiliated therewith UNIVERSITY shall require
such entities or persons to sign a Materials Transfer Agreement
substantially in the form set out in Appendix A to this Agreement;
and
(c) Prior to any such distribution of any such LICENSED MATERIAL,
UNIVERSITY and LEUKOSITE shall use reasonable efforts to consider
the patentability of such LICENSED MATERIALS and at LEUKOSITE's
expense to co-operate to file, where appropriate, PATENT RIGHTS
protecting such LICENSED MATERIALS prior to their distribution.
-17-
<PAGE> 19
SECTION 3 - GRANT
3.1 (a) UNIVERSITY hereby grants to LEUKOSITE and LEUKOSITE hereby
accepts from UNIVERSITY a world-wide sole and exclusive royalty
bearing right and license under PATENT RIGHTS, and under any and
all UNIVERSITY's copyrights, design rights, registered designs,
topography (mask work) rights, extraction rights and other
identifiable and enforceable intellectual property rights in and
to LICENSED INFORMATION and LICENSED MATERIALS, to make, have
made, use and sell or have sold on its behalf PRODUCT including
the right to sublicense third parties. LEUKOSITE shall have the
right to extend such license to its AFFILIATES.
(b) The license granted to LEUKOSITE excludes the subject-matter set
forth in Appendix 8 to the extent such subject-matter has been
licensed to the entities listed in Appendix B as of the EFFECTIVE
DATE. Furthermore, UNIVERSITY and each employee, student, agent
and appointee of UNIVERSITY in UNIVERSITY's Therapeutic Antibody
Centre shall have the irrevocable, royalty-free right to use the
invention(s) the subject of PATENT RIGHTS and / or other
identifiable and enforceable intellectual property rights, and
all LICENSED INFORMATION and LICENSED MATERIALS for academic and
non-commercial research purposes, and (with the consent of
LEUKOSITE which shall not be withheld unreasonably) for the
purpose of clinical patient care; provided, however, that in the
case of a student leaving UNIVERSITY and wishing to take LICENSED
INFORMATION or LICENSED MATERIALS with him or her, UNIVERSITY
shall use all reasonable endeavors to procure from the student an
agreement protecting the use and security of the LICENSED
INFORMATION and LICENSED MATERIALS, such agreement being
substantially in the form set out in Appendix A to this
Agreement, mutatis mutandis.
3.2 LEUKOSITE agrees to forward promptly to UNIVERSITY a copy of any and all
fully executed sublicense agreements.
3.3 The above licenses to sell any PRODUCT includes the right of LEUKOSITE,
its AFFILIATES. and SUBLICENSEES to grant to the purchaser thereof the
right to use and / or resell such purchased PRODUCT without payment of any
further royalty hereunder.
-18-
<PAGE> 20
3.4 (a) To the extent LEUKOSITE maintains an exclusive license hereunder
and taking into account the complexity, and stage of development
of the PRODUCTS and the science related thereto, LEUKOSITE shall
use reasonable efforts under the circumstances to research,
develop and then commercialise PRODUCTS and shall keep UNIVERSITY
reasonably informed of its efforts in this respect. The efforts
of a SUBLICENSEE and / or an AFFILIATE shall be considered as
efforts of LEUKOSITE.
(b) In the event that UNIVERSITY reasonably believes that LEUKOSITE
is not making reasonable efforts under the circumstances to
research, develop and then commercialise PRODUCTS pursuant to
Paragraph 3.4(a) then UNIVERSITY shall provide written notice to
LEUKOSITE which specifies UNIVERSITY's basis for such belief and
what additional efforts UNIVERSITY believes should be made by
LEUKOSITE. Upon receipt of such written notice, UNIVERSITY and
LEUKOSITE shall enter into good faith negotiations in order to
reach mutual agreement as to what efforts by LEUKOSITE shall
satisfy the requirements of this Paragraph 3.4, and if such
mutual agreement is not reached within ninety (90) days after
receipt of such written notice, then the parties agree to submit
to arbitration pursuant to Paragraph 12.2 to determine the
efforts which should be exerted by LEUKOSITE. In such
arbitration, in determining the efforts which should be exerted,
the arbitrator shall consider efforts exerted by LEUKOSITE up to
the point of arbitration, the current stage of technical
development of the PRODUCT, the resources and manpower available
to LEUKOSITE; the potential market; and regulatory and technical
problems. Thereafter, LEUKOSITE shall exert the efforts
determined by the parties or in such arbitration.
(c) If LEUKOSITE fails to exert the efforts determined by the parties or
in such arbitration, UNIVERSITY's sale and exclusive remedy for
LEUKOSITE's failure to meet such efforts is for the licenses and
rights granted hereunder for the PRODUCT to be converted from an
exclusive right and license to a non-exclusive right and license.
-19-
<PAGE> 21
3.5 Subject to Paragraph 3.4, LEUKOSITE shall have sale discretion for making
all decisions relating to the commercialisation and marketing of PRODUCT
by LEUKOSITE.
SECTION 4 - CONFIDENTIALITY
4.1 LEUKOSITE agrees to use all reasonable endeavours to maintain LICENSED
INFORMATION in confidence and not to disclose any LICENSED INFORMATION to
a third party without the prior written consent of UNIVERSITY.
4.2 The obligations of confidentiality in Paragraph 4.1 will not apply to
LICENSED INFORMATION which:
(i) was known to LEUKOSITE or generally known to the public prior to
its disclosure by UNIVERSITY to LEUKOSITE; or
(ii) subsequently becomes known to the public by some means other than a
breach of this Agreement, including publication and / or laying open
to inspection of any patent applications or patents; or
(iii) is subsequently disclosed to LEUKOSITE by a third party in
circumstances where LEUKOSITE has no reason to believe there has
been a breach of an obligation of confidentiality to UNIVERSITY; or
(iv) is independently developed by LEUKOSITE.
SECTION 5 - PATENTS
5.1 (a) LEUKOSITE shall file, prosecute and maintain patent applications
and patents which are PATENT RIGHTS licensed exclusively to
LEUKOSITE with patent Counsel selected by LEUKOSITE and shall
consult with and keep UNIVERSITY advised with respect thereto.
(b) After the EFFECTIVE DATE of this Agreement, LEUKOSITE shall bear the
cost and expense for the filing, prosecution and maintenance of
PATENT RIGHTS for which LEUKOSITE retains an exclusive license.
5.2 The costs incurred by LEUKOSITE pursuant to this Section 5 to secure or
maintain any PATENT RIGHTS shall be fully creditable
-20-
<PAGE> 22
against royalties due under Section 6, but no royalty payment, after
taking into consideration any deduction pursuant to Paragraph 6.2, shall
be reduced under this Paragraph 5.2 by more than fifty percent (50%).
SECTION 6 - ROYALTIES
6.1 (a) For each PRODUCT sold by LEUKOSITE or its AFFILIATES LEUKOSITE
shall pay UNIVERSITY one of the following royalties:
(1) a royalty of * of the NET SALES PRICE of PRODUCTS so long as
in each case the PRODUCT, where sold. shall infringe a VALID
CLAIM of any PATENT RIGHT which is licensed exclusively to
LEUKOSITE in such country: or
(2) a royalty of * of the NET SALES PRICE of other PRODUCTS sold
in countries where LEUKOSITE has an exclusive license pursuant
to this Agreement, so long as in each case the sale of the
PRODUCT without the consent of UNIVERSITY (or of LEUKOSITE as
UNIVERSITY's licensee) would infringe a copyright, design
right, registered design, topography (mask work) night,
extraction night or other identifiable intellectual property
right which is enforceable in the country of sale; or
(3) in the event PATENT RIGHTS are licensed non-exclusively to
LEUKOSITE a royalty of * of the NET SALES PRICE of PRODUCTS so
long as in each case the PRODUCT, where sold, shall infringe a
VALID CLAIM of any PATENT RIGHT which is licensed
non-exclusively to LEUKOSITE in such country; or
(4) a royalty of * of the NET SALES PRICE of other PRODUCTS sold
in countries where LEUKOSITE has a non-exclusive license
pursuant to this Agreement, so long as in each case the sale
of the PRODUCT without the consent of UNIVERSITY (or of
LEUKOSITE as UNIVERSITY's licensee) would infringe a
copyright, design right, registered design, topography (mask
work) right,
-21-
* Confidential treatment requested: material has been omitted and filed
separately with the Commission.
<PAGE> 23
extraction right or other identifiable intellectual property
right which is enforceable in the country of sale; or
(b) LEUKOSITE shall pay UNIVERSITY * of all royalties received by
LEUKOSITE and its AFFILIATES from all SUBLICENSEES, based on
the sale or distribution of PRODUCTS by the SUBLICENSEES.
(c) In the event that a PRODUCT includes both component(s) covered
by a VALID CLAIM of a PATENT RIGHT and active component(s) not
covered by a VALID CLAIM of a PATENT RIGHT (such PRODUCT being
a "Combined Product"), then the royalty due to UNIVERSITY on
the NET SALES PRICE of the Combined Product shall be either *
where the license enjoyed by LEUKOSITE is exclusive, or *
where the license is non-exclusive.
6.2 (a) In the event that royalties are to be paid by LEUKOSITE to a party who
is not an AFFILIATE of LEUKOSITE for PRODUCT for which royalties are also due to
UNIVERSITY pursuant to Paragraph 6.1 ("Other Royalties"), then the royalties to
be paid to UNIVERSITY by LEUKOSITE pursuant to Paragraph 6.1 shall be reduced by
one-half of the amount of such Other Royalties, but in no event shall any
royalties under Paragraph 6.1 be reduced by more than *.
(b) In addition to Paragraph 6.2(a), in the event that the royalty
paid to UNIVERSITY is a significant factor in the return realised
by LEUKOSITE so as to diminish LEUKOSITE's capability to respond
to competitive pressures in the market, UNIVERSITY agrees to
consider a reasonable reduction in the royalty paid to UNIVERSITY
as to each such PRODUCT for the period during which such market
condition exists. Factors determining the size of the reduction
will include profit margin on PRODUCT and on analogous products,
prices of competitive products, and LEUKOSITE's expenditures in
PRODUCT development. In no event shall such reduction exceed *.
6.3 LEUKOSITE shall keep, and shall cause each of its AFFILIATES and
SUBLICENSEES to keep, full and accurate books of account
-22-
* Confidential treatment requested: material has been omitted and filed
separately with the Commission.
<PAGE> 24
containing a particulars that may be necessary for the purpose of
calculating all royalties payable to UNIVERSITY. Such books of account
shall be kept at their principal place of business and, with all necessary
supporting data shall, for three (3) years next following the end of the
calendar year to which each shall pertain be open for inspection by
UNIVERSITY or its designee upon reasonable notice during normal business
hours for the sole purpose of verifying royalty statements or compliance
with this Agreement, but in no event more than once in each calendar year.
All information and data offered shall be used only for the purpose of
verifying royalties and UNIVERSITY agrees to use all reasonable endeavours
to maintain such information and data in confidence, and not to disclose
such information and data to a third party without the prior written
consent of LEUKOSITE. In the event that such inspection uncovers an
underpayment of royalties of ten percent (10%) or more for any
one-(1)-year period, LEUKOSITE shall bear the cost of such inspection.
6.4 With each semi-annual payment, LEUKOSITE shall deliver to UNIVERSITY a
full and accurate accounting to include at least the following
information:
(a) quantity of each PRODUCT subject to royalty sold (by country) by
LEUKOSITE, and its AFFILIATES;
(b) total receipts for each PRODUCT subject to royalty (by country);
(c) royalties received by LEUKOSITE and its AFFILIATES from
SUBLICENSEES;
(d) total royalties payable to UNIVERSITY.
6.5 In each year the amount of royalty due shall be calculated semi-annually
as of June 30 and December 31 (each being the last day of an "ACCOUNTING
PERIOD") and shall be paid semiannually within the sixty (60) days next
following such date. Every such payment shall be supported by the
accounting prescribed in Paragraph 6.4 and shall be made in United States
currency. Whenever for the purpose of calculating royalties conversion
from any foreign currency shall be required, such conversion shall be at
the rate of exchange thereafter published in the Wall Street Journal for
the last business day of the applicable ACCOUNTING PERIOD, as the case may
be.
-23-
<PAGE> 25
6.6 If the transfer of or the conversion into United States Dollar equivalent
of any remittance due hereunder is not lawful or possible in any country,
such remittance shall be made by the deposit thereof in the currency of
the country to the credit and account of UNIVERSITY or its nominee in any
commercial bank or trust company located in that country, prompt notice of
which shall be given to UNIVERSITY. UNIVERSITY shall be advised in writing
in advance by LEUKOSITE and provide to LEUKOSITE a nominee, if so desired.
6.7 Any tax required to be withheld by LEUKOSITE under the laws of any foreign
country for the account of UNIVERSITY, shall be promptly paid by LEUKOSITE
for and on behalf of UNIVERSITY to the appropriate governmental authority,
and LEUKOSITE shall use its best, efforts to furnish UNIVERSITY with proof
of payment of such tax. Any such tax actually paid on UNIVERSITY's behalf
shall be deducted from royalty payment due UNIVERSITY.
6.8 Only one royalty shall be due and payable to UNIVERSITY for the
manufacture, use and sale of a PRODUCT irrespective of the number of
patents (or claims thereof or other identifiable and enforceable
intellectual property rights which cover the manufacture, use and sale of
such PRODUCT.
6.9 Various Paragraphs of this Agreement (as for example Paragraphs 5.2,
6.2(a), 6.2(b), 7.1(b), 7.3 and 7.4) allow LEUKOSITE to reduce or withhold
a portion of the royalties due to UNIVERSITY under this Agreement. Where
more than one such Paragraph applies, the cumulative effect shall be
restricted and limited so that the actual entitlement of UNIVERSITY to any
royalty payment under this Agreement is never less than fifty per cent
(50%) of UNIVERSITY's gross entitlement, before any reduction or
withholding.
SECTION 7 - INFRINGEMENT AND NONASSERTION
7.1 (a) If any of the PATENT RIGHTS or other identifiable and enforceable
intellectual property rights under which LEUKOSITE is the exclusive
licensee is infringed by a third party, LEUKOSITE shall have the
right and option but not the obligation to bring an action for
infringement, at its expense, against such third party in the name
of LEUKOSITE and / or (with the consent of UNIVERSITY) in the name
of UNIVERSITY, and with the consent of
-24-
<PAGE> 26
UNIVERSITY to join UNIVERSITY as a party Plaintiff it required.
LEUKOSITE shall promptly notify UNIVERSITY of any such
infringement and shall keep UNIVERSITY informed as to the
prosecution of any action for such infringement. No settlement,
consent judgment or other voluntary final disposition of the suit
which adversely affects the PATENT RIGHTS or other identifiable
and enforceable intellectual property rights may be entered into
without the consent of UNIVERSITY. The consents referred to in
this Paragraph 7.1(a) shall not unreasonably be withheld or
delayed: furthermore, consent shall be given if and whenever
LEUKOSITE can demonstrate to UNIVERSITY that such an action
cannot be brought unless UNIVERSITY's name is used or (as the
case may be) UNIVERSITY is joined as a party to the action.
(b) In the event that LEUKOSITE shall undertake the enforcement
and/or defense of the PATENT RIGHTS or other identifiable and
enforceable intellectual property rights by litigation, LEUKOSITE
may withhold up to fifty percent (50%) of the royalties otherwise
thereafter due UNIVERSITY hereunder and apply the same toward
reimbursement of its expenses, including reasonable attorneys'
fees, in connection therewith. Any recovery of damages by
LEUKOSITE for any such suit shall be applied first in
satisfaction of any unreimbursed expenses and legal fees of
LEUKOSITE relating to the suit, and next toward reimbursement of
UNIVERSITY for any royalties withheld and applied pursuant to
this Section 7. The balance remaining from any such recovery
shall be considered NET SALES PRICE for which a royalty shall be
paid to UNIVERSITY pursuant to Paragraph 6.1.
7.2 In the event that LEUKOSITE is not an exclusive licensee or as an
exclusive licensee elects not to pursue an action for infringement, upon
written notice to UNIVERSITY by LEUKOSITE that an unlicensed third party
is an infringer of a VALID CLAIM of PATENT RIGHTS licensed to LEUKOSITE or
an infringer of other identifiable and enforceable intellectual property
rights licensed to LEUKOSITE, UNIVERSITY shall have the right and option,
but not the obligation, at its cost and expense to initiate infringement
litigation and to retain any recovered damages.
-25-
<PAGE> 27
7.3 In the event that litigation against LEUKOSITE is initiated by a third
party charging LEUKOSITE with infringement of a patent or other
identifiable and enforceable intellectual property right of the third
party as a result of the manufacture, use or sale by LEUKOSITE of PRODUCT
covered by PATENT RIGHTS or other identifiable and enforceable
intellectual property rights, LEUKOSITE shall promptly notify UNIVERSITY
in writing thereof. LEUKOSITE's costs as to any such defense shall be
creditable against any and all payments due and payable to UNIVERSITY
under Paragraph 6.1 of this Agreement but no royalty payment after taking
into consideration any such credit under this Paragraph 7.3 shall be
reduced by more than fifty percent (50%).
7.4 In the event of a judgment in any suit in which a court of competent
jurisdiction rules that the manufacture, use or sale by LEUKOSITE of
PRODUCT covered by a PATENT RIGHT or other identifiable and enforceable
intellectual property right has infringed on a third party's patent or
other identifiable and enforceable intellectual property right requiring
LEUKOSITE to pay damages or a royalty to said third party, or in the event
of a settlement of such suit requiring damages or royalty payments to be
made, payments due to UNIVERSITY under Paragraph 6.1 of this Agreement
arising from the applicable PRODUCT shall be correspondingly reduced by
one-half of the amounts due under the requirement of such judgment or
under the terms of such settlement. In no case, however, shall the royalty
payment after taking into consideration any such reduction under this
Paragraph 7.4 be reduced by more than fifty percent (50%).
7.5 UNIVERSITY or any person or entity licensed by UNIVERSITY shall not assert
a patent or patent application of UNIVERSITY against LEUKOSITE or its
AFFILIATES or SUBLICENSEES or their customers with respect to any PRODUCT
for which royalties are payable under the Agreement.
7.6 In any infringement suit either party may institute to enforce the PATENT
RIGHTS or other identifiable and enforceable intellectual property rights
pursuant to this Agreement, the other party hereto shall, at the request
of the party initiating such suit, co-operate in all respects and, to the
extent possible, have its employees testify when requested and make
available relevant records, papers, information, samples, specimens, and
the like. All reasonable out-of-pocket costs of UNIVERSITY incurred in
connection with
-26-
<PAGE> 28
rendering cooperation requested by LEUKOSITE shall be paid by LEUKOSITE.
SECTION 8 - WARRANTIES
8.1 Each of UNIVERSITY and LEUKOSITE warrants and represents to the other that
it has the full right and authority to enter in to this Agreement, and
that it is not aware of any impediment which would inhibit its ability to
perform the terms and conditions imposed on it by this Agreement.
8.2 UNIVERSITY warrants and represents that to the best of its knowledge and
belief (having made reasonable enquiries in accordance with UNIVERSITY's
standard procedures) it will own all right, title and interest in and to
PATENT RIGHTS and in and to the other identifiable and enforceable
intellectual property rights which are referred to in Paragraph 3.1(a) of
this Agreement; it has the right to grant the rights granted hereunder;
the granting of such rights does not require the consent of a third party;
and there are and will be no outstanding agreements, assignments or
encumbrances inconsistent with the provisions of the Agreement.
SECTION 9 - INDEMNIFICATION AND LIMITATION OF LIABILITY
9.1 Each party shall notify the other of any claim, lawsuit or other
proceeding related to PRODUCT, LICENSED MATERIALS or LICENSED INFORMATION.
LEUKOSITE agrees that it will defend, indemnify and hold harmless
UNIVERSITY and its faculty members, researchers, employees, officers,
students, agents and appointees and each of them (the "Indemnified
Parties") from and against any and all third party claims, causes of
action and costs (including attorney's fees) of any nature made or
lawsuits or other proceedings filed or otherwise instituted against the
Indemnified Parties arising out of the design, manufacture, sale or use of
PRODUCT by LEUKOSITE or its AFFILIATES or SUBLICENSEES, except to the
extent of the negligence or wilful misconduct of an Indemnified Party.
LEUKOSITE will also assume responsibility for all costs and expenses
related to such claims and lawsuits for which it is obligated to indemnify
the Indemnified Parties pursuant to this Paragraph 9.1 including, but not
limited to, the payment of all attorney's fees and costs of litigation or
other defenses. LEUKOSITE shall have the right to control the defense,
settlement or compromise of any such claim.
-27-
<PAGE> 29
9.2 UNIVERSITY accepts no responsibility for any use which may be made of
LICENSED MATERIALS and LICENSED INFORMATION; nor for any reliance which
may be placed on them; nor for advice or information given in connection
with them.
9.3 Without prejudice to any right which LEUKOSITE may have to claim against
UNIVERSITY, LEUKOSITE undertakes to make no claim against any of the other
Indemnified Parties personally, being a claim which seeks to enforce
against any of them any liability whatsoever in connection with this
Agreement or its subject-matter.
9.4 The liability of either party for any breach of this Agreement, or arising
in any other way out of the subject-matter of this Agreement, will not
extend to any incidental or consequential damages or losses including
(without limitation) loss of profits.
9.5 The maximum liability of UNIVERSITY to LEUKOSITE under or otherwise in
connection with this Agreement or its subject-matter shall not exceed a
sum equal to the aggregate of all moneys received by UNIVERSITY under
Paragraph 6.5, together with interest an the balance of such moneys from
time to time outstanding, accruing from day to day at the Lloyds Bank PLC
Base Rate from time to time in force and compounded annually as at 31
December.
9.6 If any paragraph of this Section 9 is held to be invalid or unenforceable
under any applicable statute or rule of law then it shall be deemed to be
omitted, and if as a result any party becomes liable for loss or damage
which would otherwise have been excluded then such liability shall be
subject to the remaining paragraphs of this Section 9.
SECTION 10 - ASSIGNMENT; SUCCESSORS
10.1 This Agreement shall not be assignable by either of the parties without
the prior written consent of the other party (which consent shall not be
unreasonably withheld or delayed), except that LEUKOSITE without the
consent of UNIVERSITY may assign this Agreement to an AFFILIATE or to a
successor in interest or transferee of all or substantially all of the
portion of the business to which the Agreement relates.
10.2 Subject to the limitations on assignment herein, this Agreement shall be
binding upon and inure to the benefit of said successors in interest and
assigns of LEUKOSITE and UNIVERSITY. Any such
-28-
<PAGE> 30
successor or assignee of a party's interest shall expressly assume in
writing the performance of all the terms and conditions of this Agreement
to be performed by said party.
SECTION 11 - TERMINATION
11.1 The period of this Agreement shall begin on the EFFECTIVE DATE and, except
as otherwise specifically provided herein and unless this Agreement is
terminated sooner pursuant to Paragraphs 11.2 or 11.3, shall remain in
full force and effect until (in the case of PRODUCTS protected by PATENT
RIGHTS) the expiration of the last to expire of the PATENT RIGHTS to which
they relate or (in the case of PRODUCTS) protected by other intellectual
property rights as described in Paragraph 6.1(a)(2)) the expiration of
fifteen (15) years from the date of first sale; following which LEUKOSITE
shall have fully paid-up non-exclusive, non-cancellable licenses.
11.2 Subject to Paragraph 11.7, LEUKOSITE shall have the right to terminate
this Agreement in one or more countries upon sixty (60) days' prior
written notice.
11.3 (a) Subject to Paragraph 11.3(b), upon breach of any provision of
this Agreement by either party to this Agreement, in the event
the breach is not cured within sixty (60) days after written
notice to the breaching party by the other party, in addition to
any other remedy it may have, the other party at its sole option
may terminate this Agreement, provided that such other party is
not then in material breach of this Agreement. In the event that
a party in breach disputes such termination and institutes legal
action with respect thereto, the Agreement shall not be
terminated until there is a final court decision in this respect
from which no appeal can be or is taken.
(b) In the event that UNIVERSITY is in material breach of any
material provision of this Agreement, in the event that the
breach is not cured within sixty (60) days of written notice to
UNIVERSITY by LEUKOSITE, in addition to any other remedy it may
have, LEUKOSITE may withhold any payment due to UNIVERSITY under
this Agreement until such breach is cured. Such withholding of
payments by LEUKOSITE shall not constitute a breach of this
Agreement.
-29-
<PAGE> 31
(c) UNIVERSITY may terminate this Agreement by giving not less than
seven (7) days' written notice to LEUKOSITE (i) it LEUKOSITE
makes an assignment for the benefit of its creditors, files a
petition for protection under the US Bankruptcy Code, is
adjudicated insolvent, or applies for a receiver or trustee of
any part of its property, (ii) if any proceeding of a type
described in (i) is commenced against LEUKOSITE and remains
undismissed for a period of thirty (30) days, or (iii) if
LEUKOSITE indicates its consent to any proceeding of a type
described in (i); Provided that the foregoing shall not be
applicable in a case filed under Chapter 11 of the United States
Bankruptcy Code until the case is converted to a Chapter 7 by a
final non-appealable order.
11.4 Upon any termination of this Agreement LEUKOSITE shall have the option but
not the obligation to finish any work-in-progress and to sell any
completed inventory of a PRODUCT which remains on hand as of the date of
the termination, so long as LEUKOSITE pays to UNIVERSITY the royalties
applicable to said subsequent sales in accordance with the same terms and
conditions as set forth in this Agreement.
11.5 In the event that this Agreement is terminated, any sublicenses granted by
LEUKOSITE shall remain in full force and effect, provided that the
SUBLICENSEE is not then in breach of its sublicense agreement and the
SUBLICENSEE agrees to be bound to UNIVERSITY as a licensor under the terms
and conditions of the sublicense agreement. UNIVERSITY, if requested,
shall acknowledge to a SUBLICENSEE the applicability of this provision to
such SUBLICENSEE.
11.6 The obligations of Sections 3.1(b), 4, 8, 9, 11.4, 11.5 and 12 shall
survive the expiration and any termination of this Agreement.
11.7 Upon termination of this Agreement for any reason, nothing herein shall be
construed to release either party from any obligation that matured prior
to the effective date of such termination.
SECTION 12 - GENERAL PROVISIONS
12.1 The relationship between UNIVERSITY and LEUKOSITE is that of independent
contractors. UNIVERSITY and LEUKOSITE are not joint venturers, partners,
principal and agent, master and servant, employer or employee, and have no
relationship other than as
-30-
<PAGE> 32
independent contracting parties. UNIVERSITY shall have no power to bind or
obligate LEUKOSITE in any manner. Likewise, LEUKOSITE shall have no power
to bind or obligate UNIVERSITY in any manner.
12.2 Any matter or disagreement under Paragraph 3.4 which this Agreement
specifically specifies is to be resolved by arbitration shall be submitted
to a mutually selected single arbitrator to so decide any such matter or
disagreement. The arbitrator shall conduct the arbitration in accordance
with the Rules of the International Chamber of Commerce, unless the
Parties agree otherwise. If the parties are unable to mutually select an
arbitrator, the arbitrator shall be selected in accordance with the
procedures of the International Chamber of Commerce. The decision and
award rendered by the arbitrator shall be final and binding. Judgment upon
the award may be entered in any court having jurisdiction thereof. Any
arbitration requested by UNIVERSITY pursuant to this section shall be held
in Boston, Massachusetts, USA, and any arbitration pursuant to this
Section requested by LEUKOSITE shall be held in London, England; or (in
either case) such other place as may be mutually agreed upon in wrong by
the parties.
12.3 This Agreement sets forth the entire agreement and understanding between
the parties as to the subject matter thereof and supersedes all poor
agreements in this respect. There shall be no amendments or modifications
to this Agreement, except by a written document which is signed by both
parties.
12.4 This Agreement shall be governed by English law.
12.5 The headings in this Agreement have been inserted for the convenience of
reference only and are not intended to limit or expand on the meaning of
the language contained in the particular article or section.
12.6 Where LEUKOSITE is obliged to make a payment to UNIVERSITY under this
Agreement which attracts value-added, sales. use, excise or other similar
taxes or duties, LEUKOSITE shall be responsible for paying such taxes and
duties.
12.7 If LEUKOSITE fails to make any payment due to UNIVERSITY under this
Agreement then, without prejudice to UNIVERSITY's other rights and
remedies consequent upon breach of this
-31-
<PAGE> 33
Agreement, UNIVERSITY may charge interest on the balance outstanding,
accruing from day to day at the rate of two percent (21%) per annum above
the Lloyds Bank PLC Base Rate from time to time in force and compounded
annually as at 31 December.
12.8 If the performance by either party of any of its obligations under this
Agreement (other than an obligation to make payment) shall be prevented by
circumstances beyond its reasonable control, then such party shall be
excused from performance of that obligation for the duration of the
relevant event.
12.9 Any delay in enforcing a party's rights under this Agreement or any waiver
as to a particular default or other matter shall not constitute a waiver
of a party's right to the future enforcement of its rights under this
Agreement, excepting only as to an expressed written and signed waiver as
to a particular matter for a particular period of time.
12.10 Notices: Any notices given pursuant to this Agreement shall be in writing
and shall be deemed delivered upon the earlier of (i) when received at the
address set forth below, or (ii) seven (7) business days after mailed by
certified or registered airmail postage prepaid and properly addressed,
with return receipt requested, or (iii) by facsimile as confirmed by
certified or registered airmail. Notices shall be delivered to the
respective parties as indicated or any other address designated by a party
to the other party in writing under the notice provisions of this
Paragraph 12.10:
To LEUKOSITE: LeukoSite, Inc.
800 Huntington Avenue
BOSTON, MA 02115, U.S.A.
Copy to: Elliot M. Olstein, Esq.
Carella, Byrne, Bain, Gilfillan,
Cecchi, Stewart & Olstein
6 Becker Farm Road
ROSELAND, N.J. 07068, U.S.A.
To UNIVERSITY: The Director of the Research Services
Office University of Oxford
University Offices
Wellington Square
OXFORD OX1 2JD, England
-32-
<PAGE> 34
Copy to: The Administrator
Sir William Dunn School of Pathology
University of Oxford
South Parks Road
OXFORD OX1 3RE, England.
12.11 LEUKOSITE shall not use the name of the UNIVERSITY or of any UNIVERSITY
staff member, employee, student or any adaption thereof in any
advertising, promotional or sales literature without the prior written
approval of UNIVERSITY.
12.12 In the event a court 6r governmental agency of competent jurisdiction
holds any provision. of this Agreement to be invalid, such holding shall
have no effect on the remaining provisions of this Agreement, and they
shall continue in full force and effect. Upon such holding, the parties
shall, within a reasonable period of time, determine whether the severed
provision(s) detrimentally and materially affect the obligations or
performance of either or both parties. If so affected, the parties shall,
within a reasonable period of time, negotiate in good faith to modify this
Agreement to relieve such effects. If such negotiations do not result in
mutually agreeable modification to this Agreement, either effected party
may terminate this Agreement upon providing the other party with thirty
(30) days written notice of such termination.
12.13 This Agreement shall not create any rights including without limitation
third party beneficiary rights, in any person or entity not a party to
this Agreement.
12.14 This Agreement may be signed in two or more counterparts, each such
counterpart shall be deemed an original and together shall constitute one
and the same Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement in two or more
counterparts, each as an original and all together as one instrument as of the
date set forth above.
UNIVERSITY: OXFORD UNIVERSITY
By:_______________________________
Name:_____________________________
-33-
<PAGE> 35
Title:_____________________________
LEUKOSITE: LEUKOSITE, INC.
By:_______________________________
Name:_____________________________
Title:____________________________
-34-
<PAGE> 36
APPENDIX A
FORM OF MATERIALS TRANSFER AGREEMENT
This AGREEMENT entered the ___________ day of __________________ 19__, by and
between The University of Oxford ("OXFORD") and ______________________
("Recipient").
1. Subject to availability OXFORD agrees to provide the following material to
Recipient:____________________. Such material and any related biological
material or associated know-how and data that will be received by
Recipient from OXFORD; and any substance that is replicated or derived
therefor; are covered by this Agreement. All such materials shall
hereinafter be referred to as "the Material(s)".
2. The Materials will be used by Recipient in connection with the research
described in Appendix I and only for noncommercial purposes. The Materials
shall not be used in research that is subject to consulting or licensing
obligations to another institution, corporation or business entity, unless
written permission is obtained in advance from OXFORD.
3. Recipient shall not distribute, release or disclose the Materials to any
other person or entity and shall take all reasonably practicable steps
with a view to ensuring that no-one will be allowed to take or send the
Materials to any other location, unless written permission is obtained in
advance from OXFORD. Recipient agrees to maintain the confidentiality of
any proprietary information of OXFORD regarding the Materials.
4. The Materials are supplied solely for scientific research purposes, for
use in animals and / or in vitro. THE MATERIALS SHALL NOT BE USED IN
HUMANS.
5. No right or license is granted under the Agreement either expressly or by
implication. It is understood that any and all proprietary rights,
including but not limited to patent rights, in and to the Materials shall
be and remain in OXFORD.
6. Recipient agrees to provide OXFORD with an advance copy at least thirty
(30) days in advance of any written submission (abstract or paper) or
oral presentation that makes reference to the Materials.
-35-
<PAGE> 37
If in the opinion of OXFORD any such publication describes a patentable
development, OXFORD shall have an opportunity to request that Recipient
delay the submission or public presentation until after a patent
application has been filed. In no event shall the delay be unreasonable.
If a publication does result from work using the Materials, Recipient
agrees to acknowledge OXFORD and / or give credit to OXFORD scientists, as
scientifically appropriate, based on any direct contribution they may have
made to the work.
7. Recipient agrees not to sequence or clone any Material provided by
OXFORD without the written permission of OXFORD.
8. In the event that use of the Material results in an invention,
improvement, substance, or information whether or not patentable and
patents, if any, which result therefrom ("Developed Technology"),
Recipient agrees to disclose promptly to OXFORD all such inventions.
improvements, substances or information.
9. Recipient shall assign all right, title and interest in and to Developed
Technology to OXFORD. Recipient agrees to co-operate and assist OXFORD in
obtaining patent protection for Developed Technology.
10. Recipient agrees to execute, acknowledge and deliver all such further
papers as may be necessary to perform its obligation under this Agreement.
11. Recipient acknowledges that the Materials are provided WITHOUT WARRANTY OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR ANY OTHER WARRANTY,
EXPRESS OR IMPLIED. OXFORD MAKES NO REPRESENTATION THAT THE USE OF THE
MATERIALS WILL NOT INFRINGE ANY PATENT, COPYRIGHT, TRADEMARK OR OTHER
PROPRIETARY RIGHT.
12. In no event shall OXFORD be liable for any use of the Materials by
Recipient. Recipient hereby agrees to defend, indemnify and hold harmless
OXFORD, its officers, employees, students and agents from any loss, claim,
damage, expense or liability, of whatsoever kind or nature (including
legal fees), which may arise from or in connection with this Agreement or
the use, handling or storage of the Materials.
-36-
<PAGE> 38
13. Recipient shall report to OXFORD at least once every twelve (12) months a
summary of the results of Recipient's work utilizing the Materials.
14. Upon the request of OXFORD, Recipient shall promptly return to OXFORD the
Materials furnished to Recipient under this Agreement.
15. Recipient agrees to comply with all government regulations and
guidelines which are applicable to the Recipient's use of the Materials.
16. This Agreement is not assignable, whether by operation of law or
otherwise, without the prior written consent of OXFORD.
17. This Agreement shall be governed by English law, and the English Courts
shall have exclusive jurisdiction to deal with any dispute which may arise
out of or in connection with this Agreement.
IN WITNESS of which the parties, intending to be legally bound, have caused this
Agreement to be executed by their respective duly-authorized representatives.
-37-
<PAGE> 39
APPENDIX I
[Description of the Recipient's Research Activity]
THE UNIVERSITY OF OXFORD RECIPIENT
By: By:
________________________________ ______________________________________
________________________________ ______________________________________
(Typed Name) (Typed Name)
________________________________ ______________________________________
(Title) (Title)
AUTHORIZED INSTITUTIONAL REPRESENTATIVE
By:
______________________________________
______________________________________
(Typed Name)
______________________________________
(Title)
-38-
<PAGE> 40
APPENDIX B
SUBJECT-MATTER OF OTHER LICENSES
<TABLE>
<CAPTION>
Subject-Matter Licensee
- -------------- --------
<S> <C>
</TABLE>
-39-
<PAGE> 41
SIGNED for and on behalf of SIGNED for and on behalf of
THE CHANCELLOR MASTERS THE MEDICAL RESEARCH COUNCIL
AND SCHOLARS OF THE
UNIVERSITY OF OXFORD
Name:/s/ J. Clark Name:/s/ Martin R. Wood Ph.D.
------------------------------ ---------------------------------
Head of Technology Transfer Group
Position: Position:
-------------------------- ------------------------------
Signature:/s/ J. Clark Signature:/s/ Martin R. Wood
------------------------- -----------------------------
SIGNED for and on behalf of SIGNED for and on behalf of
LEUKOSITE, INC. LEUKOSITE, INC.
Name:/s/ Christopher K. Mirabelli Name:/s/ Christopher K. Mirabelli
------------------------------ ----------------------------------
Position: Position:
-------------------------- ------------------------------
Signature:/s/ C.K. Mirabelli Signature:/s/ C.K. Mirabelli
------------------------- -----------------------------
-40-
<PAGE> 1
CONFIDENTIAL TREATMENT EXHIBIT 10.11
DATED 1997
BRITISH TECHNOLOGY GROUP LIMITED
- and -
LEUKOSITE INC.
L I C E N C E A G R E E M E N T
<PAGE> 2
INDEX
<TABLE>
<CAPTION>
Clause Heading Page
- ------ ------- ----
<S> <C> <C>
1 Definitions
2 Payments
3 Commencement and Duration
4 Licenses and Option Rights
5 Know-How
6 Royalties
7 Downpayments from Third Parties
8 Accounting for Royalties
9 Currency and Taxes
10 Verification
11 Suspension of Royalties
12 Undertakings by the Licensee
13 Marking
14 Supplementary Protection Certificate
15 Exclusion of Liability: Indemnity
16 Termination
17 Rights on Termination
18 Indexation
19 Legal Proceedings
20 Miscellaneous
21 Notices
22 Law and Jurisdiction
Schedule 1 The Development Plan
Schedule 2 The Know-How
Schedule 3 The Patents
Schedule 4 The Sub-License Terms
Schedule 5 The Trade Marks
</TABLE>
2
<PAGE> 3
THIS DEED is made the ______ day of ________________________, 1997
BETWEEN
(1) BRITISH TECHNOLOGY GROUP LIMITED whose company registration number in
England is 2664412 and whose registered office is at 101 Newington Causeway
London SE1 6BU ("BTG"), and
(2) LEUKOSITE, INC of 215 First Street, Cambridge, MA 02142, USA ("the
Licensee").
IT IS AGREED THAT:
1. Definitions
1.1. In this Agreement the following terms shall have the following
meanings (subject to subsequent amendment pursuant to this
Agreement):-
1.1.1 "Campath 1H" the anti-CD52 humanized monoclonal
antibody that is produced from the
Cell Line and derivatives of the
antibody so produced including
conjugates of the antibody with
other substances;
1.1.2 "Cell Culture Medium: the powdered CM5 cell culture
medium more particularly described
and claimed in the patent rights
represented by WF code number PA
1194 which forms part of the
Know-How;
1.1.3 "Cell Line" cell line obtained from the Chinese
Hamster Ovary (CHO) clone C1C2
derived from the original master
cell bank CIM 3D44 10.8.90 and the
Master Cell Bank CHO IH 10.11.93
which forms part of the Know-How;
3
<PAGE> 4
1.1.4 "Chargeable Transaction" the use sale or other disposal of a
Product by or on behalf of the
Licensee or sub-licensee, provided
that where such sale or other
disposal is made by or on behalf of
the Licensee or sub-licensee to
another company within its Group
for further sale or disposal then
the Chargeable Transaction shall be
the first sale or other disposal
outside that Group provided further
that neither use of Product in
clinical trials nor distribution of
Samples as part of the Product
promotion shall be deemed
Chargeable Transactions as long as
no consideration is received by the
Licensee, sub-licensee or any Group
Company in relation thereto, and
provided always that if on the sale
or disposal of Product by or on
behalf of the Licensee,
sub-licensee or relevant Group
Company (as the case may be) the
Product is not in Final Form then
the Chargeable Transaction shall be
the first sale of Product which is
in Final Form;
1.1.5 "the Confidentiality
Undertaking" the written undertaking given by
the Licensee to BTG on 13th
December 1994;
1.1.6 "Connected Persons" the meaning ascribed by Section 839
of the Income and Corporation Taxes
Act 1988;
1.1.7 "Deductions" quantity discounts and bona fide
rebates as part of a
4
<PAGE> 5
managed care programme relating (in
both cases) specifically and solely to
Product trade discounts and (where
such items are specifically shown in
the invoice) purchase, sales, import
or Value Added taxes and the costs and
delivery and insurance, but not
commission or cash discounts;
1.1.8 "the Development Plan" the document set out in Schedule 1
below together each development plan
delivered to BTG pursuant to 4.2.2
below;
1.1.9 "Dollars" U.S. dollars;
1.1.10 "the Effective Date" the date on which this Agreement is
made;
1.1.11 "the Exercise Fee" * Dollars * for exercise of each of
the Options except that for exercise
of Option 1 it shall be * Dollars *
1.1.12 "Final Form" fully formulated, in final form
packaged for ultimate consumer use
and suitable for purchase by a
purchaser or distributor who is not
undertaking substantial product
support or marketing, (eg a drug
wholesaler, a pharmacist or a group
of pharmacists, a chain of drug
retailers or a hospital or central
purchasing department for a group
of hospitals);
5
* Confidential treatment requested: material has been omitted and filed
separately with the Commission.
<PAGE> 6
1.1.13 "Force Majeure"
1.1.13.1 civil commotion, riot,
invasion, war threat or
preparation for war;
1.1.13.2 fire, explosion, storm,
flood, earthquake,
subsidence, epidemic or
other natural physical
disaster;
1.1.13.3 impossibility of the use
of railways, shipping,
aircraft, motor transport
or other means of public
or private transport;
1.1.13.4 political interference
with the normal operations
of the Licensee.
1.1.14 "the Glaxo Group" Glaxo Wellcome plc (Co. no. in
England 1047315) and, as from time
to time, any Holding Company and
any Subsidiary of Glaxo Wellcome
plc and any other Subsidiary of
Glaxo Wellcome plc's Holding
Company and affiliates;
1.1.15 "Group" the Licensee or sub-licensee (as
appropriate in the context) and, as
from time to time, any Holding
Company and Subsidiary of the
Licensee/sub-licensee and any other
Subsidiary of the
Licensee's/Sub-licensee's Holding
Company and in the case of the
Licensee any
6
<PAGE> 7
company fifty percent owned by the
Licensee;
1.1.16 "Holding Company" and the meanings ascribed to them by
Section 736 of the Companies Act
1985;
1.1.17 "The Index" the US All Urban Consumer Price Index
or if that Index shall cease to be
published the nearest index having
like effect;
1.1.18 "Inventors" Professor Herman Waldmann, Dr.
Michael Ronald Clark, Dr. Lutz
Riechmann and Dr. Gregory Paul
Winter;
1.1.19 "the Know-How" the technical information and data
and biological materials specified
in Schedule 2 and any other
information disclosed to the
Licensee by BTG pursuant to the
Confidentiality Undertaking;
1.1.20 "Launch Date" the first arm's length sale of Product
by the Licensee or any sub-licensee in
a Major Territory following grant of
Regulatory Approval in such Major
Territory;
1.1.21 "the Licences" the Licences granted or to be
granted under this Agreement;
1.1.22 "Licensee Inventions" inventions arising from the Licensee's
development of the inventions which
are the subject matter of the Patents
and inventions arising from any such
development carried out for or with
the Licensee;
7
<PAGE> 8
1.1.23 "Major Territory" UK, France, Germany, Italy, USA and
Japan;
1.1.24 "Net Sales" the aggregate Net Selling Prices of
Chargeable Transaction for a
calendar year;
1.1.25 "Net Selling Price" the price of Products the subject
of a Chargeable Transaction
calculated as follows: -
1.1.25.1 in the case of an arm's
length sale gross price as
charged or invoiced, less
any Deductions;
1.1.25.2 in the case of a sale which
is not at arm's length or any
disposal other than by sale
the open market price in the
country where the transaction
was effected or the use
occurred, less any
Deductions;
1.1.26 "the Options" Option 1, Option 2, Option 3 and
Option 4.
1.1.27 "Option 1" the right to insert 'or for
ex-Vivo bone marrow purging in humans'
before 'which is made or sold' in the
definition of "the Product" (as varied
from time to time);
1.1.28 "Option 2" the right to replace
'propymphocytic leukaemia or
8
<PAGE> 9
chronic lymphocytic leukaemia' with
'cancer' in the definition of
"Product" (as varied from time to
time);
1.1.29 "Option 3" the right to insert 'or multiple
sclerosis in humans' before 'which is
made or sold' in the definition of
"Product" (as varied from time to
time);
1.1.30 "Option 4" the right to insert 'or rheumatoid
arthritis in humans' before 'which is
made or sold' in the definition of
"Product" (as varied from time to
time);
1.1.31 "the Option Period" the period of three (3) years
commencing on the Effective Date;
1.1.32 "the Patents"
1.1.32.1 the patents and
applications for patents
specified in Schedule 3;
and
1.1.32.2 any patent which may be
granted pursuant to any of
the above applications; and
1.1.32.3 any patents and
applications corresponding
to such patents and
applications which may be
granted to or made by BTG
in other countries; and
9
<PAGE> 10
1.1.32.4 any re-issues or extensions
of such patents and any
Supplementary Protection
Certificates in respect of
such patents and any
divisions and continuations
of such applications.
1.1.33 "Product" any product containing Campath 1H
antibody for the treatment of
propymphocytic leukaemia or chronic
lymphocytic leukaemia in humans or
for such other therapy for which
Licensee has exercised its option
under Clause 4.2.1 which is made or
sold or otherwise disposed of, in
any country by, or on behalf of,
the Licensee or a sub-licensee, and
which
1.1.33.1 falls within the scope of, or
utilities any method or
process which falls within
the scope of, any of the
Patents or which
incorporates, or is itself,
the invention the subject of
any of he Patents of that
country, or
1.1.33.2 embodies or utilizes any
of the Know-How, or
10
<PAGE> 11
1.1.33.3 infringes any copyright in
the Know-how.
1.1.34 "Regulatory Approval" full regulatory approval (ie
marketing authorization) for sale
of Product;
1.1.35 "the Results" all technical data, Know-how,
computer software, notes, chemical
compounds, biological material,
models, prototypes, specimens,
drawings, reports and information
arising from the Licensees
development of the inventions which
are the subject of the Patents (and
from others' development where the
same is carried out for or with the
Licensee) including in particular
data relevant to applications for
Regulatory Approvals, and including
the copyright, design rights and
other intellectual property rights
arising therein;
1.1.36 "Sub-license" a sub-license or any agreement or
commitment for the grant of a
sub-license;
1.1.37 "the Sub-License Terms" those terms set out in Schedule 4;
1.1.38 "Supplementary Protection supplementary protection
Certificates" certificates granted pursuant to
Council regulation (EEC) No.
1768/92 ("the SPC Regulation") and
any like certificates granted by
any
11
<PAGE> 12
government, authority or agency;
1.1.39 "the Territory" the countries of the European
Union, USA, Canada and Japan;
1.1.40 "the Trade Marks" the trade marks specified in
Schedule 5;
1.1.41 "WF" The Wellcome Foundation Limited
(Co. no. in England is 194814,
registered office at Glaxo Wellcome
House, Berkeley Avenue, Greenford,
Middlesex UB6 ONN);
1.1.42 "the WF Patents" Those of the Patents which have been
licensed (as opposed to assigned) to
BTG by WF, details of which have been
made available to the Licensee;
1.1.43 "Year 1" the calendar year in which Product is
first launched by the Licensee or any
sub-licensee, with Year 2 being the
next calendar year (and so on).
1.2 Some of the licenses granted by the BTG hereunder are in fact
sub-Licences (with WF owning the relevant patent applications and
patents).
2. Payments
2.1. The Licensee shall pay to BTG: -
2.1.1 immediately upon the signing of this Agreement the sum of
twenty-five thousand dollars ($25,000); and
2.1.2 twenty-five thousand dollars ($25,000) on the first
anniversary of the Effective Date; and
12
<PAGE> 13
2.1.3 twenty-five thousand dollars ($25,000) on the second
anniversary of the Effective Date; and
2.1.4 fifty thousand dollars ($50,000) on each subsequent
anniversary of the Effective Date which is prior to the Launch
Date; and
2.1.5 one hundred thousand dollars ($100,000) on the earlier of: -
2.1.5.1 the date falling four years and six months after
the Effective Date, and
2.1.5.2 the date on which the Licensee or any sub-licensee
(or any third party on behalf of the Licensee or any
sub-licensee) files its first application for
Regulatory Approval in a Major Territory; and
2.1.6 the royalties specified in Clause 6;
2.1.7 the share of downpayments specified in Clause 7.
2.2. THE sums referred to in sub-clause 2.1 shall not be refundable.
2.3 WHEN making any payment under this Agreement the Licensee shall also
pay any Value Added Tax payable. Where the Licensee has to pay Value
Added Tax BTG shall provide the Licensee with a Value Added Tax
invoice in respect of the relevant payment.
3. Commencement and Duration
3.1 THIS agreement shall come into force on the Effective Date.
3.2 SUBJECT to Clauses 16 and 17: -
3.2.1 the Licenses under the Patents shall continue in force in each
country until all of the Patents of that country have expired;
13
"Confidential treatment requested: material has been omitted and filed
separately with the Commission."
<PAGE> 14
3.2.2 the Agreement shall continue in force until all of the royalty
obligations have expired after which Licensee shall have a
fully paid up, non-cancellable license which is equivalent in
scope to that held by the Licensee immediately before the
expiry of the said royalty obligations.
3.3 THE Licensee shall be responsible for obtaining any requisite
registration or governmental approval of this Agreement and of acts
to be carried out pursuant to or in connection with this Agreement
(including in particular that of transferring the Know-how (or part
thereof) from the UK to the USA) and the Licensee shall
expeditiously take all necessary steps to obtain the same.
4. Licenses and Option Rights
4.1 BTG grants to the Licensee on and from the Effective Date: -
4.1.1 licenses under the Patents to make, have made, use, sell
and otherwise dispose of Products;
4.1.2 Licenses for the purposes set out in 4.1.1 above to use: -
4.1.1.2 the Know-how,
4.1.2.2 the copyright in the Know-how,
SUCH licenses are without geographical restriction and, subject to the
fact that the Patents only relate to some countries, are worldwide.
FOR the avoidance of doubt it is declared that the Licensee shall not use,
nor allow others to use the biological materials forming part of Schedule 2 for
human use but substances derived from the Cell Lines may be used in humans and
Cell Culture Medium may be used in connection with the preparation of substances
for human use.
4.2.1 BTG grants the Licensee the Options.
4.2.2 Subject to the following provisions of this Agreement the
Licensee may exercise each of the Options at any time
during the Option Period except when it is in breach of its
obligations under this Agreement by simultaneously: -
14
<PAGE> 15
4.2.2.1 giving notice to exercise to BTG; and
4.2.2.2 making payment of the Exercise Fee to BTG; and
4.2.2.3 delivering a development plan to BTG, with such
development plan to be for the relevant indication,
to be similar in form and detail to the document set
out in Schedule 1 and to contain development
timescales consistent with those set out in the said
document; and
4.2.2.4 making payment of all outstanding sums (if any) due
to BTG under this Agreement.
4.2.3 In the exercise of each of the Options time shall be of the
essence.
4.3 THE licenses under the Patents of Schedule 3 Part A (and under the
related applications and patents falling within 1.1.32.2, 1.1.32.3
and 1.1.32.4 of the definition "the Patents") shall be exclusive.
The rest of the License shall be non-exclusive. The exclusivity
referred to above shall be qualified by (and subject to): -
4.3.1 the right of each member of the Glaxo Group to use any stocks
of Campath 1H remaining after the transfer of the Know-how to
the Licensee for general research and development purposes
which shall exclude clinical development and subsequent
commercialization; and
4.3.2 the right of each member of the Glaxo Group to retain stocks
of Campath lH for supply of Campath 1H to those patients to
whom any member of the Glaxo Group has obligations to under
existing clinical protocols; and
4.3.3 the right of the Inventors to carry out non-commercial work in
relation to that Campath 1H which is produced by the cell line
which they originated and which is known as TF57-19; in the
event such research produces a cell line which produces a
humanized antibody with the same specificity as Campath 1H,
and such cell line and the intellectual property rights
related thereto are
15
<PAGE> 16
assigned to BTG then BTG shall notify the Licensee of such
assignment and (on request by the Licensee) such cell line and
intellectual property rights shall be licensed to the Licensee
hereunder, (and form part of the Patents or the Know-how as
appropriate).
4.4 WITHOUT prejudice to Clause 3.2 the Licences are granted for the
purpose only of making, having made, using, selling and otherwise
disposing of Products during the life of this Agreement. These
rights shall not be used thereafter or otherwise unless and until
the Know-how has come into the public domain otherwise than through
breach or default of the Licensee or the Copyright has expired.
4.5 BTG shall, at the request and expense of the Licensee, execute any
further formal document which may be necessary to give effect to
this Agreement in any country. Until such licence shall be granted
formally, this Agreement shall take effect as a licence.
4.6 THE Licensee acknowledges that BTG and WF have the right to review
and discontinue those of the Patents which they respectively own or
beneficially own provided that as regards those of the Patents
owned/beneficially owned by BTG for countries in the Territory BTG
shall notify the Licensee prior to discontinuance/abandonment. After
any such notification, and subject to the existing rights of the
Inventors and other prior owners of such of the Patents, BTG shall
allow the Licensee to continue the Patents the subject of the
discontinuance/notification notice, with such continuance to leave
BTG as owner, and to be at the Licensee's cost.
5. Know-how
5.1 TO the extent to which it has not already done so, the Licensee
shall arrange, and pay the cost of and be responsible for, copying,
shipment to the Licensee and storage of the Know-how and such
shipment shall be at the Licensee's risk.
5.2 THE Licensee may, in appropriate circumstances, but in its sole
discretion, consult the Inventors regarding the design, conduct and
results of clinical trials and give due weight to their views.
16
<PAGE> 17
5.3 THE Licensee shall keep the Know-how confidential to the Licensee,
and to such of its officers and employees as are bound by
obligations of confidence and need to be informed, and shall ensure
that the Know-how is not disclosed to others orally or in writing,
save to the extent that the Know-how: -
5.3.1 as evidenced by the Licensee's written records, was lawfully
known to the Licensee prior to its communication by or though
BTG or WF and was not communicated to the Licensee subject to
any restrictions on disclosure or use; or
5.3.2 is necessarily disclosed by the sale of Products embodying
any of the Know-how; or
5.3.3 is or becomes in the public domain, otherwise than by any
default of the Licensee, or persons acquiring the same from
the Licensee; or
5.3.4 becomes known to the Licensee by the action of a third party
not in breach of any obligation of confidence.
5.4 ON a date to be agreed between BTG and WF, and which shall be no
later than three months after the Effective Date, BTG shall procure
that WF makes available, at WF's site in Beckenham, appropriate
scientific staff for a one day question and answer session with BTG
and the Licensee on the subject matter of this Agreement. The
Licensee shall give all reasonable assistance to BTG in preparation
of an agenda for such session and the Licensee accepts that WF
reserves the right to refuse to answer any questions at such session
which it either does not wish to answer or is unable to answer.
5.5 BTG shall also procure that WF will provide the Licensee with a
telephone contract for the six month period commencing on the
Effective Date. Such telephone contact shall be available for
reasonable enquiries on specific technical matters relating to the
subject matter of this Agreement.
5.6 As the technical information disclosed pursuant to the
Confidentiality Undertaking is now subject to the obligations in
Clause 5.3 above the Confidentiality Undertaking is superseded and
is hereby terminated.
17
<PAGE> 18
6. Royalties
6.1 SUBJECT to clauses 6.2 and 6.3 below the Licensee shall pay to BTG
in respect of Products the subject of Chargeable Transactions and as
provided in Clause 17.2 on Products held on termination, a royalty
at the rate of * on the Net Selling Price.
6.2 IF, in transactions where the Licensee itself is making the
Chargeable Transaction, the following apply:
6.2.1 the Licensee is paying patent royalties to a third
party/third parties; and
6.2.2 that third party or those third parties (as the case may be)
is not/are not member(s) of the Licensee's Group, or a
Connected Person(s) of the Licensee; and
6.2.3 such patent royalties are paid under an arm's length bona
fide licence; and
6.2.4 those patent royalties are for rights which are essential
for the exploitation of Product; and
6.2.5 the sum of such patent royalties with characteristics 6.2.1 to
6.2.4 above, ("Other Royalties") and the royalties payable to
BTG under clause 6.1 above would in total amount to more than
* on the Net Selling Price for that Chargeable Transaction
then the royalty to be paid to BTG on that Chargeable Transaction shall be
reduced by * of the amount that such Other Royalties are above * provided that
in no event shall the royalty rate payable to BTG be reduced under this Clause
6.2 below *. (By way of illustration if Other Royalties equal * then the royalty
rate payable to BTG would be *; if Other Royalties equal * then the royalty rate
payable to BTG would be *).
6.3 IF, in transactions where a non-Group sub-licensee is making the
Chargeable Transaction and that sub-licensee is (in addition to the
sub-licence) licensed by the Licensee under intellectual property
rights and Know-how relating to Product
* Confidential treatment requested: material has been omitted and filed
separately with the Commission.
18
<PAGE> 19
which are owned by the Licensee and are of a non-trivial nature then
instead of the royalty under 10.1 above the Licensee shall pay BTG
the higher of: -
6.3.1 * on the Net Selling Price; and
6.3.2 * of the royalty received by the Licensee from the
sub-licensee for the transaction.
6.4 ROYALTY shall be payable in each country for a period of twenty
years from the Effective Date. Thereafter royalty shall only be
payable in respect of Products (the subject of Chargeable
Transactions) which are such by reference to 1.1.33.1 of the
definition "Product" but not 1.1.33.2 or 1.1.33.3.
6.5 ROYALTY shall only be payable once in respect of the same Product.
6.6 THE License shall at the request of BTG provide half-yearly
forecasts of the amount of royalties likely to be payable under this
Agreement but whilst such forecasts (or the like) may be adopted and
utilized by BTG for the purposes of Clause 16.5 the Licensee shall
not be liable in damages to BTG for any inaccuracies in such
forecasts.
6.7. THE Licensee shall be entitled to credit against royalties the
amount of the royalty paid on any Products the subject of Chargeable
Transactions which are:
6.7.1 subsequently returned to the Licensee, sub-licensee or Group
Company (as the case may be) in exchange for a refund or
credit and not then re-sold or disposed of again (other than
by destruction); or
6.7.2 destroyed after a refund or credit has been given.
6.8 IF in relation to any accounting period and in any country in which
there is o extant patent forming part of the Patents Licensee
demonstrates to BTG's reasonable satisfaction that a competitor or
competitors (i.e., a company which is not part of Licensee's Group
or any sub-licensee's Group) is/are selling Campath 1H products
(which would fall within the definition PRODUCT but for being sold
by the competitor or
19
* Confidential treatment requested: material has been omitted and filed
separately with the Commission.
<PAGE> 20
competitors), then the appropriate royalty rate on sales in the
country in question shall be reduced for that accounting period if
the market share of the competitor(s) amounts to more than * of the
total market for PRODUCTS (and exact equivalents) in that country.
The reduced royalty shall be the appropriate fraction shown in the
second column below of the royalty rate normally payable (but for
the application of this clause 6.8)
<TABLE>
<CAPTION>
Market share of Competitor(s)
(based upon sales value in the
relevant accounting period) Fraction
<S> <C>
* *
* *
* *
* *
</TABLE>
Notwithstanding the above, in no case shall the royalty rate be less
than *.
7. Downpayments from Third Parties
7.1 THE Licensee shall pay TBG * of the following:
7.1.1 each lump sum payment (as opposed to royalties paid as a
consequence of actual sales), received by the Licensee (or by
any Connected Person of the Licensee or member of the
Licensee's Group) from a third party in connection with the
grant of a sub-licence, distribution or any other rights under
or in respect of Products; and
7.1.2 the cash equivalent of each non-cash benefit (not in respect
of actual sales of Products) received by the Licensee or by
any Connected Person of the Licensee or member of the
Licensee's Group from a third party in connection with the
grant of a sub-licence, distribution or any other rights under
or in respect of Products.
Provided that the foregoing shall not apply to bona fide payments to the
Licensee which are solely for services produced by the Licensee or which are
solely for equity in the Licensee.
* Confidential treatment requested: material has been omitted and filed
separately with the Commission.
20
<PAGE> 21
7.2 THE Licensee shall, within thirty (30) days of receipt by the
Licensee (or by the Connected Person or Group member) of each such
lump sum payment (7.1.1) and non-cash benefit (7.1.2)). At the same
time as the Licensee gives BTG such notification the Licensee shall
pay BTG the sum or sums due.
7.3 WITH regard to non-cash benefits, the License shall make its own
valuation but BTG may challenge such valuation in writing.
Similarly, where a payment is received by the Licensee (or by any
Connected Person of the Licensee or member of the Licensee's Group)
from a third party, and such payment relates to equity in the
Licensee as well as rights under or in respect of Products, then the
Licensee shall apportion the payment between the two elements but
BTG may challenge the apportionment if it feels that the figure
allocated to the equity does not reflect the true open market value
of the equity and includes a premium above that ("Premium"). On
receipt of either type of challenge the Licensee shall promptly
obtain an independent auditor's certificate specifying the valuation
made the by auditor. Both parties shall abide by the auditor's
certificate and shall rectify any overpayment or underpayment (as
the case may be). Where the auditor finds that there is a Premium
the Premium (but not the non-Premium payment for the equity) shall
be subject to the above revenue sharing arrangements.
8. Accounting for Royalties
8.1 THE Licensee shall: -
8.1.1 keep true and detailed accounts and records of all
royalties and other sums due under this Agreement;
8.1.2 within sixty days after the last day of March, June,
September, and December in each year deliver to BTG a
statement of all royalties and other sums due for the three
month period ending on such date showing separately the
chargeable Transactions in each country, credits under Clause
6.7 and (where relevant), the rate of exchange used or, if it
be the case, a statement that no royalties are due;
8.1.3 send with the above statement the amount shown to be due;
21
<PAGE> 22
8.1.4 immediately and without demand send to BTG the difference
between the amount already paid and the correct amount shown
to be due and payable as a result of verification under Clause
10.
8.2 ON termination or expiry, the final statement shall be delivered
within thirty days of termination or expiry and shall include
details of royalties on all Products being manufactured and all
Products manufactured but not yet disposed of.
8.3. IF the Licensee defaults in payment of the royalties and other sums
due within the period stated above, the amount due shall bear
interest, accruing from day to day, at the rate per annum of *
above the Base Rate for the time being of the National
Westminster Bank p.l.c.
9. Currency and Taxes
9.1 ALL payments shall be made in Dollars in London, England. Any
necessary currency conversion shall be at the rate at which English
bank transfers are made on the last business day of the period to
which the relevant sales and royalty statement relates.
9.2 PAYMENTS shall be made without deduction, other than such amount as
the Licensee is required to deduct or withhold by law. In regard to
any such deduction, the Licensee shall use all reasonable endeavours
to assist BTG to claim recovery or exemption under any double
taxation or similar agreement. Evidence as to the payment of such
tax or sum withheld shall, on request, be given by the Licensee to
BTG.
10. Verification
10.1 THE Licensee shall permit any authorized representative appointed by
BTG, upon reasonable notice, access to the premises of the Licensee
and access to the accounts, records and relevant documentation of
the Licensee and shall provide such information and explanations as
the representative shall require to verify the statements and to
satisfy BTG that the financial and accounting provisions of this
Agreement are
* Confidential treatment requested: material has been omitted and filed
separately with the Commission.
22
<PAGE> 23
being complied with. The representative shall also be permitted to
take copies of extracts pertinent to the verification. If the
verification discloses an underpayment to BTG of more than 10% of
the amount due the Licensee shall promptly on demand reimburse BTG
the fees and costs of the representative, and the reasonable costs
incurred by BTG in respect of the verification.
10.2 BTG shall keep confidential any information which it may acquire in
the exercise of its rights under this Clause 10 with the exception
of information which was already lawfully known to it, or to which
BTG is required to disclose by law, or which is or becomes in the
public domain otherwise than by any default of BTG.
11. Suspension of royalties
IF any of the following events shall occur in respect of the Patents:-
11.1 any patent application is finally refused so that the grant of a
patent thereon is unobtainable; or
11.2 any patent application is abandoned or withdrawn; or
11.3 any patent lapses; or
11.4 any patent is declared invalid or unenforceable by a court or
tribunal of competent jurisdiction;
then the royalties payable solely in respect of such patent application or
patent shall cease after the date of the relevant event, but BTG shall be
entitled to all sum which shall have then already fallen due, and whether
paid or unpaid at such. If such patent application is reinstated or such
patent is restored or is subsequently established as being valid and
enforceable, royalties shall again become payable, together with all
royalties which would have been payable if the relevant event had not
occurred.
23
<PAGE> 24
12. Undertakings by the Licensee
THE Licensee:-
12.1 shall not use the Campath 1H transferred pursuant to this
Agreement for human therapeutic administration;
12.2 shall not at any time make any use of the Know-how other than for
the purposes of the Licenses;
12.3 shall have full control, authority and responsibility for
development, registration and commercialization of Products and
shall use all reasonable efforts and diligence in development
registration and commercialization of Products (and the efforts of
sub-licensees, members of the Licensee's Group and collaborators
shall be considered as efforts of the Licensee in this regard);
12.4 shall deliver to BTG at intervals of six months short summary
written reports on the development and regulatory work carried out
by and for the License in relation to Products during the preceding
six months, and the Licensee shall arrange for its staff to answer
any reasonable questions BTG may raise on such reports with such
question and answer sessions to be either on the telephone or at a
meeting (as reasonable requested by BTG);
12.5 shall use all reasonable endeavours to promote the distribution and
sale of Products and will use all reasonable endeavours to procure
or make available necessary selling and manufacturing facilities to
meet demands for Products;
12.6 shall use all reasonable endeavours to maximize the demand for
Products;
12.7 undertakes to BTG that when selling Product as part of a package
with other products the Licensee shall ensure that it does not
favour the other products, or discriminate against Product, in terms
of pricing, discounts, or in any other way which would adversely
affect the royalties due to BTG under this Agreement.
24
<PAGE> 25
13. Marking
THE Licensee shall legibly mark the Products or, if not practicable, then
any associated packaging or literature, with the relevant patent or application
number.
14. Supplementary Protection Certificates
14.1 THE Licensee shall use its reasonable endeavors to promptly take all
necessary steps to facilitate BTG's application for a Supplementary
Protection Certificate or Certificates and patent
extensions in respect of Products.
14.2 IN particular, but without limitation, the Licensee shall: -
14.2.1 promptly notify BTG of the number and date of the
first and any subsequent authorization to place Products on
the market;
14.2.2.1 a copy of every authorization fulfilling the
requirements of Article 8.1(b) of the SPC
Regulation (and of any additional applicable
requirements imposed by relevant national law) in
respect of all Products;
14.2.2.2 additional information fulfilling the requirements
of Article 8.1(c) of the SPC Regulation and a copy
of the notice publishing the authorization in the
appropriate official publication (and information
and documents fulfilling any additional
requirements imposed by relevant national law)
14.2.3 permit use of documents and information provided
pursuant to this clause for the purpose of such
application for a Supplementary Protection Certificate
or Certificates.
14.3 BTG shall notify the Licensee of the application for and grant of
every Supplementary Protection Certificate in respect of Products.
25
<PAGE> 26
14.4 BTG shall not be obliged to apply for grant of any Supplementary
Protection Certificates.
14.5 FOR the avoidance of doubt the Licensee shall not be entitled to
make an application for or participate in negotiations for grant of
any Supplementary Protection Certificate.
15. Exclusion of liability; Indemnity
15.1 BTG warrants and represents that it has the full right and authority
to enter into this Agreement and is not aware of any impediment
which would inhibit its ability to perform the terms and conditions
imposed on it by this Agreement.
15.2 SAVE as expressly stated herein, no representation condition or
warranty whatsoever is made or given by or on behalf of BTG. All
conditions and warranties, arising by operation of law or
otherwise: -
15.2.1 to the effect that any of the Patents or copyright in
the Know-how, are valid or enforceable, or
15.2.2 to the effect that any of the acts hereby licensed or
agreed to be licensed by BTG will not infringe the
rights of third parties; or
15.2.3 in relation to the provision or use of the Know-how
or its fitness for purpose, accuracy or completeness;
are hereby expressly excluded.
15.3 BTG shall be under no liability whatsoever to the Licensee (whether
in negligence or otherwise, in contract or in tort) for any expense,
loss, death, damage or injury of any kind (including any loss of
profit or consequential damage) sustained by the Licensee or any
third party which arises directly or indirectly from any cause or
circumstance referred to in Clause 15.4 below.
15.4 THE Licensee shall indemnify BTG against all claims and actions by
and all damages awarded to any third person against BTG (and any
related costs and expenses) which arises directly or indirectly
form:-
26
<PAGE> 27
15.4.1 the development, manufacture, use, storage, sale or
disposal of Products; or
15.4.2 the use of the Patents or the said Copyright; or
15.4.3 the provision, evaluation or use of the Know-how; or
15.4.4 any technical or other advice given by BTG or any of its
officers, employees or agents to the Licensee or from
any reliance by the Licensee or any third party thereon.
Licensee's indemnification hereunder shall not apply to any damages that
are directly attributable to the intentional misconduct or negligence of
BTG. Licensee shall have the right to control the defense, settlement or
compromise of any action to which this indemnity applies, but shall not
act in any way which may or does do material adverse damage to BTG's name
or reputation. BTG shall notify Licensee promptly of any claim or
threatened claim and shall cooperate with all reasonable requests of
Licensee with respect thereto.
15.5 UPON the initiation of Clinical trials with Products and for two (2)
years after termination of this Agreement the Licensee shall, at its
own cost affect and maintain in force with reputable insurers,
adequate insurance in respect of the development, storage,
manufacture, use and supply of Products and shall provide evidence
of such insurance to BTG on request. Any consequent policy shall
name BTG as additional insured; waive any right of subrogation of
the insurers against BTG; be primary and without right of
contribution for other insurance which may be available to BTG;
prohibit any alteration adversely affecting BTG's interest in the
insurance (or any alteration inconsistent with the requirements of
Clause 15); prohibit the lapse of or any cancellation or non-renewal
of such insurance, without the prior consent in writing of BTG. In
the event a court determines that the Licensee has failed to meet
its obligation to obtain or maintain adequate insurance, BTG may
terminate this Agreement provided however that this Agreement may
not be terminated on this ground unless the
27
<PAGE> 28
Licensee has been given at least ninety (90) days to cure such
failure and has failed to do so.
16. Termination
16.1 THE Licensee may, at any time, terminate this Agreement, by giving not
less than 90 days notice to that effect. In such notice the Licensee must
specify whether it is terminating on account of breach by BTG, and, if it
is, must give details of that breach.
16.2 BTG may terminate this Agreement, or any of the Licenses forthwith, by
notice to the Licensee, upon the happening of any of the following
events:-
16.2.1 if any royalties or other sums payable remain unpaid for thirty
days after the due date; or
16.2.2 if the Licensee is in breach of any of the other terms or
obligations of this Agreement, and such breach is not capable of
remedy;
16.2.3 if the Licensee is in breach of any of the terms of obligations of
any of its Agreements with WF;
16.2.4 if in the United Kingdom the Licensee has a Receiver or an
Administrative receiver or Administrator appointed of the whole, or
any part, of its undertaking or assets, or in any other country has
an officer appointed to perform a function analogous to that of a
Receiver, Administrative Receiver or Administrator;
16.2.5 if an order is made, or a resolution passed, for winding-up or
administering the Licensee, unless such order or resolution is part
of a scheme of solvent reconstruction of the Licensee.
16.3 IF the Licensee is six months or more behind schedule on any milestone
(for any indication) as per the Development Plan then BTG as its sole and
exclusive remedy for such delay may serve on the Licensee a notice of
termination of this Agreement and that notice shall have automatic effect
six months after the date of service, unless within that period the
Licensee shall have achieved the relevant milestone, provided that BTG
shall not unreasonably refuse a request for the remedy period to be
extended beyond six
28
<PAGE> 29
months where the delay is due (wholly or partly) to an event of Force
Majeure, or for other reasons beyond the control of the Licensee.
16.4 IF the Licensee is in breach of any of the terms or obligations of this
Agreement, other than the cases referred to in sub-clauses 15.4, 16.2 and
16.3, and such breach is capable of remedy, BTG may serve on the Licensee
a notice of termination of the Agreement and that notice shall have
automatic effect thirty days after the date of service, unless within that
period the Licensee shall have remedied the breach.
16.5.1 LICENSEE shall, no later than 30th June of Year 3 produce Net Sales
forecasts for Years 3 to 5 inclusive; and thereafter Licensee shall
no later than 31st December of Year 5 and then no later than 31st
December of each subsequent third Year produce Net Sales forecasts
for the following three Years (so that an uninterrupted stream of
Net Sales forecasts are produced). The Licensee shall deliver each
three Year set of Net Sales forecasts to BTG within one week of
them being produced.
16.5.2 BTG shall have the right to terminate this Agreement forthwith on
notice to the Licensee if the aggregate Net Sales for Years 3 to 5
inclusive do not match or exceed twenty five percent (25%) of the
aggregate Net Sales forecasts for those Years. Thereafter BTG shall
have the right to terminate this Agreement forthwith on notice to
the Licensee if the aggregate Net Sales for any two years (the
first two being years 5 and 6, and the next Years 6 and 7), do not
match or exceed forth percent (40%) of the aggregate Net Sales
forecasts for the two Years in question.
16.5.3 If BTG believes, in good faith, that any such forecast does not
represent a reasonable assessment of the likely future sales, the
parties shall endeavour to find a mutually acceptable revision of
the forecast. If the parties cannot determine such mutually
acceptable resolution, BTG shall submit the dispute to a mutually
acceptable third party expert for a final and binding forecast, and
the cost of such expert shall be equally shared by the parties.
29
<PAGE> 30
17. Rights on termination
17.1 TERMINATION (or expiry) of this Agreement shall be without prejudice
to any rights of either party against the other which may have
accrued up to the date of termination
17.2 On Termination (or expiry) of this Agreement for whatever cause, the
Licensee shall pay to BTG royalty in respect of all Products being
manufactured at the date of termination and all Products
manufactured and not yet sold. The Licensee shall then be free to
sell or dispose of Products on which royalty has been paid.
17.3 TERMINATION (or expiry) of this Agreement for any reason shall
not bring to an end:-
17.3.1 the confidentiality obligation of Clause 5.3 until the
know-how shall have come into the public domain otherwise
than through the breach of default of the Licensee;
17.3.2 the obligations of the Licensee in respect of the accounting
for, payment of and verification of royalties and other
payments under Clauses 6, 7, 8, 9, 10 and 17.2 until the
settlement of all claims of BTG;
17.3.3 the provisions of Clause 15.
17.4 ON early termination the Licensee:-
17.4.1 shall/shall procure transfer to BTG or destruction (at BGT's
option, and in the former case at BTG's expense) of the
Know-how (and all copies and derivatives) in the possession
of the Licensee's Group; and
l7.4.2 shall (at BTG's request) assign the Trade Marks to BTG; and
17.4.3 except where the termination is for breach by BTG grant to
BTG or where necessary procure that others grant to BTG
irrevocable non-exclusive licenses under:-
17.4.3.1 each of those Licensee Inventions which is an
improvement invention to one or more of the
30
<PAGE> 31
inventions the subject of the Patents, and all patent
applications and patents relating thereto for which
the licensee has the benefit; and
17.4.3.2 the Results.
The licence in respect of the Results shall permit use of the Results in
applications for regulatory clearance and such licences (generally) shall be to
make, use sell and otherwise dispose of products falling within the scope of the
claims of any of the applications or patents for the Licensee Inventions, or
which utilise the Results, and shall include full sub-licensing rights and shall
continue, in the case of the Licensee Inventions until all of the applications
and patents relating thereto have ceased to subsist, and in the case of the
Results until all the same have fallen into the public domain (other than
through the Licensee's default). The licence in respect of the Results shall
include the physical transfer of the Results (or copies) by the Licensee to BTG,
at BTG's expense.
17.5 IF the Agreement is terminated by the Licensee then, unless the Licensee
can prove to BTG's satisfaction (considered in good faith by BTG) that
termination was on the grounds of efficacy or safety, (and here BTG will
consider the Licensee's results from trials and studies), then the Licensee
shall pay BTG the next two annual payments (under 2.1.2 to 2.1.4) which would
have been payable but for termination (and any such payments already outstanding
on the date of termination shall be disregarded for these purposes).
18. Indexation
The sums referred to in Clause 2.1.2 to 2.1.4 (inclusive) shall be
adjusted to account for increases in the Index which are above seven per cent
(7%) in any calendar year. Each time there is an annual increase above seven per
cent (7%) the sums shall be increased by the percentage increase above seven per
cent (7%) (such increase being in addition to any previous increase hereunder).
19. Legal Proceedings
If the Licensee contemplated legal proceedings against a third party under
one or more of the WF Patents, it shall first give reasonable notice to BTG and
WF. The Licensee shall take reasonable account of any concerns that WF and the
Glaxo Group have where such concerns are notified in writing to the Licensee
(whether directly or through BTG) and
31
<PAGE> 32
the Licensee shall give reasonable consideration to any alternative strategies
that WF or any member of the Glaxo Group may propose in writing prior to
commencement of the relevant action. WF and the members of the Glaxo Group shall
have the right but not the obligation to join the licensee in any such legal
proceedings.
20. Miscellaneous
20.1 THE Licensee shall not assign, charge or otherwise dispose of any of its
rights or obligations under this Agreement, or any of the Licences except
Licensee may assign, (in whole) subject only to BTG obtaining the consent of WF
(which BTG will seek on request by the Licensee), in the he case of a merger
acquisition of transfer of all or substantially all of Licensee's assets to
which this Agreement relates as long as, at the date of assignment, the
Licensee's rights under this Agreement do not represent all, or substantially
all of the Licensees's assets. For the avoidance of doubt it is declared that on
any such assignment the assignor must transfer all of the Know-how to the
assignee.
20.2 THE Licensee may grant sub-licences but only on the Sub-Licence Terms.
20.3 THE failure by either party to exercise or enforce any rights under this
Agreement shall not bee deemed to be a waiver of any such rights, nor shall any
single or partial exercise of any right, power, or privilege, or further
exercise thereof, operate so as to bar the exercise or enforcement thereof at
any later time.
20.4 THE waiver by either party of any breach of any of the terms of this
Agreement by the other shall not be deemed to be a waiver of any other breach of
the Agreement.
20.5 IF any part or provision of this Agreement is prohibited, or rendered void
or unenforceable, by any legislation, the validity or enforceability of the
Agreement as a whole or of any other part of this Agreement shall not be
affected.
20.6 SUBJECT to Clause 16.3 the rights and remedies provided in this Agreement
are cumulative and not exclusive of any rights or remedies provided by law or in
equity.
20.7 FOR the avoidance of doubt it is declared that it is understood that the
Trade Marks will be assigned to the Licensee by WF and affiliates as of the
Effective Date; it being further understood that it is entirely the
32
<PAGE> 33
Licensee's responsibility to obtain the documentation necessary to accomplish
such assignment directly from WF and affiliates.
21. Notices
21.1 ANY notice authorised or required to be given by either party under this
Agreement to the other party, shall be in writing, and shall be deemed to be
duly given if left at, or sent by recorded delivery or registered post addressed
to:-
21.1.1 in the case of the BTG, its registered office, and
21.1.2 the case of the Licensee the address of the Licensee at the head
of this Agreement, unless notice or change has been given to BTG
in writing.
21.2 ANY notice, if sent by post, shall be deemed to have been served at the
expiration of three days after posting.
21.3 THE Licensee has appointed the partners (from time to time) of Bingham,
Dana & Gould LLP, 39 Victoria Street, London, SW1 HOEE, UK as its agents in
England to accept service of legal process on its behalf and shall within
fourteen days of the signing of this Agreement provide to BTG a certified copy
of the document of appointment.
22. Law and Jurisdiction
22.1 This Agreement is to be read and construed in accordance with, and governed
by, English law.
22.2 THE Licensee submits to the jurisdiction of the English Courts and BTG
submits to the jurisdiction of the Commonwealth of Massachusetts, USA.
IN WITNESS whereof this document has been executed as a Deed the day and
year first above written.
33
<PAGE> 34
Clinical Development Plan for CAMPATH-1H
I. Introduction
CAMPATH-1H recognizes the CDw52 surface antigen expressed on virtually all
lymphocytes. It is lymphocyte depleting via complement mediated and/or ADCC
mediated lysis. CAMPATH-1H was developed and hymnized in the laboratory of Drs.
Herman Waldmann and Geoff Hal by grating the hypervariable complementary
determining regions (CDR) of the original rodent antibody into a human 1gG1
immunoglobulin variable framework region. The rat anti-human Cdw52 antibodies
CoAMPATH-IM and IG have been administered to over 2,000 bonemarrow transplant
recipients or the donor grafts by investigators affiliated with the Therapeutic
Antibody Center. CAMPATH-1H has been administered to over 500 patients in
Burroughs-Wellcome sponsored clinical trials in the areas of chronic lymphocytic
leukemia and non-Hodkin's lymphoma, rheumatoid arthritis and renal transplant
rejection.
II. Summary of Burroughs Wellcome Data
A. Drug Product
Campath-1H is expressed in Chinese hamster ovary cells (CHO) adapted to
grow in suspension in serum free medium. Culture superntent containing
crude CAMPATH-1H is concentrated by ultrafiltration followed by Protein A
and S-sepharose ion exchange chromatography. Virus removal, filtration and
further concentration by ultrafiltration is followed by size exclusion
chromatography to produce a purified solution of CAMPATH-1H in phosphate
buffered saline. CAMPATH-1H is filled in ampules for subcutaneous or
intravenous injection
B. Tissue Cross Reactivity
1. CAMPATH-1H binding to normal tissues
- CAMPATH-1H stains lymphocytes and monocytes together with a small
proportion of natural killer cells, granulocytes and myeloid
cells but not erythrocytes or platelets
- Non-specific FC interactions were noted in a variety of
tissues.
<PAGE> 35
- Specific staining was seen in glandular epithelial cells and
glandular secretions of the epidermis, interstitial dendritic
cells of the testes and epithelium and lumen of the prostrate. In
addition mature spermatozoa and seminal fluid were shown to bind
CAMPATH-1H. Sperm motility was inhibited by the antibody in the
presence but not in the absence of complement.
- CAMPATH-1H had no effect on human hematopoetic progenitor
cells.
2. CAMPATH-1H binding to malignant lymphocytes
- FITC labeled CAMPATH-1H stained 48 of 57 B-cell lymphomas and 16
of 26 T-cell lymphomas. Faint staining was seen in 4 cases and 5
cases respectively.
- Negative or equivocal staining was seen in high grade lymphoma
samples, whereas intermediate and low grade lymphoma samples
stained positively.
- Negative results were seen in 1 of 6 mycosis fungoides, 1 of 1
immunoblastic T-cell lymphoma and 3 of 17 adult T-cell
leukemia lymphoma samples.
C. Animal Toxicology
Cynomologus monkeys were chosen as the species for toxicology testing
because they express CDw52 antigen. New world monkeys and other species do
not express CDw52. Single 40 minute IV infusions of 1 or 3 mg/kg of
antibody reduced the level of circulating lymphocytes to 23% and 3-6%
respectively with recovery in 7-10 days and 17-35 days respectively. A
dose of 0.1 mg/kg had no effect on lymphocyte count.
Fourteen or 30 day IV or subcutaneous administration of 1-3 mg/kg/day
produced similar effects on lymphocyte counts and broadly similar serum
levels of antibody to those following single doses. Unexplained
neutropenia was seen in animals treated longer than 14 days. Otherwise the
only notable effect of multiple dosing was involution of the spleen,
thymus and lymph nodes.
D. Preclinical Pharmacokinetics
2
<PAGE> 36
Pharmacokinetics in Cynomologus monkeys was linear within the range of 1-3
mg/kg. The principal pharmacokinetic parameters for the IV and subcutneous
routes of administration were as follows:
<TABLE>
<CAPTION>
Parameter IV SC
--------- -- --
<S> <C> <C>
Mean terminal half -life (H=SD) 233 = 14.3 162.3 = 63.3
Mean clearance (Mls per age per KG = 0.25 = 0.05 0.58 = 0.22
SD)
Mean volume of distribution (L / kg = SD) 0.09 = 0.021 0.13 = 0.05
</TABLE>
The bioavailability of CAMPATH-1H after SC administration was
approximately 47%.
E. Clinical Efficacy and Safety
1. Phase I Trials - CAMPATH-1H was administered in 3 Phase I protocols to
174 patients with non-Hodkin's lymphomas or CLL. In these protocols
CAMPATH was administered as intravenous infusions 3/wk, 1/wk or 5 wk
respectively. a target does of 25-30 mg of CAMPATH1-1H given 3/wk was
chosen based on the results from the Phase I studies.
2. Phase I/II Pharmacokinetics
<TABLE>
<CAPTION>
Week 1 Week 4
-------------------------------------------------------------
Dose Level Cmas t 1/2 Cmas t 1/2
(mg) (g/ml +/- (hr //- SD) (g/ml //- (hr //- SD)
SD) SD)
-------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
7.5 0.8//-0.4 43//-36 1.1//-0.6 24//-17
-------------------------------------------------------------
24 3.8//-2.3 42//-19 8.3//-6l3 57//-25
-------------------------------------------------------------
75 - - 15.9//-11.4 60//-36
-------------------------------------------------------------
240 - - 56.5//-30.5 53//-38
-------------------------------------------------------------
Overall - 42//-27 - 53//-31
-------------------------------------------------------------
</TABLE>
- Linear pharmacokinetics
- Large interpatient variability
- Anti-globulin response seen in 3/167 patients tested
3. Phase II Studies - approximately 190 patients were entered into Phase
II protocols. Phase Ii studies demonstrated that CAMPATH-1H had
significant activity in patients with T-cell prolymphocytic leukemia
(T-PLL) and in patients with chronic lymphocytic
3
<PAGE> 37
leukemia (CLL) particularly those who had been previously treated and/or
were refractory to other therapies including fludarabine.
4. Safety - the majority of adverse events seen in conjunction with
CAMPATH use can be categorized as being administration related and of
relatively short duration. They were primarily cytokine release type
phenomena including fever, hypertension, rashes, joint pains and dyspnea.
These adverse events were transient and tolerance was observed on
continued administration.
The major adverse experiences occurring with CAMPATH-1H administration
were hematologic. Lymphopenia is observed in all patients treated with
CAMPATH-1H. CMV, PCP and certain fungal infections known to be associated
with deficient T-cell immunity also occurred in some patients receiving
CAMPATH but did not appear ore frequent or severe than what would be
expected with standard therapy in these patients. In addition,
neutropenia, thrombocytopenia end anemia were seen in 34%, 27% and 16% of
patients respectively. Virtually all of these patients had been treated
previously with major cytotoxic chemotherapeutic agents.
III. Campath-1H Development Plan
A. Competitive Environment
Currently, front line treatement for chronic lymphocytic leukemia consists
of alkylating agents such as chlorambucil and purine analogs such as
fludarbine and 2-CDA. These treatments are never curative. In addition,
these agents, when used in standard dosages are associated with
significant hematologic toxicity amount others. It is anticipated that
Campath will be effective in a significant percentage of these relapsing
or refractory patients and may be better tolerated. In addition, there is
the potential for Campath to be used in combination with these other
agents in NHL as well as CLL to achieve higher cR rates and therefore
better survival. It is likely that at the time Campth-1H is approved,
fludarabine will be generally accepted as a firstline treatment for CLL
both in the Europe and the US.
Other antibodies under development also represent potential competition
for CAMPATH-1H. These include the IDEC-C2B8 anti-CD20 antibody from IDEC
pharmaceuticals which is currently being developed in NHL, but not in CLL.
However, this agent clearly could have a role in the treatment of CLL.
This antibody is
4
<PAGE> 38
also being developed in combination with CHOP therapy in patients with
relapsed low-grade lymphonas.
An additional antibody under development is LYM-1, an I-131 labeled
monclonal antibody. This antibody is being developed by Alpha Therapeutics
for non-Hodgkin's lymphoma.
B. Campath Registration Strategy Overview
1. Development Overview
The following are the key elements of the clinical development plan for
CAMPATH-1H.
1. Complete transfer of the intellectual property, including
manufacturing, preclinical and clinical data from
Glaxo-Wellcome to LeukoSite/ILEX.
2. Rapidly complete analysis of the clinical data to support
registration study designs
3. Identify and contract with commercial vendor for manufacture
of clinical trial material and commercial launch materials for
CAMPATH.
4. Arrange and hold end of Phase II meetings with regulatory
authorities in Europe and the US
5. Initiate 2 well-designed clinical trials -
- Study #1. Open label trial of treatment resistant
CLL and T-PLL (approximately 50 patients)
- Study #2. Previously treated patients with chronic
lymphocytic leukemia, randomized and controlled with
respect to the use of cotrimoxazole and acyclovir vs
placebo to prevent opportunistic infections
(approximately 100 patients).
The final design and nature of these trials will be dependent on
further discussions with our expert consultants and regulatory
authorities in Europe and the US.
2. Preclinical Development
The preclinical assessment of CAMPATH-1H conducted by
Burroughs-Wellcome was very complete. No additional preclinical
toxicology testing should be necessary for
5
<PAGE> 39
submission as long as the material used to conduct the clinical
trials is considered comparable.
3. Manufacturing
The current plan is to transfer the Burroughs-Wellcome manufacturing
process as faithfully as possible to a contract manufacturer. This
will be done as rapidly and aggressively as possible consistent with
the need to produce a drug product which be considered comparable to
the Burroughs-Wellcome drug product based on the criteria for a well
characterized biological product. The availability of clinical trial
material will be the time limiting factor in beginning clinical
trials. Our current expectations are to have clinical trial material
available by the end of 1977.
4. Marketing Overview
Registration dossiers will be filed in the EU and in the US. Since
CLL is a much less common disease in Japan, no development or
marketing for this indication is planned there. It is anticipated
that marketing to the oncology hematology community in the EU and US
will require a small, but focused sales group. Such a resource may
be accessed via market licensing agreements in the US and Europe or
may be developed internally depending upon other programs and
conditions.
C. Clinical Development
1. Indications
The clinical development plan for Campath is based upon the
following conclusions from the Wellcome clinical trials:
- CAMPATH-1H is effective in patients with chronic lymphocytic
leukemia who have failed other therapies including fludarabine. The
major response rate (including CR's or PR's) was approx. 43% in the
GW trials (95% confidence interval of 30%-60%).
- CAMPATH-1H is effective in patients with T-cell prolymphocytic
leukemia. Eleven of 15 patients had major responses. (95%
confidence interval of 48%-92%)
6
<PAGE> 40
- CAMPATH-1H has also demonstrated potential efficacy in the
following indications
- minimal residual disease in patients with chronic
lymphocytic leukemia
- upfront therapy for CLL
2. Timeline
The flow diagram below gives an overview of the most aggressive possible
development strategy. It assumes that CTM will be available by the end of
Q3 '97. the possibility of requesting approval based upon existing data
will be explored as well, although this is unlikely to be successful.
Campath: Proposed Registration Timeline
Chart
The major factor which favors a rapid development program for CAMPATH-1H is its
activity in patients who have failed other therapies. These patients who have no
alternatives could benefit greatly from the availability of CAMPATH-1H and an
accelerated registration approach has great potential because of this. However,
enrollment rate may not e as rapid as outlined above and this could delay the
submission.
3. Possible Additional Campath Development
CAMPATH-1H development need not be limited to this refractory patient
population. Additional studies establishing the role of CAMPATH as front
line therapy for CLL May be warranted later on in the development process.
In addition, the role of CAMPATH-1H for the treatment of minimal residual
disease in CLL perhaps in combination with an agent like fludarabine has
the potential to make a tremendous impact on the treatment of chronic
lymphocytic leukemia. this may also be explored later on in CAMPATH
development. The flow diagram below gives a possible timeframe for
potential additional studies. These are meant to serve as examples of the
kind of additional studies which may be done later. A definite commitment
to these studies cannot be made at this time.
Campath: Possible Followup Studies
7
<PAGE> 41
Chart
4. Proposed Campath-1H Product Label
Indications: Campath-1H is indicated for the treatment of patients with
CLL who have been previously treated with firstline therapies and have
relapsed or failed. Clinical studies have demonstrated that major
responses (CR's and PR's by NCI crier) can be obtained in over 35% of such
patients with a median duration of >6 months.
5. Key Development Milestones
1. Commit to a contract manufacturing strategy and vendor: On
or before 3/15/97
2. End of Phase II meeting with FDA/other regulatory
authorities: On or before 7/15/97
3. File/cross reference IND and/or CTX's to begin registration
trials: On or before 1/15/98 (requires the release of CTM
from commercial vendor)
4. Begin clinical trials in the US/Europe: On or before
3/31/98
5. Complete enrollment in clinical trials: On or before
3/31/00
6. File registration dossier for previously treated CLL and/or
T-PLL in the US and/or Europe: On or before 12/31/00
Study Outlines
A Phase II Study to Establish the Efficacy and Safety of Campath-1H in Subjects
with PLL and Treatment Relapsed or Resistant Chronic Lymphocytic Leukemia
Study 001
STUDY SUMMARY
OBJECTIVES:
8
<PAGE> 42
- - To establish the efficacy and safety of Campath-1H in subjects with T-PLL and
B-cell chronic lymphocytic leukemia which has failed or relapsed after
previous treatment
- - Product registration
STUDY POPULATION:
Up to subject meeting the following entrance criteria, may be entered into
this study.
Key Infusing Criteria:
- - Male or non-pregnant, non-lactating female, age 18 or older who have
signed an informed consent
- - Diagnosis of PLL
or
- - Diagnosis of chronic lymphocytic leukemia as confirmed by histological,
cytological and bone marrow assessments
- Progressive and/or resistant disease following;
- at least one adequate or maximal tolerated chemotherapeutic regimen
- no more than three total previous treatments with chemotherapeutic
regimens
- - Life expectancy of at least 12 weeks
- - WHO performance status of 0, 1, or 2
- - Creatinine and LFT's (less than) 2x upper limit of normal unless directly
attributable to disease
Key Exclusion Criteria:
- - More than three previous treatments with chemotherapeutic regimens
- - Past history of anaphylaxis following exposure to rat or mouse derived CDR
grafted humanized monoclonal antibodies
- - Presence of HIV or other active infection.
- - Less than three weeks since prior chemotherapy (?)
- - Previous treatment with Campath-1H
- - Previous bone marrow transplant
STUDY DESIGN
This will be a open label, non-comparative phase II/III study to establish the
efficacy and safety of Campath-1H in patients with T-PLL or chronic
9
<PAGE> 43
lymphocyctic leukemia which has failed or relapsed after previous therapy.
BASELINE ASSESSMENTS
The following assessments will be done prior to drug administration: CBC
bone marrow biopsy/aspirate; Rai/Binet staging; lymphocyte markers (CD3,
CD4, CD8, CD14, CD16, CD19 and Cdw52), assays for complement (C3 and C4)
and immunoglobulins (IgA, IgG and IgM) will also be done at each four week
evaluation.
TREATMENT
Patients will be treated with 30mg (iv or SQ) Campath-1H three times
weekly for a minimum of 8 weeks and a maximum of 16 weeks.
Trimethoprim/sulfamethoxazole and acyclovir prophylaxis will be
administered to all patients while on therapy and for a minimum of three
months following the discontinuation of therapy. All patients will be
observed for a minimum of six months following the completion of therapy.
EFFICACY ASSESSMENT
Disease response will be assessed every four weeks according to NCI
criteria based upon evaluation of hematology, bone marrow
biopsies/aspirates, physical examinations including lymph node
assessments. Lymphocyte markers (CD3, CD4, CD8, CD14, CD16, CD19 and
Cdw52), assays for complement (C3 and C4) and immunoglobulins (IgA, IgG
and IgM) will also be done at each four week evaluation.
TREATMENT MODIFICATION/DISCONTINUATION
Discontinuation of treatment should be considered for subjects who show a
complete response or stable disease on two successive four week
evaluations. Therapy must be discontinued for a maximum of 16 weeks if
repeat assessments show continued improvement. Subjects who show a
response to therapy and later relapse may be treated under a separate
follow-on protocol.
SAFETY ASSESSMENT
Safety will be monitored by clinical laboratory evaluations, cytokine
levels, physical examinations, vital signs and adverse experiences.
Cytokines (TNF, IL-2, IL-6) will be measured before and after the
10
<PAGE> 44
initial (5mg) Campath-1H administration and before and after the first
30mg Campath-1H administration. Routine clinical laboratory evaluations
and physical examination will be conducted weekly while on therapy and at
each four week follow-up assessment. Vital signs will be collected every
30 minutes for the first two hours following the initial administration of
Campath-1H at each dosage and will continue to be monitored as clinically
indicated. Chest x-rays will be monitored as clinically indicated. Adverse
experiences will be monitored throughout the trial.
STUDY PROCEDURES:
The following assessments will be conducted while the subject is on study. The
timing of the evaluations is outlined in the Study Flow Chart.
Safety
- Physical exam
- Vital signs
- Clinical laboratory evaluations (hematology, chemistry and
urinalysis)
- Cytokine assessments (TNF, IL-2, IL-6)
- Adverse Experiences
Efficacy and Other Evaluations:
- Hematology
- Hematocrit
- Platelet count
- WBC and differential
- Bone marrow biopsy/aspirate
- Lymph node, liver and spleen measurements
- Lymphocyte markers - CD3, CD-4, CD-8, CD14, CD16, CD19, CDw52
- Complement (C3 and C4)
11
<PAGE> 45
- Immunoglobulins (IgA, IG and IgM)
STATISTICAL CONSIDERATIONS:
Safety:
Safety will be evaluated based on the incidence, severity and type of adverse
events and changes in the subject's physical examination, vital signs, clinical
laboratory results and cytokine assessments.
Efficacy:
Efficacy will be evaluated based on the following efficacy endpoints:
Primary Efficacy Endpoints
- Complete responses (according to NCI criteria) Major responses
- (CR's and PR's according to NCI criteria)
- Progression free survival
Secondary Efficacy Endpoints
- Survival
A major response rate (greater than or equal to) 30% with a mean progression
free survival of (greater than or equal to) 6 months will be considered
convincing evidence of efficacy. Failure will be defined as progressive disease
after at least four weeks of therapy.
12
<PAGE> 46
A Randomized, Controlled Phase II Study to Establish the Effectiveness of
Antimicrobial Prophylaxis and the Efficacy and Safety of Campath-1H in
Subjects with Previously Treated Chronic Lymphocytic Leukemia
Study 002
STUDY SUMMARY
OBJECTIVES:
- - To establish the efficacy and safety of Campath-1H in subjects with B-cell
chronic lymphocytic leukemia who have relapsed after or failed previous
treatment and
- - To evaluate the effectiveness of antimicrobial prophylactic therapy in
reducing the incidence of opportunistic infections.
- - Product registration
STUDY POPULATION:
Up to 100 subjects meeting the following entrance criteria, may be entered into
this study.
Key Inclusion Criteria:
- - Male or non-pregnant, non-lactating female, age 18 or older who have signed
an informed consent
- - Diagnosis of chronic lymphocytic leukemia as confirmed by histological,
cytological and bone marrow assessments
- - Treatment failure or relapse following no more than two prior exposures to
other chemotherapeutic regimens
- - Life expectancy of at least 12 weeks
- - WHO performance status of 0, 1, or 2
- - Creatinine and LFT's (less than) 2x upper limit of normal unless directly
attributable to disease
Key Exclusion Criteria:
- - More than two previous treatments with chemotherapeutic regimens
- - Past history of anaphylaxis following exposure to rat or mouse derived CDR
grafter humanized monoclonal antibodies
- - Presence of HIV or other active infection.
- - Less than three weeks since prior chemotherapy (?)
13
<PAGE> 47
- - Previous treatment with Campath-1H
- - Previous bone marrow transplant
STUDY DESIGN:
This will be a open label, controlled, randomized, comparative phase II study to
evaluate the effectiveness of antibiotic prophylactic therapy in reducing the
incidence of opportunistic infections and to assess the efficacy and safety of
Campath-1H in patients with chronic lymphocytic leukemia who have failed or
relapsed following prior chemotherapy.
Randomization
Subjects will be randomly assigned to one of the following two study groups:
<TABLE>
<CAPTION>
Study Group Campath-1H Antimicrobial Prophylaxis
Regimen
<S> <C> <C>
I 30 mg (iv or SQ) Pentamidine Aerosol 300 mg q 4 weeks
n=50 three times weekly Acyclovir po 200 mg BID*
II eo mg (iv or SQ) none
n=50 three times weekly
</TABLE>
*Prophylaxis will be administered while on therapy and for a minimum of three
months following the discontinuation of therapy.
Baseline Assessments
The following assessments will be done prior to drug administration: CBC, bone
marrow biopsy/aspirate; Rai/Binet staging; lymphocyte markers (CD3, CD4, CD8,
CD14, CD16, CD19 and Cdw52); lymph node assessment; physical examination; chest
x-ray; vital signs; clinical laboratory evaluations; complement assay (C3 and
C4); immunoglobin (IgA, IgG and IgM) assay; cytokine (TNF, IL-2, IL-6)
assessments; and blood cultures.
Treatment
All subject will be treated with 30 mg (iv or SQ) Campath-1H three times weekly
for a minimum of 8 weeks a maximum of 16 weeks. Subjects will be randomized to
receive antimicrobial prpphylaxis according to the schedule above.
All patients will be observed for a minimum of six months following the
completion of therapy.
Efficacy Assessment
Disease response will be assessed every four weeks according to NCE criteria
based upon evaluation of hematology, bone marrow biopsies/aspirates, physical
examinations including lymph node
14
<PAGE> 48
assessments. Lymphocyte markers (CD3, CD4, CD8, CD14, CD16, CD19 and Cdw52),
assays for complement (C(3) and C(4)) and immunoglobulins (igA, IgG and IgM)
will also be done at each four week evaluation. Overall incidence of infection
and infection etiologies will be recorded.
Treatment Modification / Discontinuation
Discontinuation of treatment should be considered for subjects who show a
complete response or stable disease on two successive four week evaluations.
Therapy must be discontinued if disease progresses while on treatment. Therapy
may be continued for a maximum of 16 weeks if repeat assessments show continued
improvement. Subjects who show a response to therapy and later relapse may be
retreated under a separate follow-on protocol.
Safety Assessment
Safety will be monitored by clinical laboratory evaluations, cytokine levels,
physical examinations, vital signs and adverse experiences. Cytokines (TNF,
IL-1, IL-6) will be measured before and after the initial (5mg) Campath-1H
administration and before and after the first 30mg Campath-1H administration.
Routine clinical laboratory evaluations and physical examinations will be
conducted weekly while on therapy and at each four week follow-up assessment.
Vital signs will be collected every 30 minutes for the first two hours following
the initial administration of Campath-1H at each dosage and will continue to be
monitored as clinically indicated. Chest x-rays will be monitored as clinically
indicated. Adverse experiences will be monitored throughout the trial.
STUDY PROCEDURES:
The following assessments will be conducted while the subject is on study. The
timing of the evaluations is outlined in the Study Flow Chart.
Safety:
- - Physical Exam
- - Vital signs
- - Clinical laboratory evaluations (hematology, chemistry and urinalysis)
- - Cytokine assessments (TNF, IL-2, IL-6) Adverse Experiences
Efficacy and Other Evaluations:
- - Hematology
- Hematocrit
- Platelet count
- WCB and differential
- - Blood cultures
15
<PAGE> 49
- - Bone marrow biopsy/aspirate
- - Lymph node, liver and spleen measurements Lymphocyte markers - CD3, CD4, CD8,
CD14, CD16, CD19, CDw52
- - Complement (C3 and C4) Immunoglobulins (IgA, IgG and IgM)
STATISTICAL CONSIDERATIONS:
Safety:
Safety will be compared for the two treatment groups based on the incidence,
severity and type of adverse events and changes in the subject's physical
examination, vital signs, clinical laboratory results and cytokine assessments.
Efficacy:
The overall response rate for all patients with regard to underlying disease
will be assessed as follows:
Primary Efficacy Endpoint
- Complete responses (according to NCI criteria)
- Major responses (CR's and PR's according to NCI criteria)
- Progression free survival
Secondary Efficacy Endpoints
- Survival
A major response rate of (greater than or equal to) 30% with a mean
progression ree survival of (greater than or equal to) 6 months will be
considered convincing evidence of efficacy. Failure will be defined a
progressive disease after at least four weeks of therapy. No comparison
between the two treatment groups will be made.
A comparison of the following efficacy endpoint will be made between the two
treatment regimens:
- - Incidence of infection
- Pneumocystis carinii pneumonia (PCP)
- Herpes
- Other infection(s) associates with lymphocyte depletion
16
<PAGE> 50
SCHEDULE 2
The Know-how
Contents
A. CRITICAL INFORMATION
Defined in the Material Release Agreement with LeukoSite.
B. OTHER INFORMATION
(1) Clinical Trial Data
The Case Report Forms from the trials (photocopies at Leukosite's
expense).
The clinical database (transferred as SAS transfer files on data
tape).
(2) Cell and material stocks and reports on manufacturing process
(see attached).
(3) Other reports held in Glazo Wellcome Documentation centre as
itemised in document dated 12th April 1996 from Dr. Richard
Palmer.
(4) Other reports, not included in (3) above, supporting IND to be
confirmed in writing by WF within eight weeks of the Effective Date.
C. LIST OF CLINICAL AND ACADEMIC INVESTIGATORS
to be confirmed in writing by WF within eight weeks of the Effective
Date
B(2)
CELL AND MATERIAL STOCKS AND
REPORTS ON MANUFACTURING PROCESS
1. Specification C1H.SPEC/1.150 Volume I Cell Banks 1 Sept 1994
17
<PAGE> 51
2. Specification C1H.SPEC/1.150 Volume II Production 30 Aug 1994
Campath-1H Inventory - Building 138
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
TOTAL
BATCH HARVEST REVIVAL PROCESS QUANTITY
NO. DATE BANK STAGE MG/ML* GRAMS
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
CH70 29/06/93 MCB1-WCB2 S-SEPH CONC 40.9 424.91
- -------------------------------------------------------------------------------
CH78 25/10/94 MCB2-WCB1 VIRESOLVE 2.0 145.0
CYCLE 3 1.5
- -------------------------------------------------------------------------------
CH78 25/10/94 MCB2-WCB1 S-SEPH CONC 41.4 70.38
- -------------------------------------------------------------------------------
CH78 25/10/94 MCB2-WCB1 SUPERDEX 23.1 159.39
- -------------------------------------------------------------------------------
</TABLE>
Compath-1H CTM Inventory
Not for clinical use by BTG/sublicensee
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------
BATCH NO. FILING DATA REVIVAL BANK TOTAL VIALS
(APPROXIMATE)
- -------------------------------------------------------------------------
<S> <C> <C> <C>
A3227A Mar 94 MCB1 22,000
- -------------------------------------------------------------------------
</TABLE>
*the majority to be retained by Glaxo Wellcome
Cell Bank
The inventory of cell banks is given in the table below:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------
LOCATION NUMBER TYPE
- -----------------------------------------------------------------------------
<S> <C> <C>
LIQUID NITROGEN, B119
- -----------------------------------------------------------------------------
D1C5TD 50 CHO C1H 10.11.93 (MCB2)
- -----------------------------------------------------------------------------
D1C5TC 47 CHO C1H 6.12.93 (1st WCB from
MCB2)
- -----------------------------------------------------------------------------
D1C3TB 50 DCC CTM post production cell
banks
- -----------------------------------------------------------------------------
LIQUID NITROGEN TPP, B115
- -----------------------------------------------------------------------------
B115 (TPP) location B1 45 CHO C1H 10.11.93 [MCB2]
- -----------------------------------------------------------------------------
B115 (TPP) location B2 43 CHO C1H 6.12.93 (1st WCB from
MCB2)
- -----------------------------------------------------------------------------
</TABLE>
18
<PAGE> 52
Production
- - Process Operating Instructions for Batch CH78 (equivalent to a "Batch
Record").
- - Protocols for Campath-1H Filling lots.
- - Analytical and Production methods (where available).
DETAILS OF THE CRITICAL INFORMATION TO BE
RELEASED TO LEUKOSITE
1. Seven vials of Working Cell Bank derived from Master Cell Bank 2 and
known as CHO CIH 6.12.93.*
2. Two grammes of MCB1 material in the form of filled quality assured
released vials together with quality control results, and a two gramme
sample of superdex monomer (the final stage before dilution and filling)
from MCB2 together with the provisional quality control results for that
batch.*
3. One container of dry powdered medium.*
4. Protocol(s) in respect of the Complement Mediated Cell Lysis (CMCL) and
the Antibody Dependent Cellular Cytoxicity (ADCC) tests.*
*Provided to sublicensee in February 1997.
19
<PAGE> 53
SCHEDULE 3
The Patents
Part A
HUMANISED CAMPATH ANTIBODIES
<TABLE>
<CAPTION>
COUNTRY APPLN NO APPLN DATE PAT NO PUB DATE PUB NO EXPIRY
<S> <C> <C> <C> <C> <C> <C>
UK 89301291.4 EPO328404
Australia 89/30626 618989
Austria E95068 EPO328404
Belgium 89301291.4 EPO328404
Canada 590704
Denmark 89/5021
France 89301291.4 EPO328404
Germany D68909441 EPO328404
Greece 930403279 EPO328404
Italy 89301291.4 EPO328404
Japan 89/502205
Luxembourg 89301291.4 EPO328404
Netherlands 89301291.4 EPO328404
New Zealand 227968 227968
S. Africa 891069 89/1069
Spain 2059719 EPO328404
Sweden 89301291.4 EPO328404
Switzerland 89301291.4 EPO328404
USA 08/235705
USA 08/407620
</TABLE>
PX1293 - CAMPATH 1H FOR TREATING MULTIPLE SCLEROSIS
<TABLE>
<CAPTION>
COUNTRY APPLN NO APPLN DATE PAT NO PUB DATE PUB NO EXPIRY
<S> <C> <C> <C> <C> <C> <C>
*Australia 3089692 4 Dec 1992 [4 Dec 2012]
*Canada 2124964 4 Dec 1992 [4 Dec 2012]
*Israel 103981 4 Dec 1992 [4 Dec 2012]
*Japan 509973.93 4 Dec 1992 [4 Dec 2012]
*Korea 94701885 4 Dec 1992 [4 Dec 2012]
*Mexico 927032 4 Dec 1992 20 Sept 1993 [4 Dec 2012]
*Malaysia P19202238 4 Dec 1992
*USA 244316 4 Dec 1992
*S Africa 929446 4 Dec 1992 929446 [4 Dec 2012]
</TABLE>
*Only included on exercise of Option 3
20
<PAGE> 54
PX 1285 - USE OF CAMPATH 1H IN ARTHRITIS
<TABLE>
<CAPTION>
COUNTRY APPLN NO APPLN DATE PAT NO PUB DATE PUB NO EXPIRY
<S> <C> <C> <C> <C> <C> <C>
**Australia 2698592 14 Oct 1992 671807 [14 Oct 2012]
**Canada 2060384.4 30 Jan 1992 [30 Jan 2012]
**Canada 2120911 14 Oct 1992 [14 Oct 2012]
**EP 93908763.1 14 Oct 1992 17 Aug 1994 0610447 [14 Oct 2012]
**Israel 103418 14 Oct 1992 [14 Oct 2012]
**Japan 50752893 14 Oct 1992 12 Jan 1995 50033095 [14 Oct 2012]
**Korea 94701206 14 Oct 1992 [14 Oct 2012]
**Malaysia P19201857 14 Oct 1992
**USA 08.211704 2 Jan 1994
**S Africa 927925 14 Oct 1992 927925 [14 Oct 2012]
</TABLE>
**Only included on exercise of Option 4
PX 1363 - EXPRESSION OF CAMPATH 1 ANTIGEN
<TABLE>
<CAPTION>
COUNTRY APPLN NO APPLN DATE PAT NO PUB DATE PUB NO EXPIRY
<S> <C> <C> <C> <C> <C> <C>
EP 93916075.0 14 Jul 1993 3 May 1995 0650523 [14 Jul 2013]
Japan 50425494 14 Jul 1993 5 Oct 1995 50888895 [14 Jul 2013]
USA 3745331 14 Jul 1993
</TABLE>
PX 1238 - CAMPATH PEPTIDE
<TABLE>
<CAPTION>
COUNTRY APPLN NO APPLN DATE PAT NO PUB DATE PUB NO EXPIRY
<S> <C> <C> <C> <C> <C> <C>
Austria 92908299.8 16 Apr 1992 0580672 2 Feb 1994 0580672 [16 Apr 2012]
Belgium 92908299.8 16 Apr 1992 0580672 2 Feb 1994 058672 [16 Apr 2012]
Switzerland 92908299.8 16 Apr 1992 0580672 2 Feb 1994 0580672 [16 Apr 2012]
Germany 92908299.8 16 Apr 1992 0580672 2 Feb 1994 0580672 [16 Apr 2012]
Denmark 92908299.8 16 Apr 1992 0580672 2 Feb 1994 0580672 [16 Apr 2012]
Spain 92908299.8 16 Apr 1992 0580672 2 Feb 1994 0580672 [16 Apr 2012]
France 92908299.8 16 Apr 1992 0580672 2 Feb 1994 0580672 [16 Apr 2012]
UK 92908299.8 16 Apr 1992 0580672 2 Feb 1994 0580672 [16 Apr 2012]
Greece 92908299.8 16 Apr 1992 0580672 2 Feb 1994 0580672 [16 Apr 2012]
Italy 92908299.8 16 Apr 1992 0580672 2 Feb 1994 0580672 [16 Apr 2012]
Japan 507752929 16 Apr 1992 24 Nov 1994 51052194 [16 Apr 2012]
Luxembourg 92908299.8 16 Apr 1992 0580672 2 Feb 1994 0580672 [16 Apr 2012]
Monaco 92908299.8 16 Apr 1992 0580672 2 Feb 1994 0580672 [16 Apr 2012]
Netherlands 92908299.8 16 Apr 1992 0580672 2 Feb 1994 0580672 [16 Apr 2012]
Sweden 92908299.8 16 Apr 1992 0580672 2 Feb 1994 0580672 [16 Apr 2012]
USA 137016 16 Apr 1992 5494999 [27 Feb 2013]
</TABLE>
21
<PAGE> 55
Part B
PG3100 - ANTI-CD4 CONCENTRATED ANTIBODY FORMULATION/CONCENTRATED ANTIBODY
PREPARATION
<TABLE>
<CAPTION>
COUNTRY APPLN NO APPLN DATE PAT NO PUB DATE PUB NO EXPIRY
<S> <C> <C> <C> <C> <C> <C>
UK GB9610992.1 24 Apr 1996
</TABLE>
PG 3036 - ANTIBODY GLYCOSYLATION
<TABLE>
<CAPTION>
COUNTRY APPLN NO APPLN DATE PAT NO PUB DATE PUB NO EXPIRY
<S> <C> <C> <C> <C> <C> <C>
WO GB97.00423 14 Feb 1997
</TABLE>
PA 1195 - CHO CELL ANTIBODY PRODUCTION
<TABLE>
<CAPTION>
COUNTRY APPLN NO APPLN DATE PAT NO PUB DATE PUB NO EXPIRY
<S> <C> <C> <C> <C> <C> <C>
Australia 8591491 16 Oct 1991 645355 [16 Oct 2011]
Canada 2053585 16 Oct 1991 [16 Oct 2011]
EP 9130959.6 17 Oct 1991 22 Apr 1992 0481790 [17 Oct 2011]
Ireland 355891 16 Oct 1991 [16 Oct 2011]
Japan 33386891 17 Oct 1991 5 Apr 1994 90752294 [17 Oct 2001]
New Zealand 240249 16 Oct 1991 240249 [16 Oct 2011]
USA 155864 23 Nov 1993 5545403 [13 Aug 2013]
USA 335400 3 Nov 1994 5545404 [13 Aug 2013]
USA 475607 7 Jun 1995
S Africa 918248 16 Oct 1991 918248 [16 Oct 2011]
</TABLE>
PA 1281 - MET AL CHELATE FORMULATION OF ANTIBODIES
<TABLE>
<CAPTION>
COUNTRY APPLN NO APPLN DATE PAT NO PUB DATE PUB NO EXPIRY
<S> <C> <C> <C> <C> <C> <C>
Australia 2872992 27 Oct 1992 19 Dec 1996 674290 [27 Oct 2012]
Canada 2121257 27 Oct 1992 [27 Oct 2012]
EP 92922609.0 27 Oct 1992 31 Aug 1994 0612251 [27 Oct 2012]
Israel 103560 27 Oct 1992 [27 Oct 2012]
Japan 507258.93 27 Oct 1992 16 Mar 1995 50249795 [27 Oct 2012]
Malaysia P19201936 27 Oct 1992
Singapore 9605153.7 27 Oct 1992 [27 Oct 2012]
USA 465319 5 Jun 1995
USA 232127 27 Oct 1992
S Africa 928296 27 Oct 1992 928296 [27 Oct 2012]
</TABLE>
22
<PAGE> 56
PA 1194 - SERUM FREE MEDIA WCM4
<TABLE>
<CAPTION>
COUNTRY APPLN NO APPLN DATE PAT NO PUB DATE PUB NO EXPIRY
<S> <C> <C> <C> <C> <C> <C>
Australia 8591591 16 Oct 1991 645615 [16 Oct 2011]
Canada 2053586 16 Oct 1991 [16 Oct 2011]
EP 91309596.4 17 Oct 1991 22 Apr 1992 0481791 [17 Oct 2011]
Ireland 355991 16 Oct 1991 [16 Oct 2011]
Japan 332998.91 16 Oct 1991 15 Mar 1994 7075794 [16 Oct 2011]
New Zealand 240248 16 Oct 1991 240248 25 Nov 1994 [16 Oct 2011]
USA 991717 18 Dec 1992 5316938 [16 Oct 2011]
USA 08.205379 4 Mar 1994
USA 453469 30 May 1995
S Africa 918249 16 Oct 1991 918249 [16 Oct 2011]
</TABLE>
PB 1571 - SITE CONJUGATED ANTIBODIES
<TABLE>
<CAPTION>
COUNTRY APPLN NO APPLN DATE PAT NO PUB DATE PUB NO EXPIRY
<S> <C> <C> <C> <C> <C> <C>
WO GB95.02585 3 Nov 1995 17 May 1996 WO96.14339
S Africa 95.9336 3 Nov 1995 [3 Nov 2015]
</TABLE>
PA 1993 - PURIFIED CAMPATH 1H
<TABLE>
<CAPTION>
COUNTRY APPLN NO APPLN DATE PAT NO PUB DATE PUB NO EXPIRY
<S> <C> <C> <C> <C> <C> <C>
Australia 2532192 658926 [17 Oct 2011]
Australia 7024294 17 Oct 1991 [17 Oct 2011]
Australia 8729491 17 Oct 1991 649078 [17 Oct 2011]
Brazil [17 Oct 2011]
Canada 2069481 17 Oct 1991 23 Sept 1992 0504363 [17 Oct 2011]
EP 91917891.3 17 Oct 1991 [17 Oct 2011]
Finland 922824 17 Oct 1991 [17 Oct 2011]
Finland 922380 17 Oct 1991 [17 Oct 2011]
Hungary P9202000 17 Oct 1991 30 Apr 1992 WO92.07084 [17 Oct 2011]
Ireland 356091 16 Oct 1991 [16 Oct 2011]
Ireland 922522 16 Oct 1991 [16 Oct 2011]
Israel 99761 16 Oct 1991 [16 Oct 2011]
Japan 51650991 17 Oct 1991 15 Jul 1993 50457993 [17 Oct 2011]
Korea 92.702699 16 Oct 1991 [16 Oct 2011]
Korea 92701427 16 Oct 1991 [13 Nov 2011]
Mexico 923794 29 Jun 1992 [17 Oct 2011]
Malaysia P19101909 16 Oct 1991
Malaysia P19201385 16 Oct 1991
Nigeria 21491 16 Oct 1991 RP11897 [16 Oct 2011]
New Zealand 240247 16 Oct 1991 240247 25 Mar 1994 [16 Oct 2011]
Phillipines 43295 15 Oct 1991
Phillipines 44745 30 Jul 1992
Portugal 99248 16 Oct 1991 30 Jun 1993
</TABLE>
23
<PAGE> 57
<TABLE>
<CAPTION>
COUNTRY APPLN NO APPLN DATE PAT NO PUB DATE PUB NO EXPIRY
<S> <C> <C> <C> <C> <C> <C>
Portugal 100988 16 Oct 1991 28 Feb 1994
Taiwan 80108178 16 Oct 1991 [16 Oct 2001]
USA 777731 16 Oct 1991
USA 985272 3 Dec 1992
USA 319598 7 Oct 1994
USA 08.472844 7 Jun 1995
S Africa 918259 16 Oct 1991 918259 [16 Oct 2011]
S Africa 926191 16 Oct 1991 926191 [16 Oct 2011]
</TABLE>
24
<PAGE> 58
SCHEDULE 4
The Sub-licence Terms
1. The Licensee shall be entitled to grant sub-licenses.
2. Each sub-license shall contain:-
(1) a clause specifying that the sub-license is personal to the
sub-licensee and may not be assigned.
(2) undertakings by the sub-licensee to observe and perform terms and
conditions (other than those relating to rates of royalty and other
financial terms) equivalent to those contained in this Agreement so
far as the same are applicable.
(3) a provision allowing the same direct access by BTG or its
representatives to the premises and records of the sub-licensee as
BTG has to the premises and records of the Licensee.
(4) provisions allowing termination of the sub-license in accordance
with Clause 3(4) below; and other provisions for termination
equivalent to those of this Agreement.
(5) a provision for termination in the event of, and contemporaneously
with, the termination of this Agreement or the Licenses, PROVIDED
THAT if on termination of this Agreement a sub-licensee requests a
direct licence from BTG then BTG shall not unreasonably refuse
consent and (following such request) BTG shall enter into bona fide
negotiations with such licensee over the terms of such license,
using this Agreement as a precedent but having regard also to the
financial terms in the relevant sub-license.
3. Following the grant of any sub-licence, other Licensee shall:-
(1) within thirty days of its grant, provide BTG with (i) a copy of the
sub-license and (ii) a statement from the sub-licensee addressed to
BTG confirming that, in consideration for the grant of the
sub-license, it will allow BTG the access referred to in Clause 2(3)
above.
25
<PAGE> 59
(2) be responsible for the observance and performance by its
sub-licensee of the terms and conditions of the sub-license, and
shall be directly liable to BTG for any breach by the sub-licensee
of any of its terms and conditions.
(3) notify BTG in the case of any such breach.
if a sub-licensee fails to perform or observe any of its obligations under its
sub-licence and if requested by BTG, forthwith serve on such sub-licensee
notice, specifying the breach complained of, and:-
(i) where the breach is not capable of remedy, terminating the
sub-license forthwith; or
(ii) where the breach is capable of remedy, giving notice that the
sub-licence is to terminate thirty days from the date of the notice
being served unless, within that period, the sub-licensee shall have
remedied the breach.
26
<PAGE> 60
SCHEDULE 5
The Trade Marks
REPORT ON CAMPATH
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Country TH Profile Reg. No. App Date Reg Date Next Owner Class TM Status
Renewal (English)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
AUSTRALIA CAMPATH A4339179 14Jan1986 14Jan1986 14Jan2007 WELLCOME FOUNDATION 5 REGISTERED
AUSTRIA CAMPATH IR 509233 21Oct1986 21Oct1986 20Oct2006 WELLCOME GHBH 1,5 REGISTERED
BRAZIL CAMPATH 812700490 09Aug1988 09Aug1988 09Aug1998 WELLCOME FOUNDATION 5 REGISTERED
DENMARK CAMPATH 517 1987 30Jan1987 30Jan1987 30Jan1997 WELLCOME FOUNDATION 5 REGISTERED
ENGLAND CAMPATH 102496 15Jul1986 20Oct1988 20Oct1998 WELLCOME FOUNDATION 1,5 REGISTERED
HONG KONG CAMPATH 3082/88 12Jul1986 12Jul1986 12Jul2007 WELLCOME FOUNDATION 5 REGISTERED
IRELAND CAMPATH 118450 28Jan1986 28Jan1986 27Jan2007 WELLCOME FOUNDATION 1 REGISTERED
IRELAND CAMPATH 118451 28Jan1986 28Jan1986 27Jan2007 WELLCOME FOUNDATION 5 REGISTERED
????? CAMPATH IR 509233 21Oct1986 21Oct 1986 20Oct2006 WELLCOME GHBH 1,5 REGISTERED
MALAISIA CAMPATH 86/03387 22Aug1986 06Aug1994 2Aug2007 WELLCOME FOUNDATION REGISTERED
NEW ZEALAND CAMPATH 163685 11Feb1986 11Feb1986 11Feb2007 WELLCOME FOUNDATION 1 REGISTERED
NEW ZEALAND CAMPATH 163686 11Feb1986 11Feb1986 11Feb2007 WELLCOME FOUNDATION 5 REGISTERED
NORWAY CAMPATH 130.713 29Jan1986 19Nov1987 19Nov1997 WELLCOME FOUNDATION 5 REGISTERED
PORTUGAL CAMPATH IR 509233 21Oct1986 21Oct1986 20Oct2006 WELLCOME GHBH 1,5 USE REMINDED
SINGAPORE CAMPATH 3180/86 25Jul1986 25Jul1986 25Jul2003 WELLCOME FOUNDATION 5 REGISTERED
SINGAPORE CAMPATH 4547/87 21Sep1987 21Sep1987 21Sep2004 WELLCOME FOUNDATION 1 REGISTERED
SPAIN CAMPATH IR 509233 21Oct1986 21Oct1986 20Oct2006 WELLCOME GHBH 1,5 REGISTERED
SWEDEN CAMPATH 210855 10Jun1988 10Jun1988 10Jun1998 WELLCOME FOUNDATION REGISTERED
UNITED KINGDOM CAMPATH 1257819 09Jan1986 09Jan9186 09Jan2007 WELLCOME FOUNDATION 1 REGISTERED
UNITED KINGDOM CAMPATH 1257820 09Jan1986 09Jan1986 09Jan2007 WELLCOME FOUNDATION 5 REGISTERED
UNITED STATES OF CAMPATH 1767878 27Apr1993 27Apr1993 27Apr2013 GLAXO WELL INC (US) 5 REGISTERED
AME
URUGUAY CAMPATH 261398 02Dec1993 02Dec1993 02Dec2003 WELLCOME FOUNDATION REGISTERED
???? CAMPATH IR 509233 21Oct1986 21Oct1986 20Oct2006 WELLCOME GMBH 1,5 REGISTERED
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
27
<PAGE> 61
(The COMMON SEAL OF
(BRITISH TECHNOLOGY
(GROUP LIMITED was
(affixed to this Deed in the
(presence of: -
Director/Authorised Signatory
Secretary/Authorised Signatory
(The COMMON SEAL of
(LEUKOSITE INC was affixed
(to this Deed in the presence
(of:-
Director
Secretary
<PAGE> 62
-2-
WORLDWIDE TRADE MARK ASSIGNMENT
THE ASSIGNMENT is made the ____ day of _________________________ 1997.
BETWEEN:
(1) GLAXO WELLCOME INC whose registered office is c/o CT Corporation System,
225 Hillsborough Street, Raleigh, North Carolina 27, USA (the "Assignor");
and
(2) LEUKOSITE INC whose registered office is at 215 First Street, Cambridge,
MA 02142, U.S.A. (the "Assignee").
WHEREAS:
(A) The Assignor is the proprietor of the trade mark registration for CAMPATH
details of which are set out in the Schedule hereto (the "Trade Mark").
(B) In the Agreement of even date herewith between The Wellcome Foundation
Limited ("WF") and British Technology Group Limited ("BTG") (the "Main
Agreement"), WF agreed to assign or to procure the assignment of the Trade
Mark to BTG's nominee on the terms set out herein.
(C) The Assignee is BTG's nominee.
NOW IT IS HEREBY AGREED as follows:
1. Pursuant to and in consideration of the sums specified in the Main
Agreement the Assignor hereby assigns to the Assignee all its rights,
title and interest in and to the Trade Mark together with all the goodwill
attaching to the Trade Mark (but no other or greater goodwill) to hold
unto the Assignee absolutely.
2. This Assignment and its terms shall be governed by and construed in
accordance with English law and the parties hereby submit to the exclusive
jurisdiction of the English Courts in relation to all matters arising out
of this Assignment.
3. The Assignor further covenants that at the request and cost of the
Assignee it will at all time hereafter do all such acts and execute all
such documents as may be reasonably necessary both to secure the
28
<PAGE> 63
vesting in the Assignee of all rights assigned to the Assignee hereunder
or otherwise to give full effect to this Assignment.
IN WITNESS WHEREOF this Assignment has been executed by or on behalf of the
parties hereto on the date first above written.
SIGNED for and on behalf of )
GLAXO WELLCOME INC )
____________________________________
Name:
Title:
SIGNED for and on behalf of )
LEUKOSITE INC )
____________________________________
Name:
Title:
<PAGE> 64
REPORT ON CAMPATH
Owner: GLAXO WELL INC (US)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
Country TM Profile Reg No. App Date Reg Date Next Renewal Class TM status
(English)
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
UNITED STATES OF AME CAMPATH 1767878 27Apr1993 27Apr1993 27Apr2013 5 REGISTERED
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 65
WORLDWIDE TRADE MARK ASSIGNMENT
THE ASSIGNMENT is made the ____ day of ___________________________ 1997.
BETWEEN:
(1) THE WELLCOME FOUNDATION LIMITED whose registered office is at Glaxo
Wellcome House, Berkeley Avenue, Greenford, Middlesex, UB6 ONN, England
(the "Assignor"); and
(2) LEUKOSITE INC whose registered office is at 215 First Street, Cambridge,
MA 02142, U.S.A. (the "Assignee").
WHEREAS:
(A) The Assignor is the proprietor of the trade mark registration for CAMPATH
details of which are set out in the Schedule hereto (the "Trade Mark").
(B) In the Agreement of even date herewith between the Assignor and British
Technology Group Limited ("BTG") (the "Main Agreement"), Assignor has
agreed to assign the Trade Marks to BTG's nominee on the terms set out
herein.
(C) The Assignee is BTG's nominee.
NOW IT IS HEREBY AGREED as follows:
1. Pursuant to and in consideration of the sums specified in the Main
Agreement the Assignor hereby assigns to the Assignee all its rights,
title and interest in and to the Trade Marks together with all the
goodwill attaching to the Trade Marks (but no other or greater goodwill)
to hold unto the Assignee absolutely.
2. This Assignment and its terms shall be governed by and construed in
accordance with English law and the parties hereby submit to the exclusive
jurisdiction of the English Courts in relation to all matters arising out
of this Assignment.
3. The Assignor further covenants that at the request and cost of the
Assignee it will at all time hereafter do all such acts and execute all
such documents as may be reasonably necessary both to secure the
<PAGE> 66
vesting in the Assignee of all rights assigned to the Assignee hereunder
or otherwise to give full effect to this Assignment.
IN WITNESS WHEREOF this Assignment has been executed by or on behalf of the
parties hereto on the date first above written.
SIGNED for and on behalf of )
THE WELLCOME FOUNDATION LIMITED )
____________________________________
Name:
Title:
SIGNED for and on behalf of )
LEUKOSITE INC )
____________________________________
Name:
Title:
<PAGE> 67
REPORT ON CAMPATH
Owner: WELLCOME FOUNDATION
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
Country TM Profile Reg No. App Date Reg Date Next Renewal Class TM status
(English)
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
AUSTRALIA CAMPATH A439179 14Jan1986 14Jan1986 14Jan2007 5 REGISTERED
- ---------------------------------------------------------------------------------------------------------------
BRAZIL CAMPATH 812700490 09Aug1988 09Aug1988 09Aug1998 5 REGISTERED
- ---------------------------------------------------------------------------------------------------------------
*DENMARK CAMPATH 517-1987 30Jan1987 30Jan1987 30Jan1987 5 REGISTERED
- ---------------------------------------------------------------------------------------------------------------
FINLAND CAMPATH 102496 15Jul1986 20Oct1988 20Oct1998 1,5 REGISTERED
- ---------------------------------------------------------------------------------------------------------------
HONG KONG CAMPATH 3082/88 12Jul1986 12Jul1986 12Jul2007 5 REGISTERED
- ---------------------------------------------------------------------------------------------------------------
IRELAND CAMPATH 118450 28Jan1986 28Jan1986 27Jan2007 1 REGISTERED
- ---------------------------------------------------------------------------------------------------------------
IRELAND CAMPATH 118451 28Jan1986 28Jan1986 27Jan2007 5 REGISTERED
- ---------------------------------------------------------------------------------------------------------------
MALAYSIA CAMPATH 86/03387 22Aug1986 06Aug1994 22Aug2007 REGISTERED
- ---------------------------------------------------------------------------------------------------------------
NEW ZEALAND CAMPATH 163685 11Feb1986 11Feb1986 11Feb2007 REGISTERED
- ---------------------------------------------------------------------------------------------------------------
NEW ZEALAND CAMPATH 163686 11Feb1986 11Feb1986 11Feb2007 5 REGISTERED
- ---------------------------------------------------------------------------------------------------------------
NORWAY CAMPATH 130.713 29Jan1986 19Nov1987 19Nov1997 5 REGISTERED
- ---------------------------------------------------------------------------------------------------------------
SINGAPORE CAMPATH 3180/86 25Jul1986 25Jul1986 25Jul2003 5 REGISTERED
- ---------------------------------------------------------------------------------------------------------------
SINGAPORE CAMPATH 4547/87 21Sep1987 21Sep1987 21Sep2004 1 REGISTERED
- ---------------------------------------------------------------------------------------------------------------
SWEDEN CAMPATH 210855 10Jun1988 10Jun1988 10Jun1998 REGISTERED
- ---------------------------------------------------------------------------------------------------------------
UNITED KINGDOM CAMPATH 1257819 09Jan1986 09Jan1986 09Jan2007 1 REGISTERED
- ---------------------------------------------------------------------------------------------------------------
UNITED KINGDOM CAMPATH 1257820 09Jan1986 09Jan1986 09Jan2007 5 REGISTERED
- ---------------------------------------------------------------------------------------------------------------
URUGUAY CAMPATH 261398 02Dec1993 02Dec1993 02Dec2003 REGISTERED
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
*THIS TRADE MARK IS PAST ITS RENEWAL DATE
<PAGE> 68
WORLDWIDE TRADE MARK ASSIGNMENT
THE ASSIGNMENT is made the ___ day of _______________________________ 1997.
BETWEEN:
(1) GLAXO WELLCOME GmbH (into which company Wellcome GmbH has merged) whose
registered office is at Postfach 1460, 23834 Bad Oldesloe, Germany (the
"Assignor"); and
(2) LEUKOSITE INC whose registered office is at 215 First Street, Cambridge,
MA 02142, U.S.A. (the "Assignee").
WHEREAS:
(A) The Assignor is the proprietor of the trade mark registration for CAMPATH
(which are currently recorded in the Assignor's former name) details of
which are set out in the Schedule hereto (the "Trade Marks").
(B) In the Agreement of even date herewith between The Wellcome Foundation
Limited ("WF") and British Technology Limited ("BTG") (the "Main
Agreement"), WF agreed to assign or to procure the assignment of the Trade
Marks to BTG's nominee on the terms set out herein.
(C) The Assignee is BTG's nominee.
NOW IT IS HEREBY AGREED as follows:
1. Pursuant to and in consideration of the sums specified in the Main
Agreement the Assignor hereby assigns to the Assignee all its rights,
title and interest in and to the Trade Marks together with all the
goodwill attaching to the Trade Marks (but no other or greater goodwill)
to hold unto the Assignee absolutely.
2. This Assignment and its terms shall be governed by and construed in
accordance with English law and the parties hereby submit to the exclusive
jurisdiction of the English Courts in relation to all matters arising out
of this Assignment.
3. The Assignor further covenants that at the request and cost of the
Assignee it will at all time hereafter do all such acts and execute all
<PAGE> 69
-2-
such documents as may be reasonably necessary both to secure the vesting
in the Assignee of all rights assigned to the Assignee hereunder or
otherwise to give full effect to this Assignment.
IN WITNESS WHEREOF this Assignment has been executed by or on behalf of the
parties hereto on the date first above written.
SIGNED for and on behalf of )
GLAXO WELLCOME GmbH )
____________________________________
Name:
Title:
SIGNED for and on behalf of )
LEUKOSITE INC )
____________________________________
Name:
Title:
<PAGE> 70
REPORT ON CAMPATH
Owner: WELLCOME FOUNDATION
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
Country TM Profile Reg No. App Date Reg Date Next Renewal Class TM status
(English)
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
AUSTRIA CAMPATH IR 509233 21Oct1986 21Oct1986 20Oct2006 1,5 REGISTERED
- ----------------------------------------------------------------------------------------------------------------
ITALY CAMPATH IR 509233 21Oct1986 21Oct1986 20Oct2006 1,5 REGISTERED
- ----------------------------------------------------------------------------------------------------------------
PORTUGAL CAMPATH IR 509233 21Oct1986 21Oct1986 20Oct2006 1,5 USE REMINDED
- ----------------------------------------------------------------------------------------------------------------
SPAIN CAMPATH IR 509233 21Oct1986 21Oct1986 20Oct2006 1,5 REGISTERED
- ----------------------------------------------------------------------------------------------------------------
? CAMPATH IR 509233 21Oct1986 21Oct1986 20Oct2006 1,5 REGISTERED
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 1
CONFIDENTIAL TREATMENT EXHIBIT 10.12
30th September 1996
Leukosite, Inc.
215 First Street
Cambridge
MA 02142
USA
Ladies and Gentlemen:
PROFORMA UNDERTAKINGS AND WARRANTIES
We refer you to the Material Release Agreement dated 30th September 1996 between
The Wellcome Foundation Limited and Leukosite, Inc., the heads of a sub-licence
agreement between British Technology Group Limited ("BTG") and Leukosite, Inc.
dated 30th September 1996 ("Sub-Licence").
In this letter the following capitalized terms shall have the following meanings
attributed to them: -
"Company" means The Wellcome Foundation Limited its parent company,
subsidiaries and affiliates from time to time.
"Cell Culture Medium" means the powdered CIV15 cell culture medium more
particularly described and claimed in the patent rights represented by
patent number PA 1 194.
"Cell Line" is cell line obtained from the Chinese Hamster Ovary (CHO)
Clone C I C2 derived from original master cell bank C I M 3D44 10.8.90
and the Master Cell Bank CHO CIH 10.11.93)
"Campath 1H" means the anti CD52 humanized monoclonal antibody that is
produced from the Cell Line and derivatives of the antibody so produced
including conjugates of the antibody with other substances.
"Critical Information" means that information and material listed in
the Material Release Agreement of even date hereof between The Wellcome
Foundation Ltd. and Leukosite, Inc.
<PAGE> 2
-2-
"Drug Substance" means partly purified or purified Campath I H which
originates from the Company.
"Drug Product" means purified Campath IH in vials labelled "not for
human use", which originates from the Company.
"Know How" is as detailed and set forth in the Sublicence Agreement
with BTG.
"Materials" means those materials detailed and set forth in Annex I to
this Letter.
You have agreed in consideration of entering into the Sub-Licence and in
consideration of us entering into the Material Release Agreement to provide our
company with the following undertakings and warranties (which undertakings and
warranties shall be binding from time to time on all your successors and
assigns) and to procure that your subsidiaries, affiliates, sub-contractors,
consultants and agents and duly notified to us (the "Leukosite Group") from time
to time, shall all individually undertake and warrant as follows:
(i) During the term of the Sub-Licence Agreement and the final Sub-Licence
Agreement, not to do any act or thing or through any omission use,
refer to or associate its/themselves with our company name, to bring
our Company name into disrepute or to do anything which would defame
our Company, or its name;
(ii) To immediately notify our Company if either it or they apply for or
have access from time to time through their sub-contractors and agents
to patent rights on any process or formulation invention arising from
its or their use(s) of the Know-How (as defined in the Sub-Licence) and
having application to products other than Campath IH and/or where our
Company may be blocked from using such process or formulation invention
in its development and manufacture of its other products other than
Campath 1H. Our Company shall have the right to take a non-exclusive
licence under such patent rights or analogous intellectual property
rights (exclusive of Campath IH) on reasonable terms to be agreed
including royalty payments which shall in no event exceed *;
(iii) to indemnify and hold and continue to indemnify and hold harmless our
Company, its Affiliates, directors and employees from time to
* Confidential treatment requested: material has been omitted and filed
separately with the Commission.
<PAGE> 3
-3-
time against any and all liability whatsoever and wheresoever in
respect of all acts and omissions in respect of the development,
production, use and/or sale of any products by LEUKOSITE or the
LEUKOSITE Group utilizing Campath 1H and/or any of the Know-How and/or
Drug Product and/or Drug Substance and/or Cell Culture Medium. The
indemnified party shall promptly notify the indemnifying party, who
shall have overall control and conduct of the defense, settlement or
compromise of all claims, Provided That the indemnifying party
regularly advises the indemnified party of the progress of such
defense, settlement or compromise and allows the indemnified party to
reasonably comment on such proceedings;
(iv) to obtain and maintain thereafter suitable insurance cover as set forth
in the sublicence agreement with BTG with sound and reputable
independent insurers at commercially reasonable levels of coverage in
relation to the various obligations and activities being undertaken.
You shall ensure that all your sub-contractors and agents from time to
time, likewise have similar suitable insurance covering activities by
them
(v) not to use the Materials, the Know-How, the Cell Line, Cell Culture
Medium, Drug Substance, Drug Product or the Critical Information (all
as defined in the Sub-Licence) for any purpose whatsoever except for
developing, using, making, having made and sell Campath 1H product and
you shall use best endeavors to ensure at all times that any
affiliates, subsidiaries, sub-contractors and agents from time to time
at all times comply with this provision;
(vi) to keep the Materials, the Know-How, the Cell Line, the Cell Culture
Medium and the Critical Information strictly confidential and secure at
all times and shall store the same separately from other information
and materials;
(vii) except as may be necessary to develop, make, register and sell Campath
1H product and subject to the provisions of sub-clause (x) below. not
to disclose or cause or authorize or permit the Materials, the
Know-How, the Cell Line, the Cell Culture Medium and the Critical
Information to be disclosed to any third party without first obtaining
our Company's prior written consent and to ensure at all times that all
your employees, consultants and experts from time to time prior to
being allowed access to the same are individually bound by similar
terms of confidentiality and non-use herein contained;
<PAGE> 4
-4-
(viii) not to reproduce transform or store any of the Know-How, Critical
Information or details of the Cell Culture Medium on an externally
accessible computer or electronic information retrievable system;
(ix) subject to the terms of the sub-licence agreement with BTG, in the
event the Sub-Licence is terminated, to return or destroy and ensure
your subsidiaries, affiliates. sub-contractors and agents from time to
time return or destroy to our Company's satisfaction the Know-How, the
Materials and the Cell Culture Medium, Drug Substance and Drug Product,
the Cell Line and Company information (all as defined in the
Sub-Licence) within thirty (30) days of our Company's written request
and in accordance with our Company's specific instructions and you will
issue a certificate signed by a director confirming that these
provisions have been complied with and shall ensure your subsidiaries,
affiliates, sub-contractors and/or agents from time to time (as
appropriate) issue a certificate signed by one of their directors
confirming that these provisions have been duly complied with;
(x) to promptly notify our Company, in advance where from time to time,
where you contract out the development/production of Campath 1H to a
subsidiary, affiliate or any third party sub-contractor or agent, prior
to such appointment(s) you shall on each occasion enter into an
agreement which includes similar provisions to those contained herein;
(xi) not to use Drug Product or Drug Substance transferred under the
Material Release Agreement for human therapeutic administration and
shall procure that its subsidiaries, affiliates, sub-contractors and
agents from time to time do not use Drug Substance or Drug Product for
human therapeutic administration.
Please indicate your agreement and acknowledgment of these provisions by signing
and returning to us the duplicate copy of this letter.
<PAGE> 5
-5-
Yours faithfully
For and on behalf of
THE WELLCOME FOUNDATION LIMITED
Signed: [signature appears here]
Name print:________________________
Position: _________________________
Accepted, acknowledged and agreed for and on behalf of
LEUKOSITE, INC.
Signed: [signature appears here]
Name print: _______________________
Position: __________________________
<PAGE> 6
ANNEX 1 TO PROFORMA WARRANTIES AND UNDERTAKINGS
KNOW-HOW
Contents
A. CRITICAL INFORMATION
Defined in the Material Release Agreement with Leukosite.
B. OTHER INFORMATION:-
(1) Clinical Trial Data
The Case Report Forms from the trials (photocopied at
Leukosite's expense).
The clinical database (transferred as SAS transfer files on
data tape).
(2) Cell and material stocks and reports on manufacturing process
(see attached).
(3) Other reports held in Glaxo Wellcome Documentation Centre.
(4) Other reports, not included in (3) above, supporting IND (list
to be added by end August).
C. LIST OF CLINICAL AND ACADEMIC INVESTIGATORS (to be added at Intended
Agreement stage)
<PAGE> 7
ATTACHMENT TO ANNEX I
B(2)
CELL AND MATERIAL STOCKS AND REPORTS ON MANUFACTURING PROCESS
1. Specification C1H.SPEC/1.150 Volume I Cell Banks 1 Sept 1994
2. Specification C1H.SPEC/1.150 Volume II Production 30 Aug 1994
Campath-1H Inventory - Building 138
<TABLE>
<CAPTION>
- ------------- --------------- -------------------- ------------------------ -------------- ------------- ----------------
BATCH HARVEST REVIVAL PROCESS TOTAL QUANTITY
NO. DATE BANK STAGE MG/ML* GRAMS (G)
- ------------- --------------- -------------------- ------------------------ -------------- ------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
- ------------- --------------- -------------------- ------------------------ -------------- ------------- ----------------
CH70 29/06/93 MCB1-WCB2 S-SEPH CONC 40.9 424.91 424.91
- ------------- --------------- -------------------- ------------------------ -------------- ------------- ----------------
CH78 25/10/94 MCB2-WCB1 VIRESOLVE 2.0 145.0 145.0
CYCLE 3 1.5
- ------------- --------------- -------------------- ------------------------ -------------- ------------- ----------------
CH78 25/10/94 MCB2-WCB1 S-SEPH CONC 41.4 70.38 70.38
- ------------- --------------- -------------------- ------------------------ -------------- ------------- ----------------
CH78 25/10/94 MCB2-WCB1 SUPERDEX 23.1 159.39 159.39
- ------------- --------------- -------------------- ------------------------ -------------- ------------- ----------------
</TABLE>
Campath-1H CTM Inventory
<TABLE>
<CAPTION>
- ------------------------------ ---------------------------- ----------------------------- ------------------------------
TOTAL VIALS
BATCH NO. FILLING DATA REVIVAL BANK (APPROXIMATE)
- ------------------------------ ---------------------------- ----------------------------- ------------------------------
<S> <C> <C> <C>
- ------------------------------ ---------------------------- ----------------------------- ------------------------------
A3227A Mar 94 MCB1 22,000 *
- ------------------------------ ---------------------------- ----------------------------- ------------------------------
</TABLE>
* the majority to be retained by Glaxo Wellcome
<PAGE> 8
-2-
Cell Bank
Reports on the stability of cells in culture are as follows:
<TABLE>
<CAPTION>
<S> <C> <C>
Growth and monoclonal antibody production by cells from the CM Bentley BZDR/93/001
second CHO Campath-1H Working Cell Bank.
Growth and monoclonal antibody production by cells from the CM Bentley BZDR/93/008
third CHO Campath 1-H Working Cell Bank.
Growth and monoclonal antibody production by Campath-1H S. Hay BZDR/95/007
producing CHO cells from the Mastre Cell Bank, CHO C1H 10.11.93.
Growth and monoclonal antibody production by Campath-1H N. Moy BZDR/95/008
producing CHO cells from Working Cell Bank, CHO 6/12/93.
</TABLE>
The inventory of cell banks is given in the table below:
<TABLE>
<CAPTION>
- ----------------------------------------------- ---------------- --------------------------------------------------------
LOCATION NUMBER TYPE
- ----------------------------------------------- ---------------- --------------------------------------------------------
<S> <C> <C>
- ----------------------------------------------- ---------------- --------------------------------------------------------
LIQUID NITROGEN, B119
- ----------------------------------------------- ---------------- --------------------------------------------------------
D1C5TD 50 CHO C1H 10.11.93 (MCB2)
- ----------------------------------------------- ---------------- --------------------------------------------------------
D1C5TC 47 CHO C1H 6.12.93 (1st WCB from MCB2)
- ----------------------------------------------- ---------------- --------------------------------------------------------
D1C3TB 50 DCC CTM post production cell banks
- ----------------------------------------------- ---------------- --------------------------------------------------------
LIQUID NITROGEN TPP, B115
- ----------------------------------------------- ---------------- --------------------------------------------------------
B115 (TPP) location B1 45 CHO C1H 10.11.93 [MCB2]
- ----------------------------------------------- ---------------- --------------------------------------------------------
B115 (TPP) location B2 43 CHO C1H 6.12.93 (1st WCB from MCB2)
- ----------------------------------------------- ---------------- --------------------------------------------------------
</TABLE>
Production
Other documents available:
<TABLE>
<CAPTION>
<S> <C> <C>
Campath-1H cell line selection for Master Cell Bank production CM Bentley BZDR/95/006
</TABLE>
<PAGE> 9
-3-
<TABLE>
<CAPTION>
<S> <C> <C>
The growth of Chines Hamster Ovary cells producing Campath-1H in CM Bentley BZDR/93/006
medium containing Methotrexate or Piritrexim (BM 301U)
Growth and monoclonal antibody production by cells derived from CM Bentley BZDR/94/003
the Master Cell Bank (C1H 3D44 10.8.90) in medium containing
Methotrexate and/or Piritrexim (BW 301U)
Potential impurities arising from the Campath-1H purification J Relton BZPP/95/002
process
Dilution of C-1H Inj. 10.mg/m1 with 5% Dextrose injection in PD Smith DPPP/94/001
previously empty sterilized vials
Summary report sanctioning changes to the Campath-1H Process to JS Courtenay BZPP/94/0042
be implemented at the onset of the Autumn 1994 production
campaign
</TABLE>
<PAGE> 1
EXHIBIT 10.13
MATERIAL RELEASE AGREEMENT
THIS AGREEMENT is made as of the 30th day of September 1996 BETWEEN THE WELLCOME
FOUNDATION LIMITED of Glaxo Wellcome House, Berkeley Avenue, Greenford,
Middlesex UB6 ONN, England trading as GLAXO WELLCOME RESEARCH AND DEVELOPMENT
(hereinafter called "WELLCOME") and LEUKOSITE, INC. of 215 First Street, Boston,
MA 02142, USA (hereinafter called "LEUKOSITE").
WHEREAS:
A. WELCOME has executed a Heads of Agreement with British Technology Group
Limited of even date hereof following its decision not to pursue its
further development of Campath 1H, concerning inter alia the transfer
of certain patents, cell culture medium, know how, cell line, drug
substance and drug product relating to an anti CD52 humanized
monoclonal antibody called Campath 1H which is produced from a cell
line obtained from the Chinese Hamster Ovary clone.
B. LEUKOSITE has executed a Heads of Agreement with British Technology
Group Limited of even dated hereof concerning its appointment as a
sublicensee of BTG in respect of the continued development and intended
commercialization of Campath 1H aforementioned in Recital A hereto.
C. Following signature of both the aforementioned Heads of Agreement and
conditional upon the Intended Agreements to be finally executed by both
Wellcome and Leukosite respectively with BTG, WELLCOME is agreeable to
releasing certain Critical Information to Leukosite in accordance with
the provisions of this Agreement.
D. LEUKOSITE intends to enter into an agreement with BTG relating to the
commercial exploitation of Campath 1H by LEUKOSITE and WELLCOME intends
to transfer Campath 1H to BTG who intend thereafter to sub-license the
rights to LEUKOSITE.
NOW THEREFORE, in consideration of the covenants and conditions herein
contained, THE PARTIES HEREBY AGREE AS FOLLOWS:
<PAGE> 2
1. DEFINITIONS AND INTERPRETATION
1.1 The following capitalized terms shall have the following
meanings in this Agreement unless the context required
otherwise.
1.1.1 "Agreement" means the Material Release Agreement
between The Wellcome Foundation Limited and Leukosite
Inc. respectively.
1.1.2 "Affiliate" means any company that is the holding
company, subsidiary or a subsidiary of the holding
company in question, as those term defined in Section
736 of the Companies Act 1985.
1.1.3 "Critical Information" means the material and
information listed in Annex I to this Agreement.
1.1.4 "Intended Agreements" means the sub-license agreement
between BTG and Leukosite and the agreement between
BTG and The Wellcome Foundation Limited concerning
the transfer to BTG of the Campath 1H Programme.
1.1.5 "Specified Purpose" means the evaluation of the
Critical Information by a sub-contractor of LEUKOSITE
of the sub-contractors manufacturing equipment and
techniques and which evaluation shall be limited to
assessment of cell growth productivity and stability
of expression, assessment of the purification system
and characterization of the antibody with a view to
the further development of Campath 1H.
1.2 The headings in this Agreement are inserted only for
convenience and shall not affect the construction hereof.
1.3 Where appropriate, words denoting a singular number only shall
include the plural and vice versa.
1.4 References to Sections, Clauses and Annexes are references to
Sections and Clauses of, and Annexes annexed to, this
Agreement;
-2-
<PAGE> 3
1.5 Annexed to this Agreement is Schedule 1: Critical Information.
2. RELEASE OF CRITICAL INFORMATION
2.1 Following execution of this Agreement by both parties hereto,
WELLCOME shall provide to LEUKOSITE, the Critical Information
and as soon as reasonably practicable.
2.2 The Critical Information is provided to LEUKOSITE strictly for
the Specified Purpose and subject to the conditions set forth
herein. Notwithstanding the foregoing, the Critical
Information shall at all times remain confidential.
3. CONFIDENTIALITY AND NON-USE
3.1 LEUKOSITE shall:
3.1.1 hold the Critical Information separately and securely
from other information and materials and in the
strictest of confidence at all times.
3.1.2 not disclose to, or allow any of its subsidiaries
affiliates, employees, subcontractors and/or agents
to use the Critical Information nor shall LEUKOSITE
allow any of its sublicensees, subsidiaries,
affiliates, employees, sub-contractors and/or agents
to use the Critical Information for any purpose other
than for the Specified Purpose.
3.2 Other than sublicensees and other than for the Specified
Purpose and provided that such sublicensee is bound by
confidentiality and non-use provisions at least as strict as
this Agreement, LEUKOSITE shall not disclose or cause or
authorize or permit the Critical Information to be disclosed
to any third party without first obtaining WELLCOME's prior
written consent.
3.3. LEUKOSITE shall ensure that all its employees, (including but
not limited to Dr. Lee Brettmann) consultants and experts
having access to the Critical Information shall be
individually bound in writing to an Agreement, of
-3-
<PAGE> 4
confidentiality and non-use at least as strict as this
Agreement.
3.4 LEUKOSITE shall not use, reproduce, transform or store any of
the Critical information on an externally accessible computer
or electronic information retrievable system or transmitting
it in any form or by any means whatsoever (with the exception
of facsimile where appropriate in the circumstances) outside
its place of business in USA.
3.5 LEUKOSITE shall only make copies of the Critical Information
to the extent that the same is strictly required for the
purposes hereof.
3.6 LEUKOSITE shall return or destroy and shall ensure its
sublicensees, sub-contractors, employees, consultants and
experts having access to the Critical Information return or
destroy to WELLCOME's complete satisfaction all Critical
Information and sub-unit derivative or product thereof within
thirty (30) days of termination of this Agreement.
3.7 In the event that LEUKOSITE or its employees make any
improvements, acquires or has access to or owns any
intellectual property rights relating to the Critical
Information ("the Rights") LEUKOSITE shall insofaras it can be
reasonably determined that LEUKOSITE is able to grant WELLCOME
a non-exclusive license under the Rights on reasonable terms
to be negotiated in good faith and reasonably agreed between
the parties.
3.8 The requirements and restrictions contained in this Clause
shall continue to apply after the termination or expiry of
this Agreement.
4. LIABILITY
4.1 No warranties or representations, expressed or implied, are
made by WELLCOME with regard to the Critical Information its
fitness for purpose, accuracy, completeness or its suitability
for any particular purpose. LEUKOSITE hereby accepts the
Critical Information on an "as is basis".
4.2 LEUKOSITE shall be fully responsible for the use of the
Critical Information for the Specified Purpose at all stages
-4-
<PAGE> 5
and for the results obtained therefrom. In no circumstances
will WELLCOME be held responsible or liable for the same.
LEUKOSITE shall indemnify and hold WELLCOME harmless against
all costs, claims, demands, loss, damage, liability or claims
by any person(s). WELLCOME shall give prompt notice to
LEUKOSITE of any such claim. LEUKOSITE shall control the
defense settlement or compromise of any such claim, unless the
parties mutually agree otherwise in writing.
5. TERM AND TERMINATION
5.1 This Agreement shall be effective from the date of signature
hereof and shall be coterminous with the Sublicense Agreement
between BTG and LEUKOSITE.
5.2 Following termination the provisions of Clause 3.7 shall
apply, unless the parties mutually agree otherwise in writing.
5.3 Termination of this Agreement shall not affect the obligations
concerning liability and confidentiality and non-use herein
contained.
6. ASSIGNMENT
LEUKOSITE may not assign its rights and obligations hereunder to any
third party who is not a party to this Agreement without the prior
written consent of WELLCOME, which consent shall not be unreasonably
withheld (it being understood that assignment to a competitor of
WELLCOME shall be a reasonable reason for withholding consent).
7. ACKNOWLEDGMENT
LEUKOSITE acknowledge hereunder that any breaches of its obligations
hereunder would cause irreparable damage to WELLCOME.
8. AMENDMENT
This Agreement may be only amended, extended or modified by written
agreement of the LEUKOSITE and WELLCOME authorized representatives.
-5-
<PAGE> 6
9. GOVERNING LAW
This Agreement shall be governed and construed in accordance with
English Law.
Accepted and Agreed
For and on behalf of
THE WELLCOME FOUNDATION LIMITED
Signed:[signature appears here]
Name(Print): ______________________
Position: _________________________
Accepted and Agreed
For and on behalf of
LEUKOSITE, INC.
Signed:[signature appears here]
Name(Print): ______________________
Position: _________________________
-6-
<PAGE> 7
ANNEX I
DETAILS OF THE CRITICAL INFORMATION BE RELEASED TO LEUKOSITE
1. Seven vials of Working Cell Bank derived from Master Cell Bank 2 and
known as CHO CIH 6.12.93.
2. Two grammes of MCB1 material in the form of filled quality assured
released vials together with quality control results, and a two gramme
sample of superdex monomer (the final stage before dilution and
filling) from MCB2 together with the provisional quality control
results for that batch.
3. One container of dry powdered medium.
4. Protocol(s) in respect of the Complement Mediated Cell Lysis (CMCL) and
the Antibody Dependent Cellular Cytoxicity (ADCC) tests.
-7-
<PAGE> 1
CONFIDENTIAL TREATMENT EXHIBIT 10.14
LEUKOSITE, INC.
CHRISTOPHER K. MIRABELLI, PH.D.
Chairman of the Board
Chief Executive Officer
October 7, 1996
Wendell Wierenga, Ph.D.
Senior Vice President, Research
Pharmaceutical Research Division
Warmer-Lambert/Parke-Davis
2800 Plymouth Rd.
Ann Arbor, MI 48106-1047
Dear Wendell:
As per our mutual interest in expanding our ongoing collaborative
relationship, below is a description and set of terms and conditions for a one
year collaborative agreement.
Scientific Plan
- - LeukoSite will establish assays in format for high throughput screening of
CCR5, an if and as reagents become available, CXCR4, and transfer these
assays to Parke-Davis.
- - Parke-Davis will screen the Parke-Davis compound collection for
antagonists.
- - LeukoSite will make monoclonal antibodies to CCR5 and evaluate inflammation
involvement of CCR5.
- - Parke-Davis and LeukoSite will collaborate, possibly with academic labs, on
devising secondary assays on binding and signaling of CCR5 and CXCR4,
including viral attachment mediated by these chemokine receptors.
- - Parke-Davis will evaluate the antiviral activity of compounds discovered in
the CCR5 and/or CXCR4 screens.
<PAGE> 2
Terms
- - The collaboration will terminate after one year from the signing of this
agreement letter, unless extended by mutual agreement.
- - During the one year term LeukoSite and Parke-Davis will work together on a
semiexclusive basis with regard to the screening and characterization of
compounds from the Parke-Davis and LeukoSite compound libraries.
LeukoSite will not enter into any other similar collaboration with a
commercial partner during the period except, LeukoSite will retain the
right to enter into an agreement with a third party with regard to
screening and discovery of small molecule antagonists for development and
commercialization in Japan.
Commercial Terms
- - Parke-Davis will pay LeukoSite a milestone of * if a compound is
discovered with antiviral activity with a 0.1 micromolar IC50 in a cellular
assay mutually agreed upon to demonstrate selective inhibition by a CCR5
(or CXCR4) mechanism. Alternatively, if this is reached and Parke-Davis
decides not to pursue the project further and elects not to pay this
milestone, the collaboration will terminate and LeukoSite will have
exclusive rights to use the results of the collaboration. Terms and
conditions for such rights to compounds found from the Parke-Davis Library
will be negotiated.
- - At the end of the one year, if there is mutual interest in continuing the
collaboration, Parke-Davis and LeukoSite will negotiate a research
collaboration agreement that includes milestone and royalty terms, similar
in format but, no greater in amount than in the MCP-1 agreement between the
companies. Parke-Davis will also agree to support research in the
collaborative area at LeukoSite, at an amount to be agreed upon at that
time.
- - If the collaboration terminates without LeukoSite and Parke-Davis reaching
an agreement on proceeding with the collaboration, both companies will be
free to continue independently with all of the results from the
collaboration. LeukoSite will have the right to find another partner to
work on the project, with no further obligations to Parke-Davis.
Parke-Davis will be obligated to pay LeukoSite the * milestone payment
if it proceeds with the project, independent from LeukoSite. If either
party commercializes a compound derived from a
*Confidential treatment requested: material has been omitted and filed
separately with the Commission.
-2-
<PAGE> 3
lead identified during the one-year collaborative period (alone or with
another partner) it will agree to pay the other a royalty or portion of
revenues received on the sale of the product. The royalty or portion of
revenues to be paid will be agreed to upon termination of the one year
agreement.
- - LeukoSite will not form a partnership with another party (on compounds
discovered from the Parke-Davis library) on more favorable terms than
offered to Parke-Davis.
- - The Parke-Davis isothiazolone, disulfide, and monosulfide compounds may be
used as tools in the collaboration, but will be excluded from commercial
terms of the agreement unless new compounds in this series are synthesized
in the collaboration.
LeukoSite's monoclonal antibodies may be used as tools in the collaboration
but will be excluded from commercial terms of the agreement.
Japan
- - In the one year collaboration term, LeukoSite will retain Japanese rights
for all results of the CCR5 and CXCR4 collaboration. During that time,
LeukoSite will explore possibilities to bring a Japanese company into a
three-way collaboration on this project. If there is no Japanese partner at
the end of the one year collaboration, LeukoSite and Parke-Davis will
include in negotiations the issue of whether Japanese rights are to be
included in the Parke-Davis license or whether LeukoSite would retain these
rights for license to a third party. In the event LeukoSite retains all
commercial rights in Japan it will agree to pay W-L a royalty on or portion
of revenues received on the sale by LeukoSite or its licensees of products
derived from a compound found from the Parke-Davis library or where
Parke-Davis chemistry effort is involved in lead optimization.
-3-
<PAGE> 4
For and on behalf of
LeukoSite,
Signed: [signature appears here]
Name (printed): Christopher K. Mirabelli
Position: CEO and Chairman, Board of Directors
Accepted, acknowledged and agreed for and on behalf of
Warner-Lambert/Parke-Davis
Signed: [signature appears here]
Name (printed):
Position:
-4-
<PAGE> 1
CONFIDENTIAL TREATMENT EXHIBIT 10.15
RESEARCH COLLABORATION AND LICENSE AGREEMENT
This Agreement is effective _____________________ , 1997 ("the
EFFECTIVE DATE") by and between Kyowa Hakko Kogyo Co. Ltd. (hereinafter referred
to as "KHK"), a corporation located at 6-1 Ohtemachl, 1-Chome, Chiyoda-Ku,
Tokyo. 100 Japan. and LeukoSite, Inc., a Delaware Corporation, located at 215
First Street, Cambridge, MA 02142 ("LKS").
WHEREAS, KHK is a healthcare company which develops, manufactures, and
markets pharmaceutical products for human healthcare throughout the world; and
WHEREAS, LKS is the owner or exclusive licensee of certain technology
and other proprietary, know-how related to PRODUCTS as hereinafter defined; and
WHEREAS, KHK desires to obtain an exclusive right and license in and to
such technology and proprietary know-how in the TERRITORY as hereinafter
defined; and
WHEREAS, KHK desires to support additional research in the FIELD as
hereinafter defined to be conducted by LKS; and
WHEREAS, LKS is willing to grant the exclusive right and license
desired by KHK and to, conduct the research supported by KHK.
NOW, THEREFORE, in consideration of the mutual promises and other good
and valuable consideration, the parties agree as follows:
SECTION I - DEFINITIONS.
The terms used in this Agreement have the following meaning:
<PAGE> 2
-2-
1.1 The term "AFFILIATE" as applied to either party shall mean any
company or other legal entity other than the party in question in whatever
country organized, controlling controlled by or under common control with that
party. The term "control" means ownership or control, directly or indirectly, of
at least fifty percent (50%) of the outstanding stock, voting rights or the
right entitled to elect or appoint directors.
1.2 The term "AGREEMENT YEAR" shall mean the twelve month period
beginning on the EFFECTIVE DATE, and each subsequent twelve (12) month period
thereafter
1.3 The term "COMPOUND" shall mean individually and collectively a CCR1
COMPOUND and a CXCR3 COMPOUND.
1.4 The term "CCR1 COMPOUND" shall mean a small molecule which inhibits
or acts as an antagonist of the receptor CCR1.
1.5 The term "CXCR3 COMPOUND" shall mean a small molecule which
inhibits or acts as an antagonist of the receptor CXCR3
1.6 The term "DEVELOPMENT" shall mean the conduct of all preclinical,
chemical. chemical syntheses, formulations, assays and validation, testing and
development in accordance with Good Laboratory, Clinical and Manufacturing
Practices insofar as the same are reasonably necessary to obtain marketing
approval for a PRODUCT's first approved indication in any country and performed
by either party hereto in accordance with the DEVELOPMENT PLAN.
1.7 The term "DEVELOPMENT CANDIDATE" shall have the meaning set forth
in Section 5.9.
<PAGE> 3
-3-
1.8 The term "DEVELOPMENT PLAN" shall mean the written description of
DEVELOPMENT for each AGREEMENT YEAR of this Agreement provided in Section 5.8.
1.9 The term "DIAGNOSTIC PRODUCTS" shall have the meaning set forth in
Section 2.2(f).
1.10 The term "EXTENDED TERRITORY" shall mean the entire world other
than the KHK TERRITORY.
1.11 The term "FIELD" shall mean the treatment of diseases
in humans.
1.12 The term "FIRST COMMERCIAL SALE" shall mean in each country of the
TERRITORY, the first sale to a THIRD PARTY, in connection with the nationwide
introduction of any PRODUCT by KHK, its AFFILIATES or SUBLICENSEES following,
marketing and/or pricing approval by the appropriate governmental agency for the
country in which the sale is to be made and. when governmental approval is not
required, the first sale in that country in connection with the nationwide
introduction of a PRODUCT in that country.
1.13 The term "IND" shall mean an Investigational New Drug application
filed with the United States Food and Drug Administration ("FDA") or a
comparable application in other countries.
1.14 The term "JOINT PATENT RIGHTS" shall have the meaning set forth in
Section 5.15(b).
1.15 The term "KHK TERRITORY" shall mean Japan, Peoples Republic of
China, Korea, Taiwan, India, Singapore, Malaysia, Cambodia, Myanamar,
Philippines, Thailand, Laos, Indonesia, Vietnam and Pakistan.
<PAGE> 4
-4-
1.16 The term "KHK PATENTS" shall mean any United States patent
application, including any division, continuation, or continuation-in-part
thereof and any foreign patent application or equivalent corresponding, thereto
and any Letters Patent or the equivalent thereof issuing thereon or reissue,
re-examination or extension thereof. including KHK's interest in JOINT PATENT
RIGHTS which is owned by or licensed to KHK and in and to which KHK has a
transferable interest during the term of this Agreement insofar as it contains
one or more claims to KHK TECHNOLOGY.
1.17 The term "KHK TECHNOLOGY" shall mean information and materials,
including but not limited to, inventions, whether patentable or not,
pharmaceutical, chemical and biological products, technical and nontechnical
data and information relating to the results of tests, assays, methods, and
processes, and drawings, plans, diagrams and specifications and/or other
documents containing such information and data owned by KHK or to which KHK has
a transferable interest on the EFFECTIVE DATE and/or prior to termination of
this Agreement and which are necessary or useful for the manufacture, use or
sale of a PRODUCT.
1.18 The term "LKS PATENTS" shall mean any United States patent
application. including any division, continuation. or continuation-in-part
thereof and any foreign patent application or equivalent corresponding thereto
and any Letters Patent or the equivalent thereof issuing thereon or reissue,
re-examination or extension thereof, including LKS's interest in JOINT PATENT
RIGHTS which is owned by or licensed to LKS and in and to which LKS has a
transferable interest during the term of this Agreement insofar as it contains
one or more claims to LKS
<PAGE> 5
-5-
TECHNOLOGY. The LKS Patents in effect on the EFFECTIVE DATE are set forth in
Appendix A, attached hereto and made a part hereof.
1.19 The term "LKS TECHNOLOGY" shall mean information and materials,
including but not limited to, inventions, whether patentable or not,
pharmaceutical, chemical and biological products, technical and nontechnical
data and information relating to the results of tests, assays, methods, and
processes, and drawings, plans, diagrams and specifications and/or other
documents containing such information and data owned by LKS or to which LKS has
a transferable interest on the EFFECTIVE DATE and/or during the term of this
AGREEMENT and which are necessary or useful for the manufacture, use or sale of
a PRODUCT.
1.20 The term "NET SALES" means the gross amount invoiced by KHK or
LKS in the case of Sections 2.2(d) and 12.8, its AFFILIATES and SUBLICENSEES for
sale or distribution of PRODUCT to THIRD PARTIES, less cost of freight and
freight insurance, (if billed separately), returns, rebates, sales taxes. excise
taxes, duties and allowances actually paid, including cash and trade discounts,
provided, however, that a sale or transfer to an AFFILIATE for re-sale by such
AFFILIATE shall not be considered a sale for the purpose of this provision but
the resale by such AFFILIATE shall be a sale for such purposes. A "sale" shall
also include a transfer or other disposition for consideration, but not such
transfers or dispositions for preclinical, clinical, regulatory, or governmental
purposes prior to receiving marketing approval. In the event that consideration
in addition to or in lieu of money is received for PRODUCT, such consideration
shall be added to the NET SALES. To the extent that a PRODUCT is sold in other
than an arms length transaction. NET SALES
<PAGE> 6
-6-
shall be the fair market value of such PRODUCT if sold in an arms length
transaction. PRODUCT shall be considered "sold" at the earlier of (a) the
transfer of title in such PRODUCT to a person other than an AFFILIATE of such
party as aforesaid; or (b) the shipment of such PRODUCT from the manufacturing
or warehouse facilities of such party or its AFFILIATE to a customer.
1.21 The term "PATENT RIGHT(S)" shall mean individually and
collectively, KHK PATENTS, LKS PATENTS and JOINT PATENT RIGHTS.
1.22 The term "PRODUCT" shall mean any article, composition, material,
method, process or service in the FIELD which is or incorporates or utilizes a
COMPOUND.
1.23 The term "RESEARCH" shall mean the research performed by either
party in accordance with the RESEARCH PLAN, as amended from time to time by
agreement of the parties.
1.24 The term "RESEARCH PLAN" shall mean the written description of
RESEARCH for the first AGREEMENT YEAR and for each subsequent AGREEMENT YEAR of
the Research Collaboration as set forth in Appendix B attached hereto and made a
part hereof.
1.25 The term "RESEARCH TERM" shall mean the term of the Research
Collaboration as set forth in Section 5.13.
1.26 The term "SUBLICENSEE" shall mean any non-AFFILIATE THIRD PARTY
licensed by KHK to make. have made, import, use or sell any PRODUCT.
1.27 The term "TARGET" shall mean the chemokine receptor of CCR1 and/or
CXCR3.
<PAGE> 7
-7-
1.28 The term "TERRITORY" shall mean the KHK TERRITORY and the EXTENDED
TERRITORY.
1.29 The term "THIRD PARTY(IES)" shall mean a person or entity who or
which is neither a party hereto nor an AFFILIATE or SUBLICENSEE of a party
hereto.
1.30 The term "VALID CLAIM" shall mean (i) a claim of a pending patent
application or (ii) a claim of an issued patent which has not lapsed or become
abandoned or been declared invalid or unenforceable by a court of competent
Jurisdiction or an administrative agency from which no appeal can be or is
taken.
1.31 The term "WL" shall mean the Warner Lambert Company.
1.32 The term "WL PATENT" shall mean any United States patent
application, including any division, continuation, or continuation-in-part
thereof and any Foreign patent application or equivalent corresponding thereto
and any Letters Patent or the equivalent thereof issuing thereon or reissue,
re-examination or extension thereof, including WL's interest in joint patent
rights, which JOINT PATENT RIGHTS are defined in Section 1. 14 and 5.15(b) and
which is owned by or licensed to WL and in and to which WL has a transferable
interest during the term of this Agreement insofar as it contains one or more
claims to WL TECHNOLOGY.
1.33 The term "WL TECHNOLOGY" shall mean information and materials,
including but not limited to, inventions, whether patentable or not.
pharmaceutical. chemical and biological products. technical and non- technical
data and information relating to the results of tests, assays, methods, and
processes, and drawings. plans, diagrams and specifications
<PAGE> 8
-8-
and/or other documents containing such information and data owned by WL or to
which WL has a transferable interest on the effective date of the Agreement
between WL and KHK and/or during the term of any sublicense agreement with KHK
and which are necessary or useful for the manufacture, use or sale of a PRODUCT.
1.34 The use herein of the plural shall include the singular, and the
use of the masculine shall include the feminine.
SECTION 2 - GRANT.
2.1 Unless this Agreement has already been terminated as set forth
herein, upon the selection by the parties of a COMPOUND for DEVELOPMENT under
Section 5.9, LKS shall grant to KHK and KHK shall accept from LKS an exclusive
royalty bearing right and license for the KHK TERRITORY under LKS' interest in
LKS TECHNOLOGY and LKS PATENTS to make, have made, use, sell, offer to sell or
import PRODUCTS containing the selected COMPOUND or COMPOUNDS in the
KHK TERRITORY but only for use in the KHK TERRITORY. At such time as KHK grants
a sublicense pursuant to Section 2.2(c) and for the duration of such sublicense,
the grant set forth herein shall also be applicable to the EXTENDED TERRITORY.
2.2 (a) Subject to Paragraph 2.2(b) KHK shall be entitled to extend the
license granted herein to AFFILIATES and to sublicense THIRD PARTIES but only
for the KHK TERRITORY.
In case of a license which has been extended to AFFILIATES or
sublicensed to a SUBLICENSEE, such AFFILIATES and SUBLICENSEES shall be bound by
all terms and conditions of this
<PAGE> 9
-9-
Agreement. KHK shall advise LKS of any such extension to AFFILIATES or
sublicenses to SUBLICENSEES and provide LKS with a copy of any sublicense within
sixty (60) days of execution of such sublicense.
(b) KHK shall guarantee and be responsible for the payment of all
royalties due and the making of reports under this Agreement by reason of sales
of any PRODUCTS by its AFFILIATES and SUBLICENSEES and their compliance with all
applicable terms of this Agreement. Performance or satisfaction of any
obligations of KHK under this Agreement by any of its AFFILIATES or SUBLICENSEES
shall be deemed performance or satisfaction of such obligations by KHK.
(c) The parties hereto acknowledge that KHK is negotiating with
Warner-Lambert Company ("WL") in order to sublicense to WL rights to develop
PRODUCTS in the TERRITORY in return for certain rights to KHK in such territory
already granted to WL by LKS. It is understood that any such agreement will
provide that WL will have six (6) months from the selection of a DEVELOPMENT
CANDIDATE by the parties hereto to obtain a sublicense under this Agreement. In
the event a sublicense is not granted within said six (6) month period, KHK's
rights to grant such sublicense in the EXTENDED TERRITORY shall terminate.
However, in the event such an agreement is executed between KHK and WL as
provided herein, the grant to KHK under Section 2.1 to KHK shall be applicable
to the EXTENDED TERRITORY in order to permit KHK to sublicense such rights to
WL, provided that if, at any time, such sublicense rights granted to WL
terminate, the rights granted to KHK under Section 2.1 shall thereafter be
limited to the KHK TERRITORY and
<PAGE> 10
-10-
all rights for the DEVELOPMENT of such PRODUCT in the EXTENDED TERRITORY shall
belong solely to LKS.
(d) During the term of this Agreement and during such time as LKS
retains rights with regard to PRODUCTS in the EXTENDED TERRITORY and subject to
Section 12.8, KHK will grant to LKS an exclusive sublicenseable, royalty-bearing
right and license for the EXTENDED TERRITORY under KHK PATENTS and KHK
TECHNOLOGY to make, have made, use, sell, offer to sell or import PRODUCTS for
use in the EXTENDED TERRITORY. The royalty shall be negotiated by the parties in
good faith but in no event shall such royalty be greater than * of NET SALES. In
addition, in the event KHK and WL do not enter into an agreement as set forth in
Section 2.2(c) or in the event such agreement terminates and in each case LKS
retains rights to PRODUCTS in the EXTENDED TERRITORY, the milestone payments
payable under Section 7.4 (ii), (iii) and (iv) shall be reduced by (*).
(e) For the avoidance of doubt, in the event of a sublicense by KHK to
WL, Section 2.1(a) and (b) shall be applicable to such sublicense and such
sublicense shall provide for a transfer of WL TECHNOLOGY and WL PATENTS to KHK
and/or LKS in the event of termination of such sublicense. In addition, the
sublicense shall provide that LKS shall be a third party beneficiary of such
sublicense and such sublicense shall terminate in the event this Agreement
terminates.
(f) LKS hereby grants to KHK an exclusive option during the RESEARCH
TERM to negotiate an agreement to research, develop, manufacture and sell
DIAGNOSTIC PRODUCTS (i.e., reagents in
* Confidential treatment requested: material has been omitted and filed
separately with the Commission.
<PAGE> 11
-11-
combination with COMPOUNDS for the purpose of the diagnosis of disease in
humans). This option may be exercised at any time during the RESEARCH TERM on
written notice to LKS. Upon receipt of such notice, the parties will negotiate
for ninety (90) days thereafter, in good faith, the terms of such an agreement.
If the parties cannot reach an agreement within said ninety (90) days, neither
party will have any further obligation with respect to such DIAGNOSTIC PRODUCTS.
SECTION 3 - DUE DILIGENCE.
3.1 (a) KHK shall initiate and diligently use best efforts to develop
and register PRODUCTS and continue to use its best efforts to market and sell
PRODUCTS in the KHK TERRITORY and if licensed, also in the EXTENDED TERRITORY,
as the case may be.
(i) KHK shall provide written progress reports within fifteen
(15) days of the 1st of January of each calendar year (ending for each
particular PRODUCT with the FIRST COMMERCIAL SALE of that particular PRODUCT),
indicating efforts (including research and development manpower) and progress
toward achieving research tasks and DEVELOPMENT milestones described in the
RESEARCH and DEVELOPMENT PLANS.
(ii) Upon selection of a DEVELOPMENT CANDIDATE, the parties
shall agree that KHK shall meet the certain milestones including the following:
File an IND for one PRODUCT and Initiate Phase IIb/III Clinical Trials for one
PRODUCT with the timing for meeting such milestones to be agreed upon in the
DEVELOPMENT PLAN provided for in Section 5.8.
<PAGE> 12
-12-
(b) In the event that KHK falls to meet any of its obligations under
Section 3.1 (a) with respect to PRODUCT or advises LKS that it does not have a
significant interest in developing, marketing or selling a PRODUCT or does not
intend to develop, market or sell a PRODUCT, LKS shall have the right and option
to terminate this Agreement on sixty (60) days prior written notice.
(c) KHK shall provide written reports to LKS on June 30th and December
31st of each year concerning the efforts being made in accordance with this
Section with respect to PRODUCTS in each country of the TERRITORY. KHK shall
provide LKS with any additional information reasonably requested by LKS in this
respect.
(d) As part of KHK's obligations under this Section, KHK shall provide
to LKS, both prior to and after marketing PRODUCT, its marketing plans and sales
forecasts for each PRODUCT to be sold in the TERRITORY and/or the EXTENDED
TERRITORY, as the case may be.
3.2 LKS will use its best efforts to complete the RESEARCH pursuant to
the terms of Section 5.
3.3 To the extent LKS TECHNOLOGY and/or PATENT RIGHTS licensed to KHK
under this Agreement have been licensed by LKS from a THIRD PARTY under an
agreement with such party, ("Other Party Agreement(s)"), KHK understands and
agrees as follows:
(i) The rights licensed to KHK by LKS are subject to the
terms, limitations, restrictions and obligations of the Other Party
Agreement(s).
(ii) KHK will comply with the terms, obligations, limitations
and restrictions of the Other Party Agreement(s), except that
<PAGE> 13
-13-
the compensation terms set forth in this Agreement shall be the only
compensation payable to LKS by KHK hereunder.
SECTION 4 - CONFIDENTIALITY AND ADVERSE EXPERIENCES.
4.1 During the term of this Agreement, it is contemplated that each
party may disclose to the other, proprietary and confidential technology,
inventions. technical information, material, reagents, biological materials and
the like which are owned or controlled by the party providing such information
or which that party is obligated to maintain in confidence and which is
designated by the party providing such information as confidential
("Confidential Information"). Each party shall have the right to refuse to
accept the other party's Confidential Information. Each party agrees not to
disclose and to maintain the Confidential Information in strict confidence, to
cause all of its agents, representatives and employees to maintain the
disclosing party's Confidential Information in confidence and not to disclose
any such Confidential Information to a third party without the prior written
consent of the disclosing party and not to use such Confidential Information for
any purpose other than as licensed under this Agreement.
4.2 The obligations of confidentiality will not apply to information
which:
(i) was known to the receiving party or generally known to the
public prior to its disclosure hereunder through no fault of the disclosing
party or any agent, representative or employee thereof, or
<PAGE> 14
-14-
(ii) subsequently becomes known to the public by some means
other than a breach of this Agreement, including publication and/or laying open
to inspection of any patent applications or patents;
(iii) is subsequently disclosed to the receiving party by a
third party having a lawful right to make such disclosure and who is not under
an obligation of confidentiality to the disclosing party;
(iv) is required by law, rule, regulation or bona fide legal
process to be disclosed. provided that the disclosing party takes all reasonable
steps to restrict and maintain confidentiality of such disclosure and provides
reasonable notice to the non-disclosing party; or
(V) is approved for release by the parties.
4.3 The obligations of Section 4.1 notwithstanding, KHK or LKS, as the
case may be, may disclose the Confidential Information licensed hereunder. to
THIRD PARTIES who (i) need to know the same in order to secure regulatory
approval for the sale of PRODUCT, (ii) who need to know the same in order to
work towards the commercial development of PRODUCT, or (iii) who are approved by
LKS or KHK, as the case may be, provided that such parties are bound by
obligations of confidentiality and non-use at least as stringent as set forth
herein.
4.4 Each party will keep the other informed of all reports of Adverse
experiences ("AE's") coming to its knowledge and possibly related to PRODUCT.
All reports of AE's which are serious or unexpected shall be forwarded to the
other party immediately and/or in sufficient time to properly notify the
regulatory authorities.
<PAGE> 15
-15-
SECTION 5 - RESEARCH AND DEVELOPMENT COLLABORATION.
5.1 Object. As soon as practical after the EFFECTIVE DATE, a research
and development collaboration shall be established to discover and commercialize
COMPOUND(S) in the FIELD (the "Collaboration"). Each party agrees to conduct the
RESEARCH and DEVELOPMENT to be performed and KHK agrees to support and fund the
RESEARCH in accordance with the terms and conditions set forth below.
5.2 Oversight of the RESEARCH
(a) Oversight. The RESEARCH will be overseen and monitored by the
Committee described herein (the "Research Committee").
(b) Membership. Within ten (10) days of the EFFECTIVE DATE, LKS and KHK
shall each appoint three (3) persons (or such other number of persons as the
parties may determine) to serve on the Research Committee. Such representatives
will be qualified, by reason of background and experience. to assess the
scientific progress of the RESEARCH. Each party will have the right to change
its representation on the Research Committee upon written notice sent to the
other.
(c) Chair. The Research Committee will be chaired by one representative
of each party during each six (6) month period of the RESEARCH TERM. During the
first six (6) months the Research Committee will be chaired by a representative
of LKS.
(d) Responsibilities. The Research Committee will have authority to:
(i) review and approve the RESEARCH PLAN for each AGREEMENT
YEAR prepared by LKS;
<PAGE> 16
-16-
(ii) make recommendations regarding the performance and the
conduct of the RESEARCH pursuant thereto, and monitor performance thereunder:
(iii) modify the RESEARCH PLAN;
(iv) review any and all proposed publications or
communications relating to the Collaboration and the results therefrom. in
accordance with the procedure set forth in this Section 5;
(v) review any and all proposed filing or patent applications
in connection with the RESEARCH.
5.3 Meetings. The Research Committee will meet not less than two (2)
times a year during the RESEARCH TERM of the, at such dates, times and places as
agreed to by the parties. At such meetings, the Research Committee will discuss
the RESEARCH and the performance under the Collaboration, evaluate the results
thereof and set priorities therefor. All decisions made or actions taken by the
Research Committee will be made unanimously by its members with the LKS members
cumulatively having one vote and the KHK members cumulatively having one vote
each. The Committee will prepare written minutes of each meeting and a written
record of all decisions whether made at a formal meeting or not.
5.4 Committee Deadlock. If there are issues on which the Research
Committee cannot reach agreement because of a Deadlock (as hereinafter defined),
such matters will be submitted to the President and CEO of LKS and KHK. In the
event agreement cannot be reached at this level, the Deadlock shall be resolved,
in good faith, by KHK.
<PAGE> 17
-17-
For the purpose of this Section 5.4, "Deadlock" will mean, (i) with
respect to any matter considered and voted upon by the Research Committee, that
one party votes in favor of such matter and the other party does not vote in
favor of such matter or (ii) a quorum cannot be established for the Committee to
vote on a matter.
5.5 (a) Conduct of the Collaboration. RESEARCH and DEVELOPMENT will be
conducted at appropriate sites approved by the Research Committee.
(b) LKS will be responsible for conducting the biological (i.e.
molecular biology, cell biology, in vitro and in vivo pharmacology) and
chemistry (i.e. screening of LKS compound libraries, synthetic chemistry,
molecular modeling) research in the FIELD RESEARCH activities will also go on at
KHK. The nature of these activities [eg compound/natural product library
screening pharmacology, medicinal chemistry] and how and where they shall be
conducted shall be determined by the Research Committee and set forth in the
RESEARCH PLAN.
5.6 (a) Conduct of Development. LKS will, at no cost to LKS,
participate in DEVELOPMENT to the extent it desires to do so, provided however,
that the level of LKS' participation will be defined by the Development
Committee described below at the end of the research and discovery phase of the
COLLABORATION.
(b) KHK will be responsible for all preclinical and clinical
development costs both within the KHK TERRITORY and in the EXTENDED TERRITORY.
(c) KHK will have the right to assign (up to 2) KHK scientists at any
one time at LKS during the collaborative period. KHK will bear all
<PAGE> 18
-18-
costs related to such scientists, excluding indirect laboratory and overhead
costs.
5.7 Development Committee. Prior to the selection of a COMPOUND for
DEVELOPMENT, a Development Committee shall be established by the parties hereto.
The Development Committee shall be comprised of seven (7) persons, with four (4)
being appointed by KHK and the other three (3) being appointed by LKS. Such
member(s) of the Development Committee may be replaced by the party appointing
the member(s) with prior written notice to the other party. Any increase or
decrease in the number of the members of Development Committee shall be decided
by the Development Committee. All decisions of the Development Committee shall
require a majority vote of all of the members of the Development Committee. Once
established, the Development Committee will meet at least quarterly to evaluate
and discuss the Development of PRODUCTS. The chairperson of the Development
Committee will be appointed by KHK among the members of the Development
Committee.
5.8 Responsibility of the Development Committee. The purpose of the
Development Committee shall be to coordinate and expedite the DEVELOPMENT of
COMPOUNDS into commercially successful PRODUCTS in the TERRITORY. The parties
shall establish the DEVELOPMENT PLAN setting forth the strategy, schedule and
objectives for DEVELOPMENT of COMPOUNDS selected for the DEVELOPMENT of PRODUCTS
in the TERRITORY and submit the plan to the Development Committee. The
Development Committee shall review and revise the DEVELOPMENT strategy for such
PRODUCTS.
<PAGE> 19
-19-
The DEVELOPMENT PLAN shall be updated at least annually. KHK shall
keep the Committee regularly informed and consult with the Development Committee
no less frequently than quarterly with respect to KHK's clinical and regulatory
activity relative to PRODUCTS.
5.9 Selection of COMPOUNDS for DEVELOPMENT. As long as the Development
Committee is in existence, the Development Committee shall be responsible for
the selection of COMPOUNDS for development in the KHK TERRITORY which shall take
place upon a decision to proceed to GLP Technology and other safety/PK studies
required for submission of an IND or foreign equivalent ("DEVELOPMENT
CANDIDATE"). The Development Committee may select any COMPOUND for DEVELOPMENT
resulting from RESEARCH; provided however that such selection shall take place
no later than the end of the third AGREEMENT YEAR of the Agreement or all rights
granted herein and this Agreement shall terminate forthwith.
5.10 Financial Conditions.
(a) Support Commitment. Unless terminated prior to the end of the
RESEARCH TERM during the term of the Collaboration, KHK will provide funding to
LKS for RESEARCH in the amount of (i) * for the first AGREEMENT YEAR; (ii) * for
the second AGREEMENT YEAR (or * United States dollars * if two TARGETS are
pursued plus an agreed upon amount for the additional research which will be
necessary in such event) and (iii) * for the third AGREEMENT YEAR if KHK
determines to extend the RESEARCH TERM plus an
* Confidential treatment requested: material has been omitted and filed
separately with the Commission.
<PAGE> 20
-20-
agreed upon amount for the additional research which will be necessary if two
(2) TARGETS are selected. The aforesaid funding will be inclusive of all costs
incurred by LKS implementing the RESEARCH PLAN at LKS.
(b) Payment Schedule. The support payments set forth above will be
payable by KHK annually in advance, with the First payment to be made on the
EFFECTIVE DATE hereof. However, * which the parties acknowledge has already been
received by LKS will be deducted from the aforesaid payment, therefore the
actual payment for the first AGREEMENT YEAR will be *.
(c) At the end of the First AGREEMENT YEAR KHK will pay LKS the second
payment of *(or *) if two TARGETS are selected and the agreed upon amount for
the additional research which will be necessary in such event) to support a
portion of RESEARCH at LKS in order to identify a small molecule compound for
development.
(d) At the end of the second AGREEMENT YEAR KHK shall make the *
payment for the third AGREEMENT YEAR plus an agreed upon amount for additional
research in the event two (2) TARGETS are selected in the event KHK agrees to
extend the RESEARCH TERM.
5.11 No Conflict With Research and Title to Equipment. LKS agrees that
the RESEARCH funds provided by KHK will be applied to the RESEARCH and may not,
without KHK prior written approval, be used in
* Confidential treatment requested: material has been omitted and filed
separately with the Commission.
<PAGE> 21
-21
support of any other research at LKS. LKS will retain title to any equipment
purchased with funds provided by KHK under this Agreement, if such purchase is
mutually agreed upon as part of the RESEARCH budget.
5.12 Reports, Records and Unexpended Research Funding.
(a) In the event LKS does not expend the amounts provided by KHK
pursuant to this Section 5 for RESEARCH for an AGREEMENT YEAR during the
RESEARCH TERM such amounts will be retained by LKS for use in a future AGREEMENT
YEAR or YEARS; provided that any amounts not expended by the end of the RESEARCH
TERM shall be repaid by LKS to KHK in the event the Agreement is terminated at
that time or credited against the milestone payment set forth in Section
7.2(iii); and provided further that the total amount to be credited under this
Section 5.12(a) shall not exceed a total of * for each of the two AGREEMENT
YEARS of the initial RESEARCH TERM.
(b) LKS shall provide and submit to KHK summary reports on a
semi-annual basis of the amounts expended for and a description of the work
performed in RESEARCH. The records on which such reports are based may be
reviewed no more than once each year, during normal business hours, by an
independent auditor selected by KHK and reasonably acceptable to LKS. All
information disclosed in such a review shall be deemed Confidential Information
of LKS.
5.13 Term and termination of the Research Collaboration.
The term of the Research Collaboration will be two (2) years from the
EFFECTIVE DATE hereof unless extended by mutual agreement.
*Confidential treatment requested: material has been omitted and filed
separately with the Commission.
<PAGE> 22
-22-
Either party may request an extension of up to one (1) year under terms set
forth herein.
(a) The initial stage ("Stage I") of the RESEARCH will have a term of
one year. At the end of one year, KHK will have the option to (i) select a
target either CCRI or CXCR3 for the second stage of RESEARCH ("Stage 2") and
terminate its rights to obtain a license and this Agreement with respect to the
TARGET which it has not selected, (ii) select both TARGETS or (iii) terminate
this Agreement. In the event KHK elects to continue the RESEARCH into Stage 2
the parties will work together during the next AGREEMENT YEAR or any mutually
agreed upon AGREEMENT YEARS to identify COMPOUND(S) for DEVELOPMENT KHK will
have the right to terminate Stage 2 of the RESEARCH at the end of each AGREEMENT
YEAR on prior written notice, as provided in Section 12.8.
(b) KHK shall be entitled to terminate the RESEARCH and cease funding
thereof in the event of a material breach by LKS of any of LKS's obligations and
covenants hereunder following written notice of such breach to LKS. If such
breach is not cured within thirty (3O) days after written notice is given by KHK
to LKS specifying the breach, KHK may terminate the RESEARCH and cease funding
hereunder forthwith upon written notice to LKS after expiration of such thirty
(30) day period, in which case KHK will not be responsible for any actual and
noncancelable expenditures of LKS unpaid to the date of termination and the
remedies set forth in this paragraph shall be KHK's sole and exclusive remedies
for such breach under this Agreement.
<PAGE> 23
-23-
(c) In the event that the RESEARCH is terminated pursuant to Section
5.13(b), LKS's right to receive any unpaid balance otherwise committed by KHK as
support commitment hereunder will become forfeited and no further payments with
respect to the RESEARCH will be due to LKS by KHK except to the extent that such
funds are necessary to pay actual and non-cancelable obligations of LKS accrued
to that date.
(d) LKS may terminate RESEARCH and/or DEVELOPMENT for breach by KHK of
its obligations hereunder in which case this Agreement and all licenses and
rights granted herein shall terminate forthwith.
5.14 Confidentiality. In order to facilitate the operation of RESEARCH
and/or DEVELOPMENT either party may disclose confidential or proprietary
information owned or controlled by it to the. other. It is hereby understood and
agreed that such information shall be deemed "Proprietary Information" and
treated as such in accordance with Section 4 hereof.
5.1 5 Results of the Research Collaboration.
(a) All right, title and interest in and to any new or useful process,
manufacture, compound or composition of matter, materials, Information, data,
inventions and know-how, patentable or unpatentable, or any improvement thereof,
conceived or first reduced to practice, or demonstrated to have utility during
the conduct of the Collaboration (the "Results"), and any patent applications or
patents based thereon, solely by employees or others acting on behalf of LKS
shall be owned solely by LKS ("LKS Results"), and solely by employees or others
acting on behalf of KHK shall be owned solely by KHK ("KHK Results").
<PAGE> 24
-24-
(b) The Parties recognize that, as a result of the Collaboration
between KHK and LKS hereunder, certain Results may be deemed to be joint
inventions, in accordance with applicable law, as both:
(i) one or more employees or agents of LKS or any other
persons obliged to assign such Results to LKS, and
(ii) one or more employees or agents of KHK or any other
persons obliged to assign such Results to KHK, are joint inventors of such
Results ("Joint Results"). In that event, the Parties shall jointly own patents,
inventor's certificates and applications therefor covering such Joint Results
("JOINT PATENT RIGHTS").
(c) To the extent that any LKS Results or Joint Results are necessary
to make, have made, use or sell PRODUCTS, LKS' interest in such Results shall be
included in PATENT RIGHTS licensed to KHK in the TERRITORY or EXTENDED
TERRITORY, as the case may be, under this Agreement. To the extent that any KHK
Results or Joint Results are necessary to make, use or sell PRODUCTS. KHK's
interest in such Results as well as KHK PATENTS and KHK TECHNOLOGY shall be
exclusively licensed to LKS in the EXTENDED TERRITORY to the extent LKS retains
rights in such TERRITORY under this Agreement.
(d) Any Result that a party believes may involve a patentable invention
or a preliminary finding of scientific significance will be promptly disclosed
to the Other Party at the earliest practicable time.
(e) There will be no publication of the Results by LKS or KHK, or any
LKS or KHK employee unless the Research Committee has reviewed the proposed
scientific publication concerning the Results. A party will, upon request by the
other party, delay publication to enable patent rights
<PAGE> 25
-25-
to be perfected, but in no event shall such delay exceed sixty (60) days from
the time the publication was submitted to the receiving party.
SECTION 6 - PATENTS.
6.1 (a) Each party shall promptly advise the other party in writing of
each invention arising from the Collaboration. Representatives of LKS and KHK
shall then discuss whether a patent application or applications pertaining to
such invention should be filed and in which countries. The titles, serial
numbers and other identifying data of patent applications claiming an invention
to which KHK is granted rights hereunder and filed after the EFFECTIVE DATE by
mutual agreement of LKS and KHK, shall be listed in Appendix A and shall become
LKS PATENTS.
(b) LKS at its cost and expense shall file, prosecute and maintain LKS
PATENTS through patent counsel selected by LKS, who shall consult with and keep
KHK advised with respect thereto. provided that the costs and expenses paid by
LKS for LKS PATENTS conceived or reduced to practice after the EFFECTIVE DATE
will be included as part of the support commitment set forth in Section 5.10 and
paid out of such funding.
(c) After the EFFECTIVE DATE, all costs and expenses incurred under
this Section with respect to JOINT PATENT RIGHTS and KHK PATENTS will be paid by
KHK.
(d) Included in patent costs are all reasonable costs for the
prosecution, issuance, and maintenance of such applications and patents issuing
thereon, and any divisional, continuation-in-part, reissue
<PAGE> 26
-26-
applications or patents, patents-in-addition, patents-of-revalidation or the
registrations of any patent or the like.
(e) Notwithstanding anything in this Section, KHK may, at its
discretion, elect to discontinue financial support of any patent or patent
application, provided, however, that prior to taking such action, KHK will
notify LKS of its intention at least ninety (90) days prior to the date on which
any payment or action is due. In any country in which KHK has elected to
discontinue its support of any patent application or patent. LKS, upon receiving
notice, may elect at its own expense to assume all financial responsibility for
the prosecution or maintenance of such patent application or patent. In such
event the license of the patent or patent application will be deemed to have
expired with respect to that country upon LKS's receiving notice of KHK's
decision. If any such patent or patent application is based upon a Joint Result,
then KHK shall promptly thereafter assign all of its rights and interest in any
such patent or patent application to LKS without further cost or obligation of
LKS to KHK.
6.2 With respect to any PATENT RIGHTS, each patent application, office
action, response to office action, request for terminal disclaimer, and request
for reissue or reexamination of any patent issuing from any such application
shall be provided to the other party sufficiently prior to the Filing of such
application, response or request to allow for review and comment by such party.
The owner of the patent application or patent shall have the right to take any
action that in its judgment is necessary to preserve such rights.
6.3 (a) If any of the PATENT RIGHTS under which KHK is licensed
hereunder is infringed by a THIRD PARTY in the TERRITORY,
<PAGE> 27
-27-
KHK shall have the right and option but not the obligation to bring an action
for infringement, at its sole expense, against such third party in the name of
LKS and/or in the name of KHK, and to LKS as a party plaintiff if required. KHK
shall promptly notify LKS of any such infringement and shall keep LKS informed
as to the prosecution of any action for such infringement. No settlement,
consent or other voluntary final disposition of the suit which adversely affects
LKS PATENTS may be entered into without the consent of LKS, which consent shall
not unreasonably be withheld.
(b) In the event that KHK shall undertake the enforcement and/or
defense of the PATENT RIGHTS under which KHK is licensed hereunder by litigation
any recovery of damages by KHK for any such suit shall be applied first in
satisfaction of any unreimbursed expenses and legal fees of KHK relating to the
suit. The balance remaining from any such recovery shall be divided equally
between KHK and LKS.
(c) In the event that KHK elects not to pursue an action for
infringement, upon written notice to LKS by KHK that an unlicensed THIRD PARTY
is an infringer of a VALID CLAIM of PATENT RIGHTS licensed to KHK, LKS shall
have the right and option, but not the obligation at its cost and expense to
initiate infringement litigation and to retain any recovered damages.
(d) In any infringement suit either party may institute to enforce the
PATENT RIGHTS pursuant to this Agreement, the other party hereto shall, at the
request of the party initiating such suit, cooperate in all respects and. to the
extent possible, have its employees testify when requested and make available
relevant records, papers, information,
<PAGE> 28
-28-
samples, specimens, and the like. All reasonable out-of-pocket costs incurred in
connection with rendering cooperation requested hereunder shall be paid by the
party requesting cooperation.
SECTION 7 - ROYALTIES AND OTHER COMPENSATION.
7.1 (a) KHK shall pay to LKS royalties on the annual NET SALES of
PRODUCTS sold by KHK, its AFFILIATES and SUBLICENSEES in the TERRITORY as
follows: * of NET SALES up to *, * of NET SALES over * and less than * and
* of NET SALES * or over.
(b) Such royalties shall be paid as set forth above by KHK, on a
country by country, PRODUCT by PRODUCT, basis for a period of at least twelve
(12) years in each country of the TERRITORY from the date of FIRST COMMERCIAL
SALE by KHK, its AFFILIATES and SUBLICENSEES of such PRODUCT in each such
country and thereafter such PRODUCT is covered by a VALID CLAIM of a PATENT
RIGHT, such royalties shall be payable until the last to expire PATENT RIGHT in
such country.
7.2 (a) Subject to Section 2.2(d), KHK shall pay the following amounts
upon the occurrence of the following milestone events, which may be achieved by
KHK through a SUBLICENSEE or AFFILIATE.
(i) * upon selection of a DEVELOPMENT CANDIDATE as set forth in the
Agreement. In addition, in the event KHK elects to pursue two (2) TARGETS with
LKS, KHK will pay to LKS *
* Confidential treatment requested: material has been omitted and filed
separately with the Commission.
<PAGE> 29
-29-
* upon selection of the first DEVELOPMENT CANDIDATE resulting from the second
TARGET chemokine receptor program.
(ii) * upon initiation of human clinical trials of a COMPOUND
(from each chemokine receptor TARGET program).
(iii) * upon initiation of Phase III clinical trials of a
COMPOUND (from each chemokine receptor TARGET program).
(iv) * upon issue of first market approval of a COMPOUND (from
each chemokine receptor TARGET program)
(b) Should a COMPOUND and/or PRODUCT replace another compound and/or
PRODUCT before such compound and/or PRODUCT reaches the market, it shall, for
the purpose of milestones, enter at the next payable milestone.
7.3(a) In the event that royalties are required to be paid by KHK to a
THIRD PARTY who is not an AFFILIATE of KHK in order for KHK to make, use and
sell PRODUCT without infringing such THIRD PARTY'S patents and for which
royalties are also due to LKS pursuant to Paragraph 7.1 (such royalties to such
THIRD PARTY are hereinafter "Other Royalties"), then the royalties to be paid to
LKS by KHK pursuant to Paragraph 7.1 shall be reduced by one-half of the amount
of such Other Royalties. but in no event shall any royalties payable under
Paragraph 7.1 be reduced by more than * of NET SALES. As an example, if the
royalty due LKS is * and Other Royalties
* Confidential treatment requested: material has been omitted and filed
separately with the Commission.
<PAGE> 30
-30-
are *, then the royalties due LKS may be reduced, but only by * to * of
NET SALES.
(b) In the event that litigation against KHK is initiated by a
THIRD-PARTY charging KHK with infringement of a patent of the THIRD PARTY as a
result of the manufacture, use or sale by KHK of PRODUCT covered by a PATENT
RIGHT licensed hereunder KHK shall promptly notify LKS in writing. * of KHK's
costs as to any such defense shall be creditable against any and all payments
due and payable to LKS under Section 7.1 of this Agreement but, subject to
Section 7.3(a), no royalty payment after taking into consideration any such
credit under this Section 7. (b) shall be reduced by more than * as set forth in
Section 7 3(a).
7.4 KHK shall keep, and shall cause each of its AFFILIATES and
SUBLICENSEES to keep. full and accurate books of account containing all
particulars relevant to its sales of PRODUCTS that may be necessary for the
purpose of calculating all royalties payable to LKS. Such books of account shall
be kept at their principal place of business and, with all necessary supporting
data shall, for the five (5) years next following the end of the calendar year
to which each shall pertain, be open for inspection by an independent certified
public accountant reasonably acceptable to KHK, upon reasonable notice during
normal business hours at LKS's expense for the sole purpose of verifying royalty
statements or compliance with this Agreement. In the event the inspection
determines that royalties due LKS for any period have been underpaid by five
percent (5%) or more, then KHK shall pay for all costs of the inspection. In all
cases, KHK shall pay to LKS any underpaid royalties promptly and with
* Confidential treatment requested: material has been omitted and filed
separately with the Commission.
<PAGE> 31
-31-
interest at the prime rate available to LKS, plus two percent (2%). All
information and data reviewed in the inspection shall be used only for the
purpose of verifying royalties and shall be treated as KHK Confidential
Information subject to the obligations of this Agreement. No audit by an agent
of LKS shall occur more frequently than once during any twelve (12) month
period.
7.5 In each year the amount of royalty due shall be calculated
quarterly as of the end of each CALENDAR QUARTER (each as being the last day of
an "ACCOUNTING PERIOD") and shall be paid quarterly within the thirty (30) days
next following such date. Every such payment shall be supported by the
accounting prescribed in Paragraph 7.6 and shall be made in United States
currency. Whenever for the purpose of calculating royalties, conversion from any
foreign currency shall be required. such conversion shall be at the rate of
exchange published in The Wall Street Journal for the last business day of the
ACCOUNTING PERIOD.
7.6 With each quarterly payment, KHK shall deliver to LKS a full and
accurate accounting to include at least the following information:
(a) Quantity of PRODUCT subject to royalty sold (by
country) by KHK, its AFFILIATES and SUBLICENSEES,
(b) Total receipts for each PRODUCT subject to royalty
(by country);
(C) Total royalties payable to LKS
7.7 Royalties payable to LKS which are subject to withholding tax will
be paid net of any amounts to be withheld by KHK in accordance
<PAGE> 32
-32-
with applicable withholding provisions of the tax laws of Japan. All other
payments due hereunder, except the payment provided for in Section 7.2(a)(iv)
will be paid in full to LKS with no deduction for withholding taxes.
SECTION 8 - REPRESENTATIONS AND WARRANTIES.
8.1 Each party represents and warrants to the other party that: (i) it
is free to enter into this Agreement; (ii) in so doing, it will not violate any
other agreement to which it is a party; and (iii) it has taken all corporate
action necessary to authorize the execution and delivery of this Agreement and
the performance of its obligations under this Agreement.
8.2 LKS hereby represents and warrants to KHK that:
(a) It is the owner of, or is the licensee of the proprietary
information related to PRODUCTS which it has provided to KHK under this
Agreement, and accordingly has the right to grant licenses or sublicenses
therefor;
(b) As of the EFFECTIVE DATE, all patent applications included in LKS
PATENTS are pending and have not been abandoned;
(c) It has not entered into any agreement with any THIRD PARTY which is
in conflict with the rights granted to KHK pursuant to this Agreement;
(d) To the best of its knowledge as of the EFFECTIVE DATE there are no
claims or demands which it believes can be enforced against any PRODUCTS
disclosed in the LKS PATENTS in effect on the EFFECTIVE DATE;
<PAGE> 33
-33-
(e) To the best of its knowledge and without having made any special
investigation for this purpose, the practice of any process or PRODUCT disclosed
in the LKS PATENTS in effect on the EFFECTIVE DATE does not infringe upon any
THIRD PARTY patents.
8.3 EXCEPT AS OTHERWISE EXPRESSLY SET FORTH IN THIS AGREEMENT LKS MAKES
NO REPRESENTATIONS OR EXTENDS ANY WARRANTIES OF ANY KIND, EITHER EXPRESS OR
IMPLIED, INCLUDING, BUT NOT LIMITED TO, WARRANTIES OF MERCHANTABILITY, FITNESS
FOR A PARTICULAR PURPOSE, NON-INFRINGEMENT OR VALIDITY OF ANY LKS PATENT OR
OTHER INTELLECTUAL PROPERTY RIGHTS.
SECTION 9 - INDEMNIFICATION AND INSURANCE.
9.1 Indemnification by KHK
KHK will defend, indemnify and hold harmless LKS, its AFFILIATES and
licensors and their employees, agents, officers, trustees. shareholders and
directors and each of them (the "LKS Indemnified Parties") from and against any
and all third party claims, causes of action and costs (including reasonable
attorney's fees) of any nature made or lawsuits or other proceedings filed or
otherwise instituted against the LKS Indemnified Parties resulting from or
arising out of this Agreement or out of the research, development, testing,
manufacture, sale or use of any PRODUCT by KHK or its AFFILIATES or its
SUBLICENSEES (other than those claims which result from the gross negligence or
willful misconduct of an Indemnified Party.
<PAGE> 34
-34-
9.2 Indemnification by LKS
LKS will defend, indemnify and hold harmless KHK, its AFFILIATES and
licensors and their employees, agents, officers, trustees, shareholders and
directors and each of them (the "KHK Indemnified Parties") from and against any
and all third party claims, causes of action and costs (including reasonable
attorney's fees) of any nature made or lawsuits or other proceedings filed or
otherwise instituted against the KHK Indemnified Parties resulting from or
arising out of the RESEARCH. performed by LKS or its AFFILIATES under this
Agreement (other than those claims which result from the gross negligence or
willful misconduct of an Indemnified Party.
9.3 Conditions to Indemnification
A person or entity that intends to claim indemnification under this
Section (the "Indemnitee") shall promptly notify the other party (the
"Indemnitor") of any loss, claim, damage, liability or action in respect of
which the Indemnitee intends to claim such indemnification, and the Indemnitor
shall assume the defense thereof with counsel mutually satisfactory to the
Indemnitee whether or not such claim is rightfully brought; provided, however,
that an Indemnitee shall have the right to retain its own counsel, with the fees
and expenses to be paid by the Indemnitor if Indemnitor does not assume the
defense, or if representation of such Indemnitee by the counsel retained by the
Indemnitor would be inappropriate due to actual or potential differing interests
between such Indemnitee and any other person represented by such counsel in such
proceedings. The indemnity agreement in this Section shall not apply to amounts
paid in settlement of any loss, claim
<PAGE> 35
-35-
damage, liability or action if such settlement is effected without the consent
of the Indemnitor, which consent shall not be withheld or delayed unreasonably.
The failure to deliver notice to the Indemnitor within a reasonable time after
the commencement of any such action, only if prejudicial to its ability to
defend such action, shall relieve such Indemnitor of any liability to the
Indemnitee under this Section, but the omission so to deliver notice to the
Indemnitor will not relieve it of any liability that it may have to any
Indemnitee otherwise than under this Section. The Indemnitee under this Section,
its employees and agents, shall cooperate fully with the Indemnitor and its
legal representatives in the investigations of any action, claim or liability
covered by this indemnification.
9.4 Insurance
To the extent that a party is insured for any matter which is covered
by the indemnities of Section 9.1, the Indemnitees shall be named as additional
insureds under any and all insurance policies and the insured party will provide
evidence of such insurance upon the request of the other party.
SECTION 10 - ASSIGNMENT; SUCCESSORS.
10.1 This Agreement shall not be assignable by either of the parties
without the prior written consent of the other party (which consent shall not be
unreasonably withheld), except that either party, without the consent of the
other, may assign this Agreement to a successor in interest or transferee of all
or substantially all of the portion of the business to which this Agreement
relates.
<PAGE> 36
-36-
SECTION 11 - FORCE MAJEURE.
Neither party shall be liable to the other party for damages or loss
(other than with respect to payments due LKS hereunder) occasioned by failure of
performance by the defaulting party if the failure is occasioned by war, fire,
explosion, flood, strike or lockout, embargo, or any similar cause beyond the
control of the defaulting party, provided that the party claiming this exception
has exerted all reasonable efforts to avoid or remedy such event and provided
such event does not extend for more than six (6) months.
SECTION 12 - TERMINATION.
12.1 Except as otherwise specifically provided herein and unless sooner
terminated pursuant to Sections 12.2 or 12.3 of this Agreement, this Agreement
and the licenses and rights granted hereunder shall remain in full force and
effect until KHK's obligations to pay royalties hereunder terminate. Upon
termination of KHK's obligation to pay royalties hereunder with respect to a
specific country and specific PRODUCT as to which KHK's license is then in
effect, the license granted to KHK with respect to such country and such PRODUCT
pursuant to Section 2.1 shall be deemed to be fully paid and KHK shall
thereafter have a royalty-free right to use the PATENT RIGHTS to make, have
made, use and sell such PRODUCT in such country.
12.2 (a) Upon breach of any material provisions of this Agreement by
either party to this Agreement, in the event the breach is not cured within
sixty (60) days after written notice to the breaching party by the
<PAGE> 37
-37-
other party, in addition to any other remedy it may have, the other party at its
sole option may terminate this Agreement provided that such other party is not
then in breach of this Agreement.
(b) Notwithstanding anything else to the contrary, LKS's liability for
any breach of this Agreement (including but not limited to any liability which
results from any breach of a representation or warranty) is limited to an amount
equal to the research and milestone payments received from KHK under this
Agreement.
12.3 Either party to this Agreement may, upon giving notice of
termination, immediately terminate this Agreement upon receipt of notice that
the other party has become insolvent or has suspended business in all material
respects hereof, or has consented to an involuntary petition purporting to be
pursuant to any reorganization or insolvency law of any jurisdiction, or has
made an assignment for the benefit of creditors or has applied for or consented
to the appointment of a receiver or trustee for a substantial part of its
property.
12.4 Upon any termination of this Agreement, KHK shall be entitled to,
but shall not be obligated to finish any work-in-progress for which KHK has
received firm purchase orders and to sell any completed inventory of a PRODUCT
covered by this Agreement which remains on hand as of the date of the
termination, so long as KHK pays to LKS the royalties applicable to subsequent
sales in accordance with the same terms and conditions as set forth in this
Agreement.
12.5 The obligations of Sections 4 and 9, as well as Sections 12.4,
12.5, 12.6, 12.7, 12.8 and 13.3 shall survive any termination of this Agreement.
<PAGE> 38
-38-
12.6 Upon termination of this Agreement or of the rights and licenses
granted to KHK in any country, KHK agrees not to use the LKS TECHNOLOGY and
PATENT RIGHTS or information or technology derived therefrom for the
manufacture, use or sale of PRODUCTS in any country other than those countries
in which KHK retains a license under this Agreement.
12.7 KHK agrees to use LKS TECHNOLOGY and the PATENT RIGHTS only for
the manufacture, use or sale of PRODUCTS and only and to the extent licensed
under this Agreement.
12.8 During the RESEARCH TERM, KHK may terminate this Agreement as set
forth in Section 5.13(a), provided that if notice of such termination is given
less than sixty (60) days prior to the end of an AGREEMENT YEAR, KHK shall
continue to fund RESEARCH at LKS for six (6) months after the end of the
AGREEMENT YEAR in question. Following the end of the RESEARCH TERM KHK may
terminate this Agreement on the anniversary of each AGREEMENT YEAR of this
Agreement for any reason and upon thirty (30) days' prior notice to LKS. In the
event of termination hereunder or in the event LKS terminates this Agreement as
otherwise set forth in this Agreement, ail licenses and rights granted to KHK
shall terminate forthwith and KHK shall grant to LKS an exclusive, worldwide,
royalty bearing sublicensable, license under KHK PATENTS, KHK TECHNOLOGY. and WL
TECHNOLOGY and WL PATENTS, if any, to make, have made, use, sell, offer to sell
or import PRODUCTS. If such termination occurs prior to the selection of a
DEVELOPMENT CANDIDATE, the royalty shall be * of NET SALES. If such
termination occurs after such
* Confidential treatment requested: material has been omitted and filed
separately with the Commission.
<PAGE> 39
-39-
selection, the royalty shall be determined, in good faith, by agreement of the
parties but shall not be greater than * of NET SALES.
SECTION 13 - GENERAL PROVISIONS.
13.1 The relationship between LKS and KHK is that of independent
contractors. LKS and KHK are not joint venturers, partners, principal and agent
master and servant, employer or employee, and have no relationship other than as
independent contracting parties. LKS shall have no power to bind or obligate KHK
in any manner. Likewise, KHK shall have no power to bind or, obligate LKS in any
manner.
13.2 This Agreement sets forth the entire agreement and understanding
between the parties as to the subject matter thereof and supersedes all prior
agreements in this respect. There shall be no amendments or modifications to
these Agreements, except by a written document which is signed by both parties.
13.3 This Agreement shall be construed and enforced In accordance with
the laws of the Commonwealth of Massachusetts, U.S.A. without reference to its
choice of law principles.
13.4 The headings in this Agreement have been inserted for the
convenience of reference only and are not intended to limit or expand on the
meaning of the language contained in the particular or section or paragraph.
13.5 Any delay in enforcing a party's rights under this Agreement or
any waiver as to a particular default or other matter shall not constitute a
waiver of a party's right to the future enforcement of its
* Confidential treatment requested: material has been omitted and filed
separately with the Commission.
<PAGE> 40
-40-
rights under this Agreement, excepting only as to an expressed written and
signed waiver as to a particular matter for a particular period of time.
13.6 In conducting any activities under this Agreement or in connection
with the manufacture use or sale of PRODUCT, KHK shall comply with all
applicable laws and regulations including, but not limited to, all Export
Administration Regulations of the United States Department of Commerce.
13.7 Notices. Any notices given pursuant to this Agreement shall be in
writing and shall be deemed delivered upon the earlier of (i) when received at
the address set forth below, or (ii) three (3) business days after mailed by
certified or registered mail postage prepaid and properly addressed, with return
receipt requested, or (iii) when sent, if sent, by facsimile, as confirmed by
certified or registered mail. Notices shall be delivered to the respective
parties as indicated:
If To LKS: LeukoSite, Inc.
215 First Street
Cambridge, MA 02142
Attn: CEO
Copy to: Carella, Byrne, Bain, Gilfillan,
Cecchi, Stewart & Olstein
6 Becker Farm Road
Roseland, New Jersey 07068
Fax No. (201) 994-1744
Attn: Donald S. Brooks. Esq.
If To KHK: Kyowa Kakko Kogyo Co. Ltd.
6-1 Ohtemachi, I-Chome, Chiyoda-Ku
Tokyo, 100 Japan
Attn: CEO
<PAGE> 41
-41-
13.8 Any matter or disagreement under this Agreement (other than
matters involving the validity or enforceability of patents) which cannot be
resolved by the parties is to be resolved by arbitration and shall be submitted
to a mutually selected single arbitrator to so decide any such matter or
disagreement. The arbitrator shall conduct the arbitration in accordance with
the Rules of the American Arbitration Association, unless the parties agree
otherwise. If the parties are unable to mutually select an arbitrator, the
arbitrator shall be selected in accordance with the procedures of the American
Arbitration Association. The decision and award rendered by the arbitrator shall
be final and binding. Judgment upon the award may be entered in any court having
Jurisdiction thereof Any arbitration pursuant to this section shall be held in
Boston, Massachusetts, or such other place as may be mutually agreed upon in
writing by the parties.
13.9 This Agreement may be executed in any number of separate
counterparts, each of which shall be deemed to be an original, but which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date set forth above.
LEUKOSITE, INC. KYOWA HAKKO HOGYO CO. LTD.
_____________________________ ___________________________________
By:[signature appears here] By:[signature appears here]
Name:________________________ Name:______________________________
Title:_______________________ Title:_____________________________
<PAGE> 42
APPENDIX A
LKS Patents
Application #08/709,838
__P10/MIG Receptor Designated CXCR3, Nucleic Acids and Methods of
Use Therefor
M. Loetscher and B. Moser
Application #60/021,716
Antagonists of Chemokine Receptors, LeukoSite Chemotixis and
Activation and Methods of Use Therefor
C.F. Schwender, C.R. MacKay, J.C. Pinto, and W. Newman
<PAGE> 1
CONFIDENTIAL TREATMENT
EXHIBIT 10.16
THIS AGREEMENT is made the 25th day of September 1996
BETWEEN:
(1) OXFORD ASYMMETRY LIMITED whose principal place of business is at 151
Milton Park, Abingdon, Oxfordshire, OX14 4SD, England (hereinafter
referred to as "OA"); and
(2) LEUKOSITE INC. whose principal place of business is 215 First
Street, Cambridge, MA 02141, (hereinafter referred to as
"LeukoSite").
INTRODUCTION:
(A) OA has expertise in the field of combinatorial chemistry for the rapid
production of new chemical compounds. OA offers such libraries to
customers for screening to detect compounds which may be useful for
particular applications.
(B) OA is willing to supply the libraries of chemical compounds defined
in Appendix B to LeukoSite together with data relating to the
libraries and to license LeukoSite to use the chemical compounds
and the library data for the purpose of screening the libraries for
applications within the Field of Use and to make use and sell
Compounds and/or Products resulting from the screening and
LeukoSite is willing to accept such supply and license on and
subject to the provisions of this Agreement.
(C) OA's combinatorial chemistry techniques are still experimental,
therefore preparation of the library compounds identified in Appendix B
may require a substantial amount to research and development work on
the part of OA. Accordingly, OA cannot guarantee that it will be able
to synthesize successfully all of the library compounds.
<PAGE> 2
-2-
IT IS AGREED AS FOLLOWS:
1. DEFINITIONS
In this Agreement, the following terms shall have the following
meanings:
1.1 "Affiliates" (a) any company or other legal entity
which directly or indirectly controls or
is under common control with the party
concerned and (b) any company or other
legal entity which is directly or
indirectly controlled by a company or
other legal entity referred to in (a)
above;
1.2 "Compounds" single organic chemical entities
developed and produced by or on behalf
of OA;
1.3 "Plate" a micro-titre plate of Library Compounds
in a spatial arrangement agreed with
LeukoSite;
1.4 "Confidential Information" shall have the meaning to it in Clause
9.1;
1.5 "Estimated Delivery Dates" the estimated delivery date for each
Library as stated in Appendix A;
1.6 "Exclusivity Period" the initial exclusivity period for each
Library as stated in Appendix A, which
may be extended by OA from time to time
pursuant to Clause 3.5;
1.7. "Exclusivity Extension
Fee Per Month" the price per month for extending the
Exclusivity Period for each Library as
stated in Appendix A;
1.8 "Initial Payments" the initial nonrefundable payment payable
by the Customer to OA in respect of each
Library as stated in Appendix A;
<PAGE> 3
-3-
1.9 "Success Criteria" the criteria defined in Appendix C which
have been agreed by LeukoSite and OA to
indicate that a particular Library
Compound is shown to have certain
characteristics of particular interest;
1.10 "Success Payment" the payment made by LeukoSite to OA in
respect of a Library Compound which has
achieved the Success Criteria;
1.11 "Field of Use" human pharmaceutical applications
1.12 "Intellectual Property
Rights" patents, patent applications, utility
models, copyrights, know-how, design
rights, and any other intellectual
property rights analogous to the same;
1.13 "Libraries" the libraries of Compounds identified in
Appendix B;
1.14 "Library Compound" a Compound included within any Library;
1.15 'Products" an active Compound or product resulting
from screening a Library;
1.16 "Library Data" the information to be provided by OA with
each Library as described in Appendix E;
1.17 "Purchase Price" the price payable by LeukoSite to OA in
respect of the Library Compounds and the
Library Dam as set out in Appendix A
1.18 "Specification" the specification for the Compounds as
set out in Appendix D.
1.19 "Valid Claim" a claim of an issued OA parent or joint
parent owned by OA and
<PAGE> 4
-4-
LeukoSite covering a Product which has
not lapsed or been declared invalid or
unenforceable by a court of competent
jurisdiction or an administrative agency
from which no appeal can or is taken.
2.. SUPPLY OF THE LIBRARIES AND THE LIBRARY DATA
2.1 OA shall use reasonable efforts to synthesize each of the Compounds
forming part of the Libraries. However, LeukoSite acknowledges that it
may not be feasible for OA to prepare every Compound within a Library.
Accordingly, OA shall not be liable for any failure to supply any of
the Compounds within a Library, provided tat OA has used reasonable
efforts to try to do so.
2.2 OA shall use it reasonable efforts to deliver to LeukoSite each Library
by the Estimated Delivery Date for that Library, provided that time
shall not be of the essence for such delivery and OA shall not in any
circumstances be liable for any loss or damage incurred by LeukoSite as
a result of any delay in delivery.
2.3 Physical title to and all risk of loss in each Library Compound shall
pass to LeukoSite upon delivery of the Library Compound to LeukoSite's
premises.
2.4 LeukoSite may from time to time notify OA that it wishes to receive
duplicates of any Library Compound. If OA is willing to provide
such duplicates, it shall notify LeukoSite accordingly and include in
such notice, an estimated delivery date and purchase price for the
duplicates. All duplicate Libraries Compounds shall be supplied to
LeukoSite on and subject to the same provisions as apply to the
initial Library Compounds.
2.5 OA shall provide the Library Data for a particular Library to LeukoSite
at the same time as it supplies the Library Compounds to LeukoSite.
3. USE OF LIBRARIES COMPOUNDS AND THE LIBRARY DATA
3.1 OA shall grant to LeukoSite a license as described in Clause 5 to use
the Library Compounds and the Library Data for the sole purpose of
screening the Libraries to detect Compounds which may have application
within the Field of Use.
<PAGE> 5
-5-
3.2 LeukoSite shall not use the Library Compounds and/or the Library Data
for any purpose other than the purpose expressly stated in Clause 3.1.
For the avoidance of doubt, LeukoSite shall not be entitled to screen
or test the Library Compounds for potential applications in any area or
field of use other than the Field of Use.
3.3 LeukoSite shall nor and shall procure that its Affiliates shall not
develop and/or exploit commercially any Library Compound or analogs or
derivatives of a Library Compound unless OA and LeukoSite have executed
an agreement in of such Library Compound, analog or derivative in
accordance with the provisions of Clause 5.
3.4 During a Library's Exclusivity Period, OA shall not supply or grant
rights to that Library to any third party for screening for potential
applications within the Field of Use.
3.5 If LeukoSite wishes to extend the initial Exclusivity Period for any
Library for a further period, LeukoSite shall give OA written notice
thereof at least 14 days before the expiry of the initial Exclusivity
Period specifying the Library concerned and the length of the
requested extension. If OA, at its sole discretion, agrees to extend
the Exclusivity Period, it shall notify LeukoSite of the relevant
extension fee calculated in accordance with Clause 4.5. Any such
extension to the Exclusivity Period shall commence on the date of
OA's notice to LeukoSite and shall be in respect of the Field of Use
only.
3.6. LeukoSite shall not in any circumstances sell, swap, give or in any
way release any of the Library Compounds supplied by OA to any
third party.
4. PAYMENT
4.1. LeukoSite has paid OA the sum of * upon signing of a letter of
intent dated July 15, 1996. LeukoSite will pay OA an additional
* on October 15, 1996. In the event that LeukoSite give notice
that it intends to initiate receipt of Library 3 it will make an
additional payment of * to OA. These payments (totaling *) will
make up the Initial Payments described in Appendix A for Libraries
1, 2 and 3. The Initial Payments are to cover some of OA's costs
in carrying out the research and development work required to
produce the Library Compounds. The Initial Payments
* Confidential treatment requested: material has been omitted and filed
separately with the Commission.
<PAGE> 6
-6-
will not be refundable except in the event that OA cannot synthesize at
least * of the target size of a Library due to technical difficulties.
In such events, OA will return * in the case of Library 1 or 2 and * in
the case of Library 3 to LeukoSite. LeukoSite is prepared to be
flexible and accept the appropriate substitution of particular building
blocks by others if they are shown to be technically difficult to
incorporate.
4.2. The Purchase Price for each Library Compound and the target number of
Library Compounds in each Library are stated in Appendix A.
4.3. LeukoSite may give OA one month's notice in writing that it does not
wish to receive any additional Library Compounds from a particular
Library provided that at the same time LeukoSite provides a sum of
money to OA, equivalent to the outstanding purchase price for that
Library (total Library price - price of Library Compounds already
supplied), as a non-returnable deposit for future purchases.
Notwithstanding the foregoing, on receipt of such
notice from LeukoSite, OA shall issue an invoice payable by LeukoSite
for all labour, material and overhead costs that it has incurred, or
for which commitments have been made, for the development and synthesis
of Library Compounds forming part of the cancelled Library which have
not been supplied. In no event shall this invoice be for a sum greater
than the outstanding purchase price for a particular Library.
4.4. On or after delivery of any Plate to LeukoSite, OA shall submit an
invoice to LeukoSite for the Purchase Price of the Plate together with
the costs of packaging, carriage and insurance of the Plate and any VAT
payable thereon.
4.5. If LeukoSite notifies OA pursuant to Clause 3.5, that it wishes to
extend a Library Compound's Exclusivity Period and OA notifies
LeukoSite that it is prepared to do so then Leukosite shall pay an
extension fee calculated by multiplying the Extension Fee Rate Per
Month for that Library Compound by the requested number of months
extension.
4.6. On or after OA has notified LeukoSite pursuant to Clause 3.5. that OA
will grant the requested extension, OA shall invoice LeukoSite for the
relevant extension fee calculated in accordance with Clause 4.5
together any VAT payable thereon.
* Confidential treatment requested: material has been omitted and filed
separately with the Commission.
<PAGE> 7
-7-
4.7. Leukosite will promptly inform OA if a Library Compound achieves the
Success Criteria as defined in Appendix C.
4.8. Having received notice pursuant to Clause 4.7, OA shall invoice
LeukoSite for the Success Payment defined in Appendix C.
4.9 LeukoSite shall make payments to OA in respect of any invoice submitted
under this Agreement within 14 days of the date of the invoice.
4.10 All sums stated in this Agreement are exclusive of Value Added Tax
which shall be payable in addition if applicable.
4.11. All sums payable under this Agreement shall be paid in US dollars by
way of bank transfer into OA's bank account, details of which shall
from time to time be notified to LeukoSite by OA.
5. RIGHT TO EXPLOIT THE COMPOUNDS COMMERCIALLY
5.1 If LeukoSite and/or any of its Affiliates wish to develop any Library
Compound (or analogue or derivative thereof) as a Potential Product,
then LeukoSite shall notify OA in writing, identifying the Library
Compound (or the analogue or derivative thereof) concerned and the
potential application.
5.2 On receipt of notice from LeukoSite pursuant to Clause 5. 1, the
parties shall promptly negotiate in good faith an agreement on fair and
reasonable terms to implement inter alia the FOLLOWING commercial
principles and provisions:-
5.2.1 OA to grant LeukoSite (or its designated Affiliate) the
exclusive worldwide right to manufacture, use, sell and
market the Licensed Product solely for applications within
the Field of Use.
5.2.2 In countries where OA owns Intellectual Property Rights
covering the Licensed Product or jointly owns such
Intellectual Property Rights with LeukoSite, OA shall grant
to LeukoSite an exclusive license under such Intellectual
Property Rights to develop, manufacture, use, sell and
market the Licensed Product solely for applications within
the Field of Use.
<PAGE> 8
-8-
5.2.3 LeukoSite shall have the right to grant sub-licenses under
the above license.
5.2.4 LeukoSite shall pay OA royalties of * of the net sales
value of Products sold by LeukoSite or its affiliates and *
of the royalties received from sub licensees to make, use
or sell Products.
5.2.5 Royalties under Clause 5.2.4 shall be paid on a country by
country basis for ten (10) years after the date of launch
and thereafter so long as the Product is covered by a Valid
Claim in the country where sold.
5.2.6 Royalties, including those based on amounts received from
sub licensees, payable under Clause 5.2.4 shall be reduced
by * for any period during which the Product is not covered
by a Valid Claim in the country where sold.
5.2.7 The compensation set forth in Clauses 5.2.4, 5.2.5 and
5.2.6 shall be the sole compensation applicable to a
Product.
5.2.8 Only one royalty shall be payable regardless of the number
of Valid Claims covering a Product.
5.2.9 Reporting and audit provisions.
5.2.10 LeukoSite to use reasonable efforts to develop and
commercialize the licensed Product and to maximize sales
thereof.
5.2.11 Reciprocal indemnity in respect of third party claims.
5.2.12 Confidentiality provisions.
5.2.13 Termination provisions for breach and insolvency.
6. INTELLECTUAL PROPERTY RIGHTS
6.1. Subject to any rights granted in an agreement executed pursuant to
Clause 5.2 and except for sole inventions made by LeukoSite and except
for Joint Inventions as set forth below, OA shall retain all
Intellectual Property Rights in the Libraries and Library Compounds
including without limitation the right to apply for
* Confidential treatment requested: material has been omitted and filed
separately with the Commission.
<PAGE> 9
-9-
patent protection in respect of the Libraries and/or the Library
Compounds.
6.2 LeukoSite shall not, without the prior written consent of OA, apply
for patent protection in respect of any application that it discovers
for a Library Compound until the parties have executed an
agreement in respect of such Library Compound pursuant to Clause
5.2. Subject to this provision LeukoSite shall be responsible for
filing and pursuing patent applications for all inventions related to
Products and all related costs.
6.3 In the event that OA and LeukoSite make a joint invention ("Joint
Invention"):-
6.3.1 OA and LeukoSite shall jointly own all patents resulting from
such Joint Invention except as provided in Clause 6.3.3.
6.3.2 LeukoSite shall be responsible for preparing filing and
pursuing patent applications for Joint Inventions and they
shall be responsible for all related costs. However, LeukoSite
shall consult fully with OA on the patent strategy for each
Joint Invention and shall keep OA fully informed of the
progress of such patent strategy.
6.3.3 If Leukosite does not wish to obtain patent protection for a
Joint Invention then LeukoSite shall promptly notify OA. OA
shall then have the right to obtain patent protection on such
Joint Invention. Any such patents obtained by OA in respect of
a Joint Invention shall be solely owned by OA.
6.3.6 Except for the rights granted hereunder neither party shall
exploit commercially or license a jointly owned patent in
respect of a Joint Invention in any country without prior
written consent of the other party.
7. NO OBLIGATION TO PROVIDE FURTHER INFORMATION
7.1 Save as provided in Clauses 4.7 & 5.1, LeukoSite shall be under no
obligation to provide OA with any results relating to LeukoSite's
screening of the Libraries provided that if LeukoSite shall become
aware that any of the Library Compounds are toxic or hazardous
LeukoSite shall promptly notify OA with all information in its
possession or control concerning the toxicity or hazard.
<PAGE> 10
-10-
7.2. OA shall be under no obligation to provide LeukoSite with any
information other than that contained in the Library Data.
8. WARRANTIES
8.1. OA gives no warranties whatsoever in respect of the Libraries or
any of the Library Compounds or the Library Data except that OA
warrants that:
8.1.1 OA will own the physical material in the Plates that it
delivers to LeukoSite under this Agreement;
8.1.2 The Plates and Library Compounds delivered to LeukoSite
under this Agreement will meet the Specifications; and
8.1.3 OA has the right to disclose the Library Data to LeukoSite
solely for use in accordance with the provisions of this
Agreement.
8.2 Without limitation to the generality of Clause 8.1, OA gives no
warranty that the Library Compounds:-
8.2.1. are fit for any purpose;
8.2.2. are safe for use in connection with humans, animals or
plants;
8.2.3. are non toxic;
8.2.4. are non-hazardous;
8.2.5 are new or have never been published; and/or
8.2.6 do not infringe the Intellectual Property Rights of any
third parry nor that the production or use of the Library
Compounds will not infringe the Intellectual Property
Rights of any third parry.
8.3 All warranties implied by law (whether by stature, common law, trade
usage, custom or otherwise) are hereby excluded to the maximum extent
permitted by law.
9. CONFIDENTIALITY
<PAGE> 11
-11-
9.1 In this Agreement "Confidential Information" shall mean any
:information provided to LeukoSite by OA in anticipation of, or during,
the term of this Agreement including without limitation technical
information (such as the Library Data and Information relating to OA's
business (such as its future plans). Confidential information shall not
include any information which:-
9.1.1 is or becomes, through no act of default on the part of
LeukoSite or its officers or employees, generally known or
available to the public:
9.1.2 LeukoSite can prove by documentary evidence produced to OA
that the Confidential Information disclosed was already
known to LeukoSite at the time of its disclosure to OA or
is subsequently developed by LeukoSite independently of
the information received from OA; and/or
9.1.3 is disclosed to LeukoSite by a third party without any
obligations of confidence and such third party did not
acquire such Confidential Information directly or
indirectly from OA.
9.2 LeukoSite shall not use any Confidential Information directly or
indirectly for any purpose other than that stated in Clause 3.1 or
pursuant to any license granted under Clause 5.2.
9.3 LeukoSite shall not make conies of the Confidential Information except
as necessary for the purposes stated in Clause 3.1 or pursuant to any
license granted under Clause 5.21.
9.4 LeukoSite shall not disclose to any third party any of the Confidential
Information except with the express prior written consent of OA except
as set forth in Clause 9.5.
9.5 LeukoSite shall limit disclosure of the Confidential Information to
such of its offices and employees to whom such disclosure is necessary
for the purposes of this Agreement. LeukoSite shall procure that its
officers and employees maintain the confidentiality of the Confidential
Information.
10. LIMITATION OF LIABILITY
10.1 Unless caused by the negligence or willful misconduct of OA, OA
shall have no liability whatsoever to LeukoSite for any loss or
<PAGE> 12
-12-
damage resulting directly or indirectly from LeukoSite's activities in
connection with the Libraries (and/or any of the Library Compounds)
and/or the Library Data.
10.2 OA's total liability to LeukoSite in respect of matters arising out of
or in connection with this Agreement shall not exceed the total amount
paid to OA under this Agreement.
10.3 This Clause 10 shall not operate to exclude or limit any liability
which OA is prohibited by law from excluding, or limiting-
11. INDEMNITY
LeukoSite shall indemnify fully, and keep indemnified fully, OA against
any and all damages. losses, costs and/or expenses (including without
limitation legal expenses and experts fees) incurred by OA which arise
out of or in connection with any claim or allegations by any third
party in respect of LeukoSite's use of or other activities in
connection with the Library Compounds provided under this Agreement
and/or the Library Data, except to the extent of negligence or willful
misconduct by OA. OA shall promptly notify LeukoSite of any such claim
and LeukoSite shall control the defense settlement or compromise of any
such claim.
12. EXPIRY & TERMINATION
12.1 This Agreement shall expire at the same time as the last
Exclusivity Period expires.
12.2 This Agreement may be terminated by either party by giving immediate
notice of termination to the other party if the other party shall have
failed to remedy any breach of this Agreement within 30 days of
receiving notice of such breach.
12.3 This Agreement may be terminated forthwith by OA giving written notice
to LeukoSite where LeukoSite becomes insolvent or has an Administrator,
Administrative Receiver or Receiver appointed over the whole or any
significant part of its business and assets, or if any order is made or
a resolution passed or proposed for winding-up LeukoSite (except for
the purposes of a valid amalgamation or reconstruction) or any similar
action or event which occurs in respect of that party under the laws of
any other country.
13. CONSEQUENCES OF EXPIRY & TERMINATION
<PAGE> 13
-13-
13.1 Expiry or termination of this Agreement shall be without prejudice to
any rights which may have accrued to either party before the date of
expiry or termination, including but not limited to rights granted
under Clause 5.
13.2 Upon expiry or termination of this Agreement:-
13.2.1 all rights and obligations of the parties under this
Agreement shall, subject to Clause 13.1 and 13.2.4,
terminate;
13.2.2 LeukoSite shall return to OA all unused Library Compounds
in its possession and/or control supplied under this
Agreement and all copies of the Confidential Information
in the possession and/or control of LeukoSite;
13.2.3 any agreements entered into pursuant to Clause 5.2 shall
continue in full force and effect; and
13.2.4 the following clauses shall remain in full force and
effect; Clauses 1, 3.2, 3.3, 4.7, 4.8, 4.9, 4.10, 4.11, 5,
6, 8, 9, 10, 11, 13 and 15.
14. FORCE MAJEURE
If the performance of this Agreement or any obligation under this
Agreement (except for the payment of any sum of money) is prevented,
restricted or interfered with by reason of any circumstances beyond the
reasonable control of the parties then the party so affected shall,
upon giving prompt notice in writing to the other party, be excused
from such performance or obligation to the extent of and for the
duration of such prevention, restriction or interference.
15. MISCELLANEOUS
15.1 Notice
15.1.1 Any notice or other communication given under this
Agreement shall be in writing in the English language and
shall be sent by pre-paid air-mail or by fax (confirmed on
the same day be pre-paid air-mail) to the address or fax
number set out below or to such other address or fax
<PAGE> 14
-14-
number as may from time to time be notified to the other
party in writing as the address or fax number for service
notices under this Agreement.
for Oxford Asymmetry for LeukoSite Inc.
notices to: notices to:
Dr. Edwin Moses Dr. Christopher Mirbelli
Managing Director Chief Executive Officer
151, Milton Park 215 First Street
Abingdon Cambridge,
Oxon, OX14 4SD MA 02142
UK USA
Fax: 011-44-1235-863139 Fax: 1-617-621-9349
15.1.2 Any notice so sent by pre-paid air-mail shall be deemed to
have been given on the sixth business day from and
including the date of posting. Any notice so sent by fax
(and confirmed by airmail) shall be deemed to have been
given the next business day following the day of
transmission.
15.2 Severability
15.2.1 If any provision of this Agreement is declared by any
judicial or other competent authority to be void,
voidable, illegal or otherwise unenforceable then such
provision shall be deemed to be deleted from this
Agreement and the remaining provisions of this Agreement
shall continue in full force and effect.
15.2.2 The parties shall substitute for any such unenforceable
provision an enforceable provision which achieves to the
greatest extent permissible the economic, legal and
commercial objectives of the unenforceable provision.
15.3 Waiver
Failure or delay by either party to exercise any right or remedy under
this Agreement shall not be deemed to be a waiver of that right or
remedy, or prevent it from exercising that or any other right or remedy
on that occasion or on any other occasion.
15.4 Entire Agreement and Amendments
<PAGE> 15
-15-
15.4.1 This Agreement constitutes the entire agreement and
understanding of the parties relating to the subject
matter of this Agreement and supersedes all prior oral or
written agreements, representations, understandings or
arrangements between the parties relating to the subject
matter of this Agreement.
15.4.2 The parties acknowledge that they are not relying on any
agreement, understanding, arrangements, warranty,
representation or term which is not set out in this
Agreement.
15.4.3 The parties irrevocably and unconditionally waive any
rights and/or remedies they may have (including without
limitation the right to claim damages and/or to rescind
this Agreement) in respect of any misrepresentation other
than a misrepresentation which is contained in this
Agreement or a misrepresentation which was made
fraudulently.
15.4.4 Nothing in this Clause 15.4 shall operate to: -
15.4.4.1 exclude any provision implied into this
Agreement by law and which may not be
excluded by law; or
15.4.4.2 limit or exclude any liability, right or
remedy to a greater extent than is
permissible under law.
15.4.5 No change may be made to this Agreement except in writing
in the English language signed by the duly authorised
representatives of both parties.
15.5 Relationship of the Parties
15.5.1 Nothing in this Agreement shall create,
evidence or imply any agency, partnership or
joint venture between the parties.
15.5.2 Neither party shall act or describe itself
as the agent of the other nor shall it
represent that it has any authority to make
commitments on the other's behalf.
<PAGE> 16
-16-
15.6 Assignment and Sub-contracting
15.6.1 This Agreement is personal to LeukoSite and
LeukoSite shall not, without the prior
written consent of OA, assign or transfer
the rights and obligations under this
Agreement, except that LeukoSite may assign
or transfer its rights and obligations under
this Agreement in the case of a merger or
acquisition or transfer of all of
LeukoSite's assets to which this Agreement
relates.
15.6.2 OA shall be entitled (without the consent of
LeukoSite) to assign this Agreement and/or
subcontract the obligations of this
Agreement to an Affiliate of OA.
15.7 Publicity
LeukoSite shall not make any announcement, or comment
upon, or otherwise provide any information to any third
party (other than its legal advisors) concerning this
Agreement, the performance of this Agreement and/or any
dispute or disagreement relating to this Agreement without
the prior written consent of OA.
15.8 Law and Jurisdiction
The validity, construction and performance of this Agreement shall be governed
by English law and the parties accept the non-exclusive jurisdiction of the
English courts in respect thereof.
<PAGE> 17
-17-
AGREED by the parties through their authorized signatories:-
For and on behalf of For and on behalf of
Oxford Asymmetry Limited: LeukoSite Inc.
[signature appears here] [signature appears here]
- ----------------------------- ----------------------------------------
Signature Signature
- ----------------------------- ----------------------------------------
Name (Print) Name (Print)
- ----------------------------- ----------------------------------------
Title (Print) Title (Print)
<PAGE> 18
-18-
APPENDIX A
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
Library Target Price Per Initial Total Estimated Initial Exclusivity
Number of Compound Payment Library Delivery Exclusivity Extension Fee
Compounds Delivered Price Date Period Per Month
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
la/b 500 * * * Sep-Nov 9 months See Footnote
'96 1
- -------------------------------------------------------------------------------------------------------------------------------
2 500 * * * Nov '96 - 9 months See Footnote
Jan '97 1
- -------------------------------------------------------------------------------------------------------------------------------
3 500 * * * Jan-Mar 9 months See Footnote
'97 1
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The Exclusivity Extension Fee Per Month for each Library Compound will be *
of the original cost to LeukoSite of the Library Compound. LeukoSite may choose
to extend the Exclusivity Period on any or all Library Compounds in a Library.
If an extension to the Exclusivity Period is required for no more than 50
Library Compounds per Library for Libraries 1, 2 and 3 then the Exclusivity
Extension Fee for six months will be capped at *.
* Confidential treatment requested: material has been omitted and filed
separately with the Commission.
<PAGE> 19
-19-
APPENDIX B
Identification of the Libraries
<PAGE> 20
-20-
Leukosite Library 1a
<PAGE> 21
-21-
Leukosite Library 1b
<PAGE> 22
-22-
Leukosite Library 2
<PAGE> 23
-23-
Leukosite Library 3
<PAGE> 24
-24-
APPENDIX C
SUCCESS CRITERIA AND SUCCESS PAYMENTS
1) Libraries 1 and 2
Success Criteria: containing a Library Compound(s) with in vitro potency
of less than or equal to 50nm(A) and selectivity of
greater than or equal to 10X(B).
Success Fee: $10,000 per Library
2) Library 3
Success Criteria: containing a Library Compound(s) with in vitro potency
of less than or equal to 10nM and selectivity of 10X and
in vivo activity (I.V. or p.o.) at less than or equal to
10mg/kg(c).
Success Fee: $70,000 per Library
(A)Inhibition of (alpha)4(beta)7 binding to MAdCAM in an in vitro cell adhesion
assay.
(B)IC(50) in an (alpha)4(beta)7 VCAM binding assay divided by the IC(50) in an
(alpha)4(beta)7 MAdCAM binding assay.
(C)Inhibition of 50% of (alpha)4(beta)7 MAdCAM recruitment.
<PAGE> 25
-25-
APPENDIX D
SPECIFICATION
1. Each Library Compound shall have a purity of at least 50%.
2. Library Compounds will be supplied in 96 well Plates.
3. For each Library Compound supplied a minimum of 10 mg shall be
provided per well
<PAGE> 26
-26-
APPENDIX E
LIBRARY DATA
1. MS data will be provided for each Library Compound.
2. HPLC data will be provided for 25% of the Library Compounds.
3. NMR data will be provided for 25% of the Library Compounds.
4. One MDL structure data file will be provided for each Plate
together with an Excel compatible tab-separated file of the
associated data.
<PAGE> 1
CONFIDENTIAL TREATMENT
EXHIBIT 10.17(a)
AGREEMENT OF LIMITED PARTNERSHIP
OF
L & I PARTNERS, L.P.
This Agreement of Limited Partnership of L & I Partners, L.P. dated May 2,
1997, is entered into by and among L & I, L.L.C., a Delaware limited liability
company, as the General Partner, and the persons who have executed and delivered
this Agreement and whose names appear on Schedule A hereto (as said Schedule A
hereto may be amended from time to time as hereinafter provided), as the Limited
Partners.
In consideration of the mutual covenants, conditions and agreements herein
contained, the parties hereto hereby agree as follows:
ARTICLE 1
DEFINITIONS
In addition to terms defined elsewhere in this Agreement, the following
terms shall have the following meanings:
"Act" means the Delaware Revised Uniform Limited Partnership Act, as it
may be amended from time to time, and any successor to said Act.
"Affiliate" means, when used with respect to a specified Person, any other
Person directly or indirectly controlling or controlled by or under direct or
indirect common control with the specified Person, provided that the Partnership
shall not be deemed to be an Affiliate of any Partner. For purposes of this
definition "control", when used with respect to any specified Person, means the
power to direct the management and policies of the Person, directly or
indirectly, whether through -the ownership of voting securities, by contract, by
family relationship or otherwise; and the terms "controlling" and "controlled"
have the meanings correlative to the foregoing.
"Agreement" means this Agreement of Limited Partnership of L & I Partners,
L.P., as the same may be amended, modified or restated from time to time.
"Capital Contributions" means the amount of cash or the fair market value,
as determined in the sole judgment of the General Partner, of other property
contributed to the Partnership.
<PAGE> 2
-2-
"Code" means the Internal Revenue Code of 1986, as amended.
"Commitment" shall mean the commitment by a Partner to make Capital
Contributions as determined under Article 4 hereof and set forth in Schedule A
hereto.
"Contribution Per Unit" shall mean, with respect to a Partner as of the
date of determination, the aggregate amount of all Capital Contributions made by
such Partner as of such date divided by the number of Units owned by such
Partner as of such date.
"Covered Person" means any Partner, an Affiliate of a Partner or any
officer, manager, director, shareholder, partner or member of the Partnership or
of a Partner or their respective Affiliates.
"Distributable Cash" shall mean, at the time of determination, all
Partnership cash derived from the conduct of the Partnership's business, other
than (i) Capital Contributions, together with interest earned thereon pending
utilization thereof, (ii) financing proceeds and (iii) reserves for working
capital and other amounts that the General Partner reasonably determines to be
necessary for the proper operation of the Partnership's business and its winding
up and liquidation.
"General Partner" means L & I, L.L.C., a Delaware limited liability
company, or any other Person who, at the time of reference, serves as the
general partner of the Partnership, and who owns the number of Units set forth
on Schedule A hereto.
"Gross Asset Value" means, as of any date of determination, the fair
market value of all property of the Partnership as of the date on which the
determination thereof is to be made. The fair market value of the property of
the Partnership shall be determined by the General Partner. At the General
Partner's election, or if no determination is made by the General Partner within
15 days after a request therefor is made, the fair market value of the property
of the Partnership shall be determined by an independent appraiser selected by
the General Partner. An appointed appraiser may employ persons and incur
expenses as are necessary to make the determination. In all determinations of
fair market value, no value shall be placed on the goodwill or name of the
Partnership. Determinations of fair market value made in accordance with the
foregoing shall be final and not subject to challenge by any Partner.
"ILEX" means ILEX Oncology, Inc., a Delaware corporation.
<PAGE> 3
-3-
"License Agreement" shall mean the License Agreement dated May 2, 1997
between the Partnership and LKS.
"Limited Partners" means each Person who is a limited partner (which shall
include each Limited Partner executing this Agreement on the date hereof, each
additional Limited Partner and each substituted Limited Partner) at the time of
reference thereto, and who owns the number of Units set forth on Schedule A
hereto.
"LKS" means LeukoSite, Inc., a Delaware corporation.
"Ownership Restriction Agreement" means the Ownership Restriction
Agreement dated May 2, 1997, among the Partnership, the General Partner, the
members of the General Partner and the Limited Partners.
"Partners" means, collectively, the General Partner and the Limited
Partners, and "Partner" means any one of them.
"Partnership" means L & I Partners, L.P., the limited partnership entered
into and formed hereunder pursuant to the Act.
"Person" shall mean an individual, corporation, association, limited
liability company, limited liability partnership, partnership, estate, trust,
unincorporated organization or a government or any agency or political
subdivision thereof.
"Pre-Development Budget" shall mean the budget set forth as Exhibit A
hereto, as amended in accordance with Section 18.6.
"Prime Rate" shall mean the variable rate per annum equal to the rate of
interest published in the Wall Street Journal (Southwest Edition) in the "Money
Rates" section as the "Prime Rate", adjusted as of the first business day of
each month.
"Securities Act" shall mean the Securities Act of 1933, as it may be
amended from time to time, and any successor to said Act.
"Unit Percentage" means, as to any Partner, the fraction, expressed as a
percentage, having as its numerator the number of Units owned by such Partner
and having as its dominator the total number of Units of all Partners.
"Units" means the issued and outstanding ownership interests of the
Partnership held by the Partners as set forth on Schedule A hereto (as amended
in accordance with this Agreement by the General Partner) and
<PAGE> 4
-4-
the rights and obligations associated with ownership interests of the Partners
in the Partnership at the relevant time, including the consent, approval and
management rights of the Partners and any and all other benefits to which the
Partners may be entitled as provided in this Agreement, together with the
obligations of the Partners to comply with all the terms and provisions of this
Agreement. "Unit" means any one of the Units.
ARTICLE 2
FORMATION OF PARTNERSHIP
2.1 Formation. The Partners hereby enter into and form the Partnership as
a limited partnership pursuant to the provisions of the Act.
2.2 Name. The name of the Partnership shall be "L & I Partners, L.P."
2.3 Certificate. The General Partner shall cause a certificate of limited
partnership meeting the requirements of the Act, and any amendments thereto
which are required under the Act, to be filed, when and as required.
2.4 Principal Place of Business. The principal place of business of the
Partnership shall be 11550 IH 10 West, Suite 300, San Antonio, Texas 78230, or
such other place as the General Partner may determine.
2.5 Registered Office, Registered Agent. In Delaware, the Partnership
shall maintain a registered office at 1209 Orange Street, Wilmington, Delaware
19801, and the name of the Partnership's registered agent at that address shall
be CT Corporation System. In Texas, the Partnership shall maintain a registered
office at 11550 IH 10 West, Suite 300, San Antonio, Texas 78230, and the name of
the Partnership's registered agent at that address shall be James R. Koch. ILEX
shall cause Mr. Koch to forward to each of the Partners a copy of any
correspondence received by him in his capacity as the Partnership's registered
agent in Texas.
2.6 Term. The term of the Partnership shall commence on the date hereof
and shall continue for a period of 20 years, unless the Partnership is continued
or sooner dissolved pursuant to the provisions of this Agreement.
ARTICLE 3
PURPOSE: OPPORTUNITIES
<PAGE> 5
-5-
3.1 Purpose. The purpose and nature of the business to be conducted by the
Partnership shall be limited to (a) the commercialization of the Products (as
defined in the License Agreement) under the License Agreement and (b) enter
into, make and perform all such agreements and undertakings, and to engage in
all such activities and transactions, as the General Partner may deem necessary
or advisable for or incidental to the carrying out of the foregoing.
3.2 Outside Activities. This Agreement shall not preclude or limit, in any
respect, the right of the General Partner, any other Partner or any of their
Affiliates to engage or invest in any business activity of any nature or
description, including those which may be the same as or similar to the
Partnership's business. Any such activity may be engaged in independently or
with others without any obligation whatsoever to offer same to any other
Partner. Neither the Partnership, any Partner nor any of their Affiliates shall
have any right, by virtue of this Agreement or the partnership relationship
created hereby, in or to such other investments or activities, or to the income
or proceeds derived therefrom.
ARTICLE 4
CAPITAL CONTRIBUTIONS; PARTNERS
4.1 Pre-Development Contributions. During the period commencing on the
date hereof and ending three months thereafter (the "Pre-Development Period"),
the Partners hereby commit to make Capital Contributions to fund the
Partnership's payment of third party costs and expenses set forth in the
Pre-Development Budget; provided, however, that overhead and other costs
expressly designated in the Pre-Development Budget as the separate costs of a
Partner shall be borne solely by such Partner and shall not be treated as a
Capital Contribution hereunder.
4.2 Initial Capital Commitments. Upon the expiration of the
Pre-Development Period, the Partners commit to make an aggregate of $2,000,000
in Capital Contributions (the "Initial Commitments") in accordance with their
respective Unit Percentages. Such contributions shall be used to fund the
operations of the Partnership.
4.3 Additional Capital Commitments. When the Initial Commitments have been
funded by the Partners and the Partnership has a Capital Need (as defined
below), there shall be successive additional rounds of commitments for Capital
Contributions offered by the Partnership to the Partners ("Offered Commitments"
and together with Initial Commitments, collectively the "Commitments");
provided, however,
<PAGE> 6
-6-
the aggregate Capital Contributions made by all Partners under all Commitments
shall not exceed $10,000,000 without the prior express written consent of all
Partners. Each such round shall be in increments of $2,000,000 in aggregate
Offered Commitments and shall be offered as soon as practical upon a Capital
Need. As used herein, a "Capital Need" shall be deemed to exist when (a) all
then outstanding Commitments of the Partners have been fully funded and (b) the
Partnership then needs additional funds (or reasonably anticipates the need for
additional funds within 60 days) for its operations or to maintain reasonable
reserves for such operations. Upon the occurrence of a Capital Need, an offering
of a round of Offered Commitments may be commenced by any Partner upon such
Partner giving written notice thereof to the other Partners and, once commenced,
such offering shall continue for a period of 30 days thereafter (the "Offer
Period"). With regard to each round of Offered Commitments, the General Partner
must accept Offered Commitments in an amount equal to 1% of all Offered
Commitments accepted by the Limited Partners and each Limited Partner shall have
the right (but no obligation) to accept Offered Commitments in an amount equal
to but not less than 49.5% of the Offered Commitments (which percentage may not
correspond to then existing Unit Percentages, as adjusted). Each Limited Partner
that desires (or is obligated) to accept Offered Commitments must give written
notice of its acceptance to each other Partner and to the Partnership during the
Offer Period. Unless a Limited Partner accepts Offered Commitments during the
Offer Period in accordance with the foregoing, such Limited Partner shall be
deemed to have rejected such Offered Commitments. If a Limited Partner rejects
(or is deemed to have rejected) the Offered Commitments, the other Limited
Partner may elect to accept all (but not less than all) of such rejected Offered
Commitments by giving written notice thereof to the Other Partners on or before
the expiration of 15 days after the end of the Offer Period.
4.4 Funding of Commitments. All Commitments made by the Partners pursuant
to the provisions of this Article 4 shall be funded upon request by the General
Partner (or its managers or officers) as necessary to fund the Partnership's
operations and to maintain reasonable reserves for such operations. Each request
for funding shall be given by the General Partner (or its managers or officers)
to all other Partners at least five business days prior to the funding date.
Each request for funding shall include the statement as to the intended use of
the proceeds of such funding.
4.5 Binding Commitments, Default. All Commitments made by the Partners
pursuant to the provisions of this Article 4 shall be irrevocable, binding
commitments which shall be enforceable by the Partnership
<PAGE> 7
-7-
against the Partners making such Commitments. If a Partner does not fund a
Commitment made by it in accordance with the foregoing provisions, the other
Partners may (without any obligation) fund the unfunded portion of such
Commitment. Any such funding shall be in addition to, and not in lieu of, all
rights and remedies that the Partnership and the other Partners may be entitled
to against the defaulting Partner pursuant to this Agreement, at law or in
equity.
4.6 Adjustments to Units. As of any date (an "Adjustment Date") on which,
in accordance with the foregoing, Capital Contributions are made by the Partners
other than in accordance with their Unit Percentages, the Units of all Partners
shall automatically (and without any further action by the Partners) be adjusted
so that the number of Units held by each Partner shall be equal to 100
multiplied by a fraction, the numerator of which shall be the aggregate amount
of Capital Contributions made by such Partner as of the Adjustment Date, and the
denominator of which shall be the aggregate amount of Capital Contributions made
by all Partners as of the Adjustment Date; it being understood that the total
number of Units held by all Partners shall always equal 100. As of the date of
each Adjustment Date, the Unit Percentage of each Partner shall also be adjusted
based upon the adjusted number of Units held by each Partner. Promptly after
each Adjustment Date, the General Partner shall amend Schedule A hereto to
reflect the automatic adjustment of the number of Units and Unit Percentages as
of each Adjustment Date (such adjustment shall nevertheless be effective as of
the Adjustment Date regardless when Schedule A hereto is amended).
4.7 Schedule of Partners, Commitments-, Contributions, Unit Ownership. The
name, address, Commitments, Capital Contributions and Unit ownership of each
Partner are set forth on Schedule A attached hereto. Schedule A hereto shall be
amended by the General Partner to reflect the admission of additional or
substituted Limited Partners and to reflect adjustments to Units, Unit
Percentages, Commitments and Capital Contributions in accordance with the
provisions of this Agreement. The General Partner shall amend Schedule A hereto
pursuant to the power of attorney granted under Article 13 hereof to reflect any
such adjustments. The Units owned by Partners hereunder shall not be represented
by certificates.
4.8 No Third Party Beneficiaries. In no event shall a third party,
including without limitation a creditor of the Partnership, be entitled to in
any way rely upon or enforce the obligation of Partners to make future Capital
Contributions.
<PAGE> 8
-8-
4.9 Loans and Withdrawal of Capital Contributions. No Partner shall
be permitted to borrow, or to make an early withdrawal of, any portion of the
capital contributed by such Partner.
4.10 Limited Liability of Limited Partners. No Limited Partner shall
be bound by or personally liable for the expenses, liabilities or obligations
of the Partnership.
4.11 Limited Catch-Up Option. In the event that the Unit Percentages of
the Limited Partners are adjusted pursuant to Section 4.6 as a result of one
Limited Partner (the "Contributing Partner") making more Capital Contributions,
in aggregate, than the other Limited Partner (the "Non-Contributing Partner"),
the Non-Contributing Partner shall have a limited, one-time option (the
"Option") to purchase a portion of the Contributing Partner's Units as provided
in this Section. The Option shall be exercisable by the Non-Contributing Partner
one time (but not more than one time) at any time prior to (but not after) the
fifth (5th) anniversary of the initial effective date of this Agreement (the
"Outside Date"). The Option may be exercised by the Non-Contributing Partner
giving written notice of exercise to the Contributing Partner prior to the
Outside Date. The purchase price of the Units purchasable pursuant to the Option
shall be equal to the sum of (i) the Contributing Partner's Contribution Per
Unit as of the date of exercise of the Option multiplied by the number of Units
being purchased plus (ii) Applicable Interest. The maximum number of Units
purchasable under the Option shall be equal to one-half of the amount by which
the number of Units owned by the Contributing Partner exceeds the number of
Units owned by the Non-Contributing Partner; provided, however, in no event
shall the number of Units purchasable under the Option exceed the number of
Units which, if multiplied by the Contributing Partner's Contribution Per Unit,
would equal $1,250,000.
As used herein, "Applicable Interest" shall mean interest, at the
following per annum. rates compounded annually, applied to the amount of the
short-fall in Capital Contributions being made up by the Non-Contributing
Partner pursuant to the exercise of the Option on a first-in-first-out basis:
the lesser of (i) the maximum lawful (nonusurious) rate and (ii) Prime Rate plus
1% for 0-6 months, Prime Rate plus 2% for 6-12 months, Prime Rate plus 3% for
12-18 months, Prime Rate plus 6% if more than 18 months.
Due the complexity of the foregoing, the following example is included:
Partner A has contributed $1.0 million in month one, $1.25 million in month 12
and $1.75 million in month 24; and Partner B has
<PAGE> 9
-9-
contributed $1.0 million in month one and $1.0 million in month 12 and $-0- in
month 24. If the Option is exercised for 1/3 of the amount by which the number
of Units owned by the Contributing Partner exceeds the number of Units owned by
the Non-Contributing Partner in month 34, the exercise price would be calculated
as follows:
Total Capital Contributions: $4.0 million for Partner A; $2.0 million for
Partner B
Total Units/Unit Percentages: 66.667 Units/66.667% for Partner A; 33.333
Units/33.333% for Partner B
Contribution Per Unit: $59,999.70 for Partner A; $60,000.60 for
Partner B
Option Price: (1/3 X 33.333 Units) x $59,999.70 = $666,656.67
Plus
Applicable Interest (compounded annually) on
$666,656.67: [(Prime Rate + 6%) on $250,000 for
22 months] + [(Prime Rate + 2%) on $416,656.67
for 10 months]
If the Option is exercised, the closing of the transaction shall occur 15
days thereafter at the principal offices of the General Partner. At closing, the
purchasing Partner shall pay, in cash, to the selling Partner the applicable
purchase price for the Units being purchased, and the selling Partner shall
assign the Units being purchased to the purchasing Partner free and clear of all
liens and encumbrances other than those under this Agreement and the Ownership
Restriction Agreement.
If the Contributing Partner will incur a taxable gain (excluding any
income associated with the interest portion of the purchase price under clause
(ii) above) as a result of the sale of Units pursuant to the Option, the amount
of the purchase price payable at closing by the Non-Contributing Partner shall
be increased by an amount, if any, equal to (i) the then highest federal
marginal corporate income tax rate applied to the amount of such gain less (ii)
any savings or reduction of federal income tax resulting from any deduction or
credit which (x) is allowed for federal income tax purposes and (y) decreased
the federal income tax basis of the Units sold. The parties will reasonably
cooperate with each other in determining the amount, if any, of any such gain,
including any such
<PAGE> 10
-10-
determination that may be requested by the Non-Contributing Partner in
anticipation of the possible exercise of the Option.
If the parties determine that the Contributing Partner would incur such a
taxable gain if the Option is exercised, then, upon the request of the
Non-Contributing Partner, the parties will reasonably cooperate with each other
to explore other means to achieve the same limited right to "catch up" on
previously unfunded Capital Contributions that would not involve the
Non-Contributing Partner having to pay an increased purchase price to cover the
Contributing Partner's taxable gain; provided that any such alternative must be
no less favorable, in economic terms and tax effects, to the Contributing
Partner. One such alternative may be to allow Capital Contributions that are
anticipated to be needed to fund the operations of the Partnership prior to the
Outside Date to be made on a disproportionately increased basis by the
Non-Contributing Partner with an corresponding special allocation or
re-allocation to adjust the relative Capital Account balances of the
Contributing Partner and Non-Contributing Partner so that they are in the same
proportion as Units after giving effect to such disproportionate contributions.
Notwithstanding any other provision of this Agreement, the parties agree
that the Non-Contributing Partner shall never be required or obligated to pay
interest in excess of the maximum non-usurious interest rate as may be
authorized by applicable law. It is the intention of the parties to conform
strictly to the applicable laws which limit interest rates, and any of the
provisions of this Agreement for interest (or which may be deemed to be
interest), if and to the extent payable by the Non-Contributing Partner, shall
be held to be subject to reduction to the maximum non-usurious interest rate
allowed under said law.
ARTICLE 5
CAPITAL ACCOUNTS
5.1 Capital Accounts. A capital account ("Capital Account") shall be
established for each Partner. A Partner's Capital Account shall be credited with
the fair market value (as determined in the sole judgment of the General
Partner) of property contributed and the amounts of cash contributed to the
Partnership by such Partner and shall be credited or charged, as the case may
be, with such Partner's share of Partnership items of book income, gain, loss
and deduction for each fiscal year of the Partnership determined pursuant to
Article 7 below. Each Partner's Capital Account shall be charged with the fair
market value (as determined in the sole judgment of the General Partner) of any
property
<PAGE> 11
-11-
distributed and the amount of cash distributed to such Partner. The respective
Capital Accounts of the Partners shall not bear interest.
5.2 Adjustments to Capital Accounts Upon Revaluation of Property. Upon the
occurrence of (a) the admission of an additional or substituted Limited Partner,
(b) an extraordinary (as determined by the General Partner) distribution of
property by the Partnership, or (c) the liquidation of the Partnership (each an
"Adjustment Event"), then, upon any such event, the Gross Asset Value
immediately before the Adjustment Event shall be determined. The property of the
Partnership shall thereafter be treated as if it were sold by the Partnership
and any gain or loss resulting therefrom shall be allocated among the Partners
in accordance with Article 7 hereof as of the date immediately before the
Adjustment Event resulting in the valuation of Partnership assets. Such
allocation of gain or loss shall thereafter be reflected in the Capital Accounts
of the Partners for all purposes of this Agreement. Solely for purposes of
determining adjustments to Capital Accounts, any net profit or net loss shall be
determined using the Gross Asset Value rather than the adjusted tax basis of the
property of the Partnership.
5.3 Compliance with Treasury Regulations. Notwithstanding any provision in
this Agreement to the contrary, the Capital Accounts of the Partners shall be
maintained in accordance with Treasury Regulations, as amended from time to
time, and shall be adjusted as provided therein.
ARTICLE 6
DISTRIBUTIONS
Except as otherwise provided herein, Distributable Cash of the Partnership
shall be distributed on a quarterly basis among the Partners pro rata in
accordance with their Unit Percentages. The amount and timing of such
distributions shall be determined by the General Partner. The General Partner
shall have the absolute discretion to have any distribution treated as a return
of capital. That portion of any distribution which is treated as a return of
capital shall be made to the Partners ratably in proportion to their respective
Capital Accounts immediately prior to the distribution. The General Partner and
the Partnership shall incur no liability for making distributions in accordance
with the provisions of this Agreement, whether or not the General Partner or the
Partnership have knowledge or notice of any transfer of ownership of any Units.
ARTICLE 7
ALLOCATIONS
<PAGE> 12
-12-
7.1 Book Allocations. Except as otherwise provided herein or unless
another allocation is required by the Code, Treasury Regulations, published
revenue rulings or judicial decisions, all items of Partnership book income,
gain, loss, deduction and credit shall be allocated among the Partners pro rata
in accordance with their Unit Percentages in effect for the period during which
such items accrue. For purposes of computing each item of book income, gain,
deduction or loss, the determination, recognition and classification of such
item shall be the same as its determination, recognition and classification for
federal income tax purposes.
7.2 Tax Allocations.
(a) Code Section 704(c). Notwithstanding anything herein to the
contrary, if any Partner has contributed or is treated as contributing any
property to the Partnership that has a Gross Asset Value that is in excess
of or less than its adjusted basis for federal income tax purposes at the
time of such contribution, then all gain, loss, and deduction with respect
to the contributed property shall, solely for federal income tax purposes,
be allocated among the Partners so as to take account of the variation
between the adjusted basis of such property and its initial net asset
value as required under Code Section 704(c).
(b) Partnership Asset Adjustments. In the event the Gross Asset
Value of any Partnership Asset is adjusted under Section 5.2 hereof,
subsequent allocations of Partnership income, gain, loss, and deduction
with respect to such asset, as calculated for tax purposes, shall take
account of any variation between the adjusted basis of such asset for
federal income tax purposes and its Gross Asset Value in accordance with
the principals of Code Section 704(c) as is required pursuant to Treasury
Regulations Section 1.704-1(b)(4)(i).
(c) Consistent Allocation. Except as provided in Section 7.2(a) and
(b), Partnership income, gain, loss, deduction, and credit, as calculated
for tax purposes, shall be allocated among the Partners, to the extent
possible, in accordance with the allocations of the items of Partnership
book income, gain, loss, deduction, and credit allocated pursuant to
Section 7.1.
(d) Adjustments by the Partners. Any elections or other decisions
related to Partnership tax allocations pursuant to this Section 7.2 shall
be made by the General Partner of the Partnership in a manner that
reasonably reflects the purpose and intention of
<PAGE> 13
-13-
this Agreement. Partnership tax allocations pursuant to this Section 7.2
are solely for purposes of federal, state, and local taxes and shall not
affect, or in any way be taken into account in computing, any Partner's
Capital Account or distributive share of the Partners items of Partnership
book income, gain, loss, deduction, and credit or Partnership
distributions to any of the Partners under this Agreement.
7.3 Transfer of Units. Unless otherwise unanimously agreed by the
Partners, income, gain, loss, deduction or credit attributable to any Unit (or
portion thereof) which has been transferred shall be allocated between the
transferor and the transferee equally among the days of the Partnership's fiscal
year without regard to Partnership operations during such days.
ARTICLE 8
MANAGEMENT AND OPERATION OF BUSINESS
8.1 Management by General Partner. Subject to Section 8.3 below and
subject to the provisions of the Act, the General Partner shall have exclusive
authority to manage and control the day-to-day operations and affairs of the
Partnership and to make all decisions regarding the business and property of the
Partnership. The General Partner is hereby granted by the other Partners the
right, power and authority to do on behalf of the Partnership all things which,
in the General Partner's sole judgment, are necessary, proper or desirable to
carry out and exercise such authority.
8.2 Authority to Act. In order to expedite the handling of Partnership
business, it is understood and agreed that any document executed by the General
Partner or any officer of the General Partner while acting on behalf and in the
name of the Partnership shall be deemed to be the action of the Partnership as
to any third parties. Further, any Person dealing with the Partnership or the
General Partner or any officer of the General Partner may rely upon a
certificate signed by the General Partner or any officer of the General Partner
as to:
(a) identity of the Partners;
(b) existence or nonexistence of any fact or facts that constitute
conditions precedent to acts by the Partnership or are in any other manner
related to the affairs of the Partnership;
(c) Persons who are authorized to execute and deliver any instrument
or document of the Partnership;
<PAGE> 14
-14-
(d) any act or failure to act by the Partnership; or
(e) any other matter whatsoever involving the Partnership or any
Partner.
In no event shall any Person dealing with the General Partner or any officer of
the General Partner with respect to any business or property of the Partnership
be obligated to ascertain that the terms of this Agreement have been complied
with, or be obligated to inquire into the necessity or expedience of any act or
action of the General Partner or any officer of the General Partner, and every
contract, agreement, conveyance instrument, mortgage, security agreement,
promissory note or other instrument or document executed by the General Partner
or an officer of the General Partner with respect to any business or property of
the Partnership shall be conclusive evidence in favor of any and every Person
relying thereon and claiming thereunder that (i) at the time of the execution
and/or delivery thereof, this Agreement was in full force and effect; (ii) such
instrument or document was duly executed in accordance with the terms and
provisions of this Agreement and is binding upon the Partnership; and (iii) the
General Partner or officer of the General Partner, as applicable, was duly
authorized and empowered to execute and deliver any and every such instrument or
document for and on behalf of the Partnership.
8.3 Certain Limitations upon the Power of the General Partner.
Notwithstanding anything to the contrary contained herein, without the prior
written approval of all of the Limited Partners, the General Partner shall not:
(a) Do any act in contravention of this Agreement or the certificate
of limited partnership of the Partnership;
(b) Do any act which would make it impossible to carry on the
ordinary business of the Partnership;
(c) Possess Partnership property or assign its rights in specific
Partnership property for other than a Partnership purpose;
(d) Admit a person as the General Partner;
(e) Except for the admission of a transferee or assignee of a
Limited Partner's Units transferred or assigned in compliance with the
Ownership Restriction Agreement, admit an additional Partner to the
Partnership; or
<PAGE> 15
-15-
(f) Knowingly commit any act that would subject any Limited Partner
to liability as a general partner in any jurisdiction.
8.4 Investment/Bank Accounts. The Partnership will maintain such
investment, bank and other accounts as the General Partner may deem necessary
for the investment and deposit of the Partnership funds and for the proper
segregation thereof into such separate accounts as may be deemed appropriate.
All withdrawals from any such accounts shall be made by the General Partner or
the duly authorized officers of the Partnership. Partnership funds shall not be
commingled with those of any other Person. The Partnership accounts shall be in
the name of the Partnership and all payments required of the Partnership will be
made from accounts of the Partnership.
8.5 Reimbursement. The General Partner shall be reimbursed by the
Partnership for all costs and expenses, including legal, accounting and other
fees related to the formation of the Partnership and the preparation of this
Agreement. During the term of the Partnership, the General Partner shall be
reimbursed for all direct costs and expenses incurred by it in the management
and administration of the Partnership and attributable to the business of the
Partnership.
8.6 Compensation. The General Partner shall not be entitled to any
compensation for the management and administration of the Partnership.
ARTICLE 9
BOOKS OF ACCOUNT: RECORDS, TAX INFORMATION
9.1 Fiscal Year. The fiscal year of the Partnership shall end on December
31 in each year.
9.2 Books and Records. Proper and complete records and books of account
shall be kept by the General Partner in which shall be entered fully and
accurately all transactions and other matters relative to the Partnership's
business as are usually entered into records and books of account maintained by
Persons engaged in businesses of like character. The Partnership books and
records shall be prepared in accordance with generally accepted accounting
principles applied on a consistent basis. The books and records shall at all
times be made available at the principal office of the Partnership and shall be
open to the reasonable inspection and copying by the Partners or their duly
authorized representatives with advance notice (not more than one business day
shall be required) during reasonable business hours.
<PAGE> 16
-16-
9.3 Taxation as a Partnership. The Partnership shall be treated as a
partnership for federal and all state tax purposes. The General Partner shall
cause the Partnership to prepare and file annually on or before the due date or
extended due date thereof all required federal, state and local tax returns and
filings.
9.4 Tax Elections. All elections required or permitted to be made by the
Partnership under the Code, including but not limited to, the election pursuant
to Section 754 thereof, shall be made by the General Partner, if at all, in its
sole discretion. Each Partner will upon request supply the information necessary
to properly give effect to such elections.
9.5 Tax Returns. The General Partner shall, on a timely basis, send each
Person who is a holder of an interest in the Partnership at any time during a
calendar year all partnership tax information kept on a federal income tax basis
as shall be necessary for the preparation by such holder of its federal income
tax return. Further, on request by any holder of an interest in the Partnership,
the General Partner will furnish such holder copies of all federal, state and
local income tax returns or information returns, if any, which the Partnership
is required to file.
ARTICLE 10
RESTRICTIONS ON TRANSFER
10.1 Private Offering. Each Limited Partner is fully aware that the
Partnership is selling Units to such Limited Partner in reliance upon the
exemption from registration provided by Section 4(2) of the Securities Act, and
upon the truth and accuracy of the representations of such Limited Partner
contained in this Agreement.
10.2 Securities Act Requirements. Each Limited Partner represents that (a)
its Units are being acquired for investment, with no present intention of
distributing or selling any portion thereof or with a view to any distribution
thereof within the meaning of the Securities Act, and (b) its financial
condition is such that it is able to bear all risks of holding its Units for an
indefinite period of time and that it has such knowledge and experience in
financial and business matters that it is capable of evaluating the merits and
risks of acquisition of the Units and of making an informed investment decision
with respect thereto; and (c) it will not offer or make a transfer of its Units
unless it shall have delivered to the Partnership (i) an opinion of counsel
satisfactory to the General Partner to the effect that no registration (or
perfection of an exemption) under the Securities Act is required with respect to
such transfer or (ii) such other evidence satisfactory to the General Partner
that the transfer
<PAGE> 17
-17-
will not violate the Securities Act and other applicable state securities laws.
10.3 Transfers by the Limited Partners. A Limited Partner may not sell,
transfer, assign or devise, or subject to security interest, lien or charge, all
or any part of its Units, except as permitted in the Ownership Restriction
Agreement, and any act in violation of this Section 10.3 shall be null and void
ab initio. Any transfer of or assignment of the Units of a Limited Partner shall
not dissolve the Partnership. A transferee or assignee of a Limited Partner's
Units transferred or assigned in compliance with the Ownership Restriction
Agreement shall be admitted as a substituted Limited Partner of the Partnership
(with regard to the interest so transferred and assigned) without any further
approval by the Partners.
10.4 Transfers by the General Partner. The General Partner may not sell,
assign or transfer, or subject to security interest, lien or charge, all or any
portion of its Units. The General Partner agrees not to voluntarily withdraw or
resign as the general partner of the Partnership.
ARTICLE 11
DISSOLUTION
The Partnership shall dissolve and its affairs shall be wound up in
accordance with Article 12 on the first to occur of the following:
(a) the expiration of the term of the Partnership;
(b) the bankruptcy, dissolution or termination and winding up of the
affairs of the General Partner; or
(c) the written consent to terminate by all of the Partners.
ARTICLE 12
WINDING UP AND TERMINATION OF THE PARTNERSHIP
12.1 Winding Up. If the Partnership is dissolved for any reason, it shall
be wound up and its assets sold or distributed in an orderly manner, unless, in
the case of the bankruptcy or termination and winding up of the affairs of the
General Partner, all of the Partners agree, in accordance with the Act, to
reconstitute and continue the Partnership and appoint one or more new general
partners within 90 days after such event. In the absence of any such applicable
agreement, no Partner shall have the right to reconstitute or continue the
Partnership.
<PAGE> 18
-18-
12.2 Liquidator. The General Partner, or if there is no General Partner,
then a liquidation trustee appointed by Partners owning at least 75% of the
Units of all Partners (the "Liquidation Trustee"), shall have the exclusive
authority to manage and control the Partnership during the period during which
it is being wound up. The Person(s) vested with the authority to manage and
control the Partnership during the winding up period are hereinafter referred to
as the "Liquidator".
12.3 Liquidation, Distributions. Upon the winding up and termination of
the business and affairs of the Partnership, its assets (other than cash) shall
be sold and its liabilities and obligations to creditors and all expenses
incurred in its liquidation shall be paid (either by payment or the making of
reasonable provision for payment). Thereafter, the net proceeds from such sales
(after deducting all selling costs and expenses in connection therewith) shall
be distributed among the Partners in accordance with their respective positive
balances in their Capital Accounts. Any distributions under this Section 12.3
may be made, at the election of the Liquidator, in money arising from the sale
of the property of the Partnership or by a distribution of the Partnership's
assets in kind (the distributed asset being treated as sold for its fair market
value and any deemed gain or loss being treated as allocated among the Partners
in accordance with Article 7 hereof) or such distribution may be, at the
election of the Liquidator, partially in money and partially in kind. All
determinations of fair market value under this Section 12.3 shall be made in the
sole judgment of the Liquidator. Any sales or distributions in kind of the
Partnership's assets shall be effected in compliance with the Securities Act and
applicable state securities laws, as well as applicable contractual restrictions
or requirements relating to the transfer of the assets of the Partnership.
12.4 Source of Distributions. Each holder of an interest in the
Partnership shall look solely to the assets of the Partnership for all
distributions with respect to the Partnership and its Capital Contribution
thereto (including the return thereof) and share of profits or losses thereof,
and shall have no recourse therefor (upon dissolution or otherwise) against the
Partnership, any Partner or the Liquidator.
12.5 Deficit Capital Accounts. No Partner shall be required to
restore any deficit balance existing in its Capital Account upon the
liquidation and termination of the Partnership.
12.6 Termination of Partnership. Upon the completion of the liquidation of
the Partnership and the distribution of all Partnership assets, the Partnership
shall terminate and the Liquidator shall (and is
<PAGE> 19
-19-
hereby given the power and authority to) execute, acknowledge, swear to and
record all documents required to effectuate the dissolution and termination of
the Partnership.
ARTICLE 13
POWER OF ATTORNEY
Each Limited Partner hereby makes, constitutes and appoints the General
Partner with full power of substitution and resubstitution, such Limited
Partner's true and lawful attorney for it and in its name, place and stead and
for its use and benefit, to sign, execute, certify, acknowledge, deliver, swear
to, file and record in all necessary or appropriate places such agreements,
instruments or documents as may be necessary or advisable (a) to reflect the
exercise by the General Partner of any of the powers granted to it under this
Agreement; (b) to reflect the admission to the Partnership of any additional
Limited Partner or substituted Limited Partner in the manner prescribed in this
Agreement; (c) to amend Schedule A in the manner prescribed in this Agreement;
and (d) which may be required of the Partnership or of the Partners by the laws
of the State of Delaware or any other jurisdiction in which the Partnership may
conduct business or own property. Each Limited Partner authorizes such
attorney-in-fact to take any further action which such attorney-in-fact shall
consider necessary or advisable in connection with any of the foregoing, hereby
giving such attorney-in-fact full power and authority to do and perform each and
every act or thing whatsoever requisite or advisable to be done in and about the
foregoing as fully as such Limited Partner might or could do if personally
present, and hereby ratifying and confirming all that such attorney-in-fact
shall lawfully do or cause to be done by virtue hereof. The power of attorney
granted pursuant to this Article 13: (a) is a special power of attorney coupled
with an interest and is irrevocable; (b) may be executed by such
attorney-in-fact by listing all of the Limited Partners executing any agreement,
certificate, instrument or document with the single signature of any such
attorney-in-fact acting as attorney-in-fact for all of them; (c) shall survive
the bankruptcy, death, adjudication of incompetence or insanity, or dissolution
of a Limited Partner; and (d) shall survive the delivery of an assignment by a
Limited Partner of its Units.
ARTICLE 14
LIABILITY AND EXCULPATION
14.1 Liability. Except as otherwise provided by the Act, the debts,
obligations and liabilities of the Partnership, whether arising in contract,
tort or otherwise, shall be solely the debts, obligations and liabilities of
<PAGE> 20
-20-
the Partnership, and no Partner shall be obligated for any such debt, obligation
or liability of the Partnership solely by reason of being a Partner of the
Partnership.
14.2 Exculpation. No Covered Person shall be liable to the Partnership or
any Partner under any theory of law, including tort, contract or otherwise
(INCLUDING A COVERED PERSON'S OWN NEGLIGENCE) for any loss, damage or claim
incurred by reason of any act or omission (including decisions to vote for or
against any matter) performed or omitted by such Covered Person in good faith on
behalf of the Partnership and in a manner reasonably believed to be within the
scope of authority conferred on such Covered Person by this Agreement, except
that a Covered Person shall be liable for any such loss, damage or claim
incurred by reason of such Covered Person's gross negligence or willful
misconduct. A Covered Person shall be fully protected in relying in good faith
upon the records of the Partnership and upon such information, opinions, reports
or statements presented to the Partnership by any Person as to matters the
Covered Person reasonably believes are within such other Person's professional
or expert competence and who has been selected with reasonable care by or on
behalf of the Partnership, including information, opinions, reports or
statements as to the value and amount of the assets, liabilities, profits,
losses or any other facts pertinent to the existence and amount of assets from
which distributions to Partners might properly be paid.
14.3 Duties and Liabilities of Covered Persons. To the extent that, at law
or in equity, a Covered Person has duties (including fiduciary duties) and
liabilities relating thereto to the Partnership or to any other Covered Person
arising under this Agreement, a Covered Person acting under this Agreement shall
not be liable to the Partnership or to any other Covered Person for actions
(including decisions to vote for or against any matter) taken by it in good
faith reliance on the provisions of this Agreement. The provisions of this
Agreement, to the extent that they restrict the duties and liabilities of a
Covered Person otherwise existing at law or in equity, are agreed by the parties
hereto to replace such other duties and liabilities of such Covered Person.
Unless otherwise expressly provided herein, whenever a conflict of interest
exists or arises between a Covered Person and the Partnership or a Partner, the
Covered Person shall disclose such conflict to the Partners and shall resolve
such conflict of interest, taking such action or providing such terms,
considering in each case the relative interest of each party (including its own
interest) to such conflict, agreement, transaction or situation and the benefits
and burdens relating to such interests, any customary or accepted industry
practices, and any applicable generally accepted accounting practices or
<PAGE> 21
-21-
principles. In the absence of bad faith by the Covered Person, the resolution,
action or term so made, taken or provided by the Covered Person shall not
constitute a breach of this Agreement or any other agreement contemplated herein
or of any duty or obligation of the Covered Person at law or in equity or
otherwise.
ARTICLE 15
INDEMNIFICATION
15.1 Indemnification. To the fullest extent permitted by applicable law, a
Covered Person shall be entitled to indemnification from the Partnership for any
loss, damage or claim incurred by such Covered Person (a) by reason of any act
or omission performed or omitted by such Covered Person in good faith on behalf
of the Partnership and in a manner reasonably believed to be within the scope of
authority conferred on such Covered Person by this Agreement or (b) by reason of
being a Partner, an Affiliate of a Partner or an officer, manager, director,
shareholder, partner, representative, advisor or agent of the Partnership or a
Partner or its Affiliate, except that no Covered Person shall be entitled to be
indemnified in respect of any loss, damage or claim incurred by such Covered
Person by reason of gross negligence or willful misconduct with respect to such
acts or omissions; provided, however, that any indemnity under this Article 15
shall be provided out of and to the extent of Partnership assets only, and no
Covered Person shall have any personal liability on account thereof. THE
FOREGOING INDEMNITY IS INTENDED TO INDEMNIFY EACH COVERED PERSON FOR HIS OWN
ACTS OF NEGLIGENCE AND SHALL APPLY IRRESPECTIVE OF ANY CLAIM OF CONCURRENT OR
CONTRIBUTORY NEGLIGENCE ON THE PART OF SUCH COVERED PERSON.
15.2 Expenses. To the fullest extent permitted by applicable law, expenses
(including legal fees) incurred by a Covered Person in defending any claim,
demand, action, suit or proceeding for which indemnity is sought under this
Agreement shall, from time to time, be advanced by the Partnership prior to the
final disposition of such claim, demand, action, suit or proceeding upon receipt
by the Partnership of an undertaking by or on behalf of the Covered Person to
repay such amount if it shall be determined that the Covered Person is not
entitled to be indemnified as authorized under this Article 15.
15.3 Insurance. The Partnership may purchase and maintain insurance, to
the extent and in such amounts as the General Partner shall deem reasonable, on
behalf of Covered Persons and such other Persons as the General Partner shall
determine, against any liability that may be
<PAGE> 22
-22-
asserted against or expenses that may be incurred by any such Person in
connection with the activities of the Partnership or such indemnities,
regardless of whether the Partnership would have the power to indemnify such
Person against such liability under the provisions of this Agreement. The
Partnership may enter into indemnity contracts with Covered Persons and adopt
written procedures pursuant to which arrangements are made for the advancement
of expenses and the funding of obligations under this Article 15 and containing
such other procedures regarding indemnification as are appropriate.
ARTICLE 16
NOTICES
All notices, requests and communications under this Agreement shall be in
writing and shall be given to a party at the party's address set forth in
Schedule A hereto or, in the case of the Partnership, as follows: L & I
Partners, L.P., 11550 IH 10 West, Suite 300, San Antonio, Texas 78230,
Attention: Board of Managers of L & I, L.L.C. and L & I Partners, L.P., c/o
LeukoSite, Inc., 215 First Street, Cambridge, NM 02142, Attn: Christopher K.
Mirabelli, Ph.D. Each such notice, request or other communication shall be
effective (a) if given by registered or certified mail, return receipt
requested, two days after such communication is deposited in the mails with
postage prepaid and addressed as specified pursuant to this Article 16, or (b)
if given by any other means, when delivered at the address specified pursuant to
this Article 16. Any party may change its or its address for notifications
hereunder by giving the other parties notice thereof in accordance with this
Article 16. Notwithstanding the foregoing, a copy of each notice given to the
General Partner or the Partnership shall also be given to each Limited Partner.
ARTICLE 17
DISPUTE RESOLUTION
Except as otherwise provided herein, any claim, dispute or controversy of
any nature whatsoever, including but not limited to tort claims and contract
disputes between the parties to this Agreement arising out of or related to the
terms and conditions of this Agreement, including the implementation,
applicability or interpretation thereof, shall be resolved in accordance with
the dispute resolution procedures set forth in the Ownership Restriction
Agreement.
<PAGE> 23
-23-
ARTICLE 18
MISCELLANEOUS
18.1 Further Assurances. Each Partner agrees to execute, with
acknowledgment or affidavit if required, any and all documents and writings
which may be necessary or expedient in connection with the formation of the
Partnership and the achievement of its purposes, specifically including all such
agreements, certificates, tax statements, tax returns and other documents as may
be required of the Partnership or its Partners by the laws of the United States
of America, the State of Texas or Delaware or any political subdivision or
agency thereof.
18.2 Partnership Property. The Partners agree that the property and other
assets of the Partnership are and shall be owned by the Partnership as an
entity. Each Partner, accordingly, owns Unit(s) and not an undivided interest in
such assets and properties. No Partner shall have any right to partition the
assets and properties of the Partnership; and to the extent, if any, that any
Partner would have such a right, each such Partner hereby irrevocably waives any
and all rights to maintain any action for partition of the assets and properties
of the Partnership, either as a partition in kind or a partition by sale.
18.3 Invalid Provisions. If any provision of this Agreement, or the
application of such provision to any Person or circumstance, shall be held
invalid, the remainder of this Agreement, or the application of such provision
to Persons or circumstances other than those to which it is held invalid, shall
not be affected thereby.
18.4 Entire Agreement. This Agreement and the additional documents and
agreements referred to herein constitute the entire agreement among the parties,
and it supersedes all prior or contemporaneous agreements or understandings
among the parties.
18.5 Successors and Assigns. Except as herein otherwise specifically
provided, this Agreement shall be binding upon and inure to the benefit of the
parties and their legal representatives, heirs, administrators, executors,
successors and permitted assigns.
18.6 Amendments. Except as provided in Article 4 and Article 13 relating
to certain amendment powers of the General Partner, amendments or modifications
may be made to this Agreement only by setting forth such amendments or
modifications in a written instrument signed by all the Partners.
18.7 Interpretation. Wherever from the context it appears appropriate,
each term stated in either the singular or the plural shall include the singular
and the plural, and pronouns stated in the masculine,
<PAGE> 24
-24-
the feminine or the neuter gender shall include the masculine, feminine and
neuter.
18.8 Governing Law. This Agreement and the rights of the parties hereunder
shall be governed by and interpreted in accordance with the laws of the State of
Delaware without giving effect to conflicts of law principles.
18.9 Counterparts. This Agreement may be executed in several counterparts,
each of which shall be deemed an original but all of which shall constitute one
and the same instrument. It shall not be necessary for all Partners to execute
the same counterpart hereof.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement of
Limited Partnership as of the day and in the year first above written.
GENERAL PARTNER:
L & I, L.L.C.
By:__________________________________________
Christopher K. Mirabelli, Ph.D., President
LIMITED PARTNERS:
LEUKOSITE, INC.
By:__________________________________________
Christopher K. Mirabelli, Ph.D.,
Chairman and Chief Executive Officer
ILEX ONCOLOGY, INC.
By:__________________________________________
Richard L. Love,
President
<PAGE> 25
-25-
SCHEDULE A
(As of May 2, 1997)
<TABLE>
<CAPTION>
CAPITAL UNIT UNIT
NAME AND ADDRESS CONTRIBUTIONS OWNERSHIP PERCENTAGE
- ---------------- ------------- --------- ----------
<S> <C> <C> <C>
General Partner:
L & I, L.L.C. $ 13,000 1.0 1.0%
11550 IH 10 West, Suite
300
San Antonio, TX
78230-1064
Fax No. (210) 949-8227
Attention: Board of
Managers
Limited Partners:
LeukoSite, Inc. $643,500 49.5 49.5%
215 First Street
Cambridge, MA 02142
Fax No. (617) 621-9349
Attention:Christopher
K. Mirabelli, Ph.D.
ILEX Oncology, Inc. $643,500 49.5 49.5%
11550 IH 10 West, Suite
300
San Antonio, TX
78230-1064
Fax No. (210) 949-8227
Attention: Richard L. Love
---------- ---------- ----------
TOTAL: $1,300,000 100.0 100.0%
====== ========== ========== ==========
</TABLE>
<PAGE> 26
-26-
EXHIBIT A
Pre-Development Budget
April 1. 1997 - June 30, 1997
<TABLE>
<CAPTION>
Activity/Objective Complete Expenses
- ------------------ -------- --------
<S> <C> <C>
License Fees April 1, 1997 $ *
Sannes Market Study April 1, 1997 *
Manufacturing up-front April 15, 1997 *
payment to Karl Thomas,
Gmbh
Contingency *
----------
$ *
LeukoSite Expense
Travel *
Manufacturing Consultant June 30, 1997 *
----------
$ *
ILEX Expense $ *
Medical Consultant *
European Consultant *
Pre-FDA Mtg. *
Europe Coord. of Trial *
Dossier Prep *
----------
(printing, out of
pockets, etc.)
ILEX Travel $ *
</TABLE>
* Confidential treatment requested: material has been omitted and filed
separately with the Commission.
<PAGE> 1
CONFIDENTIAL TREATMENT
EXHIBIT 10.17(b)
LICENSE AGREEMENT
This Agreement is effective May 2, 1997 ("the Effective Date") by and
between LeukoSite, Inc. ("LKS"). a Delaware corporation having an address at 215
First Street, Cambridge, MA 02142, and L & I Partners, L.P., a Delaware Limited
Partnership having an address at 11550 1 H 10 West Suite 300, San Antonio, Texas
78230 ("LICENSEE") .
WHEREAS, LICENSEE desires to obtain certain exclusive and non-exclusive
sub-licenses in and to certain patents and information which LKS has licensed
from the British Technology Group Ltd. ("BTG"); and
WHEREAS, LKS is willing to grant the sub-licenses desired by LICENSEE.
NOW THEREFORE in consideration of the mutual promises and other good
and valuable consideration, the parties agree as follows:
Section I - Definitions
1.1 IN this Agreement the following terms shall have the following meanings
(subject to subsequent amendment pursuant to this Agreement):-
1.1.1 "Campath I H" the anti-CD52 humanized monoclonal antibody
that is produced from the Cell Line and
derivatives of the antibody so-produced
including conjugates of the antibody with
other substances;
1.1.2 "Cell Culture Medium" the powdered CM5 cell culture medium more
particularly described and claimed in the
patent rights represented by WF code number
PA 1194 which forms part of the Know-how;
<PAGE> 2
-2-
1.1.3. "Cell Line" cell line obtained from the Chinese Hamster
Ovary (CHO) clone CIC2 derived from original
master cell bank CIM 3D44 10.8.90 and the
Master Cell Bank CHO IH 10.11.93 which forms
part of the Know-how;
1.1.4 "Chargeable
Transaction" the use sale or other disposal of a Product
by or on behalf of the LICENSEE, provided
that where such sale or other disposal is
made by or on behalf of the LICENSEE to
another company within its Group for further
sale or disposal then the Chargeable
Transaction shall be the first sale or other
disposal outside that Group provided further
that neither use of Product in clinical
trials nor distribution of Samples as part
of Product promotion shall be deemed
Chargeable Transactions as long as no
consideration is received by the LICENSEE or
any Group Company in relation thereto, and
provided always that if on the sale or
disposal of Product by or on behalf of the
LICENSEE or relevant Group company (as the
case may be) the Product is not in Final
Form then the Chargeable Transaction shall
be the first sale of Product which is in
Final Form;
1.1.5 "the Confidentiality
Undertaking" the written undertaking given by the
LICENSEE in Section 5.3 of this
Agreement;
1.1.6 "Connected Persons" the meaning ascribed by Section 839 of the
Income and Corporation Taxes Act 1988 of the
United Kingdom ("UK");
<PAGE> 3
-3-
1.1.7 "Deductions" quantity discounts and bona fide rebates as
part of managed care programs relating (in
both cases) specifically and solely to
Product trade discounts and (where such
items are specifically shown in the invoice)
purchase, sales, import or value Added taxes
and the costs of delivery and insurance, but
not commission or cash discounts;
1.1.8 "the Development Plan" the document set out in Schedule I below
together with each development plan
delivered to LKS pursuant to 4.2.2 below;
1.1.9 "Dollars" US dollars;
1.1.10 "the Effective Date" the date on which this Agreement is made;
1.1.11 "the Exercise Fee" * Dollars * for
exercise of each of the options except that
for exercise of Option I it shall be
* ;
1.1.12 "Final Form" fully formulated, in final form packaged for
ultimate consumer use and suitable for
purchase by a purchaser or distributor who
is not undertaking substantial product
support or marketing, (e.g., a drug
wholesaler, a pharmacist or a group of
pharmacists, a chain of drug retailers or a
hospital or central purchasing department
for a group of hospitals);
1.1.13 "Force Majeure"
1.1.13.1 civil commotion, riot, invasion,
war threat or-preparation for war;
* Confidential treatment requested: material has been omitted and filed
separately with the Commission
<PAGE> 4
-4-
1.1.13.2 fire, explosion, storm, flood,
earthquake, subsidence, epidemic or
other natural physical disaster;
1.1.13.3 impossibility of the use of
railways, shipping, aircraft, motor
transport or other means of public
or private transport;
1.1.13.4 political interference with the
normal operations of the LICENSEE.
1.1.14 "the Glaxo Group" Glaxo Wellcome plc (Co. no. in England
1047315) and, as from time to time, any
Holding Company and any subsidiary of Glaxo
Wellcome plc and any other Subsidiary of
Glaxo Wellcome plc,s Holding Company and
affiliates;
1.1.5 "Group" the LICENSEE (as appropriate in the context)
and, as from time to time, any Holding
Company and Subsidiary of the LICENSEE and
any other Subsidiary of the LICENSEE's
Holding Company and in the case of the
LICENSEE any company fifty per cent owned by
the LICENSEE;
1.1.16 "Holding Company"
and "Subsidiary" the meanings ascribed to them by section 736
of the Companies Act 1985 of the UK;
1.1.17 "The Index" the US All Urban Consumer Price Index or if
that Index shall cease to be published the
nearest index having like effect;
<PAGE> 5
-5-
1.1.18 "Inventors" Professor Herman Waldmann, Dr Michael Ronald
Clark, Dr. Lutz Riechmann and Dr Gregory
Paul Winter;
1.1.19 "the Know-how" the technical information and data and
biological materials specified in Schedule 2
and any other information disclosed to the
LICENSEE by LKS pursuant to the
Confidentiality Undertaking;
1.1.20 "Launch Date" the first arm's length sale of Product by
the LICENSEE in a Major Territory following
grant of Regulatory Approval in such Major
Territory;
1.1.21 "the Licenses" the licenses granted or to be granted under
this Agreement
1.1.22 "LICENSEE
Inventions" inventions arising from the LICENSEE's
development of the inventions which are the
subject matter of the Patents and inventions
arising from any such development carried
out for or with the LICENSEE;
1.1.23 "Major Territory" UK, France, Germany, Italy, USA and Japan;
1.1.24 "Net Sales" the aggregate Net Selling Prices of
Chargeable Transactions for a calendar year;
1.1.25 "Net Selling Price" the price of Products the subject of a
Chargeable Transaction calculated as
follows:-
1.1.25.1 in the case of an arm's length
sale the gross price as charged
or
<PAGE> 6
-6-
invoiced, less any Deductions;
1.1.25.2 in the case of a sale which is
not at arm's length or any
disposal other than by sale the
open market price in the country
where the transaction was
effected or the use occurred,
less any Deductions;
1.1.26 "the Options" Option 1, Option 2, Option 3 and Option 4.
1.1.27 "Option 1" the right to insert 'or for ex Vivo bone
marrow purging in humans' before 'which is
made or sold' in the definition of "the
Product" (as varied from time to time);
1.1.28 "Option 2" the right to replace 'propymphocytic
leukaemia or chronic lymphocytic leukaemia'
with 'cancer' in the definition of 'Product'
(as varied from time to time);
1.1.29 "Option 3" the right to insert 'or multiple sclerosis
in humans' before 'which is made or sold' in
the definition of 'Product' (as varied from
time to time);
1.1.30 "Option 4" the right to insert 'or rheumatoid arthritis
in humans' before 'which is made or sold' in
the definition of 'Product' (as varied from
time to time);
1.1.31 "the Option Period" three (3) year period provided for in the
license agreement between LKS and BTG (the
"BTG Agreement");
<PAGE> 7
-7-
1.1.32 "the Patents"
1.1.32.1 the patents and applications for
patents specified in Schedule 3;
and
1.1.32.2 any patent which may be granted
pursuant to any of the above
applications; and
1.1.32.3 any patents and applications
corresponding to such patents
and applications which may be
granted to or made by LKS in
other countries; and
1.1.32.4 any re-issues or extensions of
such patents and any
Supplementary Protection
Certificates in respect of such
patents and any divisions and
continuations of such
applications.
1.1.33. "Product" any product containing Campath I H antibody
for the treatment of propymphocytic
leukaemia or chronic lymphocytic leukaemia
in humans or for such other therapy for
which LICENSEE has exercised its option
under Clause 4.2.1 which is made or sold or
otherwise disposed of, in any country by, or
on behalf of, the LICENSEE, and which
1.1.33.1 falls within the scope of, or
utilizes any method or process
which falls
<PAGE> 8
-8-
within the scope of, any of the
Patents or which incorporates,
or is itself, the invention the
subject of any of the Patents of
that country, or
1.1.33.2 embodies or utilizes any of the
Know-how, or
1.1.33.3 infringes any copyright in the
Know-how.
1.1.34 "Regulatory Approval" full regulatory approval (i.e., marketing
authorization) for sale of Product;
1.1.35 "the Results" all technical data, Know-how, computer
software, notes, chemical compounds,
biological material, models, prototypes,
specimens, drawings, reports and information
arising from the LICENSEE's development of
the inventions which are the subject of the
Patents (and from others' development where
the same is carried out for or with the
LICENSEE) including in particular data
relevant to applications for Regulatory
Approvals, and including the copyright,
design rights and other intellectual
property rights arising therein;
1.1.36 "the Sub-License" a sub-license or any agreement or commitment
for the grant of a sub-license;
1.1.37 "the Sub-License
Terms" those terms set out in Schedule 4;
1.1.38 "Supplementary
Protection
<PAGE> 9
-9-
Certificates" supplementary protection certificates
granted "Certificates" pursuant to Council
regulation (EEC) No. 1768/92 ("the SPC
Regulation") and any like certificates
granted by any government, authority or
agency;
1.1.39 "the Territory" the countries of the European Union, USA,
Canada and Japan;
1.1.40 "the Trade Marks" the trade marks specified in Schedule 5;
1.1.41 "WF" The Wellcome Foundation Limited (Co. no. in
England is 194814, registered office at
Glaxo Wellcome House, Berkeley Avenue,
Greenford, Middlesex UB6 ONN);
1.1.42 "the WF Patents Those of the Patents which have been
licensed (as opposed to assigned) to LKS by
WF;
1.1.43 "Year 1" the calendar year in which Product is first
launched by the LICENSEE, with Year 2 being
the next calendar year (and so on).
1.2 Some of the licenses granted by LKS hereunder are in fact sub-licenses (with
WF owning the relevant patent applications and patents).
2. Payments
2.1 THE LICENSEE shall pay to LKS:-
2.1.1 immediately upon the signing of this Agreement the sum of
* ; and
2.1.2 * on the first anniversary of
the Effective Date; and
2.1.3 * on the second anniversary of
the Effective Date; and
* Confidential treatment requested: material has been omitted and filed
separately with the Commission.
<PAGE> 10
-10-
2.1.4 * on each subsequent anniversary of
the Effective Date which is prior to the Launch Date; and
2.1.5 * on the earlier of,
2.1.5.1 the date falling four years and six months after the
Effective Date, and
2.1.5.2 the date on which the LICENSEE (or any third party
on behalf of the LICENSEE) files its first
application for Regulatory Approval in a Major
Territory; and
2.1.6 the royalties specified in Clause 6;
2.1.7 the share of downpayments specified in Clause 7.
2.2 THE sums referred to in sub-clause 2.1 shall not be refundable.
2.3 WHEN making any payment under this Agreement the LICENSEE shall also pay any
Value Added Tax payable by LKS. Where the LICENSEE has to pay Value Added Tax
LKS shall provide the LICENSEE with a Value Added Tax invoice in respect of the
relevant payment.
3. Commencement and duration
3.1 THIS Agreement shall come into force on the Effective Date.
3.2 SUBJECT to Clauses 16 and 17:-
3.2.1 the Licenses under the Patents shall continue in force in each
country until all of the Patents of that country have expired;
3.2.2 the Agreement shall continue in force until all of the royalty
obligations have expired after which LICENSEE shall have a fully
paid up, non-cancelable license which is equivalent in scope to that
held by the LICENSEE immediately before the expiry of the said
royalty obligations.
* Confidential treatment requested: material has been omitted and filed
separately with the Commission.
<PAGE> 11
-11-
3.3 THE LICENSEE shall be responsible for obtaining any requisite registration
or governmental approval of this Agreement and of acts to be carried out
pursuant to or in connection with this Agreement (including in particular that
of transferring the Know-how (or part thereof) from the UK to the USA) and the
LICENSEE shall expeditiously take all necessary steps to obtain the same.
4. Licenses and Option Rights
4.1 LKS grants to the LICENSEE on and from the Effective Date:-
4.1.1 Licenses under the Patents to make, have made, use, sell and
otherwise dispose of Products;
4.1.2 licenses for the purposes set out in 4.1.1 above to use:-
4.1.2.1 the Know-how,
4.1.2.2 the copyright in the Know-how,
SUCH licenses are without geographical restriction and, subject to the
fact that the Patents only relate to some countries, are worldwide. Such
licenses are also subject to the terms set forth in Schedule 4 and to the terms
of the agreements between LKS and the Wellcome Foundation Limited set forth in
Schedule 6, attached hereto and made a part hereof and LICENSEE agrees to be
bound by such terms.
4.2 FOR the avoidance of doubt it is declared that the LICENSEE shall not use,
nor allow others to use the biological materials forming part of Schedule 2 for
human use but substances derived from the Cell Lines may be used in humans and
Cell Culture Medium may be used in connection with the preparation of substances
for human use.
4.2.1 LKS grants the LICENSEE the Options.
4.2.2 Subject to the following provisions of this Agreement the LICENSEE
may exercise each of the Options at any time during the Option
Period except when it is in breach of its obligations under this
Agreement by simultaneously:-
4.2.2.1 giving notice of exercise to LKS; and
4.2.2.2 making payment of the Exercise Fee to LKS; and
<PAGE> 12
-12-
4.2.2.3 delivering a development plan to LKS, with such
development plan to be for the relevant indication, to
be similar in form and detail to the document set out in
Schedule I and to contain development timescales
consistent with those set out in the said document; and
4.2.2.4 making payment of all outstanding sums (if any) due
to LKS under this Agreement.
4.2.3 In the exercise of each of the Options time shall be of the essence.
4.3 THE licenses under the Patents of Schedule 3 Part A (and under the related
applications and patents failing within 1.1.32.2, 1.1.32.3 and 1.1.32.4 of the
definition "the Patents") shall be exclusive. The rest of the Licenses shall be
non-exclusive. The exclusivity referred to above shall be qualified by (and
subject to):-
4.3.1 the right of each member of the Glaxo Group to use any stocks of
Campath IH remaining after the transfer of the Know-how to LKS for
general research and development purposes which shall exclude
clinical development and subsequent commercialization; and
4.3.2 the right of each member of the Glaxo Group to retain stocks of
Campath I H for supply of Carnpath I H to those patients to whom any
member of the Glaxo Group has obligations to under existing clinical
protocols; and
4.3.3 the right of the Inventors to carry out non-commercial work in
relation to that Campath I H which is produced by the cell line
which they originated and which is known as TF57:19; in the event
such research produces a cell line which produces a humanized
antibody with the same specificity as Campath IH, and such cell line
and the intellectual property rights related thereto are assigned to
LKS then LKS shall notify the LICENSEE of such assignment and (on
request by the LICENSEE) such cell line and intellectual property
right shall be licensed to the LICENSEE hereunder, (and form part of
the Patents or the Know-how as appropriate).
<PAGE> 13
-13-
4.4 WITHOUT prejudice to Clause 3.2 the Licenses are granted for the purpose
only of making, having made, using, selling and otherwise disposing of Products
during the life of this Agreement. These rights shall not be used thereafter or
otherwise unless and until the Know-how has come into the public domain
otherwise than through breach or default of the LICENSEE or the Copyright has
expired.
4.5 LKS shall, at the request and expense of the LICENSEE, execute any further
formal document which may be necessary to give effect to this Agreement in any
country. Until such license shall be granted formally, this Agreement shall take
effect as a license.
4.6 THE LICENSEE acknowledges that LKS, BTG and WF have the right to review and
discontinue those of the Patents which they respectively own or beneficially own
provided that as regards those of the Patents owned/beneficially owned by LKS
for countries in the Territory LKS shall notify the LICENSEE prior to
discontinuance/ abandonment. After any such notification, and subject to the
existing rights of the Inventors and other prior owners of such of the Patents,
LKS shall allow the LICENSEE to continue the Patents the subject of the
discontinuance/notification notice, with such continuance to leave LKS as owner,
and to-be at the LICENSEE's cost.
5. Know-how
5.1 TO the extent to which it has not already done so, the LICENSEE shall
arrange, and pay the cost of and be responsible for, copying, shipment to the
LICENSEE and storage of the Know-how and such shipment shall be at the
LICENSEE's risk.
5.2 THE LICENSEE may, in appropriate circumstances, but in its sole discretion,
consult the Inventors regarding the design, conduct and results of clinical
trials and give due weight to their views.
5.3 THE LICENSEE shall keep the Know-how confidential to the LICENSEE, and to
such of its officers and employees as are bound by obligations of confidence and
need to be informed, and shall ensure that the Know-how is not disclosed to
others orally or in writing, save to the extent that the Know-how:-
5.3.1 as evidenced by the LICENSEE's written records, was lawfully known
to the LICENSEE prior to its communication by or through LKS, BTG or
WF and was not communicated
<PAGE> 14
-14-
to the LICENSEE subject to any restrictions on disclosure or use; or
5.3.2 is necessarily disclosed by the sale of Products embodying any of
the Know-how; or
5.3.3 is or becomes in the public domain, otherwise than by any default of
the LICENSEE, or persons acquiring the same from the LICENSEE; or
5.3.4 becomes known to the LICENSEE by the action of a third party not in
breach of any obligation of confidence.
6. Royalties
6.1 SUBJECT to clauses 6.2 and 6.3 below the LICENSEE shall pay to LKS in
respect of Products the subject of Chargeable Transactions and as provided in
Clause 17.2 on Products held on termination, a royalty at the rate of * on the
Net Selling Price.
6.2 IF, in transactions where the LICENSEE itself is making the Chargeable
Transaction, the following apply:
6.2.1 the LICENSEE is paying patent royalties to a third party/third
parties; and
6.2.2 that third party or those third parties (as the case may be) is
not/are not member(s) of the LICENSEE's Group, or a Connected
Person(s) of the LICENSEE; and
6.2.3 such patent royalties are paid under an arm's length bona fide
license; and
6.2.4 those patent royalties are for rights which are essential for the
exploitation of Product; and
6.2.5 the sum of such patent royalties with characteristics 6.2.1 to 6.2.4
above, ("Other Royalties") and the royalties payable to LKS under
clause 6.1 above would in total amount to more than * on the Net
Selling Price for that Chargeable Transaction
then the royalty to be paid to LKS on that Chargeable Transaction shall be
reduced by * of the amount that such Other Royalties are above
*Confidential treatment requested: material has been omitted and filed
separately with the Commission.
<PAGE> 15
-15-
* provided that in no event shall the royalty rate payable to LKS be reduced
under this Clause 6.2 below * . (By way of illustration if Other Royalties
equal * then the royalty rate payable to LKS would be * , if Other Royalties
equal * then the royalty rate payable to LKS would be *.
6.3 ROYALTY shall be payable in each country for a period of twenty years from
the Effective Date. Thereafter royalty shall only be payable in respect of
Products (the subject of Chargeable Transactions) which are such by reference to
1.1.33.1 of the definition "Product" but not 1.1.33.2 or 1.1.33.3.
6.4 ROYALTY shall only be payable once in respect of the same Product.
6.5 THE LICENSEE shall at the request of LKS provide half-yearly forecasts of
the amount of royalties likely to be payable under this Agreement but whilst
such forecasts (or the like) may be adopted and utilized by LKS for the purposes
of Clause 16.5 the LICENSEE shall not be liable in damages to LKS for any
inaccuracies in such forecasts.
6.6 THE LICENSEE shall be entitled to credit against royalties the amount of the
royalty paid on any Products the subject of Chargeable Transactions which are:-
6.6.1 subsequently returned to the LICENSEE or Group Company (as the case
may be) in exchange for a refund or credit and not then re-sold or
disposed of again, (other than by destruction); or
6.6.2 destroyed after a refund or credit has been given.
6.7 IF in relation to any accounting period and in any country in which there is
no extant patent forming part of the Patents LICENSEE demonstrates to LKS's
reasonable satisfaction that a competitor or competitors, (i.e. a company which
is not part of LICENSEE's Group) is/are selling Campath IH products, (which
would fall within the definition PRODUCT but for-being sold by the competitor or
competitors), then the appropriate royalty rate on sales in the country in
question shall be reduced for that accounting period if the market share of the
competitor(s) amounts to more than * of the total market for PRODUCTS (and
exact equivalents) in that country. The reduced royalty shall be the appropriate
fraction shown in the second
*Confidential treatment requested: material has been omitted and filed
separately with the Commission.
<PAGE> 16
-16-
column below of the royalty rate normally payable (but for the application of
this clause 6.8)
Market share of Competitor(s)
(based upon sales value in the
relevant accounting period) Fraction
* *
* *
* *
* *
Notwithstanding the above, in no case shall the royalty rate be less than *.
7. Downpayments from Third Parties
7.1 THE LICENSEE shall pay LKS fifty per cent (50%) of the following:-
7.1.1 each lump sum payment, (as opposed to royalties paid as a
consequence of actual sales), received by the LICENSEE (or by any
Connected Person of the LICENSEE or member of the LICENSEE's Group)
from a third party in connection with the grant of a distribution or
any other right under or in respect of Products; and
7.1.2 the cash equivalent of each non-cash benefit, (not in respect of
actual sales of Products), received by the LICENSEE or by any
Connected Person of the LICENSEE or member of the LICENSEE's Group
from a third party in connection with the grant of a distribution or
any other right under or in respect of Products.
Provided that the foregoing shall not apply to bona fide payments to the
LICENSEE which are solely for services provided by the LICENSEE or which are
solely for equity in the LICENSEE.
7.2 THE LICENSEE shall, within thirty(30) days of receipt by the LICENSEE (or by
the Connected Person or Group member) of each such lump sum payment, or non-cash
benefit, notify LKS of and provide full details of such lump sum payment,
(7.1.1)), and non-cash benefit, (7.1.2)). At the same time as the LICENSEE gives
LKS such notification the LICENSEE shall pay LKS the sum or sums due.
* Confidential treatment requested: material has been omitted and filed
separately with the Commission.
<PAGE> 17
-17-
7.3 WITH regard to non-cash benefits, the LICENSEE shall make its own valuation
but LKS may challenge such valuation in writing. Similarly, where a payment is
received by the LICENSEE (or by any Connected Person of the LICENSEE or member
of the LICENSEE's Group) from a third party, and such payment relates to equity
in the LICENSEE as well as rights under or in respect of Products, then the
LICENSEE shall apportion the payment between the two elements but LKS may
challenge the apportionment if it feels that the figure allocated to the equity
does not reflect the true open market value of the equity and includes a premium
above that ("Premium"). On receipt of either type of challenge the LICENSEE
shall promptly obtain an independent auditor's certificate specifying the
valuation made by the auditor. Both parties shall abide by the auditor's
certificate and shall rectify any overpayment or underpayment (as the case may
be). Where the auditor finds that there is a Premium the Premium (but not the
non-Premium payment for the equity) shall be subject to the above revenue
sharing arrangements.
8. Accounting for Royalties
8.1 THE LICENSEE shall:-
8.1.1 keep true and detailed accounts and records of all royalties and
other sums due under this Agreement:
8.1.2 within forty-five days after the last day of March, June, September,
and December in each year deliver to LKS a statement of all
royalties and other sums due for the three month period ending on
such date showing separately the Chargeable Transactions in each
country, credits under Clause 6.7 and (where relevant), the rate of
exchange used or, if it be the case, a statement that no royalties
are due;
8.1.3 send with the above statement the amount shown to be due;
8.1.4 immediately and without demand send to LKS the difference between an
amount already paid and the correct amount shown to be due and
payable as a result of verification under Clause 10.
8.2 ON termination or expiry, the final statement shall be delivered within
thirty days of termination or expiry and shall include details of royalties on
all Products being manufactured and all Products manufactured but not yet
disposed of.
<PAGE> 18
-18-
8.3 IF the LICENSEE defaults in payment of the royalties and other sums due
within the period stated above, the amount due shall bear interest, accruing
from day to day, at the rate per annum of Four per cent (4 %) above the Base
Rate for the time being of the National Westminster Bank p.l.c.
9. Currency and Taxes
9.1 ALL payments shall be made in Dollars in Cambridge, MA. Any necessary
currency conversion shall be at the rate at which English bank transfers are
made on the last business day of the period to which the relevant sales and
royalty statement relates.
9.2 PAYMENTS shall be made without deduction, other than such amount AS the
LICENSEE is required to deduct or withhold by law. In regard to any such
deduction, the LICENSEE shall use all reasonable endeavors to assist LKS to
claim recovery or exemption under any double taxation or similar agreement.
Evidence as to the payment of such tax or sum withheld shall, on request, be
given by the LICENSEE to LKS.
10. Verification
10.1 THE LICENSEE shall permit any authorized representative appointed by LKS,
upon reasonable notice, access to the premises of the LICENSEE and access to the
accounts, records and relevant documentation of the LICENSEE and shall provide
such information and explanations as the representative shall require to verify
the statements and to satisfy LKS that the financial and accounting provisions
of this Agreement are being complied with. The representative shall also be
permitted to take copies of extracts pertinent to the verification. If the
verification discloses an underpayment to LKS of more than 10% of the amount due
the LICENSEE shall promptly on demand reimburse LKS the fees and costs of the
representative, and the reasonable costs incurred by LKS in respect of the
verification.
10.2 LKS shall keep confidential any information which it may acquire in the
exercise of its rights under this Clause 10 with the exception of information
which was already lawfully known to it, or to which LKS is required to disclose
by law, or which is or becomes in the public domain otherwise than by any
default of LKS.
11. Suspension of royalties
IF any of the following events shall occur in respect of the Patents:-
<PAGE> 19
-19-
11.1 any patent application is finally refused so that the grant of a
patent thereon is unobtainable; or
11.2 any patent application is abandoned or withdrawn; or
11.3 any patent lapses; or
11.4 any patent is declared invalid or unenforceable by a court or
tribunal of competent jurisdiction;
then the royalties -payable solely in respect of such patent application or
patent shall cease after the date of the relevant event, but LKS shall be
entitled to all sums which shall have then already fallen due, and whether paid
or unpaid at such date. If such patent application is reinstated or such patent
is restored or is subsequently established as being valid and enforceable,
royalties shall again become payable, together with all royalties which would
have been payable if the relevant event had not occurred.
12. Undertakings by the LICENSEE
THE LICENSEE:-
12.1 shall not use the Campath lH transferred pursuant to this Agreement
for human therapeutic administration;
12.2 shall not at any time make any use of the Know-how other than for
the purposes of the Licenses-,
12.3 shall have full control, authority and responsibility for
development, registration and commercialization of Products and
shall use all reasonable efforts and diligence in development
registration and commercialization of Products (and the efforts of
sub-licensees, members of the LICENSEE's Group and collaborators
shall be considered as efforts of the LICENSEE in this regard);
12.4 shall deliver to LKS at intervals of six months short summary
written reports on the development and regulatory work carried out
by and for the LICENSEE in relation to Products during the preceding
six months, and the LICENSEE shall arrange for its staff to answer
any reasonable questions LKS may raise on such reports with such
question and answer
<PAGE> 20
-20-
sessions to be either on the telephone or at a meeting (as
reasonably requested by LKS);
12.5 shall use all reasonable endeavors to promote the distribution and
sale of Products and will use all reasonable endeavors to procure or
make available necessary selling and manufacturing facilities to
meet demands for Products;
12.6 shall use all reasonable endeavors to maximize the demand for
Products;
12.7 undertakes to LKS that when selling Product as part of a package
with other products the LICENSEE shall ensure that it does not favor
the other products, or discriminate against Product, in terms of
pricing, discounts, or in any other way which would adversely affect
the royalties due to LKS under this Agreement.
13. Marking
THE LICENSEE shall legibly mark the Products or, if not practicable, then
any associated packaging or literature, with the relevant patent or application
number.
14. Supplementary Protection Certificates
14.1 THE LICENSEE shall use its reasonable endeavors to promptly take all
necessary steps to facilitate LKS's application for a Supplementary
Protection Certificate or Certificates and patent
extensions in respect of Products.
14.2 IN particular, but without limitation, the LICENSEE shall:-
14.2.1 promptly notify LKS of the number and date of the first
and any subsequent authorization to place Products on the
market;
14.2.2 promptly and free of charge provide to LKS:-
14.2.2.1 a copy of every authorization fulfilling the
requirements of Article 8.1(b) of the SPC
Regulation (and of any additional applicable
requirements imposed by
<PAGE> 21
-21-
relevant national law) in respect of all Products;
14.2.2.2 additional information fulfilling the requirements
of Article 8.l(c) of the SPC Regulation and a copy
of the notice publishing the authorization in the
appropriate official publication (and information
and documents fulfilling any additional
requirements imposed by relevant national law)
14.2.3 permit use of documents and information provided pursuant
to this clause for the purpose of such application for a
Supplementary Protection Certificate or Certificates
14.3 LKS shall notify the LICENSEE of the application for and grant of every
Supplementary Protection Certificate in respect of Products.
14.4 LKS shall not be obliged to apply for grant of any Supplementary
Protection Certificates.
14.5 FOR the avoidance of doubt the LICENSEE shall not be entitled to make an
application for or participate in negotiations for grant of any Supplementary
Protection Certificate.
15. Exclusion of liability; Indemnity
15.1 LKS warrants and represents that it has the full right and authority to
enter into this Agreement and is not aware of any impediment which would inhibit
its ability to perform the terms and conditions imposed on it by this Agreement.
15.2 SAVE as expressly stated herein, no representation condition made or
given by or on behalf of LKS. All conditions and warranties, arising by
opinion of law or otherwise:-
15.2.1 to the effect that any of the Patents or copyright in the
Know-how, are valid or enforceable, or
15.2.2 to the effect that any of the acts hereby licensed or agreed to be
licensed by LKS will not infringe the rights of third parties; or
<PAGE> 22
-22-
15.2.3 in relation to the provision or use of the Know-how or its
fitness for purpose, accuracy or completeness;
are hereby expressly excluded.
15.3 LKS shall be under no liability whatsoever to the LICENSEE (whether in
negligence or otherwise, in contract or in tort) for any expense, loss, death,
damage or injury of any kind (including any loss of profit or consequential
damage) sustained by the LICENSEE or any third party which arises directly or
indirectly from any cause or circumstance referred to in Clause 15.4 below.
15.4 THE LICENSEE shall indemnify LKS and its licensors, including BTG and WF,
against all claims and actions by and all damages awarded to any third person
against LKS (and any related costs and expenses) which arise directly or
indirectly from:-
15.4.1 the development, manufacture, use, storage, sale or disposal of
Products; or
15.4.2 the use of the Patents or the said Copyright; or
15.4.3 the provision, evaluation or use of the Know-how; or
15.4.4 any technical or other advice given by LKS or any of its officers,
employees or agents to the LICENSEE or from any reliance by the
LICENSEE or any third party thereon.
LICENSEE's indemnification hereunder shall not apply to any damages that are
directly attributable to the intentional misconduct or negligence of LKS.
LICENSEE shall have the right to control the defense, settlement or compromise
of any action to which this indemnity applies, but shall not act in any way
which may or does do material adverse damage to LKS's or BTG's name or
reputation. LKS shall notify LICENSEE promptly of any claim or threatened claim
and shall cooperate with all reasonable requests of LICENSEE with respect
thereto.
15.5 UPON the initiation of Clinical trials with Products and for two (2) years
after termination of this Agreement the LICENSEE shall, at its own cost effect
and maintain in force with reputable insurers, adequate insurance in respect of
the development, storage, manufacture, use and supply of Products and shall
provide evidence of such insurance to LKS on request. Any consequent policy
shall name LKS as additional insured; waive any right of subrogation of the
insurers against LKS; be primary
<PAGE> 23
-23-
and without right of contribution from other insurance which may be available to
LKS; prohibit any alteration adversely affecting LKS's interest in the insurance
(or any alteration inconsistent with the requirements of Clause 15); prohibit
the lapse of or any cancellation or non-renewal of such insurance, without the
prior consent in writing of LKS. In the event a court determines that the
LICENSEE has failed to meet its obligation to obtain or maintain adequate
insurance, LKS may terminate this Agreement provided however that this Agreement
may not be terminated on this ground unless the LICENSEE has been given at least
ninety (90) days to cure such failure and has failed to do so.
16. Termination
16.1 THE LICENSEE may, at any time, terminate this Agreement, by giving not less
than 120 days notice to that effect. In such notice the LICENSEE must specify
whether it is terminating on account of breach by LKS, and, if it is, must give
details of that breach.
16.2 LKS may terminate this Agreement, or any of the Licenses forthwith, by
notice to the LICENSEE, upon the happening of any of the following events:-
16.2.1 if any royalties or other sums payable remain unpaid for thirty
days after the due date, or
16.2.2 if the LICENSEE is in breach of any of the other terms or
obligations of this Agreement, and such breach is not capable of
remedy;
16.2.3 if the LICENSEE is in breach of any of the terms or obligations
of any of LKS agreements with WF and BTG;
16.2.4 if in the United Kingdom the LICENSEE has a Receiver or an
Administrative Receiver or Administrator appointed of the whole,
or any part, of its undertaking or assets, or in any other
country has an officer appointed to perform a function analogous
to that of a Receiver, Administrative Receiver or Administrator;
16.2.5 if an order is made, or a resolution passed, for winding-up or
administering the LICENSEE, unless such order or resolution is
part of a scheme of solvent reconstruction of the LICENSEE.
<PAGE> 24
-24-
16.2.6 if LICENSEE is dissolved or otherwise ceases to do business.
16.3 IF the LICENSEE is six months or more behind schedule on any milestone (for
any indication) as per the Development Plan then LKS as its sole and exclusive
remedy for such delay may serve on the LICENSEE a notice of termination of this
Agreement and that notice shall have automatic effect six months after the date
of service, unless within that period the LICENSEE shall have achieved the
relevant milestone, provided that LKS shall not unreasonably refuse a request
for the remedy period to be extended beyond six months where the delay is due
(wholly or partly) to an event of Force Majeure, or for other reasons beyond the
control of the LICENSEE.
16.4 IF the LICENSEE is in breach of any of the terms or obligations of this
Agreement, other than the cases referred to in sub-clauses 15.4, 16.2 and 16.3,
and such breach is capable of remedy. LKS may serve on the LICENSEE a notice of
termination of the Agreement and that notice shall have automatic effect thirty
days after the date of service, unless within that period the LICENSEE shall
have remedied the breach.
16.4.1 LICENSEE shall, no later than 15th June of Year 3 produce Net
Sales forecasts for Years 3 to 5 inclusive: and thereafter
LICENSEE shall no later than 15th December of Year 5 and then
no later than 15th December of each subsequent third Year
produce Net Sales forecasts for the following three Years (so
that an uninterrupted stream of Net Sales forecasts are
produced). The LICENSEE shall deliver each three Year set of
Net Sales forecasts co LKS within one week of them being
produced.
16.4.2 LKS shall have the right to terminate this Agreement forthwith
on notice to the LICENSEE if the aggregate Net Sales for Years
3 to 5 inclusive do not match or exceed twenty five per cent
(25%) of the aggregate Net Sales forecasts for those Years.
Thereafter LKS shall have the right to terminate this
Agreement forthwith on notice to the LICENSEE if the aggregate
Net Sales for any two years, (the first two being Years 5 and
6, and the next Years 6 and 7), do not match or exceed forty
per cent (40%) of the aggregate Net Sales forecasts for the
two Years in question.
<PAGE> 25
-25-
16.4.3 IF LKS believes, in good faith, that any such forecast does
not represent a reasonable assessment of the likely future
sales, the parties shall endeavor to find a mutually
acceptable revision of the forecast. If the parties cannot
determine such mutually acceptable resolution, LKS shall
submit the dispute to a mutually acceptable third party expert
for a final and binding forecast, and the cost of such expert
shall be equally shared by the parties.
17. Rights on termination
17.1 TERMINATION (or expiry) of this Agreement shall be without prejudice to any
rights of either party against the other which may have accrued up to the date
of termination.
17.2 ON termination (or expiry) of this Agreement for whatever cause, the
LICENSEE shall pay to LKS royalty in respect of all Products being manufactured
at the date of termination and all Products manufactured and not yet sold. The
LICENSEE shall then be free to sell or dispose of Products on which royalty has
been paid.
17.3 TERMINATION (or expiry) of this Agreement for any reason shall not bring to
an end:-
17.3.1 the confidentiality obligations of Clause 5.3 until the Know-how
shall have come into the public domain otherwise than through the
breach or default of the LICENSEE;
17.3.2 the obligations of the LICENSEE in respect of the accounting for,
payment of and verification of royalties and other payments under
Clauses 6, 7, 8, 9, 10 and 17.2 until the settlement of all claims
of LKS;
17.3.3 the provisions of Clause 15.
17.4 ON early termination the LICENSEE:-
17.4.1 shall/shall procure transfer to LKS or destruction (at LKS's
option, and in the former case at LKS's expense) of the Know-how
(and all copies and derivatives) in the possession of the
LICENSEE's Group; and
17.4.2 shall (at LKS's request) assign the Trade Marks to LKS; and
<PAGE> 26
-26-
17.4.3 except where the termination is for breach by LKS grant to LKS or
where necessary procure that others grant to LKS irrevocable
non-exclusive licenses under:-
17.4.3.1 each of those LICENSEE Inventions which is an
improvement invention to one or more of the
inventions the subject of the Patents, and all
patent applications and patents relating thereto
for which the LICENSEE has the benefit; and
17.4.3.2 the Results.
The license in respect of the Results shall permit use of the Results in
applications for regulatory clearance and such licenses (generally) shall be to
make, use, sell and otherwise dispose of products failing within the scope of
the claims of any of the applications or patents for the LICENSEE Inventions, or
which utilize the Results, and shall include full Sub-licensing rights and shall
continue, in the case of the LICENSEE Inventions until all of the applications
and patents relating thereto have ceased to subsist, and in the case of the
Results until all the same have fallen into the public domain (other than
through the LICENSEE's default). The license in respect of the Results shall
include the physical transfer of the Results (or copies) by the LICENSEE to LKS,
at LKS's expense.
17.5 IF the Agreement is terminated by the LICENSEE then, unless the LICENSEE
can prove to LKS's satisfaction (considered in good faith by LKS) that
termination was on the grounds of efficacy or safety, (and here LKS will
consider the LICENSEE's results from trials and studies), then the LICENSEE
shall pay LKS the next two annual payments (under 2.1.2 to 2.1.4) which would
have been payable but for termination (and any such payments already outstanding
on the date of termination shall be disregarded for these purposes).
18. Indexation
THE sums referred to in Clause 2.1.2 to 2.1.4 (inclusive) shall be adjusted
to account for increases in the Index which are above * in any calendar year.
Each tine there is an annual increase above * the sums shall be increased by the
percentage increase above * (such increase being in addition to any previous
increase hereunder).
* Confidential treatment requested: material has been omitted and filed
separately with the Commission.
<PAGE> 27
-27-
19. Legal Proceedings
If the LICENSEE contemplates legal proceedings against a third party under
one or more of the WF Patents, it shall first give reasonable notice to LKS and
WF. The LICENSEE shall take reasonable account of any concerns that WF and the
Glaxo Group have where such concerns are notified in writing to the LICENSEE
(whether directly or through LKS) and the LICENSEE shall give reasonable
consideration to any alternative strategies that WF or any member of the Glaxo
Group may propose in writing prior to commencement of the relevant action. WF
and the members of the Glaxo Group shall have the right: but not the obligation
to join the LICENSEE in any such legal proceedings.
20. Miscellaneous
20.1 THE LICENSEE shall not assign, charge or otherwise dispose of any of its
rights or obligations under this Agreement, or any of the Licenses.
20.2 Pursuant to the terms and conditions set forth in Schedule 4, the LICENSEE
may grant sub-licenses with the consent of LKS which consent shall not be
unreasonably withheld.
20.3 THE failure by either party to exercise or enforce any rights under this
Agreement shall not be deemed to be a waiver of any such rights, nor shall any
single or partial exercise of any right, power, or privilege, or further
exercise thereof, operate so as to bar the exercise or enforcement thereof at
any later time.
20.4 THE waiver by either party of any breach of any of the terms of this
Agreement by the other shall not be deemed to be a waiver of any other breach of
the Agreement.
20.5 IF any part or provision of this Agreement is prohibited, or rendered void
or unenforceable, by any legislation, the validity or enforceability of the
Agreement as a whole or of any other part of this Agreement shall not be
affected.
20.6 SUBJECT to Clause 16.3 the rights and remedies provided in this Agreement
are cumulative and not exclusive of any rights or remedies provided by law or in
equity.
20.7 FOR the avoidance of doubt it is declared that it is understood that the
Trade Marks will be assigned to the LICENSEE as of the Effective
<PAGE> 28
-28-
Date; it being further understood that it is entirely the LICENSEE's
responsibility to obtain the documentation necessary to accomplish such
assignment directly from LKS and/or WF and affiliates.
21. Notices
21.1 ANY notice authorized or required to be given by either party under
this Agreement to the other party, shall be in writing. and shall be
deemed to be duly given if left at, or sent by recorded delivery or
registered post addressed to:-
21.1.1 in the case of LKS, the address of LKS at the head of the
Agreement, unless notice of change has been given to
LICENSEE, in writing; and
21.1.2 in the case of the LICENSEE the address of the LICENSEE at
the head of this Agreement, unless notice of change has been
given to LKS, in writing.
21.2 ANY notice, if sent by post, shall be deemed to have been served at the
expiration of three days after posting.
22. Law and Jurisdiction
22.1 THIS Agreement is to be read and construed in accordance with. and
governed by, English law.
22.2 THE LICENSEE submits to the jurisdiction of the English Courts and to the
Courts of the Commonwealth of Massachusetts, USA.
<PAGE> 29
-29-
I N W I T N E S S whereof this document has been executed as a Deed,
pursuant to English law, the day and year first above written.
LEUKOSITE, INC. L & I PARTNERS, L.P.
By: L & I, L.L.C.
General Partner
_______________________________ ______________________________
, President , President
_______________________________ ______________________________
, Secretary , Secretary
<PAGE> 1
Exhibit 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our
report and to all references to our Firm included in or made part of this
Registration Statement.
/s/ Arthur Andersen LLP
Boston, Massachusetts
August 13, 1997
<PAGE> 1
Exhibit 23.3
[HAMILTON, BROOK, SMITH & REYNOLDS, P.C. LETTERHEAD]
CONSENT OF SPECIAL COUNSEL FOR LEUKOSITE, INC.
We hereby consent to the reference to our name, and to the statements
with respect to us, in LeukoSite, Inc.'s Registration Statement on Form S-1 and
the Prospectus relating thereto under the caption "Experts".
HAMILTON, BROOK, SMITH & REYNOLDS, P.C.
By: /s/ David E. Brook
--------------------------
David E. Brook
Dated: August 13, 1997
