<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
____________
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of report (Date of earliest event reported): July 21, 1999
TARGETED GENETICS CORPORATION
(Exact name of registrant as specified in charter)
<TABLE>
<CAPTION>
<S> <C> <C>
Washington 0-23930 91-1549568
(State or other jurisdiction of (Commission File Number) (IRS Employer Identification No.)
incorporation)
</TABLE>
1100 Olive Way, Suite 100
Seattle, Washington 98101
(Address of principal executive offices) (Zip Code)
(206) 623-7612
(Registrant's telephone number, including area code)
<PAGE>
Item 5. Other Events
On July 21, 1999, Targeted Genetics Corporation (the "Company") entered
into a joint venture with Elan International Services, Ltd. ("EIS"), an
affiliate of Elan Corporation, PLC ("Elan"), to develop and commercialize
enhanced gene delivery platforms that can be applied to a number of gene
candidates. Pursuant to the joint venture, the Company, EIS and Elan entered
into a Securities Purchase Agreement and a Funding Agreement; the Company and
EIS entered into a Company Registration Rights Agreement and a Convertible
Promissory Note; the Company and the newly created joint venture ("Newco")
entered into a License Agreement; Elan and Newco entered into a License
Agreement, and the Company, Elan, EIS and Newco entered into a Subscription,
Joint Development and Operating Agreement (collectively, the "Transaction
Documents").
Pursuant to the Transaction Documents, the Company subscribes for 80.1% of
Newco's initial outstanding shares of common stock for $12.015 million, and Elan
subscribes for 19.9% of Newco's initial outstanding shares of common stock for
$2.985 million. The Company obtains funds to provide its portion of the Newco
funding by issuing and selling shares of a newly created series of convertible,
exchangeable preferred stock to Elan, for a purchase price of $12.015 million.
For a period of 36 months following the signing of the Transaction Documents,
and at the request of the Company, Elan is required to purchase up to $12.015
million of a new series of convertible debt to be issued by the Company. In
addition, Elan further invests in the Company equity by purchasing the Company's
common stock at a premium, for a total of up to $10 million. This investment
will be made in two $5 million tranches. The first tranche is payable upon the
signing of the Transaction Documents, and the second tranche will be paid one
year after the signing of the Transaction Documents if the Company decides at
its option to sell to Elan common stock at a premium for an additional $5
million.
Except for certain exclusions necessitated by existing agreements of Elan
and the Company, Newco will have access to all of Elan's drug delivery
technology and all of the Company's gene delivery technology. Elan and the
Company envision a program in which various permutations of drug delivery and
gene delivery technologies will be explored and at least one potential product
will be advanced into clinical trials.
The Securities Purchase Agreement is attached hereto as Exhibit 1.1, the
Company Registration Rights Agreement is attached hereto as Exhibit 1.2, the
Funding Agreement is attached hereto as Exhibit 1.3, the Subscription, Joint
Development and Operating Agreement is attached hereto as Exhibit 1.4, the
Convertible Promissory Note is attached hereto as Exhibit 1.5, the Company
License Agreement is attached hereto as Exhibit 1.6, and the Elan License
Agreement is attached hereto as Exhibit 1.7. The Articles of Amendment of the
Company, incorporating the Designation of Rights and Preferences for the newly
issued preferred stock, are attached hereto as Exhibit 1.8. The First Amendment
of Rights Agreement of the Company, designed to prevent the Rights Agreement
from being triggered by this transaction, is attached hereto as Exhibit 1.9.
-2-
<PAGE>
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
(c) Exhibits.
Exhibit No. Description
- ---------- -----------
1.1 Securities Purchase Agreement, dated as of July 21, 1999, among
the Company, EIS and Elan.
1.2 Registration Rights Agreement, dated as of July 21, 1999, by and
among the Company and EIS.
1.3 Funding Agreement, dated as of July 21, 1999, among the Company,
EIS and Elan.
1.4* Subscription, Joint Development and Operating Agreement, dated as
of July 21, 1999, among Elan, EIS, the Company and Newco.
1.5 Convertible Promissory Note, dated July 21, 1999, issued by the
Company to EIS
1.6* License Agreement dated July 21, 1999, by and between the Company
and Newco.
1.7* License Agreement dated July 21, 1999, by and between Elan and
Newco.
1.8 Articles of Amendment of the Company, filed with the State of
Washington on July 21, 1999.
1.9 First Amendment of Rights Agreement of the Company, dated
July 21, 1999.
________________________
* Confidential Treatment Requested; the omitted material has been
separately filed with the Securities Exchange Commission.
-3-
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the registrant has duly caused this report to be signed on its behalf
by the undersigned, hereunto duly authorized.
TARGETED GENETICS CORPORATION
By: /s/ James A. Johnson
-----------------------------------
James A. Johnson
Chief Financial Officer
(Authorized Officer and Principal
Financial Officer)
Dated: August 4, 1999
-4-
<PAGE>
Exhibit Index
Exhibit No. Description
- ---------- -----------
1.1 Securities Purchase Agreement, dated as of July 21, 1999, among
the Company, EIS and Elan.
1.2 Registration Rights Agreement, dated as of July 21, 1999, by and
among the Company and EIS.
1.3 Funding Agreement, dated as of July 21, 1999, among the Company,
EIS and Elan.
1.4* Subscription, Joint Development and Operating Agreement, dated as
of July 21, 1999, among Elan, EIS, the Company and Newco.
1.5 Convertible Promissory Note, dated July 21, 1999, issued by the
Company to EIS
1.6* License Agreement dated July 21, 1999, by and between the Company
and Newco.
1.7* License Agreement dated July 21, 1999, by and between Elan and
Newco.
1.8 Articles of Amendment of the Company, filed with the State of
Washington on July 21, 1999.
1.9 First Amendment of Rights Agreement of the Company, dated July
21, 1999.
________________________
* Confidential Treatment Requested; the omitted material has been separately
filed with the Securities Exchange Commission.
<PAGE>
EXHIBIT 1.1
Execution Copy
SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT (this "Agreement"), dated as of July 21,
---------
1999, among Targeted Genetics Corporation, a Washington corporation (the
"Company"), and Elan International Services, Ltd., a Bermuda private limited
- --------
company, and a wholly owned subsidiary of Elan ("EIS").
---
R E C I T A L S:
A. The Company desires to issue and sell to EIS, and EIS desires to
purchase from the Company, (i) 12,015 shares of a newly-created series of the
Company's Preferred Stock, par value $.01 per share, captioned "Series B
Convertible Exchangeable Preferred Stock" (the "Series B Preferred Stock"), (ii)
------------------------
2,148,899 shares of the Company's Common Stock, par value $.01 per share (the
"Common Stock"); together with the Series B Preferred Stock, the "Shares"). In
------------ ------
addition, EIS has agreed to lend certain funds to the Company pursuant to a
convertible promissory note in the form attached hereto as Exhibit A (as amended
at any time, the "Note"; together with the Shares, the "Securities"), with a
---- ----------
maximum aggregate principal amount of U.S.$12,015,000, amounts in respect of
which shall be disbursed in accordance with its terms and subject to the
conditions contained herein and therein. The rights, preferences and privileges
of the Series B Preferred Stock are as set forth in the Certificate of
Designations, Preferences and Rights (the "Certificate of Designations"), the
---------------------------
form of which is attached hereto as Exhibit B.
B. The Company and EIS have previously caused to be formed Targeted
Genetics Newco, Ltd., a Bermuda private limited company ("Newco"), and pursuant
-----
to the terms of a Subscription, Joint Development and Operating Agreement, dated
as of the date hereof (as amended at any time, the "JDOA"), simultaneously with
----
the transactions contemplated by this Agreement, (i) the Company shall acquire
3,612 preferred shares of Newco, par value U.S.$1.00 per share (the "Newco
-----
Preferred Stock") and 6,000 common shares of Newco, par value U.S.$1.00 per
- ---------------
share (the "Newco Common Stock"), and (ii) EIS shall acquire 897 shares of Newco
------------------
Preferred Stock and 1,491 shares of Newco Common Stock. Additionally, as of the
date hereof, Newco has entered into license agreements with (i) Elan
Corporation, plc, an Irish public limited company and parent corporation of EIS
("Elan;" such agreement, as amended at any time, the "Elan License Agreement"),
---- ----------------------
and (ii) the Company (such agreement, as amended at any time, the "Company
-------
License Agreement" and, together with the Elan License Agreement, the "License
- ----------------- -------
Agreements").
- ----------
C. The Company and EIS are executing and delivering on the date
hereof a Registration Rights Agreement, in the form attached hereto as Exhibit C
---------
(as amended at any time, the "Company Registration Rights Agreement"), in
-------------------------------------
respect of the Common Stock issued or issuable upon conversion of the Series B
Preferred Stock and the Note, the Common Stock being purchased hereunder, and
any other Common Stock issued to EIS or any of its affiliates or permitted
transferees upon any stock split, stock dividend, recapitalization or similar
event affecting the Securities. The Company, EIS and Newco are also executing
and delivering on the date hereof a Registration Rights Agreement in the form
attached hereto as Exhibit D (as
---------
<PAGE>
amended at any time, the "Newco Registration Rights Agreement"). Additionally,
-----------------------------------
the Company and EIS are executing and delivering on the date hereof a Funding
Agreement in the form attached hereto as Exhibit E (the "Funding Agreement;"
--------- -----------------
and, together with this Agreement, the Certificate of Designations, the JDOA,
the Company Registration Rights Agreement, the Newco Registration Rights
Agreement, the License Agreements and each other document or instrument executed
and delivered in connection with the transactions contemplated hereby and by the
JDOA, the "Transaction Documents").
---------------------
A G R E E M E N T:
The parties hereto agree as follows:
SECTION 1. Closing.
-------
(a) Time and Place. The closing of the transactions contemplated
--------------
hereby (the "Closing") shall occur on the date hereof (the "Closing Date"), at
------- ------------
the offices of Brock Silverstein LLC, 800 Third Avenue, 21st Floor, New York, NY
10022.
(b) Issuance of Securities. At the Closing, the Company shall issue
----------------------
and sell to EIS, and EIS shall purchase from the Company: (i) 12,015 shares of
Series B Preferred Stock, and (ii) 2,148,889 shares of Common Stock.
(c) Purchase Price. The purchase price (the "Purchase Price") shall
-------------- --------------
be the sum of (i) U.S.$12,015,000, the purchase price for the Series B Preferred
Stock, and (ii) U.S.$5,000,000, the purchase price for the Common Stock.
(d) Convertible Note Facility. EIS shall lend up to $12,015,000 to
-------------------------
the Company pursuant to the terms and conditions of the Note.
(e) Delivery. At the Closing:
--------
(i) EIS shall pay the Purchase Price by wire transfer to an
account designated by the Company and the parties hereto shall execute and
deliver to each other, as applicable: (A) a certificate or certificates for
the Series B Preferred Stock and the Common Stock; (B) the Note; (C) the
Company Registration Rights Agreement; (D) the Newco Registration Rights
Agreement; (E) the JDOA; (F) the Certificate of Designations, as filed with
the Secretary of State of the State of Washington; (G) the License
Agreements; (H) the Funding Agreement; (I) certificates as to the
incumbency of the officers of the Company executing any of the Transaction
Documents; and (J) any other documents or instruments reasonably requested
by a party hereto; and
(ii) The Company shall cause to be delivered to EIS an
opinion of counsel in the form attached hereto as Exhibit F-1 and EIS shall
-----------
cause to be delivered to the Company an opinion of counsel in the form
attached hereto as Exhibit F-2.
-----------
2
<PAGE>
(f) Subsequent Stock Purchase. At the Company's option, upon the
-------------------------
first anniversary of the Closing Date, at the request of the Company, EIS shall,
subject to receipt of any required approvals under the Mergers and Takeovers
(Control) Acts 1978-1996, be required to subscribe for additional shares of
Common Stock in the maximum aggregate amount of $5,000,000 (the "Subsequent
----------
Stock Purchase"), at a price per share equal to 120% of the average closing
- --------------
price of the Common Stock for the 60 trading days prior to such date, as listed
on the Nasdaq National Market. The closing of the Subsequent Stock Purchase
shall occur, at the Company's request, within 10 business days of the first
anniversary of the Closing Date.
(g) Exemption from Registration. The Securities and any underlying
---------------------------
shares of Common Stock will be issued under an exemption or exemptions from
registration under the Securities Act of 1933, as amended (the "Securities
----------
Act"). Accordingly, the certificates evidencing the Series B Preferred Stock and
- ---
the Common Stock, the Note and any shares of Common Stock or other securities
issuable upon the exercise, conversion or exchange of any of the Securities
shall, upon issuance, contain a legend, substantially in the form as follows:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE
STATE SECURITIES LAWS AND NO INTEREST MAY BE SOLD,
TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS THERE IS AN
EFFECTIVE REGISTRATION STATEMENT FOR SUCH SECURITIES UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, AND ANY APPLICABLE
STATE SECURITIES LAWS OR THIS CORPORATION RECEIVES AN
OPINION OF COUNSEL FOR THE HOLDER OF THESE SECURITIES
SATISFACTORY TO THIS CORPORATION THAT REGISTRATION IS NOT
REQUIRED UNDER SUCH ACT OR APPLICABLE STATE SECURITIES LAWS.
THE TRANSFER OF THE SECURITIES REPRESENTED BY THIS
CERTIFICATE IS ALSO SUBJECT TO THE RESTRICTIONS CONTAINED IN
THAT CERTAIN SECURITIES PURCHASE AGREEMENT, DATED JULY 20,
1999, BY AND BETWEEN TARGETED GENETICS CORPORATION AND ELAN
INTERNATIONAL SERVICES, LTD.
SECTION 2. Representations and Warranties of the Company. The
---------------------------------------------
Company hereby represents and warrants to EIS, as of the date hereof, as
follows:
(a) Organization. The Company is duly organized, and validly
------------
existing under the laws of the state of Washington and has all requisite
corporate power and authority to own and lease its properties, to carry on its
business as presently conducted and as proposed to be conducted and to
consummate the transactions contemplated hereby. The Company is duly
3
<PAGE>
qualified as a foreign corporation and in good standing to do business in each
jurisdiction in which the nature of the business conducted or the property owned
by it requires such qualification, except where the failure to be so qualified
would not, individually or in the aggregate, have a material adverse effect on
the business, assets, liabilities (contingent or otherwise), operations,
condition (financial or otherwise), or prospects of the Company (a "Company
-------
Material Adverse Effect").
- -------------------------
(b) Capitalization. As of the Closing Date, the Company has reserved
--------------
a sufficient number of shares of Common Stock (i) for issuance upon conversion
of the Series B Preferred Stock being purchased hereunder by EIS (including
dividends in-kind thereon), (ii) for issuance pursuant to the Subsequent Stock
Purchase, and (iii) for issuance upon conversion of the Note (including interest
payable thereon). The Shares, when issued against payment therefor in accordance
with this Agreement, will be duly and validly issued, fully paid and
nonassessable, will not be issued in violation of any preemptive or similar
rights. The shares of Common Stock underlying the Series B Preferred Stock and
the Note (the "Underlying Shares"), when issued upon conversion or exercise in
-----------------
accordance with the terms thereof, will be duly and validly issued, fully paid
and nonassessable, and will not be issued in violation of any preemptive or
similar rights.
(c) Authorization of Transaction Documents. The Company has full
--------------------------------------
corporate power and authority to execute and deliver this Agreement and each of
the other Transaction Documents to which it is a party, and to perform its
obligations hereunder and thereunder. The execution, delivery and performance by
the Company of this Agreement and each of the other Transaction Documents to
which it is a party, including the issuance and sale of the Securities, have
been duly authorized by all requisite corporate action by the Company and, when
executed and delivered by the Company, this Agreement and each of the other
Transaction Documents to which it is a party will be the valid and binding
obligations of the Company, enforceable against the Company in accordance with
their respective terms, except (A) that enforcement may be limited by (i)
applicable bankruptcy, insolvency, reorganization, arrangement, moratorium or
other similar laws affecting creditors' rights, and (ii) general equity
principles and limitations on the availability of equitable relief, including
specific performance, and (B) that any rights to indemnity or contribution
hereunder or thereunder may be limited by state and federal securities laws and
by public policy considerations.
(d) No Violation. The execution, delivery and performance by the
------------
Company of this Agreement and each other Transaction Document to which it is a
party, including the issuance and sale of the Securities, and compliance with
the provisions hereof and thereof by the Company, does not conflict with or
constitute or result in a breach of or default under (or an event which with
notice or passage of time or both would constitute a default) or give rise to
any right of termination, cancellation or acceleration under (i) the Articles of
Incorporation, as amended, or by-laws, of the Company, (ii) applicable law,
statute, rule or regulation, or any ruling, writ, injunction, order, judgment or
decree of any court, arbitrator, administrative agency or other governmental
body applicable to the Company or any of its properties or assets, or (iii) any
contract filed as an exhibit to the Company's Annual Report on Form 10-K for the
year ended December 31, 1998 (the "1998 Form 10-K"), except where such breach,
---------------
default, termination, cancellation or acceleration would not, individually or in
the aggregate, have a Company Material Adverse Effect.
4
<PAGE>
(e) Approvals. No material permit, authorization, consent, approval,
---------
or order of or by, or any notification of or filing with, any person or entity
(governmental or otherwise) is required in connection with the execution,
delivery or performance of this Agreement or the Transaction Documents,
including the issuance and sale of the Securities, by the Company, other than
the filing of a Form D by the Company pursuant to Regulation D under the
Securities Act ("Regulation D").
(f) SEC Filings. The Company has filed with the Securities and
-----------
Exchange Commission (the "SEC") all forms, reports, schedules, statements,
---
exhibits and other documents (collectively, the "SEC Filings") required to be
-----------
filed by the Company on or before the date hereof. At the time filed, the SEC
Filings, including without limitation, any financial statements, exhibits and
schedules included therein or documents incorporated therein by reference (i)
did not contain any untrue statement of a material fact or omit 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 and (ii) complied in all material respects with the applicable
requirements of the Securities Act or the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), as the case may be.
------------
(g) Financial Statements. The audited balance sheets of the Company
--------------------
at December 31, 1997 and 1998, together with the related statements of
operations, stockholders' equity (deficit) and cash flows for each of the three
years ended December 31, 1998, together with the reports and opinions thereon of
Ernst & Young LLP, contained in the 1998 Form 10-K, comply as to form in all
material respects with applicable accounting requirements and the published
rules and regulation of the SEC with respect thereto, and fairly present, in all
material respects, the financial position of the Company and the results of its
operations and its cash flows at such dates and for the years then ended and
were prepared in conformity in all material respects with generally accepted
accounting principles applied on a consistent basis.
(h) Litigation. Except as disclosed in the SEC Filings there is no
----------
legal, administrative, arbitration or other action or proceeding or governmental
investigation pending, or to the Company's knowledge, threatened against the
Company, or any director, officer or employee of the Company that challenges the
validity or performance of this Agreement or the other Transaction Documents to
which the Company is a party.
(i) Absence of Certain Events. Since December 31, 1998, except as
-------------------------
contemplated by the Transaction Documents, (A) the Company has not (i) made,
paid or declared any dividend or distribution to any equity holder (in such
capacity) or redeemed any of its capital stock, (ii) varied its business plan or
practices, in any material respect, from past practices, (iii) entered into any
financing, joint venture, license or similar arrangement that would limit or
restrict its ability to perform its obligations hereunder and under each of the
other Transaction Documents to which it is a party, or (iv) suffered or
permitted to be incurred any liability or obligation or any lien or encumbrance
against any of its properties or assets that would limit or restrict its ability
to perform its obligations hereunder and under each of the other Transaction
Documents to which it is a party, and (B) there has not been any change or
5
<PAGE>
development which has had, or in the Company's reasonable judgment is likely to
have, a Company Material Adverse Effect.
SECTION 3. Representation and Warranties of EIS. EIS hereby
------------------------------------
represents and warrants to the Company, as of the date hereof, as follows:
(a) Organization. EIS is duly organized, validly existing and in
------------
good standing under the laws of Bermuda and has all requisite corporate power
and authority to own and lease its properties, to carry on its business as
presently conducted and as proposed to be conducted and to consummate the
transactions contemplated hereby. EIS is duly qualified as a foreign corporation
and in good standing to do business in each jurisdiction in which the nature of
the business conducted or the property owned by it requires such qualification,
except where the failure to be so qualified would not, individually or in the
aggregate, have a material adverse effect on the business, assets, liabilities
(contingent or otherwise), operations, condition (financial or otherwise), or
prospects of EIS (an "EIS Material Adverse Effect").
---------------------------
(b) Authorization of Transaction Documents. EIS has full corporate
--------------------------------------
power and authority to execute and deliver this Agreement and each of the other
Transaction Documents to which it is a party, and to perform its obligations
hereunder and thereunder. The execution, delivery, and performance by EIS of
this Agreement and each other Transaction Document to which it is a party,
including the purchase and acceptance of the Securities, have been duly
authorized by all requisite corporate action by EIS and, when executed and
delivered by EIS, this Agreement and each of the other Transaction Documents to
which it is a party, will be the valid and binding obligations of EIS,
enforceable against it in accordance with their respective terms, except (A)
that enforcement may be limited by (i) applicable bankruptcy, insolvency,
reorganization, arrangement, moratorium or other similar laws affecting
creditors' rights, and (ii) general equity principles and limitations on the
availability of equitable relief, including specific performance, and (B) that
any rights to indemnity or contribution hereunder or thereunder may be limited
by state and federal securities laws and by public policy considerations.
(c) No Violation. The execution, delivery and performance by EIS of
------------
this Agreement and each other Transaction Document to which it is a party,
including the purchase and acceptance of the Securities, and compliance with
provisions hereof and thereof by EIS, will not conflict with or constitute or
result in a breach of or default under (or an event which with notice or passage
of time or both would constitute a default) or give rise to any right of
termination, cancellation or acceleration under (i) the by-laws of EIS, (ii)
applicable law, statute, rule or regulation, or any ruling, writ, injunction,
order, judgment or decree of any court, arbitrator, administrative agency or
other governmental body applicable to EIS or any of its properties or assets, or
(iii) any material contract to which EIS is a party, except where such breach,
default, termination, cancellation or acceleration would not, individually or in
the aggregate, have an EIS Material Adverse Effect.
(d) Approvals. Except for consent required under the Mergers and
---------
Takeovers (Control) Acts 1978-1996 no material permit, authorization, consent,
approval or order of or by, or any notification of or filing with, any person or
entity (governmental or otherwise) is required
6
<PAGE>
in connection with the execution, delivery or performance of this Agreement or
the Transaction Documents by EIS.
(e) Investment Representations.
--------------------------
(i) EIS is sophisticated in transactions of this type and
capable of evaluating the merits and risks of the transactions described
herein and in the other Transaction Documents to which it is a party, and
has the capacity to protect its own interests. EIS has not been formed
solely for the purpose of entering into the transactions described herein
and therein and is acquiring the Securities (and the Underlying Shares) for
investment for its own account, not as a nominee or agent, and not with the
view to, or for resale, distribution or fractionalization thereof, in whole
or in part, and no other person (other than Elan) has a direct or indirect
interest, beneficial or otherwise in the Securities (or the Underlying
Shares); provided, however, that EIS shall be permitted to convert or
exchange such Securities in accordance with their terms.
(ii) EIS has not and does not intend to enter into any
contract, undertaking, agreement or arrangement with any person or entity
to sell, transfer or pledge the Securities (or the Underlying Shares).
(iii) EIS acknowledges its understanding that the private
placement and sale of the Securities (and the Underlying Shares) is exempt
from registration under the Securities Act by virtue of the provisions of
Regulation D. In furtherance thereof, EIS represents and warrants that it
is an "accredited investor" as that term is defined in Regulation D, has
the financial ability to bear the economic risk of its investment, has
adequate means for providing for its current needs and personal
contingencies and has no need for liquidity with respect to its investment
in the Company.
(iv) EIS agrees that it shall not sell or otherwise transfer
any of the Securities (or the Underlying Shares) without registration under
the Securities Act or pursuant to an opinion of counsel reasonably
satisfactory to the Company that an exemption from registration is
available, and fully understands and agrees that it must bear the total
economic risk of its purchase for an indefinite period of time because,
among other reasons, none of the Securities (or the Underlying Shares) have
been registered under the Securities Act or under the securities laws of
any applicable state or other jurisdiction and, therefore, cannot be
resold, pledged, assigned or otherwise disposed of unless subsequently
registered under the Securities Act and under the applicable securities
laws of such states or jurisdictions or an exemption from such registration
is available. EIS understands that the Company is under no obligation to
register the Securities (or the Underlying Shares) on its behalf with the
exception of certain registration rights with respect to certain of the
Securities (and the Underlying Shares), as provided in the Company
Registration Rights Agreement. EIS understands the lack of liquidity and
restrictions on transfer of the Securities (and the Underlying Shares) and
that this investment is suitable only for a person or entity of adequate
financial means that has no need for liquidity of this investment and that
can afford a total loss of its investment.
7
<PAGE>
(f) Litigation. There is no legal, administrative, arbitration or
----------
other action or proceeding or governmental investigation pending, or to EIS's
knowledge threatened, against EIS that challenges the validity or performance of
this Agreement or the other Transaction Documents to which EIS is a party.
SECTION 4. Covenants of the Parties.
------------------------
(a) Operating Covenants. From and after the Closing Date and until
-------------------
the earlier to occur of the exercise or expiration of the EIS Exchange Right (as
such term is defined in Section 6 hereof), the Company shall not without the
prior written consent of EIS: (i) sell, transfer, encumber, pledge or otherwise
affect, in any respect, (A) any shares of Newco Preferred Stock or Newco Common
Stock owned by the Company, including, without limitation, those shares of Newco
Preferred Stock transferable to EIS upon exercise by EIS of the EIS Exchange
Right, or (B) affect, in any respect, the Company's ability to permit EIS to
exercise the EIS Exchange Right in full, as provided herein, or (ii) enter into
any material transaction with a director, officer or more than 20% beneficial
owner of Common Stock on other than an arm's length basis.
(b) Fully-diluted Stock Ownership. Notwithstanding any other
-----------------------------
provision of this Agreement, in the event that EIS shall have determined that at
any time it (together with its affiliates, if applicable) holds or has the right
to receive Common Stock (or securities or rights, options or warrants
exerciseable, exchangeable or convertible for or into Common Stock) representing
in the aggregate in excess of 19.9% of the Company's outstanding Common Stock on
a fully diluted basis (assuming the exercise, exchange or conversion of such
securities beneficially owned by EIS or its affiliates, but not the exercise,
exchange or conversion of any other similar securities), EIS shall have the
right, in its sole discretion, rather than acquiring such securities from the
Company, to exchange such number of securities, as are necessary to bring its
holdings to below 19.9% of the voting securities of the Company, for non-voting,
convertible liquidation preferred stock of the Company (which shall be
reasonably satisfactory to each of the Company and EIS), which equity securities
shall be entitled to all of the other rights and benefits of the Common Stock.
In the event that EIS shall undertake to exercise such right, EIS shall retain
the additional right to exchange such new class of equity security for Common
Stock, in its discretion at any time. Each of the Company and EIS shall use
commercially reasonable effort to effect such transactions and any required
subsequent conversions or adjustments to such securities, on a quarterly basis,
within 15 business days of the end of each of EIS' fiscal quarter.
(c) NASD Requirements. In the event that the conversion of all or any
-----------------
portion of either or both of the Series B Preferred Stock or the Note would
trigger NASD requirements that the Company acquire shareholder approval prior to
such conversion, the Company will use its reasonable best efforts to obtain such
approval at or as soon as practicable following such conversion or notice of
EIS's intention to so convert, as the case may be (which conversion shall be
subject to such approval).
(d) Use of Proceeds. The Company shall use the proceeds of (i) the
---------------
issuance and sale of the Series B Preferred Stock solely to meet its initial
capitalization obligations to Newco as described in the JDOA, and (ii) the
issuance and funding of the Note solely to meet its developmental funding
obligations to Newco, as described in the Funding Agreement.
8
<PAGE>
(e) Confidentiality; Non-Disclosure.
-------------------------------
(i) Subject to clauses (ii) and (iii) below, from and after the
date hereof, neither the Company nor EIS (nor their respective affiliates)
shall disclose to any person or entity this Agreement or the other
Transaction Documents or the contents thereof or the parties thereto,
except that such parties may make such disclosure (x) to their directors,
officers, employees and advisors, so long as they shall have advised such
persons of the obligation of confidentiality herein and for whose breach or
default the disclosing party shall be responsible, or (y) as required by
applicable law, rule, regulation or judicial or administrative process,
provided that the disclosing party uses reasonable efforts to obtain an
order or ruling protecting the confidentiality of confidential information
of the other party contained herein or therein. The parties shall be
entitled to seek injunctive or other equitable relief in respect of any
breach or threatened breach of the foregoing covenant without the
requirement of posting a bond or other collateral.
(ii) Prior to issuing any press release or public disclosure in
respect of this Agreement or the transactions contemplated hereby, the
party proposing such issuance, except as may be required by law, in the
written opinion of such party's outside legal counsel, shall obtain the
consent of the other party to the contents thereof, which consent shall not
be unreasonably withheld or delayed; it being understood that if such
second party shall not have responded to such consent request within five
business days, such consent shall be deemed given.
(iii) This Section 4(d) shall not be construed to prohibit
disclosure by the receiving party of any information which has not been
previously determined to be confidential by the disclosing party, or which
shall have become publicly disclosed (other than by breach of the receiving
party's obligations hereunder).
(f) Market Manipulation. For the 60 trading days prior to the first
-------------------
anniversary of the Closing Date, neither EIS, nor any other affiliate of Elan
shall sell, transfer the economic risk of ownership in, make any short sale,
pledge or otherwise dispose of any shares of Common Stock or any securities
convertible into or exchangeable or exercisable for or any other rights to
purchase or acquire Common Stock.
(g) Further Assurances. From and after the date hereof, each of the
------------------
parties hereto agree to do or cause to be done such further acts and things and
deliver or cause to be delivered to each other such additional assignments,
agreements, powers and instruments, as each may reasonably require or deem
advisable to carry into effect the purposes of this Agreement and the other
Transaction Documents.
SECTION 5. Standstill.
----------
(a) Provided that nothing contained herein will prevent or prohibit EIS
from purchasing Voting Stock (as defined below) of the Company pursuant to
subsection 5(b) or from acquiring Voting Stock pursuant to the Subsequent Stock
Purchase or conversion of the Series B
9
<PAGE>
Preferred Stock or the Note in accordance with their respective terms, EIS will
not, directly or indirectly, without the prior consent of a majority of the
Board of Directors of the Company (the "Board"), (i) acquire (or offer or agree
to acquire) any Voting Stock if, as a result, EIS would beneficially own more
than 20% of the then outstanding Voting Stock; (ii) directly or indirectly
solicit proxies or consents or become a participant in a solicitation (as such
terms are defined in Regulation 14A under the Exchange Act) in opposition to the
recommendation of the majority of the Board for a Takeover Event (as defined
below); or (iii) transfer to any third party, other than its "affiliates,"
"associates" (as such terms are defined in Rule 12b-2 under the Exchange Act),
officers, directors or employees, the right to vote any Voting Stock except in
connection with the transfer of ownership of such Voting Stock for fair value.
EIS also agrees that it will not advise, assist or encourage any third party to
do any of the foregoing. Notwithstanding the foregoing, EIS will not be
obligated to dispose of any Voting Stock it owns if its percentage ownership is
increased as a result of a decrease in the number of shares of Voting Stock
outstanding.
(b) The provisions of this Section 5 will terminate: (i) if EIS owns less
than 10% of Voting Stock; (ii) if any person or group, excluding EIS, any
affiliate of Elan, or any group that includes Elan or any such affiliate, makes
a bona fide offer to acquire Voting Stock which would, if successful, result in
the bidder's beneficial ownership of at least 10% of the then outstanding Voting
Stock; or (iii) upon the second anniversary of the date of this Agreement.
(c) The Company will give EIS prompt notice of the receipt by the Company
of any written notice couched in such terms as to put the Company reasonably on
notice of the likelihood that a person or group has acquired or is proposing to
acquire an aggregate position of at least 15% of the Voting Stock, the Company
receiving any bona fide offer to purchase or acquire 15% or more of the Voting
Stock or all or substantially all of the assets of the Company, and any Board
determination to seek an acquiror for in excess of 15% of the Voting Stock.
(d) EIS will cause its affiliates and associates to comply with the
provisions of this Section 5, whether directly or indirectly, individually or as
part of a "group" (as such term is defined in Rule 13d-5 under the Exchange
Act). When used in this Section 5, the term EIS includes EIS together with its
affiliates and associates.
For purposes of this Section 5, the term "Takeover Event" means any
--------------
proposal for any merger or business combination involving the Company or any of
its subsidiaries, the purchase or sale of any assets of the Company or any of
its subsidiaries, or the purchase of any of the Voting Stock, by tender offer or
otherwise (except pursuant to the exercise of rights, warrants, options or
similar securities distributed by the Company to holders of Voting Stock
generally), and the term "Voting Stock" means the Common Stock and any preferred
------------
stock of the Company possessing voting rights and eligible to participate in
votes of all of the Company's shareholders pursuant to the Company's Articles of
Incorporation and Washington law, and includes any options, convertible
securities or other rights to acquire such stock.
SECTION 6. Certain Rights of EIS. (a) Preemptive Right. Until the
--------------------- ----------------
fourth anniversary of the date hereof, EIS shall have the preemptive right to
participate in any equity financing consummated by the Company, in order for EIS
to maintain its pro rata interest in the Company, based on the actual number of
shares of Common Stock outstanding on the date of
10
<PAGE>
such financing is consummated (without, however, giving effect to the shares of
Common Stock underlying the Series B Preferred Stock or the Note). Such
participation by EIS shall be on the same terms and conditions offered to any
other potential investor in such offering.
(b) Company Board of Directors. For so long as (i) EIS and/or its
--------------------------
affiliates or subsidiaries collectively own securities that represent ownership
of at least 10% of the Common Stock (or securities convertible, exchangeable or
exercisable for or into the Common Stock, but excluding the Series B Preferred
Stock) on a fully diluted basis, EIS shall be entitled to nominate one director
("EIS Director") for election to the Company's board of directors who shall be a
------------
member of the senior management of Elan, or otherwise shall be acceptable to the
Company; provided, however, that the Company reserves the right to exclude such
EIS Director from any material or meeting or portion thereof if the other Board
members believe in good faith that such exclusion is reasonably necessary to
protect confidential proprietary information, for competitive or similar
reasons.
(c) Conversion and Exchange Rights. The Certificate of Designations
------------------------------
sets forth certain rights of the holders of shares of Series B Preferred Stock
to convert such shares of preferred stock into newly issued shares of Common
Stock, or to exchange such shares of Series B Preferred Stock for certain shares
of Newco Preferred Stock owned by the Company (the "EIS Exchange Right"), both
------------------
on the terms and conditions set forth therein.
SECTION 7. Survival and Indemnification. (a) Survival. The
----------------------------- --------
representations and warranties of the Company and EIS contained herein shall
survive for a period of 12 months from and after the date hereof.
(b) Indemnification. In addition to all rights and remedies
---------------
available to the parties hereto at law or in equity, the parties (each, in such
capacity, "Indemnifying Party"; together, "Indemnifying Parties") shall
------------------ --------------------
indemnify each other as corporate entities (EIS and the Company), its
stockholders, officers, directors and assigns, their affiliates, and its
affiliates' stockholders, officers, directors, employees, agents,
representatives, successors and assigns (collectively, the "Indemnified
-----------
Person"), and save and hold each Indemnified Person harmless from and against
and pay on behalf of or reimburse each such Indemnified Person, as and when
incurred, for any and all loss, liability, demand, claim, action, cause of
action, cost, damage, deficiency, tax, penalty, fine or expense, whether or not
arising out of any claims by or on behalf of such Indemnified Person or any
third party, including interest, penalties, reasonable attorneys' fees and
expenses and all amounts paid in investigation, defense or settlement of any of
the foregoing (collectively, "Losses"), that any such Indemnified Person may
------
suffer, sustain incur or become subject to, as a result of, in connection with,
relating or incidental to or by virtue of:
(i) any misrepresentation or breach of warranty on the part of the
Indemnifying Party in the case of the Company under Section 2 of this Agreement
or in the case of EIS under Section 3 of this Agreement or any of the other
Transaction Documents (it being understood that the Company shall not be
responsible for any such misrepresentation or breach of warranty by Newco); or
(ii) any nonfulfillment, default or breach of any covenant or
agreement on
11
<PAGE>
the part of the Indemnifying Party under Section 4 of this Agreement or any of
the other Transaction Documents.
(c) Maximum Recovery. Notwithstanding anything in this Agreement
----------------
to the contrary, in no event shall the Indemnifying Parties be liable in the
case of the Company for indemnification under this Section 7 in an amount in
excess of the aggregate of the purchase price paid for the Shares and the
amounts advanced and not repaid under the Note or in the case of EIS for
indemnification hereunder in an amount in excess of such same aggregate. No
Indemnified Person shall assert any such claim unless Losses in respect thereof
incurred by any Indemnified Person, when aggregated with all previous Losses
hereunder, equal or exceed U.S.$50,000, but at such time that an Indemnified
Person is entitled to assert a claim, such claim shall include all Losses
covered by this Section 7.
(d) Exception. Notwithstanding the foregoing, upon judicial
---------
determination that is final and no longer appealable, that the act or omission
giving rise to the indemnification set forth above resulted primarily out of or
was based primarily upon the Indemnified Person's negligence (unless such
Indemnified Person's negligence was based upon the Indemnified Person's reliance
in good faith upon any of the representations, warranties, covenants or promises
made by the Indemnifying Party herein) the Indemnifying Party shall not be
responsible for any Losses sought to be indemnified in connection therewith, and
the Indemnifying Party shall be entitled to recover from the Indemnified Person
all amounts previously paid in full or partial satisfaction of such indemnity,
together with all costs and expenses (including reasonable attorneys fees) of
the Indemnifying Party reasonably incurred in connection with the Indemnified
Persons claim for indemnity, together with interest at the rate per annum
publicly announced by Morgan Guaranty Trust Company as its prime rate from the
time of payment of such amounts to the Indemnified Person until repayment to
the Indemnifying Party.
(e) Investigation. All indemnification rights hereunder shall
-------------
survive the execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby to the extent provided in Section 7(g) below,
irrespective of any investigation, inquiry or examination made for or on behalf
of, or any knowledge of the Indemnified Person or the acceptance of any
certificate or opinion.
(f) Contribution. If the indemnity provided for in this Section 7
------------
shall be, in whole or in part, unavailable to any Indemnified Person, due to
Section 7(b) being declared unenforceable by a court of competent jurisdiction
based upon reasons of public policy, so that Section 7(b) shall be insufficient
to hold each such Indemnified Person harmless from Losses which would otherwise
be indemnified hereunder, then the Indemnifying Party and the Indemnified Person
shall each contribute to the amount paid or payable for such Loss in such
proportion as is appropriate to reflect not only the relative benefits received
by the Indemnifying Party on the one hand and the Indemnified Person on the
other, but also the relative fault of the Indemnifying Party and be in addition
to any liability that the Indemnifying Party may otherwise have. The indemnity,
contribution and expense reimbursement obligations that the Indemnifying Party
has under this Section 7 shall survive the expiration of the Transaction
Documents. The parties hereto further agree that the indemnification and
reimbursement commitments set forth in this Agreement shall apply whether or not
the Indemnified Person is a formal party to any such
12
<PAGE>
lawsuit, claims or other proceedings.
(g) Limitation. No claim shall be brought by an Indemnified Person
----------
in respect of any misrepresentation or breach of warranty under this Agreement
after one year from the date hereof; and any claim for nonfulfillment, default
or breach of any covenant shall be brought within one year of the date of that
such Indemnified Person became aware or should have become aware of the
nonfulfillment, default or breach. Except as set forth in the previous sentence
and in Section 7(c) above, this Section 7 is not intended to limit the rights or
remedies otherwise available to any party hereto with respect to this Agreement
or the Transaction Documents.
SECTION 8. Withholding Taxes. The Company shall be entitled to
-----------------
withhold from any payments made by the Company with respect to the Shares or the
Notes any taxes required to be withheld under U.S. tax laws and shall have no
obligation to make any additional payments to EIS to cover such taxes. If any
such withholding tax becomes due with respect to interest accrued but not paid
under the Note, the EIS shall on demand by the Company pay to the Company an
amount on an after-tax basis necessary to cover any such withholding tax. EIS
acknowledges that any cash dividend payments with respect to the Shares will be
subject to 30% U.S. federal income withholding tax under current law; provided,
--------
however, that the Shares will not be subject to 30% U.S. federal income
- -------
withholding tax if the Company has no earnings or profits or to the extent the
Securities are transferred to a resident of a country that has an income tax
treaty with the United States that exempts dividends from withholding tax and
such person supplies an accurate and timely Internal Revenue Service form
establishing its entitlement to an exemption. The Company agrees that it will
not withhold tax or require payment by EIS of any withholding tax if it receives
from EIS an accurate and timely Internal Revenue Service form W-8 or any
successor or additional form indicating its entitlement to an exemption from
withholding. EIS hereby represents, warrants, and covenants that if at any time
the form so supplied becomes inaccurate and no longer permits an exemption from
withholding tax to apply, it shall promptly notify the Company of that
inaccuracy. At the point, the Company may begin to withhold payments due under
the Note and EIS shall pay to the Company any amount necessary on an after-tax
basis to cover any liability the Company has incurred for taxes due with respect
to payments accrued or paid under the Note after such form no longer permitted
the exemption to apply and before the inaccurate information was corrected by
EIS.
SECTION 9. Notices. All notices, demands and requests of any kind to
-------
be delivered to any party in connection with this Agreement shall be in writing
and shall be deemed to have been duly given if personally or hand delivered or
if sent by an internationally-recognized overnight delivery or by registered or
certified mail, return receipt requested and postage prepaid, or by facsimile
transmission addressed as follows:
(i) if to the Company, to:
Targeted Genetics Corporation
1100 Olive Way, Suite 100
Seattle, Washington 98101
Attention: Chief Executive Officer
13
<PAGE>
Facsimile: 206-623-7064
with a copy to:
Perkins Coie
1201 Third Avenue, 48th Floor
Seattle Washington 98101
Attn: Stephen M. Graham, Esq.
Facsimile: 206-583-8500
(ii) if to EIS, to:
Elan International Services, Ltd.
Flatts, Smiths Parish
Bermuda, FL 04
Attention: Director
Facsimile: 441-292-2224
with a copy to:
Brock Silverstein LLC
800 Third Avenue, 21st Floor
New York, New York 10022
Attention: David Robbins, Esq.
Facsimile: 212-371-5500
or to such other address as the party to whom notice is to be given may have
furnished to the other party hereto in writing in accordance with provisions of
this Section 9. Any such notice or communication shall be deemed to have been
effectively given (i) in the case of personal or hand delivery, on the date of
such delivery, (ii) in the case of an internationally-recognized overnight
delivery service, on the second business day after the date when sent, (iii) in
the case of mailing, on the fifth business day following that day on which the
piece of mail containing such communication is posted, and (iv) in the case of
facsimile transmission, on the date of telephone confirmation of receipt.
SECTION 10. Entire Agreement. This Agreement and the other
----------------
Transaction Documents contain the entire understanding of the parties with
respect to the subject matter hereof and thereof and supersede all prior
agreements and understandings among the parties with respect thereto.
SECTION 11. Amendments. This Agreement may not be modified or
----------
amended, or any of the provisions hereof waived, except by written agreement of
the Company and EIS.
SECTION 12. Counterparts and Facsimile. The Transaction Documents
--------------------------
may be executed in any number of counterparts, and each such counterpart hereof
shall be deemed to be an original instrument, but all such counterparts together
shall constitute one agreement. Each of
14
<PAGE>
the Transaction Documents may be signed and delivered to the other party by
facsimile transmission; such transmission shall be deemed a valid signature.
SECTION 13. Headings. The section and paragraph headings contained
--------
in this Agreement are for reference purposes only and shall not affect in any
way the meaning or interpretation of the Agreement.
SECTION 14. Governing Law. This Agreement shall be governed by and
-------------
construed in accordance with the substantive (as opposed to procedural) laws of
the State of New York, without giving effect to principles thereof relating to
conflicts of laws
SECTION 15. Disputes. Any dispute under this Agreement or any other
--------
of the Transaction Documents shall be adjudicated on an exclusive basis by
binding arbitration between or among the parties in accordance with the rules
and regulations of the American Arbitration Association in the County, City and
State of New York; provided, that any such dispute that (x) involves a
collection, proceeding in respect of the Convertible Promissory Note or (y) a
request for injunctive or other equitable relief may, in any such case, at the
option of the party seeking such relief, be adjudicated, on an exclusive basis,
in any federal or state court sitting in the County, City and State of New York.
SECTION 16. Expenses. Each of the parties shall be responsible for
--------
its own costs and expenses incurred in connection with the transactions
contemplated hereby and by the other Transaction Documents.
SECTION 17. Assignments and Transfers. This Agreement and all of the
-------------------------
provisions hereof shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and permitted assigns. This Agreement,
the shares of Series B Preferred Stock and Common Stock being purchased
hereunder by EIS, the Note, and the shares of Common Stock underlying the Series
B Preferred Stock and the Note may be transferred by EIS to its affiliates and
subsidiaries, as well as any off-balance sheet special purpose entity
established by EIS, provided, however, that EIS shall remain liable for its
obligations hereunder after any such assignment. Other than as set forth above,
no party shall transfer or assign this Agreement, the shares of Series B
Preferred Stock and Common Stock being purchased hereunder by EIS, the Note, and
the shares of Common Stock underlying the Series B Preferred Stock and the Note,
or any interest therein, without the prior written consent of the other party.
SECTION 18. Severability. In case any provision of this Agreement
------------
shall be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not be in any way affected or
impaired thereby.
15
<PAGE>
IN WITNESS WHEREOF, each of the undersigned has duly executed this
Agreement as of the date first written above.
TARGETED GENETICS CORPORATION
By /s/ Stewart Parker
-----------------------------
Name: H. Stewart Parker
Title: President & CEO
ELAN INTERNATIONAL SERVICES, LTD.
By /s/ Kevin Insley
-----------------------------
Name: Kevin Insley
Title: President & CFO
16
<PAGE>
EXHIBIT 1.2
Execution Copy
TARGETED GENETICS CORPORATION
REGISTRATION RIGHTS AGREEMENT
-----------------------------
THIS REGISTRATION RIGHTS AGREEMENT (the "Agreement") is made as of July
20th, 1999 by and among Targeted Genetics Corporation, a Washington corporation
(the "Company"), and Elan International Services, Ltd., a Bermuda private
limited company ("EIS").
R E C I T A L S:
A. Pursuant to a securities purchase agreement dated as of the date hereof
by and between the Company and EIS (the "Purchase Agreement"), EIS has acquired,
or will acquire in the future, certain shares of common stock of the Company
(the "Common Stock"), Series B Convertible Exchangeable Preferred Stock of the
Company (the "Series B Preferred Stock"), and a convertible promissory note (the
"Note"), which Series B Preferred Stock and Note are convertible into shares of
Common Stock.
B. The execution of the Purchase Agreement has occurred on the date hereof
and it is a condition to the closing of the transactions contemplated thereby
that the parties execute and deliver this Agreement.
C. The parties desire to set forth herein their agreement on the terms and
subject to the conditions set forth herein related to the granting of certain
registration rights to the Holders (as defined below) relating to the Common
Stock held by such Holders and the Common Stock underlying the Series B
Preferred Stock and the Note.
A G R E E M E N T:
The parties hereto agree as follows:
1. Certain Definitions. As used in this Agreement, the following terms
-------------------
shall have the following respective meanings:
"Commission" shall mean the U.S. Securities and Exchange Commission.
----------
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended,
------------
and the rules and regulations of the Commission thereunder, all as the same
shall be in effect from time to time.
"Holders" or "Holders of Registrable Securities" shall mean EIS and any
------- ---------------------------------
Person who shall have acquired Registrable Securities from EIS as permitted
herein, either
<PAGE>
individually or jointly, as the case may be, in a transaction pursuant to which
registration rights are transferred pursuant to Section 10 hereof.
"Person" shall mean an individual, a partnership, a company, an
------
association, a joint stock company, a trust, a joint venture, an unincorporated
organization and a governmental or quasi-governmental entity, or any department,
agency or political subdivision thereof.
"Registrable Securities" means (i) any shares of Common Stock purchased
----------------------
pursuant to the Purchase Agreement, any shares of Common Stock issued or
issuable upon conversion of shares of Series B Preferred Stock (or issued as
dividends thereon) or the Note, and (ii) any Common Stock issued or issuable in
respect of the securities referred to in clause (i) above upon any stock split,
stock dividend, recapitalization or similar event; excluding in all cases,
however, any Registrable Securities that may be sold under Rule 144 promulgated
under the Securities Act, without being subject to the volume limitations under
Rule 144, and Registrable Securities sold by a Person in a transaction
(including a transaction pursuant to a registration statement under this
Agreement and a transaction pursuant to Rule 144 promulgated under the
Securities Act) in which registration rights are not transferred pursuant to
Section 10 hereof.
The terms "register," "registered" and "registration" refer to a
-------- ---------- ------------
registration effected by preparing and filing a registration statement in
compliance with the Securities Act.
"Registration Expenses" shall mean all expenses, other than Selling
---------------------
Expenses, incurred by the Company in complying with Sections 2 or 3 hereof,
including without limitation, all registration, qualification and filing fees,
exchange listing fees, printing expenses, escrow fees, fees and disbursements of
counsel for the Company, blue sky fees and expenses, and the expense of any
special audits incident to or required by any such registration.
"Securities Act" shall mean the Securities Act of 1933, as amended.
--------------
"Selling Expenses" shall mean all underwriting discounts, selling
----------------
commissions and stock transfer taxes applicable to the securities registered by
the Holders and the costs of any accountants or other experts retained by the
Holders.
2. Demand Registration.
-------------------
(a) Requests for Registration. In the event that (i) the Company receives
-------------------------
from the Holders a written request that the Company file a registration
statement on Form S-3 (or any successor form to Form S-3), or any similar short-
term registration statement, for a public offering of Registrable Securities (a
"Demand Registration"), the reasonably anticipated aggregate price to the public
of which, net of underwriting discounts and commissions, would be at least
$1,000,000 and (ii) the Company is a registrant eligible to use Form S-3 to
register
2
<PAGE>
the Registrable Securities for such an offering, within 10 days after receipt of
any such request, the Company will give written notice of such requested
registration to all other Holders of Registrable Securities. The Company shall
include such other Holders' Registrable Securities in such offering if they have
responded affirmatively within 10 days after the receipt of the Company's
notice. The Holders in aggregate will be entitled to request only two Demand
Registrations hereunder. A registration will not count as the permitted Demand
Registration until it has become effective (unless such Demand Registration has
not become effective due solely to the fault of the Holders requesting such
registration, including a request by such Holders that such registration be
withdrawn).
(b) Priority on Demand Registration. If a Demand Registration is an
-------------------------------
underwritten offering and the managing underwriters advise the Company in
writing that in their opinion the number of Registrable Securities requested to
be included in such offering exceeds the number of Registrable Securities which
can be sold in such offering without adversely affecting the marketability of
the offering, the Company will include in such registration such number of
Registrable Securities allocated pro rata among the Holders thereof based upon
the number of Registrable Securities owned by each such Holder. No securities
other than Registrable Securities hereunder shall be included in such Demand
Registration without the prior written consent of Holders who collectively hold
Registrable Securities representing at least 50% of the Registrable Securities
then outstanding.
(c) Restrictions on Demand Registration. The Company may postpone the
-----------------------------------
filing or the effectiveness of a registration statement for a Demand
Registration if the Company determines in good faith that such Demand
Registration would reasonably be expected to have a material adverse effect on
any proposal or plan by the Company to engage in any financing, acquisition or
disposition of assets (other than in the ordinary course of business) or any
merger, consolidation, tender offer or similar transaction or would require
disclosure of any information that the board of directors of the Company
determines in good faith the disclosure of which would be detrimental to the
Company; provided, however, that in such event, the Holders initially requesting
such Demand Registration will be entitled to withdraw such request and, if such
request is withdrawn, such Demand Registration will not count as the permitted
Demand Registration hereunder and the Company will pay any Registration Expenses
in connection with such registration.
(d) Selection of Underwriters. The Holders will have the right to select
-------------------------
the investment banker(s) and manager(s) to administer an offering pursuant to
the Demand Registration, subject to the Company's prior written approval, which
will not be unreasonably withheld or delayed.
(e) Other Registration Rights. Except as provided in this Agreement, so
-------------------------
long as any Holder owns any Registrable Securities, the Company will not grant
to any Persons the right to request the Company to register any equity
securities of the Company, or any securities convertible or exchangeable into or
exercisable for such securities, which conflicts with the rights granted to the
Holders hereunder, without the prior written consent of the Holders of at least
50% of the Registrable Securities.
3
<PAGE>
3. Piggyback Registrations. (a) Right to Piggyback. At any time
----------------------- -------------------
that the Company shall propose to register Common Stock under the Securities Act
(other than in a registration on Form S-3 relating to sales of securities to
participants in a Company dividend reinvestment plan, S-4 or S-8 or any
successor form or in connection with an acquisition or exchange offer or an
offering of securities solely to the existing shareholders or employees of the
Company), the Company shall give prompt written notice to all Holders of
Registrable Securities of its intention to effect such a registration and,
subject to Section 3(b) and the other terms of this Agreement, shall include in
such registration all Registrable Securities that are permitted under applicable
securities laws to be included in the form of registration statement selected by
the Company and with respect to which the Company has received written requests
for inclusion therein by the Holders within 10 days after the receipt of the
Company's notice (each, a "Piggyback Registration").
----------------------
(b) Priority on Piggyback Registrations. If a Piggyback Registration
-----------------------------------
is an underwritten registration on behalf of the Company, and the managing
underwriters advise the Company in writing that in their opinion the number of
securities requested to be included in such registration exceeds the number
which can be sold in such offering without adversely affecting the marketability
of the offering, the Company shall include in such registration, only as may be
permitted in the reasonable business judgment of the managing underwriters for
such registration:
(i) first, up to that number of securities the Company proposes to
sell;
(ii) second, up to that number of Registrable Securities requested to
be included in such registration by the Holders and that number of securities
requested to be included in such registration by any other Person, pro rata
among the Holders of such Registrable Securities and such other Persons, on the
basis of the number of shares owned by each of such Holders subject to the
rights of such other Persons under agreements existing as of the date hereof;
and
(iii) third, up to that number of other securities requested to be
included in such registration.
4
<PAGE>
The Holders of any Registrable Securities included in such a registration shall
execute an underwriting agreement in form and substance satisfactory to the
managing underwriters.
(c) Right to Terminate Registration. If, at any time after giving written
-------------------------------
notice of its intention to register any of its securities as set forth in
Section 3(a) and prior to the effective date of the registration statement filed
in connection with such registration, the Company shall determine for any reason
not to register such securities, the Company may, at its election, give written
notice of such determination to each Holder of Registrable Securities and
thereupon be relieved of its obligation to register any Registrable Securities
in connection with such registration (but not from its obligation to pay the
Registration Expenses in connection therewith as provided herein).
(d) Selection of Underwriters. The Company shall have the right to select
-------------------------
the investment banker(s) and manager(s) to administer an offering pursuant to a
Piggyback Registration and, subject to Section 2(d), pursuant to a Demand
Registration.
4. Expenses of Registration. Except as otherwise provided herein, all
------------------------
Registration Expenses incurred in connection with registrations pursuant to
Section 2 and all Selling Expenses relating to securities registered on behalf
of the Holders of Registrable Securities shall be borne by such Holders. All
Registration Expenses incurred in connection with registrations pursuant to
Section 3 shall be borne by the Company.
5. Holdback Agreements.
-------------------
(a) The Company agrees (i) not to effect any public sale or distribution
of its equity securities, or any securities convertible into or exchangeable or
exercisable for such securities, for its own account during the seven days prior
to and during the 90-day period beginning on the effective date of any
underwritten Demand Registration (except (A) as part of such underwritten
registration, (B) pursuant to registration statements on Form S-4 or Form S-8 or
any successor form, (C) pursuant to a registration statement then in effect or
(D) as required under any existing contractual obligation of the Company),
unless the underwriters managing the registered public offering otherwise agree,
and (ii) to use reasonable efforts to cause each holder of at least 5% (on a
fully-diluted basis) of its outstanding Common Stock, or any securities
convertible into or exchangeable or exercisable for Common Stock, purchased from
the Company at any time after the date of this Agreement (other than in a
registered public offering) to agree not to effect any public sale or
distribution (including sales pursuant to Rule 144) of any such securities
during such periods (except as part of such underwritten registration, if
otherwise permitted), unless the underwriters managing the registered public
offering otherwise agree.
(b) Each Holder agrees, in the event of a public offering of Common Stock
under a registration statement on Form S-1, S-3 or S-4, not to effect any offer,
sale, distribution or transfer, including a sale pursuant to Rule 144 (or any
similar provision then effect) under the Securities Act (except as part of such
registration), beginning on the date of
5
<PAGE>
receipt of a written notice from the Company setting forth its intention to
effect such registration and ending on the earlier of (i) 180 days from the date
of receipt of such written notice or (ii) 90 days from the effective date of
such Registration Statement.
6. Registration Procedures. Whenever the Company is under the obligation
-----------------------
to register Registrable Securities hereunder, the Company will use all
reasonable efforts to effect the registration and the sale of such Registrable
Securities, and pursuant thereto the Company will as expeditiously as possible:
(a) subject to Section 2(c) and 3(a) hereof, prepare and file with the
Commission a registration statement on any form for which the Company qualifies
with respect to such Registrable Securities and use all reasonable efforts to
cause such registration statement to become effective (provided that before
filing a registration statement or prospectus or any amendments or supplements
thereto, the Company will (i) furnish to the counsel selected by the Holders
copies of all such documents proposed to be filed, which documents will be
subject to the review of such counsel, and (ii) notify each Holder of
Registrable Securities covered by such registration of any stop order issued or
threatened by the Commission);
(b) subject to Section 2(c), 3(b) and 6(e) hereof, prepare and file with
the Commission such amendments and supplements to such registration statement
and the prospectus used in connection therewith as may be necessary to keep such
registration statement effective for, in the case of a Demand Registration, a
period equal to the shorter of (i) 120 days and (ii) the time by which all
securities covered by such registration statement have been sold, and comply
with the provisions of the Securities Act with respect to the disposition of all
securities covered by such registration statement during such period in
accordance with the intended methods of disposition by the sellers thereof set
forth in such registration statement;
(c) furnish to each seller of Registrable Securities such number of copies
of such registration statement, each amendment and supplement thereto, the
prospectus included in such registration statement (including each preliminary
prospectus) and such other documents as such seller may reasonably request in
order to facilitate the disposition of the Registrable Securities owned by such
seller;
(d) use all reasonable efforts to register or qualify such Registrable
Securities under the securities or blue sky laws of such jurisdictions as any
seller reasonably requests and do any and all other acts and things which may be
reasonably necessary or advisable to enable such seller to consummate the
disposition in such jurisdictions of the Registrable Securities owned by such
seller (provided that the Company will not be required to (i) qualify generally
to do business in any jurisdiction where it would not otherwise be required to
qualify but for this Section 6(d), (ii) subject itself to taxation in any
jurisdiction, or (iii) consent to general service of process in any such
jurisdiction);
6
<PAGE>
(e) notify each seller of such Registrable Securities, at any time when a
prospectus relating thereto is required to be delivered under the Securities
Act, of the happening of any event as a result of which the prospectus included
in such registration statement contains an untrue statement of a material fact
or omits any fact necessary to make the statements therein not misleading, and,
at the request of any such seller, the Company will prepare a supplement or
amendment to such prospectus so that, as thereafter delivered to the purchasers
of such Registrable Securities, such prospectus will not contain an untrue
statement of a material fact or omit to state any fact necessary to make the
statements therein not misleading; provided, however, that the Company shall not
be required to amend the registration statement or supplement the Prospectus for
a period of up to six months if the board of directors determines in good faith
that to do so would reasonably be expected to have a material adverse effect on
any proposal or plan by the Company to engage in any financing, acquisition or
disposition of assets (other than in the ordinary course of business) or any
merger, consolidation, tender offer or similar transaction or would require the
disclosure of any information that the board of directors determines in good
faith the disclosure of which would be detrimental to the Company, it being
understood that the period for which the Company is obligated to keep the
Registration Statement effective shall be extended for a number of days equal to
the number of days the Company delays amendments or supplements pursuant to this
provision. Upon receipt of any notice pursuant to this Section 6(e), the
Holders shall suspend all offers and sales of securities of the Company and all
use of any prospectus until advised by the Company that offers and sales may
resume, and shall keep confidential the fact and content of any notice given by
the Company pursuant to this Section 6(e);
(f) cause all such Registrable Securities to be listed on each securities
exchange on which similar securities issued by the Company are then listed;
(g) provide a transfer agent and registrar for all such Registrable
Securities not later than the effective date of such registration statement;
(h) enter into such customary agreements (including underwriting
agreements in customary form) and take all such other actions as the Holders of
a majority of the Registrable Securities being sold or the underwriters, if any,
reasonably request in order to expedite or facilitate the disposition of such
Registrable Securities;
(i) make available for inspection by a representative of the Holders of
Registrable Securities included in the registration statement, any underwriter
participating in any disposition pursuant to such registration statement and any
attorney, accountant or other agent retained by any such seller or underwriter,
all pertinent financial and other records, pertinent corporate documents and
properties of the Company, and cause the Company's officers, directors,
employees and independent accountants to supply all information reasonably
requested by any such seller, underwriter, attorney, accountant or agent in
connection with such registration statement;
7
<PAGE>
(j) otherwise use its reasonable efforts to comply with all applicable
rules and regulations of the Commission, and make available to its security
holders, as soon as reasonably practicable, an earnings statement covering the
period of at least 12 months beginning with the first day of the Company's first
full calendar quarter after the effective date of the registration statement,
which earnings statement shall satisfy the provisions of Section 11(a) of the
Securities Act and Rule 158 thereunder;
(k) in the event of the issuance of any stop order suspending the
effectiveness of a registration statement, or of any order suspending or
preventing the use of any related prospectus or suspending the qualification of
any Common Stock included in such registration statement for sale in any
jurisdiction, use all reasonable efforts promptly to obtain the withdrawal of
such order; and
(l) if the registration is an underwritten offering, use all reasonable
efforts to obtain a so-called "cold comfort" letter from the Company's
independent public accountants in customary form and covering such matters of
the type customarily covered by cold comfort letters.
7. Obligations of Holders. Whenever the Holders of Registrable Securities
----------------------
sell any Registrable Securities pursuant to a Demand Registration, such Holders
shall be obligated to comply with the applicable provisions of the Securities
Act, including the prospectus delivery requirements thereunder, and any
applicable state securities or blue sky laws.
8. Indemnification. (a) In connection with any registration statement for
---------------
a Demand Registration in which a Holder of Registrable Securities is
participating, the Company agrees to indemnify, to the fullest extent permitted
by applicable law, each such Holder of Registrable Securities, its officers and
directors and each Person who controls such Holder (within the meaning of the
Securities Act) against all losses, claims, damages, liabilities, expenses or
any amounts paid in settlement of any litigation, investigation or proceeding
commenced or threatened to which each such indemnified party may become subject
under the Securities Act (collectively, "Claims") insofar as such Claim arose
out of (i) any untrue or alleged untrue statement of material fact contained, on
the effective date thereof, in any such registration statement, prospectus or
preliminary prospectus or any amendment thereof or supplement thereto or (ii)
any omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading,
except insofar as the same are caused by or contained in any information
furnished in writing to the Company by such Holder expressly for use therein or
by such Holder's failure to deliver a copy of the registration statement or
prospectus or any amendments or supplements thereto after the Company has
furnished such Holder with a sufficient number of copies of the same. In
connection with an underwritten offering, the Company will indemnify the
underwriters, their officers and directors and each Person who controls the
underwriters (within the meaning of the Securities Act) to the same extent as
provided above with respect to the indemnification of the Holders of Registrable
Securities.
8
<PAGE>
(b) In connection with any registration statements for a Demand
Registration in which a Holder of Registrable Securities is participating, each
such Holder will furnish to the Company in writing such customary information as
the Company reasonably requests for use in connection with any such registration
statement or prospectus (the "Seller's Information") and, to the fullest extent
permitted by applicable law, will indemnify the Company, its directors and
officers and each Person who controls the Company (within the meaning of the
Securities Act) against any and all Claims to which each such indemnified party
may become subject under the Securities Act insofar as such Claim arose out of
(i) any untrue or alleged untrue statement of material fact contained, on the
effective date thereof, in any such registration statement, prospectus or
preliminary prospectus or any amendment thereof or supplement thereto or (ii)
any omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading;
provided that with respect to a Claim arising pursuant to clause (i) or (ii)
above, the material misstatement or omission is contained in such Seller's
Information; provided, further, that the obligation to indemnify will be
individual to each Holder and will be limited to the amount of proceeds received
by such Holder from the sale of Registrable Securities pursuant to such
registration statement.
(c) Any Person entitled to indemnification hereunder will (i) give prompt
written notice to the indemnifying party of any claim with respect to which it
seeks indemnification (but the failure to provide such notice shall not release
the indemnifying party of its obligation under paragraphs (a) and (b), unless
and then only to the extent that, the indemnifying party has been prejudiced by
such failure to provide such notice) and (ii) unless in such indemnified party's
reasonable judgment a conflict of interest between such indemnified and
indemnifying parties may exist with respect to such claim, permit such
indemnifying party to assume the defense of such claim with counsel reasonably
satisfactory to the indemnified party. An indemnifying party who is not
entitled to, or elects not to, assume the defense of a claim will not be
obligated to pay the fees and expenses of more than one counsel for all parties
indemnified by such indemnifying party with respect to such claim, unless in the
reasonable judgment of any indemnified party a conflict of interest may exist
between such indemnified party and any other of such indemnified parties with
respect to such claim.
(d) The indemnifying party shall not be liable to indemnify an indemnified
party for any settlement, or consent to judgment of any such action effected
without the indemnifying party's consent (but such consent will not be
unreasonably withheld). Furthermore, the indemnifying party shall not, except
with the prior written approval of each indemnified party, consent to entry of
any judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to each
indemnified party of a release from all liability in respect of such claim or
litigation without any payment or consideration provided by each such
indemnified party.
(e) If the indemnification provided for in this Section 8 is unavailable to
an indemnified party under clauses (a) and (b) above in respect of any losses,
claims, damages or liabilities referred to therein, then each indemnifying
party, in lieu of indemnifying such
9
<PAGE>
indemnified party, shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages or liabilities in
such proportion as is appropriate to reflect not only the relative benefits
received by the Company (if any), the underwriters, the sellers of Registrable
Securities and any other sellers participating in the registration statement
from the sale of shares pursuant to the registered offering of securities for
which indemnity is sought but also the relative fault of the Company, the
underwriters, the sellers of Registrable Securities and any other sellers
participating in the registration statement in connection with the statement or
omission which resulted in such losses, claims, damages or liabilities, as well
as any other relevant equitable considerations. The relative benefits received
by the Company (if any), the underwriters, the sellers of Registrable Securities
and any other sellers participating in the registration statement shall be
deemed to be based on the relative relationship of the total net proceeds from
the offering (before deducting expenses) to the Company (if any), the total
underwriting commissions and fees from the offering (before deducting expenses)
to the underwriters and the total net proceeds from the offering (before
deducting expenses) to the sellers of Registrable Securities and any other
sellers participating in the registration statement. The relative fault of the
Company, the underwriters, the sellers of Registrable Securities and any other
sellers participating in the registration statement 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 the Company or by the sellers of Registrable
Securities and the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such statement or omission.
(f) The indemnification provided for under this Agreement will remain in
full force and effect regardless of any investigation made by or on behalf of
the indemnified party or any officer, director or controlling person of such
indemnified party and will survive the transfer of the Registrable Securities.
9. Participation in Underwritten Registrations. No Holder may participate
-------------------------------------------
in any registration hereunder which is underwritten unless such Holder (a)
agrees to sell such Holder's securities on the basis provided in any
underwriting arrangements approved by the Holder or Holders entitled hereunder
to approve such arrangements, (b) as expeditiously as possible notifies the
Company of the occurrence of any event as a result of which any prospectus
contains an untrue statement of material fact or omits to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading and (c) completes and executes all questionnaires, powers of
attorney, indemnities, underwriting agreements and other documents reasonably
required under the terms of such underwriting arrangements.
10. Transfer of Registration Rights. The rights granted to any Holder
-------------------------------
under this Agreement may be assigned to any permitted transferee of Registrable
Securities, in connection with any transfer or assignment of Registrable
Securities by a Holder; provided, however, that: (a) such transfer is otherwise
effected in accordance with applicable securities laws, (b) if not already a
party hereto, the assignee or transferee agrees in writing prior to such
transfer to be bound by the provisions of this Agreement applicable to the
transferor, (c) such transferee shall
10
<PAGE>
own Registrable Securities representing at least 350,000 shares of Common Stock
(as adjusted for any combinations, consolidations, stock distributions, stock
dividends or other recapitalizations with respect to such shares), and (d) EIS
shall act as agent and representative for such Holder for the giving and
receiving of notices hereunder.
11. Information by Holder. Each Holder shall furnish to the Company such
---------------------
written information regarding such Holder and any distribution proposed by such
Holder as the Company may reasonably request in writing and as shall be
reasonably required in connection with any registration, qualification or
compliance referred to in this Agreement and shall promptly notify the Company
of any changes in such information.
12. Exchange Act Compliance. The Company shall comply with all of the
-----------------------
reporting requirements of the Exchange Act then applicable to it and shall
comply with all other public information reporting requirements of the
Commission which are conditions to the availability of Rule 144 for the sale of
the Registrable Securities. The Company shall cooperate with each Holder in
supplying such information as may be necessary for such Holder to complete and
file any information reporting forms presently or hereafter required by the
Commission as a condition to the availability of Rule 144.
13. Termination of Registration Rights. All registration rights granted
----------------------------------
under this Agreement shall terminate and be of no further force and effect, as
to any particular Holder, at such time as all Registrable Securities held by
such Holder can be sold within a four-month period without compliance with the
registration requirements of the Securities Act pursuant to Rule 144 (including
Rule 144(k)) promulgated thereunder or have been resold pursuant to a Demand
Registration.
14. Miscellaneous.
-------------
(a) No Inconsistent Agreements. The Company will not hereafter enter into
--------------------------
any agreement with respect to its securities which is inconsistent with or
violates the rights granted to the Holders of Registrable Securities in this
Agreement without the prior written consent of a majority in interest of such
Registrable Securities.
(b) Remedies. Any Person having rights under any provision of this
--------
Agreement will be entitled to enforce such rights specifically to recover
damages caused by reason of any breach of any provision of this Agreement and to
exercise all other rights granted by law. The parties hereto agree and
acknowledge that money damages may not be an adequate remedy for any breach of
the provisions of this Agreement and that any party may in its sole discretion
apply to any court of law or equity of competent jurisdiction (without posting
any bond or other security) for specific performance and for other injunctive
relief in order to enforce or prevent violation of the provisions of this
Agreement; provided, however, that in no event shall any Holder have the right
to enjoin, delay or interfere with any offering of securities by the Company.
11
<PAGE>
(c) Amendments and Waivers. Except as otherwise provided herein, the
----------------------
provisions of this Agreement may be amended or waived only with the prior
written consent of the Company and Holders of at least 50% of the Registrable
Securities; provided, however, that without the prior written consent of all the
Holders, no such amendment or waiver shall reduce the foregoing percentage
required to amend or waive any provision of this Agreement.
(d) Successors and Assigns. All covenants and agreements in this Agreement
----------------------
by or on behalf of any of the parties hereto will bind and inure to the benefit
of the respective successors and assigns of the parties hereto, and shall inure
to the benefit and be enforceable by each Holder of Registrable Securities from
time to time. In addition, whether or not any express assignment has been made,
the provisions of this Agreement which are for the benefit of Holders of
Registrable Securities are also for the benefit of, and enforceable by, any
permitted transferee of Registrable Securities in accordance with Section 10
hereof.
(e) Severability. Whenever possible, each provision of this Agreement
------------
will be interpreted in such manner as to be effective and valid under applicable
law, but if any provision of this Agreement is held to be prohibited by or
invalid under applicable law, such provision will be ineffective only to the
extent of such prohibition or invalidity, without invalidating the remainder of
this Agreement.
(f) Counterparts. This Agreement may be executed simultaneously in two or
------------
more counterparts, any one of which need not contain the signatures of more than
one party, but all such counterparts taken together will constitute one and the
same Agreement.
(g) Descriptive Headings. The descriptive headings of this Agreement are
--------------------
inserted for convenience only and do not constitute a part of this Agreement.
(h) Governing Law. All questions concerning the construction, validity and
-------------
interpretation of this Agreement will be governed by the laws of the State of
New York without regard to principles of conflicts of laws, except that all
issues concerning the relative rights of the Company and its shareholders shall
be governed by Washington State Law, without giving effect to the principles
thereof relating to conflicts of laws.
(i) Notices. All notices, demands and requests of any kind to be delivered
-------
to any party in connection with this Agreement shall be in writing and shall be
deemed to have been duly given if personally delivered or if sent by nationally-
recognized overnight courier or by registered or certified airmail, return
receipt requested and postage prepaid or by facsimile transmission, addressed as
follows:
(i) if to the Company, to:
Targeted Genetics Corporation
1100 Olive Way
Suite 100
Seattle, Washington 98101
12
<PAGE>
Facsimile: (206) 623-7064
Attention: Chief Financial Officer
with a copy to:
Perkins Coie
1201 Third Avenue, 48th Floor
Seattle, Washington 98101
Facsimile: (206) 583-8500
Attention: Stephen M. Graham, Esq.
(ii) if to EIS, to:
Elan International Services, Ltd.
Flatts, Smiths Parish
Bermuda, FL 04
Facsimile: (441) 292-2224
Attention: President
with a copy to:
Brock Silverstein LLC
800 Third Avenue
New York, New York 10022
Facsimile: (212) 371-5500
Attention: David Robbins, Esq.
(j) Entire Agreement. This Agreement constitutes the full and entire
----------------
understanding and agreement between the parties with regard to the subject
matter hereof.
[Signature page follows]
13
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Registration
Rights Agreement as of the date first written above.
TARGETED GENETICS CORPORATION
By: /s/ Stewart Parker
----------------------------
Name: H. Stewart Parker
Title: President & CEO
ELAN INTERNATIONAL SERVICES, LTD.
By: /s/ Kevin Insley
----------------------------
Name: Kevin Insley
Title: President & CFO
14
<PAGE>
EXHIBIT 1.3
Execution Copy
Funding Agreement
Among
Elan Corporation, plc
And
Elan International Services, Ltd.
And
Targeted Genetics Corporation
<PAGE>
INDEX
-----
CLAUSE 1 SUBSEQUENT FUNDING
CLAUSE 2 TERMINATION
CLAUSE 3 GENERAL
i
<PAGE>
FUNDING AGREEMENT made this 20th day of July, 1999
among:
(1) ELAN CORPORATION, PLC, a public limited company incorporated under the laws
of Ireland, and having its registered office at Lincoln House, Lincoln
Place, Dublin 2, Ireland ("Elan");
(2) ELAN INTERNATIONAL SERVICES, LTD., a private limited company incorporated
under the laws of Bermuda, and having its registered office at Clarendon
House, 2 Church St., Hamilton, Bermuda ("EIS"); and
(3) TARGETED GENETICS CORPORATION a corporation incorporated under the laws of
Washington and having its principal place of business at 1100 Olive Way,
Suite 100, Seattle, Washington, United States of America ("TGEN").
RECITALS:
A. EIS and TGEN have formed a joint venture Bermuda private limited company to
be known as Targeted Genetics Newco, Ltd. ("Newco").
B. As of the date hereof, Elan, EIS, TGEN and Newco have entered into a
Subscription, Joint Development and Operating Agreement (the "JDOA") for
the purpose of recording the terms and conditions of the joint venture and
of regulating their relationship with each other and certain aspects of the
affairs of and their dealings with Newco.
C. The parties have agreed that capitalized terms when used in the Recitals
hereto and in this Agreement shall bear the same meanings as ascribed to
such terms in the JDOA.
D. Elan is beneficially entitled to the use of certain patents which have been
granted or are pending relating to Base Technologies, Drug Delivery
Technologies or Gene Delivery Technologies controlled by Elan.
E. TGEN is beneficially entitled to the use of certain patents that have been
granted or are pending relating to Base Technologies, Gene Delivery
Technologies or Drug Delivery Technologies controlled by TGEN.
F. As of the date hereof, Elan has entered into a license agreement with
Newco, and TGEN has entered into a license agreement with Newco, in
connection with the license to Newco of the Elan Intellectual Property and
the TGEN Intellectual Property, respectively.
<PAGE>
G. Elan and TGEN have agreed to co-operate in the establishment and management
of a business for the research, development and commercialization of the
Products based on their respective technologies.
CLAUSE 1
SUBSEQUENT FUNDING
1.1 It is estimated that Newco will require an additional $15,000,000 to
develop Platforms and Products based upon the TGEN Intellectual Property,
the Elan Intellectual Property and/or the Newco Technology (the "Subsequent
Funding"). During the Research and Development Term, EIS and TGEN shall
provide to Newco, by way of an unconditional capital contribution to Newco
up to an aggregate maximum amount of $15,000,000, such funding to be
provided on a pro rata basis in accordance with their respective ownership
interest in Newco (i.e., initially, 80.1% by TGEN and 19.9% by EIS).
1.2 The Subsequent Funding shall be provided by EIS and TGEN at such times as
shall be necessary for the development of the Platforms and Products, as
shall be reasonably determined in good faith by the unanimous decision of
the Newco Directors. The Subsequent Funding shall be contributed on the
following terms:
1.2.1 The minimum amount of each request for Subsequent Funding shall be
U.S.$500,000 (except in the event that an amount less than
U.S.$500,000 remains available for funding, in which case such
lesser amount may be funded);
1.2.2 There shall be no Event of Default (as defined in the Convertible
Note) under the Convertible Note on the date of the Subsequent
Funding (except to the extent that any Event of Default has been
waived by EIS); and
1.2.3 Each request for Subsequent Funding shall be consistent with the
Business Plan and the Research and Development Plan or as otherwise
approved by the Newco Directors.
1.3 Each request for Subsequent Funding shall be delivered from the Management
Committee to each of the Participants, which notice shall set forth:
(i) the amount of the Subsequent Funding requested;
(ii) the date requested to fund such amount, which date shall not be
earlier than 15 business days from the date such request is made; and
(iii) a reasonably detailed narrative and summary of the uses and
application thereof, to the extent the request is inconsistent with
Newco's budget.
2
<PAGE>
CLAUSE 2
TERMINATION
2.1 This Agreement shall govern the funding commitments of EIS and TGEN with
respect to Newco until terminated by written agreement of all Parties
hereto.
CLAUSE 3
GENERAL
3.1 Good Faith:
-----------
Each of the Parties hereto undertakes with the others to do all things
reasonably within its power that are necessary or desirable to give effect
to the spirit and intent of this Agreement.
3.2 Further Assurance:
------------------
At the request of any of the Parties, the other Party or Parties shall (and
shall use reasonable efforts to procure that any other necessary parties
shall) execute and perform all such documents, acts and things as may
reasonably be required subsequent to the signing of this Agreement for
assuring to or vesting in the requesting Party the full benefit of the
terms hereof.
3.3 No Representation:
------------------
Each of the Parties hereto hereby acknowledges that in entering into this
Agreement it has not relied on any representation or warranty except as
expressly set forth herein or in any document referred to herein.
3.4 Force Majeure:
--------------
No Party to this Agreement shall be liable for delay in the performance of
any of its obligations hereunder if such delay is caused by or results from
causes beyond its reasonable control, including without limitation, acts of
God, fires, strikes, acts of war (whether war be declared or not),
insurrections, riots, civil commotions, strikes, lockouts or other labor
disturbances or intervention of any relevant government authority, but any
such delay or failure shall be remedied by such Party as soon as
practicable.
3
<PAGE>
3.5 Relationship of the Parties:
----------------------------
Nothing contained in this Agreement is intended or is to be construed to
constitute Elan or EIS, on one hand, and TGEN, on the other hand, as
partners, or Elan or EIS as an employee or agent of TGEN, or TGEN as an
employee or agent of Elan or EIS.
No Party hereto shall have any express or implied right or authority to
assume or create any obligations on behalf of or in the name of another
Party or to bind another Party to any contract, agreement or undertaking
with any third Party.
3.6 Counterparts:
-------------
This Agreement may be executed in any number of counterparts, and each such
counterpart hereof shall be deemed to be an original instrument, but all
such counterparts together shall constitute this Agreement.
3.7 Notices:
--------
All notices, demands and requests of any kind to be delivered to any party
in connection with this Agreement shall be in writing and shall be deemed
to have been duly given if personally or hand delivered or if sent by an
internationally-recognized overnight delivery or by registered or certified
mail, return receipt requested and postage prepaid, or by facsimile
transmission addressed as follows:
if to TGEN, to:
Targeted Genetics Corporation
1100 Olive Way, Suite 100
Seattle, Washington 98101
Attention: Chief Executive Officer
Facsimile: (206) 623-7064
with a copy to:
Perkins Coie
1201 Third Avenue, 48th Floor
Seattle, Washington 98101
Attn: Stephen M. Graham, Esq.
Facsimile: (206) 583-8500
4
<PAGE>
Elan at:
Lincoln House, Lincoln Place, Dublin 2
Ireland
Attention: Vice President & General Counsel
Elan Pharmaceutical Technologies,
a division of Elan Corporation, plc
Telephone: 353-1-709-4000
Fax: 353-1-709-4124
with a copy to:
Brock Silverstein LLC
800 Third Avenue, 21st Floor
New York, NY 10022
Attention: David Robbins, Esq.
Telephone 212-371-2000
Fax: 212-371-5500
EIS at:
Elan International Services, Ltd.
102 St. James Court
Flatts, Smiths FL04
Bermuda
Attention: President
Telephone: 441-292-9169
Fax: 441-292-2224
with a copy to:
Brock Silverstein LLC
800 Third Avenue, 21st Floor
New York, NY 10022
Attention: David Robbins, Esq.
Telephone 212-371-2000
Fax: 212-371-5500
or to such other address as the party to whom notice is to be given may
have furnished to the other party hereto in writing in accordance with
provisions of this Section 3.7. Any such notice or communication shall be
deemed to have been effectively given (i) in the case of personal or hand
delivery, on the date of such delivery, (ii) in the case of an
internationally-recognized overnight delivery service, on the second
business day after the
5
<PAGE>
date when sent, (iii) in the case of mailing, on the fifth business day
following that day on which the piece of mail containing such communication
is posted, and (iv) in the case of facsimile transmission, on the date of
telephone confirmation of receipt.
3.8 Governing Law:
--------------
This Agreement shall be governed by and construed in accordance with the
substantive (as opposed to procedural) laws of the State of New York,
without giving effect to principles thereof relating to conflicts of laws.
Any dispute hereunder shall be adjudicated in a forum set forth in the
Securities Purchase Agreement.
3.9 Severability:
-------------
If any provision in this Agreement is agreed by the Parties to be, deemed
to be or is or becomes invalid, illegal, void or unenforceable under any
law that is applicable hereto, such provision will be deemed amended to
conform to applicable laws so as to be valid and enforceable, and the
validity, legality and enforceability of the remaining provisions of this
Agreement shall not be impaired or affected in any way.
3.10 Amendments:
-----------
No amendment, modification or addition hereto shall be effective or binding
on any Party unless set forth in writing and executed by a duly authorized
representative of all Parties.
3.11 Waiver:
-------
No waiver of any right under this Agreement shall be deemed effective
unless contained in a written document signed by the Party charged with
such waiver, and no waiver of any breach or failure to perform shall be
deemed to be a waiver of any future breach or failure to perform or of any
other right arising under this Agreement.
3.12 Assignment:
-----------
None of the Parties shall be permitted to assign its rights or obligations
hereunder without the prior written consent of the other Parties except as
follows:
3.12.1 Elan, EIS and/or TGEN shall have the right to assign their rights
and obligations hereunder to their Affiliates or subsidiaries
provided, however, that such assignment does not result in adverse
tax consequences for any other Parties.
3.13 Whole Agreement/No Effect on Other Agreements:
----------------------------------------------
This Agreement and the other Transaction Documents set forth all of the
agreements and understandings between the Parties with respect to the
subject matter hereof, and supersedes
6
<PAGE>
and terminates all prior agreements and understandings between the Parties
with respect to the subject matter hereof. There are no agreements or
understandings with respect to the subject matter hereof, either oral or
written, between the Parties other than as set forth in this Agreement and
the other Transaction Documents.
No provision of this Agreement shall be construed so as to negate, modify
or affect in any way the provisions of any other agreement between any of
the Parties unless specifically referred to, and solely to the extent
provided herein. In the event of a conflict between the provisions of this
Agreement and the provisions of the License Agreements, the terms of this
Agreement shall prevail unless this Agreement specifically provides
otherwise.
3.14 Successors:
-----------
This Agreement shall be binding upon and inure to the benefit of the
Parties hereto, their successors and permitted assigns.
[Signature Page Follows]
7
<PAGE>
IN WITNESS WHEREOF, the Parties hereto have executed this Funding
Agreement on the day first set forth above.
SIGNED
BY: /s/ Kevin Insley
-----------------------
for and on behalf of
ELAN CORPORATION, PLC
in the presence of: /s/ [illegible]
------------------
SIGNED
BY: /s/ Kevin Insley
-----------------------
for and on behalf of
ELAN INTERNATIONAL SERVICES, LTD.
in the presence of: /s/ [illegible]
------------------
SIGNED
BY: /s/ Stewart Parker
-----------------------
for and on behalf of
TARGETED GENETICS CORPORATION
in the presence of: /s/ Jim Johnson
------------------
<PAGE>
EXHIBIT 1.4
EXECUTION COPY
SUBSCRIPTION, JOINT DEVELOPMENT AND OPERATING AGREEMENT
ELAN CORPORATION, PLC
ELAN INTERNATIONAL SERVICES, LTD.
AND
TARGETED GENETICS CORPORATION
AND
TARGETED GENETICS NEWCO, LTD.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
1. DEFINITIONS........................................................... 2
2. NEWCO'S BUSINESS...................................................... 11
3. REPRESENTATIONS AND WARRANTIES........................................ 12
4. AUTHORIZATION AND CLOSING............................................. 15
5. CERTAIN ASSIGNMENT RIGHTS............................................. 16
6. NON-COMPETITION....................................................... 16
7. DIRECTORS; MANAGEMENT AND R&D COMMITTEES.............................. 17
8. THE BUSINESS PLAN AND REVIEWS......................................... 20
9. RESEARCH AND DEVELOPMENT WORK......................................... 20
10. INTELLECTUAL PROPERTY RIGHTS.......................................... 22
11. EXPLOITATION OF PRODUCTS OUTSIDE THE FIELD............................ 25
12. COMMERCIALIZATION..................................................... 26
13. MANUFACTURING......................................................... 27
14. TECHNICAL SERVICES AND ASSISTANCE..................................... 27
15. AUDITORS, BANKERS, REGISTERED OFFICE, ACCOUNTING REFERENCE DATE....... 28
16. REGULATORY............................................................ 29
17. TRANSFERS OF SHARES; RIGHT OF FIRST OFFER; TAG ALONG RIGHTS........... 29
18. MATTERS REQUIRING PARTICIPANTS' APPROVAL.............................. 32
19. DISPUTES.............................................................. 35
20. SUBSEQUENT FUNDING.................................................... 36
21. TERMINATION........................................................... 36
22. CONFIDENTIALITY....................................................... 37
23. COSTS................................................................. 40
24. GENERAL............................................................... 40
</TABLE>
-i-
<PAGE>
THIS SUBSCRIPTION, JOINT DEVELOPMENT AND OPERATING AGREEMENT made this 21st
day of July, 1999,
among:
ELAN CORPORATION, PLC, a public limited company incorporated under the laws
of Ireland, and having its registered office at Lincoln House, Lincoln Place,
Dublin 2, Ireland ("Elan");
ELAN INTERNATIONAL SERVICES, LTD., a private limited company incorporated
under the laws of Bermuda, and having its registered office at Clarendon House,
2 Church St., Hamilton, Bermuda ("EIS");
TARGETED GENETICS CORPORATION, a corporation incorporated under the laws of
Washington and having its principal place of business at 1100 Olive Way, Suite
100, Seattle, Washington 98101, United States of America ("TGEN"); and
TARGETED GENETICS NEWCO, LTD., a private limited company incorporated under
the laws of Bermuda, and having its registered office at Clarendon House, 2
Church St., Hamilton, Bermuda ("Newco").
RECITALS:
A. Newco desires to issue and sell to the Participants (as defined
below), and the Participants desire to purchase from Newco, for aggregate
consideration of $15,000,000, apportioned between them as set forth herein, (i)
7,491 shares of Newco's common stock, par value $1.00 per share (the "Common
Stock"), allocated 6,000 shares to TGEN and 1,491 shares to EIS, and (ii) 4,509
shares of Newco's preferred stock, par value $1.00 per share (the "Preferred
Stock"). allocated 3,612 shares to TGEN and 897 shares to EIS.
B. Elan is beneficially entitled to the use of certain patents which have
been granted or are pending in relation to Drug Delivery Technologies (as
defined below).
C. TGEN is beneficially entitled to the use of certain patents that have
been granted or are pending in relation to Gene Delivery Technologies (as
defined below).
D. As of the date hereof, Elan Pharmaceutical Technologies, a division of
Elan ("EPT"), has entered into a license agreement with Newco, and TGEN has
entered into a license agreement with Newco, in connection with the license to
Newco of the Elan Intellectual Property and the TGEN Intellectual Property,
respectively (each as defined below).
[*] OMITTED, CONFIDENTIAL MATERIAL, WHICH MATERIAL HAS BEEN SEPARATELY FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT.
<PAGE>
E. Elan and TGEN have agreed to co-operate in the establishment and
management of a business for the research, development and commercialization of
the Products (as defined below).
F. Elan and TGEN have agreed to enter into this Agreement for the purpose
of recording the terms and conditions of the joint venture and of regulating
their relationship with each other and certain aspects of the affairs of and
their dealings with Newco.
NOW IT IS HEREBY AGREED AS FOLLOWS:
1. DEFINITIONS
A. In this Agreement, the following terms shall, where not inconsistent
with the context, have the following meanings respectively.
1.1. "Affiliate" shall mean, with respect to Elan or TGEN, any
corporation or entity other than Newco (and entities controlled by it)
controlling, controlled by, or under the common control of Elan or TGEN, as the
case may be, and, with respect to Newco, any corporation or entity under control
of Newco. A corporation or non-corporate entity shall be regarded as in control
of another corporation if it owns or directly or indirectly controls more than
fifty percent (50%) of the voting stock of the other corporation or (a) in the
absence of the ownership of at least fifty percent (50%) of the voting stock of
a corporation or (b) in the case of a non-corporate entity, the power to direct
or cause the direction of the management and policies of such corporation or
non-corporate entity, as applicable.
1.2. "Agreement" means this agreement (which expression shall be
deemed to include the Recitals and the Schedules hereto).
1.3. "Antisense" shall mean [*]
1.4. "Base Technologies" shall mean technologies, techniques and
formulations for the administration of an active agent to a mammal: (i) in
formulations of the active agent with one or more substantially inert
ingredients, including, without limitation, tonicity modifiers and bulking
agents; or (ii) with or through devices or mechanical targeting systems or
mechanical delivery systems (other than Elan's MEDIPAD(R) Drug Delivery System
or devices utilizing autoinjector technology).
1.5. "Business" shall mean the business of Newco as described in
Clause 2 and as more particularly specified in the Business Plan and such other
* Confidential Treatment Requested
2
<PAGE>
business as the Participants may agree from time to time in writing should be
carried on by Newco.
1.6. "Business Plan" shall mean the business plan and program of
development to be agreed by Elan and TGEN within 60 days of the Closing Date,
with respect to the research, development, and Commercialization of the
Products, which shall include portions relating to the Project that will
constitute the "Plan" defined in the License Agreements, and which shall be
reviewed and updated by Elan and TGEN on an annual basis, upon mutual written
agreement in accordance with Clause 8 hereof.
1.7. "Clinical Phase" shall mean that portion of the Project during
which regulatory approval to conduct human clinical trials of one or more
Products will be sought in one or more territories and clinical trials will be
conducted.
1.8. "Closing Date" shall mean the date upon which the Transaction
Documents are executed and delivered by the Parties and the transactions
effected thereby are closed.
1.9. "Commercialization" shall mean the manufacture, promotion,
distribution, marketing and sale of the Products .
1.10. "Common Stock Equivalents" shall mean any options, warrants,
rights or any other securities convertible, exercisable or exchangeable, in
whole or in part, for or into Common Stock.
1.11. "Control" shall mean, with respect to Base Technologies, Drug
Delivery Technologies, Gene Delivery Technologies or Genes, the ability to grant
a license or sublicense as contemplated herein without violating the terms of
any agreement with any third party.
1.12. "Convertible Note" shall mean that certain Convertible
Promissory Note, of even date herewith, by and between TGEN and EIS.
1.13. "Development Candidate" shall mean a TGEN Proprietary Gene, or
a Gene obtained from an Independent Third Party, jointly selected by the
Participants and Newco to be developed for incorporation in Products. For the
avoidance of doubt, if it is subsequently determined by the Management Committee
of Newco that the TGEN Proprietary Gene initially offered for development as
Products is not suitable for use in a Product, TGEN shall offer an additional
TGEN Proprietary Gene to the extent available, as described in Section 9.5
below, and such additional TGEN Proprietary Gene shall in that instance become
the Development Candidate.
3
<PAGE>
1.14. "Development Phase" shall mean that portion of the Project
during which the Platform will, as implemented for administration of the
Development Candidate, be developed, improved, tested (in vitro and in animal
models), and evaluated by or for Newco for therapeutic and commercial potential.
1.15. "Directors" shall mean, at any time, the directors of Newco.
1.16. "Drug Delivery Technologies" shall mean formulation and/or
excipient systems and technologies for delivery of a therapeutic agent to a
mammal, including but not limited to [*] allowing such agent, without limitation
on other features that may be sought in addition to or instead of the following,
to be administered on an optimized schedule, and/or to be administered with
reduced side effects, and/or to be administered with enhanced efficacy, and/or
to be administered with better patient compliance, and/or to be administered in
reduced dosages. Drug Delivery Technologies shall also include Elan device
delivery technologies including the MEDIPAD(R) Drug Delivery System and devices
utilizing autoinjector technology. Notwithstanding the foregoing, Drug Delivery
Technologies shall not include Base Technologies or Gene Delivery Technologies.
1.17. "EIS Director" shall have the meaning set forth in Clause 7.
1.18. "EIS Exchange Right" shall have the meaning assigned to such
term in the TGEN Securities Purchase Agreement.
1.19. "Elan Improvements" shall have the meaning assigned thereto in
the Elan License Agreement.
1.20. "Elan Intellectual Property" shall have the meaning assigned
thereto in the Elan License Agreement.
1.21. "Elan Know-How" shall have the meaning assigned thereto in the
Elan License Agreement.
1.22. "Elan License" shall have the meaning assigned thereto in the
Elan License Agreement.
1.23. "Elan License Agreement" shall mean the license agreement
between Elan and Newco, of even date herewith, attached hereto as Schedule 1.
1.24. "Elan Patents" shall have the meaning assigned thereto in the
Elan License Agreement.
* Confidential Treatment Requested
4
<PAGE>
1.25. "Elan Program Technology" " shall have the meaning assigned
thereto in the Elan License Agreement.
1.26. "Elan Right of First Negotiation" shall have the meaning
provided in Section 2.12 of the Elan License Agreement.
1.27. "Encumbrance" shall mean any liens, charges, encumbrances,
equities, claims, options, proxies, pledges, security interests, or other
similar rights of any nature.
1.28. "Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended.
1.29. "Feasibility Phase" shall mean the initial portion of the
Project during which the Feasibility Studies will be performed by or for Newco
on the Platform and potential Products.
1.30. "Feasibility Studies" shall mean those studies described in the
Research and Development Program. Each Feasibility Study will be applicable to
one or more Platforms, as is indicated in the Research and Development Program.
1.31. "Field" shall mean the research, development and
Commercialization of a Platform for delivery of Genes to mammals. For avoidance
of doubt, the Field shall exclude (i) cell therapy, (ii) ex vivo gene therapy,
(iii) Antisense delivery and (iv) transcutaneous and/or transdermal delivery
(i.e., pertaining to delivery, onto, into and through the skin).
1.32. "Financial Year" shall mean each year commencing on January 1
(or in the case of the first Financial Year, the date hereof) and expiring on
December 31 of each year.
1.33. "Fully Diluted Common Stock" shall mean all of the issued and
outstanding Common Stock, assuming the conversion, exercise or exchange of all
outstanding Common Stock Equivalents.
1.34. "Funding Agreement" shall mean the Funding Agreement, dated as
of the date hereof, among Elan, EIS and TGEN.
1.35. "Gene" shall mean any nucleotide sequence that includes a
region or regions (or gene cassette(s)) capable of coding, causing or modulating
expression of a protein or other genetic element (other than directly modulating
5
<PAGE>
expression where the nucleic acid sequence is an Antisense) and includes one or
more elements that can control expression of said protein(s) or other genetic
element(s).
1.36. "Gene Delivery Technologies" shall mean [*]
1.37. "Independent Third Party" shall mean any person other than
Newco, TGEN, Elan or any of their respective Affiliates.
1.38. "Initial Funding" shall mean the amounts contributed to Newco
by the Participants pursuant to Section 4.3.1 hereof.
1.39. "License Agreements" shall mean the Elan License Agreement and
the TGEN License Agreement.
1.40. "Licensed Technologies" shall mean, together, the Elan
Intellectual Property and the TGEN Intellectual Property.
1.41. "MEDIPAD(R) Drug Delivery System" shall mean the ambulatory
continuous micro infusion device having a drug reservoir volume ranging from 3.3
to 5.0 ml. and associated technology.
1.42. "Newco Memorandum of Association and Bye-Laws" shall mean the
Memorandum of Association and By-Laws of Newco.
1.43. "Newco Patents" shall mean any and all patents and patent
applications Controlled by Newco, existing and/or pending as of the Effective
Date or hereafter filed or obtained by Newco, other than Elan Patents and TGEN
Patents. Newco Patents shall also include all extensions, continuations,
continuations-in-part, divisionals, patents-of-additions, re-examinations, re-
issues, supplementary protection certificates and foreign counterparts of such
patents and patent applications and any patents issuing thereon and extensions
of any patents licensed hereunder.
1.44. "Newco Program Technology" shall mean all Program Technology
other than Elan Program Technology and TGEN Program Technology.
1.45. "Newco Technology" shall mean all Program Technology and all
technology licensed or acquired by Newco or developed by Newco whether or not
pursuant to the Research and Development Program, excluding, however, TGEN
Intellectual Property and Elan Intellectual Property.
1.46. "Participant" shall mean TGEN or Elan, as the case may be, and
"Participants" shall mean both Elan and TGEN.
* Confidential Treatment Requested
6
<PAGE>
1.47. "Party" shall mean Elan, TGEN, or Newco, as the case may be,
and "Parties" means all three together.
1.48. "Person" shall mean an individual, partnership, corporation,
limited liability company, business trust, joint stock company, trust,
unincorporated association, joint venture, governmental entity or authority or
other entity of whatever nature.
1.49. "Permitted Transferee" shall mean any Affiliate or subsidiary
of Elan, EIS or TGEN, to whom this Agreement may be assigned, in whole or in
part, pursuant to the terms hereof or in the case of Elan/EIS, an off-balance
sheet special purpose entity created by Elan or EIS.
1.50. "Platform" shall mean the combined utilization of Drug Delivery
Technologies and Gene Delivery Technologies for delivery of Genes by any route
of administration
1.51. "Product" shall mean a Gene formulated for administration to
mammals, including humans, by use of a Platform.
1.52. "Program Technology" shall mean all technology developed by or
on behalf of Newco, whether by Elan, TGEN, a third party or jointly by any
combination thereof, pursuant to the Research and Development Program.
1.53. "Project" shall mean all activity as undertaken by Elan, TGEN
and Newco in order to develop the Platform and Products in accordance with the
Business Plan.
1.54. "Registration Rights Agreements" shall mean the Registration
Rights Agreements of even date herewith relating to securities of TGEN and
Newco, respectively.
1.55. "Regulatory Application" shall mean any regulatory application
or any other application for marketing approval for a Product, which Newco will
file in any country of the Territory, including any supplements or amendments
thereto.
1.56. "Regulatory Approval" shall mean the final approval to market a
Product in any country of the Territory, and any other approval which is
required to launch the Product in the normal course of business.
1.57. "Research and Development Term" shall mean the period
commencing on the Closing Date and continuing for a period of [*] thereafter, or
as
* Confidential Treatment Requested
7
<PAGE>
extended by agreement of the Participants, up to an aggregate of [*]; provided,
however, that if a Participant shall be prevented by (i) events beyond the
Participant's control, or (ii) by such Participant's delay or negligent act or
omission, from performing its obligations under the Transaction Documents within
said [*] period (or as extended), then the other Participant at its option, may
extend the duration of the Research and Development Term by a term equal in
length to the period during which the first Participant was unable to perform
its obligations hereunder.
1.58. "RHA" shall mean any relevant government health authority (or
successor agency thereof) in any country of the Territory whose approval is
necessary to market a Product in the relevant country of the Territory.
1.59. "Securities Act" shall mean the Securities Act of 1933, as
amended.
1.60. "Shares" shall mean the shares of Common Stock and Preferred
Stock of Newco.
1.61. "Stockholder" shall mean any of EIS, TGEN, any Permitted
Transferee or any other Person who subsequently becomes bound by this Agreement
as a holder of the Shares, and "Stockholders" refers to all of the Stockholders.
1.62. "Subsequent Funding" shall have the meaning given to such term
in the Funding Agreement.
1.63. "Subsidiary" shall mean any company that is a subsidiary of
Newco within the meaning of applicable laws.
1.64. "Technological Competitor of Elan" shall mean any entity which
has a significant program for the development of Drug Delivery Technology and
which is active in promoting and contracting the use of such Drug Delivery
Technology to third parties, a listing of which is contained on Schedule 3
hereto, and as such list may be supplemented by Elan from time to time with the
consent of TGEN, which consent shall not be unreasonably withheld if the
proposed additions are within the parties' contemplation as to the purpose of
the original list.
1.65. "Technological Competitor of TGEN" shall mean any entity which
has a significant program for the discovery and development of Gene Delivery
Technology, a listing of which is contained on Schedule 4 hereto, and as such
list may be supplemented by TGEN from time to time with the consent of Elan,
which consent shall not be unreasonably withheld if the proposed additions are
within the parties' contemplation as to the purpose of the original list.
* Confidential Treatment Requested
8
<PAGE>
1.66. "Term" shall mean the term of this Agreement.
1.67. "Territory" shall mean all of the countries of the world.
1.68. "TGEN Directors" shall have the meaning set forth in Clause 7.
1.69. "TGEN Improvements" shall have the meaning given to such term
in the TGEN License Agreement.
1.70. "TGEN Intellectual Property" shall have the meaning given to
such term in the TGEN License Agreement.
1.71. "TGEN Know-How" shall have the meaning given to such term in
the TGEN License Agreement.
1.72. "TGEN License" shall have the meaning given to such term in the
TGEN License Agreement.
1.73. "TGEN License Agreement" shall mean the license agreement
between TGEN and Newco, of even date herewith, attached hereto as Schedule 2.
1.74. "TGEN Patents" shall have the meaning given to such term in the
TGEN License Agreement.
1.75. "TGEN Program Technology" shall have the meaning given to such
term in the TGEN License Agreement.
1.76. "TGEN Proprietary Gene" shall mean any Gene Controlled by TGEN.
1.77. "TGEN Right of First Negotiation" shall have the meaning
provided in Section 2.12 of the TGEN License Agreement.
1.78. "TGEN Securities Purchase Agreement" shall mean that certain
securities purchase agreement, of even date herewith, by and between TGEN and
EIS.
1.79. "Transaction Documents" shall mean this Agreement, the Funding
Agreement, the Elan License Agreement, the TGEN License Agreement, the
Convertible Note, the TGEN Securities Purchase Agreement, the Registration
Rights Agreements and associated documentation of even date herewith, by and
between TGEN, Elan, EIS, EPT and Newco, as applicable.
9
<PAGE>
1.80. "United States Dollar" and "US$" and "$" shall mean the lawful
currency of the United States of America.
B. In addition, the following definitions shall have the meanings in the
Clauses corresponding thereto, as set forth below.
Definition Clause
---------- ------
"Closing"................................. 4.2
"Common Stock"............................ Recital
"Confidential Information"................ 22.1
"Co-sale Notice".......................... 17.3
"Elan".................................... Recital
"Elan Right of First Negotiation"......... 12.4
"EIS"..................................... Recital
"EPT"..................................... Recital
"Management Committee".................... 7.2.1
"Newco"................................... Recital
"Notice of Exercise"...................... 17.2
"Notice of Intention"..................... 17.2
"Offered Shares".......................... 17.2
"Offering Price".......................... 17.2
"R&D Committee"........................... 7.2.2
"Remaining Stockholders".................. 17.3
"Relevant Event".......................... 20.2
"Research and Development Program"........ 9.1
"Selling Stockholder"..................... 17.2
"Tag-Along Right"......................... 17.3
"TGEN".................................... Recital
"TGEN Right of First Negotiation"......... 12.5
"Transaction Proposal".................... 17.2
"Transfer"................................ 17.1
"Transferee Terms"........................ 17.3
"Transferring Stockholders"............... 17.3
1.1. Words importing the singular shall include the plural and vice
versa.
1.2. Unless the context otherwise requires, reference to a recital,
article, paragraph, provision, Clause or schedule is to a recital, article,
paragraph, provision, Clause or schedule of or to this Agreement.
10
<PAGE>
1.3. Reference to a statute or statutory provision includes a
reference to it as from time to time amended, extended or re-enacted.
1.4. The headings in this Agreement are inserted for convenience only
and do not affect its construction.
1.5. Unless the context or subject otherwise requires, references to
words in one gender include references to the other genders.
1.6. Capitalized terms used but not defined herein shall have the
meanings ascribed in the Transaction Documents, if defined therein.
2. NEWCO'S BUSINESS
2.1 The primary objective of Newco and any Subsidiaries is to carry on the
business of the development, testing, registration, manufacture,
commercialization and licensing of Products in the Territory and to achieve the
objectives set out in this Agreement. The focus of the collaborative venture
will be to develop the Products using the Elan Intellectual Property, the TGEN
Intellectual Property and the Newco Technology to agreed-upon specifications and
timelines.
2.2 Except as the Participants otherwise agree in writing and except as
may be provided in this Agreement, the Business Plan or the License Agreements,
the Participants shall exercise their respective powers in relation to Newco so
as to ensure that the Business is carried on in a proper and prudent manner.
2.3 Each Participant shall use all commercially reasonable and proper
means at its disposal and within its power to maintain, extend and improve the
Business of Newco, within the limits of this Agreement, and to further the
reputation and interests of Newco.
2.4 The central management and control of Newco shall be exercised in
Bermuda and shall be vested in the Directors and such Persons as they may
delegate the exercise of their powers in accordance with the Newco Memorandum of
Association and Bye-Laws. The Participants shall use commercially reasonable
efforts to ensure that to the extent required pursuant to the laws of Bermuda,
and to ensure the sole residence of Newco in Bermuda, all meetings of the
Directors are held in Bermuda or other jurisdictions outside the United States
and generally to ensure that Newco is treated as resident for taxation purposes
in Bermuda.
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3. REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties of Newco: Newco hereby represents and
---------------------------------------
warrants to each of the Stockholders as follows, as of the date hereof:
3.1.1 Organization: Newco is an exempted company duly organized,
------------
validly existing and in good standing under the laws of Bermuda, and has all the
requisite corporate power and authority to own and lease its properties, to
carry on its business as presently conducted and as proposed to be conducted, to
execute this Agreement, which has been duly authorized and is enforceable
against Newco in accordance with its terms, and to carry out the transactions
contemplated hereby.
3.1.2 Capitalization: As of the date hereof, the authorized capital
--------------
stock of Newco consists of 7,491 shares of Common Stock and 4,509 shares of
Preferred Stock. Prior to the date hereof, no shares of capital stock of Newco
have been issued.
3.1.3 Authorization: The execution, delivery and performance by
-------------
Newco of this Agreement, including the issuance of the Shares, have been duly
authorized by all requisite corporate actions; this Agreement has been duly
executed and delivered by Newco and is the valid and binding obligation of
Newco, enforceable against it in accordance with its terms, except as limited by
applicable bankruptcy, insolvency, reorganization, moratorium and other laws of
general application affecting the enforcement of creditors' rights generally,
and by general equity principles and limitations on the availability of
equitable relief, including specific performance. The Shares, when issued as
contemplated hereby, will be validly issued and outstanding, fully paid and non-
assessable and not subject to preemptive or any other similar rights of the
Stockholders or others.
3.1.4 No Conflicts: The execution, delivery and performance by Newco
------------
of this Agreement, the issuance, sale and delivery of the Shares, and compliance
with the provisions hereof by Newco, will not:
(i) violate any provision of applicable law, statute, rule or
regulation applicable to Newco or any ruling, writ, injunction, order, judgment
or decree of any court, arbitrator, administrative agency or other governmental
body applicable to Newco or any of its properties or assets;
(ii) conflict with or result in any breach of any of the
terms, conditions or provisions of, or constitute (with notice or lapse of time
or both) a default (or give rise to any right of termination, cancellation or
acceleration) under its charter or organizational documents or any material
contract to which Newco is a
12
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party, except where such violation, conflict or breach would not, individually
or in the aggregate, have a material adverse effect on Newco; or
(iii) result in the creation of, any Encumbrance upon any of
the properties or assets of Newco, except as contemplated by the Transaction
Documents.
3.1.5 Approvals: As of the date hereof, no permit, authorization,
---------
consent or approval of or by, or any notification of or filing with, any Person
is required in connection with the execution, delivery or performance of this
Agreement by Newco. Newco has full authority to conduct its business as
contemplated in the Business Plan and the Transaction Documents.
3.1.6 Disclosure: This Agreement does not contain any untrue
----------
statement of a material fact or omit to state any material fact necessary to
make the statements contained herein not misleading. Newco is not aware of any
material contingency, event or circumstance relating to its business or
prospects, which could have a material adverse effect thereon, in order for the
disclosure herein relating to Newco not to be misleading in any material
respect.
3.1.7 No Business; No Liabilities: Newco has not conducted any
---------------------------
business or incurred any liabilities or obligations prior to the date hereof,
except solely in connection with its organization and formation.
3.2 Representations and Warranties of the Stockholders: Each of the
--------------------------------------------------
Stockholders hereby severally represents and warrants to Newco as follows as of
the date hereof:
3.2.1 Organization: Such Stockholder is a corporation duly organized
------------
and validly existing under the laws of its jurisdiction of organization and has
all the requisite corporate power and authority to own and lease its respective
properties, to carry on its respective business as presently conducted and as
proposed to be conducted and to carry out the transactions contemplated hereby.
3.2.2 Authority: Such Stockholder has full corporate power and
---------
authority to enter into this Agreement and to perform its obligations hereunder,
which have been duly authorized by all requisite corporate action of such
Stockholder. This Agreement is the valid and binding obligation of such
Stockholder, enforceable against it in accordance with its terms, except as
limited by applicable bankruptcy, insolvency, reorganization, moratorium and
other laws of general application affecting the enforcement of creditors' rights
generally, and by general equity principles and limitations on the availability
of equitable relief, including specific performance.
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3.2.3 No Conflicts: The execution, delivery and performance by such
------------
Stockholder of this Agreement, purchase of the Shares, and compliance with the
provisions hereof by such Stockholder will not:
(i) violate any provision of applicable law, statute, rule or
regulation known by and applicable to such Stockholder or any ruling, writ,
injunction, order, judgment or decree of any court, arbitrator, administrative
agency or other governmental body applicable to such Stockholder or any of its
properties or assets;
(ii) conflict with or result in any breach of any of the
terms, conditions or provisions of, or constitute (with notice or lapse of time
or both) a default (or give rise to any right of termination, cancellation or
acceleration) under the charter or organizational documents of such Stockholder
or any material contract to which such Stockholder is a party, except where such
violation, conflict or breach would not, individually or in the aggregate, have
a material adverse effect on the transactions contemplated hereunder; or
(iii) result in the creation of, any Encumbrance upon any of
the properties or assets of such Stockholder, except as contemplated by the
Transaction Documents.
3.2.4 Approvals: As of the date hereof, no material permit,
---------
authorization, consent or approval of or by, or any notification of or filing
with, any Person is required in connection with the execution, delivery or
performance of this Agreement by such Stockholder.
3.2.5 Investment Representations: Such Stockholder is capable of
--------------------------
evaluating the merits and risks of its investment in Newco. Such Stockholder
has not been formed solely for the purpose of making this investment and such
Stockholder is acquiring the Common Stock for investment for its own account,
not as a nominee or agent, and not with the view to, or for resale in connection
with, any distribution of any part thereof. Such Stockholder understands that
the Shares have not been registered under the Securities Act or applicable state
and foreign securities laws by reason of a specific exemption from the
registration provisions of the Securities Act and applicable state and foreign
securities laws, the availability of which depends upon, among other things, the
bona fide nature of the investment intent and the accuracy of such Stockholders'
representations as expressed herein. Such Stockholder understands that no public
market now exists for any of the Shares and that there is no assurance that a
public market will ever exist for such Shares.
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3.3 Survival: The representations and warranties in this Clause 3 shall
--------
survive for a period of two years from and after the date hereof.
4. AUTHORIZATION AND CLOSING
4.1 Newco has authorized the issuance to (i) EIS of 2,388 shares of Common
Stock and (ii) TGEN of 6,000 shares of Common Stock and 3,612 shares of
Preferred Stock, issuable as provided in Clause 4.3 hereof.
4.2 The closing (the "Closing") shall take place at the offices of Brock
Silverstein LLC at 153 East 53/rd/ Street, New York, New York 10022 on the date
hereof or such other place if any, as the Parties may agree and shall occur
contemporaneously with the closing under the TGEN Securities Purchase Agreement.
4.3 At the Closing,
4.3.1 Newco shall issue and sell to EIS, and EIS shall purchase from
Newco, upon the terms and subject to the conditions set forth herein, 1,491
shares of Common Stock for an aggregate purchase price of $240,234 and 897
shares of Preferred Stock for an aggregate purchase price of $2,743,923 for a
total aggregate purchase price for all Shares of $2,984,157. Newco shall issue
and sell to TGEN, and TGEN shall purchase from Newco, upon the terms and
conditions set forth herein, 6,000 shares of Common Stock for an aggregate
purchase price of $966,735 and 3,612 shares of Preferred Stock for an aggregate
purchase price of $11,049,108 for a total aggregate purchase price for all
Shares of $12,015,843.
4.3.2 The Parties shall execute and deliver to each other, as
applicable, certificates in respect of the Common Stock and Preferred Stock
described above and any other certificates, resolutions or documents which the
Parties shall reasonably require.
4.4 Exemption from Registration:
---------------------------
The Shares will be issued under an exemption or exemptions from
registration under the Securities Act. Accordingly, the certificates evidencing
the Shares shall, upon issuance, contain the following legend:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
UNDER BERMUDA LAW, THE SECURITIES ACT OF 1933, AS AMENDED,
OR APPLICABLE STATE SECURITIES LAWS AND NO INTEREST SHALL BE
SOLD, TRANSFERRED OR
15
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OTHERWISE DISPOSED OF UNLESS THERE IS AN EFFECTIVE
REGISTRATION STATEMENT FOR SUCH SECURITIES UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, AND ANY APPLICABLE STATE
SECURITIES LAWS OR THIS CORPORATION RECEIVES AN OPINION OF
COUNSEL FOR THE HOLDER OF THESE SECURITIES SATISFACTORY TO
THIS CORPORATION THAT REGISTRATION IS NOT REQUIRED UNDER
SUCH ACT OR APPLICABLE STATE SECURITIES LAWS.
THE TRANSFER OF THE SECURITIES REPRESENTED BY THIS
CERTIFICATE IS ALSO SUBJECT TO THE RESTRICTIONS CONTAINED IN
THAT CERTAIN SUBSCRIPTION, JOINT DEVELOPMENT AND OPERATING
AGREEMENT, DATED JULY 20, 1999, BY AND AMONG ELAN
CORPORATION, PLC, ELAN INTERNATIONAL SERVICES, INC.,
TARGETED GENETICS CORPORATION AND TARGETED GENETICS NEWCO,
LTD.
5. CERTAIN ASSIGNMENT RIGHTS
At any time after exercise of the EIS Exchange Right and upon 1 month's
prior notice in writing from Elan to Newco and TGEN, Newco shall assign the
Newco Technology from Newco to a wholly-owned subsidiary of Newco to be
incorporated in Ireland, which company shall be newly incorporated by Elan on
behalf of Newco to facilitate such assignment; provided, however, that such
assignment shall not have a direct or indirect tax or other material adverse
effect on any of the Parties.
6. NON-COMPETITION
6.1 The Parties acknowledge and agree to be bound by the provisions of
Clause 11 of the Elan License Agreement and the provisions of Clause 11 of the
TGEN License Agreement which set forth the agreement between the parties thereto
in relation to the non-competition obligations of Elan and TGEN, respectively.
6.2 Nothing contained herein or in either the TGEN License Agreement or
the Elan License Agreement (including, without limitation, the respective
Sections 11 of those agreements) shall be construed as limiting (i) the
activities of TGEN to utilize or pursue the creation of products (other than
Products in the Field) incorporating Excluded TGEN Technology; (ii) the
activities of Elan to utilize or pursue the creation of products (other than
Products in the Field) incorporating Excluded Elan
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Technology or NanoCrystal(TM) technology licensed to a Independent Third Party
for use with proprietary compounds Controlled by such Independent Third Party;
or (iii) the activities of TGEN or Elan to utilize or pursue the creation of
products (other than Products in the Field) incorporating (A) cell therapy, ex
vivo gene therapy, Antisense, and/or transcutaneous and/or transdermal delivery
or (B) Base Technologies.
7. DIRECTORS; MANAGEMENT AND R&D COMMITTEES
Directors:
---------
Prior to the exercise of the EIS Exchange Right, the Board of
Directors of Newco shall be composed of four Directors. TGEN shall have the
right to nominate three directors of Newco ("TGEN Directors"), provided that one
such director is a resident of Bermuda, and EIS shall have the right to nominate
one Director of Newco ("EIS Director"). TGEN may appoint one of the TGEN
Directors to be the chairman of Newco. Each Participant agrees to vote its
shares of Common Stock and Preferred Stock in favor of the election of the
nominees of the other Participant to the Board of Directors.
7.1.1 If the chairman is unable to attend any meeting of the Board,
the TGEN Directors shall be entitled to appoint another Director to act as
chairman in his place at the meeting.
7.1.2 If EIS removes the EIS Director, or TGEN removes any of the
TGEN Directors, EIS or TGEN, as the case may be, shall indemnify the other
Stockholder against any claim by such removed Director arising from such
removal.
7.1.3 The Directors shall meet not less than three times in each
Financial Year and all Directors' meetings shall be held in Bermuda to the
extent required pursuant to the laws of Bermuda or to ensure the sole residence
of Newco in Bermuda.
7.1.4 At any such meeting, the presence of the EIS Director and one
of the TGEN Directors shall be required to constitute a quorum and, subject to
Clause 18 hereof, the affirmative vote of a majority of the Directors present at
a meeting at which such a quorum is present shall constitute an action of the
Directors. In the event any meeting shall lack a quorum, the meeting shall be
adjourned for a period of seven days. A notice shall be sent to the EIS
Director and the TGEN Directors specifying the date, time and place where such
adjourned meeting is to be held and reconvened.
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7.1.5 The chairman of Newco shall hold office until the first meeting
of the Directors after the exercise by EIS of the EIS Exchange Right. In the
event that the EIS Exchange Right is exercised at any time by EIS, each of TGEN,
and EIS shall cause the board of Directors of Newco to be reconfigured so that
an equal number of Directors are designated by EIS and TGEN. Thereafter, each of
EIS and TGEN, beginning with EIS, shall have the right, exercisable
alternatively, of nominating one Director to be chairman of Newco for a term of
one year. If the chairman of Newco is unable to attend any meeting of the
Directors, the Directors shall be entitled to appoint another Director to act as
chairman of Newco in his place at the meeting.
7.1.6 In case of an equality of votes at a meeting of the board of
Directors of Newco, the chairman of Newco shall not be entitled to a second or
casting vote. In the event of continued deadlock, the board of Directors shall
resolve the deadlock pursuant to the provisions set forth in Clause 19.
7.2 Management and R&D Committees:
-----------------------------
7.2.1 The Directors shall appoint a management committee (the
"Management Committee") to perform certain operational functions, such
delegation to be consistent with the Directors' right to delegate powers
pursuant to the Newco Memorandum of Association of Bye-Laws. The Management
Committee shall initially consist of four members, two of whom will be nominated
by EIS and two of whom will be nominated by TGEN, and each of whom shall be
entitled to one vote, whether or not present at any Management Committee meeting
during which such operational functions are discussed. Except as otherwise
provided herein or in the License Agreements, decisions of the Management
Committee shall require approval by at least one EIS nominee on the Management
Committee and one TGEN nominee on the Management Committee. Each of EIS and TGEN
shall be entitled to remove any of their
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nominees to the R&D Committee and appoint a replacement in place of any nominees
so removed.
7.2.3 The Management Committee shall be responsible for, inter alia,
devising, implementing and reviewing strategy for the Business of Newco, and the
operation of Newco, and in particular, devising Newco's strategy for research
and development and to monitor and supervise the implementation of Newco's
strategy for research and development.
7.2.4 The R&D Committee shall be responsible for:
7.2.4.1 designing that portion of the Business Plan that
relates to the Project for consideration by the Management Committee;
7.2.4.2 establishing a joint Project team consisting of an
equal number of team members from Elan and TGEN, including one Project leader
from each of Elan and TGEN; and
7.2.4.3 implementing such portion of the Business Plan that
relates to the Project, as approved by the Management Committee.
7.2.5 In the event of any dispute amongst the R&D Committee, the R&D
Committee shall refer such dispute to the Management Committee whose decision on
the dispute shall be binding on the R&D Committee. If the Management Committee
cannot resolve the matter, the dispute will be referred to the President of EPT
and the Chief Executive Officer of TGEN pursuant to Clause 19 hereof.
7.2.6 Not more than one time in each Financial Year, nor more than
once with respect to any accounting period, Elan and TGEN shall permit
representatives of an internationally-recognized firm of independent certified
accountants selected by Newco to have access, on reasonable notice and at any
reasonable time during normal business hours to inspect and audit the accounts
and records of Elan or TGEN and any other book, record, voucher, receipt or
invoice relating to the calculation or the cost of the Research and Development
Program and to the accuracy of the reports which accompanied them. Any such
inspection of Elan's or TGEN's records, as the case may be, shall be at the
expense of Newco, except that if such inspection reveals an overpayment in the
amount paid to Elan or TGEN, as the case may be, for the Research and
Development Program hereunder in any Financial Year of 5% or more of the amount
due to Elan or TGEN, as the case may be, then the expense of such inspection
shall be borne solely by Elan or TGEN, as the case may be, instead of by Newco.
Any surplus over the sum properly payable
19
<PAGE>
by Newco to Elan or TGEN, as the case may be, shall be paid promptly by Elan or
TGEN, as the case may be, to Newco. If such inspection reveals a deficit in the
amount of the sum properly payable to Elan or TGEN, as the case may be, by
Newco, Newco shall pay the deficit to Elan or TGEN, as the case may be.
8. THE BUSINESS PLAN AND REVIEWS
8.1 The Directors shall meet as soon as reasonably practicable after the
Closing Date hereof and shall agree upon and approve the Business Plan for the
current Financial Year within 60 days of the date hereof. In subsequent
Financial Years, the Directors shall meet prior to the accounting reference date
specified in Clause 15 and agree upon and approve the Business Plan for the
following Financial Year, or any amendment or modification to the Business Plan.
EIS and TGEN agree that they will cause their respective Directors at all times
when preparing and voting upon the Business Plan to consider in good faith
Newco's budgeting and funding requirements and the progress of the Research and
Development Program and the prospects for results therefrom in determining
whether, and at what level, to continue the development funding for the Research
and Development Program.
8.2 The Participants agree that the Management Committee shall submit to
the Directors on February 15th, May 15th, August 15th, and November 15/th/ or as
soon as reasonably practicable thereafter in each Financial Year a report on the
performance of the Business and research and development activities of Newco,
and the Directors shall hold such meeting as may be necessary to review the
performance of Newco against the Business Plan for the relevant year.
9. RESEARCH AND DEVELOPMENT WORK
9.1 During the Research Term, Newco will diligently pursue the research
and development of the Elan Intellectual Property, TGEN Intellectual Property
and Newco Technology in accordance with the Research and Development Program.
The "Research and Development Program" will be the program for (a) the
development of the Platform, and (b) the development of one or more Products in
the Field, including without limitation, screening, in-vitro pharmacology,
toxicology, stability, prototype dosage form development, formulation,
optimization, clinical and regulatory activities. Such work shall be agreed to
and conducted by Elan and/or TGEN under contract with Newco as provided in the
Business Plan.
9.2 The Research and Development Program shall include a Feasibility
Phase, a Development Phase and a Clinical Phase. During the Feasibility Phase,
Newco will diligently pursue the research and development of the Feasibility
Studies
20
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and the Program Technology. The objectives of this initial phase of research and
development work will be to develop the Platform which can be broadly applied in
the delivery of a variety of Products. The foregoing shall be provided for in
the Research and Development Program.
9.3 On successful completion of the Feasibility Phase and the designation
of one or more Products to be developed by Newco, Elan and TGEN shall meet to
discuss the development and commercial strategy for Newco and the further
exploitation of the technologies and Products vested in Newco. For example,
TGEN and Elan shall discuss strategy and terms relating to product and clinical
development, corporate partnering, licensing and supply agreements.
9.4 TGEN and Elan shall provide such research and development services as
may be reasonably required by Newco in accordance with the provisions in the
License Agreements. Newco shall pay TGEN and Elan for any research and
development work carried out by them on behalf of Newco at the end of each month
during the Research and Development Program, subject to the proper vouching of
research and development work and expenses. An invoice shall be issued to Newco
by TGEN or Elan, as applicable, by the 15/th/ day of the month following the
month in which work was performed, or as soon thereafter as practicable. Newco
shall pay the amounts invoiced within thirty days following its receipt of the
invoice. The payments by Newco to TGEN or Elan, as the case may be, shall be at
the rates prescribed in the respective License Agreement. Research and
development activities that are outsourced to third party providers shall be
charged to Newco at [*]
9.5 In the event the Management Committee, by unanimous vote of its
members, shall determine that preclinical toxicology or pharmacology studies
indicate that clinical trials of the Development Candidate should not be
undertaken, or the Management Committee determines that development of the
Development Candidate is not economically viable, TGEN in good faith shall
offer, and the Management Committee, by unanimous vote of its members shall
approve, one additional TGEN Proprietary Gene that the Management Committee
deems economically viable as a substituted Development Candidate, if and to the
extent there are then any TGEN Proprietary Genes that would be appropriate to
serve as the Development Candidate and that are not then otherwise restricted by
agreement with an Independent Third Party (it being understood that it shall be
within TGEN's discretion, subject only to its compliance with Clause 11 of the
TGEN License Agreement, to so restrict any TGEN Proprietary Genes), and subject
to the agreement of the Participants, negotiating in good faith, to changes
concerning the budget, Business Plan, license terms and funding of Newco;
provided, however, in no event shall license terms include any
* Confidential Treatment Requested
21
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obligation of Newco to make up front cash payments by Newco with respect to any
TGEN Proprietary Gene.
9.6 Except as otherwise provided herein and as provided in the TGEN
License Agreement, upon designation of a TGEN Proprietary Gene as a substituted
Development Candidate, (i) all rights to the unsuitable Development Candidate if
it is a TGEN Proprietary Gene shall revert to TGEN and (ii) all provisions
contained herein and in the TGEN License Agreement other than in the preceding
Clause (i) relating to the Development Candidate shall be deemed to apply to the
substituted Development Candidate.
10. INTELLECTUAL PROPERTY RIGHTS
10.1 Title and all other ownership rights, including patent rights,
relating to the Elan Intellectual Property shall belong to Elan. Title and all
other ownership rights, including patent rights relating to the TGEN
Intellectual Property shall belong to TGEN. Title and all other ownership
rights, including patent rights, relating to the Newco Technology shall belong
to Newco.
10.2 The Participants shall discuss in good faith all material issues
relating to filing, prosecution and maintenance of Elan Patents and TGEN Patents
insofar as such patent rights are of relevance to the License Agreements and any
patentable inventions and discoveries within the Elan Intellectual Property,
TGEN Intellectual Property and Newco Technology that relate to the License
Agreements. Subject to mutual agreement to the contrary by TGEN and Elan the
following provisions shall apply:
10.2.1 Elan, at its expense, shall make a good faith effort (i) to
secure the grant of any material patent applications within the Elan Patents
that relate to the Field; (ii) to defend all such applications against third
party oppositions and interferences; and (iii) to maintain in force any material
issued letters patent within the Elan Patents that relate to the Field
(including any letters patent that may issue covering any such Elan Improvements
that relate to the Field). Elan shall have the right in its discretion to
control such filing, prosecution, defense and maintenance provided that Newco
and TGEN at their request shall be provided with copies of all documents
relating to such filing, prosecution, defense and maintenance in sufficient time
to review such documents and comment thereon prior to filing.
10.2.2 TGEN, at its expense, shall make a good faith effort (i) to
secure the grant of any material patent applications within the TGEN Patents
that relate to the Field; (ii) to defend all such applications against third
party oppositions and interferences; and (iii) to maintain in force any material
issued letters patent
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within the TGEN Patents that relate to the Field (including any letters patent
that may issue covering any such TGEN Improvements that relate to the Field).
TGEN shall have the right in its discretion to control such filing, prosecution,
defense and maintenance provided that Elan and Newco at their request shall be
provided with copies of all documents relating to such filing, prosecution,
defense and maintenance in sufficient time to review such documents and comment
thereon prior to filing.
10.2.3 It is understood that the respective owners of the
technologies and rights described herein shall retain the discretion, in their
sole judgment, as to whether and where to file or to prosecute patent
applications on any such technologies or rights.
10.2.4 Elan and TGEN, at their joint expense on behalf of Newco,
shall (i) file and prosecute patent applications on patentable inventions and
discoveries within the Newco Technology; (ii) defend all such applications
against third party oppositions and interferences; and (iii) maintain in force
any issued letters patent within the Newco Patents (including any patents that
issue on patentable inventions and discoveries within the Newco Technology).
Elan and TGEN, directly or through the Management Committee, shall control such
filing, prosecution, defense and maintenance. Elan and TGEN agree to negotiate
in good faith on the course of action to be taken with respect to Newco
Technology.
10.2.5 Newco, Elan and TGEN shall promptly inform each other in
writing of any alleged infringement of any patents within the Elan Patents, the
TGEN Patents or Newco Patents or any alleged misappropriation of trade secrets
within the Elan Intellectual Property, the TGEN Intellectual Property or the
Newco Technology by a third party of which it becomes aware and provide the
others with any available evidence of such infringement or misappropriation
insofar as such infringements or misappropriation relate solely to the Field.
10.2.6 Newco shall have the right to prosecute at its own expense
and for its own benefit any infringements of the Elan Patents, the TGEN Patents
or misappropriation of the Elan Intellectual Property and the TGEN Intellectual
Property, insofar as such infringements or misappropriation relate solely to the
Field. In the event that Newco takes such action, Newco shall do so at its own
cost and expense. At Newco's request, the Participants shall cooperate with such
action. Any recovery remaining after the deduction by Newco of the reasonable
expenses (including attorney's fees and expenses) incurred in relation to such
infringement proceeding shall belong to Newco. Should Newco decide not to pursue
such infringers, within a reasonable period but in any event within twenty (20)
days after receiving written notice of such alleged infringement or
misappropriation each of the Participants may
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in its discretion initiate such proceedings in its own name, at its expense and
for its own benefit, and at such Participant's request, Newco shall cooperate
with such action. Alternatively, the Participants may agree to institute such
proceedings in their joint names and shall reach agreement as to the proportion
in which they shall share the proceeds of any such proceedings, and the expense
of any costs not recovered, or the costs or damages payable to the third party.
If the infringement of the Elan Patents or the TGEN Patents affects both the
Field as well as other products being developed or commercialized by TGEN or
Elan or its commercial partners outside the Field, TGEN or Elan, as the case may
be, shall endeavor to agree with Newco as to the manner in which the proceedings
should be instituted and as to the proportion in which they shall share the
proceeds of any such proceedings, and the expense of any costs not recovered, or
the costs or damages payable to the third party.
10.2.7 Newco shall have the first right but not the obligation to
bring suit or otherwise take action against any alleged infringement of the
Newco patents or alleged misappropriation of the Newco Technology. If any such
alleged infringement or misappropriation occurs that gives rise to a cause of
action both inside and outside the Field, Newco, in consultation with the
Participants, shall determine the cause of action to be taken. In the event that
Newco takes such action, Newco shall do so at its own cost and expense and all
damages and monetary award recovered in or with respect to such action shall be
the property of Newco. Newco shall keep Elan and TGEN informed of any action in
a timely manner so as to enable TGEN and Elan to provide input in any such
action and Newco shall reasonably take into consideration any such input. At
Newco's request, the Participants shall cooperate with any such action at
Newco's cost and expense.
10.2.8 In the event that Newco does not bring suit or otherwise take
action against an infringement of the Newco Patents or misappropriation of the
Newco Technology, then (i) if only one Participant determines to pursue such
suit or take such action at its own cost and expense, it shall be entitled to
all damages and monetary award recovered in or with respect to such action and
(ii) if the Participants pursue such suit or action outside of Newco, they shall
negotiate in good faith an appropriate allocation of costs, expenses and
recovery amounts.
10.2.9 In the event that a claim is, or proceedings are, brought
against Newco by a third party alleging that the sale, distribution or use of a
Product in the Territory or use of the Elan Intellectual Property or the TGEN
Intellectual Property, as the case may be, infringes the intellectual property
rights of such party, Newco shall promptly advise the other Participants of such
threat or suit.
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10.2.10 Newco shall indemnify, defend and hold harmless Elan or
TGEN, as the case may be, against all actions, losses, claims, demands, damages,
costs and liabilities (including reasonable attorneys fees) relating directly or
indirectly to all such claims or proceedings referred to herein, provided that
Elan or TGEN, as the case may be, shall not acknowledge to the third party or to
any other person the validity of any claims of such a third party, and shall not
compromise or settle any claim or proceedings relating thereto without the prior
written consent to Newco, not to be unreasonably withheld or delayed. At its
option, Elan or TGEN, as the case may be, may elect to take over the conduct of
such proceedings from Newco provided that Newco's indemnification obligations
shall continue; the costs of defending such claim shall be borne by Elan or
TGEN, as the case may be and such Participant shall not compromise or settle any
such claim or proceeding without the prior written consent of Newco, such
consent not to be unreasonably withheld, conditioned or delayed.
10.3 Newco shall not encumber any of its rights under the Licenses or the
Newco Technology without the prior written consent of Elan and TGEN. Newco shall
not be permitted to assign or sublicense any of its rights under the Licenses or
the Program Technology without the prior written consent of Elan and TGEN,
respectively, which may be withheld in Elan's or TGEN's sole discretion, as the
case may be. Notwithstanding the foregoing, subject to the Elan Right of First
Negotiation and the TGEN Right of First Negotiation, neither Elan nor TGEN shall
unreasonably withhold their consent to the licensing of rights to Commercialize
Products to Independent Third Parties who are not, with respect to Elan,
Technological Competitors of Elan or, with respect to TGEN, Technological
Competitors of TGEN. Any permitted agreement between Newco and any permitted
third party for the development or exploitation of the Elan Intellectual
Property and/or TGEN Intellectual Property in the Field shall require such third
party to maintain the confidentiality of all information concerning the Elan
Intellectual Property and the TGEN Intellectual Property.
11. EXPLOITATION OF PRODUCTS OUTSIDE THE FIELD
11.1 Licenses to Elan Program Technology and TGEN Program Technology.
---------------------------------------------------------------
Subject to the provisions of the License Agreements, Newco shall grant to Elan
an exclusive, royalty free and sublicensable license in the Territory to Elan
Program Technology outside of the Field, and to TGEN an exclusive, royalty free
and sublicensable license in the Territory to the TGEN Program Technology
outside of the Field. Such license shall be effective and exclusive on a
country-by-country basis for the life of any patents on such Elan Program
Technology or TGEN Program Technology, as the case may be, in such country, or,
to the extent the Elan Program Technology or TGEN Program Technology is not
patented or covered by pending
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patent applications in any country, for fifteen years from the date any products
are first introduced on the market in such country by Elan or TGEN, as the case
may be, under such license, or for such shorter period as shall be required
under the applicable law of any country in the Territory.
11.2 Licenses for Newco Program Technology. Newco shall negotiate in good
-------------------------------------
faith with Elan and TGEN, respectively, for the grant of exclusive or non-
exclusive licenses for the rights to Newco Program Technology (other than TGEN
or Elan Program Technology) outside the Field in the Territory. All such
licenses shall contain such customary terms contained in similar licenses in the
industry, as agreed to by the licensee and the unanimous decision of the
Management Committee, acting in good faith.
12. COMMERCIALIZATION
12.1 The Participants shall assist Newco in diligently pursuing the
research, development, prosecution and commercialization of Products in
accordance with the Business Plan. It is contemplated that TGEN, either as agent
for Newco or through its representatives on the Management Committee, shall,
during and after the Research and Development Term, locate and negotiate with
Independent Third Party development and/or marketing partners for the
Product(s), and Elan and Newco agree to refer all inquiries and prospects to
TGEN for such purposes. In the course of such representation, TGEN shall keep
Newco and Elan fully informed of its efforts and progress with respect to the
foregoing; provided that Elan shall be entitled to participate in discussions
with such Independent Third Parties and that the Management Committee of Newco
shall make all decisions concerning any agreements with any such parties; and
provided further, however, that any such information shall be kept confidential
and shall not be disclosed to the Elan Pharmaceutical Division (excluding senior
executive personnel of Elan who are bound to this confidentiality provision).
12.2 In the event TGEN shall propose to Newco the development of one or
more Products containing a TGEN Proprietary Gene, the Management Committee, by
unanimous decision, shall determine whether or not to develop any such Product.
12.3 In the event an Independent Third Party shall propose to Newco the
development of a Product containing a proprietary Gene of an Independent Third
Party, the Management Committee, by unanimous decision, shall determine whether
or not to develop any such Product. Any agreements with Independent Third
Parties shall be on commercially reasonable terms (e.g., royalties, milestones,
development fees, manufacturing rights) for developing and licensing Products.
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13. MANUFACTURING
13.1 Elan and TGEN shall have preferential rights to negotiate agreements
with Newco whereby Elan and/or TGEN will manufacture Products to meet Newco's
requirements. Newco shall evaluate each such manufacturing agreement in light
of which of Elan or TGEN (or neither, or both) has the capability and the
committed resources to perform such manufacturing services in the best interests
of Newco. If the parties cannot come to mutual agreement on who is best
qualified to perform such manufacturing services, the matter will be resolved
through the dispute resolution procedures contained in Clause 19 of this
Agreement. To the extent Elan or TGEN performs any manufacturing services to
Newco, it shall be paid a price equal to [ * ] and other terms and conditions
customary in a supply agreements shall apply.
13.2 Subject to the foregoing rights, and the right of Newco to develop or
Commercialize Products where the project was offered to, but not agreed upon,
with Elan under the Elan Right of First Negotiation, or with TGEN under the TGEN
Right of First Negotiation, Newco shall not be permitted to contract the
manufacture or Commercialization of any Product without the prior written
consent of Elan and TGEN, which consent will not be unreasonably withheld or
delayed; provided that such reasonableness standard, in the case of Elan, shall
not be applicable in the case of a proposed sublicense to any Technological
Competitor of Elan and in the case of TGEN, shall not be applicable in the case
of a proposed sublicense to any Technological Competitor of TGEN.
14. TECHNICAL SERVICES AND ASSISTANCE
14.1 Whenever commercially and technically feasible, Newco shall contract
with TGEN or Elan, as the case may be, to perform such other services as Newco
may require, other than those specifically dealt with hereunder or in the
License Agreements. In determining which Party should provide such services,
the Management Committee shall take into account the respective infrastructure,
capabilities and experience of Elan and TGEN.
14.2 Newco shall, if appropriate, conclude an administrative support
agreement with Elan and/or TGEN on such terms as the Parties thereto shall in
good faith negotiate. The administrative services shall include one or more of
the following administrative services as requested by Newco:
14.2.1 accounting, financial and other services;
* Confidential Treatment Requested
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14.2.2 tax services;
14.2.3 insurance services;
14.2.4 human resources services;
14.2.5 legal and company secretarial services;
14.2.6 patent and related intellectual property services; and
14.2.7 all such other services consistent with and of the same type
as those services to be provided pursuant to this Agreement, as may be required.
The foregoing list of services shall not be deemed exhaustive and may be
changed from time to time upon written request by Newco.
14.3 The Parties agree that each Party shall effect and maintain
comprehensive general liability insurance in respect of all clinical trials and
other activities performed by them on behalf of Newco. The Stockholders and
Newco shall ensure that the industry standard insurance policies shall be in
place for all activities to be carried out by Newco.
14.4 If Elan or TGEN so requires, TGEN or Elan, as the case may be, shall
receive, at times and for periods mutually acceptable to the Parties, employees
of the other Party (such employees to be acceptable to the receiving Party in
the matter of qualification and competence) for instruction in respect of the
Elan Intellectual Property or the TGEN Intellectual Property, as the case may
be, as necessary to further the Project.
14.5 The employees received by Elan or TGEN, as the case may be, shall be
subject to obligations of confidentiality no less stringent than those set out
in Clause 22 and such employees shall observe the rules, regulations and systems
adopted by the Party receiving the said employees for its own employees or
visitors.
15. AUDITORS, BANKERS, REGISTERED OFFICE, ACCOUNTING REFERENCE DATE
Unless otherwise agreed by the Stockholders and save as may be provided to
the contrary herein:
15.1 the auditors of Newco shall be Ernst & Young;
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15.2 the bankers of Newco shall be Bank of Bermuda or such other bank as
may be mutually agreed from time to time; and
15.3 the accounting reference date of Newco shall be December 31st in each
Financial Year.
16. REGULATORY
16.1 Newco shall keep the other Parties promptly and fully advised of
Newco's regulatory activities, progress and procedures. Newco shall inform the
other Parties of any dealings it shall have with an RHA, and shall furnish the
other Parties with copies of all correspondence relating to the Products. The
Parties shall collaborate to obtain any required regulatory approval of the RHA
to market the Products.
16.2 To the extent provided in the Business Plan, Newco shall, at its own
cost, file, prosecute and maintain any and all Regulatory Applications for the
Products in the Territory.
16.3 Any and all Regulatory Approvals obtained hereunder for any Product
shall remain the property of Newco, provided that Newco shall allow Elan and
TGEN access thereto solely to enable Elan and TGEN to fulfill their respective
obligations and exercise their respective rights under this Agreement to the
extent provided in the Business Plan. Newco shall maintain such Regulatory
Approvals at its own cost.
16.4 It is hereby acknowledged that there are inherent uncertainties
involved in the registration of pharmaceutical products with the RHAs insofar as
obtaining approval is concerned and such uncertainties form part of the business
risk involved in undertaking the form of commercial collaboration as set forth
in this Agreement. Therefore, except for liabilities resulting from failure to
use reasonable efforts, none of Elan, EIS or TGEN shall have any liability to
Newco solely as a result of any failure of a Product to achieve the approval of
any RHA.
17. TRANSFERS OF SHARES; RIGHT OF FIRST OFFER; TAG ALONG RIGHTS
17.1 General:
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No Stockholder shall, directly or indirectly, sell or otherwise transfer
(each, a "Transfer") any Shares held by it except in accordance with this
Agreement. Newco shall not, and shall not permit any transfer agent or
registrar for any Shares to, transfer upon the books of Newco any Shares from
any Stockholder to any transferee, in any
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manner, except in accordance with this Agreement, and any purported transfer not
in compliance with this Agreement shall be void.
17.2 Rights of First Offer:
---------------------
If at any time after the end of the Term, a Stockholder shall desire to
Transfer any Shares owned by it (a "Selling Stockholder"), in any transaction or
series of related transactions other than a Transfer to an Affiliate or
subsidiary or in the case of EIS to an off-balance sheet special purpose entity
established by EIS, then such Selling Stockholder shall deliver prior written
notice of its desire to Transfer (a "Notice of Intention") (i) to Newco and (ii)
to the Stockholders who are not the Selling Stockholder (and any transferee
thereof permitted hereunder, if any), as applicable, setting forth such Selling
Stockholder's desire to make such Transfer, the number of Shares proposed to be
transferred (the "Offered Shares") and the proposed form of transaction (the
"Transaction Proposal"), together with any available documentation relating
thereto and the price at which such Selling Stockholder proposes to Transfer the
Offered Shares (the "Offer Price"). The "Right of First Offer" provided for in
this Clause 17 shall be subject to any "Tag Along Right" benefiting a
Stockholder which may be provided for by Clause 17, subject to the exceptions
set forth therein.
Upon receipt of the Notice of Intention, the Stockholders who are not the
Selling Stockholder shall have the right to purchase at the Offer Price the
Offered Shares, exercisable by the delivery of notice to the Selling Stockholder
(the "Notice of Exercise"), with a copy to Newco, within 10 business days from
the date of receipt of the Notice of Intention. If no such Notice of Exercise
has been delivered by the Stockholders who are not the Selling Stockholder
within such 10-business day period, or such Notice of Exercise does not relate
to all of the Offered Shares covered by the Notice of Intention, then the
Selling Stockholder shall be entitled to Transfer all of the Offered Shares to
the intended transferee. In the event that all of the Offered Shares are not
purchased by the non-selling Stockholders, the Selling Stockholder shall sell
the available Offered Shares within 30 days after the delivery of such Notice of
Intention on terms no more favorable to a third party than those presented to
the non-selling Stockholders. If such sale does not occur, the Offered Shares
shall again be subject to the Right of First Offer set forth in Clause 17.2.
In the event that any of the Stockholders who are not the Selling
Stockholder exercises its right to purchase all of the Offered Shares (in
accordance with this Clause 17), then the Selling Stockholder shall sell all of
the Offered Shares to such Stockholder(s), in the amounts set forth in the
Notice of Intention, after not less than 10 business days and not more than 25
business days from the date of the delivery of
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the Notice of Exercise. In the event that more than one of the Stockholders who
are not the Selling Stockholders wish to purchase the Offered Shares, the
Offered Shares shall be allocated to such Stockholders on the basis of their pro
rata equity interests in Newco.
The rights and obligations of each of the Stockholders pursuant to the
Right of First Offer provided herein shall terminate upon the date that the
Common Stock is registered under Section 12(b) or 12(g) of the Exchange Act.
At the closing of the purchase of all of the Offered Shares by the
Stockholders who are not the Selling Stockholder (scheduled in accordance with
Clause 17), the Selling Stockholder shall deliver certificates evidencing the
Offered Shares being sold, duly endorsed, or accompanied by written instruments
of transfer in form reasonably satisfactory to the Stockholders who are not the
Selling Stockholder, duly executed by the Selling Stockholder, free and clear of
any adverse claims, against payment of the purchase price therefor in cash, and
such other customary documents as shall be necessary in connection therewith.
17.3 Tag Along Rights:
----------------
Subject to Clause 17.2, a Stockholder (the "Transferring Stockholder")
shall not Transfer (either directly or indirectly), in any one transaction or
series of related transactions, to any Person or group of Persons, any Shares,
unless the terms and conditions of such Transfer shall include an offer to the
other Stockholders (the "Remaining Stockholders"), to sell Shares at the same
price and on the same terms and conditions as the Transferring Stockholder has
agreed to sell its Shares (the "Tag Along Right").
In the event a Transferring Stockholder proposes to Transfer any Shares in
a transaction subject to this Clause 17.3, it shall notify, or cause to be
notified, the Remaining Stockholders in writing of each such proposed Transfer.
Such notice shall set forth: (i) the name of the transferee and the amount of
Shares proposed to be transferred, (ii) the proposed amount and form of
consideration and terms and conditions of payment offered by the transferee (the
"Transferee Terms") and (iii) that the transferee has been informed of the Tag
Along Right provided for in this Clause 17, if such right is applicable, and the
total number of Shares the transferee has agreed to purchase from the
Stockholders in accordance with the terms hereof.
The Tag Along Right may be exercised by each of the Remaining Stockholders
by delivery of a written notice to the Transferring Stockholder (the "Co-sale
Notice") within 10 business days following receipt of the notice specified in
the preceding
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subsection. The Co-sale Notice shall state the number of Shares owned by such
Remaining Stockholder which the Remaining Stockholder wishes to include in such
Transfer; provided, however, that without the written consent of the
Transferring Stockholder, the amount of such securities belonging to the
Remaining Stockholder included in such Transfer may not be greater than such
Remaining Stockholder's percentage beneficial ownership of Fully Diluted Common
Stock multiplied by the total number of shares of Fully Diluted Common Stock to
be sold by both the Transferring Stockholder and all Remaining Stockholders.
Upon receipt of a Co-sale Notice, the Transferring Stockholder shall be
obligated to transfer at least the entire number of Shares set forth in the Co-
sale Notice to the transferee on the Transferee Terms; provided, however, that
the Transferring Stockholder shall not consummate the purchase and sale of any
Shares hereunder if the transferee does not purchase all such Shares specified
in all Co-sale Notices. If no Co-sale Notice has been delivered to the
Transferring Stockholder prior to the expiration of the 10 business day period
referred to above and if the provisions of this Section have been complied with
in all respects, the Transferring Stockholder shall have the right for a 45-day
calendar day period to Transfer Shares to the transferee on the Transferee Terms
without further notice to any other party, but after such 45-day period, no such
Transfer may be made without again giving notice to the Remaining Stockholders
of the proposed Transfer and complying with the requirements of this Clause 17.
At the closing of any Transfer of Shares subject to this Clause 17, the
Transferring Stockholder, and the Remaining Stockholder, in the event such Tag
Along Right is exercised, shall deliver certificates evidencing such securities
as have been Transferred by each, duly endorsed, or accompanied by written
instruments of transfer in form reasonably satisfactory to the transferee, free
and clear of any adverse claim, against payment of the purchase price therefor.
Notwithstanding the foregoing, this Clause 17 shall not apply to any sale
of Common Stock pursuant to an effective registration statement under the
Securities Act in a bona fide public offering.
The rights and obligations of each of the Stockholders pursuant to the "Tag
Along Right" provided herein shall terminate upon the date that the Common Stock
is registered under Section 12(b) or 12(g) of the Exchange Act.
18. MATTERS REQUIRING PARTICIPANTS' APPROVAL
18.1 In consideration of TGEN and Elan agreeing to enter into the License
Agreements, the Parties hereby agree that Newco shall not during the 54-month
period beginning on the Closing Date, without the prior approval of the EIS
Director and at
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least two of the TGEN Directors, but subject to any agreements in any
Transaction Documents whereby consent to certain of the following is not to be
unreasonably withheld, conditioned or delayed:
18.1.1 engage in any activity other than the Business;
18.1.2 acquire or dispose of assets of a value in excess of US
$25,000 or sell the principal assets, undertaking or Business of Newco;
18.1.3 create any fixed or floating charge, lien (other than a lien
arising by operation of law) or other encumbrance over the whole or any part of
the undertaking, property or assets of Newco or of any Subsidiary;
18.1.4 borrow any sum in excess of a maximum aggregate sum
outstanding at any time of US $25,000;
18.1.5 make any loan or advance or give any credit (other than normal
trade credit) in excess of US$25,000 to any Person;
18.1.6 give any guarantee or indemnity to secure the liabilities or
obligations of any Party other than those which it is usual to give in the
ordinary course of a business similar to the Business;
18.1.7 enter into any contract, arrangement or commitment involving
expenditure on capital account or the realization of capital assets if the
amount or the aggregate amount of such expenditure or realization by Newco would
exceed US$50,000 in any one year or in relation to any one project, and for the
purpose of this paragraph the aggregate amount payable under any agreement for
hire, hire purchase or purchase on credit sale or conditional sale terms shall
be deemed to be capital expenditure incurred in the year in which such agreement
is entered into;
18.1.8 issue any unissued Shares or create or issue any new shares;
18.1.9 alter any rights attaching to any class of share in the
capital of Newco or alter the Newco Memorandum of Association and Bye-Laws;
18.1.10 consolidate, sub-divide or convert any of Newco's share
capital or in any way alter the rights attaching thereto;
18.1.11 dispose of Newco or of any shares in Newco;
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18.1.12 enter into any partnership or profit sharing agreement with
any Person other than arrangements with trade representatives and similar
Persons in the ordinary course of business;
18.1.13 do or permit or suffer to be done any act or thing whereby
Newco may be wound up (whether voluntarily or compulsorily), save as otherwise
expressly provided for in this Agreement;
18.1.14 issue any debentures or other securities convertible into
shares or debentures or any share warrants or any options in respect of shares
in Newco;
18.1.15 enter into any contract or transaction except in the ordinary
and proper course of the Business on arm's length terms;
18.1.16 acquire, purchase or subscribe for any shares, debentures,
mortgages or securities (or any interest therein) in any company, trust or other
Person;
18.1.17 adopt any employee benefit program or incentive schemes;
18.1.18 engage any new employee at remuneration of greater than
US$60,000 per annum;
18.1.19 pay any remuneration to the Directors by virtue of holding
such office other than Directors who hold executive office;
18.1.20 license or sub-license any of the Elan Intellectual Property,
TGEN Intellectual Property, or Newco Technology;
18.1.21 amend or vary the terms of the TGEN License Agreement or the
Elan License Agreement;
18.1.22 change the authorized signatories on Newco bank accounts;
18.1.23 amend or vary the Business Plan or approve the Budget;
18.1.24 alter the number of Directors;
18.1.25 pay dividends or distributions in respect of, or redeem or
repurchase, the equity of Newco;
18.1.26 enter into joint venture agreements or any similar
arrangements with any Person; or
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18.1.27 create, acquire or dispose of any Subsidiary or of any shares
in any Subsidiary.
19. DISPUTES
19.1 Should any dispute or difference arise between Elan and TGEN, or
between Elan or TGEN and Newco, during the period that this Agreement is in
force, then any Party may forthwith give notice to the other Parties that it
wishes such dispute or difference to be referred to the Chief Executive Officer
of TGEN and the President of EPT.
19.2 In any event of a notice being served in accordance with Clause 19.1,
each of the Participants shall within 14 days of the service of such notice
prepare and circulate to the Chief Executive Officer of TGEN and the President
of EPT a memorandum or other form of statement setting out its position on the
matter in dispute and its reasons for adopting that position. Each memorandum
or statement shall be considered by the Chief Executive Officer of TGEN and the
President of EPT who shall endeavor to resolve the dispute. If the chief
executive officers of the Participants agree upon a resolution or disposition of
the matter, they shall each sign a statement which sets out the terms of their
agreement. The Participants agree that they shall exercise the voting rights
and other powers available to them in relation to Newco to procure that the
agreed terms are fully and promptly carried into effect.
19.3 In the event the chief executive officers of the Participants are
unable to resolve such dispute, then any Party may forthwith give notice to the
other Parties that it wishes such dispute or difference to be referred to non-
binding arbitration and conciliation by a mediator jointly selected by the
Participants.
19.4 Any dispute hereunder relating to the interpretation of this Agreement
or the claim for misrepresesntation or breach of obligation that is not settled
by mutual consent or through such non-binding arbitration and conciliation shall
be finally adjudicated by binding arbitration in accordance with the rules of
the American Arbitration Association to be conducted in the County, City and
State of New York before a panel of three arbitrators, one (1) of whom shall be
selected by Elan, one (1) by TGEN and the third by the two (2) previously
selected arbitrators. Each of the Parties agrees that the decisions of the
arbitrators shall be final and binding upon it. The costs of any arbitration
shall be shared equally by TGEN and Elan.
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20. SUBSEQUENT FUNDING
20.1 The Subsequent Funding shall be provided by EIS and TGEN in accordance
with the Funding Agreement at such times as shall be necessary for the
development of Products, as shall be reasonably determined in good faith by the
Newco Board of Directors, including the EIS Director (or after the exercise of
the Exchange Right by at least one of the EIS Directors) and at least two of the
TGEN directors, that such Subsequent Funding is required for the development of
Products, whether in accordance with the Business Plan or otherwise.
20.2 In the event that (a) one Participant determines not to fund any
amounts required to develop and commercialize a particular Product, as opposed
to generally failing to fund as described under Section 20.1, above, and (b) the
other Participant desires to fund such Product, the Participant so desiring to
provide such funding shall have the right to cause Newco to transfer such
Product to it (and to enter into any appropriate license or assignment
agreements) on then-standard market terms and conditions, including as to
pricing.
21. TERMINATION
21.1 This Agreement shall govern the operation and existence of Newco until
(i) terminated by written agreement of all Parties hereto or (ii) otherwise
terminated in accordance with this Clause 21.
21.2 For the purpose of this Clause 21, a "Relevant Event" is committed or
suffered by a Participant if:
21.2.1 it commits a material breach of its obligations under this
Agreement or the applicable License, which breach remains uncured 60 days after
written notice thereof; provided, however, that (x) if the breaching Participant
has proposed a course of action to rectify the breach and is acting in good
faith to rectify same but has not cured the breach by the 60th day, such period
shall be extended by such period as is reasonably necessary to permit the breach
to be rectified and (y) if there is a good faith dispute as to the existence of
the breach or as to its materiality, or regarding the amount of any required
payment, provided, in the case of disputes as to the amount due, that any
undisputed amount is paid, the right of the non-breaching Party to terminate
this Agreement shall be stayed for a reasonable period during which a good faith
resolution of the dispute will be obtained, either by agreement or, failing
that, through the dispute resolution provisions under Clause 19 of this
Agreement;
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21.2.2 a distress, execution, sequestration or other process is
levied or enforced upon or sued out against a material part of its property
which is not discharged or challenged within 30 days;
21.2.3 it is unable to pay its debts in the normal course of
business;
21.2.4 it ceases wholly or substantially to carry on its business,
otherwise than for the purpose of a reconstruction or amalgamation, without the
prior written consent of the other Participant (such consent not to be
unreasonably withheld);
21.2.5 the appointment of a liquidator, receiver, administrator,
examiner, trustee or similar officer of such Participant or over all or
substantially all of its assets under the law of any applicable jurisdiction,
including without limitation, the United States of America, Bermuda or Ireland;
21.2.6 an application or petition for bankruptcy, corporate re-
organization, composition, administration, examination, arrangement or any other
procedure similar to any of the foregoing under the law of any applicable
jurisdiction, including without limitation, the United States of America,
Bermuda or Ireland, is filed, and is not discharged within 60 days, or a
Participant applies for or consents to the appointment of a receiver,
administrator, examiner or similar officer of it or of all or a material part of
its assets, rights or revenues or the assets and/or the business of a
Participant are for any reason seized, confiscated or condemned.
21.3 If either Participant commits a Relevant Event, the other Stockholder
shall have in addition to all other legal and equitable rights and remedies
hereunder, the right to terminate this Agreement upon 30 days' written notice.
21.4 The provisions of Clauses 1, 3, 7.1, 7.2.6, 11.1, 15, 17, 19 (but only
with respect to disputes relating to this Agreement and not necessarily all
disputes arising after the Term that may otherwise relate to Newco), 21.4, 22,
23 and 24 shall survive the termination of this Agreement; all other terms and
provisions of this Agreement shall cease to have effect and be null and void
upon the termination of this Agreement.
22. CONFIDENTIALITY
22.1 The Parties and/or Newco acknowledge and agree that it may be
necessary, from time to time, to disclose to each other confidential and/or
proprietary information, including without limitation, inventions, works of
authorship, trade secrets, specifications, designs, data, know-how and other
information, relating to the Field, the Products, present or future products,
the Newco Technology, the Elan
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Intellectual Property or the TGEN Intellectual Property, as the case may be, or
otherwise as to methods, compounds, research projects, work in process,
services, sales suppliers, customers, employees and/or business of the
disclosing Party, whether in oral, written, graphic or electronic form
(collectively "Confidential Information").
22.2 Any Confidential Information revealed by a Party to another Party
shall be maintained as confidential and shall be used by the receiving Party
exclusively for the purposes of fulfilling the receiving Party's rights and
obligations under this Agreement, and for no other purpose. Confidential
Information shall not include:
22.2.1 information that is generally available to the public;
22.2.2 information that is made public by the disclosing Party;
22.2.3 information that is independently developed by the receiving
Party, as evidenced by such Party's written records, without the aid,
application or use of the disclosing Party's Confidential Information;
22.2.4 information that is published or otherwise becomes part of the
public domain without any disclosure by the receiving Party, or on the part of
the receiving Party's directors, officers, agents, representatives or employees;
22.2.5 information that becomes available to the receiving Party on a
non-confidential basis, whether directly or indirectly, from a source other than
the disclosing Party, which source did not acquire this information on a
confidential basis;
22.2.6 information which the receiving Party is required to disclose
pursuant to:
(i) a valid order of a court or other governmental body or any
political subdivision thereof or as otherwise required by law, rule or
regulation; or
(ii) other requirement of law; provided, however, that if the
receiving Party becomes legally required to disclose any Confidential
Information, the receiving Party shall give the disclosing Party prompt notice
of such fact so that the disclosing Party may obtain a protective order or seek
confidential treatment or other appropriate remedy concerning any such
disclosure. The receiving Party shall fully co-operate with the disclosing
Party in connection with the disclosing Party's efforts to obtain any such order
or other remedy. If any such order or other remedy does not fully preclude
disclosure, the receiving Party shall make such disclosure only to the extent
that such disclosure is legally required;
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22.2.7 information which was already in the possession of the
receiving Party at the time of receiving such information, as evidenced by its
written records, provided such information was not previously provided to the
receiving Party from a source which was under an obligation to keep such
information confidential; or
22.2.8 information that is the subject of a written permission to
disclose, without restriction or limitation, by the disclosing Party.
22.3 Each Party agrees to disclose Confidential Information of another
Party only to those employees, representatives and agents requiring knowledge
thereof in connection with their duties directly related to the fulfilling of
the Party's obligations under this Agreement, so long as such persons are under
an obligation of confidentiality no less stringent than as set forth herein.
Each Party further agrees to inform all such employees, representatives and
agents of the terms and provisions of the Transaction Documents and their duties
hereunder and to obtain their consent hereto as a condition of receiving
Confidential Information. Each Party agrees that it will exercise the same
degree of care and protection, but no less than a reasonable degree of care and
protection, to preserve the proprietary and confidential nature of the
Confidential Information disclosed by a Party, as the receiving Party would
exercise to preserve its own Confidential Information. Each Party agrees that
it will, upon request of another Party, return all documents and any copies
thereof containing Confidential Information belonging to or disclosed by such
other Party. Each Party shall promptly notify the other Parties upon discovery
of any unauthorized use or disclosure of the other Parties' Confidential
Information.
22.4 Notwithstanding the above, each Party may use or disclose
Confidential Information disclosed to it by another Party to the extent such use
or disclosure is reasonably necessary in filing or prosecuting patent
applications, prosecuting or defending litigation, complying with patent
applications, prosecuting or defending litigation, complying with applicable
governmental regulations, including without limitation those relating to
securities regulations and disclosures or otherwise submitting information to
tax or other governmental authorities, conducting clinical trials, or granting a
permitted sub-license or otherwise exercising its rights hereunder.
22.5 Nothing contained herein other than Clause 6 ("Non-Competition")
shall obligate or restrict any Party from utilizing public, non-proprietary
information which is not subject to the protection of applicable patent laws.
22.6 The provisions relating to confidentiality in this Clause 22 shall
remain in effect during the Term and for a period of seven years following the
termination of this Agreement.
39
<PAGE>
22.7 The Parties agree that the obligations of this Clause 22 are
necessary and reasonable in order to protect the Parties' respective businesses,
and each Party expressly agrees that monetary damages would be inadequate to
compensate a Party for any breach by the other Party of its covenants and
agreements set forth herein. Accordingly, the Parties agree and acknowledge that
any such violation or threatened violation will cause irreparable injury to a
Party and that, in addition to any other remedies that may be available, in law
or in equity or otherwise, any Party shall be entitled to obtain injunctive
relief against the threatened breach of the provisions of this Clause 22, or a
continuation of any such breach by the other Party, specific performance and
other equitable relief to redress such breach together with its damages and
reasonable counsel fees and expenses to enforce its rights hereunder, without
the necessity of proving actual or express damages.
23. COSTS
23.1 Each Stockholder shall bear its own legal and other costs incurred in
relation to preparing and concluding this Agreement and the other Transaction
Documents.
23.2 All other costs, legal fees, registration fees and other expenses
relating to the transactions contemplated hereby, including the costs and
expenses incurred in relation to the incorporation of Newco, shall be borne by
Newco.
24. GENERAL
24.1 Good Faith:
----------
Each of the Parties hereto undertakes with the others to do all things
reasonably within its power that are necessary or desirable to give effect to
the spirit and intent of this Agreement.
24.2 Further Assurance:
-----------------
At the request of any of the Parties, the other Party or Parties shall (and
shall use reasonable efforts to procure that any other necessary parties shall)
execute and perform all such documents, acts and things as may reasonably be
required subsequent to the signing of this Agreement for assuring to or vesting
in the requesting Party the full benefit of the terms hereof.
24.3 Reliance on Representation and Warranties:
-----------------------------------------
40
<PAGE>
Each of the Parties hereto hereby acknowledges that in entering into this
Agreement it has not relied on any representation or warranty except as
expressly set forth herein or in any document referred to herein.
24.4 Force Majeure:
-------------
Neither Party to this Agreement shall be liable for delay in the
performance of any of its obligations hereunder if such delay is caused by or
results from causes beyond its reasonable control, including without limitation,
acts of God, fires, strikes, acts of war (whether war be declared or not),
insurrections, riots, civil commotions, strikes, lockouts or other labor
disturbances or intervention of any relevant government authority, but any such
delay or failure shall be remedied by such Party as soon as practicable.
24.5 Relationship of the Parties:
---------------------------
Nothing contained in this Agreement is intended or is to be construed to
constitute Elan/EIS and TGEN as partners, or Elan/EIS as an employee or agent of
TGEN, or TGEN as an employee or agent of Elan/EIS.
No Party hereto shall have any express or implied right or authority to
assume or create any obligations on behalf of or in the name of another Party or
to bind another Party to any contract, agreement or undertaking with any third
Party.
24.6 Counterparts:
------------
This Agreement may be executed in any number of counterparts, each of which
when so executed shall be deemed to be an original and all of which when taken
together shall constitute this Agreement.
24.7 Notices:
-------
Any notice to be given under this Agreement shall be sent in writing by
registered or recorded delivery post or reputable overnight courier such as
Federal Express or telefaxed to:
41
<PAGE>
Elan at:
Lincoln House, Lincoln Place, Dublin 2
Ireland
Attention: Vice President & General Counsel,
Elan Pharmaceutical Technologies,
a division of Elan Corporation, plc
Fax: 353-1-709-4124
with a copy to:
Brock Silverstein LLC
One Citicorp Center, 56th Floor
New York, NY 10022
Attention: David Robbins, Esq.
Fax: 212-371-5500
EIS at:
Elan International Services, Ltd.
102 St. James Court
Flatts, Smiths Parish FL04
Bermuda
Attention: President
Fax: 441-292-2224
with a copy to:
Brock Silverstein LLC
One Citicorp Center, 56th Floor
New York, NY 10022
Attention: David Robbins, Esq.
Fax: 212-371-5500
TGEN at:
Targeted Genetics Corporation
1100 Olive Way, Suite 100
Seattle, Washington 98101
Attention: Chief Executive Officer
Telefax: (206) 623-7064
42
<PAGE>
with a copy to:
Perkins Coie LLP
411-108/th/ Avenue N.E., Suite 1800
Bellevue, Washington 98004-5584
Attention: Roger M. Tolbert, Esq.
Telefax: (425) 453-7350
Newco at:
Targeted Genetics Newco, Ltd.
c/o Conyers Dill & Pearman
Clarendon House, Church Street
P.O. Box HM 666
Hamilton HM CX
Bermuda
Attention: David Doyle
Fax: 44-1-292-4720
with a copy to each of TGEN, EIS and their respective counsel at the addresses
indicated above;
or to such other address(es) as may from time to time be notified by any Party
to the others hereunder.
Any notice sent by mail shall be deemed to have been delivered within seven
(7) business days after dispatch or delivery to the relevant courier and any
notice sent by telecopy shall be deemed to have been delivered upon confirmation
of receipt by telephone. Notices of change of address shall be effective upon
receipt.
24.8 Governing Law
-------------
This Agreement shall be governed by and construed in accordance with the
laws of the State of New York without giving effect to any conflict of law
provision or rule.
24.9 Severability:
------------
If any provision in this Agreement or of any Transaction Document is agreed
by the Parties to be, deemed to be or becomes invalid, illegal, void or
unenforceable under any law that is applicable hereto, such provision will be
deemed amended to conform to applicable laws so as to be valid and enforceable
or, if it cannot be so
43
<PAGE>
amended without materially altering the intention of the Parties, it will be
deleted, with effect from the date of such agreement or such earlier date as the
Parties may agree, and the validity, legality and enforceability of the
remaining provisions of this Agreement shall not be impaired or affected in any
way.
24.10 Amendments:
----------
No amendment, modification or addition hereto shall be effective or binding
on any Party unless set forth in writing and executed by a duly authorized
representative of all Parties.
24.11 Waiver:
------
No waiver of any right under this Agreement shall be deemed effective
unless contained in a written document signed by the Party charged with such
waiver, and no waiver of any breach or failure to perform shall be deemed to be
a waiver of any future breach or failure to perform or of any other right
arising under this Agreement.
24.12 Assignment:
----------
None of the Parties shall be permitted to assign its rights or obligations
hereunder without the prior written consent of the other Parties except as
follows:
24.12.1 Elan, EIS and/or TGEN shall have the right to assign their
rights and obligations hereunder to their Affiliates, provided, however, that
such assignment does not result in adverse tax consequences for any other
Parties.
24.12.2 Elan and EIS shall have the right to assign their rights
and obligations hereunder to an off-balance sheet special purpose entity
established by Elan or EIS; provided, however, that such assignment does not
result in adverse tax consequences for any other Parties.
24.12.3 Elan, EIS and/or TGEN shall have the right to assign or
otherwise transfer their rights and obligations hereunder in connection with a
sale of all or substantially all of the business of such Party to which the
transaction Documents relate, whether by merger, sale of stock, sale of assets
or otherwise.
Notwithstanding any assignment hereof, each Party will remain fully liable
hereunder.
24.13 Whole Agreement/No Effect on Other Agreements:
---------------------------------------------
44
<PAGE>
This Agreement (including the Schedules attached hereto) and the other
Transaction Documents set forth all of the agreements and understandings between
the Parties with respect to the subject matter hereof, and supersedes and
terminates all prior agreements and understandings between the Parties with
respect to the subject matter hereof. There are no agreements or understandings
with respect to the subject matter hereof, either oral or written, between the
Parties other than as set forth in this Agreement and the other Transaction
Documents.
In the event of any ambiguity or conflict arising between the terms of this
Agreement and those of the Newco Memorandum of Association and Bye-Laws, the
terms of this Agreement shall prevail.
No provision of this Agreement shall be construed so as to negate, modify
or affect in any way the provisions of any other agreement between any of the
Parties unless specifically referred to, and solely to the extent provided
herein. In the event of a conflict between the provisions of this Agreement and
the provisions of the License Agreements, the terms of this Agreement shall
prevail unless this Agreement or the License Agreement specifically provides
otherwise.
24.14 Successors:
----------
This Agreement shall be binding upon and inure to the benefit of the
Parties hereto, their successors and permitted assigns.
[Signature Page Follows]
45
<PAGE>
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement on the
day first set forth above.
SIGNED
BY: /s/ Kevin Insley
-----------------------
for and on behalf of
ELAN CORPORATION, PLC
in the presence of: /s/ [illegible]
-----------------
SIGNED
BY: /s/ Kevin Insley
-----------------------
for and on behalf of
ELAN INTERNATIONAL SERVICES, LTD.
in the presence of: /s/ [illegible]
-----------------
SIGNED
BY: /s/ Stewart Parker
-----------------------
for and on behalf of
TARGETED GENETICS CORPORATION
in the presence of: /s/ Jim Johnson
-----------------
SIGNED
BY: /s/ Stewart Parker
-----------------------
for and on behalf of
TARGETED GENETICS NEWCO, LTD.
in the presence of: /s/ Jim Johnson
-----------------
46
<PAGE>
EXHIBIT 1.5
Execution Copy
THIS CONVERTIBLE PROMISSORY NOTE AND THE SHARES OF COMMON STOCK ISSUABLE UPON
CONVERSION HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, AND MAY NOT UNDER ANY CIRCUMSTANCES BE SOLD, TRANSFERRED OR OTHERWISE
DISPOSED OF WITHOUT AN EFFECTIVE REGISTRATION STATEMENT FOR SUCH SECURITIES
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND ANY APPLICABLE STATE
SECURITIES LAWS OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT
REGISTRATION IS NOT REQUIRED UNDER SUCH ACT OR APPLICABLE STATE SECURITIES LAWS.
THE TRANSFER OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE IS ALSO SUBJECT
TO THE RESTRICTIONS CONTAINED IN THAT CERTAIN SECURITIES PURCHASE AGREEMENT,
DATED JULY 21, 1999, BY AND BETWEEN TARGETED GENETICS CORPORATION AND ELAN
INTERNATIONAL SERVICES, LTD.
TARGETED GENETICS CORPORATION
CONVERTIBLE PROMISSORY NOTE
U.S. $12,015,000 July 21, 1999
New York, New York
The undersigned, Targeted Genetics Corporation, a Washington
corporation with offices at 1100 Olive Way, Suite 100, Seattle, Washington 98101
(the "Company"), unconditionally promises to pay to Elan International Services,
-------
Ltd., a Bermuda private limited company ("EIS"), or its permitted assigns,
---
transferees and successors as provided herein (collectively, the "Holder"), on
------
July 21, 2005 (the "Maturity Date"), at such place as may be designated by the
-------------
Holder to the Company, the principal amount outstanding hereunder (not to exceed
U.S.$12,015,000), together with interest thereon accrued at a rate per annum
equal to 12.0%, from and after the date of the initial disbursement of funds
hereunder (the "Original Issue Date"), compounded on a semi-annual basis, the
-------------------
initial such compounding to commence on the date that is six months from and
after the Original Issue Date (each such date, a "Compounding Date").
----------------
SECTION 1. SECURITIES PURCHASE AGREEMENT AND FUNDING AGREEMENT.
This Note is issued pursuant to a Securities Purchase
Agreement dated as of the date hereof, by and between the Company and EIS (as
amended at any time, the "Securities Purchase Agreement"), and is intended to be
-----------------------------
afforded the benefits thereof, including the representations and warranties set
forth therein. The Company shall use the proceeds of the
<PAGE>
issuance and sale of this Note solely in accordance with the provisions set
forth therein and in a certain Funding Agreement, dated as of the date hereof
-----------------
(as amended at any time, the "Funding Agreement"), by and among Elan
Corporation, plc, an Irish public limited company and the parent corporation of
EIS, EIS and the Company, and as described in Section 6 below. Capitalized terms
used but not otherwise defined herein shall have the meanings given such terms
in the Securities Purchase Agreement.
SECTION 2. DISBURSEMENTS.
(a) From and after the date hereof and until July 21, 2002,
disbursements shall be made by the Holder to the Company hereunder in minimum
increments of U.S.$500,000 (except in the event that an amount less than
U.S.$500,000 shall be remaining and available for funding hereunder, in which
case such lesser amount may be funded hereunder); provided, that the Company
shall deliver notice of a request therefor to the Holder in the form attached
hereto as Exhibit A (the "Disbursement Notice"), together with an Officer's
--------- -------------------
Certificate confirming that as of such date no Event of Default exists
hereunder; the Holder shall, subject to the terms and conditions hereof, fund
such amount within 10 business days of the receipt of the Disbursement Notice,
subject to the receipt by the Holder of any required approvals under the Mergers
and Takeovers (Control) Acts 1978-1996. A "business day" is any day that
commercial banks are open for the transaction of business in the City of New
York.
(b) Subject to the remainder of this Section 2, if the Holder and the
Company agree to extend the Research and Development Term, as defined in the
Joint Development and Operating Agreement dated as of the date hereof, then
disbursements shall be made by the Holder to the Company hereunder until the end
of the Research and Development Term.
(c) The Holder shall not be required to disburse more than a maximum
principal amount, excluding accruals of interest, of U.S.$12,015,000.
SECTION 3. PAYMENTS AND COVENANTS.
(a) Unless earlier converted in accordance with the terms of Section 4
below, or prepaid in accordance with the terms hereof, the entire outstanding
principal amount of this Note, together with any accrued and unpaid interest
thereon, shall be due and payable on the Maturity Date.
(b) Accrued interest hereon shall be paid, at the Company's option,
either (i) in cash or (ii) shall be capitalized and added to the principal
amount outstanding hereunder on each Compounding Date.
(c) This Note may be prepaid by the Company, in whole or in part on a
per tranche basis, at any time, upon not less than 15 days' prior written notice
to EIS, in cash, by causing to be paid to the Holder an amount equal to the
higher of (x) the fair market value of the Company's Common Stock, par value
$.01 per share (the "Common Stock") based on a price per share equal to the
------------
average of the closing price of the Common Stock for the 60 trading days ending
two
2
<PAGE>
business days prior to the date of repayment, underlying such tranche at the
time of such repayment, and (y) the outstanding principal amount of such tranche
and any and all accrued and unpaid interest thereon.
(d) This Note may be prepaid by the Company, in whole or in part on a
per tranche basis, at any time, upon not less than 15 days' prior written notice
to EIS, in shares of the Common Stock, by causing to be issued to the Holder the
number of shares of Common Stock equal to the outstanding principal amount of
such tranche and any and all accrued and unpaid interest thereon divided by the
lesser of (1) the price equal to the average of the closing price of the Common
Stock for the 60 trading days ending two business days prior to the date or of
repayment and (2) the Conversion Price (as defined below).
SECTION 4. CONVERSION.
(a) Conversion Right.
----------------
(i) From and after the Original Issue Date and until this Note is
repaid in full, the Holder shall have the right from time to time, in
its sole discretion, to convert the outstanding principal amount and
accrued and unpaid interest then-outstanding hereunder, on a per
tranche basis (each, a "Conversion Right"), into such number of shares
----------------
of Common Stock that shall be obtained by dividing the sum of the
outstanding principal amount of such tranche and all accrued and
unpaid interest thereon by a per share price calculated as 150% of the
average of the closing price of the Common Stock for the 60 trading
days ending two business days prior to the date that disbursement of
such tranche is requested by the Company (each, a "Conversion Price").
----------------
For the purposes of calculating the Conversion Price, each accrual of
interest shall constitute a new tranche hereunder.
(ii) The Holder shall be entitled to exercise a Conversion Right upon
at least five days' prior written notice to the Company, such
notice to be in the form attached hereto as Exhibit B. Within 10 days
---------
of the conversion date specified in such notice, the Company shall
issue stock certificates to EIS representing the aggregate number of
shares of Common Stock due to EIS as a result of such conversion.
(b) Reclassification, Etc. In case of (i) any reclassification,
---------------------
reorganization, change or conversion of securities of the class issuable upon
conversion of the outstanding principal amount and accrued and unpaid interest
then-outstanding hereunder (other than a change in par value, or from par value
to no par value), or (ii) any consolidation of the Company with or into another
entity (other than a merger or consolidation with another entity in which the
Company is the surviving entity and that does not result in any reclassification
or change of the class of securities issuable upon the conversion of the
outstanding principal amount and accrued and unpaid interest then-outstanding
hereunder), or (iii) any sale of all or substantially all the assets of the
Company (excluding the transactions contemplated by the Transaction Documents),
then the Company, or such successor or purchasing entity, as the case may be,
shall duly execute and deliver to the Holder a new Note or a supplement hereto
(in form and substance reasonably satisfactory to the
3
<PAGE>
Holder of this Note), so that the Holder shall have the right to receive, at a
total purchase price not to exceed the outstanding principal amount and accrued
and unpaid interest then-outstanding hereunder, and in lieu of the shares of
Common Stock theretofore issuable upon the conversion of such outstanding
principal amount and accrued and unpaid interest then-outstanding hereunder, the
kind and amount of shares of stock and other securities, money and property
receivable upon such reclassification, reorganization, change, merger,
consolidation or conversion by a holder of the number of shares of Common Stock
then issuable under this Note. Such new Note shall provide for adjustments that
shall be as nearly equivalent as may be practicable to the adjustments provided
for in this Section 4. The provisions of this Section 4(b) shall similarly
attach to successive reclassifications, reorganizations, changes, mergers,
consolidations, transfers or conversions.
(c) No Impairment. The Company will not, by amendment of its Articles of
-------------
Incorporation or bylaws or through any reorganization, recapitalization,
transfer of assets, consolidation, merger, dissolution, issue or sale of
securities or any other voluntary action, avoid or seek to avoid the observance
or performance of any of the terms to be observed or performed hereunder by the
Company, but will at all times in good faith assist in the carrying out of all
the provisions of this Section 4 and in the taking of all such action as may be
necessary or appropriate in order to protect the rights of EIS against
impairment. This provision shall not restrict the Company from otherwise
amending and/or restating its Articles of Incorporation in accordance with
Washington Business Corporation Act.
(d) Notice of Adjustments. Whenever the consideration issuable upon a
---------------------
conversion hereunder shall be changed pursuant to this Section 4, the Company
shall prepare a certificate setting forth, in reasonable detail, the event
requiring the change and the kind and amount of shares of stock and other
securities, money and property subsequently issuable upon a conversion hereof.
Such certificate shall be signed by its chief financial officer and shall be
delivered to EIS.
(e) Fractional Shares; Rounding. No fractional shares of Common Stock will
---------------------------
be issued in connection with any exercise hereunder, but in lieu of such
fractional shares the Company shall make a cash payment therefor based on the
applicable Conversion Price. All calculations under this Section 4 shall be made
to the nearest cent or to the nearest one-hundredth of a share, as the case may
be.
SECTION 5. EXCHANGE RIGHT.
(a) In the event that EIS shall exercise the EIS Exchange Right, EIS shall
cause to be paid to the Company, within 30 days of such exercise, an amount
equal to 30.1% of the total amount of Subsequent Funding (as such term is
defined in the Funding Agreement dated as of the date hereof) to date provided
by each of the parties to Newco, in accordance with the terms of the Funding
Agreement, together with all accrued interest thereon.
4
<PAGE>
SECTION 6. USE OF PROCEEDS.
The Company shall use the proceeds of this Note solely for
developmental funding of Newco, including the reimbursement of the Company for
any amounts previously advanced for such developmental funding, provided that
the Board of Directors of Newco has determined that such developmental funding
is necessary (which shall include the consent of at least one of the Company's
directors and the EIS director). Accordingly, total disbursements hereunder
shall not exceed the amount of Subsequent Funding paid by the Company to Newco
pursuant to the Funding Agreement.
SECTION 7. EVENTS OF DEFAULT.
The occurrence of any of the following events shall constitute
an event of default (an "Event of Default"):
----------------
(a) a default in the payment of the principal amount of this Note, when
and as the same shall become due and payable;
(b) a default in the payment of any accrued and unpaid interest on this
Note, when and as the same shall become due and payable;
(b) a material breach by the Company of its obligations under the JDOA or
the Company License Agreement, which breach remains uncured 60 days after
written notice thereof by EIS;
(c) a distress, execution, sequestration or other process is levied or
enforced upon the Company or sued out against a material part of its property
which is not discharged or challenged within 30 days;
(d) the Company is unable to pay its debts in the normal course of
business;
(e) the Company ceases wholly or substantially to carry on its business,
otherwise than for the purpose of a reconstruction or amalgamation, without the
prior written consent of the EIS (such consent not to be unreasonably withheld);
(f) the appointment of a liquidator, receiver, administrator, examiner,
trustee or similar officer of the Company or over all or substantially all of
its assets under the law; or
(g) any other termination of the JDOA.
SECTION 8. REMEDIES IN THE EVENT OF DEFAULT.
(a) In the case of any Event of Default by the Company, the Holder, may in
its sole discretion, demand that the aggregate amount of funds advanced to the
Company under this Note and outstanding hereunder and accrued and unpaid
interest thereon shall, in addition to all other rights and remedies of the
Holder hereunder and under applicable law, be and become
5
<PAGE>
immediately due and payable upon written notice delivered by the Holder to the
Company. Notwithstanding the preceding sentence, the rights of the Holder as set
forth in Section 4 hereunder shall survive any such acceleration and payment. If
the Holder shall accelerate and be paid and then elect to exercise the
Conversion Right, the Holder shall pay the Company for shares of Common Stock
issued under such Conversion Right.
(b) The Company hereby waives demand and presentment for payment, notice
of nonpayment, protest and notice of protest, diligence, filing suit, and all
other notice and promises to pay the Holder its costs of collection of all
amounts due hereunder, including reasonable attorneys' fees.
(c) In the case of any Event of Default under this Note by the Company
this Note shall continue to bear interest after such default at the interest
rate otherwise in effect hereunder plus 3% per annum (but in any event not in
excess of the maximum rate of interest permitted by applicable law).
SECTION 9. SENIORITY.
The Company shall not, without the prior written consent of the
Holder, incur any indebtedness for money borrowed that shall rank senior(in
right or priority of payment or otherwise)to the Note, other than (a)financing
under bank credit agrements or similar financing failities, up to a maximum
aggregate outstanding principal and committed amountof $5 million,(b) secured
financing and capital lease obligations in connection with the acquisition of
assets, to the extent such obligations are secured by the assets acquired and
the lender's recourse to the Company other than in respect of such assets (which
may be senior to the Note) is subordinate to or pari passu with the Note, and
(c) any financing extended by Medeva plc (or its affiliates) to fund the
construction by the Company of any manufacturing facility, so long as such
funding is not secured by other assets (which may be senior to the Note) is
subordinate to or pari passu with the Note, provided, that the Company may incur
additional indebtedness that ranks pari passu with the obligations evidenced
hereby.
SECTION 10. MISCELLANEOUS.
(a) EIS may assign this Note to its affiliates and subsidiaries, as well
as any off-balance sheet special purpose entity established by EIS. This Note
and all of the provisions hereof shall be binding upon and inure to the benefit
of the parties hereto and their respective successors and permitted assigns;
provided, however, that EIS and the Company shall remain liable for their
respective obligations hereunder after any such assignment.
(b) All notices, demands and requests of any kind to be delivered to any
party in connection with this Agreement shall be in writing and shall be deemed
to have been duly given if personally delivered or if sent by nationally-
recognized overnight courier or by registered or
6
<PAGE>
certified mail, return receipt requested and postage prepaid, or by facsimile
transmission, addressed as follows:
(i) if to the Company:
Targeted Genetics Corporation
1100 Olive Way, Suite 100
Seattle, Washington 98101
Attention: Chief Executive Officer
Facsimile: (206) 623-7064
with a copy to:
Perkins Coie
1201 Third Avenue, 48th Floor
Seattle, Washington 98101
Attn: Stephen M. Graham, Esq.
Facsimile: (206) 583-8500
(ii) if to EIS, to:
Elan International Services, Ltd.
102 St. James Court
Flatts, Smiths Parish
Bermuda SL04
Attention: President
Fax: 441-292-2224
with a copy to:
Brock Silverstein LLC
800 Third Avenue
New York, New York 10022
Attention: David Robbins, Esq.
Fax: 212-371-5500
Each party, by written notice given to the other in accordance with this Section
10(b) may change the address to which notices, other communication or documents
are to be sent to such party. All notices, other communications or documents
shall be deemed to have been duly given when received. Any such notice or
communication shall be deemed to have been effectively given, (a) in the case of
personal delivery, on the date of such delivery, (b) in the case of
nationally-recognized overnight courier, on the second business day after the
date when sent, (c) in the case of mailing, on the fifth business day following
that day on which the piece of mail containing such communication is posted, and
(d) in the case of facsimile transmission, on the date of transmission.
7
<PAGE>
(c) This Note may not be modified or amended, or any of the provisions
hereof waived, except by written agreement of the Company and EIS.
(d) This Note shall be governed by and construed in accordance with the
laws of the State of New York, without giving effect to principles thereof
relating to conflicts of laws.
(e) This Note may be executed in any number of counterparts, and each such
counterpart hereof shall be deemed to be an original instrument, but all such
counterparts together shall constitute one note. The Note may be signed and
delivered to the other party by a facsimile transmission; such transmission
shall be deemed a valid signature.
(f) Each of the parties shall be responsible for its own costs and
expenses incurred in connection with the transactions contemplated hereby.
(g) This Note is a registered instrument. A manually signed copy of
this Note shall be evidence of the rights of EIS only and is not a bearer
instrument. The Company will keep books of registry in which it will register by
book entry the interest of EIS in this Note and register by book entry any
transfer of the rights of EIS or any subsequent holder in this Note or the
payments due hereunder. No transfer by EIS or any subsequent holder of this Note
of any interest in this Note shall be permitted unless a book entry of such
transfer is made upon such registry and such transfer is effected in compliance
with this Section 10(g). Prior to the registration of any transfer by EIS or any
subsequent holder of an interest in this Note, the Company shall deem and treat
the registered owner of this Note, or any portion thereof, as the owner hereof
for all purposes.
8
<PAGE>
IN WITNESS WHEREOF, the Company and EIS have executed this Note on
the date first above written.
TARGETED GENETICS CORPORATION
By: /s/ Stewart Parker
---------------------------
Name: H. Stewart Parker
Title: President & CEO
ELAN INTERNATIONAL SERVICES, LTD.
By: /s/ Kevin Insley
---------------------------
Name: Kevin Insley
Title: President & CFO
<PAGE>
EXHIBIT A
NOTICE OF REQUEST FOR DISBURSEMENT
----------------------------------
Date:
To: Elan International Services, Ltd.
From: Targeted Genetics Corporation
Re: Disbursement Request
______________________________________________________________________________
Pursuant to the terms of the Convertible Promissory Note (the "Note")
issued by Targeted Genetics Corporation (the "Company") to Elan International
Services, Ltd. ("EIS"), dated ______, 1999, the Company hereby notifies EIS of
its request for a disbursement thereunder in the amount of $_________. Please
provide funding in the requested amount to the Company in accordance with the
following wire instructions
[
]
Sincerely,
TARGETED GENETICS CORPORATION
By: ____________________
Name:
Title:
<PAGE>
EXHIBIT B
NOTICE OF ELECTION TO EXERCISE A CONVERSION RIGHT
-------------------------------------------------
Date:
To: Targeted Genetics Corporation
From: Elan International Services, Ltd.
Re: Exercise of a Conversion Right
________________________________________________________________________________
Pursuant to the terms of the Convertible Promissory Note (the "Note")
issued by Targeted Genetics Corporation (the "Company") to Elan International
Services, Ltd. ("EIS"), dated July 21, 1999, specifically Section 4 thereof, EIS
hereby notifies the Company of its intention to exercise a right of conversion.
Pursuant to Section 4 of the Note, EIS hereby elects to convert
[$__________]* in aggregate principal amount and all accrued and unpaid interest
thereon for shares of the Company's Common Stock, par value $.001 per share,
effective [__________, ____]
We have instructed our attorneys to contact the Company to discuss the
timing and documentation of the conversion.
Sincerely,
ELAN INTERNATIONAL SERVICES, LTD.
By: ___________________________
Name:
Title:
- --------------------
* Amount must represent one or more tranches drawn down by the Company under the
Note.
<PAGE>
EXHIBIT 1.6
EXECUTION COPY
LICENSE AGREEMENT
BY AND BETWEEN
TARGETED GENETICS NEWCO, LTD.
A Bermuda Limited Company
AND
TARGETED GENETICS CORPORATION
A Washington Corporation
July 21, 1999
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
1. DEFINITIONS................................................ 1
2. GRANT OF RIGHTS............................................ 9
3. IMPROVEMENTS AND AFTER ACQUIRED TECHNOLOGY................. 14
4. DEVELOPMENT OF PRODUCTS.................................... 15
5. REGULATORY APPROVALS....................................... 15
6. FINANCIAL PROVISIONS....................................... 16
7. CONFIDENTIAL INFORMATION................................... 20
8. WARRANTIES/INDEMNITIES..................................... 22
9. INTELLECTUAL PROPERTY OWNERSHIP RIGHTS..................... 26
10. RIGHTS EXPLOITATION OUTSIDE THE FIELD...................... 28
11. NON-COMPETITION............................................ 28
12. TERM AND TERMINATION OF AGREEMENT.......................... 30
13. IMPOSSIBILITY OF PERFORMANCE - FORCE MAJEURE............... 33
14. SETTLEMENT OF DISPUTES; GOVERNING LAW...................... 33
15. ASSIGNMENT................................................. 34
16. NOTICES.................................................... 34
17. MISCELLANEOUS CLAUSES...................................... 35
</TABLE>
<PAGE>
LICENSE AGREEMENT dated as of July 21, 1999 between Targeted Genetics
Newco, Ltd., a Bermuda limited company, and Targeted Genetics Corporation, a
Washington corporation.
RECITALS:
A. Contemporaneously herewith, Elan and TGEN (capitalized terms used herein
are defined below) are entering into the Development Agreement for the
purpose of recording the terms and conditions of a joint venture and of
regulating their relationship with each other and certain aspects of the
affairs of and their dealings with Newco.
B. TGEN is beneficially entitled to the use of certain know-how and certain
patents that have been granted or are pending in relation to the
development and production of various Gene Delivery Technologies.
C. Newco desires to enter into this Agreement with TGEN so as to permit Newco
to utilize the TGEN Intellectual Property in the research, development,
manufacture, distribution and sale of the Products in the Field and in the
Territory.
D. Elan, EIS and TGEN entered into a letter agreement dated June 30, 1999 (the
"Letter Agreement") pursuant to which they agreed to enter into definitive
documents, including this Agreement, and the Elan License Agreement
relating to Newco's use of the Elan Intellectual Property.
NOW THEREFORE IT IS HEREBY AGREED AS FOLLOWS:
1. DEFINITIONS
A. In this Agreement, the following definitions shall apply:
1.1. "Affiliate" shall mean, with respect to Elan or TGEN, any corporation
or entity other than Newco (and entities controlled by it) controlling,
controlled by or under the common control of Elan or TGEN, as the case may be,
and, with respect to Newco, any corporation or entity under control of Newco. A
corporation or non-corporate entity shall be regarded as in control of another
corporation if it owns or directly or indirectly controls more than fifty
percent (50%) of the voting stock of the other corporation or (a) in the absence
of the ownership of at least fifty percent (50%) of the voting stock of a
corporation or (b) in the case of a non-corporate entity, the
[*] OMITTED, CONFIDENTIAL MATERIAL, WHICH MATERIAL HAS BEEN SEPARATELY FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT.
<PAGE>
power to direct or cause the direction of the management and policies of such
corporation or non-corporate entity, as applicable;
1.2. "Agreement" shall mean this agreement (which expression shall be
deemed to include the Recitals and the Schedules hereto);
1.3. "Antisense" shall mean [*];
1.4. "Base Technologies" shall mean technologies, techniques and
formulations for the administration of an active agent to a mammal: (i) in
formulations of the active agent with one or more substantially inert
ingredients, including, without limitation, tonicity modifiers and bulking
agents; or (ii) with or through devices or mechanical targeting systems or
mechanical delivery systems (other than Elan's MEDIPAD(R) Drug Delivery System
or devices utilizing autoinjector technology);
1.5. "cGCP", "cGLP" and "cGMP" shall mean current Good Clinical Practices,
current Good Laboratory Practices and current Good Manufacturing Practices
respectively;
1.6. "Commercialization" shall mean the manufacture, promotion,
distribution, marketing and sale of the Products;
1.7. "Control" shall mean the ability to grant a license or sublicense as
contemplated herein without violating the terms of any agreement with any
Independent Third Party;
1.8. "Definitive Documents" shall have the same meaning as given to the
term "Transaction Documents" in the Development Agreement;
1.9. "Development Agreement" shall mean the Subscription, Joint Development
and Operating Agreement of even date entered into among TGEN, Elan, EIS and
Newco;
1.10. "Development Candidate(s)" shall mean a TGEN Proprietary Gene, or a
Gene obtained from an Independent Third Party, jointly selected by the
Participants and Newco to be developed for incorporation in Products. For the
avoidance of doubt, if it is subsequently determined by the Management Committee
of Newco that the TGEN Proprietary Gene initially offered for development as a
Product is not suitable for use in a Product, TGEN shall offer an additional
TGEN Proprietary Gene to the extent available, as described in Section 9.5 of
the Development Agreement, and such additional TGEN Proprietary Gene shall in
that instance become the Development Candidate;
* Confidential Treatment Requested
-2-
<PAGE>
1.11. "Drug Delivery Technologies" shall mean formulation and/or excipient
systems and technologies for delivery of a therapeutic agent to a mammal,
including but not limited to [*] allowing such agent, without limitation on
other features that may be sought in addition to or instead of the following, to
be administered on an optimized schedule, and/or to be administered with reduced
side effects, and/or to be administered with enhanced efficacy, and/or to be
administered with better patient compliance, and/or to be administered in
reduced dosages. Drug Delivery Technologies shall also include Elan device
delivery technologies including the MEDIPAD(R) Drug Delivery System and devices
utilizing autoinjector technology. Notwithstanding the foregoing, Drug Delivery
Technologies shall not include Base Technologies or Gene Delivery Technologies;
1.12. "Effective Date" shall mean the "Closing Date" as such term is
defined in the Development Agreement;
1.13. "EIS" shall mean Elan International Services, Ltd., a Bermuda
limited company;
1.14. "Elan" shall mean Elan Pharmaceutical Technologies, a division of
Elan Corporation, plc, a public limited company incorporated under the laws of
Ireland, its, successors and permitted assigns; and, shall also include, for
purposes of the option contained in Section 2.2 below and the inclusion of the
NanoCrystal technology covered by such option and referenced in the definition
of "Elan Intellectual Property," Elan Pharma International Limited;
1.15. "Elan Improvements" shall have the meaning set forth in the Elan
License Agreement;
1.16. "Elan Intellectual Property" shall have the meaning set forth in the
Elan License Agreement;
1.17. "Elan License" shall have the meaning set forth in the Elan License
Agreement;
1.18. "Elan License Agreement" shall mean that certain license agreement,
of even date herewith, entered into between Elan and Newco;
1.19. "Elan Patents" shall have the meaning set forth in the Elan License
Agreement;
1.20. "Elan Program Technology" shall mean all Program Technology that
relates solely to Drug Delivery Technologies or Antisense whether conceived or
made
* Confidential Treatment Requested
-3-
<PAGE>
by Elan and/or its agents or TGEN or Newco and/or its agents pursuant to the
Research and Development Program;
1.21. "Elan Right of First Negotiation" shall have the meaning set forth
in the Elan License Agreement;
1.22. "Enabling Gene" shall mean a Gene selected by the Research Committee
for research purposes only.
1.23. "Excluded Elan Technology" shall mean transdermal or transcutaneous
Drug Delivery Technology (i.e., pertaining to delivery, onto, into and through
the skin);
1.24. "Excluded TGEN Technology" shall mean inventions, patents and know-
how: (a) to the extent relating to transdermal or transcutaneous drug delivery
technology (as above described); (b) to the extent relating to the treatment of
cystic fibrosis or the delivery of Genes directed therefor; (c) to the extent
relating to Antisense; or (d) that are subject to contractual obligations of
TGEN to third parties as of the Effective Date to the extent the licensing of
such inventions, patents and know-how is restricted or limited.
1.25. "FDA" shall mean the United States Food and Drug Administration or
any successors or agency the approval of which is necessary to market a product
in the United States of America;
1.26. "Field" shall mean the research, development and Commercialization
of a Platform for delivery of Genes to mammals. For avoidance of doubt, the
Field shall exclude (i) cell therapy, (ii) ex vivo gene therapy, (iii) Antisense
delivery and (iv) transcutaneous and/or transdermal delivery (as above
described);
1.27. "Gene" shall mean any nucleotide sequence that includes a region or
regions (or gene cassette(s)) capable of coding, causing or modulating the
expression of a protein or other genetic element (other than directly modulating
expression where the nucleic acid sequence is an Antisense) and includes one or
more elements that can control expression of said protein(s) or other genetic
element(s);
1.28. "Gene Delivery Technologies" shall mean [*];
1.29. "Independent Third Party" shall mean any person other than Newco,
TGEN, Elan or any of their respective Affiliates;
* Confidential Treatment Requested
-4-
<PAGE>
1.30. "In market" shall mean sales of Products whether by Newco or its
Affiliates, or where applicable by a sublicensee, to an Independent Third Party
being a wholesaler, distributor, managed care organization, hospital, pharmacy
and/or the like;
1.31. "Licensed Technologies" shall mean the Elan Intellectual Property
and the TGEN Intellectual Property;
1.32. "Licenses" shall mean the Elan License and the TGEN License;
1.33. "Lien" shall mean any and all liens, security interests,
restrictions, claims, encumbrances or rights of third parties of every kind and
nature;
1.34. "Management Committee" shall have the meaning given to such term in
the Development Agreement;
1.35. "Marketing Authorization" shall mean the procurement of
registrations and permits required by applicable government authorities in a
country in the Territory for the marketing, sale, and distribution of a Product
in such country;
1.36. "MEDIPAD(R) Drug Delivery System" shall mean the ambulatory
continuous micro infusion device having a drug reservoir volume ranging from 3.3
to 5.0 ml. and associated technology;
1.37. "Net Proceeds" shall mean the net amount realized by Newco or its
Affiliates in the form of upfront payments, milestones or royalty payments from
Independent Third Parties with respect to Products or the grant of rights
therein or to the Commercialization thereof, after deduction of all costs,
commissions and fees payable by Newco or its Affiliates associated with or
incurred with respect to such upfront payments, milestones or royalties,
including without limitation royalties and other compensations paid or payable
to any Independent Third Party (or to either of the Participants, where such
Participant has separately licensed any rights or intellectual properties to
Newco on a royalty-bearing basis).
1.38. "Net Sales" shall mean the amount billed or invoiced for sales of a
Product by Newco or its Affiliates to an Independent Third Party, less, to the
extent included in such invoice price the total of: (1) ordinary and customary
trade, quantity or cash discounts and nonaffiliated brokers' or agents'
commissions, including government managed care and other contract rebates,
pharmacy incentive programs, including chargebacks of pharmacy or hospital
performance incentive programs or similar programs; (2) credits, rebates and
returns (including, but not limited to, wholesaler and retailer returns); (3)
freight, postage and duties separately identified on
-5-
<PAGE>
the invoice or other documentation maintained in the ordinary course of
business, and (4) import, export and sales taxes, excise taxes, other
consumption taxes, customs duties, tariffs and compulsory payments to
governmental authorities separately identified on the invoice or other
documentation maintained in the ordinary course of business and based on sales
or turnover or delivery of the Products. Net Sales shall also include the amount
or fair market value of all other consideration received by Newco or its
Affiliates in respect of sales of Products by Newco or its Affiliates to an
Independent Third Party, whether such consideration is payment in kind, exchange
or another form, less the applicable deductions, as described above. If a
Product is provided to an Independent Third Party by Newco or its Affiliates
without charge or provision of invoice and used by such Independent Third Party,
then Newco or its Affiliates shall be treated as having sold such Product to
such Independent Third Party for an amount equal to the fair market value of
such Product. Sales between or among Newco and its respective Affiliates or
authorized licensees shall be excluded from the computation of Net Sales;
1.39. "Newco" shall mean Targeted Genetics Newco, Ltd., a Bermuda limited
company;
1.40. "Newco Program Technology" shall mean all Program Technology other
than Elan Program Technology and TGEN Program Technology;
1.41. "Newco Technology" shall mean all Program Technology and all
technology licensed or acquired by Newco or developed by Newco whether or not
pursuant to the Research and Development Program, excluding, however, TGEN
Intellectual Property and Elan Intellectual Property;
1.42. "Participant" shall mean Elan or TGEN, as the case may be.
"Participants" shall mean both Elan and TGEN;
1.43. "Parties" shall mean TGEN and Newco;
1.44. "Person" shall mean an individual, partnership, corporation, limited
liability company, business trust, joint stock company, trust, unincorporated
association, joint venture, or other entity of whatever nature;
1.45. "Plan" shall mean that portion of the Business Plan defined in the
Development Agreement that relates to the Project and Newco's program of
development agreed to by Elan and TGEN within sixty (60) days of the date
hereof, with respect to the research, development and Commercialization of the
Products,
-6-
<PAGE>
which Plan shall be reviewed and mutually agreed to in writing by Elan and TGEN
on an annual basis;
1.46. "Platform" shall mean the combined utilization of Drug Delivery
Technologies and Gene Delivery Technologies for delivery of Genes by any route
of administration;
1.47. "Product" shall mean a Gene formulated for administration to
mammals, including humans, by use of a Platform;
1.48. "Program Technology" shall mean all technology developed by or on
behalf of Newco, whether by Elan, TGEN, a third party or jointly by any
combination thereof, pursuant to the Research and Development Program;
1.49. "Project" shall mean all activity as undertaken by Elan, TGEN and
Newco to develop the Platform and Products in accordance with the Plan;
1.50. "Regulatory Authority" shall mean any regulatory authority outside
the United States of America, the approval of which is necessary to market a
Product;
1.51. "Research and Development Program" shall have the same meaning given
to such term in the Development Agreement;
1.52. "Research and Development Term" shall mean the period commencing on
the Effective Date and continuing for a period of [*] thereafter, or as extended
by agreement of the Participants, up to an aggregate of [*]; provided, however,
that if a Participant shall be prevented by (i) events beyond the Participants'
control, or (ii) by such Participant's delay or negligent act or omission, from
performing its obligations under the Definitive Documents within said [*] period
(or as extended), then the other Participant at its option, may extend the
duration of the Research and Development Term by a term equal in length to the
period during which the first Participant was unable to perform its obligations
hereunder;
1.53. "Technological Competitor of TGEN" shall mean any entity which has a
significant program for the discovery and development of Gene Delivery
Technology, a listing of which is contained on Schedule 4 to the Development
Agreement, and as such list may be supplemented by TGEN from time to time with
the consent of Elan, which consent shall not be unreasonably withheld if the
proposed additions are within the parties' contemplation as to the purpose of
the original list;
1.54. "Term" shall have the meaning given to it in Clause 12 below;
* Confidential Treatment Requested
-7-
<PAGE>
1.55. "Territory" shall mean all the countries of the world;
1.56. "TGEN" shall mean Targeted Genetics Corporation, a Washington
corporation;
1.57. "TGEN Improvements" shall mean, other than Excluded TGEN Technology,
any improvements to the TGEN Patents and TGEN Know-How developed by TGEN
independently or in collaboration with an Independent Third Party, which
improvements TGEN at any time during the Research and Development Term Controls
within the Field (other than pursuant to the Research and Development Program);
1.58. "TGEN Intellectual Property" shall mean the TGEN Patents, TGEN Know-
How and TGEN Improvements;
1.59. "TGEN Know-How" shall mean, other than Excluded TGEN Technology, any
and all rights (i) Controlled by TGEN as of the Effective Date to any discovery,
invention (whether or not patentable), know-how, substances, data, techniques,
processes, systems, formulations and designs relating to Base Technologies, Gene
Delivery Technologies or Drug Delivery Technologies and useful for the conduct
of the Project or Commercialization of Products and (ii) any discovery,
invention (whether or not patentable), know-how, substances, data, techniques,
processes, systems, formulations and designs relating to Base Technologies, Gene
Delivery Technologies or Drug Delivery Technologies and useful for the conduct
of the Project or Commercialization of Products developed by TGEN independently
or in collaboration with an Independent Third Party after the Effective Date;
1.60. "TGEN License" shall mean the license of TGEN Intellectual Property
to Newco pursuant to Section 2.1 hereof;
1.61. "TGEN Patents" shall mean, other than Excluded TGEN Technology, any
and all patents and patent applications relating to Base Technologies, Gene
Delivery Technologies or Drug Delivery Technologies (i) Controlled by TGEN on
the Effective Date and (ii) Controlled by TGEN and hereafter filed or obtained
(to the extent covering inventions made by TGEN independently or in
collaboration with an Independent Third Party). TGEN Patents shall also include
all extensions, continuations, continuations-in-part, continuing prosecution
applications divisionals, patents-of-additions, re-examinations, re-issues,
supplementary protection certificates and foreign counterparts of such patents
and patent applications and any patents issuing thereon and extensions of any
patents licensed hereunder;
-8-
<PAGE>
1.62. "TGEN Program Technology" shall mean all Program Technology which
relates solely to Gene Delivery Technologies, whether conceived or made by TGEN
and/or its agents or Elan or Newco pursuant to the Research and Development
Program;
1.63. "TGEN Proprietary Gene" shall mean any Gene Controlled by TGEN;
1.64. "TGEN Right of First Negotiation" shall have the meaning provided in
Section 2.12 hereof;
1.65. "Trademark" shall mean the trademark(s) belonging to TGEN as may be
selected by Newco or its permitted sub-licensees, with TGEN's consent, for use
in connection with the Products;
1.66. "United States Dollar" and "US$" shall mean the lawful currency for
the time being of the United States of America;
B. Interpretation. In this Agreement the following shall apply:
--------------
1.1 The singular includes the plural and vice versa, the masculine
includes the feminine and vice versa.
1.2. Any reference to a Clause, Section or Schedule shall, unless
otherwise specifically provided, be to a Clause, Section or Schedule of
this Agreement.
1.3. The headings of this Agreement are for ease of reference only
and shall not affect its construction or interpretation.
2. GRANT OF RIGHTS
2.1 TGEN hereby grants to Newco a license in the Territory to TGEN's rights in
(i) the TGEN Intellectual Property for all research, development, and
Commercialization purposes solely in the Field, and (ii) the Enabling Gene
for all research and development purposes solely in the Field, in each case
subject to contractual obligations that TGEN may have as of the Effective
Date, and, unless prohibited by the Section 11 ("Non-Competition"),
contractual obligations that TGEN may enter into after the Effective Date
(the "TGEN License"). The TGEN License shall be nonexclusive to Newco
during the Research and Development Term, and thereafter during the License
Term shall be exclusive to the extent applicable to the Commercialization
(i) of a Product or Products which has (have) been successfully developed
by Newco during
-9-
<PAGE>
the Research and Development Term, and (ii) of any Product containing the
same Gene that would be competitive (i.e., directed at the same indication)
with any Product being Commercialized by Newco. Otherwise, the TGEN License
shall be nonexclusive during the License Term after the Research and
Development Term.
2.2 If the inclusion of any TGEN Patents, TGEN Know-How, the Enabling Gene or
TGEN Improvements with respect to any of the foregoing in the license of
TGEN Intellectual Property is restricted or limited by a third party
agreement, TGEN shall use reasonable commercial efforts to exclude or where
applicable minimize any such restriction or limitation.
2.3 To the extent royalty or other compensation obligations to Independent
Third Parties that are payable with respect to TGEN Intellectual Property
would be triggered by a proposed use of such TGEN Intellectual Property in
connection with the Project, TGEN will inform Newco and Elan of such
royalty or compensation obligation. If Newco and Elan agree to utilize
such TGEN Intellectual Property in connection with the Project, Newco will
be responsible for the payment of such royalty or other compensation
obligations relating thereto.
2.4 Except as expressly provided herein, all proprietary rights and rights of
ownership with respect to the TGEN Intellectual Property shall at all times
remain solely with TGEN. TGEN shall disclose to Newco inventions made by or
on behalf of TGEN in connection with the performance of the Project, any
patentable inventions and discoveries within the TGEN Intellectual Property
that relate to the Field and any patentable TGEN Improvements developed by
or on behalf of TGEN.
2.5 Notwithstanding anything contained herein to the contrary, TGEN shall have
the right, outside the scope of the exclusivity under the TGEN License, and
subject to Section 11 below, to fully exploit and grant licenses and
sublicenses with respect to the TGEN Intellectual Property.
2.6 Notwithstanding the grant of the TGEN License, TGEN will not be required to
disclose to Elan or Newco proprietary manufacturing know-how, unless and
until it is determined, as described in Sections 2.13 and 2.14 below, that
a party other than TGEN will perform relevant manufacturing services for
Newco, and then such disclosures may be limited to those that are required
to support such manufacturing services by such other party.
-10-
<PAGE>
2.7 Newco shall not be permitted to (a) encumber any of its rights under the
Licenses or the Newco Technology without the prior written consent of TGEN;
(b) assign or sublicense any of its rights under the licenses for the
Licensed Technologies and the Newco Technology without the prior written
consent of TGEN, which consent may be withheld in TGEN's sole discretion.
Notwithstanding the foregoing, subject to the TGEN Right of First
Negotiation, TGEN shall not unreasonably withhold, condition or delay its
consent to the licensing of rights to Commercialize Products to Independent
Third Parties who are not Technological Competitors of TGEN. Any agreement
between Newco and any permitted Independent Third Party for the development
or exploitation of the TGEN Intellectual Property shall require such
Independent Third Party to maintain the confidentiality of all information
concerning the TGEN Intellectual Property and shall permit an assignment of
rights by Newco to TGEN in accordance with the terms of this Agreement.
Rights of permitted third party sublicensees in and to TGEN Intellectual
Property shall survive the termination of the license and sublicense
agreements granting said intellectual property rights to Newco; and Newco
and TGEN shall in good faith agree upon the form most advantageous to TGEN
in which the rights of the sublicensor under any such sublicenses are to be
held (which form may include continuation of Newco solely as the holder of
such licenses or assignment of such rights to a third party or parties,
including an assignment to TGEN).
2.8 Newco will use its reasonable commercial efforts to exploit the Elan
Intellectual Property, the TGEN Intellectual Property and Newco Technology
in accordance with this Agreement, the Elan License Agreement and the Plan.
Newco and/or its contractors or licensees/sublicensees shall employ
reasonably diligent efforts to research, develop, register, and
Commercialize the Products in appropriate regions in the Territory. Newco
and/or its contractors or licensees/sublicensees shall employ or have
employed on its or their behalf a level of advertising, sales, marketing,
and promotion efforts in each country in the Territory where Marketing
Authorization for Product has been obtained which is: (i) commensurate
with that used by other pharmaceutical marketers for products of similar
market potential in that country in the Territory, and (ii) consistent with
the market potential for the Product as depicted in the Plan and as
determined by the Management Committee in accordance with the Development
Agreement.
2.9 Newco will be solely responsible for ensuring that it or its sublicensees
manufacture and Commercialize the Products within each country of the
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<PAGE>
Territory strictly in accordance with all the legal and regulatory
requirements of each country of the Territory.
2.10 Upon the request of Newco and with the consent of TGEN, TGEN shall grant
to Newco during the Term a non-exclusive royalty free license in the
Territory, solely for use in connection with the sale of the Products, to
use one or more Trademark, on the following terms:
2.10.1 Newco shall as soon as it becomes aware of any infringement of a
Trademark give to TGEN in writing full particulars of any use or
proposed use by any other person, firm or company of a service mark,
trade name or trademark or promotional or advertising activity which
may constitute infringement.
2.10.2 If Newco becomes aware that any other person, firm or company
alleges that such Trademark is invalid or that the use of such
Trademark infringes any rights or constitutes an unauthorized use of
intellectual property of another party or that the Trademark is
otherwise attacked or attackable, Newco shall immediately give to
TGEN full particulars thereof in writing and shall make no comment
or admission to any third party in respect thereof.
2.10.3 TGEN shall have the right to conduct all proceedings relating to
such Trademark and shall in its sole discretion decide what action,
if any, to take in respect of any actual, threatened or alleged
infringement of such Trademark or any other claim or counter-claim
brought or threatened relating to the use or registration of such
Trademark. Any such proceedings shall be conducted at TGEN's expense
and for its own benefit.
2.10.4 Nothing contained in this Agreement shall grant to Newco any right,
title, or interest in or to such Trademark, whether or not
specifically recognized or perfected under applicable laws, except
for the non-exclusive license described herein. At no time during or
after the term of this Agreement shall Newco challenge or assist
others to challenge any such Trademark or the registration thereof
or attempt to register any trademarks, service marks, or trade names
confusingly similar to any such trademark. All displays of any such
Trademark that Newco intends to adopt shall first be submitted to
TGEN for approval (which shall not be unreasonably withheld,
conditioned or delayed) of design, color, and other details, or
shall be exact copies of those used by TGEN or
-12-
<PAGE>
previously approved by it for the same uses. In addition, Newco
shall fully comply with all reasonable guidelines communicated by
TGEN concerning the use of any such Trademark as well as all rules
and regulations of such use throughout the Territory.
2.10.5 The rights granted to Newco under this Section 2.10 shall
automatically terminate with respect to a Product in a country in
the Territory upon termination of Newco's right to market such
Product in any such country.
2.11 When packaged, and to the extent permitted by law, a product label shall
include an acknowledgement that the Product is made under license from TGEN
unless the incorporation of TGEN Intellectual Property is so limited that
such acknowledgment would be unreasonable. Any such acknowledgment shall
take into consideration regulatory requirements and Newco's reasonable
commercial requirements. In such event, Newco shall wherever possible give
due acknowledgement and recognition to TGEN in all printed promotional and
other material regarding the Product such as stating that the Product is
under license from TGEN and that the applicable TGEN Intellectual Property
has been applied to the Products. Newco shall consult with and obtain the
written approval of TGEN as to the format and content of the promotional
and other material insofar as it relates to a description of, or other
reference to, the application of the TGEN Intellectual Property, such
approval not to be unreasonably withheld, conditioned or delayed. The
further consent of TGEN shall not be required where the format and content
of such materials is substantively similar as the materials previously
furnished to and approved in writing by TGEN.
2.12 Notwithstanding anything contained in this Agreement to the contrary, at
such time, during or within [*] following the end of the Research and
Development Term as Newco intends to develop and Commercialize Products [*]
TGEN shall have [*] on the following terms and conditions:
2.12.1 If Newco intends to [*] then Newco immediately shall notify TGEN in
writing that TGEN may elect to [*] referred to in this Section.
TGEN shall indicate its desire to [*] pursuant to this Section by
delivering written notice to Newco within forty-five (45) days of
TGEN's receipt of the written notification from Newco to TGEN. If
TGEN elects to [*], the Parties shall [*].
* Confidential Treatment Requested
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2.12.2 If, [*] TGEN and Newco do not [*] within [*] from the notification
in writing by Newco to TGEN, then Newco shall be free [*]__
2.12.3 Following the [*] period described in Section 2.12.2, [*]
2.13 Elan and TGEN shall have preferential rights to negotiate agreements with
Newco whereby Elan and/or TGEN will manufacture Products to meet Newco's
requirements. Newco shall evaluate each such manufacturing agreement in
light of which of Elan or TGEN (or neither, or both) has the capability and
the committed resources to perform such manufacturing services in the best
interests of Newco. If the parties cannot come to mutual agreement on who
is best qualified to perform such manufacturing services, the matter will
be resolved through the dispute resolution procedures of the Joint
Development and Operating Agreement. To the extent Elan or TGEN performs
any manufacturing services to Newco, it shall be paid a price equal to [*]
and other terms and conditions customary in a supply agreements shall
apply.
2.14 Subject to the rights of Newco as provided in Section 2.12 herein and the
rights of Elan and TGEN as provided in Section 2.13 herein, Newco shall not
be permitted to contract the development or Commercialization of any
Product without the prior written consent of TGEN, which consent will not
be unreasonably withheld, conditioned or delayed; provided that such
reasonableness standard, shall not be applicable in the case of a proposed
sublicense to any Technological Competitor of TGEN.
3. IMPROVEMENTS AND AFTER ACQUIRED TECHNOLOGY
3.1 Subject to contractual restrictions permissible under Section 11 ("Non-
Competition"), TGEN Improvements shall be deemed, immediately upon
development, to be included in the license of the TGEN Intellectual
Property granted to Newco hereunder.
3.2 For the avoidance of doubt, and without limitation on the applicability of
the same exclusion as to other TGEN Intellectual Property, it is understood
that the TGEN License specifically excludes any right to use TGEN
Improvements outside of the Field.
3.3 If the inclusion of an TGEN Improvement in the license of TGEN Intellectual
Property granted to Newco hereunder is restricted or limited by a third
party
* Confidential Treatment Required
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agreement, then TGEN shall use reasonable commercial efforts to exclude, or
where applicable, to minimize any such restriction or limitation.
3.4 All rights, title, and interest to any TGEN Improvements shall be the
property of TGEN. Newco, Elan and any such third party shall execute and
deliver documents, and take such other actions as TGEN may reasonably
request, to effect or evidence such ownership.
3.5 If, after the Effective Date, TGEN acquires know-how or patent rights
relating to the Field, through acquisition of or merger with an Independent
Third Party that has know-how or patent rights relating to the Field, then
TGEN shall offer, as soon as practicable, to license such know-how and
patent rights to Newco (subject to existing contractual obligations binding
on such Independent Third Party at the time of such acquisition or merger),
on such terms as would be offered to an Independent Third Party negotiating
in good faith on an arms-length basis, and if Elan determines that Newco
should not acquire such license, then TGEN shall be free (subject to the
provisions of Section 11, below) to fully exploit such know-how and patent
rights (without the TGEN Intellectual Property then licensed to Newco,
other than outside the scope of the exclusivity of the TGEN License), and
to grant to third parties licenses and sublicenses with respect thereto.
4. DEVELOPMENT OF PRODUCTS
4.1 During the Research and Development Term, Newco will diligently pursue the
research and development of the Elan Intellectual Property, TGEN
Intellectual Property and Newco Technology in accordance with the Research
and Development Program. The objectives of this research and development
work will be (a) to develop the Platform, and (b) to develop one or more
Products in the Field.
4.2 Subject to contractual commitments made prior to, on, or after the
Effective Date (which it is understood shall be within TGEN's discretion,
subject only to its compliance with Section 11 hereof), TGEN agrees to
offer to Newco the opportunity to designate a TGEN Proprietary Gene to be
the Development Candidate. The selection of any Gene to be a Development
Candidate shall be by unanimous vote of the Management Committee. Subject
to the provisions of Section 9.5 of the Development Agreement, TGEN shall
be under no obligation to provide more than one TGEN Proprietary Gene to
serve as a Development Candidate. The obligations of TGEN under this
Section 4.2 shall terminate on such date as Newco Commercializes a Product.
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5. REGULATORY APPROVALS
5.1 Newco shall, or shall cause its sublicensees to, at its or their sole cost
file and shall use its reasonable best efforts to prosecute to approval,
the Marketing Authorizations for the Products in appropriate countries in
the Territory in accordance with the Plan. During any Marketing
Authorization registration procedure, Newco shall keep TGEN promptly and
fully advised of Newco's registration activities, progress and procedures.
Each Party shall inform the other Party and Elan of any dealings such Party
has with the FDA and any other Regulatory Authority. The Parties and Elan
shall collaborate in relation to obtaining any approval of the FDA or
Regulatory Authority for final approved labeling.
5.2 Subject to agreement to the contrary, any and all Marketing Authorizations
filed hereunder for Products shall, to the extent owned by Newco, remain
the property of Newco, provided that Newco shall allow TGEN access thereto
solely to enable TGEN to fulfill its obligations and exercise its rights
under this Agreement and the Development Agreement. Newco shall maintain
or cause its sublicensees to maintain such Marketing Authorizations at its
or their own cost.
5.3 Newco shall indemnify and hold harmless TGEN, its agents and employees from
and against all claims, damages, losses, liabilities and expenses to which
TGEN, its agents, and employees may become subject related to or arising
out of Newco's bad faith, negligence or intentional misconduct in
connection with the filing or maintenance of the Marketing Authorizations.
6. FINANCIAL PROVISIONS
6.1 In consideration of the license to the TGEN Patents, Newco shall pay to
TGEN the following amounts:
6.1.1 Product based upon the Development Candidates. Newco shall make the
---------------------------------------------
following payments with respect to Products based upon the
Development Candidates:
(a) Development Work - Initial research and development work
----------------
pursuant to the Research and Development Program regarding the
development of the Platform and one or more Development
Candidates contracted by Newco to TGEN and/or Elan shall be
payable by Newco to each of TGEN and Elan based on [*] (or
* Confidential Treatment Requested
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less, where the terms of a third party agreement do not support
such fees, and are otherwise acceptable to the Management
Committee).
(b) Upfront or Milestone Payments - If any Independent Third Party
-----------------------------
shall make upfront or milestone payments (e.g., for NDA filing,
approvals, etc.) to Newco, then [*] of the Net Proceeds from
such upfront or milestone payments shall be retained by Newco,
and Newco shall pay to each of Elan and TGEN, in proportion to
their respective ownership interests in Newco, royalties in the
amount of the remaining [*] of such Net Proceeds.
(c) Royalties payable to Elan and TGEN Upon Sales of the Products
-------------------------------------------------------------
based upon the Development Candidates - If Newco makes any In
-------------------------------------
market sales of such Products, Newco shall pay Elan a royalty
on Net Sales derived therefrom, at a rate to be determined by
the Management Committee prior to the market launch thereof to
be appropriate under the circumstances with respect to each
such Product. Newco shall retain [*] of the Net Proceeds from
all royalties derived from sales of Products based upon the
Development Candidates, and shall pay to each of Elan and TGEN
the remaining [*] of all such Net Proceeds in proportion to
their respective ownership interests in Newco.
(d) Special Provisions for TGEN Proprietary Genes. Notwithstanding
---------------------------------------------
the foregoing, in the event a Product is based upon a
Development Candidate which incorporates a TGEN Proprietary
Gene, [*] of the aggregate Net Proceeds from all upfront,
milestone and royalty payments made to Newco by an Independent
Third Party with respect to such Product shall be paid as an
additional royalty to TGEN, and the remaining [*] of such Net
Proceeds shall be paid as an additional royalty to Elan.
Thereafter, such amounts shall be allocated as provided above.
6.1.2 Products Based Upon TGEN Proprietary Genes. In the event Newco shall
------------------------------------------
desire to develop a Product incorporating a TGEN Proprietary Gene other
than a Product based upon the Development Candidate, Newco, Elan and TGEN
shall negotiate in good faith the terms for the licensing of such Gene
and royalties to be paid to each of TGEN and Elan; provided, however,
that with respect to Newco, the terms of such license shall be no less
favorable than those that would have be obtained
* Confidential Treatment Requested
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in an arm's length transaction between unrelated parties and, with
respect to TGEN, the terms of such license shall be no less favorable
than those granted to any other licensor to Newco
6.1.3 Products Based on Proprietary Genes of Independent Third Parties. Newco
----------------------------------------------------------------
shall make the following payments with respect to Products based on
proprietary Genes of Independent Third Parties:
(a) Development Work - Research and development work related to
----------------
Products based upon proprietary Genes of Independent Third Parties
performed by Elan or TGEN for Newco, as the case may be, shall be
payable to such Participant at [*] (or less, where the terms of a
third party agreement do not support such fees, and are otherwise
acceptable to the Management Committee). [*] of any profit received
by Newco for direct charges for such development following payment
of Elan's or TGEN's charges shall be payable as an additional
royalty by Newco to Elan and TGEN, in proportion to their respective
ownership interests in Newco.
(b) Upfront or Milestone Payments - If any Independent Third Party
---------- ------------------
shall make upfront or milestone payments (e.g., for NDA filing,
approvals, etc.) to Newco with respect to Products based upon
proprietary Genes of such third party, then [*] of the Net Proceeds
from such upfront or milestone payments shall be retained by Newco,
and Newco shall pay to each of Elan and TGEN the remaining [*] of
such Net Proceeds in proportion to their respective ownership
interests in Newco.
(c) Royalty Payments to Participants - If Newco makes any In market
--------------------------------
sales of such Products, Newco shall pay TGEN a royalty on Net Sales
derived therefrom, at a rate to be determined by the Management
Committee prior to the market launch thereof to be appropriate under
the circumstances with respect to each such Product. Newco shall
retain [*] of Net Proceeds derived by it from all royalties paid to
it by Independent Third Parties with respect to Products based upon
proprietary Genes of such parties, and shall pay to each of Elan and
TGEN the remaining [*] of all such Net Proceeds in proportion to
their respective ownership interests in Newco.
* Confidential Treatment Requested
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6.2 Payment of those royalties that are payable to TGEN pursuant to Clauses
6.1.1-6.1.3, if any, shall be made quarterly in arrears within forty-five
(45) days after the expiry of the calendar quarter. The method of payment
shall be by wire transfer to an account specified by TGEN and shall be
nonrefundable to Newco. Each payment made to TGEN shall be accompanied by a
true accounting of all Products sold by Newco, its Affiliates and its
permitted sublicensees, if any, during such quarter. Such accounting shall
show, on a country-by-country and Product-by-Product basis, Net Sales and
Net Proceeds invoiced and received by Newco (and the calculation thereof)
and each calculation of royalties with respect thereto, including the
calculation of all adjustments and currency conversions.
6.3 Newco shall maintain and keep clear, detailed, complete, accurate and
separate records for a period of three (3) years following the completion
of such records so: (i) as to enable any royalties which shall have accrued
hereunder to be determined; and (ii) that any deductions made in arriving
at the Net Sales and Net Proceeds can be determined.
6.4 All payments due hereunder shall be made in United States Dollars.
Payments due on Net Sales of any Product and Net Proceeds with respect to
any Product invoiced and received by Newco for each calendar quarter made
in a currency other than United States Dollars shall first be calculated in
the foreign currency and then converted to United States Dollars on the
basis of the average exchange rate in effect for such quarter for the
purchase of United States Dollars with such foreign currency quoted in the
Wall Street Journal (or comparable publication if not quoted in the Wall
Street Journal) with respect to the currency of the country of origin of
such payment, determined by averaging the rates so quoted on each business
day of such quarter.
6.5 If, at any time, legal restrictions in the Territory prevent the prompt
payment when due of royalties payable hereunder to TGEN or any portion
thereof, the Parties shall meet to discuss suitable and reasonable
alternative methods of reimbursing TGEN the amount of such royalties. In
the event that Newco is prevented from making any payment under this
Agreement by virtue of the statutes, laws, codes or government regulations
of the country from which the payment is to be made, then such payments may
be paid by depositing them in the currency in which they accrue to TGEN's
account in a bank acceptable to TGEN in the country the currency of which
is involved or as otherwise agreed by the Parties.
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6.6 TGEN and Newco agree to co-operate in all respects necessary to take
advantage of any double taxation agreements or similar agreements as may,
from time to time, be available.
6.7 Any taxes payable by TGEN on any payment made to TGEN pursuant to this
Agreement shall be for the account of TGEN. If so required by applicable
law, any payment made pursuant to this Agreement shall be made by Newco
after deduction of the appropriate withholding tax, in which event the
Parties shall co-operate to obtain the appropriate tax clearance as soon as
is practicable. On receipt of such clearance, Newco shall forthwith
procure that the amount so withheld is paid to TGEN.
6.8 Newco shall, not more than once in each calendar year, nor more than once
with respect to any accounting period, permit representatives of an
internationally-recognized firm of independent certified accountants
selected by TGEN upon reasonable notice and at any reasonable time during
normal business hours to have access to inspect and audit the accounts and
records of Newco and any other book, record, voucher, receipt or invoice
relating to the calculation of the royalty payments on Net Sales and Net
Proceeds submitted to TGEN. Any such inspection of Newco's records shall
be at the expense of TGEN, except that if any such inspection reveals a
deficiency in the amount of the royalty actually paid to TGEN hereunder in
any calendar quarter of five percent (5%) or more of the amount of any
royalty actually due to TGEN hereunder, then the expense of such inspection
shall be borne solely by Newco. Any amount of deficiency shall be paid
promptly to TGEN by Newco. If such inspection reveals a surplus in the
amount of royalties actually paid to TGEN by Newco, TGEN shall reimburse
Newco the surplus within fifteen (15) days after determination.
6.9 In the event of any unresolved dispute regarding any alleged deficiency or
overpayment of royalty payments hereunder, the matter will be subject to
resolution in accordance with Clause 19 of the Development Agreement, which
is incorporated by reference and shall for such purposes survive
termination of the Development Agreement.
7. CONFIDENTIAL INFORMATION
7.1 The Parties acknowledge that it may be necessary, from time to time, to
disclose to each other confidential and proprietary information, including
without limitation, inventions, works of authorship, trade secrets,
specifications, designs, data, know-how and other information relating to
the
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Field, the Products, Elan Intellectual Property, TGEN Intellectual Property
or the Newco Technology, as the case may be, or otherwise as to processes,
services or business of the disclosing Party. The foregoing shall be
referred to collectively as "Confidential Information". Any Confidential
Information revealed by a Party to another Party shall be used by the
receiving Party exclusively for the purposes of fulfilling the receiving
Party's obligations under this Agreement and the Development Agreement and
for no other purpose.
7.2 Each Party agrees to disclose Confidential Information of another Party
only to another Participant and to those employees, representatives and
agents of Newco or such participant requiring knowledge thereof in
connection with their duties directly related to the fulfilling of the
Party's obligations under this Agreement, the Development Agreement or the
Elan License Agreement. Each Party further agrees to inform all such
Participants and employees, representatives and agents of the terms and
provisions of this Agreement and their duties hereunder and to obtain their
consent hereto as a condition of receiving Confidential Information. Each
Party agrees that it will exercise the same degree of care, but in no event
less than a reasonable degree of care, to protect and preserve the
proprietary and confidential nature of the Confidential Information
disclosed by a Party, as the receiving Party would exercise to preserve its
own proprietary and confidential information. Each Party agrees that it
will, upon request of a Party, return all documents and any copies thereof
containing Confidential Information belonging to or disclosed by, such
Party, and that it will obtain the same agreement from the other
Participant.
7.3 Notwithstanding the above, each Party may use or disclose Confidential
Information disclosed to it by another party to the extent such use or
disclosure is reasonably necessary in filing or prosecuting patent
applications, prosecuting or defending litigation, complying with patent
applications, complying with applicable governmental regulations, including
without limitation those relating to securities regulations and
disclosures, or otherwise submitting information to tax or other
governmental authorities, conducting clinical trials, or making a permitted
sub-license or otherwise exercising its rights hereunder.
7.4 Confidential Information shall not be deemed to include:
(i) information that is generally available to the public;
(ii) information which is made public by the disclosing Party;
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(iii) information which is independently developed by a Party as evidenced
by such Party's written records, without the aid, application or use
of the disclosing Party's Confidential Information;
(iv) information that is published or otherwise becomes part of the
public domain without any disclosure by a Party, or on the part of a
Party's directors, officers, agents, representatives or employees;
(vii) information that becomes available to a Party on a non-confidential
basis, whether directly or indirectly, from a source other than a
Party, which source did not acquire this information on a
confidential basis;
(viii) information which the receiving Party is required to disclose
pursuant to:
(A) a valid order of a court or other governmental body or any
political subdivision thereof or otherwise required by law; or
(B) any other requirement of law;
provided that if the receiving Party becomes legally required to
disclose any Confidential Information, the receiving Party shall
give the disclosing Party prompt notice of such fact so that the
disclosing Party may obtain a protective order or other appropriate
remedy concerning any such disclosure. The receiving Party shall
fully cooperate with the disclosing Party in connection with the
disclosing Party's efforts to obtain any such order or other remedy.
If any such order or other remedy does not fully preclude
disclosure, the receiving Party shall make such disclosure only to
the extent that such disclosure is legally required;
(v) information which was already in the possession of the receiving
Party at the time of receiving such information, as evidenced by its
written records, provided such information was not previously
provided to the receiving Party from a source which was under an
obligation to keep such information confidential; or
(vi) information that is the subject of a written permission to disclose,
without restriction or limitation, by the disclosing Party.
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7.5 The provisions relating to confidentiality in this Clause 7 shall remain in
effect during the term of this Agreement, and for a period of seven (7)
years following the expiration or earlier termination of this Agreement.
7.6 The Parties agree that the obligations of this Clause 7 are necessary and
reasonable in order to protect the Parties' respective businesses, and each
Party expressly agrees that monetary damages would be inadequate to
compensate a Party for any breach by the other Party of its covenants and
agreements set forth herein. Accordingly, the Parties agree and
acknowledge that any such violation or threatened violation will cause
irreparable injury to a Party and that, in addition to any other remedies
that may be available, in law and equity or otherwise, any Party shall be
entitled to obtain injunctive relief against the threatened breach of the
provisions of this Clause 7, or a continuation of any such breach by the
other Party, specific performance and other equitable relief to redress
such breach together with its damages and reasonable counsel fees and
expenses to enforce its rights hereunder, without the necessity of proving
actual or express damages.
8. WARRANTIES/INDEMNITIES
8.1 TGEN represents and warrants to Newco and Elan, as a third party
beneficiary, that:
(a) TGEN is a corporation duly organized under the laws of its
jurisdiction of organization and has all the requisite corporate power
and authority to own and lease its respective properties, to carry on
its respective business as presently conducted and as proposed to be
conducted and to carry out the transactions contemplated hereby;
(b) TGEN has full corporate power and authority to enter into this
Agreement and to perform its obligations hereunder, which have been
duly authorized by all requisite corporate action of TGEN. This
Agreement is the valid and binding obligation of TGEN, enforceable
against it in accordance with its terms, except as limited by
applicable bankruptcy, insolvency, reorganization, moratorium and
other laws of general application affecting the enforcement of
creditors' rights generally, and by general equity principles and
limitations on the availability of equitable relief, including
specific performance;
(c) The execution, delivery and performance by TGEN of this Agreement will
not: (i) violate any provision of applicable law, statute, rule or
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regulation known by and applicable to TGEN or any ruling, writ,
injunction, order, judgment or decree of any court, arbitrator,
administrative agency or other governmental body applicable to TGEN or
any of its properties or assets; or (ii) conflict with or result in
any breach of any of the terms, conditions or provisions of the
charter or organizational documents of TGEN;
(d) To TGEN's best knowledge, except as set forth on Schedule 2 hereto, as
of the Effective Date: (i) TGEN has the right to grant the TGEN
License and any other rights granted herein, (ii) Schedule 1 contains
primary examples of the Elan Intellectual Property existing as of the
Effective Date, which listing is not necessarily exhaustive, (iii)
there are no agreements between Elan and any third parties that
conflict with the TGEN License which would have a material adverse
effect on the ability of Newco to conduct the Project, and (iv) TGEN
is the owner or licensee of all rights, title and interest in the TGEN
Intellectual Property.
8.2 Newco represents and warrants to TGEN that:
(a) Newco is duly and validly existing in good standing in the
jurisdiction of its incorporation and each other jurisdiction in which
the conduct of its business requires such qualification (except where
such failure to so qualify shall not have a material adverse affect on
the business and assets of Newco), and Newco is in compliance with all
applicable laws, rules, regulations or orders relating to its business
and assets;
(b) Newco has full corporate authority to execute and deliver this
Agreement and to consummate the transactions contemplated hereby; this
Agreement has been duly executed and delivered and constitutes the
legal and valid obligations of Newco and is enforceable against Newco
in accordance with its terms; and the execution, delivery and
performance of this Agreement and the transactions contemplated hereby
will not violate or result in a default under or creation of lien or
encumbrance under Newco's certificate of incorporation, by-laws or
other organic documents, any material agreement or instrument binding
upon or affecting Newco, or its properties or assets or any applicable
laws, rules, regulations or orders affecting Newco or its properties
or assets;
(c) Newco is not in default of its charter or by-laws, any applicable laws
or regulations or any material contract or agreement binding upon or
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affecting it or its properties or assets and the execution, delivery
and performance of this Agreement and the transactions contemplated
hereby will not result in any such violation;
(d) The execution of this Agreement by Newco and the full performance and
enjoyment of the rights of Newco under this Agreement will not breach
the terms and conditions of any license, contract, understanding or
agreement, whether express, implied, written or oral between Newco and
any third party;
(e) Newco has the sole, exclusive and unencumbered right to grant the
licenses and rights herein granted to TGEN and that it has not granted
and will not grant any option, license, right or interest in or to the
TGEN Intellectual Property, the Newco Technology, or other property to
any third party which would conflict with the rights granted by this
Agreement and the Definitive Documents;
(f) The Products shall be developed, manufactured, transported, stored,
handled, packaged, marketed, promoted, distributed, offered for sale
and sold in accordance with all regulations and requirements of the
FDA and foreign regulatory authorities including, without limitation,
cGCP, cGLP, cGMP regulations. The Products shall not be adulterated or
misbranded as defined by the Federal Food, Drug and Cosmetic Act (or
applicable foreign law) and shall not be a product which would violate
any section of such Act if introduced in interstate commerce; and
(g) It is fully cognizant of all applicable statutes, ordinances and
regulations of the United States of America and countries in the
Territory with respect to the manufacture of the Products including,
but not limited to, the U.S. Federal Food, Drug and Cosmetic Act and
regulations thereunder and similar statutes in countries outside of
the United States. Newco shall manufacture or procure the manufacture
of the Products in conformity with the Marketing Authorizations and in
a manner which fully complies with all United States of America and
foreign statutes, ordinances, regulations and practices.
8.3 In addition to any other indemnifications provided for herein, TGEN shall
indemnify and hold harmless Newco, Elan and their Affiliates and their
respective employees, agents, partners, officers and directors from and
against any claims, losses, liabilities or damages (including reasonable
attorney's fees and expenses) incurred or sustained by Newco arising out of
or in connection
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with any (a) breach of any representation, covenant, warranty or obligation
by TGEN hereunder, or (b) any act or omission on the part of TGEN or any of
its agents or employees in the performance of this Agreement.
8.4 In addition to any other indemnifications provided for herein, Newco shall
indemnify and hold harmless TGEN and its Affiliates and their respective
employees, agents, partners, officers and directors from and against any
claims, losses, liabilities or damages (including reasonable attorney's
fees and expenses) incurred or sustained by TGEN arising out of or in
connection with any (a) breach of any representation, covenant, warranty or
obligation by Newco hereunder, or (b) any act or omission on the part of
Newco or any of its agents or employees in the performance of this
Agreement.
8.5 The Person seeking an indemnity shall:
8.5.1 fully and promptly notify the indemnifying Party of any claim or
proceeding, or threatened claim or proceeding;
8.5.2 permit the indemnifying Party to take full care and control of such
claim or proceeding;
8.5.3 cooperate in the investigation and defense of such claim or
proceeding;
8.5.4 not compromise or otherwise settle any such claim or proceeding
without the prior written consent of the indemnifying Party, which
consent shall not be unreasonably withheld, conditioned or delayed;
and
8.5.5 take all reasonable steps to mitigate any loss or liability in
respect of any such claim or proceeding.
8.6 NOTWITHSTANDING ANYTHING TO THE CONTRARY IN THIS AGREEMENT, NEITHER TGEN
NOR NEWCO SHALL BE LIABLE TO THE OTHER PARTY, BY REASON OF ANY
REPRESENTATION OR WARRANTY, CONDITION OR OTHER TERM OR ANY DUTY OF COMMON
LAW, OR UNDER THE EXPRESS TERMS OF THIS AGREEMENT, FOR ANY CONSEQUENTIAL OR
INCIDENTAL LOSS OR DAMAGE (WHETHER FOR LOSS OF PROFIT OR OTHERWISE) AND
WHETHER OCCASIONED BY THE APPLICABLE PARTY'S NEGLIGENCE OR THAT OF ITS
EMPLOYEES OR AGENTS OR OTHERWISE
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8.7 EXCEPT AS SET FORTH IN THIS SECTION 8, TGEN IS GRANTING THE TGEN LICENSE
HEREUNDER ON AN "AS IS" BASIS WITHOUT RECOURSE, REPRESENTATION OR WARRANTY
WHETHER EXPRESS OR IMPLIED, INCLUDING WARRANTIES OF MERCHANTABILITY OR
FITNESS FOR A PARTICULAR PURPOSE, OR INFRINGEMENT OF THIRD PARTY RIGHTS,
AND ALL SUCH WARRANTIES ARE EXPRESSLY DISCLAIMED.
9. INTELLECTUAL PROPERTY OWNERSHIP RIGHTS
9.1 Subject to the terms and conditions of this Agreement, Newco shall own the
legal and equitable title to the Newco Technology.
9.2 TGEN shall own the legal and equitable title to the TGEN Intellectual
Property, including without limitation, TGEN Improvements.
9.3 Newco shall permanently mark or otherwise use reasonable efforts to cause
any third party to permanently mark all Products and/or the packaging
therefor with such license or patent notices to comply with the laws of the
country of sale or otherwise to generally communicate the existence of any
TGEN Patents for the countries of the Territory and in such manner as TGEN
may reasonably request in writing prior to the sale or commercial use
thereof.
9.4 TGEN, at its expense, shall make a good faith effort (i) to secure the
grant of any material patent applications within the TGEN Patents that
relate to the Field; (ii) to defend all such applications against third
party oppositions and interferences; and (iii) to maintain in force any
material issued letters patent within the TGEN Patents that relate to the
Field (including any letters patent that may issue covering any such Elan
Improvements that relate to the Field). TGEN shall have the right in its
discretion to control such filing, prosecution, defense and maintenance
provided that Newco and Elan at their request shall be provided with copies
of all documents relating to such filing, prosecution, defense and
maintenance in sufficient time to review such documents and comment thereon
prior to filing. Notwithstanding the foregoing, it is understood that TGEN
retains the discretion, in its sole judgment, as to whether and where to
file or to prosecute patent applications on any such technologies or rights
relating to the TGEN Intellectual Property.
9.5 Newco, TGEN and Elan shall promptly inform each other in writing of any
alleged infringement of any patents within the Elan Patents, the TGEN
Patents, or any Newco patents or any alleged misappropriation of trade
secrets within
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the TGEN Intellectual Property or the TGEN Intellectual Property by a third
party of which it becomes aware and provide the others with any available
evidence of such infringement or misappropriation insofar as such
infringements or misappropriation relate solely to the Field.
9.6 Newco shall have the right to prosecute at its own expense and for its own
benefit any infringements of the TGEN Patents or misappropriation of the
TGEN Intellectual Property, insofar as such infringements or
misappropriation relate solely to the Field. In the event that Newco takes
such action, Newco shall do so at its own cost and expense. At Newco's
request, TGEN shall cooperate with such action. Any recovery remaining
after the deduction by Newco of the reasonable expenses (including
attorney's fees and expenses) incurred in relation to such infringement
proceeding shall belong to Newco. Should Newco decide not to pursue such
infringers, within a reasonable period but in any event within twenty (20)
days after receiving written notice of such alleged infringement or
misappropriation TGEN may in its discretion initiate such proceedings in
its own name, at its expense and for its own benefit, and at TGEN's
request, Newco shall cooperate with such action. Alternatively, the
Participants may agree to institute such proceedings in their joint names
and shall reach agreement as to the proportion in which they shall share
the proceeds of any such proceedings, and the expense of any costs not
recovered, or the costs or damages payable to the third party. If the
infringement of the TGEN Patents affects both the Field as well as other
products being developed or commercialized by TGEN or its commercial
partners outside the Field, Newco and TGEN shall endeavor to agree as to
the manner in which the proceedings should be instituted and as to the
proportion in which they shall share the proceeds of any such proceedings,
and the expense of any costs not recovered, or the costs or damages payable
to the third party.
9.8 Newco shall indemnify, defend and hold harmless Elan and TGEN, against all
actions, losses, claims, demands, damages, costs and liabilities (including
reasonable attorneys fees) relating directly or indirectly to all such
claims or proceedings referred to herein, provided that TGEN, shall not
acknowledge to the third party or to any other person the validity of any
claims of such a third party, and shall not compromise or settle any claim
or proceedings relating thereto without the prior written consent to Newco,
not to be unreasonably withheld, conditioned or delayed. At its option,
Elan or TGEN, as the case may be, may elect to take over the conduct of
such proceedings from Newco provided that Newco's indemnification
obligations shall continue; the costs of defending such claim shall be
borne by Elan or TGEN, as the case may be and
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such Participant shall not compromise or settle any such claim or
proceeding without the prior written consent of Newco, such consent not to
be unreasonably withheld, conditioned or delayed.
10. RIGHTS EXPLOITATION OUTSIDE THE FIELD
10.1 Licenses to TGEN Program Technology. Newco hereby grants to TGEN an
-----------------------------------
exclusive, royalty free and sublicensable license to TGEN Program
Technology outside of the Field. Such license shall be effective and
exclusive on a country-by-country basis for the life of any patents on such
TGEN Program Technology in such country, or, to the extent the TGEN Program
Technology is not patented or covered by pending patent applications in any
country, for fifteen years from the date any products are first introduced
on the market in such country by TGEN under such license, or for such
shorter period as shall be required under the applicable law of any country
in the Territory.
10.2 Licenses for Newco Program Technology Outside the Field. Newco shall
-------------------------------------------------------
negotiate in good faith with Elan and TGEN, respectively, for the grant of
exclusive or non-exclusive licenses for the rights to Newco Program
Technology (other than TGEN Program Technology or Elan Program Technology)
outside the Field in the Territory. All such licenses shall contain such
customary terms contained in similar licenses in the industry, as agreed to
by the licensee and the unanimous decision of the Management Committee,
acting in good faith.
11. NON-COMPETITION
11.1 During the Research and Development Term (and any extensions thereto),
subject to the other provisions of this Agreement, TGEN (subject, however,
to Section 11.2 hereof and Section 20.2 of the Development Agreement) shall
not (i) market, sell, develop, or assist in the development for the use,
manufacture, distribution or sale of Products in the Field, except (a) for
or on behalf of Newco, or (b) with Newco's prior written consent, (ii)
develop, or assist in the development of, [*] in the Field or (iii) market,
sell, develop, or assist in the development for the use, manufacture or
distribution of products having the same [*] with such Product. Following
termination of the Research and Development Term, TGEN shall not during the
License Term market, sell, develop, or assist in the development for the
use, manufacture, distribution of products having the same Gene which is
part of a Product being Commercialized by Newco [*]
* Confidential Treatment Requested
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<PAGE>
11.2 If an Independent Third Party desires that TGEN shall, in connection with
the development of a Product, apply Gene Delivery Technologies to such
party's proprietary Gene or to a TGEN Proprietary Gene that is not
incorporated into a Product developed or under development by Newco, then:
(a) TGEN, Elan and Newco shall determine in their reasonable and good
faith judgment whether Newco is capable of developing such Product or
acquiring and assimilating Drug Delivery Technologies necessary to
develop such Product within the time period required by such
Independent Third Party.
(b) In the event that
(i) the Elan Intellectual Property or Newco Technology is not
applicable to such proposed Product, or
(ii) Newco cannot, within the time period required by such
Independent Third Party, acquire and/or assimilate the Drug
Delivery Technologies necessary to develop such Product, or
(iii) such Independent Third Party is unwilling to enter into an
agreement with Newco for development of such Product, or (iv)
the Management Committee, acting in good faith, determines that
Newco should not develop such Product,
TGEN may, at its sole discretion, enter into and perform such an
agreement with such Independent Third Party.
(c) In the event Newco desires to develop such Product and (i) the Elan
Intellectual Property or Newco Technology is applicable to such
proposed Product, or Newco can, within the time period required by
such Independent Third Party, acquire and/or assimilate the Drug
Delivery Technologies necessary to develop such Product, and (ii) such
Independent Third Party is willing to enter into an agreement with
Newco for development of such Product, TGEN may not enter into such an
agreement with such Independent Third Party to the extent doing so
would be otherwise prohibited by TGEN's agreement under Section 11.1
above.
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<PAGE>
12. TERM AND TERMINATION OF AGREEMENT
12.1 The term of this Agreement and the term of the Licenses granted hereunder
with respect to a Product utilizing or based on the Licensed Technologies
shall commence as of the Effective Date and continue, on a Product-by-
Product basis and country by country basis, for the life of the patent
rights upon which such Product is based or which such Product utilizes in
such country (the "Term"); provided, however, that all royalty and fee
obligations contained herein shall survive for the greater of (i) the Term
or (ii) 15 years from the first commercial sale of such Product.
12.2 Except as otherwise provided in Section 11 hereof, nothing contained herein
shall obligate or restrict any party from utilizing public, non-proprietary
information which is not subject to the protection of applicable patent
laws.
12.3 If either Party materially breaches any provision of this Agreement and if
such breach is (i) not capable of being cured or (ii) is capable of being
cured but is not cured within sixty (60) days after the non-breaching party
gives written notice of the breach to the breaching party, the non-
breaching party may terminate this Agreement immediately by giving notice
of the termination, effective on the date of the notice, provided, however,
-------- -------
that (x) if any such curable breach is not capable of being cured within
such sixty (60) day period, so long as the breaching party commences to
cure the breach promptly after receiving notice of the breach from the non-
breaching party and thereafter diligently prosecutes the cure to completion
as soon as is practicable, the non-breaching Party may not terminate this
Agreement so long as the breaching party is acting in good faith to rectify
such breach and (y) if there is a good faith dispute as to the existence
of the breach or as to its materiality, or regarding the amount of any
required payment, provided, in the case of disputes as to the amount due,
that any undisputed amount is paid, the right of the non-breaching Party to
terminate this Agreement shall be stayed for a reasonable period during
which a good faith resolution of the dispute will be obtained, either by
agreement or, failing that, through the dispute resolution provisions under
Clause 19 of the Development Agreement.
12.4 In the event that a Change of Control Event shall occur, at the sole option
of Elan and upon written notice to TGEN and Newco, the Elan License shall
be terminated. Upon written notice from TGEN to Elan of a proposed Change
of Control Event or the occurrence of a Change of Control Event, Elan shall
have thirty (30) days from such notice or occurrence to provide written
notice to TGEN as to whether it intends to terminate the Elan License
immediately. In
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<PAGE>
the event Elan does not provide written notice to TGEN during such thirty
(30) day period of its intention to terminate the Elan License, such
termination right shall be deemed waived with respect to such proposed
Change of Control Event or such occurrence of a Change of Control Event.
12.5 In the event that the Elan License Agreement shall be terminated, at the
sole option of TGEN and upon written notice to Elan and Newco, the TGEN
License shall be immediately terminated.
12.6 Upon the occurrence of an Event of Bankruptcy with respect to Newco or
TGEN, the other Party may, upon written notice to TGEN and the Party with
respect to which such Event of Bankruptcy has occurred, immediately
terminate the TGEN License. As used in this Clause 12.6, the term "Event
of Bankruptcy" relating to either Newco or TGEN shall mean:
12.6.1 the appointment of a liquidator, receiver, administrator, examiner,
trustee or similar officer for either Party or over all or a
substantial part of its assets under the law of any applicable
jurisdiction, including without limitation, Bermuda, the United
States of America or Ireland; or
12.6.2 An application or petition for bankruptcy, corporate re-
organization, composition, administration, examination, arrangement
or any other procedure similar to any of the foregoing under the
law of any applicable jurisdiction, including without limit,
Bermuda, the United States of America or Ireland (other than as
part of a bona fide restructuring or reorganization), is filed, and
is not discharged within forty-five (45) days, or if either Party
applies for or consents to the appointment of a receiver,
administrator, examiner or similar officer for it or all or a
material part of its assets, rights or revenues or the assets
and/or the business of either Party are for any reason seized,
confiscated or condemned.
12.7 Upon exercise of those rights of termination as specified in Clause 12.1
to Clause 12.6 inclusive or elsewhere within this Agreement, this
Agreement shall, subject to the other provisions of this Agreement, and
specifically subject to Section 12.8, automatically terminate forthwith
and be of no further legal force or effect.
12.8 Upon expiration or termination of this Agreement:
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12.8.1 any sums that were due from Newco to TGEN with respect to license
granted hereunder, including without limitation on Net Sales or on
Net Proceeds, in the Territory or in such particular country or
countries in the Territory (as the case may be) prior to the
expiration or termination of this Agreement as set forth herein
shall be paid in full within sixty (60) days after the expiration
or termination of this Agreement for the Territory or for such
particular country or countries in the Territory (as the case may
be);
12.8.2 any provisions clearly meant to survive termination or expiration
of this Agreement, including without limitation Section 7, shall
remain in full force and effect;
12.8.3 all representations, warranties and indemnities stated herein shall
insofar as are appropriate remain in full force and effect;
12.8.4 the rights of inspection and audit set out in Section 6 shall
continue in force for a period of one year;
12.8.5 termination or expiration of this Agreement for any reason shall
not release any Party hereto from any liability which, at the time
of such termination or expiration, has already accrued to the other
Party or to any third party beneficiary or which is attributable to
a period prior to such termination or expiration, including without
limitation claims for indemnification under Sections 8.3 - 8.5 or
9.7 arising from events, actions, omissions or liabilities that
existed at or prior to such termination or expiration, nor preclude
either Party or any third party beneficiary from pursuing all
rights and remedies it may have hereunder or at law or in equity
with respect to any breach of this Agreement;
12.8.6 all rights, licenses and sublicenses granted by TGEN in the TGEN
Intellectual Property pursuant to this Agreement shall cease for
the Territory or for such particular country or countries in the
Territory (as the case may be) and shall immediately revert to TGEN
and all TGEN Program Technology shall be deemed immediately
transferred and assigned to TGEN. Following such expiration or
termination, Newco may not thereafter use in the Territory or in
such particular country or countries in the Territory (as the case
may be) (a) any valid and unexpired TGEN Patents, (b) any TGEN
Intellectual Property that remains confidential or otherwise
proprietary to TGEN, and/or (c) Trademarks. All rights to Newco
Technology (other than Elan Program
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<PAGE>
Technology and TGEN Program Technology) shall be transferred to and
jointly owned by Elan and TGEN. Rights of permitted Independent
Third Party sublicensees in and to the TGEN Intellectual Property
shall survive the termination or expiration of the license and
sublicense agreements granting said intellectual property rights to
Newco; and Newco, Elan and TGEN shall in good faith agree upon the
form most advantageous to Elan and TGEN in which the rights of the
sublicensor under any such sublicenses are to be held (which form
may include continuation of Newco solely as the holder of such
licenses or assignment of such rights to a third party or parties,
including an assignment to both Elan and TGEN). Any sublicense
agreement between Newco and such permitted sublicensee shall permit
an assignment of rights by Newco to Elan or TGEN, as the case may
be, and shall contain additional reasonable confidentiality
protections which an assignee shall reasonably require. Upon any
such assignment, TGEN shall enter into good faith negotiations with
TGEN with respect to additional reasonable confidentiality
protections which either party shall reasonably require.
13. IMPOSSIBILITY OF PERFORMANCE - FORCE MAJEURE
13.1 Neither Party to this Agreement shall be liable for delay in the
performance of any of its obligations hereunder if such delay results from
causes beyond its reasonable control, including, without limitation, acts
of God, fires, strikes, acts of war, or intervention of a government
authority, non availability of raw materials, but any such delay or failure
shall be remedied by such Party as soon as practicable.
14. SETTLEMENT OF DISPUTES; GOVERNING LAW
14.1 Any dispute between the Parties arising out of or relating to this
Agreement will be subject to resolution in accordance with Clause 19 of the
Development Agreement, which is incorporated by reference and shall for
such purposes survive expiration or termination of the Development
Agreement.
14.2 This Agreement is construed under and ruled by the laws of the State of New
York, without regard to conflicts of law principles.
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<PAGE>
15. ASSIGNMENT
15.1 This Agreement may not be assigned by either Party without the prior
written consent of the other, which consent shall not be unreasonably
withheld, conditioned or delayed, save that (i) either Party may assign
this Agreement to its Affiliate without such consent, provided that such
assignment does not have any adverse tax consequences on the other Party,
and (ii) TGEN may assign its rights and obligations hereunder in
connection with a sale of all or substantially all of the business of TGEN
to which the Definitive Documents relate, whether by merger, sale of stock,
sale of assets or otherwise (provided that, in the event of such
transaction, no intellectual property rights of any third party that is the
acquiring corporation in such transaction shall be included in the TGEN
Intellectual Property licensed hereunder). TGEN and Newco will discuss any
assignment by either Party to an Affiliate prior to its implementation in
order to avoid or reduce any additional tax liability to the other Party
resulting solely from different tax law provisions applying after such
assignment to an Affiliate. For the purpose hereof, an additional tax
liability shall be deemed to have occurred if either Party would be subject
to a higher net tax on payments made hereunder after taking into account
any applicable tax treaty and available tax credits than such Party was
subject to before the proposed assignment. Notwithstanding any assignment
hereof to an Affiliate, each Party will remain fully liable hereunder.
16. NOTICES
16.1 Any notice to be given under this Agreement shall be sent in writing in
English by registered airmail or telefaxed to the following addresses:
If to Newco at: Targeted Genetics Newco, Ltd.
c/o Targeted Genetics Corporation
1100 Olive Way, Suite 100
Seattle, Washington 98101
Attention: Chief Executive Officer
Telefax: (206) 623-7064
If to TGEN to: Targeted Genetics Corporation
1100 Olive Way, Suite 100
Seattle, Washington 98101
Attention: Chief Executive Officer
Telefax: (206) 623-7064
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<PAGE>
with a copy to: Perkins Coie LLP
411-108/th/ Avenue N.E., Suite 1800
Bellevue, Washington 98004-5584
Attention: Roger M. Tolbert, Esq.
Telefax: (425) 453-7350
If to Elan at: Elan Corporation plc
Lincoln House, Lincoln Place, Dublin 2, Ireland
Attention: Vice President, General Counsel,
Elan Pharmaceutical Technologies,
a division of Elan Corporation, plc
Telefax: + 353 1 709 4124
with a copy to: Cohen & Tauber LLP
1350 Avenue of the Americas
26/th/ Floor
New York, New York 10019
Attention: Laurence S. Tauber
Telefax: (212) 262-1766
or to such other address(es) and telefax numbers as may from time to time be
notified by either Party or TGEN to the other hereunder.
16.2 Any notice sent by mail shall be deemed to have been delivered within seven
(7) working days after dispatch and any notice sent by telex or telefax
shall be deemed to have been delivered within twenty four (24) hours of the
time of the dispatch. Notice of change of address shall be effective upon
receipt.
17. MISCELLANEOUS CLAUSES
17.1 No waiver of any right under this Agreement shall be deemed effective
unless contained in a written document signed by the Party or third party
beneficiary charged with such waiver, and no waiver of any breach or
failure to perform shall be deemed to be a waiver of any other breach or
failure to perform or of any other right arising under this Agreement.
17.2 If any provision in this Agreement is agreed by the Parties to be, or is
deemed to be, or becomes invalid, illegal, void or unenforceable under any
law that is applicable hereto, (i) such provision will be deemed amended to
conform to applicable laws so as to be valid and enforceable or, if it
cannot be so amended without materially altering the intention of the
Parties, it will be deleted, with
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<PAGE>
effect from the date of such agreement or such earlier date as the Parties
may agree, and (ii) the validity, legality and enforceability of the
remaining provisions of this Agreement shall not be impaired or affected in
any way.
17.3 The Parties shall use their respective reasonable endeavors to ensure that
the Parties and any necessary third party shall execute and perform all
such further deeds, documents, assurances, acts and things as any of the
Parties hereto may reasonably require by notice in writing to the other
Party or such third party to carry into effect the provisions of this
Agreement.
17.4 This Agreement shall be binding upon and inure to the benefit of the
Parties hereto, their successors and permitted assigns and sub-licenses.
Elan shall be a third party beneficiary to this Agreement and shall have
the right (subject to the dispute resolution provisions of the Development
Agreement) to cause Newco to enforce Newco's rights against TGEN.
17.5 No provision of this Agreement shall be construed so as to negate, modify
or affect in any way the provisions of any other agreement between the
Parties unless specifically referred to, and solely to the extent provided,
in any such other agreement. In the event of a conflict between the
provisions of this Agreement and the provisions of the Development
Agreement, the terms of the Development Agreement shall prevail unless this
Agreement or the Development Agreement specifically provides otherwise.
17.6 No amendment, modification or addition hereto shall be effective or binding
on either Party unless set forth in writing and executed by a duly
authorized representative of each Party. Amendments hereto shall be subject
to the prior approval of TGEN, which approval, except as otherwise provided
herein, shall not be unreasonably withheld, conditioned or delayed.
17.7 This Agreement may be executed in any number of counterparts, each of which
when so executed shall be deemed to be an original and all of which when
taken together shall constitute this Agreement.
17.8 Each of the Parties undertakes to do all things reasonably within its power
which are necessary or desirable to give effect to the spirit and intent of
this Agreement.
17.9 Each of the Parties hereby acknowledges that in entering into this
Agreement it has not relied on any representation or warranty save as
expressly set out herein or in any document referred to herein.
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<PAGE>
17.10 Nothing contained in this Agreement is intended or is to be construed to
constitute Elan, TGEN and Newco as partners, or to constitute any of
Elan, TGEN or Newco as an employee of any of the others. Neither Party
hereto nor Elan shall have any express or implied right or authority to
assume or create any obligations on behalf of or in the name of the other
Party hereto or Elan or to bind the other Party hereto or Elan to any
contract, agreement or undertaking with any third party.
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<PAGE>
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of
the date first set forth above.
TARGETED GENETICS
CORPORATION
By: /s/ Stewart Parker
---------------------------------
Name: H. Stewart Parker
-------------------------------
Title: President & CEO
------------------------------
TARGETED GENETICS NEWCO, LTD.
By: /s/ Stewart Parker
---------------------------------
Name: H. Stewart Parker
-------------------------------
Title: President
------------------------------
AGREED TO:
ELAN PHARMACEUTICAL
TECHNOLOGIES,
a division of Elan Corporation, plc
By: /s/ Kevin Insley
---------------------------------
Name: Kevin Insley
-------------------------------
Title: Authorized Signatory
------------------------------
[TGEN LICENSE AGREEMENT EXECUTION PAGE]
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SCHEDULE 1
----------
TGEN Intellectual Property
[*]
* Confidential Treatment Requested
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<PAGE>
SCHEDULE 2
----------
TGEN Exceptions and Disclosures
[*]
* Confidential Treatment Requested
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<PAGE>
Exhibit 1.7
EXECUTION COPY
LICENSE AGREEMENT
BY AND BETWEEN
TARGETED GENETICS NEWCO, LTD.
A Bermuda Limited Company
AND
ELAN PHARMACEUTICAL TECHNOLOGIES,
a division of Elan Corporation, plc
An Irish Company
July 21, 1999
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Section Page
- ------- ----
<S> <C>
1. DEFINITIONS................................................. 1
2. GRANT OF RIGHTS............................................. 10
3. IMPROVEMENTS AND AFTER ACQUIRED TECHNOLOGY.................. 14
4. DEVELOPMENT OF PRODUCTS..................................... 15
5. REGULATORY APPROVALS........................................ 15
6. FINANCIAL PROVISIONS........................................ 16
7. CONFIDENTIAL INFORMATION.................................... 20
8. WARRANTIES/INDEMNITIES...................................... 22
9. INTELLECTUAL PROPERTY OWNERSHIP RIGHTS...................... 26
10. RIGHTS EXPLOITATION OUTSIDE THE FIELD....................... 28
11. NON-COMPETITION............................................. 28
12. TERM AND TERMINATION OF AGREEMENT........................... 29
13. IMPOSSIBILITY OF PERFORMANCE - FORCE MAJEURE................ 32
14. SETTLEMENT OF DISPUTES; GOVERNING LAW....................... 32
15. ASSIGNMENT.................................................. 32
16. NOTICES..................................................... 33
17. MISCELLANEOUS CLAUSES....................................... 34
</TABLE>
<PAGE>
LICENSE AGREEMENT dated as of July 21, 1999 between Targeted Genetics
Newco, Ltd., a Bermuda limited company, and Elan Pharmaceutical Technologies, a
division of Elan Corporation, plc, an Irish limited company.
RECITALS:
A. Contemporaneously herewith, Elan and TGEN (capitalized terms used
herein are defined below) are entering into the Development Agreement for the
purpose of recording the terms and conditions of a joint venture and of
regulating their relationship with each other and certain aspects of the affairs
of and their dealings with Newco.
B. Elan is beneficially entitled to the use of certain know-how and
certain patents that have been granted or are pending in relation to the
development and production of various Drug Delivery Technologies.
C. Newco desires to enter into this Agreement with Elan so as to permit
Newco to utilize the Elan Intellectual Property in the research, development,
manufacture, distribution and sale of the Products in the Field and in the
Territory.
D. Elan, EIS and TGEN entered into a letter agreement dated June 30, 1999
(the "Letter Agreement") pursuant to which they agreed to enter into definitive
documents, including this Agreement, and the TGEN License Agreement relating to
Newco's use of the TGEN Intellectual Property.
NOW THEREFORE IT IS HEREBY AGREED AS FOLLOWS:
1. DEFINITIONS
A. In this Agreement, the following definitions shall apply:
1.1. "Affiliate" shall mean, with respect to Elan or TGEN, any
corporation or entity other than Newco (and entities controlled by it)
controlling, controlled by or under the common control of Elan or TGEN, as the
case may be, and, with respect to Newco, any corporation or entity under control
of Newco. A corporation or non-corporate entity shall be regarded as in control
of another corporation if it owns or directly or indirectly controls more than
fifty percent (50%) of the voting stock of the other corporation or (a) in the
absence of the ownership of at least fifty percent (50%) of the voting stock of
a corporation or (b) in the case of a non-corporate entity, the power to direct
or cause the direction of the management and policies of such corporation or
non-corporate entity, as applicable.
[*] OMITTED, CONFIDENTIAL MATERIAL, WHICH MATERIAL HAS BEEN SEPERATELY FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT.
<PAGE>
1.2. "Agreement" shall mean this agreement (which expression shall be
deemed to include the Recitals and the Schedules hereto);
1.3. "Antisense" shall mean [*];
1.4. "Base Technologies" shall mean technologies, techniques and
formulations for the administration of an active agent to a mammal: (i) in
formulations of the active agent with one or more substantially inert
ingredients, including, without limitation, tonicity modifiers and bulking
agents; or (ii) with or through devices or mechanical targeting systems or
mechanical delivery systems (other than Elan's MEDIPAD(R) Drug Delivery System
or devices utilizing autoinjector technology);
1.5. "cGCP", "cGLP" and "cGMP" shall mean current Good Clinical
Practices, current Good Laboratory Practices and current Good Manufacturing
Practices respectively;
1.6. "Change of Control Event" shall mean that a Technological
Competitor of Elan acquires directly or indirectly voting stock or equivalent
securities in TGEN or Newco representing [*] or more of the stock which carries
entitlement to vote, or a Technological Competitor of Elan acquires by all or
substantially all of the business of TGEN or Newco to which the Transaction
Documents relate, whether by merger, sale of stock, sale of assets or otherwise;
1.7. "Commercialization" shall mean the manufacture, promotion,
distribution, marketing and sale of the Products;
1.8. "Control" shall mean the ability to grant a license or sublicense
as contemplated herein without violating the terms of any agreement with any
Independent Third Party;
1.9. "Definitive Documents" shall have the same meaning as given to the
term "Transaction Documents" in the Development Agreement;
1.10. "Development Agreement" shall mean the Subscription, Joint
Development and Operating Agreement of even date entered into among TGEN, Elan,
EIS and Newco;
1.11. "Development Candidate(s)" shall mean a TGEN Proprietary Gene, or
a Gene obtained from an Independent Third Party, jointly selected by the
Participants and Newco to be developed for incorporation in Products. For the
avoidance of doubt, if it is subsequently determined by the Management Committee
of
* Confidential Treatment Requested
-2-
<PAGE>
Newco that the TGEN Proprietary Gene initially offered for development as a
Product is not suitable for use in a Product, TGEN shall offer an additional
TGEN Proprietary Gene to the extent available, as described in Section 9.5 of
the Development Agreement, and such additional TGEN Proprietary Gene shall in
that instance become the Development Candidate.
1.12. "Drug Delivery Technologies" shall mean formulation and/or
excipient systems and technologies for delivery of a therapeutic agent to a
mammal, including but not limited to [*] allowing such agent, without limitation
on other features that may be sought in addition to or instead of the following,
to be administered on an optimized schedule, and/or to be administered with
reduced side effects, and/or to be administered with enhanced efficacy, and/or
to be administered with better patient compliance, and/or to be administered in
reduced dosages. Drug Delivery Technologies shall also include Elan device
delivery technologies including the MEDIPAD(R) Drug Delivery System and devices
utilizing autoinjector technology. Notwithstanding the foregoing, Drug Delivery
Technologies shall not include Base Technologies or Gene Delivery Technologies;
1.13. "Effective Date" shall mean the "Closing Date" as such term is
defined in the Development Agreement;
1.14. "EIS" shall mean Elan International Services, Ltd., a Bermuda
limited company;
1.15. "Elan" shall mean Elan Pharmaceutical Technologies, a division of
Elan Corporation, plc, a public limited company incorporated under the laws of
Ireland, its, successors and permitted assigns; and, shall also include, for
purposes of the option contained in Section 2.2 below and the inclusion of the
NanoCrystal(TM) technology covered by such option and referenced in the
definition of "Elan Intellectual Property," Elan Pharma International Limited.
1.16. "Elan Improvements" shall mean any improvements to the Elan
Patents and Elan Know-How developed by Elan independently or in collaboration
with an Independent Third Party, which improvements Elan at any time during the
Research and Development Term Controls within the Field (other than improvements
developed pursuant to the Research and Development Program);
1.17. "Elan Intellectual Property" shall mean the Elan Know-How, the
Elan Patents and/or the Elan Improvements. Schedule 1 hereto shall contain, by
way of illustration but not limitation, examples of Elan Intellectual Property.
For the avoidance of doubt, Elan Intellectual Property shall include, upon
exercise of the
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option contained in Section 2.2, below, technology Controlled by Elan
Corporation, plc, doing business as Elan Pharma International Ltd. (but only to
the extent such technology consists of NanoCrystal(TM) technology formerly held
by NanoSystems, a subsidiary of the Eastman Kodak Company, as improved). Elan
Intellectual Property shall exclude (a) the Excluded Elan Technology, (b)
inventions, patents and know-how controlled by all other affiliates or
subsidiaries of Elan Corporation, plc., including, but not limited to that not
Controlled by Elan, but rather Controlled prior to or during the term of this
Agreement by Axogen Limited, Neuralab Limited and the Elan Pharmaceuticals
division of Elan Corporation, plc. which incorporates, inter alia, Athena
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Neurosciences, Inc., Elan Pharmaceuticals, Inc., Athena Diagnostics, Inc.,
Carnrick Laboratories Inc. and Elan Europe Limited and (c) inventions, patents
and know-how that are subject to contractual obligations of Elan to third
parties as of the Effective Date to the extent the licensing of such inventions,
patents and know-how is restricted or limited;
1.18. "Elan Know-How" shall mean any and all rights (i) Controlled by
Elan as of the Effective Date to any discovery, invention (whether or not
patentable), know-how, substances, data, techniques, processes, systems,
formulations and designs relating to drug delivery and commercial information
relating to Base Technologies, Drug Delivery Technologies or Gene Delivery
Technologies and useful for the conduct of the Project or Commercialization of
Products and (ii) any discovery, invention (whether or not patentable), know-
how, substances, data, techniques, processes, systems, formulations and designs
relating to drug delivery and commercial information relating to Base
Technologies, Drug Delivery Technologies or Gene Delivery Technologies and
useful for the conduct of the Project or Commercialization of Products developed
by Elan independently or in collaboration with an Independent Third Party after
the Effective Date;
1.19. "Elan License" shall mean the license of the Elan Intellectual
Property to Newco as provided herein;
1.20. "Elan Patents" shall mean any and all patents and patent
applications relating to Base Technologies, Drug Delivery Technologies or Gene
Delivery Technologies (i) Controlled by Elan on the Effective Date and (ii)
Controlled by Elan and hereafter filed or obtained (to the extent covering
inventions made by Elan independently or in collaboration with an Independent
Third Party). Elan Patents shall also include all extensions, continuations,
continuations-in-part, continuing prosecution applications, divisionals,
patents-of-additions, re-examinations, re-issues, supplementary protection
certificates and foreign counterparts of such patents and patent applications
and any patents issuing thereon and extensions of any patents licensed
hereunder;
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1.21. "Elan Program Technology" shall mean all Program Technology that
relates solely to Drug Delivery Technologies or Antisense whether conceived or
made by Elan and/or its agents or TGEN or Newco and/or its agents pursuant to
the Research and Development Program;
1.22. "Elan Right of First Negotiation" shall have the meaning provided
in Section 2.12 hereof;
1.23. "Excluded Elan Technology" shall mean transdermal or
transcutaneous Drug Delivery Technology (i.e., pertaining to delivery, onto,
into and through the skin);
1.24. "Excluded TGEN Technology" shall mean inventions, patents and
know-how: (a) to the extent relating to transdermal or transcutaneous drug
delivery technology (as above described); (b) to the extent relating to the
treatment of cystic fibrosis or the delivery of Genes directed therefor; (c) to
the extent relating to Antisense; or (d) that are subject to contractual
obligations of TGEN to third parties as of the Effective Date to the extent the
licensing of such inventions, patents and know-how is restricted or limited.
1.25. "FDA" shall mean the United States Food and Drug Administration
or any successors or agency the approval of which is necessary to market a
product in the United States of America;
1.26. "Field" shall mean the research, development and
Commercialization of a Platform for delivery of Genes to mammals. For avoidance
of doubt, the Field shall exclude (i) cell therapy, (ii) ex vivo gene therapy,
(iii) Antisense delivery and (iv) transcutaneous and/or transdermal delivery (as
above described);
1.27. "Gene" shall mean any nucleotide sequence that includes a region
or regions (or gene cassette(s)) capable of coding, causing or modulating the
expression of a protein or other genetic element (other than directly modulating
expression where the nucleic acid sequence is an Antisense) and includes one or
more elements that can control expression of said protein(s) or other genetic
element(s);
1.28. "Gene Delivery Technologies" shall mean [*];
1.29. "Independent Third Party" shall mean any person other than Newco,
TGEN, Elan or any of their respective Affiliates;
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1.30. "In market" shall mean sales of Products whether by Newco or its
Affiliates, or where applicable by a sublicensee, to an Independent Third Party
being a wholesaler, distributor, managed care organization, hospital, pharmacy
and/or the like;
1.31. "Licensed Technologies" shall mean the Elan Intellectual Property
and the TGEN Intellectual Property;
1.32. "Licenses" shall mean the Elan License and the TGEN License;
1.33. "Lien" shall mean any and all liens, security interests,
restrictions, claims, encumbrances or rights of third parties of every kind and
nature;
1.34. "Management Committee" shall have the meaning given to such term
in the Development Agreement;
1.35. "Marketing Authorization" shall mean the procurement of
registrations and permits required by applicable government authorities in a
country in the Territory for the marketing, sale, and distribution of a Product
in such country;
1.36. "MEDIPAD(R) Drug Delivery System" shall mean the ambulatory
continuous micro infusion device having a drug reservoir volume ranging from 3.3
to 5.0 ml. and associated technology;
1.37. "Net Proceeds" shall mean the net amount realized by Newco or its
Affiliates in the form of upfront payments, milestones or royalty payments from
Independent Third Parties with respect to Products or the grant of rights
therein or to the Commercialization thereof, after deduction of all costs,
commissions and fees payable by Newco or its Affiliates associated with or
incurred with respect to such upfront payments, milestones or royalties,
including without limitation royalties and other compensations paid or payable
to any Independent Third Party (or to either of the Participants, where such
Participant has separately licensed any rights or intellectual properties to
Newco on a royalty-bearing basis).
1.38. "Net Sales" shall mean the amount billed or invoiced for sales of
a Product by Newco or its Affiliates to an Independent Third Party, less, to the
extent included in such invoice price the total of: (1) ordinary and customary
trade, quantity or cash discounts and nonaffiliated brokers' or agents'
commissions, including government managed care and other contract rebates,
pharmacy incentive programs, including chargebacks of pharmacy or hospital
performance incentive programs or similar programs; (2) credits, rebates and
returns (including, but not limited to, wholesaler and retailer returns); (3)
freight, postage and duties separately identified on the invoice or other
documentation maintained in the ordinary course of business, and
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(4) import, export and sales taxes, excise taxes, other consumption taxes,
customs duties, tariffs and compulsory payments to governmental authorities
separately identified on the invoice or other documentation maintained in the
ordinary course of business and based on sales or turnover or delivery of the
Products. Net Sales shall also include the amount or fair market value of all
other consideration received by Newco or its Affiliates in respect of sales of
Products by Newco or its Affiliates to an Independent Third Party, whether such
consideration is payment in kind, exchange or another form., less applicable
deductions as described above. If a Product is provided to an Independent Third
Party by Newco or its Affiliates without charge or provision of invoice and used
by such Independent Third Party, then Newco or its Affiliates shall be treated
as having sold such Product to such Independent Third Party for an amount equal
to the fair market value of such Product. Sales between or among Newco and its
respective Affiliates or authorized licensees shall be excluded from the
computation of Net Sales;
1.39. "Newco" shall mean Targeted Genetics Newco, Ltd., a Bermuda
limited company;
1.40. "Newco Program Technology" shall mean all Program Technology
other than Elan Program Technology and TGEN Program Technology;
1.41. "Newco Technology" shall mean all Program Technology and all
technology licensed or acquired by Newco or developed by Newco whether or not
pursuant to the Research and Development Program, excluding, however, TGEN
Intellectual Property and Elan Intellectual Property;
1.42. "Participant" shall mean Elan or TGEN, as the case may be.
"Participants" shall mean both Elan and TGEN;
1.43. "Parties" shall mean Elan and Newco;
1.44. "Person" shall mean an individual, partnership, corporation,
limited liability company, business trust, joint stock company, trust,
unincorporated association, joint venture, or other entity of whatever nature;
1.45. "Plan" shall mean that portion of the Business Plan defined in
the Development Agreement that relates to the Project and Newco's program of
development agreed to by Elan and TGEN within sixty (60) days of the date
hereof, with respect to the research, development and Commercialization of the
Products, which Plan shall be reviewed and mutually agreed to in writing by Elan
and TGEN on an annual basis;
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1.46. "Platform" shall mean the combined utilization of Drug Delivery
Technologies and Gene Delivery Technologies for delivery of Genes by any route
of administration;
1.47. "Product" shall mean a Gene formulated for administration to
mammals, including humans, by use of a Platform;
1.48. "Program Technology" shall mean all technology developed by or on
behalf of Newco, whether by Elan, TGEN, a third party or jointly by any
combination thereof, pursuant to the Research and Development Program;
1.49. "Project" shall mean all activity as undertaken by Elan, TGEN and
Newco to develop the Platform and Products in accordance with the Plan;
1.50. "Regulatory Authority" shall mean any regulatory authority
outside the United States of America, the approval of which is necessary to
market a Product;
1.51. "Research and Development Program" shall have the same meaning
given to such term in the Development Agreement;
1.52. "Research and Development Term" shall mean the period commencing
on the Effective Date and continuing for a period of [*] thereafter, or as
extended by agreement of the Participants, up to an aggregate of [*]; provided,
however, that if a Participant shall be prevented by (i) events beyond the
Participants' control, or (ii) by such Participant's delay or negligent act or
omission, from performing its obligations under the Definitive Documents within
said [*] period (or as extended), then the other Participant at its option, may
extend the duration of the Research and Development Term by a term equal in
length to the period during which the first Participant was unable to perform
its obligations hereunder;
1.53. "Technological Competitor of Elan" shall mean any entity which
has a significant program for the development of Drug Delivery Technology and
which is active in promoting and contracting the use of such Drug Delivery
Technology to third parties, a listing of which is contained on Schedule 3 to
the Development Agreement, as such list may be supplemented by Elan from time to
time with the consent of TGEN, which consent shall not be unreasonably withheld
if the proposed additions are within the parties' contemplation as to the
purpose of the original list;
1.54. "Term" shall have the meaning given to it in Clause 12 below;
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1.55. "Territory" shall mean all the countries of the world;
1.56. "TGEN" shall mean Targeted Genetics Corporation, a Washington
corporation;
1.57. "TGEN Intellectual Property" shall have the meaning set forth in
the TGEN License Agreement;
1.58. "TGEN License" shall have the meaning set forth in the TGEN
License Agreement;
1.59. "TGEN License Agreement" shall mean that certain license
agreement, of even date herewith, entered into between TGEN and Newco;
1.60. "TGEN Program Technology" shall mean all Program Technology which
relates solely to Gene Delivery Technologies, whether conceived or made by TGEN
and/or its agents or Elan or Newco pursuant to the Research and Development
Program;
1.61. "TGEN Proprietary Gene" shall mean any Gene Controlled by TGEN;
1.62. "Trademark" shall mean the trademark(s) belonging to Elan as may
be selected by Newco or its permitted sub-licensees, with Elan's consent, for
use in connection with the Products;
1.63. "United States Dollar" and "US$" shall mean the lawful currency
for the time being of the United States of America;
B. Interpretation. In this Agreement the following shall apply:
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1.1. The singular includes the plural and vice versa, the masculine
includes the feminine and vice versa.
1.2. Any reference to a Clause, Section or Schedule shall, unless
otherwise specifically provided, be to a Clause, Section or Schedule of this
Agreement.
1.3. The headings of this Agreement are for ease of reference only and
shall not affect its construction or interpretation.
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2. GRANT OF RIGHTS
2.1 Elan hereby grants to Newco a license in the Territory to Elan's
rights in the Elan Intellectual Property for all research, development, and
Commercialization purposes solely in the Field, subject to contractual
obligations that Elan may have as of the Effective Date, and, unless prohibited
by the Section 11 ("Non-Competition"), contractual obligations that Elan may
--
enter into after the Effective Date (the "Elan License"). The Elan License
shall be nonexclusive to Newco during the Research and Development Term, and
thereafter during the License Term shall be exclusive to the extent applicable
to the Commercialization (i) of a Product or Products which has (have) been
successfully developed by Newco during the Research and Development Term, and
(ii) of any Product containing the same Gene that would be competitive (i.e.,
directed at the same indication) with any Product being Commercialized by Newco.
Otherwise, the Elan License shall be nonexclusive during the License Term after
the Research and Development Term.
2.2 Elan hereby also grants an option, to be exercised, upon written
notice to Elan by Newco and payment of an option price of [*], to obtain a
license to the Elan Patents and Know-How related to Drug Delivery Technologies,
Gene Delivery Technologies and Base Technologies held by Elan Pharma
International Ltd. (but only to the extent such technology consists of
NanoCrystal(TM) technology formerly held by NanoSystems, a subsidiary of the
Eastman Kodak Company, as improved). The option shall be exercised at such time
as the TGEN members of the Management Committee determine that such technology
is relevant to the Project. Upon exercise of such option by Newco, such
technology, shall, subject to any contractual obligations to Independent Third
Parties that Elan may have as of the Effective Date, and, unless prohibited by
Section 11, contractual obligations to Independent Third Parties that Elan may
enter into after the exercise of such option, be deemed included within with the
Elan License, the Elan Intellectual Property, the Elan Patents, and the Elan
Know-How, as appropriate, and subject to the provisions hereof with respect
thereto. If the inclusion of any Elan Know-How, Elan Patents or Elan
Improvements in the license of Elan Intellectual Property is restricted or
limited by a third party agreement, Elan shall use reasonable commercial efforts
to exclude or where applicable minimize any such restriction or limitation.
2.3 To the extent royalty or other compensation obligations to Independent
Third Parties that are payable with respect to Elan Intellectual Property would
be triggered by a proposed use of such Elan Intellectual Property in connection
with the Project, Elan will inform Newco and TGEN of such royalty or
compensation obligation. If Newco and TGEN agree to utilize such Elan
Intellectual Property in
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connection with the Project, Newco will be responsible for the payment of such
royalty or other compensation obligations relating thereto.
2.4 Except as expressly provided herein, all proprietary rights and
rights of ownership with respect to the Elan Intellectual Property shall at all
times remain solely with Elan. Elan shall disclose to Newco inventions made by
or on behalf of Elan in connection with the performance of the Project, any
patentable inventions and discoveries within the Elan Intellectual Property that
relate to the Field and any patentable Elan Improvements developed by or on
behalf of Elan.
2.5 Notwithstanding anything contained herein to the contrary, Elan shall
have the right, outside the scope of the exclusivity under the Elan License, and
subject to Section 11 below, to fully exploit and grant licenses and sublicenses
with respect to the Elan Intellectual Property.
2.6 Notwithstanding the grant of the Elan License, Elan will not be
required to disclose to TGEN or Newco proprietary manufacturing know-how, unless
and until it is determined, as described in Sections 2.13 and 2.14 below, that a
party other than Elan will perform relevant manufacturing services for Newco,
and then such disclosures may be limited to those that are required to support
such manufacturing services by such other party.
2.7 Newco shall not be permitted to (a) encumber any of its rights under
the Licenses or the Newco Technology without the prior written consent of Elan;
(b) assign or sublicense any of its rights under the licenses for the Licensed
Technologies and the Newco Technology without the prior written consent of Elan,
which consent may be withheld in Elan's sole discretion. Notwithstanding the
foregoing, subject to the Elan Right of First Negotiation, Elan shall not
unreasonably withhold, condition or delay its consent to the licensing of rights
to Commercialize Products to Independent Third Parties who are not Technological
Competitors of Elan. Any agreement between Newco and any permitted Independent
Third Party for the development or exploitation of the Elan Intellectual
Property shall require such Independent Third Party to maintain the
confidentiality of all information concerning the Elan Intellectual Property and
shall permit an assignment of rights by Newco to Elan in accordance with the
terms of this Agreement. Rights of permitted third party sublicensees in and to
the Elan Intellectual Property shall survive the termination of the license and
sublicense agreements granting said intellectual property rights to Newco; and
Newco and Elan shall in good faith agree upon the form most advantageous to Elan
in which the rights of the sublicensor under any such sublicenses are to be held
(which form may include continuation of Newco solely as
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the holder of such licenses or assignment of such rights to a third party or
parties, including an assignment to Elan).
2.8 Newco will use its reasonable commercial efforts to exploit the Elan
Intellectual Property, the TGEN Intellectual Property and Newco Technology in
accordance with this Agreement, the TGEN License Agreement and the Plan. Newco
and/or its contractors or licensees/sublicensees shall employ reasonably
diligent efforts to research, develop, register, and Commercialize the Products
in appropriate regions in the Territory. Newco and/or its contractors or
licensees/sublicensees shall employ or have employed on its or their behalf a
level of advertising, sales, marketing, and promotion efforts in each country in
the Territory where Marketing Authorization for Product has been obtained which
is: (i) commensurate with that used by other pharmaceutical marketers for
products of similar market potential in that country in the Territory, and (ii)
consistent with the market potential for the Product as depicted in the Plan and
as determined by the Management Committee in accordance with the Development
Agreement.
2.9 Newco will be solely responsible for ensuring that it or its
sublicensees manufacture and Commercialize the Products within each country of
the Territory strictly in accordance with all the legal and regulatory
requirements of each country of the Territory.
2.10 Upon the request of Newco and with the consent of Elan, Elan shall
grant to Newco during the Term a non-exclusive royalty free license in the
Territory, solely for use in connection with the sale of the Products, to use
one or more Trademarks, on the following terms:
2.10.1 Newco shall as soon as it becomes aware of any infringement
of a Trademark give to Elan in writing full particulars of any use or proposed
use by any other person, firm or company of a service mark, trade name or
trademark or promotional or advertising activity which may constitute
infringement.
2.10.2 If Newco becomes aware that any other person, firm or
company alleges that such Trademark is invalid or that the use of such Trademark
infringes any rights or constitutes an unauthorized use of intellectual property
of another party or that the Trademark is otherwise attacked or attackable,
Newco shall immediately give to Elan full particulars thereof in writing and
shall make no comment or admission to any third party in respect thereof.
2.10.3 Elan shall have the right to conduct all proceedings
relating to such Trademark and shall in its sole discretion decide what action,
if any,
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to take in respect of any actual, threatened or alleged infringement of such
Trademark or any other claim or counter-claim brought or threatened relating to
the use or registration of such Trademark. Any such proceedings shall be
conducted at Elan's expense and for its own benefit.
2.10.4 Nothing contained in this Agreement shall grant to Newco any
right, title, or interest in or to such Trademark, whether or not specifically
recognized or perfected under applicable laws, except for the non-exclusive
license described herein. At no time during or after the term of this Agreement
shall Newco challenge or assist others to challenge any such Trademark or the
registration thereof or attempt to register any trademarks, service marks, or
trade names confusingly similar to any such trademark. All displays of any such
Trademark that Newco intends to adopt shall first be submitted to Elan for
approval (which shall not be unreasonably withheld, conditioned or delayed) of
design, color, and other details, or shall be exact copies of those used by Elan
or previously approved by it for the same uses. In addition, Newco shall fully
comply with all reasonable guidelines communicated by Elan concerning the use of
any such Trademark as well as all rules and regulations of such use throughout
the Territory.
2.10.5 The rights granted to Newco under this Section 2.10 shall
automatically terminate with respect to a Product in a country in the Territory
upon termination of Newco's right to market such Product in any such country.
2.11 When packaged, and to the extent permitted by law, a product label
shall include an acknowledgement that the Product is made under license from
Elan unless the incorporation of Elan Intellectual Property is so limited that
such acknowledgment would be unreasonable. Any such acknowledgment shall take
into consideration regulatory requirements and Newco's reasonable commercial
requirements. In such event, Newco shall wherever possible give due
acknowledgement and recognition to Elan in all printed promotional and other
material regarding the Product such as stating that the Product is under license
from Elan and that the applicable Elan Intellectual Property has been applied to
the Products. Newco shall consult with and obtain the written approval of Elan
as to the format and content of the promotional and other material insofar as it
relates to a description of, or other reference to, the application of the Elan
Intellectual Property, such approval not to be unreasonably withheld,
conditioned or delayed. The further consent of Elan shall not be required where
the format and content of such materials is substantively similar as the
materials previously furnished to and approved in writing by Elan.
2.12 Notwithstanding anything contained in this Agreement to the contrary,
at such time, during or within [*] following the end of the Research and
Development
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Term as Newco intends to develop and Commercialize Products [*] Elan shall have
[*] relating to such Product [*], on the following terms and conditions:
2.12.1 If Newco intends to [*] then Newco immediately shall notify
Elan in writing that Elan may elect to [*] referred to in this Section. Elan
shall indicate its desire to [*] pursuant to this Section by delivering written
notice to Newco within forty-five (45) days of Elan's receipt of the written
notification from Newco to Elan. If Elan elects to [*], the Parties shall [*].
2.12.2 If, [*] Elan and Newco do not [*] within [*] from the
notification in writing by Newco to Elan, then Newco shall be free [*]
2.12.3 Following the [*] period described in Section 2.12.2, [*]
2.13 Elan and TGEN shall have preferential rights to negotiate agreements
with Newco whereby Elan and/or TGEN will manufacture Products to meet Newco's
requirements. Newco shall evaluate each such manufacturing agreement in light of
which of Elan or TGEN (or neither, or both) has the capability and the committed
resources to perform such manufacturing services in the best interests of Newco.
If the parties cannot come to mutual agreement on who is best qualified to
perform such manufacturing services, the matter will be resolved through the
dispute resolution procedures of the Joint Development and Operating Agreement.
To the extent Elan or TGEN performs any manufacturing services to Newco, it
shall be paid a price equal to [*] and other terms and conditions customary in a
supply agreements shall apply.
2.14 Subject to the rights of Newco as provided in Section 2.12 herein and
the rights of Elan and TGEN as provided in Section 2.13 herein, Newco shall not
be permitted to contract the development or Commercialization of any Product
without the prior written consent of Elan, which consent will not be
unreasonably withheld, conditioned or delayed; provided that such reasonableness
standard, shall not be applicable in the case of a proposed sublicense to any
Technological Competitor of Elan.
3. IMPROVEMENTS AND AFTER ACQUIRED TECHNOLOGY
3.1 Subject to contractual restrictions permissible under Section 11
("Non-Competition"), Elan Improvements shall be deemed, immediately upon
development, to be included in the license of the Elan Intellectual Property
granted to Newco hereunder.
3.2 For the avoidance of doubt, and without limitation on the
applicability of the same exclusion as to other Elan Intellectual Property, it
is understood that the
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Elan License specifically excludes any right to use Elan Improvements outside of
the Field.
3.3 If the inclusion of an Elan Improvement in the license of Elan
Intellectual Property granted to Newco hereunder is restricted or limited by a
third party agreement, then Elan shall use reasonable commercial efforts to
exclude, or where applicable, to minimize any such restriction or limitation.
3.4 All rights, title, and interest to any Elan Improvements shall be the
property of Elan. Newco, TGEN and any such third party shall execute and
deliver documents, and take such other actions as Elan may reasonably request,
to effect or evidence such ownership.
3.5 If, after the Effective Date, Elan acquires know-how or patent rights
relating to the Field, through acquisition of or merger with an Independent
Third Party that has know-how or patent rights relating to the Field, then Elan
shall offer, as soon as practicable, to license such know-how and patent rights
to Newco (subject to existing contractual obligations binding on such
Independent Third Party at the time of such acquisition or merger), on such
terms as would be offered to an Independent Third Party negotiating in good
faith on an arms-length basis, and if TGEN determines that Newco should not
acquire such license, then Elan shall be free (subject to the provisions of
Section 11, below) to fully exploit such know-how and patent rights (without the
Elan Intellectual Property then licensed to Newco, other than outside the scope
of the exclusivity of the Elan License), and to grant to third parties licenses
and sublicenses with respect thereto.
4. DEVELOPMENT OF PRODUCTS
4.1 During the Research and Development Term, Newco will diligently
pursue the research and development of the Elan Intellectual Property, TGEN
Intellectual Property and Newco Technology in accordance with the Research and
Development Program. The objectives of this research and development work will
be (a) to develop the Platform, and (b) to develop one or more Products in the
Field.
5. REGULATORY APPROVALS
5.1 Newco shall, or shall cause its sublicensees to, at its or their sole
cost file and shall use its reasonable best efforts to prosecute to approval,
the Marketing Authorizations for the Products in appropriate countries in the
Territory in accordance with the Plan. During any Marketing Authorization
registration procedure, Newco shall keep Elan promptly and fully advised of
Newco's registration activities, progress
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and procedures. Each Party shall inform the other Party and TGEN of any dealings
such Party has with the FDA and any other Regulatory Authority. The Parties and
TGEN shall collaborate in relation to obtaining any approval of the FDA or
Regulatory Authority for final approved labeling.
5.2 Subject to agreement to the contrary, any and all Marketing
Authorizations filed hereunder for Products shall, to the extent owned by Newco,
remain the property of Newco, provided that Newco shall allow Elan access
thereto solely to enable Elan to fulfill its obligations and exercise its rights
under this Agreement and the Development Agreement. Newco shall maintain or
cause its sublicensees to maintain such Marketing Authorizations at its or their
own cost.
5.3 Newco shall indemnify and hold harmless Elan, its agents and
employees from and against all claims, damages, losses, liabilities and expenses
to which Elan, its agents, and employees may become subject related to or
arising out of Newco's bad faith, negligence or intentional misconduct in
connection with the filing or maintenance of the Marketing Authorizations.
6. FINANCIAL PROVISIONS
6.1 In consideration of the license to the Elan Patents, Newco shall pay
to Elan the following amounts:
6.1.1 Up Front License Fee Payment. Fifteen million United States
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Dollars (US$15,000,000), simultaneously with the execution and delivery of this
Agreement by both Parties; and
6.1.2 Product based upon the Development Candidates. Newco shall
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make the following payments with respect to Products based upon the Development
Candidates:
(a) Development Work - Initial research and development work
----------------
pursuant to the Research and Development Program regarding the development of
the Platform and one or more Development Candidates contracted by Newco to TGEN
and/or Elan shall be payable by Newco to each of TGEN and Elan based on [*] (or
less, where the terms of a third party agreement do not support such fees, and
are otherwise acceptable to the Management Committee).
(b) Upfront or Milestone Payments - If any Independent Third
-----------------------------
Party shall make upfront or milestone payments (e.g., for NDA filing, approvals,
etc.) to Newco, then [*] of the Net Proceeds from such upfront or milestone
payments shall be retained by Newco, and Newco shall pay to each of Elan
* Confidential Treatment Requested
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and TGEN, in proportion to their respective ownership interests in Newco,
royalties in the amount of the remaining [*] of such Net Proceeds.
(c) Royalties payable to Elan and TGEN Upon Sales of the
----------------------------------------------------
Products based upon the Development Candidates - If Newco makes any In market
- ----------------------------------------------
sales of such Products, Newco shall pay Elan a royalty on Net Sales derived
therefrom, at a rate to be determined by the Management Committee prior to the
market launch thereof to be appropriate under the circumstances with respect to
each such Product. Newco shall retain [*] of the Net Proceeds from all royalties
derived from sales of Products based upon the Development Candidates, and shall
pay to each of Elan and TGEN the remaining [*] of all such Net Proceeds in
proportion to their respective ownership interests in Newco.
(d) Special Provisions for TGEN Proprietary Genes.
---------------------------------------------
Notwithstanding the foregoing, in the event a Product is based upon a
Development Candidate which incorporates a TGEN Proprietary Gene, [*] of the
aggregate Net Proceeds from all upfront, milestone and royalty payments made to
Newco by an Independent Third Party with respect to such Product shall be paid
as an additional royalty to TGEN, and the remaining [*] of such Net Proceeds
shall be paid as an additional royalty to Elan. Thereafter, such amounts shall
be allocated as provided above.
6.1.3 Products Based Upon TGEN Proprietary Genes. In the event
------------------------------------------
Newco shall desire to develop a Product incorporating a TGEN Proprietary Gene
other than a Product based upon the Development Candidate, Newco, Elan and TGEN
shall negotiate in good faith the terms for the licensing of such Gene and
royalties to be paid to each of TGEN and Elan; provided, however, that with
respect to Newco, the terms of such license shall be no less favorable than
those that would have be obtained in an arm's length transaction between
unrelated parties and, with respect to TGEN, the terms of such license shall be
no less favorable than those granted to any other licensor to Newco
6.1.4 Products Based on Proprietary Genes of Independent Third
--------------------------------------------------------
Parties. Newco shall make the following payments with respect to Products based
- -------
on proprietary Genes of Independent Third Parties:
(a) Development Work - Research and development work related to
----------------
Products based upon proprietary Genes of Independent Third Parties performed by
Elan or TGEN for Newco, as the case may be, shall be payable to such Participant
at [*] (or less, where the terms of a third party agreement do not support such
fees, and are otherwise acceptable to the Management Committee). [*] of any
* Confidential Treatment Requested
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profit received by Newco for direct charges for such development following
payment of Elan's or TGEN's charges shall be payable as an additional royalty by
Newco to Elan and TGEN, in proportion to their respective ownership interests in
Newco.
(b) Upfront or Milestone Payments - If any Independent Third
-----------------------------
Party shall make upfront or milestone payments (e.g., for NDA filing, approvals,
etc.) to Newco with respect to Products based upon proprietary Genes of such
third party, then [*] of the Net Proceeds from such upfront or milestone
payments shall be retained by Newco, and Newco shall pay to each of Elan and
TGEN the remaining [*] of such Net Proceeds in proportion to their respective
ownership interests in Newco.
(c) Royalty Payments to Participants - If Newco makes any In
--------------------------------
market sales of such Products, Newco shall pay Elan a royalty on Net Sales
derived therefrom, at a rate to be determined by the Management Committee prior
to the market launch thereof to be appropriate under the circumstances with
respect to each such Product. Newco shall retain [*] of Net Proceeds derived by
it from all royalties paid to it by Independent Third Parties with respect to
Products based upon proprietary Genes of such parties, and shall pay to each of
Elan and TGEN the remaining [*] of all such Net Proceeds in proportion to their
respective ownership interests in Newco.
6.2 Payment of those royalties that are payable to Elan pursuant to
Clauses 6.1.2-6.1.4, if any, shall be made quarterly in arrears within forty-
five (45) days after the expiry of the calendar quarter. The method of payment
shall be by wire transfer to an account specified by Elan and shall be
nonrefundable to Newco. Each payment made to Elan shall be accompanied by a true
accounting of all Products sold by Newco, its Affiliates and its permitted
sublicensees, if any, during such quarter. Such accounting shall show, on a
country-by-country and Product-by-Product basis, Net Sales and Net Proceeds
invoiced and received by Newco (and the calculation thereof) and each
calculation of royalties with respect thereto, including the calculation of all
adjustments and currency conversions.
6.3 Newco shall maintain and keep clear, detailed, complete, accurate and
separate records for a period of three (3) years following the completion of
such records so: (i) as to enable any royalties which shall have accrued
hereunder to be determined; and (ii) that any deductions made in arriving at the
Net Sales and Net Proceeds can be determined.
6.4 All payments due hereunder shall be made in United States Dollars.
Payments due on Net Sales of any Product and Net Proceeds with respect to any
Product invoiced and received by Newco for each calendar quarter made in a
currency
* Confidential Treatment Requested
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other than United States Dollars shall first be calculated in the foreign
currency and then converted to United States Dollars on the basis of the average
exchange rate in effect for such quarter for the purchase of United States
Dollars with such foreign currency quoted in the Wall Street Journal (or
comparable publication if not quoted in the Wall Street Journal) with respect to
the currency of the country of origin of such payment, determined by averaging
the rates so quoted on each business day of such quarter.
6.5 If, at any time, legal restrictions in the Territory prevent the
prompt payment when due of royalties payable hereunder to Elan or any portion
thereof, the Parties shall meet to discuss suitable and reasonable alternative
methods of reimbursing Elan the amount of such royalties. In the event that
Newco is prevented from making any payment under this Agreement by virtue of the
statutes, laws, codes or government regulations of the country from which the
payment is to be made, then such payments may be paid by depositing them in the
currency in which they accrue to Elan's account in a bank acceptable to Elan in
the country the currency of which is involved or as otherwise agreed by the
Parties.
6.6 Elan and Newco agree to co-operate in all respects necessary to take
advantage of any double taxation agreements or similar agreements as may, from
time to time, be available.
6.7 Any taxes payable by Elan on any payment made to Elan pursuant to
this Agreement shall be for the account of Elan. If so required by applicable
law, any payment made pursuant to this Agreement shall be made by Newco after
deduction of the appropriate withholding tax, in which event the Parties shall
co-operate to obtain the appropriate tax clearance as soon as is practicable. On
receipt of such clearance, Newco shall forthwith procure that the amount so
withheld is paid to Elan.
6.8 Newco shall, not more than once in each calendar year, nor more than
once with respect to any accounting period, permit representatives of an
internationally-recognized firm of independent certified accountants selected by
Elan upon reasonable notice and at any reasonable time during normal business
hours to have access to inspect and audit the accounts and records of Newco and
any other book, record, voucher, receipt or invoice relating to the calculation
of the royalty payments on Net Sales and Net Proceeds submitted to Elan. Any
such inspection of Newco's records shall be at the expense of Elan, except that
if any such inspection reveals a deficiency in the amount of the royalty
actually paid to Elan hereunder in any calendar quarter of five percent (5%) or
more of the amount of any royalty actually due to Elan hereunder, then the
expense of such inspection shall be borne solely by Newco. Any amount of
deficiency shall be paid promptly to Elan by
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Newco. If such inspection reveals a surplus in the amount of royalties actually
paid to Elan by Newco, Elan shall reimburse Newco the surplus within fifteen
(15) days after determination.
6.10 In the event of any unresolved dispute regarding any alleged
deficiency or overpayment of royalty payments hereunder, the matter will be
subject to resolution in accordance with Clause 19 of the Development Agreement,
which is incorporated by reference and shall for such purposes survive
termination of the Development Agreement.
7. CONFIDENTIAL INFORMATION
7.1 The Parties acknowledge that it may be necessary, from time to time,
to disclose to each other confidential and proprietary information, including
without limitation, inventions, works of authorship, trade secrets,
specifications, designs, data, know-how and other information relating to the
Field, the Products, Elan Intellectual Property, TGEN Intellectual Property or
the Newco Technology, as the case may be, or otherwise as to processes, services
or business of the disclosing Party. The foregoing shall be referred to
collectively as "Confidential Information". Any Confidential Information
revealed by a Party to another Party shall be used by the receiving Party
exclusively for the purposes of fulfilling the receiving Party's obligations
under this Agreement and the Development Agreement and for no other purpose.
7.2 Each Party agrees to disclose Confidential Information of another
Party only to another Participant and to those employees, representatives and
agents of Newco or such participant requiring knowledge thereof in connection
with their duties directly related to the fulfilling of the Party's obligations
under this Agreement, the Development Agreement or the TGEN License Agreement.
Each Party further agrees to inform all such Participants and employees,
representatives and agents of the terms and provisions of this Agreement and
their duties hereunder and to obtain their consent hereto as a condition of
receiving Confidential Information. Each Party agrees that it will exercise the
same degree of care, but in no event less than a reasonable degree of care, to
protect and preserve the proprietary and confidential nature of the Confidential
Information disclosed by a Party, as the receiving Party would exercise to
preserve its own proprietary and confidential information. Each Party agrees
that it will, upon request of a Party, return all documents and any copies
thereof containing Confidential Information belonging to or disclosed by, such
Party, and that it will obtain the same agreement from the other Participant.
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7.3 Notwithstanding the above, each Party may use or disclose
Confidential Information disclosed to it by another party to the extent such use
or disclosure is reasonably necessary in filing or prosecuting patent
applications, prosecuting or defending litigation, complying with patent
applications, complying with applicable governmental regulations, including
without limitation those relating to securities regulations and disclosures, or
otherwise submitting information to tax or other governmental authorities,
conducting clinical trials, or making a permitted sub-license or otherwise
exercising its rights hereunder.
7.4 Confidential Information shall not be deemed to include:
(i) information that is generally available to the public;
(ii) information which is made public by the disclosing Party;
(iii) information which is independently developed by a Party as
evidenced by such Party's written records, without the aid, application or use
of the disclosing Party's Confidential Information;
(iv) information that is published or otherwise becomes part of the
public domain without any disclosure by a Party, or on the part of a Party's
directors, officers, agents, representatives or employees;
(v) information that becomes available to a Party on a non-
confidential basis, whether directly or indirectly, from a source other than a
Party, which source did not acquire this information on a confidential basis;
(vi) information which the receiving Party is required to disclose
pursuant to:
(A) a valid order of a court or other governmental body or
any political subdivision thereof or otherwise required by law; or
(B) any other requirement of law;
provided that if the receiving Party becomes legally required to disclose any
Confidential Information, the receiving Party shall give the disclosing Party
prompt notice of such fact so that the disclosing Party may obtain a protective
order or other appropriate remedy concerning any such disclosure. The receiving
Party shall fully cooperate with the disclosing Party in connection with the
disclosing Party's efforts to obtain any such order or other remedy. If any
such order or other remedy does not
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<PAGE>
fully preclude disclosure, the receiving Party shall make such disclosure only
to the extent that such disclosure is legally required;
(vii) information which was already in the possession of the
receiving Party at the time of receiving such information, as evidenced by its
written records, provided such information was not previously provided to the
receiving Party from a source which was under an obligation to keep such
information confidential; or
(viii) information that is the subject of a written permission to
disclose, without restriction or limitation, by the disclosing Party.
7.5 The provisions relating to confidentiality in this Clause 7 shall
remain in effect during the term of this Agreement, and for a period of seven
(7) years following the expiration or earlier termination of this Agreement.
7.6 The Parties agree that the obligations of this Clause 7 are necessary
and reasonable in order to protect the Parties' respective businesses, and each
Party expressly agrees that monetary damages would be inadequate to compensate a
Party for any breach by the other Party of its covenants and agreements set
forth herein. Accordingly, the Parties agree and acknowledge that any such
violation or threatened violation will cause irreparable injury to a Party and
that, in addition to any other remedies that may be available, in law and equity
or otherwise, any Party shall be entitled to obtain injunctive relief against
the threatened breach of the provisions of this Clause 7, or a continuation of
any such breach by the other Party, specific performance and other equitable
relief to redress such breach together with its damages and reasonable counsel
fees and expenses to enforce its rights hereunder, without the necessity of
proving actual or express damages.
8. WARRANTIES/INDEMNITIES
8.1 Elan represents and warrants to Newco and TGEN, as a third party
beneficiary, that:
(a) Elan is a corporation duly organized under the laws of its
jurisdiction of organization and has all the requisite corporate power and
authority to own and lease its respective properties, to carry on its respective
business as presently conducted and as proposed to be conducted and to carry out
the transactions contemplated hereby;
(b) Elan has full corporate power and authority to enter into this
Agreement and to perform its obligations hereunder, which have been duly
authorized by all requisite corporate action of Elan. This Agreement is the
valid and binding
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<PAGE>
obligation of Elan, enforceable against it in accordance with its terms, except
as limited by applicable bankruptcy, insolvency, reorganization, moratorium and
other laws of general application affecting the enforcement of creditors' rights
generally, and by general equity principles and limitations on the availability
of equitable relief, including specific performance;
(c) The execution, delivery and performance by Elan of this Agreement
will not: (i) violate any provision of applicable law, statute, rule or
regulation known by and applicable to Elan or any ruling, writ, injunction,
order, judgment or decree of any court, arbitrator, administrative agency or
other governmental body applicable to Elan or any of its properties or assets;
or (ii) conflict with or result in any breach of any of the terms, conditions or
provisions of the charter or organizational documents of Elan;
(d) To Elan's best knowledge, except as set forth on Schedule 2
hereto, as of the Effective Date: (i) Elan has the right to grant the Elan
License and any other rights granted herein, (ii) Schedule 1 contains primary
examples of the Elan Intellectual Property existing as of the Effective Date,
which listing is not necessarily exhaustive, (iii) there are no agreements
between Elan and any third parties that conflict with the Elan License which
would have a material adverse effect on the ability of Newco to conduct the
Project, and (iv) Elan is the owner or licensee of all rights, title and
interest in the Elan Intellectual Property.
8.2 Newco represents and warrants to Elan that:
(a) Newco is duly and validly existing in good standing in the
jurisdiction of its incorporation and each other jurisdiction in which the
conduct of its business requires such qualification (except where such failure
to so qualify shall not have a material adverse affect on the business and
assets of Newco), and Newco is in compliance with all applicable laws, rules,
regulations or orders relating to its business and assets;
(b) Newco has full corporate authority to execute and deliver this
Agreement and to consummate the transactions contemplated hereby; this Agreement
has been duly executed and delivered and constitutes the legal and valid
obligations of Newco and is enforceable against Newco in accordance with its
terms; and the execution, delivery and performance of this Agreement and the
transactions contemplated hereby will not violate or result in a default under
or creation of lien or encumbrance under Newco's certificate of incorporation,
by-laws or other organic documents, any material agreement or instrument binding
upon or affecting Newco, or
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<PAGE>
its properties or assets or any applicable laws, rules, regulations or orders
affecting Newco or its properties or assets;
(c) Newco is not in default of its charter or by-laws, any applicable
laws or regulations or any material contract or agreement binding upon or
affecting it or its properties or assets and the execution, delivery and
performance of this Agreement and the transactions contemplated hereby will not
result in any such violation;
(d) The execution of this Agreement by Newco and the full performance
and enjoyment of the rights of Newco under this Agreement will not breach the
terms and conditions of any license, contract, understanding or agreement,
whether express, implied, written or oral between Newco and any third party;
(e) Newco has the sole, exclusive and unencumbered right to grant the
licenses and rights herein granted to Elan and that it has not granted and will
not grant any option, license, right or interest in or to the Elan Intellectual
Property, the Newco Technology, or other property to any third party which would
conflict with the rights granted by this Agreement and the Definitive Documents;
(f) The Products shall be developed, manufactured, transported,
stored, handled, packaged, marketed, promoted, distributed, offered for sale and
sold in accordance with all regulations and requirements of the FDA and foreign
regulatory authorities including, without limitation, cGCP, cGLP, cGMP
regulations. The Products shall not be adulterated or misbranded as defined by
the Federal Food, Drug and Cosmetic Act (or applicable foreign law) and shall
not be a product which would violate any section of such Act if introduced in
interstate commerce; and
(g) It is fully cognizant of all applicable statutes, ordinances and
regulations of the United States of America and countries in the Territory with
respect to the manufacture of the Products including, but not limited to, the
U.S. Federal Food, Drug and Cosmetic Act and regulations thereunder and similar
statutes in countries outside of the United States. Newco shall manufacture or
procure the manufacture of the Products in conformity with the Marketing
Authorizations and in a manner which fully complies with all United States of
America and foreign statutes, ordinances, regulations and practices.
8.3 In addition to any other indemnifications provided for herein, Elan
shall indemnify and hold harmless Newco, TGEN and their Affiliates and their
respective employees, agents, partners, officers and directors from and against
any claims, losses, liabilities or damages (including reasonable attorney's fees
and expenses) incurred or
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sustained by Newco arising out of or in connection with any (a) breach of any
representation, covenant, warranty or obligation by Elan hereunder, or (b) any
act or omission on the part of Elan or any of its agents or employees in the
performance of this Agreement.
8.4 In addition to any other indemnifications provided for herein, Newco
shall indemnify and hold harmless Elan and its Affiliates and their respective
employees, agents, partners, officers and directors from and against any claims,
losses, liabilities or damages (including reasonable attorney's fees and
expenses) incurred or sustained by Elan arising out of or in connection with any
(a) breach of any representation, covenant, warranty or obligation by Newco
hereunder, or (b) any act or omission on the part of Newco or any of its agents
or employees in the performance of this Agreement.
8.5 The Person seeking an indemnity shall:
8.5.1 fully and promptly notify the indemnifying Party of any claim
or proceeding, or threatened claim or proceeding;
8.5.2 permit the indemnifying Party to take full care and control of
such claim or proceeding;
8.5.3 cooperate in the investigation and defense of such claim or
proceeding;
8.5.4 not compromise or otherwise settle any such claim or proceeding
without the prior written consent of the indemnifying Party, which consent shall
not be unreasonably withheld, conditioned or delayed; and
8.5.5 take all reasonable steps to mitigate any loss or liability in
respect of any such claim or proceeding.
8.6 NOTWITHSTANDING ANYTHING TO THE CONTRARY IN THIS AGREEMENT, NEITHER
ELAN NOR NEWCO SHALL BE LIABLE TO THE OTHER PARTY, BY REASON OF ANY
REPRESENTATION OR WARRANTY, CONDITION OR OTHER TERM OR ANY DUTY OF COMMON LAW,
OR UNDER THE EXPRESS TERMS OF THIS AGREEMENT, FOR ANY CONSEQUENTIAL OR
INCIDENTAL LOSS OR DAMAGE (WHETHER FOR LOSS OF PROFIT OR OTHERWISE) AND WHETHER
OCCASIONED BY THE APPLICABLE PARTY'S NEGLIGENCE OR THAT OF ITS EMPLOYEES OR
AGENTS OR OTHERWISE
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8.7 EXCEPT AS SET FORTH IN THIS SECTION 8, ELAN IS GRANTING THE ELAN
LICENSE HEREUNDER ON AN "AS IS" BASIS WITHOUT RECOURSE, REPRESENTATION OR
WARRANTY WHETHER EXPRESS OR IMPLIED, INCLUDING WARRANTIES OF MERCHANTABILITY OR
FITNESS FOR A PARTICULAR PURPOSE, OR INFRINGEMENT OF THIRD PARTY RIGHTS, AND ALL
SUCH WARRANTIES ARE EXPRESSLY DISCLAIMED.
9. INTELLECTUAL PROPERTY OWNERSHIP RIGHTS
9.1 Subject to the terms and conditions of this Agreement, Newco shall own
the legal and equitable title to the Newco Technology.
9.2 Elan shall own the legal and equitable title to the Elan Intellectual
Property, including without limitation, Elan Improvements.
9.3 Newco shall permanently mark or otherwise use reasonable efforts to
cause any third party to permanently mark all Products and/or the packaging
therefor with such license or patent notices to comply with the laws of the
country of sale or otherwise to generally communicate the existence of any Elan
Patents for the countries of the Territory and in such manner as Elan may
reasonably request in writing prior to the sale or commercial use thereof.
9.4 Elan, at its expense, shall make a good faith effort (i) to secure the
grant of any material patent applications within the Elan Patents that relate to
the Field; (ii) to defend all such applications against third party oppositions
and interferences; and (iii) to maintain in force any material issued letters
patent within the Elan Patents that relate to the Field (including any letters
patent that may issue covering any such Elan Improvements that relate to the
Field). Elan shall have the right in its discretion to control such filing,
prosecution, defense and maintenance provided that Newco and TGEN at their
request shall be provided with copies of all documents relating to such filing,
prosecution, defense and maintenance in sufficient time to review such documents
and comment thereon prior to filing. Notwithstanding the foregoing, it is
understood that Elan retains the discretion, in its sole judgment, as to whether
and where to file or to prosecute patent applications on any such technologies
or rights relating to the Elan Intellectual Property.
9.5 Newco, TGEN and Elan shall promptly inform each other in writing of
any alleged infringement of any patents within the Elan Patents, the TGEN
Patents, or any Newco patents or any alleged misappropriation of trade secrets
within the Elan Intellectual Property or the TGEN Intellectual Property by a
third party of which it
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becomes aware and provide the others with any available evidence of such
infringement or misappropriation insofar as such infringements or
misappropriation relate solely to the Field.
9.6 Newco shall have the right to prosecute at its own expense and for its
own benefit any infringements of the Elan Patents or misappropriation of the
Elan Intellectual Property, insofar as such infringements or misappropriation
relate solely to the Field. In the event that Newco takes such action, Newco
shall do so at its own cost and expense. At Newco's request, Elan shall
cooperate with such action. Any recovery remaining after the deduction by Newco
of the reasonable expenses (including attorney's fees and expenses) incurred in
relation to such infringement proceeding shall belong to Newco. Should Newco
decide not to pursue such infringers, within a reasonable period but in any
event within twenty (20) days after receiving written notice of such alleged
infringement or misappropriation Elan may in its discretion initiate such
proceedings in its own name, at its expense and for its own benefit, and at
Elan's request, Newco shall cooperate with such action. Alternatively, the
Participants may agree to institute such proceedings in their joint names and
shall reach agreement as to the proportion in which they shall share the
proceeds of any such proceedings, and the expense of any costs not recovered, or
the costs or damages payable to the third party. If the infringement of the
Elan Patents affects both the Field as well as other products being developed or
commercialized by Elan or its commercial partners outside the Field, Newco and
Elan shall endeavor to agree as to the manner in which the proceedings should be
instituted and as to the proportion in which they shall share the proceeds of
any such proceedings, and the expense of any costs not recovered, or the costs
or damages payable to the third party.
9.7 Newco shall indemnify, defend and hold harmless Elan and TGEN, against
all actions, losses, claims, demands, damages, costs and liabilities (including
reasonable attorneys fees) relating directly or indirectly to all such claims or
proceedings referred to herein, provided that Elan, shall not acknowledge to the
third party or to any other person the validity of any claims of such a third
party, and shall not compromise or settle any claim or proceedings relating
thereto without the prior written consent to Newco, not to be unreasonably
withheld, conditioned or delayed. At its option, Elan or TGEN, as the case may
be, may elect to take over the conduct of such proceedings from Newco provided
that Newco's indemnification obligations shall continue; the costs of defending
such claim shall be borne by Elan or TGEN, as the case may be and such
Participant shall not compromise or settle any such claim or proceeding without
the prior written consent of Newco, such consent not to be unreasonably
withheld, conditioned or delayed.
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10. RIGHTS EXPLOITATION OUTSIDE THE FIELD
10.1 Licenses to Elan Program Technology. Newco hereby grants to Elan an
-----------------------------------
exclusive, royalty free and sublicensable license to Elan Program Technology
outside of the Field. Such license shall be effective and exclusive on a
country-by-country basis for the life of any patents on such Elan Program
Technology in such country, or, to the extent the Elan Program Technology is not
patented or covered by pending patent applications in any country, for fifteen
years from the date any products are first introduced on the market in such
country by Elan under such license, or for such shorter period as shall be
required under the applicable law of any country in the Territory.
10.2 Licenses for Newco Program Technology Outside the Field. Newco shall
-------------------------------------------------------
negotiate in good faith with Elan and TGEN, respectively, for the grant of
exclusive or non-exclusive licenses for the rights to Newco Program Technology
(other than TGEN Program Technology or Elan Program Technology) outside the
Field in the Territory. All such licenses shall contain such customary terms
contained in similar licenses in the industry, as agreed to by the licensee and
the unanimous decision of the Management Committee, acting in good faith.
11. NON-COMPETITION
11.1 During the Research and Development Term (and any extensions
thereto), subject to the other provisions of this Agreement, Elan (subject,
however, to Section 20.2 of the Development Agreement) shall not (i) market,
sell, develop, or assist in the development for the use, manufacture,
distribution or sale of Products in the Field, except (a) for or on behalf of
Newco, or (b) with Newco's prior written consent (ii) develop, or assist in the
development of, [*] in the Field or (iii) market, sell, develop, or assist in
the development for the use, manufacture or distribution of products having the
same [*] with such Product. Following termination of the Research and
Development Term, Elan shall not during the License Term market, sell, develop,
or assist in the development for the use, manufacture, distribution of products
having the same Gene which is part of a Product being Commercialized by Newco
[*] In no event, however, shall the foregoing restrictions on competing apply to
Elan Pharmaceuticals or to Axogen Limited and Neuralab Limited; provided,
however, that neither the Elan Intellectual Property nor any of the Program
Technology may be utilized by such divisions in violation of the restrictions
contained in this Section 11.
* Confidential Treatment Requested
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12. TERM AND TERMINATION OF AGREEMENT
12.1. The term of this Agreement and the term of the Licenses granted
hereunder with respect to a Product utilizing or based on the Licensed
Technologies shall commence as of the Effective Date and continue, on a Product-
by-Product basis and country by country basis, for the life of the patent rights
upon which such Product is based or which such Product utilizes in such country
(the "Term"); provided, however, that all royalty and fee obligations contained
herein shall survive for the greater of (i) the Term or (ii) 15 years from the
first commercial sale of such Product.
12.2. Except as otherwise provided in Section 11 hereof, nothing contained
herein shall obligate or restrict any party from utilizing public, non-
proprietary information which is not subject to the protection of applicable
patent laws.
12.3. If either Party materially breaches any provision of this Agreement
and if such breach is (i) not capable of being cured or (ii) is capable of being
cured but is not cured within sixty (60) days after the non-breaching party
gives written notice of the breach to the breaching party, the non-breaching
party may terminate this Agreement immediately by giving notice of the
termination, effective on the date of the notice, provided, however, that (x) if
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any such curable breach is not capable of being cured within such sixty (60) day
period, so long as the breaching party commences to cure the breach promptly
after receiving notice of the breach from the non-breaching party and thereafter
diligently prosecutes the cure to completion as soon as is practicable, the non-
breaching Party may not terminate this Agreement so long as the breaching party
is acting in good faith to rectify such breach and (y) if there is a good faith
dispute as to the existence of the breach or as to its materiality, or regarding
the amount of any required payment, provided, in the case of disputes as to the
amount due, that any undisputed amount is paid, the right of the non-breaching
Party to terminate this Agreement shall be stayed for a reasonable period during
which a good faith resolution of the dispute will be obtained, either by
agreement or, failing that, through the dispute resolution provisions under
Clause 19 of the Development Agreement.
12.4. In the event that a Change of Control Event shall occur, at the sole
option of Elan and upon written notice to TGEN and Newco, the Elan License shall
be terminated. Upon written notice from TGEN to Elan of a proposed Change of
Control Event or the occurrence of a Change of Control Event, Elan shall have
thirty (30) days from such notice or occurrence to provide written notice to
TGEN as to whether it intends to terminate the Elan License immediately. In the
event Elan does not provide written notice to TGEN during such thirty (30) day
period of its intention to terminate
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<PAGE>
the Elan License, such termination right shall be deemed waived with respect to
such proposed Change of Control Event or such occurrence of a Change of Control
Event.
12.5. In the event that the TGEN License Agreement shall be terminated, at
the sole option of Elan and upon written notice to TGEN and Newco, the Elan
License shall be immediately terminated.
12.6. Upon the occurrence of an Event of Bankruptcy with respect to Newco
or Elan, the other Party may, upon written notice to TGEN and the Party with
respect to which such Event of Bankruptcy has occurred, immediately terminate
the Elan License. As used in this Clause 12.6, the term "Event of Bankruptcy"
relating to either Newco or Elan shall mean:
12.6.1. the appointment of a liquidator, receiver, administrator,
examiner, trustee or similar officer for either Party or over all or a
substantial part of its assets under the law of any applicable jurisdiction,
including without limitation, Bermuda, the United States of America or Ireland;
or
12.6.2 an application or petition for bankruptcy, corporate re-
organization, composition, administration, examination, arrangement or any other
procedure similar to any of the foregoing under the law of any applicable
jurisdiction, including without limit, Bermuda, the United States of America or
Ireland (other than as part of a bona fide restructuring or reorganization), is
filed, and is not discharged within forty-five (45) days, or if either Party
applies for or consents to the appointment of a receiver, administrator,
examiner or similar officer for it or all or a material part of its assets,
rights or revenues or the assets and/or the business of either Party are for any
reason seized, confiscated or condemned.
12.7. Upon exercise of those rights of termination as specified in Clause
12.1 to Clause 12.6 inclusive or elsewhere within this Agreement, this Agreement
shall, subject to the other provisions of this Agreement, and specifically
subject to Section 12.8, automatically terminate forthwith and be of no further
legal force or effect.
12.8. Upon expiration or termination of this Agreement:
12.8.1 any sums that were due from Newco to Elan with respect to
license granted hereunder, including without limitation on Net Sales or on Net
Proceeds, in the Territory or in such particular country or countries in the
Territory (as the case may be) prior to the expiration or termination of this
Agreement as set forth herein shall be paid in full within sixty (60) days after
the expiration or termination of
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<PAGE>
this Agreement for the Territory or for such particular country or countries in
the Territory (as the case may be);
12.8.2 any provisions clearly meant to survive termination or
expiration of this Agreement, including without limitation Section 7, shall
remain in full force and effect;
12.8.3 all representations, warranties and indemnities stated herein
shall insofar as are appropriate remain in full force and effect;
12.8.4 the rights of inspection and audit set out in Section 6 shall
continue in force for a period of one year;
12.8.5 termination or expiration of this Agreement for any reason
shall not release any Party hereto from any liability which, at the time of such
termination or expiration, has already accrued to the other Party or to any
third party beneficiary or which is attributable to a period prior to such
termination or expiration, including without limitation claims for
indemnification under Sections 8.3 - 8.5 or 9.7 arising from events, actions,
omissions or liabilities that existed at or prior to such termination or
expiration, nor preclude either Party or any third party beneficiary from
pursuing all rights and remedies it may have hereunder or at law or in equity
with respect to any breach of this Agreement;
12.8.6 all rights, licenses and sublicenses granted by Elan in the
Elan Intellectual Property pursuant to this Agreement shall cease for the
Territory or for such particular country or countries in the Territory (as the
case may be) and shall immediately revert to Elan and all Elan Program
Technology shall be deemed immediately transferred and assigned to Elan.
Following such expiration or termination, Newco may not thereafter use in the
Territory or in such particular country or countries in the Territory (as the
case may be) (a) any valid and unexpired Elan Patents, (b) any Elan Intellectual
Property that remains confidential or otherwise proprietary to Elan, and/or (c)
Trademarks. All rights to Newco Technology (other than Elan Program Technology
and TGEN Program Technology) shall be transferred to and jointly owned by Elan
and TGEN. Rights of permitted Independent Third Party sublicensees in and to the
Elan Intellectual Property shall survive the termination or expiration of the
license and sublicense agreements granting said intellectual property rights to
Newco; and Newco, Elan and TGEN shall in good faith agree upon the form most
advantageous to Elan and TGEN in which the rights of the sublicensor under any
such sublicenses are to be held (which form may include continuation of Newco
solely as the holder of such licenses or assignment of such rights to a third
party or parties, including an assignment to both Elan and TGEN).
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Any sublicense agreement between Newco and such permitted sublicensee shall
permit an assignment of rights by Newco to Elan or TGEN, as the case may be, and
shall contain additional reasonable confidentiality protections which an
assignee shall reasonably require. Upon any such assignment, Elan shall enter
into good faith negotiations with TGEN with respect to additional reasonable
confidentiality protections which either party shall reasonably require.
13. IMPOSSIBILITY OF PERFORMANCE - FORCE MAJEURE
13.1. Neither Party to this Agreement shall be liable for delay in the
performance of any of its obligations hereunder if such delay results from
causes beyond its reasonable control, including, without limitation, acts of
God, fires, strikes, acts of war, or intervention of a government authority, non
availability of raw materials, but any such delay or failure shall be remedied
by such Party as soon as practicable.
14. SETTLEMENT OF DISPUTES; GOVERNING LAW
14.1. Any dispute between the Parties arising out of or relating to this
Agreement will be subject to resolution in accordance with Clause 19 of the
Development Agreement, which is incorporated by reference and shall for such
purposes survive expiration or termination of the Development Agreement.
14.2. This Agreement is construed under and ruled by the laws of the State
of New York, without regard to conflicts of law principles.
15. ASSIGNMENT
15.1. This Agreement may not be assigned by either Party without the prior
written consent of the other, which consent shall not be unreasonably withheld,
conditioned or delayed, save that (i) either Party may assign this Agreement to
its Affiliate without such consent, provided that such assignment does not have
any adverse tax consequences on the other Party, and (ii) Elan may assign its
rights and obligations hereunder in connection with a sale of all or
substantially all of the business of Elan to which the Definitive Documents
relate, whether by merger, sale of stock, sale of assets or otherwise (provided
that, in the event of such transaction, no intellectual property rights of any
third party that is the acquiring corporation in such transaction shall be
included in the Elan Intellectual Property licensed hereunder). Elan and Newco
will discuss any assignment by either Party to an Affiliate prior to its
implementation in order to avoid or reduce any additional tax liability to the
other Party resulting solely from different tax law provisions applying after
such assignment
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<PAGE>
to an Affiliate. For the purpose hereof, an additional tax liability shall be
deemed to have occurred if either Party would be subject to a higher net tax on
payments made hereunder after taking into account any applicable tax treaty and
available tax credits than such Party was subject to before the proposed
assignment. Notwithstanding any assignment hereof to an Affiliate, each Party
will remain fully liable hereunder.
16. NOTICES
16.1. Any notice to be given under this Agreement shall be sent in writing
in English by registered airmail or telefaxed to the following addresses:
If to Newco at: Targeted Genetics Newco, Ltd.
c/o Targeted Genetics Corporation
1100 Olive Way, Suite 100
Seattle, Washington 98101
Attention: Chief Executive Officer
Telefax: (206) 623-7064
If to TGEN to: Targeted Genetics Corporation
1100 Olive Way, Suite 100
Seattle, Washington 98101
Attention: Chief Executive Officer
Telefax: (206) 623-7064
with a copy to: Perkins Coie LLP
411-108/th/ Avenue N.E., Suite 1800
Bellevue, Washington 98004-5584
Attention: Roger M. Tolbert, Esq.
Telefax: (425) 453-7350
If to Elan at: Elan Corporation plc
Lincoln House, Lincoln Place, Dublin 2, Ireland
Attention: Vice President, General Counsel,
Elan Pharmaceutical Technologies,
a division of Elan Corporation, plc
Telefax: + 353 1 709 4124
with a copy to: Cohen & Tauber LLP
1350 Avenue of the Americas
26/th/ Floor
New York, New York 10019
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<PAGE>
Attention: Laurence S. Tauber
Telefax: (212) 262-1766
or to such other address(es) and telefax numbers as may from time to time be
notified by either Party or TGEN to the other hereunder.
16.2. Any notice sent by mail shall be deemed to have been delivered within
seven (7) working days after dispatch and any notice sent by telex or telefax
shall be deemed to have been delivered within twenty four (24) hours of the time
of the dispatch. Notice of change of address shall be effective upon receipt.
17. MISCELLANEOUS CLAUSES
17.1. No waiver of any right under this Agreement shall be deemed effective
unless contained in a written document signed by the Party or third party
beneficiary charged with such waiver, and no waiver of any breach or failure to
perform shall be deemed to be a waiver of any other breach or failure to perform
or of any other right arising under this Agreement.
17.2. If any provision in this Agreement is agreed by the Parties to be, or
is deemed to be, or becomes invalid, illegal, void or unenforceable under any
law that is applicable hereto, (i) such provision will be deemed amended to
conform to applicable laws so as to be valid and enforceable or, if it cannot be
so amended without materially altering the intention of the Parties, it will be
deleted, with effect from the date of such agreement or such earlier date as the
Parties may agree, and (ii) the validity, legality and enforceability of the
remaining provisions of this Agreement shall not be impaired or affected in any
way.
17.3. The Parties shall use their respective reasonable endeavors to ensure
that the Parties and any necessary third party shall execute and perform all
such further deeds, documents, assurances, acts and things as any of the Parties
hereto may reasonably require by notice in writing to the other Party or such
third party to carry into effect the provisions of this Agreement.
17.4. This Agreement shall be binding upon and inure to the benefit of the
Parties hereto, their successors and permitted assigns and sub-licenses. TGEN
shall be a third party beneficiary to this Agreement and shall have the right
(subject to the dispute resolution provisions of the Development Agreement) to
cause Newco to enforce Newco's rights against Elan.
17.5. No provision of this Agreement shall be construed so as to negate,
modify or affect in any way the provisions of any other agreement between the
Parties
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<PAGE>
unless specifically referred to, and solely to the extent provided, in any such
other agreement. In the event of a conflict between the provisions of this
Agreement and the provisions of the Development Agreement, the terms of the
Development Agreement shall prevail unless this Agreement or the Development
Agreement specifically provides otherwise.
17.6. No amendment, modification or addition hereto shall be effective or
binding on either Party unless set forth in writing and executed by a duly
authorized representative of each Party. Amendments hereto shall be subject to
the prior approval of TGEN, which approval, except as otherwise provided herein,
shall not be unreasonably withheld, conditioned or delayed.
17.7. This Agreement may be executed in any number of counterparts, each of
which when so executed shall be deemed to be an original and all of which when
taken together shall constitute this Agreement.
17.8. Each of the Parties undertakes to do all things reasonably within its
power which are necessary or desirable to give effect to the spirit and intent
of this Agreement.
17.9. Each of the Parties hereby acknowledges that in entering into this
Agreement it has not relied on any representation or warranty save as expressly
set out herein or in any document referred to herein.
17.10. Nothing contained in this Agreement is intended or is to be
construed to constitute Elan, TGEN and Newco as partners, or to constitute any
of Elan, TGEN or Newco as an employee of any of the others. Neither Party
hereto nor TGEN shall have any express or implied right or authority to assume
or create any obligations on behalf of or in the name of the other Party hereto
or TGEN or to bind the other Party hereto or TGEN to any contract, agreement or
undertaking with any third party.
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<PAGE>
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of the
date first set forth above.
ELAN PHARMACEUTICAL TECHNOLOGIES,
a division of Elan Corporation, plc
By: /s/ Kevin Insley
--------------------------------
Name: Kevin Insley
------------------------------
Title: Authorized Signatory
-----------------------------
TARGETED GENETICS NEWCO, LTD.
By: /s/ Stewart Parker
--------------------------------
Name: H. Stewart Parker
------------------------------
Title: President
-----------------------------
AGREED TO:
TARGETED GENETICS CORPORATION
By: /s/ Stewart Parker
--------------------------------
Name: H. Stewart Parker
------------------------------
Title: President & CEO
-----------------------------
[ELAN LICENSE AGREEMENT EXECUTION PAGE]
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SCHEDULE 1
Elan Intellectual Property
[*]
* Confidential Treatment Requested
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<PAGE>
SCHEDULE 2
Elan Exceptions and Disclosures
[*]
* Confidential Treatment Requested
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<PAGE>
EXHIBIT 1.8
ARTICLES OF AMENDMENT
OF
TARGETED GENETICS CORPORATION
The following Articles of Amendment are executed by the undersigned, a
Washington corporation:
1. The name of the corporation is Targeted Genetics Corporation.
2. Pursuant to RCW 23B.06.020, the corporation states that the Designation
of Rights and Preferences of Series B Convertible Exchangeable Preferred Stock
attached hereto as Exhibit A was duly adopted by the Board of Directors of the
corporation on June 29, 1999 and shareholder approval was not required.
3. The amendment does not provide for the exchange, reclassification or
cancellation of issued shares.
These Articles of Amendment are executed by said corporation by its duly
authorized officer.
DATED: July 21, 1999
TARGETED GENETICS CORPORATION
By /s/ James A. Johnson
------------------------------------------
James A. Johnson
Senior Vice President, Finance and
Administration and Chief Financial Officer
<PAGE>
SERIES B CONVERTIBLE EXCHANGEABLE PREFERRED STOCK
DESIGNATION OF RIGHTS AND PREFERENCES
There is hereby designated a series of Preferred Stock to be known as
Series B Convertible Exchangeable Preferred Stock (the "Series B Stock"),
consisting of ____________________12,015 shares, ____________________$0.01 par
value per share, having the following rights and preferences:
1. Dividend Rights
(a) When and if this corporation's Board of Directors shall declare a
dividend or distribution payable with respect to the then-outstanding shares of
Common Stock of this corporation, other than any such dividend or distribution
payable in shares of Common Stock or other securities of this corporation (which
is provided for in Sections 3.3 and 3.4), the holders of the Series B Stock
shall be entitled to the amount of dividends per share that would be payable on
the largest number of whole shares of Common Stock into which a holder's
aggregate shares of Series B Stock could then be converted pursuant to Section
3.1(a) without regard to the provisions of Section 4 (such number to be
determined as of the record date for the determination of holders of Common
Stock entitled to receive such dividend).
(b) In addition to Section 1(a), subject to the rights of holders, if any,
of shares of Preferred Stock then outstanding having a right to dividends
ranking equal or superior to the rights of holders of Series B Stock, the
holders of the then outstanding Series B Stock shall be entitled to receive, out
of any assets of this corporation legally available therefor, a cumulative
dividend equal to 7.0% per year of $1,000.00 per share (the "Series B Original
Issue Price") (as adjusted for any combinations, consolidations, stock
distributions, stock dividends or other recapitalizations with respect to such
shares) plus accrued dividends thereon, compounded on a semi-annual basis for a
period of six years from the date of issuance. Such dividend shall be payable
solely by the issuance of additional shares of Common Stock upon conversion of
the Series B Stock into Common Stock pursuant to Section 3 hereof; provided,
however, that if the Company exercises the Redemption Right (as defined in
Section 4), such dividend shall be payable in cash upon such redemption in
accordance with Section 4. The dividend to be paid to a holder under this
Section 1 upon a conversion of the Series B Stock shall be equal to that number
of shares of Common Stock determined by dividing the total dividend accrued with
respect such holder's Series B Stock by the Series B Conversion Price,
determined in accordance with
<PAGE>
Section 3 hereof, then in effect. No dividends shall be payable under this
Section 1 in the event the Exchange Right is exercised pursuant to Section 5.
(c) In the event of any liquidation, dissolution or winding-up of the
affairs of the Corporation, whether voluntary or involuntary (collectively, a
"Liquidation"), before any payment of cash or distribution of other property
shall be made to the holders of the Common Stock or any other class or series of
stock subordinate in liquidation preference to the Series B Stock, the holders
of the Series B Stock shall be entitled to receive out of the assets of the
Corporation legally available for distribution to its shareholders, the Series B
Original Issue Price (as defined below) per share (as appropriately adjusted for
any combinations or divisions or similar recapitalizations affecting the Series
B Stock after issuance) (the "Series B Liquidation Preference"), out of funds
legally available therefor.
(d) If, upon any Liquidation, the assets of the Corporation available for
distribution to its shareholders shall be insufficient to pay the holders of the
B Preferred Stock the full amounts to which they shall be entitled, the holders
of the Series B Stock shall share ratably in any distribution of assets in
proportion to the respective amounts which would be payable to them in respect
of the shares held by them if all amounts payable to them in respect of such
were paid in full pursuant to Section 1(c).
(e) After the distribution described in Section 1(c) above have been paid,
subject to the rights of other series of preferred stock that may from time to
time come into existence, the remaining assets of the Corporation available for
distribution to shareholders shall be distributed among the holders of Common
Stock pro rata based on the number of shares of Common Stock held by each.
2. Voting Rights
Holders of Series B Stock shall not be entitled to vote together with
holders of Common Stock, including with respect to the election of directors of
this corporation, or as a separate class, except as otherwise provided by the
Washington Business Corporation Act (the "WBCA"). To the extent that, under the
WBCA, the vote of the holders of the Series B Stock, voting separately as a
class or series as applicable, is required to authorize a given action of this
corporation, the affirmative vote or consent of the holders of at least a
majority of the shares of the Series B Stock represented at a duly held meeting
at which a quorum is present or by written consent of a majority of the shares
of Series B Stock (except as otherwise may be required under the WBCA) shall
constitute the approval of such action by the class or series. Holders of the
Series B Stock shall be entitled to notice of all shareholder meetings or
written consents (and copies of proxy materials and other information sent to
shareholders)
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<PAGE>
with respect to which they would be entitled as of right under the WBCA which
notice would be provided pursuant to the Company's Bylaws and the WBCA.
3. Conversion
3.1 Right to Convert; Automatic Conversion
(a) Subject to Sections 3.3, 3.4, 3.5 and 3.6, each share of Series B
Stock shall be convertible, without payment of any additional consideration by
the holder thereof and at the option of such holder, into such number of fully
paid and nonassessable shares of Common Stock as is determined by dividing the
Series B Original Issue Price, plus any accrued and unpaid dividends, by the
Series B Conversion Price (as defined below) in effect at the time of
conversion, at any time from the date hereof, at the office of this corporation
or any transfer agent for such stock. The Series B Conversion Price shall
initially be $ 3.32 per share, subject to adjustment as provided below.
(b) In the event that a Significant Transaction (as defined below) occurs,
then, in such event, the Series B Stock shall automatically be converted into
such number of fully paid and nonassessable shares of Common Stock determined by
dividing the Series B Original Issue Price, plus accrued and unpaid dividends,
by the Series B Conversion Price then in effect, provided that the Corporation
shall have given the holders of the Series B Stock notice that such significant
transaction shall occur. For purposes of this Certificate of Designation,
"Significant Transaction" shall mean (A) a reorganization, merger or
consolidation in which immediately after (by virtue of securities issued as
consideration for such transaction) the former shareholders of this corporation
do not hold at least 50% of the voting power of the surviving or acquiring
entity in approximately the same relative percentage after such acquisition or
sale as before such acquisition or sale, (B) an acquisition of all outstanding
capital stock of this corporation or (C) a sale or other transfer of all or
substantially all of this corporation's assets, but shall not include (1) a
commencement of any bankruptcy or insolvency proceedings, whether voluntary or
involuntary, (2) a filing for reorganization or relief under bankruptcy law, (3)
a consent to the appointment of a receiver, liquidator or trustee for this
corporation or its assets, (4) a making of a general assignment by this
corporation for the benefit of its creditors or (5) any other similar corporate
action.
3.2 Mechanics of Conversion
Before any holder of Series B Stock shall be entitled to convert the same
into shares of Common Stock, such holder shall surrender the certificate or
certificates therefor, duly endorsed, at the office of this corporation or of
any transfer agent for
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<PAGE>
the Series B Stock, and shall give written notice by mail, postage prepaid, to
this corporation at its principal corporate office, of the election to convert
the same and shall state the name or names in which the certificate or
certificates for shares of Common Stock are to be issued. This corporation
shall, as soon as practicable, issue and deliver at such office to such holder
of Series B Stock or to the nominee or nominees of such holder, a certificate or
certificates for the number of shares of Common Stock to which such holder shall
be entitled. Such conversion shall be deemed to have been made immediately prior
to the close of business on the date of such surrender of the shares of Series B
Stock to be converted, and the person or persons entitled to receive the shares
of Common Stock issuable upon such conversion shall be treated for all purposes
as the record holder or holders of such shares of Common Stock as of such date.
3.3 Conversion Price Adjustments for Stock Splits and Combinations
If this corporation shall at any time or from time to time after the date
that the first share of Series B Stock is issued (the "Original Issue Date")
effect a subdivision of the outstanding Common Stock without a corresponding
subdivision of the Series B Stock , the Series B Conversion Price in effect
immediately before that subdivision shall be proportionately decreased.
Conversely, if the Company shall at any time or from time to time after the
Original Issue Date combine the outstanding shares of Common Stock into a
smaller number of shares without a corresponding combination of the Series B
Stock , the Series B Conversion Price in effect immediately before the
combination shall be proportionately increased. Any adjustment under this
Section 3.3 shall become effective at the close of business on the date the
subdivision or combination becomes effective.
3.4 Other Distributions
In the event this corporation shall declare a distribution payable in
securities of other persons, evidences of indebtedness issued by this
corporation or other persons, assets (excluding cash dividends) or options or
rights not referred to in Section 3.3, then, in each such case for the purpose
of this Section 3.4, the holders of the Series B Stock shall be entitled to a
proportionate share of any such distribution as though they were the holders of
the number of shares of Common Stock of this corporation into which their shares
of Series B Stock are convertible as of the record date fixed for the
determination of the holders of Common Stock of this corporation entitled to
receive such distribution.
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<PAGE>
3.5 Recapitalizations
If the Common Stock issuable upon the conversion of Series B Stock shall be
changed into the same or a different number of shares of any class or classes of
stock of this corporation, whether by capital reorganization, reclassification
or otherwise (other than a subdivision or combination of shares or stock
dividend provided for elsewhere in this Section 3), then and in each such event
each share of Series B Stock shall be convertible into the kind and amount of
shares of stock and other securities and property receivable upon such
reorganization, reclassification or other change by the number of shares of
Common Stock into which such share of Series B Stock might have been converted
immediately prior to such reorganization, reclassification or change, all
subject to further adjustment as provided herein.
3.6 No Fractional Shares; Certificates as to Adjustment
(a) No fractional shares of Common Stock or scrip representing fractional
shares shall be issued upon the conversion of shares of Series B Stock, but this
corporation shall pay to the holder of such shares a cash adjustment in respect
of such fractional shares in an amount equal to the same fraction of the market
price per share of the Common Stock (as determined in a reasonable manner
prescribed by this corporation's Board of Directors) at the close of business on
the applicable conversion date. The determination as to whether or not any
fractional shares are issuable shall be based upon the total number of shares of
Series B Stock being converted at any one time by any holder, not upon each
share of Series B Stock being converted.
(b) In each case of an adjustment or readjustment of the Series B
Conversion Price, this corporation at its expense will furnish each holder of
Series B Stock with a certificate, signed by this corporation's Chief Financial
Officer, showing such adjustment or readjustment and stating in detail the facts
upon which such adjustment or readjustment is based.
3.7 Notices of Record Date
In the event of any taking by this corporation of a record of the holders
of any class of securities for the purpose of determining the holders thereof
who are entitled to receive any dividend (other than a cash dividend) or other
distribution, any right to subscribe for, purchase or otherwise acquire any
shares of stock of any class or other securities or property, or to receive any
other right, this corporation shall mail to each holder of Series B Stock, at
least twenty (20) days prior to the date specified therein, a notice specifying
the date on which any such record is to be taken for the purpose of such
dividend, distribution or right, and the amount and character of such dividend,
distribution or right.
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<PAGE>
3.8 Reservation of Stock Issuable Upon Conversion
This corporation shall at all times reserve and keep available out of its
authorized but unissued shares of Common Stock such number of its shares of
Common Stock as shall be sufficient to effect the conversion of all outstanding
shares of the Series B Stock; and if at any time the number of authorized but
unissued shares of Common Stock shall not be sufficient to effect the conversion
of all then outstanding shares of the Series B Stock, in addition to such other
remedies as shall be available to the holder of such Preferred Stock, this
corporation will take such corporate action as may, in the opinion of its
counsel, be necessary to increase its authorized but unissued shares of Common
Stock to such number of shares as shall be sufficient for such purposes.
3.9 Notices
Any notice required by the provisions of this Section 3 to be given to the
holders of shares of Series B Stock shall be deemed given if deposited in the
United States mail, postage prepaid, and addressed to each holder of record at
such holder's address appearing on the books of this corporation.
4. Limitation on Issuance of Shares Upon Conversion; Redemption
(a) The following definitions shall apply to this Section 4:
(i) "Maximum Share Amount" shall mean the number of shares of this
corporation's Common Stock equal to 19.99% of this
corporation's Common Stock then outstanding;
(ii) "Excess Shares" shall mean Common Stock of this corporation
which, upon issuance, results in the beneficial ownership (as
defined in Rule 13(d)-3 of the Securities Exchange Act of 1934)
by a holder of shares of Common Stock in excess of the Maximum
Share Amount;
(iii) "Exchange Rules" shall mean the rules or regulations of Nasdaq
or any other principal securities market upon which the Common
Stock of this corporation is or becomes traded.
(b) Except as provided in Section 4(c), this corporation shall not be
obligated to issue upon conversion of the Series B Stock, in the aggregate,
Excess Shares if such issuance in excess of the Maximum Shares Amount would
constitute a breach a or violation of the Exchange Rules.
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<PAGE>
(c) To the extent this corporation will be required, or it appears likely
to the Board of Directors of this corporation that this corporation will be
required, to issue any Excess Shares, this corporation shall promptly use its
best efforts to obtain shareholder approval in accordance with the WBCA, the
applicable rules of the Securities and Exchange Commission and the Exchange
Rules. In the event this corporation does not obtain shareholder approval, this
corporation shall have the right, at its option (the "Redemption Right"), to
redeem, out of funds legally available therefor, all or any part of the Excess
Shares at a redemption price, payable in cash, equal to the Series B Original
Issue Price per share together with accrued and unpaid dividends on any such
shares that are redeemed (the "Redemption Price"). This corporation may
exercise the Redemption Right by providing notice by mail, first class postage
prepaid, to each holder of Series B Stock of record (at the close of business on
the business day preceding the day on which notice is given) of the Series B
Stock to be redeemed, at the address last shown on the records of this
corporation for such holder, notifying such holder of the redemption to be
effected, specifying the number of shares to be redeemed from such holder, the
date that the redemption is to occur (the "Redemption Date"), the place at which
payment may be obtained and calling upon such holder to surrender to this
corporation, in the manner and at the place designated, such holder's
certificate or certificates representing the shares to be redeemed (the
"Redemption Notice"). On or after the Redemption Date, each holder of Series B
Stock to be redeemed shall surrender to this corporation the certificate or
certificates representing such shares in the manner and at the place designated
in the Redemption Notice, and thereupon the Redemption Price of such shares
shall be payable to the order of the person whose name appears on such
certificate or certificates as the owner thereof and each surrendered
certificate shall be cancelled. In the event less than all of the shares
represented by any such certificate are redeemed, a new certificate shall be
issued representing the unredeemed shares. From and after the Redemption Date,
unless there shall have been a default in payment of the Redemption Price, all
rights of the holders of shares of Series B Stock designated for redemption in
the Redemption Notice as holders of Series B Stock (except the right to receive
the Redemption Price without interest upon surrender of their certificate or
certificates and except as provided in Section 6(c)) shall cease with respect to
such shares, and such shares shall not thereafter be transferred on the books of
this corporation or be deemed to be outstanding for any purpose whatsoever.
5. Exchange Right
(a) At any time beginning on the date hereof and ending on the later of
April 21, 2003 or six months after the end of the Research and Development Term
(as defined by the Joint Development and Operating Agreement among this
corporation, Elan Pharmaceuticals, plc, a public liability corporation
incorporated under the
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laws of Ireland, Elan International Services, Ltd., a Bermuda corporation
("EIS") and Targeted Genetics Newco, Ltd., a Bermuda corporation ("Newco")),
provided that no shares of Series B Stock representing the shares initially
issued and sold by this corporation to EIS and its affiliates, together with
those issued or issuable in respect of dividends provided for in Section 1, have
been converted as provided in Section 3.1(a) or 3.1(b), the holders of the
Series B Stock (by act of the holders of a majority of the Series B Stock) shall
have the right to exchange 100% of such shares of Series B Stock (the "Exchange
Right") with this corporation for 100% of the outstanding preferred shares of
[Newco], held by this corporation, representing 30.1% of the beneficial interest
in the aggregate issued and outstanding capital stock of Newco on a fully
diluted basis, so that, after giving effect to the exercise of the Exchange
Right, such holders will own such issued and outstanding capital stock of Newco
representing 50.0% of the beneficial interest in the aggregate issued and
outstanding capital stock of Newco on a fully diluted basis.
(b) In order to exercise the Exchange Right, the holders shall provide
written notice thereof to this corporation, setting forth (i) the fact that such
holders intend to exercise the Exchange Right and (ii) the proposed date for
such exercise (the "Exercise Date"), which shall be between 10 and 30 days after
the date of such notice. On the Exercise Date, (x) the holders shall tender
their shares of Series B Stock to this corporation for cancellation and (y) this
corporation shall cause to be delivered to EIS, acting on behalf of such
holders, such shares of Newco. The holders and this corporation shall take all
other necessary or appropriate actions in connection with or to effect such
closing.
(c) If any shares of Series B Stock are converted into shares of Common
Stock pursuant to Section 3.1(a) or 3.1(b), the Exchange Right shall terminate
and be of no further force or effect with respect to such shares or with respect
to those shares of Series B Stock issued as dividends pursuant to Section 1. If
all or any shares of the Series B Stock are converted to shares of Common Stock
upon the occurrence of a Significant Transaction, the Exchange Right shall be
preserved for its full term as provided in Section 5(a), except that, to
exercise the Exchange Right, EIS shall be obligated to tender the consideration
received by EIS upon the automatic conversion of the Series B Stock in
connection with such Significant Transaction. If this corporation exercises the
Redemption Right with respect to any shares of Series B Stock, the Exchange
Right shall be preserved for its full term, except that, to exercise the
Exchange Right, in addition to tendering any shares of Series B Stock then
outstanding, EIS shall be obligated to tender the consideration received by EIS
upon the redemption of any Excess Shares in connection with this corporation's
exercise of its Redemption Right.
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6. Protective Provisions
So long as any shares of Series B Stock are outstanding, this corporation
shall not, without first obtaining the approval (by vote or written consent, as
provided by law) of the holders of at least a majority of the then outstanding
shares of Series B Stock, voting as a separate class or series, amend its
Articles of Incorporation so as to adversely affect the rights, preferences or
privileges of the Series B Stock or any holder thereof, including, without
limitation, by creating any series of Preferred Stock (or issuing shares under
any such series) that is senior in right of payment upon liquidation, in respect
of dividends or otherwise to the Series B Stock, or adversely change the rights
of the holders of the Series B Stock in any other respect; provided, however,
that the creation of any series of Preferred Stock (or issuance of shares under
any such series) that is pari passu in respect of dividends or otherwise with
the Series B Stock shall not be deemed to adversely affect the rights,
preferences or privileges of the Series B Stock or any holder thereof or change
the rights of the holders of the Series B Stock in any other respect.
7. Status of Converted, Redeemed or Exchanged Stock
In the event any shares of Series B Stock shall be converted pursuant to
Section 3, redeemed pursuant to Section 4 or exchanged pursuant to Section 5,
the shares so converted, redeemed or exchanged shall be cancelled and shall not
be reissuable by this corporation.
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EXHIBIT 1.9
FIRST AMENDMENT OF RIGHTS AGREEMENT
Subject to the terms hereof, pursuant to Section 26 of the Rights
Agreement, dated as of October 17, 1996, by and between Targeted Genetics
Corporation (the "Company") and ChaseMellon Shareholder Services (the "Rights
Agreement"), the Company, by this First Amendment of Rights Agreement dated July
21, 1999, does hereby amend the Rights Agreement as follows:
Section 1 is hereby amended to add the following sentence at the end of the
definition of "Acquiring Person":
Notwithstanding the foregoing, neither Elan International Services, Ltd.
("EIS") nor any Affiliate or Associate of EIS shall be included within the
definition of "Acquiring Person" by virtue of the acquisition by EIS of shares
of Common Stock, or any securities convertible into or exchangeable for shares
of Common Stock, pursuant to the transactions contemplated by the Securities
Purchase Agreement, dated July 21, 1999, between the Company and EIS and the
Convertible Promissory Note, dated July 21, 1999, issued by the Company to EIS
(the "Transaction Securities"); provided, however, EIS shall be included within
the definition of Acquiring Person to the extent EIS, either alone or together
with all Affiliates and Associates of EIS, including the Transaction Securities,
becomes the Beneficial Owner of 15% or more of the Common Stock then outstanding
as the result of being or becoming the Beneficial Owner of Common Stock other
than the Transaction Securities.
IN WITNESS WHEREOF, the Company has executed this First Amendment to Rights
Agreement as of the date first written above.
TARGETED GENETICS CORPORATION
By: /s/ James A. Johnson
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James A. Johnson
Vice President & Chief Financial Officer
