<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): November 23, 1998
TARGETED GENETICS CORPORATION
(Exact name of registrant as specified in charter)
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<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 November 23, 1998, Targeted Genetics Corporation (the "Company") formed
a collaboration with Medeva PLC and Medeva Pharmaceuticals, Inc. ("Medeva"), an
affiliate of Medeva PLC, to develop and commercialize tgAAV-CF, the Company's
potential gene therapy product for the treatment of cystic fibrosis. Pursuant
to the collaboration, the Company and Medeva entered into a Master Agreement, a
License and Collaboration Agreement and a Supply Agreement; the Company, Medeva
and Medeva PLC entered into a Common Stock Purchase Agreement; and the Company
and Medeva PLC entered into a Credit Agreement (collectively the "Collaboration
Agreement"). Pursuant to the Collaboration Agreement, the Company could receive
up to $54 million, including $12 million in loans.
The consideration being paid by Medeva and Medeva PLC to the Company
comprises: a $5 million technology license fee; clinical and regulatory
milestone payments totaling $19 million; a loan of $2 million; investment in the
Company equity totaling $3 million; and up to a maximum of $15 million in
development funding for this project over a three year period. Under certain
conditions, Medeva will also make available to the Company a loan of $10 million
toward the building of a manufacturing facility for the production of tgAAV-CF.
Of the above amounts, a total of $8.5 million is payable upon the signing of the
Collaboration Agreement. Medeva will cover the cost of clinical and regulatory
activities related to the development of the product for which it is responsible
under the Collaboration Agreement.
Clinical trials of tgAAV-CF in the United States will be managed by the
Company through the completion of Phase I studies. The Company may, under
certain conditions, manage Phase II clinical trials in the United States.
Medeva will manage all other trials and will be responsible for worldwide
registration of tgAAV-CF. Upon registration, Medeva will be responsible for
worldwide marketing of the product. A joint development committee, comprised of
three individuals from each company, will be formed to oversee the formation and
execution of the tgAAV-CF clinical development plan. Assuming successful
development and registration of the product, Medeva will purchase tgAAV-CF from
the Company under the Supply Agreement.
The Master Agreement is attached hereto as Exhibit 1.1, the License and
Collaboration Agreement is attached hereto as Exhibit 1.2, the Supply Agreement
is attached hereto as Exhibit 1.3, the Common Stock Purchase Agreement is
attached hereto as Exhibit 1.4, and the Credit Agreement is attached hereto as
Exhibit 1.5. A letter agreement, dated as of November 23, 1998, assigning
Medeva's rights and obligations with respect to the initial purchase and sale of
the Company's stock under the Common Stock Purchase Agreement to Medeva PLC, is
attached as Exhibit 1.6.
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ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(c) Exhibits.
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EXHIBIT NO. DESCRIPTION
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1.1* Master Agreement, dated as of November 23, 1998, by and between the
Company and Medeva.
1.2* License and Collaboration Agreement, dated as of November 23, 1998,
by and between the Company and Medeva.
1.3* Supply Agreement, dated as of November 23, 1998, by and between the
Company and Medeva.
1.4 Common Stock Purchase Agreement, dated as of November 23, 1998, by
and among the Company, Medeva and Medeva PLC.
1.5 Credit Agreement, dated as of November 23, 1998, by and between the
Company and Medeva PLC.
1.6 Letter agreement, dated as of November 23, 1998, assigning Medeva's
rights and obligations with respect to the initial purchase and
sale of the Company's stock under the Common Stock Purchase
Agreement, dated as of November 23, 1998, to Medeva PLC, by and
among the Company, Medeva and Medeva PLC.
</TABLE>
* Confidential treatment requested; the omitted material has been separately
filed with the Commission.
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<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: January 4, 1999
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EXHIBIT INDEX
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EXHIBIT NO. DESCRIPTION
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1.1* Master Agreement, dated as of November 23, 1998, by and between
the Company and Medeva.
1.2* License and Collaboration Agreement, dated as of November 23,
1998, by and between the Company and Medeva.
1.3* Supply Agreement, dated as of November 23, 1998, by and between
the Company and Medeva.
1.4 Common Stock Purchase Agreement, dated as of November 23, 1998, by
and among the Company, Medeva and Medeva PLC.
1.5 Credit Agreement, dated as of November 23, 1998, by and between
the Company and Medeva PLC.
1.6 Letter agreement, dated as of November 23, 1998, assigning
Medeva's rights and obligations with respect to the initial
purchase and sale of the Company's stock under the Common Stock
Purchase Agreement, dated as of November 23, 1998, to Medeva PLC,
by and among the Company, Medeva and Medeva PLC.
</TABLE>
* Confidential treatment requested; the omitted material has been separately
filed with the Commission.
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<PAGE>
EXHIBIT 1.1
================================================================================
MASTER AGREEMENT
BETWEEN
TARGETED GENETICS CORPORATION
AND
MEDEVA PHARMACEUTICALS, INC.
AN AFFILIATE OF
MEDEVA PLC
DATED NOVEMBER 23, 1998
================================================================================
"[*]" = omitted, confidential material, which material has been separately filed
with the Securities and Exchange Commission pursuant to a request for
confidential treatment.
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TABLE OF CONTENTS
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PAGE
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ARTICLE 1 DEFINITIONS.................................................... 4
1.1 "Affiliate".................................................. 4
1.2 "Applicable Laws"............................................ 4
1.3 "Approval Application"....................................... 4
1.4 "Bulk Licensed Product"...................................... 5
1.5 "Contract Manufacturer"...................................... 5
1.6 "Control".................................................... 5
1.7 "Country".................................................... 5
1.8 "Development Period"......................................... 5
1.9 "Development Plan"........................................... 5
1.10 "Development Work"........................................... 6
1.11 "Europe"..................................................... 6
1.12 "FDA"........................................................ 6
1.13 "FFDCA"...................................................... 6
1.14 "Field"...................................................... 6
1.15 "First Commercial Sale"...................................... 6
1.16 "GLP"........................................................ 6
1.17 "GMP"........................................................ 7
1.18 "Government Authority"....................................... 7
1.19 "Improvement"................................................ 7
1.20 "Joint Invention"............................................ 7
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1.21 "Joint Patents".............................................. 7
1.22 "Know-How"................................................... 7
1.23 "Licensed Know-How".......................................... 8
1.24 "Licensed Patent Rights"..................................... 8
1.25 "Licensed Product(s)"........................................ 8
1.26 "Major European Country"..................................... 8
1.27 "Manufacturing Cost"......................................... 8
1.28 "Medeva's Manufacturing Rights".............................. 8
1.29 "Medeva Trademarks".......................................... 8
1.30 "Minimum Performance Level".................................. 9
1.31 "Minor European Country"..................................... 9
1.32 "Net Sales".................................................. 9
1.33 "Net Sales Per Annual Dose".................................. 10
1.34 "New Product"................................................ 11
1.35 "Obligations"................................................ 11
1.36 "Outside Contractor"......................................... 11
1.37 "Patent Costs"............................................... 12
1.38 "Patent Rights".............................................. 12
1.39 "Phase I Clinical Trial"..................................... 12
1.40 "Phase II Clinical Trial".................................... 13
1.41 "Phase III Clinical Trial"................................... 13
1.42 "Project Year"............................................... 13
1.43 "Reasonable Commercial Efforts".............................. 13
1.44 "Region"..................................................... 13
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1.45 "Regulatory Approval"........................................ 13
1.46 "Responsible Executive"...................................... 13
1.47 "Specifications"............................................. 14
1.48 "Steering Committee"......................................... 14
1.49 "Sublicensee"................................................ 14
1.50 "Third Party"................................................ 14
1.51 "Third Party Agreement(s)"................................... 14
1.52 "Transaction Documents"...................................... 14
1.53 "Transfer Price"............................................. 14
1.54 "U.S." or "United States".................................... 14
ARTICLE 2 CORPORATE STRUCTURE AND CONTRACTUAL RELATIONSHIP............... 14
2.1 General...................................................... 14
2.2 Formation of New TGC Subsidiary.............................. 15
2.3 Pledge of Stock of TG-Sub.................................... 17
2.4 Security Interest............................................ 17
2.5 Cell Lines................................................... 18
2.6 Sublicense................................................... 18
2.7 Limitation................................................... 18
2.8 Further Assurances........................................... 19
ARTICLE 3 CONFIDENTIALITY................................................ 19
3.1 Confidentiality; Exceptions.................................. 19
3.2 Authorized Disclosure........................................ 21
3.3 Return of Confidential Information........................... 21
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iii
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3.4 Publications and Announcements............................... 22
ARTICLE 4 REPRESENTATIONS AND WARRANTIES................................. 24
4.1 Representations and Warranties of the Parties................ 24
4.2 Representations and Warranties of TGC........................ 24
4.3 Representations and Warranties Specific to Third Party
Agreements................................................... 28
4.4 Disclaimer................................................... 31
ARTICLE 5 TERM AND TERMINATION........................................... 31
5.1 Term......................................................... 31
5.2 Termination at Will.......................................... 32
5.3 Termination for Cause........................................ 32
5.4 Limitation on Termination for Cause.......................... 33
5.5 Termination for Insolvency................................... 35
5.6 Rights on Termination........................................ 35
5.7 Accrued Rights............................................... 38
5.8 Survival..................................................... 38
ARTICLE 6 INDEMNIFICATION; INSURANCE; LIMITATION OF LIABILITY............ 38
6.1 Indemnification by Medeva.................................... 39
6.2 Indemnification by TGC....................................... 39
6.3 Indemnification Procedure.................................... 40
6.4 Insurance.................................................... 43
6.5 Limitation of Liability; Remedies Cumulative................. 43
ARTICLE 7 GOVERNING LAW; DISPUTE RESOLUTION.............................. 44
7.1 Governing Law................................................ 44
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iv
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7.2 Dispute Resolution........................................... 44
7.3 Courts of Law................................................ 44
ARTICLE 8 MISCELLANEOUS.................................................. 45
8.1 Assignment................................................... 45
8.2 Force Majeure................................................ 45
8.3 Further Actions.............................................. 46
8.4 Governmental Approvals; Compliance with Law.................. 46
8.5 Public Announcement.......................................... 46
8.6 Notices...................................................... 47
8.7 Waiver....................................................... 48
8.8 Disclaimer of Agency......................................... 49
8.9 Severability................................................. 49
8.10 Entire Agreement............................................. 50
8.11 Counterparts................................................. 50
</TABLE>
List of Schedules and Exhibits
Schedule 1.7 Countries and Regions
Schedule 1.38A U.S. Patent Rights
Schedule 1.38B Non-U.S. Patent Rights
Schedule 1.47 Specifications for Bulk Licensed Product
Schedule 4.2 Other Patent Rights
v
<PAGE>
MASTER AGREEMENT
THIS MASTER AGREEMENT (the "Agreement") is made effective as of the 23rd
day of November 1998 (the "Effective Date") by and between TARGETED GENETICS
CORPORATION, a corporation organized under the laws of the State of Washington,
United States of America, having offices at 1100 Olive Way, Suite 100, Seattle,
Washington 98101, United States of America ("TGC"), and MEDEVA PHARMACEUTICALS,
INC., having offices at 755 Jefferson Road, Rochester, New York 14632, United
States of America ("Medeva"), an Affiliate of MEDEVA PLC, a public limited
liability company organized under the laws of England, having offices at 10 St.
James's Street, London, SW1A 1EF, England ("Medeva PLC"). TGC and Medeva are
sometimes referred to herein individually as a "Party" and collectively as the
"Parties."
RECITALS
1. TGC has entered into the following four license agreements
(collectively, the "Third Party Agreements") under which it acquired certain
rights relating to cystic fibrosis gene therapy: (a) a non-exclusive license
agreement, dated March 28, 1994, with the Regents of the University of Michigan
and HSC Research and Development Limited Partnership (the "U. Michigan/HSC
Agreement"), (b) a non-exclusive license agreement, dated June 23, 1993, with
certain agencies of the United States Public Health Service within the
Department of Health and Human Services (the "NIH/CDC L-232-92 Agreement"), (c)
an exclusive license agreement, dated March 8, 1994, with certain agencies of
the United States Public Health Service within the Department of Health and
Human Services (the "NIH/CDC L-059-93 Agreement"), and (d) an exclusive sub-
license agreement, dated July 23, 1996, with Alkermes, Inc., an exclusive
licensee
1
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of the Children's Hospital Research Foundation/Children's Hospital, Inc. (the
"Alkermes Agreement").
2. TGC owns or, pursuant to the Third Party Agreements, is a licensee of
certain patents, patent applications and valuable technology and know-how
relating inter alia to cystic fibrosis gene therapy and the treatment of cystic
fibrosis using an adeno-associated viral ("AAV") vector to deliver a gene
encoding cystic fibrosis transmembrane regulator ("CFTR") protein.
3. Medeva has valuable intellectual property and technology relating to
delivery of pharmaceutical products by inhalation and other means and has
experience with the clinical development and marketing of such products.
4. The Parties wish to collaborate in the further development and
commercialization of a CFTR gene therapy product for the treatment of cystic
fibrosis.
5. It is the intent of the Parties that TGC will manufacture such CFTR
gene therapy product in bulk form (defined hereinafter as "Bulk Licensed
Product") and supply such Bulk Licensed Product exclusively to Medeva, and that
Medeva, after purchase of such Bulk Licensed Product from TGC, will finish and
pack such bulk form CFTR gene therapy product to provide a final finished form
of the product (defined hereinafter as "Licensed Product") for purposes of
marketing, selling and otherwise commercializing such Licensed Product.
6. In furtherance of these objectives, the Parties are concurrently
herewith entering into the following agreements:
(a) A certain License and Collaboration Agreement (the "LCA"),
pursuant to which the Parties will collaborate to develop such a CFTR gene
therapy product, and possibly
2
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other gene therapy products, for the treatment of cystic fibrosis, on terms and
conditions set forth more fully therein. The LCA will also include a license to
Medeva of TGC's rights under certain extant and future patents, patent
applications and know-how (excluding patents, patent applications and know-how
under the Third Party Agreements) to use the Bulk Licensed Product to make, have
made, use, have used, offer for sale, lease, market, sell, have sold and import
the Licensed Products;
(b) A certain Supply Agreement (the "Supply Agreement"), pursuant to
which TGC will manufacture Bulk Licensed Product and supply it to Medeva, on
terms and conditions set forth more fully therein;
(c) A certain Common Stock Purchase Agreement (the "Stock Purchase
Agreement"), pursuant to which Medeva will purchase from TGC shares of common
stock of TGC, on terms and conditions set forth more fully therein; and
(d) A certain Credit Agreement (the "Credit Agreement"), pursuant to
which Medeva will extend TGC credit for the purpose of constructing a facility
to manufacture Bulk Licensed Product, on terms and conditions set forth more
fully therein.
7. The Parties acknowledge and agree that development of human therapeutic
products involves risk and, in an effort to reduce the level of risk in
connection with the Parties' activities under the several agreements described
in paragraph 6 above, the Parties, to the extent consistent with the long-range
business objectives of both TGC and Medeva and as may be possible under each of
the Parties' separate circumstances, desire to segregate certain assets, rights
and liabilities associated with the development, manufacture and
commercialization of Bulk Licensed Product and the Licensed Product(s). As a
result, TGC intends to organize a new
3
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corporate structure and to provide contractual arrangements, as described in
further detail in Article 2 hereinbelow, to protect the respective interests of
each of the Parties.
In consideration of the premises and of the mutual covenants and
obligations set forth herein, the Parties agree as set out below.
ARTICLE 1
DEFINITIONS
The following capitalized terms shall have the following meanings when used
in the Transaction Documents (as defined in Section 1.52 below):
1.1 "AFFILIATE" means any individual, corporation, association or other
business entity which directly or indirectly controls, is controlled by or is
under common control with the Party in question. As used in this definition of
"Affiliate," the term "control" means the direct or indirect ownership of more
than fifty percent (50%) of the stock having the right to vote for directors
thereof or the ability to otherwise control the management of the corporation or
other business entity whether through the ownership of voting securities, by
contract, resolution, regulation or otherwise.
1.2 "APPLICABLE LAWS" means all laws, statutes, ordinances, codes, rules
and regulations which have been enacted by a Government Authority and are in
force as of the Effective Date or come into force during the term of this
Agreement, in each case to the extent that the same are applicable to the
performance by the Parties of their respective obligations under this Agreement.
For purposes of the Transaction Documents, GLP and GMP shall be deemed to be
within the term "Applicable Laws."
4
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1.3 "APPROVAL APPLICATION" means the appropriate application(s) necessary
to obtain Regulatory Approval(s), together with all documents, data and
information concerning Licensed Products in the Field required to be included
with such application(s).
1.4 "BULK LICENSED PRODUCT" means TGC's CFTR gene therapy product, as
further described in the Specifications;
1.5 "CONTRACT MANUFACTURER" means any Third Party contracted by TGC or
Medeva to provide manufacturing-related products or services which constitute or
are material to Bulk Licensed Product or to Licensed Product, or any component
or ingredient therein, or which result in any work product or other information
that TGC or Medeva would include or might reasonably be expected to include in
any document or report, including without limitation an Approval Application,
submitted to a Government Authority or be subject to review by a Government
Authority including without limitation the FDA. Without limiting the foregoing,
the term "Contract Manufacturer" shall include any Third Party, other than an
Outside Contractor, contracted by TGC or Medeva whose acts or omissions in
connection with its assumption of any obligation of TGC or Medeva under the
Supply Agreement would be imputed to, and would therefore be considered, the
acts or omissions of TGC or Medeva pursuant to FFDCA or by a Government
Authority, including without limitation FDA.
1.6 "CONTROL" means, with respect to intellectual property, that the named
Party owns such intellectual property, or otherwise possesses the ability to
grant a license or sublicense under such intellectual property without violating
the terms of any agreement or other arrangement with a Third Party and to the
extent permitted thereby.
1.7 "COUNTRY" means, for each Region, the country or, in the case of
Regions 3, 4 and 5, each of the countries, as selected by Medeva, set forth in
column (a) of Schedule 1.7.
------------
5
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1.8 "DEVELOPMENT PERIOD" means the term of the Development Plan.
1.9 "DEVELOPMENT PLAN" shall have the meaning set forth in Section 3.1 of
the LCA.
1.10 "DEVELOPMENT WORK" shall have the meaning set forth in Section 3.1 of
the LCA.
1.11 "EUROPE" means all of the Major European Countries and all of the
Minor European Countries.
1.12 "FDA" means the United States Food and Drug Administration, and any
successor thereto.
1.13 "FFDCA" means the Federal Food, Drug, and Cosmetic Act, 21 U.S.C. (S)
321 et seq., as amended.
1.14 "FIELD" means the treatment of cystic fibrosis.
1.15 "FIRST COMMERCIAL SALE" means the first sale of a Licensed Product by
Medeva, its Affiliates or its Sublicensees for use or consumption of such
Licensed Product in a Country where Regulatory Approval of such Licensed Product
has been obtained by Medeva. Sale of a Licensed Product by Medeva to an
Affiliate of Medeva or a Sublicensee of Medeva shall not constitute a First
Commercial Sale unless such Affiliate or such Sublicensee is the end user of the
Licensed Product, provided, however, in no event shall any sales for
premarketing, testing or sampling be deemed a First Commercial Sale.
1.16 "GLP" means current good laboratory practices equivalent to those
applicable in the United States and Europe and in effect from time to time
during the term of this Agreement.
6
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1.17 "GMP" means current good manufacturing practices equivalent to those
applicable in the United States and Europe and in effect from time to time
during the term of this Agreement.
1.18 "GOVERNMENT AUTHORITY" means any supranational, national, regional,
state or local government, court, governmental agency, authority, board, bureau,
instrumentality or regulatory body.
1.19 "IMPROVEMENT" means any improvement in or modification to an existing
Licensed Product, including without limitation any intellectual property
(whether patented or the subject of patent applications or otherwise) covering
such improvement or modification, except to the extent that such improvement or
modification results in a molecular sequence that is different from the
molecular sequence of such Licensed Product. The term Improvement shall not
include any New Product, as defined in Section 1.34.
1.20 "JOINT INVENTION" means any invention, development, or discovery made
or created jointly by employees or agents of TGC or any of its Affiliates, and
employees or agents of Medeva or any of its Affiliates during the course of
performance of Development Work pursuant to the Development Plan.
1.21 "JOINT PATENTS" means (i) all patents that claim Joint Inventions and
that are filed by or on behalf of TGC and/or Medeva or an Affiliate of either
pursuant to Section 6.4 of the LCA; (ii) any applications for patents that claim
improvements on Joint Inventions; (iii) any divisional, continuation,
continuation-in-part or substitute application which claims priority from any of
the foregoing applications; and (iv) any patent which may issue on any of the
foregoing applications and any extensions, reexaminations or re-issues of any of
the foregoing patents.
7
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1.22 "KNOW-HOW" means information, data and proprietary rights of any type
whatsoever (other than the Patent Rights) in any tangible or intangible form
whatsoever which is relevant to the development, manufacture and
commercialization of Bulk Licensed Products and Licensed Products, including
without limitation inventions, practices, methods, techniques, specifications,
formulations, formulae, knowledge, know-how, skill, experience, test data
(including pharmacological, biological, chemical, biochemical, toxicological and
clinical test data), analytical and quality control data, stability data,
results of studies, technical drawings and related copyrights, and other similar
information.
1.23 "LICENSED KNOW-HOW" means Know-How Controlled by TGC at any time
during the term of this Agreement.
1.24 "LICENSED PATENT RIGHTS" means the Patent Rights, excluding any and
all patents and patent applications licensed to TGC under the Third Party
Agreements.
1.25 "LICENSED PRODUCT(S)" means any product containing Bulk Licensed
Product.
1.26 "MAJOR EUROPEAN COUNTRY" means each of [ * ].
1.27 "MANUFACTURING COST" means the actual cost of manufacturing Bulk
Licensed Product, consisting of (i) the direct cost of transport, labor and
materials, and (ii) allocable manufacturing related overhead, but excluding
general administrative costs relating to the management of the company as
opposed to the costs of management of the manufacturing of Bulk Licensed
Product. All such costs shall be determined in accordance with generally
accepted accounting principles.
- ------------------------------------
/*/ Confidential Treatment Requested.
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1.28 "MEDEVA'S MANUFACTURING RIGHTS" shall have the meaning set forth in
Section 2.3.
1.29 "MEDEVA TRADEMARKS" shall have the meaning set forth in Section 4.4 of
the LCA.
1.30 "MINIMUM PERFORMANCE LEVEL" means treatment with a Licensed Product of
at least (i) [ * ] of the treatable population in the Field in each Country in
each of the following Regions: Region 1, Region 2 and Region 3, and (ii) [ * ]
-------- -------- --------
of the treatable population in the Field in each Country in each of the
following Regions: Region 4 and Region 5. Notwithstanding the above, in the
-------- --------
event that competition from a Third Party exists in any Country in any Region
for the treatment of the treatable population by a product which generates
functional CFTR protein other than a Licensed Product, the percentages set forth
as the Minimum Performance Level under (i) and (ii) above shall be reduced to
[ * ] and [ * ], respectively. For purposes of this Section 1.30, the phrase
"the treatable population in the Field" with respect to a Country shall mean
those patients registered as cystic fibrosis patients with a clinic or other
treatment center known to Medeva in such Country for whom treatment by Licensed
Product is permitted in accordance with a Regulatory Approval in such Country.
1.31 "MINOR EUROPEAN COUNTRY" means each of the countries (other than the
Major European Countries) comprising the European Union and the European Free
Trade Area as of the Effective Date.
1.32 "NET SALES" means the amount billed or invoiced in U.S. dollars (or
converted thereto in accordance with the rate announced by NatWest Bank, London,
England, for purchase
- ------------------------------------
/*/ Confidential Treatment Requested.
9
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of the applicable currency on the last day of the calendar quarter in which such
amount was billed or invoiced) on sales of Licensed Products by a Party or
Affiliates of a Party or Sublicensees of a Party to independent, unrelated
parties in bona fide arm's length transactions, less the following deductions,
in each case related specifically to a Licensed Product and, except in respect
of clause (viii) below, actually allowed and taken by such parties and not
otherwise recovered by or reimbursed to such Party or an Affiliate of such Party
or a Sublicensee of such Party: (i) trade, cash, promotional and quantity
discounts to the extent that such amounts are set forth separately as such in
the total amount billed or invoiced; (ii) taxes on sales (such as sales or use
taxes or value added tax) to the extent added to the sales price and set forth
separately as such in the total amount billed or invoiced; (iii) freight,
insurance, packing costs and other transportation charges to the extent added to
the sales price and set forth separately as such in the total amount billed or
invoiced; (iv) amounts repaid or credits taken by reason of rejections, defects
or returns or because of retroactive price reductions, or due to recalls or
government laws or regulations requiring rebates; (v) free goods, rebates taken
by or fees paid to distributors, and charge-backs to the extent that such
amounts are documented; (vi) documented customs duties actually paid by such
Party, Affiliates of such Party or Sublicensees of such Party on import into the
country of sale; (vii) [ * ]; and (viii) allowances for doubtful accounts
recorded by a Party in its financial books and records, and determined in
accordance with GAAP in the U.S. in the case of TGC and in the United Kingdom in
the case of Medeva. Net Sales shall also include the amount or fair market value
of all other consideration received by a Party or Affiliates of a Party or
Sublicensees of a Party in respect of Licensed Products, whether such
consideration is in cash, payment in kind, exchange or other form.
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/*/ Confidential Treatment Requested.
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1.33 "NET SALES PER ANNUAL DOSE" means the numerical value obtained from
(i) Net Sales in a period (i.e., a calendar quarter or a calendar year) in each
jurisdiction where Licensed Products were sold, divided by (ii) the number of
doses sold in such period in such jurisdiction, multiplied by (iii) the number
of doses of Licensed Product to be administered to a patient in a one-year
period as indicated under the Regulatory Approval for such Licensed Product in
such jurisdiction (or, if such a number of doses is not so indicated, the number
of doses per patient generally used).
1.34 "NEW PRODUCT" means any product, including without limitation any
intellectual property (whether patented or the subject of patent applications or
otherwise) covering such product, with a molecular sequence that is different
from the molecular sequence of an existing Licensed Product. For purposes of
example, a product which would be the result of a modification of either the
promoter, the gene or the vector of an existing Licensed Product would be a New
Product. The term New Product shall not include any Improvement, as such term is
defined in Section 1.19.
1.35 "OBLIGATIONS" shall have the meaning set forth in Section 2.3.
1.36 "OUTSIDE CONTRACTOR" means any Third Party contracted by TGC or Medeva
to provide products or services, including without limitation regulatory
services, but excluding manufacturing-related products or services, which are
material to the performance of its responsibilities under the Development Plan,
or which result in any work product or other information that TGC or Medeva
would include or might reasonably be expected to include in any document or
report, including without limitation an Approval Application, submitted to a
Government Authority or be subject to review by a Government Authority,
including without limitation the FDA. Without limiting the foregoing, the term
"Outside Contractor" shall include
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any Third Party, other than a Contract Manufacturer, contracted by TGC or Medeva
whose acts or omissions in connection with its assumption of any obligation of
TGC or Medeva under the LCA or the Supply Agreement, would be imputed to, and
would therefore be considered the acts or omissions of, TGC or Medeva pursuant
to FFDCA or by a Government Authority, including without limitation FDA.
1.37 "PATENT COSTS" means all preparation, filing, prosecution and
maintenance out-of-pocket fees and expenses, incurred in connection with the
establishment and maintenance of rights under the Patent Rights or Joint
Patents.
1.38 "PATENT RIGHTS" means (i) the U.S. patents and patent applications
listed on Schedule 1.38A attached hereto plus such other U.S. patents and patent
--------------
applications Controlled by TGC at any time during the term of this Agreement
covering any Licensed Product, including but not limited to Improvements and New
Products provided that patents and patent applications covering an Improvement
or New Product shall be included hereunder only if such Improvement or New
Product has been recommended by the Steering Committee and approved by the
Parties for development pursuant to Section 2.4 of the LCA, but excluding any
and all U.S. patents and patent applications licensed to TGC under the Third
Party Agreements; (ii) any divisional, continuation, continuation-in-part or
substitute application which claims priority from any of the foregoing patent
applications; (iii) any and all U.S. patents which may issue on any of the
patent applications within (i) or (ii) above; (iv) any extensions, re-
examinations, or reissues of U.S. patents within (i) or (iii) above; (v) any and
all foreign patent applications and patents corresponding to any of the patent
applications or patents within (i), (ii), (iii) or (iv) above, including without
limitation the patents and patent applications listed on Schedule 1.38B; and
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(vi) any and all patents and patent applications licensed to TGC under the Third
Party Agreements as of the Effective Date or thereafter.
1.39 "PHASE I CLINICAL TRIAL" shall have the meaning set forth in Section 1
of Exhibit A to the LCA.
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1.40 "PHASE II CLINICAL TRIAL" shall have the meaning set forth in Section
1 of Exhibit A to the LCA.
---------
1.41 "PHASE III CLINICAL TRIAL" shall have the meaning set forth in Section
1 of Exhibit A to the LCA.
---------
1.42 "PROJECT YEAR" means the applicable twelve (12) month period beginning
on the first day of the calendar quarter in which this Agreement is executed, or
on any anniversary thereof.
1.43 "REASONABLE COMMERCIAL EFFORTS" shall be determined under the law of
the State of New York, United States of America, and shall mean such efforts as
are consistent with good faith efforts made by businesses of similar size and
resources in a similar circumstance and context to achieve a particular result
in a timely manner, but shall not require a Party to take actions that would be
commercially unreasonable to such Party in the circumstances.
1.44 "REGION" means each of the geographical regions set forth in column
(b) of Schedule 1.7 attached hereto.
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1.45 "REGULATORY APPROVAL" means, with respect to a nation or multinational
jurisdiction, (i) any approvals, licenses, registrations or authorizations
necessary for the manufacture (where relevant), marketing and sale of Licensed
Products in the Field in such
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nation or jurisdiction, and (ii) where relevant, pricing approvals necessary to
obtain reimbursement from a Government Authority.
1.46 "RESPONSIBLE EXECUTIVE" means the Chief Executive Officer of a Party,
or his or her duly appointed representative.
1.47 "SPECIFICATIONS" shall mean the specifications set forth in Schedule
--------
1.47 attached hereto, as amended or otherwise revised from time to time by
- ----
mutual agreement of the Parties.
1.48 "STEERING COMMITTEE" shall have the meaning set forth in Section 3.1
of the LCA.
1.49 "SUBLICENSEE" means an authorized or permitted sublicensee of a Party.
1.50 "THIRD PARTY" means any individual or entity other than TGC or Medeva
or their respective Affiliates.
1.51 "THIRD PARTY AGREEMENT(S)" means the four (4) license agreements
entered into by TGC under which TGC acquired certain rights relating to cystic
fibrosis gene therapy, as more fully identified in Recital 1 of this Agreement.
1.52 "TRANSACTION DOCUMENTS" means this Agreement, the LCA, the Supply
Agreement, the Credit Agreement and the Stock Purchase Agreement.
1.53 "TRANSFER PRICE" shall have the meaning set forth in Section 2.2.1 of
the Supply Agreement.
1.54 "U.S." or "UNITED STATES" means the United States of America and its
territories and possessions.
ARTICLE 2
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CORPORATE STRUCTURE
AND CONTRACTUAL RELATIONSHIP
2.1 GENERAL. The parties will use their Reasonable Commercial Efforts to
consummate the restructuring set forth in this Article 2 promptly after the date
hereof. The agreements of TGC in this Article 2 are subject to the condition
precedent that TGC shall be reasonably satisfied that performance of these
agreements will not (i) result in breach of any material agreement to which TGC
is a party, (ii) violate any Applicable Law, (iii) result in the imposition of a
lien (except in favor of Medeva or its Affiliates) on or loss of any property
rights of TGC, (iv) have a material adverse effect on TGC, its business,
properties, or prospects, or (v) require TGC to pay additional royalties or
other charges to Third Parties that Medeva will not pay or reimburse to TGC. If
any action to be taken by TGC at Medeva's request in pursuit of the transactions
set forth in this Article 2 requires that TGC pay royalties or other charges to
Third Parties beyond those contemplated by the LCA and the Supply Agreement,
Medeva shall reimburse TGC any and all such royalties and other charges.
Notwithstanding the previous sentence, if Medeva determines that the cost and
expense, including without limitation any such additional royalties and other
charges, relating to any of such transactions is not justified, Medeva shall
instruct TGC not to enter into such transaction and thereby avoid such cost and
expense.
2.2 FORMATION OF NEW TGC SUBSIDIARY.
2.2.1 TGC will (i) organize an entity controlled by TGC ("TG-Sub") as
a business entity acceptable to TGC; (ii) contribute to TG-Sub (the form of such
investment to be determined by TGC) assets (and related liabilities) which are
required by TGC to manufacture Bulk Licensed Product for Phase III Clinical
Trials and commercial sale, including without
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limitation the assets described in this Article 2, but excluding any such assets
which are used by TGC in the conduct of its other business so long as TG-Sub
shall have the right to use such assets to manufacture Bulk Licensed Product;
(iii) except as otherwise may be agreed by TGC, not permit TG-Sub to own any
assets other than as contemplated by this Agreement, to have any employees, or
conduct any business other than the production of Bulk Licensed Product; and
(iv) enter into such management and other agreements with TG-Sub as shall be
necessary or useful to TGC and TG-Sub in the conduct of their respective
businesses it being understood that although TG-Sub will own the assets herein
described it will not be an operating company and that all the operations
contemplated by the Transaction Documents will be performed by TGC. The
agreements of TGC in Section 2.2.2 through 2.2.7 below are subject to provisions
contained in this Section 2.2. 1.
2.2.2 TGC will grant TG-Sub an exclusive sublicense of TGC's rights under
the Alkermes Agreement for use in the Field. The Parties believe that Alkermes'
consent will not be required for this sublicense pursuant to Section 2.2 of the
Alkermes Agreement.
2.2.3 TGC will assign all its rights under the U. Michigan/HSC Agreement
to TG-Sub pursuant to Section 13 of such agreement. The Parties acknowledge that
the consent of TGC's counterparties to such agreement will be required for such
assignment.
2.2.4 TGC will assign all its rights under the NIH/CDC L-059-93 Agreement
to TG-Sub pursuant to Section 12.07 of such agreement. The Parties believe that
the consent of TGC's counterparties to such agreements will not be required for
such assignments.
2.2.5 TGC will assign to TG-Sub, or grant TG-Sub an exclusive sublicense
under, TGC's rights under the NIH/CDC L-232-92 Agreement for use in the Field
pursuant to Section 14.07 or 3.02 of such agreement. The Parties acknowledge
that the consent of TGC's
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counterparties to such agreement may be required in the case of an assignment
and would be required in the case of a sublicense.
2.2.6 TGC will grant TG-Sub an exclusive license for use in the Field
under all Licensed Patent Rights and Licensed Know-How following which TG-Sub
will become the assignee of TGC under Section 8.1 of this Agreement.
2.2.7 TGC will assign to TG-Sub all TGC's rights in respect of leasehold,
contractual, title and other property interests in the manufacturing facilities,
equipment and contracts used to manufacture Bulk Licensed Product for Phase III
Clinical Trials under the LCA and Supply Agreement and for commercial sale under
the Supply Agreement. If at any time, any of such facilities, equipment or
contracts are no longer required or reasonably likely to be required to
manufacture Bulk Licensed Product, all such rights with respect to such
facilities, equipment and contracts may be assigned or otherwise transferred by
TG-Sub out of TG-Sub.
2.3 PLEDGE OF STOCK OF TG-SUB. TGC will pledge all the shares of the capital
stock of TG-Sub to Medeva to secure Medeva's right to manufacture Bulk Licensed
Product pursuant to Section 3.4 of the Supply Agreement, ("Medeva's
Manufacturing Rights") and TGC's and TG-Sub's obligations to Medeva under such
section (the "Obligations"). Such shares will be held in escrow under terms
that will be adequate to perfect Medeva's first priority lien thereon.
2.4 SECURITY INTEREST. TG-Sub will grant Medeva a security interest in
substantially all its assets to secure Medeva's Manufacturing Rights and TGC's
Obligations; such assets to include a leasehold mortgage on any real property
leases and a lien upon TG-Sub's contracts, equipment leases, intangible contract
rights, and equipment and all proceeds thereof (the "Collateral"). TGC will
likewise grant Medeva a lien on all of its interest, if any, in the Collateral.
The Parties acknowledge that the consent of the counterparties to TGC's
Collateral
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consisting of contract rights may be required to grant these liens, including
without limitation, the counterparties under the U. Michigan/HSC Agreement
pursuant to Section 13 thereof.
2.5 CELL LINES. TGC and TG-Sub will sell to Medeva all cell lines and other
bio-material extant or resulting from the Development Work under the LCA (the
"Cell Lines"). Medeva will store the Cell Lines in its facilities in the U.S.
or U.K.
2.6 SUBLICENSE. TG (and/or TG-Sub) will grant Medeva a sublicense, co-
exclusive with itself (and TG-Sub in the case of [ * ] Agreement) of TGC's
(and/or TG-Sub's) rights under the [ * ] Agreement and the [ * ]
Agreement for use in the Field (the "Sublicense"). The Parties believe that the
consent of TGC's counterparties to the [ * ] Agreement will be required.
2.7 LIMITATION. Notwithstanding anything in this Agreement to the contrary,
Medeva agrees that, except as necessary to enforce Medeva's Manufacturing Rights
or in the event of a breach by TGC of its Obligations, (i) TG-Sub will be at all
times under the sole dominion and control of TGC; (ii) TG-Sub may, at any time,
pay dividends to, make loans to, investments in and other transfers to TGC from
net profits and assets not required to perform its obligations under the
Transaction Documents; (iii) TG-Sub may incur obligations, grant liens on its
property and acquire assets in the ordinary course of business; (iv) in the
ordinary course of business, TGC and/or TG-Sub may enter into agreements with
Third Parties, including leases, licenses and agreements, which (notwithstanding
the use by TGC of its Reasonable Commercial Efforts to avoid such prohibition)
by their terms prohibit encumbrance or assignment; (v) Medeva will execute and
deliver such subordination and intercreditor agreements as TGC or TG-Sub may
- ------------------------------------
/*/ Confidential Treatment Requested.
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reasonably request in the exercise of its rights as herein provided (including,
without limitation, agreements subordinating liens granted to Medeva to liens
granted to parties extending credit to TG-Sub); and (vi) Medeva will agree that
it will not exercise its rights in respect of the Collateral or the Sublicense
and that it will not use or grant any Third Party the right to use the Cell
Lines, except as necessary to exercise Medeva's Manufacturing Rights and to
enforce the Obligations.
2.8 FURTHER ASSURANCES. Each Party agrees to use its Reasonable Commercial
Efforts to execute, acknowledge and deliver such further instruments, and to do
all such other acts as may be necessary or appropriate to carry out the purposes
of this Article 2 including without limitation, filing financing statements,
mortgages and notices as may be necessary to perfect and give Third Parties
notice of Medeva's rights hereunder.
ARTICLE 3
CONFIDENTIALITY
3.1 CONFIDENTIALITY; EXCEPTIONS. Except as otherwise provided in the
Transaction Documents, the Parties agree that, for the term of this Agreement
and for ten (10) years thereafter, all non-public, proprietary or "confidential"
marked invention disclosures, know-how, data, and technical, financial and other
information of any nature whatsoever, including without limitation all
discussions and information exchanged between the Parties pursuant to a certain
nondisclosure agreement entered into by the Parties dated September 2, 1997
(collectively, "Confidential Information"), disclosed or submitted, either
orally or in writing (including without limitation by electronic means) or
through observation, by one Party (the "Disclosing Party") to the other Party
(the "Receiving Party") hereunder shall be received and maintained by the
Receiving Party in strict confidence, shall not be used for any purpose other
than the purposes expressly permitted by the Transaction Documents, and shall
not be disclosed to any
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Third Party (including without limitation in connection with any publications,
presentations or other disclosures). Notwithstanding the foregoing, the
Receiving Party may, subject to the provisions of the Transaction Documents,
disclose the Disclosing Party's Confidential Information to those of its and its
Affiliates' or its Sublicensees' directors, officers, employees, agents,
consultants and clinical investigators that have a need to know such
Confidential Information to achieve the purposes of any of the Transaction
Documents and the documents contemplated by Article 2 (the "Restructuring
Documents"); provided, however, that such Party shall ensure that its and its
Affiliates' or Sublicensees' directors, officers, employees, agents, consultants
or clinical investigators to whom disclosure is to be made are bound by, and
take reasonable efforts to ensure compliance with, the confidentiality terms
hereof. Each Party will promptly notify the other upon discovery of any
unauthorized use or disclosure of the Confidential Information. Except as may
result in certain circumstances under the Restructuring Documents, Confidential
Information belongs to and shall remain the property of the Disclosing Party.
The provisions of this Article 3 shall not apply to any information which can be
shown by the Receiving Party:
3.1.1 To have been known to or in the possession of the Receiving Party
prior to the date of its actual receipt from the Disclosing Party;
3.1.2 To be or to have become readily available to the public other than
through any act or omission of the Receiving Party in breach of any of the
Transaction Documents or any other agreement between the Parties;
3.1.3 To have been disclosed to the Receiving Party, other than under an
obligation of confidentiality, by a Third Party which had no obligation to the
Disclosing Party not to disclose such information to others; or
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3.1.4 To have been subsequently independently developed by the
Receiving Party without use of the Confidential Information as demonstrated by
competent written records.
3.2 AUTHORIZED DISCLOSURE. Each Party may disclose Confidential Information
hereunder solely to the extent such disclosure is reasonably necessary in
connection with submissions to any Government Authority for the purposes of any
of the Transaction Documents or in filing or prosecuting patent applications
contemplated under the Transaction Documents, prosecuting or defending
litigation, complying with Applicable Laws or conducting Development Work for
the purposes expressly permitted by any of the Transaction Documents; provided
that in the event of any such disclosure of the Disclosing Party's Confidential
Information by the Receiving Party, the Receiving Party will, except where
impracticable, give reasonable advance notice to the Disclosing Party of such
disclosure requirement (so that the Disclosing Party may seek a protective order
and or other appropriate remedy or waive compliance with the confidentiality
provisions of this Article 3) and will use its reasonable efforts to secure
confidential treatment of such Confidential Information required to be
disclosed. Notwithstanding the above, Medeva may disclose preclinical and
clinical data and results relating to Licensed Products to qualified medical
professionals for the limited purposes of marketing such Licensed Products and
conducting medical education initiatives reasonably designed to increase Net
Sales.
3.3 RETURN OF CONFIDENTIAL INFORMATION. The Receiving Party shall keep
Confidential Information belonging to the Disclosing Party in appropriately
secure locations. Upon the expiration or termination of this Agreement, any and
all Confidential Information possessed in tangible form by a Receiving Party,
its Affiliates or Sublicensees, or its or any of their officers, directors,
employees, agents, consultants or clinical investigators and belonging to
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the Disclosing Party, shall, upon written request, be immediately returned to
the Disclosing Party (or destroyed if so requested) and not retained by the
Receiving Party, its Affiliates or Sublicensees, or any of their officers,
directors, employees, agents, consultants or clinical investigators; provided
however that a Party may retain one (1) copy of any Confidential Information in
an appropriately secure location, which by Applicable Laws it must retain, for
so long as such Applicable Laws require such retention but thereafter shall
dispose of such retained Confidential Information in accordance with Applicable
Laws or this Section 3.3.
3.4 PUBLICATIONS AND ANNOUNCEMENTS. Except as otherwise permitted under any
of the Transaction Documents or as required by law, regulation, or court order,
each Party agrees not to publish any Confidential Information received from the
other Party. Except as required by law, regulation or court order, Medeva and
TGC each agree that without obtaining the other Party's prior written approval
for any publication or any presentation, which shall not be unreasonably
withheld, neither Party shall publish or present (i) any Confidential
Information generated by that Party and related to the development or
commercialization of Licensed Products for use in the Field, or (ii) the results
of any clinical trial studies or non-clinical studies or investigations carried
out by that Party related to the development of Licensed Products for use in the
Field. At least thirty (30) days prior to any such publication or presentation,
the Party proposing to publish or present shall provide the other Party a copy
of the proposed abstract, manuscript or presentation (including without
limitation information to be presented verbally) for review. The other Party
shall respond in writing within such time period with either approval of the
proposed material or a specific statement of (a) concern based upon the need to
seek patent protection, (b) concern regarding competitive disadvantage arising
from the proposal, or (c) concern regarding the timing and circumstances of such
disclosure in light of such Party's
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business. In the event that the other Party has concerns about disclosure of
Confidential Information, the Party proposing to publish agrees to provide such
other Party any additional information relating to the proposed disclosure, as
reasonably requested by such other Party. In the event of concern relating to
patent protection, the Party proposing to publish agrees not to submit such
abstract or manuscript for publication or to make such presentation until the
other Party has had a reasonable period of time to seek patent protection for
any material in such publication or presentation which it believes is patentable
or to resolve any other issues, such period not to exceed sixty (60) additional
days. In the event of concern regarding competitive disadvantage or the timing
and other circumstances relevant to the disclosure, the Parties will negotiate
in good faith to attempt to arrive at a compromise to permit the disclosing
Party an opportunity to publish or present the disclosure within a reasonable
period of time. The Party proposing to publish also agrees to delete from any
such abstract or manuscript or presentation any Confidential Information of the
other Party that such other Party reasonably believes has commercial value based
upon the secrecy of such information. Once approval for a publication or
presentation has been granted, the relevant Party shall be entitled to use
information contained in such publication or presentation after the date of its
publication or presentation without seeking further approval. It is understood
that general comments made by a Party relating to the relationship between
Medeva and TGC established by the Transaction Documents, including, for example,
general comments made in response to inquiries at professional meetings and
other similar circumstances, are not intended to be restricted by the provisions
of this Article 3, provided that such information has been disclosed to the
public previously or cleared for such disclosure by the other Party. It is
understood further that Confidential Information may be disclosed by TGC to
Third Parties bound by non-disclosure agreements to the extent such
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Confidential Information (1) relates to TGC's AAV vector technology generally
and is not specific to the Bulk Licensed Products, Licensed Products or to the
Field and (2) is disclosed in relation to matters outside the Parties'
collaboration efforts, Bulk Licensed Products, Licensed Products or the Field.
Prior to any such disclosure, TGC will provide such disclosures to Medeva for
Medeva's approval which shall not be unreasonably withheld.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
4.1 REPRESENTATIONS AND WARRANTIES OF THE PARTIES. Each Party represents and
warrants to the other Party that:
(a) Such Party is duly organized and validly existing and in good standing
under the laws of the jurisdiction of its formation.
(b) Such Party has the full corporate power and is duly authorized to enter
into, execute and deliver the Transaction Documents, and to carry out and
otherwise perform its obligations thereunder.
(c) The Transaction Documents have been duly executed and delivered by, and
are the legal and valid obligations binding upon such Party and the entry into,
the execution and delivery of, and the carrying out and other performance of its
obligations under the Transaction Documents by such Party (i) does not conflict
with, or contravene or constitute any default under, any agreement, instrument
or understanding, oral or written, to which it is a party, including without
limitation its certificate of incorporation or by-laws, and (ii) does not
violate Applicable Law or any judgment, injunction, order or decree of any
Government Authority having jurisdiction over it.
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4.2 REPRESENTATIONS AND WARRANTIES OF TGC. TGC represents and warrants to
Medeva that:
(a) To the best of TGC's knowledge, as of the Effective Date, TGC Controls,
or otherwise has the right to use, all Patent Rights and Know-How necessary to
manufacture Bulk Licensed Products and, further, TGC has disclosed, or from time
to time will disclose, to Medeva all Patent Rights and all Licensed Know-How of
which TGC is aware and which is useful for the production, manufacture or
commercialization of Bulk Licensed Products and Licensed Products for use in the
Field;
(b) TGC has conducted or has caused TGC's Outside Contractors, Contract
Manufacturers and consultants to conduct, and will in the future conduct, pre-
clinical research, process development and other relevant research and
development activities required to support clinical testing, Regulatory
Approvals and commercialization of the Licensed Products in the Field in
accordance with Applicable Laws, including without limitation, known or
published standards of FDA;
(c) TGC has conducted or has caused TGC's Outside Contractors, Contract
Manufacturers and consultants to conduct, and will in the future conduct,
clinical research with Licensed Products in the Field in the U.S. through
completion of Phase I Clinical Trials and Phase II Clinical Trials, to the
extent such Phase II Clinical Trials are conducted in the U.S., in accordance
with Applicable Laws, including without limitation, known or published standards
of FDA;
(d) Except as otherwise provided in the Transaction Documents, TGC will
maintain in effect all governmental permits, licenses, orders, applications and
Regulatory Approvals, if applicable, necessary to manufacture, supply and sell
Bulk Licensed Product and
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will manufacture and supply Bulk Licensed Product in accordance with such
governmental permits, licenses, orders, applications, Regulatory Approvals and
Applicable Laws;
(e) TGC has employed and will in the future employ individuals of
appropriate education, knowledge, and experience to conduct or oversee the
conduct of preclinical research, process development and other relevant research
and development activities required to support clinical testing, Regulatory
Approvals and commercialization of the Licensed Products in the Field;
(f) TGC has employed and will in the future employ individuals of
appropriate education, knowledge, and experience to conduct or oversee the
conduct of clinical research with Licensed Products in the Field in the U.S.
through completion of Phase I Clinical Trials and Phase II Clinical Trials, to
the extent such Phase II Clinical Trials are conducted in the U.S.;
(g) Except as otherwise provided for in the Transaction Documents,
including for example in Sections 3.1 and 3.2 of the Supply Agreement, TGC
maintains and shall maintain throughout the term of this Agreement a work force
suitably qualified and trained, and facilities and equipment sufficient, to
enable TGC to perform its obligations as constituted from time to time under the
Transaction Documents;
(h) To the best of TGC's knowledge, there are not as of the Effective Date,
nor have there been over the five (5) year period immediately preceding the
Effective Date, any claims, lawsuits, arbitrations, legal or administrative or
regulatory proceedings, charges, complaints or investigations by any Government
Authority (except for any Government Authority with authority over the granting
of patents and proceedings relating thereto) or other Third Party threatened,
commenced or pending against TGC or its licensors relating to, and TGC
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has not received any notice of infringement with respect to, the Patent Rights,
the Licensed Know-How, or Bulk Licensed Product (or Licensed Products to be
manufactured by TGC for use by TGC for clinical trial purposes), including TGC's
right to manufacture, use or sell Bulk Licensed Products (or Licensed Products
for use by TGC for clinical trial purposes).
(i) Except as previously disclosed to Medeva, to the best of TGC's
knowledge, as of the Effective Date, the exercise by Medeva of the rights and
licenses granted to Medeva by TGC under the Transaction Documents will not
infringe any rights owned by any Third Party;
(j) Except as previously disclosed to Medeva, to the best of TGC's
knowledge, as of the Effective Date, TGC is not aware of any patents or patent
applications, other than patents and patent applications within the Patent
Rights, required for the production, manufacture or commercialization of Bulk
Licensed Products and Licensed Products in the Field; and further TGC will
promptly disclose to Medeva any knowledge relating to any such patents or patent
applications acquired by TGC during the term of this Agreement and, further, the
patents and patent applications listed on Schedule 4.2 (the "Other Patent
------------
Rights") and TGC's rights under the Other Patent Rights (i) are not required for
the production, manufacture or commercialization of Bulk Licensed Product or
Licensed Products in the Field, (ii) will not be assigned, sublicensed or
otherwise encumbered by TGC with respect to, or in any way which would impair
the application of such rights by TGC or by Medeva in, the Field, and (iii) will
be added to the Licensed Patent Rights at any time as such rights are required
for the production, manufacture or commercialization of Bulk Licensed Product or
Licensed Products in the Field as Medeva may determine in Medeva's sole
discretion.
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(k) Except as previously disclosed to Medeva, to the best of TGC's
knowledge, as of the Effective Date, TGC is not aware of any Third Parties that
Control any patents or Know-How required for the production, manufacture or
commercialization of Licensed Products in the Field; and
(l) To the best of TGC's knowledge, as of the Effective Date, TGC Controls
or otherwise is entitled to use worldwide all rights in, to and under the Patent
Rights and the Licensed Know-How, in all cases free and clear of any lien,
claim, charge, encumbrance or right of any Third Party.
4.3 REPRESENTATIONS AND WARRANTIES SPECIFIC TO THIRD PARTY AGREEMENTS. TGC
further represents and warrants to Medeva that:
(a) No other agreement or understanding, verbal or written, exists to which
TGC is legally bound regarding the intellectual property rights granted to TGC
pursuant to the Third Party Agreements;
(b) The Third Party Agreements, including respective modifications attached
thereto, as previously provided to Medeva represent the complete and entire
understanding of TGC and, to the knowledge of TGC, its respective Third Party
Agreement licensors as of the Effective Date with respect to the intellectual
property rights granted to TGC pursuant to the Third Party Agreements, and such
Third Party Agreements will not be further modified or amended by TGC
unilaterally, or by TGC together with its respective Third Party Agreement
licensors, without the prior written consent of Medeva;
(c) Except for royalty payments and other fees expressly set forth in the
Third Party Agreements, no other royalty, fee or other amount, whatsoever, is
due or, to the best of
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TGC's knowledge as of the Effective Date, will become due to any Third Party as
a result of TGC's exercise of the licenses and rights granted to TGC under the
Third Party Agreements or Medeva's exercise of the rights granted to Medeva
pursuant to the terms of the Transaction Documents;
(d) TGC will comply with all terms of each of the Third Party Agreements;
(e) To the best of TGC's knowledge, as of the Effective Date, the exercise
by Medeva of the rights and licenses granted to Medeva by TGC under the
Transaction Documents will not violate, or cause TGC to breach TGC's obligations
under, the Third Party Agreements;
(f) To the best of TGC's knowledge, there are not now, nor have there been
over the five (5) year period immediately preceding the Effective Date, any
claims, lawsuits, arbitrations, legal or administrative or regulatory
proceedings, charges, complaints or investigations by any Government Authority
(except for any Government Authority with authority over the granting of patents
and proceedings relating thereto) or other Third Party threatened, commenced or
pending against TGC or its licensors relating to the intellectual property
rights licensed to TGC, including TGC's right to use such intellectual property
rights, whether or not Controlled by TGC, pursuant to the Third Party
Agreements;
(g) TGC will notify Medeva promptly if any Third Party Agreement licensor
of TGC elects not to file a patent application pursuant to such licensor's
rights under its respective Third Party Agreement and TGC, upon Medeva's written
request, will exercise TGC's right, if available, to participate in the filing
or prosecution of any such patent application;
(h) TGC will not terminate, amend or assign, nor by act or omission permit
the termination, amendment or assignment of, any of the Third Party Agreements
without the
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prior written consent of Medeva, which consent may be granted or withheld in
Medeva's sole discretion;
(i) TGC will notify Medeva promptly if TGC receives any notice or
communication suggesting, threatening or stating that a Third Party Agreement
licensor of TGC intends to terminate, modify, assign or otherwise amend its
respective Third Party Agreement;
(j) TGC will provide Medeva with copies of all communications to Third
Party Agreement licensors or from Third Party Agreement licensors, including
without limitation communications regarding alleged or actual infringement by a
Third Party of intellectual property owned or otherwise controlled by a Third
Party Agreement licensor and under which TGC was granted a license and rights
under the Third Party Agreement with such licensor;
(k) With respect to the [ * ] Agreement, the treatment of cystic
fibrosis is not one of the "Optioned Field(s) of Use" (as defined in the [ * ]
Agreement);
(l) With respect to the [ * ] Agreement, TGC exclusively Controls the
Patent Rights licensed to TGC under the [ * ] Agreement;
(m) With respect to the [ * ] Agreement and the [ * ] Agreement,
TGC shall, upon request by Medeva, (i) provide Medeva with copies of any
Commercial Development Plan (as defined in such agreements) and permit Medeva to
provide comments and suggestions for consideration by TGC to any future version
of a Commercial Development Plan, (ii) appeal a Third Party Agreement licensor's
unilateral decision to terminate either or both of these Third Party Agreements,
(iii) exercise any and all administrative or judicial remedies that may be
available as a result of such termination, (iv) use its best efforts to obtain a
direct license for
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Medeva with the respective licensors following any such termination, and (v) not
elect to surrender any license or rights in any country granted to TGC by a
Third Party Agreement licensor under either or both of these Third Party
Agreements, without the prior written consent of Medeva;
(n) With respect to the [ * ] Agreement, TGC exclusively Controls the
Patent Rights licensed to TGC under the [ * ] Agreement; and
(o) With respect to the [ * ] Agreement, TGC shall inform Medeva
promptly if TGC becomes aware of any Third Party that (i) receives any license
and right under the intellectual property under which TGC was granted a license
and rights pursuant to the [ * ] Agreement, or (ii) develops and produces
any product similar to a Licensed Product. Further, TGC shall exercise its
right to request prompt and detailed notification of measures taken in response
to allegations or events of infringement of the rights granted to TGC
thereunder.
4.4 DISCLAIMER. EXCEPT AS EXPRESSLY SET FORTH IN THIS ARTICLE 4 OF THIS
AGREEMENT, IN SECTION 2.8 OF THE SUPPLY AGREEMENT, IN ARTICLE 6 OF THE CREDIT
AGREEMENT AND IN ARTICLE 3 OF THE STOCK PURCHASE AGREEMENT, THE PARTIES MAKE NO
REPRESENTATIONS OR WARRANTIES OF ANY KIND WHATSOEVER, EITHER EXPRESS OR IMPLIED,
WRITTEN OR ORAL, INCLUDING WITHOUT LIMITATION ANY IMPLIED WARRANTY OF
MERCHANTABILITY, WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE, OR WARRANTY OF
NON-INFRINGEMENT.
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ARTICLE 5
TERM AND TERMINATION
5.1 TERM. This Agreement and the LCA and Supply Agreement shall commence as
of the Effective Date and shall continue in full force and effect until (i) the
expiration in the last jurisdiction of the term of the last patent within the
Patent Rights or, if sooner, (ii) the determination by a court or administrative
agency of competent jurisdiction in the last jurisdiction that the last patent
within the Patent Rights is invalid or unenforceable, or (iii) such earlier date
as this Agreement, the LCA and the Supply Agreement are terminated in accordance
with the terms and conditions of this Article 5. Upon expiration or termination
of this Agreement, or the LCA or the Supply Agreement, all three agreements
shall simultaneously so expire or terminate.
5.2 TERMINATION AT WILL.
5.2.1 During the Development Period, at any time after the one (1) year
anniversary of the Effective Date, Medeva may terminate this Agreement, the LCA
and the Supply Agreement upon at least one hundred eighty (180) days' prior
written notice to TGC, if in Medeva's sole opinion, Medeva considers that
further development of Licensed Products in the Field is not technically or
commercially viable.
5.2.2 At any time after the ten (10) year anniversary of the Effective
Date, Medeva may terminate this Agreement, the LCA and the Supply Agreement,
with or without cause, upon at least one hundred and twenty (120) days' prior
written notice to TGC.
5.3 TERMINATION FOR CAUSE. Subject to Section 5.4 below, if either Party
commits a material breach of this Agreement, the LCA or the Supply Agreement at
any time, which breach is not cured within thirty (30) days in the case of a
breach consisting of an undisputed
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nonpayment of money, or sixty (60) days in the case of any other material
breach, after written notice from the non-breaching Party specifying the breach,
or if such breach is not susceptible of cure within such period, the breaching
Party is not making diligent good faith efforts to cure such breach, the non-
breaching Party shall have the right to terminate this Agreement, the LCA and
the Supply Agreement by written notice. The Parties acknowledge and agree that
failure to exercise any right or option or to take any action expressly within
the discretion of a Party shall not be deemed to be a material breach hereunder.
5.4 LIMITATION ON TERMINATION FOR CAUSE.
5.4.1 With respect to any alleged material breach except undisputed
payment defaults, a Party may not terminate this Agreement, or the LCA or the
Supply Agreement for such alleged material breach unless (i) a court of
competent jurisdiction renders a final adjudication affirming the existence of a
material breach, or (ii) the breach is an "Established Material Breach" (as
defined in Section 5.4.2 of this Agreement) and such Established Material Breach
is not cured within sixty (60) days following receipt of an "Arbitration
Decision" (as defined in Section 5.4.2 of this Agreement), or if such
Established Material Breach is not susceptible of cure within such period, the
breaching Party is not making diligent good faith efforts to cure such
Established Material Breach.
5.4.2 In order to establish a material breach (other than an undisputed
payment default) entitling a Party to terminate this Agreement, or the LCA or
the Supply Agreement under Section 5.3 above, the Party alleging the occurrence
of such material breach (the "Requesting Party") shall submit the issue to an
expedited, non-binding arbitration (the "Material Breach Arbitration") before a
mutually agreed upon arbitrator, or in the event the Parties cannot agree upon
an arbitrator, before a panel of three (3) American Arbitration Association-
approved
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arbitrators consisting of one (1) arbitrator chosen by each Party and one (1)
arbitrator selected by the two Party-chosen arbitrators, (one arbitrator or
three arbitrators, the "Arbitration Panel"). The Arbitration Panel will
determine whether the other Party (the "Breaching Party") has committed the
material breach alleged by the Requesting Party, whether the Requesting Party
had committed a prior material breach that justified the subsequent breach by
the Breaching Party, and if the material breach alleged by the Requesting Party
has been committed, whether any other evidence exists which may excuse the
Breaching Party's material breach. An "Established Material Breach" shall mean a
determination (the "Arbitration Decision") by the Arbitration Panel that the
Breaching Party committed the alleged material breach, that the Requesting Party
did not commit a material breach sufficient to excuse the subsequent material
breach by the Breaching Party, and that no other sufficient reason exists to
excuse the breach by the Breaching Party (such sufficiency to be determined by
the Arbitration Panel in its sole discretion). The Arbitration Decision shall
identify any ways by which the Established Material Breach may be cured. For
purposes of determining an Established Material Breach as contemplated by this
Section 5.4.2, the Arbitration Decision shall be deemed final. The rules of the
American Arbitration Association shall govern any Material Breach Arbitration.
5.4.3 Notwithstanding the procedure set forth under Section 5.4.2 above
and any resulting outcome, the Parties acknowledge and agree that an Arbitration
Decision does not constitute a binding decision on either Party with respect to
the existence (or non-existence) of a breach of this Agreement or the LCA or the
Supply Agreement, nor justify the subsequent termination of this Agreement, or
the LCA or the Supply Agreement (or exercise of some other remedy). Either
Party may contest the other Party's actions following an Arbitration Decision by
commencing a court action pursuant to Section 7.3 of this Agreement. The
Parties further
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acknowledge and agree that the Arbitration Decision, the findings by the
Arbitration Panel and any testimony from the Arbitration Panel (or testimony
from any person or entity appearing before the Arbitration Panel to the extent
that such testimony relates specifically to the Arbitration Decision) shall not
be admissible for any reason whatsoever in any court proceedings of any nature
whatsoever, including without limitation proceedings related to equitable
remedies or damages; provided further that Parties agree to instruct a fact
finder, judge or jury in connection with proceedings to resolve disputes
hereunder not to give any weight to the fact that an Arbitration Decision was or
was not rendered.
5.5 TERMINATION FOR INSOLVENCY. Either Party may terminate this Agreement or
the LCA or the Supply Agreement upon written notice to the other Party on or
after the occurrence of any of the following events: (i) the appointment of a
trustee, receiver or custodian for all or substantially all of the property of
the other Party, or for any lesser portion of such property, if the result
materially and adversely affects the ability of the other Party to fulfill its
obligations hereunder or thereunder, which appointment is not dismissed within
sixty (60) days, (ii) the determination by a court or tribunal of competent
jurisdiction that the other Party is insolvent, (iii) the filing of a petition
for relief in bankruptcy by the other Party on its own behalf, or the filing of
any such petition against the other Party if the proceeding is not dismissed or
withdrawn within sixty (60) days thereafter, (iv) an assignment by the other
Party for the benefit of creditors, or (v) the dissolution or liquidation of the
other Party. All rights and licenses granted under or pursuant to this
Agreement or the LCA or the Restructuring Agreements by TGC to Medeva are, and
shall otherwise be deemed to be, for the purposes of Section 365(n) of the
Bankruptcy Code, licenses of rights to "intellectual property" as defined under
Section 101(35A) of the Bankruptcy Code. The Parties agree that Medeva, as a
licensee of such rights and
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licenses, shall retain and may fully exercise all of its rights and elections
under the Bankruptcy Code.
5.6 RIGHTS ON TERMINATION.
5.6.1 In the event that TGC terminates this Agreement, or the LCA or the
Supply Agreement pursuant to Section 5.3 above, all rights granted to Medeva
hereunder and thereunder shall revert to TGC.
5.6.2 In the event that Medeva terminates this Agreement, or the LCA or
the Supply Agreement pursuant to Section 5.3 or 5.5 above, TGC shall be deemed
to have granted to Medeva an exclusive worldwide license under the Licensed
Patent Rights and the Licensed Know-How, and to the extent Controlled by TGC,
intellectual property held by TGC under the Third Party Agreements, as of the
date of such termination to make, have made, use, have used, sell, offer for
sale, have sold, lease, market and import Licensed Products for use in the Field
subject to payment by Medeva to TGC of a royalty of [ * ] of Net Sales after the
effective date of termination of this Agreement until the date this Agreement
otherwise would have expired pursuant to Section 5.1(i) or (ii) above. Medeva
shall have the right to offset Medeva's reasonable damages in connection with
such breach, as determined by an independent third party auditor, against any
royalty payments made to TGC pursuant to the foregoing [ * ] royalty. TGC shall
reasonably assist Medeva in the transfer of the manufacturing of the Bulk
Licensed Products, including the transfer of useful biomaterials (e.g., cell
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lines) and shall provide Medeva with copies of all written or other
tangible forms of recorded Licensed Know-How relating to the manufacturing
processes for Bulk Licensed Products and Licensed Products. Upon expiration of
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Medeva's obligation to pay to TGC royalties under this Section 5.6.2, Medeva
shall have a paid-up, irrevocable, worldwide, nonexclusive right and license
under the Licensed Know-How granted by TGC to Medeva hereinabove to make, have
made, use and sell Licensed Products for use in the Field.
5.6.3 In the event that Medeva terminates this Agreement, or the LCA or
the Supply Agreement pursuant to Section 5.2 above, or TGC terminates this
Agreement, or the LCA or the Supply Agreement pursuant to Section 5.3 above,
then, in addition to any liability or obligation accrued as of the effective
date of termination, Medeva shall reimburse TGC for TGC's actual costs
associated with terminating any agreed pre-clinical and clinical studies already
in progress pursuant to the Development Plan.
5.6.4 Except as otherwise provided in this Section 5.6.4, in the event
this Agreement, or the LCA or the Supply Agreement are terminated for any
reason, (i) except as otherwise expressly provided in the Transaction Documents,
all rights and obligations of the Parties under this Agreement, the LCA and the
Supply Agreement shall terminate; (ii) Medeva shall surrender to TGC, or, at
TGC's sole option, Medeva shall destroy and provide TGC with a certificate
signed by a Responsible Executive of Medeva attesting to the destruction of, all
copies of any Licensed Know-How or other Confidential Information provided by
TGC hereunder; (iii) TGC shall surrender to Medeva, or, at Medeva's sole option,
TGC shall destroy and provide Medeva with a certificate signed by a Responsible
Executive of TGC attesting to the destruction of, all copies of any Confidential
Information provided by Medeva hereunder; (iv) in addition to any liability or
obligation accrued as of the effective date of termination, Medeva shall pay for
any Bulk Licensed Product delivered at any time before or after such termination
pursuant to any Purchase Order accepted by TGC prior to such termination and
shall have the right to use such
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Bulk Licensed Product to manufacture Licensed Product in the Field and to sell
or otherwise dispose of stock of any Licensed Product in the Field then on hand,
subject to the payment to TGC of applicable payments hereunder; and (v) except
to the extent permitted in clause (iv) above Medeva agrees not to make, have
made, use, sell, offer for sale and import the Licensed Products for use in the
Field.
5.7 ACCRUED RIGHTS. Termination, relinquishment or expiration of this
Agreement, the LCA and the Supply Agreement for any reason shall be without
prejudice to any right which shall have accrued to the benefit of either Party
prior to such termination, relinquishment or expiration, including damages
arising from any breach under the Transaction Documents. Such termination,
relinquishment or expiration shall not relieve either Party from obligations
which are expressly indicated to survive termination or expiration of the
respective Transaction Documents.
5.8 SURVIVAL.
5.8.1 The following Articles and Sections of this Agreement, the LCA and
the Supply Agreement shall survive expiration of such agreements: Articles 3, 6,
7 and 8, and Sections 4.5, 5.7 and 5.8.1 of this Agreement, Sections 6.1, 6.2,
6.4 and 6.6, and the last sentence of Section 2.1, of the LCA, and Article 5 of
the Supply Agreement.
5.8.2 The following Articles and Sections of this Agreement, the LCA and
the Supply Agreement shall survive termination of such agreements and, in each
case, shall apply in accordance with the terms and conditions set forth in such
Articles and Sections: Articles 3, 6, 7 and 8, and Sections 4.5, 5.6, 5.7 and
5.8.2 of this Agreement, Sections 3.7.4, 6.1, 6.2, 6.4, 6.5, 6.6 and 6.7 of the
LCA, and Article 5 and Sections 6.3, 6.4, 7.1 and 7.2 of the Supply Agreement.
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ARTICLE 6
INDEMNIFICATION; INSURANCE; LIMITATION OF LIABILITY
6.1 INDEMNIFICATION BY MEDEVA. Except for any actions or liabilities arising
out of infringement of Third Party patent rights pursuant to Section 6.8 of the
LCA, Medeva hereby agrees to save, defend, and hold TGC, its Affiliates and
their officers, directors, employees and agents harmless from and against any
and all losses, damages, liabilities, costs and expenses, including reasonable
attorneys' fees and expenses that arise in connection therewith, ("Losses")
resulting from or arising out of: (i) the storage of Bulk Licensed Products, or
the conversion of Bulk Licensed Product to Licensed Products, after the date of
delivery of such Bulk Licensed Products to Medeva; or (ii) the labeling,
marketing and distribution of Licensed Products (subsections (i) and (ii), all
except to the extent caused by the negligence or willful misconduct of, or
failure to comply with Applicable Laws or breach of this Agreement, or the LCA
or the Supply Agreement by, TGC or its Affiliates, Sublicensees, Outside
Contractors, Contract Manufacturers, and its or their directors, officers,
agents, employees, consultants or clinical investigators, and except to the
extent such Losses result from or arise out of any act or omission for which TGC
is found to have an indemnification obligation pursuant to Section 6.2 of this
Agreement); or (iii) the negligence or willful misconduct of Medeva or its
Affiliates, Sublicensees, and its or their directors, officers, agents,
employees, or consultants or clinical investigators; or (iv) the material breach
by Medeva or its Affiliates of any provision of any of the Transaction
Documents. Notwithstanding the above, in the event that Losses arise in
connection with an inherent defect in a Licensed Product which is not the direct
and proximate
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cause of either Party, Medeva shall bear [ * ] of such Losses, and TGC shall
bear [ * ] of such Losses.
6.2 INDEMNIFICATION BY TGC. TGC hereby agrees to save, defend and hold
Medeva, its Affiliates and their officers, directors, employees and agents
harmless from and against any and all Losses resulting from or arising out of
(i) clinical trials of Licensed Product in the Field conducted by TGC pursuant
to the Development Plan, except to the extent such Losses result from or arise
out of any act or omission for which Medeva is found to have an indemnification
obligation pursuant to Section 6.1, or (ii) the manufacture, use, or consumption
of Bulk Licensed Products (or TGC's manufacture and use of Licensed Products),
or the storage of Bulk Licensed Products prior to the date of delivery thereof
to Medeva (including without limitation for any breach of the warranty in
Section 2.8 of the Supply Agreement), all except to the extent caused by the
negligence or willful misconduct of, or failure to comply with Applicable Laws
or breach of terms of this Agreement, the LCA or the Supply Agreement by, Medeva
or its Affiliates or Sublicensees, and its or their directors, officers, agents,
employees, consultants or clinical investigators, or (iii) the negligence or
intentional misconduct of TGC, or its Affiliates, Sublicensees, Outside
Contractors and Contract Manufacturers, and its or their directors, officers,
agents, employees, consultants or clinical investigators, or (iv) TGC's material
breach of any provision of any of the Transaction Documents. Notwithstanding
the above, in the event that Losses arise in connection with an inherent defect
in a Licensed Product which is not the direct and proximate cause of either
Party, Medeva shall bear [ * ] of such Losses, and TGC shall bear [ * ] of such
Losses.
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6.3 INDEMNIFICATION PROCEDURE.
6.3.1 Each indemnified Party (the "Indemnitee") agrees to give the
indemnifying Party (the "Indemnitor") prompt written notice of any Losses or
discovery of fact upon which the Indemnitee intends to base a request for
indemnification. Notwithstanding the foregoing, the failure to give timely
notice to the Indemnitor shall not release the Indemnitor from any liability to
the Indemnitee to the extent the Indemnitor is not prejudiced thereby.
6.3.2 The Indemnitee shall furnish promptly to the Indemnitor
copies of all papers and official documents in the Indemnitee's possession or
control which relate to any Losses; provided, however, that if the Indemnitee
defends or participates in the defense of any Losses, then the Indemnitor shall
also provide such papers and documents to the Indemnitee. The Indemnitee shall
cooperate with the Indemnitor in providing witnesses and records necessary in
the defense against any Losses.
6.3.3 The Indemnitor shall have the right, by prompt notice to the
Indemnitee, to assume direction and control of the defense of any Third Party
claim forming the basis of such Losses, with counsel reasonably satisfactory to
the Indemnitee and at the sole cost of the Indemnitor, so long as (i) the
Indemnitor shall promptly notify the Indemnitee in writing (but in no event more
than sixty (60) days after the Indemnitor's receipt of notice of the claim) that
the Indemnitor intends to indemnify the Indemnitee from and against any Losses
the Indemnitee may suffer arising out of the claim absent the development of
facts that give the Indemnitor the right to claim indemnification from the
Indemnitee and (ii) the Indemnitor diligently pursues the defense of the claim.
6.3.4 If the Indemnitor assumes the defense of the claim as
provided in Section 6.3.3 above or Section 6.3.5 below the Indemnitee may
participate in such defense with
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the Indemnitee's own counsel who shall be retained, at the Indemnitee's sole
cost and expense; provided, however, that neither the Indemnitee nor the
Indemnitor shall consent to the entry of any judgment or enter into any
settlement with respect to the claim without the prior written consent of the
other Party, which consent shall not be unreasonably withheld or delayed. If
the Indemnitee withholds consent in respect of a judgment or settlement
involving only the payment of money by the Indemnitor and which would not
involve any stipulation or admission of liability or result in the Indemnitee
becoming subject to injunctive relief or other relief, the Indemnitor shall have
the right, upon notice to the Indemnitee within five (5) days of receipt of the
Indemnitee's written denial of consent, to pay to the Indemnitee, or to a trust
for its or the Third Party's benefit, as shall be established at trial or by
settlement, the full amount of the Indemnitor's obligation under Section 6.1 or
Section 6.2, as applicable, with respect to such proposed judgment or
settlement, including all interest, costs or other charges relating thereto,
together with all attorneys' fees and expenses incurred to such date for which
the Indemnitor is obligated under this Agreement, if any, at which time the
Indemnitor's rights and obligations with respect to the claim shall cease.
6.3.5 If the Indemnitor does not so assume the defense of such
claim, the Indemnitee may conduct such defense with counsel of the Indemnitee's
choice but may not settle such case without the written consent of the
Indemnitor, such consent not to be unreasonably withheld or delayed. In
addition, the Indemnitor shall have the right to assume control of the defense,
at its own expense, at any time upon five (5) days' prior notice to the
Indemnitee.
6.3.6 Except as provided in Section 6.3.5 above, the Indemnitor
shall not be liable for any settlement or other disposition of a Loss by the
Indemnitee which is reached without the written consent of the Indemnitor.
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6.3.7 Except as otherwise provided in this Section 6.3, the
portion of costs and expenses, including reasonable fees and expenses of
counsel, incurred by any Indemnitee under Section 6.3.5 in connection with any
claim corresponding to the Indemnitor's obligation under Section 6.1 or Section
6.2, as applicable, shall be reimbursed on a calendar quarter basis by the
Indemnitor, for so long as the Indemnitee controls the defense of the claim,
without prejudice to the Indemnitor's right to contest the Indemnitee's right to
indemnification and subject to refund in the event the Indemnitor is ultimately
held not to be obligated to indemnify the Indemnitee.
6.4 INSURANCE.
6.4.1 For so long as Medeva is conducting clinical trials using
Licensed Products in the Field or manufacturing, marketing and promoting
Licensed Products for use in the Field, Medeva shall obtain product liability
insurance for the benefit of Medeva, naming TGC as an additional party insured,
covering such Licensed Products under terms which are similar to that obtained
by Medeva for Medeva's other marketed products or products under clinical
trials.
6.4.2 For so long as TGC is conducting clinical trials using
Licensed Products in the Field or manufacturing and supplying Bulk Licensed
Products for use by Medeva in the manufacturing, marketing and promotion of
Licensed Products the Field, TGC shall obtain product liability insurance for
the benefit of TGC, naming Medeva as an additional party insured, covering such
Bulk Licensed Products and Licensed Products obtained therefrom under terms
which are similar to that obtained by other companies comparable to TGC for
products similar to Bulk Licensed Products and Licensed Products used in similar
circumstances under similar conditions.
6.5 LIMITATION OF LIABILITY; REMEDIES CUMULATIVE.
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6.5.1 EXCEPT FOR EACH PARTY'S INDEMNIFICATION OBLIGATIONS
HEREUNDER AND ANY CLAIMS RELATED TO ONE PARTY'S INFRINGEMENT OF THE OTHER
PARTY'S INTELLECTUAL PROPERTY OR BREACH BY A PARTY OF ITS CONFIDENTIALITY
OBLIGATIONS HEREUNDER, UNDER NO CIRCUMSTANCES SHALL A PARTY HEREOF BE LIABLE TO
THE OTHER PARTY HEREOF FOR CONSEQUENTIAL, INCIDENTAL, PUNITIVE OR SPECIAL
DAMAGES.
6.5.2 THE REMEDIES PROVIDED IN THE TRANSACTION DOCUMENTS ARE
CUMULATIVE AND NOT EXCLUSIVE OR IN LIMITATION OF ANY OTHER REMEDY AVAILABLE
UNDER THE TRANSACTION DOCUMENTS OR AT LAW OR IN EQUITY. ACCORDINGLY, UNLESS
OTHERWISE EXPRESSLY PROVIDED IN THE TRANSACTION DOCUMENTS, A REMEDY PROVIDED IN
THE TRANSACTION DOCUMENTS AS AVAILABLE EITHER TO TGC OR MEDEVA IS NOT INTENDED
AS AN EXCLUSIVE REMEDY.
ARTICLE 7
GOVERNING LAW; DISPUTE RESOLUTION
7.1 GOVERNING LAW. This Agreement shall be governed by and construed
under the laws of the State of New York.
7.2 DISPUTE RESOLUTION. In the event of any dispute arising out of or
related to this Agreement, or the LCA or the Supply Agreement or any breach of
any of such agreements, the Parties shall refer such dispute to the Responsible
Executive of Medeva and the Responsible Executive of TGC for attempted
resolution by good faith negotiations within thirty (30) days after such
referral is made, In the event such officers are unable to resolve such dispute
within such thirty (30) day period, either Party may assert its rights in a
manner consistent with the
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provisions of Section 5.3 above and Section 7.3 below, but subject to the
procedure set forth in Section 5.4 above if applicable.
7.3 COURTS OF LAW. The state and federal courts situated in the County of
New York, State of New York, United States of America, shall have sole
jurisdiction and venue to resolve all disputes arising hereunder between the
Parties and initiated by TGC. The state and federal courts situated in King
County, State of Washington, United States of America, shall have sole
jurisdiction and venue to resolve all disputes arising hereunder between the
Parties and initiated by Medeva. The Parties irrevocably submit to such
jurisdiction and venue, waive any claim to an inconvenient forum posed by such
venue, and agree that process may be served in any manner permitted by such
court before which a dispute is pending.
ARTICLE 8
MISCELLANEOUS
8.1 ASSIGNMENT.
8.1.1 Neither Party may assign or otherwise transfer its rights or
obligations under this Agreement, or the LCA or the Supply Agreement without the
prior written consent of the other Party, such consent not to be unreasonably
withheld, except that a Party may assign or otherwise transfer its rights or
obligations in whole or in part without such consent (i) to an Affiliate of such
Party, including without limitation, with respect to Medeva, Medeva PLC,
provided that no such assignment shall relieve any Party as the primary obligor
hereunder, or (ii) to a Third Party in connection with the merger,
consolidation, or sale of substantially all of the assets of the assigning
Party, or reorganization affecting substantially all of the assets or voting
control of the assigning Party.
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8.1.2 This Agreement shall be binding upon and inure to the
benefit of the successors and permitted assigns of the Parties. Any assignment
not in accordance with this Agreement shall be void.
8.2 FORCE MAJEURE. With respect to this Agreement, the LCA and the Supply
Agreement, neither Party shall lose any rights hereunder or be liable to the
other Party for damages or losses on account of failure of performance by the
defaulting Party if the failure is occasioned by government action, war, fire,
explosion, flood, strike, lockout, embargo, act of God, or any other similar
cause beyond the control of the defaulting Party, provided that the Party
claiming force majeure shall promptly notify the other Party in writing setting
forth the nature of such force majeure, shall use its best efforts to eliminate,
remedy or overcome such force majeure and shall resume performance of its
obligations hereunder as soon as reasonably practicable after such force majeure
ceases. Notwithstanding the above, a force majeure event shall not affect
Medeva's obligations in any manner with respect to timely payment of money due
TGC pursuant to the terms of this Agreement, or the LCA or the Supply Agreement.
Except as provided in the previous sentence, if any force majeure continues for
more than one hundred eighty (180) days, the other Party may terminate this
Agreement in part, on a country-by-country basis, or in whole, if all countries
are affected, upon written notice to the affected Party.
8.3 FURTHER ACTIONS. Each Party agrees to execute, acknowledge and
deliver such further instruments, and to do all such other acts, as may be
necessary or appropriate in order to carry out the purposes and intent of the
Transaction Documents.
8.4 GOVERNMENTAL APPROVALS; COMPLIANCE WITH LAW. The Parties shall make
all filings with Government Authorities as shall be required by Applicable Laws
in connection with the Transaction Documents and the activities contemplated
hereunder or thereunder. In fulfilling
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its obligations under the Transaction Documents each Party agrees to comply in
all material respects with all Applicable Laws.
8.5 PUBLIC ANNOUNCEMENT. Except for such disclosure as is deemed
necessary, in the reasonable judgment of a Party, to comply with Applicable
Laws, no announcement, news release, public statement, publication or
presentation relating to the existence of the Transaction Documents, or the
terms hereof or thereof, will be made without the other Party's prior written
approval, which approval shall not be unreasonably withheld. The Parties agree
that they will coordinate the initial announcement or press release relating to
the existence of the Transaction Documents so that such initial announcement or
press release is made contemporaneously by each Party. Notwithstanding the
foregoing, each Party consents to references to it in reports or documents or
other disclosures sent to stockholders or filed with or submitted to any
Governmental Authority or stock exchange or as may be required by law to be
made. However, the Party making such references shall afford the other Party
the prior opportunity to review the text of any such report, document or other
disclosure, and shall use its best efforts to comply with any reasonable
requests regarding changes to such reports, documents and other disclosures
which are provided to it by the other Party in a timely manner. The Parties
each agree that once approval for disclosure of information subject to this
Section 8.5 has been obtained, the Party that requested such approval shall be
entitled to use such information without an obligation to seek further approval.
8.6 NOTICES. All notices required or permitted to be given under this
Agreement, the LCA or the Supply Agreement, including without limitation all
invoices provided by TGC to Medeva, shall be in writing and shall be deemed
given if delivered personally or by facsimile transmission receipt verified,
mailed by registered or certified mail return receipt requested,
47
<PAGE>
postage prepaid, or sent by express courier service, to the Parties at the
following addresses, or at such other address for a Party as shall be specified
by like notice, provided that notices of a change of address shall be effective
only upon receipt thereof.
IF TO TGC, TARGETED GENETICS CORPORATION
ADDRESSED TO: 1100 Olive Way, Suite 100
Seattle, Washington 98101
United States of America
Attention: H. Stewart Parker
President and Chief Executive Officer
Telephone: (206) 623-7612
Facsimile: (206) 223-0288
Except for invoices,
with a copy to: Morrison & Foerster llp
425 Market Street
San Francisco, California 94105-2482
United States of America
Attention: Charles F. Hoyng, Esq.
Telephone: (415) 268-7000
Facsimile: (415) 268-7522
IF TO MEDEVA MEDEVA PHARMACEUTICALS, INC.
ADDRESSED TO: C/O MEDEVA PLC
10 St. James's Street
London SW1A 1EF
England
Attention: Corporate Secretary
Telephone: (44) 171-839-3838
Facsimile: (44) 171-930-1516
With a copy to: Medeva Pharmaceuticals, Inc.
755 Jefferson Road
Rochester, New York 14632
United States of America
Attention: General Counsel
Telephone: (716) 274-5370
Facsimile: (716) 482-1495
The date of receipt of any notice given under this Agreement, or the LCA or the
Supply Agreement, including without limitation any invoice provided by TGC to
Medeva, shall be deemed to be the date given if delivered personally or by
facsimile transmission receipt verified,
48
<PAGE>
seven (7) days after the date mailed if mailed by registered or certified mail
return receipt requested, postage prepaid, and two (2) days after the date sent
if sent by express courier service.
8.7 WAIVER. No failure of either Party to exercise and no delay in
exercising any right, power or remedy in connection with this Agreement, or the
LCA or the Supply Agreement (each a "Right") will operate as a waiver thereof,
nor will any single or partial exercise of any Right preclude any other or
further exercise of such Right or the exercise of any other Right.
8.8 DISCLAIMER OF AGENCY. The relationship between TGC and Medeva
established by this Agreement, the LCA and the Supply Agreement is that of
independent contractors, and nothing contained in any such agreement shall be
construed to (i) give either Party the power to direct or control the day-to-day
activities of the other, (ii) constitute the Parties as the legal representative
or agent of the other Party or as partners, joint venturers, co-owners or
otherwise as participants in a joint or common undertaking, or (iii) allow
either Party to create or assume any liability or obligation of any kind,
express or implied, against or in the name of or on behalf of the other Party
for any purpose whatsoever, except as expressly set forth in this Agreement, the
LCA and the Supply Agreement.
8.9 SEVERABILITY. If any term, covenant or condition of this Agreement,
or the LCA or the Supply Agreement or the application thereof to any Party or
circumstance shall, to any extent, be held to be invalid or unenforceable by a
court or administrative agency of competent jurisdiction, then (i) the remainder
of such documents, or the application of such term, covenant or condition to
Parties or circumstances other than those as to which it is held invalid or
unenforceable, shall not be affected thereby and each term, covenant or
condition of such documents shall be valid and be enforced to the fullest extent
permitted by law; and (ii) the Parties hereto covenant and agree to renegotiate
any such term, covenant or application thereof
49
<PAGE>
in good faith in order to provide a reasonably acceptable alternative to the
term, covenant or condition of such documents or the application thereof that is
invalid or unenforceable, it being the intent of the Parties that the basic
purposes of this Agreement are to be effectuated.
8.10 ENTIRE AGREEMENT. The Transaction Documents, including all schedules
and exhibits attached thereto, which are hereby incorporated therein by
reference, set forth all covenants, promises, agreements, warranties,
representations, conditions and understandings between the Parties hereto and
supersedes and terminates all prior agreements and understandings between the
Parties. There are no covenants, promises, agreements, warranties,
representations, conditions or understandings, either oral or written, between
the Parties other than as set forth herein or therein. No subsequent
alteration, amendment, change or addition to the Transaction Documents shall be
binding upon the Parties hereto unless reduced to writing and signed by the
respective authorized officers of the Parties.
8.11 COUNTERPARTS. The Transaction Documents may be executed in
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
50
<PAGE>
IN WITNESS WHEREOF, the Parties have executed this Agreement in duplicate
originals by their proper officers as of the date and year first above written.
TARGETED GENETICS CORPORATION MEDEVA PHARMACEUTICALS, INC.
("TGC") ("MEDEVA")
By: /s/ H. Stewart Parker By: /s/ William Bogie
---------------------- ------------------
Name: H. Stewart Parker Name: William Bogie
----------------- --------------
Title: President, Chief Executive Officer Title: President
----------------------------------- ---------
Medeva PLC hereby agrees that, for all purposes of this Agreement, the LCA
and the Supply Agreement, it shall be a surety for Medeva Pharmaceuticals, Inc.
In any action to enforce Medeva PLC's agreement under this paragraph, Medeva PLC
hereby expressly waives any and all defenses of any nature whatsoever which may
be available to Medeva PLC as guarantor which are not also available to Medeva
as primary obligor.
MEDEVA PLC
("MEDEVA PLC")
By: /s/ G. Watts
------------
Name: G. Watts
----------
Title: Finance Director
------------------
51
<PAGE>
SCHEDULE 1.7
COUNTRIES AND REGIONS
---------------------
- --------------------------------------------------------------------------------
(a) (b)
Country Region
- --------------------------------------------------------------------------------
[ * ] [ * ]
- --------------------------------------------------------------------------------
- --------------------------
/*/ Confidential Treatment Requested.
<PAGE>
SCHEDULE 1.38A
U.S. PATENT RIGHTS
------------------
<TABLE>
<CAPTION>
Patent No. Patent App. No. Issue Date Filing Date Title
- ---------- --------------- ---------- ----------- -----
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------
US 08/564,167 6/12/95 "Packaging Cell Lines for
Generation of High Titers
of Recombinant AAV Vectors"
- ------------------------------------------------------------------------------------------------
</TABLE>
[ * ]
- ------------------------
/*/ Confidential Treatment Requested.
<PAGE>
SCHEDULE 1.38B
NON-U.S. PATENT RIGHTS
----------------------
<TABLE>
<CAPTION>
Patent No. Patent App. No. Issue Date Filing Date Title
- ---------- --------------- ---------- ----------- -----
<S> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------
Aust 45963/96 6/12/95 "Packaging Cell Lines for
Generation of High Titers
of Recombinant AAV Vectors"
Can 2,207,927 6/12/95
Eur 95944069.4 6/12/95
Jap 8-517764 6/12/95
- -------------------------------------------------------------------------------------------
</TABLE>
[ * ]
- --------------------------
/*/ Confidential Treatment Requested.
<PAGE>
SCHEDULE 1.47
SPECIFICATIONS FOR BULK LICENSED PRODUCT
----------------------------------------
See Attached
[ * ]
- --------------------
/*/ Confidential Treatment Requested.
<PAGE>
SCHEDULE 4.2
OTHER PATENT RIGHTS
-------------------
<TABLE>
<CAPTION>
Patent No. Patent App. No. Issue Date Filing Date Title
- ---------- --------------- ---------- ----------- -----
<S> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------
US 5,658,776 19/8/97 "Generation of High Titers of
Recombinant AAV Vectors"
Aust 688428 2/7/98
Can 2,176,117 3/11/94
Eur 95902421.7 3/11/94
Jap 07-513877 3/11/94
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
US 08/362,608 9/1/95 "Stable Cell Lines Capable
of Expressing the
Adeno-Associated Virus
Replication Gene"
Aust 678867 2/10/97
Can 2,176,215 3/11/94
Eur 95900505.9 3/11/94
Jap 07-513874 3/11/94
- ---------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
EXHIBIT 1.2
================================================================================
LICENSE AND COLLABORATION AGREEMENT
BETWEEN
TARGETED GENETICS CORPORATION
AND
MEDEVA PHARMACEUTICALS, INC.
AN AFFILIATE OF
MEDEVA PLC
DATED NOVEMBER 23, 1998
================================================================================
"[*]" = omitted, confidential material, which material has been separately filed
with the Securities and Exchange Commission pursuant to a request for
confidential treatment.
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE 1 DEFINITIONS..................................................... 3
1.1 Incorporation by Reference..................................... 3
ARTICLE 2 GRANT OF RIGHTS................................................. 3
2.1 Grant of License to Medeva..................................... 3
2.2 Covenant To Take No Action..................................... 4
2.3 Sublicenses.................................................... 4
2.4 Improvements and Other Development Activities.................. 5
2.5 Covenants...................................................... 6
2.6 No Other Rights................................................ 7
ARTICLE 3 PRODUCT DEVELOPMENT............................................. 7
3.1 Steering Committee............................................. 7
3.2 Responsibilities of the Parties................................ 9
3.3 Development R&D Funding........................................ 11
3.4 Other Costs and Expenses....................................... 13
3.5 Reports; Inspection............................................ 15
3.6 Conduct of Development Work; Subcontracting.................... 15
3.7 Approval Applications and Regulatory Approvals................. 16
ARTICLE 4 MARKETING AND COMMERCIALIZATION................................. 18
4.1 Diligence...................................................... 18
4.2 Termination of Exclusivity..................................... 18
4.3 Status Reports................................................. 21
4.4 Trademarks..................................................... 21
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
ARTICLE 5 CONSIDERATION................................................... 22
5.1 Equity Purchase................................................ 22
5.2 License and Technology Access Fee.............................. 22
5.3 Other Payments................................................. 22
5.4 Form of Payment; Late Payments................................. 23
ARTICLE 6 INTELLECTUAL PROPERTY MATTERS................................... 24
6.1 Ownership of Intellectual Property............................. 24
6.2 Ownership of Approval Applications and Regulatory Approvals.... 24
6.3 Prosecution and Maintenance of Patent Rights; Abandonment...... 25
6.4 Prosecution and Maintenance of Joint Patents; Abandonment...... 27
6.5 Enforcement of Patent Rights................................... 28
6.6 Enforcement of Joint Patent Rights............................. 30
6.7 Settlement with a Third Party.................................. 32
6.8 Infringement of Third Party Rights............................. 32
6.9 Infringement of Medeva Trademarks.............................. 33
6.10 Offset for Infringement........................................ 33
ARTICLE 7 MASTER AGREEMENT................................................ 35
7.1 Incorporation by Reference..................................... 35
</TABLE>
List of Schedules and Exhibits
Schedule 3.3.2 Budgeted Development R&D Funding for First Project Year
Exhibit A Development Plan
Exhibit B Outside Contractor Letter
ii
<PAGE>
LICENSE AND COLLABORATION AGREEMENT
THIS LICENSE AND COLLABORATION AGREEMENT (the "Agreement") is made
effective as of the 23rd day of November 1998 (the "Effective Date") by and
between TARGETED GENETICS CORPORATION, a corporation organized under the laws of
the State of Washington, United States of America, having offices at 1100 Olive
Way, Suite 100, Seattle, Washington 98101, United States of America, ("TGC") and
MEDEVA PHARMACEUTICALS, INC., a corporation organized under the laws of the
State of Delaware, United States of America, having offices at 755 Jefferson
Road, Rochester, New York 14623, United States of America, ("Medeva") an
Affiliate of MEDEVA PLC, a public limited liability company organized under the
laws of England, having offices at 10 St. James's Street, London, SW1A 1EF,
England ("Medeva PLC"). TGC and Medeva are sometimes referred to herein
individually as a "Party" and collectively as the "Parties."
RECITALS
1. TGC has entered into the following four license agreements
(collectively, the "Third Party Agreements") under which it acquired certain
rights relating to cystic fibrosis gene therapy, including (a) a non-exclusive
license agreement, dated March 28, 1994, with the Regents of the University of
Michigan and HSC Research and Development Limited Partnership (the "U.
Michigan/HSC Agreement"), (b) a non-exclusive license agreement, dated June 23,
1993, with certain agencies of the United States Public Health Service within
the Department of Health and Human Services (the "NIH/CDC L-232-92 Agreement"),
(c) an exclusive license agreement, dated March 8, 1994, with certain agencies
of the United States Public Health Service within the Department of Health and
Human Services (the "NIH/CDC L-059-93 Agreement"), and (d) an exclusive sub-
license agreement, dated July 23, 1996, with Alkermes, Inc., an exclusive
licensee of
1
<PAGE>
the Children's Hospital Research Foundation/Children's Hospital, Inc. (the
"Alkermes Agreement").
2. TGC owns or, pursuant to the Third Party Agreements, is a licensee of
certain patents, patent applications and valuable technology and know-how
relating inter alia to cystic fibrosis gene therapy and the treatment of cystic
----- ----
fibrosis using an adeno-associated viral ("AAV") vector to deliver a gene
encoding a cystic fibrosis transmembrane regulator ("CFTR") protein.
3. Medeva has valuable intellectual property and technology relating to
delivery of pharmaceutical products by inhalation and other means and has
experience with the clinical development and marketing of such products.
4. The Parties wish to collaborate in the further development and
commercialization of a CFTR gene therapy product for the treatment of cystic
fibrosis on the terms and conditions hereinafter set forth.
5. Concurrently herewith, the Parties are entering into a certain Supply
Agreement (the "Supply Agreement"), pursuant to which TGC will supply to Medeva,
and Medeva will purchase from TGC, TGC's CFTR gene therapy product for use in
the treatment of cystic fibrosis, as more fully set forth therein, a certain
Common Stock Purchase Agreement, pursuant to which Medeva will purchase from TGC
shares of common stock of TGC, as set forth more fully therein, a Credit
Agreement, pursuant to which Medeva will extend TGC credit for the purpose of
constructing a manufacturing facility, as set forth more fully therein, and a
certain Master Agreement (the "Master Agreement"), pursuant to which the
Parties' intent is set forth to organize a new corporate structure and to
provide contractual arrangements to protect the interests of each of the Parties
and, in addition, which contains provisions which are intended by
2
<PAGE>
the Parties to be common to, and to apply to and govern the Parties under, this
Agreement and the Supply Agreement and, in certain limited respects, the Common
Stock Purchase Agreement and the Credit Agreement, as set forth more fully
therein,.
In consideration of the premises and of the mutual covenants and
obligations set forth herein, the Parties agree as set out below.
ARTICLE 1
DEFINITIONS
1.1 INCORPORATION BY REFERENCE. Article 1 (Definitions) of the Master
Agreement is hereby incorporated by reference. All capitalized terms not
otherwise defined in this Agreement shall have the meanings set forth in Article
1 of the Master Agreement.
ARTICLE 2
GRANT OF RIGHTS
2.1 GRANT OF LICENSE TO MEDEVA. Subject to the terms and conditions of this
Agreement, including without limitation payment of the license fee set forth in
Section 5.2, TGC hereby grants Medeva, for the sole purpose of enabling Medeva
to exercise Medeva's rights and to perform Medeva's obligations under this
Agreement, a worldwide, exclusive license under the Licensed Patent Rights and
the Licensed Know-How to use Bulk Licensed Product to make, have made, use, have
used, offer for sale, lease, market, sell, have sold and import Licensed
Products for use in the Field. It is understood and agreed that, upon expiration
of this Agreement in accordance with the terms of Section 5.1 of the Master
Agreement, Medeva shall have a paid-up, irrevocable, worldwide, nonexclusive
right and license under the Licensed Know-How existing as of the date of such
expiration to make, have made, use and sell Licensed Products for use in the
Field.
3
<PAGE>
2.2 COVENANT TO TAKE NO ACTION. Subject to the terms and conditions of this
Agreement, Medeva hereby agrees that, if any intellectual property rights
Controlled by Medeva shall be required by TGC or Affiliates of TGC or
Sublicensees of TGC to enable TGC or Affiliates of TGC or Sublicensees of TGC to
develop and manufacture Bulk Licensed Product for sale to Medeva in accordance
with the terms of this Agreement, Medeva will take no action of any nature
whatsoever during the term of this Agreement under such intellectual property
which would interfere with such activities.
2.3 SUBLICENSES. Medeva shall have the right to grant sublicenses under the
license set forth in Section 2.1 and to employ Contract Manufacturers and
Outside Contractors in connection with the performance of its obligations
hereunder, provided that the execution of a sublicense or a subcontract shall
not in any way diminish, reduce or eliminate any of Medeva's obligations under
this Agreement, and Medeva shall remain primarily liable for such obligations.
The right of Medeva to grant sublicenses pursuant to this Section 2.3 is subject
to the following conditions:
(a) At least thirty (30) days prior to the anticipated date of
execution and delivery of each proposed sublicense by Medeva and the proposed
Sublicensee of Medeva, Medeva shall forward to TGC all material terms of the
proposed sublicense agreement which relate directly to Medeva's obligations
under this Agreement and to the Licensed Products;
(b) Each sublicense and proposed Sublicensee of Medeva as so disclosed
to TGC in (a) above shall be subject to approval in advance in writing by TGC,
which approval shall not be unreasonably withheld or delayed;
(c) Each Sublicensee of Medeva shall be expressly prohibited from
further sublicensing; and
4
<PAGE>
(d) Each sublicense shall contain terms with the same effect as Article
3 of the Master Agreement and, where relevant, Sections 2.5, 4.3 and 6.1 of this
Agreement, Sections 6.3 and 7.1 of the Supply Agreement, and Sections 7.1 and
8.4 of the Master Agreement, and TGC shall be expressly acknowledged as a third
party beneficiary thereof, and Medeva shall be responsible for the performance
by its Sublicensee of the relevant terms of such sublicense and shall take all
measures reasonably requested by TGC to enforce such terms against such
Sublicensee.
2.4 IMPROVEMENTS AND OTHER DEVELOPMENT ACTIVITIES.
2.4.1 To the extent that it has the right to do so, each Party shall
promptly disclose to the Steering Committee and the other Party all Improvements
and New Products with utility in the Field which such Party conceives of, makes,
acquires, discovers or invents during the term of this Agreement (collectively,
"Product Information"). TGC represents and warrants that TGC has the right to
disclose to Medeva all Product Information which exists as of the Effective
Date, and that TGC shall use Reasonable Commercial Efforts during the term of
this Agreement not to enter into any agreement which would restrict TGC's right
to make the disclosures contemplated under this Section 2.4.1.
2.4.2 Within thirty (30) days of receipt of any Product Information, the
Steering Committee shall determine whether to recommend that an Improvement be
adopted or that a New Product be developed. If the Steering Committee determines
that an Improvement should be adopted or that a New Product should be developed,
the Steering Committee shall recommend whether such adoption or development
should occur in lieu of or in addition to the then-current activities with
respect to existing Licensed Product(s).
5
<PAGE>
2.4.3 If the Steering Committee recommends adoption of an Improvement or
development of a New Product, and if Medeva and TGC agree upon such adoption or
development and the anticipated cost thereof, the Steering Committee may request
that either TGC or Medeva undertake, and such Party shall undertake, development
activities leading to adoption of such Improvement or development of such New
Product. Such development work shall be (i) conducted pursuant to a development
plan established by the Steering Committee, (ii) supported by appropriate
research funding, including without limitation, but only in the case of a New
Product, other payments similar to those set forth in Section 5.3, and (iii)
performed in accordance with parameters for adoption of such Improvement or
development of such New Product consistent with parameters set forth herein for
development of Licensed Products.
2.5 COVENANTS. Each Party covenants and agrees that, during the term of this
Agreement, it shall not, nor shall it enter into or permit or cause its
Affiliates, Sublicensees, Contract Manufacturers and Outside Contractors to
enter into any agreement or arrangement to, manufacture, develop, use, offer for
sale, lease, market, sell, import, commercialize or otherwise exploit, either
directly or indirectly, [ * ], including without limitation any Licensed Product
or New Product, except in accordance with the terms and conditions of the
collaboration provided for in this Agreement (collectively, "Outside Development
and Commercialization Work"). Without limiting the foregoing, except for
sublicenses and subcontracts entered into under terms and conditions consistent
with the terms and conditions of this Agreement, neither Party will grant any
Third Party any right under the Patent Rights or the Licensed Know-How which
would permit such Third Party to engage in or otherwise exploit Outside
Development and Commercialization Work in the Field. If a Party breaches the
foregoing covenants, then without
- -------------------------------------
/*/ Confidential Treatment Requested.
6
<PAGE>
limiting any other remedies available to the other Party, the breaching Party
shall, at its sole expense, contribute the Outside Development and
Commercialization Work to the other Party for use under the terms of this
Agreement and secure for the other Party the exclusive right to use and exploit
the Outside Development and Commercialization Work in connection with the
development, sale and exploitation of Licensed Products and New Products in the
Field.
2.6 NO OTHER RIGHTS. This Agreement confers no license or rights by
implication, estoppel, or otherwise under any patents, patent applications,
know-how or other intellectual property rights of either Party other than as
expressly set forth in this Article 2. Each Party hereby expressly reserves all
rights not specifically granted to the other Party hereunder.
ARTICLE 3
PRODUCT DEVELOPMENT
3.1 STEERING COMMITTEE. In accordance with the terms and conditions set forth
below, the commercial development of Licensed Products in the Field
("Development Work") will be conducted by or on behalf of the Parties pursuant
to the mutually agreed development plan to be attached hereto as Exhibit A (the
---------
"Development Plan"). Within ten (10) days after the Effective Date, each of the
Parties shall appoint three (3) persons to serve as its representatives on a
joint steering committee (the "Steering Committee"). Each Party shall have the
right to change any or all of its representatives on the Steering Committee upon
written notice to the other Party. The Steering Committee shall:
(a) Establish the Development Plan, including without limitation
milestones, go/no-go criteria, timelines and responsibilities, and ensure that
each Party completes its respective work in compliance with the Development
Plan;
7
<PAGE>
(b) Monitor and make recommendations regarding the performance of the
Development Plan and the conduct of the Development Work;
(c) Propose modifications to the Development Plan;
(d) Establish regulatory strategies;
(e) Determine how Improvements should be incorporated into the
Development Plan;
(f) Determine whether to recommend that an Improvement be incorporated
or that a New Product be developed, and if so whether such incorporation or
development should occur in lieu of or in addition to the then-current
activities with respect to existing Licensed Product(s); and
(g) Review any and all proposed publications or communications relating
to the Development Plan, and activities relating to an Improvement or a New
Product, if applicable, and the results therefrom and any and all proposed
filings of patent applications in connection therewith.
The Steering Committee shall meet not less frequently than once per calendar
quarter during the Development Period, on such dates and at such times as agreed
to by the Parties. All decisions made or actions taken by the Steering Committee
shall be made unanimously, with each Party entitled to one (1) vote. A quorum of
the Steering Committee shall consist of two members, provided that at least one
member appointed by each Party is present. Members of the Steering Committee may
attend a meeting of the Steering Committee either in person or by telephone
conference call, but not by proxy. In the event of a deadlock vote regarding a
matter before the
8
<PAGE>
Steering Committee, the Responsible Executives of the Parties shall meet to
resolve the matter. If resolution of the matter is not achieved by the
Responsible Executives of the Parties within thirty (30) days of the deadlock
vote, TGC shall have the right to resolve such deadlock until the start of the
first Phase II Clinical Trial; provided, however, that Medeva shall have the
right to resolve any deadlock with respect to the design and location of Phase
II Clinical Trials and the determination of which Party shall be responsible to
conduct such trials. Thereafter, Medeva shall have the right to resolve any
deadlock.
3.2 RESPONSIBILITIES OF THE PARTIES.
3.2.1 In accordance with the Development Plan, as modified from time to
time, TGC shall use Reasonable Commercial Efforts to:
(a) Conduct preclinical Development Work, including without
limitation pre-clinical research, process development and other relevant
research and development activities, required to support clinical testing,
Regulatory Approvals and commercialization of the Licensed Products in the Field
("Development R&D");
(b) Conduct clinical research with Licensed Products in the Field
in the U.S. through completion of Phase I Clinical Trials;
(c) Conduct clinical research with Licensed Products in the Field
in the U.S. through completion of Phase II Clinical Trials, to the extent the
Steering Committee, in its sole discretion, determines that it is appropriate
for TGC to conduct such Phase II Clinical Trials in the U.S. pursuant to Section
3.1 hereinabove;
(d) Pursuant to the terms of the Supply Agreement, produce all AAV-
CFTR raw material and manufacture therefrom sufficient Bulk Licensed Product for
the manufacture of
9
<PAGE>
Licensed Products for use in all clinical trials to be conducted by TGC and
Medeva in the Field; and
(e) Pursuant to the terms of the Supply Agreement, manufacture or
have manufactured Licensed Products for use in clinical trials to be conducted
by TGC in the Field.
3.2.2 In accordance with the Development Plan, as modified from time to
time, Medeva shall use Reasonable Commercial Efforts to:
(a) Conduct Development R&D and other Development Work to support
commercialization of the Licensed Products in the Field, except to the extent
that TGC is responsible therefor as set forth in Section 3.2.1;
(b) Conduct all clinical trials (except Phase I Clinical Trials to
be conducted by TGC pursuant to Section 3.2.1(b) and Phase II Clinical Trials to
be conducted by TGC pursuant to Section 3.2.1(c)) necessary to obtain Regulatory
Approvals required for commercialization of Licensed Products in the Field in
each of the Countries;
(c) Use Bulk Licensed Product supplied to Medeva pursuant to the
Supply Agreement, to manufacture or have manufactured Licensed Products in
appropriate dosage and appropriate delivery form for clinical trials of such
Licensed Products to be conducted by Medeva;
(d) Obtain and maintain Regulatory Approvals for Licensed Products
in the Field in Regions 1 and 3 by any appropriate means;
(e) Launch Licensed Products in the Field in Regions 1 and 3; and
10
<PAGE>
(f) Promote and sell Licensed Products in the Field in Regions 1
and 3.
3.3 DEVELOPMENT R&D FUNDING.
3.3.1 Medeva will provide funding to TGC during the first three (3)
Project Years of the Development Period to enable TGC to fulfill its
responsibilities to conduct Development R&D and any non-aerosol Phase I Clinical
Trials to the extent approved by Medeva. The Steering Committee will agree upon
the activities to be conducted under the Development Plan (as provided in
Section 3.1 above) and upon a budget for funding to cover expenses of such
activities to be conducted during each such Project Year, such budget to include
a five percent (5%) contingency to cover unforeseen cost overruns or unexpected
cost items. Except as provided in the following sentence, TGC will be
responsible for expenses incurred in a Project Year by TGC in respect of
activities that were not approved by the Steering Committee or in respect of
activities approved by the Steering Committee to the extent that such expenses
exceed the budgeted amounts therefor, including the five percent (5%)
contingency. If, during any Project Year, the Steering Committee agrees to
modify or otherwise change the activities to be conducted by TGC or to increase
the amount budgeted for activities previously approved, the budget for funding
to TGC for that Project Year will be revised to reflect any adjustment in the
estimated expenses for such Project Year as a result of the modified or
otherwise changed activities or budget. The total funding to TGC from Medeva for
Development R&D shall be an amount equal to the lesser of either (i) Five
Million U.S. Dollars ($US5,000,000) per Project Year, or (ii) notwithstanding
the budget, the expenses actually incurred by TGC in a Project Year with respect
to Development R&D, subject to approval by the Steering Committee of the
activities to be conducted by TGC and the expenses associated with such
activities. During the third Project Year, the Parties will decide Development
R&D funding requirements, if any, for a
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fourth Project Year. Notwithstanding anything to the contrary, if Medeva decides
in its sole discretion to provide Development R&D funding for any Project Year
after the third Project Year, the Parties, during such Project Year, will decide
the funding requirements, if any, for the next Project Year. Medeva has no
obligation to provide any Development R&D funding after the third Project Year
of the Development Period, unless the Steering Committee recommends that TGC
continue its Development Work and, accordingly, that Development R&D funding
should be provided.
3.3.2 Budgeted Development R&D funding for the first Project Year is set
forth in Schedule 3.3.2. The Development R&D funding payment for the first
--------------
quarter of the first Project Year shall be [ * ], representing one-fourth of the
budgeted research funding set forth in Schedule 3.3.2, and shall be paid upon
--------------
execution of this Agreement. Thereafter and for each Project Year after the
First Project Year, research funding payments shall be paid quarterly in advance
in equal quarterly installments based upon budgeted Development R&D funding for
such Project Year as approved by the Steering Committee. Notwithstanding the
previous sentence, after the end of each quarter, the Parties will review the
amount of actual expenses incurred by TGC in the just-ended quarter and, in the
event that the amount actually spent was less than the Development R&D funding
payment advanced by Medeva to TGC for such quarter, the amount not expended
shall be applied as a credit toward the next research funding payment to be made
by Medeva. In the event that the amount of actual expenses incurred by TGC in
the just-ended quarter was more than the research funding payment for such
quarter, such excess will be paid by Medeva together with the next scheduled
research funding payment. All funding payments to TGC hereunder shall be made in
U.S. Dollars by wire transfer of immediately
- -------------------------------------
/*/ Confidential Treatment Requested.
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available funds to such account notified by TGC from time to time to Medeva in
writing in accordance with Section 5.4 so long as the total funding payments for
a Project Year do not exceed the maximum amount thereof provided in Section
3.3.1.
3.3.3 As per Section 3.3.1 above, the Development R&D activities for which
Medeva will provide research funding and the budgeted funding for such
activities for each Project Year after the first Project Year shall be
recommended by the Steering Committee and agreed upon by Medeva and TGC in
advance of the start of each such Project Year. In the event that the budgeted
funding for any Project Year has not been agreed upon in advance of the start of
such Project Year, the Responsible Executives of the Parties shall meet to
resolve the matter. In the interim before resolution of the matter, Medeva will
provide funding payments in amounts sufficient to fund the costs and expenses of
Development R&D activities previously approved by the Steering Committee under
the Development Plan and still ongoing from the previous Project Year.
3.4 OTHER COSTS AND EXPENSES.
3.4.1 Medeva will bear all costs and expenses incurred by Medeva in
performance of Medeva's responsibilities under the Development Plan.
3.4.2 Medeva will reimburse TGC for the costs and reasonable expenses of
conducting a Phase I Clinical Trial in the Field in the U.S. with an aerosol
form of a Licensed Product, but only to the extent that such costs and expenses
during the Project Year in which such clinical trial is underway, together with
the Development R&D funding provided by Medeva to TGC pursuant to Section 3.3 in
such Project Year do not exceed Five Million U.S. Dollars ($US5,000,000).
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3.4.3 In the event that the Steering Committee decides to have TGC conduct
Phase II Clinical Trials in the U.S. as contemplated under Section 3.2.1(c)
above, Medeva shall reimburse TGC for all expenses incurred by TGC to conduct
such Phase II Clinical Trials in accordance with a budget for such trials
prepared by TGC and approved by Medeva prior to initiation of such trials (the
"Phase II Expenses").
3.4.4 Subject to the limitations set forth in this Section 3.4, TGC shall
invoice Medeva yearly in arrears for the costs of conducting the Phase I Trials
contemplated under Section 3.4.2 above and, if applicable, quarterly in arrears
for the Phase II Expenses. Medeva shall pay such invoices within thirty (30)
days after receipt thereof in the manner provided in Section 5.4.
3.4.5 Except as provided in Section 3.3 and Sections 3.4.2-3.4.4 above,
TGC will bear all of its costs and expenses incurred in performing TGC's
responsibilities under the Development Plan as provided in Section 3.2.1. To the
extent that Medeva assigns responsibilities to TGC under the Development Plan in
addition to those contained in Section 3.2.1 above, Medeva shall reimburse TGC
for all expenses incurred by TGC relating to such additional responsibilities
pursuant to the budget provided in Section 3.3.1 or in accordance with an
additional budget prepared by TGC and approved by Medeva in advance of any
required work.
3.5 REPORTS; INSPECTION. Each Party shall maintain, and shall cause its
Contract Manufacturers and Outside Contractors to maintain, accurate and
complete records of all Development Work and all results of any trials, studies
and other investigations conducted under this Agreement by or on behalf of such
Party, its Affiliates or Sublicensees, as applicable. For so long as a Party is
conducting Development Work hereunder, such Party will prepare and submit
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to the Steering Committee, on a semi-annual basis, written progress reports
summarizing the current status and progress of Development Work. A Party, or
such Party's authorized representatives (including members of Steering Committee
selected by such Party), may visit the facilities of the other Party where
Development Work is being performed during normal business hours upon reasonable
notice without undue interruption to normal business operations.
3.6 CONDUCT OF DEVELOPMENT WORK; SUBCONTRACTING. Each Party may contract with
one or more Outside Contractors to perform any or all of its non-manufacturing
obligations under the Development Plan, provided that (i) the contracting Party
permits the other Party to review and comment on, and incorporates the
reasonable comments of such other Party in, the drafts of the respective
agreements (each an "Outside Contractor Agreement"), (ii) the contracting Party
provides the other Party with a true and accurate copy of each such Outside
Contractor Agreement, and (iii) the contracting Party uses Reasonable Commercial
Efforts to cause each Outside Contractor to agree to execute and deliver to the
other Party a letter in the form of Exhibit B hereto, and to include the
---------
provisions set forth therein in the relevant Outside Contractor Agreement. As to
each Outside Contractor that executes and delivers such a letter to Medeva, TGC
agrees that Medeva may seek to enforce TGC's remedies under such Outside
Contractor Agreement directly against such Outside Contractor without first
exhausting its remedies against TGC if the Outside Contractor breaches such
Outside Contractor Agreement so as to cause TGC to become liable to Medeva for
damages due to TGC's inability to complete its responsibilities under Section
3.2.1 hereof; provided, however, that if Medeva shall seek to exercise such
-------- -------
remedies, TGC shall remain primarily liable and obligated to Medeva under all
provisions of this Agreement. Further, TGC agrees to use its Reasonable
Commercial Efforts to include in each Outside Contractor Agreement the following
provisions: (a) a prohibition against
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sublicensing by such Outside Contractor of any Patent Rights or Licensed Know-
How licensed to such Outside Contractor by TGC; (b) if TGC provides such Outside
Contractor any Bulk Licensed Product, a prohibition against the sale by such
Outside Contractor of such Bulk Licensed Product to any Third Party; (c) a
prohibition, approved by Medeva, against manufacturing, having manufactured,
supplying, using or selling any product which generates functional CFTR protein
and which is derived from or embodies, in whole or in part, any intellectual
property either Controlled by TGC or licensed to TGC pursuant to the Third Party
Agreements; and (d) a right for TGC to terminate such Outside Contractor
Agreement in the event of a breach of the terms set forth in either of (a), (b)
or (c) above.
3.7 APPROVAL APPLICATIONS AND REGULATORY APPROVALS.
3.7.1 TGC, (at Medeva's expense subject to the limitations set forth in
Section 3.4.2 and, if applicable, Section 3.4.3) with appropriate assistance
from Medeva, will be responsible for assembling all Approval Applications needed
to conduct clinical trials with Licensed Products in the Field in the U.S. in
accordance with TGC's obligations under Section 3.2.1. Medeva with appropriate
assistance from TGC, at Medeva's expense, will be responsible for assembling all
Approval Applications needed to conduct clinical trials with Licensed Products
in the Field in accordance with Medeva's obligations under Section 3.2.2. The
expenses incurred by a Party after the Effective Date in assembling such
Approval Applications shall be paid or reimbursed in accordance with Section
3.4.4 above.
3.7.2 Medeva will be responsible for obtaining and thereafter, subject to
Reasonable Commercial Efforts and Medeva's obligations with respect to Minimum
Performance Levels set forth in Section 4.2, maintaining Regulatory Approval for
Licensed Products in the Field in each Country in Region 1 and in Region 3.
Medeva shall consult in good faith with TGC with respect
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to Approval Applications necessary to obtain Regulatory Approval for Licensed
Products in the Field in such Countries; and TGC will cooperate with Medeva, at
Medeva's expense, in such manner as Medeva may reasonably request in obtaining
such Regulatory Approvals. Each Party will promptly send to the other copies of
all Regulatory Approvals (including English translations thereof, if applicable)
and of any other correspondence with any Government Authority regarding use of
Licensed Products in the Field.
3.7.3 In the event that TGC converts the exclusive license granted to
Medeva to a non-exclusive license in any Region pursuant to Section 4.2 of this
Agreement, Medeva, at Medeva's expense, for a period of six (6) months after the
effective date of such conversion, shall cooperate reasonably with TGC and TGC's
designee, if applicable, in the issuance (or reissuance, if appropriate) in the
name of TGC or TGC's designee of all Regulatory Approvals necessary to market
Licensed Product(s) in the Region (or Regions) in which Medeva has lost
exclusivity.
3.7.4 In the event that TGC terminates this Agreement pursuant to Section
5.3 of the Master Agreement, or in the event that Medeva terminates this
Agreement pursuant to Section 5.2 of the Master Agreement, Medeva, at Medeva's
expense, for a period of six (6) months after the effective date of such
termination, shall cooperate reasonably with TGC and TGC's designee, if
applicable, in the issuance (or reissuance, if appropriate) in the name of TGC
or TGC's designee of all Regulatory Approvals theretofore obtained by Medeva.
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ARTICLE 4
MARKETING AND COMMERCIALIZATION
4.1 DILIGENCE. The Parties acknowledge that Medeva is one of the first
companies in the world seeking to obtain Regulatory Approval of a gene therapy
product. As such, Medeva may not anticipate all tests or studies which a
Government Authority (e.g., FDA) may require during the regulatory approval
----
process of the Licensed Products.
4.2 TERMINATION OF EXCLUSIVITY.
4.2.1 Upon thirty (30) days prior written notice, TGC may convert the
exclusive license granted to Medeva hereunder with respect to a Region to a non-
exclusive license for such Region if Medeva (i) fails to submit an Approval
Application in each Country in such Region [ * ] with Licensed Products in the
Field (subject to certain adjustments set forth below), or (ii) fails to launch
a Licensed Product in the Field in each Country in a Region [ * ] after
Regulatory Approval is obtained in such Country, subject to reasonable delay to
take advantage of suitable launch timings (e.g., professional sales meetings
and/or congresses), as determined by the Parties; provided, however, that the
-------- -------
right of TGC to terminate Medeva's exclusivity pursuant to this Section 4.2 may
not be exercised by TGC if Medeva's failure to submit an application for
Regulatory Approval or to commence a Licensed Product launch in a Country is due
to (a) a request by a Government Authority in or governing such Country to
conduct tests or studies not provided for, or other than as provided for, in the
Development Plan, or (b) a court order, judgment, ruling, or other similar
demand or requirement imposed upon Medeva arising out and as the result of a
Third Party Infringement (as defined in Section 6.8.1 below), or (c)TGC's breach
of the Supply Agreement. In connection with (i) above, the [ * ] period shall be
- -------------------------------------
/*/ Confidential Treatment Requested.
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extended if, and only if, (1) the treatment protocol for patients enrolled in
such Phase III Clinical Trials covers a period of more than [ * ], in which case
such [ * ] period shall be extended by the number of months by which the length
of such treatment protocol exceeds [ * ]; or (2) the conduct of such Phase III
Clinical Trial is delayed due to TGC's failure to perform its obligations
hereunder, or under the Supply Agreement, in a timely manner, in which case such
[ * ] period shall be extended by a reasonable amount of time to compensate for
the delay caused by such TGC failure. In the event that Medeva's failure under
this Section 4.2.1 is due to TGC's breach of this Agreement or the Supply
Agreement, TGC shall have no right to convert the exclusive license granted to
Medeva hereunder with respect to a Region to a non-exclusive license for such
Region unless and until TGC has cured such breach and, in such case, the
relevant time periods referred to in this Section 4.2.1 above shall be extended
by a reasonable amount of time to compensate for the delay caused by TGC.
4.2.2 Upon thirty (30) days prior written notice, TGC may convert the
exclusive license granted to Medeva hereunder with respect to a Region to a non-
exclusive license for such Region if Medeva fails to achieve the applicable
Minimum Performance Level in each Country in such Region within [ * ] after
Regulatory Approval is obtained for such Country, unless such failure is due to
either (i) a court order, judgment, ruling, or other similar demand or
requirement imposed upon Medeva arising out and as the result of a Third Party
Infringement, or (ii) TGC's breach of this Agreement or the Supply Agreement. In
the event that Medeva's failure is due to TGC's breach of this Agreement or the
Supply Agreement, TGC shall have no right to convert the exclusive license
granted to Medeva hereunder with respect to a Region to a non-exclusive
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/*/ Confidential Treatment Requested.
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license for such Region unless and until TGC has cured such breach and, in such
case, the [ * ] period referred to above shall be extended by a reasonable
amount of time to compensate for the delay caused by TGC.
4.2.3 In the event that the exclusive license granted to Medeva with
respect to a Region is converted to a non-exclusive license for such Region
pursuant to this Section 4.2, Medeva will be entitled to reimbursement of a
portion of its total development costs (including without limitation Development
R & D funding, and the payments under Sections 5.2 and 5.3 of this Agreement) in
obtaining all Regulatory Approvals. The amount of reimbursement shall equal the
total of such development costs divided by a number corresponding to the
specific Region in which the exclusive license was converted to a non-exclusive
license. For Region 1, such number shall be "2;" for Region 2, such number shall
-------- - --------
be "5;" for Region 3, such number shall be "2;" for Region 4, such number shall
- -------- - --------
be "6;" and for Region 5, such number shall be "7." Notwithstanding the above,
- -------- -
the total amount of reimbursement to Medeva under this Section 4.2.3 shall not
exceed [ * ] of Medeva's total development costs in obtaining Regulatory
Approvals. Such reimbursement shall be paid by TGC to Medeva in the form of a
royalty equal to [ * ] of TGC's Net Sales. TGC's Net Sales shall include sales
of Bulk Licensed Products not subsequently manufactured into Licensed Products
and, in addition, sales of Licensed Products.
4.2.4 The Parties agree that Medeva cannot be found in breach of Sections
3.2.2(d)-(f) if Medeva has not lost exclusivity pursuant to Sections 4.2.1 and
4.2.2. Further, a loss of exclusivity pursuant to Sections 4.2.1 or 4.2.2 only,
without additional facts or information, shall
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/*/ Confidential Treatment Requested.
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not constitute ipso facto a material breach of this Agreement entitling TGC to
---- -----
terminate this Agreement.
4.3 STATUS REPORTS. In addition to Medeva's obligation to prepare and submit
to the Steering Committee the reports required under Section 3.5 but only to the
extent not otherwise covered thereby, Medeva shall prepare and submit to TGC on
a semi-annual basis written status reports of Medeva's commercialization
programs for Licensed Products in the Field, including without limitation the
status of Regulatory Approvals. In addition to the foregoing, at TGC's request
from time to time, not to exceed once per quarter, Medeva agrees to provide
verbal updates on the status of Medeva's marketing of Licensed Products in the
Field.
4.4 TRADEMARKS. Medeva shall at its own expense select, register and maintain
the trademark(s) used by Medeva, its Affiliates and Sublicensees (the "Medeva
Trademarks") in connection with Licensed Products in the Field. All trademarks
used by TGC, its Affiliates or Sublicensees, including without limitation
trademarks used by TGC, its Affiliates or Sublicensees after conversion by TGC
of the exclusive license granted to Medeva hereunder with respect to a Region to
a non-exclusive license for such Region pursuant to Section 4.2, shall not be
confusingly similar to the Medeva Trademarks. TGC shall have no rights in
respect of Medeva Trademarks, including in the event of a termination of
exclusivity under Section 4.2.
ARTICLE 5
CONSIDERATION
5.1 EQUITY PURCHASE. In consideration of the grant by TGC of the rights and
licenses set forth in Article 2, Medeva or an Affiliate of Medeva, in accordance
with terms and conditions set forth in a certain Common Stock Purchase Agreement
of even date herewith, shall purchase
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shares of common stock of TGC corresponding to a total purchase price equal to
Three Million U.S. Dollars ($US3,000,000).
5.2 LICENSE AND TECHNOLOGY ACCESS FEE. In addition to the foregoing, and in
further consideration of the grant by TGC of the rights and licenses set forth
in Article 2, upon the execution of this Agreement by each of the Parties,
Medeva will pay to TGC Five Million U.S. Dollars ($US5,000,000). Except as
provided in Section 6.10.2, such payment may not be applied to or otherwise
credited against any other payments which may be due to TGC under this
Agreement.
5.3 OTHER PAYMENTS. In addition to the foregoing, and in further consideration
of the grant by TGC of the rights and licenses set forth in Article 2, Medeva
shall pay to TGC the amounts specified below upon the occurrence of the events
specified below:
5.3.1 [ * ] either (i) within thirty (30) days after the date of written
notice by TGC to Medeva that TGC is authorized or otherwise permitted by FDA to
commence Phase I Clinical Trials of the first aerosol Licensed Product in the
Field, or (ii) upon the execution date of this Agreement if such authorization
or permission is obtained prior to such date.
5.3.2 [ * ] within thirty (30) days after the date of the enrollment of
the first patient in Phase II Clinical Trials for the first Licensed Product in
the Field.
5.3.3 [ * ] within thirty (30) days after the date of the enrollment of
the first patient in Phase III Clinical Trials for the first Licensed Product in
the Field.
- -------------------------------------
/*/ Confidential Treatment Requested.
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5.3.4 [ * ] within thirty (30) days after the date of the filing of a
Product License Application with FDA (or the equivalent thereof) for approval of
the first Licensed Product in the Field.
5.3.5 [ * ] within thirty (30) days after the date of Regulatory Approval
for sale of the first Licensed Product in the Field.
Except as provided in Section 6.10.2, none of the payments specified in this
Section 5.3 may be applied to or otherwise credited against any other payments
which may be due to TGC under this Agreement.
5.4 FORM OF PAYMENT; LATE PAYMENTS. Each Party shall make all payments due the
other Party under this Agreement in U.S. Dollars by wire transfer of immediately
available funds to such account notified by the receiving Party from time to
time to the other Party in writing. If any sum payable to TGC under this
Agreement shall not have been paid on or before the applicable due date, simple
interest shall accrue on the unpaid amount at the rate of twelve percent (12%)
per annum or, if less, the maximum rate permitted under applicable law from the
payment due date until the actual date of payment without prejudice to any other
claim or remedy; provided, however, that no interest shall accrue on any portion
--------
of an unpaid amount which is the subject of a good faith, legitimate dispute. If
any such dispute is resolved against Medeva, the date of resolution shall be
deemed the date that payment to TGC is due.
- -------------------------------------
/*/ Confidential Treatment Requested.
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ARTICLE 6
INTELLECTUAL PROPERTY MATTERS
6.1 OWNERSHIP OF INTELLECTUAL PROPERTY.
6.1.1 As between the Parties, subject only to the licenses set forth in
Article 2, TGC shall retain all right, title and interest in and to (i) the
Patent Rights and the Licensed Know-How, and (ii) all inventions and
developments made solely by employees, agents or contractors of TGC in the
course of performance of Development Work pursuant to the Development Plan, and
all patents and patent applications claiming such inventions or developments.
6.1.2 As between the Parties, subject only to the covenant set forth in
Section 2.2, Medeva shall own all Improvements made by Medeva and all inventions
and developments made solely by employees, agents or contractors of Medeva in
the course of performance of Development Work pursuant to the Development Plan,
and all patents and patent applications claiming such inventions or
developments.
6.1.3 The Parties shall jointly own any Joint Inventions and all Joint
Patents.
6.1.4 Inventorship of inventions shall be determined in accordance with
rules and guidelines regarding inventorship as established under U.S. patent
law.
6.2 OWNERSHIP OF APPROVAL APPLICATIONS AND REGULATORY APPROVALS.
6.2.1 Subject to the rights granted to or owned by Medeva hereunder, TGC
shall own all rights, title and interest in all Approval Applications filed in
the U.S. for the conduct of Phase I Clinical Trials in the U.S. and Phase II
Clinical Trials, to the extent such Phase II Clinical Trials are conducted in
the U.S. Such Approval Applications shall be filed in TGC's name and owned
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by TGC. Notwithstanding anything to the contrary, including without limitation
Section 6.2.2 below, TGC shall own any establishment license application, and
any establishment license which may issue therefrom, necessary for TGC to
manufacture Bulk Licensed Product; provided that such a license is applicable to
the activities contemplated under this Agreement and the Supply Agreement, and
is required under Applicable Laws.
6.2.2 Subject to the rights granted to or owned by TGC hereunder, Medeva
shall own all right, title and interest in all Approval Applications for the
conduct of all Phase II Clinical Trials (except clinical trials to be conducted
by TGC) and Phase III Clinical Trials necessary to obtain Regulatory Approvals
required for commercialization of Licensed Products in the Field, together with
any Regulatory Approval obtained in connection therewith. Such Approval
Applications, together with any Regulatory Approvals obtained in connection
therewith, shall be filed in Medeva's name and owned by Medeva.
6.2.3 Each Party shall retain ownership and control of any of its
Confidential Information included in any Approval Application. Notwithstanding
the previous sentence, each Party agrees that it shall not withhold from the
other Party any Confidential Information necessary for the filing, maintenance,
modification or protection of an Approval Application by such other Party.
6.3 PROSECUTION AND MAINTENANCE OF PATENT RIGHTS; ABANDONMENT.
6.3.1 TGC, or TGC's designee, shall have the responsibility to file,
prosecute and maintain the Patent Rights (except as otherwise provided under the
Third Party Agreements) and shall bear all Patent Costs associated therewith.
TGC shall provide Medeva with an opportunity to review and comment on the nature
and text of new or pending applications for Patent Rights (except as otherwise
provided under the Third Party Agreements) worldwide. TGC shall
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consider in good faith any comments from Medeva regarding steps that might be
taken to strengthen patent protection with respect to any patent within the
Patent Rights, and shall conduct discussions with Medeva on a reasonable basis
regarding the patent prosecution strategy for Patent Rights. TGC agrees to keep
Medeva informed of the course of patent prosecution or other proceedings
relating to the Patent Rights to the extent known by TGC.
6.3.2 In the event TGC elects not to file or continue to prosecute an
application for a patent within the Patent Rights or to abandon an issued patent
within the Patent Rights in any country, TGC shall notify Medeva not less than
two (2) months before any relevant deadline, and thereafter Medeva shall have
the right to pursue, at Medeva's expense and in Medeva's sole discretion,
prosecution of such patent application or maintenance of such issued patent
(except with respect to any patent application or patent licensed to TGC under
the Third Party Agreements, in which case Medeva shall only have the right to
pursue prosecution or maintenance to the extent permitted in the applicable
Third Party Agreement).
6.3.3 TGC shall provide Medeva with a copy of any communications received
by TGC, or any communication which TGC intends to provide to any of its
licensors under the Third Party Agreements, relating to the preparation, filing,
prosecution and maintenance, including without limitation the issuance, lapse,
revocation, surrender, invalidation or abandonment, of any patent or patent
application under which TGC received a grant of rights pursuant to the Third
Party Agreements. To the extent TGC is afforded an opportunity by any such
licensor to comment on, or participate in the filing or maintenance of, any such
patent or patent application, TGC shall promptly notify Medeva and discuss TGC's
comments and TGC's participation in such filing or maintenance with Medeva.
Thereafter TGC shall notify its licensor of Medeva's comments and suggestions
relating to such filing or maintenance of such patent or patent application and
shall use
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its Reasonable Commercial Efforts to cause such licensor to consider Medeva's
comments and suggestions. Without limiting the foregoing, TGC agrees not to
abandon any patent or patent application licensed to TGC under the Third Party
Agreements for which TGC has responsibility for prosecution and maintenance
without Medeva's prior written consent.
6.4 PROSECUTION AND MAINTENANCE OF JOINT PATENTS; ABANDONMENT. The Parties
agree to discuss in good faith and implement a mutually agreeable patent
strategy with respect to all Joint Inventions that may be patentable. With
respect to all Joint Inventions for which the Parties agree patent protection
should be sought, the Parties shall cooperate in the preparation, filing and
prosecution of Joint Patents and shall discuss and agree on the content and form
of relevant patent applications and any other relevant matters before such
applications are made. Each Party shall consider in good faith any comments from
the other regarding steps that might be taken to strengthen such Joint Patents.
Medeva shall have the right to file, prosecute and maintain such Joint Patents
worldwide, and the Parties shall bear all Patent Costs associated therewith
equally. Medeva shall take no significant steps relating to Joint Patents
without the prior approval of TGC for so long as TGC is paying its share of the
Patent Costs relating thereto. In the event that Medeva elects not to prosecute
a patent application on a particular Joint Invention, TGC may do so at its sole
discretion and expense, and all rights in such Joint Invention and the Joint
Patent claiming such invention shall be assigned to TGC. Either Party may choose
at any time not to continue to pay any such prosecution and maintenance costs
with respect to a particular Joint Patent, and shall thereafter assign all its
rights in such Joint Patent to the Party that pays all such costs. Such
assignment shall take place in a timely manner to enable the non-assigning Party
to meet any external requirement concerning prosecution matters and paying
prosecution and maintenance costs. In the event that a Party elects, at any
time, not to participate in the
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preparation, filing and prosecution of any patent application covering a Joint
Invention, such Party shall provide reasonable assistance to the other Party, at
the expense of such other Party, with respect to any activities determined by
such other Party as necessary to obtain patent protection for such Joint
Invention.
6.5 ENFORCEMENT OF PATENT RIGHTS.
6.5.1 If any patent within the Patent Rights is or might reasonably be
infringed by a Third Party through the manufacture, use or sale of any products
in the Field (an "Infringement in the Field"), the Party to this Agreement first
having knowledge of such infringement shall promptly notify the other Party in
writing. The notice shall set forth the facts of that infringement in reasonable
detail.
6.5.2 Except as provided in Section 6.5.3, in the event of an Infringement
in the Field which, in the Parties' reasonable judgment, if continued, would
affect materially the marketing and commercialization of Licensed Product by
Medeva, TGC shall institute, prosecute, and control any action or proceeding
with respect to such infringement, provided that either (i) the patent allegedly
infringed is owned by TGC or (ii) TGC has a right to institute, prosecute and
control such action or proceeding. If the patent infringed is not owned by TGC
and TGC does not have a right to institute, prosecute and control such action or
proceeding, TGC shall use Reasonable Commercial Efforts to cause the owner of
such patent (the "Patent Owner") to institute, prosecute and control, or permit
TGC to control, any action or proceeding with respect to such infringement. To
the extent permitted by Applicable Laws where either (a) TGC has brought suit or
(b) the Patent Owner is a party other than TGC and TGC is authorized to permit
Medeva to do so, Medeva shall have the right, at its own expense, to be
represented in any such action or proceeding by counsel of its own choice. In
addition, to the extent that TGC is
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authorized to permit Medeva to do so, TGC agrees to permit Medeva to control any
action or proceeding with respect to such infringement and, if the Patent Owner
is not TGC and TGC does not have the right to institute prosecute and control
such action or proceeding, TGC shall use Reasonable Commercial Efforts to cause
such Patent Owner to permit Medeva to control any such action or proceeding.
6.5.3 If TGC or the Patent Owner fails to bring an action or proceeding
with respect to an Infringement in the Field within a period of ninety (90) days
after the earlier of (i) the date of the Parties' determination that such
infringement, in the Parties' reasonable judgment, if continued, would affect
materially the marketing and commercialization of Licensed Product by Medeva,
or, (ii) the date of Medeva's request to bring such an action or proceeding,
Medeva, to the extent that TGC is authorized to permit Medeva to do so, shall
have the right, but not the obligation, to bring and control an action or
proceeding in its name against such infringement by counsel of Medeva' own
choice. If the Patent Owner is not TGC, and TGC is not authorized to permit
Medeva to bring and control such an action or proceeding, TGC shall use
Reasonable Commercial Efforts to cause such Patent Owner to permit Medeva to do
so. In any such action, TGC and the Patent Owner shall have the right to join as
a party (or parties) and be represented in any such action by counsel of their
own choice at their own expense. Notwithstanding the above, in the event that it
is not possible under relevant local laws for Medeva to bring and control such
an action or proceeding, TGC, to the extent that TGC is able to do so, shall
bring, or shall cause the Patent Owner to bring, such an action and Medeva shall
control such action, at Medeva's expense. In any such case, TGC agrees to be
joined as a party plaintiff if necessary for Medeva to prosecute the action and
to give Medeva reasonable assistance and authority to file and prosecute the
suit. In addition, if the Patent Owner is not TGC and TGC does not have
29
<PAGE>
authority to require the Patent Owner to join as a party plaintiff, TGC agrees
to use Reasonable Commercial Efforts to cause the Patent Owner to agree to be
joined as a party plaintiff if helpful for Medeva to prosecute the action and to
give Medeva reasonable assistance and authority to file and prosecute the suit.
6.5.4 TGC, or the Patent Owner if not TGC, shall retain all other rights
with respect to enforcement of patents which could give rise to an Infringement
in the Field. Any damages or other monetary awards recovered in an action or
proceeding against an infringer of the Patent Rights based on an Infringement in
the Field shall be applied first to the reimbursement of Medeva and TGC, and the
Patent Owner if not TGC, of their respective out-of-pocket expenses (including
reasonable attorneys' fees and expenses) incurred in prosecuting such
infringement action, on a pro rata basis based upon their respective out-of-
pocket expenses, until all such expenses have been recovered. Unless TGC's pre-
existing written obligations to the Patent Owner require otherwise, any
remaining balance shall be divided (i) equally between the parties in the suit
if TGC, or the Patent Owner if not TGC, is controlling the litigation provided
Medeva did not have the right to control the litigation, or (ii) in the ratio of
[ * ] to Medeva and [ * ] to TGC and the Patent Owner if Medeva is controlling
the litigation or TGC is controlling the litigation at Medeva's request.
6.6 ENFORCEMENT OF JOINT PATENT RIGHTS. If any Joint Patent is or might
reasonably be infringed by a Third Party in any country in the Territory, the
Party to this Agreement first having knowledge of such infringement shall
promptly notify the other Party in writing. The notice shall set forth the
facts of that infringement in reasonable detail. With respect to Joint Patents
that are owned solely by one Party, such Party shall have the sole right, but
not the
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<PAGE>
obligation, to institute, prosecute, and control any action or proceeding with
respect to such infringement. The non-owning Party agrees to give the owning
Party, at the owning Party's expense, including reimbursement of the non-owning
Party's out-of-pocket expenses, all reasonable assistance to defend or settle
any such action or proceedings. The owning Party shall bear the costs of such
action or proceedings. If such suspected infringement involves a jointly-owned
Joint Patent and if the Parties do not agree on a joint plan of action, then
Medeva first shall have the right, but not the obligation, to institute,
prosecute, and control any action or proceeding with respect to such
infringement, by counsel of its own choice and thereafter TGC shall have the
right but not the obligation to do so. The Party not bringing the action shall
have the right, at its own expense, to join as a party and be represented in any
such action by counsel of its own choice. If one Party brings any such action or
proceeding with respect to a jointly-owned Joint Patent, the other Party agrees
to be joined as a party plaintiff if necessary to prosecute the action and to
give the first Party reasonable assistance and authority to file and prosecute
the suit. Any damages or other monetary awards recovered in an action against an
infringer of a jointly-owned Joint Patent shall be applied to the reimbursement
of TGC and Medeva for their respective out-of-pocket expenses (including
reasonable attorneys' fees and expenses) incurred in prosecuting such
infringement action on a pro rata basis based upon their respective out-of-
pocket expenses until all such expenses have been recovered, and any remaining
balance shall be divided equally between the Parties.
6.7 SETTLEMENT WITH A THIRD PARTY. A Party may not settle an action or
proceeding against an infringer under Section 6.5 or Section 6.6 above with
respect to a product in the Field without the written consent of such other
Party. Such consent shall not be unreasonably withheld, but
31
<PAGE>
may be withheld if such settlement would materially and adversely affect the
interest of the other Party.
6.8 INFRINGEMENT OF THIRD PARTY RIGHTS.
6.8.1 In the event that a Third Party alleges that such Third Party's
intellectual property rights are being or have been infringed by (i) Medeva's or
TGC's selling, manufacturing, having manufactured or using, pursuant to this
Agreement or Supply Agreement, Bulk Licensed Product, Licensed Products or
products covered by Joint Patents, or (ii) a Third Party's use of Bulk Licensed
Product, Licensed Products or products covered by Joint Patents, Medeva shall
have the right to defend or settle in its sole discretion any legal action or
proceeding arising therefrom (a "Third Party Infringement"). In addition, in the
event that a patent application or patent held or otherwise controlled by Third
Party may be subject to challenge, opposition or other similar actions or
proceedings, including without limitation interference proceedings, Medeva shall
have the right to take appropriate steps to initiate and pursue such actions or
proceedings. TGC and Medeva shall consult with each other concerning strategy,
approaches and the consequences of approaches to be undertaken pursuant to this
Section 6.8, and TGC shall provide and shall cause the Patent Owner to provide,
if applicable, all reasonable assistance requested by Medeva in connection with
any such action or proceeding, provided however that Medeva reimburses the out-
of-pocket expenses of TGC and the Patent Owner, if applicable, in providing such
assistance.
6.8.2 If a Third Party Infringement alleges infringement of a Third Party
intellectual property right about which TGC notified Medeva prior to the
execution of this Agreement or a Third Party intellectual property right about
which neither Medeva nor TGC was aware prior to the
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execution of this Agreement, Medeva shall be responsible for [ * ] of the costs
and expenses (including without limitation reasonable attorney's fees) incurred
in defending or settling such Third Party Infringement, and TGC shall be
responsible for [ * ] of such costs and expenses. However, if a Third Party
Infringement arises out of a breach of TGC's warranties or representations under
this Agreement, then TGC shall be responsible for [ * ] of the costs and
expenses actually incurred by Medeva in defending or settling such Third Party
Infringement. Payment by TGC of costs and expenses for which TGC is responsible
under this Section 6.8.2 shall be made within sixty (60) days after the date of
TGC's receipt of Medeva's invoice with respect thereto.
6.9 INFRINGEMENT OF MEDEVA TRADEMARKS. TGC agrees to give Medeva prompt
written notice of any unlicensed use by Third Parties of Medeva Trademarks of
which TGC has knowledge.
6.10 OFFSET FOR INFRINGEMENT.
6.10.1 If Medeva is required in accordance with Section 6.8.2 of this
Agreement, at any time during the term of this Agreement, to pay any damages or
other payments (but not milestone payments or payments of ongoing royalties in
either case based upon an amount of Licensed Product sold or a percentage of
sales of Licensed Product which are to be deducted from Net Sales pursuant to
Section 1.32(vii) of the Master Agreement) to any person or entity as a result
of a judgment, settlement or agreement relating to the past and/or future use of
Bulk Licensed Product by either Party ("Third Party Payments"), except insofar
as such Third Party Payments are attributable to the willful misconduct,
negligence or breach of this Agreement by Medeva, its Affiliates or
Sublicensees, Medeva may offset [ * ] of the amount of such Third
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Party Payments actually paid by Medeva against any fees and payments due TGC or
payable on behalf of TGC pursuant to (i) Section 5.3 of this Agreement, but not
research funding payments to TGC pursuant to Section 3.4, or (ii) Section 2.2.1
and Section 6.2 of the Supply Agreement, or (iii) Section 5.6.2 of the Master
Agreement. Such offsets may be made after the date a Third Party Payment was
paid by Medeva.
6.10.2 If at any time during the term of this Agreement, as a result of a
Third Party Infringement, Medeva (i) is prevented from selling Licensed Products
in either Region 1 or Region 3, or both; and (ii) has used its best efforts to
defend or settle legal actions relating to such Third Party Infringement, or to
otherwise obtain a license under intellectual property rights which are the
basis of such Third Party Infringement, then Medeva shall be entitled to offset
[ * ] of payments due to TGC pursuant to Section 5.2 and Section 5.3, but not
research funding payments to TGC pursuant to Section 3.4, against amounts
otherwise due to TGC pursuant to Section 2.2.1 and Section 6.2 of the Supply
Agreement.
6.10.3 Offsets by Medeva allowed pursuant to this Section 6.10,
cumulatively, shall be limited to, and shall not exceed, a total amount in any
calendar year equal to the sum of (i) [ * ] of the amount otherwise due to TGC
in such calendar year pursuant to Section 5.3 of this Agreement; (ii) [ * ] of
the amount otherwise due to TGC in such calendar year pursuant to Section 6.2 of
the Supply Agreement; and (iii) [ * ] of TGC's net profits in such calendar year
on sale of Bulk Licensed Product to Medeva pursuant to Section 2.2.1 of the
Supply Agreement. For purposes of this Section 6.10.3, the term "net profits"
shall mean Transfer Price less TGC's Manufacturing Cost.
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ARTICLE 7
MASTER AGREEMENT
7.1 INCORPORATION BY REFERENCE. Article 3 (Confidentiality), Article 4
(Representations and Warranties), Article 5 (Term and Termination), Article 6
(Indemnification; Insurance; Limitation of Liability), Article 7 (Governing Law;
Dispute Resolution) and Article 8 ( Miscellaneous) of the Master Agreement are
hereby incorporated by reference. The Parties intend and agree that the
provisions contained in the articles referred to in the previous sentence,
together with the provisions contained in the articles set forth in this
Agreement, describe fully the rights and obligations as between the Parties
under this Agreement, and that such articles, together with the articles set
forth in this Agreement, shall apply to and govern the Parties with respect to
this Agreement.
IN WITNESS WHEREOF, the Parties have executed this Agreement in duplicate
originals by their proper officers as of the date and year first above written.
TARGETED GENETICS CORPORATION MEDEVA PHARMACEUTICALS, INC.
("TGC") ("MEDEVA")
By: /s/ H. Stewart Parker By: /s/ William Bogie
------------------------------------- --------------------------------
Name: H. Stewart Parker Name: William Bogie
----------------------------------- ------------------------------
Title: President, Chief Executive Officer Title: President
---------------------------------- -----------------------------
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SCHEDULE 3.3.2
BUDGETED DEVELOPMENT R&D FUNDING FOR FIRST PROJECT YEAR
-------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
Cost Structure per FTE (US $s) (1):
Direct labor [*]
Payroll taxes and benefits [*]
Lab supplies [*]
Indirect costs:
Dept. operating costs [*]
R&D management [*]
R&D facility maintenance/operating costs [*]
R&D rent and utilities [*]
R&D equipment-related costs [*]
Allocated G&A costs [*]
------
Total costs per FTE [*]
Less G&A costs [*]
------
Rate per FTE payable by Medeva [*]
Estimated level of effort (FTEs):
Process development [*]
Assay development [*]
Preclinical biology [*]
Product development [*]
------
Total [*]
Total cost of TGC internal effort (thousands of US $s) [*]
External costs (animal studies, assays, etc.) [*]
------
Subtotal [*]
5% Contingency [*]
------
Total estimated budget--Project Year 1 (thousands of US $s)
</TABLE>
(1) FTE = full time equivalent R&D employee [*]
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EXHIBIT A
DEVELOPMENT PLAN
----------------
SECTION 1
- ---------
1. For the purposes of the Transaction Documents the definitions of Phase I
Clinical Trial, Phase II Clinical Trial and Phase III Clinical Trial shall be
as follows:
"Phase I Clinical Trial" means the studies currently consisting of Studies
AAV9501, AAV9502 and AAV9701 (as described in Section 3 of this Exhibit A),
together with all extensions of these studies and any additional studies
which the Steering Committee determines (in accordance with the provisions of
Article 3 of this Agreement) are required to explore tolerance and, through
molecular and biological end points as indicators, designed to demonstrate
activity sufficient for the purposes of designing the Phase II Clinical
Trial.
"Phase II Clinical Trial" means the studies currently consisting of Studies
AAV9901 and AAV9902 (as described in Section 3 of this Exhibit A), together
with all extensions of these studies and any additional studies which the
Steering Committee determines (in accordance with the provisions of Article 3
of this Agreement) are required for the initial demonstration of clinical
efficacy (e.g. reduced infection incidents and/or increased FVC) and initial
determination of side effects, and designed to be sufficient for the purposes
of designing the Phase III Clinical Trial.
"Phase III Clinical Trial" means the studies required to provide definitive
proof of efficacy/determination of safety profile and to be performed after
appropriate evidence has been obtained of efficacy during Phase II Clinical
Trials, and designed to be sufficient for the purposes of submitting an
Approval Application.
2. The Parties have discussed previously (i) an outline of the clinical portions
of the Development Plan, (ii) the timetable for such clinical portion which
is attached in Section 2 of this Exhibit A, and the (iii) proposed budgeted
Development R&D funding for the first Project Year which is set out in
Schedule 3.3.2 to this Agreement.
3. The Parties acknowledge that it is the responsibility of the Steering
Committee (to be set up under Article 3 of this Agreement) to establish the
Development Plan and carry out the other activities in respect thereof in
accordance with the provisions of the Transaction Documents and in particular
Article 3 of this Agreement.
4. The draft preliminary Development Plan attached in Section 3 of this Exhibit
A has been drawn up by TGC and following discussion with Medeva it has been
agreed that such Development Plan will form the basis for discussion and
establishment of the Development Plan in accordance with the provisions of
Article 3 of this Agreement.
SECTION 2 - See Attached
- ---------
SECTION 3 - See Attached
- ---------
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EXHIBIT A - Section 2
[ * ]
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EXHIBIT A
SECTION 3
- ---------
[ * ]
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EXHIBIT B
OUTSIDE CONTRACTOR LETTER
-------------------------
Medeva Pharmaceuticals, Inc.
755 Jefferson Road
Rochester, New York 14623
United States of America
Re: Third Party Service Contract
Dear Ladies and Gentlemen:
This letter will serve as notice to Medeva BV ("Medeva") that pursuant to
Section 3.7 of the License and Collaboration Agreement (the "Agreement") dated
_______________, between Medeva and Targeted Genetics Corporation ("TGC"),
[insert name of third party service provider] (the "Service Provider") has been
engaged as a contractor for TGC in connection with the performance of the
following obligation of TGC under the Agreement:
[insert description of obligation]
A copy of our agreement with TGC is attached hereto (the "Service Contract").
Such Service Contract constitutes the entire agreement between Service Provider
and TGC, is in full force and to our knowledge neither party is in breach of any
of the terms thereof.
Service Provider hereby acknowledges that, during the term of the Service
Contract, in the event of a breach of the Service Contract by Service Provider
which causes TGC to breach its obligations to Medeva, Medeva shall have the
right to pursue and seek to enforce TGC's remedies (including equitable
remedies) under the Service Contract directly against Service Provider without
first exhausting its remedies against TGC.
Service Provider acknowledges that any fees or compensation due it pursuant to
the Service Contract shall be payable by TGC only. Service Provider represents
and warrants to Medeva that it is not an affiliate of TGC. Service Provider
further acknowledges that Medeva shall not have any liability to, nor be
responsible for the payment of any amounts to, Service Provider.
Very truly yours,
[Name of Service Provider]
By:________________________
Name:
Title:
Address:
Date:
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EXHIBIT 1.3
================================================================================
SUPPLY AGREEMENT
BETWEEN
TARGETED GENETICS CORPORATION
AND
MEDEVA PHARMACEUTICALS, INC.
AN AFFILIATE OF
MEDEVA PLC
DATED NOVEMBER 23, 1998
================================================================================
"[*]" = omitted, confidential material, which material has been separately filed
with the Securities and Exchange Commission pursuant to a request for
confidential treatment.
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE 1 DEFINITIONS 3
1.1 Incorporation by Reference........................................................ 3
ARTICLE 2 PRODUCT SUPPLY..................................................................... 3
2.1 Clinical Supply................................................................... 3
2.2 Commercial Supply................................................................. 5
2.3 Invoices.......................................................................... 7
2.4 Order and Invoice Non-Conformance................................................. 8
2.5 Non-Payment of Invoices........................................................... 9
2.6 Insurance......................................................................... 9
2.7 Records........................................................................... 10
2.8 Product Warranty.................................................................. 10
ARTICLE 3 PRODUCT MANUFACTURE................................................................ 10
3.1 Establishment of Clinical Supply Source........................................... 10
3.2 Establishment of Commercial Supply Source......................................... 11
3.3 Subcontracting.................................................................... 13
3.4 Alternate Manufacturing Source.................................................... 14
ARTICLE 4 QUALITY CONTROL.................................................................... 16
4.1 Product Specifications Amendments................................................. 16
4.2 Product Non-Conformance........................................................... 16
4.3 Manufacturing Process............................................................. 18
4.4 Inspection........................................................................ 18
4.5 Safety Procedures................................................................. 19
4.6 Government Inspection............................................................. 19
</TABLE>
<PAGE>
<TABLE>
<S> <C>
ARTICLE 5 ADVERSE EVENTS; RECALL............................................................. 20
5.1 Adverse Experience Reporting...................................................... 20
5.2 Notification and Recall........................................................... 21
5.3 Recall Expense.................................................................... 22
ARTICLE 6 ADDITIONAL COMPENSATION; PAYMENT................................................... 23
6.1 Third Party Agreements............................................................ 23
6.2 Sales Bonus....................................................................... 24
6.3 Reports and Payments.............................................................. 25
6.4 Form of Payment; Late Payments.................................................... 25
ARTICLE 7 RECORDS AND AUDIT RIGHTS........................................................... 26
7.1 Medeva Records and TGC Audit Rights............................................... 26
7.2 TGC Records and Medeva Audit Rights............................................... 27
ARTICLE 8 MASTER AGREEMENT................................................................... 28
8.1 Incorporation by Reference........................................................ 28
</TABLE>
List of Schedules and Exhibits
Schedule 2.2.1 Transfer Price of Bulk Licensed Product
Exhibit A Contract Manufacturer Letter
ii
<PAGE>
SUPPLY AGREEMENT
THIS SUPPLY AGREEMENT (the "Supply Agreement") is made effective as of the
23rd day of November 1998 (the "Effective Date") by and between TARGETED
GENETICS CORPORATION, a corporation organized under the laws of the State of
Washington, United States of America, having offices at 1100 Olive Way, Suite
100, Seattle, Washington 98101, United States of America, ("TGC") and MEDEVA
PHARMACEUTICALS, INC., a corporation organized under the laws of the State of
Delaware, United States of America, having offices at 755 Jefferson Road,
Rochester, New York 14623, United States of America, ("Medeva") an Affiliate of
MEDEVA PLC, a public limited liability company organized under the laws of the
England, having offices at 10 St. James's Street, London, SW1A 1EF, England
("Medeva PLC"). TGC and Medeva are sometimes referred to herein individually as
a "Party" and collectively as the "Parties."
RECITALS
1. TGC has entered into the following four license agreements
(collectively, the "Third Party Agreements") under which it acquired certain
rights relating to cystic fibrosis gene therapy, including (a) a non-exclusive
license agreement, dated March 28, 1994, with the Regents of the University of
Michigan and HSC Research and Development Limited Partnership (the "U.
Michigan/HSC Agreement"), (b) a non-exclusive license agreement, dated June 23,
1993, with certain agencies of the United States Public Health Service within
the Department of Health and Human Services (the "NIH/CDC L-232-92 Agreement"),
(c) an exclusive license agreement, dated March 8, 1994, with certain agencies
of the United States Public Health Service within the Department of Health and
Human Services (the "NIH/CDC L-059-93 Agreement"), and (d) an exclusive sub-
license agreement, dated July 23, 1996, with Alkermes, Inc., an exclusive
licensee of
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the Children's Hospital Research Foundation/Children's Hospital, Inc. (the
"Alkermes Agreement").
2. TGC owns or, pursuant to the Third Party Agreements, is a licensee of
certain patents, patent applications and valuable technology and know-how
relating inter alia to cystic fibrosis gene therapy and the treatment of cystic
-----
fibrosis using an adeno-associated viral ("AAV") vector to deliver a gene
encoding a cystic fibrosis transmembrane regulator ("CFTR") protein.
3. Medeva has valuable intellectual property and technology relating to
delivery of pharmaceutical products by inhalation and other means and has
experience with the clinical development and marketing of such products.
4. The Parties wish to collaborate in the further development and
commercialization of an AAV-CFTR gene therapy product for the treatment of
cystic fibrosis.
5. Concurrently herewith, the Parties are entering into a certain License
and Collaboration Agreement (the "LCA"), pursuant to which the Parties will
collaborate to develop such a gene therapy product, and possibly other gene
therapy products for the treatment of cystic fibrosis, on terms and conditions
set forth more fully therein, a certain Master Agreement (the "Master
Agreement"), pursuant to which the Parties' intent is set forth to organize a
new corporate structure and to provide contractual arrangements to protect the
interests of each of the Parties and, in addition, which contains provisions
which are intended by the Parties to be common to, and to apply to and govern
the Parties, under this Supply Agreement and the LCA, as set forth more fully
therein, a certain Common Stock Purchase Agreement, pursuant to which Medeva
will purchase from TGC shares of common stock of TGC as set forth more fully
therein,
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and a Credit Agreement, pursuant to which Medeva will extend TGC credit for the
purpose of constructing a manufacturing facility, as set forth more fully
therein.
In consideration of the premises and of the mutual covenants and
obligations set forth herein, the Parties agree as set out below.
ARTICLE 1
DEFINITIONS
1.1 INCORPORATION BY REFERENCE. Article 1 (Definitions) of the Master Agreement
is hereby incorporated by reference. All capitalized terms not otherwise defined
in this Supply Agreement shall have the meanings set forth in Article 1 of the
Master Agreement.
ARTICLE 2
PRODUCT SUPPLY
2.1 CLINICAL SUPPLY.
2.1.1 Subject to the terms and conditions of this Section 2.1, and except
as otherwise provided in Section 3.4, TGC or a Contract Manufacturer of TGC
shall manufacture all Bulk Licensed Product for use in the manufacture of
Licensed Products required to conduct all clinical trials pursuant to the
Development Plan. In addition, TGC or a Contract Manufacturer of TGC shall
manufacture all Licensed Products required to conduct clinical trials for which
TGC is responsible pursuant to Section 3.2.1(b) or Section 3.2.1(c) of the LCA.
2.1.2 TGC agrees to supply to Medeva, and Medeva agrees to purchase from
TGC, Medeva's total requirements of Bulk Licensed Product for use in the
manufacture of Licensed Products for use in clinical trials to be conducted by
Medeva pursuant to the Development Plan. The price for Bulk Licensed Product to
be paid by Medeva shall be equal to Manufacturing Cost.
3
<PAGE>
2.1.3 The Steering Committee shall determine the requirements for Bulk
Licensed Product for each year during the Development Period required to conduct
and complete clinical trials pursuant to the Development Plan. The Steering
Committee shall deliver to TGC a written forecast of the quantities of Bulk
Licensed Product required for the manufacture of Licensed Products to be used at
each of the anticipated clinical trial stages of the Development Plan, together
with a schedule for delivery of such quantities. It is anticipated that such
forecast and delivery schedule will require multiple shipments of Bulk Licensed
Product. If necessary, the Steering Committee shall deliver a revised forecast
and delivery schedule to TGC sufficiently in advance of the first date which a
new or revised quantity of Bulk Licensed Product is required so as to enable TGC
to satisfy its obligation under this Section 2.1.3 but in no event later than
nine (9) months, or such shorter time as may be agreed upon by the Parties,
before any requested delivery date for new or revised quantities of Bulk
Licensed Product.
2.1.4 TGC shall use its best efforts to provide Bulk Licensed Product
corresponding to the quantities and delivery dates set forth in the forecast and
delivery schedule delivered to TGC pursuant to Section 2.1.3. In the event that
the Steering Committee, at any time within nine (9) months before a requested
delivery date determines that the quantity of Bulk Licensed Product
corresponding to a particular shipment set forth in such forecast is not
adequate to satisfy requirements, the Steering Committee shall notify TGC and
shall provide a revised forecast. TGC shall use its Reasonable Commercial
Efforts to provide Bulk Licensed Product in excess of the quantity last forecast
for such shipment more than nine (9) months before the requested delivery dates
but, notwithstanding anything to the contrary herein, TGC shall have no
obligation to provide such additional Bulk Licensed Product. TGC shall provide
prompt written notice to Medeva in the event of any anticipated delays in the
scheduled delivery date and shall cooperate with Medeva to
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<PAGE>
reschedule delivery at the earliest possible date so as to minimize the impact
on the conduct and completion of clinical trials pursuant to the Development
Plan.
2.1.5 Delivery by TGC of Bulk Licensed Product to Medeva shall be made CIP
(Incoterms 1990) at Medeva's facility in Rochester, New York, or such other
Medeva facility in the U.S. selected by Medeva.
2.1.6 It is understood that each Party may, for convenience, use its own
standard preprinted forms of invoice, purchase order, acknowledgement or
acceptance in the performance of its obligations hereunder; provided that any
terms, conditions or provisions in such pre-printed forms which are inconsistent
with or which modify or supplement this Supply Agreement shall be null and void.
2.2 COMMERCIAL SUPPLY.
2.2.1 Subject to the terms and conditions of this Section 2.2, and except
as otherwise provided in Section 3.4, TGC shall manufacture Bulk Licensed
Product and supply such Bulk Licensed Product solely to Medeva, and Medeva
agrees to purchase from TGC, Medeva's total requirements of Bulk Licensed
Product for use in the manufacture of Licensed Products for marketing and
commercialization in the Field. The price for Bulk Licensed Product to be paid
by Medeva (the "Transfer Price") shall be determined as set forth in Schedule
--------
2.2.1.
- -----
2.2.2 At least nine (9) months prior to the first delivery to Medeva of Bulk
Licensed Product for commercial sales is due to occur (the "First Commercial
Quarter"), Medeva shall determine its requirements for Bulk Licensed Product and
shall deliver to TGC a rolling twelve (12) month forecast (the "Commercial
Forecast") of such requirements. The Commercial Forecast shall cover the four
(4) succeeding calendar quarters commencing with and including
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<PAGE>
the First Commercial Quarter. After delivery of the initial Commercial Forecast,
the Commercial Forecast shall be updated on a calendar quarterly basis by adding
a calendar quarter to the previous Commercial Forecast. The quantities of Bulk
Licensed Product for the first calendar quarter of each Commercial Forecast
shall be firm. The quantities of Bulk Licensed Product for the remaining three
(3) calendar quarters in each Commercial Forecast shall be non-binding estimates
for planning purposes only. From time-to-time after the Effective Date, the
Parties shall consider the timing of the delivery of Commercial Forecasts by
Medeva to TGC and, if appropriate in light of market demand, manufacturing
capacity, inventory levels, and other pertinent factors, negotiate in good faith
a revised time schedule for delivery of Commercial Forecasts. Medeva shall
submit to TGC a firm purchase order (a "Commercial Purchase Order") for the
purchase of all Bulk Licensed Product at least ninety (90) days prior to the
specified delivery date. Each Commercial Purchase Order shall specify the
quantity or, if more than one shipment is requested, quantities of Bulk Licensed
Product ordered, and the requested delivery date or dates. Medeva shall not
order, for any particular calendar quarter, less Bulk Licensed Product than the
quantity of Bulk Licensed Product which was set forth in its firm Commercial
Forecast for such calendar quarter.
2.2.3 TGC shall accept all Commercial Purchase Orders for a particular
calendar quarter, provided the amount of Bulk Licensed Product ordered does not
exceed the amount of the firm Commercial Forecast for such calendar quarter plus
fifteen percent (15%). TGC shall use its Reasonable Commercial Efforts to
fulfill the amount by which a Commercial Purchase Order exceeds a firm
Commercial Forecast by more than 15% of such Commercial Forecast, but TGC shall
have no obligation to do so beyond use of Reasonable Commercial Efforts. All
Commercial Purchase Orders accepted by TGC shall not thereafter be cancelable by
either Party. TGC shall
6
<PAGE>
use best efforts to meet the delivery date specified in the Commercial Purchase
Order. TGC shall provide prompt written notice to Medeva in the event of any
anticipated delays in the scheduled delivery date and shall cooperate with
Medeva to reschedule delivery at the earliest possible date so as to minimize
the impact on Medeva.
2.2.4 Delivery by TGC of Bulk Licensed Product to Medeva shall be made CIP
(Incoterms 1990) at Medeva's facility in Rochester, New York, or such other
Medeva facility in the U.S. selected by Medeva in the applicable Commercial
Purchase Order.
2.2.5 TGC and Medeva each shall establish reasonable inventory levels of
Bulk Licensed Product and Licensed Product, respectively, including safety
stock, to meet demand for Licensed Products for marketing and commercialization
in the Field pursuant to this Supply Agreement and taking into account lead
times for manufacture, price and procurement of material inputs, manufacturing
capacity, product stability and expiration dating. Such inventory shall be
utilized on a first-in-first-out (FIFO) basis.
2.2.6 It is understood that each Party may, for convenience, use its own
standard preprinted forms of invoice, purchase order, acknowledgement or
acceptance in the performance of its obligations hereunder; provided that any
terms, conditions or provisions in such pre-printed forms which are inconsistent
with or which modify or supplement this Supply Agreement or the LCA shall be
null and void.
2.3 INVOICES. TGC shall promptly invoice Medeva for all Bulk Licensed Product
shipped. Invoices shall be accompanied by a certificate of analysis for each
invoiced batch or part batch of Bulk Licensed Product. All payments for Bulk
Licensed Product shall be made by Medeva to TGC within thirty (30) days after
the date of Medeva's receipt of TGC's invoice therefor in the
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manner provided in Section 6.4. Notwithstanding the above, in the event that
Medeva disputes the amount, or any portion thereof, of any invoice submitted to
it by TGC, Medeva shall promptly notify TGC of the amount and nature of the
disagreement. The Parties shall promptly attempt to resolve such disagreement in
good faith in the manner provided in Section 2.4 and Medeva shall make payments
with respect to disputed invoices as provided in such section.
2.4 ORDER AND INVOICE NON-CONFORMANCE.
2.4.1 In the event Medeva disputes whether Bulk Licensed Product supplied
by TGC conforms to an order placed for such Bulk Licensed Product pursuant to
Section 2.1 or Section 2.2 with respect to quantity, Medeva shall provide notice
to TGC within fifteen (15) days after receipt thereof. In the case of any non-
conformity which results from delivery of less Bulk Licensed Product than
ordered, TGC shall supply additional Bulk Licensed Product promptly. In such
case, Medeva shall pay for the quantity actually received in accordance with the
provisions of Section 2.3. In the case of any non-conformity which results from
delivery of more Bulk Licensed Product than ordered, Medeva may elect either to
(i) return to TGC, at TGC's expense, any Bulk Licensed Product in excess of the
quantity of Bulk Licensed Product ordered, or (ii) accept any Bulk Licensed
Product in excess of the quantity ordered as against future orders of Bulk
Licensed Product. In such case, Medeva shall pay for the quantity actually
received and accepted in accordance with the provisions of Section 2.3 unless
otherwise agreed. In the event of any non-conformity under this Section 2.4.1,
Medeva shall have no obligation to pay any amount to TGC greater than the amount
corresponding to the lesser of either the quantity of Bulk Licensed Product
ordered, or the quantity of Bulk Licensed Product actually received.
2.4.2 In the event that Medeva disputes any invoice due to the price at
which any quantity of Bulk Licensed Product is invoiced as a result of the
Parties being unable to reach
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agreement with respect to the calculation of Manufacturing Cost or Transfer
Price, Medeva shall be obligated to pay the undisputed amount of such invoice in
full in accordance with the provisions of Section 2.3 pending resolution of the
dispute pursuant to Section 7.2.
2.4.3 In the event that Medeva disputes any invoice due to non-conformance
of the Bulk Licensed Product supplied by TGC with the Specifications, such
dispute shall be resolved in accordance with Section 4.2 of the Agreement.
Pending resolution of such dispute, Medeva shall not be obligated to pay any
such invoice. Upon resolution of any such dispute in favor of TGC, Medeva shall
pay the invoice amount due within ten (10) days of such resolution.
2.5 NON-PAYMENT OF INVOICES. If Medeva fails to pay any amounts when due
pursuant to the provisions of Sections 2.3 and 2.4 above, TGC shall be entitled
to charge Medeva interest on any such past due amounts in accordance with
Section 6.4 for late payments. Additionally, at TGC's sole option and in TGC's
sole discretion, after fifteen (15) days prior written notice to Medeva, TGC
shall have a right to suspend delivery of Bulk Licensed Product until such time
as such past due amounts are paid by Medeva; provided that amounts not paid by
Medeva when due pursuant to this Article 2 exceed the amount past due from TGC
to Medeva pursuant to the Transaction Documents by more than Fifty Thousand U.S.
Dollars ($US50,000).INSURANCE. TGC shall use Reasonable Commercial Efforts to
procure and maintain throughout the term of this Supply Agreement property
insurance (in which Medeva shall be named as an additional insured), with such
types and amounts of coverage as are customary in the industry, covering all
Bulk Licensed Product intended for supply to Medeva pursuant to this Supply
Agreement. All such insurance policies shall require at least thirty (30) days
prior written notice to Medeva concerning cancellation thereof. Upon request,
TGC shall provide Medeva with evidence that such insurance is in effect.
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2.6 RECORDS. TGC shall maintain, and shall cause its Affiliates, Contract
Manufacturers, Outside Contractors and other agents to maintain, all records
necessary to comply with all Applicable Laws relating to the manufacture,
filling, packaging, storage and shipment of Bulk Licensed Product. All such
records shall be maintained for such period as may be required by Applicable
Laws; provided, however, that all records relating to the manufacture, stability
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and quality control of each batch, or part batch, of Bulk Licensed Product shall
be retained until the Parties agree to dispose of such records.
2.7 PRODUCT WARRANTY. TGC represents and warrants that, at the time of
delivery of any Bulk Licensed Product to Medeva, such Bulk Licensed Product (i)
will have been manufactured, filled, packaged, stored and shipped in accordance
with the Specifications, applicable Regulatory Approvals and all Applicable
Laws, (ii) will not be adulterated or misbranded under the FFDCA, or under any
other Applicable Laws, (iii) may be introduced into interstate commerce
consistent with the intended use for such Bulk Licensed Product pursuant to the
FFDCA, and (iv) will have expiration dating as agreed upon by the Parties. TGC
further represents and warrants that it shall obtain and maintain, and cause its
Affiliates, Sublicensees, Contract Manufacturers and Outside Contractors to
obtain and maintain, all necessary licenses, permits or approvals required by
Applicable Laws in connection with the manufacture, filling, package, storage,
and shipment of Bulk Licensed Product, including without limitation permits
related to manufacturing facilities.
ARTICLE 3
PRODUCT MANUFACTURE
3.1 ESTABLISHMENT OF CLINICAL SUPPLY SOURCE. TGC and Medeva intend that TGC
will manufacture Bulk Licensed Product at TGC's facilities in Seattle,
Washington, United States of America, and pursuant to Section 2.1 supply such
Bulk Licensed Products to Medeva. In order
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to satisfy the anticipated demand for clinical quantities of Bulk Licensed
Product (and initial commercial quantities of Bulk Licensed Product, as further
described in Section 3.2 below), TGC's present facilities require modification
and/or expansion to provide a GMP manufacturing facility suitable for production
of Bulk Licensed Product to be used in the manufacture of Licensed Products. In
connection with such build-out, Medeva shall provide TGC a loan in the amount of
Two Million U.S. Dollars ($US2,000,000). Medeva shall deliver such loan amount
in accordance with the terms of a certain Credit Agreement of even date
herewith.
3.2 ESTABLISHMENT OF COMMERCIAL SUPPLY SOURCE.
3.2.1 In the event that the Steering Committee reasonably determines that,
in addition to the facility utilized by TGC to provide Bulk Licensed Product for
clinical trials and initial commercial sales under this Supply Agreement, as
further described in Section 3.1 above, a manufacturing facility will be
required in order to satisfy the long term commercial demand for supply of Bulk
Licensed Product, TGC shall provide for the establishment of such a
manufacturing facility (the "Additional Facility"). Notwithstanding the Steering
Committee's aforementioned role, TGC agrees to plan for the Additional Facility
on a timely basis so as to prevent a shortage of Bulk Licensed Product. TGC
anticipates that the cost of establishing the Additional Facility will be in
excess of Ten Million U.S. Dollars ($10,000,000) (such undetermined amount to be
referred to herein as the "Facility Cost").
3.2.2 TGC agrees to use its Reasonable Commercial Efforts to raise
financing, independent of Medeva, in an amount equal to the Facility Cost. If,
despite TGC's Reasonable Commercial Efforts, TGC fails to raise sufficient
financing equal to the Facility Cost, TGC shall promptly notify Medeva and the
Steering Committee, detailing in its notice its Reasonable Commercial Efforts to
date together with an explanation for its inability to raise such financing.
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TGC shall, in consultation with Medeva, continue to use its Reasonable
Commercial Efforts to search for financing and shall provide the Steering
Committee with bi-weekly written updates of its efforts in this regard.
3.2.3 During the three (3) months following the notice referred to in
Section 3.2.2, the Parties shall discuss the feasibility of using Medeva's
biological manufacturing facilities at Speke as the site for the Additional
Facility. If the Parties determine that the use of such site is feasible,
Medeva shall fund the construction of the Additional Facility, either in whole
or in part, subject to the negotiation of satisfactory terms for such
arrangement. If the proposal to use such site is not feasible, or if the
Parties are not able to agree on terms satisfactory to Medeva, then Medeva shall
use its own Reasonable Commercial Efforts to obtain Third Party financing on
behalf of TGC (on terms and conditions acceptable to TGC). If, despite these
efforts, Medeva is unsuccessful in obtaining or in its sole discretion decides
not to seek Third Party financing on behalf of TGC, and TGC has not obtained
financing through its own Reasonable Commercial Efforts, then Medeva shall
provide TGC with funding of up to Ten Million U.S. Dollars ($US10,000,000) to
finance the cost thereof so long as funding of the balance of the cost of
establishing the Additional Facility has been committed previously. Such
financing shall take the form of, or a debt financing, or another form as may be
mutually agreed by the Parties such as an equity investment in TGC at a premium
to market, in each case on commercially reasonable terms pursuant to a separate
written agreement between the Parties.
3.2.4 Notwithstanding the above, in the event that such manufacturing
facility is established within a Medeva facility and, as a consequence of such
location, a cost saving in establishing the facility results as compared to the
cost of establishing a separate facility, TGC will reduce the Transfer Price for
Bulk Licensed Product for use in the manufacture of Licensed
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Products for commercialization in the Field by [ * ] for a period of time
sufficient to permit Medeva to recover the benefit of such cost saving.
3.2.5 If TGC fails to manufacture and supply Medeva with Bulk Licensed
Product as required under the terms of this Supply Agreement, due only to its
inability, despite its Reasonable Commercial Efforts, to raise financing (which
prevents the establishment of the Additional Facility), such failure to
manufacture and supply Bulk Licensed Product shall not be deemed a breach of
this Supply Agreement.
3.3 SUBCONTRACTING. TGC may contract with one or more Contract Manufacturers
to perform any or all of its obligations under this Supply Agreement, provided
that (i) TGC permits Medeva to review and comment on, and incorporates the
reasonable comments of Medeva in, the drafts of the respective agreements (each
a "Contract Manufacturer Agreement"), (ii) TGC provides Medeva with a true and
accurate copy of each such Contract Manufacturer Agreement, and (iii) TGC uses
Reasonable Commercial Efforts to cause each Contract Manufacturer to agree to
execute and deliver to Medeva a letter in the form of Exhibit A hereto, and to
---------
include the provisions set forth therein in the relevant Contract Manufacturer
Agreement. As to each Contract Manufacturer that executes and delivers such a
letter to Medeva, TGC agrees that Medeva may seek to enforce TGC's remedies
under such Contract Manufacturer Agreement directly against such Contract
Manufacturer without first exhausting its remedies against TGC if the Contract
Manufacturer breaches such Contract Manufacturer Agreement so as to cause TGC to
become liable to Medeva for damages due to TGC's inability to supply Bulk
Licensed Product in accordance with the terms of this Supply Agreement;
provided, however, that if Medeva shall seek to exercise such remedies, TGC
- -------- -------
shall remain primarily liable and obligated to Medeva
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/*/ Confidential Treatment Requested.
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under all provisions of this Supply Agreement. Further, TGC agrees to use its
Reasonable Commercial Efforts to include in each Contract Manufacturer Agreement
the following provisions: (a) a prohibition against sublicensing by such
Contract Manufacturer of Patent Rights or Licensed Know-How licensed to such
Contract Manufacturer by TGC, (b) a prohibition against the sale by such
Contract Manufacturer of Bulk Licensed Product to any Third Party; (c) a
prohibition, approved by Medeva, against manufacturing, having manufactured,
supplying, using or selling any product which generates functional CFTR protein
and which is derived from or embodies, in whole or in part, any intellectual
property either Controlled by TGC or licensed to TGC pursuant to the Third Party
Agreements; and (d) a right for TGC to terminate such Contract Manufacturer
Agreement in the event of a breach of the terms set forth in either of (a), (b)
or (c) above.
3.4 ALTERNATE MANUFACTURING SOURCE.
3.4.1 If TGC is unable to manufacture or supply Bulk Licensed Product for
any reason whatsoever including, for example, because a Government Authority
enjoins such manufacture at TGC's facilities, Medeva shall have the right to
manufacture such Bulk Licensed Products for TGC in order to attempt to fulfill
TGC's manufacturing and supply obligations under this Supply Agreement
thereafter through the remaining term of this Supply Agreement. Such right,
however, shall be exercisable only if (i) TGC's inability to manufacture or
supply Bulk Licensed Product could reasonably be expected to result in a period
of time of at least three (3) months during which no Licensed Product would be
available to Medeva for commercial sale, (ii) Medeva provides reasonable
evidence of its ability to start production of Bulk Licensed Product more
rapidly than TGC could restart production of Bulk Licensed Product, and (iii)
TGC's
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inability to manufacture or supply Bulk Licensed Product did not result, wholly
or in part, from a breach by Medeva of its obligations hereunder.
3.4.2 If, at any time, Medeva manufactures Bulk Licensed Product on behalf
of TGC pursuant to Section 3.4.1, Medeva shall sell such Bulk Licensed Product
to TGC at a transfer price equal to Medeva's Manufacturing Cost plus [ * ].
Pursuant to the terms of this Supply Agreement TGC shall then sell such Bulk
Licensed Product only to Medeva. Medeva shall at all times use its Reasonable
Commercial Efforts to keep its Manufacturing Costs as low as possible.
3.4.3 TGC shall provide Medeva with all reasonable assistance in setting up
and overseeing such alternate manufacturing facility including the transfer of
cell lines and viral stocks, and copies of all written or other tangible forms
of recorded Know-How Controlled by TGC or manufacturing processes. Additionally,
to expedite the creation of such a facility, TGC shall keep a second source of
critical AAV-CFTR raw materials, including in particular cell lines and viral
stocks, at Medeva's Speke facility.
3.4.4 If, at any time subsequent to Medeva's exercise of its rights under
Section 3.4.1, Medeva's demand for Bulk Licensed Product exceeds the amount that
can be supplied from Medeva's manufacturing facility, TGC will have the right to
manufacture Bulk Licensed Product in TGC's facility in order to meet such excess
demand.
3.4.5 Any delay occasioned by the transfer of manufacturing hereunder shall
be added to the relevant deadlines in Section 4.2 of the LCA.
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/*/ Confidential Treatment Requested.
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ARTICLE 4
QUALITY CONTROL
4.1 PRODUCT SPECIFICATIONS AMENDMENTS. The Parties will cooperate to amend or
supplement the Specifications in order to incorporate Improvements and New
Products approved in accordance with Section 2.4 of the LCA, or for any other
reasonable business purpose, subject to the grant of any Regulatory Approvals,
including without limitation approvals from FDA, required by Applicable Laws in
connection with any such changes. As contemplated by such provisions any and
all such amendments or supplements shall require the prior written consent of
each of the Parties, such consent not to be unreasonably withheld or delayed.
4.2 PRODUCT NON-CONFORMANCE.
4.2.1 If Medeva determines that any shipment of Bulk Licensed Product from
TGC does not conform to the warranty provided in Section 2.8 above, Medeva shall
give TGC notice thereof (including a sample from such shipment and copies of the
results of any testing supporting Medeva's determination) within fifteen (15)
days after receipt thereof, in the case of non-conformities that may be
ascertained by the exercise of reasonable diligence (which shall not include
laboratory testing or other chemical analysis), and within fifteen (15) days
after discovery thereof, in the case of other non-conformities (including,
without limitation, non-conformities relating to stability). Notwithstanding
anything to the contrary, except as provided in Section 2.4, the sole criteria
for a determination that any shipment of Bulk Licensed Product is non-conforming
is failure to satisfy the warranty for such Bulk Licensed Product provided in
Section 2.8. Medeva may elect in its discretion to conduct routine laboratory
testing and other chemical analysis of shipments of Bulk Licensed Product. If
TGC confirms such non-conformity,
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it shall promptly so notify Medeva. If TGC does not confirm such non-conformity,
it shall promptly so notify Medeva, and the Parties shall promptly submit the
disputed shipment for testing to an independent testing laboratory or other
independent Third Party expert that is mutually acceptable to the Parties. The
findings of the testing laboratory or Third Party expert shall be binding on the
Parties. The expenses of such testing or other investigation shall be borne by
TGC if the non-conformity is confirmed, and otherwise by Medeva.
4.2.2 If any Bulk Licensed Product delivered by TGC hereunder does not
conform to the warranty provided in Section 2.8 above for any reason other than
the willful or negligent acts or omissions of Medeva or its customers or agents
which occur after the date of delivery thereof by TGC, TGC shall credit Medeva
with the costs incurred by Medeva with respect to such non-conforming Bulk
Licensed Product, which costs shall be deemed equal to the sum of any amounts
paid on account of such Bulk Licensed Product pursuant to Section 2.1.2 or
Section 2.2.1, as applicable, any and all transportation and storage charges
incurred by Medeva in connection with such Bulk Licensed Product, any and all
costs incurred by Medeva in manufacture of Licensed Products from such Bulk
Licensed Product, and any and all transportation and storage charges incurred by
Medeva in connection with such Licensed Products, and any and all contractual
penalties paid by Medeva to Medeva's customers as a direct result of Medeva's
failure to deliver Licensed Products in a timely manner but only to the extent
that such penalties are not deducted from amounts billed or otherwise invoiced
on sales of Licensed Products in connection with the calculation of Net Sales.
In addition, at Medeva's option, (i) TGC shall be relieved of any obligation to
deliver any Bulk Licensed Product in replacement of such non-conforming Bulk
Licensed Product, or (ii) TGC shall use best efforts to replace the non-
conforming Bulk Licensed Product with substitute conforming Bulk Licensed
Product immediately after TGC's receipt of Medeva's notice of election of option
(ii) of this
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Section 4.2.2 or, if available inventory levels are not adequate to permit
immediate replacement, as much as possible and the balance within ninety (90)
days after the date of receipt by TGC of such Medeva notice, in which case
Medeva shall pay to TGC any unpaid amounts in respect of the replacement Bulk
Licensed Product in accordance with Section 2.1.6 or Section 2.2.5, as
applicable, following delivery of such replacement Bulk Licensed Product.
4.3 MANUFACTURING PROCESS. If any process event occurs during the
manufacturing of any batch or part batch of Bulk Licensed Product (or Licensed
Product manufactured by TGC for use by TGC in clinical trials), which event is
likely materially to affect the safety, efficacy or regulatory status of such
Bulk Licensed Product (or such Licensed Product), then TGC shall notify Medeva
as soon as reasonably possible. Medeva and TGC shall consult with each other as
to the disposition of all affected batches or part batches of such Bulk Licensed
Product (or such Licensed Product). TGC agrees to report to Medeva, on an
annual basis, any atypical process events that are unlikely materially to affect
the safety, efficacy or regulatory status of the Bulk Licensed Product (or
Licensed Product manufactured by TGC for use by TGC in clinical trials).
Further, on an annual basis and to the extent of its knowledge, TGC agrees to
provide Medeva with notice of any out of process steps which occur in the
manufacture of Bulk Licensed Product (or Licensed Product manufactured by TGC
for use by TGC in clinical trials). No Bulk Licensed Product may be reworked
unless the rework procedure is in conformity with the applicable Regulatory
Approval or the other applicable guidelines of the Government Authority in the
country where the Licensed Product is being sold, except with the prior written
consent of Medeva, which consent may not be unreasonably withheld.
4.4 INSPECTION. TGC shall permit Medeva representatives to enter TGC's
facilities, and shall use Reasonable Commercial Efforts to cause its Contract
Manufacturers to do the same with respect
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to their facilities, upon reasonable prior notice and at reasonable intervals,
during normal business hours for the purpose of making quality assurance audits
of the facilities and of the procedures and processes used by TGC and such
Contract Manufacturers in storing, manufacturing and shipping Bulk Licensed
Product (or Licensed Product manufactured on behalf of TGC for use by TGC in
clinical trials).
4.5 SAFETY PROCEDURES. TGC shall maintain and enforce health and safety
procedures for the handling and manufacture of Bulk Licensed Product that comply
in all respects with all Applicable Laws.
4.6 GOVERNMENT INSPECTION. TGC agrees to advise Medeva by telephone and
facsimile immediately of any proposed or announced visit or inspection, and as
soon as possible but in any case within twenty-four (24) hours (or, in the case
of a Contract Manufacturer's, Outside Contractor's or other Third Party's
facility, within twenty-four (24) hours after receipt by TGC of notice thereof),
of any unannounced visit or inspection, by any Governmental Authority of any
facilities used by TGC or its Contract Manufacturers or Outside Contractors in
the performance of its obligations hereunder, including the processes or
procedures used at such facilities in the manufacture of Bulk Licensed Product
(or Licensed Product manufactured by TGC for use by TGC in clinical trials).
TGC shall provide Medeva with a reasonable description of each such visit or
inspection promptly (but in no event later than five (5) calendar days)
thereafter, and with copies of any letters, reports or other documents
(including 483's) issued by any such authorities that relate to the Bulk
Licensed Product, Licensed Product, or such facilities, processes or procedures.
Medeva may review TGC's responses to any such reports and communications, and if
practicable, and, insofar as timely received, Medeva's reasonable views and
requests shall be taken into account prior to submission of such reports and
communications
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to the relevant Governmental Authority. TGC shall also provide Medeva with the
notice, information, documentation, and opportunity to comment provided for
above with respect to Contract Manufacturers or Outside Contractors.
ARTICLE 5
ADVERSE EVENTS; RECALL
5.1 ADVERSE EXPERIENCE REPORTING. Each Party shall notify, and shall cause its
Affiliates and Sublicensees and, with respect to TGC, its Contract Manufacturers
or Outside Contractors to notify, the other Party promptly upon receipt of (i)
any information concerning any potentially serious or unexpected side effect,
injury, toxicity or sensitivity reaction or any unexpected incidence or other
adverse experience (an "Adverse Experience") and the severity thereof associated
with the clinical uses, studies, investigations, tests and marketing of the
Licensed Products, whether or not determined to be attributable to the Bulk
Licensed Product or Licensed Product, (ii) any information regarding any pending
or threatened action which may affect the safety or efficacy claims of the
Licensed Products or the continued marketing of the Licensed Products in any
nation or jurisdiction, (iii) any material communications with or notice from a
Government Authority indicating that it intends to visit or inspect a Party's
facilities, or the facilities of an Affiliate or a Sublicensee of such Party
and, with respect to TGC, a Contract Manufacturer or Outside Contractor, for a
purpose relevant to the development, manufacture or marketing of the Licensed
Products. Without limiting the foregoing, TGC shall and shall use Reasonable
Commercial Efforts to require each Affiliate, Sublicensee, Contract Manufacturer
and Outside Contractor to notify Medeva's responsible drug safety department by
telephone and facsimile within twenty-four (24) hours after TGC first becomes
aware of any Adverse Experience that gives cause for concern or is unexpected or
that is fatal, life-threatening (as it occurred),
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permanently disabling, requires (or prolongs) inpatient hospitalization,
represents a significant hazard, or is a cancer or a congenital anomaly or
represents an overdose, or any other circumstance that might necessitate a
recall, expedited notification of FDA or any other relevant Government
Authorities or a significant change in the label of the Licensed Product,
including without limitation any deviation from the specified environmental
conditions for shipping or storage of the Licensed Product. To the extent that
Medeva becomes aware of any Adverse Experience that appears to be related to the
manufacture of Bulk Licensed Product, Medeva shall provide notification to TGC
within forty-eight (48) hours after Medeva becomes aware of such Adverse
Experience. Each party shall make such reports as are necessary to comply with
laws and regulations applicable to it, at its sole expense. Further, in the
event a Party (or its Affiliates or Sublicensees) receives a communication or
directive from a Government Authority commencing or threatening seizure of Bulk
Licensed Products or Licensed Products, or other removal from the market of Bulk
Licensed Products or Licensed Products, such Party shall transmit such
information to the other Party within twenty-four (24) hours of receipt.
5.2 NOTIFICATION AND RECALL. If any Governmental Authority issues or requests
a recall or takes similar action in connection with Bulk Licensed Product or a
Licensed Product, or if either Party determines that an event, incident or
circumstance has occurred which may result in the need for a recall or market
withdrawal, the Party notified of or wishing to call such recall or similar
action shall, within twenty four (24) hours, advise the other Party thereof by
telephone or facsimile, after which the Parties shall promptly discuss and work
together to effect an appropriate course of action; provided, however, that
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either Party may initiate a recall or market withdrawal thereafter if it deems
such action necessary or appropriate. Notification to FDA (or such other
applicable Government Authority with respect to countries other than the United
States) and
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compliance with Applicable Laws in conducting such recall shall be the
responsibility of Medeva.
5.3 RECALL EXPENSE. A Party shall bear the full expense of both Parties
incurred in any recall resulting from breach of its respective warranties or
obligations hereunder. Such expenses of recall shall include, without
limitation, the expenses of notification and destruction or return of the
recalled Licensed Product and the sum paid by a Third Party for the recalled
Licensed Product. Without limitation of the foregoing, if the failure to meet
applicable legal requirements is caused by the act or omission of TGC in
manufacture and sale of Bulk Licensed Product to Medeva, TGC shall further
reimburse Medeva for (i) any amounts paid to TGC by Medeva in purchase of such
Bulk Licensed Product and in manufacture of Licensed Products from such Bulk
Licensed Products that are recalled or that cannot be shipped by Medeva due to
the condition of Bulk Licensed Product requiring the recall, and (ii) all
liabilities incurred by Medeva by virtue of being unable to meet its supply
obligations to its customers because Licensed Products could not be timely
shipped by Medeva due to the condition of Bulk Licensed Product requiring
recall. In the event, however, that a recall is partially caused by TGC's
actions or omissions and partially caused by Medeva's actions or omissions, then
each Party shall be responsible for its proportionate share of the recall
expenses based on its proportionate share of causation. In the event that a
recall is, or is partially, the result of an inherent defect which is not the
direct and proximate cause of either Party, then provided the inherently
defective Bulk Licensed Product or Licensed Product has otherwise been
manufactured, filled, packaged, stored and shipped in accordance with the
Specifications, Applicable Laws and applicable Regulatory Approvals, the parties
shall attribute a reasonable percentage of the recall expenses to the
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inherent defect (such amount, the "Inherent Defect Costs"). Medeva shall be
responsible for [ * ] of the Inherent Defect Costs and TGC shall be responsible
for [ * ] of the Inherent Defect Costs.
ARTICLE 6
ADDITIONAL COMPENSATION; PAYMENT
6.1 THIRD PARTY AGREEMENTS. Medeva shall reimburse to TGC or, at TGC's election,
pay the royalties due after the Effective Date by TGC to its licensors pursuant
to the Third Party Agreements on sales of Bulk Licensed Products under the
following sections of the respective Third Party Agreements: (i) with respect to
the U. Michigan/HSC Agreement, Sections 4.2, 4.3 and 4.4 thereof, net of any
credits permitted under Section 4.4 thereof or any deductions permitted under
Section 4.5 thereof to the extent Medeva pays the Third Party royalties which
give rise to TGC's right to take the deduction permitted by such Section 4.5;
(ii) with respect to the NIH/CDC L-232-92 Agreement, Sections 5.02 (as amended),
5.03, 5.04 and 5.05 thereof, net of any credits permitted pursuant to Section
5.02 thereof and any credits which may be available under Section 5.09 (new
paragraph) thereof to the extent that Medeva pays any patent expenses payable by
TGC under Section 5.08 (new paragraph) thereof; (iii) with respect to the
NIH/CDC L-059-93 Agreement, Sections 6.02, 6.03, 6.05 (as revised) and 6.06
thereof, net of any credits permitted pursuant to Section 6.02 thereof and any
credits which may be available under Section 6.08 or Section 7.01 (revised)
thereof to the extent that Medeva pays any expenses payable by TGC under such
sections; and (iv) with respect to the Alkermes Agreement, Sections 3.1 and 3.3
thereof, but net of any reductions permitted pursuant to Section 3.2 thereof.
All such reimbursements or such payments shall be paid by Medeva within forty-
five (45) days
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/*/ Confidential Treatment Requested.
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after written notice thereof by TGC to Medeva. Medeva shall be entitled to
deduct any royalty payments actually paid by Medeva pursuant to this Section 6.1
from amounts billed or invoiced on sales of Licensed Products in connection with
the calculation of Net Sales. No royalties shall be paid in advance of the
corresponding due dates under the applicable Third Party Agreement.
6.2 SALES BONUS. For each calendar year, beginning with the calendar year in
which the First Commercial Sale occurs, Medeva shall pay to TGC an annual
sales bonus on Net Sales in accordance with the following scale:
(a) [ * ] of Net Sales for such calendar year; provided that Net
Sales Per Annual Dose for such calendar year equals at least [ * ] but is
less than [ * ];
(b) [ * ] of Net Sales for such calendar year; provided that Net Sales
Per Annual Dose for such calendar year equals at least [ * ] but is less
than [ * ];
(c) [ * ] of Net Sales; provided that Net Sales for such calendar year
Per Annual Dose for such calendar year equals at least [ * ] but is less
than [ * ];
(d) [ * ] of Net Sales for such calendar year; provided that Net Sales
Per Annual Dose for such calendar year equals at least [ * ] but is less
than [ * ];
(e) [ * ] of Net Sales for such calendar year; provided that Net Sales
Per Annual Dose for such calendar year equals at least [ * ] but is less
than [ * ];
(f) [ * ] of Net Sales for such calendar year; provided that Net Sales
Per Annual Dose for such calendar year equals at least [ * ] but is less
than [ * ]; and
- ------------------------------------
/*/ Confidential Treatment Requested.
24
<PAGE>
(g) [ * ] of Net Sales for such calendar year; provided that Net
Sales Per Annual Dose for such calendar year equals at least [ * ].
6.3 REPORTS AND PAYMENTS. Within thirty (30) days after the end of each
calendar quarter during the term of this Supply Agreement, beginning with the
calendar quarter in which the First Commercial Sale occurs, Medeva shall deliver
to TGC a written report setting forth (i) Net Sales for such calendar quarter,
together with all information necessary in order to determine such Net Sales,
(ii) the Net Sales Per Annual Dose for such calendar quarter, together with all
information necessary in order to determine such Net Sales Per Annual Dose, and
(iii) if such calendar quarter is the last calendar quarter of a calendar year,
the sales bonus payment due and payable to TGC pursuant to Section 6.2 for such
calendar year. Medeva shall deliver full payment of sales bonus payments due
and payable to TGC pursuant to Section 6.2 for the calendar year covered by a
report under this Section 6.3 at the time of delivery of such report in the
manner provided in Section 6.4.
6.4 FORM OF PAYMENT; LATE PAYMENTS. Each Party shall make all payments due the
other Party under this Supply Agreement in U.S. Dollars by wire transfer of
immediately available funds to such account notified by the receiving Party from
time to time to the other Party in writing. If any sum payable to a Party under
this Supply Agreement shall not have been paid on or before the applicable due
date, or having been paid at the other Party's request is found to be an
overpayment pursuant to Article 7 below, simple interest shall accrue on the
unpaid (or overpaid) amount at the rate of twelve percent (12%) per annum or, if
less, the maximum rate permitted under applicable law from the date that payment
was due (or received) until the actual date of payment (or reimbursement)
without prejudice to any other claim or remedy; provided, however,
--------
- ----------------------------------------
/*/ Confidential Treatment Requested.
25
<PAGE>
that no interest shall accrue on any portion of an unpaid (or overpaid) amount
which is the subject of a good faith, legitimate dispute. The date of resolution
of any such dispute shall be deemed the date that payment (or reimbursement) is
due.
ARTICLE 7
RECORDS AND AUDIT RIGHTS
7.1 MEDEVA RECORDS AND TGC AUDIT RIGHTS. Medeva shall keep and maintain
complete and accurate records and books of account in sufficient detail and form
so as to enable verification of sales bonus payments due and payable by Medeva
pursuant to Section 6.2 hereof, Net Sales Value (as defined in Schedule 2.2.1)
--------------
used in the determination of Transfer Price in accordance with Schedule 2.2.1,
--------------
and Medeva's Manufacturing Cost in the event that Medeva manufactures Bulk
Licensed Product pursuant to Section 3.4.2. Medeva shall maintain such records
and books of account for a period of not less than three (3) years following the
year to which the records pertain. Medeva shall permit such records and books
of account to be examined at Medeva's premises only by an independent certified
public accountant selected by TGC and acceptable to Medeva, such acceptance not
to be unreasonably withheld, provided that such independent accountant may not
have performed services for either Party at any time within the then last three
(3) years and no more than one such examination may be conducted by or on behalf
of TGC in any calendar year. Each and any such examination shall be conducted
during Medeva's normal business hours and only after ten (10) days' prior
written notice to Medeva. In performing the examination, the independent
certified public accountant shall consult with the Parties as he/she deems
appropriate. Upon completion of the examination, the independent certified
accountant shall report to the Parties only whether amounts paid to TGC were
underpaid or whether amounts paid by TGC were overpaid (provided that such
overpayment was at Medeva's request)
26
<PAGE>
and, if so, the amount of such underpayment or overpayment. In the event of
underpayment by Medeva, Medeva shall promptly pay TGC all amounts underpaid (or
undisputed payments due TGC and not paid), together with interest due on such
underpaid amounts. In the event of overpayment by TGC (provided that such
overpayment was at Medeva's request), Medeva shall promptly reimburse TGC all
amounts overpaid, together with interest due on such overpaid amounts. Such
interest, if applicable, shall be paid in accordance with Section 6.4. The cost
of such examination shall be borne by TGC, unless such examination reveals a
discrepancy of greater than five percent (5%) in Medeva's favor, in which case
Medeva shall bear such cost.
7.2 TGC RECORDS AND MEDEVA AUDIT RIGHTS. TGC shall keep and maintain complete
and accurate records and books of account in sufficient detail and form so as to
enable verification of TGC's Manufacturing Cost, the Transfer Price determined
in accordance with Schedule 2.2.1, royalties due and payable by TGC to TGC's
--------------
licensors pursuant to the Third Party Agreements, and TGC's Net Sales per
Section 4.2 of the LCA. TGC shall maintain such records and books of account
for a period of not less than three (3) years following the year to which the
records pertain. TGC shall permit such records and books of account to be
examined at TGC's premises only by an independent certified public accountant
selected by Medeva and acceptable to TGC, such acceptance not to be unreasonably
withheld, provided that such independent accountant may not have performed
services for either party at any time within the then last three (3) years and
no more than one such examination may be conducted by or on behalf of Medeva in
any calendar year. Each and any such examination shall be conducted during
TGC's normal business hours and only after ten (10) days' prior written notice
to TGC. In performing the examination, the independent certified public
accountant shall consult with the Parties as he/she deems appropriate. Upon
completion of the examination, the independent certified accountant
27
<PAGE>
shall report to the Parties only whether amounts paid by Medeva were overpaid
(provided that such overpayment was at TGC's request) or whether amounts paid to
Medeva were underpaid and, if so, the amount of such overpayment or
underpayment. In the event of overpayment by Medeva (provided that such
overpayment was at TGC's request), TGC shall promptly reimburse Medeva all
amounts overpaid, together with interest due on such overpaid amounts. In the
event of underpayment to Medeva, TGC shall promptly pay Medeva all amounts
underpaid (or undisputed payments due Medeva and not paid), together with
interest due on such underpaid amounts. Such interest, if applicable, shall be
paid in accordance with Section 6.4. The cost of such examination shall be borne
by Medeva, unless such examination reveals a discrepancy of greater than five
percent (5%) in TGC's favor, in which case TGC shall bear such cost.
ARTICLE 8
MASTER AGREEMENT
8.1 INCORPORATION BY REFERENCE. Article 3 (Confidentiality), Article 4
(Representations and Warranties), Article 5 (Term and Termination), Article 6
(Indemnification; Insurance; Limitation of Liability), Article 7 (Governing Law;
Dispute Resolution) and Article 8 ( Miscellaneous) of the Master Agreement are
hereby incorporated by reference. The Parties intend and agree that the
provisions contained in the articles referred to in the previous sentence,
together with the provisions contained in the articles set forth in this Supply
Agreement, describe fully the rights and obligations as between the Parties
under this Agreement, and that such articles, together with the articles set
forth in this Supply Agreement, shall apply to and govern the Parties with
respect to this Supply Agreement.
28
<PAGE>
IN WITNESS WHEREOF, the Parties have executed this Supply Agreement in
duplicate originals by their proper officers as of the date and year first above
written.
<TABLE>
<CAPTION>
TARGETED GENETICS CORPORATION MEDEVA PHARMACEUTICALS, INC.
("TGC") ("MEDEVA")
<S> <C>
By: /s/ H. Stewart Parker By: /s/ William Bogie
------------------------------------- -------------------------------------
Name: H. Stewart Parker Name: William Bogie
------------------------------------ -------------------------------------
Title: President, Chief Executive Officer Title: President
------------------------------------ -------------------------------------
</TABLE>
29
<PAGE>
SCHEDULE 2.2.1
TRANSFER PRICE OF BULK LICENSED PRODUCT
---------------------------------------
1. DETERMINATION OF INITIAL TRANSFER PRICE
---------------------------------------
Prior to the date of delivery of Medeva's first order of Bulk Licensed
Product for use in the manufacture of Licensed Products for commercial sale, the
Parties shall negotiate in good faith to establish an initial transfer price
based upon available information with the intention of approximating the result
of the transfer price calculation described below (the "Initial Transfer
Price"). Medeva shall pay the Initial Transfer Price for its purchases of Bulk
Licensed Product from TGC until such price is changed in accordance with
Paragraph 2 below.
2. CALCULATION OF TRANSFER PRICE
-----------------------------
Within thirty (30) days after the end of the first June 30th or December
31st that is at least six (6) months following the date of the First Commercial
Sale and each subsequent six-month period ending June 30 or December 31 during
the term of this Supply Agreement, Medeva shall deliver to TGC a written report
setting forth Net Sales Value (as defined below) for such period. Such
calculation of Net Sales Value shall be based upon (i) Net Sales of Licensed
Products during such period; (ii) units (e.g. doses) of Licensed Product sold
during such period; and (iii) the quantity of Bulk Licensed Product used to
manufacture such units of Licensed Products sold during such period. TGC shall
calculate Transfer Price (as defined below) based on such Net Sales Value for
such six-month period and shall provide such calculation to Medeva no later than
fifteen (15) days after receipt by TGC of Medeva's written report setting forth
Net Sales Value. The Parties shall thereafter have forty-five (45) days to
review and analyze such calculation, and to mutually agree upon any appropriate
changes to such calculation. Such Transfer Price will thereafter, beginning
October 1 or April 1, as the case may be, be applied to Medeva's purchases of
Bulk Licensed Product from TGC for the ensuing six-month period. The calculation
is as follows:
(A) A transfer price for Bulk Licensed Product supplied by TGC to Medeva
will be calculated as follows for a given quantity of Bulk Licensed Product:
"TRANSFER PRICE" = Base Transfer Price + Dose-Based Adjustment (if any)
(B) A base transfer price will be calculated as follows:
"BASE TRANSFER PRICE" = Net Sales Value x [ * ]%
(C) If, and only for so long as, Approved Dose is greater than Assumed
Dose, and if, and only for so long as, Manufacturing Cost is greater than
[ * ]% of Net Sales Value, then a dose-based adjustment will be calculated as
follows:
- ----------------------------------------
/*/ Confidential Treatment Requested.
<PAGE>
"DOSE-BASED ADJUSTMENT" =
[(Manufacturing Cost / Net Sales Value) - [ * ]] x 50% x Net Sales Value
- ------------------------------------
/*/ Confidential Treatment Requested.
2
<PAGE>
SCHEDULE 2.2.1
TRANSFER PRICE OF BULK LICENSED PRODUCT
---------------------------------------
(continued)
3. RETROACTIVE ADJUSTMENT
----------------------
Beginning with the first calculation of Transfer Price, finalized in
accordance with the preceding Paragraph 2, and continuing thereafter with each
such Transfer Price calculation, TGC shall calculate a retroactive adjustment as
if such Transfer Price had been applied to Medeva's purchases of Bulk Licensed
Product from TGC during the period from which Net Sales Value was derived (the
"Adjustment Period"). However, with regard to the first such calculation of
Transfer Price, such retroactive adjustment will be calculated as if such
Transfer Price had been applied to Medeva's purchases of Bulk Licensed Product
for the period beginning with the first shipment of Bulk Licensed Product to
Medeva for use in the manufacture of Licensed Products for commercial sale and
ending on the last day of the six-month period from which Net Sales Value was
derived for the respective Transfer Price calculation (the "Initial Adjustment
Period"). Each such retroactive adjustment shall be paid by TGC or Medeva, as
the case may be, no later than one hundred twenty (120) days after the end of
the respective Adjustment Period or Initial Adjustment Period.
4. DEFINED TERMS
-------------
For purposes of the above calculations, unless otherwise indicated, defined
terms are consistent with those contained in Article 1 of the Master Agreement.
"NET SALES VALUE" means, for a quantity of Bulk Licensed Product, the Net Sales
of Licensed Product manufactured from such quantity of Bulk Licensed Product.
"APPROVED DOSE" means the quantity of DNase Resistant Particles ("DRP") to be
administered to an individual patient during a one-year period according to the
labeling approved by FDA or the equivalent thereof in countries other than the
U.S.
"ASSUMED DOSE" means [ * ] DRP.
- ----------------------------------------
/*/ Confidential Treatment Requested.
3
<PAGE>
SCHEDULE 2.2.1
TRANSFER PRICE OF BULK LICENSED PRODUCT
---------------------------------------
(continued)
[ * ]
In the event that the Approved Dose set forth in a Regulatory Approval in a
jurisdiction should exceed the Assumed Dose and the Manufacturing Cost of such
Approved Dose is greater than [ * ] of Net Sales Value, but the Approved
Dose set forth in another Regulatory Approval in another jurisdiction equals or
is less than the Assumed Dose, the Parties agree to negotiate in good faith to
determine a weighted average Transfer Price to take into account such a
difference.
- ----------------------------------------
/*/ Confidential Treatment Requested.
4
<PAGE>
EXHIBIT A
CONTRACT MANUFACTURER LETTER
----------------------------
Medeva Pharmaceuticals, Inc.
755 Jefferson Road
Rochester, New York 14623
United States of America
Re: Third Party Manufacturer
Dear Ladies and Gentlemen:
This letter will serve as notice to Medeva BV ("Medeva") that pursuant to
Section 3.3 of the Supply Agreement (the "Supply Agreement") dated
_______________, between Medeva and Targeted Genetics Corporation ("TGC"),
[insert name of third party manufacturer] (the "Contract Manufacturer") has been
engaged as a contractor for TGC in connection with the performance of the
following obligation of TGC under the Supply Agreement:
[insert description of obligation]
A copy of our agreement with TGC is attached hereto (the "Contract Manufacturing
Agreement"). Such Contract Manufacturing Agreement constitutes the entire
agreement between Contract Manufacturer and TGC, is in full force and to our
knowledge neither party is in breach of any of the terms thereof.
Contract Manufacturer hereby acknowledges that, during the term of the Contract
Manufacturing Agreement, it will not manufacture Licensed Product, or any AAV-
CFTR gene therapy product for use in the treatment of cystic fibrosis in humans
for, or sell or distribute such products to, any person or entity other than TGC
or Medeva. Contract Manufacturer further acknowledges that in the event of a
breach of the Contract Manufacturing Agreement by Contract Manufacturer which
causes TGC to breach its obligations to Medeva, Medeva shall have the right to
pursue and seek to enforce TGC's remedies (including equitable remedies) under
the Contract Manufacturing Agreement directly against Contract Manufacturer
without first exhausting its remedies against TGC.
Contract Manufacturer acknowledges that any fees or compensation due it pursuant
to the Contract Manufacturing Agreement shall be payable by TGC only. Contract
Manufacturer represents and warrants to Medeva that it is not an affiliate of
TGC. Contract Manufacturer further acknowledges that Medeva shall not have any
liability to, nor be responsible for the payment of any amounts to, Contract
Manufacturer.
Very truly yours,
[Name of Contract Manufacturer]
By:________________________
Name:
Title:
Address:
Date:
<PAGE>
EXHIBIT 1.4
TARGETED GENETICS CORPORATION
COMMON STOCK PURCHASE AGREEMENT
DATED
AS OF
NOVEMBER 23, 1998
<PAGE>
CONTENTS
<TABLE>
<C> <S> <C>
1. Purchase and Sale of Stock.................................................. 1
1.1 Agreement to Purchase................................................. 1
1.2 Purchase and Sale..................................................... 2
2. Delivery.................................................................... 2
3. Representations and Warranties of the Company............................... 2
3.1 Organization, Good Standing and Qualification,
Due Execution and Validity............................................ 3
3.2 Capitalization........................................................ 3
3.3 Authorization......................................................... 3
3.4 Valid Issuance of Stock............................................... 4
3.5 Governmental Consents................................................. 4
3.6 Litigation............................................................ 4
3.7 Compliance With Other Instruments..................................... 5
3.8 SEC Reports; Financial Statements..................................... 5
3.9 Compliance With Laws.................................................. 5
3.10 Changes.............................................................. 6
4. Representations and Warranties of the Investor and Parent................... 6
4.1 Authorization......................................................... 7
4.2 Exemption from Registration........................................... 7
4.3 Purchase Entirely for Own Account..................................... 7
4.4 Access to Information................................................. 8
4.5 Restricted Securities................................................. 8
4.6 Legends............................................................... 8
5. Conditions of the Investor's/Parent's Obligations at Closing................ 8
5.1 Representations and Warranties........................................ 9
5.2 Performance........................................................... 9
5.3 Exemption............................................................. 9
5.4 Compliance Certificate................................................ 9
5.5 Proceedings and Documents............................................. 9
5.6 Opinion of Company Counsel............................................ 10
5.7 No Injunctions or Restraints.......................................... 10
6. Conditions of the Company's Obligations at Closing.......................... 10
6.1 Representations and Warranties........................................ 10
</TABLE>
-i-
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
6.2 Performance................................................................. 10
6.3 Exemption................................................................... 10
6.4 No Injunctions or Restraints................................................ 10
7. Covenants of the Company.......................................................... 11
7.1 Rule 144 Reporting.......................................................... 11
7.2 Demand Registration......................................................... 11
7.3 Company Registration........................................................ 11
7.4 Information................................................................. 12
7.5 Indemnification............................................................. 12
8. Miscellaneous..................................................................... 12
8.1. Amendments................................................................. 12
8.2. Notice..................................................................... 12
8.3. Counterparts............................................................... 12
8.4 No Waiver................................................................... 13
8.5 Courts of Law............................................................... 13
8.6 Benefit of Agreement........................................................ 13
8.7 Severability................................................................ 13
8.8 Entire Agreement; Governing Law............................................. 14
</TABLE>
-ii-
<PAGE>
COMMON STOCK PURCHASE AGREEMENT
COMMON STOCK PURCHASE AGREEMENT, dated as of the 23rd day of November,
1998, by and among TARGETED GENETICS CORPORATION, a Washington corporation (the
"Company"), MEDEVA PHARMACEUTICALS, INC., a Delaware corporation (the
"Investor"), and MEDEVA PLC, a public limited liability company organized under
the laws of the United Kingdom ("Parent").
RECITAL
A. The Investor is an affiliate of Parent.
B. The Investor desires to purchase from the Company, and the Company
desires to sell to the Investor, shares of the Company's common stock, par value
$.01 per share (the "Common Stock"), upon the terms and subject to the
conditions set forth herein and in connection with the execution of a separate
Master Agreement (the "Master Agreement"), License and Collaboration Agreement
(the "License and Collaboration Agreement"), Supply Agreement and Credit
Agreement between the Company and the Investor or Parent, dated as of even date
herewith (collectively with this Agreement, the "Transaction Documents").
C. Capitalized terms used herein and not otherwise defined shall have the
meanings assigned to them in the Master Agreement.
AGREEMENTS
NOW, THEREFORE, in consideration of the mutual covenants and conditions set
forth herein, the parties hereto agree as follows:
1. PURCHASE AND SALE OF STOCK
1.1 AGREEMENT TO PURCHASE
Upon the terms and subject to the conditions of this Agreement, the Company
shall sell and issue to the Investor, and the Investor shall purchase from the
Company US$3 million of shares of Common Stock (the "Shares"); provided,
however, that if for any reason the Investor fails to purchase the Shares, then
Parent shall purchase the Shares subject to the terms and conditions of this
Agreement and shall assume all of the rights and obligations of the Investor
hereunder.
<PAGE>
1.2 PURCHASE AND SALE
The purchase and sale of the Shares shall occur at two closings. The first
closing (the "First Closing") shall occur on the date of this Agreement, or such
other date as to which the parties agree, and the second closing (the "Second
Closing") shall occur ten (10) Business Days following the Investor's receipt of
the Company's written notice (the "Notice"), or such other date as to which the
parties agree; provided that the Notice is received during the period beginning
six (6) months, and ending eighteen (18) months, from the date of this
Agreement. At the First Closing, the Investor shall purchase 750,000 Shares at
US$2.00 per Share for an aggregate purchase price of US$1,500,000. At the
Second Closing, the Investor shall purchase US$1,500,000 of Shares at a price
per Share equal to one hundred twenty percent (120%) of the average closing
price of the Common Stock on the ten (10) trading days immediately preceding the
date of the Notice (the "Notice Date") and the ten (10) trading days immediately
following the Notice Date. During the period described in the preceding
sentence, the Investor and Parent shall not engage in any activity, directly or
indirectly, that may adversely affect the trading price of the Common Stock.
Accordingly, and without limitation, during such period the Investor and Parent
shall not, directly or indirectly, sell, offer, contract to 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 exerciseable for or any other rights to purchase or acquire Common Stock.
The First Closing and the Second Closing shall be referred to herein
collectively as the "Closings."
2. DELIVERY
At the Closings, subject to the terms and conditions hereof, the Company
shall deliver to the Investor a certificate representing the Shares to be
purchased by the Investor from the Company at such Closing, dated the date of
such Closing and duly registered in the name of the Investor, against payment of
the aggregate purchase price therefor by wire transfer to the account specified
by the Company in writing.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to the Investor as of the date
hereof and as of the date of each Closing as follows:
-2-
<PAGE>
3.1 ORGANIZATION, GOOD STANDING AND QUALIFICATION, DUE EXECUTION AND
VALIDITY
The Company is a corporation organized and validly existing under the laws
of the state of Washington and has all requisite corporate power and authority
to own its properties and carry on its business as currently conducted and as
proposed to be conducted as contemplated by the Transaction Documents. The
Company is duly qualified to transact business and is in good standing as a
foreign corporation in each jurisdiction in which the failure to so qualify
would have a material adverse effect on its financial condition, results of
operations, business or properties (a "Material Adverse Effect"). The Company
has previously provided the Investor with complete and correct copies of its
Restated Articles of Incorporation and its Amended and Restated Bylaws as in
effect on the date of this Agreement. The Company has no subsidiaries nor does
it control, nor is it controlled by or under common control with, any other
person or entity.
3.2 CAPITALIZATION
As of the date of this Agreement, the authorized capital stock of the
Company consists of (a) 6,000,000 shares of preferred stock, par value $.01 per
share, no shares of which are outstanding but 400,000 shares of which are
designated as Series A Participating Cumulative Preferred Stock, issuable upon
exercise of certain preferred stock purchase rights associated with the Common
Stock, and (b) 40,000,000 shares of Common Stock, 28,974,741 shares of which
were issued and outstanding as of September 30, 1998, 4,470,349 shares of which
were subject to warrants outstanding as of September 30, 1998 and 2,564,740
shares of which are reserved for issuance upon the exercise of stock options
granted or to be granted under the Company's 1992 Restated Stock Option Plan or
the Company's Stock Option Plan for Nonemployee Directors. Except as set forth
in this Section 3.2 or in the SEC Documents (as defined herein) and as
contemplated by Section 1 of this Agreement, there are no outstanding options,
warrants, conversion privileges, preemptive rights, or other rights or
agreements to purchase or otherwise acquire or issue any equity securities of
the Company. The Company has no obligation to repurchase or redeem any
outstanding securities.
3.3 AUTHORIZATION
The Company has all requisite power and authority to execute, deliver and
perform its obligations under this Agreement. All corporate action on the part
of the Company, its officers, directors and shareholders necessary for the
authorization, execution and delivery of this Agreement and the transactions
contemplated herein, the performance of all obligations of the Company hereunder
and the authorization, issuance and
-3-
<PAGE>
delivery of the Shares being sold hereunder have been taken or will be taken
prior to the First Closing. This Agreement has been duly executed and delivered
by the Company and constitutes a valid and legally binding obligation of the
Company, enforceable in accordance with its terms, except as (a) such
enforceability may be limited by bankruptcy, insolvency or similar laws
affecting creditors' rights generally and (b) the availability of equitable
remedies may be limited by equitable principles of general applicability.
3.4 VALID ISSUANCE OF STOCK
The Shares, when issued, sold and delivered in accordance with the terms
hereof for the consideration expressed herein, will be duly and validly issued,
fully paid and nonassessable and free of any liens or encumbrances other than
those, if any, created by the Investor, and will be issued in compliance with
all applicable state and federal securities laws. The outstanding shares of
Common Stock are all duly and validly authorized and issued, fully paid and
nonassessable and were issued in compliance with all applicable state and
federal securities laws.
3.5 GOVERNMENTAL CONSENTS
No consent, approval, order or authorization of, or registration,
qualification, designation, declaration or filing with, any Governmental
Authority on the part of the Company is required in connection with the
consummation of the transactions contemplated by this Agreement, except for the
qualification or registration (or taking such action as may be necessary to
secure an exemption from qualification or registration, if available) of the
offer and sale of the Shares under all applicable state securities laws.
3.6 LITIGATION
There is no action, suit, claim, proceeding or investigation pending or, to
the Company's knowledge, threatened against the Company that relates to or
challenges the legality, validity or enforceability of this Agreement or the
Shares or that could either individually or in the aggregate have a Material
Adverse Effect nor has the U.S. Food and Drug Administration taken any action
with respect to the Licensed Products which would prohibit the marketing of the
Licensed Products if developed as contemplated by the License and Collaboration
Agreement. The Company is not a party to or subject to the provisions of any
order, writ, injunction, judgment or decree of any Governmental Authority that
could have a Material Adverse Effect.
-4-
<PAGE>
3.7 COMPLIANCE WITH OTHER INSTRUMENTS
The Company is not in violation of any provision of its Restated Articles
of Incorporation or its Amended and Restated Bylaws or in violation or default
of any provision of any instrument, Applicable Law, judgment, order, writ,
decree or contract to which it is a party or by which it is bound, which
violation or default would adversely affect the legality, validity, or
enforceability of this Agreement or have a Material Adverse Effect. The
execution, delivery and performance of this Agreement and the consummation of
the transactions contemplated hereby will not require any consent under or be in
conflict with or constitute, with or without the passage of time or the giving
of notice or both, either a violation or default under any such provision,
instrument, Applicable Law, judgment, order, writ, decree or contract or give
rise to a right to terminate or accelerate any contract or an event which
results in the creation of any lien, charge or encumbrance upon any of the
Company's assets.
3.8 SEC REPORTS; FINANCIAL STATEMENTS
The Company has furnished the Investor with a true and complete copy of
each report, schedule, registration statement and definitive proxy statement
filed by the Company with the Securities and Exchange Commission (the "SEC")
since December 31, 1997 (the "SEC Documents"), which are all the documents that
the Company has been required to file with the SEC during such period. As of
their respective dates, the SEC Documents complied with the requirements of the
Securities Act of 1933, as amended (the "Securities Act"), or the Securities
Exchange Act of 1934, as amended, as applicable, and the rules and regulations
of the SEC thereunder, and none of the SEC Documents contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading. The financial
statements of the Company included in the SEC Documents are complete in all
material respects and were prepared in accordance with generally accepted
accounting principles applied on a consistent basis during the periods involved
(except as may be indicated in the notes thereto or, in the case of unaudited
financial statements, as permitted by Form 10-Q of the SEC) and fairly present
(subject, in the case of unaudited financial statements, to normal recurring
audit adjustments) the financial position of the Company at the dates thereof
and the results of its operations and changes in financial position for the
periods then ended.
3.9 COMPLIANCE WITH LAWS
The Company has complied, and is in compliance with, all Applicable Laws
and all federal, state, county, local and foreign, decrees and orders, and
possesses all governmental franchises, permits and consents, and has made all
governmental filings
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and declarations, applicable to the operation of its business, to its employees,
or to the real property and the personal property that it owns or leases
(including, without limitation, all such Applicable Laws, decrees and orders
relating to pharmaceutical, antitrust, consumer protection, currency exchange,
environmental protection, equal opportunity, health, occupational safety,
pension, securities and trading-with-the-enemy matters), the failure to comply
with which would, individually or in the aggregate, have a Material Adverse
Effect. The Company has not received any notification of any asserted present or
past unremedied failure by the Company to comply with any of such Applicable
Laws, decrees or orders.
3.10 CHANGES
Since June 30, 1998 there has not been:
(a) any damage, destruction or loss (whether or not covered by
insurance) which has had or is expected to have a Material Adverse Effect;
(b) any material change in the accounting methods or practices
followed by the Company;
(c) any material debt obligation or liability (whether absolute or
contingent) incurred by the Company (whether or not presently outstanding)
except (i) current liabilities incurred, and obligations under agreements
entered into, in the ordinary course of business and (ii) obligations or
liabilities entered into or incurred in connection with the execution of the
Transaction Documents;
(d) any sale, lease, abandonment or other disposition by the Company
of any real property or, other than in the ordinary course of business, of any
equipment or other operating properties or any sale, assignment, transfer,
license or other disposition by the Company of any intellectual property
relevant to the Licensed Products or other intangible asset (except any license
to Investor pursuant to the Transaction Documents); or
(e) any other event or occurrence that has had or is expected to have
a Material Adverse Effect.
4. REPRESENTATIONS AND WARRANTIES OF THE INVESTOR AND PARENT
The Investor and Parent hereby represent and warrant to the Company as
follows:
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4.1 AUTHORIZATION
All acts and conditions necessary for the authorization, execution,
delivery and consummation by the Investor and Parent of this Agreement and the
transactions contemplated hereby have been, or will be prior to the First
Closing, taken, performed and obtained. This Agreement constitutes a valid and
legally binding obligation of the Investor and Parent, enforceable in accordance
with its terms, except as (a) such enforceability may be limited by bankruptcy,
insolvency or similar laws affecting creditors' rights generally and (b) the
availability of equitable remedies may be limited by equitable principles of
general applicability. The Investor and Parent have full power and authority to
execute, deliver and perform their obligations under this Agreement and to own
the Shares. The execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby will not conflict with or
constitute a violation or default under any provision of the charter or bylaws
of either the Investor or Parent, or of any material agreement, indenture or
other instrument to which either the Investor or Parent is a party, or by which
they or their properties or assets are bound, or of any order, judgment or
decree against or binding upon the Investor or Parent.
4.2 EXEMPTION FROM REGISTRATION
The Investor and Parent have been advised that none of the Shares to be
purchased by the Investor or Parent hereunder are being registered under the
Securities Act and the rules and regulations of the SEC promulgated thereunder,
or applicable state securities laws, but are being offered and sold pursuant to
exemptions from such laws, and that the Company's reliance upon such exemptions
is predicated in part on the Investor's and Parent's representations contained
herein.
4.3 PURCHASE ENTIRELY FOR OWN ACCOUNT
The Shares to be received by the Investor or Parent will be acquired for
investment for either the Investor's or Parent's own account, not as a nominee
or agent, and not with a view to the distribution of any part thereof, and
neither the Investor nor Parent has any present intention of selling, granting
any participation in, or otherwise distributing the same in a manner contrary to
the Securities Act or any applicable state securities law. Neither the Investor
nor Parent has any contract, undertaking, agreement or arrangement with any
person to sell, transfer or grant participations to such person or to any third
person with respect to any of the Shares.
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4.4 ACCESS TO INFORMATION
The Investor and Parent have been furnished such information as they have
requested to evaluate an investment in the Shares. The Investor and Parent have
been given the opportunity to ask questions of and receive answers from
representatives of the Company concerning the terms and conditions of the
offering of the Shares and to obtain any additional information, to the extent
reasonably available.
4.5 RESTRICTED SECURITIES
The Investor and Parent realize that none of the Shares to be purchased by
the Investor or Parent hereunder have been registered under the Securities Act
and that all of such Shares are characterized under the Securities Act as
"restricted securities" and therefore cannot be sold or transferred unless
subsequently registered under the Securities Act or an exemption from such
registration is available. In this connection, the Investor and Parent represent
that they are familiar with Rule 144 of the SEC, as presently in effect, and
understand the resale limitations imposed thereby and by the Securities Act.
4.6 LEGENDS
It is understood that the certificates evidencing the Shares may bear
legends in substantially the following form:
The securities evidenced by this certificate have not
been registered under the Securities Act of 1933, as
amended (the "Act"), or applicable state securities law,
and no interest therein may be sold, distributed,
assigned, offered, pledged or otherwise transferred
unless (i) there is an effective registration statement
under the Act and applicable state securities laws
covering any such transaction involving said securities,
(ii) this corporation receives an opinion of legal
counsel for the holder of these securities reasonably
satisfactory to this corporation stating that such
transaction is exempt from registration or (iii) this
corporation otherwise satisfies itself that such
transaction is exempt from registration.
5. CONDITIONS OF THE INVESTOR'S/PARENT'S OBLIGATIONS AT CLOSING
The obligations of the Investor and Parent under Section 1 hereof are
subject to the fulfillment on or before the date of the First Closing or the
Second Closing, as the
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case may be, of each of the following conditions, unless waived in writing by
the Investor and Parent:
5.1 REPRESENTATIONS AND WARRANTIES
The representations and warranties of the Company contained in Section 3
hereof and in the Transaction Documents shall be true on and as of the date of
the First Closing or the Second Closing, as the case may be. The Company shall
have taken all actions on its part to be taken to permit the representations and
warranties of the Investor contained in Section 4.4 hereof to be true on the
date of the First Closing or the Second Closing, as the case may be.
5.2 PERFORMANCE
The Company shall have performed and complied with all agreements,
obligations and conditions contained in this Agreement that are required to be
performed or complied with by it on or before the date of the First Closing or
the Second Closing, as the case may be. The Company shall not be in default of
any of its obligations under the Transaction Documents or any other agreement
entered into with the Investor or any of its affiliates after the date hereof,
and all such agreements shall continue to be valid, binding and in full force
and effect.
5.3 EXEMPTION
The offer and sale of the Shares to the Investor or Parent pursuant to this
Agreement shall be exempt from registration under the Securities Act.
5.4 COMPLIANCE CERTIFICATE
The Chief Executive Officer or the Chief Financial Officer of the Company
shall have delivered to the Investor or Parent, as the case may be, a
certificate stating that the conditions specified in Sections 5.1 and 5.2 hereof
have been fulfilled.
5.5 PROCEEDINGS AND DOCUMENTS
All corporate and other proceedings in connection with the transactions
contemplated at the First Closing and the Second Closing and all documents
incident thereto shall be reasonably satisfactory to the Investor and the
Investor's counsel and the Transaction Documents shall each have been duly
executed and delivered by the Company.
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5.6 OPINION OF COMPANY COUNSEL
The Investor shall have received from Perkins Coie, counsel for the
Company, an opinion, dated as of the date of the First Closing or the Second
Closing, as the case may be, in form and substance reasonably satisfactory to
the Investor.
5.7 NO INJUNCTIONS OR RESTRAINTS
There shall be no temporary restraining order, preliminary or permanent
injunction or other order issued by any court of competent jurisdiction or other
legal restraint or prohibition preventing consummation of the offer, sale and
purchase of the Shares contemplated hereby.
6. CONDITIONS OF THE COMPANY'S OBLIGATIONS AT CLOSING
The obligations of the Company under Section 1 hereof are subject to the
fulfillment on or before the date of the First Closing or the Second Closing, as
the case may be, of each of the following conditions, unless waived in writing
by the Company:
6.1 REPRESENTATIONS AND WARRANTIES
The representations and warranties of the Investor and Parent contained in
Section 4 hereof shall be true on and as of the date of the First Closing.
6.2 PERFORMANCE
The Investor and Parent shall have performed and complied with all
agreements, obligations and conditions contained in this Agreement that are
required to be performed or complied with by them on or before the date of the
First Closing or the Second Closing, as the case may be.
6.3 EXEMPTION
The offer and sale of the Shares to the Investor or to Parent pursuant to
this Agreement shall be exempt from registration under the Securities Act.
6.4 NO INJUNCTIONS OR RESTRAINTS
There shall be no temporary restraining order, preliminary or permanent
injunction or other order issued by any court of competent jurisdiction or other
legal restraint or prohibition preventing consummation of the offer, sale and
purchase of the Shares contemplated hereby.
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7. COVENANTS OF THE COMPANY
7.1 RULE 144 REPORTING
The Company shall use its best efforts to make and keep public information
available, as those terms are understood and defined in Rule 144 under the
Securities Act, such that the condition specified in Rule 144(c) is always met
after the date of the First Closing.
7.2 DEMAND REGISTRATION
In the event the condition specified in Rule 144(c) is not met at any time
after the date of the First Closing, the Investor or Parent may request that all
of the Shares be registered under the Securities Act. Upon the receipt of such
request the Company shall use its Reasonable Commercial Efforts to effect such
registration at the Company's expense as soon as practicable. As used in this
Agreement, "Reasonable Commercial Efforts" shall be determined under the law of
the state of New York, United States of America, and shall mean such good faith
efforts as are consistent with efforts made by businesses of similar size and
resources in a similar circumstance and context to achieve a particular result
in a timely manner, but shall not require a party to take actions that would be
commercially unreasonable to such party in the circumstances.
7.3 COMPANY REGISTRATION
If at any time or from time to time the Company shall determine to register
any of its securities for its own account, other than (a) a registration
relating solely to employee benefit plans or (b) a registration relating solely
to a Rule 145 transaction, the Company will promptly give the Investor and
Parent written notice thereof and include in such registration all Shares held
by the Investor and Parent which cannot for whatever reason be sold by the
Investor or Parent under Rule 144 as specified in a written request by the
Investor or Parent made within twenty (20) days after receipt of such written
notice from the Company. Notwithstanding the foregoing, if the managing
underwriter determines that marketing factors require a limitation of the number
of shares to be underwritten, the managing underwriter may limit or exclude some
or all of the Shares to be included in such registration, such limitation or
exclusion to be made pro rata with all other shareholders' shares also being
registered at such time and on the basis of the number of shares being
registered.
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7.4 INFORMATION
The Company shall furnish to the Investor and Parent a copy of each
document filed with the SEC, and each amendment to the Company's Articles of
Incorporation and Bylaws adopted, after the date of this Agreement. The
covenants set forth in this Section 7.4 shall terminate and be of no further
force or effect upon the disposition by the Investor and Parent of seventy-five
(75%) or more of the Shares.
7.5 INDEMNIFICATION
The Company shall indemnify the Investor and Parent for losses and expenses
resulting from any breach of a covenant or of a representation or warranty under
this Agreement on the date of the First Closing or the Second Closing or in the
event the second or third sentence in Section 3.8 hereof ever prove to be or
have been untrue, provided, however, that under no circumstances shall the
Investor or Parent be entitled to any indemnification in excess of the amount
paid by the Investor or Parent for the Shares.
8. MISCELLANEOUS
8.1. AMENDMENTS
Any term of this Agreement may be amended and the observance of any
obligation hereunder may be waived (either generally or in a particular instance
and either retroactively or prospectively) only with the written consent of the
Company, the Investor and Parent. No failure of any party to exercise and no
delay in exercising any right, power or remedy in connection with this Agreement
will operate as a waiver thereof, nor will any single or partial exercise of any
right preclude any other or further exercise of such right or the exercise of
any other right.
8.2. NOTICE
All notices required or permitted to be given under this Agreement shall be
governed by the terms of Section 8.6 of the Master Agreement.
8.3. COUNTERPARTS
This Agreement may be executed and delivered (including by facsimile
transmission) in one or more counterparts, and by the different parties hereto
in separate counterparts, each of which when executed and delivered shall be
deemed to be an original but all of which taken together shall constitute one
and the same agreement.
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8.4 NO WAIVER
No failure or delay on the part of the Investor or Parent in exercising any
right, power, or privilege hereunder and no course of dealing between the
Company and the Investor or Parent shall operate as a waiver thereof; nor shall
any single or partial exercise of any right, power, or privilege hereunder
preclude any other or further exercise thereof or the exercise of any right,
power, or privilege. The rights and remedies herein expressly provided are
cumulative and not exclusive of any rights or remedies that the Investor or
Parent would otherwise have.
8.5 COURTS OF LAW
The state and federal courts situated in the County of New York, State of
New York, United States of America, shall have sole jurisdiction and venue to
resolve all disputes arising hereunder between the Parties and initiated by the
Company. The state and federal courts situated in King County, State of
Washington, United States of America, shall have sole jurisdiction and venue to
resolve all disputes arising hereunder between the Parties and initiated by the
Investor or Parent. The Parties irrevocably submit to such jurisdiction and
venue, waive any claim to an inconvenient forum posed by such venue, and agree
that process may be served in any manner permitted by such court before which a
dispute is pending.
8.6 BENEFIT OF AGREEMENT
This Agreement is binding upon and inures to the benefit of the Company,
the Investor, Parent and their successors. Notwithstanding the foregoing, the
Company, the Investor and Parent are precluded from assigning any of their
respective rights or delegating any of their respective obligations hereunder or
under any of the other Transaction Documents without the prior written consent
of the other party, except that the Investor and Parent may assign and delegate
their rights and obligations hereunder to an Affiliate so long as the Investor
and Parent remain primarily liable hereunder.
8.7 SEVERABILITY
If any provision of the Transaction Documents is held invalid under any
Applicable Laws, such invalidity shall not affect any other provision of the
Transaction Documents that can be given an effect without the invalid provision,
and, to this end, the provisions hereof are severable.
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8.8 ENTIRE AGREEMENT; GOVERNING LAW
The Transaction Documents and the other documents delivered at the Closings
constitute the full and entire understanding and agreement between the parties
with respect to the subject matter hereof and supersede all prior agreements
with respect to the subject matter hereof. This Agreement shall be governed by
and construed under the laws of the State of New York.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
COMPANY
TARGETED GENETICS CORPORATION
By /s/ H. Stewart Parker
---------------------------------------
Its President, Chief Executive Officer
---------------------------------------
Address: 1100 Olive Way, Suite 100
Seattle, WA 98101
Fax: (206) 623-7064
INVESTOR
MEDEVA PHARMACEUTICALS, INC.
By /s/ William Bogie
---------------------------------------
Its President
---------------------------------------
Address: 755 Jefferson Road
Rochester, NY 14623
Fax: (716) 475-1016
PARENT
MEDEVA PLC
By /s/ G. Watts
---------------------------------------
Its Finance Director
---------------------------------------
Address: 10 St. James's Street
London SW1A 1EF
England
Fax: (44) 171-930-1514
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EXHIBIT 1.5
TARGETED GENETICS CORPORATION
CREDIT AGREEMENT
DATED
AS OF
NOVEMBER 23, 1998
<PAGE>
CONTENTS
<TABLE>
<S> <C>
EXHIBITS........................................................................... iii
1. Definitions................................................................. 1
1.1 Terms Defined......................................................... 1
1.2 Accounting Terms...................................................... 3
1.3 Currency.............................................................. 3
2. The Loan.................................................................... 3
2.1 Loan Commitment....................................................... 3
2.2 Use of Proceeds....................................................... 3
2.3 The Note.............................................................. 3
2.4 Advance of Proceeds................................................... 4
2.5 Interest Rate......................................................... 4
2.6 Repayment............................................................. 4
2.7 Prepayments........................................................... 5
2.8 Issuance of Common Stock.............................................. 5
3. Conditions Precedent to Funding the Loan.................................... 6
4. Affirmative Covenants of Borrower........................................... 6
4.1 Financial Data; Reporting Requirements................................ 6
4.2 Licenses and Permits.................................................. 7
4.3 Maintenance of Properties............................................. 7
4.4 Payment of Charges.................................................... 7
4.5 Insurance............................................................. 8
4.6 Maintenance of Records................................................ 8
4.7 Inspection............................................................ 8
4.8 Corporate Existence................................................... 8
4.9 Exchange of Note...................................................... 8
4.10 Other Agreements...................................................... 9
4.11 Further Assurances.................................................... 9
5. Negative Covenants of Borrower.............................................. 9
6. Representations and Warranties of Borrower.................................. 9
6.1 Organization, Good Standing and Qualification, Due Execution
and Validity.......................................................... 10
6.2 Authorization......................................................... 10
6.3 Governmental Consents................................................. 10
6.4 Litigation............................................................ 11
6.5 Compliance With Other Instruments..................................... 11
</TABLE>
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<TABLE>
<S> <C>
6.6 SEC Reports; Financial Statements..................................... 11
6.7 Compliance With Laws.................................................. 12
6.8 Changes............................................................... 12
7. Events of Default; Remedies................................................. 13
7.1 Events of Default..................................................... 13
7.2 Acceleration; Remedies................................................ 14
8. Miscellaneous............................................................... 15
8.1 Notices............................................................... 15
8.2 Payment of Expenses................................................... 15
8.3 No Waiver............................................................. 16
8.4 Entire Agreement and Amendments....................................... 16
8.5 Benefit of Agreement.................................................. 16
8.6 Severability.......................................................... 17
8.7 Descriptive Headings.................................................. 17
8.8 Courts of Law......................................................... 17
8.9 Counterparts.......................................................... 17
8.10 Governing Law......................................................... 17
</TABLE>
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EXHIBITS
Exhibit 2.3 -- Promissory Note
Exhibit 3(d) -- Opinion of Counsel
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<PAGE>
CREDIT AGREEMENT
CREDIT AGREEMENT, dated as of the 23rd day of November, 1998, by and
between TARGETED GENETICS CORPORATION, a Washington corporation ("Borrower"),
and MEDEVA PLC, a public limited liability company organized under the laws of
the United Kingdom ("Lender").
RECITAL
Borrower has requested Lender to extend to Borrower a term loan in the
amount of $2,000,000, and Lender is willing to extend such credit facility to
Borrower on the terms and conditions set forth in this Agreement.
AGREEMENTS
NOW, THEREFORE, in consideration of the mutual covenants and conditions set
forth herein, the parties hereto agree as follows:
1. DEFINITIONS
1.1 TERMS DEFINED
As used herein, the following terms have the meanings set forth below.
Capitalized terms used herein and not otherwise defined shall have the meanings
assigned to them in the Master Agreement:
"Affiliate" means any individual, corporation, association or other
business entity which directly or indirectly controls, is controlled by or is
under common control with the party in question. As used in this definition of
"Affiliate," the term "control" means the direct or indirect ownership of more
than fifty percent (50%) of the stock having the right to vote for directors
thereof of the ability to otherwise control the management of the corporation or
other business entity whether through the ownership of voting securities, by
contract, resolution, regulation or otherwise.
"Business Day" means any day except a Saturday, Sunday, or other day on
which national banks in the state of Washington are authorized or required by
law to close.
"Common Stock" means the common stock of Borrower, $.01 par value per
share.
<PAGE>
"Common Stock Purchase Agreement" means that certain Common Stock Purchase
Agreement dated of even date herewith entered into between Borrower and an
Affiliate of Lender and includes all amendments thereof.
"Default" means any condition or event that constitutes an Event of Default
or with the giving of notice or lapse of time or both would, unless cured or
waived, become an Event of Default.
"Event of Default" has the meaning set forth in Section 7.1 hereof.
"Governmental Approval" means any authorization, consent, approval,
certificate of compliance, license, permit, or exemption from, contract with,
registration or filing with, or report or notice to, any Governmental Authority
required or permitted by Applicable Laws.
"License and Collaboration Agreement" means that certain License and
Collaboration Agreement dated of even date herewith entered into between
Borrower and an Affiliate of Lender, and includes all amendments thereof.
"Loan" has the meaning set forth in Section 2.1 hereof and includes all
renewals and amendments of the Loan.
"Loan Documents" means this Agreement and the Note, together with all other
agreements, instruments, and documents arising out of or relating to this
Agreement or the Loan, and includes all amendments thereof.
"Manufacturing Facility" has the meaning set forth in Section 2.2 hereof.
"Master Agreement" means that certain Master Agreement dated of even date
herewith entered into between Borrower and an Affiliate of Lender, and includes
all amendments thereto.
"Material Adverse Effect" has the meaning set forth in Section 6.1 hereof.
"Note" has the meaning set forth in Section 2.3 hereof and includes all
renewals, replacements, and amendments of the Note.
"Payment Date" has the meaning set forth in Section 2.6 hereof.
"Person" means any individual, partnership, joint venture, firm,
corporation, association, trust, or other enterprise or any Governmental
Authority.
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"Supply Agreement" means that certain Supply Agreement dated of even date
herewith entered into between Borrower and an Affiliate of Lender, and includes
all amendments thereof.
"Transaction Documents" means this Agreement, the Master Agreement, the
License and Collaboration Agreement, the Supply Agreement and the Common Stock
Purchase Agreement.
1.2 ACCOUNTING TERMS
Unless otherwise specified herein, all accounting terms used herein shall
be interpreted, all accounting determinations hereunder shall be made, and all
financial statements required to be delivered hereunder shall be prepared in
accordance with U.S. generally accepted accounting principles consistently
applied.
1.3 CURRENCY
All reference to amounts of funds and "$" set forth in the Loan Documents
shall constitute references to the currency of the United States of America.
2. THE LOAN
2.1 LOAN COMMITMENT
Subject to and upon the terms and conditions set forth herein and in
reliance upon the representations, warranties, and covenants of Borrower
contained herein or made pursuant hereto, Lender shall lend to Borrower
$2,000,000 on a term-loan basis (the "Loan").
2.2 USE OF PROCEEDS
The proceeds of the Loan shall be used by Borrower to finance the design,
engineering, and construction of a manufacturing facility (the "Manufacturing
Facility") for the production of Bulk Licensed Product to supply Phase III
clinical trials and commercial sales (to the extent provided in the License and
Collaboration Agreement and the Supply Agreement) and to finance the acquisition
of furniture, fixtures, and equipment for such facility.
2.3 THE NOTE
The Loan shall be evidenced by a promissory note in the form attached
hereto as Exhibit 2.3 (the "Note").
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2.4 ADVANCE OF PROCEEDS
Upon satisfaction of the conditions described in Section 3 hereof, Lender
shall cause the Loan proceeds to be advanced to Borrower via wire transfer of
funds as set forth below within seven (7) Business Days following Borrower's
written request specifying the account to receive the funding: (a) no advances
shall be made prior to May 2, 1999; (b) on or after May 2, 1999 Borrower may
request the advance of $1,000,000, and (c) on or after August 2, 1999 Borrower
may request the advance of the remaining $1,000,000 or, if no advance was made
to Borrower pursuant to preceding clause (b), the full amount of the Loan.
2.5 INTEREST RATE
(a) The Loan shall bear annual interest on the principal amount
thereof remaining unpaid from time to time, at the rate of 150 basis points
over LIBOR (based on the one-month LIBOR rate, as published in the Wall Street
Journal on the first Business Day of each calendar month), provided that, except
as provided in Section 2.5(b), the interest rate charge on the Loan shall not be
greater than 7% nor less than 5%.
(b) Upon the occurrence and during the continuance of any Default,
Lender may, at its option, charge interest on the Loan and any interest or other
amounts past due hereunder at a rate of up to 2 percent per annum in excess of
the rate set forth in Section 2.5(a) hereof from the date of the occurrence of
the Default until the Default is cured or waived by Lender or, absent cure or
waiver, until the Loan and such other amounts are repaid in full.
(c) All computations of interest shall be based on a 365-day year for
the actual number of days elapsed.
(d) Notwithstanding any provision contained herein or in the Note, the
total liability of Borrower for payment of interest pursuant hereto shall not
exceed the maximum amount of interest permitted by Applicable Law to be charged,
collected, or received from Borrower; and if any payments by Borrower include
interest in excess of that maximum amount, Lender shall apply the excess first
to reduce the unpaid interest on and principal of the Loan, and any excess shall
be returned to Borrower.
2.6 Repayment
(a) Accrued interest on the Loan shall be paid annually on the
anniversary date of the first advance and, if earlier, on the date the
outstanding
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<PAGE>
principal is due. All outstanding principal shall be due and payable in full on
the earlier of (a) the five-year anniversary date of this Agreement, or (b) the
end of the calendar quarter during which Lender's aggregate cumulative Net
Sales, measured from the date hereof, equal or exceed $60,000,000 (the "Payment
Date"). In the event that the Payment Date would fall on a day that is not a
Business Day, then the Payment Date shall be extended to the next succeeding
Business Day.
(b) Borrower shall pay to Lender on the Payment Date all outstanding
principal and interest on the Loan and any other amounts due hereunder: (i) by
paying cash directly to Lender in immediately available United States funds to
the account specified by Lender in writing, (ii) by issuing to Lender Common
Stock in accordance with the provisions of Section 2.8 hereof, or (iii) any
combination of cash or the issuance of Common Stock in accordance with Section
2.8 hereof; provided, however, that Lender may in its sole discretion elect to
require payment solely in cash.
2.7 PREPAYMENTS
Borrower may prepay all or any portion of the Loan at any time without
premium or penalty. All prepayments shall be applied first to any accrued
interest on the Loan and then to the outstanding principal balance of the Loan.
Prepayments may be made in the form of cash or the issuance of Common Stock or
any combination thereof; provided, however, that Lender may in its sole
discretion elect to require payment solely in cash. The date of any such
prepayment shall be referred to as the "Prepayment Date."
2.8 ISSUANCE OF COMMON STOCK
In the event that Borrower elects to pay or prepay all or any portion of
the Loan through the issuance of Common Stock, Borrower shall give Lender ten
(10) days' written notice. Upon receiving a written notice from Borrower,
Lender shall notify Borrower in writing within five (5) Business Days as to
whether Lender is willing to accept Common Stock as payment or prepayment of all
or any portion of the outstanding principal or interest on the Loan. If Common
Stock is to be issued, on or before the Payment Date or the Prepayment Date,
Lender shall deliver to Borrower customary representations as to Lender's
investment intent. The purchase price per share of Common Stock shall equal the
average closing price of the Common Stock on the twenty (20) trading days
immediately preceding the Payment Date or the Prepayment Date, as the case may
be. Borrower shall grant to Lender registration rights with respect to such
Common Stock pursuant to a Registration Rights Agreement in form and substance
reasonably satisfactory to Borrower and Lender.
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<PAGE>
3. CONDITIONS PRECEDENT TO FUNDING THE LOAN
Lender shall not be required to make either funding under the Loan unless
or until the following conditions have been fulfilled:
(a) Lender shall have received this Agreement and the other
Transaction Documents and the Note, duly executed and delivered by Borrower.
(b) No Default or Event of Default shall exist, and after having given
effect to the funding of the Loan, no Default or Event of Default shall exist
and no default shall exist under the other Transaction Documents, and after
giving effect to the funding of the Loan, no such default shall exist
thereunder.
(c) All representations and warranties of Borrower contained herein or
in the other Loan Documents or the Transaction Documents or otherwise made in
writing in connection herewith or therewith shall be true and correct in all
material respects with the same effect as though such representations and
warranties had been made on and as of the date of the funding of the Loan.
(d) All corporate proceedings of Borrower shall be satisfactory in
form and substance to Lender, and Lender shall have received all information and
copies of all documents, including records of all corporate proceedings, and an
opinion of counsel to Borrower in the form of Exhibit 3(d) attached hereto, that
Lender has requested in connection therewith, such documents where appropriate
to be certified by proper corporate authorities or Governmental Authorities.
4. AFFIRMATIVE COVENANTS OF BORROWER
Borrower hereby covenants and agrees that so long as this Agreement is in
effect, and until the Loan, together with interest thereon, and all other
obligations incurred hereunder are paid or satisfied in full, Borrower shall:
4.1 FINANCIAL DATA; REPORTING REQUIREMENTS
Keep its books of account in accordance with U.S. generally accepted
accounting principles, consistently applied, and furnish to Lender:
(a) As soon as practicable and in any event within five (5) days after
filing, a copy of all periodic and special reports and forms filed by Borrower
with the U.S. Securities and Exchange Commission.
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<PAGE>
(b) Promptly after the commencement thereof, notice of all actions,
suits and proceedings before any Governmental Authority, affecting Borrower,
which, if determined adversely to Borrower, could have a Material Adverse
Effect.
(c) With reasonable promptness, such other information regarding the
business, operations, and financial condition of Borrower as Lender may from
time to time reasonably request.
4.2 LICENSES AND PERMITS
Maintain all material Governmental Approvals and all related or other
material agreements necessary for Borrower to operate its business, as it now
exists or as it may be modified or expanded as contemplated by the Transaction
Documents. Borrower shall at all times comply with all material Applicable Laws
relating to the operations, facilities, or activities of Borrower.
4.3 MAINTENANCE OF PROPERTIES
Keep the Manufacturing Facility and Borrower's material properties in good
repair and in good working order and condition, in a manner consistent with past
practices and comparable to industry standards; from time to time make all
appropriate and proper repairs, renewals, replacements, additions, and
improvements thereto; and keep them and all material equipment that may now or
in the future be subject to compliance with any Applicable Laws in full
compliance with such Applicable Laws.
4.4 PAYMENT OF CHARGES
Duly pay and discharge all (a) taxes, assessments, levies, and any other
charges of Governmental Authorities imposed on or against Borrower or its
property or assets, or upon any property leased by Borrower, prior to the date
on which penalties attached thereto, unless and to the extent only that such
taxes, assessments, levies, and any other charges of Governmental Authorities,
after written notice thereof having been given to Lender, are being contested in
good faith and by appropriate proceedings; (b) claims allowed by Applicable
Laws, whether for labor, materials, rentals, or anything else, which could, if
unpaid, become a lien or charge upon Borrower's property or assets or the
outstanding capital stock of Borrower or result in a Material Adverse Effect
(unless and to the extent only that the validity thereof is being contested in
good faith and by appropriate proceedings after written notice thereof has been
given to Lender); (c) trade bills in accordance with the terms thereof or
generally prevailing industry standards; and (d) other indebtedness heretofore
or hereafter incurred or assumed by Borrower, unless such indebtedness be
renewed or
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extended. In the event any charge is being contested by Borrower as allowed
above, Borrower shall establish adequate reserves against possible liability
therefor.
4.5 INSURANCE
Maintain insurance upon Borrower's properties and business in accordance
with prevailing industry standards, including, without limitation, general
liability insurance (including products liability and personal injury liability
(for bodily injury and death)), upon Borrower's properties, products and
business, waiving subrogation, with minimum limits of no less than US$5,000,000
per occurrence. Borrower shall use Reasonable Commercial Efforts to add Lender
as an additional insured under such insurance coverage. All such insurance
policies shall require at least thirty (30) days' prior written notice to Lender
concerning cancellation thereof. At least annually and otherwise upon request
by Lender, Borrower shall deliver to Lender a certificate or certificates of
insurance evidencing the required coverage. Compliance herewith in no way
limits Borrower's indemnity obligations, except to the extent that Borrower's
insurance company actually pays Lender or its Affiliates amounts which Borrower
would otherwise pay Lender.
4.6 MAINTENANCE OF RECORDS
Keep at all times books of account and other records in which full, true,
and correct entries will be made of all material dealings or transactions in
relation to the business and affairs of Borrower.
4.7 INSPECTION
Subject to reasonable notice to Borrower and at reasonable times, allow any
representative of Lender to examine the books of account and other records and
files of Borrower relevant to the Loan, and to discuss the affairs, business,
finances, and accounts of Borrower with its senior officers and inspect the
Manufacturing Facility.
4.8 CORPORATE EXISTENCE
Maintain and preserve the corporate existence of Borrower.
4.9 EXCHANGE OF NOTE
Upon receipt of a written notice of loss, theft, destruction, or mutilation
of the Note, and upon surrendering such Note for cancellation if mutilated,
execute and deliver a new Note of like tenor in lieu of such lost, stolen,
destroyed, or mutilated Note. Lender hereby agrees to indemnify and hold
Borrower harmless from all
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claims, losses, and damages (including reasonable attorneys' fees) incurred by
Borrower as a result of loss, theft, or destruction of the Note.
4.10 OTHER AGREEMENTS
Comply with all covenants and agreements set forth in or required pursuant
to any of the other Loan Documents or Transaction Documents.
4.11 FURTHER ASSURANCES
Promptly upon request by Lender, duly execute and deliver or cause to be
duly executed and delivered to Lender such further instruments, agreements, and
documents and do or cause to be done such further acts as may be necessary to
carry out more effectively the provisions and purpose of this Agreement and the
other Loan Documents.
5. NEGATIVE COVENANTS OF BORROWER
Borrower covenants and agrees that until the Loan, together with interest
thereon, and all other obligations incurred hereunder are paid or satisfied in
full, Borrower shall not, without the prior written consent of Lender, which
consent shall not be unreasonable withheld or delayed:
(a) declare or pay any cash distributions or dividends or return any
capital to any of Borrower's shareholders;
(b) wind up, liquidate, or dissolve Borrower's affairs or enter into any
transaction to dispose of (or agree to do any of the foregoing at any time) all
or substantially all of its assets;
(c) grant any mortgage on or any security interest in any lease agreement
relating to the Manufacturing Facility; or
(d) grant any security interest in any equipment, personal property,
furniture or fixtures associated with the Manufacturing Facility; provided,
however, that Borrower may grant such a security interest to any entity
providing financing to facilitate the acquisition of such equipment, personal
property, furniture or fixtures, limited, however, to the property so acquired
and to the acquisition price thereof.
6. REPRESENTATIONS AND WARRANTIES OF BORROWER
Borrower hereby represents and warrants to Lender as of the date hereof and
the date of each funding of the Loan as follows:
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6.1 ORGANIZATION, GOOD STANDING AND QUALIFICATION, DUE EXECUTION AND
VALIDITY
Borrower is a corporation organized and validly existing under the laws of
the state of Washington and has all requisite corporate power and authority to
own its properties and carry on its business as currently conducted and as
contemplated by the Transaction Documents. Borrower is duly qualified to
transact business and is in good standing as a foreign corporation in each
jurisdiction in which the failure to so qualify would have a material adverse
effect on its financial condition, results of operations, business or properties
(a "Material Adverse Effect"). Borrower has previously provided the Investor
with complete and correct copies of its Restated Articles of Incorporation and
its Amended and Restated Bylaws as in effect on the date of this Agreement.
6.2 AUTHORIZATION
Borrower has all requisite power and authority to execute, deliver and
perform its obligations under this Agreement and the other Loan Documents. All
corporate action on the part of Borrower, its officers, directors and
shareholders necessary for the authorization, execution and delivery of this
Agreement and the other Loan Documents and the transactions contemplated herein
and therein and the performance of all obligations of Borrower hereunder and
thereunder have been taken or will be taken prior to the initial funding of the
Loan. Borrower, its officers, directors, and shareholders will have taken all
corporate action necessary for the authorized issuance of Common Stock
hereunder, if any, prior to the Payment Date or Prepayment Date on which such
Common Stock is to be issued. Each of the Agreement and the other Loan
Documents have been duly executed and delivered by Borrower and constitutes a
valid and legally binding obligation of Borrower, enforceable in accordance with
its terms, except as (a) such enforceability may be limited by bankruptcy,
insolvency or similar laws affecting creditors' rights generally and (b) the
availability of equitable remedies may be limited by equitable principles of
general applicability.
6.3 GOVERNMENTAL CONSENTS
No consent, approval, order or authorization of, or registration,
qualification, designation, declaration or filing with, any Governmental
Authority on the part of Borrower is required in connection with the
consummation of the transactions contemplated by this Agreement or the other
Loan Documents.
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6.4 LITIGATION
There is no action, suit, claim, proceeding or investigation pending or, to
Borrower's knowledge, threatened against Borrower that relates to or challenges
the legality, validity or enforceability of this Agreement or the other Loan
Documents or that could either individually or in the aggregate have a Material
Adverse Effect, nor has the U.S. Food and Drug Administration taken any action
with respect to the Licensed Products which would prohibit the marketing of the
Licensed Products if developed as contemplated by the License and Collaboration
Agreement. Borrower is not a party to or subject to the provisions of any
order, writ, injunction, judgment or decree of any court or other Governmental
Authority that could have a Material Adverse Effect.
6.5 COMPLIANCE WITH OTHER INSTRUMENTS
Borrower is not in violation of any provision of its Restated Articles of
Incorporation or its Amended and Restated Bylaws or in violation or default of
any provision of any instrument, Applicable Lawjudgment, order, writ, decree or
contract to which it is a party or by which it is bound, which violation or
default would adversely affect the legality, validity, or enforceability of this
Agreement or the other Loan Documents or have a Material Adverse Effect. The
execution, delivery and performance of this Agreement or the other Loan
Documents and the consummation of the transactions contemplated hereby will not
require any consent under or be in conflict with or constitute, with or without
the passage of time or the giving of notice or both, either a violation or
default under any such provision, instrument, Applicable Law, judgment, order,
writ, decree or contract or give rise to a right to terminate or accelerate any
contract or an event which results in the creation of any lien, charge or
encumbrance upon any of Borrower's assets.
6.6 SEC REPORTS; FINANCIAL STATEMENTS
Borrower has furnished the Investor with a true and complete copy of each
report, schedule, registration statement and definitive proxy statement filed by
Borrower with the Securities and Exchange Commission (the "SEC") since December
31, 1997 (the "SEC Documents"), which are all the documents that Borrower has
been required to file with the SEC during such period. As of their respective
dates, the SEC Documents complied with the requirements of the Securities Act of
1933, as amended (the "Securities Act"), or the Securities Exchange Act of 1934,
as amended, as applicable, and the rules and regulations of the SEC thereunder,
and none of the SEC Documents contained any untrue statement of a material fact
or omitted to state a material fact required to be stated therein or necessary
in order to make the statements therein, in light of the circumstances under
which they were
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made, not misleading. The financial statements of Borrower included in the SEC
Documents are complete in all material respects and were prepared in accordance
with generally accepted accounting principles applied on a consistent basis
during the periods involved (except as may be indicated in the notes thereto or,
in the case of unaudited financial statements, as permitted by Form 10-Q of the
SEC) and fairly present (subject, in the case of unaudited financial statements,
to normal recurring audit adjustments) the financial position of Borrower at the
dates thereof and the results of its operations and changes in financial
position for the periods then ended.
6.7 COMPLIANCE WITH LAWS
Borrower has complied, and is in compliance with, all Applicable Laws and
all federal, state, county, local and foreign decrees and orders, and possesses
all governmental franchises, permits and consents, and has made all governmental
filings and declarations, applicable to the operation of its business, to its
employees, or to the real property and the personal property that it owns or
leases (including, without limitation, all such Applicable Laws, decrees and
orders relating to pharmaceutical, antitrust, consumer protection, currency
exchange, environmental protection, equal opportunity, health, occupational
safety, pension, securities and trading-with-the-enemy matters), the failure to
comply with which would, individually or in the aggregate, have a Material
Adverse Effect. Borrower has not received any notification of any asserted
present or past unremedied failure by Borrower to comply with any of such
Applicable Laws, decrees or orders.
6.8 CHANGES
Since June 30, 1998 there has not been:
(a) any damage, destruction or loss (whether or not covered by
insurance) which has had or is expected to have a Material Adverse Effect;
(b) any material change in the accounting methods or practices
followed by Borrower;
(c) any material debt obligation or liability (whether absolute or
contingent) incurred by Borrower (whether or not presently outstanding) except
(i) current liabilities incurred, and obligations under agreements entered into,
in the ordinary course of business and (ii) obligations or liabilities entered
into or incurred in connection with the execution of the Transaction Documents;
(d) any sale, lease, abandonment or other disposition by Borrower of
any real property or, other than in the ordinary course of business, of any
equipment
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or other operating properties or any sale, assignment, transfer, license or
other disposition by Borrower of any intellectual property relevant to the
Licensed Products or other intangible asset (except any license to an Affiliate
of Lender pursuant to the Transaction Documents); or
(e) any other event or occurrence that has had or is expected to have
a Material Adverse Effect.
7. EVENTS OF DEFAULT; REMEDIES
7.1 EVENTS OF DEFAULT
"Event of Default," wherever used herein, means any one of the following
events (whatever the reason for the Event of Default, whether it shall relate to
one or more of the parties hereto, and whether it shall be voluntary or
involuntary or be pursuant to or affected by operation of Applicable Law):
(a) If Borrower fails to pay the principal of or interest on the Note,
within ten (10) Business Days after the Payment Date and after written notice to
Borrower from Lender of such failure to pay; or
(b) If any representation or warranty made by Borrower in this
Agreement is breached or is false or misleading; or
(c) If Borrower fails to observe or perform any other term, covenant,
or agreement to be performed or observed pursuant to the provisions of the Loan
Documents and such default either (i) cannot be cured within thirty (30) days of
written notice to Borrower from Lender of such default or (ii), if it is capable
of being cured within such period, is not cured within thirty (30) days of
written notice to Borrower from Lender of such default or, so long as Borrower
is diligently pursuing a cure, such longer period of time, not to exceed an
additional thirty (30) days, as is reasonably necessary to cure such default; or
(d) If custody or control of any substantial part of the property of
Borrower is assumed by any Governmental Authority; or
(e) If Borrower is generally not able to, or admits in writing its
inability to, pay its debts as they become due, or if Borrower suspends or
discontinues its business or operations or a substantial part thereof, or if
Borrower makes an assignment for the benefit of creditors or a composition with
creditors, is unable or admits in writing its inability to pay its debts as they
mature, files a petition in bankruptcy, becomes insolvent (howsoever such
insolvency may be evidenced), is adjudicated insolvent or bankrupt, petitions or
applies to any tribunal for the
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appointment of any receiver, liquidator, or trustee of or for it or any
substantial part of its property or assets, commences any proceeding relating to
it under any Applicable Law of any jurisdiction whether now or hereafter in
effect relating to bankruptcy, reorganization, arrangement, readjustment of
debt, receivership, dissolution, or liquidation; or if there is commenced
against Borrower any such proceeding that remains undismissed for a period of
sixty (60) days or more, or an order, judgment, or decree approving the petition
in any such proceeding is entered; or if Borrower by any act or failure to act
indicates its consent to, approval of, or acquiescence in, any such proceeding
or any appointment of any receiver, liquidator, or trustee of or for it or for
any substantial part of its property or assets, suffers any such appointment to
continue undischarged or unstayed for a period of sixty (60) days or more, or
takes any corporate action for the purpose of effecting any of the foregoing; or
if any court of competent jurisdiction assumes jurisdiction with respect to any
such proceeding, or if a receiver or a trustee or other officer or
representative of a court or of creditors, or if any Governmental Authority,
under color of legal authority, takes and holds possession of all or
substantially all of the assets of Borrower; or
(f) If an Event of Default shall occur under any of the other Loan
Documents or a default shall occur under any of the other Transaction Documents
or if Borrower fails to pay when due any other indebtedness with a principal
amount in excess of US$500,000 or if an event of default occurs thereunder such
that the lender thereof may accelerate the payments due thereunder; or
(g) If one or more judgments, decrees or orders for the payment of
money in excess of US$100,000 in the aggregate in excess of amounts covered by
insurance is rendered against Borrower and such judgments, decrees or orders
continue unsatisfied and in effect for a period of thirty (30) consecutive days
without being vacated, discharged, satisfied or stayed or bonded pending appeal;
or
(h) If Borrower fails to complete construction of the Manufacturing
Facility or commence production of Bulk Licensed Product within ninety (90) days
after the scheduled dates for such completion or production as set forth in the
Development Plan.
7.2 ACCELERATION; REMEDIES
Upon the occurrence of any Event of Default or at any time thereafter, if
any Event of Default is then continuing, Lender may, by written notice to
Borrower, declare the entire unpaid principal balance or any portion of the
principal balance of the Note and interest accrued thereon to be immediately due
and payable by the maker thereof; and such principal and interest shall
thereupon become and be immediately due and payable, without presentation,
demand, protest, notice of protest, or other
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notice of dishonor of any kind, all of which are hereby expressly waived by
Borrower. Lender may proceed to protect and enforce its rights hereunder in any
manner or order it deems expedient without regard to any equitable principles of
marshaling or otherwise. All rights and remedies given by the Loan Documents are
cumulative and not exclusive of any thereof or of any other rights or remedies
available to Lender; no course of dealing between Borrower and Lender or any
delay or omission in exercising any right or remedy shall operate as a waiver of
any right or remedy; and every right and remedy may be exercised from time to
time and as often as deemed appropriate by Lender. Lender shall apply any
proceeds received by it in connection with its exercise of rights or remedies
first to the payment of reasonable costs and expenses incurred by it in
- -----
connection with such exercise, including, without limitation (to the extent
permitted by law), reasonable attorneys' fees and legal expenses, and second to
------
the payment of the outstanding Loan amount (and accrued interest), as Lender in
its sole discretion may elect. Borrower shall remain liable to Lender for and
shall pay to Lender any deficiency which may remain between the amount of
proceeds received and the sum owed to Lender. Upon the occurrence and during the
continuance of any Event of Default, Lender or any of its Affiliates may at any
time, and from time to time, without notice to Borrower, set-off and apply any
and all amounts at any time owing by Lender or any of its Affiliates to or for
the credit of Borrower against any and all obligations of Borrower now or
hereafter existing under the Loan Documents, irrespective of whether or not
Lender shall have made any demand under the Loan Documents or the obligations
thereunder remain unmatured. Although Borrower waives any right to receive
notice of Lender's actions under this Section, Lender agrees to notify Borrower
promptly after any such set-off and application, provided that the failure to
give such notice shall not affect the validity of such set-off and application.
Lender's rights hereunder are in addition to any of Lender's other rights or
remedies.
8. MISCELLANEOUS
8.1 NOTICES
All notices required or permitted to be given under this Agreement shall be
governed by the terms of Section 8.6 of the Master Agreement.
8.2 PAYMENT OF EXPENSES
If there shall occur any Event of Default, Lender shall be entitled to
recover any costs and expenses incurred by Lender in connection with the
preservation of rights under, and enforcement of, the Loan Documents, whether or
not any lawsuit is commenced, in all such cases, including, without limitation,
reasonable attorneys' fees and costs. Reasonable attorneys' fees shall include,
without limitation, attorneys' fees
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and costs incurred in connection with any bankruptcy case or other insolvency
proceeding commenced by or against Borrower, including all fees incurred in
connection with (a) moving for relief from the automatic stay, to convert or
dismiss the case or proceeding, or to appoint a trustee or examiner, or (b)
proposing or opposing confirmation of a plan of reorganization or liquidation,
in any case without regard to the identity of the prevailing party.
8.3 NO WAIVER
No failure or delay on the part of Lender or the holder of the Note in
exercising any right, power, or privilege hereunder and no course of dealing
between Borrower and Lender or the holder of the Note shall operate as a waiver
thereof; nor shall any single or partial exercise of any right, power, or
privilege hereunder preclude any other or further exercise thereof or the
exercise of any right, power, or privilege. The rights and remedies herein
expressly provided are cumulative and not exclusive of any rights or remedies
that Lender or any subsequent holder of the Note would otherwise have. No
notice to or demand on Borrower in any case shall entitle Borrower to any other
or further notice or demand in similar or other circumstances or shall
constitute a waiver of the right of Lender to any other or further action in any
circumstances without notice or demand.
8.4 ENTIRE AGREEMENT AND AMENDMENTS
This Agreement, the other Loan Documents and the Transaction Documents
represent the entire agreement between the parties hereto with respect to the
Loan and the transactions contemplated hereunder and, except as expressly
provided herein, shall not be affected by reference to any other documents.
This Agreement and the other Loan Documents, or any provision hereof or thereof,
may not be changed, waived, discharged, or terminated orally, but only by an
instrument in writing, signed by the party against whom enforcement of the
change, waiver, discharge, or termination is sought.
8.5 BENEFIT OF AGREEMENT
This Agreement is binding upon and inures to the benefit of Borrower and
Lender and their successors. Notwithstanding the foregoing, Borrower and Lender
are precluded from assigning any of their respective rights or delegating any of
their respective obligations hereunder or under any of the other Loan Documents
without the prior written consent of the other party, except that Lender may
assign and delegate its rights and obligations hereunder to an Affiliate so long
as Lender remains primarily liable hereunder.
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8.6 SEVERABILITY
If any provision of the Loan Documents is held invalid under any Applicable
Laws, such invalidity shall not affect any other provision of the Loan Documents
that can be given an effect without the invalid provision, and, to this end, the
provisions hereof are severable.
8.7 DESCRIPTIVE HEADINGS
The descriptive headings of the several sections of this Agreement are
inserted for convenience only and do not affect the meaning or construction of
any of the provisions hereof.
8.8 COURTS OF LAW
The state and federal courts situated in the County of New York, State of
New York, United States of America, shall have sole jurisdiction and venue to
resolve all disputes arising hereunder between the parties and initiated by
Borrower. The state and federal courts situated in King County, State of
Washington, United States of America, shall have sole jurisdiction and venue to
resolve all disputes arising hereunder between the Parties and initiated by
Lender. The Parties irrevocably submit to such jurisdiction and venue, waive
any claim to an inconvenient forum posed by such venue, and agree that process
may be served in any manner permitted by such court before which a dispute is
pending.
8.9 COUNTERPARTS
This Agreement may be executed in one or more counterparts, each of which
shall constitute an original agreement, but all of which together shall
constitute one and the same instrument.
8.10 GOVERNING LAW
This Agreement and the rights and obligations of the parties hereunder
shall be construed in accordance with and shall be governed by the laws of the
State of New York.
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IN WITNESS WHEREOF, Borrower and Lender have caused this Agreement to be
duly executed by the respective, duly authorized signatories as of the date
first above written.
TARGETED GENETICS CORPORATION
By /s/ H. Stewart Parker
--------------------------------------
Title President, Chief Executive Officer
-----------------------------------
MEDEVA PLC
By /s/ G. Watts
------------------------------------
Title Finance Director
-----------------
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EXHIBIT 2.3
TO CREDIT AGREEMENT
PROMISSORY NOTE
US $2,000,000 ___________, 1998
For value received, the undersigned, TARGETED GENETICS CORPORATION
("Borrower"), promises to pay to the order of MEDEVA PLC ("Lender"), at 10 St.
James's Street, London, United Kingdom SW1A 1EF, or such other place or places
as the holder hereof may designate in writing, the principal sum of Two Million
United States Dollars (US $2,000,000) or so much thereof as advanced by Lender,
in accordance with the terms and conditions of that certain credit agreement of
even date herewith by and between Borrower and Lender (together with all
supplements, exhibits, amendments and modifications thereto, the "Credit
Agreement"). Borrower also promises to pay interest on the unpaid principal
balance hereof, commencing as of the first date of an advance hereunder, in like
money in accordance with the terms and conditions, and at the rate or rates
provided in the Credit Agreement. All such interest is payable annually,
commencing one year from the first date of an advance hereunder. All principal,
is due and payable in full on the Payment Date (as defined in the Credit
Agreement) or such earlier date as provided in the Credit Agreement.
Borrower waives presentment for payment, demand, notice of nonpayment,
notice of protest, and protest of this Note, and all other notices in connection
with the delivery, acceptance, performance, default, dishonor, or enforcement of
the payment of this Note except such notices as are specifically required by
this Note or by the Credit Agreement, and agrees that its liability shall be
unconditional without regard to the liability of any other party and shall not
be in any manner affected by any indulgence, extension of time, renewal, waiver,
or modification granted or consented to by Lender. Borrower consents to any and
all extensions of time, renewals, waivers, or modifications that may be granted
by Lender with respect to the payment or other provisions of this Note and the
Credit Agreement.
This Note is the Note referred to in the Credit Agreement and as such is
entitled to all of the benefits and obligations specified in the Credit
Agreement. Reference is made to the Credit Agreement for provisions for the
repayment of this Note and the acceleration of the maturity hereof.
TARGETED GENETICS CORPORATION
By
---------------------------------------
Title
------------------------------------
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EXHIBIT 3(d)
TO CREDIT AGREEMENT
OPINION OF COUNSEL
November 23, 1998
Medeva PLC
10 St. James's Street
London, United Kingdom SW1A 1EF
RE: CREDIT AGREEMENT, DATED AS OF NOVEMBER 23, 1998, BY AND BETWEEN TARGETED
GENETICS CORPORATION AND MEDEVA PLC
Ladies and Gentlemen:
We have acted as counsel to Targeted Genetics Corporation, a Washington
corporation (the "Company"), in connection with the transactions contemplated by
the Credit Agreement dated as of November 23, 1998 (the "Credit Agreement") by
and between the Company and Medeva PLC, a public limited liability company
organized under the laws of England ("Lender"). We are rendering this opinion
letter to you at the request of the Company pursuant to Section 3(d) of the
Credit Agreement. Except as otherwise indicated herein, capitalized terms used
and not otherwise defined in this opinion letter have the meanings assigned to
such terms in the Credit Agreement.
For purposes of the opinions set forth below, we have examined copies only
of (a) the Credit Agreement and the Note between the Company and the Lender,
(collectively, the "Transaction Documents"), (b) the Company's Articles of
Incorporation, as amended and filed with the Washington Secretary of State (the
"Company's Articles of Incorporation") and Bylaws, as amended (the "Company's
Bylaws"), (c) certificates of government officials, corporate officers and other
representatives of persons referred to herein, (d) certificates provided to us
in connection with delivery of this letter by the Chief Financial Officer and
the Secretary of the Company ("Officer's Certificates"), and (e) such other
documents as we have deemed necessary for purposes of the opinions expressed
below.
As to matters of fact bearing upon the opinions set forth below, we have,
with your consent, relied solely upon, and have not independently verified the
accuracy of, the representations, warranties and other statements of all parties
contained in the Transaction Documents and matters of fact set forth in
certificates of government
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officials, corporate officers and other representatives of persons referred to
herein. During the course of our representation of the Company, nothing came to
our attention that has led us to believe that the representations, warranties or
statements upon which we have relied for the purposes of rendering these
opinions are inaccurate in any material respect.
In rendering such opinions, we have further relied upon the following
assumptions, the accuracy of which we have not independently verified:
(i) Each signature is genuine; each document submitted to us as an
original is authentic; and each document submitted to us as a
copy conforms to the original.
(ii) All natural persons who executed or delivered the Transaction
Documents on behalf of the Company have sufficient legal capacity
to perform such acts.
(iii) The factual representations and warranties in the Transaction
Documents of each of the parties thereto are true, and the facts
and circumstances contemplated pursuant to the Transaction
Documents are as contemplated therein.
(iv) Each certificate provided by a governmental official reviewed
by us for the purpose of rendering this opinion letter is
accurate, complete and authentic, and all official public records
(including their proper indexing and filing) are accurate and
complete.
(v) All statutes, judicial and administrative decisions, and rules
and regulations of governmental agencies, constituting the law
examined by us, are generally available (i.e., in terms of access
and distribution following publication or other release) to
lawyers practicing in such jurisdiction, and are in a format that
makes legal research reasonably feasible.
(vi) The constitutionality or validity of the relevant statute,
rule, regulation or agency action is not in issue unless a
reported decision in the opining jurisdiction has specifically
addressed but not resolved, or has established, its
unconstitutionality or invalidity.
(vii) The directors of the Company are Jack L. Bowman, H. Stewart
Parker, Jeremy Curnock Cook, Mark P. Richmond, Martin P. Sutter,
James D. Grant, and Louis P. Lacasse and there are
-21-
<PAGE>
presently no vacancies on the Board of Directors of the Company.
Based upon the examinations, assumptions, qualifications and exceptions
stated herein, we are of the opinion that:
1. The Company is a corporation validly existing under the laws of the
state of Washington.
2. The Company has the requisite corporate power and corporate authority
to execute, deliver and perform its obligations under the Transaction Documents
and, to the extent material to the Company's respective performance of its
obligations thereunder, to own its properties and to carry on its business as it
is now conducted.
3. The Company has authorized, by all necessary corporate action on the
part of the Company, the execution, delivery and performance of each of the
Transaction Documents.
4. The execution, delivery and performance by the Company of the
Transaction Documents do not conflict with or result in a violation of the
Company's Articles of Incorporation or Bylaws or any agreement listed as an
Exhibit to the Company's most recent Form 10-K, as filed with the Securities and
Exchange Commission.
5. The execution, delivery and performance by the Company of the
Transaction Documents are not prohibited by, nor do they result in the
imposition of a fine, penalty or other similar sanction for a violation under,
the provisions of the laws of the state of Washington.
6. Except as disclosed in the Credit Agreement, the execution and delivery
to Lender by the Company of the Transaction Documents and the performance by the
Company of its obligations thereunder do not require under present law any
filing or registration by the Company with, or approval or consent to the
Company of, any governmental agency or authority in the state of Washington that
has not been made or obtained.
7. The Common Stock that may be issued by the Company as repayment or
prepayment of all or any part of the Loan pursuant to Section 2.8 of the Credit
Agreement has been duly reserved for issuance and when issued in accordance with
the Credit Agreement it will be duly and validly issued, fully paid and
nonassessable.
-22-
<PAGE>
8. The Transaction Documents have been duly and validly executed.
The opinions expressed above are subject to the following exclusions and
qualifications:
a. Our opinions are as of the date hereof, and we have no
responsibility to update this opinion for events and circumstances occurring
after the date hereof or as to facts relating to prior events that are
subsequently brought to our attention. We do not undertake to advise you of any
changes in law.
b. We are qualified to practice law in the state of Washington and do
not express any opinions in this letter concerning any laws other than
Washington state law; and we express no opinion with respect to the laws,
regulations or ordinances of any county, municipality, or governmental
subdivision or agency of whatever description or character, or with respect to
matters that may be affected by the laws of any other jurisdiction or that may
be affected by pending or proposed legislation.
c. Notwithstanding that the opinions expressed herein may refer to
any party other than the Company, we are not representing, and do not purport to
represent, such party in connection with the transaction described herein.
d. In giving the opinion that the Company is validly existing under
the laws of the state of Washington, we have relied solely upon a certificate to
that effect issued by the Secretary of State of the state of Washington.
This opinion is rendered only to you and is solely for your benefit in
connection with the above transaction. This opinion may not be relied upon by
or disclosed to any other person for any purpose without our prior written
consent.
Very truly yours,
PERKINS COIE LLP
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<PAGE>
EXHIBIT 1.6
November 23, 1998
Medeva Pharmaceuticals, Inc.
755 Jefferson Road
Rochester, NY 14623
Medeva PLC
10 St. James's Street
London SW1EF
England
RE: COMMON STOCK PURCHASE AGREEMENT (THE "AGREEMENT") DATED AS OF NOVEMBER
23, 1998 AMONG TARGETED GENETICS CORPORATION (THE "COMPANY"), MEDEVA
PHARMACEUTICALS, INC. ("INVESTOR"), AND MEDEVA PLC ("PARENT")
Gentlemen:
We understand that you wish to amend the Agreement to provide for the
purchase of Common Stock by Parent at the initial closing. We agree as follows:
1. With respect to the initial purchase and sale of the Company's common
stock under the Agreement, Investor hereby assigns to Parent all of Investor's
rights and obligations under the Agreement.
2. With respect to the initial purchase and sale of the Company's common
stock under the Agreement, Parent shall have and shall perform all of Investor's
rights and obligations under the Agreement.
3. All other terms and conditions of the Agreement are hereby confirmed and
shall continue in full force and effect.
<PAGE>
November 23, 1998
Page 2
Please confirm your agreement with the foregoing by signing a copy of this
letter in the space provided below and returning it to the undersigned.
TARGETED GENETICS CORPORATION,
By: /s/ James A. Johnson
--------------------
Name: James A. Johnson
Its: Vice President, Finance
Agreed to and accepted this 23rd day of November, 1998.
MEDEVA PHARMACEUTICALS, INC.
By: /s/ Mark Glyn Hardy
-------------------
Name: Mark Glyn Hardy
---------------
Its: Assistant Secretary
-------------------
MEDEVA PLC
By: /s/ John Murphy
---------------
Name: John Murphy
-----------
Its: Company Secretary
-----------------
SMG:smg
