<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 6, 1996
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
PROGENITOR, INC.
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 2836 31-1344193
(State or other jurisdiction (Primary Standard (I.R.S. Employer
of incorporation or Industrial Identification Number)
organization) Classification Code
Number)
</TABLE>
1507 CHAMBERS ROAD
COLUMBUS, OHIO 43212
(614) 488-6688
(Address, including zip code and telephone number,
including area code, of Registrant's principal executive offices)
------------------------
DOUGLASS B. GIVEN, M.D., PH.D.
PRESIDENT AND CHIEF EXECUTIVE OFFICER
PROGENITOR, INC.
1507 CHAMBERS ROAD
COLUMBUS, OHIO 43212
(614) 488-6688
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
------------------------
COPIES TO:
<TABLE>
<S> <C>
GAVIN B. GROVER, ESQ. CHARLES W. MULANEY, JR., ESQ.
GREGORY H. HANSON, ESQ. SKADDEN, ARPS, SLATE,
KRISTIAN E. WIGGERT, ESQ. MEAGHER & FLOM
MORRISON & FOERSTER LLP 333 WEST WACKER DRIVE
345 CALIFORNIA STREET CHICAGO, ILLINOIS 60606
SAN FRANCISCO, CALIFORNIA 94104 (312) 407-0700
(415) 677-7000
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the Registration Statement becomes effective.
------------------------
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, please check the following box./ /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering./ /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, please check the following box and list the Securities
Act registration statement number of the earlier registration statement for the
same offering./ /
If delivery of the Prospectus is expected to be made pursuant to Rule 434,
please check the following box./ /
------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED
PROPOSED MAXIMUM
AMOUNT TO MAXIMUM AGGREGATE AMOUNT OF
TITLE OF EACH CLASS OF BE OFFERING PRICE OFFERING REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED (1) PER SHARE (2) PRICE (2) FEE
<S> <C> <C> <C> <C>
Common Stock, Class A, $.001 par
value............................. 2,875,000 $13.00 $37,375,000 $12,888
</TABLE>
(1) Includes 375,000 shares that the Underwriters have the option to purchase to
cover over-allotments, if any.
(2) Estimated solely for the purpose of calculating the amount of the
registration fee pursuant to Rule 457(a) of the Securities Act of 1933.
------------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT THAT SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PROGENITOR, INC.
CROSS-REFERENCE SHEET
PURSUANT TO ITEM 501(B) OF REGULATION S-K
<TABLE>
<CAPTION>
ITEMS OF FORM S-1 LOCATION IN PROSPECTUS
- -------------------------------------------------------------- --------------------------------------------------
<C> <S> <C>
Item 1. Forepart of the Registration Statement and Outside
Front Cover Page of Prospectus................... Facing Page of Registration Statement; Outside
Front Cover Page
Item 2. Inside Front and Outside Back Cover Pages of
Prospectus....................................... Inside Front and Outside Back Cover Pages
Item 3. Summary Information, Risk Factors, and Ratio of
Earnings to Fixed Charges........................ Prospectus Summary; Risk Factors
Item 4. Use of Proceeds................................... Use of Proceeds
Item 5. Determination of Offering Price................... Outside Front Cover Page; Underwriting
Item 6. Dilution.......................................... Risk Factors; Dilution
Item 7. Selling Security Holders.......................... Not applicable
Item 8. Plan of Distribution.............................. Outside Front and Inside Front Cover Pages;
Underwriting
Item 9. Description of Securities to be Registered........ Description of Capital Stock
Item 10. Interests of Named Experts and Counsel............ Legal Matters; Experts
Item 11. Information with Respect to the Registrant........ Outside Front and Inside Front Cover Pages;
Prospectus Summary; Risk Factors; Dividend
Policy; Capitalization; Selected Financial Data;
Management's Discussion and Analysis of Financial
Condition and Results of Operations; Business;
Management; Certain Transactions; Principal
Stockholders; Shares Eligible for Future Sale;
Description of Capital Stock; Financial
Statements
Item 12. Disclosure of Commission Position on
Indemnification for Securities Act Liabilities... Not applicable
</TABLE>
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
SUBJECT TO COMPLETION, DATED JUNE 6, 1996
PROSPECTUS
2,500,000 SHARES
[LOGO]
PROGENITOR, INC.
COMMON STOCK
All of the 2,500,000 shares of Common Stock offered hereby are being sold by
Progenitor, Inc. ("Progenitor" or the "Company"). Prior to the Offering, there
has been no public market for the Common Stock of the Company. It is currently
estimated that the initial public offering price will be between $11.00 and
$13.00 per share. See "Underwriting" for a discussion of the factors to be
considered in determining the initial public offering price. The Company has
applied to list the Common Stock for quotation on the Nasdaq National Market
under the symbol "PGEN."
THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK. SEE "RISK
FACTORS" BEGINNING ON PAGE 5.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
UNDERWRITING
DISCOUNTS AND PROCEEDS TO
PRICE TO PUBLIC COMMISSIONS(1) COMPANY(2)
<S> <C> <C> <C>
Per Share.............................. $ $ $
Total(3)............................... $ $ $
</TABLE>
(1) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended. See "Underwriting."
(2) Before deducting expenses of the Offering payable by the Company, estimated
at $850,000.
(3) The Company has granted the Underwriters a 30-day option to purchase up to
375,000 additional shares of Common Stock on the same terms and conditions
set forth above, solely to cover over-allotments, if any. If such option is
exercised in full, the total Price to Public, Underwriting Discounts and
Commissions and Proceeds to Company will be $ , $ and $ ,
respectively. See "Underwriting."
------------------------
The shares of Common Stock offered by the Underwriters are subject to prior
sale, receipt and acceptance by them and subject to the right of the
Underwriters to reject any order in whole or in part and certain other
conditions. It is expected that delivery of such shares will be made at the
offices of the agent of Vector Securities International, Inc., in New York, New
York on or about , 1996.
---------------------
Vector Securities International, Inc.
Tucker Anthony
Incorporated
Genesis Merchant Group
Securities
, 1996
<PAGE>
[A vertical flow chart illustrating Progenitor's functional genomics approach
for the discovery of novel genes, receptors, and other proteins. The four
primary boxes are arranged in the following order with arrows indicating their
sequence in time: Developmental Biology Platform, Factor Isolation/Proprietary
Genomics, Novel Embryonic Genes/Receptors/Factors, and Drug Leads and Targets.
Below the last primary box are five types of discoveries pursued by the Company
(Leptin Receptors, DEL-1 Gene, BFU-e Factor, New Leads and Other Opportunities)
with possible applications beneath each type of discovery.]
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK OF
THE COMPANY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
Progenitor and the Progenitor logo are trademarks of the Company. This
Prospectus may contain trademarks and servicemarks of other parties.
2
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION AND FINANCIAL STATEMENTS AND NOTES THERETO APPEARING ELSEWHERE IN
THIS PROSPECTUS, INCLUDING INFORMATION UNDER "RISK FACTORS."
THE COMPANY
Progenitor is a functional genomics company engaged in the discovery,
characterization and validation of novel genes, receptors and related proteins
as therapeutic leads and targets for the treatment of major diseases. The
Company's functional genomics approach combines developmental biology expertise
and proprietary technology with gene sequencing and other molecular biology
techniques to accelerate the discovery process. Using its developmental biology
approach to functional genomics, the Company has made several discoveries,
including the discovery of the B219 leptin receptor, for which it filed patent
applications in September and December 1994. Leptin is believed to have roles in
blood cell formation ("hematopoiesis"), reproduction and obesity. The Company
has entered into a collaboration with Chiron Corporation ("Chiron") for the
development and commercialization of the Company's proprietary T7T7 gene
delivery system, and a collaboration with Novo Nordisk A/S ("Novo Nordisk") for
the isolation, development and commercialization of blood cell growth factors.
Developmental biology is the study of the genetic and cellular events that
control the development of a single fertilized egg into a fully-formed, complex
organism. Many genes involved in the process of cell growth and differentiation
may be expressed exclusively, or at enhanced levels, during certain stages of
early development and may become inactive in the cells of adult organisms. By
comparing the sequential expression of genes from one stage of early development
to the next, the Company believes it can identify, isolate and sequence specific
genes, receptors and other proteins which play key roles in cell growth and
differentiation. The Company believes that early developmental cells and tissues
are a rich and largely unexploited source for genes and proteins that may lead
to the development of treatments for diseases characterized by aberrant cell
growth and differentiation, such as cancer, blood and immune system disorders
and degenerative diseases associated with aging.
Progenitor possesses a number of proprietary technologies that it uses in
its discovery programs. The Company has developed proprietary methods and cell
lines using mouse (murine) embryonic stem cells for studying the differentiation
of cells in the early development of tissues and organs. Progenitor also has
developed proprietary techniques to isolate, grow, maintain in culture and
differentiate cells from the murine yolk sac. The yolk sac contains the earliest
cells in development that are committed to differentiate into the blood, immune
and vascular systems. In addition, Progenitor has developed proprietary gene
cloning and screening techniques to identify genes that encode receptors for
growth factors important in hematopoiesis and cancer therapy, as well as the
growth and development of neural and other tissues.
Progenitor has used its functional genomics approach to make three principal
discoveries. In addition to its B219 leptin receptor discovery, the Company has
discovered, in collaboration with Vanderbilt University ("Vanderbilt"), the
developmentally-regulated endothelial cell locus ("DEL-1") gene. The DEL-1 gene
is involved in the early growth and development of blood vessels and bone. The
Company believes that DEL-1 may have potential applications in diseases
accompanied by excessive blood vessel formation, such as cancer, and in diseases
such as cardiovascular and other disorders that may be treatable by stimulating
blood vessel growth. The Company also has identified a murine burst forming
units-erythroid ("BFU-e") red blood cell growth factor activity. The Company
believes that a BFU-e factor may be useful in the development of treatments for
a variety of blood disorders.
The Company currently is focusing its efforts and resources on the
discovery, characterization and validation process and intends to enter into
strategic alliances for the development and commercialization of drugs and other
products based on its discoveries. In March 1995, the Company entered into an
agreement with Chiron for the development and commercialization of the Company's
T7T7 gene delivery system for selected applications. In May 1995, the Company
entered into a development and commercialization agreement with Novo Nordisk
relating to the BFU-e red blood cell growth factor.
The Company was incorporated in Delaware in February 1992 as a
majority-owned subsidiary of Interneuron Pharmaceuticals, Inc. ("Interneuron"),
and commenced operations in May 1992. Following the Offering, Interneuron will
own 51.2% of the Company's Common Stock (48.7% if the Underwriters'
over-allotment option is exercised in full). The Company's executive offices are
located at 1507 Chambers Road, Columbus, Ohio 43212, and its telephone number is
(614) 488-6688.
3
<PAGE>
THE OFFERING
<TABLE>
<S> <C>
Common Stock offered................................ 2,500,000 shares
Common Stock to be outstanding after the Offering... 7,293,819 shares (1)
Use of proceeds..................................... To fund research and development activities, to
fund expansion of facilities and acquisition of
equipment, and for working capital and general
corporate purposes. See "Use of Proceeds."
Proposed Nasdaq National Market symbol.............. PGEN
</TABLE>
SUMMARY FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEARS ENDED SEPTEMBER 30, MARCH 31,
------------------------------- --------------------
1993 1994 1995 1995 1996
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues...................................................... $ -- $ -- $ 2,821 $ 5 $ 912
Expenses:
Research and development.................................... 3,116 4,113 4,228 1,661 1,706
General and administrative.................................. 1,339 1,275 1,116 534 691
Interest.................................................... 246 648 352 304 56
--------- --------- --------- --------- ---------
Total expenses............................................ 4,701 6,036 5,696 2,499 2,453
--------- --------- --------- --------- ---------
Net loss...................................................... $ (4,701) $ (6,036) $ (2,875) $ (2,494) $ (1,541)
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Pro forma net loss per share (2).............................. $ (0.63) $ (0.33)
--------- ---------
--------- ---------
Pro forma weighted average shares outstanding (2)............. 4,536,481 4,676,327
--------- ---------
--------- ---------
</TABLE>
<TABLE>
<CAPTION>
MARCH 31, 1996
-----------------------------------------
PRO FORMA
ACTUAL PRO FORMA (3) AS ADJUSTED (4)
--------- ------------- ---------------
<S> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents........................................... $ 27 $ 177 $ 27,227
Working capital..................................................... (800) (650) 26,400
Total assets........................................................ 1,087 1,237 28,287
Long-term obligations............................................... 1,214 232 232
Deficit accumulated during development stage........................ (16,215) (16,215) (16,215)
Total stockholders' equity (deficit)................................ (1,291) (159) 26,891
</TABLE>
- ------------------
(1) Based on shares outstanding as of May 31, 1996 and an assumed initial public
offering price of $12.00 per share. Excludes: (i) 606,625 shares of Common
Stock issuable upon exercise of stock options outstanding as of May 31,
1996, with a weighted average exercise price of $6.62 per share; (ii) 26,126
shares of Common Stock issuable upon exercise of warrants outstanding as of
May 31, 1996, with an exercise price of $9.18 per share; and (iii) 661,700
additional shares of Common Stock reserved for issuance under the Company's
stock plans. See "Capitalization," "Management -- Stock Plans" and
"Description of Capital Stock."
(2) See Note 1 of Notes to Financial Statements for information concerning the
computation of pro forma net loss per share.
(3) Gives pro forma effect, assuming an initial public offering price of $12.00
per share, to: (i) the conversion of a convertible debenture and promissory
note held by Interneuron into Common Stock upon the closing of the Offering;
and (ii) the purchase by The Ohio University Foundation of 25,000 shares of
Common Stock at a price of $6.00 per share, pursuant to a stock purchase
right. See "Capitalization" and "Certain Transactions."
(4) Pro forma as adjusted to give effect to the issuance and sale of the
2,500,000 shares of Common Stock offered hereby (after deducting estimated
underwriting discounts and commissions and the estimated expenses of the
Offering) and the receipt and application of the estimated net proceeds
therefrom at an assumed initial public offering price of $12.00 per share.
See "Use of Proceeds" and "Capitalization."
------------------
EXCEPT AS OTHERWISE NOTED, ALL INFORMATION IN THIS PROSPECTUS, INCLUDING
FINANCIAL INFORMATION, SHARE AND PER SHARE DATA: (I) REFLECTS THE CONSUMMATION
OF A 1-FOR-2 REVERSE STOCK SPLIT TO BE EFFECTED PRIOR TO OR CONCURRENTLY WITH
THE OFFERING; (II) REFLECTS THE AUTOMATIC CONVERSION OF ALL OUTSTANDING SHARES
OF PREFERRED STOCK INTO AN AGGREGATE OF 1,774,014 SHARES OF COMMON STOCK UPON
THE CLOSING OF THE OFFERING; (III) REFLECTS THE CONVERSION OF THE CONVERTIBLE
DEBENTURE AND PROMISSORY NOTE HELD BY INTERNEURON INTO AN AGGREGATE OF 142,026
SHARES OF COMMON STOCK (BASED ON THE OUTSTANDING BALANCE AS OF MAY 31, 1996)
UPON THE CLOSING OF THE OFFERING; (IV) REFLECTS THE PURCHASE BY THE OHIO
UNIVERSITY FOUNDATION OF 25,000 SHARES OF COMMON STOCK AT A PRICE OF $6.00 PER
SHARE, PURSUANT TO A STOCK PURCHASE RIGHT; AND (V) ASSUMES AN INITIAL PUBLIC
OFFERING PRICE OF $12.00 PER SHARE AND NO EXERCISE OF THE UNDERWRITERS'
OVER-ALLOTMENT OPTION. SEE "DESCRIPTION OF CAPITAL STOCK" AND "UNDERWRITING."
4
<PAGE>
RISK FACTORS
IN ADDITION TO THE OTHER INFORMATION IN THIS PROSPECTUS, THE FOLLOWING
FACTORS SHOULD BE CONSIDERED CAREFULLY BY POTENTIAL INVESTORS IN EVALUATING AN
INVESTMENT IN THE SHARES OF COMMON STOCK OFFERED HEREBY. THIS PROSPECTUS
CONTAINS, IN ADDITION TO HISTORICAL INFORMATION, FORWARD-LOOKING STATEMENTS THAT
INVOLVE RISKS AND UNCERTAINTIES. THE COMPANY'S ACTUAL RESULTS COULD DIFFER
SIGNIFICANTLY FROM THOSE DISCUSSED IN THE FORWARD-LOOKING STATEMENTS.
UNCERTAINTIES RELATING TO TECHNOLOGICAL APPROACH OF THE COMPANY. To date,
the Company has not developed or commercialized any products. There can be no
assurance that the Company's functional approach to genomics will enable it to
discover genes, receptors or other proteins with functions relevant to the
treatment of diseases. The Company's discovery programs are primarily directed
to complex diseases. There is limited scientific understanding relating to the
role of genes, receptors and other proteins in these diseases and relatively few
products based on genetic discoveries have been developed and commercialized to
date. Accordingly, even if the Company is successful in identifying genes,
receptors or other proteins associated with specific diseases, there can be no
assurance that the Company will be successful in marketing its discoveries to
pharmaceutical companies for use in the development of therapeutic and
diagnostic products or that any such resulting products will be successfully
commercialized.
The development of products based on the Company's discoveries also will be
subject to the risks of failure inherent in the development of products based on
new technologies. These risks include the possibility that any such products
will be found to be ineffective or toxic, or otherwise fail to receive necessary
regulatory approvals; that any such products will be difficult to manufacture on
a commercial scale or will be uneconomical to market; that proprietary rights of
third parties will preclude the Company or its strategic partners from marketing
any such products; or that third parties will market superior or equivalent
products. As a result, there can be no assurance that the Company's research and
development activities or those of its licensees and collaborators will result
in any commercially viable products. See "-- Uncertainty of Patents and
Proprietary Rights," "Business -- Progenitor's Functional Genomics Approach,"
"-- Progenitor's Discovery Programs" and "-- Strategic Collaboration
Agreements."
Genomics, biotechnology, developmental biology and pharmaceutical
technologies have undergone and are expected to continue to undergo rapid and
significant change. The Company's future success will depend in large part on
its ability to maintain a competitive position with respect to these
technologies. Rapid technological developments by the Company or others may
result in compounds, products or processes becoming obsolete before the Company
recovers any expenses it incurs in connection with the development of such
products. See "-- Intense Competition; Rapid Technological Change" and "Business
- -- Competition."
HISTORY OF OPERATING LOSSES; ANTICIPATION OF FUTURE LOSSES. Progenitor is a
development stage company that commenced operations in May 1992. As of March 31,
1996, the Company had an accumulated deficit of approximately $16.2 million and
a working capital deficit of $800,000. Losses have resulted from expenses
incurred in the Company's research and development programs and, to a lesser
extent, from general and administrative and interest expenses. Neither the
Company nor any of its collaborative partners has yet developed any products
which have entered clinical trials or generated any revenues to the Company. To
date, all of the Company's revenues have resulted from payments from strategic
partners and a development grant from a governmental agency. The Company expects
to incur substantial additional losses over the next several years and expects
cumulative losses to increase substantially as it expands its research and
development activities. Payments from collaborative partners, license fees,
payments under governmental grants and investment income, in each case, if any,
are expected to be the only sources of revenue for the foreseeable future. The
Company has not yet generated any revenues from the achievement of milestones
under its collaborative agreements. Royalties or other revenues from commercial
sales of products are not expected for a number of years, if at all. To achieve
profitable
5
<PAGE>
operations, Progenitor, alone or with others, must successfully discover
medically relevant genes, receptors or related proteins and thereafter use these
discoveries to develop products, conduct preclinical studies and clinical
trials, obtain required regulatory approvals and successfully manufacture,
introduce and market such products, of which there can be no assurance. The time
required to reach or sustain profitability is highly uncertain and there can be
no assurance that the Company will be able to achieve profitability on a
sustained basis, if at all. Moreover, if profitability is achieved, the level of
profitability cannot be predicted and may vary significantly from quarter to
quarter. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations."
EARLY STAGE OF DEVELOPMENT; UNCERTAINTY OF FINAL PRODUCT
DEVELOPMENT. Significant discovery, research and development efforts will be
required prior to the time any of the Company's genes, receptors or other
protein discoveries may develop into product candidates or result in products
that may be brought to the market, if at all. Products, if any, resulting from
the Company's research and development programs are not expected to be
commercially available for a number of years, if at all. Significant additional
research and development efforts and extensive preclinical studies and clinical
trials will be required prior to submission of any regulatory application for
commercial use. There can be no assurance that the Company or any collaborator
or licensee will be permitted to undertake clinical trials of any potential
products, if developed, that sufficient numbers of patients can be enrolled for
such trials, or that such clinical trials will demonstrate that the products
tested are safe and efficacious. Even if clinical trials are successful, there
can be no assurance that the Company or any collaborator or licensee will obtain
regulatory approval for any indication, that an approved product can be produced
and distributed in commercial quantities at reasonable costs or gain acceptance
for use by physicians and other health care providers, or that any potential
products will be successfully marketed at prices that would permit the Company
to operate profitably. The failure of any of these events to occur could have a
material adverse effect on the Company's business, financial condition and
results of operations. See "Business -- Progenitor's Discovery Programs" and "--
Government Regulation."
NEED FOR ADDITIONAL CAPITAL; UNCERTAINTY OF ADDITIONAL FUNDING. The Company
expects negative cash flow from operations to continue and to increase for the
foreseeable future. The Company will require substantial additional funds to
continue research and development, conduct preclinical studies and clinical
trials, conduct activities relating to commercialization of rights it has
retained in strategic collaboration agreements, if any, and expand
administrative capabilities. The Company estimates that at its planned rate of
spending, any existing cash and cash equivalents, together with the net proceeds
from the Offering and the interest income thereon, will be sufficient to meet
its capital requirements for at least the next 18 months. There can be no
assurance, however, that the Company's assumptions regarding its future levels
of expenditures and operating losses will prove accurate. The Company's future
capital requirements will depend on many factors, including the scientific
progress in and the breadth of the Company's research and development programs;
the results of research and development, preclinical studies and clinical trials
conducted by the Company or its collaborative partners or licensees, if any; the
acquisition and licensing of products and technologies; the Company's ability to
establish and maintain relationships with corporate and academic collaborators;
competing technological and market developments; the time and costs involved in
filing, prosecuting, defending and enforcing patent and intellectual property
claims; the receipt of licensing or milestone fees from any current or future
collaborative arrangements, if established; the continued funding of
governmental research grants; the timing of regulatory approvals; and other
factors. To the extent undertaken by the Company, the time and costs involved in
conducting preclinical studies and clinical trials, seeking regulatory
approvals, and scaling-up manufacturing and commercialization activities also
would increase the Company's capital needs.
The Company will need to raise substantial additional capital to fund
operations. Prior to this Offering, Interneuron has funded substantially all of
the Company's operations. Interneuron, however, is under no obligation to
provide, and the Company does not expect that Interneuron will provide, any
additional funds in the future. The Company intends to seek additional funding
through public or
6
<PAGE>
private equity or debt financing and collaborative arrangements. There can be no
assurance that additional financing will be available when needed, or that, if
available, such financing will be available on terms acceptable to the Company.
If additional funds are raised by issuing equity securities, dilution to
existing stockholders will result. In addition, in the event that additional
funds are obtained through arrangements with collaborative partners, such
arrangements may require the Company to relinquish rights to certain of its
technologies or potential products that it would otherwise seek to develop or
commercialize itself. If funding is insufficient at any time in the future, the
Company may be required to delay, scale back or eliminate some or all of its
research and development programs or cease operations. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations --
Liquidity and Capital Resources."
DEPENDENCE ON COLLABORATORS. The Company's strategy for development and
commercialization of drugs and other products from its discoveries depends upon
the formation of various corporate collaborations. The Company expects to rely
on collaborative partners to research and develop potential products, conduct
clinical trials, obtain regulatory approvals, and manufacture and market any
resulting products. The Company has entered into agreements with Chiron and Novo
Nordisk. The Company's revenues will be dependent on the success of the products
developed by these and any future collaborative partners. The failure of the
Company's collaborative partners to develop, obtain regulatory approval of, and
market products incorporating the Company's discoveries would have a material
adverse effect on the Company's business, financial condition and results of
operations. There can be no assurance that any collaborative partner will commit
sufficient development resources, technology, regulatory expertise,
manufacturing, marketing and other resources towards developing, promoting and
commercializing products incorporating the Company's discoveries. Further,
competitive conflicts may arise among these third parties that could prevent
them from working cooperatively with the Company. The amount and timing of
resources devoted to these activities by such parties could depend on the
achievement of milestones by the Company and generally will be controlled by
such partners. In addition, the Company's collaborative agreements generally
provide the Company's collaborator with the right to terminate the agreement in
part or in full under certain circumstances. Any such termination would
substantially reduce the likelihood that the collaborative product candidate
will be developed, would obtain regulatory approvals and be manufactured and
successfully commercialized and any such termination could, therefore, have a
material adverse effect on the Company's business, financial condition and
results of operations. The Company's royalties from sales of products licensed
to collaborators, if any, may be less than the revenues the Company could have
generated had it commercialized and marketed products itself. There can be no
assurance that the Company will be successful in establishing additional or
maintaining existing collaborative arrangements, that any collaborative partners
will be successful in developing and commercializing products or that the
Company will generate revenues from royalties sufficient to offset the Company's
significant investment in research and development and other costs. See
"Business -- Strategic Collaboration Agreements" and "-- License Agreements."
INTENSE COMPETITION; RAPID TECHNOLOGICAL CHANGE. Research in the field of
genomics is highly competitive. Competitors of the Company in the genomics area
include, among others, public companies such as Genome Therapeutics Corporation,
Human Genome Sciences, Inc., Incyte Pharmaceuticals, Inc., Millennium
Pharmaceuticals, Inc. ("Millennium"), Myriad Genetics, Inc. and Sequana
Therapeutics, Inc., as well as private companies and major pharmaceutical
companies and universities and other research institutions, including those
receiving funding from the federally funded Human Genome Project. A number of
entities are attempting to rapidly identify and patent randomly-sequenced genes
and gene fragments. In addition, certain other entities are pursuing a gene
identification, characterization and product development strategy based on gene
mapping. The Company's competitors may discover, characterize or develop
important genes in advance of the Company, which could have a material adverse
effect on any related Company discovery program. The Company expects competition
to intensify in genomics research as technical advances in the field are made
and become more widely known.
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In addition, the Company faces, and will continue to face, intense
competition from pharmaceutical and biotechnology companies, as well as academic
and research institutions and governmental agencies. The Company is subject to
significant competition from organizations that are pursuing the same or similar
technologies as those which constitute the Company's discovery platform, and
from organizations that are pursuing pharmaceutical or other products that are
or may be competitive with the Company's or its collaborators' or licensees'
potential products. Many of the organizations competing with the Company have
greater capital resources, larger research and development staffs and
facilities, greater experience in drug discovery and development, obtaining
regulatory approvals and pharmaceutical product manufacturing, and greater
marketing capabilities than the Company.
The Company also is aware of a number of companies and institutions that are
developing or considering the development of potential gene-based and cell-based
treatments, including early-stage gene therapy companies, large pharmaceutical
companies, academic and research institutions, government agencies and other
health care providers. Many of these entities are more advanced than the Company
in their product development programs for gene and cell-based therapies and have
more experience with regulatory agencies and clinical trials. The fields of gene
and cell-based therapies are new and many competitive approaches are being taken
to discover practical means by which these technologies can be made into
products. Rapid technologic advances could result in actual or proposed
technologies, products or processes of the Company becoming obsolete prior to
successful commercialization.
The Company is and will continue to be reliant on strategic partners for
support of its programs, including preclinical and clinical development,
manufacturing and marketing of its initial products. Each of the Company's
present and future partners is conducting multiple product development efforts
within each disease or technology area that is the subject of the alliance with
the Company. Any product candidate or technology of the Company, therefore, may
be subject to internal competition with a potential product under development or
technology platform under evaluation by a strategic partner. See "--Dependence
on Collaborators," "Business -- Background -- Overview of Genomics,"
"-- Progenitor's Functional Genomics Approach" and "-- Competition."
UNCERTAINTY OF PATENTS AND PROPRIETARY RIGHTS. The Company's success will
depend to a significant extent on its ability to obtain and enforce patents,
maintain trade secret protection and operate without infringing on the
proprietary rights of third parties. Because the patent positions of
biotechnology and pharmaceutical companies can be highly uncertain and
frequently involve complex legal and factual questions, the breadth of claims
allowed in biotechnology and pharmaceutical patents or their enforceability
cannot be predicted. Commercialization of pharmaceutical products can be subject
to substantial delays as a result of the time required for product development,
testing and regulatory approval. The value of any patents issued or licensed to
the Company may depend upon the remaining term of patent protection available at
the time products that utilize the patented technology are commercialized.
The Company actively pursues a policy of seeking patent protection for a
number of its proprietary products and technologies. Progenitor has licensed
from Ohio University one U.S. patent and pending U.S. patent applications
relating to stem cell technology and to gene delivery technology (and has
received a notice of allowance relating to a gene delivery technology
application), along with certain corresponding foreign patent applications and
one issued foreign patent. Progenitor has filed six U.S. patent applications
relating to certain leptin receptors (including various isoforms of the leptin
receptor), including patent applications filed in September and December 1994.
In March 1996, Progenitor's international patent application covering certain
leptin receptors was published. The Company believes that there may be
significant litigation regarding patent and other intellectual property rights
relating to leptin and leptin receptors. The Company is aware that Millennium
has filed a patent application relating to a receptor for leptin and its use in
obesity applications, and has licensed to Hoffmann-La Roche Inc. rights to
develop certain therapeutics for obesity using Millennium's discovery of a
leptin receptor. There can be no assurance that Millennium's patent application,
or additional patent applications filed by Millennium or others, will not result
in issued patents covering a leptin receptor, the leptin protein or other
ligands, or any of their respective uses, including obesity. There can be no
assurance that
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the invention by Millennium will be accorded an invention date later than
Progenitor's invention date or that any patent will issue to Progenitor.
Progenitor's failure to obtain a patent on a leptin receptor or the issuance of
a patent to a third party covering a leptin receptor, the leptin protein or
other ligands, or any of their respective uses, including obesity, could have a
material adverse effect on the Company's business, financial condition and
results of operations.
A number of other groups are attempting to identify partial gene sequences
and full-length genes, the functions of which have not been characterized. The
public availability of partial gene sequence information before the Company
applies for patent protection on a corresponding full-length gene could
adversely affect the Company's ability to obtain patent protection with respect
to such gene. To the extent any patents issue to other parties on such partial
or full-length genes, and as other patents issue with the expansion of the
biotechnology industry, the risk increases that the potential products and
processes of the Company or its collaborative partners may give rise to claims
of patent infringement.
The patent positions of pharmaceutical and biotechnology firms, including
the Company, are uncertain and involve complex legal and factual questions for
which important legal principles are largely unresolved, particularly in regard
to human therapeutic uses. Substantial periods of time pass before the United
States Patent and Trademark Office (the "USPTO") responds to patent
applications. In addition, the coverage claimed in a patent application can be
significantly reduced before a patent is issued. Consequently, the Company does
not know whether any of its pending or future patent applications will result in
the issuance of patents or, if any patents are issued, whether the patents will
be subjected to further proceedings limiting their scope, and whether they will
provide significant proprietary protection or competitive advantage, or will be
circumvented or invalidated. Because patent applications in the United States
are maintained in secrecy until patents issue and patent applications in certain
other countries generally are not published until more than 18 months after they
are filed, and since publication of discoveries in scientific or patent
literature often lags behind actual discoveries, the Company cannot be certain
that it or any licensor was the first creator of inventions covered by pending
patent applications or that it or such licensor was the first to file patent
applications on such inventions.
There can be no assurance that the Company's patents, if issued, would be
held valid or enforceable by a court or that such patents would cover products
or technologies of the Company's competitors. Competitors or potential
competitors may have filed applications for or received patents, and may obtain
additional patents and proprietary rights relating to compounds or processes
competitive with those of the Company. To protect its proprietary rights, the
Company may be required to participate in interference proceedings declared by
the USPTO to determine priority of invention, which could result in substantial
cost to the Company. Moreover, even if the Company's patents issue, there can be
no assurance that they will provide sufficient proprietary protection or will
not be later limited, circumvented or invalidated. Accordingly, there can be no
assurance that the Company will develop proprietary technologies that are
patentable, that the Company's patent applications will result in patents being
issued or that, if issued, patents will afford protection against competitors
with similar technology or products, nor can there be any assurance that the
Company's patents will be held valid by a court of competent jurisdiction.
In addition to patent protection, the Company also relies to a significant
extent upon trade secret protection for its unpatented confidential and
proprietary information including many of the Company's key discovery
technologies, such as its proprietary methods of isolating and manipulating
murine ES cells. There can be no assurance that others will not independently
develop substantially equivalent proprietary information and techniques or
otherwise gain access to the Company's trade secrets or disclose such
technology. To protect its trade secrets, the Company requires its employees,
consultants, scientific advisors and parties to collaborative agreements to
execute confidentiality agreements upon the commencement of employment, the
consulting relationship or the collaboration with the Company. In the case of
employees, the agreements also provide that all inventions resulting from work
performed by them while employed by the Company will be the exclusive property
of the Company. There can be no assurance, however, that these agreements will
provide meaningful protection of the Company's trade secrets or adequate
remedies in the event of unauthorized use or disclosure
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of such information, that the Company can meaningfully protect its rights in
such unpatented proprietary technology through other means, that any obligation
to maintain the confidentiality of such proprietary technology will not be
breached by employees, consultants, advisors, collaborative partners or others,
or that others will not independently develop substantially equivalent
technology. The loss of trade secret protection of any of the Company's key
discovery technologies would materially and adversely affect the Company's
competitive position and could have a material adverse effect on the Company's
business, financial condition and results of operations. Finally, disputes may
arise as to the ownership of proprietary rights to the extent that outside
collaborators or consultants apply technological information developed
independently by them or others to Company projects or apply Company technology
to other projects and, if adversely determined, such disputes could have a
material adverse effect on the Company's business, financial condition and
results of operations.
The Company may incur substantial costs if it is required to defend itself
in patent suits brought by third parties or if the Company initiates such a suit
to enforce the Company's patents or to determine the scope and validity of other
parties' proprietary rights. Any legal action against the Company or its
collaborators or licensees claiming damages and seeking to enjoin commercial
activities relating to the affected products and processes could, in addition to
subjecting the Company to potential liability for damages, require the Company
or its collaborators or licensees to obtain a license or licenses in order to
continue to manufacture or market the affected products and processes. There can
be no assurance that the Company or its collaborators or licensees would prevail
in any such action or that any license required under any such patents would be
made available on commercially acceptable terms, if at all. Any adverse outcome
of such litigation could have a material adverse effect on the Company's
business, financial condition and results of operations. In addition, if the
Company becomes involved in such litigation, it could consume a substantial
portion of the Company's managerial and financial resources. The Company is
unable to predict how courts will resolve any future issues relating to the
validity and scope of its patents should they be challenged.
It is uncertain whether any third-party patents will require the Company to
alter its products or processes, obtain licenses, cease certain activities or
pay substantial damages. If any licenses are required, there can be no assurance
that the Company will be able to obtain any such license on commercially
acceptable terms, if at all. Failure by the Company or its collaborators and
licensees to obtain a license to any technology required to commercialize the
Company's discoveries may have a material adverse effect on the Company's
business, financial condition and results of operations. See "Business --
Patents and Proprietary Rights."
UNCERTAINTIES RELATED TO CLINICAL TRIALS. Before seeking regulatory
approvals for the commercial sale of any products that may be developed
incorporating the Company's discoveries, the Company or its collaborative
partners will be required to demonstrate through preclinical studies and
clinical trials that such products are safe and effective for use in the target
indications. To date, no product candidates incorporating the Company's
discoveries have entered clinical trials. The results from preclinical studies
and early clinical trials may not be indicative of results that will be obtained
in large-scale testing, and there can be no assurance that any clinical trials,
if undertaken, will demonstrate sufficient safety and efficacy to obtain the
requisite regulatory approvals or will result in marketable products. Clinical
trials also are often conducted with patients having advanced stages of disease.
During the course of treatment, these patients can die or suffer other adverse
medical effects for reasons that may not be related to the product candidate
being tested but which can nevertheless affect clinical trial results. A number
of companies in the biotechnology industry have suffered significant setbacks in
advanced clinical trials, even after achieving promising results in earlier
trials. If products developed by the Company or its collaborative partners are
not shown to be safe and effective in clinical trials, the resulting delays in
developing other product candidates and conducting related preclinical testing
and clinical trials, as well as the need for additional financing, would have a
material adverse effect on the Company's business, financial condition and
results of operations. See "Business -- Progenitor's Discovery Programs."
GOVERNMENT REGULATION; NO ASSURANCE OF REGULATORY APPROVAL. Prior to
marketing, any new drug or other product developed by the Company or its
collaborative partners must undergo an extensive
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regulatory approval process in the United States and other countries. This
regulatory process, which includes preclinical studies and clinical trials, and
may include post-marketing studies, of each product candidate to establish its
safety and efficacy, usually takes many years and require the expenditure of
substantial resources. Preclinical tests include laboratory evaluations and will
require animal studies conducted in accordance the United States Food and Drug
Administration's ("FDA") current Good Laboratory Practices ("cGLP") regulations
to assess the product's potential safety and efficacy. Data obtained from
preclinical studies and clinical trials are susceptible to varying
interpretations that could delay, limit or prevent regulatory approval. Delays
or rejections also may be encountered based upon changes in FDA policies for
drug or biologic approval during the period of product development and FDA
regulatory review of each new drug application ("NDA") submitted in the case of
new pharmaceutical agents, or product license application ("PLA") in the case of
biologics. Product development of new pharmaceuticals is highly uncertain, and
unanticipated developments, clinical or regulatory delays, unexpected adverse
side effects or inadequate therapeutic efficacy could slow or prevent the
product development efforts of the Company and its collaborators or licensees,
and have a materially adverse effect on the Company's business, financial
condition and results of operations. There can be no assurance that regulatory
approval will be obtained for any drugs or other products developed by the
Company or its collaborative partners or licensees. Furthermore, regulatory
approval may entail limitations on the indicated use of a drug or other product.
Because certain of the products likely to result from the Company's discovery
programs involve the application of new technologies and may be based upon a new
therapeutic approach, such products may be subject to substantial additional
review by various government regulatory authorities other than the FDA and, as a
result, regulatory approvals may be obtained more slowly than for products using
conventional technologies. Under current guidelines, proposals to conduct
clinical research involving gene therapy at institutions supported by the
National Institutes of Health ("NIH") must be approved by the Recombinant DNA
Advisory Committee ("RAC") and the NIH. Furthermore, gene therapies are
relatively new technologies and have not been tested extensively in humans. The
regulatory requirements governing these products and related clinical procedures
for their use are uncertain and are subject to change.
Even if regulatory approval is obtained, a marketed product and its
manufacturer are subject to continuing review. Among the conditions for product
approval and continued marketing approval is that the quality control and
manufacturing procedures of the Company or its collaborative partners conform to
the FDA's current good manufacturing practice ("cGMP") regulations which must be
followed at all times. In complying with cGMP requirements, manufacturers must
expend time, money and effort on a continuing basis in production, record
keeping and quality control. Manufacturing establishments, both domestic and
foreign, are subject to inspection by or under the authority of the FDA and by
other federal, state and local agencies. Failure to pass such inspections may
subject the manufacturer to possible FDA actions such as the suspension of
manufacturing, seizure of the product, withdrawal of approval or other
regulatory sanctions. The FDA also may require the manufacturer to recall a
product from the market.
Discovery of previously unknown problems with a product may have adverse
effects on the Company's business, including withdrawal of the product from the
market. Violations of regulatory requirements at any stage, including
preclinical studies and clinical trials, the approval process or post-approval,
may result in various adverse consequences to the Company, including the FDA's
delay in approval or refusal to approve a product, withdrawal of an approved
product from the market or the imposition of criminal penalties against the
manufacturer and NDA or PLA holder. The Company has not submitted an
investigational new drug application ("IND") for any product candidate, and no
product candidate has been approved for commercialization in the United States
or elsewhere. The Company intends to rely primarily on its strategic partners to
file INDs and generally direct the regulatory approval process. No assurance can
be given that the Company or any of its strategic partners will be able to
conduct clinical testing or obtain the necessary approvals from the FDA or other
regulatory authorities for any products. Failure to obtain required governmental
approvals will delay or preclude the Company's strategic partners from marketing
drugs or other products developed by the
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Company or limit the commercial use of such products and could have a material
adverse effect on the Company's business, financial condition and results of
operations. See "Business -- Government Regulation."
DEPENDENCE ON KEY PERSONNEL. The Company is highly dependent upon the
principal members of its scientific and management staff and the services of Dr.
Douglass B. Given, President and Chief Executive Officer, and Dr. H. Ralph
Snodgrass, Vice President, Research and Chief Scientific Officer, in particular.
The Company has no employment agreements with its executive officers other than
Dr. Given. The loss of any of these persons could have a material adverse effect
on the Company's business, financial condition and results of operations. In
order to support the Company's existing operations, the Company will be required
to hire and retain additional management, administrative and financial
personnel, including a chief financial officer. Recruiting and retaining
qualified scientific personnel and advisors to perform research and development
work in the future also will be critical to the Company's success. There can be
no assurance that the Company will be able to attract and retain such personnel
and advisors on acceptable terms given the competition among numerous
pharmaceutical, biotechnology and other companies, universities and other
research institutions for experienced personnel and advisors. In addition,
Progenitor's anticipated growth and expansion are expected to place increased
demands on the Company's resources and management skills. The failure of the
Company's existing personnel to handle such increased demands or the Company's
failure to attract and to retain additional personnel with such capabilities
could have a material adverse effect on the Company's business, financial
condition and results of operations. See "Management."
DEPENDENCE ON RESEARCH COLLABORATORS AND SCIENTIFIC ADVISORS. The Company
has relationships with collaborators at academic and other institutions who
conduct research in cooperation with the Company. Such collaborators are not
employees of the Company. All of the Company's consultants are employed by
employers other than the Company and may have commitments to, or consulting or
advisory contracts with, other entities that may limit their availability to the
Company. As a result, the Company has limited control over their activities and,
except as otherwise required by its collaboration and consulting agreements, can
expect only limited amounts of their time to be dedicated to the Company's
activities. The potential success of the Company's discovery programs depends in
part on continued collaborations with researchers at academic and other
institutions. There can be no assurance that the Company will be able to
negotiate additional acceptable collaborations at academic and other
institutions or that its existing collaborations will be maintained or be
successful.
The Company's research collaborators and scientific advisors sign agreements
which provide for confidentiality of the Company's proprietary information and
results of studies. There can be no assurance, however, that the Company will be
able to maintain the confidentiality of its technology and other confidential
information in connection with every collaboration, and any unauthorized
dissemination of the Company's confidential information could have a material
adverse effect on the Company's business, financial condition and results of
operations. See "-- Uncertainty of Patents and Proprietary Rights."
LACK OF COMMERCIAL MANUFACTURING, DISTRIBUTION OR MARKETING
CAPABILITIES. To date, the Company has focused its hiring on research
scientists and a small administrative and managerial staff and has made no
investment in manufacturing, marketing or product sales resources. The Company
does not generally expect to engage directly in manufacturing, marketing or sale
of products and intends to contract with others in order to pursue the
commercialization of any products developed based upon its discoveries. There
can be no assurance that the Company will be able to enter into such
arrangements on acceptable terms, if at all. The Company will be dependent to a
significant extent on collaborative partners, licensees or other entities for
development, manufacturing and commercialization of products. If the Company is
unable to obtain or retain third-party manufacturing on commercially acceptable
terms, its ability to commercialize products may be delayed or foreclosed. The
Company's dependence upon third parties for the manufacture, marketing and sales
of products may adversely affect the Company's ability to develop and deliver
products on a timely and competitive basis. The Company's current facilities and
staff are inadequate for commercial production and distribution of products. If
the
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Company chooses in the future to engage directly in the development,
manufacturing and marketing of certain products, it will require substantial
additional funds, personnel and production and other facilities. There can be no
assurance that any of these resources will be available to the Company on
acceptable terms, if at all. See "-- Need for Additional Capital; Uncertainty of
Additional Funding" and "-- Dependence on Collaborators."
UNCERTAINTY OF HEALTH CARE REFORM MEASURES AND THIRD-PARTY
REIMBURSEMENT. The business and financial condition of pharmaceutical and
biotechnology companies will continue to be affected by the efforts of
third-party payors, such as government health administration authorities,
private health insurers and other organizations, to contain or reduce the cost
of health care. In the United States and in certain foreign jurisdictions there
have been, and the Company expects that there will continue to be, a number of
legislative and regulatory proposals aimed at changing the health care system.
While the Company cannot predict whether any such legislative or regulatory
proposals will be adopted or the effect that such proposals may have on its
business, the consideration or approval of such proposals could have a material
adverse effect on the trading and market price of the Common Stock or on the
Company's ability to raise capital or to obtain additional collaborative
partners, and the adoption of such proposals could have a material adverse
effect on the Company's business, financial condition and results of operations.
In both domestic and foreign markets, successful commercial sales of the
Company's or its collaborators' or licensees' potential products will depend in
part on the availability of reimbursement from government and health
administrative authorities, private health insurers or other third-party payors.
Third-party payors are increasingly challenging the price and cost-effectiveness
of medical products and services. Significant uncertainty exists as to the
reimbursement status of newly approved health care products. Future legislation
and regulations affecting the pricing of pharmaceuticals could further limit
reimbursement for medical products and services. There can be no assurance that
any of the Company's potential products will be considered cost-effective or
that adequate third-party reimbursement will be available to enable Progenitor,
its collaborators or licensees to maintain price levels sufficient to realize an
appropriate return on its investment. In addition, the trend toward managed
health care in the United States and the concurrent growth of managed care
organizations, such as health maintenance organizations, which could control or
significantly influence the purchase of health care services and products, as
well as legislative proposals to reduce government insurance programs, could
result in pricing pressure for any products that might be developed by the
Company. If adequate reimbursement is not provided by government and other
third-party payors for the Company's or its collaborative partners' or
licensees' potential products, there would be a material adverse effect on the
Company's business, financial condition and results of operations. See "Business
- -- Government Regulation."
RISK OF PRODUCT LIABILITY. The testing, manufacture, marketing and sale of
pharmaceutical and other products entail the inherent risk of liability claims
or product recalls and associated adverse publicity. Clinical trials and sales
by the Company or its collaborators or licensees of potential products
incorporating the Company's discoveries may expose the Company to potential
liability resulting from the use of such products. Such liability might result
from claims made directly by consumers or by regulatory agencies, pharmaceutical
companies or others selling such products. The Company currently has a limited
amount of clinical trial and product liability insurance coverage through
Interneuron. The Company will seek to obtain its own coverage upon completion of
this Offering and to maintain and appropriately increase such coverage as
clinical development of any product candidates progresses and if and when its
products are ready to be commercialized. There can be no assurance that the
Company will be able to obtain such insurance or, if obtained, that such
insurance can be acquired at a reasonable cost or in sufficient amounts to
protect the Company against such liability. Certain of the Company's license
agreements require it to indemnify licensors against product liability claims
arising from products developed using the licensed technology. Also, certain of
these agreements and other collaboration agreements require the Company to
maintain minimum levels of insurance coverage. The failure to maintain product
liability coverage, the occurrence of any product liability claim or a recall of
products of the Company or its collaborators or licensees, if developed, could
inhibit or prevent commercialization of
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products being developed by the Company and could have a material adverse effect
on the Company's business, financial condition and results of operations. In
addition, to the extent any product liability claim exceeds the amount of any
insurance coverage, the Company's business, financial condition and results of
operations could be materially and adversely affected. See "Business --
Strategic Collaboration Agreements" and "-- Product Liability Insurance."
NO PRIOR TRADING MARKET; NO ASSURANCE OF ACTIVE TRADING MARKET; POTENTIAL
VOLATILITY OF STOCK PRICE. Prior to this Offering, there has been no public
market for the Common Stock and there can be no assurance that an active public
market for the Common Stock will develop or be sustained after the Offering. The
initial public offering price will be determined through negotiations between
the Company and representatives of the Underwriters and there can be no
assurance that future market prices for the Common Stock will equal or exceed
the initial public offering price. The stock market has experienced significant
price and volume fluctuations that are often unrelated to the operating
performance of particular companies. In addition, the market prices of
securities of other biotechnology companies in the past have been highly
volatile and the market price of the Company's Common Stock also may experience
such volatility. Factors such as the results of preclinical studies and clinical
trials by the Company or its collaborative partners, licensees or competitors,
evidence of the safety or efficacy of products of the Company or its
competitors, announcements of technological innovations or new discoveries,
product opportunities or products by the Company or its competitors, changes in
governmental regulations or third-party reimbursement policies, developments in
patent or other proprietary rights of the Company or its competitors,
fluctuations in the Company's operating results and changes in general market
conditions for biotechnology stocks could have an adverse impact on the future
price of the Common Stock. See "Underwriting."
CONTROL OF COMPANY BY, AND POTENTIAL CONFLICTS OF INTEREST WITH,
INTERNEURON. Following the Offering, Interneuron will own 51.2% of the
outstanding Common Stock of the Company (48.7% if the Underwriters'
over-allotment option is exercised in full). Accordingly, Interneuron will
continue to control the election of directors of the Company and voting with
respect to matters submitted to stockholders, including extraordinary corporate
transactions such as a merger or sale of substantially all of the Company's
assets. Interneuron's ownership of a substantial block of the Company's voting
stock could have the effect of delaying or preventing sales of additional
securities of the Company or a sale of the Company or other change of control
supported by the other stockholders of the Company. In addition, the Company may
be subject to various risks arising from Interneuron's influence over the
Company, including conflicts of interest relating to new business opportunities
that could be pursued by the Company or by Interneuron and its other affiliates,
and significant corporate transactions for which stockholder approval is
required. See "Certain Transactions -- Relationship with Interneuron" and
"Principal Stockholders."
ANTI-TAKEOVER CONSIDERATIONS. After the Offering, the Company will have the
authority to issue up to 5,000,000 shares of Preferred Stock in one or more
series and to fix the powers, designations, preferences and relative rights
thereof without any further vote or action by the Company's stockholders. The
Company has no current plans to issue shares of Preferred Stock. However, the
rights of the holders of Common Stock will be subject to, and may be adversely
affected by, the rights of the holders of any Preferred Stock that may be issued
in the future. The issuance of Preferred Stock would dilute the voting power of
holders of Common Stock and could have the effect of delaying, deferring or
preventing a change in control of the Company. In addition, all outstanding
options under the Company's 1992 Stock Option Plan and 1996 Stock Incentive Plan
become exercisable following certain changes in control of the Company. The
Company is subject to the provisions of Section 203 of the Delaware General
Corporation Law, which could delay or make more difficult a merger, tender offer
or proxy contest involving the Company and may have the effect of discouraging
takeovers which could be in the best interest of certain stockholders. In
general, the statute prohibits a publicly held Delaware corporation from
engaging in a "business combination" with an "interested stockholder" for a
period of three years after the date of the transaction in which the person
became an interested stockholder, unless the business combination is approved in
a prescribed manner. There can be no assurance that this provision,
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the rights of option holders and the Company's ability to issue Preferred Stock
will not have an adverse effect on the market value of the Company's stock in
the future. See "Management -- Stock Plans" and "Description of Capital Stock."
HAZARDOUS AND RADIOACTIVE MATERIALS; ENVIRONMENTAL MATTERS. Research and
development conducted by the Company involves the controlled use of hazardous
materials, chemicals, biological materials and radioactive compounds. The
Company, and its collaborative partners, as applicable, are subject to
international, federal, state and local laws and regulations governing the use,
manufacture, storage, handling and disposal of such substances and certain waste
products. The Company believes that the safety procedures relating to its
in-house research and development and production efforts comply in all material
respects with the standards currently prescribed by such laws and regulations.
However, the risk of accidental contamination or injury from these materials
cannot be completely eliminated. In the event of such an accident, the Company
could be held liable for any resulting damages, and any such liability could
exceed the Company's resources. Moreover, there can be no assurance that the
Company's collaborative partners are and will continue to be in compliance with
such standards or that the Company will not be required to incur significant
costs in the future to comply with new or modified standards. In such events,
there would be a material adverse effect on the Company's business, financial
condition and results of operations. See "Business -- Government Regulation."
MANAGEMENT DISCRETION AS TO USE OF PROCEEDS. The Company anticipates using
the net proceeds of the Offering primarily to fund research and development
activities, the expansion of facilities, working capital and general corporate
purposes. The Company also may use the net proceeds of the Offering for other
purposes, including the acquisition of technology rights, products or
businesses. Accordingly, management will retain broad discretion over the use of
the net proceeds of the Offering. There can be no assurance as to the timing or
application of such proceeds, or that the application thereof will not have a
material adverse effect on the Company's future business, financial condition or
results of operations. See "Use of Proceeds."
SHARES ELIGIBLE FOR FUTURE SALE; REGISTRATION RIGHTS; POSSIBLE ADVERSE
EFFECT ON STOCK PRICE. Sales of substantial amounts of Common Stock in the
public market after the Offering, or the possibility of such sales occurring,
could adversely affect prevailing market prices for the Common Stock or the
future ability of the Company to raise capital through an offering of equity
securities. Of the 7,293,819 shares to be outstanding after the Offering, the
2,500,000 shares of Common Stock offered hereby will be freely tradeable without
restriction in the public market unless such shares are held by "affiliates" of
the Company, as that term is defined in Rule 144 under the Securities Act of
1933, as amended (the "Securities Act"). The remaining 4,793,819 shares of
Common Stock are restricted securities under the Securities Act and may be sold
in the public market only if they are registered or if they qualify for
exemption from registration under Rule 144 or 701 under the Securities Act.
Pursuant to "lock-up" agreements, all of the Company's executive officers and
directors and certain stockholders who collectively hold 715,279 of such
restricted securities have agreed not to offer, sell or otherwise dispose of any
of their restricted securities for a period of 180 days from the date of this
Prospectus without the prior written consent of Vector Securities International,
Inc. Interneuron will hold 3,736,017 of such restricted securities and has
agreed pursuant to a lock-up agreement not to offer, sell or otherwise dispose
of any of its restricted securities for a period of 365 days from the date of
this Prospectus without the prior written consent of Vector Securities
International, Inc. The Company has also agreed that it will not offer, sell or
otherwise dispose of Common Stock for a period of 180 days from the date of this
Prospectus without the prior written consent of Vector Securities International,
Inc. other than pursuant to existing stock option plans. Upon termination of the
lock-up agreements, approximately 321,071 and 3,593,991 of the restricted
securities will be available for immediate sale beginning 181 days and 366 days,
respectively, after the date of this Prospectus, in the public market subject to
certain volume, manner of sale and other limitations under Rule 144 and 329,200
shares will be eligible for immediate sale 181 days after the date of this
Prospectus without limitation under Rule 144(k). Vector Securities
International, Inc. may, at its sole discretion and at any time without notice,
release all or any portion of the shares subject to such lock-up agreements. The
Securities and Exchange Commission has proposed revisions to Rule 144, the
effect of
15
<PAGE>
which would be to shorten the holding periods under Rule 144. If enacted, these
proposed revisions would increase, potentially substantially, the number of
shares that would be available for sale in the public market following the
expiration of the lock-up agreements. See "Description of Capital Stock" and
"Shares Eligible for Future Sale."
After the Offering, holders of an aggregate of 261,273 shares of Common
Stock will be entitled to certain rights with respect to the registration of
such shares for resale under the Securities Act. In addition, the Company
intends to file a Registration Statement on Form S-8 after the date of this
Prospectus to register an aggregate of 606,625 shares of Common Stock reserved
for issuance upon exercise of outstanding options and an aggregate of 661,700
shares of Common Stock reserved for issuance pursuant to future option grants
under the Company's 1992 Stock Option Plan and the Company's 1996 Stock
Incentive Plan. If such registrations cause a large number of shares to be
registered and sold in the public market, such sales could have an adverse
effect on the market price for the Company's Common Stock. See "Description of
Capital Stock -- Registration Rights" and "Shares Eligible for Future Sale."
DILUTION. Investors purchasing shares of Common Stock in the Offering will
incur immediate and substantial dilution equal to $8.28 per share. Additional
dilution is likely to occur upon the exercise of outstanding warrants and stock
options. See "Dilution."
ABSENCE OF DIVIDENDS. The Company has never declared or paid cash dividends
on its Common Stock. The Company currently intends to retain any future earnings
to finance the growth and development of its business and, therefore, does not
anticipate paying any cash dividends in the foreseeable future. See "Dividend
Policy."
16
<PAGE>
USE OF PROCEEDS
The net proceeds from the sale of the 2,500,000 shares of Common Stock
offered hereby at an assumed initial public offering price of $12.00 per share
are estimated to be approximately $27.1 million ($31.2 million if the
Underwriters' over-allotment option is exercised in full), after deducting
estimated underwriting discounts and commissions and estimated expenses of the
Offering payable by the Company.
The Company anticipates using the net proceeds of the Offering primarily to
fund research and development activities, to fund the expansion of facilities
and acquisition of equipment, and for working capital and general corporate
purposes. The Company may also use a portion of the net proceeds of the Offering
to acquire technology rights, products or businesses. No such transactions
involving a material amount of consideration are being negotiated as of the date
of this Prospectus. The amounts actually expended for each purpose will depend
on numerous factors, including the scientific progress in and the breadth of the
Company's research and development programs; the results of research and
development, preclinical studies and clinical trials conducted by the Company or
its collaborative partners or licensees, if any; the acquisition and licensing
of products and technologies; the Company's ability to establish and maintain
relationships with corporate and academic collaborators; competing technological
and market developments; the time and costs involved in filing, prosecuting,
defending and enforcing patent and intellectual property claims; the receipt of
licensing or milestone fees from any current or future collaborative
arrangements, if established; the continued funding of governmental research
grants; the timing of regulatory approvals, if any; and other factors. The
Company estimates that, at its planned rate of spending, the net proceeds of the
Offering and the interest income thereon, together with any existing cash and
cash equivalents, will be sufficient to meet its capital requirements for at
least the next 18 months. There can be no assurance, however, that the Company's
assumptions regarding its future levels of expenditures and operating losses
will prove accurate. Pending such uses, the Company intends to invest the net
proceeds of the Offering in investment grade, interest-bearing securities. See
"Risk Factors -- History of Operating Losses; Anticipation of Future Losses,"
"-- Need for Additional Capital; Uncertainty of Additional Funding," "--
Management Discretion as to Use of Proceeds" and "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Liquidity and
Capital Resources."
DIVIDEND POLICY
The Company has never declared or paid cash dividends on shares of its
Common Stock. The Company currently intends to retain any future earnings for
its business and, therefore, does not anticipate paying any dividends in the
foreseeable future.
17
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company as of March
31, 1996 (i) on an actual basis as if the 1-for-2 reverse stock split had
occurred prior to March 31, 1996; (ii) on a pro forma basis to give effect
(assuming an initial public offering price of $12.00 per share) upon the closing
of the Offering to (a) the automatic conversion of all outstanding shares of
Preferred Stock into an aggregate of 1,774,014 shares of Common Stock, (b) the
conversion of a convertible debenture and promissory note held by Interneuron
into an aggregate of 81,819 shares of Common Stock (based on the outstanding
balance as of March 31, 1996) and (c) the purchase by The Ohio University
Foundation of 25,000 shares of Common Stock at a price of $6.00 per share,
pursuant to a stock purchase right; and (iii) on a pro forma basis as adjusted
to reflect the issuance and sale of the 2,500,000 shares of Common Stock offered
hereby (after deducting estimated underwriting discounts and commissions and the
estimated expenses of the Offering), and the receipt and application of the
estimated net proceeds therefrom. See "Use of Proceeds" and "Description of
Capital Stock."
<TABLE>
<CAPTION>
MARCH 31, 1996
------------------------------------
PRO FORMA AS
ACTUAL PRO FORMA ADJUSTED
--------- ----------- ------------
(IN THOUSANDS, EXCEPT SHARE DATA)
<S> <C> <C> <C>
Long-term obligations....................................................... $ 1,214 $ 232 $ 232
Stockholders' equity:
Preferred Stock, Series A, $.01 par value: 2,120,000 shares authorized;
2,020,496 shares issued and outstanding, actual; no shares authorized,
issued or outstanding, pro forma and pro forma as adjusted............... 20 -- --
Preferred Stock, Series B, $.01 par value: 880,000 shares authorized;
349,000 shares issued and outstanding, actual; no shares authorized,
issued or outstanding, pro forma and pro forma as adjusted............... 3 -- --
Preferred Stock, $.001 par value: 5,000,000 shares authorized; no shares
issued or outstanding, actual, pro forma and pro forma as adjusted....... -- -- --
Common Stock, $.001 par value: 39,000,000 shares authorized; 2,852,779
shares issued and outstanding, actual; 4,733,612 shares issued and
outstanding, pro forma; 7,233,612 shares issued and outstanding, pro
forma as adjusted (1).................................................... 3 5 7
Additional paid-in capital................................................ 14,898 16,051 43,099
Deficit accumulated during development stage.............................. (16,215) (16,215) (16,215)
--------- ----------- ------------
Total stockholders' equity (deficit).................................... (1,291) (159) 26,891
--------- ----------- ------------
Total capitalization.................................................. $ (77) $ 73 $ 27,123
--------- ----------- ------------
--------- ----------- ------------
</TABLE>
- ------------------------
(1) Excludes: (i) 606,625 shares of Common Stock issuable upon exercise of stock
options outstanding as of May 31, 1996, with a weighted average exercise
price of $6.62 per share; (ii) 26,126 shares of Common Stock issuable upon
exercise of warrants outstanding as of May 31, 1996, with an exercise price
of $9.18 per share; and (iii) 661,700 additional shares of Common Stock
reserved for issuance under the Company's stock plans. See "Management --
Stock Plans" and "Description of Capital Stock."
18
<PAGE>
DILUTION
Pro forma net tangible book value per share is equal to the Company's net
tangible assets (tangible assets of the Company less total liabilities) divided
by 4,733,612 shares of Common Stock outstanding as of March 31, 1996 (as if the
1-for-2 reverse split of the Company's Common Stock had occurred prior to March
31, 1996), assuming (i) the automatic conversion of all outstanding shares of
Preferred Stock into an aggregate of 1,774,014 shares of Common Stock upon the
closing of the Offering, (ii) the conversion of a convertible debenture and
promissory note held by Interneuron into an aggregate of 81,819 shares of Common
Stock upon the closing of the Offering (based on the outstanding balance as of
March 31, 1996) and (iii) the purchase by The Ohio University Foundation of
25,000 shares of Common Stock at a price of $6.00 per share, pursuant to a stock
purchase right. The pro forma net tangible book value of the Company as of March
31, 1996 was approximately negative $159,000 or negative $.03 per share. Without
taking into account any other changes in pro forma net tangible book value other
than to give effect to the sale of the 2,500,000 shares of Common Stock in the
Offering (at an assumed initial public offering price of $12.00 per share) and
the receipt and application of the estimated net proceeds therefrom, the pro
forma net tangible book value of the Company as of March 31, 1996 would have
been approximately $26.9 million or $3.72 per share. This represents an
immediate increase in pro forma net tangible book value of $3.75 per share to
existing stockholders and an immediate dilution of $8.28 per share to new
investors. The following table sets forth the per share dilution to new
investors in the Offering:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share..................... $ 12.00
Pro forma net tangible book value per share as of March 31,
1996............................................................. $ (.03)
Increase per share attributable to new investors.................. 3.75
---------
Pro forma net tangible book value per share after the Offering...... 3.72
---------
Dilution per share to new investors................................. $ 8.28
---------
---------
</TABLE>
The following table summarizes, on a pro forma basis as of March 31, 1996,
the differences between existing stockholders and new investors with respect to
the number of shares of Common Stock purchased from the Company, the total
consideration paid and the average price paid per share (at an assumed initial
public offering price of $12.00 per share and before deducting estimated
underwriting discounts and commissions and estimated offering expenses):
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
----------------------- -------------------------- PRICE PER
NUMBER PERCENT AMOUNT PERCENT SHARE
---------- ----------- ------------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Existing stockholders....................... 4,733,612 65.0% $ 16,056,077 34.9% $ 3.39
New investors............................... 2,500,000 35.0 30,000,000 65.1 12.00
---------- ----- ------------- -----
Total................................... 7,233,612 100.0% $ 46,056,077 100.0%
---------- ----- ------------- -----
---------- ----- ------------- -----
</TABLE>
The foregoing tables reflect no exercise of outstanding options or warrants
subsequent to March 31, 1996. As of May 31, 1996, there were (i) 606,625 shares
of Common Stock issuable upon exercise of outstanding stock options, with a
weighted average exercise price of $6.62 per share; and (ii) 26,126 shares of
Common Stock issuable upon exercise of outstanding warrants, with an exercise
price of $9.18 per share. To the extent these options or warrants are exercised,
there will be further dilution to the new investors. Furthermore, the Company
has reserved 661,700 additional shares of Common Stock for issuance under its
stock plans. The Company's currently outstanding shares of Series A and B
Preferred Stock have antidilution and conversion adjustment provisions that will
increase or decrease the number of shares of Common Stock outstanding as of
March 31, 1996, above or below the number of shares used in the calculation of
dilution to new investors in the event that the initial public offering price is
less than or greater than $12.00 per share. See "Capitalization," "Management --
Stock Plans," "Description of Capital Stock -- Preferred Stock" and "-- Stock
Purchase Right and Warrants."
19
<PAGE>
SELECTED FINANCIAL DATA
The following table sets forth selected financial data of the Company. The
selected financial data for each of the three years in the period ended
September 30, 1995 and the balance sheet data as of September 30, 1994 and 1995
are derived from the financial statements of the Company which have been audited
by Coopers & Lybrand L.L.P., independent accountants. The selected statements of
operations data for the period from May 8, 1992 (date of inception) to September
30, 1992, and the balance sheet data as of September 30, 1992 and 1993, are
derived from audited financial statements not included herein. The statement of
operations data for the six months ended March 31, 1995 and 1996 and for the
period from May 8, 1992 (date of inception) to March 31, 1996 and the balance
sheet data as of March 31, 1996, have been derived from unaudited financial
statements which include all adjustments, consisting solely of normal recurring
adjustments, which management considers necessary to fairly present the
financial information set forth herein. The results for the six months ended
March 31, 1995 and 1996, are not necessarily indicative of the results to be
expected for future periods. The selected financial data should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the Financial Statements and related Notes
thereto and other financial information included elsewhere herein.
<TABLE>
<CAPTION>
MAY 8, 1992
MAY 8, 1992 (DATE OF
(DATE OF SIX MONTHS ENDED INCEPTION)
INCEPTION) TO YEARS ENDED SEPTEMBER 30, MARCH 31, TO
SEPTEMBER 30, -------------------------------- --------------------- MARCH 31,
1992 1993 1994 1995 1995 1996 1996
--------------- --------- --------- ---------- --------- ---------- ------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues........................ $ -- $ -- $ -- $ 2,821 $ 5 $ 912 $ 3,733
Expenses:
Research and development...... 775 3,116 4,113 4,228 1,661 1,706 13,938
General and administrative.... 264 1,339 1,275 1,116 534 691 4,685
Interest...................... 23 246 648 352 304 56 1,325
------- --------- --------- ---------- --------- ---------- ------------
Total expenses.............. 1,062 4,701 6,036 5,696 2,499 2,453 19,948
------- --------- --------- ---------- --------- ---------- ------------
Net loss...................... $ (1,062) $ (4,701) $ (6,036) $ (2,875) $ (2,494) $ (1,541) $ (16,215)
------- --------- --------- ---------- --------- ---------- ------------
------- --------- --------- ---------- --------- ---------- ------------
Pro forma net loss per
share (1)...................... $ (.63) $ (.33)
---------- ----------
---------- ----------
Pro forma weighted average
shares outstanding (1)......... 4,536,481 4,676,327
---------- ----------
---------- ----------
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 30,
------------------------------------------
1992 1993 1994 1995 MARCH 31, 1996
--------- --------- --------- --------- --------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents............................. $ 35 $ 11 $ 10 $ 1,174 $ 27
Working capital....................................... (379) (497) (988) (269) (800)
Total assets.......................................... 568 94 977 2,395 1,087
Long-term obligations................................. 1,210 6,158 11,767 705 1,214
Deficit accumulated during development stage.......... (1,062) (5,763) (11,799) (14,674) (16,215)
Total stockholders' equity (deficit).................. (1,057) (5,755) (11,791) (101) (1,291)
</TABLE>
- --------------------------
(1) See Note 1 of Notes to Financial Statements for information concerning the
computation of pro forma net loss per share.
20
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
THE FOLLOWING DISCUSSION AND ANALYSIS OF THE RESULTS OF OPERATIONS AND
FINANCIAL CONDITION OF THE COMPANY SHOULD BE READ IN CONJUNCTION WITH THE
FINANCIAL STATEMENTS AND NOTES THERETO INCLUDED ELSEWHERE IN THIS PROSPECTUS.
OVERVIEW
A development stage company, Progenitor was incorporated in February 1992
and commenced operations in May 1992. The Company has devoted substantially all
of its resources since inception to research and development programs. To date,
all of the Company's revenues have resulted from payments from collaborative
partners and a grant from the U.S. Department of Commerce's National Institute
of Standards and Technology Advanced Technology Program ("ATP") that was awarded
to the Company in November 1994. Payments from collaborative partners, license
fees, payments under governmental grants and investment income, in each case, if
any, are expected to be the only sources of revenue for the foreseeable future.
Certain payments under collaborative arrangements are contingent upon the
Company meeting certain milestones. Payments under collaborative or licensing
arrangements, if any, will be subject to significant fluctuation in both timing
and amount and therefore the Company's results of operations for any period may
not be comparable to the results of operations for any other period. The Company
has not yet received any royalties or other revenues from the sale of products
or services and does not expect to receive any such revenues for the next
several years, if at all. As of March 31, 1996, the Company had a total
stockholders' deficit of $1.3 million, including an accumulated deficit of $16.2
million. See "Risk Factors -- History of Operating Losses; Anticipation of
Future Losses."
Interneuron provided the initial funding of the Company and had invested
$12.5 million in Progenitor in equity and debt financings through March 31,
1996. Interneuron owns a majority of the outstanding capital stock of the
Company and will own 51.2% (48.7% if the Underwriters' over-allotment option is
exercised in full) of the outstanding Common Stock following the closing of the
Offering. Interneuron has no obligation to invest any additional funds in the
Company, and the Company does not expect Interneuron to do so. Progenitor raised
an additional $1.6 million in net proceeds through a private placement of
Preferred Stock in fiscal 1995. The Company intends to seek additional funding
through public or private equity or debt financing and collaborative
arrangements. There can be no assurance, however, that additional financing will
be available when needed, or that, if available, such financing will be
available on terms acceptable to the Company. See "Risk Factors -- Need for
Additional Capital; Uncertainty of Additional Funding" and "Certain Transactions
- -- Relationship With Interneuron."
Significant discovery, research and development efforts will be required
prior to the time any of the Company's gene, receptor or protein discoveries may
develop into product candidates or result in products that may be brought to the
market, if at all. Products, if any, resulting from the Company's research and
development programs are not expected to be commercially available for a number
of years, if at all, even if any are successfully developed and proven safe and
effective. Significant additional research and development efforts and extensive
preclinical studies and clinical trials will be required prior to submission of
any regulatory application for commercial use. See "Risk Factors -- Early Stage
of Development; Uncertainty of Final Product Development."
RESULT OF OPERATIONS
SIX MONTHS ENDED MARCH 31, 1995 AND 1996
Revenues increased from $5,000 for the six months ended March 31, 1995 to
$912,000 for the six months ended March 31, 1996. The increase in revenues was
attributable to a $500,000 payment received
21
<PAGE>
in January 1996 from Chiron pursuant to the collaboration agreement entered into
in March 1995, and a payment of $400,000 under the Company's ATP grant which
provides for aggregate payments of $2.0 million over three years.
Research and development expense was $1.7 million for the six months ended
March 31, 1995 and 1996. This expense consisted primarily of salaries and
consulting fees, sponsored research projects and expenditures for laboratory
supplies and animal facilities. The Company expects research and development
expense to increase in the future. Continued growth in such expense, however,
will be dependent on the availability of capital.
General and administrative expense increased from $534,000 for the six
months ended March 31, 1995 to $691,000 for the six months ended March 31, 1996.
The increase was largely due to increases in annual salaries, legal fees, travel
expenses and occupancy charges. The Company expects general and administrative
expenses to increase in the future as it expands its operations and hires
additional employees.
Interest expense decreased from $304,000 for the six months ended March 31,
1995 to $57,000 for the six months ended March 31, 1996. From its inception, the
Company has incurred interest expense resulting from the debt funding provided
by Interneuron. The decrease in interest expense for the six month period ended
March 31, 1996 was attributable to a decrease in the Company's average
outstanding borrowings, due to the conversion into equity in January 1995 of
$11.5 million of the Company's debt payable to Interneuron.
FISCAL YEARS ENDED SEPTEMBER 30, 1993, 1994 AND 1995
The Company recognized no revenue for fiscal 1993 and 1994. Revenue
increased to $2.8 million in fiscal 1995. The Company's revenues in fiscal 1995
were attributable to an initial cash payment of $2.5 million under the Company's
collaboration agreement with Chiron and recognition of $260,000 of revenue
related to a payment under the Company's ATP grant.
Research and development expense increased from $3.1 million for fiscal
1993, to $4.1 million for fiscal 1994 and to $4.2 million for fiscal 1995. The
increase in fiscal 1994 was largely due to the addition of senior research and
development management in late fiscal 1993 as well as annual salary increases,
increased short-term sponsored research commitments and increased depreciation
expense resulting from additions of laboratory, office and computer equipment.
The increase in research and development expense in fiscal 1995 was largely
attributable to the incurrence of $750,000 as reimbursement for certain start-up
manufacturing costs related to the Chiron collaboration.
General and administrative expense was $1.3 million for fiscal 1993 and
fiscal 1994, and decreased to $1.1 million for fiscal 1995. The slight decrease
between fiscal 1994 and fiscal 1995 resulted from a reimbursement from
Interneuron of employee benefit expenses.
Interest expense increased from $245,000 for fiscal 1993 to $648,000 for
fiscal 1994 and decreased to $352,000 for fiscal 1995. The increase from fiscal
1993 to fiscal 1994 was due to an increase in the Company's borrowings from
Interneuron. The decrease in interest expense in fiscal 1995 was due to the
conversion into equity of $11.5 million of the Company's debt payable to
Interneuron, resulting in a lower average debt balance in fiscal 1995. The
Company began incurring interest expense related to equipment financings in
fiscal 1994. The Company expects to continue financing equipment purchases
through sale-leaseback arrangements, if favorable terms are available, which
could result in an increase in interest expense.
No income tax provision or benefit has been provided for federal income tax
purposes as the Company has incurred losses since inception. As of September 30,
1995, the Company had deferred tax assets of $5.7 million. Because of
uncertainties surrounding the realization of these favorable tax attributes in
future tax periods, all of the net deferred tax assets have been fully offset by
a valuation allowance. As of September 30, 1995, the Company had total net
operating loss carryforwards of $13.1
22
<PAGE>
million and tax credits of approximately $468,000, both of which expire on dates
through 2009. The Company's ability to utilize the net operating loss
carryforwards in future years may be limited in some circumstances, including
significant changes in ownership interests, due to certain provisions of the
Internal Revenue Code of 1986, as amended.
LIQUIDITY AND CAPITAL RESOURCES
Since inception, Progenitor has financed its operations primarily through
debt and equity financings from Interneuron of $12.5 million through March 31,
1996, a private financing of $1.6 million in net proceeds from the sale of
preferred stock in fiscal 1995 and a private financing from Ohio University in
February, 1996 of $350,000. In addition, the Company received a $2.5 million
payment from Chiron in April 1995 and received a payment of $65,000 in August
1995 under the ATP grant. The Company also completed sale-leaseback transactions
generating $88,000 in cash during fiscal 1995. The Company used these sources of
financing to fund its operations. During fiscal 1995 and the first six months of
fiscal 1996, respectively, the Company used $1.6 million and $2.0 million of
cash in operating activities. As of March 31, 1996, the Company had cash and
cash equivalents totaling $27,000.
The Company expects negative cash flow from operations to continue and to
increase for the foreseeable future. The Company will require substantial
additional funds to continue research and development, conduct preclinical
studies and clinical trials, conduct activities relating to commercialization of
rights it has retained in strategic collaboration agreements, if any, and expand
administrative capabilities. The Company estimates that, at its planned rate of
spending, its existing cash and cash equivalents, together with the net proceeds
from the Offering and the interest income thereon, will be sufficient to meet
its capital requirements for at least the next 18 months. There can be no
assurance, however, that the Company's assumptions regarding its future levels
of expenditures and operating losses will prove accurate. The Company's future
capital requirements will depend on many factors, including the scientific
progress in and the breadth of the Company's research and development programs;
the results of research and development, preclinical studies and clinical trials
conducted by the Company or its collaborative partners or licensees, if any; the
acquisition and licensing of products and technologies; the Company's ability to
establish and maintain relationships with corporate and academic collaborators;
competing technological and market developments; the time and costs involved in
filing, prosecuting, defending and enforcing patent and intellectual property
claims; the receipt of licensing or milestone fees from any current or future
collaborative arrangements, if established; the continued funding of
governmental research grants; the timing of regulatory approvals, if any; and
other factors. To the extent undertaken by the Company, the time and costs
involved in conducting preclinical studies and clinical trials, seeking
regulatory approvals, and scaling-up manufacturing and commercialization
activities also would increase the Company's capital needs. The Company will
need to raise substantial additional capital to fund operations. Prior to this
Offering, Interneuron has funded substantially all of the Company's operations.
Interneuron, however, is under no obligation to provide, and the Company does
not expect that Interneuron will provide, any additional funds in the future.
The Company intends to seek additional funding through public or private
equity or debt financing and collaborative arrangements. There can be no
assurance that additional financing will be available when needed, or that, if
available, such financing will be available on terms acceptable to the Company.
If additional funds are raised by issuing equity securities, dilution to
existing stockholders will result. In addition, in the event that additional
funds are obtained through arrangements with collaborative partners, such
arrangements may require the Company to relinquish rights to certain of its
technologies or potential products that it would otherwise seek to develop or
commercialize itself. If funding is insufficient at any time in the future, the
Company may be required to delay, scale back or eliminate some or all of its
research and development programs or cease operations. See "Risk Factors -- Need
for Additional Capital; Uncertainty of Additional Funding."
23
<PAGE>
BUSINESS
Progenitor is a functional genomics company engaged in the discovery,
characterization and validation of novel genes, receptors and related proteins
as therapeutic leads and targets for the treatment of major diseases. The
Company's functional genomics approach combines developmental biology expertise
and proprietary technology with gene sequencing and other molecular biology
techniques to accelerate the discovery process. Using its developmental biology
approach to functional genomics, the Company has made several discoveries,
including the discovery of the B219 leptin receptor, for which it filed patent
applications in September and December 1994. Leptin is believed to have roles in
blood cell formation ("hematopoiesis"), reproduction and obesity. The Company
has entered into a collaboration with Chiron Corporation ("Chiron") for the
development and commercialization of the Company's proprietary T7T7 gene
delivery system, and a collaboration with Novo Nordisk A/S ("Novo Nordisk") for
the isolation, development and commercialization of blood cell growth factors.
BACKGROUND
Genes play an important role in the structure and function of an organism's
cells and therefore provide a fundamental basis for understanding the causes of,
and potentially developing treatments for, many human diseases. Genes consist of
discrete sequences of DNA that are comprised of unique orderings of nucleotide
base pairs. These genetic sequences provide instructions to the cell for the
synthesis of proteins through a process known as gene expression. Proteins are
responsible for the structure and biological functions of all organisms through
their regulation of, and participation in, cell structure, growth and activity,
as well as their involvement in communications and interactions among cells.
Cells often communicate through receptor-mediated interactions using a protein
or other ligand that binds specifically to a cell-surface protein receptor.
These receptor-mediated communications are fundamental to the differentiation
and organization of cells during the early development of an organism.
Although most cells contain an organism's entire genome, or full set of
genes, only a small fraction of an organism's genome is expressed in each cell.
The genes expressed, as well as the order, level and timing of their expression,
determine the function of different cells within an organism. Intrinsic defects
in genes, or defects caused by external stimuli, may lead to inappropriate or
inadequate production of proteins, resulting in abnormal or degenerative cell
functions that characterize various diseases such as cancer. Therefore,
determining the role of specific genes, receptors and related proteins involved
in cell functions may provide a basis for understanding the causes of, and
developing possible treatments for, these diseases.
OVERVIEW OF DEVELOPMENTAL BIOLOGY
Developmental biology is the study of the genetic and cellular events that
control the transformation of a single fertilized egg into a fully-formed,
complex organism. This transformation is orchestrated by the interactive up- and
down-regulation of gene expression by a small fraction of the organism's genes.
The expression of these regulatory genes results in the synthesis of proteins
that regulate the expression of other genes and control cell functions, direct
cell to cell communications and affect development of cells throughout the
embryo. Many genes involved in the process of cell growth and differentiation
may be expressed exclusively, or at enhanced levels, during certain stages of
early development and may become inactive in the normal cells of fully-formed
organisms. The Company believes that the discovery and characterization of genes
involved in early development, and the proteins they produce, may be used to
develop treatments for a range of diseases characterized by aberrant cell growth
or differentiation.
Developmental biology seeks to define the process and mechanisms by which
non-committed, immature cells (stem cells) differentiate into specialized cells
performing specific functions. For example, the blood and immune systems develop
from a few precursor stem cells that grow in the yolk sac, a tissue
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that surrounds the developing embryo. In early stages of development, each of
these yolk sac stem cells is capable of developing into any of the mature cells
of the blood. However, as development progresses, individual cells differentiate
into specific types of blood and immune cells as a result of patterns of
specific gene expression. The yolk sac also is the source of the earliest
endothelial cell precursors that grow and differentiate to form blood vessels.
These endothelial cell precursors also express proteins that direct the growth
and differentiation of the blood cells. The following diagram illustrates the
development of a single fertilized egg into a seven-day-old mouse embryo.
[Diagram showing five stages in the development of an embryo from a
fertilized egg cell to the blastula stage (fertilized egg cell, cleavage, four
cells, sixteen cells and blastula), above the caption "Embryo Development" and a
drawing of a seven-day-old mouse embryo with its yolk sac and three types of
mature cells that develop from the yolk sac.]
OVERVIEW OF GENOMICS
Recent developments in the study of the genome (genomics), including the
introduction and improvement of automated equipment, have allowed for the
identification of genes that may contribute to or inhibit abnormal or
degenerative cell activity common to certain diseases. Genomics may therefore
represent a useful first step toward discovering and developing effective
diagnostic processes and therapies to detect and treat these diseases.
Traditional genomics companies may be divided broadly into those employing
high-volume gene sequencing techniques and those engaged in gene mapping. Gene
sequencing companies use high-throughput equipment to identify randomly the DNA
sequences of a large number of genes, generally without any initial reference to
their biological function. Individual gene sequences then are selected from
among these randomly generated sequences by using screening techniques based on
the similarity of the selected sequence to sequences within known genes.
Selected genes then are subjected to an extensive series of assays to define
their biological function and determine their potential therapeutic role, if
any. High-throughput gene sequencing as a primary means of gene discovery is
capital intensive, requires extensive effort to sift through the large volume of
identified sequences, and produces a relatively low yield of potential
therapeutic targets.
Gene mapping companies analyze the differences between genetic sequences of
well-defined healthy and diseased populations of genetically related
individuals, in order to identify and sequence genes that may play a role in
specific diseases. Gene mapping is a labor intensive, technically-demanding
process that typically seeks to identify a single disease-related gene. This
approach often is even more complex for diseases involving multiple genes. The
success of this approach depends upon identifying a sufficiently large
population of related individuals with strong evidence of a genetically
transmitted disease. As a result, the use of this approach may be limited to
those diseases where discrete populations of genetically related, healthy and
diseased individuals are readily accessible.
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PROGENITOR'S FUNCTIONAL GENOMICS APPROACH
Progenitor uses developmental biology as a discovery platform to identify
novel genes, receptors and related proteins that control cell growth and
differentiation through which the blood, immune, vascular and other systems are
developed. By comparing the sequential expression of genes from one stage of
early development to the next, the Company believes it can identify, isolate and
sequence specific genes, receptors and related proteins which play functional
roles in this process. The Company believes that its approach provides a rich
and largely unexploited source for the discovery of medically important leads
and targets to develop treatments for diseases characterized by aberrant cell
growth or differentiation. These diseases include cancer, blood and immune
system disorders and degenerative diseases associated with aging.
Progenitor's approach starts with the identification of medically relevant
biological functions that are involved in the differentiation of early-stage
stem cells, tissues, and systems derived from various murine embryonic sources,
including yolk sac stem cells and embryonic stem ("ES") cells. Progenitor has
isolated proprietary cell lines from these murine sources, which it uses for
analyzing relevant biological functions, such as the normal establishment of
organ systems. The Company then develops and applies proprietary assays and
model systems to further characterize a selected biological function. Following
function characterization, the Company uses gene sequencing and other molecular
biology techniques to identify the genes, receptors or other proteins associated
with that function. The Company also uses a wide variety of other classical
developmental and molecular biology techniques, including enhancer traps,
promoter traps, IN SITU hybridization, subtractive cloning, gene knock-outs and
transgenic methods to supplement its proprietary capabilities. These techniques
allow the Company to correlate gene expression with biological function. The
Company then screens for biological activity in adult tissues in order to
validate the potential of isolated genes, receptors and related proteins as
therapeutic leads and targets. The Company believes that its developmental
biology approach to functional genomics will permit more accelerated and
cost-effective discoveries of therapeutically relevant drug development leads
and targets than traditional genomics approaches.
The Company conducts its initial research in murine systems because murine
cells and tissues are accessible and can be manipulated in ways not feasible
with humans cells and tissues. In addition, the genetic composition and patterns
of gene expression in murine cells are highly similar to those in humans. These
similarities enable the Company first to identify and isolate relevant murine
genes, receptors or proteins and then to identify the equivalent human gene,
receptor or protein without the need for complex and time-consuming assays using
human cells and tissues. See "Risk Factors -- Uncertainties Relating to
Technological Approach of the Company."
PROGENITOR'S PROPRIETARY DISCOVERY TECHNOLOGIES
The Company possesses a number of key proprietary technologies that it uses
in its discovery programs. The Company seeks protection of these proprietary
technologies through maintenance of trade secrets and by filing patent
applications, where appropriate. Progenitor's key proprietary technologies
relate to ES cells, yolk sac stem cells, discovery techniques for hematopoietic
growth factors and receptors and gene delivery systems. See "-- Patents and
Proprietary Rights."
EMBRYONIC STEM CELL TECHNOLOGY
The Company has developed proprietary methods and cell lines using murine ES
cells for studying cell differentiation in the development of tissues and
organs. The Company maintains murine ES cells in culture in an undifferentiated
state and then modifies the culture conditions to control the progression of the
ES cells from one stage of development to the next. Using this technique, the
Company is able to control and time the cell differentiation process and can
accurately isolate and modify cells from the
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earliest stages of the formation of the blood, immune, vascular and other
systems. These capabilities enable the Company to take multiple "molecular
snapshots" in order to isolate the genes associated with these critical
developmental stages.
These methods and cell lines also serve as assay systems in which the
expression of discovered genes can be manipulated in order to clarify their
function further. The ES cells can be manipulated in order to study the effect
of the addition or deletion of specific genes on normal cell growth and
differentiation, either IN VITRO or IN VIVO. The Company currently is using this
technology to identify the genes, receptors and related proteins involved in the
development of the blood and vascular systems, and to develop assays for cloning
the murine burst-forming units-erythroid ("BFU-e") red blood cell growth factor
and its human equivalent.
YOLK SAC STEM CELL TECHNOLOGY
Progenitor has developed proprietary techniques to isolate, grow, maintain
in culture and differentiate cells isolated from the murine yolk sac. Yolk sac
stem cells appear later in development than ES cells, and are committed to
develop only into cells of the blood, immune and vascular systems. The Company
believes the mammalian yolk sac to be one of a number of tissues that is an
enriched source of novel genes that may be expressed exclusively or at enhanced
levels during early development.
Progenitor has used cultured yolk sac stem cell lines to identify its murine
BFU-e red blood cell growth factor activity. The Company is using these cell
lines in its program to isolate the factor and clone its gene, and to identify
other genes, receptors and related proteins with potential therapeutic
applications. The Company has a pending patent application relating to cellular
compositions derived from the mammalian yolk sac and methods of obtaining and
using such compositions. See "Risk Factors -- Uncertainty of Patents and
Proprietary Rights."
TECHNOLOGY FOR DISCOVERY OF NOVEL RECEPTORS
Progenitor has developed proprietary gene cloning and screening techniques
to identify novel members of a family of genes that encode receptors for growth
factors involved in normal blood cell formation ("hematopoiesis") as well as in
the growth and development of neural and other tissues. The Company's techniques
rely on enhancements to traditional cloning techniques, including the
development of proprietary screening algorithms used in the selection of a
targeted family of genes. The Company applies its receptor discovery techniques
to enriched gene sources produced through a combination of proprietary cell
lines, freshly isolated cell subpopulations, and proprietary ES cell
differentiation methods. The Company used these methods to discover certain
leptin receptors (including various isoforms of the leptin receptor), for which
it filed U.S. patent applications in September and December 1994. Progenitor
intends to use its discovered receptors to identify and clone novel growth
factors, to screen for small molecules that activate or inhibit receptor
functions, and to identify and purify unique bone marrow cells.
T7T7 GENE DELIVERY SYSTEM
The Company, in collaboration with Ohio University, has developed a
proprietary nonviral gene delivery system known as T7T7. The Company believes
that the T7T7 gene delivery system will enable it to express genes in cells in
order to facilitate the characterization and validation of its discoveries. The
Company believes that its gene delivery system, in addition to other gene
delivery techniques, will allow it to assess efficiently the biological effects
of discovered genes while saving the time and expense of producing and
characterizing quantities of purified protein that would otherwise be required
for these studies.
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The T7T7 system is a nonviral, naked DNA plasmid that can effect expression
of the gene it carries in the cytoplasm of a cell and works IN VIVO and IN VITRO
in both dividing and nondividing cells. In contrast, most other gene delivery
systems must reach the cell nucleus to be effective and function only in
dividing cells.
The Company has filed a U.S. patent application and corresponding foreign
applications relating to the T7T7 gene delivery system. In March 1996, the USPTO
issued a notice of allowance on the patent application for claims covering the
composition of matter and methods for using the T7T7 system. The Company
currently is working with Chiron to explore potential commercialization of the
T7T7 system in clinical gene therapy applications. The Company has licensed
certain technologies incorporated in the T7T7 system from Associated
Universities, Inc. and the Wisconsin Alumni Research Foundation. See "Risk
Factors -- Uncertainty of Patents and Proprietary Rights."
PROGENITOR'S DISCOVERY PROGRAMS
The Company, using its proprietary cell lines and technologies, has made
three principal discoveries to date. These discoveries and their potential
therapeutic applications are described below.
LEPTIN RECEPTORS
The Company has utilized its proprietary receptor discovery technology to
identify gene sequences that encode various isoforms of the B219 leptin
receptor. Leptin receptors recently have been implicated in the regulation of
obesity and the control of appetite and metabolic activity. However, in a recent
publication of NATURE MEDICINE, the Company disclosed findings suggesting that
leptin receptors may play a broader and more fundamental biological role than
has been recognized previously. The Company has demonstrated IN VITRO that
leptin, acting on a leptin receptor, stimulates the growth and differentiation
of certain hematopoietic cells, including cells found in adult bone marrow. In
addition, the Company demonstrated IN VIVO that leptin receptors are expressed
in ovarian cells critical for controlling the growth and development of
reproductive cells, and that leptin is found in high levels in the ovarian fluid
surrounding the reproductive cells. Progenitor believes that these receptors
could provide a means to identify novel proteins, or ligands, and other
molecules that have unique and important therapeutic and diagnostic applications
in obesity, hematopoiesis and reproduction. In addition, leptin receptors
potentially may be used to sort immature blood cells and create subpopulations
of cells expressing a desired receptor for use as therapeutic leads. In order to
characterize further the function of leptin receptors, the Company is
researching the role of the leptin protein in the hematopoietic and immune
systems, as well as its role in the growth and development of reproductive
cells. The Company intends to establish strategic corporate partnerships for the
development and commercialization of its leptin receptors. In September and
December 1994, the Company filed U.S. patent applications relating to the B219
leptin receptor (including varous isoforms of the leptin receptor). There can be
no assurance that patents will issue from these applications, that, if issued,
any resulting patents will provide the Company with meaningful protection or
rights, that the Company will be successful in entering into collaborative
agreements or that any drugs or other products will be developed and
commercialized from the Company's leptin receptor discoveries. See "Risk Factors
- -- Early Stage of Development; Uncertainty of Final Product Development," "--
Dependence on Collaborators," "-- Uncertainty of Patents and Proprietary Rights"
and "-- Dependence upon Research Collaborators and Scientific Advisors."
DEL-1 GENE
Progenitor has discovered, in collaboration with Vanderbilt, DEL-1, a gene
that encodes a novel cell-surface protein involved in the early growth and
development of blood vessels and bone. The growth of new blood vessels
(angiogenesis) is an important activity in development that is typically absent
in normal adult tissues, but may be present in certain disorders such as cancer
and diabetic retinopathy.
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Progenitor and Vanderbilt have shown that the DEL-1 gene is expressed uniquely
in areas of developing blood vessels and bone but is inactive in normal, mature
animal systems. Moreover, Progenitor has shown that mice implanted with human
tumors express the murine DEL-1 gene in developing blood vessels that feed the
tumor.
The Company believes that targeting the protein expressed by the DEL-1 gene
(Del-1) to inhibit the growth of new blood vessels may represent an important
new therapeutic approach to treating cancer. The rapidly dividing malignant
cells of a tumor require a large, continuous and ever-increasing blood supply. A
substantial body of research in animals and humans suggests that attacking the
growth of tumor blood vessels may be an effective treatment for cancer. Since
the DEL-1 gene is normally not expressed in the adult, and the Del-1 protein is
accessible in the lining of blood vessels, the Company believes the Del-1
protein may be a highly specific, accessible and stable target for the
development of cancer therapeutics, diagnostics and imaging agents. Other genes
identified to date that are involved in the regulation of blood vessel formation
are also expressed in normal adult tissues and thus may not provide the same
potential selectivity as the Del-1 protein as a target for cancer detection and
therapy.
The Company intends to enter into academic and corporate collaborations to
pursue the research, development and commercialization of the DEL-1 gene and the
Del-1 protein for the treatment of diseases characterized by excessive blood
vessel formation, such as cancer, and diseases such as cardiovascular and other
disorders that may be treated by stimulating blood vessel growth.
Progenitor and Vanderbilt have fully sequenced the human and murine DEL-1
genes, respectively. Progenitor and Vanderbilt have filed two joint patent
applications relating to the DEL-1 nucleotide sequences, the proteins they
encode, methods of expressing functional gene products, and methods of using the
DEL-1 gene and protein and engineered cells in various normal and disease
conditions. The Company has an exclusive, worldwide license to Vanderbilt's
commercial rights under these patent applications. There can be no assurance
that patents will issue from these applications, that, if issued, any resulting
patents will provide the Company with meaningful protection or rights, that the
Company will be successful in entering into collaborative agreements or that any
drugs or products will be developed and commercialized from the Company's DEL-1
discoveries. See "Risk Factors -- Early Stage of Development; Uncertainty of
Final Product Development," "-- Dependence on Collaborators," "-- Uncertainty of
Patents and Proprietary Rights" and "-- Dependence on Research Collaborators and
Scientific Advisors."
BFU-E RED BLOOD CELL GROWTH FACTOR
Progenitor has identified from its murine yolk sac stem cell lines a growth
factor activity that stimulates the formation and development of red blood cells
from the BFU-e red blood cell precursors, which are found in adult bone marrow.
The identified activity is distinct from that of erythropoietin ("EPO") and
other known growth factors. The Company is attempting to purify the BFU-e growth
factor and clone its gene.
The Company believes there is a large and growing market for agents that
stimulate new blood cell development. These include support therapy for patients
with inherited anemias, or patients who are undergoing kidney dialysis, cancer
chemotherapy or bone marrow transplantation. In order to address these potential
markets, Progenitor has entered into an agreement with Novo Nordisk, through its
subsidiary, ZymoGenetics, Inc. ("ZymoGenetics"), for the research and
development relating to the BFU-e red blood cell growth factor activity
identified by the Company. Progenitor, along with Novo Nordisk, is seeking to
clone the murine BFU-e red blood cell growth factor and its human equivalent.
There can be no assurance that the Company will be successful in cloning a
murine BFU-e red blood cell growth factor or validating its significance as a
therapeutic lead or that Novo Nordisk will be successful in developing or
commercializing any drugs or other products based on the BFU-e red blood cell
growth factor. See "Risk Factors -- Early Stage of Development; Uncertainty of
Final Product Development,"
"-- Dependence on Collaborators," "-- Uncertainty of Patents and Proprietary
Rights" and "-- Dependence on Research Collaborators and Scientific Advisors."
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OTHER PROGRAMS
GENE THERAPY. The Company believes that the T7T7 gene delivery system will
enable it to deliver genes to cells IN VIVO and IN VITRO in order to facilitate
the characterization and validation of its discoveries. In addition, the Company
has entered into a collaborative agreement with Chiron to explore clinical uses
of the Company's T7T7 gene delivery system. Under this agreement, Chiron has
agreed to develop and potentially to commercialize the T7T7 system for selected
applications. Progenitor has retained the right to market and license the T7T7
system for other applications and to use and license joint technologies of the
collaboration as well as technological improvements to the T7T7 system made by
Chiron. The initial T7T7-based gene therapy product being developed by Chiron is
intended for treatment of solid-tumor cancers. The Company intends to pursue
opportunities with other corporate partners to develop gene therapies using the
T7T7 system for applications retained by Progenitor. See "-- Strategic
Collaboration Agreements -- Chiron Agreement" and "Risk Factors -- Dependence on
Collaborators."
NOVEL RECEPTORS. The Company continues to apply discovery techniques
similar to those used in its early discovery of certain leptin receptors
(including various isoforms of the leptin receptor) in order to identify
additional novel gene sequences and receptors. These techniques have resulted in
the identification of over 30 additional novel genes that are structurally
similar to members of the hematopoietin receptor gene family. While the Company
has not fully characterized the discovered genes, it believes that they
represent potential targets for discovering additional growth factors and
isolating important cell subpopulations for therapeutic approaches to diseases
characterized by aberrant cell growth or differentiation.
STRATEGY
The Company's strategy includes the following elements:
EMPLOY DEVELOPMENTAL BIOLOGY APPROACH. The Company is using its
developmental biology approach to functional genomics in order to accelerate the
discovery, characterization and validation of medically important genes,
receptors and related proteins as drug development leads and targets for the
pharmaceutical industry. The Company intends to enhance its technology platform
and supplement its internal research and development capabilities through
further academic collaborations. In order to increase the efficiency of the
discovery process once a targeted biological function has been identified, the
Company also intends to acquire additional advanced molecular biology and
genomics equipment and capabilities, including high-throughput gene sequencing,
bio-informatics, robotic cloning, biological assays and protein analysis.
ENTER INTO STRATEGIC ALLIANCES FOR PRODUCT DEVELOPMENT. The Company is
focusing its resources on the discovery, characterization and validation of
novel genes, receptors and related proteins that may play key roles in major
diseases. The Company intends to enter into strategic alliances for the
development and commercialization of drugs and other products based on its
discoveries. This strategy is intended to enable the Company to maximize the
effectiveness of its discovery technologies and to use its collaborators'
expertise and resources in research and development, clinical testing, obtaining
regulatory approvals, and manufacturing and marketing. The Company believes this
strategy will allow it to benefit from the development of any drugs or other
products that may result from its discoveries without incurring the substantial
costs associated with such development. The Company has entered into an
agreement with Chiron for the development of gene therapies for certain cancers
using the Company's T7T7 gene delivery system, and with Novo Nordisk for the
isolation and development of a BFU-e growth factor.
PURSUE PATENT PROTECTION. The Company will continue to seek protection of
its discoveries and proprietary technologies through maintenance of trade
secrets and by filing patent applications, where appropriate. There is
substantial uncertainty regarding the strength of patents for partially
sequenced genes or for genes without a known function. The Company believes that
its functional genomics
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approach improves the Company's ability to identify and correlate gene sequences
with known biological functions and thereby may enhance the likelihood of
ultimately securing patent protection for its discoveries of novel genes,
receptors and related proteins and their uses.
STRATEGIC COLLABORATION AGREEMENTS
CHIRON AGREEMENT
In March 1995, Progenitor entered into an agreement with Chiron for the
development and commercialization of the Company's T7T7 gene delivery system for
selected applications. The agreement grants Chiron an exclusive, worldwide
license to the T7T7 gene delivery system for (i) all products carrying a
specified gene, which has potential applications for tumor ablation; (ii) four
infectious disease vaccine constructs; (iii) products used for the prevention,
therapy or diagnosis of human restenosis; (iv) five additional constructs
designated by Chiron; and (v) additional constructs, with certain limitations,
that may be designated by Chiron upon payment of a fee for each such additional
construct. Progenitor also may grant licenses to third parties to constructs for
fields of use not licensed to and not in conflict with the exclusive licenses
granted to Chiron. Any such third-party licenses are subject to Chiron's right
of first refusal for any construct of the T7T7 gene delivery system not already
covered by the agreement for the development of a noninfectious disease vaccine.
Pursuant to the agreement, Chiron and Progenitor will develop jointly the T7T7
tumor ablation product for the treatment of cancer. The parties will own jointly
all preclinical and clinical data from the collaboration, which may be used by
either party for any purpose subject to the exclusive licenses granted to
Chiron. Progenitor has the right to collaborate and jointly invest in Chiron's
development efforts on the tumor ablation product, with the Company's
participation in any resulting product revenues based on its contributions.
Under the agreement, Chiron has committed to use reasonable efforts to
commercialize one or more licensed products and has certain manufacturing rights
and obligations for any resulting products. If Chiron chooses to abandon
development of a construct, its license rights terminate with respect to that
construct. Subject to the foregoing rights, the agreement provides that each
party will retain ownership of all inventions (and any related patents) made
solely by its employees and arising from the activities performed under the
agreement.
The agreement terminates upon the later of the expiration of the patents
upon which it is based or, within any given country, ten years after the first
commercial sale of a product developed under the agreement within such country.
In such events, Chiron's affected license rights become fully-paid and
non-exclusive. Chiron may also terminate the agreement earlier with respect to
any particular construct upon 30 days' notice, and either party may terminate
the agreement in the event of a material breach by the other party of its
obligations under the agreement. In such events, Chiron's license rights would
revert to Progenitor, but Chiron would retain exclusive rights to inventions and
discoveries made solely by its employees, and joint rights to discoveries made
jointly with Progenitor. Chiron also would be required to pay Progenitor all
royalties accrued before termination.
Progenitor received a $2.5 million payment upon execution of the agreement
as a license fee and reimbursement of past research and development expenses,
and an additional $500,000 in January 1996 for continued funding of Progenitor's
research and development expenses. Progenitor has paid Chiron $750,000 pursuant
to the agreement, in full satisfaction of Progenitor's obligation to reimburse
Chiron for certain start-up manufacturing costs. Under the agreement, Progenitor
is entitled to receive up to an additional $4.3 million in various fees and
milestone payments for each licensed product if all specified research, clinical
development, regulatory and marketing approval milestones are achieved, plus
additional fees for development of specific constructs and for the first product
developed. The agreement encompasses a minimum of eleven potential products that
Chiron may develop. In the event that all such milestones are achieved and all
contemplated products reach market, Progenitor would receive an aggregate of
$51.3 million (including payments already received) plus royalties on net
product sales.
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There can be no assurance that the Company and Chiron will be successful in
developing or commercializing any drugs or products utilizing Progenitor's T7T7
gene delivery system or that such agreement will not terminate prior to its
expiration. As such, there can be no assurance that any milestones will be
achieved or that any royalties or other payments contemplated by the agreement
will ever be made. See "Risk Factors -- Dependence on Collaborators."
NOVO NORDISK AGREEMENT
In May 1995, Progenitor and Novo Nordisk, through its subsidiary
ZymoGenetics, entered into a research, development and commercialization
agreement under which Novo Nordisk received an exclusive, worldwide license to
any and all rights of the Company related to the BFU-e red blood cell growth
factor activity identified by the Company for use in any and all human
therapeutic and small molecule drug design uses. Under the agreement, the
development effort is divided into two stages. During the first stage, if
commenced, Novo Nordisk will attempt to purify, clone and sequence a BFU-e red
blood cell growth factor and other growth factors with similar hematopoietic
functions. If this stage is successfully completed, Novo Nordisk will have the
right to decide whether to proceed to the second stage, in which Progenitor will
conduct research to establish the biological function of the growth factor.
During the second stage, if commenced, Progenitor may be entitled to receive up
to $4.0 million in research fees from Novo Nordisk.
The agreement with Novo Nordisk terminates upon the expiration of the last
patent related to the Company's growth factor discoveries. Novo Nordisk also has
a right to earlier termination of the agreement upon 30 days' notice. If Novo
Nordisk exercises this right before payment of any license fees required under
the agreement, it would be obligated to grant to Progenitor an exclusive
worldwide license to all of Novo Nordisk's rights arising from the research
conducted pursuant to the agreement to make, use and sell related products. In
the event that Novo Nordisk had paid the Company at least $4 million in research
fees under the agreement prior to such early termination, Progenitor would be
obligated to pay Novo Nordisk royalties for any sales of products made using the
licensed technology.
If Novo Nordisk decides to develop any licensed products, it will be
obligated to pay Progenitor a one-time license fee of $5 million and up to an
additional $18 million for each product if certain clinical testing, regulatory
and marketing approval milestones are met, plus an additional $1 million for
milestones related to the first licensed product. In addition, Progenitor has
the right to royalties for sales of any resulting products. In the event that
all milestones are reached with respect to the BFU-e red blood cell growth
factor, Progenitor would receive an aggregate of $28 million under the
agreement, plus royalties on net product sales. Novo Nordisk has the right to
manufacture and market any such products on an exclusive worldwide basis. There
can be no assurance that the Company or Novo Nordisk will successfully clone the
murine BFU-e red blood cell growth factor or its human equivalent, or, if
cloned, that Novo Nordisk will continue the program, that the Company will be
able to establish the biological function of the growth factor or that Novo
Nordisk will be successful in developing and commercializing any drugs or other
products utilizing the BFU-e red blood cell growth factor. As such, there can be
no assurance that any milestones will be achieved, or that any royalties or
other payments contemplated by the agreement will ever be made. See "Risk
Factors -- Dependence on Collaborators."
LICENSE AGREEMENTS
OHIO UNIVERSITY
Progenitor entered into research and licensing agreements with Ohio
University as of January 1992 relating to yolk sac stem cells and as of April
1993 relating to the T7T7 gene delivery system. The agreements, as amended,
grant Progenitor an exclusive worldwide license to the yolk sac stem cells and
T7T7 gene delivery system, respectively, and related technologies covered in
Ohio University's existing
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patents and patent applications, as well as any technology developed from its
related sponsored research. In exchange, the Company is obligated to pay certain
license and research fees as well as royalties based on net sales of any
resulting products. In addition, under the 1992 license agreement and the terms
of a related stock purchase agreement, The Ohio University Foundation received a
5% equity interest in the Company subject to certain antidilution protection and
was granted the right to purchase 25,000 shares of Progenitor's Common Stock in
the event of an initial public offering, merger or other similar corporate
transactions at a price equal to 50% of the anticipated public offering price or
merger or other consideration, as applicable. The Ohio University Foundation has
agreed to exercise such right in full prior to the closing of the Offering.
Under the license agreement, The Ohio University Foundation has the right to
designate two representatives to the Board of Directors of Progenitor until
Progenitor consummates an initial public offering. See "Certain Transactions --
The Ohio University Foundation."
VANDERBILT UNIVERSITY
In July 1995, Progenitor entered into a license agreement with Vanderbilt
pursuant to which Progenitor obtained an exclusive worldwide license to
Vanderbilt's commercial rights under a jointly owned patent application, to
develop and market products and processes utilizing technology relating to the
DEL-1 gene. The gene was co-discovered by Progenitor and Vanderbilt. Under this
agreement, Progenitor is obligated to pay royalties on any resulting product
sales. Vanderbilt University may terminate the agreement after three years if
Progenitor has not made adequate efforts to commercialize products based on the
gene.
ADVANCED TECHNOLOGY PROGRAM GRANT
In November 1994, the Company was awarded a $2.0 million, three-year grant
to study the immunology of yolk-sac-derived endothelial cells for therapeutic
applications under the ATP. The grant specifies the research and development
therapeutics based on an understanding of the biology of development of
endothelial cells. The research agreements between the Company and its
subcontractors under the ATP grant (the University of Colorado, The University
of Wisconsin, Ohio University, Vanderbilt University and Bio Support, Inc.)
require that all parties assign rights to any inventions made by them under the
grant to the Company. The ATP grant provides that the Company retains full
rights to any intellectual property developed as part of the project.
The ATP grant is administered by United States Department of Commerce. As of
May 1, 1996, the Company had received $646,000 under the ATP grant. The grant is
subject to yearly appropriations by the United States Congress for the ATP
program, and legislation has been introduced to eliminate the program. There can
be no assurance that funding for the ATP program will not be reduced or
eliminated at any time.
PATENTS AND PROPRIETARY RIGHTS
Patents and licenses are important to the Company's businesses. The
Company's policy is to file patent applications to protect technology,
inventions and improvements to inventions that are considered important to the
development of its business. The Company also relies on trade secrets, know-how,
continuing technological innovations and licensing opportunities to develop and
maintain its competitive position. To date, the Company has filed or exclusively
licensed a number of pending patent applications in the USPTO relating to its
various core technology programs, as well as foreign counterparts of certain of
these applications in Europe, Japan and certain other countries. These pending
patent applications include the following: six U.S. applications relating to
leptin receptors (including various isoforms of the leptin receptor); two U.S.
applications relating to its vascular biology program (DEL-1); one U.S.
application relating to its gene delivery system (T7T7); and one U.S.
application relating to yolk sac stem cells. No United States or foreign patent
has issued to the Company to date. However, the Company has an exclusive license
from Ohio University to one issued U.S. patent covering a method of
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providing tissue-specific expression of exogenous genetic material in a mammal
by genetically transformed embryonic carrier cells such as yolk sac cells. A
notice of allowance has been received for the patent application with respect to
the Company's T7T7 gene delivery system. The Company has exclusive licenses
under the patent application relating to the T7T7 gene delivery system from Ohio
University, the patent application relating to yolk sac stem cells from Ohio
University, and the patent applications relating to the DEL-1 gene from
Vanderbilt University. The Company has also licensed two issued patents that
relate to its T7T7 gene delivery program on a nonexclusive basis from Associated
Universities, Inc. and the Wisconsin Alumni Research Foundation.
The Company's success will depend to a significant extent on its ability to
obtain and enforce patents, maintain trade secret protection and operate without
infringing on the proprietary rights of third parties. Because the patent
positions of biotechnology and pharmaceutical companies can be highly uncertain
and frequently involve complex legal and factual questions, the breadth of
claims allowed in biotechnology and pharmaceutical patents or their
enforceability cannot be predicted. Commercialization of pharmaceutical products
can be subject to substantial delays as a result of the time required for
product development, testing and regulatory approval. The value of any patents
issued or licensed to the Company may depend upon the remaining term of patent
protection available at the time products that utilize the patented technology
are commercialized.
The Company actively pursues a policy of seeking patent protection for a
number of its proprietary products and technologies. Progenitor has licensed
from Ohio University one U.S. patent and pending U.S. patent applications
relating to stem cell technology and to gene delivery technology (and has
received a notice of allowance relating to a gene delivery technology
application), along with certain corresponding foreign patent applications and
one issued foreign patent. Progenitor has filed six patent applications relating
to certain leptin receptors, including applications filed in September and
December 1994. In March 1996, Progenitor's international patent application
covering certain leptin receptors was published. The Company believes that there
may be significant litigation regarding patent and other intellectual property
rights relating to leptin and leptin receptors. The Company is aware that
Millennium has filed a patent application relating to a receptor for leptin and
its use in obesity applications, and has licensed to Hoffmann-La Roche Inc.
rights to develop certain therapeutics for obesity using Millennium's discovery
of a leptin receptor. There can be no assurance that Millennium's patent
application, or additional patent applications filed by Millennium or others,
will not result in issued patents covering a leptin receptor, the leptin protein
or other ligands, or any of their respective uses including obesity. There can
be no assurance that the invention by Millennium will be accorded an invention
date later than Progenitor's invention date or that any patent will issue to
Progenitor. Progenitor's failure to obtain a patent on a leptin receptor or the
issuance of a patent to a third party covering a leptin receptor, the leptin
protein or other ligands, or any of their respective uses, could have a material
adverse effect on the Company's business, financial condition and results of
operations.
A number of other groups are attempting to identify partial gene sequences
and full-length genes, the functions of which have not been characterized. The
public availability of partial gene sequence information before the Company
applies for patent protection on a corresponding full-length gene could
adversely affect the Company's ability to obtain patent protection with respect
to such gene. To the extent any patents issue to other parties on such partial
or full-length genes, and as other patents issue with the expansion of the
biotechnology industry, the risk increases that the potential products and
processes of the Company or its collaborative partners may give rise to claims
of patent infringement.
The patent positions of pharmaceutical and biotechnology firms, including
the Company, are uncertain and involve complex legal and factual questions for
which important legal principles are largely unresolved, particularly in regard
to human therapeutic uses. Substantial periods of time pass before the USPTO
responds to patent applications. In addition, the coverage claimed in a patent
application can be significantly reduced before a patent is issued.
Consequently, the Company does not know whether any of its pending or future
patent applications will result in the issuance of patents or, if any patents
are issued, whether the patents will be subjected to further proceedings
limiting their scope, and whether they will provide significant proprietary
protection or competitive advantage, or will be
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circumvented or invalidated. Because patent applications in the United States
are maintained in secrecy until patents issue and patent applications in certain
other countries generally are not published until more than 18 months after they
are filed, and since publication of discoveries in scientific or patent
literature often lags behind actual discoveries, the Company cannot be certain
that it or any licensor was the first creator of inventions covered by pending
patent applications or that it or such licensor was the first to file patent
applications on such inventions.
There can be no assurance that the Company's patents, if issued, would be
held valid or enforceable by a court or that such patents would cover products
or technologies of the Company's competitors. Competitors or potential
competitors may have filed applications for or received patents, and may obtain
additional patents and proprietary rights relating to compounds or processes
competitive with those of the Company. To protect its proprietary rights, the
Company may be required to participate in interference proceedings declared by
the USPTO to determine priority of invention, which could result in substantial
cost to the Company. Moreover, even if the Company's patents issue, there can be
no assurance that they will provide sufficient proprietary protection or will
not be later limited, circumvented or invalidated. Accordingly, there can be no
assurance that the Company will develop proprietary technologies that are
patentable, that the Company's patent applications will result in patents being
issued or that, if issued, patents will afford protection against competitors
with similar technology or products, nor can there be any assurance that the
Company's patents will be held valid by a court of competent jurisdiction.
In addition to patent protection, the Company also relies to a significant
extent upon trade secret protection for its unpatented confidential and
proprietary information including many of the Company's key discovery
technologies, such as its proprietary methods of isolating and manipulating
murine ES cells. There can be no assurance that others will not independently
develop substantially equivalent proprietary information and techniques or
otherwise gain access to the Company's trade secrets or disclose such
technology. To protect its trade secrets, the Company requires its employees,
consultants, scientific advisors and parties to collaborative agreements to
execute confidentiality agreements upon the commencement of employment, the
consulting relationship or the collaboration with the Company. In the case of
employees, the agreements also provide that all inventions resulting from work
performed by them while employed by the Company will be the exclusive property
of the Company. There can be no assurance, however, that these agreements will
provide meaningful protection of the Company's trade secrets or adequate
remedies in the event of unauthorized use or disclosure of such information,
that the Company can meaningfully protect its rights in such unpatented
proprietary technology through other means, that any obligation to maintain the
confidentiality of such proprietary technology will not be breached by
employees, consultants, advisors, collaborative partners or others, or that
others will not independently develop substantially equivalent technology. The
loss of trade secret protection of any of the Company's key discovery
technologies would materially and adversely affect the Company's competitive
position and could have a material adverse effect on the Company's business,
financial condition and results of operations. Finally, disputes may arise as to
the ownership of proprietary rights to the extent that outside collaborators or
consultants apply technological information developed independently by them or
others to Company projects or apply Company technology to other projects and, if
adversely determined, such disputes could have a material adverse effect on the
Company's business, financial condition and results of operations.
The Company may incur substantial costs if it is required to defend itself
in patent suits brought by third parties or if the Company initiates such a suit
to enforce the Company's patents or to determine the scope and validity of other
parties' proprietary rights. Any legal action against the Company or its
collaborators or licensees claiming damages and seeking to enjoin commercial
activities relating to the affected products and processes could, in addition to
subjecting the Company to potential liability for damages, require the Company
or its collaborators or licensees to obtain a license or licenses in order to
continue to manufacture or market the affected products and processes. There can
be no assurance that the Company or its collaborators or licensees would prevail
in any such action or that any license required under any such patents would be
made available on commercially acceptable terms, if at all.
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Any adverse outcome of such litigation could have a material adverse effect on
the Company's business, financial position and results of operations. In
addition, if the Company becomes involved in such litigation, it could consume a
substantial portion of the Company's managerial and financial resources. The
Company is unable to predict how courts will resolve any future issues relating
to the validity and scope of its patents should they be challenged.
It is uncertain whether any third-party patents will require the Company to
alter its products or processes, obtain licenses, cease certain activities or
pay substantial damages. If any licenses are required, there can be no assurance
that the Company will be able to obtain any such license on commercially
acceptable terms, if at all. Failure by the Company or its collaborators and
licensees to obtain a license to any technology required to commercialize the
Company's discoveries may have a material adverse effect on the Company's
business, financial condition and results of operations. See "Risk Factors --
Uncertainty of Patents and Proprietary Rights."
COMPETITION
Research in the field of genomics is highly competitive. Competitors of the
Company in the genomics area include, among others, public companies such as
Genome Therapeutics Corporation, Human Genome Sciences, Inc., Incyte
Pharmaceuticals, Inc., Millennium, Myriad Genetics, Inc. and Sequana
Therapeutics, Inc., as well as private companies and major pharmaceutical
companies and universities and other research institutions, including those
receiving funding from the federally funded Human Genome Project. A number of
entities are attempting to rapidly identify and patent randomly-sequenced genes
and gene fragments. In addition, certain other entities are pursuing a gene
identification, characterization and product development strategy based on gene
mapping. The Company's competitors may discover, characterize or develop
important genes in advance of the Company, which could have a material adverse
effect on any related Company discovery program. The Company expects competition
to intensify in genomics research as technical advances in the field are made
and become more widely known.
In addition, the Company faces, and will continue to face, intense
competition from pharmaceutical and biotechnology companies, as well as academic
and research institutions and governmental agencies. The Company is subject to
significant competition from organizations that are pursuing the same or similar
technologies as those which constitute the Company's discovery platform, and
from organizations that are pursuing pharmaceutical or diagnostic products that
are competitive with the Company's or its collaborators' potential products.
Many of the organizations competing with the Company have greater capital
resources, larger research and development staffs and facilities, greater
experience in drug discovery and development, obtaining regulatory approvals and
pharmaceutical product manufacturing, and greater marketing capabilities than
the Company.
The Company also is aware of a number of companies and institutions that are
developing or considering the development of potential gene-based and cell-based
treatments, including early-stage gene therapy companies, large pharmaceutical
companies, academic and research institutions, government agencies and other
health care providers. Many of these entities are more advanced than the Company
in their product development programs for gene and cell-based therapies and have
more experience with regulatory agencies and clinical trials. The field of gene
and cell-based therapy is new and many competitive approaches are being taken to
discover practical means by which these technologies can be made into products.
Rapid technologic advances could result in actual or proposed technologies,
products or processes of the Company becoming obsolete prior to successful
commercialization. See "Risk Factors -- Intense Competition; Rapid Technological
Change."
The Company is and will continue to be reliant on strategic partners for
support of its programs, including preclinical and clinical development,
manufacturing and marketing of its initial products. Each of the Company's
present and future partners is conducting multiple product development efforts
within each disease or technology area that is the subject of the alliance with
the Company. Any product
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candidate or technology of the Company, therefore, may be subject to internal
competition with a potential product under development or technology platform
under evaluation by a strategic partner. See "Risk Factors -- Dependence on
Collaborators."
GOVERNMENT REGULATION
Prior to marketing, any new drug or other product developed by the Company
and its collaborative partners must undergo an extensive regulatory approval
process in the United States and other countries. This regulatory process, which
includes preclinical studies and clinical trials, and may include post-marketing
studies, of each product candidate to establish its safety and efficacy, usually
takes many years and require the expenditure of substantial resources.
Preclinical tests include laboratory evaluations and will require animal studies
conducted in accordance the FDA's cGLP regulations to assess the product's
potential safety and efficacy. Data obtained from preclinical studies and
clinical trials are susceptible to varying interpretations that could delay,
limit or prevent regulatory approval. Delays or rejections also may be
encountered based upon changes in the FDA's policies for drug or biologic
approval during the period of product development and FDA regulatory review of
each NDA submitted in the case of new pharmaceutical agents, or PLA in the case
of biologics. Product development of new pharmaceuticals is highly uncertain,
and unanticipated developments, clinical or regulatory delays, unexpected
adverse side effects or inadequate therapeutic efficacy could slow or prevent
the product development efforts of the Company and its collaborators or
licensees, and have a materially adverse effect on the Company's business,
financial condition and results of operations. There can be no assurance that
regulatory approval will be obtained for any drugs or other products developed
by the Company or its collaborative partners or licensees. Furthermore,
regulatory approval may entail limitations on the indicated use of a drug or
other product. Because certain of the products likely to result from the
Company's discovery programs involve the application of new technologies and may
be based upon a new therapeutic approach, such products may be subject to
substantial additional review by various government regulatory authorities other
than the FDA and, as a result, regulatory approvals may be obtained more slowly
than for products using conventional technologies. Under current guidelines,
proposals to conduct clinical research involving gene therapy at institutions
supported by the NIH must be approved by the RAC and the NIH. Furthermore, gene
therapies are relatively new technologies and have not been tested extensively
in humans. The regulatory requirements governing these products and related
clinical procedures for their use are uncertain and are subject to change.
Even if regulatory approval is obtained, a marketed product and its
manufacturer are subject to continuing review. Among the conditions for product
approval and continued marketing approval is that the quality control and
manufacturing procedures of the Company or its collaborative partners conform to
the FDA's cGMP regulations which must be followed at all times. In complying
with cGMP requirements, manufacturers must expend time, money and effort on a
continuing basis in production, record keeping and quality control.
Manufacturing establishments, both domestic and foreign, are subject to
inspection by or under the authority of the FDA and by other federal, state and
local agencies. Failure to pass such inspections may subject the manufacturer to
possible FDA actions such as the suspension of manufacturing, seizure of the
product, withdrawal of approval or other regulatory sanctions. The FDA also may
require the manufacturer to recall a product from the market.
Discovery of previously unknown problems with a product may have adverse
effects on the Company's business, including withdrawal of the product from the
market. Violations of regulatory requirements at any stage, including
preclinical studies and clinical trials, the approval process or post-approval,
may result in various adverse consequences to the Company, including the FDA's
delay in approval or refusal to approve a product, withdrawal of an approved
product from the market or the imposition of criminal penalties against the
manufacturer and NDA or PLA holder. The Company has not submitted an IND for any
product candidate, and no product candidate has been approved for
commercialization in the United States or elsewhere. The Company intends to rely
primarily on its strategic partners to file INDs and generally direct the
regulatory approval process. No assurance can be
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given that the Company or any of its strategic partners will be able to conduct
clinical testing or obtain the necessary approvals from the FDA or other
regulatory authorities for any products. Failure to obtain required governmental
approvals will delay or preclude the Company's strategic partners from marketing
drugs or other products developed by the Company or limit the commercial use of
such products and could have a material adverse effect on the Company's
business, financial condition and results of operations.
In addition to regulations enforced by the FDA, the Company also is subject
to regulation under the Occupational Safety and Health Act, the Environmental
Protection Act, the Toxic Substances Control Act, the Resource Conservation and
Recovery Act and other federal, state and local regulations. The Company's
research and development activities involve the controlled use of hazardous
materials, chemicals, biological materials and radioactive compounds. Although
the Company believes that its safety procedures for handling and disposing of
such materials comply with the current standards prescribed by state and federal
laws and regulations, the risk of accidental contamination or injury from these
materials cannot be completely eliminated. In the event of such an accident, the
Company could be held liable for any resulting damages and any such liability
could exceed the Company's resources. See "Risk Factors -- Government
Regulation" and "-- Hazardous and Radioactive Materials; Environmental Matters."
PRODUCT LIABILITY INSURANCE
The testing, manufacture, marketing and sale of pharmaceutical and other
products entail the inherent risk of liability claims or product recalls and
associated adverse publicity. Clinical trials and sales by the Company or its
collaborators or licensees of potential products incorporating the Company's
discoveries may expose the Company to potential liability resulting from the use
of such products. Such liability might result from claims made directly by
consumers or by regulatory agencies, pharmaceutical companies or others selling
such products. The Company currently has a limited amount of clinical trial and
product liability insurance coverage through Interneuron. The Company will seek
to obtain its own coverage upon completion of this Offering and to maintain and
appropriately increase such coverage as clinical development of any product
candidates progresses and if and when its products are ready to be
commercialized. There can be no assurance that the Company will be able to
obtain such insurance or, if obtained, that such insurance can be acquired at a
reasonable cost or in sufficient amounts to protect the Company against such
liability. Certain of the Company's license agreements require the Company to
indemnify licensors against product liability claims arising from products
developed using the licensed technology. Also, certain of these agreements and
other collaboration agreements require the Company to maintain minimum levels of
insurance coverage. The failure to maintain product liability coverage, or the
occurrence of any product liability claim, or a recall of any products of the
Company or its collaborators or licensees, if developed, could inhibit or
prevent commercialization of products being developed by the Company and could
have a material adverse effect on the Company's business, financial condition
and results of operations. In addition, to the extent any product liability
claim exceeds the amount of any insurance coverage, the Company's business,
financial condition and results of operations could be materially and adversely
affected. See "Risk Factors -- Risk of Product Liability."
HUMAN RESOURCES
As of May 1, 1996, Progenitor had 24 full-time employees, of whom 11 hold
Ph.D. or M.D. degrees. Of the Company's full-time employees, 19 are engaged in
research and development activities and five are engaged in business
development, finance and administration. None of the Company's employees is
covered by a collective bargaining agreement, and the Company has never
experienced any strike or work stoppage. The Company believes its relations with
its employees to be good.
In order to support the Company's existing operations, it will be required
to hire and retain additional management, administrative and financial
personnel, including a chief financial officer. The Company's success will
depend in large part on its ability to attract and retain key employees and
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scientific advisors. Competition among biotechnology and pharmaceutical and
other companies for highly skilled scientific and management personnel is
intense. There can be no assurance that the Company will be successful in
retaining its existing personnel or advisors, or in attracting additional
qualified employees. See "Risk Factors -- Dependence on Collaborators," "--
Dependence on Research Collaborators and Scientific Advisors" and "-- Dependence
on Key Personnel."
FACILITIES
Progenitor currently occupies approximately 19,000 square feet of laboratory
and office space in a single facility in Columbus, Ohio. Total lease payments
for fiscal 1995 were $106,970. In addition, the Company leases a separate
facility with approximately 7,000 square feet of space from The Ohio State
University for laboratory animals. Space in this facility is leased on the basis
of a per diem for each animal housed. Total payments to The Ohio State
University in fiscal 1995 were $23,582. The current lease on the laboratory and
office facility expires on December 31, 1996 and includes an option for an
additional one-year extension. Although the Company believes that these
facilities will be adequate to meet its projected needs for the next two years,
it may be required to locate additional or alternative facilities within this
time frame, depending on the Company's growth and development.
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MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The current executive officers and directors of the Company are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- --------------------------------------------- --- ------------------------------------------------------------
<S> <C> <C>
Douglass B. Given, M.D., Ph.D................ 44 President, Chief Executive Officer and Director
H. Ralph Snodgrass, Ph.D..................... 48 Vice President, Research and Chief Scientific Officer
Stephen J. Williams, Ph.D.................... 42 Vice President, Corporate Development
Glenn L. Cooper, M.D......................... 43 Chairman of the Board
Robert P. Axline............................. 60 Director
Alexander. M. Haig, Jr....................... 71 Director
Morris Laster, M.D........................... 32 Director
Jerry P. Peppers............................. 50 Director
David B. Sharrock............................ 60 Director
</TABLE>
DOUGLASS B. GIVEN, M.D., PH.D. has served as President, Chief Executive
Officer and Director of the Company since June 1994 and served as Executive Vice
President and Chief Operating Officer from January 1993 to June 1994. Prior to
joining Progenitor, Dr. Given was Vice President at the Schering Plough Research
Institute, a pharmaceutical research facility, from March 1989 to December 1992.
Dr. Given also serves as a Director of the Edison BioTechnology Center, is on
the Dean's Advisory Council of the University of Chicago and is on the Dean's
Advisory Council of The Ohio State University. Dr. Given received an M.D. and
Ph.D. in Biological Sciences from the University of Chicago, performed his
post-doctoral training in Internal Medicine and Infectious Diseases at Harvard
Medical School and Massachusetts General Hospital and received an M.B.A. from
the Wharton School of Business at the University of Pennsylvania.
H. RALPH SNODGRASS, PH.D. has served as Chief Scientific Officer since May
1996 and has served as Vice President, Research since he joined the Company in
July 1993. Prior to joining Progenitor, Dr. Snodgrass was Assistant Professor of
Microbiology and Immunology at the University of North Carolina, Chapel Hill
from January 1988 to June 1993. Dr. Snodgrass has held appointments at The Ohio
State University as Clinical Associate Professor, Division of Bone Marrow
Transplantation, Department of Internal Medicine since July 1994, and as Adjunct
Associate Professor, Department of Medical Microbiology and Immunology since
July 1995. Dr. Snodgrass received his Ph.D. in Immunology from the University of
Pennsylvania and performed his post-doctoral training at The Fox Chase Cancer
Center, Philadelphia.
STEPHEN J. WILLIAMS, PH.D. has served as Vice President, Corporate
Development since May 1996 and previously served as Vice President, Business
Development from June 1994 to May 1996. Prior to joining Progenitor, Dr.
Williams was Medical Director, Strategic Product Planning at Bristol-Myers
Squibb from March 1993 to June 1994; and Associate Director, New Product
Planning at DuPont Merck Pharmaceutical Company from January 1991 to March 1993.
Dr. Williams received his Ph.D. in Pharmacology from Duke University.
GLENN L. COOPER, M.D. has served as Chairman of the Board of Directors of
the Company since June 1994, and has been a director since December 1992. Dr.
Cooper has been President, Chief Executive Officer and a director of Interneuron
since May 1993 and served as President and Chief Executive Officer of Progenitor
from September 1992 until June 1994. Prior to joining Progenitor in 1992, Dr.
Cooper was Executive Vice President and Chief Operating Officer of Sphinx
Pharmaceuticals Corporation from August 1990. Dr. Cooper serves as Chairman of
the Boards of Directors of Intercardia, Inc. and Transcell Technologies, Inc.,
and is a director of InterNutria, Inc., each of which is a subsidiary of
Interneuron.
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Dr. Cooper received his M.D. from Tufts University School of Medicine and
performed his post-doctoral training in Internal Medicine and Infectious
Diseases at the New England Deaconess Hospital and Massachusetts General
Hospital.
ROBERT P. AXLINE has been a Director of Progenitor since June 1992 as a
designee of The Ohio University Foundation. Mr. Axline has been President of
Image Data Systems Inc. since 1995 and Chairman of Plastic Card Systems Inc.
since 1987. Both companies are engaged in the manufacture and sale of plastic
identification card machines and supplies.
ALEXANDER M. HAIG, JR. has been a Director of Progenitor since December
1992. General Haig has served as Chairman and President of Worldwide Associates,
Inc., a marketing consulting firm, since 1984. Previously, General Haig served
as Secretary of State of the United States from January 1981 to July 1982, and
President and Chief Operating Officer of United Technologies Corporation from
November 1979 to January 1981, where he remains a Senior Consultant. General
Haig has also served as Supreme Allied Commander of NATO and White House Chief
of Staff under the Nixon and Ford Administrations. General Haig also serves on
the Board of Directors of Interneuron, MGM Grand, Inc. and America Online, Inc.
MORRIS LASTER, M.D. has served as a Director of Progenitor since its
inception and served as Chief Executive Officer from its inception to September
1992. Dr. Laster has been Vice President of The Castle Group, Ltd. since
February 1990. He has also served as Chief Executive Officer of Synpro, Ltd., a
biotechnology firm, since November 1995. Previously, he was interim Chief
Executive Officer of Xenograft Technologies, Ltd., a biopharmaceuticals firm,
from January 1993 to September 1993. Dr. Laster received his M.D. from Downstate
Medical Center, New York, and received post-doctoral training in surgery at Case
Western Reserve University Hospital.
JERRY P. PEPPERS joined Progenitor's Board of Directors in June 1992 as a
designee of The Ohio University Foundation. He is a partner in the law firm of
Winthrop, Stimson, Putnam & Roberts, where he has served as an attorney since
1971. Mr. Peppers received his J.D. from Duke University.
DAVID B. SHARROCK has been a Director of Progenitor since January 1994 and a
Director of Interneuron since January 1995. Mr. Sharrock has been associated
with Marion Merrell Dow, a pharmaceuticals company, or its predecessors since
1958, most recently as Executive Vice President and Chief Operating Officer and
Director from January 1990 until his retirement in December 1993. Since that
time he has served as an independent consultant. Mr. Sharrock also serves as a
Director of Cincinnati Bell Inc., Unitog Company, Inc. and Intercardia, Inc.
BOARD OF DIRECTORS COMMITTEES AND OTHER INFORMATION
At present, all directors are elected annually and serve until the next
meeting of stockholders or until the election and qualification of their
successors. In addition, The Ohio University Foundation is entitled to designate
two directors. Messrs. Axline and Peppers currently serve as the designees of
The Ohio University Foundation. The rights of The Ohio University Foundation to
designate two members of the Board of Directors will terminate upon the closing
of the Offering. See "Certain Transactions -- The Ohio University Foundation."
The Board of Directors intends to establish an Audit Committee and a
Compensation Committee prior to the closing of the offering. The Audit Committee
will oversee the actions by the Company's independent auditors and review the
Company's internal financial and accounting controls and policies. The
Compensation Committee will be responsible for determining salaries, incentives
and other forms of compensation for officers and other employees of the Company
and will administer various incentive compensation and benefit plans.
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All executive officers serve at the discretion of the Board of Directors,
subject to the terms of any employment agreements. Currently, the Company has an
employment agreement only with Dr. Given. There are no family relationships
among the Company's directors and executive officers. See "-- Employment
Agreement."
DIRECTORS' COMPENSATION
Except as described below, the Company's directors do not currently receive
any cash compensation for service on the Board of Directors or any committee
thereof, but directors may be reimbursed for certain expenses in connection with
attendance at Board of Directors and committee meetings. Prior to the closing of
the Offering, the Company intends to establish a formal policy relating to the
compensation of directors.
Pursuant to a letter agreement dated January 26, 1994, the Company pays Mr.
Sharrock $2,000 for each meeting of the Board that he attends. Upon execution of
this agreement, the Company also granted Mr. Sharrock options to purchase 2,500
shares of Common Stock, at an exercise price of $4.00 per share, one-third of
which vest each January 21 beginning January 21, 1995. During fiscal 1995, the
Company paid Mr. Sharrock $6,000 pursuant to this arrangement and accrued an
additional $2,000 in fees.
The Company, along with Interneuron and Transcell Technologies, Inc., is a
party to a consulting agreement with Mr. Sharrock, entered into on February 1,
1994, pursuant to which Mr. Sharrock receives $2,000 per day in exchange for his
service as a consultant on the development and commercialization of each
company's technology. Collectively, the three companies must use Mr. Sharrock's
services for a minimum of 20 days per year during the term of the agreement. The
Company paid Mr. Sharrock $4,000 during fiscal 1995 under this arrangement. The
agreement provides that Mr. Sharrock will not compete with the Company during
the term of the agreement and for a period of one year thereafter. This
agreement terminates on February 1, 1997, with automatic one-year extensions
with respect to each company unless Mr. Sharrock or such company gives notice at
least sixty days prior to expiration of the then-current term.
During fiscal 1995, the Company was party to a consulting agreement with Dr.
Laster, pursuant to which the Company paid him $500 per month for his services
as a scientific advisor. Dr. Laster received $7,000 pursuant to this agreement
in fiscal 1995, including $1,000 in fees accrued but not paid in fiscal 1994.
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EXECUTIVE COMPENSATION
The following table sets forth for the fiscal year ended September 30, 1995
the compensation for services rendered to the Company in all capacities with
respect to its Chief Executive Officer and each of its other executive officers
with annual compensation in excess of $100,000 (the Chief Executive Officer and
such other executive officers are hereinafter referred to as the "Named
Executive Officers"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
ANNUAL COMPENSATION ---------------
SECURITIES
--------------------- UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION SALARY BONUS OPTIONS (#) COMPENSATION
- ----------------------------------------------------------- ---------- --------- --------------- ---------------
<S> <C> <C> <C> <C>
Douglass B. Given, M.D., Ph.D. ........................... $ 185,000 $ 46,250 95,000 $ 1,065(1)
President and Chief Executive Officer
Doros Platika, M.D.(2) .................................... 135,000 35,700 40,000(3)
Executive Vice President, Research and
Development
H. Ralph Snodgrass, Ph.D. ................................ 109,000 30,000 30,000(4)
Vice President, Research and Chief Scientific
Officer
Stephen J. Williams, Ph.D. ............................... 135,000 -- 17,500
Vice President, Corporate Development
</TABLE>
- --------------
(1) Consists of premiums paid by the Company on a term life insurance policy for
Dr. Given.
(2) Dr. Platika's employment with the Company terminated effective as of May 24,
1996, pursuant to a Separation Agreement and Release. See "Certain
Transactions -- Transactions with Directors and Executive Officers."
(3) Includes options exercisable for 7,500 shares of Common Stock, all of which
vested on September 14, 1995, the date of grant. As a result of the
termination of Dr. Platika's employment by the Company, options granted
during fiscal 1995 that were vested as of May 24, 1996 remain exercisable
until August 24, 1996, and all other options granted during fiscal 1995
terminated effective May 24, 1996 in accordance with the terms of the 1992
Stock Option Plan. See "Certain Transactions -- Transactions with Directors
and Executive Officers."
(4) Includes options exercisable for 12,500 shares of Common Stock, all of which
vest upon the earliest of the achievement of performance milestones relating
to the leptin receptor program or the BFU-e growth factor program, or
September 14, 2002.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Board of Directors did not have a Compensation Committee in fiscal 1995.
All deliberations with regard to executive compensation were by the full Board
of Directors. Dr. Cooper, the former President and Chief Executive Officer of
the Company, participated as a director in these deliberations. Dr. Given
participated as a director in deliberations and voting with regard to the
compensation of Drs. Platika, Snodgrass and Williams, but abstained from
deliberations and voting with regard to his own compensation.
43
<PAGE>
STOCK PLANS
1992 STOCK OPTION PLAN
The 1992 Stock Option Plan was adopted and approved by the Board of
Directors in December 1992 and by the stockholders of the Company in February
1993. The plan was amended with the approval of the Board of Directors and the
stockholders in September 1995 to increase the number of shares of Common Stock
available for grant. A total of 500,000 shares of Common Stock have been
reserved for issuance under the 1992 Stock Option Plan, as amended. As of May
31, 1996, options to purchase 6,675 shares of Common Stock granted under the
1992 Stock Option Plan had been exercised, options to purchase 376,000 shares of
Common Stock were outstanding and options to purchase 117,325 shares of Common
Stock remained available for grant. The outstanding options were held by 38
individuals and were exercisable at a weighted average exercise price of $4.70
per share. Outstanding options to purchase an aggregate of 32,500 shares were
held by employees who are not officers or directors of the Company. The 1992
Stock Option Plan will terminate in 2002, unless sooner terminated by the Board
of Directors.
The Board of Directors currently administers the 1992 Stock Option Plan.
Prior to the closing of the Offering, the Board intends to designate a
Compensation Committee and delegate to it the administration of the 1992 Stock
Option Plan. The Compensation Committee will be constituted to comply with the
rules governing a plan intended to qualify as a discretionary plan under Rule
16b-3 of the Securities Exchange Act of 1934. Awards under the 1992 Stock Option
Plan may consist of (i) options to purchase Common Stock that are designed to
qualify, under Section 422 of the Internal Revenue Code of 1986, as amended (the
"Code"), as "incentive stock options" ("Incentive Stock Options") or (ii)
options to purchase Common Stock that are not described in Sections 422 or 423
of the Code ("Non-Qualified Stock Options" and, collectively with Incentive
Stock Options, "Options").
The Board of Directors has discretion to grant Incentive Stock Options to
employees and officers (including officers who are directors) of the Company and
Non-Qualified Stock Options to employees, officers (including officers who are
directors), directors, independent contractors and consultants of the Company.
The Board may set the terms of such grants, subject to applicable restrictions
in the 1992 Stock Option Plan. Incentive Stock Option grants are subject to the
following limitations: (i) the term of any Incentive Stock Option may not be
longer than ten years, provided that the term of any Incentive Stock Option
granted to an individual possessing more than 10% of the combined voting power
of the Company or an affiliate (a "10% Holder") may not be longer than five
years; (ii) the aggregate fair market value of all shares underlying Incentive
Stock Options granted to an individual that first become exercisable in any
calendar year may not exceed $100,000; and (iii) the exercise price of Incentive
Stock Options may not be less than the fair market value of the underlying
shares on the grant date, provided that the exercise price of any Incentive
Stock Option granted to a 10% Holder may not be less than 110% of the fair
market value of the underlying shares on the grant date. With respect to
Non-Qualified Stock Options, the Board has discretion to grant such Options with
an exercise price below the fair market value of the Common Stock. As of May 31,
1996, no such below-market grants had been made.
During an optionee's lifetime, an Option is exercisable only by the optionee
and no Option may be transferred by the optionee other than by will or the laws
of descent and distribution. An optionee whose relationship with the Company or
any related corporation ceases for any reason (other than termination because of
death or total disability) may exercise, in the three-month period following
such cessation (unless such Options terminate or expire sooner by their terms),
or such longer period as determined by the Board, that portion of the optionee's
Options that is exercisable at the time of such cessation. In the event the
optionee dies or becomes totally disabled, the Options vested as of the date of
death or total disability may be exercised prior to the earlier of such Option's
specified expiration date or one year from the date of the optionee's death or
disability.
Unexercised Options granted under the 1992 Stock Option Plan terminate upon
the occurrence of certain events, including a change in control, dissolution,
liquidation, merger or consolidation of the Company. All outstanding Options
vest and become immediately exercisable prior to the effective time
44
<PAGE>
of any such event. In a merger in which the Company is the surviving
corporation, Options will be deemed to apply to the numbers of shares to which
the holders thereof prior to such merger would be entitled. The converted
Options would continue to vest in accordance with the vesting schedule set by
the Board for such Options.
The Board of Directors may amend the 1992 Stock Option Plan, insofar as
permitted by law, with respect to any shares of Common Stock reserved for
issuance but not yet subject to Options. Shares subject to Options granted under
the 1992 Stock Option Plan that have lapsed or terminated may again be subject
to Options granted under the 1992 Stock Option Plan. Furthermore, the Board may
offer to exchange new Options for existing Options, with the shares subject to
the existing Options being again available for grant under the 1992 Stock Option
Plan.
1996 STOCK INCENTIVE PLAN
The 1996 Stock Incentive Plan (the "1996 Plan") was adopted and approved by
the Board of Directors in May 1996 and will be presented for approval by the
stockholders of the Company prior to the closing of the Offering. A total of
775,000 shares of Common Stock have been reserved for issuance under the 1996
Plan. As of May 31, 1996, no options issued under the 1996 Plan had been
exercised, options to purchase 275,000 shares of Common Stock were outstanding
and options to purchase 500,000 shares of Common Stock remained available for
grant. Outstanding options under the 1996 Plan were held by 3 individuals and
were exercisable at an exercise price of $9.00 per share. No options were held
by persons who are not officers or directors of the Company. The 1996 plan will
terminate in May 2006, unless sooner terminated by the Board of Directors.
Upon the adoption and approval of the 1996 Plan, the Board of Directors will
delegate administration of the 1996 Plan to the Compensation Committee (the
"Committee"). Awards under the 1996 Plan may consist of (i) Incentive Stock
Options, (ii) Non-Qualified Stock Options, (iii) the sale or bonus grant of
restricted shares of Common Stock ("Restricted Stock"), and (iv) the grant of
stock appreciation rights ("SARs"), either alone or together with Options.
The Committee will have discretion to grant Options, Restricted Stock and
SARs to employees, officers (including officers who are directors of the
Company), directors, independent contractors and consultants of the Company,
provided that only employees and officers of the Company may receive Incentive
Stock Options. The Committee may set the terms of such grants, subject to
applicable restrictions in the 1996 Plan. Incentive Stock Option and
Non-Qualified Stock Option grants are subject to the same limitations under the
1996 Plan as those discussed above for the 1992 Stock Option Plan. With respect
to Non-Qualified Stock Options, the Committee will have discretion to grant such
Options with an exercise price below the fair market value of the Common Stock.
As of May 31, 1996, no such below-market grants had been made.
Upon certain changes in control of the Company (as defined in the 1996
Plan), or upon the merger, dissolution, liquidation or sale of all or
substantially all of the assets of the Company, all outstanding Options, SARs,
and Restricted Stock will become fully vested, nonforfeitable and exercisable,
and any Restricted Stock will be released from all restrictions on transfer and
all repurchase and forfeiture restrictions. Each Option or SAR shall remain
exercisable for the remaining term of the Option or SAR, except that each Option
or SAR shall terminate as of the effective date of a merger, dissolution,
liquidation or sale of all or substantially all of the assets of the Company.
The vesting and exercisability of any Option or SAR shall not be accelerated if
it is (i) assumed by a successor corporation or parent thereof, (ii) replaced
with a comparable Option or SAR of such successor corporation or parent thereof
or (iii) replaced with a cash incentive program of such successor corporation or
parent thereof that preserves the option spread or compensation element existing
at the time of the transaction triggering acceleration and provides for
subsequent payment in accordance with the same vesting schedule applicable to
such Option or SAR.
45
<PAGE>
The Board of Directors may amend the 1996 Plan, and any agreements
evidencing awards granted thereunder, at any time and for any reason, subject to
certain restrictions on the ability to adversely affect awards previously
granted thereunder and to any legal requirement to obtain stockholder approval.
With the holder's written consent, the Committee also may cancel any outstanding
Option or SAR or accept any outstanding Option or SAR in exchange for a new
Option or SAR.
EMPLOYMENT AGREEMENT
On January 3, 1993, the Company entered into a four-year employment
agreement with Dr. Given. The agreement provides for an initial annual base
salary of $175,000, reviewable annually by the Board of Directors, and annual
bonuses based on the achievement of performance milestones as mutually agreed by
the Board of Directors and Dr. Given. Under the agreement, Dr. Given was granted
the right to purchase 3% of the shares of Common Stock of the Company
outstanding as of the date of the agreement, or 82,907 shares, at a purchase
price of $.02 per share. Such stock is subject to a repurchase option in favor
of the Company, exercisable upon termination of Dr. Given's employment for any
reason, that expires equally with respect to one-fourth of such shares on each
anniversary date of the agreement beginning on the first anniversary date.
Under the agreement, Dr. Given received the right to a $100,000 loan bearing
interest at 7% annually for the purchase of a home in Ohio. Upon the granting of
the loan, the Company waived the charging of interest on the loan, and certain
other provisions of the agreement relating to the loan, and received from Dr.
Given an interest-free promissory note in the amount of $100,796 secured by the
property purchased. The note requires Dr. Given to repay at least $60,796 of the
loan on or before April 1, 1997. Of this portion, $20,000 was forgiven effective
in fiscal 1996 at the approval of the Board of Directors, and $40,796 remains
payable. The balance of $40,000 is subject to forgiveness in $10,000 increments
upon the achievement of certain performance milestones, including a successful
initial public offering of the Company's Common Stock. As of March 31, 1996, the
Company had forgiven, effective in fiscal 1996, $10,000 of the loan pursuant to
this provision. See "Certain Transactions -- Transactions with Directors and
Executive Officers."
The agreement also provides that, during the term of the agreement and,
unless Dr. Given terminates his employment for cause as defined in the
agreement, for a period of two years after termination of Dr. Given's
employment, he will not compete with the Company, directly or indirectly. In the
event the Board of Directors terminates Dr. Given's employment without cause, as
defined in the agreement, he would be entitled to his base salary plus pro-rated
average bonuses, subject to reduction for compensation received from other
employment, for a period of six months from the date of termination.
46
<PAGE>
STOCK OPTION GRANTS IN LAST FISCAL YEAR
The following table contains information concerning the grant of stock
options to the Named Executive Officers during the fiscal year ended September
30, 1995.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
NUMBER OF PERCENT OF ANNUAL RATES OF STOCK
SECURITIES TOTAL OPTIONS PRICE APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OPTION TERM($)(3)
OPTIONS EMPLOYEES IN PRICE EXPIRATION ----------------------
NAME GRANTED(#) FISCAL YEAR(1) ($/SHARE)(2) DATE 5% 10%
- ---------------------------------------------- ------------- --------------- ------------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Douglass B. Given, M.D., Ph.D................. 50,000(4) 26.60% $ 6.00 9/14/05 $ 188,668 $ 478,123
45,000(5) 23.94 6.00 9/14/05 169,802 430,310
Doros Platika, M.D.(6)........................ 32,500(5) 17.29 6.00 5/24/96 -- --
7,500(7) 4.00 6.00 8/24/96 2,121 4,242
H. Ralph Snodgrass, Ph.D...................... 17,500(5) 9.31 6.00 9/14/05 66,034 167,343
12,500(8) 6.65 6.00 9/14/05 47,167 119,531
Stephen J. Williams, Ph.D.(5)................. 17,500 9.31 6.00 9/14/05 66,034 167,343
</TABLE>
- --------------
(1) Based on an aggregate of 188,000 options granted to employees in fiscal
1995.
(2) All options were granted at an exercise price equal to the fair market value
of the Common Stock on the date of grant, as determined by the Board of
Directors.
(3) The potential realizable value is based on the term of the option at its
time of grant (ten years, except for options granted to Dr. Platika (see
footnotes (6) and (7)). It is calculated by assuming that the stock price on
the date of grant appreciates at the indicated annual rate, compounded
annually for the entire term of the option, and that the option is exercised
and sold on the last day of its term for the appreciated stock price. No
gain to the optionee is possible unless the stock price increases over the
option term, which will benefit all stockholders.
(4) Consists of options that vest equally over three years on each anniversary
of the date of grant, September 14, 1995.
(5) Consists of options that were under the terms of the original grant to vest
on the earlier of September 14, 2002 or a prior change in the control of the
Company. On May 13, 1996, the Company's Board of Directors amended the
options granted to Drs. Given, Snodgrass and Williams so that they vest
equally over three years on each anniversary of the date of grant, September
14, 1995. See "Certain Transactions -- Transactions with Directors and
Executive Officers."
(6) Dr. Platika's employment with the Company terminated effective as of May 24,
1996, pursuant to a Separation Agreement and Release. Of the options granted
during fiscal 1995, those vested as of May 24, 1996, remain exercisable
until August 24, 1996, and all other options granted during fiscal 1995
terminated effective May 24, 1996, in accordance with the terms of the 1992
Stock Option Plan. See "Certain Transactions -- Transactions with Directors
and Executive Officers."
(7) Consists of options that vested immediately on the date of grant, September
14, 1995.
(8) Consists of options that vest upon the earliest of the achievement of
performance milestones relating to the leptin receptor program or the BFU-e
growth factor program, or September 14, 2002.
47
<PAGE>
FISCAL YEAR-END OPTION VALUES
For each of the Named Executive Officers, the following table shows
information about the value of unexercised options as of September 30, 1995. No
options were exercised by the Named Executive Officers during fiscal 1995.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT FISCAL IN-THE-MONEY OPTIONS AT
YEAR-END(#) FISCAL YEAR-END($)(1)
-------------------------- --------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- --------------------------------------------------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Douglass B. Given, M.D., Ph.D............................ 4,125 107,375 $ 8,250 $ 24,750
Doros Platika, M.D.(2)................................... 23,750 53,750 84,750 94,750
H. Ralph Snodgrass, Ph.D................................. 6,250 38,750 20,000 20,000
Stephen J. Williams, Ph.D................................ 5,000 32,500 10,000 30,000
</TABLE>
- --------------
(1) Based on the fair market value of the Common Stock as of September 30, 1995
($6.00 per share), minus the exercise price, multiplied by the number of
shares underlying the option.
(2) Dr. Platika's employment with the Company terminated effective as of May 24,
1996, pursuant to a Separation Agreement and Release. See "Certain
Transactions -- Transactions with Directors and Executive Officers."
DIRECTOR AND OFFICER INDEMNIFICATION AND LIABILITY
The Certificate of Incorporation contains provisions eliminating or limiting
the personal liability of directors to the Company or its stockholders to the
fullest extent permitted by Delaware law.
Delaware law provides that directors of a corporation will not be personally
liable for monetary damages for breach of their fiduciary duties as directors,
except liability for (i) any breach of their duty of loyalty to the corporation
or its stockholders, (ii) acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) unlawful payments of
dividends or unlawful stock repurchases or redemptions or (iv) any transaction
from which the director derived an improper personal benefit.
The Company's charter documents provide that the Company shall indemnify its
directors and executive officers and employees and other agents to the fullest
extent permitted by law. The Company believes that indemnification under its
charter documents covers at least negligence and gross negligence on the part of
the indemnified parties. The Company's charter documents also permit it to
secure insurance on behalf of any officer, director, employee or other agent for
any liability arising out of his or her actions in such capacity, regardless of
whether the charter documents would permit indemnification.
The Company intends to enter into agreements to indemnify its directors and
executive officers, in addition to indemnification provided for in the Company's
charter documents. These agreements, among other things, indemnify the Company's
directors and executive officers for certain expenses (including attorneys'
fees), judgments, fines and settlement amounts incurred by any such person in
any action or proceeding, including any action by or in the right of the
Company, arising out of such person's services as a director or executive
officer of the Company, any subsidiary of the Company or any other company or
enterprise to which such person provides services at the request of the Company.
The Company believes that these provisions and agreements will assist the
Company in attracting and retaining qualified persons to serve as directors and
executive officers.
48
<PAGE>
CERTAIN TRANSACTIONS
RELATIONSHIP WITH INTERNEURON
Progenitor was incorporated in February 1992 as a majority-owned subsidiary
of Interneuron and assumed all rights and obligations of Scimark Corp. under the
January 1992 research and licensing agreement with Ohio University. See
"Business -- License Agreements -- Ohio University." Upon Progenitor's
organization, Interneuron purchased 2,081,250 shares of Common Stock for $.002
per share. Progenitor also issued 112,500 and 56,250 shares of Common Stock,
respectively, to Morris Laster, M.D., a director of the Company, and Steven
Kanzer, then Assistant Secretary of the Company, for a purchase price of $.002
per share. Lindsay Rosenwald, M.D., the Chairman of the Board and a principal
stockholder of Interneuron, was the Company's President until September 1992,
and was a director of the Company until May 1996. Dr. Rosenwald also owns the
Castle Group Ltd. ("Castle"), a venture capital firm. Dr. Laster was the
Company's Chief Executive Officer until September 1992, and Dr. Laster and Mr.
Kanzer were and continue to be employees of Castle.
From Progenitor's inception through December 1994, Interneuron funded
Progenitor's operations through advances evidenced by promissory notes payable
on demand and bearing interest at 1% over the prime rate. In December 1994, upon
the initial closing of the private placement referred to below, the aggregate
amount of such advances of approximately $11.5 million, plus accrued interest of
approximately $1.1 million, was converted by Interneuron into an aggregate of
2,020,496 shares of Series A Preferred Stock of the Company at a conversion
price of $6.25 per share. These shares will convert into 1,512,741 shares of
Common Stock upon the closing of the Offering. See "Description of Capital Stock
- -- Preferred Stock."
Between December 1994 and July 1995, Progenitor issued and sold an aggregate
of 349,000 shares of Series B Preferred Stock in a private placement. These
shares will convert into 261,273 shares of Common Stock upon the closing of the
Offering. See "Description of Capital Stock -- Preferred Stock." The private
placement was a sale of units, each unit consisting of Series B shares of
Preferred Stock of the Company, shares of preferred stock of Transcell
Technologies, Inc. ("Transcell"), a subsidiary of Interneuron, a put protection
right from Interneuron and warrants to purchase Interneuron's common stock. The
put protection right provides that on the third anniversary of the final closing
date of the private placement, holders of such Series B Preferred Stock have the
right to sell to Interneuron their Series B Preferred Stock of Progenitor at a
purchase price equal to the purchase price of such shares in the private
placement. The put protection right will expire upon the closing of the
Offering. Of the approximately $4.4 million gross proceeds of the private
placement, Progenitor received approximately $1.6 million, net of placement
agent fees and Interneuron received approximately $833,000 from the proceeds of
the private placement as its consideration for the issuance of warrants for its
common stock and the put protection right. Of this amount, Interneuron loaned
approximately $417,000 to Progenitor in exchange for a convertible debenture
dated March 31, 1995, bearing interest at 1% over the prime rate. The principal
amount of this debenture and accrued interest thereon (approximately $463,000 as
of May 31, 1996), will automatically be converted at the closing of the Offering
into shares of Common Stock at a conversion price equal to the initial public
offering price. See "Description of Capital Stock -- Interneuron Convertible
Debenture and Promissory Note."
Paramount Capital, Inc. ("Paramount") acted as the placement agent for the
private placement and D.H. Blair & Co., Inc. ("Blair") was a selected dealer.
Paramount is owned by Dr. Rosenwald. Progenitor paid Paramount approximately
$129,000 as its share of placement agent fees. Pursuant to Paramount's rights
under its placement agent agreement, designees of Paramount received in the
private placement warrants to purchase an aggregate of 22,201 shares of Series B
Preferred Stock (representing the right to purchase 16,619 shares of Common
Stock following the closing of the Offering). Dr. Rosenwald received warrants to
purchase 12,274 of these shares of Series B Preferred Stock (representing the
right to purchase 9,189 shares of Common Stock following the closing of the
Offering). Blair is substantially owned by family members of J. Morton Davis
(including members of Dr. Rosenwald's family), a principal
49
<PAGE>
stockholder of Interneuron. Blair received fees for acting as selected dealer,
aggregating $45,094. Designees of Blair also received in the private placement
warrants to purchase an aggregate of 12,700 shares of Series B Preferred Stock
(representing the right to purchase 9,507 shares of Common Stock following the
closing of the Offering). All of these warrants are exercisable until five years
after the closing of the Offering at an exercise price of $9.18 per share of
Common Stock, and pursuant to a cashless exercise provision may be exercised
without the need to pay any cash. See "Description of Capital Stock -- Stock
Purchase Right and Warrants." The Company also agreed to indemnify Paramount and
Blair against certain liabilities, including liabilities under the Securities
Act in connection with the private placement. See "Description of Capital Stock
- -- Stock Purchase Right and Warrants."
Since March 1996, Interneuron has continued to provide advances to
Progenitor. These advances are evidenced by a promissory note dated March 31,
1996, in the principal amount of approximately $523,000, as updated from time to
time, payable on the earlier of five years from the date of the note or the
closing of the Offering. Interneuron has agreed to convert at the closing of
this Offering the entire indebtedness evidenced by the note, including the
original principal balance, additional advances from April 1, 1996 through the
closing of the Offering, and all accrued interest (an aggregate of $1.2 million
of principal and accrued interest as of May 31, 1996) into shares of Progenitor
Common Stock at a conversion price equal to the initial public offering price.
See "Description of Capital Stock -- Interneuron Convertible Debenture and
Promissory Note."
Based on the amount owed by Progenitor to Interneuron under the promissory
note as of May 31, 1996, and as a result of the conversion upon the closing of
the Offering of the Series A Preferred Stock, convertible debenture and
promissory note held by Interneuron, Interneuron will own 3,736,017 shares, or
51.2% of Progenitor's outstanding Common Stock after closing of the Offering.
During fiscal 1995, Interneuron paid for certain Progenitor expenses which
were reimbursed by Progenitor at cost. In addition, Interneuron guaranteed
Progenitor's office lease (which guarantee will be released upon the closing of
the Offering as to obligations arising after the closing of the Offering) and
its equipment leases. Prior to the closing of the Offering, the Company and
Interneuron expect to enter into a tax allocation agreement to provide, among
other things, for the payment of tax liabilities, the entitlement to tax
refunds, and the allocation of responsibility and cooperation in the filing of
tax returns. In addition, the Company and Interneuron intend to enter into an
intercompany services agreement which may provide, among other things, for: the
participation of the Company and its employees in certain programs administered
by Interneuron, at cost, such as insurance; the provision of certain services by
Interneuron at Progenitor's request at agreed upon prices in areas such as
clinical and regulatory affairs, quality control, finance, administration, human
resources and management information systems; and the pro rata participation by
Interneuron in future equity offerings by the Company, subject to certain
restrictions. It is anticipated that the intercompany services agreement also
will provide that all future transactions between the Company and Interneuron
must be approved by a majority of the disinterested members of the Company's
Board of Directors and must be on terms no less favorable to the Company than
could be obtained from unaffiliated third parties.
After the Offering, Interneuron will continue to control the election of
directors of the Company and voting with respect to matters submitted to
stockholders, including extraordinary corporate transactions such as a merger or
sale of substantially all of the Company's assets. Interneuron's ownership of a
substantial block of the Company's voting stock could have the effect of
delaying or preventing sales of additional securities of the Company or a sale
of the Company or other change of control supported by the other stockholders of
the Company. In addition, the Company may be subject to various risks arising
from Interneuron's influence over the Company, including conflicts of interest
relating to new business opportunities that could be pursued by the Company or
by Interneuron and its other affiliates, and significant corporate transactions
for which stockholder approval is required. See "Risk Factors -- Control of
Company By, and Potential Conflicts of Interest With, Interneuron."
Interneuron has no obligation to invest any further funds in the Company or
otherwise provide funding to the Company after the Offering, and the Company
does not expect Interneuron to do so. The
50
<PAGE>
Company intends to seek additional funding through public or private equity or
debt financing and collaborative arrangements. There can be no assurance that
additional financing will be available when needed, or that, if available, such
financing will be available on terms acceptable to the Company. See "Risk
Factors -- Need for Additional Capital; Uncertainty of Additional Funding."
Interneuron has entered into a lock-up agreement which limits its ability to
sell shares of the Company's Common Stock during the 365-day period following
the date of this Prospectus. See "Shares Eligible for Future Sale" and
"Underwriting."
THE OHIO UNIVERSITY FOUNDATION
Upon the Company's formation in February 1992, The Ohio University
Foundation purchased 125,000 shares of Common Stock at a purchase price of $.002
per share, and Dr. Thomas Wagner, an employee of Ohio University and an
affiliate of The Ohio University Foundation, purchased 125,000 shares of Common
Stock at $.002 per share. Pursuant to certain antidilution rights, The Ohio
University Foundation was issued an additional 53,750 shares of Common Stock
from fiscal 1992 through fiscal 1994. Also, in December 1994, Dr. Wagner
received an additional 53,750 shares of Common Stock pursuant to similar
antidilution provisions contained in a related stock purchase agreement. In
February 1996, The Ohio University Foundation purchased an additional 58,333
shares of Common Stock for a purchase price of $6.00 per share pursuant to a
stock purchase agreement. In the event the initial public offering price is less
than $12.00 per share, pursuant to such stock purchase agreement, The Ohio
University Foundation will be entitled to receive additional shares of Common
Stock such that the price per share paid by The Ohio University Foundation under
the agreement is equal to 50% of the initial public offering price. In
connection with such purchase, the Company and The Ohio University Foundation
amended certain provisions of the 1992 stock purchase agreement in exchange for
which Progenitor granted The Ohio University Foundation the right to purchase
25,000 shares of Progenitor Common Stock at a price equal to 50% of the initial
public offering price. The Ohio University Foundation has agreed to exercise
such right to purchase 25,000 shares immediately prior to the Offering at a
price of $6.00 per share.
Ohio University entered into license and sponsored research agreements with
the Company (or its predecessor) in January 1992 and April 1993. Pursuant to the
initial license agreement, Ohio University has the right to designate two
members of Progenitor's Board of Directors until the completion of Progenitor's
initial public offering. Messrs. Axline and Peppers are Trustees of The Ohio
University Foundation and serve as Ohio University's designees to Progenitor's
Board of Directors. Under the Ohio University license and sponsored research
agreements, Progenitor paid Ohio University an aggregate of approximately
$570,000, $246,000, $397,000 and $66,000 in fiscal 1993, 1994, 1995, and for the
six months ended March 31, 1996, respectively. Ohio University also is entitled
to receive royalties based on any sales of licensed products resulting from such
arrangements. Under a consulting agreement with Dr. Wagner entered into in
February 1992, Progenitor paid Dr. Wagner consulting fees of approximately
$93,000, $93,000, $113,000 and $30,000 during fiscal 1993, 1994, 1995, and for
the six months ended March 31, 1996, respectively. See "Business -- License
Agreements."
TRANSACTIONS WITH DIRECTORS AND EXECUTIVE OFFICERS
Dr. Cooper served as the Company's President from September 1992 until June
1994. In September 1992, the Company loaned Dr. Cooper $150,000 to assist him in
purchasing a new home in the state of Ohio. In October 1993, Dr. Cooper repaid
the loan in full. Pursuant to Dr. Cooper's employment agreement, Dr. Cooper
purchased 133,681 shares of Common Stock at $.02 per share, subject to the
Company's right to repurchase such shares over a three-year period. In May 1993,
upon Dr. Cooper's appointment as president of Interneuron, the repurchase option
was modified at the approval of the Board of Directors and the Company
repurchased 74,267 of Dr. Cooper's shares.
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<PAGE>
On January 3, 1993, the Company entered into an employment agreement with
Dr. Given. Under the agreement, Dr. Given received the right to a $100,000 loan
bearing interest at 7% annually for the purchase of a home in Ohio. Upon the
granting of the loan, the Company waived the charging of interest on the loan,
and certain other provisions of the agreement relating to the loan, and received
from Dr. Given an interest-free promissory note in the amount of $100,796
secured by the property purchased. The note requires Dr. Given to repay at least
$60,796 of the loan on or before April 1, 1997. Of this portion, $20,000 was
forgiven effective in fiscal 1996 at the approval of the Board of Directors, and
$40,796 remains payable. The balance of $40,000 is subject to forgiveness in
$10,000 increments upon the achievement of certain performance milestones,
including a successful initial public offering of the Company's Common Stock. As
of March 31, 1996, the Company had forgiven, effective in fiscal 1996, $10,000
of the loan pursuant to this provision. Upon completion of the Offering, an
additional $10,000 of the loan will be forgiven pursuant to this provision. See
"Management -- Employment Agreement."
The Company provided Dr. Williams with a $55,000 down payment loan for the
purchase of a home in Ohio upon the commencement of his employment in June 1994.
This loan is evidenced by a promissory note executed in fiscal 1995 which
accrues interest at 9% annually and is secured by Dr. Williams' home. Under the
terms of the promissory note, $40,000 of this loan, plus accrued interest, is
subject to forgiveness by the Board of Directors upon the achievement of certain
performance milestones. Pursuant to this arrangement, the Board of Directors
approved forgiveness effective in fiscal 1996 of $20,000 of the loan, plus
associated accrued interest. The Board of Directors also approved forgiveness
effective in fiscal 1996 of an additional $8,000 of the loan, plus associated
accrued interest, in lieu of a salary increase. The balance of $30,119,
including accrued interest as of March 31, 1996, remains outstanding. In
addition, the Company loaned Dr. Williams $21,448 in fiscal 1995. This amount
was repaid in May 1996. Upon completion of the Offering, an additional $10,000
of the loan, plus associated accrued interest, will be forgiven.
Effective as of May 24, 1996, Dr. Doros Platika's employment terminated
pursuant to a Separation Agreement and Release (the "Release") among the
Company, Dr. Platika and Interneuron. The Release obligates Dr. Platika to
provide services to the Company in a consulting capacity for a minimum of twenty
hours per month for the six-month period following May 24, 1996. Dr. Platika
also agreed not to compete with the Company for a period of two years after his
termination. The Release also contains arrangements with respect to loans made
by the Company to Dr. Platika and certain stock options to acquire securities of
the Company and Interneuron. Prior to termination, the Company had made loans to
Dr. Platika that had a balance of $207,378 including accrued interest, as of May
24, 1996, which amount reflects the forgiveness effective in fiscal 1996 of
$26,652 of such loans previously approved by the Board of Directors. Pursuant to
the Release, an additional $120,000 of this balance was forgiven subject to Dr.
Platika's payment to the Company of withholding payments required with respect
thereto and with respect to the loans to Dr. Platika previously forgiven by the
Company effective in fiscal 1996. Prior to the Release, the Company had granted
Dr. Platika options to purchase a total of 77,500 shares of Common Stock, at
exercise prices ranging from $0.20 to $6.00 per share. Of these, options to
purchase a total of 23,750 shares of Common Stock had previously vested. The
Release provides for the vesting as of June 1, 1996 of options to purchase 6,875
shares of Common Stock at $0.20 per share and the vesting as of June 15, 1996 of
options to acquire 2,500 shares of Common Stock at $4.00 per share. All of Dr.
Platika's other unvested options were canceled pursuant to the Release. On June
15, 1996, Dr. Platika will hold options exercisable for 33,125 shares of Common
Stock, which options will expire on August 24, 1996 in accordance with the terms
of the 1992 Stock Option Plan. The Release also provides that Interneuron will
grant to Dr. Platika vested stock options to purchase 2,500 shares of
Interneuron Common Stock at a price per share of $8.75, which will be
exercisable on or prior to August 24, 1996.
The Company has granted stock options to its directors and executive
officers on several occasions since the beginning of fiscal 1993, all of which
vest over a four-year period from the date of grant, except as indicated below.
In fiscal 1993, Dr. Snodgrass received options to purchase 5,000 shares of
Common
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<PAGE>
Stock at an exercise price of $0.20 per share, and options to purchase 5,000
shares of Common Stock at an exercise price of $2.00 per share and Dr. Platika
received options to purchase 7,500 shares of Common Stock at an exercise price
of $6.00 per share, all of which vested immediately upon the date of grant.
During fiscal 1994, Mr. Sharrock received options to purchase 2,500 shares
of Common Stock at an exercise price of $4.00 per share, which vest over three
years. Also in fiscal 1994, the Company granted Drs. Cooper, Given, Snodgrass
and Williams options to purchase 8,500, 16,500, 10,000 and 20,000 shares of
Common Stock, respectively, at an exercise price of $4.00 per share.
In September 1995, the Company granted options to Drs. Given, Snodgrass and
Williams to purchase 45,000, 17,500 and 17,500 shares, respectively, at an
exercise price of $6.00 per share, which originally were intended to vest on
September 14, 2002. These options were amended by the Board of Directors on May
13, 1996, so that one-third of such options vest on each anniversary date of the
date of grant. In September 1995, the Company granted to Dr. Given options to
purchase an additional 50,000 shares at an exercise price of $6.00 per share,
which also vest over three years from the date of grant. In September 1995 the
Company also granted to Dr. Snodgrass options to purchase 12,500 shares of
Common Stock, all of which vest upon the earliest of the achievement of
performance milestones relating to the leptin receptor program or the BFU-e
growth factor program, or September 14, 2002.
On February 21, 1996, each of Messrs. Axline, Haig, Peppers and Sharrock
received options to purchase 7,500 shares of Common Stock at an exercise price
of $6.00 per share.
All of the option grants described above were made pursuant to the 1992
Stock Option Plan.
On May 13, 1996, in connection with the Board of Directors' adoption of the
Company's 1996 Stock Incentive Plan, Drs. Given, Snodgrass and Williams were
granted options, which vest over three years, to purchase 100,000, 100,000 and
75,000 shares of Common Stock, respectively, at an exercise price of $9.00 per
share.
INSIDER TRANSACTIONS
The Company has adopted a policy that all future transactions between the
Company and its executive officers, directors and other affiliates must be
approved by a majority of the disinterested members of the Company's Board of
Directors, and must be on terms no less favorable to the Company than could be
obtained from unaffiliated third parties. In addition, this policy requires that
any loans by the Company to its executive officers, directors or other
affiliates be for bona fide business purposes only.
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PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding beneficial
ownership of the Company's Common Stock as of May 31, 1996, and as adjusted to
reflect the sale of the shares of Common Stock being offered hereby, by (i) each
stockholder who is known by the Company to own beneficially more than 5% of the
Company's outstanding Common Stock, (ii) each director and Named Executive
Officer of the Company and (iii) all directors and executive officers of the
Company as a group.
<TABLE>
<CAPTION>
PERCENTAGE BENEFICIALLY
NUMBER OF OWNED(2)
SHARES --------------------------
BENEFICIALLY PRIOR TO AFTER
BENEFICIAL OWNER OWNED(1) OFFERING OFFERING
- --------------------------------------------------------------------- ----------- ------------ ------------
<S> <C> <C> <C>
Glenn L. Cooper, M.D.(3) ............................................ 3,741,767 78.0% 51.3%
One Ledgemont Center
99 Hayden Avenue
Lexington, Massachusetts 02173
Interneuron Pharmaceuticals, Inc. ................................... 3,736,017 77.9 51.2
One Ledgemont Center
99 Hayden Avenue
Lexington, Massachusetts 02173
The Ohio University Foundation (4) .................................. 262,083 5.5 3.6
102 Research and Technology Center
Athens, Ohio 45701
Morris Laster, M.D................................................... 112,500 2.3 1.5
Douglass B. Given, M.D., Ph.D. (5)................................... 91,157 1.9 1.2
H. Ralph Snodgrass, Ph.D. (6)........................................ 12,500 * *
Stephen J. Williams, Ph.D. (7)....................................... 10,000 * *
David B. Sharrock (8)................................................ 1,666 * *
Robert P. Axline..................................................... -- * *
Alexander M. Haig, Jr................................................ -- * *
Jerry P. Peppers..................................................... -- * *
3,969,590 82.8 54.1
All executive officers and directors as a group
(9 persons) (9).....................................................
</TABLE>
- ------------------
* Less than one percent.
(1) To the Company's knowledge, except as indicated in the footnotes to this
table and subject to applicable community property laws, each of the persons
named in this table has sole voting and investment power with respect to all
shares of Common Stock indicated opposite such person's name.
(2) Percentage of beneficial ownership is based on 4,793,819 shares of Common
Stock outstanding as of May 31, 1996, and 7,293,819 shares of Common Stock
outstanding after completion of this Offering, reflecting the conversion of
the convertible debenture and promissory note held by Interneuron and all
outstanding shares of Preferred Stock into Common Stock and the purchase by
The Ohio University Foundation of 25,000 shares of Common Stock pursuant to
a stock purchase right. See "Capitalization" and "Description of Capital
Stock." Shares of Common Stock subject to options, warrants and convertible
notes currently exercisable or convertible, or exercisable or convertible
within 60 days of May 31, 1996, are deemed outstanding for computing the
percentage of the person or entity holding such securities but are not
deemed outstanding for computing the percentage of any other person or
entity.
(3) Includes 3,736,017 shares held by Interneuron, options exercisable for 4,250
shares of Common Stock held by Dr. Cooper and options exercisable for 1,500
shares of Common Stock held by Dr. Cooper's wife. Dr. Cooper is President,
Chief Executive Officer and a director of Interneuron. Dr. Cooper disclaims
beneficial ownership of the shares held by Interneuron.
(4) Includes a stock purchase right for 25,000 shares of Common Stock.
(5) Includes options exercisable for 8,250 shares of Common Stock.
(6) Includes options exercisable for 12,500 shares of Common Stock.
(7) Includes options exercisable for 10,000 shares of Common Stock.
(8) Includes options exercisable for 1,666 shares of Common Stock.
(9) Includes options exercisable for 38,166 shares of Common Stock. See
footnotes 3, 5, 6, 7 and 8 above.
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<PAGE>
DESCRIPTION OF CAPITAL STOCK
The Company's Certificate of Incorporation, as amended (the "Certificate of
Incorporation") currently authorizes 42,000,000 shares of capital stock,
consisting of 39,000,000 shares of Common Stock, Class A, $.001 par value, and
3,000,000 shares of Preferred Stock, $.01 par value. In connection with the
Offering, the Company's Certificate of Incorporation will be amended and
restated (the "Restated Certificate of Incorporation"). The Restated Certificate
of Incorporation will authorize the issuance of 44,000,000 shares of capital
stock, consisting of 39,000,000 shares of Common Stock, par value $.001 per
share, and 5,000,000 shares of Preferred Stock, par value $.001 per share. Set
forth below is a description of the capital stock of the Company.
COMMON STOCK
As of May 31, 1996, assuming the conversion of all outstanding shares of
Preferred Stock and the convertible debenture and promissory note into Common
Stock, and the exercise of the stock purchase right described below, there were
4,793,819 shares of Common Stock issued and outstanding held of record by 55
stockholders, 606,625 shares of Common Stock issuable upon the exercise of
outstanding stock options and 26,126 shares of Common Stock issuable upon the
exercise of outstanding warrants.
The holders of Common Stock are entitled to one vote per share on all
matters submitted to a vote of stockholders and are not entitled to cumulative
voting rights with respect to the election of directors. Accordingly, holders of
a majority of the shares of Common Stock entitled to vote in any election of
directors may elect all of the directors standing for election. Holders of
Common Stock are entitled to receive ratably such dividends, if any, as may be
declared by the Board of Directors out of funds legally available therefor,
subject to preferences that may be applicable to any outstanding Preferred
Stock. In the event of liquidation, dissolution or winding up of the Company,
holders of Common Stock are entitled to share ratably in all net assets
remaining after payment of liabilities and the liquidation preference of any
outstanding Preferred Stock. Holders of Common Stock have no preemptive,
subscription, redemption, conversion or other subscription rights, and there are
no sinking fund provisions applicable to the Common Stock. All currently
outstanding shares of Common Stock are, and the shares of Common Stock being
issued and sold in the Offering will be, duly authorized, validly issued, fully
paid and nonassessable.
PREFERRED STOCK
The Company currently has outstanding 2,020,496 shares of Series A Preferred
Stock and 349,000 shares of Series B Preferred Stock. Such shares will
automatically convert into Common Stock upon consummation of this Offering. Both
the Series A and Series B Preferred Stock have antidilution and conversion
adjustment provisions that will increase or decrease the number of shares of
Common Stock outstanding as of May 31, 1996 above or below the number of shares
set forth herein and will increase or decrease the number of shares used in
calculations for purposes of, among other things, dilution to new investors,
shares held by certain principal stockholders, shares subject to registration
rights and shares eligible for future sale, in the event that the initial public
offering price of the Common Stock offered hereby, is less than or greater than
$12.00 per share, as the case may be. See "Dilution," "Principal Stockholders,"
"-- Registration Rights," and "Shares Eligible for Future Sale."
The actual number of shares of Common Stock issuable to each holder of
Preferred Stock upon conversion of the Series A and Series B Preferred Stock
will equal the product of (a) the number of shares of Preferred Stock held by
such holder multiplied by (b) the greater of (x) one or (y) a fraction, the
numerator of which is $12.50 and the denominator of which is .6957 multiplied by
the initial public offering price of the Common Stock offered hereby. At the
assumed initial public offering price of $12.00 per share, 1,774,014 shares of
Common Stock will issue upon conversion of the Preferred Stock.
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<PAGE>
Following completion of the Offering and the conversion of all outstanding
shares of Preferred Stock, the Board of Directors will have the authority to
issue from time to time up to 5,000,000 shares of Preferred Stock in one or more
series and to fix the powers, designations, preferences and relative,
participating, optional or other rights thereof, including dividend rights,
conversion rights, voting rights, redemption terms, liquidation preferences and
the number of shares constituting each such series, without any further vote or
action by the Company's stockholders. The issuance of Preferred Stock could
adversely affect the rights of holders of Common Stock and could have the effect
of delaying, deferring or preventing a change in control of the Company. The
Company has no present plans to issue any shares of Preferred Stock.
STOCK PURCHASE RIGHT AND WARRANTS
Pursuant to a Stock Purchase Agreement entered into on March 27, 1992, as
amended on February 26, 1996, the Company granted The Ohio University Foundation
the right to purchase up to 25,000 shares of Common Stock in the event of an
initial public offering, merger or other similar corporate transaction involving
Progenitor, at a price equal to 50% of the assumed initial public offering price
per share or other per share consideration. The Ohio University Foundation has
agreed to exercise such right in full prior to the closing of the Offering. See
"Certain Transactions -- The Ohio University Foundation."
As of March 31, 1996, there were warrants outstanding to purchase an
aggregate of 26,126 shares of Common Stock at exercise prices of $9.18 per
share. The warrants also contain a cashless exercise right that allows the
holder to receive the number of shares of Common Stock subject to the warrant
multiplied by a fraction, the numerator of which is the difference between the
then current per share market price of the Common Stock and $9.18 and the
denominator of which is the then current per share market price of the Common
Stock. These warrants were issued in connection with a private placement of
Preferred Stock for which Paramount, an affiliate of Interneuron, acted as
placement agent. See "Certain Transactions -- Relationship with Interneuron."
The warrants expire five years from the date of this Offering. Upon automatic
conversion of the outstanding Preferred Stock in connection with the
consummation of this Offering, all such warrants will be converted into warrants
to purchase shares of Common Stock. The number of shares of Common Stock for
which such warrants are exercisable is subject to adjustment if the initial
public offering price of the Common Stock offered hereby is less than or greater
than $12.00 per share in the same manner and according to the same formula
described above for the conversion of the Company's currently outstanding
Preferred Stock. See "-- Preferred Stock." The warrants do not confer upon the
holder thereof any voting or preemptive rights, or any other rights as a
stockholder of Progenitor prior to exercise. Upon exercise of such warrants,
holders of the underlying shares of Common Stock will be entitled to certain
registration rights with respect to such shares. See "-- Registration Rights."
REGISTRATION RIGHTS
Pursuant to Investors' Rights Agreements (the "Investors' Agreements"), the
holders of 261,273 shares of Common Stock (the "Registrable Securities") or
their transferees are entitled to certain rights with respect to the
registration of such shares under the Securities Act. Pursuant to the Investors'
Agreements, subject to certain exceptions and limitations, the holders of at
least 50% of the Registrable Securities may require, on one occasion during the
four-year period commencing 12 months after the consummation of this Offering
(the "Registration Period"), that the Company use its best efforts to register
the Registrable Securities for public resale. During the Registration Period,
the holders of the Registrable Securities may also require the Company (but not
more than twice in any calendar year) to register all or a portion of their
Registrable Securities on Form S-3 under the Securities Act when use of such
form becomes available to the Company; provided, among other limitations, that
the anticipated aggregate offering price, net of underwriting discounts and
commissions, will exceed $500,000 or the number of shares of Registrable
Securities exceeds 20,000, whichever has a greater value. In addition, in
56
<PAGE>
the event the Company elects to register any Common Stock under the Securities
Act, either for its own account or for the account of any other stockholders,
the Company, on two such occasions during the Registration Period, is required
to notify, and subject to certain marketing and other limitations, is required
to include in such registration the Registrable Securities of holders requesting
registration. The holders of 26,126 shares of Common Stock issuable, after
completion of the Offering, upon exercise of outstanding warrants are entitled
to similar registration rights with respect to the registration of the
underlying shares on a Form S-3 or in the event the Company files a registration
statement during the Registration Period pursuant to the terms of the warrants.
All registration expenses of any such registration are to be borne by the
Company and all selling expenses relating to Registrable Securities are to be
borne by the holders of the securities being registered. See "Certain
Transactions -- Relationship with Interneuron."
INTERNEURON CONVERTIBLE DEBENTURE AND PROMISSORY NOTE
On March 31, 1995, the Company issued a convertible debenture in the amount
of $387,968 to Interneuron, and procured an additional advance of $28,651 under
such debenture on June 30, 1995. The debenture is convertible immediately prior
to the consummation of this Offering into a number of shares of Common Stock
equal to the outstanding principal amount and any accrued interest divided by
the initial public offering price of the Common Stock, plus a cash payment in
lieu of fractional shares.
Interneuron has provided and continues to provide advances to Progenitor
evidenced by a promissory note dated March 31, 1996, in the principal amount of
approximately $523,000, as updated from time to time, payable on the earlier of
five years from the date of the note or the closing of this Offering.
Interneuron has agreed to convert the indebtedness evidenced by the note
(approximately $1.2 million as of May 31, 1996), including additional advances
from April 1, 1996 through the closing of the Offering and accrued interest
thereon, into shares of Common Stock upon the closing of the Offering at a
conversion price equal to the initial public offering price. See "Certain
Transactions -- Relationship with Interneuron."
DELAWARE ANTI-TAKEOVER LAW AND CERTAIN CHARTER PROVISIONS
The Company is subject to the provisions of Section 203 of the Delaware
General Corporation Law ("DGCL"), an anti-takeover law. In general, the statute
prohibits a publicly-held Delaware corporation from engaging in a "business
combination" with an "interested stockholder" for a period of three years after
the date of the transaction in which the person became an interested
stockholder, unless the business combination is, or the transaction in which the
person became an interested stockholder was, approved in a prescribed manner or
another prescribed exemption applies. For purposes of Section 203, a "business
combination" is defined broadly to include a merger, asset sale or other
transaction resulting in a financial benefit to the interested stockholder. In
general, an "interested stockholder" is a person who, together with affiliates
and associates, owns (or within the three years prior to such transaction, did
own) 15% or more of the corporation's voting stock.
In addition, certain provisions of the Company's Certificate of
Incorporation may have the effect of preventing, discouraging or delaying any
change in the control of Progenitor. The authorization of undesignated Preferred
Stock makes it possible for the Board of Directors to issue Preferred Stock with
voting or other rights or preferences that could impede the success of any
attempt to change control of the Company. See "-- Preferred Stock."
LIMITATION OF LIABILITY
Section 145 ("Section 145") of the DGCL provides a detailed statutory
framework covering indemnification of officers and directors against liabilities
and expenses arising out of legal proceedings brought against them by reason of
their being or having been directors or officers. Section 145 generally provides
57
<PAGE>
that a director or officer of a corporation (i) shall be indemnified by the
corporation for all expenses of such legal proceedings when he is successful on
the merits, (ii) may be indemnified by the corporation for the expenses,
judgments, fines and amounts paid in settlement of such proceedings (other than
a derivative suit), even if he is not successful on the merits, if he acted in
good faith and in a manner he reasonably believed to be in or not opposed to the
best interests of the corporation, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful, and
(iii) may be indemnified by the corporation for the expenses of a derivative
suit (a suit by a stockholder alleging a breach by a director or officer of a
duty owed to the corporation), even if he is not successful on the merits, if he
acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the corporation. No indemnification may be made
under clause (iii) above, however, if the director or officer is adjudged liable
for negligence or misconduct in the performance of his duties to the
corporation, unless a corporation determines that, despite such adjudication,
but in view of all the circumstances, he is entitled to indemnification. The
indemnification described in clauses (ii) and (iii) above may be made only upon
a determination that indemnification is proper because the applicable standard
of conduct has been met. Such a determination may be made by a majority of a
quorum of disinterested directors, independent legal counsel, the stockholders
or a court of competent jurisdiction. The Company's Certificate of Incorporation
provides that the Company shall indemnify to the fullest extent permitted by
Section 145, as it now exists or as amended, all persons whom it may indemnify
pursuant thereto.
Section 102(b)(7) of the DGCL permits a corporation to provide in its
certificate of incorporation that a director of the corporation shall not be
personally liable to the corporation or its stockholders for monetary damages
for breach of fiduciary duty as a director, except for liability (i) for any
breach of the director's duty of loyalty to the corporation or its stockholders,
(ii) for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii) under Section 174 of the DGCL,
or (iv) for any transaction from which the director derived an improper personal
benefit. The Company's Certificate of Incorporation provides for the elimination
of personal liability of a director for breach of fiduciary duty, as permitted
by Section 102(b)(7) of the DGCL.
The Underwriting Agreement provides for indemnification by the Underwriters
under certain circumstances of directors, officers and controlling persons of
the Company against certain liabilities, including liabilities under the
Securities Act.
Prior to the closing of the Offering, the Company intends to obtain
liability insurance insuring the Company's officers and directors against
liabilities that they may incur in such capacities.
The Investors' Agreements provide for cross-indemnification of stockholders
of the Company whose shares with registration rights are included in a
registration under the Securities Act, and of the Company, its officers and
directors for certain liabilities arising in connection with such registration.
TRANSFER AGENT AND REGISTRAR
Chemical Mellon Shareholder Services has been appointed as the transfer
agent and registrar for the Company's Common Stock.
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SHARES ELIGIBLE FOR FUTURE SALE
Prior to the Offering, there has not been any public market for the Common
Stock and there can be no assurance that a significant public market for the
Common Stock will be developed or be sustained after the Offering. Sales of
substantial amounts of Common Stock in the public market after the Offering, or
the possibility of such sales occurring, could adversely affect prevailing
market prices for the Common Stock or the future ability of the Company to raise
capital through an offering of equity securities.
After the Offering, the Company will have outstanding 7,293,819 shares of
Common Stock (7,668,819 shares if the Underwriters' over-allotment option is
exercised in full). Of these shares, the 2,500,000 shares offered hereby will be
freely tradable in the public market without restriction under the Securities
Act, unless such shares are held by "affiliates" of the Company, as that term is
defined in Rule 144 under the Securities Act.
The remaining 4,793,819 shares of Common Stock outstanding upon completion
of the Offering will be "restricted securities" as that term is defined in Rule
144 ("Restricted Shares"). The Restricted Shares were issued and sold by the
Company in private transactions in reliance upon exemptions from registration
under the Securities Act. Restricted Shares may be sold in the public market
only if they are registered or if they qualify for an exemption from
registration under the Securities Act, including an exemption under Rule 144 or
701, which are summarized below.
Pursuant to "lock-up" agreements, all of the Company's executive officers
and directors and certain stockholders, who collectively hold 715,279 of such
Restricted Shares, have agreed not to offer, sell, contract to sell, grant any
option to purchase or otherwise dispose of any such shares for a period of 180
days from the date of this Prospectus without the prior written consent of
Vector Securities International, Inc. Interneuron will hold 3,736,017 Restricted
Shares and has agreed pursuant to a lock-up agreement not to offer, sell or
otherwise dispose of any of its Restricted Shares for a period of 365 days from
the date of this Prospectus without the prior written consent of Vector
Securities International, Inc. The Company has also agreed that it will not
offer, sell or otherwise dispose of Common Stock for a period of 180 days from
the date of this Prospectus, other than pursuant to existing stock option plans,
without the prior written consent of Vector Securities International, Inc. Upon
termination of such lock-up agreements, approximately 321,071 and 3,593,591 of
the Restricted Shares will be eligible for immediate sale beginning 181 days and
366 days, respectively, after the date of this Prospectus, in the public market
subject to certain volume, manner of sale and other limitations under Rule 144
and approximately 329,200 of such Restricted Shares will be eligible for
immediate sale 181 days after the date of this Prospectus without limitation
under Rule 144(k).
The Securities and Exchange Commission has recently proposed amendments to
Rule 144 and Rule 144(k) that would permit resale of restricted shares under
Rule 144 after a one-year, rather than a two-year holding period, subject to
compliance with the other provisions of Rule 144, and would permit resale of
restricted shares by non-affiliates under Rule 144(k) after a two-year, rather
than a three-year holding period. Adoption of such amendments could result in
resale of restricted shares sooner than would be the case under Rule 144 and
Rule 144(k) as currently in effect.
Following the expiration of such lock-up periods, certain shares issued upon
exercise of options granted by the Company prior to the date of this Prospectus
will also be available for sale in the public market pursuant to Rule 701 under
the Securities Act. Rule 701 permits resales of such shares in reliance upon
Rule 144 but without compliance with certain restrictions, including the holding
period requirement, imposed under Rule 144. In general, under Rule 144 as
currently in effect, beginning on , 1996 (90 days after the date of
this Prospectus), a person (or persons whose shares of the Company are
aggregated) who has beneficially owned Restricted Shares for at least two years
(including the holding period of any prior owner who is not an affiliate of the
Company) would be entitled to sell within any three-month period a number of
shares that does not exceed the greater of (i) one percent of the then
outstanding shares of Common Stock (approximately 72,938 shares immediately
after the Offering), or (ii) the average weekly trading volume of the Common
Stock during the four calendar weeks preceding the filing of a Form 144 with
respect to such sale. Sales under Rule 144 are also subject to
59
<PAGE>
certain manner of sale and notice requirements and to the availability of
current public information about the Company. Under Rule 144(k), a person who is
not deemed to have been an affiliate of the Company at any time during the 90
days preceding a sale and who has beneficially owned the shares proposed to be
sold for at least three years (including the holding period of any prior owner
who is not an affiliate of the Company) is entitled to sell such shares without
complying with the manner of sale, public information, volume limitation or
notice provisions of Rule 144.
As of May 31, 1996, options to purchase a total of 606,625 shares of Common
Stock were outstanding under the Company's stock option plans. Of such shares,
approximately 443,000 shares are subject to lock-up agreements for a period of
180 days from the date of this Prospectus and the remaining 163,625 shares will
be available for sale in the public market 90 days after the date of this
Prospectus pursuant to Rule 701. As of May 31, 1996, 661,700 shares were
available for future option grants under such plans.
The Company intends to file after the effective date of the Offering a
Registration Statement on Form S-8 to register an aggregate of 1,268,325 shares
of Common Stock reserved for issuance under its 1992 Stock Option Plan and 1996
Stock Incentive Plan. Such Registration Statement will become effective
automatically upon filing. Shares issued under the foregoing plans, after the
filing of the Registration Statement on Form S-8, may be sold in the open
market, subject, in the case of certain holders, to the Rule 144 limitations
applicable to affiliates, the above-referenced lock-up agreements and vesting
restrictions imposed by the Company.
After the closing of the Offering, holders of an aggregate of 261,273 shares
of Common Stock issued upon the conversion of Preferred Stock will be entitled
to certain rights with respect to the registration of such shares under the
Securities Act. In addition, the 26,126 shares issuable upon exercise of
outstanding warrants have similar registration rights during the four-year
period commencing 12 months after consummation of the Offering. See "Description
of Capital Stock -- Registration Rights."
60
<PAGE>
UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement, the
underwriters (the "Underwriters") named below, for whom Vector Securities
International, Inc., Tucker Anthony Incorporated and Genesis Merchant Group
Securities are acting as representatives (the "Representatives"), have severally
agreed to purchase, subject to the terms and conditions of the Underwriting
Agreement, and the Company has agreed to sell to the Underwriters, the following
respective number of shares of Common Stock.
<TABLE>
<CAPTION>
UNDERWRITERS NUMBER OF SHARES
- ------------------------------------------------------------------------------------- -----------------
<S> <C>
Vector Securities International, Inc.................................................
Tucker Anthony Incorporated..........................................................
Genesis Merchant Group Securities....................................................
--------
Total.............................................................................. 2,500,000
--------
--------
</TABLE>
The Underwriting Agreement provides that the obligations of the Underwriters
are subject to certain conditions precedent, including the absence of any
material adverse change in the Company's business and the receipt of certain
certificates, opinions and letters from the Company and its counsel and
independent auditors. The nature of the Underwriters' obligation is such that
they are committed to purchase all shares of Common Stock offered hereby if any
of such shares are purchased.
The Underwriters propose to offer the shares of Common Stock to the public
at the offering price set forth on the cover page of this Prospectus and to
certain dealers at such price less a concession not in excess of $ per
share. The Underwriters may allow to selected dealers and such dealers may
reallow a concession not in excess of $ per share to certain other
dealers. After the initial public offering of the shares of Common Stock, the
offering price and other selling terms may be changed by the Representatives.
The Company has granted to the Underwriters an option, exercisable at any
time during the 30-day period after the date of this Prospectus, to purchase up
to an additional 375,000 shares of Common Stock at the initial public offering
price set forth on the cover page of this Prospectus, less underwriting
discounts and commissions. The Underwriters may exercise such option solely for
the purpose of covering over-allotments, if any, in connection with the
Offering. To the extent such option is exercised, each Underwriter will be
obligated, subject to certain conditions, to purchase approximately the same
percentage of such additional shares as the number of shares set forth next to
such Underwriter's name in the preceding table bears to the total number of
shares listed in the table.
The offering of the shares is made for delivery when, as and if accepted by
the Underwriters and subject to prior sale and to withdrawal, cancellation or
modification of the Offering without notice. The Underwriters reserve the right
to reject an order for the purchase of shares in whole or in part.
At the request of the Company, the Underwriters have reserved 50,000 shares
for sale to employees, directors and other persons and entities associated with
the Company. The number of shares available for sale to the general public will
be reduced to the extent that the reserved shares are purchased by persons or
entities designated by the Company. Any reserved shares that are not purchased
by persons or entities designated by the Company will be offered by the
Underwriters to the general public on the same basis as other shares offered
hereby.
The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act, or to contribute to
payments that the Underwriters may be required to make in respect thereof.
61
<PAGE>
The executive officers, directors and certain employees of the Company and
other stockholders have agreed that they will not, without the prior written
consent of Vector Securities International, Inc., offer, sell, contract to sell,
grant any option to purchase or otherwise dispose of any shares of Common Stock,
options or warrants to acquire shares of Common Stock or securities exchangeable
for or convertible into shares of Common Stock for a period of 180 days (365
days in the case of Interneuron) after the date of this Prospectus. The Company
has agreed that it will not, without the prior written consent of Vector
Securities International, Inc., offer, sell, contract to sell, grant any option
to purchase or otherwise dispose of any shares of Common Stock, options or
warrants to acquire shares of Common Stock or securities exchangeable for or
convertible into shares of Common Stock for a period of 180 days after the date
of this Prospectus, except for securities issued under its stock option plans.
See "Shares Eligible for Future Sale."
Prior to the Offering, there has been no public market for the Common Stock.
Consequently, the initial public offering price for the shares of Common Stock
included in the Offering will be determined by negotiations between the Company
and the Representatives. Among the factors considered in determining such price
will be the history of and prospects for the Company's business and the industry
in which it competes, an assessment of the Company's management and the present
state of the Company's development, its past and present operations and
financial performance, the prospects for future earnings of the Company, the
present state of the Company's discovery programs, the current state of the
economy in the United States and the current level of economic activity in the
industry in which the Company competes and in related or comparable industries,
and the current prevailing condition in the securities markets, including
current market valuations of publicly traded companies that are comparable to
the Company.
In February 1996, the Company engaged Vector Securities International, Inc.
as its primary financial advisor for a period of one year with automatic
six-month extensions, unless terminated in accordance with the terms of the
agreement, to provide certain financial advisory services to the Company. As
compensation for such services, the Company paid Vector Securities
International, Inc. a non-refundable retainer fee of $75,000 to be credited
against additional advisory fees payable upon completion of certain
transactions.
LEGAL MATTERS
The validity of the issuance of the shares of Common Stock offered hereby
and certain matters relating to the Offering will be passed upon for the Company
by Morrison & Foerster LLP, San Francisco, California. Certain legal matters
relating to the Offering will be passed upon for the Underwriters by Skadden,
Arps, Slate, Meagher & Flom, Chicago, Illinois.
EXPERTS
The financial statements of Progenitor, Inc. (a Development Stage Company)
as of September 30, 1994 and 1995 and for each of the three years in the period
ended September 30, 1995, and for the period from May 8, 1992 (date of
inception) to September 30, 1995, appearing in this Prospectus and Registration
Statement have been audited by Coopers & Lybrand L.L.P., independent
accountants, as set forth in their report thereon appearing elsewhere herein and
in this Registration Statement, which includes an explanatory paragraph
regarding the Company's ability to continue as a going concern, and are included
in reliance upon such report given upon the authority of such firm as experts in
accounting and auditing.
The statements in this Prospectus under the captions "Risk Factors --
Uncertainty of Patents and Proprietary Rights," "Business -- Progenitor's
Functional Genomics Approach," "Business -- Progenitor's Proprietary Discovery
Technologies," "Business -- Progenitor's Discovery Programs" and "Business --
Patents and Proprietary Rights" relating to patent matters have been reviewed
and approved by Pennie & Edmonds, New York, New York, patent counsel to the
Company, and have been included herein in reliance upon the review and approval
by such firm as experts in patent law.
62
<PAGE>
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission, a
Registration Statement on Form S-1, including amendments thereto, under the
Securities Act with respect to the Common Stock offered hereby. This Prospectus
does not contain all of the information set forth in the Registration Statement
and the exhibits and schedules filed therewith. For further information with
respect to the Company and such Common Stock, reference is hereby made to the
Registration Statement and to the exhibits and schedules filed therewith.
Statements contained in this Prospectus regarding the contents of any contract
or other document referred to are not necessarily complete, and in each instance
reference is made to the copy of such contract or other document filed as an
exhibit to the Registration Statement, each such statement being qualified in
all respects by such reference. Copies of the Registration Statement, including
the exhibits and schedules thereto, may be inspected without charge at the
principal office of the Securities and Exchange Commission at 450 Fifth Street,
N.W, Room 1024, Washington, D.C. 20549, and at the following regional offices of
the Securities and Exchange Commission: Midwest Regional Office, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661-2511; and Northeast Regional
Office, Seven World Trade Center, New York, New York 10048. Copies can be
obtained at prescribed rates from the Public Reference Section of the Commission
at 450 Fifth Street, N.W, Room 1024, Washington, D.C. 20549.
The Company intends to distribute to its stockholders annual reports
containing financial statements audited by its independent public accountants
and will make available copies of quarterly reports for the first three quarters
of each fiscal year containing unaudited financial information.
63
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Report of Independent Accountants.......................................................................... F-2
Balance Sheets............................................................................................. F-3
Statements of Operations................................................................................... F-4
Statements of Stockholders' Deficit........................................................................ F-5
Statements of Cash Flows................................................................................... F-6
Notes to the Financial Statements.......................................................................... F-7
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
Board of Directors and Stockholders of
Progenitor, Inc.
We have audited the accompanying balance sheets of Progenitor, Inc. (a
Development Stage Company) as of September 30, 1994 and 1995, and the related
statements of operations, stockholders' deficit, and cash flows for the years
ended September 30, 1993, 1994 and 1995, and for the period from May 8, 1992
(date of inception) to September 30, 1995. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Progenitor, Inc. (a Development
Stage Company) as of September 30, 1994 and 1995, and the results of its
operations and its cash flows for the years ended September 30, 1993, 1994 and
1995, and for the period from May 8, 1992 (date of inception) to September 30,
1995, in conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming the Company
will continue as a going concern. As discussed in Note 1 to the financial
statements, the Company is in the development stage. The Company's lack of
revenues and its need for additional financing to fund its operations raise
substantial doubt about its ability to continue as a going concern. Management's
plans in regard to these matters are also described in Note 1. The financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.
COOPERS & LYBRAND L.L.P.
Columbus, Ohio
June 5, 1996
F-2
<PAGE>
PROGENITOR, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
SEPTEMBER 30, PRO FORMA
------------------------ MARCH 31, MARCH 31,
1994 1995 1996 1996
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
(UNAUDITED) (UNAUDITED)
Current assets:
Cash and cash equivalents..................................... $ 9,544 $ 1,173,743 $ 26,695 $ 176,695
Accounts receivable........................................... -- 193,898 193,897 193,897
Accounts receivable -- parent................................. -- 131,600 -- --
Prepaid expenses and other current assets..................... 3,000 22,618 142,776 142,776
----------- ----------- ----------- -----------
Total current assets........................................ 12,544 1,521,859 363,368 513,368
----------- ----------- ----------- -----------
Property and equipment, at cost:
Equipment..................................................... 908,788 1,063,602 1,101,622 1,101,622
Leasehold improvements........................................ 121,173 -- -- --
----------- ----------- ----------- -----------
1,029,961 1,063,602 1,101,622 1,101,622
Less accumulated depreciation............................... (268,030) (409,120) (536,281) (536,281)
----------- ----------- ----------- -----------
761,931 654,482 565,341 565,341
Notes receivable officers, net.................................. 202,096 218,734 157,888 157,888
----------- ----------- ----------- -----------
Total assets................................................ $ 976,571 $ 2,395,075 $1,086,597 $1,236,597
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable.............................................. $ 173,166 $ 232,656 $ 133,387 $ 133,387
Accrued expenses.............................................. 679,394 1,343,718 784,748 784,748
Capital lease obligation -- current........................... 147,907 214,485 245,718 245,718
----------- ----------- ----------- -----------
Total current liabilities................................... 1,000,467 1,790,859 1,163,853 1,163,853
----------- ----------- ----------- -----------
Note payable -- parent.......................................... 10,453,193 -- 525,473 --
Convertible debenture -- parent................................. -- 436,740 456,355 --
Accrued interest -- parent...................................... 871,585 -- -- --
Capital lease obligation........................................ 441,976 268,382 231,736 231,736
----------- ----------- ----------- -----------
Total liabilities......................................... 12,767,221 2,495,981 2,377,417 1,395,589
----------- ----------- ----------- -----------
Commitments and contingencies
Stockholders' deficit:
Preferred stock, Series A, $.01 par value: 2,120,000 shares
authorized; 2,020,496 shares issued and outstanding as of
September 30, 1995 and March 31, 1996........................ -- 20,205 20,205 --
Preferred stock, Series B, $.01 par value: 880,000 shares
authorized; 349,000 shares issued and outstanding as of
September 30, 1995 and March 31, 1996........................ -- 3,490 3,490 --
Common stock, Class A, $.001 par value: 39,000,000 shares
authorized; 2,568,668, 2,789,271, 2,852,779 and 4,733,612
(pro forma) shares issued and outstanding as of September 30,
1993, 1994 and 1995, and March 31, 1996, respectively........ 2,569 2,789 2,853 4,734
Common stock, Class B, $.001 par value: 1,000,000 shares
authorized; 250,000 shares issued and outstanding as of
September 30, 1994........................................... 250 -- -- --
Additional paid-in capital.................................... 5,094 14,546,640 14,897,701 16,051,343
Deficit accumulated during development stage.................. (11,798,563) (14,674,030) (16,215,069) (16,215,069)
----------- ----------- ----------- -----------
Total stockholders' deficit................................. (11,790,650) (100,906) (1,290,820) (158,992)
----------- ----------- ----------- -----------
Total liabilities and stockholders' deficit................. $ 976,571 $ 2,395,075 $1,086,597 $1,236,597
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-3
<PAGE>
PROGENITOR, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
MAY 8, 1992 MAY 8, 1992
(DATE OF SIX MONTHS ENDED MARCH (DATE OF
YEARS ENDED SEPTEMBER 30, INCEPTION) TO 31, INCEPTION)
------------------------------------- SEPTEMBER 30, ------------------------ TO MARCH 31,
1993 1994 1995 1995 1995 1996 1996
----------- ----------- ----------- ------------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
(UNAUDITED) (UNAUDITED) (UNAUDITED)
Revenue $ -- $ -- $ 2,821,386 $ 2,821,386 $ 4,537 $ 911,962 $ 3,733,348
Operating expenses:
Research and
development.............. 3,116,062 4,112,991 4,227,959 12,231,899 1,660,751 1,705,732 13,937,631
General and
administrative........... 1,339,086 1,274,896 1,116,652 3,995,433 533,751 690,536 4,685,969
----------- ----------- ----------- ------------- ----------- ----------- ------------
Total operating
expenses............... 4,455,148 5,387,887 5,344,611 16,227,332 2,194,502 2,396,268 18,623,600
----------- ----------- ----------- ------------- ----------- ----------- ------------
Interest expense capital
lease...................... -- 44,257 62,945 107,202 34,891 35,292 142,494
Interest expense parent..... 245,391 603,581 289,297 1,160,882 269,175 21,441 1,182,323
----------- ----------- ----------- ------------- ----------- ----------- ------------
Net loss................ $(4,700,539) $(6,035,725) $(2,875,467) $(14,674,030) ($2,494,031) ($1,541,039) $(16,215,069)
----------- ----------- ----------- ------------- ----------- ----------- ------------
----------- ----------- ----------- ------------- ----------- ----------- ------------
Pro forma net loss per
share...................... $ (0.63) $ (0.33)
----------- -----------
----------- -----------
Pro forma weighted-average
shares outstanding......... 4,536,481 4,676,327
----------- -----------
----------- -----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-4
<PAGE>
PROGENITOR, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF STOCKHOLDERS' DEFICIT
FROM MAY 8, 1992 (DATE OF INCEPTION) TO SEPTEMBER 30, 1995,
AND (UNAUDITED) FOR THE SIX MONTHS ENDED MARCH 31, 1996
<TABLE>
<CAPTION>
PREFERRED STOCK COMMON STOCK
---------------------------------------------- ---------------------------------
SERIES A SERIES B CLASS A CLASS B
---------------------- ---------------------- ---------------------- ---------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES
--------- ----------- --------- ----------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, May 8, 1992 (inception)
Issued in May 1992 at $.002 per share....... -- $ -- -- $ -- 2,412,950 $ 2,413 --
Issued in May 1992 at $.001 per share....... -- -- -- -- -- -- 250,000
Net loss.................................... -- -- -- -- -- -- --
--------- ----------- --------- ----------- --------- ----------- ---------
Balance, September 30, 1992................... -- -- -- -- 2,412,950 2,413 250,000
Issued in December 1992 and January 1993 at
$.000 per share under anti-dilution
provisions................................. -- -- -- -- 13,397 13 --
Issued in December 1992 and January 1993 at
$.02 per share............................. -- -- -- -- 216,588 217 --
Repurchased at $.02 per share............... -- -- -- -- (74,267) (74) --
Net loss.................................... -- -- -- -- -- -- --
--------- ----------- --------- ----------- --------- ----------- ---------
Balance, September 30, 1993................... -- -- -- -- 2,568,668 2,569 250,000
Net loss.................................... -- -- -- -- -- -- --
--------- ----------- --------- ----------- --------- ----------- ---------
Balance, September 30, 1994................... -- -- -- -- 2,568,668 2,569 250,000
--------- ----------- ---------
Issued preferred stock at $6.25 for
conversion of debt to equity............... 2,020,496 20,205 -- -- -- -- --
Conversion of Class B common to Class A
common under anti-dilution provisions...... -- -- -- -- 178,750 179 (250,000)
Issued in December 1994 at $.000 per share
under anti-dilution provisions............. -- -- -- -- 40,353 40 --
Stock options exercised at $.20 per share... -- -- -- -- 1,500 1 --
Issued preferred stock in December-April at
$4.47 per share, net of offering costs..... -- -- 349,000 3,490 -- -- --
Net loss.................................... -- -- -- -- -- -- --
--------- ----------- --------- ----------- --------- ----------- ---------
Balance, September 30, 1995................... 2,020,496 20,205 349,000 3,490 2,789,271 2,789 --
--------- ----------- --------- ----------- --------- ----------- ---------
Stock options exercised at $.20-$2.00 per
share...................................... -- -- -- -- 5,175 5 --
Issued common stock in February 1996 at
$6.00 per share............................ -- -- -- -- 58,333 59 --
Net loss.................................... -- -- -- -- -- -- --
--------- ----------- --------- ----------- --------- ----------- ---------
Balance, March 31, 1996 (Unaudited)........... 2,020,496 $ 20,205 349,000 $ 3,490 2,852,779 $ 2,853 --
--------- ----------- --------- ----------- --------- ----------- ---------
--------- ----------- --------- ----------- --------- ----------- ---------
<CAPTION>
DEFICIT
ACCUMULATED
DURING THE
PAID-IN DEVELOPMENT
AMOUNT CAPITAL STAGE TOTAL
----------- ---------- ------------- -----------
<S> <C> <C> <C> <C>
Balance, May 8, 1992 (inception)
Issued in May 1992 at $.002 per share....... $ -- $ 2,413 $ -- $ 4,826
Issued in May 1992 at $.001 per share....... 250 -- -- 250
Net loss.................................... -- -- (1,062,299) (1,062,299)
--- ---------- ------------- -----------
Balance, September 30, 1992................... 250 2,413 (1,062,299) (1,057,223)
Issued in December 1992 and January 1993 at
$.000 per share under anti-dilution
provisions................................. -- (13) -- --
Issued in December 1992 and January 1993 at
$.02 per share............................. -- 4,105 -- 4,322
Repurchased at $.02 per share............... -- (1,411) -- (1,485)
Net loss.................................... -- -- (4,700,539) (4,700,539)
--- ---------- ------------- -----------
Balance, September 30, 1993................... 250 5,094 (5,762,838) (5,754,925)
Net loss.................................... -- -- (6,035,725) (6,035,725)
--- ---------- ------------- -----------
Balance, September 30, 1994................... 250 5,094 (11,798,563) (11,790,650)
--- ---------- ------------- -----------
Issued preferred stock at $6.25 for
conversion of debt to equity............... -- 12,607,895 -- 12,628,100
Conversion of Class B common to Class A
common under anti-dilution provisions...... (250) 161,751 -- 161,680
Issued in December 1994 at $.000 per share
under anti-dilution provisions............. -- 214,960 -- 215,000
Stock options exercised at $.20 per share... -- 299 -- 300
Issued preferred stock in December-April at
$4.47 per share, net of offering costs..... -- 1,556,641 -- 1,560,131
Net loss.................................... -- -- (2,875,467) (2,875,467)
--- ---------- ------------- -----------
Balance, September 30, 1995................... -- 14,546,640 (14,674,030) (100,906)
--- ---------- ------------- -----------
Stock options exercised at $.20-$2.00 per
share...................................... -- 1,120 -- 1,125
Issued common stock in February 1996 at
$6.00 per share............................ -- 349,941 -- 350,000
Net loss.................................... -- -- (1,541,039) (1,541,039)
--- ---------- ------------- -----------
Balance, March 31, 1996 (Unaudited)........... $ -- $14,897,701 $(16,215,069) $(1,290,820)
--- ---------- ------------- -----------
--- ---------- ------------- -----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-5
<PAGE>
PROGENITOR, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
MAY 8, 1992 MAY 8, 1992
(DATE OF SIX MONTHS ENDED MARCH (DATE OF
YEARS ENDED SEPTEMBER 30, INCEPTION) TO 31, INCEPTION)
---------------------------------- SEPTEMBER 30, ------------------------ TO MARCH 31,
1993 1994 1995 1995 1995 1996 1996
---------- ---------- ---------- ------------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
(UNAUDITED) (UNAUDITED) (UNAUDITED)
Cash flows from operating
activities:
Net loss................... $(4,700,539) $(6,035,725) $(2,875,467) $(14,674,030) ($2,494,031) ($1,541,039) ($16,215,069)
Adjustments to reconcile
net loss to net cash used
in operating activities:
Depreciation and
amortization............ 193,539 289,340 262,263 749,668 126,708 141,726 891,394
Gain on sale of
equipment............... -- -- -- -- -- (16,437) (16,437)
Noncash expense for anti-
dilution stock
issuances............... -- -- 376,680 376,680 -- -- 376,680
Changes in operating
assets and liabilities:
Notes receivable
officers, net......... 16,408 (66,146) (16,638) (218,734) (34,588) 60,846 (157,888)
Accounts receivable.... -- -- (193,898) (193,898) -- -- (193,898)
Accounts receivable --
parent................ -- -- (131,600) (131,600) -- 131,600 --
Prepaid expenses and
other current
assets................ (8,526) 7,000 (19,618) (22,618) (28,747) (120,158) (142,776)
Accounts payable....... (177,065) 59,847 59,490 232,656 (105,835) (99,269) 133,387
Accrued expenses....... 279,992 274,529 664,324 1,343,718 108,280 (558,970) 784,748
Accrued interest --
parent................ 245,391 603,581 261,350 1,132,935 269,175 19,615 1,152,550
---------- ---------- ---------- ------------- ----------- ----------- ------------
Cash used in operating
activities.............. (4,150,800) (4,867,574) (1,613,114) (11,405,223) (2,159,038) (1,982,086) (13,387,309)
---------- ---------- ---------- ------------- ----------- ----------- ------------
Cash flows from investing
activities:
Purchase of property and
equipment................. (571,419) (294,623) (154,814) (1,404,150) (119,943) (36,146) (1,440,296)
---------- ---------- ---------- ------------- ----------- ----------- ------------
Cash used in investing
activities.............. (571,419) (294,623) (154,814) (1,404,150) (119,943) (36,146) (1,440,296)
---------- ---------- ---------- ------------- ----------- ----------- ------------
Cash flows from financing
activities:
Proceeds from note payable
-- parent................. 4,695,371 4,570,771 1,041,972 11,495,165 1,034,147 525,473 12,020,638
Proceeds from convertible
debenture -- parent....... -- -- 436,740 436,740 387,968 -- 436,740
Proceeds from issuance of
stock, net................ 2,837 -- 1,560,431 1,568,344 1,450,781 351,125 1,919,469
Proceeds from sale
leaseback................. -- 662,602 87,771 750,373 87,770 117,325 867,698
Principal payments on
capital lease
obligation................ -- (72,719) (194,787) (267,506) (84,716) (122,739) (390,245)
---------- ---------- ---------- ------------- ----------- ----------- ------------
Cash provided by
financing activities.... 4,698,208 5,160,654 2,932,127 13,983,116 2,875,950 871,184 14,854,300
---------- ---------- ---------- ------------- ----------- ----------- ------------
Net (decrease) increase
in cash and cash
equivalents............. (24,011) (1,543) 1,164,199 1,173,743 596,969 (1,147,048) 26,695
Cash and cash equivalents,
beginning of period......... 35,098 11,087 9,544 -- 9,544 1,173,743 --
---------- ---------- ---------- ------------- ----------- ----------- ------------
Cash and cash
equivalents, end of
period.................. $ 11,087 $ 9,544 $1,173,743 $ 1,173,743 $ 606,513 $ 26,695 $ 26,695
---------- ---------- ---------- ------------- ----------- ----------- ------------
---------- ---------- ---------- ------------- ----------- ----------- ------------
Supplemental disclosure of
cash flow information:
Cash paid for interest,
net....................... $ -- $ 22,937 $ 84,265 $ 107,202
---------- ---------- ---------- -------------
---------- ---------- ---------- -------------
Supplemental schedule of
noncash investing and
financing activities:
</TABLE>
In 1995, the parent company converted debt of $11,495,165 and accrued
interest of $1,132,935 into 2,020,496 shares of Series A preferred stock
(see Note 11).
The accompanying notes are an integral part of the financial statements.
F-6
<PAGE>
PROGENITOR, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
A. ORGANIZATION: Progenitor, Inc. (the Company), a Delaware Corporation,
is a functional genomics company engaged in the discovery, characterization and
validation of novel genes, receptors and related proteins as therapeutic leads
and targets for the treatment of major diseases.
B. BASIS OF PRESENTATION: The accompanying financial statements have been
prepared on a going-concern basis, which contemplates the realization of assets
and the satisfaction of liabilities in the normal course of business. The
financial statements do not include any adjustments relating to the
recoverability and classification of recorded asset amounts or the amounts and
classification of liabilities that might be necessary should the Company be
unable to continue as a going concern.
During the year ended September 30, 1995, the Company arranged for the
financing of its operating activities by borrowing approximately $1,458,000 from
its parent company, Interneuron Pharmaceuticals, Inc. ("Interneuron"), by
obtaining a $2,500,000 licensing fee from Chiron Corporation ("Chiron"), and by
raising approximately $1,560,000 from a private placement offering. Significant
additional research and development activities, clinical testing, and regulatory
approvals must be completed before commercial sales, if any, will commence. The
Company is actively pursuing research and development grants and negotiating
equity and corporate partnership arrangements to fund its research and
development activities.
C. PROPERTY AND EQUIPMENT: Depreciation is computed using the
straight-line method over the estimated useful lives of the depreciable assets.
Equipment leased under capital leases is amortized using the straight-line
method over the lease term. Leasehold improvements are amortized over the
estimated useful life of the asset or lease term, whichever is the shorter
period. Maintenance and repairs are charged to expense as incurred, while
renewals and improvements are capitalized. Equipment includes $707,972 and
$795,743 of equipment under capital lease and accumulated amortization of
$83,924 and $298,741 as of September 30, 1994 and 1995, respectively.
D. REVENUE RECOGNITION: The Company recognizes revenue under strategic
alliances as certain agreed upon milestones are achieved or license fees are
earned.
E. RESEARCH AND DEVELOPMENT COSTS: All costs related to research and
development are expensed as incurred.
F. CASH AND CASH EQUIVALENTS: For purposes of the statement of cash flows,
cash and cash equivalents consist of cash in banks, highly liquid debt
instruments and money market funds with original maturities of three months or
less.
G. INTERIM FINANCIAL STATEMENTS (UNAUDITED): The interim financial
statements reflect all adjustments, consisting only of normal recurring
accruals, which are, in the opinion of the Company's management, necessary for a
fair presentation of the financial position and results of operations for the
periods presented. Revenues and expenses for any interim period are not
necessarily indicative of results for a full year.
H. PRO FORMA PRESENTATION (UNAUDITED): The pro forma unaudited balance
sheet as of March 31, 1996 reflects (a) the automatic conversion of all
outstanding shares of Preferred Stock into an aggregate of 1,774,014 shares of
Common Stock, (b) the conversion of the convertible debenture and promissory
note held by Interneuron into an aggregate of 81,819 shares of Common Stock and
(c) the purchase by the Ohio University Foundation of 25,000 shares of Common
Stock at a price of $6.00 per share pursuant to a stock purchase right. Such
conversions will occur upon the closing of the Company's proposed initial public
offering ("IPO") of common stock.
F-7
<PAGE>
PROGENITOR, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
I. PRO FORMA NET INCOME PER SHARE (UNAUDITED): Pro forma unaudited net
income per share is computed using the weighted-average number of outstanding
shares of common stock and common stock equivalents, assuming conversion of all
outstanding Preferred Stock, the convertible debenture and promissory note held
by Interneuron into common stock (as of their original date of issuance), which
will occur upon completion of the Company's proposed IPO. Common stock
equivalents are excluded from the computation when their effect is
anti-dilutive; however, pursuant to the requirements of the Securities and
Exchange Commission ("SEC"), common stock equivalent shares relating to stock
options and warrants (using the treasury stock method and an assumed IPO price
of $12.00 per share) issued during the 12-month period prior to the IPO are
included for all periods presented whether or not they are anti-dilutive.
Historical earnings per share have not been presented because such amounts are
not meaningful due to the significant change in the Company's capital structure
that will occur in connection with the Company's proposed IPO.
J. RECLASSIFICATIONS: Certain reclassifications have been made to the
prior year's financial statements to conform to the current-year presentation.
K. USE OF ESTIMATES: The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
L. STOCK SPLIT: In May 1996, the Board of Directors authorized a
one-for-two reverse stock split on Class A common shares effective prior to the
effective date of the proposed IPO. All references to Class A common shares,
underlying stock options and warrants and per share data have been restated to
reflect the reverse stock split.
2. ACCRUED EXPENSES:
Accrued expenses consist of the following:
<TABLE>
<CAPTION>
1994 1995
---------- ------------
<S> <C> <C>
Sponsored research.................................................. $ 494,855 $ 438,794
Chiron.............................................................. -- 701,296
Other............................................................... 184,539 203,628
---------- ------------
$ 679,394 $ 1,343,718
---------- ------------
---------- ------------
</TABLE>
3. INCOME TAXES:
No income tax provision or benefit has been provided for federal income tax
purposes as the Company has incurred losses since inception. As of September 30,
1995, net deferred tax assets totaled approximately $5,688,000 on total net
operating loss carryforwards of approximately $13,050,000 and tax credits of
approximately $468,000 that expire on various dates through 2009. Due to the
uncertainty surrounding the realization of these favorable tax attributes in
future tax returns, all of the net deferred tax assets have been fully offset by
a valuation allowance.
4. STOCK OPTIONS AND WARRANTS:
A. STOCK OPTIONS: Under the Company's Stock Option Plan adopted in 1992,
incentive stock options and nonqualified stock options may be granted. The
number of Class A common shares
F-8
<PAGE>
PROGENITOR, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
4. STOCK OPTIONS AND WARRANTS: (CONTINUED)
authorized and reserved for issuance is 500,000. The outstanding options vest
over a period of three to four years. As of September 30, 1994 and 1995, 32,356
and 81,695 stock options were exercisable, respectively. Options granted to
stockholders with 10% or greater ownership expire after five years.
Stock option activity is summarized below:
<TABLE>
<CAPTION>
NUMBER OF OPTION
SHARES PRICE
----------- -----------
<S> <C> <C>
Outstanding at September 30, 1992................................... -- --
Granted........................................................... 104,700 $ 0.20-4.00
Forfeited......................................................... 250 0.20
-----------
Outstanding at September 30, 1993................................... 104,450 0.20-4.00
Granted........................................................... 75,875 4.00
Forfeited......................................................... 1,700 0.20-4.00
-----------
Outstanding at September 30, 1994................................... 178,625 0.20-4.00
Granted........................................................... 192,250 4.00-6.00
Forfeited......................................................... 20,472 0.20-4.00
Exercised......................................................... 1,500 0.20
-----------
Outstanding at September 30, 1995................................... 348,903 0.20-6.00
-----------
-----------
</TABLE>
In September 1995, the Company issued 112,500 stock options to certain
executives. These options vest in September 2002. An additional 12,500 stock
options were issued that vest upon the achievement of certain milestones.
The Company issued 43,250 stock options to certain employees at an exercise
price of $6.00 per share. In May 1996, the Company amended the terms of 92,500
stock options by changing the vesting period to three to four years.
In December 1995, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards ("SFAS") No. 123, ACCOUNTING FOR
STOCK-BASED COMPENSATION, which changes the measurement, recognition and
disclosure standards for stock-based compensation. The Company will adopt the
disclosure requirements of SFAS No. 123 in fiscal year 1997, but will elect to
continue to measure compensation cost following present accounting rules.
In May 1996, the Company adopted the 1996 Stock Incentive Plan (the "Plan").
The number of common shares authorized and available for issuance is 775,000.
Under the Plan, incentive stock options, nonqualified stock options, stock
appreciation rights and stock grants may be granted. In May 1996, 275,000 stock
options were granted to officers of the Company at an exercise price of $9.00
per share.
B. WARRANTS: In June 1995, the Company issued to designees of the
Placement Agent, which is an affiliate of the parent company, warrants to
purchase a total of 34,901 shares of Series B convertible preferred stock. The
warrants were issued in conjunction with the private placement offering
discussed in Note 10. The warrants are exercisable at a price of $6.875 per
share and expire on the earlier of (i) five years from an initial public
offering of the Company's common stock, or (ii) June 30, 2005. The Company paid
the Placement Agent approximately $129,000 as its share of placement agent fees.
5. COMMITMENTS:
The Company has entered into various operating leases for furniture,
fixtures, and equipment which expire through the year 1998.
F-9
<PAGE>
PROGENITOR, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
5. COMMITMENTS: (CONTINUED)
In April 1994, the Company entered into a sale-lease back equipment lease
financing agreement with a leasing company providing for funding of up to an
aggregate of $2,200,000 for equipment purchased prior to June 30, 1995. The book
value of the assets leased under this arrangement totaled $795,743, and the net
asset value of the equipment totaled $750,373. During the year ended September
30, 1994, the Company recorded and deferred a loss on the leased assets of
$45,370, which it is amortizing over the life of the lease. The lease is being
treated as a capital lease and is guaranteed by Interneuron.
In November 1994, the Company entered into a one-year lease for laboratory
and administrative space that expires in December 1995. The lease provides for
monthly rental payments of approximately $10,900. The Company has extended the
lease through 1996. The Company has the option to extend the lease on a yearly
basis for 1997. The minimum rental commitments under these agreements are as
follows:
<TABLE>
<CAPTION>
OPERATING CAPITAL LEASE
YEARS ENDING SEPTEMBER 30, LEASES OBLIGATION
- ------------------------------------------------------------------- ---------- -------------
<S> <C> <C>
1996............................................................... $ 174,679 $ 258,699
1997............................................................... 16,138 258,699
1998............................................................... 11,783 29,466
1999............................................................... 10,331 --
2000............................................................... 3,444 --
---------- -------------
Total lease payments............................................... $ 216,375 546,864
----------
----------
Less amount representing interest.................................. (63,997)
-------------
Present value of future lease payments............................. 482,867
Less current portion............................................... (214,485)
-------------
Noncurrent portion of capital lease obligation..................... $ 268,382
-------------
-------------
</TABLE>
Rent expense approximated $97,000, $140,000 and $186,000 during the years
ended September 30, 1993, 1994 and 1995, respectively, and $514,000 for the
period May 8, 1992 (date of inception) through September 30, 1995.
6. RELATED-PARTY TRANSACTIONS:
Under employment agreements with certain executives, the Company advanced
loans to assist in purchasing new homes. As of September 30, 1995, there were
loans to three executives for a total of $359,744. The first loan of $100,796 is
interest-free, with $60,796 due upon the earlier of April 1997 or the
termination of the officer's employment. The remaining balance is to be forgiven
upon the achievement of specified milestones. The second loan of $182,500 bears
interest at 7% per annum, with $142,500 due upon the earlier of the sale of the
officer's existing home, June 1997, or termination of the officer's employment.
The remaining balance is to be forgiven upon the achievement of specified
milestones. During 1995, loans totaling $76,448 were made to a third executive,
$21,448 of which is non-interest-bearing and was repaid in May 1996. The
remaining loans bear interest at 9% per annum, with $15,000 due upon the earlier
of March 1999, or the termination of the officer's employment. The balance of
$40,000 is to be forgiven upon the achievement of specified milestones.
The Company has recorded $81,200 and $141,010 as of September 30, 1994 and
1995, respectively, as a note receivable reserve in anticipation of the
potential forgiveness of certain loan amounts.
F-10
<PAGE>
PROGENITOR, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
7. CONSULTING AGREEMENTS:
The Company has entered into various consulting agreements which range from
one to three years and are subject to renewals, whereby outside consultants
provide scientific advice and administrative services to the Company. Payments
to consultants made during 1993, 1994 and 1995, totaled approximately $203,500,
$309,000 and $243,000, respectively, and $914,000 for the period May 8, 1992
(date of inception) through September 30, 1995. Of these amounts, approximately
$181,000, $190,000 and $177,400 represented payments to certain stockholders in
1993, 1994 and 1995, respectively, and $707,400 for the period May 8, 1992 (date
of inception) through September 30, 1995.
8. LICENSE AND RESEARCH AGREEMENTS:
The Company entered into a license agreement and a sponsored research
agreement with Ohio University in January 1992, certain terms of which were
amended in October 1993. The license agreement grants the Company the exclusive
worldwide license to patent and other rights to yolk sac stem cells and related
technologies in exchange for royalties based on sales. The research agreement
requires the Company to fund specified minimum levels of research and related
expenses, as well as any additional costs approved in advance by the Company.
In addition, the Company agreed to issue 5% of its equity to the Ohio
University Foundation and agreed to preserve this percentage ownership position
until the parent company's total investment in the Company is at least $10.0
million or the date of an IPO by the Company. The $10.0 million investment was
achieved during 1995, thus the percentage ownership position no longer needs to
be preserved. Until an initial public offering of the Company is consummated,
the Ohio University Foundation was entitled to increase its interest to 6.25% by
purchasing additional equity at a price equal to 50% of the offering price of
common stock in any such initial public offering. This provision was canceled in
February 1996, Ohio University entered into a stock purchase agreement with the
Company pursuant to which Ohio University purchased 58,333 shares of common
stock for $350,000 ($6.00 per share). If the IPO price is less than $12.00 per
share, additional shares will be issued until Ohio University has paid a maximum
of 50% of the IPO price. Additionally, a stock purchase right was issued to Ohio
University to purchase 25,000 shares of the common stock at 50% of the IPO
price.
The license agreement also contains certain requirements related to the
management and operation of the Company, including the nomination of two Ohio
University designees to the Board of Directors of the Company. The Castle Group,
Ltd. ("Castle"), which is controlled by a former director of the Company and a
principal stockholder of Interneuron, has unconditionally guaranteed to Ohio
University the performance of the Company's obligations under the license
agreement until the earlier of five years or an initial public offering by the
Company. Certain employees of Castle own common stock of the Company.
In April 1993, the Company entered into a second license agreement and a
sponsored research agreement with Ohio University pursuant to which the Company
agreed to fund research relating to the T7T7 gene delivery system, developing an
active cell membrane transport system. The license agreement grants the Company
the exclusive worldwide license to all patent and other rights derived from this
and related technologies in exchange for royalties based on sales.
In February 1994, the Company entered into a license agreement with Albert
Einstein College of Medicine of Yeshiva University ("AECOM"). The agreement
grants the Company the exclusive worldwide license to all patent and other
rights from research done on retroviral vectors by AECOM in exchange for a
license fee and royalties based on sales.
F-11
<PAGE>
PROGENITOR, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
8. LICENSE AND RESEARCH AGREEMENTS: (CONTINUED)
In September 1994, the Company entered into a license agreement with
Wisconsin Alumni Research Foundation ("WARF"). The agreement grants the Company
a nonexclusive license to certain patents developed by WARF in exchange for a
license fee, maintenance fees, and royalties based on sales.
In November 1994, the Company was awarded a competitive grant of $2.0
million through the Advanced Technology Program ("ATP") of the U.S. Department
of Commerce. The funds will be received over a three-year period commencing June
1, 1995.
In March 1995, the Company entered into a license and collaboration
agreement with Chiron. As required by the agreement, an initial cash payment of
$2.5 million was paid by Chiron to the Company in April 1995. The Company has
committed to reimburse Chiron the start-up manufacturing costs incurred related
to this agreement up to $750,000. Chiron paid $500,000 to the Company in January
1996, for continued research funding. The agreement also calls for future
payments contingent upon the achievement of certain milestones.
In May 1995, the Company entered into a sponsored research and license
agreement with Novo Nordisk, through its subsidiary, ZymoGenetics, Inc. The
agreement calls for research and license fees to be paid to the Company,
contingent upon certain conditions and the meeting of certain milestones.
Additionally, the Company has entered into various sponsored research
agreements with varying terms up to two years in length. The total sponsored
research expense was $882,217, $890,000 and $601,103 for the years ended
September 30, 1993, 1994 and 1995, respectively, and $2,690,680 for the period
from May 8, 1992 (date of inception) through September 30, 1995. Payments to
Ohio University for sponsored research totaled $485,480, $245,888 and $353,527,
for the years ended September 30, 1993, 1994 and 1995, respectively, and
$1,281,132 for the period May 8, 1992 (date of inception) through September 30,
1995. Amounts owed to Ohio University for sponsored research were $424,401 and
$215,600 at September 30, 1994 and 1995, respectively. In addition, at September
30, 1995, the Company had commitments to fund additional sponsored research of
approximately $824,000, including a commitment of $52,390 to Ohio University.
9. COMMON STOCK:
The Company is authorized to issue two classes of shares of common stock,
designated Class A and Class B. Shares of the Company's Class B common stock are
convertible, at any time at the option of the holder, into shares of Class A
common stock. The conversion ratio is subject to adjustment based on several
factors, including the issuance of additional Class A shares.
Holders of Class B shares are entitled to pro rata dividend, liquidation,
and voting rights based on the number of Class A shares into which such Class B
shares are convertible. Class B shares are automatically converted to Class A
shares upon the receipt by the Company of capital contributions of $10.0 million
in aggregate amount from the date of incorporation. When this was achieved in
1995, all Class B shares were converted into a total of 357,500 Class A common
shares.
10. PREFERRED STOCK:
In December 1994, the Company's Board of Directors approved the
authorization of 2,120,000 shares of Series A and 880,000 shares of Series B
preferred stock. These preferred shares are convertible into shares of Class A
common stock and have preferential rights in terms of dividends and liquidation
over common stock. Shares of preferred stock have voting rights equal to the
number of shares of their common stock equivalent.
F-12
<PAGE>
PROGENITOR, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
10. PREFERRED STOCK: (CONTINUED)
Shares of Series A preferred stock are convertible, at any time at the
option of the holder, into shares of Class A common stock. The initial
conversion ratio is based on a Series A price of $6.25, subject to adjustment
based on several factors. Series A preferred shares are automatically converted
upon a qualified public offering.
Through July 7, 1995, the Company has issued 349,000 shares of Series B
preferred stock in connection with private placements. The private placement was
a sale of units, each unit consisting of shares of preferred stock of the
Company, shares of preferred stock of another subsidiary of Interneuron,
Transcell Technologies, Inc., and a put protection right from Interneuron. The
put protection right provides that on the third anniversary of the final closing
date of the private placement, the owner has the right to sell to Interneuron a
percentage of the preferred stock of the Company that is deemed to be illiquid,
as defined in the agreement. The Company received approximately $1,560,000, net
of offering costs, as its share of the proceeds from the private placement.
Shares of Series B preferred stock are convertible, at any time at the option of
the holder, into shares of Class A common stock. The initial conversion ratio is
based on a Series B price of $6.25, subject to adjustment based on several
factors. Series B preferred shares are automatically converted upon a qualified
public offering.
Shares of authorized common stock have been reserved for the exercise of all
convertible preferred stock outstanding.
11. NOTE PAYABLE TO THE PARENT COMPANY:
The note payable to the parent company, Interneuron, bore interest at a rate
of 1% over the prime lending rate (7 3/4% prime plus 1% at September 30, 1994)
and was payable on demand. Periodic advances were made available under this note
at the discretion of Interneuron. In December 1994, the outstanding balance on
the Note Payable -- parent of $11,495,165 and accrued interest of $1,132,935 was
converted into 2,020,496 shares of Series A preferred stock.
In March 1996, the Company entered into a promissory note with the parent
company, bearing interest at a rate of 1% over the prime lending rate. The note
is due on the earlier of March 31, 2001 or the closing of an initial public
offering.
Since the inception of the Company, Interneuron has paid for certain Company
expenses which were reimbursed by the Company at cost.
12. CONVERTIBLE DEBENTURE-PARENT:
In March 1995, the Company entered into a convertible debenture agreement
with IPI, at a rate of 1% over the prime lending rate. The prime lending rate
was 8.75% as of September 30, 1995. Principal and interest are due at the
earlier of five years from the final closing date or upon a qualified public
offering as defined in the agreement. The debenture is convertible, at any time
at the option of the holder, into shares of Class A common stock. The conversion
price is equal to the fair market value of the common stock at the time of the
conversion. The debenture is automatically converted upon a qualified public
offering.
13. EMPLOYEE BENEFITS:
Employees of the Company are eligible to participate in the Interneuron
Pharmaceuticals, Inc. 401(k) Savings Plan under which employees may defer a
portion of their annual compensation. Company contributions to the 401(k)
Savings Plan may be made on a discretionary basis. As of September 30, 1995, no
Company contributions have been made.
F-13
<PAGE>
[Three color photographs showing the following: 1. The location of the human
B219 leptin receptor gene on human chromosome lp32; 2. Staining of the Del-1
protein in the endothelial cells of blood vessels in a human tumor grown in a
mouse; 3. Effect of the BFU-e growth factor activity on early red blood cell
development IN VITRO.]
<PAGE>
- --------------------------------------------
--------------------------------------------
- --------------------------------------------
--------------------------------------------
NO DEALER, SALES REPRESENTATIVE OR ANY OTHER PERSON IS AUTHORIZED IN
CONNECTION WITH ANY OFFERING MADE HEREBY TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION NOT CONTAINED HEREIN AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY
OR THE UNDERWRITERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY ANY SECURITY OTHER THAN THE COMMON STOCK OFFERED
HEREBY, NOR DOES IT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO
BUY ANY OF THE COMMON STOCK OFFERED HEREBY TO ANY PERSON IN ANY JURISDICTION IN
WHICH IT IS UNLAWFUL TO MAKE SUCH AN OFFER OR SOLICITATION. NEITHER THE DELIVERY
OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES
CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE
COMPANY SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED HEREIN IS
CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE HEREOF.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Prospectus Summary............................... 3
Risk Factors..................................... 5
Use of Proceeds.................................. 17
Dividend Policy.................................. 17
Capitalization................................... 18
Dilution......................................... 19
Selected Financial Data.......................... 20
Management's Discussion and Analysis of Financial
Condition and Results of Operations............ 21
Business......................................... 24
Management....................................... 39
Certain Transactions............................. 48
Principal Stockholders........................... 53
Description of Capital Stock..................... 54
Shares Eligible for Future Sale.................. 58
Underwriting..................................... 60
Legal Matters.................................... 61
Experts.......................................... 61
Additional Information........................... 62
Index to Financial Statements.................... F-1
</TABLE>
------------------------
UNTIL , 1996 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER OR NOT PARTICIPATING
IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN
ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS
UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
2,500,000 SHARES
[LOGO]
COMMON STOCK
-------------------
PROSPECTUS
-------------------
Vector Securities International, Inc.
Tucker Anthony
Incorporated
Genesis Merchant Group
Securities
, 1996
- --------------------------------------------
--------------------------------------------
- --------------------------------------------
--------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth all expenses, other than underwriting
discounts and commissions, payable by the Registrant in connection with the sale
of the Common Stock being registered. All the amounts shown are estimates except
for the SEC registration fee, the NASD filing fee and the Nasdaq listing fee.
<TABLE>
<S> <C>
SEC Registration Fee.............................................. $ 12,888
NASD Filing Fee................................................... 4,238
Nasdaq National Market Listing Fee................................ 38,971
Printing and engraving expenses................................... *
Legal fees and expenses........................................... *
Accounting fees and expenses...................................... *
Blue sky fees and expenses........................................ 15,000
Transfer agent and registrar fees................................. *
Miscellaneous..................................................... *
---------
Total......................................................... $ 850,000
---------
---------
</TABLE>
- --------------
* To be supplied by amendment.
ITEM 14. INDEMNIFICATION OF OFFICERS AND DIRECTORS
Section 145 ("Section 145") of the Delaware General Corporation Law ("DGCL")
provides a detailed statutory framework covering indemnification of officers and
directors against liabilities and expenses arising out of legal proceedings
brought against them by reason of their being or having been directors or
officers. Section 145 generally provides that a director or officer of a
corporation (i) shall be indemnified by the corporation for all expenses of such
legal proceedings when he is successful on the merits, (ii) may be indemnified
by the corporation for the expenses, judgments, fines and amounts paid in
settlement of such proceedings (other than a derivative suit), even if he is not
successful on the merits, if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful, and (iii) may be
indemnified by the corporation for the expenses of a derivative suit (a suit by
a stockholder alleging a breach by a director or officer of a duty owed to the
corporation), even if he is not successful on the merits, if he acted in good
faith and in a manner he reasonably believed to be in or not opposed to the best
interests of the corporation. No indemnification may be made under clause (iii)
above, however, if the director or officer is adjudged liable for negligence or
misconduct in the performance of his duties to the corporation, unless a
corporation determines that, despite such adjudication, but in view of all the
circumstances, he is entitled to indemnification. The indemnification described
in clauses (ii) and (iii) above may be made only upon a determination that
indemnification is proper because the applicable standard of conduct has been
met. Such a determination may be made by a majority of a quorum of disinterested
directors, independent legal counsel, the stockholders or a court of competent
jurisdiction. The Company's Certificate of Incorporation provides that the
Company shall indemnify to the fullest extent permitted by Section 145, as it
now exists or as amended, all persons whom it may indemnify pursuant thereto.
Section 102(b)(7) of the DGCL permits a corporation to provide in its
Certificate of Incorporation that a director of the corporation shall not be
personally liable to the corporation or its stockholders for monetary damages
for breach of fiduciary duty as a director, except for liability (i) for any
breach of the director's duty of loyalty to the corporation or its stockholders,
(ii) for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii) under Section 174 of the
II-1
<PAGE>
DGCL, or (iv) for any transaction from which the director derived an improper
personal benefit. The Company's Certificate of Incorporation provides for the
elimination of personal liability of a director for breach of fiduciary duty, as
permitted by Section 102(b)(7) of the DGCL.
Section of the Form of Underwriting Agreement, filed as Exhibit 1.1 hereto,
contains certain provisions relating to indemnification.
Prior to the closing of the Offering, the Company intends to obtain
liability insurance insuring the Company's officers and directors against
liabilities that they may incur in such capacities.
The Company maintains liability insurance insuring the Company's officers
and directors against liabilities that they may incur in such capacities.
The Investors' Agreements provide for cross-indemnification of stockholders
of the Company whose shares with registration rights are included in a
registration under the Securities Act, and of the Company, its officers and
directors for certain liabilities arising in connection with such registration.
See also the undertakings set out in response to Item 17 herein.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
Since January 1, 1993, the Company has issued and sold the following
unregistered securities:
(1) In 1993, the Company (a) sold 82,907 shares of Common Stock to Dr. Given
for $.02 per share pursuant to the terms of his employment agreement, (b)
issued 11,400 shares of Common Stock to The Ohio University Foundation
without additional consideration pursuant to certain antidilution rights
contained in a stock purchase agreement with the Company and (c) issued a
certificate for 14,854 shares of Common Stock to Dr. Cooper in exchange
for certificates for 89,121 shares of Common Stock pursuant to a
repurchase of Common Stock in connection with the termination of Dr.
Cooper's employment agreement with the Company.
(2) In 1994, the Company (a) issued 178,750 shares of Common Stock to Dr.
Thomas Wagner upon the conversion of the shares of Class B Common Stock
held by Dr. Wagner and (b) issued 40,353 shares of Common Stock to The
Ohio University Foundation without additional consideration pursuant to
certain antidilution rights contained in a stock purchase agreement with
the Company.
(3) Between December 1994 and July 1995, the Company issued and sold an
aggregate of 349,000 shares of Series B Preferred Stock to certain
persons and entities for $4.48 per share. In connection with such
transaction, the Company issued warrants to purchase 22,627 shares of
Series B Preferred Stock to designees of Paramount Capital, Inc., the
placement agent for such transaction, and warrants to purchase 12,274
shares of Series B Preferred Stock to designees of D.H. Blair & Co.,
Inc., selected dealer for such transaction, pursuant to rights of such
entities under agreements with the Company.
(4) In December 1994, upon the initial closing of the issuance and sale of
Series B Preferred Stock described in paragraph (3) above, in exchange
for the cancellation of an aggregate of approximately $12.6 million of
debt owed by the Company to Interneuron, the Company issued and sold
2,020,496 shares of Series A Preferred Stock to Interneuron for $6.25 per
share.
(5) In 1996, the Company issued (a) 58,333 shares of Common Stock to The
Ohio University Foundation pursuant to a Stock Purchase Agreement dated
as of February 26, 1996, for $6.00 per share, (b) issued and sold 6,625
shares of Common Stock for $0.20 per share to certain former employees
pursuant to the exercise of stock options granted under the 1992 Stock
Option Plan and (c) issued and sold 50 shares of Common Stock for $2.00
per share to a former employee pursuant to the exercise of stock options
granted under the 1992 Stock Option Plan.
II-2
<PAGE>
(6) Since January 1, 1993, the Company granted stock options to employees,
consultants, directors, officers and affiliates of the Company as
described below. From February 1 to June 1, 1993, the Company granted
stock options under the 1992 Stock Option Plan covering an aggregate of
82,450 shares of Common Stock at an exercise price of $0.20 per share. On
June 21, 1993, the Company granted stock options under the 1992 Stock
Option Plan covering an aggregate of 14,250 shares of Common Stock at an
exercise price of $2.00 per share. From June 2, 1993 to December 31,
1994, the Company granted stock options under the 1992 Stock Option Plan
covering an aggregate of 84,375 shares of Common Stock at an exercise
price of $4.00 per share. From March 1, 1995 to February 21, 1996, the
Company granted stock options under the 1992 Stock Option Plan covering
an aggregate of 235,000 shares of Common Stock at an exercise price of
$6.00 per share. On May 13, 1996, the Company granted stock options under
the 1996 Stock Incentive Plan covering an aggregate of 275,000 shares of
Common Stock at an exercise price of $9.00 per share.
The sales and issuances of Common Stock in the transactions described in
paragraphs (1), (2) and (5) above other than pursuant to the exercise of stock
options were deemed to be exempt from registration under the Securities Act
pursuant to Section 4(2) thereof.
The issuance and sale of the Series B Preferred Stock in the transactions
described in paragraph (3) were deemed to be exempt from registration under the
Securities Act pursuant to Section 4(2) of the Securities Act and/or Regulation
D promulgated thereunder.
The issuance of the warrants in the transactions described in paragraph (3)
was deemed to be exempt from registration under the Securities Act pursuant to
Section 4(2) thereof.
The issuance and sale of the Series A Preferred Stock in the transaction
described in paragraph (4) were deemed to be exempt from registration under the
Securities Act pursuant to Section 4(2) thereof.
The issuances and sales of Common Stock pursuant to the exercise of stock
options described in paragraph (5) were deemed to be exempt from registration
under the Securities Act by virtue of Rule 701 promulgated thereunder, or were
deemed to be exempt pursuant to Section 4(2) thereof.
With respect to the grant of stock options described in paragraph (6),
exemption from registration under the Securities Act was unnecessary in that
none of such transactions involved a "sale" of securities as such term is used
in Section 2(3) of the Securities Act.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(A) EXHIBITS.
<TABLE>
<C> <S>
+1.1 Form of Underwriting Agreement.
+3.1 Amended and Restated Certificate of Incorporation of the Company.
+3.2 Amended and Restated Bylaws of the Company.
+4.1 Specimen Stock Certificate of the Company.
4.2 Reference is made to Exhibits 3.1 and 3.2.
5.1 Opinion of Morrison & Foerster LLP.
+10.1 Form of Indemnification Agreement entered into between the Company and its
directors and executive officers.
10.2 The Company's 1992 Stock Option Plan.
10.3 Form of Incentive Stock Option Agreement under the 1992 Stock Option Plan.
10.4 Form of Non-Qualified Stock Option Agreement under the 1992 Stock Option
Plan.
+10.5 The Company's 1996 Stock Incentive Plan.
</TABLE>
II-3
<PAGE>
<TABLE>
<C> <S>
10.6 Form of Investors' Rights Agreement, entered into among the Company,
Interneuron Pharmaceuticals, Inc., Transcell Technologies, Inc., and the
holders of the Company's Preferred Stock, Series B.
*10.7 License Agreement, dated as of January 28, 1992, by and between Scimark
Corp., The Castle Group Ltd. and Ohio University, as amended October 15,
1993.
*10.8 Sponsored Research Agreement, dated January 31, 1992, by and between Scimark
Corp. and Ohio University, as amended October 15, 1993, February 16, 1994,
November 16, 1994 and November 22, 1995.
*10.9 License Agreement, dated as of April 1, 1993, by and between the Company and
Ohio University.
*10.10 Sponsored Research Agreement, dated April 1, 1993, by and between the
Company and Ohio University, as amended August 7, 1995 and November 22,
1995.
10.11 License Agreement, dated as of June 8, 1994, by and between the Company and
Associated Universities, Inc.
*10.12 Standard License Agreement, dated as of September 1, 1994, by and between
the Company and the Wisconsin Alumni Research Foundation, as amended June 2,
1995.
*10.13 License and Collaboration Agreement, dated as of March 31, 1995, by and
between the Company and Chiron Corporation, as amended April 10, 1996.
*10.14 Sponsored Research and License Agreement, dated as of May 1, 1995, by and
between the Company and Novo Nordisk A/S, as amended January 17, 1996 and
March 17, 1996.
*10.15 License Agreement, dated as of July 17, 1995, by and between the Company and
Vanderbilt University.
*10.16 License Agreement, dated as of May 30, 1996, by and between the Company and
AMRAD Developments PTY Ltd.
10.17 Lease Agreement, dated as of November 1994, by and between the Company and
Thomas R. Eggers.
10.18 Lease, Service and Affiliation Agreement, entered into as of February 1995,
by and between the Company and The Ohio State University.
10.19 Employment Agreement, dated January 3, 1993, by and between the Company and
Douglass B. Given.
+10.20 Intercompany Services Agreement, dated as of June , 1996, by and between
the Company and Interneuron Pharmaceuticals, Inc.
+10.21 Tax Allocation Agreement, dated as of June , 1996, by and between the
Company and Interneuron Pharmaceuticals, Inc.
23.1 Consent of Coopers & Lybrand L.L.P.
23.2 Consent of Pennie & Edmonds.
23.3 Consent of Morrison & Foerster LLP (included in Exhibit 5.1).
24.1 Power of Attorney (See Page II-6 of this Registration Statement).
27 Financial Data Schedule.
</TABLE>
- --------------
+ To be filed by amendment.
* Confidential treatment has been requested from the Securities and Exchange
Commission for portions of these agreements.
II-4
<PAGE>
(B) FINANCIAL STATEMENT SCHEDULES.
None.
Schedules not listed above have been omitted because the information
required to be set forth therein is not applicable or is shown in the financial
statements or notes thereto.
ITEM 17. UNDERTAKINGS.
The undersigned registrant hereby undertakes to provide to the Underwriters
at the closing specified in the Underwriting Agreement, certificates in such
denominations and registered in such names as required by the Underwriters to
permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
registrant pursuant to the provisions described in Item 14, the Underwriting
Agreement, or otherwise, the registrant has been advised that in the opinion of
the Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act and is, therefore, unenforceable. In
the event that a claim for indemnification against such liabilities (other than
the payment by the registrant of expenses incurred or paid by a director,
officer or controlling person of the registrant in the successful defense of any
action, suit, or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered hereunder,
the registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final adjudication
of such issue.
The undersigned registrant undertakes that:
(1) For purposes of determining any liability under the Securities Act,
the information omitted from the form of prospectus filed as part of the
Registration Statement in reliance upon Rule 430A and contained in the form
of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of the
Registration Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be in the initial bona fide offering thereof.
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Columbus, State of Ohio,
on June 6, 1996.
PROGENITOR, INC.
By: /s/ DOUGLASS B. GIVEN
-----------------------------------
Douglass B. Given, M.D., Ph.D.
PRESIDENT, CHIEF EXECUTIVE OFFICER
AND DIRECTOR
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints, severally and not jointly, Douglass B. Given, H.
Ralph Snodgrass and Stephen J. Williams with full power to act alone, his true
and lawful attorneys-in-fact, with the power of substitution, for him and in his
name, place and stead, in any and all capacities, to sign any and all amendments
(including post-effective amendments) to this Registration Statement, and to
sign any registration statement for the same offering covered by this
Registration Statement that is to be effective upon filing pursuant to Rule
462(b) promulgated under the Securities Act of 1933, and all post-effective
amendments thereto, and to file the same, with all exhibits thereto, and other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact full power and authority to do and perform
each and every act and thing requisite and necessary to be done as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact may lawfully do or cause to be done
by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------------------ ----------------------------------------- --------------
<C> <S> <C>
/s/ DOUGLASS B. GIVEN
------------------------------------------- President, Chief Executive Officer and June 6, 1996
Douglass B. Given, M.D., Ph.D. Director
/s/ DAVID B. BITTNER
------------------------------------------- Acting Chief Financial Officer June 6, 1996
David B. Bittner
/s/ ROBERT P. AXLINE
------------------------------------------- Director June 6, 1996
Robert P. Axline
/s/ GLENN L. COOPER
------------------------------------------- Director June 6, 1996
Glenn L. Cooper M.D.
/s/ ALEXANDER M. HAIG
------------------------------------------- Director June 6, 1996
Alexander M. Haig, Jr.
</TABLE>
II-6
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------------------ ----------------------------------------- --------------
<C> <S> <C>
/s/ MORRIS LASTER
------------------------------------------- Director June 6, 1996
Morris Laster, M.D.
/s/ JERRY P. PEPPERS
------------------------------------------- Director June 6, 1996
Jerry P. Peppers
/s/ DAVID B. SHARROCK
------------------------------------------- Director June 6, 1996
David B. Sharrock
</TABLE>
II-7
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. EXHIBIT PAGE
- --------- ------------------------------------------------------------------------------------------------ ---------
<C> <S> <C>
+1.1 Form of Underwriting Agreement..................................................................
+3.1 Amended and Restated Certificate of Incorporation of the Company................................
+3.2 Amended and Restated Bylaws of the Company......................................................
+4.1 Specimen Stock Certificate of the Company.......................................................
4.2 Reference is made to Exhibits 3.1 and 3.2.......................................................
5.1 Opinion of Morrison & Foerster LLP..............................................................
+10.1 Form of Indemnification Agreement entered into between the Company and its directors and
executive officers..............................................................................
10.2 The Company's 1992 Stock Option Plan............................................................
10.3 Form of Incentive Stock Option Agreement under the 1992 Stock Option Plan.......................
10.4 Form of Non-Qualified Stock Option Agreement under the 1992 Stock Option Plan...................
+10.5 The Company's 1996 Stock Incentive Plan.........................................................
10.6 Form of Investors' Rights Agreement, entered into among the Company, Interneuron
Pharmaceuticals, Inc., Transcell Technologies, Inc., and the holders of the Company's Preferred
Stock, Series B.................................................................................
*10.7 License Agreement, dated as of January 28, 1992, by and between Scimark Corp., The Castle Group
Ltd. and Ohio University, as amended October 15, 1993...........................................
*10.8 Sponsored Research Agreement, dated January 31, 1992, by and between Scimark Corp. and Ohio
University, as amended October 15, 1993, February 16, 1994, November 16, 1994 and November 22,
1995............................................................................................
*10.9 License Agreement, dated as of April 1, 1993, by and between the Company and Ohio University....
*10.10 Sponsored Research Agreement, dated April 1, 1993, by and between the Company and Ohio
University, as amended August 7, 1995 and November 22, 1995.....................................
10.11 License Agreement, dated as of June 8, 1994, by and between the Company and Associated
Universities, Inc...............................................................................
*10.12 Standard License Agreement, dated as of September 1, 1994, by and between the Company and the
Wisconsin Alumni Research Foundation, as amended June 2, 1995...................................
*10.13 License and Collaboration Agreement, dated as of March 31, 1995, by and between the Company and
Chiron Corporation, as amended April 10, 1996...................................................
*10.14 Sponsored Research and License Agreement, dated as of May 1, 1995, by and between the Company
and Novo Nordisk A/S, as amended January 17, 1996 and March 17, 1996............................
*10.15 License Agreement, dated as of July 17, 1995, by and between the Company and Vanderbilt
University......................................................................................
*10.16 License Agreement, dated as of May 30, 1996, by and between the Company and AMRAD Developments
PTY Ltd.........................................................................................
10.17 Lease Agreement, dated as of November 1994, by and between the Company and Thomas R. Eggers.....
10.18 Lease, Service and Affiliation Agreement, entered into as of February 1995, by and between the
Company and The Ohio State University...........................................................
10.19 Employment Agreement, dated January 3, 1993, by and between the Company and Douglass B.
Given...........................................................................................
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. EXHIBIT PAGE
- --------- ------------------------------------------------------------------------------------------------ ---------
+10.20 Intercompany Services Agreement, dated as of June , 1996, by and between the Company and
Interneuron Pharmaceuticals, Inc................................................................
<C> <S> <C>
+10.21 Tax Allocation Agreement, dated as of June , 1996, by and between the Company and Interneuron
Pharmaceuticals, Inc............................................................................
23.1 Consent of Coopers & Lybrand L.L.P..............................................................
23.2 Consent of Pennie & Edmonds.....................................................................
23.3 Consent of Morrison & Foerster LLP (included in Exhibit 5.1)....................................
24.1 Power of Attorney (See Page II-5 of this Registration Statement)................................
27 Financial Data Schedule.........................................................................
</TABLE>
- --------------
+ To be filed by amendment.
* Confidential treatment has been requested from the Securities and Exchange
Commission for portions of these agreements.
(B) FINANCIAL STATEMENT SCHEDULES.
None.
Schedules not listed above have been omitted because the information
required to be set forth therein is not applicable or is shown in the financial
statements or notes thereto.
<PAGE>
Exhibit 5.1
[LETTERHEAD]
June __, 1996
Progenitor, Inc.
1507 Chambers Road
Columbus, Ohio 43212
Ladies and Gentlemen:
At your request, we have examined the Registration Statement on Form
S-1 filed by Progenitors, Inc., a Delaware corporation (the "Company"), with
the Securities and Exchange Commission on June __, 1996 (the "Registration
Statement"), relating to the registration under the Securities Act of 1933,
as amended, of up to 2,875,000 shares of the Company's Common Stock, $0.001
par value (the "Common Stock"), all of which are shares of authorized but
unissued stock to be offered and sold by the Company (including 375,000
shares of Common Stock subject to the underwriters' over-allotment option).
The Common Stock is to be sold to the underwriters named in the Registration
Statement for resale to the public.
As counsel to the Company, we have examined the proceedings taken by
the Company in connection with the issuance and sale by the Company of up to
2,875,000 shares of Common Stock.
We are of the opinion that the shares of Common Stock to be offered and
sold by the Company have been duly authorized and, when issued and sold by
the Company in the manner described in the Registration Statement and the
related Prospectus and in accordance with the resolutions adopted by the
Board of Directors of the Company, will be validly issued, fully paid and
nonassessable.
We consent to the use of this opinion as an exhibit to the Registration
Statement and further consent to all references to us in the Registration
Statement, the Prospectus constituting a part thereof and any amendments
thereto.
Very truly yours,
<PAGE>
PROGENITOR, INC.
1992 STOCK OPTION PLAN
1. PURPOSE. The purpose of the 1992 Stock Option Plan of Progenitor,
Inc. is to provide incentive to employees of the Company, as defined below, to
encourage employee proprietary interest in the Company, to encourage employees
to remain in the employ of the Company, and to attract to the Company
individuals of experience and ability.
2. DEFINITIONS.
(a) "Board" shall mean the Board of Directors of the Company.
(b) "Code" shall mean the Internal Revenue Code of 1986, as amended.
(c) "Committee" shall mean the Committee appointed by the Board in
accordance with Section 4 of the Plan.
(d) "Common Stock" shall mean the $.001 par value, Class A Common
Stock of the Company.
(e) "Company" shall mean Progenitor, Inc., a Delaware corporation, or
any successor corporation to the Company in accordance with Section 10 hereof.
(f) "Corporation" shall mean and include the Corporation and any
parent or subsidiary corporation thereof, within the meaning of Section 425 of
the Code.
(g) "Disability" shall mean the condition of an Employee who is
unable to engage in any substantial gainful activity by reason of any medically
determinable physical or mental impairment which can be expected to result in
death or which has lasted or can be expected to last for a continuous period of
not less than twelve (12) months, all within the meaning of Section 105(d)(4) of
the Code.
(h) "Employee" shall mean any individual (including an officer or a
director) who is an employee of the Corporation (within the meaning of Section
3401 of the Code and the regulations thereunder).
(i) "Exercise Price" shall mean the price per Share of Common Stock,
determined by the Board or Committee, at which an option may be exercised.
(j) "Fair Market Value" of a Share of Common Stock as of a specified
date shall mean the closing price of a Share on the principal securities
exchange on which such Shares are traded on the day immediately preceding the
date as of which Fair Market Value is being determined, or on the next preceding
date on which such Shares are traded if no Shares were traded on such
immediately preceding day, or if the Shares are not traded on a securities
exchange, Fair Market Value shall be deemed to be the average of the high bid
and low asked
1
<PAGE>
prices of the Shares in the over-the-counter market on the day immediately
preceding the date as of which Fair Market Value is being determined or on the
next preceding date on which such high bid and low asked prices were recorded.
If the Shares are not publicly traded, Fair Market Value shall be determined by
the Board or Committee. In no case shall Fair Market Value be less than the par
value of a Share of a Common Stock, and in no event shall Fair Market Value be
determined with regard to restrictions other than restrictions which, by their
terms, will never lapse.
(k) "Incentive Stock Option" shall mean an Option described in Code
Section 422A(b).
(l) "Nonstatutory Stock Option" shall mean an Option which is not an
Incentive Stock Option.
(m) "Option" shall mean a stock option granted pursuant to the Plan.
(n) "Optionee" shall mean a person to whom an Option has been
granted.
(o) "Plan" shall mean this Progenitor, Inc. 1992 Stock Option Plan.
(p) "Purchase Price" shall mean the Exercise Price times the number
of whole Shares with respect to which an Option is exercised.
(q) "Share" shall mean one share of Common Stock.
(r) "Ten Percent Shareholder" shall mean any Employee who, at the
time of the grant of an Option, owns (or is deemed to own, under Section 425(d)
of the Code) more than ten percent of the total combined voting power of all
classes of outstanding stock of the Corporation.
3. EFFECTIVE DATE. This Plan was approved by the Board effective
___________________.
4. ADMINISTRATION. The Plan shall be administered by the Board or a
Committee appointed by the Board consisting of not less than two members. The
Board may from time to time remove members from, or add members to, the
Committee. Vacancies on the Committee, however caused, shall be filled by the
Board. The Board or Committee shall from time to time at its discretion make
determinations with respect to the persons who shall be granted Options, the
number of Shares to be optioned to each and the designation of such Options as
Incentive Stock Options or Nonstatutory Stock Options. The interpretation and
construction by the Board or the Committee of any provisions of the Plan or of
any Option granted thereunder shall be binding and conclusive on all Optionees
and of their legal representatives and beneficiaries.
5. ELIGIBILITY. Any Employee may be granted Incentive Stock Options
under the Plan and any Employee or officer, director or consultant of the
Corporation may be granted Non-Statutory Stock Options under the Plan if, in
each instance, the Board or Committee determines
2
<PAGE>
that such person performs services of special importance to the management,
operation and development of the business of the Corporation.
6. STOCK. The stock subject to Options granted under the Plan shall be
Shares of authorized but unissued or reacquired Common Stock. The aggregate
number of Shares which may be issued under Options exercised under this Plan
shall not exceed 500,000. The number of Shares subject to Options outstanding
under the Plan at any time may not exceed the number of Shares remaining
available for issuance under the Plan. In the event that any Option outstanding
under the Plan expires for any reason or is terminated, the Shares allocable to
the unexercised portion of such Option may again be subjected to an Option under
the Plan.
The limitations established by this Section 6 shall be subject to
adjustment upon the occurrence of the events specified and in the manner
provided in Section 10 hereof.
7. TERMS AND CONDITIONS OF OPTIONS. Options granted pursuant to the Plan
shall be evidenced by written agreements in such form as the Board or the
Committee shall from time to time determine, which agreements shall comply with
and be subject to the following terms and conditions:
(a) Date of Grant. Each Option shall specify its effective date (the
"date of grant"), which shall be the date specified by the Board or Committee in
its action relating to the grant of the Option.
(b) Number of Shares. Each Option shall state the number of Shares
to which it pertains and shall provide for the adjustment thereof in accordance
with the provisions of Section 10 hereof.
(c) Exercise Price. Each Option shall state the Exercise Price,
which price shall be determined by the Board or Committee, provided however,
that the Exercise Price (i) in the case of an Incentive Stock Option granted to
an Employee who is not a Ten Percent Shareholder, shall not be less than the par
value nor less than the Fair Market Value of the Shares to which the Option
relates on the date of grant, (ii) in the case of an Incentive Stock Option
granted to an Employee who is a Ten Percent Shareholder, shall not be less than
the par value nor less than 110% of the Fair Market Value of the Shares to which
the option relates on the date of grant, and (iii) in the case of a Nonstatutory
Stock Option granted to any Employee or officer or director of the Corporation,
shall not be less than the par value of the Shares to which the Option relates.
The Exercise Price of an Option shall be subject to adjustment in accordance
with Section 10 hereof.
(d) Exercise of Options and Medium and Time of Payment. To exercise
an Option, the Optionee shall give written notice to the Company specifying the
number of Shares to be purchased and accompanied by payment in cash or by
certified check of the full Purchase Price therefor. No Share shall be issued
until full payment therefor has been made.
(e) Term and Exercise of Options; Nontransferability of Options.
Incentive Options are not exercisable for a period of one (1) year following the
date of grant. Thereafter,
3
<PAGE>
subject to Section 10 hereof, and Nonstatutory Options may be exercised as
determined by the Board or Committee and as stated in the written agreement
evidencing the Option, provided, however, that no Incentive Stock Option granted
to an Employee who is not a Ten Percent Shareholder shall be exercisable after
the expiration of ten (10) years from the date it is granted, and no Incentive
Stock Option granted to an Employee who is a Ten Percent Shareholder shall be
exercisable after the expiration of five (5) years from the date it is granted.
During the lifetime of the Optionee, the Option shall be exercisable only by the
Optionee and shall not be assignable or transferable. In the event of the
Optionee's death, no option shall be transferable by the Optionee otherwise than
by will or by the laws of descent and distribution.
(f) Termination of Employment. In the event that an Optionee shall
cease to be employed by the Corporation for any reason, such Optionee (or the
heirs or legatees of such Optionee, if applicable) shall have the right, subject
to the restrictions of Subsection (e) hereof, to exercise the Option at any time
within three (3) months after such termination of employment (twelve (12) months
if the termination was due to the death or Disability of the Optionee or, in the
case of a Nonstatutory Stock Option, retirement) to the extent that, on the day
preceding the date of termination of employment, the Optionee's right to
exercise such Option had accrued pursuant to the terms of the option agreement
pursuant to which such Option was granted, and had not previously been
exercised.
For this purpose, the employment relationship will be treated as continuing
intact while the Optionee is on military leave, sick leave or other bona fide
leave of absence (to be determined in the sole discretion of the Board and, in
the case of an Optionee who has received an Incentive Stock Option, only to the
extent permitted under Section 422A of the Code and the regulations promulgated
thereunder). Moreover, in the case of an optionee who has been granted an
Incentive Stock Option, employment shall, in no event, be deemed to continue
beyond the ninetieth (90th) day after the Optionee ceased active employment,
unless the Optionee's reemployment rights are guaranteed by statute or by
contract.
(g) Rights as a Shareholder. An Optionee or a transferee of a
deceased Optionee shall have no rights as a shareholder with respect to any
Shares covered by his or her Option until the date of the issuance of a stock
certificate for such Shares. No adjustment shall be made for dividends
(ordinary or extraordinary, whether in cash, securities or other property) or
distributions or other rights for which the record date is prior to the date
such stock certificate is issued, except as provided in Section 10.
(h) Modification, Extension and Renewal of Options. Subject to the
terms and conditions and within the limitations of the Plan, the Board or
Committee may modify, extend or renew outstanding Options granted under the
Plan, or accept the exchange of outstanding Options (to the extent not
theretofore exercised) for the granting of new Options in substitution therefor.
Notwithstanding the foregoing, however, no modification of an Option shall,
without the consent of the Optionee, alter or impair any rights or obligations
under any Option theretofore granted under the Plan. Moreover, in the case of
any modification, extension or renewal of an Incentive Stock Option, all of the
requirements set forth herein shall apply in the same manner as though a new
Incentive Stock Option had been granted to the Optionee on the
4
<PAGE>
date of such modification, extension or renewal, but only if such modification,
extension or renewal is treated, under Section 425(h) of the Code, as the
granting of a new option.
(i) Identification of Option. Each Option granted under the Plan
shall clearly identify its status as an Incentive Stock Option or Non-Statutory
Stock Option.
(j) Other Provisions. The option agreements authorized under the
Plan shall contain such other provisions not inconsistent with the terms of the
Plan, including, without limitation, restrictions upon the exercise of the
Option, as the Board or Committee shall deem advisable.
8. LIMITATION ON ANNUAL AWARDS. The aggregate Fair Market Value
(determined at the time the Option is granted) of stock for which Incentive
Stock Options are exercisable for the first time during any calendar year under
the terms of the Plan (and all other plans maintained by the Corporation and its
parent or subsidiary corporations) shall not exceed the sum of $100,000.
9. TERM OF PLAN. Options may be granted pursuant to the Plan until ten
years from the date that the Plan is adopted by the Board or ten years from the
date that the Plan is approved by the shareholders of the Company, whichever
occurs earlier.
10. RECAPITALIZATION. Subject to any required action by the shareholders
and the last sentence of subsection 7(h) hereof, the number of Shares covered by
this Plan as provided in Section 6, the number of Shares covered by each
outstanding Option, and the Exercise Price thereof shall be proportionately
adjusted for any increase or decrease in the number of issued Shares resulting
from a subdivision or consolidation of Shares, stock split, or the payment of a
stock dividend.
Subject to any required action by the shareholders of the Company and the
last sentence of Subsection 7(h) hereof, if the Company shall be the surviving
corporation in any merger or consolidation, each outstanding Option, shall
pertain and apply to the securities to which a holder of the number of Shares
subject to the Option would have been entitled. A dissolution or liquidation of
the Company or a merger or consolidation in which the Company is not the
surviving corporation shall cause each outstanding Option to terminate, unless
the agreement of merger or consolidation shall otherwise provide, provided that
each Optionee shall, in such event, have the right immediately prior to such
dissolution or liquidation, or merger or consolidation in which the Company is
not the surviving corporation, if a period of one (1) year from the date of the
grant of the Option shall have elapsed, to exercise the Option in whole or in
part, subject to limitations on exercisability under Section 8 hereof.
In the event of a change in the Common Stock as presently constituted,
which is limited to a change of all of its authorized shares with par value into
the same number of shares with a different par value or without par value, the
shares resulting from any such change shall be deemed to be Shares of Common
Stock within the meaning of the Plan.
5
<PAGE>
To the extent that the foregoing adjustments relate to stock or securities
of the Company, such adjustments shall be made by the Board or Committee, whose
determination in that respect shall be final, binding and conclusive.
Except as hereinbefore expressly provided in this Section 10, the optionee
shall have no rights by reason of any subdivision or consolidation of shares of
stock of any class, stock split, or the payment of any stock dividend or any
other increase or decrease in the number of shares of stock of any class or by
reason of any dissolution, liquidation, merger, or consolidation or spin-off of
assets or stock of another corporation, and any issue by the Company of shares
of stock of any class or securities convertible into shares of stock of any
class, shall not affect, and no adjustment by reason thereof shall be made with
respect to, the number or price of Shares subject to the Option.
The grant of an Option pursuant to the Plan shall not affect in any way the
right or power of the Company to make adjustments, reclassifications,
reorganizations or changes of its capital or business structure or to merge or
consolidate or to dissolve, liquidate, sell or transfer all or any part of its
business or assets.
11. SECURITIES LAW REQUIREMENTS. No Shares shall be issued upon the
exercise of any Option unless and until the Company has determined that: (i) it
and the Optionee have taken all actions required to register the Shares under
the Securities Act of 1933 or perfect an exemption from the registration
requirements thereof; (ii) any applicable listing requirement of any stock
exchange on which the Common Stock are listed has been satisfied; and (iii) any
other applicable provision of state or Federal law has been satisfied.
12. AMENDMENT OF THE PLAN. The Board or Committee may, insofar as
permitted by law, from time to time, with respect to any Shares at the time not
subject to Options, suspend or discontinue the Plan or revise or amend it in any
respect whatsoever except that, without approval of the shareholders of the
Company, no such revision or amendment shall:
(a) Increase the number of Shares subject to the Plan; or
(b) Change the designation in Section 5 of the Plan of the class of
Employees eligible to receive options.
(c) Amend this Section 12 to defeat its purpose.
13. APPLICATION OF FUNDS. The proceeds received by the Company from the
sale of Common Stock pursuant to the exercise of an Option will be used for
general corporate purposes.
14. NO OBLIGATION TO EXERCISE OPTION. The granting of an Option shall
impose no obligation upon the Optionee to exercise such Option.
6
<PAGE>
15. WITHHOLDING.
(a) Non-Statutory Options. Whenever Shares are to be delivered upon
exercise of a Non-Statutory Option, the Corporation shall be entitled to require
as a condition of delivery that the Optionee remit to the Corporation an amount
sufficient to satisfy the Corporation's federal, state and local withholding tax
obligations with respect to the exercise of the Option.
(b) Incentive Stock Options. The acceptance of Shares upon exercise
of an Incentive Stock Option shall constitute an agreement by the Optionee
(unless and until the Corporation shall notify the Optionee that it is relieved,
in whole or in part, of its obligations under Section 15(b)) (i) to notify the
Corporation if any or all of such Shares are disposed of by the Optionee within
two years from the date the Option was granted or within one year from the date
the Shares were transferred to the Optionee pursuant to his exercise of the
Option, and (ii) to remit to the Corporation, at the time of and in the case of
any such disposition, an amount sufficient to satisfy the Corporation's federal,
state and local withholding tax obligations with respect to such disposition,
whether or not, as to both (i) and (ii), the Optionee is in the employ of the
Corporation at the time of such disposition.
16. GOVERNING LAW. The provisions of this Plan shall be governed and
construed in accordance with the laws of the State of Delaware provided,
however, that in the case of the provisions applicable to Incentive Stock
Options, such provisions shall (to the extent possible) be construed in a manner
conforming to and consistent with the requirements of Section 422A of the Code.
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<PAGE>
OPTIONEE:_________________
GRANT______________
PROGENITOR, INC.
1992 STOCK OPTION PLAN
INCENTIVE STOCK OPTION AGREEMENT
OPTION AGREEMENT, dated as of ___________________, by and between
Progenitor, Inc., a Delaware corporation (the "Company"), and __________________
(the "Optionee").
The Company has adopted the 1992 Stock Option Plan (the "Plan"), a
copy of which is attached hereto, and desires to grant to the Optionee the
options provided for herein, all subject to the terms and conditions of the
Plan. Capitalized terms used herein and not defined have the same meanings as
set forth in the Plan.
IT IS AGREED as follows:
1. GRANT OF OPTION. The Company hereby grants to the Optionee on
the date hereof the right and option to purchase an aggregate of _______ of its
shares of Common Stock (as defined in the Plan) at an option price per share of
$_____ (being the Fair Market Value of a share of Common Stock on the date of
grant), as an Incentive Stock Option (subject to adjustment pursuant to
Section 10 of the Plan).
2. OPTION PERIOD. The option granted hereby shall expire on
____________ subject to earlier termination as provided in the Plan.
3. EXERCISE OF OPTION.
A. The option granted hereby shall become exercisable in
installments commencing ________________, on a cumulative basis, as follows:
Cumulative
Number of Options Which
Date are Exercisable
---- ------------------------
_________________________________ _________________________________
_________________________________ _________________________________
_________________________________ _________________________________
_________________________________ _________________________________
1
<PAGE>
B. The Optionee may exercise the option (to the extent then
exercisable) by delivering to the Company a written notice duly signed by the
Optionee in the form attached hereto as Exhibit A stating the number of Shares
that the Optionee has elected to purchase, and accompanied by payment of an
amount equal to the full purchase price for the Shares to be purchased. The
notice must also contain a statement (if required and in a form acceptable to
the Company) that the Optionee is acquiring the Shares for investment and not
with a view toward their distribution or resale. Following receipt by the
Company of such notice and payment, the company shall (subject to Section 11 of
the Plan) issue, as soon as practicable, the Shares in the name of the Optionee
and deliver the certificate therefor to the Optionee. No Shares shall be issued
until full payment therefor has been made and until the Company has complied
with all requirements of the Securities Act of 1933, the Securities Exchange
Act of 1934, any securities exchange on which the Company's stock may then be
listed and all applicable state laws in connection with the issuance of the
Shares on the listing of the Shares on said securities exchange. The Optionee
shall have none of the rights of a shareholder in respect of such Shares until
they are issued.
4. EMPLOYMENT. Nothing contained in this Option Agreement shall
confer upon the Optionee any right to be employed by the Company nor prevent the
Company from terminating its current relationship with the Optionee at any time,
with or without cause. If the Optionee's employment with the Company is
terminated for any reason, the Option shall be exercisable only as to those
shares immediately purchasable by the Optionee at the date of termination,
subject to Section 2 hereof, thereafter as provided in the Plan. The option
shall expire 90 days after the date of termination.
5. DEATH. If the Optionee dies while employed by the Company, that
portion of this option which was exercisable by the Optionee at the time of
death shall be exercisable by his legal representatives or beneficiaries at any
time within twelve (12) months after the Optionee's death.
6. NON-TRANSFERABILITY OF OPTION. This Option shall not be
transferable other than by will or by the laws of descent and distribution, and
may be exercised during the Optionee's lifetime only by him.
7. TAX STATUS. The Company makes no representation or warranty
whatsoever to the Optionee as to the tax consequences of the grant or exercise
of the Option or of the disposition of Shares acquired thereunder.
8. INCORPORATION OF PLAN. The option granted hereby is subject to,
and governed by, all the terms and conditions of the Plan, which are hereby
incorporated by reference. This Agreement, including the Plan incorporated by
reference herein, is the entire agreement among the parties hereto with respect
to the subject matter hereof and supersedes all prior agreements and
understandings. In the case of any conflict between the terms of this agreement
and the Plan, the provisions of the Plan shall control.
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<PAGE>
9. NOTICES. Any notice to be given by the Optionee hereunder shall
be sent to the Company at its principal executive offices, and any notice from
the Company to the Optionee shall be sent to the Optionee at his address set
forth below; all such notices shall be in writing and shall be delivered in
person or by registered or certified mail. Either party may change the address
to which notices are to be sent by notice in writing given to the other in
accordance with the terms hereof.
10. GOVERNING LAW. This Option Agreement shall be Governed by the
laws of the State of Delaware.
11. NOTICE OF EARLY DISPOSITION--INCENTIVE STOCK OPTIONS. The
Optionee hereby agrees to notify the Company of any early disposition of Shares
as stated in Section 15(b)(i) of the Plan.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
PROGENITOR, INC.
By:
-----------------------------------
OPTIONEE
-----------------------------------
Signature
Address:
-----------------------------------
-----------------------------------
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<PAGE>
EXHIBIT A
PROGENITOR, INC.
STOCK OPTION EXERCISE
(To be signed and delivered to
Progenitor, Inc.
upon exercise of the Option)
The undersigned, the holder of a Stock Option, dated __________________
hereby irrevocable elects to exercise the purchase rights represented by such
Option, and to purchase thereunder __________ shares of Class A Common Stock,
par value $.001 of Progenitor, Inc. ("Shares"), and herewith makes payment of
$________ ($_____ per share) therefor, plus withholding tax, if any, required in
connection with the exercise of any Nonstatutory Option, and requests that the
Certificates for the Shares be issued in the name of, and delivered to
_________________________________ whose address is _________________________
_________________________________________________________________________.
The undersigned hereby represents that the shares to be purchased upon the
exercise of this Option are being purchased for investment only, and not with a
view towards the sale, transfer, or distribution thereof.
The undersigned hereby agrees to notify Progenitor, Inc. of any early
disposition of the Shares and agrees to pay any additional withholding tax due
in connection therewith, all in accordance with Section 15(b) of the Plan.
-----------------------------------
Signature
-----------------------------------
Date
-----------------------------------
Social Security Number
4
<PAGE>
OPTIONEE:_________________
GRANT:______________
PROGENITOR, INC.
1992 STOCK OPTION PLAN
NON-QUALIFIED STOCK OPTION AGREEMENT
OPTION AGREEMENT, dated as of ___________________, by and between
Progenitor, Inc., a Delaware corporation (the "Company"), and __________________
(the "Optionee").
The Company has adopted the 1992 Stock Option Plan (the "Plan"), a copy of
which is attached hereto, and desires to grant to the Optionee the options
provided for herein, all subject to the terms and conditions of the Plan.
Capitalized terms used herein and not defined have the same meanings as set
forth in the Plan.
IT IS AGREED as follows:
1. GRANT OF OPTION. The Company hereby grants to the Optionee on the
date hereof the right and option to purchase an aggregate of _______ of its
shares of Common Stock (as defined in the Plan) at an option price per share of
$_____ (being the Fair Market Value of a share of Common Stock on the date of
grant), as an Non-qualified Stock Option (subject to adjustment pursuant to
Section 10 of the Plan).
2. OPTION PERIOD. The option granted hereby shall expire on
____________ subject to earlier termination as provided in the Plan.
3. EXERCISE OF OPTION.
A. The option granted hereby shall become exercisable in
installments commencing ________________, on a cumulative basis, as follows:
Cumulative
Number of Options Which
Date are Exercisable
---- ------------------------
_________________________________ _________________________________
_________________________________ _________________________________
_________________________________ _________________________________
_________________________________ _________________________________
1
<PAGE>
B. The Optionee may exercise the option (to the extent then
exercisable) by delivering to the Company a written notice duly signed by the
Optionee in the form attached hereto as Exhibit A stating the number of Shares
that the Optionee has elected to purchase, and accompanied by payment of an
amount equal to the full purchase price for the Shares to be purchased. The
notice must also contain a statement (if required and in a form acceptable to
the Company) that the Optionee is acquiring the Shares for investment and not
with a view toward their distribution or resale. Following receipt by the
Company of such notice and payment, the company shall (subject to Section 11 of
the Plan) issue, as soon as practicable, the Shares in the name of the Optionee
and deliver the certificate therefor to the Optionee. No Shares shall be issued
until full payment therefor has been made and until the Company has complied
with all requirements of the Securities Act of 1933, the Securities Exchange
Act of 1934, any securities exchange on which the Company's stock may then be
listed and all applicable state laws in connection with the issuance of the
Shares on the listing of the Shares on said securities exchange. The Optionee
shall have none of the rights of a shareholder in respect of such Shares until
they are issued.
4. CONSULTING RELATIONSHIP. Nothing contained in this Option Agreement
shall confer upon the Optionee any right to be a consultant to the Company nor
prevent the Company from terminating its current relationship with the Optionee
at any time, with or without cause. If the Optionee's consulting relationship
with the Company is terminated for any reason, the Option shall be exercisable
only as to those shares immediately purchasable by the Optionee at the date of
termination, subject to Section 2 hereof, thereafter as provided in the Plan.
The option shall expire 90 days after the date of termination.
5. DEATH. If the Optionee dies while employed by the Company, that
portion of this option which was exercisable by the Optionee at the time of
death shall be exercisable by his legal representatives or beneficiaries at any
time within twelve (12) months after the Optionee's death.
6. NON-TRANSFERABILITY OF OPTION. This Option shall not be transferable
other than by will or by the laws of descent and distribution, and may be
exercised during the Optionee's lifetime only by him.
7. TAX STATUS. The Company makes no representation or warranty
whatsoever to the Optionee as to the tax consequences of the grant or exercise
of the Option or of the disposition of Shares acquired thereunder.
8. INCORPORATION OF PLAN. The option granted hereby is subject to, and
governed by, all the terms and conditions of the Plan, which are hereby
incorporated by reference. This Agreement, including the Plan incorporated by
reference herein, is the entire agreement among the parties hereto with respect
to the subject matter hereof and supersedes all prior agreements and
understandings. In the case of any conflict between the terms of this agreement
and the Plan, the provisions of the Plan shall control.
2
<PAGE>
9. NOTICES. Any notice to be given by the Optionee hereunder shall be
sent to the Company at its principal executive offices, and any notice from the
Company to the Optionee shall be sent to the Optionee at his address set forth
below; all such notices shall be in writing and shall be delivered in person or
by registered or certified mail. Either party may change the address to which
notices are to be sent by notice in writing given to the other in accordance
with the terms hereof.
10. GOVERNING LAW. This Option Agreement shall be Governed by the laws of
the State of Delaware.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
PROGENITOR, INC.
By:
-----------------------------------
OPTIONEE
-----------------------------------
Signature
Address:
-----------------------------------
-----------------------------------
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<PAGE>
EXHIBIT A
PROGENITOR, INC.
STOCK OPTION EXERCISE
(To be signed and delivered to
Progenitor, Inc.
upon exercise of the Option)
The undersigned, the holder of a Stock Option, dated ____________________
hereby irrevocable elects to exercise the purchase rights represented by such
Option, and to purchase thereunder __________ shares of Class A Common Stock,
par value $.001 of Progenitor, Inc. ("Shares"), and herewith makes payment of
$________ ($_____ per share) therefor, plus withholding tax, if any, required in
connection with the exercise of any Nonstatutory Option, and requests that the
Certificates for the Shares be issued in the name of, and delivered to
_________________________________ whose address is__________________________
__________________________________________________________________________.
The undersigned hereby represents that the shares to be purchased upon
the exercise of this Option are being purchased for investment only, and not
with a view towards the sale, transfer, or distribution thereof.
The undersigned hereby agrees to notify Progenitor, Inc. of any early
disposition of the Shares and agrees to pay any additional withholding tax due
in connection therewith, all in accordance with Section 15(b) of the Plan.
-----------------------------------
Signature
-----------------------------------
Date
-----------------------------------
Social Security Number
4
<PAGE>
INVESTORS' RIGHTS AGREEMENT
THIS INVESTORS' RIGHTS AGREEMENT is made as of the day of ,
199 , by and among Progenitor, Inc. a Delaware corporation ("Progenitor"),
Transcell Technologies, Inc. a Delaware Corporation ("Transcell"), Interneuron
Pharmaceuticals, Inc., a Delaware Corporation ("Interneuron"), and
(the "Investor"). Progenitor and Transcell are sometimes
referred to individually as a "Company" and collectively as the "Companies".
RECITALS
WHEREAS, the Companies, Interneuron and the Investor are parties to
the Subscription Agreement of even date herewith (the "Subscription Agreement")
relating to the purchase by the Investor of the Series B Convertible Preferred
Stock, par value $.01 per share, of each Company ("Series B Preferred Stock"),
and Warrants to purchase Common Stock of Interneuron ("Warrants") and the Put
Protection Right as defined below, from Interneuron;
WHEREAS, in order to induce the Companies and Interneuron to enter
into the Subscription Agreement, induce Interneuron to issue the Warrants and
grant the Put Protection Right and to induce the Investor to purchase the Series
B Preferred Stock pursuant to the Subscription Agreement, the Investors, the
Companies and Interneuron hereby agree that this Agreement shall govern (i) the
rights of the Investor to cause each Company to register shares of the Class A
Common Stock, par value $.01 per share, of such Company (the "Issuing Company")
issuable to the Investors upon the conversion of the Series B Preferred Stock of
the Issuing Company (the "Common Stock") and Interneuron to register the shares
of Common Stock, par value $.001 per share, of Interneuron that may be issued by
Interneuron upon exercise of the Warrants and the Put Protection Right ("IPI
Common Stock"), (ii) the terms of the Put Protection Right and (iii) certain
other matters as set forth herein;
NOW, THEREFORE, THE PARTIES HEREBY AGREE AS FOLLOWS:
1. REGISTRATION RIGHTS. Each Company covenants and agrees with
respect to the Common Stock issuable upon conversion of its Series B Preferred
Stock and Interneuron covenants and agrees as provided in Section 1.14 below
with respect to the IPI Common Stock, as follows:
1.1 DEFINITIONS. For purposes of this Section 1:
(a) The term "Act" means the Securities Act of 1933, as
amended.
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<PAGE>
(b) The term "Holder" means any person owning or having the
right to acquire Registrable Securities or any assignee thereof in accordance
with Section 1.12 hereof.
(c) The term "1934 Act" shall mean the Securities Exchange
Act of 1934, as amended.
(d) The terms "register", "registered" and "registration"
refer to a registration effected by preparing and filing a registration
statement or similar document under the Act, and the declaration or order of
effectiveness of such registration statement or document.
(e) The term "Registrable Securities" means (i) the Common
Stock issuable or issued upon conversion of the Issuing Company's Series B
Preferred Stock and (ii) any Common Stock of the Issuing Company issued as (or
issuable upon the conversion or exercise of any warrant, right or other security
which is issued as) a dividend or other distribution with respect to, or in
exchange for or in replacement of the shares referenced in (i) above and in this
subparagraph (ii), excluding in all cases (x) any Registrable Securities sold by
a person in a transaction in which his rights under this Section 1 are not
assigned or are assigned in violation of this Agreement and (y) any Registrable
Securities that have already been registered under the Act or which are freely
transferable without registration under the Act due to the lapse of time or
otherwise and which are not subject to any sales volume limitation under Rule
144 (as hereafter defined) based on the Investor's holdings of Registrable
Securities.
(f) The number of shares of "Registrable Securities then
outstanding" for each Company shall be determined by the number of shares of
Common Stock outstanding which are, and the number of shares of Common Stock
issuable pursuant to then exercisable or convertible securities which are,
Registrable Securities.
(g) The term "SEC" shall mean the Securities and Exchange
Commission.
1.2 REQUEST FOR REGISTRATION.
(a) If, during the four (4) year period commencing twelve
(12) months following the closing date of the first registration statement for a
public offering of securities of an Issuing Company (other than a registration
statement relating either to the sale of securities to employees of the Issuing
Company pursuant to a stock option, stock purchase or similar plan or a SEC Rule
145 transaction) (the "IPO"), a Company shall receive (i) a written request
from the Holders of a majority of the Registrable Securities then outstanding
that the Issuing Company file a registration statement under the Act covering
the registration of at least fifty percent (50%) of the Registrable Securities
then outstanding (a "Demand Registration") or (ii) PROVIDED that the Issuing
Company is eligible to file a registration statement on Form S-3 under the
2
<PAGE>
Act, a written request from any Holder of the Registrable Securities that the
Issuing Company file a registration statement on Form S-3 under the Act covering
the registration of the Registrable Securities PROVIDED that (w) the anticipated
aggregate offering price, net of underwriting discounts and commissions, will
exceed $500,000 or (x) the number of Registrable Securities sought to be
registered exceeds 40,000, whichever has a greater value (an "S-3 Registration")
then, in each case, the Issuing Company shall, subject to the limitations set
forth in this Agreement (including the limitations of subsection 1.2(b)), (i)
within twenty (20) days of the receipt thereof, give written notice of such
request to all Holders (the "Notice of Request for Registration") and (ii) as
soon as practicable, use its best efforts to effect such registration under the
Act covering all Registrable Securities which the Holders request to be
registered by notice to the Issuing Company within thirty (30) days of the
mailing of the Notice of Request for Registration by the Company in accordance
with this Section 1.2(a) and Section 3.6.
(b) If the Holders initiating the registration request
hereunder ("Initiating Holders") intend to distribute the Registrable Securities
covered by their request by means of an underwriting, they shall so advise the
Issuing Company as part of their request made pursuant to subsection 1.2(a) and
the Issuing Company shall include such information in the written notice
referred to in subsection 1.2(a). The underwriter will be selected by the
Initiating Holders and shall be reasonably acceptable to the Issuing Company.
In such event, the right of any Holder to include his Registrable Securities in
such registration shall be conditioned upon such Holder's participation in such
underwriting and the inclusion of such Holder's Registrable Securities in the
underwriting (unless otherwise mutually agreed by a majority in interest of the
Initiating Holders and such Holder) to the extent provided herein. All Holders
proposing to distribute their securities through such underwriting shall
(together with the Company as provided in subsection 1.4(e)) enter into an
underwriting agreement in customary form with the underwriter or underwriters
selected for such underwriting. Notwithstanding any other provision of this
Section 1.2 to the contrary, if the underwriter advises the Initiating Holders
in writing that marketing factors require a limitation of the number of shares
to be underwritten on behalf of the Holders, then the Initiating Holders shall
so advise all Holders of Registrable Securities which would otherwise be
underwritten pursuant hereto, and the number of shares of Registrable Securities
that may be included in the underwriting shall be allocated among all Holders
thereof, including the Initiating Holders, in proportion (as nearly as
practicable) to the amount of Registrable Securities of the Issuing Company
owned by each Holder or, in the event holders of other securities of the Company
request inclusion in such registration, pro rata as to all holders of securities
of the Issuing Company requesting inclusion in such registration. A
registration shall not count as a Demand Registration pursuant to this Section
1.2 unless the Initiating Holders are able to register at least fifty percent
(50%) of the Registrable Securities requested to be included in such
registration pursuant to Section 1.2(a).
(c) Notwithstanding the foregoing, an Issuing Company shall
not be obligated to effect any registration pursuant to this Section 1.2 if at
the time of any request to register Registrable Securities pursuant to this
Section 1.2, the Issuing
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<PAGE>
Company is engaged, or has fixed plans to engage within ninety (90) days of the
time of the request, in a registered public offering or is engaged, or has fixed
plans to engage within ninety (90) days of the request, in any other activity
that, in the good faith determination of the Board of Directors of the Issuing
Company, would be adversely affected by the requested registration to the
material detriment of the Issuing Company, then the Issuing Company may at its
option direct that such request be delayed for a period not in excess of one
hundred twenty (120) days from the effective date of such offering, or the date
of commencement of such other material activity, as the case may be, such rights
to delay a request to be exercised by the Issuing Company not more than once in
any twelve month period.
(d) In addition, the Issuing Company shall not be obligated
to effect, or to take any action to effect, any registration pursuant to this
Section 1.2:
(i) in the case of (x) a Demand Registration, after
the Issuing Company has effected one Demand Registration and such registration
has been declared or ordered effective or (y) an S-3 Registration during a
calendar year in which the Issuing Company has effected two S-3 Registrations in
such year and each registration has been declared or ordered effective; or
(ii) within one hundred and twenty (120) days after the
effective date of any registration statement effected by the Issuing Company
whether for its own account or for the account of others.
1.3 "PIGGY-BACK" REGISTRATION RIGHTS. If (but without any
obligation to do so), during the four (4) year period commencing twelve (12)
months following the IPO, an Issuing Company proposes to register (including for
this purpose a registration effected by the Issuing Company for stockholders
other than the Holders) any of its stock or other securities under the Act in
connection with the public offering of such securities solely for cash (other
than a registration on Form S-8 or S-4 or relating solely to the sale of
securities to participants in a Company stock plan or a registration on any form
which does not include substantially the same information as would be required
to be included in a registration statement covering the sale of the Registrable
Securities), the Issuing Company shall, at such time, promptly give each Holder
written notice of such registration. Upon the written request of each Holder
given within ten (10) business days after mailing of such notice by the Issuing
Company in accordance with Section 2.5, the Issuing Company shall, subject to
the limitations set forth in this Agreement (including the limitations of
Section 1.2(b) and the provisions of Section 1.8), include in the Issuing
Company's registration statement under the Act all of the Registrable Securities
that each such Holder has requested to be registered; PROVIDED, HOWEVER, that
(i) the Issuing Company shall not be obligated to effect any registration
pursuant to this Section 1.3 after the Issuing Company has effected two (2) such
registrations and each such registration has been declared or ordered effective
and (ii) nothing in this Section 1.3 shall prevent the
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Issuing Company from at any time abandoning or delaying any such registration
without obligation to any Holder.
1.4 OBLIGATIONS OF THE ISSUING COMPANY. Whenever required under
this Section 1 to effect the registration of any Registrable Securities or to
include Registrable Securities in a registration statement, the Issuing Company
shall, as expeditiously as reasonably possible:
(a) Prepare and file with the SEC a registration statement
with respect to such Registrable Securities and use its reasonable best efforts
to cause such registration statement to become effective, and, upon the request
of the Holders of a majority of the Registrable Securities registered
thereunder, keep such registration statement effective for a period of one
hundred twenty (120) days or such shorter period as required until the
distribution contemplated in the Registration Statement has been completed;
PROVIDED, HOWEVER, that such 120-day period shall be extended for a period of
time equal to the period the Holder refrains from selling any securities
included in such registration at the request of an underwriter of Common Stock
(or other securities) of the Issuing Company, and PROVIDED FURTHER that if
applicable rules under the Act governing the obligation to file a post-effective
amendment permit, in lieu of filing a post-effective amendment which (x)
includes any prospectus required by Section 10(a)(3) of the Act or (y) reflects
facts or events representing material or fundamental change in the information
set forth in the registration statement, the Issuing Company may incorporate by
reference information required to be included in (x) and (y) above to the extent
such information is contained in periodic reports filed pursuant to Section 13
or 15(d) of the 1934 Act in the registration statement.
(b) Prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in connection
with such registration statement as may be necessary to comply with the
provisions of the Act with respect to the disposition of all securities covered
by such registration statement.
(c) Furnish to the Holders such numbers of copies of a
prospectus, including a preliminary prospectus, in conformity with the
requirements of the Act, and such other documents as they may reasonably request
in order to facilitate the disposition of Registrable Securities owned by them.
(d) Use its reasonable best efforts to register and qualify
the securities covered by such registration statement under such other
securities or Blue Sky laws of such jurisdictions as shall be reasonably
requested by the Holders; PROVIDED that the Issuing Company shall not be
required in connection therewith or as a condition thereto to qualify to do
business or to file a general consent to service of process in any such states
or jurisdictions, unless the Issuing Company is already subject to service in
such jurisdiction and except as may be required by the Act.
(e) In the event of any underwritten public offering, enter
into and perform its obligations under an underwriting agreement, in usual and
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customary form, with the managing underwriter of such offering. Each Holder
participating in such underwriting shall also enter into and perform its
obligations under such an agreement.
(f) Notify each Holder of Registrable Securities covered by
such registration statement at any time when a prospectus relating thereto is
required to be delivered under the Act of the happening of any event as a result
of which the prospectus included in such registration statement, as then in
effect, includes an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances then existing.
(g) Cause all such Registrable Securities registered
pursuant hereunder to be listed on each securities exchange on which similar
securities issued by the Issuing Company are then listed.
1.5 FURNISH INFORMATION.
(a) It shall be a condition precedent to the obligation of
an Issuing Company to take any action pursuant to this Section 1 with respect to
the Registrable Securities of any selling Holder that such Holder shall furnish
to the Issuing Company such information regarding the Holder, the Registrable
Securities held by the Holder, and the intended method of disposition of such
securities as shall be required to effect the registration of such Holder's
Registrable Securities.
(b) An Issuing Company shall have no obligation with
respect to any registration requested pursuant to Section 1.2 if, due to the
operation of subsection 1.5(a), the number of shares or the anticipated
aggregate offering price of the Registrable Securities to be included in the
registration does not equal or exceed the number of shares or the anticipated
aggregate offering price required to originally trigger the Issuing Company's
obligation to initiate such registration as specified in subsection 1.2(a).
1.6 EXPENSES OF DEMAND REGISTRATION AND S-3 REGISTRATIONS. All
expenses other than underwriting discounts and commissions incurred in
connection with registrations, filings or qualifications pursuant to Section
1.2, including (without limitation) all registration, filing and qualifications
fees, printers' and accounting fees and fees and disbursements of counsel for
the Issuing Company shall be borne by the Issuing Company; PROVIDED, HOWEVER,
that the Issuing Company shall not bear the cost of any professional fees or
costs of accounting, financial or legal advisors to any of the holders;
PROVIDED, FURTHER, that the Issuing Company shall not be required to pay for any
expenses of any registration proceeding begun pursuant to Section 1.2 if the
registration request is subsequently withdrawn at the request of the Holders of
a majority of the Registrable Securities to be registered (in which case all
Participating Holders shall bear such expenses), unless the Holders of a
majority of the Registrable Securities agree to forfeit their right to their
Demand Registration or one S-3 Registration, as the case may be,
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pursuant to Section 1.2. Notwithstanding the foregoing, each Holder shall pay
all registration expenses which such Holder is required to pay under applicable
law.
1.7 EXPENSES OF COMPANY REGISTRATION. The Issuing Company shall
bear and pay all expenses incurred in connection with any registration, filing
or qualification of Registrable Securities with respect to the registrations
pursuant to Section 1.3 for each Holder, including (without limitation) all
registration, filing, and qualification fees, printers and accounting fees
relating or apportionable thereto, but excluding underwriting discounts and
commissions relating to Registrable Securities; PROVIDED, HOWEVER, that the
Issuing Company shall not bear the cost of any professional fees or costs of
accounting, financial or legal advisors to any of the Holders. Notwithstanding
the foregoing, each Holder shall pay all registration expenses which such Holder
is required to pay under applicable law.
1.8 UNDERWRITING REQUIREMENTS. In connection with any offering
involving an underwriting of shares of the Issuing Company's capital stock, the
Issuing Company shall not be required under Section 1.3 to include any of the
Holders' securities in such underwriting unless they accept the terms of the
underwriting as agreed upon between the Issuing Company and the underwriters
selected by it (or by other persons entitled to select the underwriters), and
then only in such quantity as the underwriters determine in their sole
discretion will not jeopardize the success of the offering by the Issuing
Company. If the total amount of securities, including Registrable Securities,
requested by stockholders to be included in such offering exceeds the amount of
securities to be offered, other than by the Issuing Company, that the
underwriters determine in their sole discretion is compatible with the success
of the offering, then the Issuing Company shall be required to include in the
offering only that number of such securities, if any, including Registrable
Securities, which the underwriters determine in their sole discretion will not
jeopardize the success of the offering (the securities so included to be
apportioned pro rata among the selling stockholders according to the total
amount of securities entitled to be included therein owned by each selling
stockholder or in such other proportions as shall mutually be agreed to by such
selling stockholders). For purposes of the preceding parenthetical concerning
apportionment, for any selling stockholder that is a holder of Registrable
Securities and that is a partnership or corporation, the partners, retired
partners and stockholders of such holder, or the estates and family members of
any such partners and retired partners and any trusts for the benefit of any of
the foregoing persons shall be deemed to be a single "selling stockholder", and
any pro-rata reduction with respect to such "selling stockholder" shall be based
upon the aggregate amount of shares carrying registration rights owned by all
entities and individuals included in such "selling stockholder", as defined in
this sentence.
1.9 INDEMNIFICATION. In the event any Registrable Securities
are included in a registration statement under this Section 1:
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(a) To the extent permitted by law, the Issuing Company
will indemnify and hold harmless each Holder, any underwriter (as defined in the
Act) for such Holder and each person, if any, who controls such Holder or
underwriter within the meaning of the Act or the 1934 Act, against any losses,
claims, damages, or liabilities (joint or several) to which they may become
subject under the Act, or the 1934 Act, insofar as such losses, claims, damages,
or liabilities (or actions in respect thereof) arise out of or are based upon
any of the following statements, omissions or violations (collectively a
"Violation"): (i) any untrue statement or alleged untrue statement of a material
fact contained in such registration statement, including any preliminary
prospectus or final prospectus contained therein or any amendments or
supplements thereto, (ii) the omission or alleged omission to state therein a
material fact required to be stated therein, or necessary to make the statements
therein not misleading, or (iii) any violation or alleged violation by the
Issuing Company of the Act, or any rule or regulation promulgated under the Act,
and the Issuing Company will pay to each such Holder, underwriter or controlling
person any reasonable legal or other expenses reasonably incurred by them in
connection with investigating or defending any such loss, claim, damage,
liability, or action; PROVIDED, HOWEVER, that the indemnity agreement contained
in this subsection 1.9(a) shall not apply to amounts paid in settlement of any
such loss, claim, damage, liability, or action if such settlement is effected
without the consent of the Issuing Company (which consent shall not be
unreasonably withheld), nor shall the Issuing Company be liable in any such case
for any such loss, claim damage, liability, or action to the extent that it
arises out of or is based upon a Violation which occurs in reliance upon and in
conformity with information furnished for use in connection with such
registration by any such Holder, underwriter or controlling person.
(b) To the extent permitted by law, each selling Holder
will indemnify and hold harmless the Issuing Company, each of its directors,
each of its officers who has signed the registration statement, each person, if
any, who controls the Issuing Company within the meaning of the Act, any
underwriter, any other Holder selling securities in such registration statement
and any controlling person of any such underwriter or other Holder, against any
losses, claims, damages, or liabilities (joint or several) to which any of the
foregoing persons may become subject, under the Act, insofar as such losses,
claims, damages, or liabilities (or actions in respect thereto) arise out of or
are based upon any Violation, in each case to the extent (and only to the
extent) that such Violation occurs in reliance upon and in conformity with
information furnished by such Holder for use in connection with such
registration; and each such Holder will pay any legal or other expenses
reasonably incurred by any person intended to be indemnified pursuant to this
subsection 1.9(b), in connection with investigating or defending any such loss,
claim, damage, liability, or action; PROVIDED, HOWEVER, that the indemnity
agreement contained in this subsection 1.9(b) shall not apply to amounts paid in
settlement of any such loss, claim, damage, liability, or action if such
settlement is effected without the consent of the Holder (which consent shall
not be unreasonably withheld); PROVIDED, that, in no event shall any indemnity
under this subsection 1.9(b) exceed the net proceeds from the offering relating
to securities sold by such Holder.
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(c) Promptly after receipt by an indemnified party under
this Section 1.9 of notice of the commencement of any action (including any
governmental action), such indemnified party shall, if a claim in respect
thereof is to be made against any indemnifying party under this Section 1.9,
deliver to the indemnifying party a written notice of the commencement thereof
and the indemnifying party shall have the right to participate in, and, to the
extent the indemnifying party so desires, jointly with any other indemnifying
party similarly notified, to assume the defense thereof with counsel selected by
the indemnifying party and approved by the indemnified party (whose approval
shall not be unreasonably withheld); PROVIDED, HOWEVER, that an indemnified
party (together with all other indemnified parties which may be represented
without conflict by one counsel) shall have the right to retain one separate
counsel, with the fees and expenses to be paid by the indemnifying party, if
representation of such indemnified party by the counsel retained by the
indemnifying party would be inappropriate due to actual or potential differing
interests between such indemnified party and any other party represented by such
counsel in such proceeding. The failure to deliver written notice to the
indemnifying party within a reasonable time of the commencement of any such
action, if prejudicial to its ability to defend such action, shall relieve such
indemnifying party of any liability to the indemnified party under this Section
1.9, but the omission so to deliver written notice to the indemnifying party
will not relieve it of any liability that it may have to any indemnified party
otherwise than under this Section 1.9.
(d) If the indemnification provided for in this Section 1.9
is held by a court of competent jurisdiction to be unavailable to an indemnified
party with respect to any loss, liability, claim, damage, or expense referred to
therein, then the indemnifying party, in lieu of indemnifying such indemnified
party hereunder, shall contribute to the amount paid or payable by such
indemnified party as a result of such loss, liability, claim, damage, or expense
in such proportion as is appropriate to reflect the relative fault of the
indemnifying party on the one hand and of the indemnified party on the other in
connection with the statements or omissions that resulted in such loss,
liability, claim, damage, or expense as well as any other relevant equitable
considerations. The relative fault of the indemnifying party and of the
indemnified party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission to state a material fact relates to information supplied by the
indemnifying party or by the indemnified party and the parties' relative intent,
knowledge, access to information, and opportunity to correct or prevent such
statement or omission.
(e) Notwithstanding the foregoing, to the extent that the
provisions on indemnification and contribution contained in the underwriting
agreement entered into in connection with the underwritten public offering are
in conflict with the foregoing provisions, the provisions in the underwriting
agreement shall control.
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(f) The obligations of the Company and Holders under this
Section 1.9 shall survive the completion of any offering of Registrable
Securities in a registration statement under this Section 1, and otherwise.
1.10 REPORTS UNDER SECURITIES EXCHANGE ACT OF 1934. With a view
to making available to the Holders of the benefits of Rule 144 promulgated under
the Act and any other rule or regulation of the SEC that may at any time permit
a Holder to sell securities of the Issuing Company to the public without
registration or pursuant to a registration on Form S-3, the Issuing Company
agrees, after the IPO to:
(a) make and keep public information available, as those
terms are understood and defined in SEC Rule 144, at all times commencing ninety
(90) days after the effective date of the registration statement filed in
connection with an IPO by the Issuing Company;
(b) file with the SEC in a timely manner all reports and
other documents required of the Issuing Company under the Act and the 1934 Act;
and
(c) furnish to any Holder, so long as the Holder owns any
Registrable Securities, forthwith upon request (i) a written statement by the
Issuing Company that it has complied with the reporting requirements of SEC Rule
144 (at any time after ninety (90) days after the effective date of the
registration statement filed by the Company in connection with an IPO), the Act
and the 1934 Act (at any time after it has become subject to such reporting
requirements), (ii) a copy of the most recent annual or quarterly report of the
Issuing Company and such other reports and documents so filed by the Issuing
Company, and (iii) such other information as may be reasonably requested (and
which is publicly available) in availing any Holder of any rule or regulation of
the SEC which permits the selling of any such securities without registration or
pursuant to such form.
1.11 LOCK-UP PROVISION. In connection with the IPO, the Investor
hereby agrees to be subject to a lock-up for 180 days or such longer period
following the IPO as required by the underwriter or underwriters of the IPO, but
in no event longer than 13 months. In connection with any subsequent public
offering of the Issuing Company's securities, the Investor hereby agrees to be
subject to a lock-up for 120 days or such longer period following such public
offering as required by the underwriter or underwriters of such public offering
but in no event longer than 13 months. During such lock-up periods, the
Investor agrees not to directly or indirectly sell, offer to sell, contract to
sell (including, without limitation, any short sale), grant any option to
purchase or otherwise transfer or dispose of (other than to donees who agree to
be similarly bound) any securities of the Issuing Company held by it at any time
during such period except Common Stock included in such registration without the
prior written consent of such underwriter or underwriters. This Section 1.11
shall be binding upon any transferee of the Securities and the certificates
shall bear a legend to such effect.
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In order to enforce the foregoing covenant, the Issuing Company
may impose stock-transfer instructions with respect to the Registrable
Securities of each Investor (and the shares or securities of every other person
subject to the foregoing restriction) until the end of such period.
Notwithstanding the foregoing, the obligation described in this
Section 1.11 shall not apply to a registration relating solely to employee
benefit plans on Form S-1 or Form S-8 or similar forms which may be promulgated
in the future, or a registration relating solely to a Commission Rule 145
transaction on Form S-4 or similar forms which may be promulgated in the future.
1.12 TERMINATION OF REGISTRATION RIGHTS.
(a) No Holder shall be entitled to exercise any right
provided for in this Section 1 after five (5) years following the Termination
Date (as defined in the Purchase Agreement).
(b) In addition, the right of any Holder to request
registration pursuant to Section 1.2 or inclusion in any registration pursuant
to Section 1.3 shall terminate on the closing of the IPO if all shares of
Registrable Securities held or entitled to be held upon conversion by such
Holder may immediately be sold under Rule 144 during any 90-day period, or on
such date after the IPO as all shares of Registrable Securities held or entitled
to be held upon conversion by such Holder may immediately be sold under Rule 144
during any 90-day period.
1.13 S-3 REGISTRATION RIGHTS FOR IPI COMMON STOCK. If holders of
Series B Preferred Stock exercising their Put Protection Right receive a minimum
of $200,000 of IPI Common Stock, then the holders of such shares (the "Put
Shares") shall be entitled to request two registration statements on Form S-3.
In addition, the holders of the Warrants shall be entitled to request two
registration statements with respect to the IPI Common Stock issuable upon
exercise of the Warrants (the "Warrant Shares"). In each such case, the
following sections of Section 1 shall apply to Interneuron and such shares of
IPI Common Stock shall be deemed Registrable Securities for purposes of this
paragraph: the proviso to Section 1.2(a), 1.2(b), 1.2(c), 1.2(d)(ii), 1.4
through 1.10 and 1.12. Such rights are exercisable commencing 30 days after the
Put Protection Exercise Date with respect to the Put Shares and for a period of
three years commencing one year from the Initial Closing Date with respect to
the Warrant Shares, PROVIDED that if the Put Protection Right is exercised and a
registration is requested pursuant to this section, then the separate
registration rights with respect to the Warrant Shares shall terminate and the
holders of such shares shall be entitled to piggyback rights on a registration
statement with respect to the Put Shares, PROVIDED FURTHER, that in each case
Interneuron is then eligible to file a registration statement on Form S-3
relating to the resale of the IPI Common Stock.
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2. PUT PROTECTION RIGHT.
2.1 CERTAIN DEFINITIONS. "AGGREGATE LIQUID SECURITY VALUE"
shall mean the aggregate fair market value of the cash and/or readily
marketable securities received or held by an investor that are attributable to
the Series B Preferred Stock of either Progenitor or Transcell (or any successor
entity). In the case of securities, fair market value shall be determined as of
the date that such securities first became readily marketable. In the case of
an IPO by either Company (i) the fair market value shall be the initial public
offering price of the Company's Common Stock in such offering before
underwriting discounts and commissions, (ii) securities shall be considered
readily marketable on the effective date of such initial public offering and
(iii) securities shall include the Common Stock issuable upon conversion of the
Series B Preferred Stock at the time of such public offering regardless of any
underwriter lock-up or other resale restriction. In the case of a merger, other
corporate transaction, or sale or exchange of Series B Preferred Stock, for cash
and/or other securities, such other securities shall be considered readily
marketable if securities of the same class held by the investor are traded on a
securities exchange or in the over-the-counter market, without regard to any
underwriter lock-up of 13 months or less.
"ILLIQUID SECURITIES" shall mean the Series B Preferred Stock of
Progenitor or Transcell, the Common Stock received upon conversion of the Series
B Preferred Stock, or other non-publicly traded securities received upon
exchange of the Preferred Stock pursuant to a merger or other corporate
transaction, held by an investor at the Third Anniversary, the value of which
are not included in an investor's Aggregate Liquid Security Value.
"INVESTOR'S UNIT PURCHASE PRICE" shall mean the investor's
aggregate initial purchase price for the Series B Preferred Stock, the Warrants
and the Put Protection Right pursuant to the Subscription Agreement.
"PERCENTAGE" shall mean a percent equal to the lesser of (a) the
aggregate Investor's Unit Purchase Price that is attributable to its Illiquid
Securities divided by the Illiquid Value, which shall mean the aggregate fair
market value of an investor's Illiquid Securities on the Third Anniversary
(without any minority interest discounts, as determined by an independent
investment banking firm selected by the Issuing Company), and (b) 100%.
2.2 GRANT OF PUT PROTECTION RIGHT. To the extent on the third
anniversary of the Final Closing Date (as defined in the Purchase Agreement (the
"Third Anniversary"), an investor's Aggregate Liquid Security Value (as
hereinafter defined) does not equal or exceed the Investor's Unit Purchase
Price, then to such extent for a period of thirty days following the Third
Anniversary, each investor that is a record holder of an Issuing Company's
Series B Preferred Stock (or a successor security) on the 90th day prior to the
Third Anniversary (the "Record Date") shall have the right (the "Put Protection
Right") to sell to Interneuron a Percentage (as hereinafter defined) of their
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Illiquid Securities (as hereinafter defined) for a purchase price (the "IPI
Purchase Price") equal to the difference between the Investor's Unit Purchase
Price and the Aggregate Liquid Security Value. The IPI Purchase Price shall be
payable, at the option of Interneuron in (a) cash or (b) such number of shares
of IPI Common Stock as shall equal to the greater of (x) the average closing
sales price of the IPI Common Stock for the sixty days immediately preceding the
Third Anniversary (the "IPI Stock Price"), and (y) $2.00.
2.3 CERTAIN LIMITATIONS. (a) The right to exercise the Put
Protection Right shall be conditioned upon the Investor's status as an
"accredited investor" on the Record Date in the event Interneuron elects to
issue IPI Common Stock to purchase the Illiquid Securities. In such case,
Investor will be required to complete a questionnaire substantially similar to
the form included in the Subscription Agreement.
(b) Investor hereby agrees not to effect any transactions
in Interneuron Common Stock during the 90-day period from the Record Date until
the Third Anniversary.
2.4 MECHANICS OF EXERCISE. If the conditions set forth in
Section 2.2 are satisfied, an Investor shall exercise the Put Protection Right
by giving written notice (an "Exercise Notice") in the form attached hereto to
Interneuron during the period commencing on the Third Anniversary and ending on
the 30th day after the Third Anniversary. Upon receipt of one or more Exercise
Notices, Interneuron shall retain an independent investment banking firm to
determine the Illiquid Value and deliver a written opinion with respect to the
Illiquid Value to Interneuron within 60 days of the receipt of the Exercise
Notice (the "Put Opinion"). Interneuron shall pay the Put Purchase Price to all
Investors who have delivered an Exercise Notice within 30 days of receipt of the
Put Opinion.
3. MISCELLANEOUS.
3.1 SUCCESSORS AND ASSIGNS. Except as otherwise provided in
Section 2.3 below and elsewhere herein, the terms and conditions of this
Agreement shall inure to the benefit of and be binding upon the respective
successors and assigns of the parties (including transferees of any shares of
Registrable Securities). Nothing in this Agreement, express or implied, is
intended to confer upon any party other than the parties hereto or their
respective successors and assign any rights, remedies, obligations, or
liabilities under or by reason of this Agreement, except as expressly provided
in this Agreement.
3.2 TRANSFER OF RIGHTS.
(a) The rights granted to the Investor pursuant to Section
1 may not be transferred or assigned, except that such rights are assignable to
anyone who acquires at least such number of shares of Series B Preferred Stock
as equals the lesser of (i) eighty percent (80%) of the aggregate number of
shares of Series B Preferred Stock purchased by the Investor and (ii) 100,000
shares of Series B Preferred
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Stock; PROVIDED, HOWEVER, that the Companies are given written notice by the
transferee at the time of any such permitted transfer stating the name and
address of the transferee and identifying the shares of Series B Preferred Stock
with respect to which such are rights are being assigned.
(b) Notwithstanding anything to the contrary herein, if the
Investor is a partnership, it may transfer rights granted pursuant to Section 1
to any of its partners to whom shares of Series B Preferred Stock are
transferred. In the event of such transfer, such partner shall be deemed to be
the Investor of such shares of Series B Preferred Stock and may, subject to
paragraph (a) above, again transfer such right to any other person or entity
which acquired such shares from such partner.
(c) The right granted to the Investor pursuant to Section 2
may not be transferred or assigned without the prior written consent of
Interneuron.
3.3 GOVERNING LAW. This Agreement shall be governed by and
construed under the laws of the State of New York as applied to agreements among
New York residents entered into and to be performed entirely within New York
without regard to principles of conflicts of law.
3.4 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall be deemed an original, but all of which together shall constitute
one and the same instrument.
3.5 TITLES AND SUBTITLES. The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
3.6 NOTICES. Unless otherwise provided, any notice required or
permitted under this Agreement shall be given in writing and shall be deemed
effectively given upon personal delivery to the party to be notified, upon
conformed delivery by a recognized courier or messenger service or upon deposit
with the United States Post Office, by registered or certified mail, postage
prepaid and addressed to the party to be notified ad the address indicated for
such party on the signature page hereof, or at such other address as such party
may designate by ten (10) days' advance written notice to the other parties.
3.7 EXPENSES. If any action at law or in equity is necessary to
enforce or interpret the terms of this Agreement, the prevailing party shall be
entitled to reasonable attorneys' fees, costs and necessary disbursements in
addition to any other relief to which such party may be entitled.
3.8 AMENDMENTS AND WAIVERS. Any term of this Agreement may be
amended and the observance of any term of this Agreement may be waived (either
generally or in a particular instance and either retroactively or
prospectively), only
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with the written consent of the Company and the holders of a majority of the
Registrable Securities then outstanding. Any amendment or waiver effected in
accordance with this paragraph shall be binding upon each holder of any
Registrable Securities then Outstanding, each future holder of all such
Registrable Securities, and the Company.
3.9 SEVERABILITY. If one or more provisions of this Agreement
are held to be unenforceable under applicable law, such provision shall be
excluded from this Agreement and the balance of the Agreement shall be
interpreted as if such provision were so excluded and shall be enforceable in
accordance with its terms. The parties hereto shall endeavor to replace any
such unenforceable provision or provisions with a valid and enforceable
provision or provisions which shall have substantially the same economic effect
as the unenforceable provision or provisions.
3.10 AGGREGATION OF STOCK. All shares of Registrable Securities
held or acquired by affiliated entities or persons shall be aggregated together
for the purpose of determining the availability of any rights under this
Agreement.
3.11 ENTIRE AGREEMENT; AMENDMENT; WAIVER. This Agreement
constitutes the full and entire understanding and agreement between the parties
with regard to the subjects hereof and thereof.
15
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
PROGENITOR, INC.
By:
--------------------------------
Douglass Given, M.D.
President
Address: 1507 Chambers Road
Columbus, OH 43212
INVESTOR
By:
--------------------------------
Address:
TRANSCELL TECHNOLOGIES, INC.
By:
--------------------------------
Elizabeth Tallet
President
Address: 200 Cornwall Road
Monmouth Junction, NJ 08852
INTERNEURON PHARMACEUTICALS, INC.
By:
--------------------------------
Glenn L. Cooper
President
Address: 99 Hayden Avenue, #340
Lexington, MA 02173
16
<PAGE>
THE INFORMATION BELOW MARKED BY * AND ( ) HAS BEEN OMITTED PURSUANT TO A
REQUEST FOR CONFIDENTIAL TREATMENT. THE OMITTED PORTIONS HAVE BEEN SEPARATELY
FILED WITH THE COMMISSION.
OHIO UNIVERSITY
RESEARCH AND GRADUATE STUDIES
102 RESEARCH AND TECHNOLOGY CENTER
ATHENS, OHIO 45701
LICENSE AGREEMENT
with
SCIMARK CORPORATION
AND
CASTLE GROUP LTD.
375 PARK AVENUE
NEW YORK, NY 10152
DATE: JANUARY 28, 1992
<PAGE>
(1)
This Agreement is made and entered into this 28th day of January 1992 (the
"Effective Date) by and between Ohio University, a corporation duly organized
and existing under the laws of the State of Ohio and having its principal office
at 102 Research and Technology Center, Athens, Ohio 45701, U.S.A. (hereinafter
referred to as "OU"), and Scimark Corporation, a corporation duly organized
under the laws of New York and having its principal office at 375 Park Avenue,
New York New York 10152, U.S.A. (hereinafter referred to "LICENSEE"), and The
Castle Group Ltd., a corporation duly organized under the laws of New York and
having its principal office at 375 Park Avenue, New York, New York 10152, U.S.A.
(hereinafter referred to as "CASTLE").
WHEREAS, OU is and represents that it is the owner of certain PATENT
RIGHTS (as later defined herein) relating to U.S. Patent No. 5,032,407 and
C-I-P Application USSN [ * * * ] ("Technology A"); and U.S. Patent
Application USSN [ * * * ] by Thomas Wagner and Lei Han, (Technology B").
WHEREAS, OU desires to have the PATENT RIGHTS (as later defined herein)
utilized in the public interest and as willing to grant a license thereunder,
WHEREAS, LICENSEE desires to commercially utilize the PATENT RIGHTS (as
later defined herein) in the public interest through the research, development,
production, manufacture, marketing and sale of the LICENSED PRODUCT(s) (as later
defined herein) and the LICENSED PROCESS(es) (as later defined herein);
WHEREAS, in connection herewith, OU and LICENSEE are entering into a
Sponsored Research Agreement to further develop the PATENT RIGHTS (as later
defined herein), LICENSED PRODUCT(s) (as later defined herein) and LICENSED
PROCESS(es) (as later defined herein);
<PAGE>
(2)
WHEREAS, Interneuron Pharmaceuticals, Inc. (hereinafter referred to as
"IPI") owns a majority of the stock of LICENSEE and is in the business of
researching, developing, producing, manufacturing, marketing and selling
pharmaceutical and health care products and services;
WHEREAS, CASTLE is in the business of locating, investigating and funding
scientific inventions which have potential commercial application in the
pharmaceutical and health care industries;
WHEREAS, LICENSEE desires to obtain an exclusive license under the PATENT
RIGHTS upon the terms and conditions hereinafter set forth; and
WHEREAS, CASTLE is willing to guarantee to OU, the performance of certain
of LICENSEE's obligations contained herein;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein, the parties hereto agree as follows:
ARTICLE 1 - DEFINITIONS
For the purposes of the Agreement, the following words and phrases shall
have the following meanings:
1.1 "LICENSEE" shall mean Scimark Corporation, a New York corporation,
"AFFILIATE" shall mean a related company of LICENSEE, the voting stock of which
is directly or indirectly more than fifty percent (50%) owned or controlled by
LICENSEE, an organization which directly or indirectly controls more than fifty
percent (50%) of the voting stock of LICENSEE, and an organization the majority
ownership of which is directly or indirectly common to the ownership of
LICENSEE.
1.2 "PATENT RIGHTS" shall mean all of the following intellectual property:
(a) the United States and foreign patents and/or patent applications
listed in (or to be added to, pursuant to the SPONSORED RESEARCH
AGREEMENT) Appendices A and B;
<PAGE>
(3)
(b) United States and foreign patents issued from the applications listed
in (or to be added to, pursuant to the SPONSORED RESEARCH AGREEMENT)
Appendices A and B and from divisionals and continuations of these
applications;
(c) claims of U.S. and foreign continuation-in-part applications. and of
the resulting patents. which are directed to subject matter
specifically described in the U.S. and foreign applications listed in
(or to be added to pursuant to the SPONSORED RESEARCH AGREEMENT)
Appendices A and B;
(d) claims of all foreign patent applications, and of the resulting
patents, which are directed to subject matter specifically described
in the United States patents and/or applications described in (a), (b)
or (c) above; and
(e) any reissues, re-examinations, or extensions of United States or
foreign patents described in (a), (b) (c) or (d) above.
1.3 A "LICENSED PRODUCT" shall mean any product or part thereof which:
(a) is covered in whole or in part by an issued and unexpired claim
contained in the PATENT RIGHTS of Technology A in the country in which
any such product or part thereof is made, used or sold.
(b) is manufactured by using a process or is employed to practice a
process which is covered in whole of in part by an issued and
unexpired claim contained in the PATENT RIGHTS of Technology A in the
country in which a LICENSED PROCESS is used or in which such product
or part thereof is used or sold.
(c) is covered in whole or in part by an issued and unexpired claim
contained in the PATENT RIGHTS of Technology B in the country in which
any such product or part thereof is made, used or sold as it directly
relates to yolk sac as a delivery system; and limited to the field of
use of yolk sac cells, and derivatives therefrom, hematopoietic tissue
hepatic tissue and neural tissue.
(d) is manufactured by using a process or is employed to practice a
process which is covered in part by an issued and unexpired claim
contained in the PATENT RIGHTS of Technology B in the country in which
an LICENSED PROCESS is used or in which such product or part thereof
is used or sold and is limited to the field of use of yolk sac cells,
and derivatives therefrom, hematopoietic tissue hepatic tissue and
neural tissue.
1.4 A "LICENSED PROCESS" shall mean any process which is covered in whole
or in part by an issued, unexpired claim contained in the PATENT RIGHTS in any
country where the process is practiced.
1.5 "NET SALES" shall mean LICENSEE'S, an AFFILIATE'S, or SUBLICENSEE'S
billings for LICENSED PRODUCTS and LICENSED PROCESSES produced hereunder less
the sum of the following:
(a) discounts allowed in amounts customary in the trade;
<PAGE>
(4)
(b) sales, tariff duties and/or use taxes directly imposed and with
reference to particular sales;
(c) outbound transportation prepaid or allowed;
(d) amounts allowed or credited on returns; and
(e) bad debts actually written off during the period.
No deductions shall be made for commissions paid to individuals whether
they be with independent sales agencies or regularly employed by LICENSEE,
AFFILIATES or SUBLICENSEES and on their payroll. LICENSED PRODUCTS and LICENSED
PROCESSES shall be considered "sold" when billed out or invoiced.
1.6 "Territory" shall mean worldwide.
1.7 "Tangible Property" shall mean tangible biological materials created
in a result of research which includes cell lines, DNA constructs, vectors, and
plasmids and any related material. Any cells or subcultures, clones, or
progeny thereof, or DNA molecules or portions thereof which are replicated or
derived from biological materials referred to in this paragraph 1.7 is also
included in this definition.
1.8 "TECHNOLOGY A" shall mean any and all PATENT RIGHTS more closely
related to Patent No. 5,032,407 and C.I.P. Application USSN [ * * * ] by Tom
Wagner, Barbara King and Mike Reed than to TECHNOLOGY B;
1.9 "TECHNOLOGY B" shall mean, any and all PATENT RIGHTS more closely
related to U.S. Patent Application USSN [ * * * ] by Tom Wagner and Lei Han
than that to TECHNOLOGY A;
1.10 "FIRST YEAR MILESTONE" shall mean [ * * * ].
<PAGE>
(5)
1.11 "TWO YEAR MILESTONE" shall mean the milestone mutually agreeable to OU
and LICENSEE at the time the FIRST YEAR MILESTONE is achieved;
1.12 "INITIAL PUBLIC OFFERING" shall mean the first issuance of equity
securities which is registered under the Securities Act of 1933;
1.13 "SUBLICENSEE" shall mean an entity which LICENSEE has granted the
right to manufacture and market the LICENSED PRODUCTS or the right to sublicense
the LICENSED PROCESSES to others and shall not include a hospital or clinic
which permits its associated medical doctors to practice the LICENSED PROCESSES;
1.14 "CASTLE" shall mean The Castle Group Ltd., a New York corporation;
1.15 "IPI" shall mean Interneuron Pharmaceuticals, Inc. a Delaware
corporation; and
1.16 "SPONSORED RESEARCH AGREEMENT" shall mean the Sponsored Research
Agreement entered into by OU and LICENSEE In connection herewith.
ARTICLE 2 - GRANT
2.1 OU hereby grants to LICENSEE the exclusive right and license to make,
have made, use, lease and sell the LICENSED PRODUCTS and the LICENSED PROCESSES
and to practice under the pending patent rights worldwide to the end of the term
for which the last to expire patent in the PATENT RIGHTS is granted unless this
Agreement shall be sooner terminated according to the terms hereof.
2.2 LICENSEE agrees that LICENSED PRODUCTS and LICENSED PROCESSES leased,
sold or otherwise distributed for use in the United States shall be developed at
the principal research operation and principal processing/manufacturing site
which is located in the Athens, Ohio area or such location as mutually agreed
upon by OU and the LICENSEE.
<PAGE>
(6)
2.3 OU shall have the right to practice under the PATENT RIGHTS and to use
and distribute to third parties the TANGIBLE PROPERTY for noncommercial research
purposes provided that any OU employee practicing under the PATENT RIGHTS or any
OU employee or third party receiving the TANGIBLE PROPERTY, shall have first
executed a Confidentiality Agreement with OU substantially in the form provided
in Appendix C. Fifteen day prior written notification of TANGIBLE PROPERTY
distribution to third parties will be given to LICENSEE.
2.4 LICENSEE shall have the right to enter into sublicensing agreements for
the rights, privileges and licenses granted hereunder.
2.5 LICENSEE agrees that sublicenses granted by it shall provide that the
obligations to OU of Articles 2, 5, 7, 8, 9, 10, 12, 13, and 15 of this
Agreement shall be binding upon the sublicensee as if it were a party of this
Agreement. LICENSEE further agrees to incorporate and attach copies of these
Articles to sublicense agreements.
2.6 LICENSEE agrees to forward to OU a copy of any and all sublicense
agreements promptly upon execution by the parties.
2.7 If LICENSEE receives non-cash royalties from SUBLICENSEES in lieu of
cash royalties under any sublicense under this Agreement, those goods or
services will be valued at a fair market price subject to discounts and costs
specified in Article 1.5.
2.10 The license granted hereunder shall not be construed to confer any
rights upon LICENSEE by implication, estoppel or otherwise as to any technology
not specifically set forth in Appendix A or B hereof.
ARTICLE 3 - DILIGENCE
3.1 LICENSEE shall use its best efforts to bring LICENSED PRODUCTS or
LICENSED PROCESSES to market through its own efforts a thorough, vigorous and
diligent program for exploitation
<PAGE>
(7)
of the PATENT RIGHTS and to continue active, diligent marketing efforts for
LICENSED PRODUCTS or LICENSED PROCESSES throughout the life of this Agreement.
3.2 In addition, LICENSEE shall adhere to the following milestones:
(a) The LICENSEE will commence a search for a Chief Executive Officer or
equivalent within three months of November 18, 1991, and in the event
no one is hired for such position within the four month period
following the commencement of such search, the LICENSEE shall retain a
professional executive search firm to assist in the hiring of someone
for such position, and, in any event, LICENSEE shall hire a Chief
Executive Officer or equivalent within six months of the achievement
of the FIRST YEAR MILESTONE.
(b) The LICENSEE shall undertake the preparation of a business plan
showing the amount of money, number and kind of personnel and time
budgeted and planned for each phase of development of the LICENSED
PRODUCTS and LICENSED PROCESSES and shall provide similar reports to
OU on or before March 1 of each year, within six months of November
18, 1991.
(c) The LICENSEE shall raise a minimum of Three Million Dollars
($3,000,000) (or a lesser amount as may be mutually agreed upon by the
LICENSEE and OU based on re-evaluation of the commercial potential of
the LICENSED PRODUCTS and LICENSED PROCESSES) within 18 months of the
achievement of the TWO YEAR MILESTONE.
3.3 LICENSEE shall locate its executive offices, principal research
operations and principal processing/manufacturing in the Athens, Ohio area or
other such location as may be mutually agreed upon by OU and the LICENSEE.
3.4 LICENSEE shall designate two (2) seats on the LICENSEE Board of
Directors, of the five (5) seats, to the Ohio University Foundation, until such
time as LICENSEE consummates an Initial Public Offering, subject to change by
mutual agreement of OU and the LICENSEE.
3.5 LICENSEE' failure to perform in accordance with Paragraphs 3.1, 3.2,
3.3 and 3.4 above shall be grounds for OU to terminate this Agreement pursuant
to Paragraph 13.3 hereof.
ARTICLE 4 - ROYALTIES
4.1 For the rights, privileges and license granted hereunder, LICENSEE
shall pay to OU in the manner hereinafter provided to the end of the term of the
PATENT RIGHTS or until this Agreement shall be terminated:
<PAGE>
(8)
(a) License issue fee of Ten Thousand Dollars ($10,0000), which said
License Issue Fee shall be deemed earned and due immediately upon the
Effective Date.
(b) License maintenance fees of Seventy-Five Thousand Dollars ($75,000)
per year commencing two years after the achievement of the TWO YEAR
MILESTONE payable on January 1 of the third year after completion of
the TWO YEAR MILESTONE and on January 1 of each year thereafter;
provided, however, that running royalties subsequently due on NET
SALES for each said year, it any, shall be creditable against the
license maintenance fee for said year. License maintenance fees paid
in excess of running royalties shall not be creditable to running
royalties for future years.
(c) Running royalties in an amount equal to three and one half percent
(3.5%) of NET SALES of the LICENSED PRODUCTS and LICENSED PROCESSES
used, leased or sold by and/or for LICENSEE or an AFFILIATE.
(d) Running royalties for SUBLICENSEES will amount to the lesser of three
and one half percent (3.5%) of NET SALES of LICENSED PRODUCTS or
LICENSED PROCESSES used, leased or sold, or thirty percent (30%) of
running royalties received by LICENSEE and AFFILIATES from
SUBLICENSEES for sublicenses of LICENSED PRODUCTS or LICENSED
PROCESSES.
(e) Issue of five percent (5%) equity in LICENSEE, on a fully diluted
basis, to the Ohio University Foundation, or its designee(s), which
equity interest will be entitled to "antidilution protection" as is
necessary to preserve such percentage ownership position until total
investment in LICENSEE equals or exceeds Five Million Dollars
($5,000,000). Until such time as LICENSEE consummates an INITIAL
PUBLIC OFFERING of its securities, OU shall have the option to
increase its five percent (5%) equity interest in LICENSEE by twenty-
five percent (25%) to six and one quarter percent (6.25%) of the equity
of LICENSEE at a price equal to fifty percent (50%) of the anticipated
offering price of such securities in the INITIAL PUBLIC OFFERING.
4.2 All payments due hereunder shall be paid in full, without deduction of
excise taxes which may be imposed by any government and which shall be paid by
LICENSEE.
4.3 No multiple royalties shall be payable because any LICENSED PRODUCT or
LICENSED PROCESS, its manufacture, use, lease or sale are or shall be favored by
more than one PATENT RIGHTS patent application or PATENT RIGHTS patent licensed
under this Agreement or for sales between LICENSEE and an AFFILIATE.
4.4 Royalty payments shall be paid in United States dollars in Athens,
Ohio, or at such other place as OU may reasonably designate consistent with the
laws and regulations controlling in any foreign country. If any currency
conversion shall be required in connection with the payment of royalties
hereunder, such conversion shall be made be using the exchange rate prevailing
at the Chase Manhattan
<PAGE>
(9)
Bank (N.A.) on the last business day of the calendar quarterly reporting period
to which such royalty payments relate.
4.5 Royalty payments are nonrefundable.
4.6 Notwithstanding anything to the contrary contained herein, no
royalties shall be payable with respect to the mouse/human testing model.
ARTICLE 5 REPORTS AND RECORDS
5.1 LICENSEE shall keep full, true and accurate books of account
containing all particulars that may be necessary for the purpose of showing the
amounts payable to OU hereunder. Said books of account shall be kept at
LICENSEE'S principal place of business or the principal place of business of the
appropriate division of LICENSEE to which this Agreement relates. Said books
and the supporting data shall be open four (4) times per year for five (5) years
following the end of the calendar year to which they pertain, for the inspection
of OU or its agents for the purpose of verifying LICENSEE'S royalty statement or
compliance in other aspects with this Agreement. Should such inspection lead to
the discovery of a greater than ten percent (10%) discrepancy in reporting,
LICENSEE agrees to pay the full cost of such inspection.
5.2 LICENSEE, within sixty (60) days after March 31, June 30, September 30
and December 31, of each year, shall deliver to OU true and accurate reports,
giving such particulars of the business conducted by LICENSEE, AFFILIATES and
its SUBLICENSEES during the preceding three-month period under this Agreement as
shall be pertinent to a royalty accounting hereunder. This shall include at
least the following:
(a) number of LICENSED PRODUCTS manufactured and sold by LICENSEE,
AFFILIATES, and all SUBLICENSEES;
(b) total billings for LICENSED PRODUCTS sold by LICENSEE, AFFILIATES, and
all SUBLICENSEES;
(c) accounting for all LICENSED PROCESSES used or sold by LICENSEE,
AFFILIATES, and all SUBLICENSEES;
<PAGE>
(10)
(d) total royalties due; and
(e) names and addresses of all SUBLICENSEES and AFFILIATES of LICENSEE.
5.3 With each such report submitted, LICENSEE shall pay to OU the
royalties due and payable under this Agreement. If no royalties shall be due,
LICENSEE shall so report.
5.4 On or before the ninetieth (90th) day following the close of
LICENSEE's fiscal year, LICENSEE shall provide OU with LICENSEE's certified
financial statements for the preceding fiscal year including, at a minimum, a
Balance Sheet and an Operating Statement.
5.5 The royalty payments set forth in this Agreement and amounts due under
Article 6 shall, if overdue, bear interest until payment at a per annum rate two
percent (2%) above the prime rate in effect at the Chase Manhattan Bank (N.A.)
on the due date. The payment of such interest shall not foreclose OU from
exercising any other rights it may have as a consequence of the lateness of any
payment.
ARTICLE 6 - PATENT PROSECUTION
6.1 OU shall apply for, seek prompt issuance of, and maintain during the
term of this Agreement the PATENT RIGHTS in the United States and in the foreign
countries to be mutually determined by OU and Scimark listed in Appendix B
hereto and amended as new countries are added or deleted. Appendix B may be
amended by verbal agreement of both parties, such agreement to be confirmed in
writing within ten (10) days of the verbal agreement. At LICENSEE'S election,
LICENSEE may apply for, prosecute, or maintain any such patent applications,
using patent counsel of its choice.
6.2 Payment of all fees and costs incurred after November 18, 1991,
relating to the filing, prosecution, and maintenance of the PATENT RIGHTS shall
be the responsibility of LICENSEE.
6.3 Any and all inventions, technologies, know-how, materials, products,
data, ideas and related matters, related and/or unrelated to Technology A or
Technology B, including any PATENT RIGHTS which may be issued thereon, which are
developed or otherwise discovered as a result of the
<PAGE>
(11)
SPONSORED RESEARCH AGREEMENT between LICENSEE and OU shall be the property of OU
and shall be automatically and exclusively licensed to the LICENSEE pursuant to
and subject to the same terms and conditions of Technology A and Technology B,
including but, not limited to, payment of royalties pursuant to Article 4,
6.4 OU and its employees shall cooperate with LICENSEE to the fullest
extent reasonable, except for payment of fees and costs, to help assure proper
patent filing, prosecution and maintenance.
ARTICLE 7 - INFRINGEMENT
7.1 LICENSEE shall inform OU promptly in writing of any alleged
infringement of the PATENT RIGHTS by a third party and of any available evidence
thereof. Similarly, OU shall promptly inform LICENSEE in writing of any alleged
infringement of PATENT RIGHTS by a third party and any available evidence
thereof.
7.2 During the term of this Agreement the LICENSEE shall have the right
but not the obligation to prosecute at its own expense all infringements of the
PATENT RIGHTS and LICENSEE agrees to include OU as a party plaintiff in any such
suit, without expense to OU. The total cost of any such infringement action
commenced by the LICENSEE shall be borne by the LICENSEE.
7.3 If after OU has provided LICENSEE With ninety (90) days prior written
notice, the LICENSEE fails to either prosecute an infringer or enter into a
sublicense agreement, settlement, consent judgement or other voluntary final
disposition with an infringer, OU may prosecute such infringer itself. No
settlement, consent judgement or other voluntary final disposition of the
infringement suit may be entered into without the consent of OU, which consent
shall not unreasonably be withheld. LICENSEE shall indemnify OU against any
order for costs that may be made against OU in such proceedings.
7.4 Patent enforcement and/or defense litigation shall adhere to the
following:
(a) In the event that LICENSEE shall undertake the enforcement and/or
defense of the PATENT RIGHTS by litigation including alternative
dispute resolution. LICENSEE may withhold up to fifty percent (50%)
of the payments otherwise thereafter due OU under
<PAGE>
(12)
Article 4 hereunder and apply the same toward reimbursement of up to
half of LICENSEE's expenses, including reasonable attorneys' fees, in
connection therewith. Any recovery of damage by LICENSEE for each
such suit shall be applied first in satisfaction of any unreimbursed
expenses and legal fees of LICENSEE relating to such suit, and next
toward reimbursement of OU for any payments under Article 4 past due
or withheld and applied pursuant to this Article 7. The balance
remaining from any such recovery shall be treated as royalties from
SUBLICENSEES.
(b) In the event that OU stuff undertake the enforcement and/or defense of
the PATENT RIGHTS against third parties by litigation pursuant to OU's
rights under Section 7.3 of this Agreement, any recovery of damages by
OU for each such suit shall be applied first in satisfaction of any
unreimbursed expenses and legal fees of OU relating to such suit. The
balance remaining from any such recovery shall be divided seventy
percent (70%) to OU and thirty percent (30%) to LICENSEE.
7.5 In the event that a declaratory judgement action alleging invalidity
or noninfringement of any of the PATENT RIGHTS shall be brought against
LICENSEE, OU, at its option, shall have the right, within thirty (30) days after
commencement of such action, to intervene and jointly participate in the defense
of the action at its own expense.
7.6 In any suit as either party may be involved to enforce the PATENT
RIGHTS pursuant to this Agreement, the other party hereto shall, at the request
and expense of the party initiating such suit, cooperate in all respects and, to
the extent possible, have its employees testify when requested and make
available relevant records, papers, information, samples, specimens, and the
like.
7.7 LICENSEE, shall have the sole right in accordance with the terms and
conditions herein to sublicense the alleged infringer for future use of the
PATENT RIGHTS. Any upfront fees as part of such a sublicense shall be shared
equally between LICENSEE and OU; other royalties shall be treated per Article 4.
ARTICLE 8 - PRODUCT LIABILITY
8.1 LICENSEE shall at all times during the term of this Agreement and
thereafter, indemnify, defend and hold OU, its trustees, officers, employees and
affiliates, harmless against all claims and expenses, including legal expenses
and reasonable attorneys' fees, arising out of the death of or injury to any
person or persons or out of any damage to property and against any other claim,
proceedings
<PAGE>
(13)
demand, expense and liability of any kind whatsoever resulting from the
production, manufacture, sale, use, lease, consumption or advertisement of the
LICENSED PRODUCT(s) and/or LICENSED PROCESS(es) or arising from any obligation
of LICENSEE hereunder.
8.2 LICENSEE shall obtain and carry in full force and effect liability
insurance in the amount of One Million Dollars ($1,000,000) per incident and
Three Million Dollars ($3,000,000) annually, to be increased by the parties, if
necessary, which shall protect LICENSEE and OU in regard to events covered by
Paragraph 8.1 above.
8.3 EXCEPT AS OTHERWISE EXPRESSLY SET FORTH IN THIS AGREEMENT, OU MAKES NO
REPRESENTATIONS AND EXTENDS NO WARRANTIES OF ANY KIND, EITHER EXPRESS OR
IMPLIED, INCLUDING BUT NOT LIMITED TO WARRANTIES OR MERCHANTABILITY, FITNESS FOR
A PARTICULAR PURPOSE, AND VALIDITY OF PATENT RIGHTS CLAIMS, ISSUED OR PENDING.
NOTHING IN THIS AGREEMENT SHALL BE CONSTRUED AS A REPRESENTATION MADE OR
WARRANTY GIVEN BY OU THAT THE PRACTICE BY LICENSEE OF THE LICENSE GRANTED
HEREUNDER SHALL NOT INFRINGE THE PATENT RIGHTS OF ANY THIRD PARTY.
ARTICLE 9 - EXPORT CONTROLS
It is understood that OU is subject to United States laws and regulations
controlling the export of technical data, computer software, laboratory
prototypes and other commodities (including the Arms Export Control Act as
amended and the Export Administration Act of 1979), and that its obligations
hereunder are contingent on compliance with applicable United States export laws
and regulations. The transfer of certain technical data and commodities may
require a license from the cognizant agency of the United States Government
and/or written assurances by LICENSEE that LICENSEE shall not export data or
commodities to certain foreign countries without prior approval of such agency.
OU neither represents that a license shall not be required nor that, if
required, it shall be issued.
<PAGE>
(14)
ARTICLE 10 - NON-USE OF NAMES
OU acknowledges that LICENSEE has a legitimate interest in using the name
of OU. OU's representative organizations, or OU's employees for capital raising
and financing purposes. Accordingly, OU consents to the use by LICENSEE and its
AFFILIATES and SUBLICENSEES for such purposes, of the name of OU, OU
representative organizations and OU employees having involvement with TECHNOLOGY
A or TECHNOLOGY B, provided, that, in the case of any advertising, promotional
or sales literature, LICENSEE and its AFFILIATES shall obtain the prior written
consent of OU or said employee. LICENSEE shall not have the right to use any
trademark or logo of OU.
ARTICLE 11 - ASSIGNMENT
This Agreement is not assignable and any attempt to do so shall be void.
ARTICLE 12 - ARBITRATION
12.1 All controversies and/or disputes arising out of this agreement,
shall be decided by a panel of three (3) arbitrators. Written notice of any
dispute shall be given by the aggrieved party, clearly specifying the nature of
the dispute and the relief requested, including the paragraph of this agreement
in question, if any. If the dispute cannot be amicably resolved (evidenced in
writing signed by both parties) within thirty (30) days of such notice, either
party may serve the other with a written demand for arbitration pursuant to this
Article.
12.2 Within fifteen (15) days of a demand for arbitration pursuant to
paragraph 12.1, the parties shall each select one arbitrator of their choice,
and the two arbitrators so selected shall choose the third arbitrator, who shall
serve as the chairperson of the panel. Each party shall be responsible for the
compensation of the arbitrator of their choice, and the cost of the third
arbitrator shall be equally shared by the parties. All pro-hearing, hearing,
and post-hearing procedures, including those for Disclosure and Challenge, shall
be governed by the Commercial Arbitration Rules of the American Arbitration
Association then in effect except as modified in this Agreement. Unless
otherwise agreed in writing by the parties, the situs of the arbitration
proceedings pursuant to this article shall be determined by the arbitrators,
said
<PAGE>
(15)
decision to be based upon the convenience of the situs to all parties and to be
made within ten days of final empanelment thereof. The arbitrators shall be
bound to make specific findings of fact and reach conclusions of law, based upon
the submissions and evidence of the parties, and shall issue a written decision
explaining the basis for the decision and award. At the request of either
party, arbitration proceedings shall be conducted on a confidential basis.
12.3 During the pendency of any proceeding under Section 12.1 or 12.2,
neither party will commence any litigation relating to any dispute under this
Agreement and any litigation commenced prior to commencement of any proceeding
under Sections 12.1 or 12.2 shall be stayed pending the outcome thereof, The
parties agree to fully abide by the terms of any arbitration award hereunder as
final and binding. Judgment upon any award may be entered and enforced by
either party in any court of competent jurisdiction.
12.4 Notwithstanding the foregoing, nothing in Article 12 shall be
construed to waive any rights or timely performance of any obligations existing
under this Agreement.
ARTICLE 13 - TERMINATION
13.1 If LICENSEE shall cease to carry on business, this Agreement shall
terminate upon notice by OU.
13.2 Should LICENSEE fail to make any payment whatsoever due and payable
to OU hereunder which is not the subject of a bone fide dispute, OU shall have
the right to terminate this Agreement effective on sixty (60) days' notice,
unless LICENSEE shall make all such payments to OU within said sixty (60) day
period. Upon the expiration of the sixty (60) day period, if LICENSEE shall not
have made all such payments to OU, the rights, privileges and license granted
hereunder shall automatically terminate.
13.3 Upon any material breach or default of this Agreement by LICENSEE and
any AFFILIATE, other than those occurrences set out in Paragraphs 13.1 and 13.2
hereinabove, which shall
<PAGE>
(16)
always take precedence in that order over any material breach or default
referred to in this Paragraph 13.3, OU shall have the right to terminate this
Agreement and the rights, privileges and license granted hereunder effective on
ninety (90) days' notice to LICENSEE. Such termination shall become
automatically effective unless LICENSEE shall have cured any such material
breach or default prior to the expiration of the ninety (90) day period.
13.4 LICENSEE shall have the right to terminate this Agreement or
relinquish its rights to any claim contained in the PATENT RIGHTS at any time on
six (6) months' notice to OU and upon payment of all amounts due OU through the
effective date of the termination.
13.5 Upon termination of this Agreement for any reason, nothing herein
shall be construed to release either party from any obligation that matured
prior to the effective date of such termination. LICENSEE and any AFFILIATE or
SUBLICENSEE thereof may, however, after the effective date of such termination,
sell all LICENSED PRODUCTS, and complete LICENSED PRODUCTS in the process of
manufacture at the time of such termination and sell the same, provided that
LICENSEE shall pay to OU the running royalties thereon as required by Article 4
of this Agreement and shall submit the reports required by Article 5 hereof on
the sales of LICENSED PRODUCTS.
13.6 Upon termination of this Agreement for any reason, any AFFILIATE or
SUBLICENSEE not then in default shall have the right to seek a license from OU.
OU agrees to negotiate such licenses in good faith under reasonable terms and
conditions.
ARTICLE 14 - PAYMENTS, NOTICES
AND OTHER COMMUNICATIONS
Any payment. notice or other communication pursuant to this Agreement shall
be sufficiently made or given three (3) days after date of mailing if sent to
such party by certified first class mail, postage prepaid, addressed to it at
its address below or as it shall designate by written notice given to the other
party:
<PAGE>
(17)
in case of OU:
David N. Allen, Director
Technology Transfer Office
Ohio University Innovation Center
Athens, OH 45701
in the case of LICENSEE:
Lindsay A. Rosenwald, M.D., Chairman
Scimark Corporation, c/o, The Castle Group Ltd.
375 Park Avenue, New York, NY 10152
ARTICLE 15 - MISCELLANEOUS PROVISIONS
15.1 This Agreement shall be construed, governed, interpreted and applied
in accordance with Article 12 and the laws of the State of Ohio, U.S.A. except
that questions affecting the construction and effect of any patent shall be
determined by the law of the country in which the patent was granted.
15.2 The parties hereto acknowledge that this Agreement sets forth the
entire Agreement and understanding of the parties hereto as to the subject
matter hereof, and shall not be subject to any change of modification except by
the execution of a written instrument subscribed to by the parties hereto.
15.3 The provisions of this Agreement are severable, and in the event that
any provisions of this Agreement shall be determined to be invalid or
unenforceable under any controlling body of law, such invalidly or
unenforceability shall not in any way affect the validity or enforceability of
the remaining provisions hereof.
15.4 LICENSEE agrees to mark the LICENSED PRODUCTS sold in the United
States with all applicable United States patent numbers. All LICENSED PRODUCTS
shipped to or sold in other countries shall be marked in such a manner as to
conform with the patent laws and practice of the country of manufacture or sale.
<PAGE>
(18)
15.5 The failure of either party to assert a right hereunder or to insist
upon compliance with any term or condition of this Agreement shall not
constitute a waiver of that right or excuse a similar subsequent failure to
perform any such term or condition by the other party.
Article 16 - GUARANTEE
16.1 In consideration for OU entering into this License Agreement with
LICENSEE, CASTLE hereby unconditionally guarantees to OU, the performance of
LICENSEE'S obligations under this Agreement. CASTLE's guarantee under the
Section 16.1 shall continue until the earlier of five (5) years or an INITIAL
PUBLIC OFFERING by LICENSEE.
IN WITNESS WHEREOF, the Parties have duly executed this Amendment the day
and year set forth below.
OHIO UNIVERSITY
By /S/ T. LLOYD CHESNUT
---------------------------------------------------
Name T. Lloyd Chesnut
--------------------------------------------------
Title Vice President for Research and Graduate Studies
--------------------------------------------------
Date
--------------------------------------------------
SCIMARK CORPORATION
By /S/ LINDSAY A. ROSENWALD
---------------------------------------------------
Name Lindsay A. Rosenwald, M.D.
--------------------------------------------------
Title Chairman and Chief Executive Officer
--------------------------------------------------
Date
--------------------------------------------------
<PAGE>
(19)
THE CASTLE GROUP LTD.
By /S/ LINSDAY A. ROSENWALD
--------------------------------------------------
Name Lindsay A. Rosenwald, M.D.
--------------------------------------------------
Title Chairman and Chief Executive Office
--------------------------------------------------
Date
--------------------------------------------------
<PAGE>
APPENDIX A
UNITED STATES PATENT RIGHTS
1. U. S. Patent No. 5,032,407 and C.I.P. Application U.S.S.N. [ * * * ]
by Thomas Wagner, Barbara King and Mike Reed;
2. U. S. Patent Application USSN [ * * * ] by Thomas Wagner and
Lel Han; and
3. Additional patents and patent applications relating to improvements
(as defined in the Sponsored Research Agreement) arising from the
Sponsored Research Agreement.
<PAGE>
APPENDIX B
1. Foreign patent applications any patents within the PATENT RIGHTS as of
Effective Date:
None
2. Foreign countries in which the PATENT RIGHTS shall be filed,
prosecuted and maintained in accordance with Article 6:
b. To be mutually determined by Scimark and Ohio University as
necessary.
<PAGE>
MEMORANDUM OF UNDERSTANDING
AND
AMENDMENT
This Memorandum of Understanding ("Memorandum") is made and entered into this
15th day of October 1993 by and between Ohio University ("OU") and Progenitor,
Inc., a corporation duly organized under the laws of Delaware, having its
principal office at 132 North Woods Boulevard, Columbus, Ohio 43235
("LICENSEE").
WHEREAS, OU, Scimark Corporation ("Scimark") and The Castle Group, Ltd. have
entered into a certain License Agreement dated January 28, 1992 (the "LICENSE
AGREEMENT'), and OU and Scimark have entered into a certain Sponsored Research
Agreement dated January 28, 1992 (the "RESEARCH AGREEMENT"). The LICENSE
AGREEMENT and the RESEARCH AGREEMENT are referred to collectively as the
"AGREEMENTS".
WHEREAS, Scimark has assigned all its rights and obligations under the LICENSE
AGREEMENT and the RESEARCH AGREEMENT to LICENSEE and LICENSEE has assumed all of
such rights and obligations of Scimark.
WHEREAS, OU and LICENSEE agree that it is in the best interest of OU and
LICENSEE to interpret certain provisions of the LICENSE AGREEMENT and amend the
RESEARCH AGREEMENT.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein, the parties hereto agree to the following interpretation and
amendment:
1. Article 2.2 and 3.3 of the LICENSE AGREEMENT are hereby interpreted to
allow for the LICENSEE's executive offices to be located at 132 North Woods
Boulevard, Columbus, Ohio 43235. LICENSEE further agrees that its executive
offices, principal research operations and principal processing/manufacturing
operations relating to Licensed Products leased, sold or otherwise distributed
for use in the United States shall be located in Ohio. LICENSEE shall maintain
discovery research activities related to the Licensed Products and Processes in
the Athens, Ohio area. LICENSEE shall use its best efforts to perform
processing/manufacturing rights related to Licensed Products or Processes
intended for sale or distribution in the U.S. in the state of Ohio, and to
locate such activities in the Athens, Ohio area. Provided, however, that
LICENSEE may locate such activities outside of the Athens, Ohio area if LICENSEE
can demonstrate a material disadvantage for locating such activities in the
Athens, Ohio area.
2. OU and LICENSEE have determined that the First Year Milestone referred to
in Article 1.10 of the LICENSE AGREEMENT and the RESEARCH AGREEMENT has been
achieved and that the Two Year Milestone referred to in Article 1.11 of the
LICENSE AGREEMENT and the RESEARCH AGREEMENT is waived and deemed not
applicable. The $(***) payment to OU required by the RESEARCH AGREEMENT upon
achievement of the First Year Milestone shall now be due with the last quarterly
installment of the Second Year.
<PAGE>
3. LICENSEE agrees to extend for an additional two years its RESEARCH
AGREEMENT on similar terms and conditions, provided, however, that such
extension is contingent upon LICENSEE consummating a corporate partner
collaboration resulting in funding of LICENSEE of at least $10 million over the
term of the collaboration.
This Memorandum shall be valid, enforceable, and governed by the laws of the
State of Ohio.
IN WITNESS WHEREOF, the parties hereto have executed this Memorandum as of the
day and year first above written.
OHIO UNIVERSITY PROGENITOR, INC.
By: /S/T. LLOYD CHESNUT By: /S/DOUGLASS A. GIVEN
----------------------------- -------------------------
T. Lloyd Chesnut Douglass R. Given
Its: Vice President for Research Its: EVP/COO
----------------------------- ------------------------
and Graduate Studies
-----------------------------
<PAGE>
THE INFORMATION BELOW MARKED BY * AND ( ) HAS BEEN OMITTED PURSUANT TO A
REQUEST FOR CONFIDENTIAL TREATMENT. THE OMITTED PORTIONS HAVE BEEN SEPARATELY
FILED WITH THE COMMISSION.
SPONSORED RESEARCH AGREEMENT
This SPONSORED RESEARCH AGREEMENT (this "Agreement"), dated as of
January 31, 1992, between OHIO UNIVERSITY, a corporation duly organized and
existing under the State of Ohio and having its principal office at 105 Research
and Technology Center, Athens, Ohio 45701 (the "University"), and SCIMARK CORP.,
a corporation duly organized under the laws of New York and having its principal
office at 375 Park Avenue, New York, New York 10152 ("Sponsor");
WITNESSETH:
WHEREAS, in connection herewith, the University and Sponsor are entering
into a License Agreement pursuant to which the University will grant to
Sponsor, and Sponsor will acquire from the University, an exclusive license
under certain patent rights and technology for the purpose of allowing
Sponsor to develop, market, and use, worldwide, certain products and
processes relating to U.S. Patent No. 5,032,407 and C.I.P. Application USSN
(***) reconstitution using yolk sac and other neodetermined cells" by Thomas
Wagner, Barbara King and Mike Reed, and U.S. Patent Application USSN (***)"
by Thomas Wagner and Lei Han as it directly relates to yolk sac as a delivery
system; and limited to the field of use of yolk sac cells, and derivatives
therefrom, hematopoietic tissue, hepatic tissue and neural tissue; and
WHEREAS, the University has experience in the research and development of
human diagnostic and therapeutic products and processes and has the facilities,
equipment and employees that will permit it to attempt to carry out research and
development activities, on behalf of Sponsor, with respect to such rights and
technology; and
WHEREAS, Sponsor desires to engage the University to perform such services
in connection with research and development activities, and the University is
willing to provide such services;
AGREEMENTS:
NOW, THEREFORE, in consideration of the foregoing premises and for other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the University and Sponsor hereby agree as follows:
1
<PAGE>
Section 1. DEFINITIONS
1.1 DEFINITIONS
As used herein, capitalized terms shall have the respective meanings set
forth below or in Schedule A hereto, which is incorporated by this reference as
though fully set forth herein.
"ABANDONED PRODUCT" shall have the meaning set forth in Section 2.1.5
hereof.
"AVAILABLE FUNDS" shall have the meaning set forth in Section 3.1 hereof.
"BENCHTOP FLOW CYTOMETER SYSTEM" shall mean the benchtop flow cytometer
system manufactured by Becton-Dickenson and costing approximately $116,000.
"BUDGET" shall mean the reasonably detailed budget for each quarter of the
term of this Agreement for the execution of the Development Guidelines, as set
forth in the budget attached hereto as Schedule B, as the same may be amended
from time to time in accordance with Section 2.1.1 hereof.
"CASH BALANCE" shall mean the total payments made by Sponsor under this
Agreement at any given time, less the total Research and Development Costs
incurred by the University at such time. Indirect Research and Development Costs
of the University shall be deemed to be incurred as direct Research and
Development Costs are incurred by University.
"CLAIM" shall have the meaning set forth in Section 7.1 or 7.2 hereof.
"CONFIDENTIAL INFORMATION" shall have the meaning set forth in Section 5.1
hereof.
"DEVELOPMENT GUIDELINES" shall mean the guidelines for research and
development of the Proposed Products, the Specified Technologies, and the
Improvements, as set forth in the development guidelines attached hereto as
Schedule C, as the same may be revised from time to time in accordance with
Section 2.1.2 hereof.
"FIRST YEAR MILESTONE" shall mean the establishment of (***)
"IMPROVEMENTS" shall mean any and all U.S. and foreign patent and patent
applications, continuation and continuation applications, continuation-in-part
and continuation-in-part applications, divisionals, reissues, re-examinations,
improvements, methods, processes, trade secrets, structures, inventions,
designs, ideas, formulas, techniques, statistics, product concepts, and other
know-how created or discovered as a result of Research and Development.
2
<PAGE>
"LICENSE AGREEMENT" shall mean the License Agreement between University and
Sponsor entered into contemporaneously herewith.
"PRINCIPAL INVESTIGATOR" shall mean the employee from time to time of the
University who shall have primary responsibility for performing the Research and
Development and for supervising the University's performance thereof. The
Principal Investigator on the date hereof is identified in Schedule D hereto.
"PROPOSED PRODUCT" shall mean any commercial product or process
incorporating any Specified Technology or Improvement which is proposed by
Sponsor and described in Schedule F attached hereto, as may be revised from time
to time by agreement of the parties.
"RESEARCH AND DEVELOPMENT" shall have the meaning set forth in Section 2.1
hereof.
"RESEARCH AND DEVELOPMENT COSTS" shall mean all direct or indirect costs,
fees and out-of-pocket or other expenses incurred, paid or accrued by the
University in respect of the Research and Development, determined in accordance
with Section 3.3 hereof, including, without limitation, the expenses set forth
in Schedule E hereto.
"SECOND YEAR MILESTONE" shall mean the milestone mutually agreeable to the
University and Sponsor at the time the First Year Milestone is achieved.
"SPONSOR INDEMNITEES" shall have the meaning set forth in Section 7.1
hereof.
"SPECIFIED TECHNOLOGIES" shall mean the technologies specified in Schedule
G attached hereto.
"UNIVERSITY INDEMNITEES" shall have the meaning set forth in Section 7.2
hereof.
1.2 SINGULAR AND PLURAL.
Singular and plural forms, as the case may be, of terms defined herein
shall have correlative meanings.
Section 2. RESEARCH AND DEVELOPMENT
2.1 RESEARCH AND DEVELOPMENT SERVICES
Sponsor hereby engages the University, and the University hereby agrees to
undertake, the research and development of the Specified Technologies and
Improvements in accordance with the Development Guidelines for the purpose of
allowing Sponsor to develop, use, and sell, the Proposed Products and products
and processes which are based on or employ such technologies or improvements on
an
3
<PAGE>
exclusive worldwide basis (the "Research and Development"). Such services shall
be provided as follows:
2.1.1. BUDGET
Expenditures made on behalf of Sponsor by the University, shall not exceed
in any year, the amount allocated in the Budget applicable to such year, unless
otherwise approved by the Board of Directors of Sponsor. Sponsor shall not be
responsible for the reimbursement to the University of any Research and
Development Costs which exceed the amount so allocated in the Budget. The
University and Sponsor may revise the Budget from time to time if approved in
writing by both parties or their authorized representatives.
2.1.2 BEST EFFORTS
During the term of this Agreement, the University shall use its best
efforts to (a) conduct the Research and Development on behalf of Sponsor with
respect to the Specified Technologies and the Improvements in a prudent and
skillful manner in accordance in all material respects with the Development
Guidelines and the Budget then in effect and applicable laws, ordinances, rules,
regulations, orders, licenses and other requirements now or hereafter in effect,
and (b) report to Sponsor significant deviations from the Development Guidelines
or the Budget in a timely manner. The University may revise the Development
Guidelines from time to time with the written consent of an authorized
representative of Sponsor. Any revisions to the Development Guidelines shall be
noted in a revised Schedule C. The University shall, at Sponsor's expense as
described below, furnish all labor and supervision, including, but not limited
to, the Principal Investigator, services, supplies and materials necessary to
perform the Research and Development in accordance with the Development
Guidelines and Budget then in effect. In addition to its undertakings pursuant
to the License Agreement, the University agrees to use its reasonable efforts to
attempt to obtain, on behalf of and at the expense of Sponsor, any patent or
technology license from any other Person that the University reasonably
determines to be necessary or useful to enable the University to conduct the
Research and Development under this Agreement.
2.1.3 OTHER ACTIVITIES; SUBCONTRACTS
During the term of this Agreement, the University or the Principal
Investigator, as the case may be, shall devote such time and effort to the
performance of services pursuant to this Agreement as may be necessary or
appropriate to fulfill its duties as described in this Section 2; however, it is
specifically understood and agreed by Sponsor that the University shall not be
required to devote full time to such services and that the University shall have
the right to engage in its own research and development activities and in other
business activities with other persons, and Sponsor shall not, by virtue of this
Agreement, have any right, title or interest in or to such independent
activities or to the income or profits derived therefrom and, without limiting
the University's obligation to
4
<PAGE>
use its best efforts to provide certain services hereunder, nothing set forth in
this Agreement shall limit or reduce the ability of the University to carry on
such other activities; provided, however, that University may not perform
sponsored research on behalf of any commercial entity with respect to any
technology which is related to the Proposed Products, the Specified
Technologies, or the Improvements.
2.1.4 REPORTS AND RECORDS
Within forty-five (45) days after the end of each calendar quarter during
the term of this Agreement, the University shall provide to Sponsor (a) a
reasonably detailed report setting forth the total Research and Development
Costs incurred during such quarter in accordance with Section 3.2.2 hereof, and
(b) a brief written summary. During the term of this agreement, representatives
of the University will meet with representatives of the Sponsor at time and in a
manner mutually agreed upon to discuss progress and results. The written
summaries shall contain a brief description of any material developments with
respect to the Specified Technologies and the Improvements and progress made in
relation to the achievement of the First Year Milestone. The written summary
shall be provided to the Sponsor within thirty (30) days after the end of the
quarter.
The University shall prepare a final report, within ninety (90) days after
the expiration or termination of this Agreement, setting forth in reasonable
detail a summary of the work performed hereunder and the material developments
with respect thereto and containing a final statement of all Research and
Development Costs billed to Sponsor hereunder. The University shall keep and
maintain, in accordance with generally accepted accounting principles, proper
and complete records and books of account documenting all of its expenses
related to the Research and Development, including those allocated to and
reimbursed by Sponsor hereunder. At Sponsor's request and expense, the
University shall permit an independent public accountant selected by Sponsor to
have access, once in each calendar year during the term of this Agreement and
once during the period which is three (3) calendar years following the
termination hereof, during regular business hours and upon reasonable notice to
the University, to such records and books for the sole purpose of determining
the appropriateness of Research and Development Costs invoiced hereunder. The
University shall also provide Sponsor with access to copies of the audit
workpapers of University's Ohio State or outside auditors.
2.1.5 ABANDONED PRODUCT
From time to time, the Board of Directors of Sponsor shall determine in its
reasonable business judgment, based on the reports provided by the University
pursuant to Section 2.1.4 hereof and after discussions with the management of
the University, whether the Research and Development with respect to the
development of a particular Proposed Product is rendered or is likely to be
rendered unfeasible or uneconomic and should be discontinued. If at any time
Sponsor determines based on such reports in its reasonable business judgment, or
the University determines with Sponsor's consent
5
<PAGE>
(which shall not be withheld unreasonably), that the Research and Development
should be discontinued with respect to the development of a particular Proposed
Product, then (a) the Research and Development shall be discontinued with
respect to such Proposed Product (an "ABANDONED PRODUCt"), and (b) the
University and Sponsor shall agree upon an allocation, to one or more Proposed
Products that are not Abandoned Products, the funds that were, in the most
recent budget, to be expended for Research and Development activities with
respect to such Abandoned Product (but had not yet been expended or irrevocably
committed by the University in connection with the research, experimentation and
development of such Abandoned Product).
2.1.6 PRINCIPAL INVESTIGATOR
The University agrees, that in the event the Principal Investigator
identified in Schedule D hereto is unable or unwilling to perform his functions
hereunder, it shall designate an alternative Principal Investigator, who must be
mutually agreeable to the parties hereto.
2.1.7 LICENSE TO TECHNOLOGY FOR DEVELOPMENT
Sponsor hereby grants to the University a sole and exclusive (against
Sponsor and all other persons) royalty-free, license, including the right to
license or sublicense to other Persons, to employ and engage in any and all uses
of the Licensed Products and Licensed Processes, as defined in the License
Agreement for purpose of performing its duties hereunder, including, without
limitation, the activities described in Section 2.1.2 hereof. The foregoing
license shall terminate upon termination or expiration of this Agreement.
2.1.8 AVAILABLE FUNDS
The University shall not be obligated to incur Research and Development
Costs in excess of the amount of this agreement. Each quarter the University
shall present a report of actual costs incurred to the Sponsor. The Sponsor
shall have the right to review the reports with the University and disallow any
costs which are not appropriate within the terms of the budget presented in
Schedule C.
2.1.9 SECOND YEAR MILESTONE
Upon the achievement by the University of the First Year Milestone, the
parties shall negotiate in good faith to determine the Second Year Milestone.
2.2 DISCLAIMER OF WARRANTIES
The University cannot and does not guarantee that the Research and
Development will be successful in whole or in part. To the extent that the
University has complied with Section 2.1.2 hereof, the failure of the University
to develop successfully any Proposed Products will not in and of itself
constitute a breach by the University of any
6
<PAGE>
representation, warranty, covenant or other obligation under this Agreement. In
addition, neither the University nor Sponsor makes any representation or
warranty or guaranty that the Available Funds will be sufficient for the
completion of the Research and Development or commercialization of the Proposed
Products and the University acknowledges and agrees that it has no agreement,
arrangement or understanding with the Sponsor for the provision by the Sponsor
of monies in excess of the Available Funds.
2.3 RIGHTS TO PROPERTY
All right, title and interest to any Improvements acquired or developed
pursuant to this Agreement shall be the sole and exclusive property of
University. The University shall promptly disclose such Improvements to Sponsor,
and Sponsor shall have the right to immediately use such Improvements. Upon
becoming a Patent Right (as defined in the License Agreement), an improvement
shall automatically and without further action by the parties hereto, such as
the additional up front license fees, become subject to the License Agreement.
All matters relating to patent applications with respect to Improvements shall
be governed Article 6 of the License Agreement. University shall treat all
Improvement as Confidential Information subject to section 5 hereof.
All right, title and interest to the Benchtop Flow Cytometer System
purchased in connection with this Agreement shall immediately vest in the
University, provided, however, that during the term of this Agreement, Sponsor
will have open access to such system. All right, title and interest to any other
equipment, supplies materials and other items with a value in excess of $1,000
per item and a useful life beyond three (3) years purchased, built, manufactured
or otherwise acquired either from or on behalf of Sponsor in conjunction with
the performance of the Research and Development by the University shall
immediately vest in the Sponsor, provided, however, that so long as the License
Agreement shall remain in effect, the University shall have open access to all
such equipment.
2.4 SPONSOR'S FDA FILE
Notwithstanding the provisions of Section 2.3 hereof, the University agrees
that it will place all notes, know-how, processes, formulations, results,
reports and other data which are necessary, appropriate or desirable on the
Sponsor's file maintained, or that will be maintained, with the FDA in
connection with Sponsor's Investigational New Drug applications for the
Specified Technologies, Proposed Products, Improvements, and all related
applications.
SECTION 3. PAYMENT FOR SERVICES; TIMING OF PAYMENTS
3.1 PAYMENTS
In consideration of the activities to be carried out by the University
hereunder, Sponsor shall pay to University, on the first day of each quarter
during the term of this
7
<PAGE>
Agreement, the budgeted Research and Development Costs contained in the Budget
for such quarter (such amounts being referred to herein in the aggregate as the
"AVAILABLE FUNDS"). All payments to the University shall be in United States
dollars and made payable to Ohio University and sent to the University's address
set forth in Section 13 below.
3.2 TIMING OF PAYMENTS
3.2.1 QUARTERLY PAYMENTS
While this Agreement remains in effect, during the first year of this
Agreement, Sponsor shall pay to the University,
(a) $58,000 on the execution hereof representing the
Sponsor's share of the cost of the Benchtop Flow Cytometer System, plus;
(b) $276,480 payable in quarterly installments on the first
day of each quarter in the amounts provided in the Budget.
If the University achieves the First Year Milestone, or Sponsor
nevertheless elects to extend the term of this Agreement for an additional year
pursuant to Section 8.3(c) hereof, then while this Agreement remains in effect,
Sponsor shall pay to the University,
(a) $58,000 payable within fifteen (15) days after the
achievement of the First Year Milestone, plus;
(b) $302,000 payable in quarterly installments on the first
day of each quarter in the second year in the amounts provided in the Budget.
3.2.2 REIMBURSEMENTS
Within sixty (60) days after the end of each quarter, the University shall
deliver a report for the Research and Development Costs actually incurred in the
quarter. Within ninety (90) days after the end of the agreement, the University
shall deliver a statement of the actual costs incurred in the agreement year,
and, subject to the provisions of Section 2.1.1, Sponsor shall pay to the
University any additional Research and Development Costs in excess of the
Sponsor's actual payments to the University which were approved in advance in
writing by Sponsor. If the amount reflected in the final statement for Research
and Development Costs is less than the costs actually paid by Sponsor in the
year, the University shall apply such excess against the Research and
Development Costs incurred in the next year, or if none, shall promptly refund
such amount to the Sponsor.
8
<PAGE>
3.3 CALCULATION OF COSTS
Direct costs shall be allocated on a reasonable and consistent basis, and
charged to Sponsor for services performed by the University on behalf of Sponsor
hereunder. Indirect costs shall be allocated to this Agreement at the rate of
forty-four (44%) of the direct costs incurred by the University under this
Agreement excluding direct costs for equipment (such as the Benchtop Flow
Cytometer System and other assets having a useful life in excess of three (3)
years and value in excess of $1,000 per individual item.).
SECTION 4. REPRESENTATIONS, WARRANTIES AND COVENANTS
4.1 REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE UNIVERSITY.
The University represents, warrants and covenants to Sponsor as follows:
(a) University is a corporation duly organized, validly existing
and in good standing under the laws of the State of Ohio with corporate powers
adequate for executing and delivering, and performing its obligations under,
this Agreement;
(b) the execution, delivery and performance of this Agreement
have been duly authorized by all necessary corporate action on the part of the
University;
(c) this Agreement has been duly executed and delivered by the
University and is a legal, valid and binding obligation of the University,
enforceable against the University in accordance with its terms;
(d) the execution, delivery and performance of this Agreement do
not and will not conflict with or contravene any provision of the charter
documents or by-laws of the University or any agreement, document, instrument,
indenture or other obligation or the University;
(e) in cooperation with Sponsor, the Development Guidelines were
prepared in good faith by or on behalf of the University, based upon information
and assumptions that the University believes to be reasonable and correct and
the University is not aware of any discovery, change or development concerning
any of the Proposed Products having a material adverse effect upon the accuracy
or appropriateness of the information or assumptions contained in the
Development Guideline nor does the University have any reason to believe that
the results of the Research and Development indicated in the Development
Guidelines are not achievable;
(f) in cooperation with Sponsor, the University has proposed,
and in cooperation with Sponsor, shall in the future propose, the Budget
provided hereunder and any amendments or modifications thereto in good faith;
and
9
<PAGE>
(g) the University shall not enter into any agreement or make
any commitment that would contravene any material provisions of, or materially
derogate any of the rights of Sponsor under, this Agreement.
4.2 REPRESENTATIONS, WARRANTIES AND COVENANTS OF SPONSOR.
Sponsor represents, warrants and covenants to the University as follows:
(a) Sponsor is a corporation duly organized, validly existing
and in good standing under the laws of the State of New York with corporate
powers adequate for executing and delivering, and performing its obligations
under, this Agreement;
(b) the execution, delivery and performance of this Agreement
have been duly authorized by all necessary corporate action on the part of
Sponsor;
(c) this Agreement has been duly executed and delivered by
Sponsor and is a legal, valid and binding obligation of Sponsor, enforceable
against Sponsor in accordance with its terms; and
(d) the execution, delivery and performance of this Agreement do
not and will not conflict with or contravene any provision of the charter
documents or by-laws of Sponsor or any agreement, document, instrument,
indenture or other obligation of Sponsor.
SECTION 5. CONFIDENTIALITY
5.1 CONFIDENTIAL INFORMATION
With respect to all nonpublic proprietary rights or technology disclosed by
the University to Sponsor or by Sponsor to the University pursuant to this
Agreement and (b) Improvements (hereinafter "CONFIDENTIAL INFORMATION", the
party receiving such Confidential Information (which in the case of
Improvements, shall be considered the University) shall maintain the
confidential and proprietary status of such Confidential Information, keep such
Confidential Information and each part thereof within its possession or under
its control sufficient to prevent any activity with respect to the Confidential
Information that is not specifically authorized by this Agreement or the License
Agreement, use all its best efforts to prevent the disclosure of any
Confidential Information to any third party unless such disclosure would be
allowed by this Agreement or the License Agreement, limit disclosure to only
those of its officers and employees who need to know and use its best efforts to
ensure that such Confidential Information is used only for those purposes
specifically authorized herein; PROVIDED, HOWEVER, that such restriction shall
not apply to any Confidential Information which is (a) independently developed
by a party outside the scope of this Agreement, (b) in the public domain at the
time of its receipt or thereafter becomes part of the public domain through
10
<PAGE>
no fault of the recipient, (c) received without an obligation of confidentiality
from a third party having the right to disclose such information, (d) released
from the restrictions of this Section 5 by the express written consent of the
disclosing party, (e) disclosed to any permitted assignee or subcontractor of
the University or Sponsor hereunder or under the License Agreement (if such
assignee, sublicensee or subcontractor is subject to the provisions of this
Section 5.1) or (f) required by law, statute, rule or court order to be
disclosed (the disclosing party shall, however, use its best efforts to obtain
confidential treatment of any such disclosure).
5.2 PERMITTED DISCLOSURES
Notwithstanding the provisions of Section 5.1 hereof, the University and
Sponsor may, to the extent necessary, disclose and use Confidential Information
(a) for the purpose of securing institutional or government approval to
clinically test or market any Specified Technology, Proposed Product or
Improvement or (b) for the purpose of securing patent protection for an
Specified Technology, Proposed Product, or Improvement, PROVIDED, HOWEVER, that
in each such instance (i) the other party hereto shall have been notified of the
permitted disclosure and (ii) any such disclosure shall be made to Persons which
either have agreed to be bound by or are already subject to a duty of
confidentiality, for the benefit of a party hereto, substantially the same as
that set forth in Section 5.1 hereof, wherever reasonably possible.
SECTION 6. DISCLAIMER OF WARRANTY; CONSEQUENTIAL DAMAGES
(a) Nothing in this Agreement shall be construed as a
representation made or warranty given by either party hereto that the practice
by the other party hereto of any patent license granted hereunder, or that the
use of any Specified Technology, Proposed Products, or Improvements licensed
hereunder, will not infringe the patent or proprietary rights of any other
person. In addition, the University and Sponsor acknowledge that THE SPECIFIED
TECHNOLOGY, PROPOSED PRODUCTS, AND THE IMPROVEMENTS ARE LICENSED TO SPONSOR AND
THE UNIVERSITY, RESPECTIVELY, AS IS, AND THE UNIVERSITY AND SPONSOR DISCLAIM
EXPRESSLY AND HEREBY WAIVE, RELEASE AND RENOUNCE ANY WARRANTY, EXPRESS OR
IMPLIED, WITH RESPECT TO SUCH SPECIFIED TECHNOLOGY, PROPOSED PRODUCTS, OR
IMPROVEMENTS, INCLUDING, WITHOUT LIMITATION, ANY WARRANTY OF MERCHANTABILITY OR
FITNESS FOR A PARTICULAR PURPOSE.
(b) NEITHER PARTY TO THIS AGREEMENT SHALL BE ENTITLED TO
RECOVER FROM THE OTHER ANY SPECIAL, INCIDENTAL, CONSEQUENTIAL OR PUNITIVE
DAMAGES.
11
<PAGE>
SECTION 7. INDEMNIFICATION AND INSURANCE
7.1 SPONSOR RIGHT TO INDEMNIFICATION
The University shall indemnify each of Sponsor, its successors and assigns,
and the directors, officers, employees and agents thereof (the "SPONSOR
INDEMNITEES"), pay on demand and protect, defend, save and hold each Sponsor
Indemnitee harmless from and against, on an after-tax basis, any and all
liabilities, damages, losses, settlements, claims, actions, suits, penalties,
fines, costs or expenses (including, without limitation, reasonable attorneys'
fees) (any of the foregoing, a "CLAIM") incurred by or asserted against any
Sponsor Indemnitee of whatever kind or nature, including, without limitation,
any claim or liability based upon negligence, warranty, strict liability,
violation of government regulation, arising from or occurring as a result of (a)
any use of the Specified Technologies or Improvements by the University or its
Affiliates or sublicensees, (b) any of the activities or services to be
performed by the University hereunder, or (c) any breach by the University of
this Agreement, except in all cases claims based upon the willful misconduct of
Sponsor. Sponsor shall promptly notify the University of any Claim, upon
becoming aware thereof, and permit the University at the University's cost to
defend against such Claim and shall cooperate in the defense thereof. Neither
Sponsor nor the University shall enter into, or permit, any settlement of any
such Claim without the express written consent of the other party. Sponsor may,
at its option and expense, have its own counsel participate in any proceeding
which is under the direction of the University and will cooperate with the
University and its insurer in the disposition of any such matter.
7.2 UNIVERSITY RIGHT TO INDEMNIFICATION
Sponsor shall indemnify each of the University, its successors and assigns,
and the directors, officers, employees and agents thereof (the "UNIVERSITY
INDEMNITEES"), pay on demand and protect, defend, save and hold each University
Indemnitee harmless from and against, on an after-tax basis, any and all
liabilities, damages, losses, settlements, claims, actions, suits, penalties,
fines, costs or expenses (including, without limitation, reasonable attorneys'
fees) (any of the foregoing, a "CLAIM") incurred by or asserted against any
University Indemnitee of whatever kind or nature, including, without limitation,
any claim or liability based upon negligence, warranty, strict liability,
violation of government regulation, arising from or occurring as a result of
(a) any use of the Specified Technology or Improvements by Sponsor or its
Affiliates or sublicensees, or (b) any breach by Sponsor of this Agreement,
except in all cases claims based upon the willful misconduct of the University.
The University shall promptly notify Sponsor of any Claim, upon becoming aware
thereof, and permit the University at Sponsor's cost to defend against such
Claim and shall cooperate in the defense thereof. Neither the University nor
Sponsor shall enter into, or permit, any settlement of any such Claim without
the express written consent of the other party. The University may, at its
option and expense, have its own counsel participate in any proceeding which is
under the
12
<PAGE>
direction of Sponsor and will cooperate with Sponsor and its insurer in the
disposition of any such matter.
7.3 INSURANCE
The University shall, to the extent available at commercially reasonable
rates, maintain, with insurers or underwriters of good repute or University's
own self-insurance program, such insurance relating to the Research and
Development as is customary for comparable businesses undertaking research
programs of a similar nature, to maintain against such risks and pursuant to
such terms (including deductible limits or self-insured retentions) as are
customary and reasonable for such businesses.
SECTION 8. TERM AND TERMINATION
8.1 TERM
This Agreement shall be effective as of the date hereof and shall continue
in full force and effect for two (2) years, unless earlier terminated in part as
provided in Section 8.2 or 8.3 hereof.
8.2 Termination by the University
The University shall have the right to terminate this Agreement, effective
upon written notice of termination to Sponsor in the event that:
(a) Sponsor shall (i) seek the liquidation, reorganization,
dissolution or winding-up of itself of the composition or readjustment of its
debts, (ii) apply for or consent to the appointment of, or the taking of
possession by, a receiver, custodian, trustee or liquidator of itself or of all
or a substantial part of its property, (iii) make a general assignment for the
benefit of its creditors, (iv) commence a voluntary case under the Bankruptcy
Code, (v) file a petition seeking to take advantage of any other law relating to
bankruptcy, insolvency, reorganization, winding-up or composition or
readjustment of debts, or (vi) adopt any resolution of its shareholders or board
of directors for the purpose of effecting any of the foregoing; or
(b) a proceeding or case shall be commenced without the
application or consent of Sponsor and such proceeding or case shall continue
undismissed, or an order, judgment or decree approving or ordering any of the
following shall be entered and continue unstayed and in effect, for a period of
forty-five (45) days from and after the date service of process is effected upon
Sponsor, seeking (i) Sponsor's liquidation, reorganization, dissolution or
winding-up, or the composition or readjustment of its debts, (ii) the
appointment of a trustee, receiver, custodian, liquidator or the like of Sponsor
or of all or any substantial part of its assets, or (iii) similar relief in
respect of Sponsor under any law relating to bankruptcy,
13
<PAGE>
insolvency, reorganization, winding-up or the composition or readjustment of
debts; [or]
(c) Sponsor shall fail to pay a payment when due as provided in
Section 3.2 hereof, after receiving (15) days prior written notice of such
nonpayment, and such payment is not the subject of a good faith controversy
between the parties hereto.
8.3 TERMINATION BY SPONSOR
Sponsor shall have the right to terminate this Agreement and any license or
sublicense granted hereunder, effective upon written notice of termination to
the University in the event that:
(a) the University fails to perform or observe or otherwise
breaches any of its material obligations under this Agreement and such failure
or breach continues for a period of sixty (60) days after written notice thereof
to the University from Sponsor; or
(b) The Principal Investigator identified on Schedule D
hereto is unwilling or able to supervise the performance by the University of
this Agreement and no alternative Principal Investigator mutually agreeable to
the parties hereto has been designated by the University;
(c) upon the one year anniversary of this Agreement,
University has failed to achieve the First Year Milestone, provided, however,
that at any time prior to thirty (30) days after the first anniversary of this
Agreement, Sponsor may elect in writing to extend the term of this Agreement for
an additional one (1) year despite the University's failure to achieve the First
Year Milestone.
8.4 EFFECT OF TERMINATION
Sections 2.1.4, 2.3, 3, 5, 6, 7, 9, 10 and 12 of this Agreement, and all
obligations to pay any amounts due hereunder, shall survive, and shall not be
affected by, any termination of this Agreement pursuant to this Section 8.
SECTION 9. PUBLICATION OF RESULTS
9.1 PUBLIC ACCESS INFORMATION
Sponsor acknowledges that the basic objective of research activities at the
University is the generation of new knowledge and its expeditious dissemination
and the University, subject to the provisions of Section 9.2 below, shall have
the discretion to publish freely any results of the Research and Development.
Sponsor shall provide all reasonable cooperation with the University in meeting
this objective. Any such publication by the
14
<PAGE>
University shall acknowledge the Sponsor as the sponsor of the Research and
Development.
9.2 NOTIFICATION TO SPONSOR
Prior to any publication whatsoever to any third party of the results of
the Research and Development, the University agrees that it will:
9.2.1 AVAILABILITY OF COPIES
Make available to the Sponsor, at least sixty (60) days in advance, a copy
of any document, manuscript or other data incorporating such results of the
Research and Development and shall not publish any such document, manuscript or
other data to which Sponsor shall reasonably object, provided, however, that
Sponsor may not object to the publication of any thesis and/or Dissertation of
any student of the University, wherein such publication is required for such
student to graduate, provided that, University has adequately protected
Sponsor's intellectual property rights, including, but not limited to patent
rights, know-how, and trade secrets, pursuant to the procedures contemplated by
Section 9.2.2 hereof;
9.2.2 PROTECTION OF RIGHTS
Take all necessary, appropriate or desirable steps to establish and protect
its intellectual property rights and ownership in such results of the Research
and Development pursuant to Article 6 of the License Agreement, and/or executing
confidentiality agreements with third parties who will receive such results of
the Research and Development.
SECTION 10. UNIVERSITY NAME; PRINCIPAL INVESTIGATOR ACTING AS A CONSULTANT
10.1 CAPITAL RAISING AND FINANCING
University acknowledges that Sponsor has a legitimate interest in using the
name of the University, the University's representative organizations, or the
University's employees for capital raising and financing purposes. Accordingly,
the University consents to the use by Sponsor and its sublicensees for such
purposes, of the name of the University, and University employees having
involvement with the Specified Technologies, the Proposed Products, or the
Improvements, provided, that Sponsor shall obtain the prior written consent of
the University.
10.2 PRINCIPAL INVESTIGATOR AS CONSULTANT
The University acknowledges and consents to the employment by Sponsor of
the Principal Investigator identified on Schedule D hereto as a consultant to
act on behalf of
15
<PAGE>
the Sponsor in various activities. Sponsor acknowledges that the Principal
Investigator is subject to the University's conflicts of interest and extramural
activities policies, a copy of which has been provided to the Sponsor by the
University.
SECTION 11. NO IMPLIED WAIVERS; RIGHTS CUMULATIVE
No failure on the part of the University or Sponsor to exercise and no
delay in exercising any right, power, remedy or privilege under this Agreement,
or provided by statute or at law or in equity or otherwise, including, without
limitation, the right or power to terminate this Agreement, shall impair,
prejudice of constitute a waiver of any such right, power, remedy or privilege
or be construed as a waiver of any breach of this Agreement or as an
acquiescence therein, nor shall any single or partial exercise of any such
right, power, remedy or privilege preclude any other or further exercise thereof
or the exercise of any other right, power, remedy or privilege.
SECTION 12. RELATIONSHIP OF THE PARTIES
Nothing contained in this Agreement is intended, or is to be construed, to
constitute the University and Sponsor as partners or joint venturers or the
University as an employee of Sponsor. Neither party hereto shall have any
express or implied right or authority to assume or create any obligations on
behalf of or in the name of the other party or to bind the other party to any
contract, agreement or undertaking with any third party.
SECTION 13. NOTICES
All notices, requests and other communications to the University or Sponsor
hereunder shall be in writing (including telecopy or similar electronic
transmissions), shall refer specifically to this Agreement and shall be
personally delivered or sent by telecopy or other electronic facsimile
transmission or by registered mail, or certified mail, return receipt requested,
postage prepaid, in each case to the respective address specified below (or such
other address as may be specified in writing to the other party hereto):
IF THE UNIVERSITY, TO: Carol Blum / cc: Tom Wagner
Assistant Vice President for Research
Ohio University
105 Research and Technology Center
Athens, Ohio 45701
16
<PAGE>
IF TO THE SPONSOR, TO: Lindsay A. Rosenwald, MD
Chairman
Scimark. Corp.
c/o The Castle Group Ltd.
375 Park Avenue
New York, New York 10152
Section 14. FORCE MAJEURE
Each party shall be excused for any failure or delay in performing any of
its obligations under this Agreement if such failure or delay is caused by Force
Majeure.
Section 15. FURTHER ASSURANCES
Each of the University and Sponsor agrees to duly execute and deliver, or
cause to be duly executed and delivered, such further instruments and do and
cause to be done such further acts and things, including, without limitation,
the filing of such additional assignments, agreements, documents and
instruments, that may be necessary or as the other party hereto may at any time
and from time to time reasonably request in connection with this Agreement or to
carry out more effectively the provisions and purposes of, or to better assure
and confirm unto such other party its rights and remedies under, this Agreement.
Section 16. SUCCESSORS AND ASSIGNS
The terms and provisions of this Agreement shall inure to the benefit of,
and be binding upon; the University, Sponsor and their respective successors and
assigns. Any reference to the University or Sponsor hereunder shall be deemed to
include the successors thereto and assigns thereof.
Section 17. AMENDMENTS
No amendment, modification, waiver, termination or discharge of any
provision of this Agreement, nor consent to any departure by the University or
Sponsor therefrom, shall in any event be effective unless the same shall be in
writing specifically identifying this Agreement and the provision intended to be
amended, modified, waiver, terminated or discharged and signed by the University
and Sponsor, and each such amendment, modification, waiver, termination or
discharge shall be effective only in the specific instance and for the specific
purpose for which given. No provision of this Agreement shall be varied,
contradicted or explained by any oral agreement, course of dealing or
performance or any other matter not set forth in an agreement in writing and
signed by the University and Sponsor.
17
<PAGE>
Section 18. GOVERNING LAW
This Agreement shall in all respects, including all matters of
construction, validity and performance, be governed by, and construed and
enforced in accordance with, the laws of the State of Ohio applicable to
contracts entered into in that state between citizens of that state and to be
performed wholly within that state without reference to any rules governing
conflicts of laws.
Section 19. SEVERABILITY
If any provision hereof should be held invalid, illegal or unenforceable in
any respect in any jurisdiction, the parties will reexamine all terms to the
agreement to determine then, to the fullest extent permitted by law, (a) those
other provisions hereof which shall remain in full force and effect in such
jurisdiction and shall be liberally construed in order to carry out the
intentions of the parties hereto as nearly as may be possible and (b) such
invalidity, illegality or unenforceability shall not affect the validity,
legality or enforceability of such provision in any other jurisdiction.
Section 20. HEADINGS
Headings used herein are for convenience only and shall not in any way
affect the construction of, or be taken into consideration in interpreting, this
Agreement.
Section 21. EXECUTION IN COUNTERPARTS
This Agreement may be executed in any number of counterparts, each of which
counterparts, when so executed and delivered, shall be deemed to be an original,
and all of which counterparts, taken together, shall constitute one and the same
instrument.
Section 22. ENTIRE AGREEMENT
This Agreement constitutes, on and as of the date hereof, the entire
agreement of Sponsor and the University with respect to the subject matter
hereof, and all prior or contemporaneous understandings or agreements, whether
written or oral, between the University and Sponsor with respect to such subject
matter are hereby superseded in their entirety.
Section 23. ARBITRATION
(a) At the option of any party, any and all disputes or
controversies, whether of law or fact and of any nature whatsoever arising from
or respecting this Agreement, shall be decided by binding arbitration in
accordance with the rules and regulations of the American Arbitration
Association (the "ASSOCIATION").
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<PAGE>
(b) If the parties are unable to agree upon a single
arbitrator, the arbitrator shall be a single, independent arbitrator selected by
the Association. The Corporation reserves the right to disqualify any individual
arbitrator who shall be employed by or affiliated with a competing organization.
(c) Arbitration shall take place in a location mutually
agreeable to the parties. At the request of any party, arbitration proceedings
will be conducted in the confidence; in such case all documents, testimony and
records shall be received, heard and maintained by the arbitrator in secrecy
under seal, available for the inspection only of the parties and their
respective attorneys and their respective experts who shall agree in advance and
in writing to receive all such information confidentially and to maintain such
information in secrecy until such information shall become generally known. The
decision of the arbitrator will be final and binding upon the parties hereto and
all persons claiming under and through them.
(d) Each party shall bear its own costs in connection with
the arbitration procedure.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered as of the date first above written.
UNIVERSITY: OHIO UNIVERSITY
By: /s/ T. LLOYD CHESNUT
Its: Vice President for Research & Graduate Studies
SPONSOR: SCIMARK CORP.
By: /s/ LINDSAY ROSENWALD
Its:
------------------------------------------
19
<PAGE>
SCHEDULE A
ADDITIONAL DEFINITIONS
None.
A-1
<PAGE>
SCHEDULE B
BUDGET
Quarter 1 $69,120
Quarter 2 $69,120
Quarter 3 $69,120
Quarter 4 $69,120
Quarter 5 $75,500
Quarter 6 $75,500
Quarter 7 $75,500
Quarter 8 $75,500
B-1
<PAGE>
SCHEDULE C
DEVELOPMENT GUIDELINES
(***)
C-1
<PAGE>
SCHEDULE D
PRINCIPAL INVESTIGATOR
1. The principal investigator shall be Dr. Thomas Wagner
D-1
<PAGE>
<TABLE>
<CAPTION>
YOLK SAC CELL SPONSORED RESEARCH PROJECT 2-YEAR BUDGET SCHEDULE E - Research and Development Costs
YR 1 YR 2 2 YEAR
ITEMS Q1 Q2 Q3 Q4 TOTALS Q1 Q2 Q3 Q4 TOTALS TOTALS
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SALARIES
SENIOR CELL BIO TECHNICIAN 6863 6863 7206 7206 28136 7206 7206 7566 7566 29543 57679
ANIMAL CARE TECHNICIAN 3889 3889 4083 4083 15944 4083 4083 4287 4287 16741 32685
CLERICAL 1830 1830 1922 1922 7503 1922 1922 2018 2018 7878 15381
SUBTOTAL SALARIES 12581 12581 13210 13210 51583 13210 13210 13871 13871 54162 105745
BENEFITS
SENIOR CARE BIO TECHNICIAN 3064 3064 1858 3476 11461 11461 3476 1950 3974 12876 24337
ANIMAL CARE TECHNICIAN 1923 1923 2203 2203 8252 2203 2203 2543 2543 9493 17745
CLERICAL (CL.P.M) 564 564 610 610 2348 610 610 664 664 2549 4897
SUBTOTAL BENEFITS 5551 5551 4671 6289 22062 14275 6289 5158 7181 24917 46979
SUBTOTAL SAL & B'S 18132 18132 17881 19500 738645 27486 19500 19029 21052 79080 152725
SUPPLIES
PLASTICWARE 2100 2520 2940 2940 10500 4410 4410 4410 4410 17640 28140
TISS.CULT.: MEDIA, SERUM ETC 5000 6000 7000 7000 25000 14000 14000 14000 14000 56000 81000
CAGES & OTHER MOUSERM SUPPL'S 18262 0 18262 0 36523 19175 0 19175 0 38349 74873
FEED & BEDDING 1850 2220 2625 2625 9320 3938 3938 3938 3938 15750 25070
MISC. CONSUM. LAB SUPPLIES 1000 1000 1000 1000 4000 3750 3750 3750 3750 15000 19000
0
SUBTOTAL SUPPLIES 28212 11740 31827 13565 85343 45272 26098 45272 26098 142739 228083
ADMIN./OTHER COSTS
TRAVEL 2000 1000 1000 1000 5000 1000 1000 1000 1000 4000 9000
TRAINING 2000 2500 0 0 4500 0 0 0 0 0 4500
INFO & COMMUNICATIONS 900 900 900 900 3600 945 945 945 945 3780 7380
EQUIP. REPAIR & MAINTENANCE 3000 3000 3000 3000 12000 3300 3300 3300 3300 13200 25200
OFFICE & COMPUTER SUPPLIES 540 540 567 567 2214 624 624 624 624 2495 4709
0
SUBTTL ADMIN/OTHER 8440 7940 5467 5467 27314 5869 5869 5869 5869 23475 50789
EQUIPMENT
CELL SORTER 58525 0 0 0 58525 0 0 0 0 0 58525
MOUSERM RACKS; OTHER EQUIP 7312 0 0 0 7312 6659 0 0 0 6659 13971
0
SUBTOTAL EQUIPMENT 65837 0 0 0 65837 6659 0 0 0 6659 72496
TOTAL OPERATING COSTS 120621 37812 55175 38532 252139 85285 51466 70169 53018 251953 504092
INDIR.COST @ 44% (NO EQUIP.) 24105 16637 24277 16954 81973 34595 22645 30875 23328 107929 189902
GRAND TOTAL ALL COSTS 144725 54449 79452 55486 334112 119881 74111 101044 76346 359882 693994
</TABLE>
<PAGE>
SCHEDULE F
(***)
F-1
<PAGE>
SCHEDULE G
SPECIFIED TECHNOLOGIES
U.S. Patent Number 5,032,407 and C-1-P Application USSN (***) by Thomas
Wagner, Barbara King and Mike Reed and U.S. Patent Application USSN (***) by
Thomas Wagner and Lei Han as it directly relates to yolk sac as a delivery
system.
G-1
<PAGE>
MEMORANDUM OF UNDERSTANDING
AND
AMENDMENT
This Memorandum of Understanding ("Memorandum") is made and entered into
this 15th day of October 1993 by and between OHIO UNIVERSITY ("OU") and
PROGENITOR, INC., a corporation duly organized under the laws of Delaware,
having its principal office at 132 North Woods Boulevard, Columbus, Ohio 43235
("LICENSEE").
WHEREAS, OU, Scimark Corporation ("Scimark") and The Castle Group, Ltd.
have entered into a certain License Agreement dated January 28, 1992 (the
"LICENSE AGREEMENT"), and OU and Scimark have entered into a certain Sponsored
Research Agreement dated January 28, 1992 (the "RESEARCH AGREEMENT"). The
LICENSE AGREEMENT and the RESEARCH AGREEMENT are referred to collectively as the
"AGREEMENTS".
WHEREAS, Scimark has assigned all its rights and obligations under the
LICENSE AGREEMENT and the RESEARCH AGREEMENT to LICENSEE and LICENSEE has
assumed all of such rights and obligations of Scimark.
WHEREAS, OU and LICENSEE agree that it is in the best interest of OU and
LICENSEE to interpret certain provisions of the LICENSE AGREEMENT and amend the
RESEARCH AGREEMENT.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein, the parties hereto agree to the following interpretation and
amendment:
1. Article 2.2 and 3.3 of the LICENSE AGREEMENT are hereby interpreted to
allow for the LICENSEE's executive offices to be located at 132 North Woods
Boulevard, Columbus, Ohio 43235. LICENSEE further agrees that its executive
offices, principal research operations and principal processing/manufacturing
operations relating to Licensed Products leased, sold or otherwise distributed
for use in the United States shall be located in Ohio. LICENSEE shall maintain
discovery research activities related to the Licensed Products and Processes in
the Athens, Ohio area. LICENSEE shall use its best efforts to perform
processing/manufacturing rights related to Licensed Products or Processes
intended for sale or distribution in the U.S. in the state of Ohio, and to
locate such activities in the Athens, Ohio area. Provided, however, that
LICENSEE may locate such activities outside of the Athens, Ohio area if LICENSEE
can demonstrate a material disadvantage for locating such activities in the
Athens, Ohio area.
2. OU and LICENSEE have determined that the First Year Milestone referred
to in Article 1.10 of the LICENSE AGREEMENT and the RESEARCH AGREEMENT has been
achieved and that the Two Year Milestone referred to in Article 1.11 of the
LICENSE AGREEMENT and the RESEARCH AGREEMENT is waived and deemed not
applicable. The (***) payment to OU required by the RESEARCH AGREEMENT upon
achievement of the
1
<PAGE>
First Year Milestone shall now be due with the last quarterly installment of the
Second Year.
3. LICENSEE agrees to extend for an additional two years its RESEARCH
AGREEMENT on similar terms and conditions, provided, however, that such
extension is contingent upon LICENSEE consummating a corporate partner
collaboration resulting in funding of LICENSEE of at least (***) over the
term of the collaboration.
This Memorandum shall be valid, enforceable, and governed by the laws of
the State of Ohio.
IN WITNESS WHEREOF, the parties hereto have executed this Memorandum as of
the day and year first above written.
OHIO UNIVERSITY
By: /s/ T. LLOYD CHESNUT
Its: Vice President for Research and Graduate Studies
PROGENITOR, INC.
By: /s/ DOUGLASS GIVEN
Its: EVP/COO
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February 16, 1994
Glenn L. Cooper, M.D.
Chief Executive Officer
Interneuron Pharmaceuticals, Inc.
1 Ledgemont Center
99 Hayden Avenue - Suite 340
Lexington, MA 02173
Re: AMENDMENT FOR QUARTER BY QUARTER CONTINUATION OF PROGENITOR -
OU/EBI SPONSORED RESEARCH AGREEMENT
Dear Mr. Cooper:
Reference is made to the SPONSORED RESEARCH AGREEMENT effective as of
January 31, 1992 (the "Agreement") between the Ohio University ("OU") and
Scimark, Corp., now Progenitor, Inc. ("Sponsor"), a subsidiary of Interneuron
Pharmaceuticals, Inc., as well as to the MEMORANDUM OF UNDERSTANDING AND
AMENDMENT entered into by the same parties on October 15, 1993 (the
"Memorandum"). The Edison Biotechnology Institute (f.k.a. Edison Animal
Biotechnology Center, or, EABC) (hereinafter "EBI") is a research unit of OU
responsible for conducting the continuing research project.
As contemplated by Section 17 of the Agreement, the Project is hereby
modified and continued effective as of January 31, 1994 by mutual agreement of
the parties; the Project will proceed on a QUARTER BY QUARTER CONTINUATION basis
until 30 days after the consummation (in a fully-executed agreement) of the
Sponsor's planned CORPORATE PARTNERSHIP ARRANGEMENT, or until January 30, 1996,
whichever date occurs first.
It is hereby understood that the Sponsor is under no formal obligation to
continue the Agreement since such a continuation was deemed contingent upon the
prior realization of the CORPORATE PARTNER(SHIP) COLLABORATION; and that such an
arrangement has not yet been realized. However, because the Sponsor wishes to
continue the project, Sponsor has agreed to fund the work on a quarter by
quarter basis at the same funding level as Year 2 of the Agreement (i.e.,
(***)). Further, the Sponsor
intends to continue its diligent efforts to attain the CORPORATE PARTNER(SHIP)
COLLABORATION at the earliest possible date, and thereby to facilitate the full
funding of Years 3 and 4 in a two year continuation of the Agreement, as agreed
upon on agreed upon in the Memorandum.
Upon finalization of the CORPORATE PARTNER(SHIP) COLLABORATION, the Sponsor
will promptly initiate discussions with EBI for formalizing the remaining
balance of the two-year agreement as agreed upon in the Memorandum and will
execute such an agreement within 30 days of the execution date of the CORPORATE
PARTNER(SHIP) COLLABORATION, as
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required above. At such a time, the Sponsor would also pay an annualized
(***) retroactive cost inflator for each quarterly payment made, or due and
payable (i.e., (***)), for up to a maximum of eight (8) quarters envisioned
under this interim QUARTER BY QUARTER CONTINUATION.
In the event that the Sponsor is unable or unwilling to continue this
quarter by quarter continuation, the Sponsor agrees to give EBI advance notice
of termination by notifying the EBI in writing a full calendar quarter in
advance of such termination. To clarify this, calendar quarters begin on the
first day of January, April, July and October and end on March 31st, June 30th,
September 30th and December 31st, respectively. As such, although notice of
termination would occur at some time in one calendar quarter (e.g., between
January 1st to March 31st), the advance notice period must include the following
full calendar quarter (in this example, April 1st to June 30th).
The provisions of the Agreement and Memorandum shall otherwise remain in
full force until such expiration except that the funding to be provided by the
Sponsor pursuant to Section 3 ("Payment for Services; Timing of Payments") and
Schedule B ("Budget") shall now be in accordance with the attachment to this
Letter Agreement entitled "Schedule of Payments", Attachment A). Sponsor shall
make up to 8 quarterly payments, as specified in Attachment A ("Schedule of
Payments"). The attachment is hereby incorporated into and made a part of the
Agreement.
If the foregoing is in accordance with your understanding, please so
indicate by signing in the space provided below.
Sincerely,
OHIO UNIVERSITY
By: /S/ T. LLOYD CHESNUT
--------------------------------
Name: T. Lloyd Chesnut, Ph.D.
Title: Vice President for Research and
Graduate Studies
Date signed: February 16, 1994
PROGENITOR, INC.
By: /S/ GLENN L. COOPER
-------------------------
Name: Glenn L. Cooper, M.D.
Title: Chief Executive Officer
Date signed: 2/24/94
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ATTACHMENT A
QUARTER BY QUARTER CONTINUATION
SCHEDULE OF PAYMENTS
(***)
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- -------------------------------------------------------------------------------
November 16, 1994
David Allen, Ph.D.
Director
The Innovation Center
Ohio University - EBI
20 E. Circle Drive, Suite 190
Athens, OH 457601-3751
Dear Dave:
Reference is made to the yolk sac agreement and the extension to that agreement
between Ohio University and Progenitor, Inc. for sponsored research. Thank you
for discussions Nov. 3 and Nov. 15. For the yolk sec agreements, Progenitor has
been operating under a payment contingency based on completion of our first
commercial deal. That first deal hasn't been completed.
We would like to propose a payment schedule consistent with our ability to pay.
The proposal is:
1. Begin paying (***)/month for current, on-going work.
2. Continue to make the (***)/month payments until the balance is paid.
3. Continue to make the (***)/month following receipt of (***) or
more derived from commercial deals until the balance is paid.
If the foregoing is acceptable, please indicate below and return a copy to me at
your earliest convenience.
Sincerely yours,
/S/ DOUGLASS GIVEN
Douglass B. Given M.D., Ph.D.
President and C.E.O.
Accepted: /S/ T. LLOYD CHESNUT
Date: 12/2/94
--------------------------
DBG/jab
1507 Chambers Road Telephone: (614)488-6688
Columbus, OH 43212-1566 Facsimile: (614) 488-0404
<PAGE>
- -------------------------------------------------------------------------------
November 22, 1995
David Allen, Ph.D.
Director
The Innovation Center
Ohio University - EBI
20 E. Circle Drive, Suite 190
Athens, OH 45701-3751
REF.: SPONSORED RESEARCH AGREEMENT DATED JANUARY 31, 1992, AS AMENDED
Dear Dave:
In reference to the above agreement for yolk sac research, we would like to
propose a modification to the payment schedule that is consistent with our
ability to service our obligation to Ohio University (OU). We propose that OU
defer Progenitor's installment payments on its (***) obligation to OU until
July 1996 when payment will resume at a rate of (***) per month until our
obligation is fulfilled.
If the foregoing is acceptable, please indicate by signing below and returning a
copy to me at your earliest convenience.
Sincerely yours,
/S/ DAVID B. BITTNER
David B. Bittner
Director of Finance
Accepted: /S/ DAVID ALLEN
Date: 11/30/95
1507 Chambers Road Telephone: (614)488-6688
Columbus, OH 43212-1566 Facsimile: (614) 488-0404
<PAGE>
THE INFORMATION BELOW MARKED BY * AND ( ) HAS BEEN OMITTED PURSUANT TO A
REQUEST FOR CONFIDENTIAL TREATMENT. THE OMITTED PORTIONS HAVE BEEN SEPARATELY
FILED WITH THE COMMISSION.
EXHIBIT 10.9
OHIO UNIVERSITY
RESEARCH AND GRADUATE STUDIES
102 RESEARCH AND TECHNOLOGY CENTER
ATHENS, OHIO 45701
LICENSE AGREEMENT
with
PROGENITOR, INC.
ONE PRESIDENT STREET
ATHENS, OHIO 45701
DATE: APRIL 1, 1993
<PAGE>
This Agreement is made and entered into this first day of April 1993 (the
"Effective Date) by and between Ohio University, a corporation duly organized
and existing under the laws of the State of Ohio and having its principal office
at 102 Research and Technology Center, Athens, Ohio 45701, U.S.A. (hereinafter
referred to as "OU"), and Progenitor, a corporation duly organized under the
laws of Delaware and having its principal office at One President Street,
Athens, Ohio 45701, U.S.A. (hereinafter referred to "LICENSEE").
WHEREAS, OU is and represents that it is the owner of certain PATENT
RIGHTS (as later defined herein) relating to an invention by Thomas Wagner and
Xiao Chen.
WHEREAS, OU desires to have the PATENT RIGHTS (as later defined herein)
utilized in the public interest and is willing to grant a license thereunder,
WHEREAS, LICENSEE desires to commercially utilize the PATENT RIGHTS (as
later defined herein) in the public interest through the research, development,
production, manufacture, marketing and sale of the LICENSED PRODUCT(s) (as later
defined herein) and the LICENSED PROCESS(es) (as later defined herein);
WHEREAS, in connection herewith, OU and LICENSEE are entering into a
Sponsored Research Agreement to further develop the PATENT RIGHTS (as later
defined herein), LICENSED PRODUCT(s) (as later defined herein) and LICENSED
PROCESS(es) (as later defined herein); and
WHEREAS, LICENSEE desires to obtain an exclusive license under the PATENT
RIGHTS upon the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein, the parties hereto agree as follows:
ARTICLE 1 - DEFINITIONS
For the purposes of the Agreement, the following words and phrases shall
have the following meanings:
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1.1 "LICENSEE" shall mean Progenitor, "AFFILIATE" shall mean a related
company of LICENSEE, the voting stock of which is directly or indirectly more
than fifty percent (50%) owned or controlled by LICENSEE, an organization which
directly or indirectly controls more than fifty percent (50%) of the voting
stock of LICENSEE, and an organization the majority ownership of which is
directly or indirectly common to the ownership of LICENSEE.
1.2 "PATENT RIGHTS" shall mean all of the following intellectual
property:
(a) the invention disclosure (OU Technology Transfer Office docket
number 050592) listed in (or to be added to, pursuant to the SPONSORED RESEARCH
AGREEMENT) Appendices A;
(b) United States and foreign patents issued from the invention
disclosure listed in (or to be added to, pursuant to the SPONSORED RESEARCH
AGREEMENT) Appendices A and from divisionals and continuations of these
applications;
(c) claims of U.S. and foreign continuation-in-part applications, and
of the resulting patents, which are directed to subject matter specifically
described in the U.S. and foreign applications listed in (or to be added to
pursuant to the SPONSORED RESEARCH AGREEMENT) Appendices A;
(d) claims of all foreign patent applications, and of the resulting
patents, which are directed to subject matter specifically described in the
United States patents and/or applications described in (a), (b) or (c) above;
and
(e) any reissues, re-examinations, or extensions of United States or
foreign patents described in (a), (b) (c) or (d) above.
1.3 A "LICENSED PRODUCT' shall mean any product or part thereof which:
(a) is covered in whole or in part by an issued and unexplored claim
contained in the PATENT RIGHTS of Technology A in the country in which any such
product or part thereof is made, used or sold.
(b) is manufactured by using a process or is employed to practice a
process which is covered in whole or in part by an issued and unexplored claim
contained in the PATENT RIGHTS of Technology A in the country in which a
LICENSED PROCESS is used or in which such product or part thereof is used or
sold.
1.4 A "LICENSED PROCESS" shall mean any process which is covered in
whole or in part by an issued, unexplored claim contained in the PATENT RIGHTS
in any country where the process is practiced.
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1.5 "NET SALES" shall mean LICENSEE'S, an AFFILIATE'S, or
SUBLICENSEE'S billings for LICENSED PRODUCTS and LICENSED PROCESSES produced
hereunder less the sum of the following:
(a) discounts allowed in amounts customary in the trade:
(b) sales, tariff duties and/or use taxes directly imposed and with
reference to particular sales;
(c) outbound transportation prepaid or allowed;
(d) amounts allowed or credited on returns; and
(e) bad debts actually written off during the period.
No deductions shall be made for commissions paid to individuals whether
they be with independent sales agencies or regularly employed by LICENSEE,
AFFILIATES or SUBLICENSEES and on their payroll. LICENSED PRODUCTS and LICENSED
PROCESSES shall be considered "sold" when billed out or invoiced.
1.6 "Territory" shall mean worldwide.
1.7 "Tangible Property" shall mean tangible biological materials
created as a result of research which includes cell lines, DNA constructs,
vectors, and plasmids and any related material. Any cells or subcultures,
clones, or progeny thereof, or DNA molecules or portions thereof which are
replicated or derived from biological materials referred to in this paragraph
1.7 is also included in this definition.
1.8 "TECHNOLOGY A" shall mean any and all PATENT RIGHTS more closely
related to invention disclosure (OU Technology Transfer Office, docket number
050592) by Tom Wagner and Xiao Chen.
1.9 "SUBLICENSEE" shall mean an entity which LICENSEE has granted the
right to manufacture and market the LICENSED PRODUCTS or the right to sublicense
the LICENSED PROCESSES to others and shall not include a hospital or clinic
which permits its associated medical doctors to practice the LICENSED PROCESSES;
and
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1.10 "SPONSORED RESEARCH AGREEMENT" shall mean the Sponsored Research
Agreement entered into by OU and LICENSEE in connection herewith.
ARTICLE 2 - GRANT
2.10 OU hereby grants to LICENSEE the exclusive right and license to
make, have made, use, lease and sell the LICENSED PRODUCTS and the LICENSED
PROCESSES and to practice under the pending patent rights worldwide to the end
of the term for which the last to expire patent in the PATENT RIGHTS is granted
unless this Agreement shall be sooner terminated according to the terms hereof.
2.2 OU shall have the right to practice under the PATENT RIGHTS and to
use and distribute to third parties the TANGIBLE PROPERTY for noncommercial
research purposes provided that any OU employee practicing under the PATENT
RIGHTS or any OU employee or third party receiving the TANGIBLE PROPERTY, shall
have first executed a Confidentiality Agreement with OU substantially in the
form provided in Appendix B. Fifteen day prior written notification of TANGIBLE
PROPERTY distribution to third parties will be given to LICENSEE.
2.3 LICENSEE shall have the right to enter into sublicensing
agreements for the rights, privileges and licenses granted hereunder.
2.4 LICENSEE agrees that sublicenses granted by it shall provide that
the obligations to OU of Articles 2, 5, 7, 8, 9, 10, 12, 13, and 15 of this
Agreement shall be binding upon the sublicensee as if it were a party of this
Agreement. LICENSEE further agrees to incorporate and attach copies of these
Articles to sublicense agreements.
2.5 LICENSEE agrees to forward to OU a copy of any and all sublicense
agreements promptly upon execution by the parties.
2.6 If LICENSEE receives non-cash royalties from SUBLICENSEES in lieu
of cash royalties under any sublicense under this Agreement, those goods or
services will be valued at a fair market price subject to discounts and costs
specified in Article 1.5.
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2.7 The license granted hereunder shall not be construed to confer any
rights upon LICENSEE by implication, estoppel or otherwise as to any technology
not specifically set forth in Appendix A hereof.
ARTICLE 3 - DILIGENCE
LICENSEE shall use its best efforts to bring LICENSED PRODUCTS or
LICENSED PROCESSES to market through its own efforts by a thorough, vigorous and
diligent program for exploitation of the PATENT RIGHTS and to continue active,
diligent marketing efforts for LICENSED PRODUCTS or LICENSED PROCESSES
throughout the life of this Agreement.
ARTICLE 4 - ROYALTIES
4.1 For the rights, privileges and license granted hereunder, LICENSEE
shall pay to OU in the manner hereinafter provided to the end of the term of the
PATENT RIGHTS or until this Agreement shall be terminated:
(a) A payment for recoupment of OU legal expenses of [ * * * ],
which said payment shall be deemed earned and due immediately upon the
Effective Date.
(b) License maintenance fees of [ * * * ] per year commencing upon
the issuance of the first patent covered in the "Patent Rights" (and on
January 1 of each year) thereafter; provided, however, that running royalties
subsequently due on NET SALES for each said year, if any, shall be creditable
against the license maintenance fee for said year. License maintenance fees
paid in excess of running royalties shall not be creditable to running
royalties for future years.
(c) Royalties in an amount equal to [ * * * ] of NET SALES of the
LICENSED PRODUCTS and LICENSED PROCESSES used, leased or sold by and/or for
LICENSEE or an AFFILIATE.
(d) Royalties for SUBLICENSEES will amount to [ * * * ] of running
royalties received by LICENSEE and AFFILIATES from SUBLICENSEES for
sublicenses of LICENSED PRODUCTS or LICENSED PROCESSES, and will not exceed
[ * * * ] of sublicensee NET SALES.
4.2 All payments due hereunder shall be paid in full, without
deduction of excise taxes which may be imposed by any government and which shall
be paid by LICENSEE.
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4.3 No multiple royalties shall be payable because any LICENSED
PRODUCT or LICENSED PROCESS, its manufacture, use, lease or sale are or shall be
covered by more than one PATENT RIGHTS patent application or PATENT RIGHTS
patent licensed under this Agreement or for sales between LICENSEE and an
AFFILIATE.
4.4 Royalty payments shall be paid in United States dollars in Athens,
Ohio, or at such other place as OU may reasonably designate consistent with the
laws and regulations controlling in any foreign country. If any currency
conversion shall be required in connection with the payment of royalties
hereunder, such conversion shall be made by using the exchange rate prevailing
at the Chase Manhattan Bank (N.A.) on the last business day of the calendar
quarterly reporting period to which such royalty payments relate.
4.5 Royalty payments are nonrefundable.
4.6 Payments made to LICENSEE and AFFILIATES from SUBLICENSEES, in
lieu of royalties as specified in Article 4.1 (d) above, [ * * * ] shall be
paid by the LICENSEE to OU at the time an Agreement with a SUBLICENSEE takes
affect. LICENSEE shall present the methodology and analysis upon which the
estimated value was calculated. Disputes over estimated value will be
resolved through Article 12. This provision excludes payments from
SUBLICENSEES to LICENSEE for the purpose of sponsored research.
ARTICLE 5 - REPORTS AND RECORDS
5.1 LICENSEE shall keep full, true and accurate books of account
containing all particulars that may be necessary for the purpose of showing the
amounts payable to OU hereunder. Said books of account shall be kept at
LICENSEE'S principal place of business or the principal place of business of the
appropriate division of LICENSEE to which this Agreement relates. Said books
and the supporting data shall be open four (4) times per year for five (5) years
following the end of the calendar year to which they pertain, for the inspection
of OU or its agents for the purpose of verifying LICENSEE'S royalty statement or
compliance in other aspects with this Agreement. Should such inspection lead to
the discovery of a greater than
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ten percent (10%) discrepancy in reporting, LICENSEE agrees to pay the full cost
of such inspection.
5.2 LICENSEE, within sixty (60) days after March 31, June 30,
September 30 and December 31, of each year, shall deliver to OU true and
accurate reports, giving such particulars of the business conducted by LICENSEE,
AFFILIATES and its SUBLICENSEES during the preceding three-month period under
this Agreement as shall be pertinent to a royalty accounting hereunder. This
shall include at least the following:
(a) number of LICENSED PRODUCTS manufactured and sold by LICENSEE,
AFFILIATES, and all SUBLICENSEES;
(b) total billings for LICENSED PRODUCTS sold by LICENSEE, AFFILIATES,
and all SUBLICENSEES;
(c) accounting for all LICENSED PROCESSES used or sold by LICENSEE,
AFFILIATES, and all SUBLICENSEES;
(d) total royalties due; and
(e) names and addresses of all SUBLICENSEES and AFFILIATES of
LICENSEE.
5.3 With each such report submitted, LICENSEE shall pay to OU the
royalties due and payable under this Agreement. If no royalties shall be due,
LICENSEE shall so report.
5.4 On or before the ninetieth (90th) day following the close of
LICENSEE's fiscal year, LICENSEE shall provide OU with LICENSEE's certified
financial statements for the preceding fiscal year including, at a minimum, a
Balance Sheet and an Operating Statement.
5.5 The royalty payments set forth in this Agreement and amounts due
under Article 6 shall, if overdue, bear interest until payment at a per annum
rate two percent (2%) above the prime rate in effect at the Chase Manhattan Bank
(N.A.) on the due date. The payment of such interest shall not foreclose OU
from exercising any other rights it may have as a consequence of the lateness of
any payment.
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ARTICLE 6 - PATENT PROSECUTION
6.1 OU shall apply for, seek prompt issuance of, and maintain during
the term of this Agreement the PATENT RIGHTS in the United States and in the
foreign countries to be mutually determined by OU and Licensee. Licensee shall
inform OU of its intentions to file in foreign countries 60 days prior to
required filing dates. At that time, the countries intended for filing should
be identified. At LICENSEE'S election, LICENSEE may apply for, prosecute, or
maintain any such patent applications, using patent counsel of its choice.
6.2 Payment of all fees and costs incurred after the effective date,
relating to the filing, prosecution, and maintenance of the PATENT RIGHTS shall
be the responsibility of LICENSEE.
6.3 Any and all inventions, technologies, know-how, materials,
products, data, ideas and related matters, related and/or unrelated to
Technology A, including any PATENT RIGHTS which may be issued thereon, which are
developed or otherwise discovered as a result of the SPONSORED RESEARCH
AGREEMENT between LICENSEE and OU shall be the property of OU and shall be
automatically and exclusively licensed to the LICENSEE pursuant to and subject
to the same terms and conditions of Technology A, including, but not limited to,
payment of royalties pursuant to Article 4.
6.4 OU and its employees shall cooperate with LICENSEE to the fullest
extent reasonable, except for payment of fees and costs, to help assure proper
patent filing, prosecution and maintenance.
6.5 Licensee and its employees shall cooperate with OU to the fullest
extent reasonable to help OU understand the PATENT RIGHTS sufficient to allow OU
to follow the patent filing and prosecution.
LICENSEE and its employees will cooperate with OU to the fullest extent
reasonably possible to help assure proper patent filing,prosecution and
maintenance should OU assume such duties and responsibilities.
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ARTICLE 7 - INFRINGEMENT
7.1 LICENSEE shall inform OU promptly in writing of any alleged
infringement of the PATENT RIGHTS by a third party and of any available evidence
thereof. Similarly, OU shall promptly inform LICENSEE in writing of any
alleged infringement of PATENT RIGHTS by a third party and any available
evidence thereof.
7.2 During the term of this Agreement the LICENSEE shall have the
right but not the obligation to prosecute at its own expense all infringements
of the PATENT RIGHTS and LICENSEE agrees to include OU as a party plaintiff in
any such suit, without expense to OU. The total cost of any such infringement
action commenced by the LICENSEE shall be borne by the LICENSEE.
7.3 If after OU has provided LICENSEE with ninety (90) days prior
written notice, the LICENSEE fails to either prosecute an infringer or enter
into a sublicense agreement, settlement, consent judgment or other voluntary
final disposition with an infringer, OU may prosecute such infringer Itself. No
settlement, consent judgement or other voluntary final disposition of the
infringement suit may be entered into without the consent of OU, which consent
shall not unreasonably be withheld.
7.4 Patent enforcement and/or defense litigation shall adhere to the
following:
(a) In the event that LICENSEE shall undertake the enforcement and/or
defense of the PATENT RIGHTS by litigation including alternative dispute
resolution, LICENSEE may withhold up to fifty percent (50%) of the payments
otherwise thereafter due OU under Article 4 hereunder and apply the same toward
reimbursement of up to half of LICENSEE's expenses, including reasonable
attorneys' fees, in connection therewith. Any recovery of damages by LICENSEE
for each such suit shall be applied first in satisfaction of any unreimbursed
expenses and legal fees of LICENSEE relating to such suit, and next toward
reimbursement of OU for any payments under Article 4 past due or withheld and
applied pursuant to this Article 7. The balance remaining from any such
recovery shall be treated as royalties from SUBLICENSEES.
(b) In the event that OU shall undertake the enforcement and/or
defense of the PATENT RIGHTS against third parties by litigation pursuant to
OU's rights under Section 7.3 of this Agreement, any recovery of damages by OU
for each such suit shall be applied first in satisfaction of any unreimbursed
expenses and legal fees of OU relating to such suit. The
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balance remaining from any such recovery shall be divided ninety percent (90%)
to OU and ten percent (10%) to LICENSEE.
7.5 In the event that a declaratory judgement action alleging
invalidity or noninfringement of any of the PATENT RIGHTS shall be brought
against LICENSEE, OU, at its option, shall have the right, within thirty (30)
days after commencement of such action, to intervene and jointly participate in
the defense of the action at its own expense.
7.6 In any suit as either party may be involved to enforce the PATENT
RIGHTS pursuant to this Agreement, the other party hereto shall, at the request
and expense of the party initiating such suit, cooperate in all respects and, to
the extent possible, have its employees testify when requested and make
available relevant records, papers, information, samples, specimens, and the
like.
7.7 LICENSEE, shall have the sole right in accordance with the terms
and conditions herein to sublicense the alleged infringer for future use of the
PATENT RIGHTS. Any upfront fees as part of such a sublicense shall be treated
per Article 4.
ARTICLE 8 - PRODUCT LIABILITY
8.1 LICENSEE shall at all times during the term of this Agreement and
thereafter, indemnity, defend and hold OU, its trustees, officers, employees and
affiliates, harmless against all claims and expenses, including legal expenses
and reasonable attorneys' fees, arising out of the death of or injury to any
person or persons or out of any damage to property and against any other claim,
proceeding, demand, expense and liability of any kind whatsoever resulting from
the production, manufacture, sale, use, lease, consumption or advertisement of
the LICENSED PRODUCT(s) and/or LICENSED PROCESS(es) or arising from any
obligation of LICENSEE hereunder.
8.2 LICENSEE shall obtain and carry in full force and effect liability
insurance in the amount of One Million Dollars ($1,000,000) per incident and
Three Million Dollars ($3,000,000) annually, to be increased by the parties, if
necessary, which shall protect LICENSEE and OU in regard to events covered by
Paragraph 8.1 above.
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8.3 EXCEPT AS OTHERWISE EXPRESSLY SET FORTH IN THIS AGREEMENT, OU
MAKES NO REPRESENTATIONS AND EXTENDS NO WARRANTIES OF ANY KIND, EITHER EXPRESS
OR IMPLIED, INCLUDING BUT NOT LIMITED TO WARRANTIES OR MERCHANTABILITY, FITNESS
FOR A PARTICULAR PURPOSE, AND VALIDITY OF PATENT RIGHTS CLAIMS, ISSUED OR
PENDING. NOTHING IN THIS AGREEMENT SHALL BE CONSTRUED AS A REPRESENTATION MADE
OR WARRANTY GIVEN BY OU THAT THE PRACTICE BY LICENSEE OF THE LICENSE GRANTED
HEREUNDER SHALL NOT INFRINGE THE PATENT RIGHTS OF ANY THIRD PARTY.
ARTICLE 9 - EXPORT CONTROLS
It is understood that OU is subject to United States laws and regulations
controlling the export of technical data, computer software, laboratory
prototypes and other commodities and that its obligations hereunder are
contingent on compliance with applicable United States export laws and
regulations. The transfer of certain technical data and commodities may require
a license from the cognizant agency of the United States Government and/or
written assurances by LICENSEE that LICENSEE shall not export data or
commodities to certain foreign countries without prior approval of such agency.
OU neither represents that a license shall not be required nor that, if
required, it shall be issued.
ARTICLE 10 - NON-USE OF NAMES
OU acknowledges that LICENSEE has a legitimate interest in using the name
of OU, OU's representative organizations, or OU's employees for capital raising
and financing purposes. Accordingly, OU consents to the use by LICENSEE and its
AFFILIATES and SUBLICENSEES for such purposes, of the name of OU, OU
representative organizations and OU employees having involvement with TECHNOLOGY
A, provided, that, in the case of any advertising, promotional or sales
literature, LICENSEE and its AFFILIATES shall obtain the prior written consent
of OU or said employee. LICENSEE shall not have the right to use any trademark
or logo of OU.
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ARTICLE 11 - ASSIGNMENT
This Agreement is not assignable and any attempt to do so shall be void.
ARTICLE 12 - ARBITRATION
12.1 All controversies and/or disputes arising out of this agreement,
shall be decided by a panel of three (3) arbitrators. Written notice of any
dispute shall be given by the aggrieved party, clearly specifying the nature of
the dispute and the relief requested, including the paragraph of this agreement
in question, if any. If the dispute cannot be amicably resolved (evidenced in
writing signed by both parties) within thirty (30) days of such notice, either
party may serve the other with a written demand for arbitration pursuant to this
Article.
12.2 Within fifteen (15) days of a demand for arbitration pursuant to
paragraph 12.1, the parties shall each select one arbitrator of their choice,
and the two arbitrators so selected shall choose the third arbitrator, who shall
serve as the chairperson of the panel. Each party shall be responsible for the
compensation of the arbitrator of their choice, and the cost of the third
arbitrator shall be equally shared by the parties. All pre-hearing, hearing,
and post-hearing procedures, including those for Disclosure and Challenge, shall
be governed by the Commercial Arbitration Rules of the American Arbitration
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Agreement and any litigation commenced prior to commencement of any proceeding
under Sections 12.1 or 12.2 shall be
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stayed pending the outcome thereof. The parties agree to fully abide by the
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prior to the effective date of
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In case of OU:
David N. Allen, Director
Technology Transfer Office
Ohio University Innovation Center
Athens, OH 45701
In the case of LICENSEE:
Glenn L. Cooper, MD, President
Progenitor
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except that questions
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affecting the construction and effect of any patent shall be determined by the
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IN WITNESS WHEREOF, the parties have duly executed this Agreement the day
and year set forth below.
OHIO UNIVERSITY
By: /S/ T. LLOYD CHESNUT
Name: T. Lloyd Chesnut, Ph.D.
Title: Vice President for Research and Graduate Studies
Date: 4-19-93
PROGENITOR
By: /S/ GLENN L. COOPER
Name: Glenn L. Cooper, M.D.
Title: President and Chief Executive Officer
Date: 4/20/93
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APPENDIX A
UNITED STATES PATENT RIGHTS
Disclosure on T7/T7 Technology
OU TTO docket number 050592
Classification: Applied Biological Sciences/Biochemistry
Self-initiating and self-sustaining eukaryotic transient gene expression systems
based on DNA vectors containing pre-bound bacteriophage T7 RNA polymerase
(Cytoplasmic expression vector / transfection / transcription)
Xiaozhuo Chen*, Yunsheng Li, Keyong Xiong, and Thomas E. Wagner
Edison Animal Biotechnology Center, Ohio University, Athens, Ohio 45701
*To whom reprint requests should be addressed.
Correspondence to: Dr. Xiaozhuo Chen
Present address:
Progenitor Inc.
One President Street
Athens, Ohio 45701
Telephone: 614-593-4608
Fax: 614-593-4795
Abbreviation: RNAP, RNA polymerase; hGH, human growth hormone; CAT,
chloramphenicol acetyltransferase; kbp, kilobase pairs; DMEM, Dulbecco's
modified Eagle medium; kb, kilobases.
<PAGE>
APPENDIX A
UNITED STATES PATENT RIGHTS
Disclosure on T7/T7 Technology
OU TTO docket number 050592
Classification: Applied Biological Sciences/Biochemistry
Self-initiating and self-sustaining eukaryotic transient gene expression systems
based on DNA vectors containing pre-bound bacteriophage T7 RNA polymerase
(Cytoplasmic expression vector / transfection / transcription)
Xiaozhuo Chen*, Yunsheng Li, Keyong Xiong, and Thomas E. Wagner
Edison Animal Biotechnology Center, Ohio University, Athens, Ohio 45701
*To whom reprint requests should be addressed.
Correspondence to: Dr. Xiaozhuo Chen
Present address:
Progenitor Inc.
One President Street
Athens, Ohio 45701
Telephone: 614-593-4608
Fax: 614-593-4795
Abbreviation: RNAP, RNA polymerase; hGH, human growth hormone; CAT,
chloramphenicol acetyltransferase; kbp, kilobase pairs; DMEM, Dulbecco's
modified Eagle medium; kb, kilobases.
<PAGE>
APPENDIX A
ABSTRACT
A novel eukaryotic expression system has been developed. This system
differs from all other existing expression systems in that it relies on the
binding of bacteriophage T17 RNA polymerase (RNAP) to its cognate T17 promoters,
locate on a plasmid which contains a T7 RNAP gene driven by the T7 promoter and
functional/reporter gene driven by another T7 promoter (T7T7/T7-gen construct),
prior to cell transfection. This T7T7 promoter-gene arrangement creates, a
potential positive feedback loop for the expression of the T7 RNAP gene. Once
this DNA-enzyme complex is introduced into eukaryotic cells by lipofection, the
transcription of the T7 and the functional/reporter genes is initiated by the
prebound TM RNAP. The T7 RNAP, which is responsible for the initiation and
maintenance of expression of both T7 and functional/reporter genes, is
replenished by translation of newly synthesized T17 mRNA. This T7 system was
designed in such a manner that the expression of the functional/reporter genes
can occur in the cytoplasm and does not require any nuclear involvement. When
transfected by a pT7T7/T7hGH plasmid with the prebound T7 RNAP, mouse L cells
were found to secrete detectable amount of biologically active human growth
hormone as early as 8 hours after the transfection, and the expression could be
sustained for at least 6 days. This system was successfully used to express
human growth hormone and chloramphenicol acetyltransferase genes in both mouse L
and human HepG2 cells.
INTRODUCTION
Several DNA delivery and expression systems have been developed and
successfully used to introduce and express foreign genes in eukaryotic cells,
and less satisfactorily, in animals. These systems basically consist of a DNA
delivery method and a DNA vector. DNA delivery methods include calcium
phosphate precipitation (1), DEAE-dextran (2), lipofection (3), electroporation
(4) retroviruses (5), direct DNA injection (6, 7), specific receptor-mediated
DNA uptake (8, 9), and more recently, aerosol DNA delivery (10). Expression
vector are in general a plasmid DNA containing a gene of interest linked to a
promote sequence which dictates the expression of the gene once the gene is
introduce into a given cell line.
2
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APPENDIX A
Because of the use of eukaryotic or mammalian promoters, all these
methods require nuclear localization of the introduced DNA for gene expression.
Yet in only a very small percentage of the cells which take up DNA is the DNA
found within the nuclei of the cells. This problem becomes more pronounced when
whole animal tissues are the targets of foreign gene expression because cell
division, which is required for nuclear deposition of the introduced DNA, does
not occur at nearly as high a frequency in the cells of tissues as it does in
cultured cells. Conversely, strong evidence has been provided for the efficient
cytoplasmic uptake of foreign DNA by cells and animals (3,). And, the DNA
introduced into the cells of these whole animal tissues has been observed to
remain for periods of up to several months (7).
Bacteriophage T7 RNA polymerase (RNAP) has been used extensively IN VITRO
and IN VIVO in transcription and expression studies both in bacteria and
eukaryotic cells due to some of its unique biochemical characteristics: it is a
single polypeptide enzyme capable of carrying out transcription with high
promote specificity and efficiency, without involvement of any other cellular
transcription factors (11-13). Recombinant vaccinia viruses containing a T7
gene or a cell line which constitutively expresses T7 RNAP were used to express
genes of interest in the cytoplasm of mammalian cells (14-17). When
chloramphenicol acetyltransferase (CAT) gene was inserted into a T7
promoter-containing mammalian vector and transfected into a stable cell line
which expressed T7 RNAP, as high as 30% of cytoplasmic proteins were found to be
the CAT enzymes in the transfected cells when the cells were coinfected with the
recombinant vaccinia viruses during transfection (17). However, the expression
of any gene using this T7 system has to be coupled with cell lines which express
T7 RNAP in the first place and with coinfection of the recombinant vaccinia
viruses, greatly limiting the usefulness and flexibility of the system. Based
on our knowledge of T7 RNAP and existing T7 expression systems, we hypothesized
that a cell-type independent, self-initiating, and self-sustaining, eukaryotic
transient expression vector could be constructed if T7 RNAP molecules could be
prebound to T7 promoter sequences and cointroduced into cells with plasmid DNA.
Here we describe the construction and expression studies of a novel
eukaryotic expression vector. This vector contains a T7 RNAP gene driven by a
T7 promoter, and another sequence containing a functional or a reporter gene
under the control of a second T7 promoter
3
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APPENDIX A
(T7T7/-gene construct). These two sequences can be either in the same plasmid
(single plasmid system) or in two separate plasmids (dual plasmid system) when
introduced to cells. However, the most important feature which distinguishes
this system from other existing gene expression systems is that the initiation
and maintenance of the gene expression depend upon the binding of T7 RNAP to its
promoters before the plasmid(s) is introduced into cells. Once the DNA-T7
enzyme complex is in the cytoplasm of the cells, the transcription is initiated
by the T7 RNAP prebound to the T7 promoters in the plasmid. The transcription
of both T7 and functional/reporter genes is subsequently maintained by new
cellularly synthesized T7 RNAP. In this study, gene expression using single or
dual T7 plasmid systems was investigate and compared with a conventional
mammalian promoter-containing expression vector. Two genes with different
expression modes, human growth hormone (hGH, as a secretory protein) and CAT (an
intracellular enzyme) were used on mouse L and human HepG2 cells, to test our
hypothesis. The T7 system described herein may provide a new method for the
efficient utilization of cytoplasmically introduced genetic sequences designed
for the specific expression of mRNA and protein products.
MATERIALS AND METHODS
ENZYMES. Bacteriophage T7 RNAP (50U/ul), restriction endonucleases, and
the Klenow fragment were from New England BioLabs.
CELLS AND PLASMIDS. Mouse L and human HepG2 cells were from Dr.
Kopchick's laboratory. E. Coli DH5alpha was from Bethesda Research
Laboratories. E coli HMS174 with pLysE (13, 18); plasmids pAR1 173 (11), which
contains a gene coding for T7 RNAP, and pATUO-1 (19), which contains a Lac I
gene, were provided by Dr. Studier. Plasmid pTM-1 (20) was from Dr. Moss'
laboratory. Plasmid phGH (21) was from Dr. Goodman's laboratory. Plasmid
pBLCAT (22), which contains a CAT gene, was obtained from Dr. T. Coleman; and
pMThGH, which contains a hGH cDNA (21) driven by a mouse metallothionein I
promoter (23), was constructed in our laboratory (X.C., unpublished data).
The bacteria were grown in LB medium with appropriate antibiotics.
4
<PAGE>
APPENDIX A
CONSTRUCTIONS OF PLASMIDS. pTM-1, a cytoplasmic expression vector which
contains a T7 promoter connected to at its 3' end an EMC capping independent
sequence (20), was linearized with restriction enzyme Bam HI. A 2.6 kbp Barn HI
fragment of pAR 1173 containing a T7 gene was inserted into pTM-I vector by
ligation. The ligation products were subsequently transformed into E coli
strain DH5alpha. However, 100% of the recombinant clones were found to have T7
gene inserted in an orientation opposite to that of the promoter's (which formed
a T77T construct, not T7T7. X.C. and Y.L., unpublished data), suggesting that
T7T7 construct was lethal to the host bacteria (18, 19, 24). Several steps were
subsequently taken to reduce the toxicity to bacterial hosts resulted from the
expression of the T7 gene while maintaining the ability of the construct to be
expressed in eukaryotic cells.
First, a 1.6 kbp EagI/EcoNI Lac I gene which encodes a repressor was
isolated from pAUTO-1 and inserted into ClaI and XbaI sites of pTM-I by a blunt-
end ligation (figure 1). In addition, an operator sequence, GGA ATT GTG AGC GGA
TAA CAA TTCC (25mer) (24), which provides the binding site for Lac I repressor,
was inserted immediately 3' to the T7 promoter sequence (as shown in pTLO-1 in
figure l) where the operator was shown to have the maximal suppression of T7
promoter activity (24). As a second step to further reduce the cytotoxicity,
the Shine-Dalgamo sequence (S-D box) of the T7 gene was removed from the gene to
reduce unwanted translation of T7 mRNA which was generated as a result of a
leaky Lac I suppression (figure 1). Oligonucleotide CCC GAT TTA CTA ACT CCA TGG
ACA CGA TTA ACA TCG CTA AG (41mer) was used as a primer for deletion of S-D box
sequence using a phagemid mutagenesis method (25, 26). In addition, an NcoI
site (CCATGG, as underlined in the oligonucleotide) was added to the TM gene. A
2.6 kbp NcoI/BamHI modified T7 fragment was inserted into the gap between the
Ncol and BamHI sites of pTM-I in such a manner that the optimized translation of
the T7 gene would be initiated from the ATG in the NcoI site (23, figure 1).
However, this modification altered the second amino acid residue of T7 RNAP from
an Asn (AAC) to an Asp (GAC). Finally, the constructed pT7T7 was transformed
into and prepared from HMS174 cells which contained a plasmid pLysE encoding a
T7 lysozyme, a T7 RNAP inhibitor. All the mutations described in this and
subsequent sections were confirmed by DNA sequencing (27).
5
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APPENDIX A
Construction of pT7hGH was simpler than that of pT7T7 since hGH is not
toxic to the bacterial hosts. pTM-I was linearized with SmaI in the polycloning
site. A 0.9 kbp Hind III fragment of an hGH cDNA was isolated from plasmid
phGH, 5' protruding ends of the fragment were filled by Klenow fragment and
dNTPs and was inserted into pTM-I by a blunt-end ligation. With a deletion
mutation, the reading frame of the hGH sequence was adjusted in a similar manner
as for pT7T7 so that the ATG in NcoI site serves as the first codon for the hGH
cDNA (figure 2A).
Construction of pT7CAT was carried out in a similar fashion as that of
pT7hGH. A 1.7 kbp DNA fragment containing CAT gene was isolated from pBLCAT3,
blunt ended with Klenow fragment and dNTPs, and inserted into SmaI site of pTM-1
by ligation. The relative position of ATG codon of CAT gene to the T7 promoters
was also adjusted to the optimal position by a deletion mutation (figure 2B).
The adjustments for both hGH and CAT genes did not result in mutations in their
amino acid sequences.
Following construction of pT7T7 and pT7hGH a single plasmid, pT7T7/T7hGH,
was constructed from these sequences. As shown in figure 3, pT7T7 was
linearized at EagI site, the EagI site was subsequently filled by Klenow
fragment. A 2.1 kbp ClaI/EagI T7hGH fragment was isolated from pT7hGH, the
single stranded cohesive ends were also filled in by Klenow fragment.
pT7T7/T7hGH was made by ligating these two sequences together followed by
transformation using HMS174 pLysE cells. Large scale preparation of
pT7T7/T7hGH, and other plasmid DNA used in this study, were made using Qiagen
columns (Qiagen).
ADDITION OF POLY(DT) TAILS TO HGH AND CAT GENES IN PT7 PLASMIDS. This T7
system was designed as a cytoplasmic expression system and therefore no natural
poly(A) tails would be added to the hGH and CAT mRNA generated by this system.
Poly dT tails of 40 base pairs long were added to the 3' ends of both hGH and
CAT genes in, order to increase the stability and possibly the translation
efficiency of the hGH and CAT mRNA.
TRANSIENT TRANSFECTIONS. Mouse L and human HepG2 cells were grown in
DMEM supplemented with 10% Nu serum or 10% calf serum (growth media),
respectively, in 6-well cell culture dishes to 80% confluence. plasmid DNA was
diluted with H20 and the T7 buffer to
6
<PAGE>
APPENDIX A
various concentrations in a total volume o 75 micro-l in sterile polysterene
tubes. Five micro-l of T7 RNAP (50micro-l) was added to DNA solution and the
mixture was incubated at room temperature for 10 min followed by addition of
20 micro-l (lmicro-g/micro-l) of lipofectin (3). After gentle mix, the
lipofectin-DNA-enzyme solution was incubated at room temperature for another
5 min. Meanwhile, growth media were removed from L cells, the cells were
washed twice with DMEM. One and half ml of DMEM was added to each well,
followed by addition of 100 micro-l of lipofectin-DNA-enzyme solution. After
gentle mix, the dishes were incubated at 37 C in a cell culture incubator.
Following 4 hours' incubation, the media were removed, 2 ml of growth media
were added to each well, and the dishes were incubated at 37 C with 5% CO2.
Growth media from the transfected cells were collected every 8 hours for the
first 24 hours and then every 24 hours and the cells were replenished with
fresh growth media. Cells which were transfected with pT7T7/T7hGH alone,
pT7hGH + T7 RNAP, or pMThGH were used as expression controls. pMThGH, a.
conventional expression vector, also served as a reference for comparison of
expression profiles. Transfection of pMThGH was performed using a standard
lipofection protocol without adding T7 RNAP. In a similar manner, pT7CAT and
pT7CAT + T7/RNAP were used as controls for CAT assays, respectively. In
DEAE-dextran transfections, DNA-T7 RNAP solution was prepared identically as
described for lipofection. After adding DEAE-dextran containing DMEM to
DNA-T7 enzyme solution, cells were transfected under the conditions as
previously described (28). HGH RIA. hGH RIA was performed using a
commercially available RIA kit (Hybritech, San Diego).
CAT ASSAY. pT7T7, pT7CAT, and T7 RNAP were coincubated and
transiently transfected into either L or hepG2 cells by the same lipofection
protocol as described in transfection section. 24 hours after the
transfection, the cells from each well of a 6-well dish were individually
harvested in 1 ml PBS, Following centrifugation and removal of PBS, the cells
were resuspended in 100 micro-l of 100 mM Tris (pH 7.8). Frozen and thawed
three times, the cell debris was removed by centrifugation. The supernatant
was incubated at 65 C for 10 min, followed by centrifugation to remove
protein precipitates. The resulting supernatant was assayed for CAT activity
as described (29).
7
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APPENDIX A
NORTHERN ANALYSIS OF T7 AND hGH mRNA. Twenty four or 48 hours after
the transfection, transfected cells were lysed by 1 ml of RNAzol
(Cinna/Biotecx Laboratories) immediately after PBS wash. Total RNA was
isolated as described (30). 20 micro-g of total RNA from each cell sample
was subjected to 1% formaldehyde gel electrophoresis. Following the
electrophoresis, resolved RNA was transferred from the gel to a nylon-based
membrane (Gene Screen Plus from NEN), hybridized to a (32)P-labeled, 2.6 kbp
T7 fragment and subsequently visualized by autoradiogrphy (31). After being
stripped off the T7 probe, the same membrane was rehybridized to a 0.9 kbp
hGH probe. Actin mRNA served as reference controls to standardize sample
intensities. RESULTS
CONSTRUCTION OF PLASMIDS. Figures 1, 2 and 3 schematically demonstrate
how the plasmids used in this study, pT7T7, pT7hGH, pT7CAT, as well as
pT7T7/T7hGH, were constructed. The pT7T7 and pT7T7/T7hGH plasmids were grown in
the presence of the pLysE plasmid to reduce the toxicity of the T7 enzymes to E
coli. Therefore, the preparations of these plasmids were always contaminated
with some pLysE plasmid (less than or equal to 10%, Y.L. and K.X., unpublished
data). Since pT7CAT and pT7hGH are not toxic to their bacterial hosts, their
replication did not require pLysE.
COMPARISON OF LIPOFECTIN AND DEAE-DEXTRAN TRANSFECTIONS. In order to
determine which DNA delivery methods work more efficiently for the T7 system,
both lipofectin or DEAE-dextran transfection methods were compared on the same
6-well cell culture plates. Table 1 shows the elative transfection efficiencies
of lipofection and DEAE-dextran methods on the T7 expression systems. CAT
assays, compared to hGH assays, resulted in smaller standard deviations largely
due to the higher sensitivity of the assays while hGH assays could not as
accurately detect low levels of hGH expression from DEAE-dextran transfected
cells. As indicated by table 1, lipofection was approximately 8 - 10 times more
efficient than DEAE-dextran method for expressing the T7 systems.
TRANSIENT EXPRESSION OF THE FUNCTIONAL/REPORTER GENES.
8
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APPENDIX A
a. hGH EXPRESSION. Expression of pT7T7+pT7hGH (dual plasmid) or
pT7T7/T7hGH (single plasmid) in L cells compared to that of pT7hGH and pMThGH is
shown in figure 4. Cell culture fluids from transiently transfected L cells
were collected and assayed for hGH every 8 hours for the first 24 hours and then
every 24 hours for 5 days. Assays for more than 6 days were not performed
because by day 7 the cells were severely overgrown in the well and starting to
die. Detecatble levels of hGH could be found as early as 8 hours after
transfection in cell culture fluids collected from cells transfected either by
pT7T7 + pT7hGH + T7 RNAP or pT7T7/T7hGH + T7 RNAP. However, expression of
pMThGH (which serves as positive control as well as a reference for expression
profiles in this study) could not be detected until 24 hours after the
transfection. The expression of hGH by pMThGH was not higher than those of the
T7 systems until 72 hours or later. For cell samples transfected by pT7hGH plus
T7 RNAP (negative control I), only the culture medium collected 8 hours after
the transfection demonstrated low levels of hGH (figure 4). The expression
disappeared after longer incubations. No hGH could be detected at any time in
the culture fluids collected from the cells transfected by pT7T7/T7hGH alone.
The expression of the T7 systems reached their peaks (approximately 3 ng/ml)
approximately 24 to 48 hours after the transfection whereas expression of pMThGH
reached its peak approximately 7ng/ml) at about 96 to 120 hours. Therefore,
the kinetic profile of the hGH expression by the T7 system seemed to be quite
different from that of traditional expression vector.
b. CAT EXPRESSION. Figure 5 demonstrates the results of CAT assays.
Cells were lysed and assayed 48 hours after the transfection. CAT activities in
pT7T7 + pT7CAT + T7 RNAP transfected cells were more than 50 times that of the
pT7CAT + T7 RNAP transfected samples (negative control type 1) and were more
than 100 times that of pT7CAT transfected samples (negative control type II).
On the basis of absolute quantity, it turned out that the intracellular CAT
activity corresponds to approximately 2-3 ng CAT protein/well (or per 10(6)
cells), in the same range of magnitude as extracellular hGH levels expressed by
either pT7T7/T7hGH+T7 RNAP or pT7T7+pT7hGH+T7 RNAP.
NORTHERN ANALYSIS OF T7 mRNA. In order to prove that the sustained
expression of the functional/reporter genes in the T7 systems was indeed due the
sustained expression of the T7 genes in the same systems, total RNA from the
transfected cells was isolated and analyzed by
9
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APPENDIX A
Northern blots as shown in figure 5. Both T7 and hGH mRNA was found in the
cells transfected by pT7T7/T7hGH+T7 RNAP, but not in the cells transfected
either by pT7T7/T7hGH alone, or by pT7hGH+T7 RNAP (figure 5-I and II). The
position of the major bands on the blots correspond to the anticipated sizes for
the T7 an hGH mRNA. Also, the levels of T7 and hGH mRNA were found to follow
the same trend: the higher the T7 mRNA level (24 hr), the higher the hGH mRN
level, and vice versa (48hr's samples).
EXPRESSION OF hGH AND CAT IN BOTH L AND HepG2 CELLS. Expressions hGH and
CAT by mouse L and human Hep G2 cells transfected pT7T7+pT7hGH, pT7T7+pT7CAT are
summarized in table 2. Because two cells types grow in very different modes (L
cells grow in a single uniform layer whereas HepG2 cells tend to grow in
clusters), hGH and CAT levels per well were found quite different for two cell
types. However, when the expression levels were adjusted on the basis of per mg
of cell proteins, it was found that L cells and HepG2 cells express both genes,
particularly the CAT gene, with comparable efficiencies (table II).
DISCUSSION
We have described the construction and expression of a novel eukaryotic
expression system. To our knowledge, this is the first reported successful
attempt to express genes of interest in mammalian cells using a plasmid-bound
transcriptase, in this case a T7 RNAP, prior. to the introduction of plasmid
into the cells. The rationale for this unique design is presented and
summarized in figure 7. Great efforts were made to construct the T7T7 sequence
in order to reduce the cytotoxicity to such levels as to allow sufficient
quantities of the plasmids to be prepared from bacterial cells for eukaryotic
expression studies. Most of the genetic manipulations were similar to those
used in construction of T7 vectors for the expression of cloned genes in
bacteria (18, 19, 24). However, the goal of making expression systems
functional in eukaryotic cells, not in bacterial cells, allowed us to make more
genetic modifications such as the removal of S-D box from the T7 gene, to
further minimize its toxicity to E coli host cells (figure 1). It is not known
at present whether all these manipulations are necessary for successful
production of the plasmids in E coli. However, from our experiences, these
manipulations are advantageous with respect to increasing plasmid yields and
reducing the
10
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APPENDIX A
risk of DNA mutations resulted from the selective pressure exerted upon the host
cells by the toxic effects of the expressed T7 RNAP.
In this study, lipofection was found far more superior to the DEAE-
dextran method to deliver the T7 system to cells (table 1). The key for the
success of the T7 systems in eukaryotic cells is to keep the T7 RNAP tightly
bound in undegraded form to the DNA during the process of transfection. The
experimental result suggests that the liposomes may better protect the DNA-T7
enzyme complex and/or better facilitate the complex reaching the cytoplasm of
the cells.
Sustained hGH and CAT expressions were found in cells transfected with
either pT7T7 + pT7hGH + T7 RNAP, or pT7T7/T7hGH + T7 RNAP (figure 4), or pT7T7 +
pT7CAT + T7 RNAP (figure 5). Human growth hormone which was secreted into the
growth media by the transfected L cells was found biologically active in rat Nb2
cells (X.C. and Y.L., unpublished data). In contrast, extremely low levels of
hGH or CAT activities were detected for just a very short period in cells
transfected with pT7hGH+ T7 RNAP or pT7CAT + T7 RNAP (figures 4 and 5 ). These
results suggest that it is the post-transfection expression of the T7 gene in
either pT7T7 or in pT7T7/T7hGH which maintained the lasting expression of the
CAT and hGH genes. Since there was no T7T7 sequence in the control plasmids to
provide a functional T7 gene in the transfected cells, no T7 RNAP could be
cellularly generated to replenish the enzyme pool established at the beginning
of the transfection, only low and temporary gene expression was observed. The
presence of the T7 and hGH mRNA in the cells transfected by pT7T7/T7hGH+T7 RNAP
and the absence of both mRNA in the cells transfected with pT7T7/T7hGH alone or
pT7hGH+T7 RNAP (figure 6) strongly support the notion that the T7T7 positive
feedback loop was indeed in operation in the transfected cells. As shown in
figure 4, the onset of expression of hGH using the T7 systems is more rapid
compared to that of a conventional mammalian promoter-containing plasmid pMThGH.
This result is consistent with that of the study using a T7CAT vector coupled
with recombinant vaccine viruses, which showed that 48 hours after the
transfection the cells transfected by the T7 system produced several hundred-
fold higher CAT activities than those expressed either RSVCAT or SV40CAT (14).
The rapid expression and different kinetic profiles exhibited by the T7 systems
(figure 4) suggest that an expression mechanism, which differs from the one used
by pMThGH, was employed by the T7 system. It is
11
<PAGE>
APPENDIX A
likely that the plasmid-bound T7 RNAP initiated transcription immediately after
the plasmids were taken into the cytoplasm of the cells, followed by rapid
protein synthesis and secretion which resulted in the shift the expression
curves to the left (figure 4). In contrast, pMThGH had to reach the nuclei of
the transfected cells for hGH expression. This may explain the long delay of
the hGH expression by pMThGH. This result is consistent with those of other
studies which showed that reporter genes were actively transcribed by T7 RNAP in
the cytoplasm of cells (14, 17). It is also consistent with the cytoplasmic
expression ability of the T7 parental plasmid pTM-I (20). Because of the rapid
and efficient expression in the early hours post transfection compared to other
conventional plasmid systems, this T7 expression system may prove to be useful
to express cDNA in those circumstances in which rapid assays are desirable.
Because of the unique self-sufficient and cellular factor-independent
natures of the T7 RNAP, this T7 system is basically cell-type independent. It
should allow expression of virtually any cDNAs in a wide range of eukaryotic
cells which can be transfected by lipofectin. Comparable expression
efficiencies of the T7 systems (for both hGH and CAT genes) in mouse L and human
HepG2 cells support this notion (Table 2). This expression system can be
particularly useful when foreign gene expression is desired in a specific cell
type but appropriate promoters for that cell type are unavailable. In addition,
cytoplasmic expression demonstrated by this and other studies may provide an
alternative to nuclear expressions, particularly in animals, for foreign gene
expression. Rapid and efficient transcription demonstrated by this system
suggest that the T7 system may also be utilized to produce RNA products such as
antisense or ribozyme RNAs in cells. Finally, the successful expression of the
functional/reporter genes with a DNA prebound enzyme suggests that other DNA
binding proteins may also be cointroduced into cells with DNA.
REFERENCES
1. Wigler, M., Pellicer, A., Silverstein, S., Axel, R., Urlaub, G. &
Chasin, L. (1979) PROC. NATL. ACAD. SCI. USA 76, 1373-1376.
2. Sompagnac, L. M. & Danna, K. J. (1981) PROC. NATL. ACAD. SCI.
USA 78, 7575-78.
12
<PAGE>
APPENDIX A
3. FeIgner, P. L., Gadek, T. R., Holm, M., Roman, R., Chan, H. W.,
Wenz, M., Northrop, J. P., Gingold, G. M. & Danielsen, M. (1987)
PROC. NATL. ACAD. SCI. USA 84, 7413-7417.
4. Neumann, E., Schaefer-Ridder, M., Wang, Y. & Hofschneider, P. H.
(1982) EMBO J. 7, 841-845.
5. Schimotohno, K. & Ternin, H. M. (1981) CELL 26, 67-77.
6. Benvensty, N. & Reshef, L. (1986) PROC. NATL. ACAD. SCI. USA 83,
9551-9555
7. Wolff, J. A., Malone, R. W., Williams, P., Chong, W., Acsadi, G.,
Jani, A. & FeIgner, P. L. (1990) SCIENCE 247, 1465-1468.
8. Wu, G. Y. & Wu C. H. (1988) J. Biol. Chem. 263, 14621-14624.
9. Wu, C. H., Wilson, J. M. & Wu, G. Y. (1989) J. BIOL. CHEM. 264,
16985-16987.
10. Stribling, R., Brunette, E., Liggitt, D., Gaensler, K. & Debs, R.
(1992) PROC. NATL. ACAD. SCI. 89, 11277-11281.
11. Davanloo, P., Rosenberg, A. H., Dunn, J. J. & Studier, F. W.
(1984) PROC. NATL. ACAD. SCI. USA 81, 2035-2039.
12. Dunn, J. J. & Studier, F. W. (1983) J. MOL. BIOL. 166, 477-535.
13. Studier, F. W., Rosenberg A. H., Dunn, J. J. & Dubendorff. J. W.
(1990) METHODS ENZYMOL. 185, 60-89.
14. Fuerst, T. R., Niles, E. G., Studier, F. W. & Moss, B. (1986)
PROC. NATL. ACAD. SCI. USA 83, 8122-8126.
15. Fuerst, T. R. & Moss, B. (1989) J. MOL. BIOL. 206, 333-348.
16. Elroy-Stein, O., Fuerst, T. R. & Moss, B. (1989) PROC. NATL. ACAD.
SCI. USA 86, 6126-6130.
17. Elroy-Stein, O. & Moss, B. (1990) PROC. NATL. ACAD. SCI. USA 87,
6743-6747.
18. Studier, F. W. (1991) J. MOL. BIOL. 219, 37-44.
19. Dubendorff, J. W. & Studier, F. W. (1991) J. Mol. Biol. 219,
61-68.
20. Moss, B., Elroy-Stein, O., Mizukarni, T., Alexander, W. A., &
Fuerst, T. R. (1990) NATURE 348, 91-92.
13
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APPENDIX A
21. Martial, J. A., Hallewell, R A., Baxter, J. D. & Goodman H. M.
(1979) SCIENCE 205, 602-607.
22. Luckow, B. & Schutz, G. 1987 NUCLEIC ACIDS RES. 15 5490
23. Brinster, R. L., Chen, H. Y., Trumbauer, M., Senear, A. W.,
Warren, R. & Palmiter R. D. 1981 CELL 27 223 -23 1.
24. Dubendorff, J. W. & Studier, F. W. (1991) J. MOL. BIOL. 219,
45-59.
25. Kunkel, T. A. (1985) PROC. NATL. ACAD. SCI. USA 82, 488-492.
26. Kunkel, T. A., Roberts, J. D. & Zukour, R. A. (1987) METHODS
ENZYMOL 154, 367-382.
27. Sanger, F., Niklen S., & Coulson. A. R. (1977) PROC. NATL.
ACAD. SCI. USA 76, 4350-4354.
28. Chen, X. Z., Shafer, A. W., Yun, J. S., Li, Y. S., Wagner, T. E. &
Kopchick, J. J. 1992 MOL. ENDOCRINOL. 6, 598-606.
29. Neumann, J. R., Morency, C. A. & Russian, K. O. (1987)
BIOTECHNIQUES 5, 444-447.
30. Chomczynski, P. & Sacchi, N. (1987) ANAL. BIOCHEM. 162, 156-159
31. Rave, N., Crkvenjakov, R. & Boedtker, H. (1979) NUCLEIC ACIDS RES.
6, 3559-3567.
14
<PAGE>
APPENDIX A
ACKNOWLEDGMENT
We thank Dr. Kopchick for L and HepG2 cells, Dr. Studier for generously
providing plasmids pAR1173, pAUTO-1, and HMS174 (pLysE) cells; for his comments
on the constructions of plasmids, and Dr. Moss for pTM-I plasmid. We thank Dr.
Wight for critical reading and suggestions on the manuscript, and S. Aizicovici
for technical assistance. This study was supported in part by the Thomas Edison
Program of the State of Ohio.
X. Chen and Y. Li equally contributed to this study and either should be
considered as first author.
15
<PAGE>
APPENDIX A
FIGURE AND TABLE LEGENDS
Figure 1. Construction of pT7T7 plasmid. pTM-1 and pAR1173 are used as
starting plasmids. pTM-I contains a bacteriophage T7 (PHI10) promoter (PT7), a
capping independent (EMC) sequence which facilitates translation of uncapped
transcripts, as well as a T7 transcription termination sequence (TT7).
Polyclonig site (PCS) in pTM-I contains several restriction sites for cDNA
insertions. pAR1173 provides a T7 RNAP gene (Bam HI fragment). In pTLO-1, Lac
I and Op represent the Lac I gene and the operator sequence, respectively.
pT7T7 was constructed as described in METHODS AND MATERIALS.
Figure 2. Structures of plasmids pT7hGH and pT7CAT. A. pT7hGH, B.
pT7CAT. pT7hGH and pT7CAT were constructed using similar strategies. Both genes
were individually inserted into pTM-I. NcoI site (5'-proximal one for pT7CAT)
in both plasmids represents the junction of the EMC sequence and the inserted
genes (hGH or CAT). ATG codon in the NcoI site represents the first amino acid
residue for both hGH and CAT proteins. Internal restriction sites Bgl II for
the hGH cDNA and Nco I for the CAT gene were used for restriction analysis to
identify the inserted genes. pT7hGH and pT7CAT do not contain either Lac I or
operator sequences.
Figure 3. Construction of pT7T7/T7hGH. Smaller ClaI/EagI fragment from
pT7hGH was isolated and inserted into EagI site of pT7T7 by a blunt end ligation
as described in METHODS AND MATERIALS. In the clone used in this study, the
orientation of the T7hGH fragment in pT7T7/T7hGH is the same as that of T7T7
sequence. In this plasmid, T7hGH sequence has a structural arrangement similar
to T7T7 except that the operator is absent from T7hGH sequence.
Table 1. Comparison of relative transfection efficiencies.
Mouse L cells on the same 6-well plate were transfected with pT7T7/ThGH+
T7 RNAP or pT7T7+pT7CAT+T7 RNAP by either lipofection or DEAE-dextran methods as
described in MATERIALS AND METHODS. These two methods were compared on the
basis of hGH or CAT activities expressed per mg of cellular proteins isolated
from the transfected cells. The mean values of hGH and CAT activities of the
cells transfected by lipofection were arbitrarily assigned
16
<PAGE>
APPENDIX A
as 100. The activities of hGH or CAT expressed by DEAE-dextran method are
presented as mean +/- SD with respect to those expressed by lipofection method.
Figure 4. Expression of hGH in mouse L cells transfected by T7hGH
systems. Mouse L cells were transfected by either pT7T7 + pT7hGH (dual
plasmids) or pT7T7/T7hGH (single plasmid) with prebound T7 RNAP as follows:
One micro-g of plasmid DNA (0.5 micro-g+0.5 micro-g for dual plasmids) was
coincubated with 125 U of T7 RNAP at room temperature for 10 minutes, 20
micro-1 of lipofectin was mix with the DNA-enzyme complexes to a final volume
of 100 micro-1. Following 5 min room temperature incubation, the
liposome-DNA-enzyme mixture was added to mouse L cells in a 6-well cell
culture dish. The transfection and protein assays were performed as
described in MATERIALS AND METHODS. Cell samples transfected by pT7T7/T7hGH
alone, pT7hGH + T7 RNAP, or pMThGH ( 1 micro-g DNA/well served as negative
and positive controls, respectively. Each point in curves represents an
average value of at least three individual measurements. Error bars
represent standard deviations of the measurements. [open box]= pT7T7/ThGT7
alone, [filled diamond]=T7hGH+T7 RNAP, [filled box]= pMThGH, [filled box]
=pT7T7 + pT7hGH + T7 RNAP, and [open diamond]=pT7T7/T7hGH +T7 RNAP.
Figure 5. Expression of the CAT gene in mouse L cells transfected with
pT7T7 + pT7CAT with prebound T7 RNAP. Transfection was performed the same way
as described in MATERIALS AND METHODS. 24 hours after the transfection, cells
were harvested and assayed for CAT activity also as described. Cell samples
transfected with either pT7CAT alone or pT7CAT with prebound T7 RNAP were served
as controls. Error bars represent standard deviations of the measurements.
Figure 6. Northern analysis of the T7 and hGH mRNA expressed by mouse L
cells transfected by the T7 system. The cells were transfected by the T7
systems, and total RNA was isolated as described in METHODS. Following
gelelectrophoresis and transfer of resolved RNA on a membrane, the membrane was
hybridized first with a 2.6 kbp 32p-labeled T7 probe, then by a 0.9 kbp hGH
probe after stripping off the first T7 probe. Actin mRNA in each sample serve
as a RNA concentration reference. I. Northern blot using T7 probe. A=cells
transfected by pT7T7/T7hGH, B=pT7hGH+T7 RNAP, A and B were isolated 24 hr after
the transfection. C
17
<PAGE>
APPENDIX A
and D=PT7T7/T7hGH+T7 RNAP; sample C was isolated 24 hr post transfection, D=48
hr. 11. Same membrane hybridized with a hGH probe. Lane order is the same as
in I.
Table 2. Relative expression efficiencies of L and HepG2 cells
transfected by the T7 systems.
Both L and HepG2 cells were transfected by the T7 systems as described in
MATERIALS AND METHODS. Both hGH and CAT activities per mg cellular protein
expressed by the L cells are arbitrarily assigned a value of 100. The
corresponding activities expressed by HepG2 cells are also adjusted on the basis
of per mg cellular proteins to compare with those of the L cells, and a
presented as mean +/- D.
Figure 7. Schematic presentation of self-initiation and positive feedback
loop features of the T7T7/T7-gene expression system.
A. Cotransfected, rebound T7 RNAPs initiate transcriptions from T7
promoters (PT7) on both T7T7 and T7hGH sequences (1 and 1'). EMC serves as
capping, independent sequence in translation for the T7 and hGH transcripts; B.
newly cellularly synthesized T7 RNAPs replenish the polymerase pool in the
cytoplasm of the transfected cells (2 and 2'); and C. maintenance of the T7 and
hGH gene expressions in the cells (3 and 3'). In this plasmid, hGH cDNA can be
replaced to express other cDNA.
18
<PAGE>
[Graphics omitted for Figure 1., Figure 2., Figure 3., Table 1., Figure 4.,
Figure 5., Figure 6., Table 2. and Figure 7. A fair and accurate narrative
description of such omitted material is provided under "FIGURE AND TABLE
LEGENDS".]
19
<PAGE>
APPENDIX A
RAPID AND EFFICIENT GENE EXPRESSIONS IN MICE
BY INJECTION OF PLASMID DNA PRE-BOUND WITH
BACTERIOPHAGE T7 RNA POLYMERASE
Xiaozhuo Chen, Yunsheng Li, Keyong Xiong, & Thomas E. Wagner
Edison Animal Biotechnology Center, Ohio University, Athens, Ohio 45701, USA
20
<PAGE>
ABSTRACT
A cytoplasmic expression vector, based on prebinding of a bacteriophage T7 RNA
polymerase (RNAP) to its cognate T7 promoters on a plasmid prior to
transfection, has been successfully used in two mammalian cell lines to express
functional and reporter genes in cDNA forms(1). Here we show that the same
expression system can be utilized to express functional and reporter genes in
several different tissues and regions of mice such as muscles, tails, as well as
brains by directly injecting the plasmid DNA, complexed with the T7 RNA
polymerase and liposome, into these animal tissues. The expression was found
rapid that luciferase activity could be detected in the tissues less than one
hour after the injection of a luciferase cDNA-containing T7 plasmid. Nano gram
levels of human growth hormone was found in the cerebrospinal fluids of mice 24
hours after a human growth hormone cDNA-containing T7 plasmid was injected into
mouse brains. The expression of the injected luciferase gene could be detected
for at least one week. This expression system may provide an alternative way to
express exogenous genes in animals and in human for gene therapy purposes.
21
<PAGE>
APPENDIX A
TEXT
Traditional gene expression vectors for mammalian cells are designed to express
exogenous DNA in the nuclei of the transfected cells. This type of systems
require the use of mammalian transcription/regulatory sequences which drive
protein coding sequences for nuclear expression. The entry of the nuclei, and in
most of the cases the integration into the host cell chromosome by the exogenous
DNA sequence, are obligatory for such systems to function in mammalian cells.
However, those two events are very unlikely to happen unless the transfected
cells are dividing which is common in cell cultures whereas is unfortunately
rare in whole animal systems with respect to foreign gene expressions. It is
these less frequently-occuring events that hinder most of the traditional
expression systems to work with satisfactory efficiencies in animals(1-5). On
the other hand, cytoplasmic gene expression has been shown to be possible in
cell cultures(6-8), and mammalian cytoplasmic expression vectors have been
developed(9,10). In our previous experiments(10), we demonstrated that
functional and reporter genes could be expressed with relatively high efficiency
in two cell lines by a plasmid vector using an apparently different expression
mechanism(10), presumably cytoplasmic expression. This plasmid contains a
bacteriophage T7 RNAP gene driven by a cognate T7 promoter, and a second gene (a
cDNA encoding either a functional or reporter protein) driven by a second T7
promoter. When the plasmid DNA, complexed with the T7 RNAP and liposome IN
VITRO, was transfected into mammalian cells using lipofectin, the prebound T7
RNAP initiates transcription of both T7 and functional/reporter genes. The newly
cellularly synthesized T7 RNAP, in combination of the two T7-gene sequence in
the plasmid, forms a positive feedback loop for the T7 gene expression, and
maintains the expression of both T7 and the functional/reporter genes (figure
1).
In this study, we extended our investigation on the expression of the T7 system
to animals. In order to have a more sensitive assay, a new T7 expression vector,
which contains a T7 gene and a luciferase reporter gene driven by their own T7
promoters, was constructed (figure 2). Ten to 50 micro-g of the T7 plasmid DNA,
complexed with T7 RNAP and lipofectin, was injected into the tails, leg muscles
of adult mice, and the brains of mice of 10 to 20 days of age. A traditional
mammalian expression plasmid, pRSVLuc which contains a luciferase gene under the
control of a Rous sarcoma virus (RSV) promoter, was also injected into these
three sites for comparisons. Luciferase activities were found in all these
injection sites by either plasmids 24-48 hours after the injection (figure 3).
Although the expression levels varied tremendously from one injection to
another, the average expression levels of the T7 system in each of the three
injected tissues were at least 3-10 times higher than those of pRSVLuc (figure
3). The expression of the luciferase gene by the T7 system was so rapid that its
activity could be detected 1 hour after the injection (unpublished
observations), suggesting that the DNA enzyme complexes were taken up by cells
probably immediately after the injection, followed by rapid cytoplasmic
expressions. In order to determine whether lipofectin facilitates or inhibits
the DNA uptake and expression in these tissues, the DNA-T7 RNAP complexes were
injected directly into these sites with and without lipofectin. It was found
that in both mouse tails and the brains, lipofectin enhanced the luciferase
expression, whereas the inclusion of lipofectin decreased the expression in the
muscles (figure 4). Similarly, direct pRSVLuc injection improved luciferase
expression only in the muscles, and the expression levels were still lower than
those generated by the direct injection of the T7 system (figure 4).
22
<PAGE>
APPENDIX A
In order to determine whether this T7, expression system is able to produce
biologically functional, rather than just reporters, proteins in mice,
pT7T7/T7hGH(10), a plasmid containing a human growth hormone (hGH) cDNA under
the control of a T7 promoter, was injected into the mouse brains following
Pre-binding the DNA with the T7 RNAP. 200 to 800 pg/ml of hGH were found in the
brain tissues and the cerebrespinal fluids of the injected mice 24-48 hours
after the injection (figure 5). However, hGH could not be detected in the sera
of the injected mice when pT7T7/T7hGH was injected into either the tails or the
muscles. The reason that hGH could be detected in the brain but not in other
parts of the body was probably due to the relative inaccessibility of the brains
and the cerebrespianl fluids to other parts of the body. Therefore, hGH produced
by the brains were retained in the cerebrespinal fluids.
To determine whether the T7 system could generate long lasting expression in
mice, tails of the injected mice were tested for luciferase activity 2, 4, 7,
and 14 days following the injection. Luciferase could be detected in the mice at
least 7 days after the injection (unpublished observation).
Unlike most traditional expression vectors which are either retrovirus based or
mammalian promoter-containing plasmids, the delivery of the T7 system does not
require cell surface receptors therefore does not have cell specificity. It in
theory can be delivered to any cell types in any tissues in animal. In addition,
it is able to express in any cells at any cellular growth stages once it is in
the cytoplasm of that cell since the expression of the T7 system does not
require any specific cellular transcription factors and does not require cell
divisions.
Another advantage of this system is that the expression by the T7 system is very
rapid and efficient. It takes more than 120 hours for traditional vectors such
as pCMVLuc or pRSVLuc to express as much luciferase as produced by the T7 system
in the first 48 hours..
Unlike traditional vectors, the expression of the T7 system does not require
nuclear entry and chromosomal integration. In addition, the system does not
involve retroviral sequence, therefore drastically reduces the risk for
post-introduction mutations which may be a great concern for gene therapy.
No significant cytotoxicity could be detected in either cultured mammalian cells
or in the animals which expressed the T7 system.
The expression peaks seem to be related to primarily the stability of the DNA,
the stability of the specific protein being expressed and the host cell type
being transfected.
23
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APPENDIX B
CONFIDENTIAL DISCLOSURE AGREEMENT
THIS AGREEMENT, effective upon the date of last signature, by and between
Ohio University having a place of business at One President Street, Athens, Ohio
45701 (hereinafter referred to as "OU") and (1) having a place of business at
(2) (hereinafter referred to as "COMPANY");
WITNESSETH:
WHEREAS, (6), a member/members of the faculty of Ohio University (the
"OU"), have/has invented "(4)" (OU Inv. Disc No. (5)) (hereinafter referred to
as the "INVENTION") which INVENTION is property of the OU; and
WHEREAS, OU, Technology Transfer Office, the technology transfer manager
for OU, has the right to disclose to others the INVENTION, supporting disclosure
materials, and other written, oral, or visual materials relating thereto, and
prototypes and/or samples thereof (the "CONFIDENTIAL INFORMATION");
WHEREAS, COMPANY wishes to review the CONFIDENTIAL INFORMATION for the
purpose of determining whether or not it is interested in acquiring a license
and/or other rights from OU which would enable COMPANY to undertake further
development and sales embodying the INVENTION;
NOW, THEREFORE, in consideration of the premises and covenants herein
contained, the parties hereto agree as follows:
1. OU, the inventor(s) and/or other employees or agents of the OU
shall disclose to COMPANY the CONFIDENTIAL INFORMATION regarding the INVENTION.
In the event CONFIDENTIAL INFORMATION is orally or visually disclosed, COMPANY
shall not be bound by the obligations set forth herein unless same is reduced to
writing, marked as "confidential," and forwarded to COMPANY within thirty (30)
days of such oral or visual disclosure, referencing the place and date of
disclosure and the names of employees of COMPANY to whom such disclosure was
made, and including therein a description of the information disclosed.
2. Upon execution of this Agreement, a confidential relationship
shall arise between OU and COMPANY, and COMPANY agrees to hold in confidence all
CONFIDENTIAL INFORMATION disclosed to it by OU, the inventor(s) and/or other
employees or agents of the OU and not to disclose such CONFIDENTIAL INFORMATION
to anyone except such of its employees as may be necessary and not to use such
CONFIDENTIAL INFORMATION for a purpose not covered by this Agreement, unless:
a. Such CONFIDENTIAL INFORMATION is a part of the public domain prior
to the date first written hereinabove: or
1
<PAGE>
b. Such CONFIDENTIAL INFORMATION becomes a part of the public domain
not due to some unauthorized act by or omission of COMPANY after this Agreement
is executed; or
c. COMPANY can demonstrate that it or an affiliate or subsidiary
company of COMPANY independently developed such CONFIDENTIAL INFORMATION; or
d.Such CONFIDENTIAL INFORMATION is disclosed to COMPANY by a third party who has
the right to make such disclosure; or
e. Permission to disclose said CONFIDENTIAL INFORMATION or to make
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3. COMPANY shall use such efforts to preserve the confidentiality of
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4. It is understood and agreed that the CONFIDENTIAL INFORMATION
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COMPANY may determine its interest in developing products under an agreement to
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CONFIDENTIAL INFORMATION disclosed to COMPANY as confidential and not to use
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other party.
2
<PAGE>
7. No modification or waiver of any of the provisions of this
Agreement shall be valid unless in writing and signed by the parties hereto.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
by their duly authorized officers.
OHIO UNIVERSITY
By.
-----------------------------------
Title:
--------------------------------
Date:
---------------------------------
(1)
By:
-----------------------------------
Title:
--------------------------------
Date:
--------------------------------
3
<PAGE>
THE INFORMATION BELOW MARKED BY * AND ( ) HAS BEEN OMITTED PURSUANT TO A
REQUEST FOR CONFIDENTIAL TREATMENT. THE OMITTED PORTIONS HAVE BEEN SEPARATELY
FILED WITH THE COMMISSION.
OHIO UNIVERSITY
RESEARCH AND GRADUATE STUDIES
102 RESEARCH AND TECHNOLOGY CENTER
ATHENS, OHIO 45701
SPONSORED RESEARCH AGREEMENT
RESEARCH TO BE CONDUCTED BY
OHIO UNIVERSITY EDISON ANIMAL BIOTECHNOLOGY CENTER
FOR
PROGENITOR, INC.
ONE PRESIDENT STREET
ATHENS, OH 45701
Date April 1, 1993
<PAGE>
SPONSORED RESEARCH AGREEMENT
THIS AGREEMENT is made and entered into as of the first (1st) day of April,
1993 (herein after called "Effective Date"), by and between Progenitor, Inc., a
corporation duly organized under the laws of Delaware and having its principal
office at One President Street, Athens OH 45701 (hereinafter called "Sponsor"),
and Ohio University, a corporation duly organized and existing under the laws of
the State of Ohio and having its principal office at 102 Research and Technology
Center,, Athens OH 45701 (hereinafter called "OU").
WHEREAS, Sponsor desires that OU Edison Animal Biotechnology Center (herein
after referred to as "EABC") performs certain research as described in the scope
of work attached hereto and incorporated herein as Exhibit A, and EABC desires
to perform such research upon and subject to the terms and conditions
hereinafter set forth.
NOW, THEREFORE, the parties agree as follows:
1. SCOPE OF WORK EABC shall use all reasonable efforts to perform the
research and deliver any reports or other items specified in Exhibit A attached
hereto.
2. INVESTIGATORS. EABC shall provide Thomas Wagner as Principal
Investigator for work under this Agreement.
3. PERIOD OF PERFORMANCE. The period of performance under this Agreement
is specified as April 1, 1993 to March 31, 1995 unless extended or terminated as
described elsewhere in this Agreement.
4. COMPENSATION. Sponsor agrees to pay OU its costs to perform the
research at EABC as described in the attached proposal (see Exhibit B, pages
1-3) up to a total of [ * * * ]. OU will invoice the Sponsor quarterly for
costs incurred in the previous quarter and the Sponsor shall pay said
invoices within sixty (60) days. OU will submit a final report of all
expenditures within ninety (90) days of the date of termination of the
Agreement. OU will maintain current and complete financial records in
accordance with standard accounting practices.
5. REPORTS. EABC will provide an annual report to Sponsor within sixty
(60) days of the completion of the first year and within sixty (60) days of the
second year. EABC agrees to make employees working in execution of this
Agreement appropriately available to Sponsor during working hours for
consultation about research progress and related matters.
6. TERMINATION. Sponsor shall have the right to terminate this Agreement
effective upon written notice of termination to OU in the event that:
<PAGE>
(a) OU or EABC fails to perform or observe or otherwise breaches any
of its material obligations under this Agreement and such failure or breach
continues for a period of sixty (60) days after written notice thereof to OU
from Sponsor; or
(b) the Principal Investigator, Thomas Wagner, is unable to supervise
the performance by EABC of this Agreement and no alternative Principal
Investigator mutually agreeable to the parties has been designated by OU.
Sponsor shall remain responsible for payment to OU for all work performed
through the date of termination and for reimbursement to OU of all commitments
incurred in the conduct of the research which cannot be reasonably canceled. OU
will make every effort to cancel outstanding commitments at the time of
notification.
7. INTELLECTUAL PROPERTY. With the exception of any special terms
defined elsewhere in the attached License Agreement, entered into on the same
Effective Date as this Agreement, OU shall own all right, title, and interest in
and to any and all inventions, improvements, discoveries, materials, products,
know-how, data, formulations, processes or procedures first made or conceived or
first reduced to practice in the performance of the work under this Agreement,
and all patents or other proprietary rights thereto whether such patents or
other proprietary rights were individually conceived or reduced to practice by
EABC employees or jointly by EABC and Sponsor's employees. OU shall promptly
disclose any Intellectual Property to Sponsor and rights to such property shall
be governed by the License Agreement. The exception to this Article 7 on
intellectual property shall include any and all technology first made or
conceived or reduced to practice solely by Sponsor.
Sponsor hereby grants EABC a royalty-free license to employ and engage all
uses of Licensed Products and Licensed Processes, as defined in the License
Agreement for the purpose of performing research duties as defined herein. The
foregoing license shall survive the termination or expiration of this Agreement
by one (1) year, but be limited to research purposes only.
8. PUBLICATIONS. Sponsor acknowledges that the basic objective of
research activities at OU is the generation of new knowledge and its expeditious
dissemination and OU, subject to provisions of this Section 8 below, shall have
the discretion to publish freely any results of research. Sixty (60) days prior
to submission for publication or presentation, OU will provide a copy of the
manuscript to the Sponsor for comment. The Sponsor will present the written
comments to OU within thirty (30) days after receipt. Such comments shall
include an assessment of potential intellectual property that is in the best
interests of Sponsor to protect. OU agrees to take all necessary, appropriate
or desirable steps to establish and protect its intellectual property pursuant
to Article 6 of the License Agreement, or execute a Confidential Disclosure
Agreement pursuant to Section 11 herein. Sponsor may not object to the
publication or presentation of research results derived by EABC from this
Agreement as long as Sponsor has had a
<PAGE>
sufficient opportunity, as defined above, to secure its license rights to
intellectual property as defined in the License Agreement.
9. COPYRIGHTS. According to OU policy, the individual creator owns all
rights, title and interest to any and all copyrights or copyrightable material,
including software programs, produced, composed or fixed in any tangible medium
of expression in the performance of work under this agreement. The creator may
assign copyrights, free of restrictions to the Sponsor.
10. HOLD HARMLESS. Each party shall at all times during this agreement
and thereafter, indemnify, defend and hold the other party, its trustees,
officers, employees and affiliates, harmless against all claims and expenses,
including legal expenses and attorney's fees, arising out of death or personal
injury or out of damage to property or business loss resulting from or sustained
as a result of executing this Agreement. In no event shall either party be
liable for special, direct, indirect or consequential damages, losses, costs,
charges, claims, demands, fees or expenses of any kind incurred by the other
party as a result of this Agreement. Indemnification provisions for licensure
of technology derived from this Agreement are covered in the License Agreement.
OU makes no representation and extends no warranties of any kind, either
expressed or implied, including but not limited to warranties or
merchantability, fitness for a particular purpose, and validity of patent rights
claims which may be derived from research undertaken pursuant to this Agreement.
11. CONFIDENTIALITY. With respect to all nonpublic proprietary rights or
technology disclosed by the University to Sponsor or by Sponsor to the
University pursuant to this Agreement and (b) Improvements (hereinafter
"Confidential Information"), the party receiving such Confidential Information
(which in the case of Improvements, shall be considered the University) shall
maintain the confidential and proprietary status of such Confidential
Information, keep such Confidential Information and each part thereof within its
possession or under its control sufficient to prevent any activity with respect
to the Confidential Information that is not specifically authorized by the
Agreement or the License Agreement, use all its best efforts to prevent the
disclosure of any Confidential Information to any third party unless such
disclosure would be allowed by this Agreement or the License Agreement, limit
disclosure to only those of its officers and employees who need to know and use
its best efforts to ensure that such Confidential Information is used only for
those purposes specifically authorized herein; provided, however, that such
restriction shall not apply to any Confidential Information which is (a)
independently developed by a party outside the scope of this Agreement, (b) in
the public domain at the time of its receipt or thereafter becomes part of the
public domain through no fault of the recipient, (c) received without an
obligation of confidentiality from a third party having the right to disclose
such information, (d) released from the restrictions of this Section 11 by the
express written consent of the disclosing party, (e) disclosed to any permitted
assignee or subcontractor of the University or Sponsor hereunder or under the
License Agreement (if such assignee,
<PAGE>
sublicensee or subcontractor is subject to the provisions of this Section 11 or
(f) required by law, statute, rule or court order to be disclosed (the
disclosing party shall, however, use its best efforts to obtain confidential
treatment of any such disclosure).
Notwithstanding the provisions of Section 11 hereof, the University and
Sponsor may, to the extent necessary, disclose and use Confidential Information
(a) for the purpose of securing institutional or government approval to
clinically test or market any Specified Technology, Proposed Product or
Improvement or (b) for the purpose of securing patent protection for a Specified
Technology, Proposed Product, or Improvement, provided, however, that in each
such instance (i) the other party hereto shall have been notified of the
permitted disclosure and (ii) any such disclosure shall be made to Persons which
either have agreed to be bound by or are already subject to a duty of
confidentiality, for the benefit of a party hereto, substantially the same as
that set forth in Section 11 hereof, wherever reasonably possible.
12. INDEPENDENT CONTRACTOR. OU is an independent contractor and shall be
free to exercise its discretion and independent judgment as to the method and
means of performance of its work hereunder. OU employees shall not be
considered employees of Sponsor, and neither OU nor Sponsor personnel will, by
virtue of this Agreement, be entitled or eligible, by reason of this Agreement,
to participate in any benefits or privileges given or extended by either party
to its employees.
13. NEWS RELEASE. Neither party may use the name of the other party in
news releases, publicity, advertising, or other promotion, without the prior
consent of the party except for documents used for internal consumption by
Sponsor. OU acknowledges that the Sponsor does desire general public
information releases regarding the award of this contract at OU, and OU will
work with Sponsor on such public information.
14. NOTICES. All notices under this agreement given by either party to
the other shall be in writing and shall be sent by U.S. Postal Service,
Certified Mail, Return Receipt Requested, postage prepaid and addressed to the
following individuals:
For OU:
Office of Research and Sponsored Programs
Attention: Carol J. Blum
Assistant Vice President for Research
105 University Technology and Research Center
Ohio University
Athens, Ohio 45701-2979
614-593-2856
Copies to: Thomas Wagner
Edison Animal Biotechnology Center
Wilson Hall
<PAGE>
Ohio University
Athens, Ohio 45701
David N. Allen
Acting Director
Edison Animal Biotechnology Center
c/o OU Innovation Center
One President Street
Athens, Ohio 45701
or Sponsor: Glenn L Cooper, MD
President and CEO
Progenitor, Inc.
One President St.
Athens. OH 45701
15. ARBITRATION. All controversies and/or disputes arising out of this
Agreement shall be governed by Article 12 of the License Agreement.
16. FORCE MAJEURE. Each party shall be excused for any failure or delay
in performing any of its obligations under this Agreement if such failure or
delay is caused by Force Majeure.
17. ENTIRE AGREEMENT. This document, its references and attachments,
constitutes the entire agreement and understanding of the parties with respect
to the subject matter hereof. This Agreement may not be modified or amended
except by written instrument signed by both parties hereto.
18. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Ohio.
TO ACKNOWLEDGE THEIR ACCEPTANCE, the parties have signed below.
OHIO UNIVERSITY SPONSOR
By /S/ T. LLOYD CHESNUT By /S/ GLENN L. COOPER
---------------------- ---------------------
Name T. Lloyd Chesnut, Ph.D. Name Glenn L.Cooper, M.D.
------------------------- --------------------
Title V.P. Research and Graduate Studies Title President and CEO
------------------------------------ -----------------
Date 4-19-93 Date 4/20/93
------- -------
<PAGE>
EXHIBIT A
RESEARCH PLAN FOR T7-T7 RESEARCH PROJECT
During the period of the proposed research program three specific goals will be
investigated.
1. Developing and testing means for the delivery of the T7-T7 DNA vectors into
cells within a target animal. presently, delivery of the T7-T7 vector is
accomplished by passive introduction into target cells and this method of DNA
uptake, either as naked DNA or lipofectin coated DNA, is only marginally
effective in some selected tissues. Only in muscle, brain and epidermal tissue
is passive introduction observed. Therefore, the major objective of the
proposed research program is to develop an active cell membrane transport system
for the T7-T7 vector. Progenitor will supply an oligosaccharide molecule from a
collaborative arrangement. This oligosaccharide is proposed to act as an active
carrier system which may transport the T7-T7 vector across cell membranes.
Edison Center scientists will develop methods of linking this active transport
molecule to the T7-T7 vector and study its efficacy at efficiently delivering
the T7-T7 vector into cells of a tissues. The ability of this transport system
to effectively deliver the T7-T7 system into the cytoplasm of both cells in
culture and cells from each of the tissues of the mouse model will be
investigated.
2. Determination of the duration of expression of the introduced T7-T7 vector
in the tissues of whole live animals. Once efficient delivery of the T7-T7
vector has been accomplished it is important to determine how long after initial
introduction into a test animal gene expression from the vector continues.
Therefore, vectors expressing marker genes such as luciferase will be introduced
into a large number of test animals and individual animals sacrificed at
predetermined times for luminescence assay of each tissue to determine the
length of activity of this vector in each tissue type.
3. In addition to these crucial studies of the T7-T7 system, improved vectors
will be designed and constructed expressing at least two commercially
significant gene products. Concurrent with the above stated goals of the
proposed research program an additional undertaking will be to improve the
present vector by addition of sever cloning sites and other features to make the
vector more generally useful for the introduction of genes of choice. The
improved vector will be used to introduce two new genes chosen by Progenitor for
gene therapy delivery.
<PAGE>
EXHIBIT B
[ * * * ]
<PAGE>
PROGENITOR, Inc.
August 7, 1995
David N. Allen, Ph.D.
Director
Ohio University
Edison Biotechnology Institute
20 East Circle Drive, Suite 190
Athens, OH 45701-3751
Re: Reinstatement and extension by Letter Agreement of the T-7 Sponsored
Research Agreement
Dear Dr. Allen:
Reference is made to the Sponsored Research Agreement (the "Agreement")
dated April 1, 1993 and in force through March 31, 1995, between the Ohio
University Edison Biotechnology Institute (herein "OUEBI" but f.k.a. the Ohio
University Edison Animal Biotechnology Center) and Progenitor, Inc.,
("Sponsor").
As contemplated in Section 3 (Period of Performance) of the Agreement, the
Agreement, as hereinafter modified, is hereby extended from July 1, 1995 to June
30, 1996.
1. The first paragraph of Section 7 of the Agreement is hereby
modified to read in its entirety as follows:
With the exception of any special items defined elsewhere in the
attached License Agreement, entered into on the same Effective Date as
this Agreement, OU shall own all right, title, and interest in and to
any and all inventions, improvements, discoveries, materials,
products, know-how, data, formulations, processes or procedures first
made or conceived or first reduced to practice in the performance of
the work under this Agreement, and all patents or other proprietary
rights thereto whether such patents or other proprietary rights were
individually conceived or reduced to practice by EABC employees or
jointly by EABC and Sponsor's employees. All such patents and other
proprietary rights shall be deemed to be within the term PATENT RIGHTS
in the attached License Agreement. OU shall promptly disclose any
intellectual property to Sponsor. The exception to this Article 7 on
intellectual property shall include any and all technology first-made
or conceived or reduced to practice solely by Sponsor.
<PAGE>
2. The research and development activities to be conducted by OUEBI
pursuant to Section 1 (Scope of Work) of the Agreement during this extension to
the Agreement shall be in accordance with Exhibit A (Proposed and On-going T-7
Research Projects Covered by Progenitor Contract) attached hereto and hereby
incorporated into and made a part of this Letter Agreement.
3. Funding for research and development activities to be conducted
by OUEBI pursuant to Section 4 (Compensation) of the Agreement during this
extension to the Agreement shall be provided by the Sponsor and shall be in
accordance with the budget provided in Exhibit B attached hereto and hereby
incorporated into and made a part of this Letter Agreement. Sponsor shall
fulfill its payment obligations hereunder by making 4 quarterly reimbursement
payments during the term of the extension of the Agreement in accordance with
the provisions of Section 4 (Compensation).
4. A paragraph (c) should be added to Section 6, Termination:
(c) The sponsor elects to terminate this Agreement for any reason,
effective ninety (90) days following written notification.
5. All provisions of the Agreement not expressly modified by this
letter agreement shall remain in full force and effect.
If the foregoing is in accordance with your understanding, please so
indicate by signing the space provided below.
Acknowledged and accepted.
/S/ CAROL J. BLUM /S/ STEPHEN J. WILLIAMS, Ph.D.
- ----------------------------------- --------------------------------------
Carol J. Blum, Ph.D. Stephen J. Williams, Ph.D.
Associate V.P. for Research & Vice President, Business Development
Graduate Studies Progenitor, Inc.
Date Date August 7, 1995
-----------------------------
/S/ DAVID N. ALLEN
- -----------------------------------
David N. Allen, Ph.D
Director
Date 8 Aug. 1995
<PAGE>
EXHIBIT A
PROPOSED AND ONGOING T7 RESEARCH PROJECTS
COVERED BY PROGENITOR CONTRACT
Several T7-related research projects are proposed and will be carried out by a
collaborative effort between Progenitor's Dr. Chen's group and Dr. Wagner's
group at the Ohio University Edison Institute. The progenitor contract will
support work by Dr. Li and Mr. Keyong Xiong of the Edison Biotechnology
Institute, Ohio University, in this collaborative interaction from 1995 to 1996.
These proposed projects include repeating antitumor efficacy studies, finishing
an ongoing animal immunization study, and modifying the existing T7TK vector
system as well as developing new T7 vectors.
In repeating antitumor efficacy studies, 80 to 100 nude mice will be used to
1) optimize in vivo T7 DNA injection (salt concentration, pH, dosage,...)
2) inject old and new T7TK vectors and ganciclovir (GCV) to estimate antitumor
efficacy of the approach for treatment of 143B tumors grown on nude mice This
study takes about two month to finish. Similar animal tumor study may be
carried out in late 1995 or in 1996. Daily technical support will be needed for
animal care, and DNA/GCV injections during the study.
In animal immunization studies, 20 BALB/c mice are currently used for
pT7-hemagglutinin (T7-HA) injection and serum testing. These mice are being
investigated for their humoral and cellular immune responses to the expressed
influenza HA antigen. This study will be finished within 2-3 months, but may be
repeated at a larger scale (at least 40 BALB/c mice will be involved) either in
late 1995 or in 1996.
In order to modify existing T7TK vector, site-specific mutagenesis will be
used frequently in molecular biology lab to delete all unnecessary DNA
sequences from the existing vector to generate a shorter and more efficient
T7TK vector for future tumor preclinical and clinical uses. This project
involves DNA cloning, restriction and ligation reactions, single strand DNA
production, phagemid mutagenesis, large scale plasmid preparation,
transfection, and protein bioassays. It takes about greater than or equal to
3 months to finish this project. In a related research project, new T7
vectors for new applications will be designed, constructed, and tested both in
cultured cells and in animals. These studies will include both retroviral and
adenoviral/T7 hybrid systems. This part of the research is anticipated to
continue for the whole year (1995-1996).
Smaller scale, unplanned T7 experiments also may be carried out from time to
time to test new ideas, new reagents ect.
<PAGE>
EXHIBIT B
[ * * * ]
<PAGE>
PROGENITOR, Inc.
November 22, 1995
David Allen, Ph.D.
Director
The Innovation Center
Ohio University - EBI
20 E. Circle Dr., Suite 190
Athens, OH 45701-3751
Dear Dave:
Regarding EBI sponsored research support from Progenitor, Progenitor proposes to
increase the size of its commitment under the T7-T7 contract dated April 1, 1993
as amended and extended from July 1, 1995 to June 30, 1996, from [ * * * ] to
[ * * * ]. The [ * * * ] direct cost only increment is intended to support
personnel during the period of January through June, 1996. Consistent with the
original agreement, Progenitor will make payments on actual expenses within 60
days of receipt of the quarterly invoices from OU.
Sincerely,
/S/ DOUGLASS B. GIVEN
- -----------------------------------
Douglass B. Given, M.D., Ph.D.
President and CEO
1507 Chambers Road Telephone: (614) 488-6688
Columbus, OH 43212-1566 Facsimile:(614) 488-0404
<PAGE>
LICENSE AGREEMENT
This Agreement is effective as of the latest date of signing below and is
by and between Associated Universities, Inc., ("Licensor"), operator of
Brookhaven National Laboratory, Upton, New York 11973, under contract with the
U.S. Department of Energy, and Progenitor, Inc., having a principal place of
business at 132 North Woods Blvd., Columbus, Ohio 43235 ("Licensee").
Licensor represents that it is the owner of United States Patent No.
4,952,496 issued August 28, 1990 in the names of F. William Studier, Parichehre
Davanloo, Alan H. Rosenberg, Barbara Moffatt and John J. Dunn entitled, "Cloning
and Expression of the Gene for Bacteriophage T7 RNA Polymerase", any C.I.P.
application(s) or divisional application(s) filed therefrom, and any patent(s)
that issue thereon ("Patent Properties"), and has the right to grant the license
herein granted;
Licensee desires to secure a non-exclusive license under the aforesaid
Patent Properties to use the T7 expression system in the conduct of its own
research, T7 expression system here being defined to be the use of T7 RNA
polymerase from the cloned gene to direct selective transcription (and
translation, if appropriate) of target DNA under the control of a T7 promoter,
and Licensor is willing to grant the same on the terms and conditions set forth
herein;
Accordingly, in consideration of the premises and the mutual covenants of
this Agreement, the parties hereto agree as follows:
I - GRANT
(a) Subject to the rights of the U.S. Government, as set forth more fully
in the waiver document entitled "Statement of Considerations", attached hereto
as ATTACHMENT A, and in the assignment from the U.S. Government to Licensor
entitled "License, Assignment, and Agreement", attached hereto as ATTACHMENT B,
Licensor hereby grants and agrees to grant to Licensee, for the life of this
Agreement, a non-exclusive license under the aforesaid Patent Properties to use
the T7 expression system in the conduct of its own research. No other use or
<PAGE>
right is hereby licensed under said Patent Properties. A separate license is
required for use of the T7 expression system for any commercial manufacture, use
or sale of products.
(b) Nothing herein shall be construed to prevent Licensor from licensing
any invention covered by the Patent Properties licensed hereunder to any other
for the purpose of manufacturing, using or selling any such invention.
II - LICENSE FEE
Licensee agrees to pay, as consideration for this License Grant, an initial
sum of Two Thousand Dollars ($2,000.00), payable by Licensee to Licensor upon
execution of this Agreement by both parties, and subsequent sums of Two Thousand
Dollars ($2,000.00), per year, each payable on the respective anniversaries of
the execution of this Agreement.
III - DISCLAIMER, INDEMNIFICATION AND HOLD HARMLESS
(a) Licensor makes no representation or warranty, and no representation or
warranty shall be implied with respect to the Patent License herein granted
other than that Licensor has the right to grant this license. It is agreed that
Licensor shall not be liable for:
1) the adequacy of the patent license granted hereunder; or
2) claims that the use of the T7 expression system constitute an
infringement of any property right or patent right of any third party.
(b) It is further agreed that Licensor shall not be liable for any
damages, including special or consequential damages incurred by Licensee, nor
for claims for such damages or other injuries asserted against Licensee, arising
out of Licensee's practice of the Grant set forth in Article I of this
Agreement. Licensee shall indemnify and hold harmless Licensor from any claims,
actions, judgments or awards arising out of Licensee's practice of the Grant set
forth in Article I.
(c) Licensor shall not be obligated to prosecute against any third party
any suit for infringement of the aforesaid Patent Properties, licensed by it
under this Agreement.
(d) This Agreement is entered into by AUI (Licensor) in its private
capacity. It is understood and agreed that the U.S. Government is not a party
to this Agreement and in no
2
<PAGE>
manner whatsoever shall be liable for, nor assume any responsibility or
obligation for, any claim, cost or damage arising out of or resulting from this
Agreement or the subject matter licensed.
IV - SUCCESSOR RIGHTS
(a) The obligations of Licensee hereunder shall run in favor of the
successors, assigns or other legal representatives of Licensor.
(b) Licensee's rights under this Agreement and the license herein granted
shall not be assigned for the benefit of creditors of Licensee, or otherwise,
nor shall such rights or license pass to any receiver of Licensee's assets,
except for a person or corporation succeeding to the entire business and good
will of Licensee as the result of a sale, consolidation, reorganization or
otherwise, provided such person or corporation shall, without delay accept in
writing the provisions of this Agreement and agree to become in all respects
bound thereby in the place and stead of Licensee. Such rights or license shall
not be otherwise transferred without the written consent of Licensor.
V - TERMINATION
(a) If Licensee shall default in the payment of any portion of the License
Fee then due, or shall commit any breach of any covenant herein contained, and
shall fail to remedy any such default or breach within thirty (30) days after
written notice thereof by Licensor, then Licensor may, at its option, terminate
the license and all other rights herein granted, by giving notice in writing to
such effect.
(b) Licensee may terminate this license by giving written notice of such
termination to Licensor, at least sixty (60) days prior to the anniversary date
upon which the termination will become effective. Such termination shall not
serve to pro-rate or otherwise diminish the License Fee for the year in which
the notice is given.
(c) Unless previously terminated in accordance with the foregoing
provisions of this Article, this Agreement, the license granted to Licensee
under the aforesaid Patent Properties and all of the rights granted to Licensee
shall become effective as of the date set forth at the outset of
3
<PAGE>
this Agreement and shall run to the full end of the term of the patent(s) that
are a part of said Patent Properties licensed hereunder, and shall thereupon
expire.
VI - ADVERTISING
Neither the granting of the license or the rights herein granted nor the
acceptance of the license fee or royalty payments hereunder, shall constitute an
approval of, or acquiescence in, advertising or other business practices of
Licensee's, nor an approval of or acquiescence in, any use of the corporate name
of Licensor, or any use of the name Brookhaven National Laboratory, or any use
of the names of the inventors on the Patent Properties licensed hereunder, or
any use of names of any agencies of the U.S. Government, in connection with the
manufacture, advertising, use or sale of Licensee's products, and Licensor
hereby expressly reserves all rights of actions with respect thereto.
VII - NOTICES
All notices provided for in this Agreement shall be by letter or other
conventional written form and shall be directed by one party to the other at its
respective address, as follows, and shall be deemed to be given when such notice
is received by the other party:
Margaret C. Bogosian
Patent Counsel
Brookhaven National Laboratory
Building No. 902C
P.O. Box 5000
Upton, New York 11973-5000
Dr. Douglas Given
Chief Operating Officer
Progenitor, Inc.
132 North Woods Blvd.
Columbus, OH 43235
Alternatively, such notices may be delivered to such other address or
addresses as either Licensor or Licensee, respectively, may later establish by
written notice to the other.
VIII - UNITED STATES GOVERNMENT EXPORT CONTROL REGULATIONS
(a) The Export Control Regulations of the U.S. Department of Commerce
4
<PAGE>
prohibit, except under a special validated license, the exportation from the
United States of technical data relating to certain commodities listed in the
Regulations, unless the exporter has received certain written assurance from the
foreign importer. In order to facilitate the exchange of technical information
under this Agreement, Licensee therefor hereby gives its assurance to Licensor
that it will comply with all of the requirements of the U.S. Export Control
Regulations.
(b) Violation of the U.S. Export Control laws or regulations by Licensee
shall constitute grounds for Licensor, in its sole discretion, to terminate this
license agreement. Failure to obtain any needed export control license may
result in criminal liability under the United States law.
IX - APPLICABLE LAW
This Agreement shall be construed, interpreted and applied in accordance
with the laws of the United States and of the State of New York.
X - INTEGRATION CLAUSE
This Agreement contains the entire and only agreement between the parties
and it supersedes all pre-existing agreements between such parties respecting
the subject matter hereof; and any representation, promise or condition in
connection therewith not incorporated herein shall not be binding upon either
party.
5
<PAGE>
The parties hereto have duly executed this Agreement.
LICENSOR:
ASSOCIATED UNIVERSITIES, INC.
By /S/THOMAS J. DAVIN, JR.
--------------------------------
Thomas J. Davin, Jr.
Title Vice President - Corporate Affairs
----------------------------------
Date 6-8-94
LICENSEE:
PROGENITOR, INC.
By /S/WILLIAM E. TANNER
--------------------------------
William E. Tanner
Title Vice President
--------------
Date 5/27/94
6
<PAGE>
ATTACHMENT A
STATEMENT OF CONSIDERATIONS
WAIVER REQUEST BY ASSOCIATED UNIVERSITIES INC. (AUI) OPERATOR OF BROOKHAVEN
NATIONAL LABORATORY (BNL) FOR AN IDENTIFIED INVENTION ENTITLED "CLONING AND
EXPRESSION OF THE GENE FOR BACTERIOPHAGE T7 RNA POLYMERASE" DOE CASE NO.
S-64,618 W(I)-86-027
Associated Universities' request is for a waiver of domestic rights to the above
identified invention for which a patent application has been filed by DOE. A
copy of AUI's waiver petition is attached hereto. As set forth in their
petition of May 13, 1985, Associated Universities has had ongoing negotiations
with several companies directed towards the exclusive licensing of this
invention in particular fields of use. These licenses are intended to take the
basic technology from the laboratory to practical application which will require
substantial private investment. The willingness of private companies to develop
the invention in particular a field is demonstrated by their investing in
examining the clones at their own expense by obtaining the test package made
available by BNL as set forth in the attached letter of February 12.
By the attached letter of April 7, 1986, AUI has set forth procedures it will
utilize to assure that each licensee will pursue development of this invention.
This will include providing in each license a certification of intent to develop
the invention. AUI has an interest in assuring development by the licensee
because of its own financial investment and its desire to receive royalties.
A patent application on this invention was filed on March 26, 1984. In order to
include new work covered by disclosure S-60,863 within the application, a
continuation-in-part application S-64,618 has been filed with the original case
abandoned. The waiver request as set forth in the attached letter of March 14
1986 is for the invention claimed in the new application.
AUI has agreed that this waiver shall be subject to any terms and conditions
included within their contract in the future to implement Public Law 98-620.
This will make the rights obtained in this invention consistent with those to be
obtained in inventions under P.L. 98-620. Reimbursement to DOE for all costs
related to patent prosecution of the above invention shall be provided by AUI.
The subject matter of these inventions is not classified or sensitive under
section 148 of the Atomic Energy Act of 1954 (42 U.S.C. 2168) as amended, or
under Directive 5230.25, nor were the inventions made under the Uranium
Enrichment or Civilian High Level Nuclear Waste and Spent Fuels Programs.
Accordingly, in view of the statutory objectives to be obtained and the factors
to be considered under DOE statutory waiver policy, all of which have been
considered, it is concluded that a
7
<PAGE>
waiver to the invention identified above will best serve the interest of the
United States and general public and that the waiver should be granted.
In view of the considerations and objectives for waiver set forth in DOE PR 9-
9.109-6, all of which have been considered, it is believed that a waiver to the
identified invention described above will best serve the United States and
general public and is therefore recommended that the waiver be granted.
/S/PAUL A. GOTTLIEB
-------------------------
Paul A. Gottlieb
Assistant Chief
Office of Patent Counsel
Date: 4-8-86
Based on the foregoing Statement of Considerations, it is determined that the
interest of the United States and the general public will best be served by a
waiver of patent rights in the invention described above and therefore the
waiver is granted.
CONCURRENCE: APPROVAL:
/S/ANTIONETTE JOSEPH /S/RICHARD E. CONSTANT
- ------------------------------ -------------------------
Ms. Antionette Joseph Richard E. Constant
Director of Office of Field Assistant General Counsel for
Operations Management Patents, HQ
Office of Energy Research
Date: 4/17/86 Date: 4/17/86
8
<PAGE>
SMALL BUSINESS CERTIFICATION
Please check the appropriate statement below, and return to the address
indicated below for AUI license administration records:
_X_ Licensee identified below is a "Small Business Concern" as that term
is defined by the Small Business Administration of the U.S.
Government.
___ Licensee identified below is NOT a "Small Business Concern" as that
term is defined by the Small Business Administration of the U.S.
Government.
Acknowledged by /S/DOUGLASS GIVEN Date June 28, 1994
------------------------
On behalf of Licensee, Progenitor, Inc.
--------------------------------
(name of Licensee)
Please return this certification to:
Office of Technology Transfer
Brookhaven National Laboratory
Bldg. 902C
Upton, NY 11973
<PAGE>
ATTACHMENT B
LICENSE, ASSIGNMENT AND AGREEMENT
Title: CLONING AND EXPRESSION OF THE GENE FOR BACTERIOPHAGE T7 RNA POLYMERASE
Inventors: F. William Studier, et al.
Serial No.: 002,408 Filing Date: (U.S.): December 29, 1986
Contractor: Associated Universities
DOE Contract No.: DE-AC02-76CH00016
Foreign Applications filed in or intended to be filed at
Contractor's expense in (countries): None
(1) Whereas the Associated Universities, Inc. (herein called "AUI") has
requested a waiver of title by the Government of the United States of America,
and the Government has granted such waiver by the attached waiver instrument
dated April 17, 1986 with respect to the invention entitled "Cloning and
Expression of the Gene For Bacteriophage T7 RNA Polymerase" identified by DOE
Case No. S-64,618, on which U.S. Patent Application, Serial No. 002,408 was
filed on 12/29/86 and in which the Government has rights pursuant to Contract
No. DE-AC02-76CH00016; and
(2) Whereas such waiver provides that the waiver shall be subject to any
terms and conditions to be included in Contract No. DE-AC02-76CH00016 in the
future to implement Public Law 98-620;
(3) Whereas the United States Department of Energy has the right and
authority to assign and transfer to AUI the entire right, title, and interest in
and to said invention, patent(s) and patent application(s) as herein set forth;
(4) Whereas the Government desires to confirm, of record, certain license
and other rights in and to the said invention and any patent(s) or patent
application(s) thereon;
(5) Now, therefore, for good and valuable consideration, the receipt and
adequacy of which is hereby acknowledged, the Government of the United States,
as represented by the United States Department of Energy, hereby assigns and
transfers to AUI the entire right, title,
<PAGE>
and interest in and to said invention, patent(s) and patent application(s)
retaining for the Government of the United States of America and its agencies
and instrumentalities, a nonexclusive, nontransferable, irrevocable paid-up
license in each patent application filed in any country on said invention and
any resulting patent, including each patent claiming the filing date priority of
the aforesaid patent application, to practice and have practiced, for or on
behalf of the Government of the United States of America any invention covered
by such patent application or patent.
(6) AUI hereby confirms the Government's rights in so far as they are set
forth in the aforesaid waiver instrument and as they are to be included in said
contract to implement Public Law 98-620, and agrees that any license,
assignment, or other conveyance made by AUI of a right or interest with respect
to said invention(s) or said patent application(s) or patent(s) shall be subject
thereto.
Approved and granted on behalf of the Government of the United States.
UNITED STATES DEPARTMENT OF ENERGY
By /S/ RICHARD E. CONSTANT
-----------------------------------------------
Title Assistant General Counsel for Patents, HQ
---------------------------------------------
Date
---------------------------------------------
Witness:
/S/
Approved, accepted and consented to this 9th day of March, 1987.
(SEAL)
ATTEST: ASSOCIATED UNIVERSITIES, INC.
-----------------------------
/S/ By /S/ JEROME HUDIS
--------------------------
Its Vice President
--------------------------
<PAGE>
STATEMENT OF CONSIDERATIONS
WAIVER REQUEST BY ASSOCIATED UNIVERSITIES INC. (AUI) OPERATOR OF BROOKHAVEN
NATIONAL LABORATORY (BNL) FOR AN IDENTIFIED INVENTION ENTITLED "CLONING AND
EXPRESSION OF THE GENE FOR BACTERIOPHAGE T7 RNA POLYMERASE" DOE CASE NO.
S-64,618 W(I)-86-027
Associated Universities' request is for a waiver of domestic rights to the above
identified invention for which a patent application has been filed by DOE. A
copy of AUI's waiver petition is attached hereto. As set forth in their
petition of May 13, 1985, Associated Universities has had ongoing negotiations
with several companies directed towards the exclusive licensing of this
invention in particular fields of use. These licenses are intended to take the
basic technology from the laboratory to practical application which will require
substantial private investment. The willingness of private companies to develop
the invention in particular a field is demonstrated by their investing in
examining the clones at their own expense by obtaining the test package made
available by BNL as set forth in the attached letter of February 12.
By the attached letter of April 7, 1986, AUI has set forth procedures it will
utilize to assure that each licensee will pursue development of this invention.
This will include providing in each license a certification of intent to develop
the invention. AUI has an interest in assuring development by the licensee
because of its own financial investment and its desire to receive royalties.
A patent application on this invention was filed on March 26, 1984. In order to
include new work covered by disclosure S-60,863 within the application, a
continuation-in-part application S-64,618 has been filed with the original case
abandoned. The waiver request as set forth in the attached letter of March 14
1986 is for the invention claimed in the new application.
AUI has agreed that this waiver shall be subject to any terms and conditions
included within their contract in the future to implement Public Law 98-620.
This will make the rights obtained in this invention consistent with those to be
obtained in inventions under P.L. 98-620. Reimbursement to DOE for all costs
related to patent prosecution of the above invention shall be provided by AUI.
The subject matter of these inventions is not classified or sensitive under
section 148 of the Atomic Energy Act of 1954 (42 U.S.C. 2168) as amended, or
under Directive 5230.25, nor were the inventions made under the Uranium
Enrichment or Civilian High Level Nuclear Waste and Spent Fuels Programs.
Accordingly, in view of the statutory objectives to be obtained and the factors
to be considered under DOE statutory waiver policy, all of which have been
considered, it is concluded that a waiver to the invention identified above will
best serve the interest of the United States and general public and that the
waiver should be granted.
<PAGE>
In view of the considerations and objectives for waiver set forth in DOE PR 9-
9.109-6, all of which have been considered, it is believed that a waiver to the
identified invention described above will best serve the United States and
general public and is therefore recommended that the waiver be granted.
/S/PAUL A. GOTTLIEB
-----------------------------
Paul A. Gottlieb
Assistant Chief
Office of Patent Counsel
Date: 4-8-86
Based on the foregoing Statement of Considerations, it is determined that the
interest of the United States and the general public will best be served by a
waiver of patent rights in the invention described above and therefore the
waiver is granted.
CONCURRENCE: APPROVAL:
/S/ANTIONETTE JOSEPH /S/RICHARD E. CONSTANT
- --------------------- -----------------------------
Ms. Antionette Joseph Richard E. Constant
Director of Office of Field Assistant General Counsel for
Operations Management Patents, HQ
Office of Energy Research
Date: 4/17/86 Date: 4/17/86
16
<PAGE>
THE INFORMATION BELOW MARKED BY * AND ( ) HAS BEEN OMITTED PURSUANT TO A
REQUEST FOR CONFIDENTIAL TREATMENT. THE OMITTED PORTIONS HAVE BEEN SEPARATELY
FILED WITH THE COMMISSION.
STANDARD LICENSE AGREEMENT - PALMENBERG TECHNOLOGY
This Agreement is made effective the lst day of September, 1994, by and
between Wisconsin Alumni Research Foundation (hereinafter called "WARF"), a
nonstock, nonprofit Wisconsin corporation, and Progenitor, Inc. (hereinafter
called "Progenitor"), a corporation organized and existing under the laws of
Ohio;
WHEREAS, WARF owns certain inventions that are described in the "Licensed
Patents" defined below, and WARF is willing to grant a license to Progenitor
under any one or all of the Licensed Patents and Progenitor desires a license
under all of them;
NOW, THEREFORE, in consideration of the mutual covenants and agreements set
forth below, the parties covenant and agree as follows:
Section 1. DEFINITIONS.
For the purpose of this Agreement, the Appendix A definitions shall apply.
Section 2. GRANT.
A. LICENSE.
WARF hereby grants to Progenitor a nonexclusive license, limited to the
Licensed Field and the Licensed Territory, under the Licensed Patents to make,
use and sell Products.
B. SUBLICENSES.
(i) In the event Progenitor licenses inventions of its own which
require the practice of an invention of a Licensed Patent, Progenitor may grant
written, nonexclusive sublicenses to third parties. This right to grant
sublicenses shall be limited to Progenitor's licensees, and to the extent
necessary for Progenitor's licensees to practice inventions owned and licensed
by Progenitor. Sublicenses so granted are nonassignable by the sublicensee and
exclude the right of the sublicensee to grant sublicenses. Any agreement
granting a sublicense shall state that the sublicense is subject to the
termination of this Agreement. Progenitor shall have the same responsibility
for the activities of any sublicensee as if the activities were directly those
of Progenitor.
(ii) In respect to sublicenses granted by Progenitor under this
Section 2B, Progenitor shall pay to WARF an amount equal to what Progenitor
would have been required to pay to WARF had Progenitor sold the amount of
Products sold by such sublicensee.
<PAGE>
Section 3. CONSIDERATION.
A. DEVELOPMENT.
Progenitor agrees to and warrants that: it has, or will obtain, the
expertise necessary to independently evaluate the inventions of the Licensed
Patents; it will establish and actively and diligently pursue the development
plan (see Appendix C) to the end that the inventions of the Licensed Patents
will be utilized to provide Products for sale in the retail market; and, until
the date Progenitor begins paying WARF earned royalties on Product sales, IT
WILL SUPPLY WARF WITH A WRITTEN DEVELOPMENT REPORT WITH RESPECT TO EACH CALENDAR
YEAR ON OR BEFORE JANUARY 30 FOLLOWING THE END OF THE APPLICABLE CALENDAR YEAR.
All development activities and strategies and all aspects of Products design and
decisions to market and the like are entirely at the discretion of Progenitor,
and Progenitor shall rely entirely on its own expertise with respect thereto.
WARF's review of Progenitor's development plan is solely to verify the existence
of Progenitor's commitment to development activity and to assure compliance with
Progenitor's obligations to utilize the inventions of the Licensed Patents for
the marketplace, as set forth above.
B. LICENSE FEE.
Progenitor agrees to pay to WARF a license fee of [ * * * ] by
October 1, 1994.
C. MAINTENANCE FEE.
In addition to the Section 3B initial license fee, Progenitor agrees to pay
WARF a maintenance fee equal to [ * * * ] for each year ending on December 31,
BEGINNING WITH THE YEAR, ENDING ON DECEMBER 31, 1996, AND ENDING WITH THE YEAR
THAT PROGENITOR BEGINS PAYING WARF EARNED ROYALTIES ON PRODUCT SALES. The
maintenance fee for a given year shall be due and received by WARF on or before
January 30 following the end of the applicable year. The maintenance fee is
non-refundable and shall not be offset by future earned royalties or minimum
royalties due to WARF under this Agreement.
D. ROYALTY.
In addition to the Section 3B and 3C fees, Progenitor agrees to pay to WARF
as "earned royalties" a royalty calculated as a percentage of the Selling Price
of Products in accordance with the terms and conditions of this Agreement. The
royalty is deemed earned as of the earlier of the date the Product is actually
sold and paid for, the date an invoice is sent by Progenitor (or its
sublicensee(s)), or the date a Product is transferred to a third party for any
promotional reasons. The royalty shall remain fixed while this Agreement is in
effect at a rate of [ * * * ] of the Selling Price.
<PAGE>
E. ACCOUNTING; PAYMENTS.
(i) Amounts owing to WARF under Sections 2B or 3D with respect
to any given calendar quarter shall be paid quarterly. Except as otherwise
directed, all amounts owing to WARF under this Agreement shall be paid in U.S.
dollars to WARF at the address provided in Section 14(a). All amounts owing
under Sections 2B or 3D shall be due and received by WARF on or before the
thirtieth day following the end of each calendar quarter ending on March 31,
June 30, September 30 and December 31. All royalties owing with respect to
Selling Prices stated in currencies other than U.S. dollars shall be converted
at the rate shown in the Federal Reserve Noon Valuation - Value of Foreign
Currencies on the day preceding the payment.
(ii) A full accounting showing how any amounts owing to WARF
under Section 3D have been calculated shall be submitted to WARF on the date of
each such payment. Each accounting for earned royalties shall provide
Progenitor's average invoice price used in royalty calculations for all Products
sold and list all deductions taken for shipping costs, allowances because of
returned Products and sales taxes. In the event no payment is owed to WARF, a
statement setting forth that fact shall be supplied to WARF.
Section 4. CERTAIN WARRANTIES OF WARF.
A. WARF warrants that except as otherwise provided under Section 12
of this Agreement with respect to U.S. Government interests, it is the owner of
the Licensed Patents and has the right to enter into this Agreement. However,
nothing in this Agreement shall be construed as:
(i) a warranty or representation by WARF as to the validity or
scope of any of Licensed Patents;
(ii) a warranty or representation that anything made, used, sold
or otherwise disposed of under the license granted in this Agreement will or
will not infringe patents of third parties;
(iii) an obligation to bring or prosecute actions or suits
against third parties for infringement of Licensed Patents;
(iv) an obligation to furnish any know-how not provided in
Licensed Patents; or
(v) a warranty or representation by WARF that it will not grant
licenses to others to make, use or sell products not covered by the claims of
the Licensed Patents which may be similar and/or compete with Products made or
sold by Progenitor (or its sublicensee(s)).
<PAGE>
B. WARF MAKES NO REPRESENTATIONS, EXTENDS NO WARRANTIES OF ANY KIND,
EITHER EXPRESS OR IMPLIED, AND ASSUMES NO RESPONSIBILITIES WHATSOEVER WITH
RESPECT TO USE, SALE, OR OTHER DISPOSITION BY PROGENITOR, ITS SUBLICENSEES OR
THEIR VENDEES OR OTHER TRANSFEREES OF PRODUCTS INCORPORATING OR MADE BY USE OF
INVENTIONS LICENSED UNDER THIS AGREEMENT.
Section 5. RECORDKEEPING.
A. Progenitor and its sublicensee(s) shall keep books and records
sufficient to verify the accuracy and completeness of the accounting referred to
above. Such books and records shall be preserved for a period not less than six
years after they are created during and after the term of this Agreement.
B. Progenitor and its sublicensee(s) shall take all steps necessary
so that WARF may within thirty days of its request review and copy all the
books and records at a single U.S. location to verify the accuracy of
Progenitor's (and its sublicensee(s)'s) accounting. Such review may be
performed by any employees of WARF as well as by any attorney or registered CPA
designated by WARF, upon reasonable notice and during regular business hours.
C. If royalties in any given calendar year exceed [ * * * ],
Progenitor and its sublicensee(s) also shall provide WARF with verification of
Product sales on a tradename by tradename basis for each country where Products
were sold. Such report shall verify the method, accuracy and completeness of
Progenitor's (and its sublicensee(s)'s) accounting under Section 5A and shall be
due ninety (90) days after the expiration of the calendar year for which the
report is being made.
D. Progenitor and its sublicensee(s) shall also provide WARF with a
five (5) year sales projection of Products. Such projection shall not be
binding upon Progenitor or its sublicensee(s) and shall be solely for WARF's
internal use in projecting its own future royalties.
Section 6. TERM; TERMINATION.
A. The term of this license shall begin on the effective date of
this Agreement and continue until the earlier of the date that no Licensed
Patent remains an enforceable patent or the payment of earned royalties under
Section 3D, once begun, ceases for more than four (4) calendar quarters.
B. Progenitor may terminate this Agreement at any time by giving
at least ninety days' written and unambiguous notice of such termination to
WARF. Such a notice shall be accompanied by a statement of the reasons for
termination.
<PAGE>
C. If Progenitor at any time defaults in the timely payment of any
monies due to WARF or the timely submission to WARF of any Development Report,
fails to actively pursue the development plan, or commits any breach of any
other covenant herein contained, and Progenitor fails to remedy any such breach
or default within ninety days after written notice thereof by WARF, WARF may, at
its option, terminate this Agreement by giving notice of termination to
Progenitor.
D. Upon the termination of this Agreement, Progenitor shall remain
obligated to provide an accounting for and to pay royalties earned up to the
date of the termination and any minimum royalties shall be prorated as of the
date of termination by the number of days elapsed in the applicable calendar
year.
Section 7. ASSIGNABILITY.
This Agreement may not be transferred or assigned by Progenitor except with
the prior written consent of WARF.
Section 8. CONTEST OF VALIDITY.
In the event Progenitor contests the validity of any Licensed Patent,
Progenitor shall continue to pay royalties with respect to that patent as if
such contest were not underway until the patent is adjudicated invalid or
unenforceable by a court of last resort.
Section 9. PATENT MARKING.
Progenitor shall insure that it applies patent markings that meet all
requirements of U.S. law, 35 U.S.C. 287, with respect to all Products subject to
this Agreement.
Section 10. PRODUCT LIABILITY; CONDUCT OF BUSINESS.
A. Progenitor shall, at all times during the term of this Agreement
and thereafter, indemnify, defend and hold WARF and the inventors of the
Licensed Patents harmless against all claims and expenses, including legal
expenses and reasonable attorneys fees, arising out of the death of or injury to
any person or persons or out of any damage to property and against any other
claim, proceeding, demand, expense and liability of any kind whatsoever (other
than patent infringement claims) resulting from the production, manufacture,
sale, use, lease, consumption or advertisement of Products arising from any
right or obligation of Progenitor hereunder. Notwithstanding the above, WARF at
all times reserves the right to retain counsel of its own to defend WARF's
interests.
B. Progenitor warrants that it now maintains and will continue to
maintain liability insurance coverage appropriate to the risk involved in
marketing the products subject to this Agreement and that such insurance
coverage lists WARF and the inventors of the Licensed Patents as additional
insureds. Within thirty (30) days after the execution
<PAGE>
of this Agreement and thereafter annually between January 1 and January 31 of
each year, Progenitor will present evidence to WARF that the coverage is being
maintained with WARF and its inventors listed as additional insureds. In
addition, Progenitor shall provide WARF with at least 30 days prior written
notice of any change in or cancellation of the insurance coverage.
Section 11. USE OF NAMES.
Progenitor shall not use WARF's name, the name of any inventor of
inventions governed by this Agreement, or the name of the University of
Wisconsin in sales promotion, advertising, or any other form of publicity
without the prior written approval of the entity or person whose name is being
used.
Section 12. UNITED STATES GOVERNMENT INTERESTS.
It is understood that if the United States Government (through any of its
agencies or otherwise) has funded research, during the course of or under which
any of the inventions of the Licensed Patents were conceived or made, the United
States Government is entitled, as a right, under the provisions of 35 U.S.C. S
200-212 and applicable regulations of Chapter 37 of the Code of Federal
Regulations, to a nonexclusive, nontransferable, irrevocable, paid-up license to
practice or have practiced the invention of such Licensed Patents for
governmental purposes. Any license granted to Progenitor in this Agreement
shall be subject to such right.
Section 13. MISCELLANEOUS.
This Agreement shall be construed in accordance with the internal laws of
the State of Wisconsin. If any provisions of this Agreement are or shall come
into conflict with the laws or regulations of any jurisdiction or any
governmental entity having jurisdiction over the parties or this Agreement,
those provisions shall be deemed automatically deleted, if such deletion is
allowed by relevant law, and the remaining terms and conditions of this
Agreement shall remain in full force and effect. If such a deletion is not so
allowed or if such a deletion leaves terms thereby made clearly illogical or
inappropriate in effect, the parties agree to substitute new terms as similar in
effect to the present terms of this Agreement as may be allowed under the
applicable laws and regulations. The parties hereto are independent contractors
and not joint venturers or partners.
Section 14. NOTICES.
Any notice required to be given pursuant to the provisions of this
Agreement shall be in writing and shall be deemed to have been given at the
earlier of the time when actually received as a consequence of any effective
method of delivery, including but not limited to hand delivery, transmission by
telecopier, or delivery-by a professional courier service or the time when sent
by certified or registered mail addressed to the party for
<PAGE>
whom intended at the address below or at such changed address as the party shall
have specified by written notice, provided that any notice of change of address
shall be effective only upon actual receipt.
(a) Wisconsin Alumni Research Foundation
Attn: Managing Director
614 Walnut Street
Madison, Wisconsin 53705
(b) Progenitor, Inc.
Attn: Executive Vice President & C.O.O.
132 North Woods Blvd.
Columbus, OH 43235
Section 15. INTEGRATION.
This Agreement constitutes the full understanding between the parties with
reference to the subject matter hereof, and no statements or agreements by or
between the parties, whether orally or in writing, except as provided for
elsewhere in this Section 15, made prior to or at the signing hereof, shall vary
or modify the written terms of this Agreement. Neither party shall claim any
amendment, modification, or release from any provisions of this Agreement by
mutual agreement, acknowledgement, or otherwise, unless such mutual agreement is
in writing, signed by the-other party, and specifically states that it is an
amendment to this Agreement.
Section 16. AUTHORITY.
The persons signing on behalf of WARF and Progenitor hereby warrant and
represent that they have authority to execute this Agreement on behalf of the
party for whom they have signed.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement on
the dates indicated below.
WISCONSIN ALUMNI RESEARCH FOUNDATION
By: /S/ RICHARD H. LEAZER Date: October 12, 1994
-----------------------
Richard H. Leazer, Managing Director
PROGENITOR, INC.
By: /S/ STEPHEN J. WILLIAMS Date: September 23, 1994
-----------------------
Name and Office: Stephen J. Williams, V.P., Business Development
-----------------------------------------------
<PAGE>
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Reviewed by WARF's Attorney: Reviewed by Progenitor's Attorney:
/S/ KENNETH J. HANSEN /S/ M. A. BUTLER
- --------------------------------------- ----------------------------------
September 2, 1994 September 14, 1994
----------------- ------------------
(Neither attorney shall be deemed a signatory to this Agreement.)
<PAGE>
APPENDIX A
A. "Licensed Patents" shall refer to and mean United States Patent
No. 4,937,190.
B. "Products" shall refer to and mean any and all human therapeutic
products that employ or are in any way produced by the practice of an invention
claimed in the Licensed Patents or that would otherwise constitute infringement
of any claims of the Licensed Patents.
C. "Selling Price" shall mean, in the case of Products that are
sold, the invoice price to the retail customer of Products (regardless of
uncollectible accounts) less any shipping costs, allowances because of returned
Products, or sales taxes. The "Selling Price" for a Product that is transferred
to a third party for promotional purposes without charge or at a discount shall
be the average invoice price to the retail customer of that type of Product
during the applicable calendar quarter. WARF is exempt from paying income taxes
under U.S. law. Therefore, all payments due under this Agreement shall be made
without deduction for taxes, assessments, or other charges of any kind which may
be imposed on WARF by any government outside of the United States or any
political subdivision of such government with respect to any amounts payable to
WARF pursuant to this Agreement. All such taxes, assessments, or other charges
shall be assumed by Progenitor.
D. "Development Report" shall mean a written account of Progenitor's
progress under the development plan having at least the information specified on
Appendix B to this Agreement, and shall be sent to the address specified on
Appendix B.
E. "Licensed Field" shall be unlimited, except that Progenitor shall
not have the right to sell Products in the research reagent market that has been
exclusively licensed to Novagen, Inc. (i.e., sales of Products which have not
been approved by the applicable government agency for diagnostic or therapeutic
applications to laboratories, at academic, government, industrial and/or
clinical institutions engaged in the investigation of biological and biochemical
processes).
F. "Licensed Territory" shall mean all countries of the world.
<PAGE>
APPENDIX B
DEVELOPMENT REPORT
A. Date development plan initiated and time period covered by this report.
B. Development Report (up to 4 paragraphs)
1. Activities completed since last report including the object and
parameters of the development, when initiated, when completed and the
results.
2. Activities currently under investigation, i.e., ongoing activities
including object and parameters of such activities, when initiated,
and projected date of completion.
C. Future Development Activities (up to 4 paragraphs).
1. Activities to be undertaken before next report including, but not
limited to, the type and object of any studies conducted and their
projected starting and completion dates.
2. Estimated total development time remaining before a product will be
commercialized.
D. Changes to initial development plan (up to 2 paragraphs) .
1. Reasons for change.
2. Variables that may cause additional changes.
E. Items to be provided if applicable:
1. Information relating to Product that has become publicly available,
e.g., published articles, competing products, patents, etc.
2. Development work being performed by third parties other than
Progenitor to include name of third party, reasons for use of third
party, planned future uses of third parties including reasons why and
type of work.
3. Update of competitive information trends in industry, government
compliance (if applicable) and market plan.
<PAGE>
PLEASE SEND DEVELOPMENT REPORTS TO:
Wisconsin Alumni Research Foundation
Attn.: Contract Coordinator
614 Walnut Street
P.O. Box 7365
Madison, WI 53707-7365
<PAGE>
APPENDIX C
DEVELOPMENT PLAN
A development plan of the scope outlined below shall be submitted to WARF by
Progenitor prior to the execution of this agreement. In general, the plan
should provide WARF with a summary overview of the activities that Progenitor
believes are necessary to bring Products to the marketplace.
Estimated
Start Date Finish Date
---------- -----------
I. Development Program
A. Development Activities to be Undertaken
(Please break activities into subunits with the date of completion of
major milestones)
1 .
2.
.
.
B. Estimated Total Development Time
II. Governmental Approval
A. Types of submissions required
B. Government agency e.g. FDA, EPA, etc.
III. Proposed Market Approach
IV. Competitive Information
A. Potential Competitors
B. Potential Competitive Devices/Compositions
C. Known Competitor's plans, developments, technical achievements
D. Anticipated Date of Product Launch
TOTAL LENGTH: approximately 2-3 pages
<PAGE>
WISCONSIN
ALUMNI
RESEARCH
FOUNDATION
Telephone: (608) 263-6050
June 2, 1995
Steven J. Williams, Ph.D.
Vice President, Business Development
Progenitor, Inc.
1507 Chambers Road
Columbus, OH 43212-1566
RE: License Agreement - Progenitor
WARF Ref: Palmenberg-P87055
Agreement No. 94-0071
-------------------------------
Dear Dr. Williams:
The Wisconsin Alumni Research Foundation ("WARF") received your letter
dated May 8, 1995, in which you requested expansion of the term "Products" in
the above-referenced license agreement between WARF and Progenitor, Inc. (the
"Agreement"). WARF hereby agrees that the definition of "Products" in the
Agreement be amended by inserting the words "and prophylactic" after the word
"therapeutic" contained therein.
Sincerely,
/S/ RICHARD H. LEAZER
Richard H. Leazer
Managing Director
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Approved in form for execution (not a signatory to this letter)
/S/ KENNETH J. HANSEN
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Kenneth J. Hansen
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THE INFORMATION BELOW MARKED BY * AND ( ) HAS BEEN OMITTED PURSUANT TO A
REQUEST FOR CONFIDENTIAL TREATMENT. THE OMITTED PORTIONS HAVE BEEN SEPARATELY
FILED WITH THE COMMISSION.
LICENSE AND COLLABORATION AGREEMENT
BY AND AMONG
CHIRON CORPORATION,
AND
PROGENITOR, INC.
DATED AS OF
MARCH 31, 1995
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LICENSE AND COLLABORATION AGREEMENT
THIS LICENSE AND COLLABORATION AGREEMENT (the "Agreement") is made by and
among Chiron Corporation, a Delaware corporation having its principal place of
business at 4560 Horton Street, Emeryville, California 94608, ("Chiron"), and
Progenitor, Inc., a Delaware corporation having its principal place of business
at 1507 Chambers Road, Columbus, Ohio 43212 ("Progenitor"), and is effective as
of March 31, 1995 (the "Effective Date").
BACKGROUND
A. Progenitor owns or controls through licenses the rights to
intellectual property relating to the T7T7 Technology (as defined below);
B. Chiron wishes to license or sublicense on an exclusive basis from
Progenitor rights to the T7T7 Technology for application in the area of
infectious disease vaccines and [ * * * ] and to license [ * * * ] constructs
(as defined below) as well as certain T7T7 Constructs to be selected by
Chiron as provided below for application in all disease areas, and Progenitor
agrees to grant Chiron such licenses as more fully described herein;
C. Chiron and Progenitor seek to collaborate in research and development
efforts to evaluate and develop [ * * * ] Constructs to treat cancer;
D. Chiron and Progenitor have entered into a Letter Agreement dated March
31, 1995 (the "Letter Agreement") providing for the foregoing and pursuant to
such Letter Agreement Chiron and Progenitor agreed to enter into a formal
agreement containing the terms set forth therein;
E. Chiron and Progenitor agree that this Agreement shall constitute such
formal agreement.
NOW, THEREFORE, in consideration of the mutual covenants contained herein,
Chiron and Progenitor agree as follows:
AGREEMENT
SECTION 1. DEFINITIONS
As used herein, the following terms shall have the specified meanings:
1.1 "AFFILIATE" means any corporation or other entity controlled by a
party to this Agreement. For such purpose "control" shall mean the ownership,
directly or indirectly, of more than 50% of the voting stock of a corporate
entity, or of more than 50% of the beneficial interest of an entity other than a
corporation.
1.2 "CONSTRUCT" shall mean T7T7 Technology in which the variable coding
sequence in the expression vector encodes a functional gene product or products
(E.G., functional/immunogenic protein or RNA ribozyme/antisense) or a portion
thereof. For purposes of this definition, the following shall each constitute a
single Construct: (i) constructs which have related function either immediately
upstream or downstream in a specific biochemical pathway, (ii) in the case of
viruses, the [ * * * ] and (iii) for human genes related to [ * * * ],
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[ * * * ], include Genetic Sequences of related protein (or RNA) subtypes, or
isoenzymes or homologous forms or splice variants, if any.
1.3 "DESIGNATED CONSTRUCT" shall mean a Construct designated by Chiron
pursuant to Section 4.1, including any Construct that is substituted by Chiron
pursuant to Section 4.2, or a Construct added by Chiron pursuant to Sections 4.3
or 4.4.
1.4 "FDA" means the United States Food and Drug Administration, or a
successor to such agency.
1.5 "GENETIC SEQUENCE" shall mean a gene or partial sequence thereof, and
those elements necessary for its expression, or its transcription or replication
product or intermediates or portions thereof, including either DNA or RNA, and
in the case of viral diseases comprises and includes the entire virus genome.
1.6 "GMP" means the current applicable Good Manufacturing Practices
regulations of the FDA.
1.7 "IND" means an investigational new drug application and associated
documents required to be filed with the FDA in order to obtain approval to
commence human clinical trials of a product.
1.8 "INFECTIOUS DISEASE VACCINE" shall mean a Construct that is used to
elicit an immune response, including but not limited to, a T cell response
and/or an antibody response, against an infectious agent, including therapeutic
and prophylactic vaccines.
1.9 "JOINT TECHNOLOGY" shall mean any invention or discovery, whether or
not patentable, arising from activities performed in the course of this
Agreement and invented or made jointly by employees of Chiron (including persons
obligated to assign inventions to Chiron) and employees of Progenitor (including
persons obligated to assign inventions to Progenitor), whether or not such
inventions or discoveries are also owned in conjunction with third parties.
1.10 "JOINT T7T7 TECHNOLOGY" shall mean Joint Technology that constitutes
T7T7 Technology Improvements.
1.11 "KNOW-HOW" means any knowledge or proprietary information or
biological material owned solely by a party hereto with the right to
sublicense which is not generally publicly known or available, including,
without limitation, all preclinical, clinical, chemical, biochemical,
toxicological, manufacturing, formulation and scientific research information.
1.12 "LICENSED PATENT RIGHTS" shall mean all of Progenitor's rights
arising from or under United States Patent Application Serial [ * * * ], as
well as any provisionals, divisionals, continuations, continuations-in-part,
reissues, reexaminations or extensions thereof, any additional foreign
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applications corresponding thereto, and any patents in the United States or any
foreign country issuing on any of the foregoing (the "Basic T7T7 Patents").
Licensed Patent Rights shall also include, without limitation, Progenitor's
rights arising under patents and patent applications covering any T7T7
Technology, T7T7 Technology Improvements or Joint Technology.
1.13 "LICENSED PRODUCT" shall mean any material, the relevant manufacture,
use, sale, offer for sale or import of which by Chiron would, in the absence of
the licenses granted herein, infringe one or more Valid Claims of Licensed
Patent Rights, treating, for this purpose only, all patents covering any Joint
Technology as if they were solely owned by Progenitor.
1.14 "LICENSED TECHNOLOGY" shall mean the Licensed Patent Rights, T7T7
Technology, Joint Technology and T7T7 Technology Improvements of Progenitor.
1.15 "NET SALES" means the gross amount invoiced for sales, leases or
other dispositions of Licensed Products, directly to third parties in arms'-
length commercial transactions or indirectly to third parties in arms'-length
commercial transactions for sales through agents or consignees of Licensed
Products less the following deductions (to the extent they are not already
deducted from the amount invoiced):
(a) Discounts, chargebacks, rebates and allowances actually
taken in amounts and to the extent customary in the trade;
(b) Credits or allowances for returns;
(c) Sales, use taxes, tariffs or import duties directly imposed
against gross sales and actually paid by the selling party;
and
(d) Outbound transportation (freight and insurance) actually
paid by the selling party.
1.16 "NONINFECTIOUS DISEASE VACCINE" shall mean a Construct that is used
to elicit an immune response, including but not limited to, a T cell response
and/or an antibody response, against a noninfectious disease agent.
1.17 "OHIO UNIVERSITY LICENSE" shall mean that certain License Agreement
dated April 1, 1993 between Ohio University and Progenitor, as it may be amended
from time to time.
1.18 "PLA" means a Product License Application or a New Drug Application
filed with the FDA with respect to a Licensed Product.
1.19 [ * * * ] shall mean the research and development collaboration
between Chiron and Progenitor conducted pursuant to the terms of Section 3 of
this Agreement.
1.20 "[ * * * ] CONSTRUCT" shall mean a Construct in which the variable
coding sequence in the expression vector encodes a [ * * * ] gene.
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1.21 "T7T7 TECHNOLOGY" shall mean a self-initiating and self-sustaining
gene expression system as described in the Basic T7T7 Patents, and all material
(including the T7T7 vector and T7 polymerase), information, Know How, property
and rights in the possession or control of Progenitor that is necessary or
useful in the development, production or use of a Construct, including, but not
limited to, a [ * * * ] Construct.
1.22 "T7T7 TECHNOLOGY IMPROVEMENTS" shall mean any future invention or
discovery, whether or not patentable, arising during the term of this Agreement
from research conducted in connection with, and which invention or discovery
specifically relates to, the self-initiating and self-sustaining gene expression
system as described in the Basic T7T7 Patents and invented or made by or on
behalf of Chiron or Progenitor (or by any third party pursuant to a joint
development and/or license arrangement with Progenitor or Chiron to the extent
that Progenitor or Chiron has the right to license such invention or discovery
to the other party under this Agreement and subject to such terms as may be
imposed by such third party), including all material, information, Know How,
property and rights associated with such invention or discovery. A T7T7
Technology Improvement shall be limited to an improvement with respect to the
T7T7 expression system itself and shall not include any invention or discovery
related to the application of such expression system to any Construct.
Notwithstanding the foregoing, T7T7 Technology Improvements of Progenitor shall
include any invention or discovery related to the application of the T7T7
expression system to any Construct licensed to Chiron hereunder.
1.23 "THIRD PARTY T7T7 LICENSES" shall mean the Ohio University License,
the WARF License and the proposed license agreement to be entered into
between [ * * * ] and Progenitor covering technology necessary for freedom of
operation to practice the Licensed Technology.
1.24 "VALID CLAIM" shall mean a claim in an issued patent included within
the Licensed Technology which claim has not been held invalid or unpatentable by
a court or governmental agency of competent jurisdiction in a decision that is
not subject to appeal.
1.25 "WARF LICENSE" shall mean that certain License Agreement dated
September 1, 1994 between Wisconsin Alumni Research Foundation and Progenitor,
as it may be amended from time to time.
SECTION 2. EXCLUSIVE RIGHTS GRANTED TO CHIRON
2.1 [ * * * ] Subject to the terms and conditions of this Agreement,
Progenitor hereby grants to Chiron an exclusive worldwide license (including
an exclusive sublicense under the Third Party T7T7 Licenses, to the extent
such sublicenses are deemed necessary by Chiron and subject to the terms and
conditions of such Third Party T7T7 Licenses), with the right to sublicense,
under the Licensed Technology owned or controlled by Progenitor to make, have
made, use and sell the Licensed Products that are produced using or
incorporate a [ * * * ] Construct for all indications, including therapeutic,
prophylactic, diagnostic applications and/or vaccine applications.
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2.2 INFECTIOUS DISEASE VACCINES. Subject to the terms and conditions of
this Agreement, Progenitor hereby grants to Chiron an exclusive worldwide
license (including an exclusive sublicense under the Third Party T7T7 Licenses,
to the extent such sublicenses are deemed necessary by Chiron and subject to the
terms and conditions of such Third Party T7T7 Licenses), with the right to
sublicense, under the Licensed Technology owned or controlled by Progenitor to
make, have made, use and sell Licensed Products that are Infectious Disease
Vaccines.
2.3 [ * * * ] LICENSED PRODUCTS. Subject to the terms and conditions of
this Agreement, Progenitor hereby grants to Chiron an exclusive worldwide
license (including an exclusive sublicense under the Third Party T7T7
Licenses, to the extent such sublicenses are deemed necessary by Chiron and
subject to the terms and conditions of such Third Party T7T7 Licenses), with
the right to sublicense, under the Licensed Technology owned or controlled by
Progenitor to make, have made, use and sell Licensed Products that are used
for the prophylactic, therapeutic and/or diagnostic treatment of restenosis
in humans; provided, however, that Progenitor reserves all rights with
respect to Constructs incorporating Progenitor's proprietary genes and
technologies related to [ * * * ] as well as Constructs, products, genes and
therapies arising from Progenitor's internal [ * * * ]discovery program,
including but not limited to, genetically engineered [ * * * ].
2.4 DESIGNATED CONSTRUCTS. Subject to the terms and conditions of this
Agreement, Progenitor hereby grants to Chiron an exclusive worldwide license
(including an exclusive sublicense under the Third Party T7T7 Licenses, to the
extent such sublicenses are deemed necessary by Chiron and subject to the terms
and conditions of such Third Party T7T7 Licenses), with the right to sublicense,
under the Licensed Technology owned or controlled by Progenitor to make, have
made, use and sell Licensed Products that are produced using or incorporate any
Designated Construct for all indications, including therapeutic, prophylactic,
diagnostic applications and/or vaccine applications.
2.5 MAINTENANCE OF THIRD PARTY LICENSES. Progenitor shall maintain each
of the Ohio University License and the WARF License (and upon entering into
the proposed license agreement with [ * * * ] shall maintain such license) in
full force and effect and shall not amend or modify the Ohio University
License and the WARF License (and the proposed license agreement with
[ * * * ] once entered into) without Chiron's prior written consent, which
consent shall not be unreasonably withheld. The obligations of Progenitor to
Ohio University under Articles 2, 5, 7, 8, 9, 10, 12, 13 and 15 of the Ohio
University license shall be binding upon Chiron as if its were a party to the
Ohio University License and such articles are hereby incorporated by
reference herein. To the extent the license granted hereunder includes
rights under the WARF license, such license is subject to the termination of
the WARF License.
2.6 ACCESS TO BIOLOGICAL MATERIALS. Progenitor shall deliver to Chiron
the T7T7 vector, along with associated biological materials and information to
enable Chiron to commence research and process development work. At the first
meeting of the joint development team
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established pursuant to Section 3.1, the parties shall determine the materials
and information of Progenitor that will be transferred to Chiron in order to
commence the T7T7 Collaboration, and such materials and information shall be set
forth in writing and attached as an exhibit to this Agreement. During the term
of this Agreement, Progenitor shall provide Chiron with access to all
improvements to the T7T7 vector. Progenitor shall also provide to Chiron any
and all Know-How owned or controlled by Progenitor that is reasonably necessary
or useful for developing or producing the Licensed Products, including, but not
limited to, in vitro and animal data, and manufacturing information. Except as
otherwise permitted under this Agreement, Progenitor hereby agrees that it will
not provide any such biological materials or Know-How that is exclusively
licensed to Chiron hereunder to any individual or organization to use for any
commercial purpose.
2.7 RESERVATION OF RIGHTS. In addition to its rights pursuant to
Section 4.5 and notwithstanding the license grants in Sections 2.1,
Progenitor hereby retains and reserves a non-exclusive, non-transferable
royalty-free right and license under the Licensed Technology owned or
controlled by Progenitor solely for purposes of conducting research and
development as part of the [ * * * ]Collaboration, but not for making, using
or selling any commercial products using or incorporating the [ * * * ]
Construct.
SECTION 3. [ * * * ] COLLABORATION
3.1 [ * * * ] COLLABORATION. Chiron and Progenitor will collaborate in
developing Licensed Products that are produced using or incorporate a
[ * * * ]Construct for treatment or prevention of cancer in humans. The
[ * * * ] Collaboration will be managed by a joint development team
consisting of individuals from Chiron and from Progenitor. Chiron shall fund
studies to define proof-of-principle of the [ * * * ] Construct in a cancer
indication determined by the joint development team. Progenitor may
establish broader proof-of-principle for the [ * * * ] Construct by funding a
glioma and/or breast cancer model in a Phase I clinical trial; provided
however, that the joint development team shall have approved any such
clinical plan. Chiron shall have the exclusive right to develop the [ * * * ]
Construct for use in cancer indications; however, in addition, to the
clinical trials which Progenitor may conduct, Progenitor shall have the right
to collaborate and jointly invest with Chiron in such development activities.
Chiron shall have no obligation to fund further development work in the
[ * * * ] Collaboration; however, at Chiron's discretion it will provide
additional funds based on defined research and development plans if the
results of the research program warrant such funding.
3.2 DATA. All preclinical and clinical data obtained from any studies
conducted in the course of the [ * * * ] Collaboration shall be jointly owned by
Chiron and Progenitor and may be used by either party for any purpose, subject
to the exclusive licenses granted to Chiron pursuant to Section 2.
SECTION 4. DESIGNATED CONSTRUCTS
4.1 DESIGNATION OF CONSTRUCTS. Subject to the terms of this Agreement,
Progenitor hereby grants Chiron a right to designate up to five Constructs
(other than the [ * * * ],
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Construct) which shall constitute the initial Designated Constructs and shall be
licensed to Chiron pursuant to Section 2.4 hereof. Such Constructs shall be
designated by Chiron within seventy-five (75) days following the effective date
of this Agreement.
4.2 LIMITED RIGHT OF SUBSTITUTION. If Chiron shall notify Progenitor in
writing within eighteen (18) months following the effective date of this
Agreement, that it is discontinuing the use of a Designated Construct in the
development of a Licensed Product, then upon the receipt of such notice the
license granted pursuant to Section 2.4 shall thereupon terminate as to the
Designated Construct. Chiron shall then have the right to designate an
alternative Construct; provided, however, that Chiron's right to designate an
alternative Construct pursuant to this Section 4.2 shall terminate eighteen (18)
months following the effective date of this Agreement. Progenitor may reject
the alternative Construct designated by Chiron if (i) at the time of the
substitution request by Chiron, Progenitor has formally undertaken an internal
project to which it has made a material commitment of internal resources and
which it is continuing to pursue at the time of receipt of the substitution
request from Chiron, to develop and commercialize the requested Construct
itself; or (ii) Progenitor has established or is conducting good faith
negotiations to establish a collaboration with a third party to develop and
commercialize the suggested Construct. In the event that an alternative
Construct is substituted pursuant to this Section 4.2, such Construct shall be
included as a Designated Construct for purposes of this Agreement and shall be
licensed to Chiron pursuant to Section 2.4.
4.3 RIGHT TO DESIGNATE ADDITIONAL DESIGNATED CONSTRUCTS. Subject to the
terms of this Agreement, Progenitor hereby grants Chiron a right to designate
additional Constructs to the extent not already licensed by Progenitor to a
third party after compliance by Progenitor with Section 4.4 hereof which upon
designation shall be included as a Designated Construct for purposes of this
Agreement and shall be licensed to Chiron pursuant to Section 2.4. To designate
an additional Construct, Chiron shall notify Progenitor in writing that it
wishes to designate the particular Construct. Progenitor may reject the
Construct designated by Chiron if (i) at the time of the designation request by
Chiron, Progenitor has formally undertaken an internal project to which it has
made a material commitment of internal resources and which it is continuing to
pursue at the time of receipt of the substitution request from Chiron, to
develop and commercialize the requested Construct itself; or (ii) Progenitor has
established or is conducting good faith negotiations to establish a
collaboration with a third party to develop and commercialize the suggested
Construct. During the period expiring five (5) years following execution of
this Agreement, Chiron shall pay Progenitor [ * * * ] upon designation of an
additional Construct. Following expiration of such five year period, Chiron may
designate an additional Construct upon commercially reasonable terms.
4.4 RIGHT OF FIRST OFFER. Progenitor grants to Chiron a right of first
offer ("Right of First Offer") with respect to the designation of any Construct
not already included as a Designated Construct that Progenitor wishes to license
for development as a Noninfectious Disease Vaccine. Progenitor shall provide to
Chiron in writing the proposed material financial terms of such license (the
"License Offer"). Chiron shall have two months to notify Progenitor that it
wishes to designate such Construct as a Designated Construct on the financial
terms set forth in the License Offer. If Chiron fails to respond within two
months or elects not to exercise
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this Right of First Offer, then Chiron's right to designate such Construct as a
Designated Construct shall terminate, and Progenitor shall be free to grant such
a license to a third party for such Construct on terms no more favorable than
those set forth in the License Offer. If Progenitor has not licensed the
Construct within a nine-month period, then it must reoffer the Construct to
Chiron pursuant to the terms of this Section 4.4 before it may license it to a
third party. In granting such a license to a third party following compliance
with this Section 4.4, Progenitor may license to such third party on a
nonexclusive basis, Joint T7T7 Technology and T7T7 Technology Improvements of
Chiron; provided that Progenitor shall pay to Chiron a commercially reasonable
royalty for such technology or improvements.
4.5 PROGENITOR RETAINED FIELDS. Progenitor shall be free to grant
licenses to a third party to Constructs for fields of use not licensed to and
not in conflict with any exclusive license granted hereunder to, or not
already designated by, Chiron. In granting such a license to a third party,
Progenitor may license to such a third party on a nonexclusive basis, Joint
T7T7 Technology and T7T7 Technology Improvements of Chiron; provided that
Progenitor shall pay to Chiron a commercially reasonable royalty for such
technology or improvements. Notwithstanding the foregoing provision of this
Section 4.5, Progenitor shall not license to such third party any T7T7
Technology Improvements of Chiron made after the date of such license by
Progenitor to the third party unless, pursuant to the terms of the license
between Progenitor and such third party, any future T7T7 Technology
Improvements of such third party shall be sublicensable by Progenitor to
Chiron on the terms of this Agreement, in which case such T7T7 Technology
Improvements shall automatically be licensed to Chiron hereunder. In such
event, the parties hereto shall take into account the value of such
sublicense to Chiron when determining the commercially reasonable royalty
payable by Progenitor to Chiron. Notwithstanding the foregoing, Progenitor
will not, independently or in a collaboration with third parties, develop or
commercialize Constructs for human use: (i) targeting or directed against
then-current fields of use being licensed to Chiron hereunder (other than
Constructs incorporating Progenitor's proprietary genes and technologies
related to [ * * * ] as well as Constructs, products, genes and therapies
arising from Progenitor's internal [ * * * ] discovery program, including but
not limited to, genetically engineered [ * * * ], for use in treating
[ * * * ]) or (ii) utilizing the same general biochemical intracellular or
extracellular mechanism of action as then current Constructs (or potential
Constructs in the case of [ * * * ] and Infectious Disease Vaccines) and
directed against the same, or a substantially similar, clinical endpoint as
any being pursued by Chiron (other than Constructs incorporating Progenitor's
proprietary genes and technologies related to [ * * * ] as well as
Constructs, products, genes and therapies arising from Progenitor's internal
[ * * * ] discovery program, including but not limited to, genetically
engineered [ * * * ], for use in treating [ * * * ]). If Progenitor elects
to pursue development of a Licensed Product for a field of use not licensed
to Chiron and not in conflict with the exclusive license granted hereunder,
either by itself or in collaboration with a third party, and if marketing
rights with respect to such Licensed Product have not been granted to a third
party as Progenitor and/or its collaborator near commercialization of such
Licensed Product, then Progenitor will consider and discuss with Chiron
granting marketing rights to Chiron on commercially reasonable terms.
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SECTION 5. MAINTENANCE OF EXCLUSIVE RIGHTS
TO INFECTIOUS DISEASE VACCINES
5.1 MAINTENANCE OF EXCLUSIVITY TO FIELD. Pursuant to Section 2.2,
Progenitor has granted to Chiron exclusive rights to all Constructs in the field
of Infectious Disease Vaccines. To maintain its exclusive rights to this field,
Chiron shall pay to Progenitor (i) $500,000 on March 31, 1996 and (ii) $500,000
on March 31, 1997. If Chiron fails to make any such payment then all Infectious
Disease Vaccine Rights licensed to Chiron pursuant to Section 2.2 revert to
Progenitor other than rights with respect to four Infectious Disease Vaccine
Constructs (not including [ * * * ], to which Chiron has rights granted pursuant
to Section 2.1 or any Construct licensed to Chiron pursuant to Section 2.3 or
Section 2.4) to be designated by Chiron in writing within sixty (60) days
following the scheduled payment date. Chiron shall maintain an exclusive
license with respect to those four Constructs under the terms of Section 2.2 of
this Agreement.
SECTION 6. DILIGENCE; ABANDONMENT
6.1 DILIGENCE IN COMMERCIALIZATION OF LICENSED PRODUCTS. Chiron shall use
commercially reasonable efforts, commensurate with those efforts it uses for its
other products of similar potential to develop and commercialize one or more
Licensed Products. Chiron shall deliver to Progenitor, within forty-five (45)
days following the last day of each calendar year, a report summarizing Chiron's
progress with respect to developing and commercializing any Constructs that are
being developed by Chiron pursuant to this Agreement and Licensed Products.
6.2 ABANDONMENT. In the event that Chiron abandons development of a
Construct, it shall notify Progenitor and the rights granted to Chiron pursuant
to Section 2 with respect to such use of such Construct shall terminate.
Subject to compliance with Section 4.5 (including the restrictions on the
granting of a license to future T7T7 Technology Improvements of Chiron),
Progenitor shall thereupon be free to develop or grant licenses to a third party
with respect to such use of such Construct and Progenitor may license to such
third party on a nonexclusive basis and not in conflict with any exclusive
licenses granted to Chiron hereunder, Joint T7T7 Technology and T7T7 Technology
Improvements of Chiron; provided that Progenitor shall pay to Chiron a
commercially reasonable royalty for such technology and improvements. If
Progenitor elects to pursue development of a Licensed Product in a disease
indication abandoned by Chiron, either by itself or in collaboration with a
third party, and if marketing rights with respect to such Licensed Product have
not been granted to a third party as Progenitor and/or its collaborator near
commercialization of such Licensed Product, then Progenitor will consider and
discuss with Chiron granting marketing rights to Chiron on commercially
reasonable terms.
SECTION 7. ROYALTIES AND MILESTONES
In consideration for the rights granted to Chiron under Section 2 and otherwise
hereunder, Chiron shall make the following payments to Progenitor:
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7.1 INITIAL PAYMENT. Pursuant to the terms of that certain Letter
Agreement dated March 31, 1995, Chiron has paid to Progenitor on April 3, 1995 a
non-refundable, noncreditable payment of $2,500,000 as reimbursement for
research and development expenses incurred by Progenitor prior to such date with
respect to activities performed in developing the T7T7 Technology. To the
extent that such payment exceeded the research and development expenses incurred
by Progenitor, such excess amount shall be treated as a license fee.
7.2 MILESTONE PAYMENTS. Within thirty (30) days of the occurrence of the
events specified below, Chiron shall make the following non-refundable milestone
payments to Progenitor for each Licensed Product (except for the first milestone
which shall be applicable only to the first [ * * * ] Licensed Product). For
purposes of this Section 7.2 only, a "Licensed Product" for which milestone
payments shall be paid hereunder shall include a product, the manufacture, use,
sale, offer for sale or import of which by Chiron would infringe one or more
pending claims contained in a patent application included within the Licensed
Patent Rights.
EVENT MILESTONE PAYMENT
Demonstration of safety in a Phase I/II $500,000
trial for the first [ * * * ] Licensed Product
and a decision by Chiron to perform additional
clinical trials
Filing of IND $1,000,000 (for first
IND other than IND
for [ * * * ] Licensed
Product)
$250,000 (for subsequent
INDs, other than INDs for
[ * * * ] for a
cancer indication)
Initiation of Phase III trial $1,000,000 ($1,250,000 in the
case if a Phase III trial
for [ * * * ])
Approval of PLA or its equivalent in Europe $1,000,000 for each approval
or Japan
Except for the milestone paid on approval of the first PLA (or, if earlier, the
first PLA equivalent in Europe or Japan) for each Licensed Product, each of the
milestone payments made upon the approval of a PLA (or its equivalent in Europe
or Japan) shall be considered prepaid royalties. Chiron shall offset against
earned royalties payable to Progenitor, any such prepaid royalties.
7.3 EARNED ROYALTIES. During the term of this Agreement, Chiron shall
pay to Progenitor a royalty (the "Standard Royalty") of [ * * * ] of Net
Sales of Licensed Products sold in countries where the manufacture or sale of
such Licensed Products would
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infringe a Valid Claim of a Licensed Patent Right; provided, that if the only
Valid Claim that would be infringed is a claim included in Joint Technology
then the royalty shall equal [ * * * ] of Net Sales. In addition, Chiron
shall pay to Progenitor an amount equal to the royalties payable by
Progenitor pursuant to any Third Party T7T7 License as a result of the sale
of such Licensed Products by Chiron; provided that the total earned royalty
payment to Progenitor pursuant to this Section 7.3 shall not exceed [ * * * ]
of Net Sales of such Licensed Products (the "Royalty Cap"). If the amount of
the Royalty Cap creates an undue economic hardship to Progenitor, then at the
request of Progenitor, Chiron and Progenitor shall meet to discuss an
appropriate adjustment, if warranted in the circumstances, to the Royalty Cap.
7.4 REDUCED ROYALTIES. Notwithstanding the provisions of Section 7.3,
for Licensed Products where the manufacture or sale of such Licensed Product
in the United States, Europe or Japan would infringe a Valid Claim of a
Licensed Patent Right but which are manufactured or sold in countries where
the manufacture or sale and use of such Licensed Products would not infringe
a Valid Claim of a Licensed Patent Right and no competitor is selling an
equivalent product to the Licensed Product, then (on a country-by-country and
product-by-product basis), Chiron shall pay to Progenitor [ * * * ] of the
Standard Royalty (or [ * * * ] of the royalty payable on Joint Technology)
and the Royalty Cap shall be reduced by [ * * * ]. Notwithstanding the
provisions of Section 7.3, for Licensed Products where the manufacture or
sale of such Licensed Product in the United States, Europe or Japan would
infringe a Valid Claim of a Licensed Patent Right but which are manufactured
or sold in countries where the manufacture or sale and use of such Licensed
Products would not infringe a Valid Claim of a Licensed Patent Right and one
or more competitors is selling an equivalent product to the Licensed Product,
then (on a country-by-country and product-by-product basis) Chiron shall pay
to Progenitor [ * * * ] of the Standard Royalty (or [ * * * ] of the royalty
payable on Joint Technology) and the Royalty Cap shall be reduced by
[ * * * ].
7.5 SUBLICENSE ROYALTIES. Chiron shall pay to Progenitor royalties
pursuant to Section 7.3 and/or Section 7.4 on the Net Sales of Licensed Products
by all sublicensees of Chiron as though such Net Sales were made by Chiron
itself.
7.6 ADDITIONAL COMPENSATION IN [ * * * ] COLLABORATION. Chiron agrees
to provide Progenitor additional compensation to be negotiated in good faith
above the royalties payable pursuant to Section 7.3 and 7.4 based on
contributions by Progenitor of technology, Know How and funding for Licensed
Products resulting from the [ * * * ] Collaboration. In addition, on January
10, 1996, Chiron shall pay to Progenitor a noncreditable, nonrefundable fee
of $500,000 for continued funding of Progenitor's research and development
expenses for activities under the [ * * * ] Collaboration.
7.7 PAYMENT OF ROYALTIES. During the term of this Agreement and for so
long thereafter as Chiron is required to pay or report royalties payable under
Sections 7.3, 7.4 and 7.5, Chiron shall use reasonable efforts to deliver to
Progenitor within forty-five (45) days, but in no event more than sixty (60)
days, after March 31, June 30, September 30, and December 31 of each year a
report, showing for each country the total gross sales of each Licensed Product
sold or otherwise disposed of by Chiron, its Affiliates or sublicensees,
deductions to arrive at total Net
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Sales for each Licensed Product and total royalties due for each Licensed
Product. Simultaneously with the delivery of each such report, Chiron shall pay
to Progenitor the royalty payments due under this Agreement for the period
covered by such report. If no royalties are due, it shall be so reported. The
duty to report pursuant to this Section 7.7 shall commence when the first
commercial sale of a Licensed Product is made.
7.8 RECORDS OF ROYALTY OBLIGATIONS. Chiron will keep and maintain full,
true and accurate books and records as are required to determine accurately the
royalties payable to Progenitor for three (3) years following the date on which
such royalties were paid or reported. Progenitor shall have the right, at its
own expense, to have the books and records of Chiron audited at reasonable times
by a qualified independent accounting firm reasonably acceptable to Chiron,
under appropriate confidentiality provisions, solely for the purpose of
verifying the accuracy of royalties paid or reported by Chiron and such
accountants shall provide to Progenitor only the information necessary to verify
the royalty calculations. If such accounting firm concludes that additional
earned royalties are owed for any such period, Chiron shall pay the additional
royalties within thirty (30) days of the date that Progenitor delivers to Chiron
such accounting firm's written report so concluding. Any overpayments shall be
credited towards future royalty payments.
7.9 METHOD OF PAYMENT. All payments due pursuant to this Section 7 shall
be paid in United States Dollars by wire transfer to Progenitor to be paid
according to instructions provided by Progenitor (which instructions shall be
consistent with the applicable laws and regulations of any foreign jurisdiction)
with a letter sent by facsimile to Progenitor at the facsimile number for notice
specified in Section 16.1 hereof on the date of wiring confirming the transfer
and the payment amount. The Net Sales amount calculated hereunder shall be the
amount of Licensed Products sold, denominated in the currency of sale, and
converted into its equivalent in United States Dollars at the monthly average
composite rate as published by Bloomberg Financial Markets, Commodities and News
for each month in which sales occur.
If laws or regulations require the withholding of income taxes owed by
Progenitor on account of royalties accruing under this Agreement, such taxes
shall be deducted on a country-by-country basis by Chiron from such remittable
royalty and will be paid by it to the proper taxing authority. Proof of payment
shall be secured and sent to Progenitor as evidence of such payment.
7.10 RELEASE OF FUNDS. If the law or regulation of any country shall at
any time operate to prohibit the transfer of funds therefrom to Progenitor,
Chiron shall notify Progenitor to such effect and (provided that Chiron shall
first attempt in good faith to follow Progenitor's wiring instructions pursuant
to the first sentence of Section 7.9) shall have the right to pay or cause to be
paid royalties hereunder on account of its sales and the sales of its Affiliates
and sublicensees in such country by depositing local currency (if Chiron is paid
in such currency) to the account of Progenitor in an interest-bearing account,
if permissible, at the prevailing commercial interest rate in a bank in such
country (which account and bank are reasonably acceptable to Progenitor).
Chiron shall thereafter cooperate with Progenitor in Progenitor's efforts to
obtain the lawful release of said funds to Progenitor but shall have no further
responsibility therefor. If Progenitor
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is unsuccessful in obtaining the lawful release of said funds after six (6)
months, then Chiron shall pay such amount and accrued interest, if any, to
Progenitor in United States Dollars after converting such amount into its
equivalent in United States Dollars at the rate as published by Bloomberg
Financial Markets, Commodities & News in effect on the date of conversion.
SECTION 8. MANUFACTURING
8.1 MANUFACTURING. Chiron shall be responsible for all GMP manufacturing
activities under this Agreement, including, but not limited to, the
manufacturing of materials for clinical and commercial purposes; provided,
however, that Progenitor may utilize non-GMP materials for its preclinical
studies until such time as GMP materials are available from Chiron. Chiron
agrees to use its commercially reasonable diligent efforts to undertake all such
manufacturing activities and shall devote appropriate resources to accomplish
these responsibilities. Progenitor shall be responsible for Chiron's startup
manufacturing costs and expenses of production of GMP materials as such costs
and expenses are incurred in an amount not to exceed $750,000. Such costs and
expenses shall be billed to Progenitor on a quarterly basis for calendar year
1995.
8.2 CLINICAL SUPPLIES. Chiron shall supply Progenitor's requirements of
both T7T7 polymerase and the Constructs in drug product form, which shall be
manufactured in accordance with GMP, to be used for the clinical trials
conducted by Progenitor pursuant to Section 3.1. Such supplies will be made
available by Chiron at no charge to Progenitor (other than as a part of the
reimbursement of Chiron's manufacturing costs pursuant to Section 8.1) in such
reasonable quantities to be mutually agreed to by Chiron and Progenitor from
time to time.
8.3 PREFERRED MANUFACTURER. Progenitor or its licensee shall retain the
right to manufacture products developed or licensed as permitted pursuant to
this Agreement by Progenitor that utilize T7T7 Technology ("Progenitor
Products"). If Chiron is manufacturing commercial supplies of the polymerase
used in such Progenitor Product and the manufacture of the polymerase for
Progenitor or its licensee will not require any additional regulatory filings by
Chiron, Chiron agrees to manufacture reasonable commercial supplies of the
polymerase for Progenitor or its licensee pursuant to the terms of a
manufacturing and supply agreement to be negotiated by the parties; provided
that this provision shall apply in the event and only in the event that Chiron
determines, in its sole discretion, that it has or is willing to establish
adequate manufacturing capacity to supply Progenitor or its licensee and
provided, further, that Progenitor or such licensee agrees to purchase supplies
of the polymerase at the price proposed by Chiron in its sole discretion which
price may be higher that the price available from other third party
manufacturers. Moreover, if Progenitor or its licensees determine to seek a
third party to manufacture any such Progenitor Product, including the
polymerase, Progenitor or such licensee shall first offer Chiron the right to
manufacture such Progenitor Product on terms to be mutually agreed to by Chiron
and Progenitor or its licensee; provided that Chiron has available manufacturing
capacity and that the price to be charged by Chiron to Progenitor or its
licensee for the manufacture of such Progenitor Product is competitive with
prices chargeable by other third party manufacturers who are comparable to
Chiron in quality and capacity.
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SECTION 9. MARKETING AND REGULATORY
9.1 MARKETING. Chiron shall have exclusive worldwide rights to sell and
market, either directly or through third parties, Licensed Products hereunder.
9.2 REGULATORY. Chiron will hold all regulatory submissions for any
Licensed Product; provided, however, that Progenitor will hold any INDs it files
for its clinical trials conducted pursuant to Section 3.1.
.
SECTION 10. REPRESENTATIONS, WARRANTIES
AND COVENANTS OF PROGENITOR
Progenitor hereby represents, warrants and covenants to Chiron as follows:
10.1 Progenitor has entered into a license agreement with Ohio University,
pursuant to which Progenitor holds an exclusive worldwide license, with the
right to sublicense to Chiron, under the Ohio University License, to the
Licensed Patent Rights owned by Ohio University. Progenitor has provided to
Chiron a true and correct copy of such license agreement. To the best of
Progenitor's knowledge, no third party other than Ohio University has any
ownership rights in and to the patents and/or patent applications licensed to
Progenitor under the Ohio University License.
10.2 Progenitor has entered into a license agreement with Wisconsin Alumni
Research Foundation, pursuant to which Progenitor holds an nonexclusive
worldwide license, with the right to sublicense to Chiron, under the WARF
License, to the Licensed Patent Rights owned by the Wisconsin Alumni Research
Foundation. Progenitor has provided to Chiron a true and correct copy of such
license agreement.
10.3 Each of the Ohio University License and the WARF license is valid,
binding and in full force and effect, has not been modified or amended, nor has
Progenitor waived any provision thereof. There is no default under the Ohio
University License or the WARF License on the part of any party thereto.
10.4 Progenitor has obtained or will obtain no later than April 30, 1995,
any consents required under the Ohio University License or the WARF License to
the sublicensing of the rights thereunder to Chiron.
10.5 Assuming the receipt of any consents or waivers from Ohio University
and WARF to the sublicenses granted by Progenitor to Chiron hereunder (which
consents and waivers shall be obtained by Progenitor no later than April 30,
1995), the execution, delivery and performance of this Agreement by Progenitor
and the compliance with the terms and provisions hereof does not and will not
conflict with or result in a breach of any of the terms and provisions of or
constitute a default under any agreement affecting any of the Licensed
Technology, including the Ohio University License and the WARF License.
10.6 Progenitor shall use its best efforts to enter into a license
agreement on
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commercially reasonable terms with [ * * * ] pursuant to which Progenitor
shall license from [ * * * ] technology necessary for freedom of operation to
practice the Licensed Technology, which license shall be sublicensable by
Progenitor to Chiron on the terms set forth in this Agreement.
10.7 Progenitor assumes full responsibility for any and all payments which
may be due and payable to any third party under the Third Party T7T7 Licenses by
reason of the transactions contemplated hereby.
10.8 Progenitor agrees to perform all obligations under the Third Party
T7T7 Licenses during the term of this Agreement, and shall not terminate or
consent to the termination of any Third Party T7T7 License.
10.9 On or before April 30, 1995, Progenitor shall deliver to Chiron a
letter from Ohio University and from Wisconsin Alumni Research Foundation
stating that the Ohio University License and the WARF License, respectively, is
in full force and effect and that Progenitor is not in default thereunder;
Progenitor agrees to promptly notify Chiron in the event of any default by
Progenitor under any Third Party T7T7 License; Progenitor agrees that, in the
event of termination of any Third Party T7T7 License, Progenitor shall use its
best efforts to cause such third party licensor to enter into a license with
Chiron on the same terms and conditions as set forth in such current license
with Progenitor.
10.10 EXCEPT AS EXPRESSLY PROVIDED IN THIS AGREEMENT, THE LICENSED
TECHNOLOGY PROVIDED BY PROGENITOR TO CHIRON IS PROVIDED "AS IS" AND PROGENITOR
MAKES NO REPRESENTATION OR WARRANTY OF ANY KIND, EXPRESS OR IMPLIED, WRITTEN OR
ORAL, INCLUDING, WITHOUT LIMITATION, ANY REPRESENTATION OR WARRANTY WITH RESPECT
TO THE VALUE, ADEQUACY, FREEDOM FROM FAULT, OR THE QUALITY, EFFICIENCY,
SUITABILITY, CHARACTERISTICS, USEFULNESS, MERCHANTABILITY OR FITNESS FOR
PARTICULAR PURPOSE, OF THE LICENSED TECHNOLOGY PROVIDED BY PROGENITOR TO CHIRON.
SECTION 11. PATENT RIGHTS
11.1 OWNERSHIP OF INVENTIONS. The rights to patent inventions or
discoveries arising from the activities performed with respect to the
development of any Licensed Product shall be based on inventorship as determined
in accordance with United States Patent Law. Each party shall retain all right,
title and interest in and to all such inventions that were invented solely by
such party's employees or persons obligated to assign their inventions to such
party, subject to any license right or rights of first refusal granted to the
other party under this Agreement. All right, title and interest in and to
inventions arising from the activities performed with respect to the development
of any Licensed Product and invented jointly by employees of Chiron (including
persons obligated to assign inventions to Chiron) and employees of Progenitor
(including persons obligated to assign inventions to Progenitor), whether or not
such inventions are also owned in conjunction with third parties, shall be owned
jointly by Chiron and Progenitor, subject to the exclusive licenses to Joint
Technology granted to Chiron by Progenitor pursuant to Section 2 hereof.
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11.2 PATENT MAINTENANCE.
(a) To the extent permitted by applicable law, Progenitor shall file,
prosecute and maintain at its own expense all patent applications and issued
patents constituting Licensed Technology (other than Joint Technology) in such
countries which Chiron reasonably requests. In addition, Progenitor may file,
prosecute and maintain at its own expense all patent applications and issued
patent constituting Licensed Technology (other than Joint Technology) in such
other countries as Progenitor determines. Chiron shall file, prosecute and
maintain at its own expense all patent applications and issued patents
constituting T7T7 Technology Improvements of Chiron in such countries as Chiron
determines. Each party shall advise the other party in a timely manner as to
the status of all patent applications owned by such party which are subject to
this Section 11.2(a) and any significant events regarding such patent
applications or patents issuing therefrom.
(b) Notwithstanding Section 11.2(a) above, Chiron and Progenitor
shall jointly file, prosecute and maintain in effect, and each party shall pay
fifty percent (50%) of the cost thereof, applications and patents for patent
rights relating to inventions that are jointly owned in accordance with Section
11.1. Any such patents shall be prepared by patent counsel jointly selected by
Chiron and Progenitor, and Chiron and Progenitor shall both have the opportunity
to review such patent applications and provide input with regard to the
prosecution thereof.
11.3 EMPLOYEE OBLIGATIONS. Each party represents and warrants that all of
its employees or consultants who will be involved in activities performed in the
course of this Agreement are bound by an obligations to assign an invention to
such party and to cooperate with such party in connection with the patenting of
any such inventions.
11.4 PATENT CONSULTATION. Chiron and Progenitor agree to meet
periodically, as reasonably requested by each party, to review Progenitor's
patent estate as it relates to the T7T7 Technology Improvements of Progenitor,
the Licensed Technology or to Licensed Products and to review Chiron's patent
estate to the extent it relates to T7T7 Technology Improvements of Chiron.
11.5 COMPULSORY LICENSES. In the event that Progenitor shall at any time
while this Agreement is in effect be compelled by applicable law to issue
licenses to other licensees for the Licensed Products, Progenitor shall inform
Chiron of the order compelling any such licenses and shall renegotiate the
royalties and other payments required hereunder only with respect to the country
or countries wherein such compulsory licenses have been ordered so that the
renegotiated royalty and payment terms shall be no less favorable to Chiron than
those granted to any third party under any such compulsory license.
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SECTION 12. INFRINGEMENT; ENFORCEMENT OF
PROPRIETARY RIGHTS
12.1 ALLEGED INFRINGEMENT OF THIRD PARTY PATENT RIGHTS. Chiron shall, at
its own expense, conduct the defense of all claims or suits brought against it
or Progenitor by third parties claiming that the manufacture, use or sale by
Chiron, its Affiliates or sublicensees of a Licensed Product constitutes an
infringement of a third party's patent or other intellectual property rights,
and Progenitor shall, at the request and expense of Chiron give Chiron all
reasonable assistance in any such proceedings. Chiron may apply 50% of its
reasonable out-of-pocket costs actually incurred (including reasonable
attorneys' fees) as a credit against any royalty payments payable to Progenitor
under Sections 7.3, 7.4 and 7.5 hereof. If any damages (excluding punitive or
exemplary damages) awarded against Chiron in a judgment or order related to such
claim are stated to be compensation to the plaintiff for lost sales, 50% of such
amount, to the extent not covered by insurance, may be offset against the
royalties payable under Sections 7.3, 7.4 and 7.5. If Chiron licenses
intellectual property rights to settle such claim in a settlement that has been
approved by Progenitor, Chiron may reduce the royalties payable under Sections
7.3, 7.4 and 7.5 by 50% of the royalty payable to the third party.
12.2 INFRINGEMENT BY THIRD PARTIES. Each party shall promptly notify the
other of any infringement or possible infringement by third parties of any
Licensed Technology. Chiron shall have the right, but not the obligation, to
file and maintain lawsuits for infringement by third parties of the Licensed
Patent Rights, T7T7 Technology and T7T7 Technology Improvements of Progenitor.
Progenitor shall, at the request of Chiron, give Chiron all reasonable
assistance and cooperation in any such proceedings. If within forty-five (45)
days after receiving notice of such infringement or potential infringement,
Chiron does not inform Progenitor that it will prosecute the infringement or
potential infringement, Progenitor shall have the right, but not the obligation,
to bring the claim. In addition, Chiron shall have the right to file and
maintain lawsuits for infringement by third parties of Joint Technology and T7T7
Technology Improvements of Chiron. Progenitor shall, at the request of Chiron,
give Chiron all reasonable assistance and cooperation in any such proceedings.
With respect to infringement of Joint Technology, if within forty-five (45) days
after receiving notice of such infringement or potential infringement, Chiron
does not inform Progenitor that it will prosecute the infringement or potential
infringement, Progenitor shall have the right, but not the obligation, to bring
the claim. In the event that Chiron is the prosecuting party, Chiron shall have
the right to withhold from its royalty obligations pursuant to Sections 7.3, 7.4
and 7.5 hereof, to the extent of 50% of Chiron's reasonable expenses and legal
fees then incurred in connection with such suit, the royalties otherwise
thereafter due hereunder to Progenitor for the Licensed Products. The
prosecuting party shall be entitled to retain any award in such action, except
that if Chiron prosecutes a claim for infringement of the Licensed Patent
Rights, T7T7 Technology or T7T7 Technology Improvements of Progenitor, Chiron
shall reimburse Progenitor for Chiron's expenses and legal fees previously
deducted from royalties (but only to the extent all such expenses and legal fees
were reimbursed in the award) and Chiron shall pay Progenitor a royalty under
Sections 7.3, 7.4 and 7.5, as applicable, as to any portion of an award that it
receives that is stated to be compensation for infringing sales by such third
party.
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12.3 JOINDER. Any party prosecuting or defending a claim under this
Section 12 shall have the right to join the other party in any such proceeding,
only if it is necessary to join the other party in order to prosecute or defend
such action.
.
12.4 SETTLEMENT OF CLAIMS. Neither party may settle a claim described in
this Section 12 without the consent of the other party, if such settlement would
impose any monetary obligation on the other party or require the other party to
submit to an injunction or otherwise limit the other party's rights under this
Agreement.
12.5 COOPERATION. In conducting the defense or prosecution of any claim
described in this Section 12, Progenitor and Chiron shall consult with each
other as reasonably necessary as to the status of the action. Upon reasonable
request, the parties shall assist the person or persons controlling the defense
or prosecution of an infringement claim.
SECTION 13. INDEMNITY
13.1 MUTUAL INDEMNITIES. Each party agrees to indemnify and hold the
other party and its affiliates, officers, directors, employees, agents and
stockholders harmless against any and all losses, liabilities, damages, claims,
judgments, demands, and expenses (including reasonable attorneys' fees) and
costs (together or individually, a "Loss") arising out of or in connection with
(i) in the case of Progenitor, the breach by Progenitor of any of its
representations or warranties contained in this Agreement; or (ii) the
nonperformance, partial or total, of any covenants of the indemnifying party
contained in this Agreement.
13.2 PROGENITOR INDEMNITIES. Progenitor agrees to indemnify and hold
Chiron and its affiliates, officers, directors, employees, agents and
stockholders harmless against any Loss (i) arising out of or in connection with
any alleged act or omission of Progenitor in carrying out the development of any
Licensed Products, including but not limited to clinical testing of such
products and (ii) arising out of any death or injury to any person or persons or
out of damage to any property resulting from the production, manufacture, use,
consumption, sale or advertisement of any product by Progenitor, its affiliates,
its licensees or sublicensees (other than Chiron or any Chiron Affiliate or
sublicensee), except to the extent such Loss results from negligence or willful
misconduct of Chiron, its affiliates or sublicensees or any matter for which
Chiron must indemnify Progenitor under Sections 13.1 or 13.3, and will reimburse
Chiron for any legal or other expenses in investigating, defending or preparing
to defend any such action, proceeding or claim.
13.3 CHIRON INDEMNITIES. Chiron agrees to indemnify and hold Progenitor
and its affiliates, officers, directors, employees, agents and stockholders
harmless against any Loss arising out of any death or injury to any person or
persons or out of damage to any property resulting from the production,
manufacture, use, consumption, sale or advertisement of the Licensed Products
hereunder by Chiron, its affiliates or its sublicensees, except to the extent
such Loss results from negligence or willful misconduct of Progenitor, its
affiliates, its licensees or sublicensees (other than Chiron or any Chiron
Affiliate or sublicensee) or any matter for which Progenitor must indemnify
Chiron under Sections 13.1, 13.2 or l3.4 and will reimburse
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Progenitor for any legal or other expenses in investigating, defending or
preparing to defend any such action, proceeding or claim.
13.4 INDEMNITY FOR THIRD PARTY T7T7 LICENSES. Progenitor shall indemnify,
defend and hold harmless Chiron and its employees, officers, directors,
stockholders and agents from and against any Loss which the indemnified party
may incur, suffer or be required to pay resulting from or arising in connection
with (i) any breach by Progenitor of any agreement listed on Exhibit A to which
it or an Affiliate is a party, or (ii) the successful enforcement by an
indemnified party of any of the foregoing.
13.5 NOTICE TO INDEMNIFYING PARTY. As a condition to the indemnified
party's right to indemnification under this Section, the indemnified party shall
give prompt written notice to the indemnifying party of any suits, claims or
demands by third parties or the indemnified party which may give rise to any
Loss for which indemnification may be required under this Section. The
indemnifying party shall be entitled to assume the defense and control of any
suit, claim or demand of any third party at its own cost and expense; provided,
however, that (i) the other party shall have the right to be represented by its
own counsel at its own cost in such matters, and (ii) neither party may settle a
claim described in this Section 13 if such settlement would impose any monetary
obligation on the other party or require the other party to submit to an
injunction or otherwise limit the other party's rights under this Agreement,
without the consent of the other party, which consent shall not be unreasonably
withheld.
13.6 INSURANCE. The parties shall mutually agree from time to time the
types and amount of insurance coverage, if any, to be maintained by each party
to insure against the activities of the parties under this Agreement. Each
party agrees to maintain such insurance for the period agreed to and to name
the other party as an additional insured.
SECTION 14. OWNERSHIP OF PROPRIETARY
INFORMATION; CONFIDENTIALITY
14.1 OWNERSHIP OF PROPRIETARY INFORMATION. Each party shall retain all
right, title and interest in and to any proprietary information (excluding
patent inventions or discoveries which are subject to Section 11.1 hereof) that
are developed or acquired by such party or its Affiliates or agents in the
course of performing its activities under this Agreement. All unpatented
proprietary information developed pursuant to the T7T7/TK Collaboration shall be
licensed to Chiron as set forth in Section 2.
14.2 CONFIDENTIAL INFORMATION RECEIVED FROM OTHER PARTY. Each party
hereto (a "Recipient") will keep in confidence and refrain from using, except as
contemplated in this Agreement, any confidential or proprietary information
(collectively, the "Confidential Information") received from the other party
(the "Furnishing Party"), whether furnished before or after the Effective Date.
In addition, except as contemplated by this Agreement, neither party shall
furnish to any third party, without prior approval of the other party, any
biological material including but not limited to vectors, genes, constructs,
polymerases, adjuvants, antigens and/or the like, provided by the other party.
Such biological material shall be included as "Confidential
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Information" hereunder. The foregoing obligations shall not apply to, and the
definition of "Confidential Information" does not include:
(a) information that at the time of the use or disclosure by the
Recipient was already in the public domain other than through the fault of the
Recipient or its employees, licensees, agents or subcontractors, in violation
hereof;
(b) Information that was rightfully known by the Recipient (as shown
by its written records) prior to the date of disclosure by the Furnishing Party
to the Recipient;
(c) Information that was received by the Recipient on an unrestricted
basis from a source under no duty of confidentiality to the Furnishing Party;
(d) Information that Recipient believes in good faith is required to
be disclosed to comply with any applicable law, regulation or order of a
government authority of court of competent jurisdiction (including any
securities laws applicable to such party or any laws, rules or regulations
governing approval to manufacture, market or sell Licensed Products in any
jurisdiction), in which event the disclosing party shall use all reasonable
efforts to advise the other party in advance of the need for such disclosure; or
(e) Information that is independently developed by the Recipient
without reliance on the Confidential Information.
Notwithstanding the foregoing, it is understood that each party may disclose
Confidential Information to its employees, licensees, consultants, contractors
and agents if such persons are subject in writing to obligations of
confidentiality and to restrictions on use with respect to such information to
the same extent the party is so obligated hereunder. In addition, each party
may disclose to a potential licensee Confidential Information provided by the
other party (which Confidential Information in the case of disclosure by
Progenitor shall be limited to general information on the T7T7 expression system
itself without specifically identifying particular gene products or non-
abandoned Constructs) if such persons are subject in writing to obligations of
confidentiality and to restriction on use with respect to such information to
the same extent the party is so obligated hereunder. Upon termination or
expiration of this Agreement, each party shall return to the other party at such
other party's expense all unused biological materials supplied by the other
party or shall, at such other party's written request, destroy all such
materials.
14.3 DISCLOSURE OF AGREEMENT TERMS. Prior to public disclosure by either
party of the existence of this Agreement or of any of its terms and conditions,
the party proposing to disclose such information shall provide the other party
with advance written notice thereof and a copy of such proposed disclosure.
Such disclosure shall not be made without the prior written consent to such
disclosure by the other party, which consent shall not be unreasonably withheld
or delayed; provided that such consent shall not be required with respect to
disclosures required by applicable securities laws, but in such case the party
preparing to disclose this Agreement or its
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terms shall consult with the other party in preparing a redacted version of the
Agreement and in seeking confidential treatment thereof.
SECTION 15. TERM AND TERMINATION OF AGREEMENT
15.1 TERM. This Agreement is effective as of the Effective Date and shall
continue in effect until the expiration of the later of (i) the expiration of
the last to expire Licensed Patent Rights which would be infringed by the
making, using or selling or any Licensed Patent or (ii) within a given country,
ten years after the first commercial sale of a Licensed Product within such
country, whereupon Chiron shall have a fully paid-up, non-exclusive license
under the rights granted in Section 2.
15.2 EARLY TERMINATION. This Agreement may be terminated:
(i) by either party upon the material breach of the terms of this
Agreement by the other party if such breach is not cured within ninety (90) days
after written notice from the non-breaching party; provided, however, that
termination of this Agreement is not intended to be the sole remedy of either
party in the event of a breach by the other party, and in the event of a breach
of this Agreement by one party, the other party shall be entitled, in addition,
to all remedies available at law or in equity; or
(ii) subject to applicable law, by either party upon the bankruptcy,
insolvency, assignment for the benefit of creditors or other act of insolvency
by, of or against the other party or its parent, if any.
In addition, Chiron may terminate this Agreement with respect to a
particular Construct upon thirty (30) days' written notice to Progenitor.
Upon termination of this Agreement, each party shall, upon the request of
the other party, at such party's expense and within one month from the date of
termination, return all material embodiments of Confidential Information of the
other party, including but not limited to documents and biological materials.
15.3 REGULATORY FILINGS REGARDING [ * * * ] CONSTRUCT. In the event
that this Agreement is terminated pursuant to Section 15.2 other than by
reason of breach by Progenitor or the application of Section 15.2(ii) to
Progenitor, Chiron agrees to grant to Progenitor the right to reference
Chiron regulatory filings with respect to the [ * * * ] Construct, subject to
the following limitations: Such reference rights shall be limited to
regulatory filings resulting from the [ * * * ] Collaboration which have been
made prior to the date of termination and shall permit Progenitor to
reference only such information in such filings that relates to the [ * * * ]
gene expression system as described in the Basic T7T7 Patents and not any
information relating to [ * * * ]or any other proprietary or confidential
information of Chiron.
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Except as expressly set forth in this Agreement, no rights or licenses of
any kind are granted to Progenitor under any intellectual property or
confidential information of Chiron, including without limitation intellectual
property or Confidential Information relating to [ * * * ] or to any
Construct licensed to or developed by Chiron under this Agreement.
15.4 SURVIVAL. If this Agreement is terminated pursuant to Section 15.1
or Section 15.2, the following provisions shall survive termination: Chiron's
obligation to pay royalties accrued prior to such termination pursuant to
Section 7 hereof and the provisions of Section 3.2, 7.7, 7.8, 7.9 and 7.10, the
provisions of Section 10, Section 11.1, Section 13, Section 14 and Section 15.
In addition, any rights, obligations, cause of action or claim of Chiron or
Progenitor, accrued or to accrue, because of any breach or default by the other
party shall survive termination.
15.5 PROVISIONS CONTRARY TO LAW. In performing this Agreement, the
parties shall comply with all applicable laws. Nothing in this Agreement shall
be construed so as to require the violation of any law, and wherever there is
any conflict between any provision of this Agreement and any law the law shall
prevail, but in such event the affected provision of this Agreement shall be
affected only to the extent necessary to bring it within the applicable law,
unless such conflicts affect a material provision of this Agreement in which
event the parties shall use their best efforts to agree upon a valid and
enforceable provision as a substitute for the affected provision, taking into
account the intent of this Agreement.
SECTION 16. MISCELLANEOUS
16.1 NOTICES. Any notice or other communication required or permitted to
be given by either party under this Agreement shall be given in writing and
shall be effective when delivered by hand or by electronic facsimile or by
registered or certified mail, postage prepaid (in which case delivery shall be
evidenced by return receipt), addressed to such party at the following addresses
or such other address as may be designated by notice pursuant to this Section
16.1:
If to Progenitor: Progenitor, Inc.
1507 Chambers Road
Columbus, OH 43212
Attention: President
Facsimile: (614) 488-0404
Copy to:
Facsimile:
If to Chiron: Chiron Corporation
4560 Horton Street
Emeryville, CA 94608-2916
Attention: President
Facsimile (510) 655-3283
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Copy to General Counsel
Facsimile (510) 654-5360
16.2 FORCE MAJEURE. Neither party to this Agreement shall be liable for
delay or failure in the performance of any of its obligations hereunder if such
delay or failure is due to causes beyond its reasonable control, including,
without limitation, acts of God, fires, earthquakes, strikes and labor disputes,
acts of war, civil unrest or intervention of any governmental authority, but any
such delay or failure shall be remedied by such party as soon as is reasonably
possible.
16.3 USE OF NAMES. Neither party shall use the name of the other in any
promotional materials or advertising without the prior written consent of the
other.
16.4 ASSIGNMENTS. This Agreement shall not be assignable by any party
hereto, whether by assignment, merger, sale of assets or otherwise, without the
prior written consent of the other party, which consent shall not be
unreasonably withheld; provided, however, that no consent shall be required for
any assignment of this Agreement by Chiron to an Affiliate of Chiron, or by
Progenitor to an Affiliate of Progenitor. Neither party may sublicense all of
its rights without the prior written consent of the other party, which consent
shall not be unreasonably withheld, except that no such consent shall be
required for any sublicense by Chiron to any Affiliate of Chiron, or by
Progenitor to any Affiliate of Progenitor. Any purported assignment in
contravention of this Section 16.4 shall, at the option of the non-assigning
party, be null and void and of no effect. This Agreement shall inure to the
benefit of and be binding on the parties' permitted assigns, successors in
interest and subsidiaries.
16.5 WAIVERS AND MODIFICATIONS. The failure of any party to insist on the
performance of any obligation hereunder shall not act as a waiver of such
obligation. No waiver, modification, release or amendment of any obligation
under this Agreement shall be valid or effective unless in writing and signed by
both parties hereto.
16.6 CHOICE OF LAW AND JURISDICTION. This Agreement is subject to and
shall be construed and enforced in accordance with the laws of the State of
California.
16.7 LIMITATION OF LIABILITY. Except for indemnification claims pursuant
to Section 13, with respect to any claim by one party against the other arising
out of the performance or failure of performance of the other party under this
Agreement, the liability of one party to the other party for such breach shall
be limited under this Agreement or otherwise at law or equity to the direct
damages only; in no event shall a party be liable to the other party for
indirect, incidental or consequential damages including, without limitation,
lost profits.
16.8 FEES. Except as otherwise provided herein, each party shall bear its
own legal fees incurred in connection with the transactions contemplated hereby.
16.9 ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
between the parties as to the subject matter hereof, and all prior negotiations,
representations, agreements and
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understandings (including the Letter Agreement) are merged into, extinguished by
and completely expressed by this Agreement.
16.10 COUNTERPARTS. This Agreement may be executed in any number of
counterparts with the same effect as if all parties had signed the same
document. All such counterparts shall be deemed an original, shall be construed
together and shall constitute one and the same instrument.
IN WITNESS THEREOF, the parties have duly executed this Agreement as of the
date set forth above.
CHIRON CORPORATION PROGENITOR, INC.
By: /S/ L.T. WILLIAMS By: /S/ DOUGLASS GIVEN
------------------------------ -------------------------------
Name: L.T. Williams, M.D., Ph.D. Name: Douglass Given M.D., Ph.D.
---------------------------- --------------------------------
Title: Senior Vice President Title:
---------------------------- --------------------------------
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EXHIBIT A
PROGENITOR AGREEMENTS
(1) License Agreement dated April 1, 1993 between Progenitor, Inc. and
Ohio University.
(2) License Agreement dated September 1, 1994 between Progenitor, Inc. and
Wisconsin Alumni Research Foundation.
(3) Proposed License Agreement between Progenitor, Inc. and [ * * * ]
(to be entered into).
<PAGE>
PROGENITOR, INC.
April 10, 1996
Michael S. Richman
Chiron Corporation
4560 Horton St.
Emeryville, CA 94608-2916
Dear Michael:
This is written pursuant to Section 5.1 of the License and Collaboration
Agreement by and among Chiron Corporation and Progenitor, Inc. dated as of
March 31, 1995 (the "Agreement").
As you are aware, pursuant to Section 5.1 of the Agreement, in order to maintain
its exclusive rights to all Constructs in the field of Infectious Disease
Vaccines granted by Progenitor to Chiron pursuant to Section 2.2 of the
Agreement, Chiron was obligated to pay to Progenitor $500M by March 31, 1996.
In light of Chiron's failure to make payment under Section 5.1 of the Agreement,
all Infectious Disease Vaccine Rights, other than rights with respect to four
Infectious Disease Vaccine Constructs (not including (***) to which Chiron
received rights granted pursuant to Section 2.1 or any Construct pursuant to
Section 2.3 or Section 2.4 of the Agreement), licensed to Chiron pursuant to
Section 2.2 of the Agreement, revert to Progenitor.
By this letter, Progenitor respectfully requests Chiron, in accord with Section
5.1 of the Agreement, to designate in writing by May 30, 1996 the four
Infectious Disease Vaccine Constructs to which it will maintain rights under
Section 2.2.
We look forward to our continuing collaboration on these four Constructs and
under the other terms of the Agreement.
Very truly yours,
/S/ STEPHEN J. WILLIAMS
Stephen J. Williams, Ph.D.
Vice President, Business Development
cc: Douglass B. Given, M.D., Ph.D.
bcc: Chuck Hoyng
SJW/was
<PAGE>
THE INFORMATION BELOW MARKED BY * AND ( ) HAS BEEN OMITTED PURSUANT TO A
REQUEST FOR CONFIDENTIAL TREATMENT. THE OMITTED PORTIONS HAVE BEEN SEPARATELY
FILED WITH THE COMMISSION.
SPONSORED RESEARCH AND LICENSE AGREEMENT
THIS AGREEMENT is entered into as of the 1st day of May, 1995 by and
between Progenitor, Inc., 1507 Chambers Road, Columbus, Ohio 43212-1566
("Progenitor"), and Novo Nordisk, c/o ZymoGenetics, Inc., 1201 Eastlake Avenue
East, Seattle, Washington 98102 ("Novo Nordisk").
A. Progenitor has rights in technology related to: (a) a hematopoietic
receptor homologue referred to as Hu-B 1.219, and (b) an activity present in the
supenatant of the murine yolk-sac-derived cell line YS-4, referred to as Mu-
YSDF-1. Novo Nordisk and its Affiliates have experience in isolating and
cloning ligands to receptors and purifying and cloning growth factors and in
developing products therefrom.
B. Novo Nordisk and its Affiliates desire to obtain, and Progenitor
desires to grant to Novo Nordisk and its Affiliates, a license under
Progenitor's rights with respect to the Hu-B 1. 219 receptor and the YSDF-1
growth factor, on the terms and conditions set forth in this Agreement.
C. In addition, the parties desire to collaborate in a research effort as
described in this Agreement.
NOW, THEREFORE, the parties hereby agree as follows:
1. DEFINITIONS
1.1 AFFILIATE of a party shall mean any entity that controls, is
controlled by or is under common control with such party or such party's
Affiliates.
1.2 FIELD shall mean any and all human therapeutic uses and all small
molecule drug design uses, but excluding all non-therapeutic uses (including but
not limited to diagnostic and cell-sorting uses).
1.3 GROWTH FACTOR shall mean any protein molecule which is purified
from the supernatant of the murine yolk-sac-derived cell line YS-4 and any human
homologue (Hu-YSDF-1) of MU-YSDF-1, wherein such protein molecule is stimulatory
to any hematopoietic stem cell, hematopoietic blast cell or any hematopoietic
progenitor cell found in the bone marrow, including without limitation any
erythrocyte progenitors, megakaryocyte progenitors and/or macrophage
progenitors, and any nucleic acid molecule corresponding to such protein
molecule, including but not limited to cDNA, genomic DNA and RNA in both the
sense and anti-sense orientations, any homologous nucleic acid and/or protein
sequence and any small molecular weight mimetic, as well as any functional
equivalents of any of the foregoing, all as further described in Exhibit 1.3.
1.4 JOINT COMMITTEE shall mean the committee described in Section 2.4
of this Agreement.
<PAGE>
1.5 JOINT TECHNOLOGY shall mean any partial or complete sequence
information describing any Ligand or Growth Factor and any other information,
data, property and rights, as well as any inventions, whether patentable or not,
developed from the materials provided to Novo Nordisk by Progenitor pursuant to
this Agreement and arising from the research conducted pursuant to this
Agreement in the course of the Research Phase at or on behalf of Novo Nordisk,
Progenitor or any Affiliate of either. Work done by or on behalf of Novo
Nordisk and/or its Affiliates pursuant to Section 2.2 shall not be considered to
be done in the course of the Research Phase. The parties agree that any and all
Joint Technology shall be jointly owned by Novo Nordisk and Progenitor.
1.6 LICENSED PATENT RIGHTS shall mean all of Progenitor's rights in
and to Licensed Technology that is covered at any time by any patent or patent
application in any country worldwide, and all divisions, continuations,
continuations-in-part, reissues, reexaminations or extensions thereof and any
period of marketing exclusivity relating thereto. Licensed Patent Rights shall
include, without limitation, rights arising under those patents and/or patent
applications listed in Exhibit 1.6. Licensed Patent Rights shall also include,
without limitation, Progenitor's rights arising under patents and patent
applications covering any, Joint Technology.
1.7 LICENSED PRODUCT shall mean any material, the relevant
manufacture, use, sale, offer for sale or import of which by Novo Nordisk or an
Affiliate of Novo Nordisk would, in the absence of the licenses granted herein,
infringe one or more Valid Claims of Licensed Patent Rights, treating, for this
purpose only, all patents covering any Joint Technology as if they were solely
owned by Progenitor.
1.8 LICENSED TECHNOLOGY shall mean any and all material, information,
property and rights in or coming into the possession or control of Progenitor
that is necessary or useful in the development, production or use of any
Receptor, Ligand, and/or Growth Factor in the Field.
1.9 LIGAND shall mean any protein molecule that specifically binds to
the Receptor and any nucleic acid molecule corresponding to such protein
molecule, including, but not limited to, cDNA, genomic DNA, and RNA in both the
sense and anti-sense orientations, any homologous nucleic acid and/or protein
sequence and any small molecular weight mimetic, as well as any functional
equivalents of any of the foregoing, all as further described in Exhibit 1.9.
1.10 NET SALES shall mean the gross proceeds actually received by Novo
Nordisk or an Affiliate of Novo Nordisk, or a sublicensee of either, pursuant to
sales of a Licensed Product (except sales by Novo Nordisk or one of its
Affiliates or sublicensees to Novo Nordisk or one of its Affiliates or
sublicensees other than for end use), less, to the extent included in such gross
proceeds, sales and/or use taxes, income taxes withheld at the source, import
and/or export duties, outbound transportation and insurance, wholesaler and cash
discounts, sales commissions and incentives, returns and allowances, and third
party royalties.
1.11 NOVO NORDISK GROWTH FACTOR PATENT RIGHTS shall mean Novo
Nordisk's rights in and to Joint Technology arising from the research conducted
pursuant to this Agreement
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in the course of Growth Factor Stage 1 and Growth Factor Stage 2 that is covered
at any time by any patent or patent application in any country worldwide, and
all divisions, continuations, continuations-in-part, reissues, reexaminations or
extensions thereof, and any period of marketing exclusivity relating thereto.
1.12 NOVO NORDISK LIGAND PATENT RIGHTS shall mean Novo Nordisk's
rights in and to Joint Technology arising from the research conducted pursuant
to this Agreement in the course of Ligand Stage 1 and Ligand Stage 2 that is
covered at any time by any patent or patent application in any country
worldwide, and all divisions, continuations, continuations-in-part, reissues,
reexaminations or extensions thereof, and any period of marketing exclusivity
relating thereto.
1.13 NOVO NORDISK PATENT RIGHTS shall mean Novo Nordisk's rights in
and to Joint Technology that is covered at any time by any patent or patent
application in any country worldwide, and all divisions, continuations,
continuations-in-part, reissues, reexaminations or extensions thereof, and any
period of marketing exclusivity relating thereto. Novo Nordisk Patent Rights
shall include, without limitation, all Novo Nordisk Growth Factor Patent Rights
and all Novo Nordisk Ligand Patent Rights.
1.14 PROGENITOR GROWTH FACTOR NET SALES shall mean the gross proceeds
actually received by Progenitor or an Affiliate of Progenitor, or a sublicensee
of either, pursuant to sales of Progenitor Growth Factor Product (except sales
by Progenitor or one of its Affiliates or sublicensees to Progenitor or one of
its Affiliates or sublicensees other than for end use), less, to the extent
included in such gross proceeds, sales and/or use taxes, income taxes withheld
at the source, import and/or export duties, outbound transportation and
insurance, wholesaler and cash discounts, sales commissions and incentives,
returns and allowances, and third party royalties.
1.15 PROGENITOR LIGAND NET SALES shall mean the gross proceeds
actually received by Progenitor or an Affiliate of Progenitor, or a sublicensee
of either, (pursuant to sales of Progenitor Ligand Product (except sales by
Progenitor or one of its Affiliate or sublicensees to Progenitor or one of its
Affiliates or sublicensees other than for end use), less, to the extent included
in such gross proceeds, sales and/or use taxes, income taxes withheld at the
source, import and/or export duties, outbound transportation and insurance,
wholesaler and cash discounts, sales commissions and incentives, returns and
allowances, and third party royalties.
1.16 PROGENITOR NET SALES shall mean the gross proceeds actually
received by Progenitor or an Affiliate of Progenitor, or a sublicensee of
either, pursuant to sales of Progenitor Product (except sales by Progenitor or
one of its Affiliates or sublicensee, to Progenitor or one of its Affiliates or
sublicensees other than for end use), less, to the extent included in such gross
proceeds, sales and/or use taxes, income taxes withheld at the source, import
and/or export duties, outbound transportation and insurance, wholesaler and cash
discounts, sales commissions and incentives, returns and allowances, and third
party royalties.
1.17 PROGENITOR GROWTH FACTOR PRODUCT shall mean any material, the
relevant manufacture, use, sale, offer for sale or import of which by Progenitor
or an Affiliate of Progenitor would, in the absence of the licenses granted in
Section 8.6 hereof, infringe one or
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more Valid Claims of Novo Nordisk Growth Factor Patent Rights, treating, for
this purpose only, all patents covering Joint Technology arising from the
research conducted pursuant to this Agreement in the course of Growth Factor
Stage 1 and Growth Factor Stage 2 as if they were owned solely by Novo Nordisk.
1.18 PROGENITOR LIGAND PRODUCT shall mean any material, the relevant
manufacture, use, sale, offer for sale or import of which by Progenitor or an
Affiliate of Progenitor would, in the absence of the licenses granted in Section
8.5 hereof, infringe one or more Valid Claims of Novo Nordisk Ligand Patent
Rights, treating, for this purpose only, all patents covering Joint Technology
arising from the research conducted pursuant to this Agreement in the course of
Ligand Stage 1 and Ligand Stage 2 as if they were owned solely by Novo Nordisk.
1.19 PROGENITOR PRODUCT shall mean any material, the relevant
manufacture, use, sale, offer for sale or import of which by Progenitor or an
Affiliate of Progenitor would, in the absence of the licenses granted in Section
8.7 hereof, infringe one or more Valid Claims of Novo Nordisk Patent Rights,
treating, for this purpose only, all patents covering Joint Technology as if
they were owned solely by Novo Nordisk.
1.20 RECEPTOR shall mean the protein molecule (***), and any nucleic
acid molecule corresponding to such protein molecule, including, but not
limited to, cDNA, genomic DNA, and RNA in both the sense and anti-sense
orientations, any homologous nucleic acid and/or protein sequence and any
small molecular weight mimetic, as well as any functional equivalents of any
of the foregoing.
1.21 RESEARCH PHASE shall mean the initial phase of the term of this
Agreement when the parties are actively conducting research regarding Ligands
and Growth Factors. The Research Phase will consist of two stages for Ligands
and two stages for Growth Factors, which are described in Section 2.1 below.
The Research Phase shall begin on the date of this Agreement and shall continue
until termination of the final stage thereof or the earlier termination of this
Agreement.
1.22 ROYALTIES shall mean all royalties payable by Novo Nordisk to
Progenitor hereunder.
1.23 VALID CLAIM shall mean: (i) a claim of an unexpired patent, or
one whose expiration date has been extended by law, so long as such claim shall
not have been held invalid in an unappealed or an unappealable decision, in a
court of competent jurisdiction; or (ii) any subsisting right of market
exclusivity granted on the basis of any of the claims described in clause (i).
2. RESEARCH.
2.1 The Research Phase will consist of two Ligand stages and/or two
Growth Factor stages, as described below:
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2.1.1 Prior to the commencement of Ligand Stage l, Novo
Nordisk will determine whether or not the Receptor sequence provided by
Progenitor to Novo Nordisk is full-length, and, if Novo Nordisk determines that
such sequence is not full-it length, Novo Nordisk will complete such sequence.
During Ligand Stage 1 of the Research Phase, Novo Nordisk and/or one or more of
its Affiliates will attempt to isolate, clone and sequence a Ligand pursuant to
the work plan attached as Exhibit 2.1.1. As required by Novo Nordisk or
requested by the Joint Committee, and at no additional charge, Progenitor will
provide Novo Nordisk with samples of cDNA encoding the Receptor and any other
materials or assistance required to enable Novo Nordisk to determine that the
Receptor sequence provided by Progenitor to Novo Nordisk is full-length (or, if
Novo Nordisk determines that it is not full-length, to enable Novo Nordisk to
complete such sequence) and to carry out Novo Nordisk's obligations during
Ligand Stage 1. During Ligand Stage 1, Novo Nordisk will limit its use of the
Receptor and any related tools and reagents provided to it by Progenitor to
carrying, out the tasks contemplated by this Section 2.1. Novo Nordisk will not
screen the Receptor against any material, or commingle the Receptor with any
material, that is the property of any person or entity other than Novo Nordisk,
Progenitor and/or any Affiliate of either such party, except with the prior
approval of the Joint Committee. Following the end of Ligand Stage 1, Novo
Nordisk will not use the Receptor except in connection with any Identified
Ligand (as defined below). The parties anticipate that Ligand Stage 1 will
continue for approximately (***). If Novo Nordisk has not isolated, cloned
and sequenced a Ligand within (***) after the date of the commencement of
Ligand Stage 1, Progenitor may deliver written notice to Novo Nordisk at any
time after expiration of such (***) period but before completion of such
tasks by Novo Nordisk demanding that Novo Nordisk complete such tasks within 60
days after delivery of such notice, and, if Novo Nordisk does not complete such
tasks within such 60-day period, Progenitor may terminate Ligand Stage 1 and the
license granted to Novo Nordisk pursuant to this Agreement with respect to the
Receptor and all Ligands by delivery of written notice to Novo Nordisk, and,
after such termination, Progenitor shall have the rights granted in Section 8.5.
Ligand Stage 1 will begin on the date that Novo Nordisk notifies Progenitor in
writing that: (i) Progenitor has completed delivery of the samples of cDNA
encoding the Receptor and other materials to be delivered to Novo Nordisk
pursuant to this Section 2.1.1, and (ii) Novo Nordisk has possession of the
full-length Receptor sequence. Ligand Stage 1 will continue until Novo Nordisk
has notified Progenitor in writing that Novo Nordisk has successfully completed
the tasks of isolating, cloning and sequencing a Ligand (the "Ligand Stage 1
Termination Date"), or until Ligand Stage 1 or this Agreement is terminated,
whichever occurs first. Each determination of whether or not Novo Nordisk has
successfully isolated, cloned and sequenced a Ligand will be made by Novo
Nordisk in its sole discretion, based on some or all of the criteria set forth
in Exhibit 1.9 having been met and based on the recommendation, if any, of the
Joint Committee. Within 60 days after the Ligand Stage 1 Termination Date, Novo
Nordisk, will notify Progenitor in writing (the "Identified Ligand Notice")
stating whether or not Novo Nordisk desires to go forward with Ligand Stage 2 of
the Research Phase and what Ligand or Ligands, if more than one, (or other
result of the work conducted pursuant to Ligand Stage 1) Novo Nordisk desires to
go forward with (each is referred to herein as an "Identified Ligand"). If Novo
Nordisk states in the Identified Ligand Notice that it does not desire to
proceed to Ligand Stage 2 with any Ligand (or other result of the work conducted
pursuant to Ligand Stage 1), the licenses granted to Novo Nordisk pursuant to
this Agreement with respect to the Receptor and all Ligands will terminate
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as of the date of delivery to Progenitor of the Identified Ligand Notice, and,
after such termination, Progenitor shall have the rights granted in Section 8.5.
2.1.2 During Ligand Stage 2 of the Research Phase,
Progenitor will perform the studies described in Exhibit 2.1.2 and will work
with Novo Nordisk to establish the biological function of each Identified Ligand
to Novo Nordisk's satisfaction. Progenitor will notify Novo Nordisk in writing
when Progenitor is ready to commence such activities (the "Ligand Stage 2
Commencement Notice"), which notice will be delivered to Novo Nordisk no later
than 30 days after Progenitor's receipt of the Identified Ligand Notice. Ligand
Stage 2 will begin on the date Novo Nordisk receives the Ligand Stage 2
Commencement Notice and shall continue for a period of (***) thereafter.
Novo Nordisk will be responsible for producing, at no additional charge, all
recombinant Identified Ligand protein required by Progenitor (as determined by
the Joint Committee) to complete its tasks during Ligand Stage 2. Progenitor
will limit its use of such protein to performance of its obligations under this
Agreement. Within 60 days after the end of Ligand Stage 2, Novo Nordisk will
notify Progenitor in writing (the "Ligand Development Notice") stating whether
or not Novo Nordisk desires to go forward with development of a Licensed Product
based on an Identified Ligand or any other result of the work performed pursuant
to Ligand Stage 2. If Novo Nordisk states in the Ligand Development Notice that
it does not desire to proceed with development of any such Licensed Product, the
licenses granted to Novo Nordisk pursuant to this Agreement with respect to the
Receptor and all Ligands will terminate as of the date of delivery to Progenitor
of the Ligand Development Notice, and, after such termination, Progenitor shall
have the rights granted in Section 8.5.
2.1.3 During Growth Factor Stage 1 of the Research Phase,
Novo Nordisk and/or one or more of its Affiliates will attempt to purify,
clone and sequence a Growth Factor pursuant to the work plan attached as
Exhibit 2.1.3. As required by Novo Nordisk, and at no additional charge,
Progenitor will provide Novo Nordisk with samples of Growth Factor-producing
cell lines and any other materials or assistance required to enable Novo
Nordisk to carry out Novo Nordisk's obligations during Growth Factor Stage 1.
During Growth Factor Stage 1, Novo Nordisk will limit its use of all Growth
Factors and any related tools and reagents provided to it by Progenitor to
carrying out the tasks contemplated by this Section 2.1. Novo Nordisk will
not screen any Growth Factor provided to Novo Nordisk by Progenitor against
any material, or commingle any such Growth Factor with any material, that is
the property of any person or entity other than Novo Nordisk, Progenitor
and/or any Affiliate of either such party, except with the prior approval of
the Joint Committee. Following the end of Growth Factor Stage 1, Novo
Nordisk will not use any Growth Factor provided to Novo Nordisk by Progenitor
except in connection with any Identified Growth Factor (as defined below).
The parties anticipate that Growth Factor Stage 1 will continue for
approximately (***). If Novo Nordisk has not purified, cloned and sequenced
a Growth Factor within (***) after the date of the commencement of Growth
Factor Stage 1, Progenitor may deliver written notice to Novo Nordisk at any
time after expiration of such (***) period but before completion of such
tasks by Novo Nordisk demanding that Novo Nordisk complete such tasks within
60 days after delivery of such notice, and, if Novo Nordisk does not complete
such tasks within such 60-day period, Progenitor may terminate Growth Factor
Stage 1 and the license granted to Novo Nordisk pursuant to this Agreement
with respect to all Growth Factors by delivery of written
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notice to Novo Nordisk, and, after such termination, Progenitor shall have the
rights granted in Section 8.6. Growth Factor Stage 1 will begin on the later of
the date of this Agreement or the date that Novo Nordisk notifies Progenitor in
writing that Progenitor has completed delivery of the samples of Growth Factor
cell lines and other materials to be delivered to Novo Nordisk pursuant to this
Section 2.1.3 and will continue until Novo Nordisk has notified Progenitor in
writing that Novo Nordisk has successfully completed the tasks of purifying,
cloning and sequencing a Growth Factor (the "Growth Factor Stage 1 Termination
Date"), or until Growth Factor Stage 1 or this Agreement is terminated,
whichever occurs first. Each determination of whether or not Novo Nordisk has
successfully purified, cloned and sequenced a Growth Factor will be made by Novo
Nordisk in its sole discretion, based on some or all of the criteria set forth
in Exhibit 1.3 having been met and based on the recommendation, if any, of the
Joint Committee. Within 60 days after the Growth Factor Stage 1 Termination
Date, Novo Nordisk will notify Progenitor in writing (the "Identified Growth
Factor Notice") stating whether or not Novo Nordisk desires to go forward with
Growth Factor Stage 2 of the Research Phase and what Growth Factor or Growth
Factors, if more than one, (or other result of the work conducted pursuant to
Growth Factor Stage 1) Novo Nordisk desires to go forward with (each is referred
to herein as an "Identified Growth Factor"). If Novo Nordisk states in the
Identified Growth Factor Notice that it does not desire to proceed to Growth
Factor Stage 2 with any Growth Factor (or other result of the work conducted
pursuant to Growth Factor Stage 1), the licenses granted to Novo Nordisk
pursuant to this Agreement with respect to all Growth Factors will terminate as
of the date of delivery to Progenitor of the Identified Growth Factor Notice,
and, after such termination, Progenitor shall have the rights granted in Section
8.6.
2.1.4 During Growth Factor Stage 2 of the Research Phase,
Progenitor will perform the studies described in Exhibit 2.1.4 and will work
with Novo Nordisk to establish the biological function of each Identified Growth
Factor to Novo Nordisk's satisfaction. Progenitor shall notify Novo Nordisk in
writing when Progenitor is ready to commence such activities (the "Growth Factor
Stage 2 Commencement Notice"), which notice will be delivered to Novo Nordisk no
later than 30 days after Progenitor's receipt of this, Identified Growth Factor
Notice. Growth Factor Stage 2 will begin on the date Novo Nordisk receives the
Growth Factor Stage 2 Commencement Notice and shall continue for a period of two
years thereafter. Novo Nordisk will be responsible for producing, at no
additional charge, all recombinant Identified Growth Factor protein required by
Progenitor (as determined by the Joint Committee) to complete its tasks during
Growth Factor Stage 2. Progenitor will limit its use of such protein to
performance of its obligations under this Agreement. Within 60 lays after the
end of Growth Factor Stage 2, Novo Nordisk will notify Progenitor in writing
(the "Growth Factor Development Notice") stating whether or not Novo Nordisk
desires to go forward with development of a Licensed Product based on an
Identified Growth Factor or any other result of the work performed pursuant to
Growth Factor Stage 2. If Novo Nordisk states in the Growth Factor Development
Notice that it does not desire to proceed with development of any such Licensed
Product, the licenses granted to Novo Nordisk pursuant to this Agreement with
respect to all Growth Factors will terminate as of the date of delivery to
Progenitor of the Growth Factor Development Notice, and, after such termination,
Progenitor shall have the rights granted in Section 8.6.
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2.1.5 Progenitor will devote no less than the equivalent of
(***) qualified scientists working full-time on completion of its obligations
throughout Ligand Stage 2 and Growth Factor Stage 2; provided, however, that
during any period during which Progenitor is simultaneously performing work in
Ligand Stage 2 and Growth Factor Stage 2, Progenitor will devote no less than
the equivalent of (***) qualified scientists working full-time on completion
of its obligations hereunder; provided further, however, that, throughout any
period during which Progenitor is simultaneously performing work in Ligand Stage
2 and Growth Factor Stage 2, the Joint Committee will consider whether or not
(i) the tasks to be completed by Progenitor during Ligand Stage 2 and Growth
Factor Stage 2 justify the devotion of such greater resources by Progenitor (in
terms of additional qualified scientists working on the project), and (ii)
Progenitor has such additional resources available to devote to completion of
such tasks. If the Joint Committee, in its sole discretion, determines that
such additional effort is not justified and/or that Progenitor does not have
such additional resources available, the Joint Committee may authorize
Progenitor to devote less than the equivalent of (***) qualified scientists
working full-time on such project, in which case the research fees to be paid to
Progenitor during such period shall be reduced as provided in Section 4. 1
below. For purposes of this Agreement, the phrase "full-time" shall mean forty
hours per week, excluding holidays.
2.1.6 If Novo Nordisk determines at any time that any
(Growth Factor is also a Ligand (or part of a Ligand), Novo Nordisk will provide
Progenitor with written notice of such determination, and such Growth Factor
shall thereafter be treated as a Ligand (and not as a Growth Factor) for
purposes of this Agreement.
2.2 If Novo Nordisk elects to go forward with development of any
Licensed Product, Novo Nordisk and/or one or more of its Affiliates will attempt
through commercially reasonable efforts to develop and commercialize such
Licensed Product and to secure all necessary regulatory approvals in connection
therewith. Progenitor acknowledges that Novo Nordisk may, but shall not be
required to, begin such activities before the end of Ligand Stage 2, Growth
Factor Stage 2 and/or the Research Phase. As between the parties, all results
of such efforts by or on behalf of Novo Nordisk and/or its Affiliates,
regardless of when such efforts are made, shall be owned by Novo Nordisk, and
shall not be deemed to be part of the Joint Technology. Progenitor will assist
Novo Nordisk in this effort as and when reasonably requested by Novo Nordisk.
Novo Nordisk does not guarantee that it will develop, produce or market a
Licensed Product or that it will generate Royalties for Progenitor.
2.3 As requested by Novo Nordisk, Progenitor will share with
personnel of Novo Nordisk, its Affiliates, and their sublicensees and
subcontractors, to the extent it can do so without violating any obligation of
Progenitor and/or any of its Affiliates to any third party (and Progenitor
warrants that any such obligations existing on the date of this Agreement that
would prohibit Progenitor from sharing pertinent materials or information with
Progenitor have been disclosed by Progenitor to Novo Nordisk in writing prior to
the date hereof), all materials and documents in Progenitor's possession, and
all Progenitor's knowledge and know-how, related to the Receptor, Ligands,
Growth Factors, the mammalian cells expressing any of the foregoing, methods of
isolating any of the foregoing, the Licensed Patent Rights and Licensed
Technology, including without limitation all such materials, documents,
knowledge and know-how obtained
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by Progenitor from any third party, subject to the applicable confidentiality
provisions contained in this Agreement; provided, however, that nothing in
this Section shall be construed as requiring Progenitor to describe to Novo
Nordisk the exact method employed by Progenitor in identifying the partial
cDNA sequence disclosed in the United States patent application filed on
behalf of Progenitor on (***), except as required to be disclosed to the
United States Food and Drug Administration ("FDA") or any other regulatory
agency in connection with gaining approval to market and/or distribute any
Licensed Product. As requested by Progenitor, Novo Nordisk will share with
personnel of Progenitor, its Affiliates, and their sublicensees and
subcontractors, to the extent it can do so without violating any obligation
of Novo Nordisk and/or any of its Affiliates to any third party, all
materials and documents in Novo Nordisk's possession, and all Novo Nordisk's
knowledge and know-how, related to the Receptor, Ligands, Growth Factors, the
Licensed Patent Rights and Licensed Technology and acquired or developed by
Novo Nordisk and/or its Affiliates in the course of the Research Phase.
2.4 The parties hereby establish the Joint Committee, to be comprised
of three representatives appointed by Novo Nordisk and three representatives
appointed by Progenitor. The initial representatives of Novo Nordisk to the
Joint Committee shall be Dr. Don Foster, Dr. John Forstrom, and Dr. Luciana
Simoncini and the initial representatives of Progenitor to the Joint Committee
shall be Dr. H. Ralph Snodgrass, Dr. Doros Platika, and Dr. Stephen Williams.
One representative from each party shall be that party's project leader for this
Agreement. Each party will promptly notify the other party of any change in its
appointed representatives. In addition, if any designated representative of a
party is unable to attend any meeting of the Joint Committee, such party may
designate a replacement for such designated representative; provided, however,
that if all three designated representatives of either party are unable to
attend any meeting of the Joint Committee, such meeting shall be rescheduled.
2.4.1 Where the Joint Committee is specifically authorized by
this Agreement to make determinations, any such determinations shall be made by
majority vote, and each representative shall have one vote. During the Research
Phase, the Joint Committee shall meet in person at least twice each calendar
year and by teleconference at least once each calendar quarter (excluding the
calendar quarters in which it meets in person). Following the Research Phase,
the Joint Committee shall meet in person or by teleconference at least once each
calendar year. Each party shall bear its own expenses for its personnel
attending such meetings. The representatives of each party shall prepare and
distribute to both parties written minutes of each such meeting, both during and
after the Research Phase, which minutes will, without limitation, describe each
recommendation and determination made by the Joint Committee pursuant to Section
2.1. Such minutes of each meeting shall be reviewed, amended if necessary and
approved at the following meeting of the Joint Committee, and copies of all such
final minutes shall immediately be distributed to both parties.
2.4.2 The purpose of the Joint Committee during the Research
Phase shall be: (i) to advise the parties regarding the overall strategy for the
Research Phase, as contemplated by this Agreement; (ii) to coordinate the
parties' activities hereunder; (iii) to review all results of work done in the
Research Phase and suggest modifications to the scope and goals of such work, if
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the Joint Committee deems it necessary; and (iv) to undertake the
responsibilities and make the recommendations and determinations delegated to it
pursuant to Section 2.1 of this Agreement.
2.4.3 Outside the course of the Research Phase, the role of
the Joint Committee shall be to advise Novo Nordisk with respect to development
and commercialization of Licensed Product, as requested by Novo Nordisk.
2.5 All rights in any partial or complete sequence information
describing any Ligand or Growth Factor, and other technology, data, information
and inventions, whether or not patentable, developed from the materials provided
to Novo Nordisk by Progenitor pursuant to this Agreement and arising from the
research conducted by or on behalf of either or both parties pursuant to this
Agreement in the course of the Research Phase shall be jointly owned by Novo
Nordisk and Progenitor. Work performed by or on behalf of Novo Nordisk and/or
its Affiliates pursuant to Section 2.2 shall not be considered to be conducted
in the course of the Research Phase. Each party will ensure that all third
parties that conduct any portion of the research to be conducted by such party
or on such party's behalf pursuant to this Agreement sign appropriate documents
transferring their rights therein to such party consistent with the terms of
this Agreement.
2.6 Progenitor acknowledges that Novo Nordisk may, now or in the
future, conduct its own research and/or enter into one or more agreements with
third parties that involve identification and/or characterization of putative
ligands and/or receptors in general, and of cytokine-like ligands and/or
receptors in particular. The parties recognize that such efforts on behalf of
Novo Nordisk may result in identification and/or characterization of a molecule
that is identical or substantially similar to the Receptor, a Ligand or a Growth
Factor. Alternatively, a molecule discovered by Novo Nordisk or obtained by
Novo Nordisk from a third party may be a portion of the Receptor, a Ligand or a
Growth Factor, or the Receptor, a Ligand or a Growth Factor may be a portion of
such a molecule. In such case, Novo Nordisk will have the sole right to
determine, in its discretion, which molecule or molecules (whether a Ligand, a
Growth Factor or a molecule discovered by Novo Nordisk or obtained from a third
party), if any, to develop into a product. Except as set forth in Section 2.5,
all technology, data, information and inventions, whether or not patentable,
arising from any research conducted by or on behalf of Novo Nordisk shall, as
between the parties, be the sole property of Novo Nordisk. Novo Nordisk will
not disclose to Progenitor any confidential information received by Novo Nordisk
from a third party, and, as set forth in Section 5 below, Novo Nordisk will not
disclose to any third party confidential information received by Novo Nordisk
from Progenitor. Novo Nordisk will not intentionally seek a collaboration with
any third party with respect to any molecule that is identical or substantially
similar to the Receptor, a Ligand or a Growth Factor. Novo Nordisk will notify
Progenitor in writing within 24 hours after Progenitor discloses Progenitor's
sequence for the Receptor to Novo Nordisk whether or not Novo Nordisk and/or any
of its Affiliates is then working with any molecule that is identical or
substantially similar to the Receptor.
2.7 So long as Novo Nordisk is producing any Identified Ligand and/or
any Identified Growth Factor, and so long as the Joint Committee determines that
supply of such materials by Novo Nordisk to Progenitor and its Affiliates
pursuant to this Section would not
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interfere with the development or commercialization of any Licensed Product
pursuant to this Agreement, Novo Nordisk will supply Progenitor with reasonable
quantities of such Identified Ligand and/or Identified Growth Factor, in any
form produced by Novo Nordisk for its own purposes, for use only by Progenitor
and its Affiliates solely in conducting research activities outside the Field.
Progenitor shall not provide any such materials to any third party without Novo
Nordisk's prior, written consent in each instance. Any such materials shall be
provided to Progenitor for no additional charge, except that Progenitor will
reimburse Novo Nordisk, as requested by Novo Nordisk, for any expenses incurred
in packaging such materials and shipping them to Progenitor. Any and all such
materials shall be provided by Novo Nordisk AS IS AND WITHOUT WARRANTY OF ANY
KIND.
3. LICENSE.
3.1 Subject to the terms of this Agreement, Progenitor hereby grants
Novo Nordisk and its Affiliates the worldwide, sole and exclusive license, with
right to sublicense, under the Licensed Patent Rights and Licensed Technology,
to make, have made, use, sell, have sold, offer for sale and import Licensed
Product for use in the Field and not otherwise carry out its rights and
obligations pursuant to this Agreement.
3.2 Subject to the terms of this Agreement, Novo Nordisk hereby
grants Progenitor and its Affiliates the worldwide, royalty-free, sole and
exclusive license, with right to sublicense, under Novo Nordisk's rights in any
Novo Nordisk Patent Rights, to make, have made, use, sell, have sold, offer for
sale and import products for use outside the Field. SUCH LICENSE IS GRANTED AS
IS, WITHOUT WARRANTY OF ANY KIND, AND PROGENITOR AGREES TO INDEMNIFY NOVO
NORDISK FOR ANY LOSS, DAMAGE, LIABILITY AND EXPENSE, INCLUDING WITHOUT
LIMITATION ATTORNEYS' FEES AND COSTS OF DEFENSE, ARISING OUT OF ANY EXERCISE OF
SUCH RIGHTS, AND/OR OUT OF ANY USE OF MATERIALS PROVIDED BY NOVO NORDISK TO
PROGENITOR HEREUNDER, BY OR ON BEHALF OF PROGENITOR, ITS AFFILIATES AND/OR ITS
OR THEIR LICENSEES AND ASSIGNEES, EXCLUDING ANY SUCH LOSS, DAMAGE, LIABILITY OR
EXPENSE INTENTIONALLY CAUSED BY NOVO NORDISK AND/OR ITS AFFILIATES.
3.3 Within 15 days after the date of this Agreement, Progenitor will
deliver to Novo Nordisk all documentation regarding patent applications and
other fillings made with the patent authority of any country with respect to
Licensed Patent Rights. Progenitor shall have the sole right to file and
prosecute any patent applications relating to the Receptor and its uses and to
maintain such patent rights. Except as provided in Section 8.5.2, 8.6.2 and
8.7.2, Novo Nordisk shall have the sole right to file and prosecute any patent
applications giving rise, in whole or in part, to the Licensed Patent Rights,
with the exception of patents and patent applications relating to the Receptor
and its uses, and to maintain patents under such Licensed Patent Rights. Each
party will provide the other party with copies of all such patent applications
and amendments filed by it and all other correspondence between it and the
patent authority of any country regarding such patent applications and
amendments. Each party shall bear all expenses of the patent, filing,
prosecution and maintenance activities undertaken by it. If at any time during
the
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term of this Agreement either party elects not to file or to abandon any patent
or patent application which such party has the right to file and prosecute
pursuant to this Section, such party shall notify the other party of that
decision at least 30 days prior to any deadline for the filing of any such
patent application or any response or the taking of any other action necessary
to maintain such patent or patent application in existence. Thereafter, AS ITS
SOLE AND EXCLUSIVE REMEDY THEREFOR, such other party shall have the right to
take over responsibility for the maintenance of such patent or the prosecution
of such patent application, at its sole expense and discretion.
3.4 Except for the rights and licenses explicitly granted as stated
in this Agreement, each party retains all rights and ownership in and to its
technology and intellectual properties, and makes no grant of rights by
implication. It is understood that Progenitor retains the non-exclusive right,
without the right to sublicense, to make, have made, use and import the Licensed
Product and the Licensed Technology for research purposes.
4. FEES AND ROYALTIES.
4.1 Novo Nordisk will pay Progenitor a quarterly research fee of U.S.
$(***) during Ligand Stage 2 and/or Growth Factor Stage 2; provided, however,
that during any period in which Progenitor is simultaneously performing work in
Ligand Stage 2 and Growth Factor Stage 2, such total research fee shall be
$(***) per quarter (or a pro rata portion thereof for any partial quarter);
provided further, however, that if, pursuant to Section 2.1.5, the Joint
Committee authorizes Progenitor to devote less than the equivalent of fifteen
qualified scientists to the completion of its obligations hereunder during any
period in which Progenitor is simultaneously performing work in Ligand Stage 2
and Growth Factor Stage 2, the research fee to be paid hereunder shall be
reduced pro rata according to the reduced amount of effort (in terms of the
number of qualified scientists working on the project) required to be devoted by
Progenitor.
4.1.1 Notwithstanding any of the foregoing, the total of all
research fees payable by Novo Nordisk pursuant to this Section 4.1 shall not
exceed the following amounts: (i) if Novo Nordisk elects, pursuant to Section
2.1.1 and 2.1.3, to proceed to Stage 2 with a Ligand or Ligands or with a Growth
Factor or Growth Factors, but not with both, such research fees shall not exceed
$4,000,000; and (ii) if Novo Nordisk elects, pursuant to Section 2.1.1 and
2.1.3, to proceed to Stage 2 with both a Ligand or Ligands and a Growth Factor
or Growth Factors, such research fees shall not exceed $6,000,000.
4.1.2 Each such research fee shall be due within 60 days
after Novo Nordisk's receipt of an invoice therefor, but no sooner than the
tenth day of each January, April, July, and October; provided, however, that the
first such payment shall be due 60 days after receipt of an invoice therefor
following the announcement of the first Stage 2 of the Research Phase (Ligand
Stage 2 or Growth Factor Stage 2), but no earlier than (***). Novo
Nordisk will not be obligated to make any research fee payment due on or after
the effective date of any termination of this Agreement.
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4.2 In addition, if Novo Nordisk elects to go forward with
development of a Licensed Product, Novo Nordisk will pay Progenitor a license
fee of U.S. $5,000,000 within 90 days after the earlier of: (i) the delivery to
Progenitor of the first Ligand Development Notice or Growth Factor Development
Notice stating that Novo Nordisk desires to go forward with development of a
Licensed Product; or (ii) the commencement by or on behalf of Novo Nordisk of
production of an active ingredient for any Licensed Product under Good
Manufacturing Practices (GNMP). Nothing in this Agreement shall be construed as
requiring Novo Nordisk to pay more than one such license fee.
4.3 In addition, Novo Nordisk will make the following milestone
payments to Progenitor:
4.3.1 Novo Nordisk will pay Progenitor U.S. $1,000,000 within 60
days after the earlier of (i) the date that, pursuant to an Investigational New
Drug filing, if any, made by Novo Nordisk or an Affiliate of Novo Nordisk for a
Licensed Product, Novo Nordisk or an Affiliate of Novo Nordisk is permitted for
the first time by the FDA to proceed with clinical testing of a Licensed
Product; or (ii) the date of the first human administration of a Licensed
Product by or on behalf of Novo Nordisk or an Affiliate of Novo Nordisk in any
country. Regardless of the number of Licensed Products, nothing in this
Agreement shall be construed as requiring Novo Nordisk to pay any milestone
payment pursuant to this Section 4.3.1 more than once.
4.3.2 Novo Nordisk will pay Progenitor U.S. $3,000,000
within 60 days after the first initiation of Phase III clinical trials (or the
first initiation of equivalent steps under the laws of any country other than
the United States) for use of each separate Licensed Product to treat any
specific indication.
4.3.3 Novo Nordisk will pay Progenitor U.S. $5,000,000
within 60 days after the first Product License Application ("PLA"), New Drug
Application ("NDA") or equivalent filing, if any, made by Novo Nordisk or an
Affiliate of Novo Nordisk for each separate Licensed Product is granted final
approval by the FDA.
4.3.4 Novo Nordisk will pay Progenitor U.S. $5,000,000 within
60 days after the first PLA-equivalent filing, if any, made by Novo Nordisk or
an Affiliate of Novo Nordisk for each separate Licensed Product is granted final
approval by the appropriate regulatory authority of Germany, or the United
Kingdom, or any European central drug agency with authority for regulating such
matters in Germany and/or the United Kingdom. One-half of each such payment (or
$2,500,000) shall be deemed to be an advance on Royalties payable on Net Sales
in Europe.
4.3.5 Novo Nordisk will pay Progenitor U.S. $5,000,000 within
60 days after the first time final approval is granted by the appropriate
regulatory authority for sale of each separate Licensed Product in Japan. The
entire amount of each such payment shall be deemed to be an advance on Royalties
payable on Net Sales in Japan.
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4.3.6 Except as set forth in Sections 4.3.4 and 4.3.5 above,
the milestone payments shall be nonrefundable once paid and noncreditable
against Royalties.
4.4 In addition, Novo Nordisk shall pay to Progenitor a Royalty on
annual Net Sales with respect to each separate Licensed Product (which shall be
calculated separately for each "separate Licensed Product," as defined in
Section 4.5), at the following rates:
4.4.1 Novo Nordisk shall pay Progenitor a Royalty of (***)
of Net Sales with respect to such Licensed Product up to and including
$100,000,000 in any calendar year;
4.4.2 Novo Nordisk shall pay Progenitor a Royalty of (***)
of Net Sales with respect to such Licensed Product over $100,000,000 up to
and including $250,000,000 in any calendar year;
4.4.3 Novo Nordisk shall pay Progenitor a Royalty of (***)
of Net Sales with respect to such Licensed Product over $250,000,000 up to
and including $500,000,000 in any calendar year; and
4.4.4 Novo Nordisk shall pay Progenitor a Royalty of (***)
of Net Sales with respect to such Licensed Product over $500,000,000 in any
calendar year.
All such Royalties (after allowing credit for advances on Royalties paid
pursuant to Sections 4.3.4 and 4.3.5 and any reduction of royalties pursuant to
Section 4.6) shall be due and payable within 60 days after the end of each
calendar half year for Net Sales received in such calendar half year, as
follows: Within 60 days after the end of each first and third calendar quarter
for which Royalties are payable hereunder (that is, the calendar quarters ending
on March 31 and on September 30 of each such year), Novo Nordisk will submit to
Progenitor a report stating the approximate Net Sales and Royalties due for such
quarter, together with payment of such approximate amount. Within 60 days after
the end of each calendar half year for which Royalties are payable hereunder
(that is, the periods ending on June 30 and on December 31 of each such year),
Novo Nordisk will submit to Progenitor a statement of actual Net Sale for such
half year, separated as to Net Sales within Europe, Japan and all other
countries, and the calculation of Royalties payable hereunder with respect to
such Net Sales, together with payment of all remaining Royalties due with
respect to such Net Sales, as adjusted for any amount previously paid as
approximate Royalties with respect to such Net Sales.
4.5 Whether or not a Licensed Product is considered a "separate
Licensed Product" for purposes of making milestone payments pursuant to Sections
4.3.2 through 4.3.5 and for purposes of calculating Royalties pursuant to
Section 4.4 will be determined on the basis of whether or not such Licensed
Product contains any active ingredient different than or in addition to the
active ingredient(s) in any other Licensed Product. That is, each Licensed
Product will be considered to be a "separate Licensed Product" for which any
additional milestone payment is due and for which Royalties are calculated
separately only if such Licensed Product contains one or more active ingredients
not also contained in any Licensed Product for
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which such milestone payment has then already been made or for which Royalties
have then already been calculated, respectively.
4.6 If subsequent to the date of this Agreement, Novo Nordisk
determines in its sole discretion, which it will exercise in good faith, after
consulting with Progenitor with respect thereto, that royalties must be paid to
one or more third parties in order for Novo Nordisk to exercise the rights
granted in Section 3.1, each party will share such third-party royalty
obligation as follows: the royalty payments by Novo Nordisk under Section 4.4
shall be reduced by one-half of such third party royalties, except that such
reduction should be limited so that the royalty paid to Progenitor under Section
4.4 is not reduced by more than one-half.
4.7 All payments to be made by Novo Nordisk to Progenitor under this
Agreement shall be made in United States dollars. Conversion of foreign
currency to United States dollars for payments of Royalties shall be made at the
conversion rate published in the Wall Street Journal, Eastern edition, on the
last business day of the calendar quarter to which such payments relate.
4.8 If laws or regulations require withholding by Novo Nordisk of any
taxes imposed upon Progenitor on account of any Royalties paid under this
Agreement, such taxes will be deducted by Novo Nordisk as required by law from
such remittable Royalty and shall be paid by Novo Nordisk to the proper taxing
authority. Official receipt of such taxes shall be secured and sent to
Progenitor as evidence of such payment. The parties will use reasonable efforts
to ensure that any withholding taxes imposed are reduced as far as possible
under the provisions of the current or any future double taxation treaties or
agreements between foreign countries and the parties shall cooperate with each
other with respect thereto, with the appropriate party under the circumstances
providing the documentation required under such treaty or agreement to claim
benefits thereunder.
4.9 Novo Nordisk shall keep accurate records in sufficient detail to
enable the amounts of Royalties due to Progenitor to be determined. Upon
Progenitor's request and after reasonable prior notice, Novo Nordisk shall
permit an independent certified public accountant selected by Progenitor to have
access during ordinary business hours to Novo Nordisk's records necessary to
determine the correctness of any report or payment made with respect to any half
year and to obtain information as to the amount payable to Progenitor for any
such period. Such examination shall be at Progenitor's expense and shall not
take place more than once each year. These rights with respect to any year
shall terminate two (2) years after the end of such year. Information supplied
to Progenitor by such independent certified public accountant shall not include
any proprietary information not require to be disclosed to it under other
Sections of this Agreement. If such accounting firm concludes that additional
Royalties are owed for any half year, Progenitor will provide Novo Nordisk with
access to such accounting firm's work product with respect to such conclusion,
and Novo Nordisk shall have a period of up to 60 days after receipt of such work
product in which to review such findings. If, after such 60-day review period,
Novo Nordisk agrees with the conclusion reached by such accounting firm with
respect to such additional Royalties, Novo Nordisk shall promptly pay the
additional Royalties owed. If, after such 60-day review period, the parties are
not in agreement as to the amount of any
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additional Royalties owed, the parties will negotiate in good faith for a period
of 60 days with respect thereto. If the parties are unable to agree on the
amount of any such additional Royalties owed after such 60-day period of
negotiation, the parties will submit such question to binding arbitration
pursuant to Section 9.9.
5. CONFIDENTIALITY.
5.1 Each party (the "Receiving Party") acknowledges and agrees that
the other party (the "Disclosing Party") may, in the course of performing this
Agreement and the parties' other dealings, disclose confidential information
belonging to the Disclosing Party in writing, orally or by demonstration or
sample. All such confidential information of the Disclosing Party shall be
maintained in confidence by the Receiving Party and will not be used by the
Receiving Party for any purpose except as authorized hereunder. The Receiving
Party shall exercise the same degree of care to preserve the confidentiality of
such information of the Disclosing Party as it uses to protect its own
confidential information of similar nature, and the Receiving Party shall
safeguard such information against disclosure to third parties, including
without limitation employees and persons working or consulting for the Receiving
Party. This obligation of confidentiality does not apply to information and
material that:
(i) were properly in the possession of the Receiving Party,
without any restriction on use or disclosure, prior to receipt from the
Disclosing Party, and such possession can be properly demonstrated by the
Receiving Party;
(ii) are in the public domain by public use, publication, general
knowledge or the like, or after disclosure hereunder become general or public
knowledge through no fault of the Receiving Party;
(iii) are properly obtained by the Receiving Party from a
third party not under a confidentiality obligation;
(iv) are independently developed by or on behalf of the Receiving
Party without the assistance of the confidential information of the Disclosing
Party; or
(v) are required to be disclosed by order of any court or
governmental authority.
5.2 The Receiving Party shall not acquire any rights with respect to
confidential information disclosed to it by the Disclosing Party, except as
expressly set forth in this Agreement. The Receiving Party shall not disclose
any confidential information of the Disclosing Party to any third party or to
any employees, officers or directors of the Receiving Party except those who
reasonably require such disclosure for purposes of performing the Receiving
Party's obligations under this Agreement without the prior, written consent of
the Disclosing Party.
5.3 Upon termination of this Agreement, the Receiving Party shall
return to the Disclosing Party or destroy any tangible copies of any
confidential information provided to it
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hereunder by the Disclosing Party; provided, however, that the Receiving Party
may retain one (1) copy of confidential information disclosed to it by the
Disclosing Party in its confidential legal files for archival purposes.
5.4 Each party agrees that it will not make any public announcement
or other publication regarding any results of the research conducted hereunder
before a patent application has been filed with respect thereto, except upon the
prior written approval of the other party in each instance. In addition, each
party will refrain from issuing any press release or making any public
announcement or other publication regarding this Agreement or the relationship
of the parties hereto, except for announcements or disclosures which are
required by law to be made, without the prior, written consent of the other
party in each instance, which consent will not be unreasonably withheld.
Progenitor will also refrain from publishing or disclosing any information or
material that is in any way related to this Agreement or any Receptor, Ligand,
Growth Factor or Licensed Product without the prior, written consent of Novo
Nordisk in each instance, which consent will not be unreasonably withheld. Each
party will respond to any request for consent pursuant to this Section 5.4 as
soon as reasonably possible.
6. WARRANTIES AND INDEMNIFICATION.
6.1 Each party hereby represents and warrants that:
6.1.1 It has full right and authority to enter into this
Agreement, has taken all corporate action necessary on its part to authorize the
execution and delivery of this Agreement and the performance of its obligations
hereunder, and its respective obligations under this Agreement are not subject
to prior commitments or obligations to any third party.
6.1.2 It has not entered into any contract, agreement,
partnership, joint venture or other arrangement, whether oral or written, with
any third party relating to any Receptor, Ligand, Growth Factor, Licensed
Product, Licensed Patent Right or Licensee Technology that is inconsistent with
the terms of this Agreement.
6.2 Progenitor represents and warrants that, to the best of
Progenitor's knowledge, the technology developed by or on behalf of Progenitor
covered by the Licensed Patent Rights and Licensed Technology, as it exists on
the date of this Agreement, has been made and developed without the use of, or
infringement upon, the secrets, patents or of her proprietary rights or
interests of any third party and without the use of any equipment, supplies or
facilities of any third party that would create any right to any Licensed Patent
Right, Licensed Technology or Joint Technology in such third party.
6.3 Novo Nordisk assumes all risks of damage or injury to persons and
to property arising out of any manufacture, use or sale of Licensed Product by
or on behalf of Novo Nordisk and its Affiliates and sublicensees, and shall hold
harmless and indemnify Progenitor and its Affiliates from and against any and
all personal injury, property damage, product liability or similar claims,
losses and liabilities arising out of such manufacture, use or sale of Licensed
Product, except for such claims, losses and liabilities caused by a breach of
Progenitor's representations under any other Section of this agreement and
except as set forth in Section 6.4.
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Progenitor assumes all risks of damage or injury to persons and to property
arising out of any manufacture, use or sale of Progenitor Ligand Product,
Progenitor Growth Factor Product and Progenitor Product by or on behalf of
Progenitor and its Affiliates and sublicensees, and shall hold harmless and
indemnify Novo Nordisk and its Affiliates from and against any and all personal
injury, property damage, product liability or similar claims, losses and
liabilities arising out of such manufacture, use or sale of Progenitor Ligand
Product, Progenitor Growth Factor Product and/or Progenitor Product, except for
such claims, losses and liabilities caused by a breach of Novo Nordisk's
representations under any other Section of this Agreement and except as set
forth in Section 6.4.
6.4 Nothing in this Agreement shall be construed as a warranty,
representation or undertaking with respect to the utility, efficacy,
nontoxicity, safety or appropriateness of using any Receptor, Ligand, Growth
Factor, Licensed Product or any other product; provided, however, that
Progenitor represents and warrants that it has fully disclosed to Novo Nordisk,
and Progenitor covenants that it will fully disclose to Novo Nordisk, to the
extent it can do so without violating any obligation of Progenitor and/or any of
its Affiliates to any third party, all data and information in Progenitor's
possession, knowledge or control relating to the use, manufacture, utility,
efficacy, nontoxicity, safety and appropriateness of each Receptor, Ligand,
Growth Factor and Licensed Product. Otherwise, the physical quantities of
materials provided by each party to the other hereunder are provided "as is,"
and neither party makes any representation or warranty of any kind, express or
implied, written or oral, including without limitation, any representation or
warranty with respect to the value, adequacy, freedom from fault, or the
quality, efficiency, suitability, characteristics, usefulness, merchantability
of fitness for a particular purpose of, such physical quantities of materials,
except as otherwise set forth in this Agreement.
6.5 NOVO NORDISK ACKNOWLEDGES THAT, EXCEPT AS OTHERWISE SET FORTH IN
THIS AGREEMENT, THE LICENSES GRANTED BY PROGENITOR IN THIS AGREEMENT ARE GRANTED
WITHOUT WARRANTY OF ANY KIND.
6.6 Each party agrees to indemnify and hold the other party harmless
from and against any loss, damage, liability and expense, including, without
limitation, reasonable attorneys' fees and costs of defense, arising out of any
breach of such party's representations, warranties or covenants under this
Agreement. Progenitor agrees that Novo Nordisk shall have the right to set off
any such amounts owed to Novo Nordisk from fees and Royalties payable to
Progenitor hereunder.
7. INFRINGEMENT.
7.1 Except as set forth in Sections 8.5.3, 8.6.3 and 8.7.3, in the
event that any of the Licensed Patent Rights are infringed or believed to be
infringed by a third party, Novo Nordisk may, at its option, elect to prosecute
such infringement claims. If Novo Nordisk elects to commence such an action,
Novo Nordisk shall have control of such action and shall have the right to
settle or compromise the same, and Progenitor agrees that it shall fully
cooperate in every reasonable way with the prosecution of such action. If Novo
Nordisk elects to commence such
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an action, Progenitor hereby grants Novo Nordisk the right to do so in
Progenitor's name, and, if Progenitor is a legally indispensable party to such
action, Novo Nordisk may cause it to be joined as a party in such action at Novo
Nordisk's expense. Novo Nordisk shall notify Progenitor of any action filed by
Novo Nordisk pursuant to this Section and shall keep Progenitor generally
informed as to the progress of such action.
7.2 Recoveries or reimbursements from any such action shall first be
applied to reimburse Novo Nordisk for its expenses, costs and fees in connection
with the action. Any remaining recoveries or reimbursements, to the extent they
constitute the equivalent of, or damages or payments in lieu of, reasonable
royalties on the infringer's sales (but not in excess of the amount that would
be payable pursuant to Section 4.4), shall be shared with Progenitor in
accordance with Section 4.4, and otherwise shall be retained by Novo Nordisk as
its own property.
7.3 In the event that Novo Nordisk decides not to commence or
continue prosecution of an infringement of the Licensed Patent Rights pursuant
to the above paragraphs, Novo Nordisk will promptly give written notice of such
decision to Progenitor. Progenitor shall thereafter have the right, but not the
obligation, to commence or continue such action at its own expense, controlling
such action and retaining all recoveries therefrom. If Progenitor elects to
bring an action to prosecute the infringement of any Licensed Patent Rights
under this Section, Progenitor shall have sole control of such action and may
settle or compromise such action in its sole discretion, provided that no such
settlement or compromise conflicts with any provision of this Agreement. If
Progenitor elects to commence such an action, Novo Nordisk hereby grants
Progenitor the right to do so in Novo Nordisk's name, and, if Novo Nordisk is a
legally indispensable party to such action, Progenitor may cause it to be joined
as a party in such action at Progenitor's expense, and Novo Nordisk agrees to
cooperate fully in every reasonable way with the prosecution of such action.
8. TERM AND TERMINATION.
8.1 The term of this Agreement shall begin on the date set forth
above and shall continue until the earlier of the date of termination in
accordance with Section 8.3 or the date of expiration of the last to expire of
any Valid Claim of the Licensed Patent Rights.
8.2 Novo Nordisk may terminate the licenses granted to it pursuant
to this Agreement with respect to Receptor and all Ligands at any time during
Ligand Stage 1 or after the end of Ligand Stage 2 upon delivery of 30 days'
written notice to Progenitor, or at any time during Ligand Stage 2 upon
delivery of 90 days' written notice to Progenitor. Novo Nordisk may also
terminate the licenses granted to it pursuant to this Agreement with respect
to all Growth Factors at any time during Growth Factor Stage 1 or after the
end of Growth Factor Stage 2 upon delivery of 30 days' written notice to
Progenitor, or at any time during Growth Factor Stage 2 upon delivery of 90
days' written notice to Progenitor. Novo Nordisk may also terminate this
Agreement at any time before the commencement of Ligand Stage 2 or Growth
Factor Stage 2 or after termination of the Research Phase upon delivery of 30
days' written notice to Progenitor, or at any other time upon delivery of 90
days' written notice to Progenitor.
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8.3 Either party may terminate this Agreement upon 120 days' written
notice to the other party at any time that such other party is in material
breach of any obligation hereunder if such breach is not cured within such 120-
day period. Neither party shall be deemed to be in material breach of this
Agreement during any period in which a good faith dispute between the parties
exists regarding performance or breach of its obligations hereunder.
8.4 The provisions in this Agreement regarding payment of fees and
Royalties accrued as of the date of termination, confidentiality,
indemnification and the provisions set forth in Sections 1, 6, 8.5, 8.6, 8.7,
8.8, 8.9 and 9 shall survive any expiration or termination of this Agreement.
In addition, Novo Nordisk shall have a continuing, nonexclusive right to use the
Licensed Technology, but not to exercise any Licensed Patent Rights, following
any termination or expiration of this Agreement.
8.5 Effective only upon any termination of the licenses grants
pursuant to this Agreement with respect to the Receptor and all Ligands by Novo
Nordisk pursuant to Section 8.2 or by Progenitor pursuant to Section 2.1.1,
which termination becomes effective prior to the payment by Novo Nordisk of the
license fee pursuant to Section 4.2, Novo Nordisk hereby grants to Progenitor
and its Affiliates the worldwide, sole and exclusive license, with right to
sublicense, under Novo Nordisk's rights in Novo Nordisk Ligand Patent Rights and
Joint Technology arising from the research conducted pursuant to this Agreement
in the course of Ligand Stage 1 and Ligand Stage 2 (the "Ligand Joint
Technology"), to make, have made, use, sell, have sold, offer for sale and
import Progenitor Ligand Product for use in the Field. Novo Nordisk will
deliver to Progenitor, within 90 days after any such termination, all material
constituting Ligand Joint Technology and copies of all data in Novo Nordisk's
possession regarding the Ligand Joint Technology. If such a termination occurs,
the following terms shall apply until expiration of the last to expire of any
Valid Claim of the Novo Nordisk Ligand Patent Rights or until such license is
terminated by Novo Nordisk, which Novo Nordisk may do by delivery of 120 days'
written notice to Progenitor at any time that Progenitor is in breach of any
obligation under this Section 8.5, if such breach is not cured within such 120-
day period:
8.5.1 If such termination occurs after Novo Nordisk has paid
at least (***) in research fees to Progenitor pursuant to Section 4.1,
Progenitor shall pay Novo Nordisk a royalty on annual Progenitor Ligand Net
Sales with respect to each separate Progenitor Ligand Product, at the following
rates:
(i) Progenitor shall pay Novo Nordisk a royalty of (***)
of Progenitor Ligand Net Sales with respect to such Progenitor Ligand Product
up to and including $100,000,000 in any calendar year;
(ii) Progenitor shall pay Novo Nordisk a royalty of (***)
of Progenitor Ligand Net Sales with respect to such Progenitor Ligand Product
over $100,000,000 up to and including $250,000,000 in any calendar year;
(iii) Progenitor shall pay Novo Nordisk a royalty of
(***) of Progenitor Ligand Net Sales with respect to such Progenitor Ligand
Product over $250,000,000 up to and including $500,000,000 in any calendar
year; and
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(iv) Progenitor shall pay Novo Nordisk a royalty of (***)
of Progenitor Ligand Net Sales with respect to such Progenitor Ligand Product
over $500,000,000 in any calendar year.
Whether or not a product is considered a "separate Progenitor Ligand Product"
for the purpose of calculation of the applicable royalty rate will be determined
on the basis of whether or not such Progenitor Ligand Product contains any
active ingredient different from or in addition to the active ingredient(s) in
any other Progenitor Ligand Product (in which case such product will be treated
as a separate Progenitor Ligand Product for such purpose). All such royalties
shall be due and payable within 60 days after the end of each calendar half year
for Progenitor Ligand Net Sales received in the preceding calendar half year, as
follows: Within 60 days after the end of each first and third calendar quarter
for which royalties are payable by Progenitor under this Section 8.5 (that is,
the calendar quarters ending on March 31 and on September 30 of each such year),
Progenitor will submit to Novo Nordisk a report stating the approximate
Progenitor Ligand Net Sales and royalties due for such quarter, together with
payment of such approximate amount. Within 60 days after the end of each
calendar half year during which royalties a payable by Progenitor under this
Section 8.5 (that is, the periods ending on June 30 and on December 31 of each
such year), Progenitor will submit to Novo Nordisk a written statement of actual
Progenitor Ligand Net Sales for the half year, separated as to Progenitor Ligand
Net Sales within Europe, Japan and all other countries, and the calculation of
royalties payable hereunder with respect to such Progenitor Ligand Net Sales,
together with payment of all remaining royalties due with respect to such
Progenitor Ligand Net Sales, as adjusted for any amount previously paid as
approximate royalties with respect to such Progenitor Ligand Net Sales.
Progenitor shall keep, and shall cause its sublicensees to keep, complete, true
and accurate records for the purpose of showing the derivation of all royalties
payable to Novo Nordisk under this Agreement. During any period in which such
royalties are payable by Progenitor to Novo Nordisk hereunder, the provisions of
Sections 4.7, 4.8 and 4.9 above, regarding conversion of foreign currency,
withholding and payment of taxes, and retention and inspection of records, shall
apply to Novo Nordisk as licensor and Progenitor as licensee just as applicable
under those Sections to Progenitor as licensor and Novo Nordisk as licensee.
8.5.2 Following any termination giving rise to the rights
granted in this Section 8.5, Progenitor shall have the right, at its expense, to
file, prosecute and maintain patent applications and other patent filings in or
with respect to any Novo Nordisk Ligand Patent Rights and Ligand Joint
Technology.
8.5.3 In addition, following any termination giving rise to
the rights granted in this Section 8.5, Progenitor shall have the sole and
exclusive right, as between the parties, to institute suit against any third
party for infringement of Novo Nordisk Ligand Patent Rights and Ligand Joint
Technology.
(i) If Progenitor elects to commence such an action,
Progenitor shall have control of such action and shall have the right to settle
or compromise the same, and Novo Nordisk agrees that it shall fully cooperate in
every reasonable way with the prosecution of such action. If Progenitor elects
to commence such an action, Novo Nordisk hereby grants
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<PAGE>
Progenitor the right to do so in Novo Nordisk's name, and, if Novo Nordisk is a
legally indispensable party to such action, Progenitor may cause it to be joined
as a party in such action at Progenitor's expense. Progenitor shall notify Novo
Nordisk of any action filed by Progenitor pursuant to this Section and shall
keep Novo Nordisk generally informed as to the progress of such action.
(ii) Recoveries or reimbursements from any such action shall
first be applied to reimburse Progenitor for its expenses, costs and fees in
connection with the action. Any remaining recoveries or reimbursements, to the
extent they constitute the equivalent of, or damages or payments in lieu of,
reasonable royalties on the infringer's sales (but not in excess of the amount
that would be payable pursuant to Section 8.5.1), shall be shared with Novo
Nordisk in accordance with Section 8.5.1, and otherwise shall be retained by
Progenitor as its own property.
(iii) In the event that Progenitor decides not to commence
or continue prosecution of an infringement of the Novo Nordisk Ligand Patent
Rights pursuant to the above paragraphs, Progenitor will promptly give written
notice of such decision to Novo Nordisk. Novo Nordisk shall thereafter have the
right, but not the obligation, to commence or continue such action at its own
expense, controlling such action and retaining all recoveries therefrom. If
Novo Nordisk elects to bring any such action, Novo Nordisk shall have sole
control of such action and may settle or compromise such action in its sole
discretion. If Novo Nordisk elects to commence such an action, Progenitor
hereby grants Novo Nor Nordisk the right to do so in Progenitor's name, and, if
Progenitor is a legally indispensable party to such action, Novo Nordisk may
cause it to be joined as a party in such action at Novo Nordisk s expense, and
Progenitor agrees to cooperate fully in every reasonable way with the
prosecution of such action.
8.5.4 Following any termination giving rise to the rights
granted in this Section 8.5, Novo Nordisk covenants that it will fully disclose
to Progenitor, to the extent it can do so without violating any obligation of
Novo Nordisk and/or any of its Affiliates to any third party, all data and
information in Novo Nordisk's possession, knowledge or contract relating to the
use, manufacture, utility, efficacy, nontoxicity, safety and appropriateness of
each Receptor, Ligand, and Progenitor Ligand Product.
8.6 Effective only upon any termination of the licenses granted
pursuant to this Agreement with respect to all Growth Factors by Novo Nordisk
pursuant to Section 8.2 or by Progenitor pursuant to Section 2.1.3, which
termination becomes effective prior to the payment by Novo Nordisk of the
license fee pursuant to Section 4.2, Novo Nordisk hereby grants to Progenitor
and its Affiliates the worldwide, sole and exclusive license, with right to
sublicense, under Novo Nordisk's rights in Novo Nordisk Growth Factor Patent
Rights and Joint Technology arising from the research conducted pursuant to this
Agreement in the course of Growth Factor Stage 1 and Growth Factor Stage 2 (the
"Growth Factor Joint Technology"), to make, have made, use, sell, have sold,
offer for sale and import Progenitor Growth Factor Product for use in the Field.
Novo Nordisk will deliver to Progenitor within 90 days after any such
termination, all materials constituting Growth Factor Joint Technology and
copies of all
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data in Novo Nordisk's possession regarding the Growth Factor Joint Technology.
If such a termination occurs, the following terms shall apply until expiration
of the last to expire of any Valid Claim of the Novo Nordisk Growth Factor
Patent Rights or until such license is terminated by Novo Nordisk, which Novo
Nordisk may do by delivery of 120 days' written notice to Progenitor at any time
that Progenitor is in breach of any obligation under this Section 8.6, if such
breach is not cured within such 120-day period:
8.6.1 If such termination occurs after Novo Nordisk has paid
at least (***) in research fees to Progenitor pursuant to Section 4.1,
Progenitor shall pay Novo Nordisk a royalty on annual Progenitor Growth Factor
Net Sales with respect to each separate Progenitor Growth Factor Product, at the
following rates:
(i) Progenitor shall pay Novo Nordisk a royalty of (***)
of Progenitor Growth Factor Net Sales with respect to such Progenitor Growth
Factor Product up to and including $100,000,000 in any calendar year;
(ii) Progenitor shall pay Novo Nordisk a royalty of (***)
of Progenitor Growth Factor Net Sales with respect to such Progenitor Growth
Factor Product over $100,000,000 up to and including $250,000,000 in any
calendar year;
(iii) Progenitor shall pay Novo Nordisk a royalty of
(***) of Progenitor Growth Factor Net Sales with respect to such Progenitor
Growth Factor Product over $250,000,000 up to and including $500,000,000 in
any calendar year; and
(iv) Progenitor shall pay Novo Nordisk a royalty of (***)
of Progenitor Growth Factor Net Sales with respect to such Progenitor Growth
Factor Product over $500,000,000 in any calendar year.
Whether or not a product is considered a "separate Progenitor Growth Factor
Product" for the purpose of calculation of the applicable royalty rate will be
determined on the basis of whether or not such Progenitor Growth Factor Product
contains any active ingredient different from or in addition to the active
ingredient(s) in any other Progenitor Growth Factor Product (in which case such
product will be treated as a separate Progenitor Growth Factor Product for such
purpose). All such royalties shall be due and payable within 60 days after the
end of each calendar half year for Progenitor Growth Factor Net Sales received
in the preceding calendar half year, as follows: Within 60 days after the end of
each first and third calendar quarter for which royalties are payable by
Progenitor under this Section 8.6 (that is, the calendar quarters ending on
March 31 and on September 30 of each such year), Progenitor will submit to Novo
Nordisk a report stating the approximate Progenitor Growth Factor Net Sales and
royalties due for such quarter, together with payment of such approximate
amount. Within 60 days after the end of each calendar half year during which
royalties are payable by Progenitor under this Section 8.6 (that is, the periods
ending on June 30 and on December 31 of each such year), Progenitor will submit
to Novo Nordisk a written statement of Progenitor Growth Factor Net Sales for
the half year, separated as to Progenitor Growth Factor Net Sales within Europe,
Japan and any other countries, and the calculation of royalties payable
hereunder with respect to such Progenitor Growth Factor Net Sales, together with
payment of all remaining royalties due with respect to
23
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such Progenitor Growth Factor Net Sales, as adjusted for any amount previously
paid as approximate royalties with respect to such Progenitor Growth Factor Net
Sales. Progenitor shall keep, and shall cause its sublicensees to keep,
complete, true and accurate records for the purpose of showing the derivation of
all royalties payable to Novo Nordisk under this Agreement. During any period
in which such royalties are payable by Progenitor to Novo Nordisk hereunder, the
provisions of Sections 4.7, 4.8 and 4.9 above, regarding conversion of foreign
currency, withholding and payment of taxes, and retention and inspection of
records, shall apply to Novo Nordisk as licensor and Progenitor as licensee just
as applicable under those Sections to Progenitor as licensor and Novo Nordisk as
licensee.
8.6.2 Following any termination giving rise to the right granted
in this Section 8.6, Progenitor shall have the right, at its expense, to file,
prosecute and maintain patent applications and other patent filings in or with
respect to any Novo Nordisk Growth Factor Patent Rights and Growth Factor Joint
Technology.
8.6.3 In addition, following any termination giving rise to the
rights granted in this Section 8.6, Progenitor shall have the sole and exclusive
right, as between the parties, to institute suit against any third party for
infringement of Novo Nordisk Growth Factor Patent Rights and Growth Factor Joint
Technology.
(i) If Progenitor elects to commence such an action, Progenitor
shall have control of such action and shall have the right to settle or
compromise the same, and Novo Nordisk agrees that it shall fully cooperate in
every reasonable way with the prosecution of such action. If Progenitor elects
to consummate such an action, Novo Nordisk hereby grants Progenitor the right to
do so in Novo Nordisk's name, and, if Novo Nordisk is a legally indispensable
party to such action, Progenitor may cause it to be joined as a party in such
action at Progenitor's expense. Progenitor shall notify Novo Nordisk of any
action filed by Progenitor pursuant to this Section and shall keep Novo Nordisk
generally informed as to the progress of such action.
(ii) Recoveries or reimbursements from any such action shall
first be applied to reimburse Progenitor for its expenses, costs and fees in
connection with the action. Any remaining recoveries or reimbursements, to the
extent they constitute the equivalent of, or damages or payments in lieu of,
reasonable royalties on the infringer's sales (but not in excess of the amount
that would be payable pursuant to Section 8.6. 1), shall be shared with Novo
Nordisk in accordance with Section 8.6.1, and otherwise shall be retained by
Progenitor as its own property.
(iii) In the event that Progenitor decides not to commence or
continue prosecution of an infringement of the Novo Nordisk Growth Factor Patent
Rights pursuant to the above paragraphs, Progenitor will promptly give written
notice of such decision to Novo Nordisk. Novo Nordisk shall thereafter have the
right, but not the obligation, to commence or continue such action at its own
expense, controlling such action and retaining all recoveries therefrom. If
Novo Nordisk elects to bring any such action, Novo Nordisk shall have sole
control of such action and may settle or compromise such action in its sole
discretion. If Novo
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Nordisk elects to commence such an action, Progenitor hereby grants Novo Nordisk
the right to do so in Progenitor's name, and, if Progenitor is a legally
indispensable party to such action, Novo Nordisk may cause it to be joined as a
party in such action at Novo Nordisk's expense, and Progenitor agrees to
cooperate fully in every reasonable way with the prosecution of such action.
8.6.4 Following any termination giving rise to the rights
granted in this Section 8.6, Novo Nordisk covenants that it will fully disclose
to Progenitor, to the extent it can do so without violating any obligation of
Novo Nordisk and/or any of its Affiliates to any third party, all data and
information in Novo Nordisk's possession, knowledge or control relating to the
use, manufacture, utility, efficacy, nontoxicity, safety and appropriateness of
each Growth Factor and Progenitor Growth Factor Product.
8.7 Effective only upon any termination of this Agreement by Novo
Nordisk pursuant to Section 8.2 or by Progenitor pursuant to Section 8.3, which
termination becomes effective prior to the payment by Novo Nordisk of the
license fee pursuant to Section 4.2, Novo Nordisk hereby grants to Progenitor
and its Affiliates the worldwide, sole and exclusive license, with right to
sublicense, under Novo Nordisk's rights in Novo Nordisk Patent Rights and Joint
Technology, to make, have made, use, sell, have sold, offer for sale and import
Progenitor Product for use in the Field. Novo Nordisk will deliver to
Progenitor, within 90 days after any such termination, all materials
constituting Joint Technology and copies of all data in Novo Nordisk's
possession regarding the Joint Technology. If such a termination occurs, the
following terms shall apply until expiration of the last to expire of any Valid
Claim of the Novo Nordisk Patent Rights or until such license is terminated by
Novo Nordisk, which Novo Nordisk may do by delivery of 120 days' written notice
to Progenitor at any time that Progenitor is in breach of any obligation under
this Section 8.7, if such breach is not cured within such 120-day period:
8.7.1 If such termination occurs after Novo Nordisk has
paid at least (***) in research fees to Progenitor pursuant to Section 4.1,
Progenitor shall pay Novo Nordisk a royalty on annual Progenitor Net Sales
with respect to each separate Progenitor Product, at the following rates:
(i) Progenitor shall pay Novo Nordisk a royalty of (***)
of Progenitor Net Sales with respect to such Progenitor Product up to and
including $100, 000, 000 in any calendar year;
(ii) Progenitor shall pay Novo Nordisk a royalty of (***)
of Progenitor Net Sales with respect to such Progenitor Product over
$100,000,000 up to and including $250,000,000 in any calendar year;
(iii)Progenitor shall pay Novo Nordisk a royalty of (***)
of Progenitor Net Sales with respect to such Progenitor Product over
$250,000,000 up to and including $500,000,000 in any calendar year; and
(iv) Progenitor shall pay Novo Nordisk a royalty of (***)
of Progenitor Net Sales with respect to such Progenitor Product over
$500,000,000 in any calendar year.
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Whether or not a product is considered a "separate Progenitor Product" for the
purpose of calculation of the applicable royalty rate will be determined on the
basis of whether or not such Progenitor Product contains any active ingredient
different from or in addition to the active ingredient(s) in any other
Progenitor Product (in which case such product will be treated as a separate
Progenitor Product for such purpose). All such royalties shall be due and pay
payable within 60 days after the end of each calendar half year for Progenitor
Net Sales received in the preceding calendar half year, as follows: Within 60
days after the end of each first and third calendar quarter for which royalties
are payable by Progenitor under this Section 8.7 (that is, the calendar quarters
ending on March 31 and on September 30 of each such year), Progenitor will
submit to Novo Nordisk a report stating the approximate Progenitor Net Sales and
royalties due for such quarter, together with payment of such approximate
amount. Within 60 days after the end of each calendar half year during which
royalties are payable by Progenitor under this Section 8.7 (that is, the periods
ending on June 30 and on December 31 of each such (year), Progenitor will submit
to Novo Nordisk a written statement of Progenitor Net Sales for the half year,
separated as to Progenitor Net Sales within Europe, Japan and all other
countries, and the calculation of royalties payable hereunder with respect to
such Progenitor Net Sales, together with payment of all remaining royalties due
with respect to such Progenitor Net Sales, as adjusted for any amount previously
paid as approximate royalties with respect to such Progenitor Net Sales.
Progenitor shall keep, and shall cause its sublicensees to keep, complete, true
and accurate records for the purpose of showing the derivation of all royalties
payable to Novo Nordisk under this Agreement. During any period in which such
royalties are payable by Progenitor to Novo Nordisk hereunder, the provisions of
Sections 4.7, 4.8 and 4.9 above, regarding conversion of foreign currency,
withholding and payment of taxes, and retention and inspection of records, shall
apply to Novo Nordisk as licensor and Progenitor as licensee just as applicable
under those Sections to Progenitor as licensor and Novo Nordisk as licensee.
8.7.2 Following any termination giving rise to the rights
granted in this Section 8.7, Progenitor shall have the right, at its expense, to
file, prosecute and maintain patent applications and other patent filings in or
with respect to any Novo Nordisk Patent Rights and Joint Technology.
8.7.3 In addition, following any termination giving rise to
the rights granted in this Section 8.7, Progenitor shall have the sole and
exclusive right, as between the parties, to institute suit against any third
party for infringement of Novo Nordisk Patent Rights and Joint Technology.
(i) If Progenitor elects to commence such an action,
Progenitor shall have control of such action and shall have the right to settle
or compromise the same, and Novo Nordisk agrees that it shall fully cooperate in
every reasonable way with the prosecution of such action. If Progenitor elects
to commence such an action, Novo Nordisk hereby grants Progenitor the right to
do so in Novo Nordisk's name, and, if Novo Nordisk is a legally indispensable
party to such action, Progenitor may cause it to be joined as a party in such
action at Progenitor's expense. Progenitor shall notify Novo Nordisk of any
action filed by Progenitor pursuant to this Section and shall keep Novo Nordisk
generally informed as to the progress of such action.
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(ii) Recoveries or reimbursements from any such action shall
first be applied to reimburse Progenitor for its expenses, costs and fees in
connection with the action. Any remaining recoveries or reimbursements, to the
extent they constitute the equivalent of, or damages or payments in lieu of,
reasonable royalties on the infringer's sales (but not in excess of the amount
that would be payable pursuant to Section 8.7.1), shall be shared with Novo
Nordisk in accordance with Section 8.7.1, and otherwise shall be retained by
Progenitor as its own property.
(iii) In the event that Progenitor decides not to
commence or continue prosecution of an infringement of the Novo Nordisk Patent
Rights pursuant to the above paragraphs, Progenitor will promptly give written
notice of such decision to Novo Nordisk. Novo Nordisk shall thereafter have the
right, but not the obligation, to commence or continue such action at its own
expense, controlling such action and retaining all recoveries therefrom. If
Novo Nordisk elects to bring any such action, Novo Nordisk shall have sole
control of such action and may settle or compromise such action in its sole
discretion. If Novo Nordisk elects to commence such an action, Progenitor
hereby grants Novo Nordisk disk the right to do so in Progenitor's name, and, if
Progenitor is a legally indispensable party to such action, Novo Nordisk may
cause it to be joined as a party in such action at Novo Nordisk's expense, and
Progenitor agrees to cooperate fully in every reasonable way with the
prosecution of such action.
8.7.4 Following any termination giving rise to the right
granted in this Section 8.7, Novo Nordisk covenants that it will fully disclose
to Progenitor, to the extent it can do so without violating any obligation of
Novo Nordisk and/or any of its Affiliates to any third party, all data and
information in Novo Nordisk's possession, knowledge or control relating to the
use, manufacture, utility, efficacy, nontoxicity, safety and appropriateness of
each Receptor, Ligand, Growth Factor and Progenitor Product.
8.8 Upon Progenitor's request, Novo Nordisk will negotiate with
Progenitor in good faith for a reasonable period of time following any
termination of the licenses granted hereunder and/or of this Agreement, which
termination is effective after the payment by Novo Nordisk of the license fee
pursuant to Section 4.2, regarding a license to Progenitor of rights under
applicable Novo Nordisk Patent Rights and Joint Technology, but the parties
acknowledge that no agreement for a grant of any such license is included in the
terms of this Agreement, and Novo Nordisk shall not be required to grant any
such license nor to do so on any particular terms.
8.9 PROGENITOR ACKNOWLEDGES THAT THE LICENSES GRANTED IN SECTIONS
8.5, 8.6 AND 8.7 ARE GRANTED AS IS, WITHOUT WARRANTY OF ANY KIND, AND PROGENITOR
AGREES TO INDEMNIFY NOVO NORDISK FOR ANY LOSS, DAMAGE, LIABILITY AND EXPENSE,
INCLUDING WITHOUT LIMITATION ATTORNEYS' FEES AND COSTS OF DEFENSE, ARISING OUT
OF ANY EXERCISE OF SUCH RIGHTS BY OR ON BEHALF OF PROGENITOR, ITS AFFILIATES
AND/OR ANY LICENSEE OR ASSIGNEE OF PROGENITOR OR AN AFFILIATE OF PROGENITOR.
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9. MISCELLANEOUS.
9.1 Novo Nordisk shall have complete control, as between the parties,
over the development, manufacture, testing, pricing, marketing, sale and
distribution of any Licensed Product. All trademark and service mark rights and
all goodwill associated with any trademarks and service marks used by Novo
Nordisk and its Affiliates and sublicensees in connection with Licensed Product
shall, as among the parties, belong solely to Novo Nordisk.
9.2 This Agreement constitutes the entire agreement and supersedes
all prior agreements and understandings, both written and oral, among the
parties hereto with respect to the subject matter hereof.
9.3 Neither party shall assign or transfer any of its rights
hereunder, or delegate any of its obligations hereunder, to any third party
(other than an Affiliate of such party) without the prior, written consent of
the other party in each instance; provided, however, that (i) either party may
assign all its rights and obligations hereunder to a third party that acquires
all assets of such party associated with the collaboration established by this
Agreement, so long as such assigning party provides the other party with notice
of such assignment at least 30 days before it becomes effective; and (ii) Novo
Nordisk may delegate any duty arising under this Agreement to any third party so
long as Novo Nordisk remains ultimately responsible, as between the parties, for
performance of such duty. This Agreement shall bind and benefit the parties
hereto and their permitted successors and assigns.
9.4 All notices, requests, reports and other communication provided
for or permitted hereunder shall be given in writing and shall be hand delivered
or sent by facsimile, reputable courier or by registered or certified mail,
postage prepaid, return receipt requested, to the address set forth on the first
page of this Agreement, or to such other address as a party may inform the
others of in writing. Notices will be deemed delivered on the earliest of
transmission by facsimile, actual receipt or ten days after mailing as set forth
herein.
9.5 Any terms of this Agreement may be amended, modified or waived
only in a writing signed by all the parties hereto.
9.6 If any provisions of this Agreement shall be held invalid,
illegal or unenforceable, such provision shall be enforced to the maximum extent
permitted by law and the parties' fundamental intentions hereunder, and the
remaining provisions shall not be affected or impaired.
9.7 Nothing herein contained shall constitute this a joint venture
agreement or constitute either party as the partner, principal or agent of the
other, this being an Agreement between independent contracting parties. Neither
party shall have any authority to bind the other party in any respect
whatsoever.
9.8 This Agreement shall be governed by, and construed and enforced
in accordance with, the laws of the State of Washington, U.S.A., without regard
to its conflict of law rules.
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9.9 Any dispute arising between the parties relating to, arising out
of or in any way connected with this Agreement or any term or condition hereof,
or the performance by either party of its obligations hereunder, whether before
or after terrain termination of the Agreement, shall be finally resolved by
binding arbitration. Whenever a party shall in decide to institute arbitration
proceedings, it shall give written notice to that effect to the other party.
The party giving such notice shall refrain from instituting the arbitration
proceedings for a period of sixty (60) days following such notice. During such
60-day period, the parties shall make good faith efforts to amicably resolve the
dispute without arbitration. Any arbitration hereunder shall be conducted under
the Commercial Arbitration Rules of the American Arbitration Association
("AAA"). Each such arbitration shall be conducted by a panel of three
arbitrators: one arbitrator shall be appointed by each of Progenitor and Novo
Nordisk and the third shall be appointed by such two arbitrators, or, if such
two arbitrators are unable to agree on the third arbitrator within a period of
30 days after appointment of the second of them, such third arbitrator shall be
appointed by the AAA. Any such arbitration shall be held in New York, New York.
The arbitrators shall have the authority to grant specific performance and to
allocate between the parties the costs of arbitration in such equitable manner
as they determine. Judgment upon the award so rendered may be entered in any
court having jurisdiction, or application may be made to such court for judicial
acceptance of any award and an order of enforcement, as the case may be. In no
event shall a demand for arbitration be made after the date when institution
institutional legal or equitable proceeding based on such claim, dispute or
other matter in question would be barred by the applicable statute of
limitations.
IN WITNESS WHEREOF, the parties hereto have caused their duly
authorized officers to execute and acknowledge this Agreement as of the day and
year first above written.
Progenitor, Inc. Novo Nordisk
By /S/ DOUGLASS GIVEN By /S/ DR. BRUCE CARTER
------------------------------ ----------------------------------
Its Douglass Given M.D., Ph.D. Dr. Bruce Carter, Executive Vice
President President, Health Care Discovery and
Chief-Executive Development
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[Add appropriate notary blocks for Novo Nordisk and Progenitor.]
Subscribed and sworn to before me Subscribed and sworn to before me
this 8th day of May, 1995. this 20th day of May, 1995.
/S/ JENNIFER S. DUFFY /S/ JALEY D. STONE
- ------------------------------ ----------------------------------
Notary Public Notary Public
Jennifer S. Duffy Seattle, Wash.
Notary Public for the State of Ohio. 1/1/98
My commission expires Dec. 17, 1997 Expiration Date
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EXHIBIT 1.3 GROWTH FACTOR
(***)
31
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EXHIBIT 1.6 EXISTING LICENSED PATENT RIGHTS
(***)
32
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EXHIBIT 1.9 LIGAND
(***)
33
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EXHIBIT 2.1.1 WORK PLAN FOR LIGAND STAGE 1: (***) plan
(***)
34
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EXHIBIT 2.1.2 WORK PLAN FOR LIGAND STAGE 2
(***)
35
<PAGE>
(***)
36
<PAGE>
(***)
37
<PAGE>
EXHIBIT 2.1.3 WORK PLAN FOR GROWTH FACTOR STAGE 1: (***) plan
(***)
38
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EXHIBIT 2.1.4 WORK PLAN FOR GROWTH FACTOR STAGE 2
(***)
39
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(***)
40
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ZYMOGENETICS
22 June, 1995
Stephen J. Williams, Ph.D.
Progenitor, Inc.
1507 Chambers Road
Columbus, Ohio 43212-1566
Dear Steve:
I am sending this letter to notify you that Progenitor has completed delivery
of the samples of cDNA encoding the Receptor as stated in the letter
addressed to Dr. Joseph Cioffi, dated 1 of June 1995.
This letter also serves as notification that ZymoGenetics has initiated
Ligand Stage 1 as of June 1, 1995. We are all looking forward to a successful
completion of this stage.
Sincerely,
/s/ LUCIANA SIMONCINI
Luciana Simoncini
Associate, New Business Development
cc: Mark Murray
Don Foster
Si Lok
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PROGENITOR, INC.
- --------------------------------------------------------------------------------
VIA TELEFACSIMILE
January 17, 1996
Dr. Bruce Carter
Executive Vice President of Health Care
Discovery and Development
1201 Eastlake Avenue East
Seattle, WA 98102
Dear Dr. Carter:
(Reference: Letter dated June 22, 1995 from L. Simoncini to S. Williams)
This is written pursuant to Section 2.1.1 of the Sponsored Research and
License Agreement between Novo Nordisk and Progenitor dated May 1, 1995.
Since Novo Nordisk has not notified Progenitor that it has successfully
completed the tasks of isolating, cloning and sequencing a Ligand during
Ligand Stage 1 of the Agreement, we respectfully demand that Novo Nordisk
complete such tasks within (***) of the date of this letter. In the event
that Novo Nordisk does not complete such tasks within such (***) period, as
provided in Section 2.1.1 Progenitor may terminate Ligand Stage 1 and the
license granted to Novo Nordisk pursuant to this Agreement with respect to
the Receptor and all Ligands.
We look forward to reviewing the progress of the research during our
meeting on January 31, 1996 in Seattle.
Very truly yours,
/S/ DOUGLASS B. GIVEN
Douglass B. Given, M.D., Ph.D.
President and CEO
cc: Mark Murray
Glenn L. Cooper, M.D.
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THE INFORMATION BELOW MARKED BY * AND ( ) HAS BEEN OMITTED PURSUANT TO A
REQUEST FOR CONFIDENTIAL TREATMENT. THE OMITTED PORTIONS HAVE BEEN SEPARATELY
FILED WITH THE COMMISSION.
LICENSE AGREEMENT
between
VANDERBILT UNIVERSITY
and
PROGENITOR, INC.
THIS AGREEMENT, by and between VANDERBILT UNIVERSITY, a not-for-profit
corporation, organized and existing under the laws of the state of Tennessee,
("VANDERBILT") and PROGENITOR, INC., a corporation, having a principal place of
business at 1507 Chambers Road, Columbus, Ohio 43212, ("LICENSEE") is effective
as of the 17th day of July, 1995 (the "EFFECTIVE DATE").
RECITALS
WHEREAS, VANDERBILT and LICENSEE by separate assignments each hold equal and
undivided right, title and interest in and to a certain patent application
titled "Developmentally Regulated Endothelial Cell Locus-1" (attached hereto as
Appendix I) which describes inventions made by Dr. Thomas Quertermous and Dr.
Brigid Hogan of VANDERBILT and by Dr. Ralph Snodgrass and Dr. Thomas Zupancic of
LICENSEE relating to developmental endothelial locus-1 (del-1) gene (the
"Inventions"); and
WHEREAS, LICENSEE desires to obtain exclusive rights and interests in and to
such patent application and any patents that may issue therefrom for purposes of
commercialization of such inventions; and
WHEREAS, VANDERBILT is willing to grant to LICENSEE a license under any and all
rights and interests held by VANDERBILT in and to such patent application and
such patents for purposes of commercialization of such inventions upon the terms
and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual covenants and agreements herein
contained, it is agreed by the parties as follows:
1 DEFINITIONS
1.0 PATENT RIGHTS shall mean:
(a) Any United States patent applications covering the Inventions
(including without limitation the patent application attached hereto
as Appendix I), as shall be set forth in Appendix II:
(b) Any United States and/or foreign, patent applications and/or patents,
which may, by subsequent agreement between the parties, be added to
Appendix II;
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(c) Any later-filed United States and/or foreign patent applications,
based on the patent applications and/or patents listed in Appendix II,
or corresponding thereto, including without limitation any
continuations, continuations-in-part, divisionals, reissues,
reexaminations, or extensions thereof; and
(d) Any United States and/or foreign patents issuing from any of the
foregoing.
1.1 LICENSED PRODUCT shall mean;
(a) Any product which is covered by a valid and unexpired, issued claim
contained in the Patent Rights in the country in which such product is
manufactured, used, leased or sold; or
(b) Any product which is covered by a pending claim in a patent
application contained in the Patent Rights in the country in which
such product is manufactured, used, leased or sold; or
(c) Any product which is manufactured by using a process which is covered
by a valid and unexpired, issued claim contained in the Patent Rights
in the country in which such process is used; or
(d) Any product which is manufactured by using a process which is covered
by a pending claim in a patent application contained in the Patent
Rights in the country in which such process is used.
In connection with (b) and (d) above, in the event that a pending claim in a
patent application contained in the Patent Rights has not issued as a claim in
an issued patent within a period of six (6) years after the date from which such
patent application takes priority, such pending claim shall not be within the
Patent Rights, and a product which is covered by such pending claim, or a
product manufactured by using a process which is covered by such pending claim,
shall not be a Licensed Product. However, in the event that such pending claim
subsequently issues as a claim in an issued patent at a date after such six (6)
year period, such claim shall be within the Patent Rights, and a product which
is covered by such claim, or a product manufactured by using a process which is
covered by such pending claim, shall be a Licensed Product as of the date of
issuance of such patent.
1.2 LICENSED THERAPEUTIC PRODUCT shall mean any Licensed Product used for the
treatment of, or prophylaxis for, a disease condition in humans including
without limitation any Licensed Product used in cell sorting.
1.3 NET SALES shall mean receipts actually collected for Licensed Products
sold, leased or otherwise distributed by LICENSEE, Affiliates and sublicensees
of either LICENSEE or Affiliates during the term of this Agreement, less any
allowances for:
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(a) cash, trade, or quantity discounts actually given,
(b) taxes, including sales taxes and duties, and
(c) credits, returns and replacements.
1.4 FAIR MARKET VALUE shall mean the equivalent cash consideration which
LICENSEE or an Affiliate or a sublicensee of either LICENSEE or an Affiliate
would have realized from an unaffiliated, unrelated buyer in an arm's length
sale of an identical item sold in the same quantity and at the same time and
place of the transaction.
1.5 AFFILIATE shall mean any entity directly or indirectly controlling,
controlled by or under common control with LICENSEE. For purposes of this
Agreement, "control" shall mean direct or indirect ownership of more than fifty
percent (50%) of the outstanding voting securities of an entity, or the right to
receive more than fifty percent (50%) of the profits or earnings of an entity,
or the right to control the policy decisions of an entity.
1.6 RESEARCH AND DEVELOPMENT Funds shall mean any monetary consideration
provided by a third party to Licensee specifically for the purpose of assisting
LICENSEE in meeting LICENSEE's obligations of due diligence under this Agreement
relating to development of a Licensed Product or a Licensed Therapeutic Product
for commercialization. "Research and Development Funds" shall not include
monetary consideration received by LICENSEE from third parties in exchange for
services provided by LICENSEE using any Licensed Product after commercialization
of such Licensed Product. Any judgment as to whether or not such services are
being provided by LICENSEE shall be based on good faith representation of the
parties.
2 GRANT
2.0 EXCLUSIVE LICENSE. VANDERBILT hereby grants to LICENSEE and LICENSEE
hereby accepts from VANDERBILT, upon the terms and conditions herein specified,
an exclusive, royalty bearing, worldwide right and license under any and all
rights and interests held or otherwise controlled by VANDERBILT in and to the
Patent Rights (a) to make, have made, use, lease, offer to sell and sell
Licensed Products, and (b) to use and have used any method, process or
procedure, said right and license to include the right to sublicense, subject
only to (i) rights held by the United States government as set forth in
Section 2.1, if any, and (ii) a reserved, non-exclusive, non-transferable,
royalty-free right and license in VANDERBILT for the purpose of conducting
internal, non-commercial research only.
2.1 UNITED STATES GOVERNMENT RIGHTS. Notwithstanding the exclusive right and
license granted by VANDERBILT herein to LICENSEE, the United States Government
may have certain rights in and to inventions made at VANDERBILT under a funding
agreement between VANDERBILT and the United States Government or as required by
law or regulation. The parties hereto acknowledge and agree that this Agreement
is
3
<PAGE>
subject to rights held by the United States Government under any such funding
agreement or under any applicable law or regulation. In the event that there
exists any conflict between this Agreement and any funding agreement between
VANDERBILT and the United States Government or any applicable law or regulation
relating to the inventions made at VANDERBILT that are the subject matter of
this Agreement, the terms of such funding agreement, or applicable law or
regulation shall prevail.
2.2 DUE DILIGENCE. LICENSEE shall use reasonable efforts to effect
introduction of Licensed Products into the commercial market as soon as
practicable, consistent with sound, prudent and reasonable business practices
and judgment; thereafter, until the expiration of this Agreement, LICENSEE shall
endeavor to keep Licensed Products reasonably available to the public.
VANDERBILT shall have the right to terminate the rights and license granted by
VANDERBILT to LICENSEE hereunder concerning VANDERBILT's interest in and to the
Patent Rights at any time after three (3) years from the EFFECTIVE DATE if, in
VANDERBILT's reasonable judgment, LICENSEE:
(a) has not put the subject matter licensed hereunder into commercial use
in a country or countries where licensed, directly or through a sublicense or,
after commercial introduction, is not keeping such subject matter reasonably
available to the public; or
(b) is not demonstrably engaged in a research, development, manufacturing,
marketing or licensing program directed toward commercial use of the subject
matter licensed hereunder.
In making any determination VANDERBILT shall take into account the normal course
of such programs conducted with sound, prudent and reasonable business practices
and judgment, and shall take into account the reports provided hereunder by
LICENSEE.
2.3 SUBLICENSING. All sublicenses granted by LICENSEE hereunder shall include
a requirement that the sublicensee use its best efforts to bring the subject
matter of the sublicense into commercial use as quickly as is reasonably
possible. Such sublicenses shall be subject and subordinate to the terms and
conditions of this Agreement, except the sublicensee may not further sublicense.
copies of all sublicense agreements shall be provided to VANDERBILT promptly
after execution. VANDERBILT's receipt of such sublicense shall not constitute
an approval of such sublicense or a waiver of any of VANDERBILT's rights or
LICENSEE's obligations hereunder. LICENSEE will reasonably consider granting
sublicenses to companies suggested or referred to LICENSEE by VANDERBILT.
2.4 SUBSIDIARIES AND DISTRIBUTORS. License rights granted hereunder shall
enable LICENSEE to make, have made, use, lease, offer to sell, sell or otherwise
distribute Licensed Products through any of its subsidiaries and to lease, offer
to sell, sell or otherwise distribute Licensed Products through any of its
normal channels including without limitation its subsidiaries, distributors, and
agents. LICENSEE ensures that Licensed Products and any products embodying the
Inventions or produced through the
4
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Inventions for use or sale in the United States shall be manufactured
substantially in the United States or its territories.
2.5 EXTENSION TO AFFILIATES. VANDERBILT hereby grants to LICENSEE the right to
extend the licenses granted in Section 2.0 to an AFFILIATE, subject to the terms
and conditions hereof.
2.6 LICENSED PRODUCTS SUPPLY. LICENSEE agrees to supply the laboratories of
the inventors at VANDERBILT at no charge reasonable quantities of Licensed
Products that LICENSEE offers for sale or otherwise makes available for public
use.
3 TERM AND TERMINATION
3.0 TERM. Unless previously terminated as herein provided, this Agreement
shall become effective on the EFFECTIVE DATE and shall continue in full force
and effect until expiration of the term of the last patent within the Patent
Rights or, with respect to patent applications, a period of six (6) years after
the date from which the last such patent application takes priority expires and
no patent issues from such patent application. Upon expiration of this
Agreement, LICENSEE may manufacture, use and sell any product and shall not be
required to pay royalties by reason of such manufacture, use or sale of such
product.
3.1 TERMINATION. This Agreement may be terminated by written notice to the
other party:
(a) In the event that one party commits any substantial breach of this
Agreement, the non-breaching party at its option, may terminate this Agreement
by giving the breaching party written notice of its election to terminate as of
a stated date, not less than sixty (60) days from the date of such written
notice. Such written notice shall state without limitation the nature of the
defaults claimed by the non-breaching party. The breaching party during said
sixty (60) day period, or such longer period as may be indicated by the non-
breaching party, may correct any default stated in said written notice and if
such default is corrected, this Agreement shall continue in full force and
effect as if such written notice had not been given. Failure by LICENSEE to pay
earned royalties to VANDERBILT in a timely manner shall be deemed a substantial
breach of the Agreement; or
(b) In the event LICENSEE shall become insolvent or shall suspend
business, or shall file a voluntary petition or an answer admitting the
jurisdiction of the court and the material allegations of, or shall consent to,
involuntary petition pursuant to or purporting to be pursuant to any
reorganization or insolvency law of any jurisdiction, or shall make an
assignment for the benefit of creditors, or shall apply for or consent to the
appointment of a receiver or trustee of a substantial part of its property, to
the extent permitted by applicable law, this Agreement shall automatically
terminate effective as of a date ten (10) days prior to LICENSEE's change of
status hereunder.
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3.2 EFFECT OF TERMINATION. Upon termination of this Agreement, LICENSEE grants
permission to VANDERBILT to grant worldwide, nonexclusive licenses without the
prior written consent of LICENSEE. Immediately upon termination, any
sublicenses granted hereunder shall become non-exclusive and VANDERBILT
ownership interest shall revert to VANDERBILT.
3.3 SURVIVAL. Sections 3.2, 3,3, 7, 9.1, 9.2, 9.3, 9.4, 10 and 11 of the
Agreement shall survive expiration or termination of this Agreement.
4 CONSULTING AGREEMENTS
4.0 CONSULTING AGREEMENTS. In the event LICENSEE desires to enter into a
consulting agreement with any of the inventors at VANDERBILT, any such
consulting agreement shall be separate and apart from this Agreement, and in
accord with VANDERBILT policy and procedures.
5 ROYALTIES AND MILESTONES
5.0 ROYALTIES. Commencing upon the EFFECTIVE DATE, LICENSEE agrees to pay
royalties to VANDERBILT in accordance with the following:
(a) (***) of Net Sales attributed to Licensed Therapeutic Products; and
(b) (***) of Net Sales attributed to Licensed Products used for IN
VITRO diagnostic purposes; and
(c) (***) of Net Sales attributed to Licensed Products used for IN
VITRO research purposes; and
(d) (***) of Net Sales attributed to products made using Licensed
Products as a discovery tool in the vaccine, diagnostic or therapeutic
fields; and
(e) With respect to Licensed Products not otherwise within (a)-(d) in this
Section 5.0 above, royalties upon NET SALES attributed to such Licensed Products
will be agreed upon in writing by VANDERBILT and LICENSEE.
5.1 (***)
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5.2 NO MULTIPLE ROYALTIES. Notwithstanding Section 5.0 above, no multiple
royalties shall be due or payable because the manufacture, use, lease, or sale
of any Licensed Product is or shall be covered by more than one valid and
unexpired claim contained in the Patent Rights. In addition, notwithstanding
Section 5.0 above, only one royalty shall be due and payable on any Licensed
Product on the manufacture, use, lease, or sale of such Licensed Product.
5.3 SCHEDULE OF PAYMENT. LICENSEE agrees to pay royalties as set forth herein
on a quarterly basis and payments shall be due within sixty (60) days after end
of each quarter. Each such payment shall be accompanied by a statement for the
period covered by such royalties showing total number or volume of Licensed
Products sold, with a breakdown of sales for the categories of Licensed Products
set forth in Section 5.0 by country and total royalties and fees due. Such
statement shall be certified as accurate and complete by a responsible officer
of LICENSEE.
5.4 MILESTONE PAYMENTS. LICENSEE agrees to use its reasonable best efforts and
diligence consistent with prudent business judgment to proceed with the
development, manufacture, use and sale of Licensed Products. LICENSEE,
designated Affiliates or
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sublicensee(s) of either LICENSEE or Affiliates, will use reasonable best
efforts to initiate development activities as soon as reasonably possible after
the EFFECTIVE DATE. In connection therewith:
(a) Upon United States Food and Drug Administration ("FDA") approval of
the first Licensed Product for sale in the United States by LICENSEE,
designated Affiliates or sublicensees of either LICENSEE or Affiliates, or
upon the ten (10) year anniversary of the EFFECTIVE DATE, whichever occurs
first, LICENSEE shall pay VANDERBILT a milestone payment of (***). After such
payment, no additional milestone payments will be due for approval of
additional Licensed Products by the FDA.
(b) Upon approval by the requisite regulatory authority of the first
Licensed Product for sale in any country which is a member of the European
Economic Community by LICENSEE, designated Affiliates or sublicensees of
either LICENSEE or Affiliates, LICENSEE shall pay VANDERBILT a milestone
payment of (***). After such payment, no additional milestone payments will
be due for approval of additional Licensed Products by any European
regulatory authority.
(c) Upon approval by the requisite regulatory authority of the first
Licensed Product for sale in Japan by LICENSEE, designated Affiliates or
sublicensees of either LICENSEE or Affiliates, LICENSEE shall pay VANDERBILT
a milestone payment of (***). After such payment, no additional milestone
payments will be due for approval of additional Licensed Products by any
Japanese regulatory authority.
5.5 SUBLICENSE FEES. LICENSEE agrees to pay to VANDERBILT an amount equal
to (***)up to a total of (***) of monetary consideration received by LICENSEE
from each sublicensee, including without limitation license fees and
milestone payments for any sublicense granted by LICENSEE, to the extent said
monetary consideration either (a) is for purposes other than for the purchase
of equity, or (b) is NOT Research and Development Funds. This Section 5.5
shall not apply to royalties received by LICENSEE from sublicensees. For
purposes of this Section 5.5, non-cash consideration received by LICENSEE
from such sublicenses shall be valued at its Fair Market Value as of date of
receipt by LICENSEE.
5.6 REPORTS. In addition to LICENSEE's obligations pursuant to Section 5.3
relating to statements concerning royalties, LICENSEE shall provide written
annual reports within sixty (60) days after December 31 of each calendar year
which shall include but not be limited to: report of progress on research and
development, regulatory approvals, manufacturing, sublicensing, and marketing
activities during the preceding twelve (12) months as well as plans, including
development plans, for the coming year. LICENSEE shall promptly notify
VANDERBILT if any changes in the marketplace or in
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LICENSEE's financial condition or business aims suggest commercialization will
not occur within ten (10) years after the EFFECTIVE DATE.
5.7 LICENSE MAINTENANCE FEES. Upon issue of the first United States patent
within the Patent Rights and up until such time as a Licensed Product is
introduced into the market, LICENSEE shall pay to VANDERBILT a license
maintenance fee equal to (***) per year per United States patent within the
Patent Rights on which VANDERBILT inventors are listed. In addition, LICENSEE
shall pay any patent maintenance fees required to be paid to the patent
office relating to patents within the Patent Rights.
5.8 RECORDS. LICENSEE shall maintain complete and accurate records sufficient
to enable accurate calculation of royalties due VANDERBILT under this Agreement.
LICENSEE shall, at VANDERBILT's request and expense, but not more frequently
than once per calendar year, provide certified statements from LICENSEE's
auditors, concerning royalties due pursuant to this Agreement. Once a calendar
year, VANDERBILT shall have the right to select a certified public accountant to
inspect, on reasonable notice and during regular business hours, the records of
LICENSEE to verify LICENSEE's statements and royalty payments due pursuant to
this Agreement; provided that the entire cost for such inspection shall be borne
by VANDERBILT, unless there is a discrepancy of greater than ten percent (10%)
in VANDERBILT's favor, in which case LICENSEE shall bear the entire cost of the
inspection. Records shall be preserved by LICENSEE for three (3) years for
inspection by VANDERBILT.
5.9 TERMINATION OF OBLIGATION TO PAY ROYALTIES. LICENSEE's obligation to pay
royalties hereunder shall continue until expiration of the last patent within
the Patent Rights, unless this Agreement is terminated prior to such expiration.
Notwithstanding the above, in the event that all patents within the Patent
Rights expire or are declared invalid or unenforceable and/or, with respect to
patent applications, a period of six (6) years after the date from which the
last such patent application takes priority expires and no patent issues from
such patent application, LICENSEE's obligation to pay royalties shall terminate
on the effective date of such expiration or declaration.
5.10 CURRENCY. Royalties due and payable hereunder on sales of Licensed
Products in currencies other than United States Dollars shall be calculated
using the appropriate exchange rate for purchase of such currency quoted by
Citicorp Bank (New York) foreign exchange desk on the last banking day of each
calendar quarter. Royalty and milestone payments to VANDERBILT shall be in U.S.
Dollars.
5.11 TRANSFER OF AGREEMENT. In the event that LICENSEE is acquired by a third
party or enters into a joint venture with a third party relating to the subject
matter of this Agreement, or in any other way transfers all or substantially all
of its assets relating to this Agreement to a third party, all obligations of
LICENSEE hereunder, including
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without limitation obligations relating to payment of royalties, shall be
binding upon such third party.
6 PATENT PROSECUTION AND MAINTENANCE
6.0 PROSECUTION. LICENSEE, at its own expense and utilizing patent attorneys
of its choice, shall be responsible for the filing, prosecution, and maintenance
of any patent applications and patents contained in the Patent Rights, subject
to VANDERBILT's prior review and approval, such approval not to be unreasonably
withheld. LICENSEE agrees to consider and cooperate with suggested changes from
VANDERBILT or its patent counsel with regard to correspondence and documents to
be filed with the United States Patent and Trademark office or any foreign
patent office.
6.1 COOPERATION. VANDERBILT shall fully cooperate with LICENSEE in preparing,
filing, prosecuting and maintaining any patent applications and patents within
the Patent Rights. LICENSEE, or its patent counsel, shall provide VANDERBILT
with copies of all correspondence and documents filed with or received from the
United States Patent and Trademark Office or any foreign patent office. In
addition, LICENSEE agrees that any and all official or "ribbon" copies of issued
patents shall be forwarded to, and retained by, VANDERBILT.
6.2 ABANDONMENT. Should LICENSEE elect not to file, prosecute, and/or maintain
any patent application or patent contained in the Patent Rights, LICENSEE, not
later than sixty (60) days prior to the applicable filing or other deadline,
shall provide written notice to VANDERBILT to such effect, which then shall have
the right, but not the obligation to file, prosecute and/or maintain the patent
application or patent at its own expense. Thereafter, LICENSEE shall have no
further rights in any such patent application or patent, as applicable.
6.3 MAINTENANCE. Subject to LICENSEE's election under Section 6.2 above,
LICENSEE shall be obligated to make timely payment of all maintenance fees
following the issuance of each and every patent within the Patent Rights.
Should LICENSEE elect to terminate this Agreement, LICENSEE shall notify
VANDERBILT promptly in writing and in sufficient time to enable VANDERBILT to
make timely payment to maintain any patent within the Patent Rights, or
prosecute any patent application within the Patent Rights. LICENSEE shall not
abandon any patent application or patent within the Patent Rights without
providing written notice to VANDERBILT and, after such written notice, provide
VANDERBILT sufficient opportunity to assume prosecution of such patent
application or maintenance of such patent.
7 CONFIDENTIALITY
7.0 GENERAL. VANDERBILT and LICENSEE acknowledge that it may be necessary for
one party to disclose to the other party certain confidential or proprietary
information. In such event, the receiving party agrees not to use and to
preserve as confidential any
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and all information identified by the disclosing party as confidential or
proprietary information except as reasonably necessary to exploit or otherwise
exercise the rights and license granted hereunder. The obligation of
confidentiality in this Section 7 shall apply to any and all information
contained in any patent application or draft thereof provided by VANDERBILT to
LICENSEE, including applications confidentially provided to LICENSEE prior to
the EFFECTIVE DATE. The obligation of confidentiality shall not apply to
information which:
(a) is now in the public domain or which becomes generally available to
the public through no fault of the receiving party; or
(b) is already known to, or in the possession of, the receiving party
prior to disclosure by the disclosing party as can be demonstrated by
documentary evidence; or
(c) is disclosed on a non-confidential basis from a third party having the
right to make such a disclosure; or
(d) is independently developed by the receiving party (by activity not
associated with confidential or proprietary information received hereunder) as
can be demonstrated by documentary evidence.
7.1 TERM. The confidentiality obligations of the parties pursuant to this
Section 7 shall continue in full force and effective for a period of five (5)
years after the expiration or termination of this Agreement.
8 INFRINGEMENT
8.0 THIRD PARTY INFRINGEMENT OF PATENT RIGHTS. LICENSEE and VANDERBILT each
shall provide written notice promptly to the other party of any alleged
infringement by a third party of the Patent Rights which becomes known to either
LICENSEE or VANDERBILT and, together with such notice, provide the other party
with all available evidence of such alleged infringement.
8.1 ENFORCEMENT AND DEFENSE. During the term of this Agreement, LICENSEE shall
have the right, but not the obligation, to enforce and/or defend, at LICENSEE's
expense and utilizing counsel of LICENSEE's choice, any infringement of the
Patent Rights and/or allegations of infringement of a third party's patent
rights. In furtherance thereof, VANDERBILT hereby agrees that LICENSEE, at
LICENSEE's expense, may join VANDERBILT as a party in any suit or legal action.
LICENSEE shall promptly provide VANDERBILT copies of all pleadings and other
documents submitted by LICENSEE or received by LICENSEE in the course of any
such suit or legal action. LICENSEE may enter into any settlement, consent
judgment or voluntary final disposition of any suit or legal action on behalf of
LICENSEE, but no settlement, consent judgment or other voluntary final
disposition of any such suit or legal action may be entered into by
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LICENSEE on behalf of VANDERBILT without the written consent of VANDERBILT,
which consent shall not unreasonably be withheld.
8.2 COSTS OF ENFORCEMENT AND DEFENSE. In the event that LICENSEE shall
undertake the enforcement and/or defense of the Patent Rights, as provided in
Section 8.1, LICENSEE may withhold up to fifty percent (50%) of any royalties
due and payable to VANDERBILT in the country in which a suit is filed or legal
action is taken, and apply the same toward reimbursement of up to one half (1/2)
LICENSEE's expenses relating to such suit or legal action, including without
limitation attorneys' fees and other expenses. In the event that LICENSEE is
awarded attorneys' fees and other expenses from a third party as a consequence
of a suit or legal action, LICENSEE shall promptly pay to VANDERBILT any
royalties withheld under this Section 8.2.
8.3 CONTROL. If within six (6) months after receiving notice of any alleged
infringement of the Patent Rights by a third party, LICENSEE shall have been
unsuccessful in persuading the alleged infringer to desist, or shall not have
brought and shall not be diligently prosecuting suit or other legal action, or
if LICENSEE shall notify VANDERBILT, at any time prior to initiation of suit or
legal action, of LICENSEE's intention not to bring suit or legal action against
the alleged infringer, then, and in those events only, VANDERBILT shall have the
right, but not the obligation, to prosecute, at VANDERBILT's expense and
utilizing counsel of VANDERBILT's choice, any enforcement or defense of the
Patent Rights, and VANDERBILT may, for such purposes, join the LICENSEE as a
party to such suit or legal action. The total cost of any such infringement
action commenced by VANDERBILT shall be borne by VANDERBILT and VANDERBILT shall
be entitled to keep recovery of any settlement amount or damages for past
infringement derived therefrom.
8.4 COOPERATION. In any suit or legal action to enforce and/or defend the
Patent Rights, the party not in control of such suit or legal action, at the
request and expense of the controlling party, shall cooperate in all respects
and, to the extent reasonably possible, have its employees testify when
requested and make available relevant records, papers, information, samples,
specimens, and the like.
8.5 DAMAGES. In the event LICENSEE institutes suit or legal action for
infringement of Licensed Patents in LICENSEE's name pursuant to this Section 8
and a settlement acceptable to both LICENSEE and VANDERBILT is entered into or
monetary damages are awarded in a final non-appealable judgment, the amount paid
as a result of such settlement or such monetary damages awarded shall be applied
first to reimburse LICENSEE for any unreimbursed expenses and legal fees of
LICENSEE relating to such suit or legal action, and next toward reimbursement of
VANDERBILT for any royalties past due or withheld in accordance with the terms
of this Section 8, including without limitation any amounts withheld as
reimbursement of attorneys' fee or other expenses pursuant to Section 8.2. After
reimbursement of LICENSEE for expenses and legal fees and reimbursement of
VANDERBILT for royalties past due or withheld, a portion of the
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balance of any settlement amount or monetary damages received shall be
distributed to VANDERBILT, such portion to equal the lesser of either (i) fifty
percent (50%) of such balance, or (ii) an amount equal to royalties which would
have been due VANDERBILT under this Agreement if the products sold by the
infringer actually had been sold by LICENSEE. In the event that an award of
treble damages is received, after reimbursement of LICENSEE for expenses and
legal fees and reimbursement of VANDERBILT for royalties past due or withheld,
and after distribution to VANDERBILT of a portion of the balance of any damages
in accordance with the previous sentence, a portion of such treble damages equal
to twenty-five percent (25%) shall be distributed to VANDERBILT.
8.6 INFRINGEMENT OF THIRD PARTY PATENT RIGHTS. Each party shall notify the
other party promptly if any suit or legal proceeding is commenced or threatened
against such party or against any purchaser of a Licensed Product sold by
LICENSEE, Affiliates or sublicensees of either LICENSEE or Affiliates on the
ground that the manufacture, use, lease, or sale of such Licensed Product is an
infringement of a third party's patent rights or other intellectual property
rights. In accordance with Section 8.1 above, LICENSEE, at LICENSEE's expense,
shall have the right but not an obligation to defend against all suits or legal
actions brought against LICENSEE as a result of the exercise of the rights
granted to LICENSEE by VANDERBILT hereunder, and VANDERBILT, at LICENSEE's
request and LICENSEE's expense, shall give LICENSEE all reasonable assistance in
any such suit or legal action. To the extent that LICENSEE cannot reasonably
discontinue the acts that allegedly infringe such third party patent rights and
retain the benefit of the rights and license granted by VANDERBILT to LICENSEE
hereunder, up to fifty percent (50%) of LICENSEE's reasonable out-of-pocket
expenses in the defense of such suits may be set-off against any royalty
payments due and payable to VANDERBILT hereunder. Payment of any amounts which
may be recovered by such third party by way of judgment, award, decree, or
settlement as a result of infringement of third party patent rights by a
Licensed Product, including without limitation attorneys' fees and other
expenses, shall be the sole responsibility of LICENSEE and fifty percent (50%)
of such amounts may be off-set against royalties due and payable to VANDERBILT
hereunder.
9 WARRANTIES AND INDEMNITIES
9.0 WARRANTIES OR REPRESENTATIONS. Except as otherwise expressly provided
herein, nothing in this Agreement shall be construed as:
(a) A warranty or representation by VANDERBILT as to the validity or scope
of a patent within the Patent Rights; or
(b) A warranty or representation by VANDERBILT that anything made, used,
sold, or otherwise disposed of through the license granted herein is or will be
free from
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infringement of patents, copyrights, trademarks, or other proprietary rights of
third parties; or
(c) An obligation by VANDERBILT to bring or prosecute actions or suits
against third parties for infringement; or
(d) Granting by implication, estoppel, or otherwise any licenses under
patents of VANDERBILT or other persons other than Patent Rights, regardless of
whether such patents are dominant or subordinate to any patent within the Patent
Rights.
9.1 INDEMNIFICATION. Subject to the terms and conditions of Section 9.3 below,
LICENSEE shall indemnify, defend and hold harmless VANDERBILT and its trustees,
officers, faculty, staff, employees, students, agents and representatives, and
their respective successors, heirs and assigns (the "Indemnities"), against any
liability, damage, loss or expenses (including without limitation reasonable
attorney's fees and expense of defense) incurred by or imposed upon the
indemnities or any one of them in connection with any claims, suits, actions,
demands or judgments arising out of any theory of law (including, but not
limited to, actions in the form of tort, warranty, or strict liability)
concerning any Licensed Product manufactured, used, leased or sold by LICENSEE,
Affiliates or sublicensees of either LICENSEE or Affiliates. Except as
otherwise provided herein, such indemnity obligation shall include claims and
expenses related to infringement of a third party's rights by the Licensed
Product. LICENSEE agrees, at LICENSEE's expense, to provide attorneys
reasonably acceptable to VANDERBILT to defend against any actions brought or
filed against any party indemnified hereunder, whether or not such actions are
rightfully brought.
9.2 NO OTHER REPRESENTATIONS OR WARRANTIES. EXCEPT AS EXPRESSLY PROVIDED
HEREIN, VANDERBILT MAKES NO REPRESENTATIONS AND EXTENDS NO WARRANTIES OF ANY
KIND EXPRESS OR IMPLIED. THERE ARE NO EXPRESS OR IMPLIED WARRANTIES OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE, OR THAT USE OF A LICENSED
PRODUCT WILL NOT INFRINGE ANY PATENT, COPYRIGHT, TRADEMARK, OR OTHER RIGHTS OF
THIRD PARTIES.
9.3 NOTICE. In connection with LICENSEE's obligations pursuant to Section 9.1
above, VANDERBILT shall give prompt written notice to LICENSEE of the
commencement of any action, suit, or proceeding for which indemnification from
LICENSEE may be sought, and LICENSEE, through counsel reasonably satisfactory to
VANDERBILT, shall assume the defense thereof; provided, however, that VANDERBILT
shall be entitled to participate in any such action, suit, or proceeding with
counsel of VANDERBILT's choice and at VANDERBILT's expense. If LICENSEE fails
to assume the defense within a reasonable time, VANDERBILT may assume such
defense and the reasonable fees and expenses of its attorneys will be covered by
the indemnity provided for in Section 9.1. No such action, suit, or proceeding
shall be
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compromised or settled in any manner which might adversely affect the interests
of VANDERBILT without the prior written consent of VANDERBILT. Notwithstanding
anything in this Section 9.3 to the contrary, LICENSEE shall not, without the
written consent of VANDERBILT:
(a) Settle or compromise any action, suit, or proceeding or consent to the
entry of any judgment which does not include as an unconditional term thereof
the delivery by the claimant or plaintiff to VANDERBILT of a written release
from all liability in respect of such action, suit, or proceeding; or
(b) Settle or compromise any action, suit, or proceeding in any manner
which may materially and adversely affect VANDERBILT.
VANDERBILT's consent shall not be unreasonably withheld.
9.4 INSURANCE. (a) Beginning at the time as any Licensed Product is being
commercially distributed or sold (other than for the purpose of obtaining
regulatory approvals) by LICENSEE, an Affiliate or a sublicensee of either
LICENSEE or an Affiliate, except as otherwise provided herein below, LICENSEE or
such other party shall procure and maintain comprehensive general products
liability and general tort liability insurance in amounts not less than
$2,000,000 per incident and $2,000,000 annual aggregate and name VANDERBILT as
an additional insured. Such insurance shall provide (i) product liability
coverage and (ii) broad form contractual liability coverage for LICENSEE's
indemnification under this Agreement. If LICENSEE elects to self-insure all or
part of the limits described above (including deductibles or retentions which
are in excess of $250,000 annual aggregate), such self-insurance program must be
reasonably acceptable to VANDERBILT. The minimum amount of insurance coverage
required shall not be construed to create or limit LICENSEE's liability with
respect to its indemnification under this Agreement.
(b) LICENSEE shall provide VANDERBILT with written evidence of such
insurance and designation of VANDERBILT as an additional insured upon request of
VANDERBILT. LICENSEE shall provide VANDERBILT with written notice at least
thirty (30) days prior to cancellation, non-renewal or a material change in such
insurance; if LICENSEE does not obtain replacement insurance within such thirty
(30) day period, VANDERBILT shall have the right to terminate this Agreement
effective upon written notice to LICENSEE thereof at the end of a thirty (30)
day period without additional notice or any additional waiting periods.
(c) LICENSEE shall maintain comprehensive general products liability and
general tort liability insurance or self-insurance beyond the expiration or
termination of this Agreement during (i) the period that any Licensed Product is
being commercially distributed or sold by LICENSEE, Affiliates or a sublicensee
of either LICENSEE or an Affiliate, and (ii) a further period not less than the
statute of limitations for product liability claims in any state in which
Licensed Products are used.
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10 USE OF NAMES
10.0 VANDERBILT'S NAME. LICENSEE agrees not to identify VANDERBILT or to use
the name of VANDERBILT, its faculty, employees, or students, or any trademark,
service mark, trade name, or symbol of VANDERBILT, or that is associated with
any of them, in promotional advertising, business plan or other similar
materials without VANDERBILT's prior written consent, except as required by
governmental authority, such consent not to be unreasonably withheld.
Notwithstanding the above, LICENSEE may, without VANDERBILT's prior written
consent, refer to VANDERBILT as LICENSEE's licensor with respect to the subject
matter of this Agreement in a business plan, fund raising material or the like.
Other uses of VANDERBILT's name shall be made only after prior approval by the
Associate Vice Chancellor for Health Affairs for the Vanderbilt Medical Center.
10.1 LICENSEE'S NAME. VANDERBILT agrees not to identify LICENSEE or to use the
name of LICENSEE, its officers, employees, or any trademark, service mark, trade
name or symbol of LICENSEE, or that is associated with any of them, without
LICENSEE's prior written consent, except as may be required by governmental
authority.
11 MISCELLANEOUS
11.0 MANNER OF PAYMENT. All payments hereunder shall be made by check to
VANDERBILT. Where required to do so by applicable law or treaty, LICENSEE shall
withhold taxes required to be paid to a taxing authority on account of such
income to VANDERBILT, and LICENSEE shall furnish VANDERBILT with satisfactory
evidence of such withholding and payment in order to permit VANDERBILT to obtain
a tax credit or other relief as may be available under the applicable law or
treaty.
11.1 PROVISIONS CONTRARY TO LAW. (a) In exercise of rights granted and meeting
obligations under this Agreement, the parties shall comply with all applicable
laws and regulations. In particular, it is understood and acknowledged that the
transfer of certain commodities and technical data is subject to United States
laws and regulations controlling the export of such commodities and technical
data, including all Export Administration Regulations of the United States
Department of Commerce. Such laws and regulations among other things, prohibit
or require a license for the export of certain types of technical data to
certain specified countries. LICENSEE hereby agrees and gives written assurance
that LICENSEE will comply with all United States laws and regulations
controlling the export of commodities and technical data, that LICENSEE will be
solely responsible for any violation of such by LICENSEE, Affiliates or
sublicensees of either LICENSEE or Affiliate, and that LICENSEE will defend and
hold VANDERBILT harmless in the event of any legal action of any nature
occasioned by such violation.
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(b) Nothing in this Agreement shall be construed so as to require the
violation of any law or regulation, and wherever there is any conflict between
any provision of this Agreement and any applicable law or regulation, such
applicable law or regulation shall prevail, but in such event the affected
provision of this Agreement shall be affected only to the extent necessary to
bring it within such applicable law or regulation.
11.2 NOTICES. Any notices required hereunder may be initially given by
facsimile with confirmation by postpaid, first class, registered or certified
mail addressed as set forth below unless changed by notice so given:
In the case of VANDERBILT: Office of Technology Transfer
Vanderbilt University
405 Kirkland Hall
Nashville, Tennessee 37240
Telephone: 615-343-2430
Facsimile: 615-343-0488
In the case of LICENSEE: Progenitor, Inc.
1507 Chambers Road
Columbus, Ohio 43212
Attn: President
Telephone: 614-488-6688
Facsimile: 614-488-0404
Any such notice shall be deemed served when delivered or, if delivery is not
accomplished by reason or some fault of the addressee, when tendered.
11.3 FORCE MAJEURE. Neither party to this Agreement shall be liable for delay
or failure in the performance of any of such party's obligations hereunder
provided such delay or failure is due to causes beyond such party's reasonable
control, including without limitation acts of God, fires, earthquakes, strikes
and labor disputes, acts of war, civil unrest, or intervention of any
governmental authority. Any such delay or failure shall be remedied by such
party as soon as is reasonably possible. Notwithstanding the above, failure to
make timely royalty payments shall not be excused by this force majeure.
11.4 ASSIGNMENTS. LICENSEE may, without prior written consent, assign or
otherwise transfer this Agreement and the rights and license granted hereunder
provided that such assignment or transfer is to an Affiliate or subsidiary of
LICENSEE or is accompanied by sale or other transfer of all or substantially all
of LICENSEE's business or of that part of LICENSEE's business relating to rights
and license granted hereunder; provided that the transferee party expressly
assumes, in writing, performance of all terms and conditions of this Agreement.
This Agreement shall not be assignable by VANDERBILT without the prior written
consent of LICENSEE, which consent shall not be unreasonably withheld.
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11.5 WAIVERS AND MODIFICATIONS. The failure of any party to insist on the
performance of any obligation hereunder shall not act as a waiver of such
obligation. No waiver, modification, release, or amendment of any provision of
this Agreement shall be valid or effective unless in writing and signed by both
parties hereto.
11.6 SUCCESSORS IN INTEREST. This Agreement shall inure to the benefit of and
be binding upon any permitted assignee or successor in interest of the parties
hereto.
11.7 SEVERABILITY. In the event that any provision of this Agreement becomes or
is declared by a court of competent jurisdiction to be illegal, unenforceable or
void, this Agreement shall continue in full force and effect without said
provision; provided that no such severability shall be effective if it
materially changes the economic benefit of this Agreement to either VANDERBILT
or LICENSEE.
11.8 CHOICE OF LAW AND JURISDICTION. This Agreement is subject to and shall be
construed and enforced in accordance with the laws of the U.S.A. and Tennessee.
Any action on any dispute arising out of this Agreement shall be first brought
in Davidson Country, Tennessee, and the parties consent to the jurisdiction of
the state and federal courts therein.
11.9 ENTIRE AGREEMENT. This Agreement constitutes the entire agreement between
the parties as to the subject matter hereof, and all prior negotiations,
representations, agreements and understandings are merged into, extinguished by
and completely expressed by this Agreement.
11.10 DESCRIPTIVE HEADINGS. The headings of the several sections of this
Agreement are intended for convenience of reference only and are not intended to
be a part of or to affect the meaning or interpretation of this Agreement.
11.11 COUNTERPARTS. This Agreement may be executed in counterparts, each of
which shall be deemed an original, but both of which together shall constitute
one and the same instrument.
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IN WITNESS WHEREOF, the undersigned are duly authorized to execute this
Agreement on behalf of VANDERBILT and LICENSEE, as applicable, on the date(s)
written below.
VANDERBILT UNIVERSITY PROGENITOR, INC.
("VANDERBILT") ("LICENSEE")
By: /S/Joel G. Hardman By: /S/Douglass B. Given
Print Name: Joel G. Hardman Print Name: Douglass B. Given
-------------------------- -----------------
Title: Assoc. Vice-Chancellor for Title: President
------------------------------- ----------------------
Health Affairs
-------------------------------
Date: 7-14-95 Date: July 13, 1995
-------------------------------- -----------------------
By: /S/Jeff Carr
Print Name: Jeff Carr
--------------------------
Title: Vice-Chancellor for University
-------------------------------
Relations and General Counsel
---------------------------------
Date: 7/19/95
----------------------------------
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THE INFORMATION BELOW MARKED BY * AND ( ) HAS BEEN OMITTED PURSUANT TO A
REQUEST FOR CONFIDENTIAL TREATMENT. THE OMITTED PORTIONS HAVE BEEN SEPARATELY
FILED WITH THE COMMISSION.
AMRAD DEVELOPMENTS PTY LTD
and
PROGENITOR INC.
______________________________________________________________________________
LICENCE AGREEMENT
______________________________________________________________________________
ARTHUR ROBINSON & HEDDERWICKS
Melbourne
Ref: SLM:MRP
Tel 9614 1011
<PAGE>
______________________________________________________________________________
LICENCE AGREEMENT
______________________________________________________________________________
THIS AGREEMENT is made on May 30, 1996 between:
1. AMRAD DEVELOPMENTS PTY LTD (ACN 006 923 904), an Australian company
incorporated in the State of Victoria and having its registered office at
17-27 Cotham Road, Kew, Victoria 3101, Australia (AMRAD)
and
2. PROGENITOR INC, an American company having its principal place of business
at 1507 Chambers Road, Colombia, Ohio, United States of America
(PROGENITOR).
RECITALS
A. AMRAD is in possession of patent rights and know-how relating to Leukaemia
Inhibitory Factor (LIF).
B. Progenitor wishes to receive a non-exclusive licence to cause in vitro
expression of human LIF (* * *). AMRAD is willing to grant Progenitor
such a licence on the terms of this Agreement.
IT IS AGREED as follows.
1. DEFINITIONS AND INTERPRETATION
1.1 DEFINITIONS
The following definitions apply unless the context requires otherwise.
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ACADEMIC COLLABORATOR means a Third Party from a University or a tertiary
institution to whom Progenitor transfers Know-how pursuant to this
Agreement.
AFFILIATED COMPANY means a related body corporate within the meaning of
section 50 of the Corporations Law.
AGREEMENT means this Licence Agreement.
FIRST COMMERCIAL APPLICATION means the first occasion on which a Process is
exercised, or a Product is transferred, by Progenitor or a Strategic
Partner in circumstances such that Progenitor or a Strategic Partner
becomes entitled to a benefit from a Third Party by reason of that
application of LIF.
GOOD MANUFACTURING PRACTICES are as defined by the responsible health
authorities in any country in the Territory in which Process is exercised
or Product is sold.
KNOW-HOW means technical information, data, knowledge, inventions,
techniques, processes, systems, formulae, results of experiments, samples,
specimens, cultures, cell lines, and other materials relating to LIF.
LICENCE FEE means any licence fee payable by Progenitor to AMRAD in any
year of this Agreement pursuant to Clause 4.1 or 4.2.
LIF means the polypeptide Leukaemia Inhibitory Factor having the amino acid
sequence set out in Figure 29 of PCT Patent Application WO 88/7548, as well
as any polypeptide having LIF activity as described and claimed in the
above patent application, in natural or recombinant form.
LIF PRODUCT (* * *)
PATENT RIGHTS means the patents and patent applications set out in Annexure
A attached hereto, and all patents issuing upon said patent applications,
including any divisions,
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continuations, continuations-in-part, reissues, registrations, additions or
extensions to any of the said patents and patent applications and any
special protection certificates issued in connection with any of the said
patents and patent applications.
PROCESS means any process which involves the direct or indirect use of LIF.
PRODUCT means any product which contains LIF or which was produced by
direct or indirect use of LIF or of a Process.
STRATEGIC PARTNER means a Third Party to which AMRAD has granted
a licence under Clause 3.3 on Progenitor's request.
TERRITORY means the entire world.
THIRD PARTY means any person other than Progenitor or AMRAD.
1.2 INTERPRETATION
Headings are for convenience only and do not affect interpretation. The
following rules apply unless the context requires otherwise.
(a) The singular includes the plural and conversely.
(b) A gender includes all genders.
(c) If a word or phrase is defined, its other grammatical forms have a
corresponding meaning.
(d) A reference to a person, corporation, trust, partnership,
unincorporated body or other entity includes any of them.
(e) A reference to a clause or Annexure is a reference to a clause of, or
an annexure to, this Agreement.
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(f) A reference to an agreement or document (including, without
limitation, a reference to this Agreement) is to the agreement or
document as amended, varied, supplemented, novated or replaced, except
to the extent prohibited by this Agreement or that other agreement or
document.
(g) A reference to a party to this Agreement or another agreement or
document includes the party's successors, permitted substitutes and
permitted assigns (and, where applicable, the party's legal personal
representatives).
(h) A reference to DOLLARS and $ is to the currency of the United States
of America.
2. REPRESENTATIONS AND WARRANTIES
2.1 AUTHORIZATION
Each party warrants and represents to the other that it has the legal
rights and power to extend the rights and licences granted to the other in
this Agreement, that each has the full right to enter into this Agreement,
and to fully perform its obligations hereunder, and that neither has made
nor will make any commitments to others in conflict with or in derogation
of its rights and obligations under this Agreement. Each party further
represents to the other that it is not aware of any legal obstacles,
including patent rights of others, which could prevent either party from
carrying out the provisions of this Agreement.
2.2 PATENT VALIDITY
Nothing in this Agreement shall be construed as a warranty or
representation by either party as to the validity or scope of any Patent
Rights or that the exercise of any rights granted under this Agreement will
not infringe any Third Party rights.
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<PAGE>
3. LICENCE
3.1 GRANT OF LICENCE
AMRAD hereby grants Progenitor a non-exclusive licence under the Patent
Rights and Know-how to express LIF (* * *). The licence to Progenitor
does not include any use of LIF from a species other than human or the
use of human LIF for any other purpose.
Except as expressly permitted by this Agreement, Progenitor may not sub-
license the rights under this Clause 3.1.
3.2 ACADEMIC COLLABORATORS
Progenitor may sub-license the rights granted under clause 3.1 to an
Academic Collaborator provided that:
(a) Progenitor obtains AMRAD's prior written consent to any such sub-
license;
(b) Progenitor shall procure that any Academic Collaborator which is sub-
licensed pursuant to this Clause shall enter into an agreement with
Progenitor on terms which are consistent with the terms of this
Agreement;
(c) any sub-licence granted to an Academic Collaborator shall be
restricted to use for research purposes only for the benefit of
Progenitor and shall expressly prohibit any commercial use of the sub-
licensed rights;
(d) any sub-licence granted to an Academic Collaborator shall expressly
prohibit any right to further sub-license or to transfer or assign the
sub-licence; and
(e) upon termination of this Agreement, all rights granted to any Academic
Collaborator under this Agreement will immediately cease.
5
<PAGE>
For the avoidance of doubt, Progenitor shall procure that any Academic
Collaborator to which it grants a sub-license pursuant to this Clause shall
perform the obligations ascribed to Progenitor under this Agreement.
Progenitor shall be liable to AMRAD for any failure of a sub-licensed
Academic Collaborator to perform the obligations ascribed to Progenitor
under this Agreement. Any such failure shall be taken to be a material
breach of this Agreement by Progenitor.
3.3 STRATEGIC PARTNERS
Subject to AMRAD's approval of a proposed Strategic Partner, such approval
not to be unreasonably withheld, AMRAD shall, upon Progenitor's request,
enter into an agreement with the proposed Strategic Partner on terms
substantially the same as the terms of this Agreement, including economic
terms as expressed in Clause 4.1.
4. PAYMENTS BY PROGENITOR
4.1 ANNUAL LICENCE FEES
(a) Within thirty (30) days of the date of this Agreement Progenitor
shall pay AMRAD the Licence Fee of (* * *) for the first year
of this Agreement.
(b) Until the first to occur of:
(i) the First Commercial Application; or
(ii) the third anniversary of the date of this Agreement,
Progenitor shall pay AMRAD on each anniversary of the date of
this Agreement a Licence Fee for the following year of one
hundred and ten percent (110%) of the Licence Fee payable by
Progenitor to AMRAD in the immediately preceding year.
(c) Following the first to occur of:
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<PAGE>
(i) the First Commercial Application; or
(ii) the third anniversary of the date of this Agreement,
Progenitor shall pay AMRAD on each anniversary of the date of
this Agreement, a Licence Fee for the following year of (* * *).
4.2 MILESTONE PAYMENT
Upon the first sale by Progenitor or any of its Strategic Partners of a LIF
Product, Progenitor shall become liable to pay AMRAD a further Licence Fee
of (* * *). This Licence Fee will be payable to AMRAD in a maximum of
five (5) annual installments, with each instalment being the greater of:
(a) (* * *); or
(b) (* * *) of the aggregate gross revenue in the preceding year of
Progenitor and its Strategic Partners from sale of such LIF Product.
The first instalment is due on the first anniversary of the sale of such
LIF Product.
4.3 CPI ADJUSTMENT
The Licence Fees set out in Clause 4.1(c) and 4.2 above shall be annually
adjusted in accordance with the increase in the United States of America
Consumer Price Index in the period from the date of this Agreement to the
date on which the payment is made. For the purposes of this Agreement, the
Index at a particular time shall be the Index most recently published by
the United States Bureau of Labor Statistics at that time.
4.4 NET PAYMENTS
All payments to AMRAD made under this Clause 4 shall be net payments
and no deductions shall be made in respect of withholding tax or other
charges.
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<PAGE>
4.5 RECORDS
Progenitor shall keep for a minimum of five (5) years from the first sale
of a LIF Product, complete and accurate records of all matters which are
relevant for determining the amount which is to be paid to AMRAD under this
Agreement and shall allow the authorised representatives of AMRAD
reasonable access to examine and make copies of such records.
5. PATENT APPLICATIONS
AMRAD shall be entitled to file patent applications in its own name and in
any country for any inventions relating to LIF made by AMRAD during the
term of this Agreement. Progenitor shall be entitled to patent
applications in its own name and in any country for any inventions relating
to any Process or Product made by Progenitor during the term of this
Agreement. A party filing a patent application pursuant to this Clause
shall inform the other party as soon as reasonably possible after filing,
and shall provide the other party with a copy of the priority text, and
information as to its filing date and application number.
6. INTELLECTUAL PROPERTY
6.1 MAINTENANCE OF PATENT RIGHTS
AMRAD shall prosecute and maintain in force the Patent Rights at its own
expense. If AMRAD decides not to pursue or maintain in force one or more
of the Patent Rights, it may, subject to any contractual obligations with a
Third Party, allow Progenitor to do so at Progenitor's expense, such
expenses to be deductible from Licence Fees.
6.2 INFRINGEMENTS OF THIRD PARTY PATENTS
If AMRAD, Progenitor, licensees of AMRAD, any Academic Collaborator,
Strategic Partner or any of their respective customers are sued by a Third
Party for infringement of a patent because of the exercise of any Process
pursuant to this Agreement, the party
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<PAGE>
which has been sued shall promptly notify the other party in writing of the
institution of such suit, and the parties shall consult together to agree
upon the course of action to be taken.
7. REPORTING AND PAYMENTS
7.1 REPORTING
Progenitor shall within sixty (60) days of each of:
(a) the First Commercial Application; and
(b) the first sale by Progenitor or any of its Strategic Partners of a LIF
Product, notify AMRAD of such First Commercial Application or such first
sale.
7.2 METHOD OF PAYMENT
Payment of all sums due under this Agreement shall be made by bank draft
payable to AMRAD in Australian dollars to such account as AMRAD shall
direct. All payments under this Agreement are non-refundable.
7.3 DEFAULT INTEREST
If Progenitor fails to make any payment due under this Agreement by the due
date then it shall pay AMRAD interest at the rate of two per cent (2%)
above the overdraft rate specified at that time by the Commonwealth Banking
Corporation of Australia on the amount due from the date payment fell due
until the amount is paid.
8. CONFIDENTIALITY AND PUBLICATIONS
8.1 NON-DISCLOSURE OBLIGATIONS
(a) Except as otherwise provided in this Clause 8, during the term of this
Agreement and for a period of 10 years thereafter Progenitor shall
maintain in confidence and
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<PAGE>
use only for purposes of this Agreement information and data
(INFORMATION) resulting from or related to the development of LIF
pursuant to this Agreement, or supplied by AMRAD pursuant to this
Agreement.
(b) To the extent that it is necessary to fulfil its obligations or
exercise its rights under this Agreement, Progenitor may disclose
Information it is otherwise obliged under this Clause not to disclose
to its Academic Collaborators on a need-to-know basis on condition
that such persons agree to keep the Information confidential for the
same time periods and to the same extent as such party is required to
keep the Information confidential. The obligation not to disclose
Information shall not apply to any part of such Information that:
(i) is or becomes patented, published or otherwise part of the
public domain other than by acts of Progenitor or its
Academic Collaborators; or
(ii) is disclosed to Progenitor or its Academic Collaborators by
a Third Party, provided such Information was not obtained by
such Third Party directly or indirectly from AMRAD; or
(iii) prior to disclosure under this Agreement, was already in the
possession of Progenitor or its Academic Collaborators,
provided such Information was not obtained directly or
indirectly from AMRAD; or
(iv) is developed independently of the Information obtained from
AMRAD, as demonstrated by written evidence.
8.2 TERMS OF THIS AGREEMENT
AMRAD and Progenitor each agrees not to disclose any terms or conditions of
this Agreement to any Third Party without the prior written consent of the
other party hereto, except as required by applicable law or to persons with
whom Progenitor or AMRAD has entered into or proposes to enter into a
business relationship provided that Third Party is bound by confidentiality
obligations.
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<PAGE>
9. TERM AND TERMINATION
9.1 EXPIRATION
The term of the licence granted under Clause 3.1 above shall expire on a
country-by-country basis on the date of expiration of any Patent Rights in
that country, whereupon such licence shall become fully paid-up and
irrevocable; provided however that any provision of this Agreement which,
by its nature, is intended to survive expiration of the term of the licence
granted under Clause 3.1 shall so survive which provisions include, but not
are limited to, Clauses 8.1 and 8.2.
9.2 TERMINATION FOR CAUSE
Either party may terminate this Agreement upon the occurrence of any of the
following:
(a) Upon or after the bankruptcy, insolvency, dissolution or winding up of
the other party (other than dissolution or winding up for the purposes
of reconstruction or amalgamation); or
(b) Upon or after the breach of any material provision of this Agreement
by the other party if the breaching party has not commenced to cure
such breach within 30 days after written notice thereof by the other
party and thereafter proceeded diligently to cure such breach within a
reasonable time. In no event shall such reasonable time to cure such
breach exceed ninety (90) days from the date of such notice.
9.3 TERMINATION BY PROGENITOR
Progenitor shall be entitled to terminate this Agreement at any time upon
90 days' written notice to AMRAD.
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9.4 EFFECT OF TERMINATION
Expiration or termination of this Agreement shall not relieve the parties
of any obligation accruing prior to such expiration or termination.
Progenitor's licence under Clause 3.1 will terminate on termination of this
Agreement. In addition, notwithstanding termination of this Agreement by
Progenitor, Clause 4.2 shall survive.
10. INDEMNITY AND LIABILITY
10.1 INDEMNITY
Progenitor shall indemnify and hold AMRAD harmless from and against any and
all liability, damage, loss, cost or expense (including reasonable
Attorney's fees) resulting from any claims made or suits brought against
AMRAD which arise or result from Progenitor's development or licensing of
Processes, Products or LIF, or any development or use of Processes,
Products or LIF by any Academic Collaborators, Progenitor's failure to
develop or exercise Processes or Products in accordance with Good
Manufacturing Practices or to manufacture LIF in accordance with Good
Manufacturing Practices or any negligence of Progenitor in the development
or use of Processes or Products or the manufacture of LIF, including the
failure of Processes or LIF to meet specifications. AMRAD shall promptly
notify Progenitor of any such claim or suit and shall permit Progenitor, at
Progenitor's cost and expense, to handle and control such claim or suit.
10.2 LIABILITY INSURANCE
Progenitor shall maintain product liability insurance with respect to the
exercise of Processes and the production and distribution of Products in
such amount (but not less than $10 million) as is customarily maintained in
accordance with good business practice for the pharmaceutical industry.
Progenitor shall maintain such insurance for so long as it continues to
exercise or license any Process or produce or distribute any Product, and
thereafter for so long as Progenitor maintains insurance for itself
covering supply of Process or Product.
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Progenitor shall, upon AMRAD's request:
(a) produce evidence of the currency of such insurance; and
(b) note the interest of AMRAD on the policy in respect of such insurance.
11. ASSIGNMENT
11.1 CONDITIONS OF ASSIGNMENT
This Agreement may not be assigned or otherwise transferred nor, except as
expressly provided hereunder, may any right or obligation hereunder be
assigned or transferred by either party without the prior written consent
of the other party; provided however that AMRAD may, without the consent of
Progenitor, assign or otherwise transfer this Agreement or any right or
obligation under this Agreement to an Affiliated Company.
11.2 EXCEPTIONS
Notwithstanding Clause 11.1, Progenitor may transfer or assign its rights
and obligations under this Agreement to a successor to all or substantially
all of its assets relating to this Agreement, whether by sale, merger,
operation of law or otherwise. Progenitor's rights of assignment or
transfer pursuant to this Clause 11.2 are subject to AMRAD's prior approval
in writing, such approval not to be unreasonably withheld.
12. SEVERABILITY
Both parties hereby expressly agree and contract that it is not the
intention of either party to violate any public policy, statutory or common
laws, rules, regulations, treaty or decision of any government agency or
executive body thereof of any country or community or association of
countries; should one or several provisions of the Agreement be or become
invalid, then the Parties hereto shall substitute, by mutual consent, valid
provisions for such invalid provisions which valid provisions in their
economic effect come so close to the invalid provisions that it can be
reasonably assumed that the Parties would have contracted this Agreement
with those new provisions. In case
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<PAGE>
such provisions cannot be found, the invalidity of one or several
provisions of the Agreement shall not affect the validity of the Agreement
as a whole, unless the invalid provisions are of such essential importance
for this Agreement that it is to be reasonably assumed that the Patties
would not have contracted this Agreement without the invalid provisions.
13. NOTICES
Any notice or report required or permitted to be given or made under
this Agreement by one of the parties hereto to the other shall be in
writing, delivered personally or by facsimile (and promptly confirmed by
personal delivery or courier) or courier, postage prepaid, addressed to
such other party at its address indicated below, or to such other address
as the addressee shall have last furnished in writing to the addressor and
shall be effective upon receipt by the addressee.
AMRAD Developments Pty Ltd Progenitor Inc.
17-27 Cotham Road 1507 Chambers Road
Kew, Victoria 3101 Colombia, Ohio
Australia 43212-1566
United States of America
Fax No: 613 9853 0202 Fax No: 614 488 0404
Attention: John Grace Attention: Dr. Stephen Williams
Managing Director Vice President,
Business
Development
14. APPLICABLE LAW
This Agreement shall be governed by and construed in accordance with the
laws of the State of Victoria and Commonwealth of Australia.
14
<PAGE>
15. ARBITRATION
Any disputes arising between the parties relating to, arising out of or in
any way connected with this Agreement or any term or condition hereof, or
the performance by either party of its obligations hereunder, whether
before or after termination of this Agreement, shall be finally resolved by
binding arbitration. Whenever a party shall decide to institute
arbitration proceedings, it shall give written notice to that effect to the
other party. The party giving such notice shall refrain from instituting
the arbitration proceedings for a period of 60 days following such notice.
Any arbitration hereunder shall be conducted under the International
Chamber of Commerce (ICC) Arbitration Rules. Each such arbitration shall
be conducted in the English language by a panel of three arbitrators
appointed in accordance with such rules. Any such arbitration shall be
held in Melbourne, Australia. The arbitrators shall have the authority to
grant specific performance, and to allocate between the parties the costs
of arbitration in such equitable manner as they determine. Judgment upon
the award so rendered may be entered in any court having jurisdiction or
application may be made to such court for judicial acceptance of any award
and an order of enforcement, as the case may be.
16. ENTIRE AGREEMENT
This Agreement contains the entire agreement between the parties with
respect to its subject matter and supersedes all prior agreements and
understandings between the parties in connection with it.
17. AMENDMENT
This Agreement may be amended, or any term hereof modified, only by a
written instrument duly executed by both parties hereto.
18. INDEPENDENT CONTRACTORS
It is expressly agreed that AMRAD and Progenitor shall be independent
contractors and that the relationship between the two parties shall not
constitute a partnership, joint
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venture or agency. Neither AMRAD nor Progenitor shall have the authority
to make any statements, representations or commitments of any kind, or to
take any action, which shall be binding on the other, without the prior
written authorisation of the party to do so.
19. WAIVER
The waiver by either party hereto of any right hereunder or the failure to
perform or of a breach by the other party shall not be deemed a waiver of
any other right hereunder or of any other breach or failure by said other
party whether of a similar nature or otherwise.
20. FURTHER ASSURANCES
Each party agrees to do all things and execute all deeds, instruments,
transfers or other documents as may be necessary or desirable to give full
effect to the provisions of this Agreement and the transactions
contemplated by it.
21. COSTS AND STAMP DUTY
Each party shall bear its own costs arising out of the negotiations
preparation and execution of this Agreement.
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22. COUNTERPARTS
This Agreement may be executed in any number of counterparts. All
counterparts together will be taken to constitute one instrument.
IN WITNESS WHEREOF the parties have executed this Agreement as of the date first
set forth above.
Each attorney executing this Agreement states that he or she has no notice of
revocation or suspension of his or her power of attorney.
SIGNED for and on behalf of AMRAD )
DEVELOPMENTS PTY LTD by its )
attorney in the presence of: )
/S/ JOHN GRACE
-----------------------------------
Signature
/S/ S. M. SHUTE JOHN GRACE
- ------------------------------------- -----------------------------------
Signature Print Name
S. M. SHUTE
- -------------------------------------
Print Name
SIGNED for and on behalf of
PROGENITOR )
INC by its )
attorney in the presence of: )
/S/ STEPHEN J. WILLIAMS
-----------------------------------
Signature
- -------------------------------------
Signature STEPHEN J. WILLIAMS
-----------------------------------
Print Name
- -------------------------------------
Print Name
17
<PAGE>
ANNEXURE A
This is the Annexure A referred to in the definition of Patent Rights in Clause
1.1 of the Licence Agreement between AMRAD Developments Pty Ltd and Progenitor
Inc relating to LIF, as evidenced by the signatories below who signed that
Licence Agreement on behalf of the respective parties.
COUNTRY SEAL NO APPLICATION STATUS EXPIRY DATE APPLICATION
NO DATE
USA 5,187,077 294,514 Granted 16/02/10 31/03/88
USA 5,443,825 948,614 Granted 22/08/12
USA 5,427,925 058,987 Granted 27/06/10 31/03/88
USA - 412,769 Pending 31/03/88
Divisional
of 948,614
/S/ JOHN GRACE /S/ STEPHEN J. WILLIAMS
- -------------------------- -----------------------
AMRAD DEVELOPMENTS PTY LTD PROGENITOR INC
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State of California
County of San Francisco
On 5/30/96 before me Sandra Blue personally appeared Stephen J. Williams /_/
personally known to me proved to me on the basis of satisfactory evidence to be
the person(s)
- OR /X/ whose name(s) is/are subscribed to the within instrument and
acknowledged to me that he/she/they executed the same in his/her/their
authorized capacity(ies), and that by his/her/their signature(s) on the
instrument the person(s), or the entity upon behalf of which the person(s)
acted, executed the instrument.
WITNESS my hand and official seal.
/S/ SANDRA BLUE
--------------------------------
OPTIONAL
Though the information below is not required by law, it may prove valuable to
persons relying on the document and could prevent fraudulent removal and
reattachment of this form to another document.
Description of Attached Document:
Title or Type of Document: License Agreement
Document Date: 5/30/96 Number of Pages:16 +Appendix
Signer(s) Other Than Named Above: John Grace
Capacity(ies) Claimed by Signer(s)
/_/ Individual
/X/ Corporate Officer
Title(s): Partner -/_/ Limited /_/ General
/_/ Attorney-in-Fact
/_/ Trustee
/_/ Guardian or Conservator Other:
Signer Is Representing: Progenitor
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<PAGE>
____________________________
LEASE AGREEMENT
BETWEEN
THOMAS R. EGGERS
LANDLORD
AND
PROGENITOR, INC.
TENANT
____________________________
Prepared by:
Jack S. Levey
Schwartz, Kelm, Warren & Ramirez
41 South High Street
Columbus, Ohio 43215
(614) 222-3000
<PAGE>
LEASE AGREEMENT
THIS LEASE AGREEMENT (the "Lease") is made and entered into as of the
_______ day of November, 1994, between THOMAS R. EGGERS ("Landlord"), and
PROGENITOR, INC., a Delaware corporation ("Tenant").
SECTION 1. FUNDAMENTAL LEASE TERMS. The following capitalized terms (the
"Fundamental Lease Terms") are set forth in this Section 1 for ease of
reference. Each subsequent reference in this Lease to any of the Fundamental
Lease Terms shall incorporate such terms as if the same were fully and
completely stated therein. In the event of a conflict between any of the
Fundamental Lease Terms and the Lease, the latter shall control. Capitalized
terms other than Fundamental Lease Terms shall have the respective meanings,
when used in this Lease, given to such terms in the definition thereof contained
herein.
1.1. Premises: Being approximately 18,662 net square feet of
office/business space, consisting of the basement level and first
two floors of the three (3) story building located at 1507
Chambers Rd., Columbus, Ohio 43212. The Premises includes the
casework and benches currently existing in the Premises, but does
not include the Equipment.
1.2. Named Brokers: Group One Realty, Inc. and Carey Legget Realty.
1.3. Term Commencement: January 1, 1995.
1.4. Term Expiration: December 31, 1995.
1.5. Basic Rent: For the initial term, $130,634.04 per annum, payable
in monthly installments of $10,886.17.
Basic Rent for the first Extension Term is $135,229.50 per annum,
in monthly installments of $ 11,274.96, subject to adjustment
under Section 4.4.
Basic Rent for the second Extension Term is $139,965.00 per annum,
in monthly installments of $11,663.75, subject to adjustment under
Section 4.4.
1.6. Security Deposit: Twenty Thousand Dollars ($20,000).
1.7. Option Terms: Two extension terms of one year each.
1.8. Permitted Use: Office and biological research laboratory purposes,
and any other uses permissible under applicable laws and
regulations, provided that in no event shall the basement be used
for any purpose except a biological research laboratory.
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1.9. Landlord's Notice Address: Thomas R. Eggers, 1399 Cambridge Blvd.,
Columbus, Ohio 43212.
1.10. Tenant's Notice Address: Progenitor, Inc., 1507 Chambers Road,
Columbus, Ohio 43212, Attention: Douglass B. Given.
1.11. Equipment: The following items of laboratory equipment currently
located in the Premises:
(a) All three autoclaves in autoclave room, along with steam
generator, as listed below:
(1) Amsco computerized Model 2021 with printer
(2) Market Forge Sterilmatic
(3) Amsco small utensil autoclave
(4) Amsco model LB-20 steam generator
(b) A six foot stainless steel BioFlow HEPA filtered sterile
biological hood (Germfree Laboratories).
The demise of the Premises does not include, and the payment of
Basic Rent does not enable Tenant to, use of the Equipment.
Landlord wishes to leave the Equipment on the Premises. Tenant
agrees that Landlord may do so and shall have reasonable access to
maintain and service the Equipment as is required during the term
of the Lease, provided that Tenant has the Landlord's permission
to utilize, at no additional expense, the existing large autoclave
and is permitted to remove, at its sole cost and expense, the
existing biological hood.
1.12. Guarantor: Interneuron Pharmaceuticals, Inc., a Delaware
corporation, One Ledgemont Center, 99 Hayden Avenue, Suite 340,
Lexington, MA 02173, Attention: Chief Financial Officer.
Capitalized terms other than Fundamental Lease Terms shall have
the respective meanings, when used in this Lease, given to such
terms in the definition thereof contained herein.
1.13. Building: The building in which the Premises are located, all
improvements appurtenant thereto, and the real property on which
the building and appurtenances are located.
1.14. Uppermost Story: The premises located on the third floor of the
Building, consisting of approximately 5,986 square feet.
SECTION 2. DEMISE. Landlord hereby leases to Tenant and Tenant hereby rents
from Landlord, upon the terms, covenants and conditions herein set forth, the
Premises constituting the entire land and other real property in the parcel
located at and known by the
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<PAGE>
street address specified in Section 1.2 and more particularly described in
Exhibit A, the Building constructed thereon and all other improvements on and
appurtenances to said parcel, excepting only the Equipment and the Uppermost
Story.
SECTION 3. TERM.
3.1. INITIAL TERM. The term of this Lease shall commence on the date
set forth in Section 1.3 (the "Commencement Date") and shall end on the date
set forth in Section 1.4.
3.2. EXTENSION TERMS. Tenant shall have the option to extend the Term
of this Lease for the number of consecutive extension terms (the "Extension
Terms") set forth in Section 1.7. Each Extension Term shall commence on the
day immediately following the expiration of the term as set forth in Section
1.4 or the expiration date of the preceding Extension Term, as the case may
be. Tenant can exercise the option to extend the term only by serving written
notice thereof upon Landlord not less than three months prior to the scheduled
expiration of the term (or the preceding Extension Term, as the case may be),
time being of the essence. Any such notice by Tenant shall be unconditional
and irrevocable. If Tenant fails to exercise the option within the time
period set forth in this section, the option shall lapse and shall be null and
void. Tenant shall not have the option to extend this Lease if, on either the
date that Tenant gives notice of exercise, or on the then scheduled expiration
date of this Lease, Tenant is in default under the terms of this Lease. Each
Extension Term shall be upon all of the terms, covenants and conditions
contained in this Lease in respect of the term, except that the Base Rent
during each Extension Term shall be as set forth in the Fundamental Lease
Terms and that, after expiration of the third Extension Term, there shall be
no further Extension Terms. Notwithstanding the foregoing, in the event
Tenant desires to exercise its option to extend the term and Tenant has been
in material default more than 3 times since the Commencement Date, regardless
of whether such material defaults were cured, option of Landlord, at its sole
discretion, shall have the night to reject Tenant's extension of the term,
which right shall be exercised, if at all, by Landlord's notice to Tenant sent
to notify within 60 days of Landlord's receipt of Tenant's notice of exercise.
Notwithstanding any other provision of this Lease, "material default"
includes, but is not limited to, any monetary default that is not cured within
the time permitted by Section 22.1; any default in Tenant's obligations under
Section 29; any failure to remedy a violation of law within the time permitted
hereby; violation of Section 8, 16, or 25; and any default which, if left
uncured, would constitute a breach of any covenant of Landlord under any
Mortgage (as defined in Section 19), loan agreement, or similar instrument.
SECTION 4. RENT.
4.1. BASIC RENT. Basic rent ("Basic Rent") shall be in the amount set
forth in Section 1.5. Basic Rent for each Lease Year is payable in 12 equal
monthly installments, in advance, on or before the first day of each and every
calendar month during the term hereof except as herein set forth. Basic Rent
shall be prorated for any Lease Year less than 12 calendar months at the
beginning or end of the term of this Lease. Basic Rent for the first
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full calendar month of the term shall be payable on the date hereof. If the
term of this Lease commences on other than the first day of a calendar month,
the first installment of Basic Rent shall be prorated on the basis of a 30-day
month and shall be payable together with the installment for the first full
calendar month. "Lease Year" means each consecutive 12-month period during the
Term (including any Extension Term).
4.2. LATE CHARGE. Tenant hereby acknowledges that late payment by
Tenant to Landlord of Basic Rent or other sums due hereunder will cause Landlord
to incur costs not contemplated by this Lease, the exact amount of which is
extremely difficult to ascertain. Such costs include, but are not limited to,
processing and accounting charges. Accordingly, if any installment of Basic
Rent or any other sum due from Tenant shall not be received by Landlord or
Landlord's designee within five days after said amount is due, Tenant shall pay
to Landlord a late charge equal to five percent of such overdue amount. The
parties hereby agree that such late charge represents a fair and reasonable
estimate of the cost that Landlord will incur by reason of late payment by
Tenant. Acceptance of such late charge by Landlord shall in no event constitute
a waiver of Tenants default with respect to such overdue amount, nor prevent
Landlord from exercising any of the other rights and remedies granted hereunder.
Notwithstanding the foregoing, Landlord and Tenant agree that no late charge
shall be assessed for the first such late payment in any consecutive 12-months
unless such amount remains unpaid for more than 10 days after Landlord notifies
Tenant that the same is due and unpaid. In addition, Tenant shall pay Landlord
a handling fee of $20.00 for each check or other item submitted by Tenant and
returned by Landlord's bank due to insufficient funds or a stop payment order.
4.3. ADDITIONAL RENT. Tenant shall pay, as additional rent
("Additional Rent"), all other sums of money or charges required to be paid
by Tenant hereunder in addition to Basic Rent, whether or not the same be
designated as such. If such amounts or charges are not paid at the time
provided for in this Lease, they shall nevertheless be collectible as
additional rent with the next installment of Basic Rent thereafter falling
due, but nothing herein contained shall be deemed to suspend or delay the
payment of any amount of money or charge at the time the same becomes due and
payable hereunder, or limit any other remedy of Landlord. All amounts of
money payable by Tenant to Landlord hereunder, if not paid when due, shall
bear interest from the due date until paid at a rate (the "Default Rate")
equal to the lesser of (a) a floating rate equal to two percent per annum
plus the rate (the "Prime Rate") announced from time to time by Bank One,
Columbus, NA as its prime rate (which Prime Rate need not be such bank's most
favorable rate) or (b) the highest rate legally permitted.
4.4. BASIC RENT ADJUSTMENTS. Effective November 16, 1995, the Basic
Rent set forth in Section 1.5 shall be adjusted as follows. Basic Rent shall be
increased by an amount equal to $3,720.00 per annum, ($310.00 per monthly
installment) for each percentage point by which the Prime Rate in effect on
November 16, 1995 exceeds 8.5% per annum. Thereafter, Basic Rent shall be
increased or decreased by an amount equal to $3,720.00 per
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annum ($310.00 per monthly installment) for each percentage point of increase or
decrease in the Prime Rate occurring after January 1, 1996. All adjustments
under this Section 4.4 shall be pro-rated for any fraction of a percentage
point. Notwithstanding any other provision of this Section 4.4, however, (a)
there shall be no increase under this Section 4.4 until such time as the Prime
Rate exceeds 8.5% per annum, and (b) Basic Rent shall never be less than the
amounts set forth in Section 1.5. During any portion or portions of the Term
(including any Extension Term) in which the Prime Rate does not exceed 8.5% per
annum, Basic Rent shall be the amount set forth in Section 1.5. Each adjustment
under this Section 4.4 shall take effect on the first day of the calendar month
following the date that the change in Prime Rate takes effect, and shall be
payable with the next installment of Basic Rent coming due. Landlord may notify
Tenant of adjustments under this Section 4.4, but shall not be obligated to do
so. Landlord's failure to no notify Tenant, or delay in notifying Tenant, of
any adjustment shall not be deemed a waiver of Landlord's right to receive the
adjustment, nor shall it delay the date on which the adjustment takes effect.
4.5. MANNER OF PAYMENT. All Basic Rent and Additional Rent
(collectively "Rent") shall be payable when due without prior demand and without
any deductions, setoffs or counterclaims whatsoever in lawful money of the
United States of America and shall be paid to Landlord at Landlord's Notice
Address, or to such other person or at such other place as Landlord may from
time to time designate in writing to Tenant.
SECTION 5. TENANT'S SHARE OF OPERATING COSTS.
5.1. OPERATING COSTS. During each Lease Year of the term, Tenant
agrees to pay to Landlord, as additional rent, in the manner provided in Section
5.2, Tenant's Share of Operating Costs (as defined below) of the reasonable
costs and expenses of every kind and description paid or incurred by Landlord
("Operating Costs") in owning, leasing, operating, managing, equipping,
repairing, replacing and otherwise maintaining the Premises and the Building,
and maintaining order and security therein. Operating Costs shall include,
without limitation, all of the following costs and expenses: (a) personal
property taxes; (b) accruals to reserves for repair and replacement of the roof,
the HVAC system, the elevator and related component parts of the Premises (which
accruals shall be calculated on the basis of reasonably anticipated costs and
replacements using a useful life determined pursuant to Internal Revenue Service
Standards and Regulations); (c) water and sewerage charges; (d) all types of
insurance coverage carried by Landlord with respect to the Premises, including,
without limitation, fire, rent, public liability, personal and bodily injury and
property damage liability, automobile coverage, vandalism and malicious mischief
and all broad form coverages, and sign insurance, all in limits and with
companies selected by Landlord at competitive market rates; (e) the direct cost
of personnel (including applicable payroll taxes, worker's compensation
insurance, disability insurance and uniforms) to implement all of the foregoing;
and (f) all real estate taxes, assessments (special or otherwise), water and
sewer rents, rates and charges (including water and sewer connection and/or
hook-up charges), parking district or similar taxes, and other governmental
levies and charges of every kind and nature whatsoever, general and special,
extraordinary as well as ordinary, foreseen
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and unforeseen, including, without Limitation, any payments required, by
contract or otherwise, to be made by Landlord to any taxing authority in lieu of
any of the foregoing, and each and every installment thereof, which shall or may
be levied, assessed, imposed, become due and payable, or liens upon, or arising
in connection with the use, occupancy or possession of, or become due and
payable out of, or for, the Premises or any part thereof, of any land, buildings
or other improvements therein (as initially constructed or as the same may at
any time thereafter be enlarged or reduced), including interest on installment
payments and all costs and fees (including attorneys' and appraisers' fees)
incurred by Landlord in contesting taxes and negotiating with the public
authorities as to the same. If at any time after the date hereof the methods of
taxation prevailing shall be altered so that in addition to, or in lieu of, or
as a substitute for the whole or any part of the taxes now levied, assessed or
imposed, there shall be levied, assessed or imposed (i) a tax, assessment, levy,
imposition, charge or license fee measured by or based in whole or in part upon
the rents receivable by Landlord for the Premises or any portion thereof, (ii) a
tax, assessment, levy, imposition, charge or license fee imposed upon Landlord
which is otherwise measured by or based in whole or in part upon the land,
buildings or other improvements comprising the Premises or any portion thereof,
or (iii) any other tax, levy, imposition, charge or license fee however
described or imposed, then the same shall be included in the computation of
taxes. Landlord and Tenant agree that Tenant shall have the right to pay all
such taxes directly and to contest the amount of such taxes, upon 10 days' prior
written notice to Landlord, should Landlord elect not to do so.
5.2. TENANT'S SHARE OF OPERATING COSTS. Tenant shall pay Tenant's
Share of Operating Costs to Landlord within 30 days of its receipt from Landlord
of a statement detailing such operating costs. "Tenant's Share of Operating
Costs" means (a) as to Operating Costs related to the HVAC system serving the
Premises exclusively, the elevator system (including but not limited to the cab,
motors, lifts, shaft and doors) exclusively serving the Premises, and the
electric system serving the Premises, 100%; and (b) as to all other Operating
Costs, 78.4%.
SECTION 6. PURPOSE. Tenant shall use and occupy the Premises solely for the
use set forth in Section 1.8, and for no other purpose without the prior written
consent of Landlord.
SECTION 7. CONDITION OF PREMISES. Tenant hereby acknowledges that, except as
set forth below, no representations have been made to Tenant respecting the
condition of the Premises or the Building, or applicable zoning laws and
regulations. The taking of possession of the Premises by Tenant shall be
conclusive evidence as against Tenant that the Premises were in good and
satisfactory condition when possession was so taken. Landlord shall have the
right to extend an additional stairwell to the Uppermost Story.
SECTION 8. ASSIGNMENT OF LEASE.
8.1. LANDLORD'S CONSENT REQUIRED. Tenant shall not transfer, assign,
sublet (in whole or in part), enter into license, concession or management
agreements, or hypothecate
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this Lease or Tenant's interest in and to the Premises without first
procuring the consent of Landlord, which consent may not be unreasonably
withheld, provided, however, that Landlord shall have the right to condition
any such consent upon Tenant delivering to Landlord the consent of Guarantor
thereto, in form and substance satisfactory to Landlord and Landlord's
counsel, and provided further that the assignment or sublease shall not be
for a use prohibited by Section 6. Any attempted transfer, assignment,
subletting, license, concession or management agreement or hypothecation
without Landlord's consent shall be void and shall, at the option of
Landlord, terminate this Lease. This Lease shall not, nor shall any interest
herein, be assignable as to the interest of Tenant by operation of law.
Consent by Landlord to any such assignment, subletting or other transfer
shall not constitute a waiver of the requirement for such consent to any
subsequent assignment, subletting or other transfer. The acceptance by
Landlord of the payment of Rent following any assignment, subletting or other
transfer shall not be deemed to be a consent by Landlord to such assignment,
subletting or other transfer nor shall the same be deemed a waiver of any
right or remedy of Landlord under this Lease.
8.2. CHANGE OF CONTROL. If (a) Tenant or guarantor or any general
partner of Tenant or guarantor is a corporation, any dissolution, merger,
consolidation or other reorganization of such corporation, or any pledge of the
corporate stock or securities or any sale or other transfer, singly or in the
aggregate, of a controlling percentage of the corporate stock or securities of
Tenant or guarantor or any such general partner, (b) Tenant or guarantor is a
partnership, any change in the general partner(s) in such partnership, or (c)
Tenant or guarantor is a partnership or other form of business entity, any
pledge, sale or other transfer of a controlling percentage of the interest in
Tenant or guarantor (any of the events described in subsections (a), (b) or (c)
of this Section 8.2 being collectively referred to as a "Change of Control"),
shall constitute an assignment hereunder. Tenant shall notify Landlord at least
seven days in advance of a Change of Control. The term "controlling percentage"
as used herein shall mean (i) in the case of a corporate tenant or guarantor or
a corporate general partner of a partnership tenant or guarantor, the ownership
of stock or securities possessing, and of the right to exercise, a majority of
the total combined voting power of all classes of stock or securities of such
corporation, issued, outstanding and entitled to vote for the election of
directors, whether such ownership be direct ownership, or indirect ownership
through ownership of stock or securities of another corporation or otherwise,
and (ii) in the case of a partnership or other form of business entity as tenant
or guarantor, the ownership of interests possessing, and of the right to
exercise, a majority of the total combined voting power of all interests in such
partnership or other form of business entity, issued, outstanding and entitled
to vote with respect to any matters pertaining to the control of such
partnership or other form of business entity, whether such ownership be direct
ownership or indirect ownership through ownership of stock, securities or
interests of another corporation, or partnership or otherwise.
8.3. TENANT TO REMAIN LIABLE. Regardless of Landlord's consent, no
transfer, assignment, subletting, license or concession agreement or
hypothecation shall release Tenant of Tenant's obligation or alter the primary
liability of Tenant to pay the rents and to
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perform all other obligations to be performed by Tenant hereunder. The
acceptance of rent by Landlord from any other person shall not be deemed to be a
waiver by Landlord of any provision hereof. In the event of default by any
assignee of Tenant or any successor of Tenant in the performance of any of the
terms hereof, Landlord may proceed directly against Tenant without the necessity
of exhausting remedies against such assignee or successor. Landlord may consent
to subsequent transfers, assignments, subletting, licenses or concession
agreements or hypothecations, or to amendments or modifications to this Lease
with assignees of Tenant, without notifying Tenant, or any successor of Tenant,
and without obtaining its or their consent thereto and such action shall not
relieve Tenant of liability under this Lease; provided that, Tenant shall have
no increased, excess or additional liability or responsibility in respect of or
arising out of any subsequent transfer, assignment, subletting, license or
concession agreement or hypothecation or in respect of any such amendment to
this Lease, but shall remain liable only as to the original terms of this Lease
together with such amendments thereof actually entered into by or approved in
writing by Tenant.
SECTION 9. UTILITIES. Landlord shall cause the Uppermost Story either (a) to
be separately metered for electricity, in which event Landlord shall pay the
public utility for all electricity consumed or wasted in the Uppermost Story, or
(b) to be submetered for electricity, in which event Landlord shall allow Tenant
a credit against Rent for all electricity consumed or wasted in the Uppermost
Story, as measured by the submeter, at the rates charged by the public utility.
Except as set forth in the preceding sentence, Tenant shall pay for all gas,
electricity, sewer, water and other utilities consumed or wasted upon the
Premises or in the Building during the term of this Lease. Except as
hereinafter provided any interruption of utility service to the Premises shall
never be deemed an eviction or disturbance of Tenant's use and possession of the
Premises, or render Landlord liable to Tenant for damages, or relieve Tenant
from the performance of its obligations under this Lease. In the event that an
interruption of utility service cannot be remedied without an expenditure of
funds for capital improvements, Landlord agrees, provided such capital
expenditure does not exceed Five Thousand Dollars ($5,000), to pay the cost of
such improvement. In the event such expenditure will exceed the sum of Five
Thousand Dollars ($5,000), then, unless Tenant agrees to pay the cost of such
improvement, Landlord shall have the right and option to terminate the Lease
upon fifteen (15) days prior written notice to Tenant.
SECTION 10. CONDUCT OF TENANT UPON PREMISES. Tenant shall not use or permit
upon the Premises anything that will increase the rate of insurance maintained
by Landlord thereon or anything that may be dangerous to life or limb, and
Tenant shall do nothing and suffer nothing to be done upon the Premises in any
way tending to create a nuisance or injure the reputation of the Premises, or to
disturb any other tenant in the Premises. Tenant shall comply with all legal,
health and police regulations respecting the Premises, and will not use the
Premises for lodging or sleeping purposes, or for any immoral or illegal
purpose. Tenant shall observe and comply with all reasonable rules and
regulations promulgated by Landlord from time to time with respect to the use of
the Premises. Tenant shall not apply for or acquiesce in any rezoning, variance
or other zoning change affecting the Premises
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without the prior written consent of Landlord in each instance, which may be
withheld in Landlord's sole discretion.
SECTION 11. INCREASE IN INSURANCE RATES. In the event that the rate of any
insurance maintained by Landlord with respect to the Premises is increased as a
result of Tenant's use or occupancy of the Premises, then Tenant shall pay such
increase as additional rent hereunder upon demand of Landlord.
SECTION 12. MAINTENANCE OF PREMISES. Tenant shall, at Tenant's sole cost
and expense, keep the Premises and every part thereof (including without
limitation building walls and roof) in good and sanitary condition and repair
and shall perform all necessary maintenance, whether interior or exterior,
structural or non-structural, foreseen or unforeseen. Tenant will keep the
trees, lawn and landscaping on the Premises in good condition, including but not
limited to any necessary mowing, weeding, watering, and pruning. Tenant's
obligation to repair the Premises shall include all necessary replacements of
the equipment and facilities therein or serving the same. Without limiting the
generality of the foregoing, Tenant shall replace all broken glass in the
Premises with glass of the same size and quality as that broken, and Tenant
shall keep the Premises and appurtenances, including the parking area and
sidewalks, in a clean and safe condition, keeping the parking area and sidewalks
properly sealed, surfaced, and striped, reasonably free of debris, snow and ice.
Tenant shall comply with all applicable laws, regulations and ordinances and the
directions of the proper public officers in connection with the Premises.
Tenant shall be responsible for the removing and hauling away of any trash
created upon the Premises. Landlord has no obligation and has made no promise
to alter, improve or repair the Premises or any part thereof. Tenant shall
perform the maintenance described on Schedule 1 hereto according to the
timetable set forth therein, and shall perform all other maintenance as needed.
In the event that Tenant becomes obligated to complete improvements which do not
specifically relate to the Tenant's business for the purposes of compliance with
applicable federal, state or local laws or is required to make major repairs or
replacements and such improvements or repairs and replacements, then Landlord
and Tenant shall agree to calculate the useful life of such improvements,
repairs and replacements and shall allocate to each the cost thereof in
accordance with the period of time during which each will have possession of the
Premises. For example, if such an expenditure is required when there remains
only 18 months left in the term of the Lease, and the useful life of the
proposed improvement, repair or replacement is three years, then Landlord and
Tenant shall share in the cost of such improvement, repair or replacement
equally. In the event that the cost of such improvement, repair or replacement
exceeds Twenty Thousand Dollars ($20,000) or in the event that Landlord's share
of such expense exceeds twenty percent (20%), then Tenant shall obtain
Landlord's consent prior to completing such improvement, repair or replacement.
Landlord shall reimburse Tenant for 21.6% of Tenant's actual and reasonable cost
of performing the work described in Parts III (Plumbing System), IV
(Grounds/Exterior) and V (Safety Items) of Schedule 1, upon Tenant's submission
of invoices accompanied by such reasonable supporting information as Landlord
shall reasonably request.
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SECTION 13. ALTERATIONS; SIGNS.
13.1. ALTERATIONS. Tenant shall give Landlord notice of all proposed
improvements to the Premises. Tenant shall not make any alterations in, or
improvements to, the Premises which affect the structure, the exterior,
mechanical systems, or the utilities of the Premises, or which impair the value
or utility of the Premises, or which affect access to or use of the Uppermost
Story, without first obtaining Landlord's written consent, which shall not be
unreasonably withheld for non-structural alterations necessary for normal
laboratory operations, provided that the alterations do not decrease the value
of the Building and do not interfere with the use or enjoyment of the Uppermost
Story. Any such alterations or improvements made without Landlord's consent may
be removed by Landlord, at any time, at Tenant's expense. All additions and
improvements, whether temporary or permanent in character (excepting the movable
trade fixtures and personal property of Tenant), made in or upon the Premises,
either by Landlord or by Tenant, shall be Landlord's property and shall remain
upon the Premises at the expiration or earlier termination of this Lease;
provided that Landlord may elect, upon written notice to Tenant not later than
10 days before the end of the term, to require Tenant to remove any such items
designated by Landlord at the end of the term, in which event Tenant shall
remove the designated items at its own expense. Tenant shall repair all damage
to the Premises caused by the installation or removal of Tenant's fixtures,
equipment, furniture and alterations. In no event shall any cabinets, shelves,
counters or casework in the Premises be deemed Tenant's trade fixtures or
personal property, whether installed by Tenant or by Landlord, and all such
items shall remain in the Premises upon the expiration or sooner termination of
this Lease, except to the extent Landlord requires their removal by notice to
Tenant pursuant to this Section 13.1. Any alterations or improvements to the
Premises consented to by Landlord shall be made by Tenant at Tenant's sole cost
and expense. In no event shall Tenant commence any such alterations or
improvements to which Landlord has consented until Tenant has received
Landlord's written approval of the plans and specifications therefor. Tenant
shall reimburse Landlord for all costs which Landlord may incur in connection
with granting approval to Tenant for any such alterations and additions,
including any costs or expenses which Landlord may incur in electing to have
outside architects and engineers review said matters. All such alterations and
improvements shall be promptly completed by Tenant in strict accordance with
such approved plans and specifications. Tenant shall provide Landlord with a
set of "as-built" drawings for any such work. Tenant shall maintain such
insurance coverage in connection with the making of any such alterations or
improvements as Landlord shall reasonably require. If the cost of Tenant's
proposed alteration, addition or improvement to or of the Premises shall be
reasonably estimated by Landlord to cost in excess of $10,000, Landlord may
require Tenant to obtain and maintain bonds to assure the complete and proper
performance of the work.
13.2. SIGNS. No signs, graphics, notices or other lettering shall be
exhibited, inscribed, painted or affixed by or on behalf of Tenant at any place
on the exterior of the Premises or in the interior of the Premises so that the
same is visible from the exterior
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of the Premises without the prior written consent of Landlord, which shall not
be unreasonably withheld.
13.3. LANDLORD'S ALTERATIONS. Landlord reserves the right to make
improvements and additions to the Premises and the Building during this Lease.
However, except as set forth below, all such improvements shall be subject to
Tenant's consent, which consent shall not be unreasonably withheld. Landlord
shall have the absolute right to make any and all improvements, additions and
alterations that Landlord deems necessary or desirable for the occupancy and
enjoyment of the Uppermost Story, in Landlord's sole discretion, without need
for Tenant's consent. Landlord shall use reasonable efforts not to unreasonably
materially interfere with the operation of Tenant's business in the Premises in
the course of its activities under this Section 13.3, but Landlord's activities
under this section shall not entitle Tenant to any abatement of Rent nor any
claim of constructive eviction or loss of quiet enjoyment.
SECTION 14. RELEASE OF LANDLORD FROM LIABILITY. Landlord shall in no event
be liable for any damage, either to person or property, sustained by Tenant due
to the Premises, or any part or appurtenance thereof, becoming out of repair, or
due to the happening of any accident in or about the Premises, including,
without limitation, breaking, bursting, stoppage or leaking of water, gas, sewer
or steam pipes, or due to any act or neglect of any other tenant or occupant of
the Premises or the Building, or of any other person. To the fullest extent
permitted by law, Tenant agrees to use and occupy the Premises and other
portions of the Building at Tenant's own risk, and Tenant hereby releases
Landlord from all claims of any kind, including without limitation, loss of
life, bodily injury, damage to merchandise, equipment, fixtures or other
property or damage to business or for business interruption arising, directly or
indirectly, out of or from or on account of such occupancy and use or resulting
from any present or future condition or state of repair thereof.
SECTION 15. INDEMNITY. Tenant shall indemnify Landlord and save Landlord
harmless from all claims, liability, damage, loss and expense, including,
without limitation, reasonable attorneys' fees, arising out of (a) the use of
the Equipment, or the use or occupancy of the Premises or the Building, by
Tenant or those claiming by, through or under Tenant, (b) any injury to or death
of any person or damage to any property occurring in, on or about the Premises
from any cause whatsoever, (c) any default of Tenant under this Lease, and (d)
any act, neglect or omission of Tenant, its agents, employees, representatives,
licensees, customers and invitees occurring in, on or about the Premises or with
respect to the Equipment.
SECTION 16. INSURANCE.
16.1. TENANT'S INSURANCE. At all times during the term of this Lease
and any period prior to the term of this Lease during which Tenant has
possession of the Premises, Tenant shall, at its sole expense, procure and
maintain the following types of insurance coverage:
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16.1.1. General public liability insurance on an occurrence
basis covering the Premises and Tenant's use thereof with a minimum limit of
liability of $1,000,000, combined single limit, per occurrence. The insurance
coverage required under this Section 16.1.1 shall include a contractual
liability endorsement covering the matters set forth in Section 15. The
deductible, if any, under this insurance shall not exceed $1,000.00.
16.1.2. Insurance covering Tenant's trade fixtures,
furnishings, equipment, decorations and contents in an amount not less than 100%
of full replacement cost providing protection against perils included within the
standard form "All Risk" insurance.
16.1.3. Employer's liability insurance and worker's
compensation insurance, as required by applicable law.
16.2. LANDLORD'S INSURANCE. At all times during the term of this Lease,
Landlord shall acquire fire, wind, storm and extended coverage on the Premises,
which insurance shall be in an amount not less than the replacement value of the
Premises.
16.3. EVIDENCE OF INSURANCE. The insurance required under this Section
16 and acquired by Landlord with respect to the Building and all renewals
thereof shall be issued by such good and responsible companies qualified to do
and doing business in the State of Ohio as may be approved by Landlord, with a
Best's rating of A+ (or, if Class XIII or larger, A). Each policy of insurance
required to be carried under this Section 16, or a certificate thereof, shall be
delivered to Landlord, or Tenant, as applicable, at least 30 days prior to the
Commencement Date; and at least 30 days prior to the expiration of any such
policy, a renewal certificate thereof shall be delivered to Landlord or Tenant.
Each policy shall expressly provide that the policy shall not be canceled or
altered in such manner as to adversely affect the coverage afforded thereby
without 30 days' prior written notice to Landlord or Tenant. All insurance
required under Sections 16.1.1 and 16.1.2 above shall be carried in the joint
names of Landlord and Tenant.
16.4. FAILURE TO MAINTAIN INSURANCE. In the event that Tenant shall
fail to insure or shall fail to furnish to Landlord any such policy or
certificate as herein required, Landlord may from time to time effect such
insurance for the benefit of Tenant or Landlord or both of them for a period not
exceeding one year, and any premium paid by Landlord shall be recoverable from
Tenant as Additional Rent on demand.
16.5. WAIVER OF SUBROGATION. Landlord and Tenant mutually agree that
with respect to any loss which is covered by insurance then being carried by
them respectively, or required to be carried hereunder, the one carrying or
required to carry such insurance and suffering said loss hereby releases the
other (and the other's officers, partners, agents and employees) of and from any
and all claims with respect to such loss to the extent of such insurance,
whether or not caused by the actual or alleged negligence of the one so
released; and they further mutually agree that their respective insurance
companies shall have no right of subrogation against the other on account
thereof. Each insurance policy carried by the parties shall contain a clause to
the effect that the foregoing waiver shall not affect the right
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of the insured party to recover under such policy. The foregoing waivers shall
be operative only so long as available in the state in which the Premises is
located.
SECTION 17. DAMAGE OR DESTRUCTION.
17.1. TERMINATION OF LEASE. Except as otherwise herein provided, in the
event that the Premises are damaged by fire or other casualty, Landlord shall
repair the same (exclusive of the repairs and restorations required to be made
by Tenant pursuant to Section 17.2) if, in Landlord's opinion, such damage can
be repaired within 90 days and the estimated cost of such repair does not exceed
the net amount of Landlord's estimated insurance award in connection with such
damage. If, in Landlord's opinion, such damage cannot be repaired within 90
days or the estimated cost of such repair exceeds the net amount of Landlord's
estimated insurance award in connection with such damage, Landlord shall so
notify Tenant. Thereafter, either Landlord or Tenant may, upon notice to the
other within 30 days after the date of such casualty, terminate this Lease. If
Landlord does not elect to so terminate this Lease, Landlord shall, within a
reasonable period of time, commence to repair such damage (exclusive of the
repairs and restorations required to be made by Tenant pursuant to Section
17.2). In the event Landlord is unable to complete such repair within 120 days,
subject to unavoidable delays as set forth in Section 31.2 hereof, Tenant shall
have the option to terminate this Lease by 30 days' prior written notice to
Landlord; provided that such termination will be void if, within 30 days after
receipt of Tenant's notice, Landlord completes the repairs.
17.2. RESTORATION BY TENANT. In the event that the Premises are damaged
by fire or other casualty, unless this Lease is otherwise terminated pursuant to
the provisions of this Section 17, Tenant shall, at its sole cost and expense,
forthwith repair and restore its furnishings, trade fixtures, equipment and
contents therein.
17.3. DAMAGE DURING LAST YEAR. In the event that the Premises, or any
portion of the Building that is necessary for Tenant's occupancy, are damaged by
fire or other casualty during the last year of the term hereof, Landlord may
elect to terminate this Lease upon notice to Tenant given within 30 days of such
casualty. Notwithstanding the foregoing, Landlord may not terminate the Lease
hereunder if Tenant has renewal options for additional Extension Terms (provided
Tenant agrees to exercise such options and Guarantor consents thereto).
17.4. TERMINATION. Upon any termination of this Lease under any of the
provisions of this Section 17, the parties shall be released thereby without
further obligation to the other party coincident with the surrender of
possession of the Premises to the Landlord except for items which have
theretofore accrued and are then unpaid, and the indemnities provided herein,
which obligations shall survive such termination and Tenant shall irrevocably
assign to Landlord all of its right, title and interest in any insurance awards
or proceeds and any other claims with respect to such casualty (other than
awards, proceeds or claims under policies maintained by Tenant relating to
Tenant's furnishings, trade fixtures
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or equipment). Landlord shall promptly refund to Tenant any unearned payment of
Basic Rent or other charges hereunder.
17.5. RENT ABATEMENT. Tenant shall be entitled to an abatement of Basic
Rent while repairs under this Section 17 are being made, in the proportion that
the area of the Premises rendered unusable by Tenant by such damage bears to the
total area of the Premises, but only to the extent of any rent loss insurance
proceeds received by Landlord.
SECTION 18. CONDEMNATION. In the event that the Premises, or any portion
thereof necessary for Tenant's operation as contemplated by this Lease, are
taken as a result of the exercise of the power of eminent domain, or if Landlord
shall convey title to the Premises, or any portion thereof necessary in Tenant's
reasonable judgment for Tenant's operation as contemplated by this Lease, under
threat of such a taking, this Lease shall terminate as of the date on which the
Premises or portion thereof shall be so taken, or title so conveyed, and Rent
shall be adjusted as of such date. Tenant shall not be entitled to any part of
the award paid in connection with any such taking, and Landlord shall be
entitled to receive the full amount thereof. Notwithstanding the foregoing,
Tenant shall be entitled to make a claim to the appropriate authority for
relocation costs, and for any loss of or damage to trade fixtures installed by
Tenant, together with any award for loss of business, provided any such award is
made separately from, and does not diminish, Landlord's award for the Premises.
In the event of a taking pursuant to the exercise of the power of eminent domain
of less than the entire Premises and if this Lease is not terminated pursuant to
this Section 18, this Lease shall terminate only as to the portion of the
Premises so taken, and from and after the date of such taking a just proportion
of the Basic Rent shall be abated according to the extent and nature of the
taking.
SECTION 19. SUBORDINATION. This Lease and all rights of Tenant hereunder
are and shall be subject and subordinate in all respects to any mortgage, deed
of trust, other security instrument or ground lease (collectively, "Mortgage")
which may now or hereafter affect the land and buildings comprising the
Premises, or any portion thereof, provided that Tenant is given adequate
assurances that, in the absence or a default, its tenancy under the Lease will
not be disturbed. The provisions of this Section 19 shall be self-operative and
no further instrument of subordination shall be required. In confirmation of
such subordination, Tenant shall promptly execute and deliver any instrument, in
recordable form if requested, that Landlord or the holder of any Mortgage may
request to evidence such agreement of subordination and nondisturbance; and if
Tenant fails to execute, acknowledge or deliver any such instrument within 10
days after request therefor, Tenant hereby irrevocably constitutes and appoints
Landlord as Tenant's attorney-in-fact, coupled with an interest, to execute,
acknowledge and deliver any such instruments for and on behalf of Tenant.
Tenant agrees, that to the extent that Landlord incurs cost as a result of
Tenant's negotiation of non-disturbance language with Landlord's lenders, Tenant
shall pay any costs or expenses imposed by the lender. If any act or omission
by Landlord would give Tenant the right, immediately or after lapse of time, to
(a) cancel or terminate this Lease, or (b) credit or offset any amounts against
future Rent payable hereunder (but no such right shall be implied
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by or inferred from this Section), Tenant will not exercise any such right until
(i) it has given written notice of such act or omission to the holder of each
Mortgage whose name and address shall have previously been furnished to Tenant,
and (ii) a reasonable period for remedying such act or omission shall have
elapsed following such giving of notice and following the time when such party
shall have become entitled under such Mortgage to remedy the same (including any
time necessary to obtain possession of the Premises) without such party having
commenced and continued to remedy such act or omission or to cause the same to
be remedied. If any person shall succeed to all or part of Landlord's interest
in the Premises, whether by purchase, foreclosure, deed in lieu of foreclosure,
power of sale, termination of Lease or otherwise, and if so requested or
required by such successor in interest, Tenant shall attorn to such successor in
interest and shall execute such agreement in confirmation of such attornment as
such successor in interest shall require. In the event of attornment, no such
successor shall be: (i) liable for any act or omission of Landlord, or subject
to any offsets or defenses which Tenant might have against Landlord (prior to
such successor becoming Landlord under such attornment), (ii) liable for any
security deposit or bound by any prepaid Rent not actually received by such
Lender, or (iii) bound by any future modification of this Lease not consented to
by such successor.
SECTION 20. ACCESS TO PREMISES. Landlord and its authorized representatives
shall have the right, subject to the limitations set forth on Schedule 2
attached hereto and made a part hereof by this reference, to enter upon the
Premises during all regular business hours for the purpose of (a) inspecting or
exhibiting the same to prospective purchasers, lessors, lenders and tenants, (b)
maintaining and repairing all utility equipment, in, upon, above or under the
Premises as may be necessary for the servicing of the Premises, (c) correcting,
at Tenant's sole cost and expense, any unclean, offensive or noxious condition
which in Landlord's reasonable judgment is existing on the Premises, (d)
altering, improving, renovating, repairing, remodeling, refurbishing, painting,
decorating or enjoying the use and occupancy of the Uppermost Story, or
permitting Landlord's tenants, licensees or invitees so to do, and (e)
exercising Landlord's rights under Section 7, Section 13.3, Section 23 or any
other section of this Lease. In addition, Landlord shall at all times have
unrestricted access to the Uppermost Story. Landlord shall also have the right
subject to the limitations set forth on Schedule 2 attached hereto and made a
part hereof by this reference to enter upon the Premises during all regular
business hours (and in emergencies at all times) for the purpose of making any
repairs thereto or thereon or to the Building, as Landlord may deem necessary,
and for any other lawful purpose; and in connection therewith, Landlord shall
have the right to bring and store materials, tools and equipment in, through or
above the Premises that may be required therefor, without the same constituting
an actual or constructive eviction of Tenant from the Premises or any part
thereof. Landlord in no event shall be liable for any inconvenience,
disturbance, loss of business or other damages to Tenant by reason of the
performance by Landlord of any work in, upon, above or under the Premises or for
bringing and storing materials, tools and equipment in, through or above the
Premises during the course thereof, and the obligations of Tenant under this
Lease shall not be affected thereby in any manner whatsoever, nor shall the same
constitute any ground for an abatement of any Rent. During the period
commencing 12 months prior to the expiration
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of the term, Landlord may place upon the exterior of the Premises "For Lease",
"To Let" or "For Rent" signs of reasonable size which signs shall not be
removed, obliterated or hidden by Tenant. Landlord reserves the right to use up
to a total of 10 parking spaces for itself, and tenants or occupants of the
Uppermost Story.
SECTION 21. COVENANT OF QUIET ENJOYMENT. Tenant, subject to the terms and
provisions of this Lease, and upon paying the Rent and keeping and performing
the covenants of this Lease on the part of Tenant to be kept and performed,
shall peaceably and quietly hold, occupy and enjoy the Premises during said term
without any hindrance by Landlord or any person lawfully claiming under
Landlord.
SECTION 22. DEFAULT.
22.1. EVENTS OF DEFAULT; LANDLORD'S REMEDIES. If Tenant shall fail to
pay Rent or any installment or year-end adjustment thereof within 10 days after
written notice thereof from Landlord to Tenant, or if Tenant shall fail to
perform any of the other terms, provisions, covenants and agreements hereof on
Tenant's part to be kept, observed and performed and such failure shall continue
for a period of 30 days or more after written notice thereof from Landlord to
Tenant, or if Tenant shall abandon, desert or vacate the Premises, or if Tenant
shall transfer, assign or hypothecate this Lease or sublet all or any portion of
the Premises in violation of the provisions of Section 8, or if Tenant shall
file a petition in bankruptcy, or if an involuntary petition in bankruptcy shall
be filed against Tenant and not dismissed within 30 days after such filing, or
if Tenant shall make an assignment for the benefit of creditors, or if Tenant
shall take or receive the advantage or benefit of any insolvency or bankruptcy
act, or if Tenant shall enter into an agreement of composition with Tenants
creditors, then, and in any such event, Tenant shall be in default hereunder,
and Landlord may, at its option, in addition to any other remedies which
Landlord may have at law or in equity, at once without notice to Tenant or any
other persons, re-enter and repossess the Premises and remove all persons and
effects therefrom, using such force as may be necessary without being deemed
guilty in any manner of trespass, eviction, or forcible entry or detainer, and,
as Landlord elects, either declare this Lease to be terminated without prejudice
to any and all rights which Landlord may have against Tenant for rents, damages
or breach of this Lease (for which Tenant shall continue liable notwithstanding
such termination), or attempt to relet the Premises on such terms as Landlord
shall determine. Such reletting shall not be considered as a surrender or
acceptance back of the Premises or a termination of this Lease, and Tenant shall
pay Landlord any deficiency between the amount received, if any, from such re-
letting and the amount of Basic Rent and additional rent payable by Tenant
hereunder. Tenant expressly waives the service of any notice of intention to
terminate this Lease or to re-enter the Premises, and waives the service of any
demand for payment of rent or repossession. No receipt of monies from Tenant by
Landlord after the termination of this Lease, or after the giving of any notice
of default, shall reinstate or continue the term hereof.
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22.2. RIGHT OF REDEMPTION. Tenant hereby expressly waives any and all
rights of redemption granted by or under any present or future laws in the event
of Tenant being evicted or dispossessed for any cause, or in the event of
Landlord obtaining possession of the Premises by reason of the violation by
Tenant of any of the covenants and conditions of this Lease or otherwise.
22.3. COUNTERCLAIMS AND JURY TRIALS. To the fullest extent permitted by
law, Tenant hereby waives trial by jury in any action, proceeding or
counterclaim brought by Tenant against Landlord arising out of or in any way
connected with this Lease, the relationship of Landlord and Tenant, or Tenant's
use or occupancy of the Premises. In the event Landlord commences any action or
proceeding for eviction or nonpayment of Rent hereunder, Tenant agrees not to
impose any counterclaim of any nature or description (except a compulsory
counterclaim) in any such action or proceeding. The foregoing, however, shall
not be construed as a waiver of Tenant's right to assert such claim in a
separate action or proceeding instituted by Tenant.
22.4. RIGHT OF INJUNCTION; REMEDIES CUMULATIVE. In the event of a
breach or threatened breach by Tenant of any of the covenants or provisions
hereof, Landlord shall have the right of injunction. Reference in this Lease to
any particular remedy shall not preclude Landlord from any other remedy provided
Landlord herein, or at law or in equity, and the exercise of one or more of the
remedies herein or otherwise provided shall not preclude Landlord from
exercising any other remedy.
22.5. SECURITY DEPOSIT. Tenant shall deposit with Landlord the Security
Deposit in the amount set forth in Section 1.6 promptly upon the execution of
this Lease. The Security Deposit shall be held by Landlord, without liability
for interest thereon, as security for the full and faithful performance by
Tenant of each and every term, covenant and condition of this Lease on the part
of Tenant to be observed and performed. The Security Deposit shall not be
mortgaged, assigned, transferred or encumbered by Tenant without the prior
consent of Landlord in each instance and any such act on the part of Tenant
shall be without force and effect and shall not be binding upon Landlord. If
any installment of Rent payable by Tenant to Landlord, or any payment due
Landlord under the Equipment Lease, shall be overdue and unpaid or should
Landlord make payments on behalf of Tenant, or should Tenant fail to perform any
of its obligations under this Lease or the Equipment Lease, then Landlord may,
at its option, and without prejudice to any other remedy which Landlord may have
on account thereof, appropriate and apply the Security Deposit or so much
thereof as may be necessary to compensate Landlord toward the payment of the
Rent or other payments due from Tenant, or toward any loss, damage or expense
sustained by Landlord resulting from such default on the part of Tenant; and in
such event Tenant shall forthwith upon demand restore the Security Deposit to
the original sum deposited. In the event Tenant shall fully and faithfully
comply with all of the terms, covenants and conditions of this Lease and the
Equipment Lease and pay all of the installments of Rent and payments under the
Equipment Lease as they fall due, the Security Deposit shall be returned in full
to Tenant following the date of the expiration or sooner termination of the term
and the surrender of
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the Premises and the Equipment by Tenant in compliance with the provisions of
this Lease and the Equipment Lease. In the event any bankruptcy insolvency,
reorganization or other creditor-debtor proceedings shall be instituted by or
against Tenant, or its successors or assigns, or the guarantor, if any, the
Security Deposit shall be deemed to be applied first to the payment of any Rent
or other payment due Landlord for all periods prior to the institution of such
proceedings and the balance, if any, of the Security Deposit may be retained by
Landlord in partial satisfaction of Landlord's damages. Landlord may deliver
the Security Deposit to the transferee of Landlord's interest in the Premises in
the event that such interest be sold or transferred and thereupon Landlord shall
be discharged and released from all further Liability with respect to the
Security Deposit or the return thereof to Tenant, and Tenant agrees to look
solely to the new landlord for the return of the Security Deposit, and this
provision shall also apply to any subsequent transferees.
22.6. CLAIMS. Tenant agrees in consideration of Landlord's execution of
this Lease that any claim or defense of any kind by Tenant based upon or arising
in connection with this Lease or otherwise shall be barred unless asserted by
Tenant by the commencement of an action or the interposition of a defense within
three years after any inaction or the occurrence of any action to which claim or
defense relates. This provision shall survive any termination of this Lease
however arising.
SECTION 23. LANDLORD'S RIGHT TO CURE DEFAULTS. All covenants and agreements
to be performed by Tenant under any of the terms of this Lease shall be at
Tenant's sole cost and expense and without abatement of Rent. If Tenant shall
fall to pay any sum of money, other than Basic Rent, required to be pal by
Tenant hereunder or shall fail to perform any other act on Tenant's part to be
performed hereunder, Landlord may, but shall not be obligated so to do, and
without waiving or releasing Tenant from any obligation of Tenant hereunder,
make any such payment or perform any such other act on Tenant's part to be made
or performed as in this Lease provided. All sums so paid by Landlord and all
necessary incidental costs, together with interest thereon at the Default Rate,
shall be deemed additional rent and shall be payable to Landlord upon demand.
SECTION 24. ATTORNEYS' FEES. If, as a result of any breach or default by
Tenant in the performance of any of the provisions of this Lease, Landlord uses
the services of an attorney in order to secure compliance with such provision or
recover damages therefor, or to terminate this Lease or evict Tenant, Landlord
shall be entitled to recover from Tenant for the reasonable fees of its
attorneys.
SECTION 25. LIENS. Tenant shall keep the Premises free from any liens
arising out of any work performed, materials furnished or obligations incurred
by Tenant. In the event that Tenant shall not, within 30 days following written
notice and demand for removal of any such lien by or on behalf of Landlord,
cause the same to be released of record, Landlord shall have, in addition to all
other remedies provided herein and by law, the right but not the obligation to
cause the same to be released by means of bond or posting security. All sums
paid by Landlord for such purpose, and all expenses incurred by it in connection
therewith,
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together with interest at the Default Rate, shall be deemed additional rent and
payable to Landlord by Tenant on demand. Landlord shall have the right to post
and keep posted on the Premises any notices that may be provided by law or which
Landlord may deem to be proper for the protection of Landlord, the Premises and
the Premises from such liens.
SECTION 26. CONVEYANCE BY LANDLORD AND LIABILITY. Notwithstanding anything
to the contrary contained in any provision of this Lease, Tenant agrees to look
solely to Landlord's interest in the Building for the enforcement or
satisfaction any liability of Landlord, whether direct or indirect, accrued or
prospective, contingent or fixed, in connection with any judgment, order or
other remedy or claim under or in connection with this Lease or any related
agreement or instrument or any other matter whatsoever relating thereto or to
the Premises (collectively, "Landlord Liabilities") and Landlord shall not be
personally liable for any Landlord Liability or the enforcement or collection of
any judgment, order or other remedy or deficiency in connection therewith.
Without limiting the generality of the foregoing, under no circumstances shall
any present or future principals or investors, general or limited partners,
officers, directors, shareholders, trustees, beneficiaries, participants,
advisors, managers, employees, agents or affiliates of Landlord, or of any of
the other foregoing parties, have any liability for any Landlord Liabilities.
In case Landlord (or any successor owner of the Premises) shall convey or
transfer the Premises to another party, such other party shall thereupon be and
become landlord hereunder and shall be deemed to have fully assumed and be
liable for all obligations of this Lease to be performed by Landlord, including
the return of any security deposit. Tenant shall attorn to such other party,
and Landlord (or such successor owner) shall, from and after the date of
conveyance or transfer, be free of and automatically released from all Landlord
Liabilities.
SECTION 27. ESTOPPEL CERTIFICATE. At any time and from time to time, Tenant
shall execute, acknowledge and deliver to Landlord, within 10 days of written
request, a certificate certifying (a) that this Lease is unmodified and is in
full force and effect (or, if there have been modifications, that this Lease is
in full force and effect, as modified, and stating the date and nature of each
such modification), (b) the date, if any, to which Rent and other sums payable
hereunder have been paid, (c) that no notice has been received by Tenant of any
default which has not been cured, except as to defaults specified in said
certificate, and (d) such other matters as may be reasonably requested by
Landlord. Any such certificate may be relied upon by any prospective purchaser,
mortgagee or beneficiary under any deed of trust of the Premises.
SECTION 28. HOLDING OVER. If Tenant remains in possession of the Premises,
or any part thereof, after any termination of this Lease, no tenancy or interest
in the Premises shall result therefrom, unless Landlord elects as hereinafter
provided, but such holding over shall be an unlawful detainer and Tenant shall
be subject to immediate eviction and removal, and Landlord may, in addition to
any other rights which Landlord may have hereunder or at law or in equity, elect
at its sole option and discretion to treat any such holding over as the creation
of a month-to-month tenancy subject to all of the terms, covenants and
conditions as
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are set forth in this Lease insofar as the same are applicable to a
month-to-month tenancy, except that the Basic Rent shall be multiplied by 150%.
SECTION 29. HAZARDOUS MATERIALS.
29.1. RESTRICTION ON USE. Except as permitted in Section 29.2, Tenant
shall not transport, use, store, maintain, generate, manufacture, handle, or
dispose, and in no event shall release, discharge or spill, any "Hazardous
Material" (as defined below), or permit any of the same to occur, or permit any
Hazardous Materials to leak or migrate, on or about the Premises or the
Building. The term "Hazardous Material" for purposes hereof shall mean any
flammable, explosive, toxic, radioactive, biological, corrosive or otherwise
hazardous chemical, substance, liquid, gas, device, form of energy, material or
waste or component thereof, including, without limitation, petroleum-based
products, diesel fuel, paints, solvents, lead, radioactive materials, cyanide,
DDT, printing inks, acids, pesticides, ammonia compounds, and any other items
which now or subsequently are found to have an adverse effect on the environment
or the health and safety of persons or animals or the presence of which requires
investigation or remediation under any Law or governmental policy. Without
limiting the generality of the foregoing, "Hazardous Material" 'includes any
item defined as a "hazardous substance", "hazardous material", hazardous waste",
"regulated substance" or "toxic substance" under the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended, 42 U.S.C. Section
9601 et seq., Hazardous Materials Transportation Act, 49 U.S.C. Section 1801, et
seq., Resource Conservation and Recovery Act of 1976, 42 U.S.C. Section 6901 et
seq., Clean Water Act, 33 U.S.C. Section 1251 et seq., Safe Drinking Water Act,
14 U.S.C. Section 300f, et seq., Toxic Substances Control Act, 15 U.S.C. Section
2601, et seq., Federal Insecticide, Fungicide and Rodenticide Act, 7 U.S.C.
Section 136 et seq., Atomic Energy Act of 1954, 42 U.S.C. Section 2014 et seq.,
and any similar Laws, and all regulations, guidelines, directives and other
requirements thereunder, all as may be amended or supplemented from time to
time.
29.2. NECESSARY MATERIALS. Notwithstanding Section 29. 1, Tenant may
transport, use, store, handle and dispose of Hazardous Materials on and about
the Premises, if and to the extent that the Hazardous Materials are necessary
for the operation of Tenant's biological laboratory on the Premises, subject to
the provisions of this Section 29.2 and Section 29.3 through 29.7. The
permission granted by this Section 29.2 shall apply only to Hazardous Materials
specifically used in the performance of the primary business for which Tenant
has leased the Premises, and only in accordance with applicable federal, state,
and local laws and regulations and sound commercial practice, and in such manner
as to not prohibit or materially restrict continued use of the Premises for the
purposes permitted by this Lease. Tenant's activities under this Section 29.2
shall be conducted in strict compliance with all applicable laws, rules and
regulations, including to the extent applicable, but not limited to, those set
forth in Section 29.1, and all applicable insurance requirements. All Hazardous
Material presenting biological hazards shall be handled according to
Communicable Disease Center recommended methods and OSHA standards, but such
handling shall not relieve
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Tenant from the obligation to comply with any and all other legal or insurance
requirements that may apply.
29.3. NOTICE TO LANDLORD. Tenant shall immediately notify Landlord of
any inquiry, test, investigation, or enforcement proceeding by or against
Landlord or the or the Building concerning a Hazardous Material. Tenant
acknowledges that Landlord, as the owner of the Premises, shall have the right,
at its election, in its own name or as Tenant's agent, to negotiate, defend,
approve, and appeal, at Tenant's expense, any action taken or order issued with
regard to a Hazardous Material by an applicable governmental authority. Tenant
shall promptly furnish Landlord with copies of all reports of any inspection of
Tenant's activities on the or in or about the Building conducted by or at the
request of any governmental or other regulatory authority.
29.4. CONTAMINATION. If Tenant's storage, use or disposal of any
Hazardous Material in, on or adjacent to the Premises results in any
contamination of the Premises, the soil or surface or groundwater (i) requiring
remediation under federal, state or local statutes, ordinances, regulations or
policies, or (ii) at levels which are unacceptable to Landlord, in Landlord's
reasonable judgment, Tenant agrees to cleanup the contamination. Tenant further
agrees to indemnify, defend and hold Landlord harmless from and against any
claims, suits, causes of action, costs, fees, including attorneys' fees and
costs, arising out of or in connection with any clean-up work, inquiry or
enforcement proceeding in connection therewith, and any Hazardous Materials
currently or hereafter used, stored or disposed of by Tenant or its agents,
employees, contractors or invitees on or about the Premises, whether with or
without Landlord's consent.
29.5. RIGHT OF ENTRY. Notwithstanding any other right of entry granted
to Landlord under this Lease, Landlord shall have the right subject to the
limitations set forth in Schedule 2 attached hereto and incorporated herein by
this reference to enter the Premises or to have consultants enter the Premises
throughout the term of this Lease for the purpose of determining: (i) whether
the Premises are in conformity with federal, state and local statutes,
regulations, ordinances, and policies including those pertaining to the
environmental condition of the Premises, (ii) whether Tenant has complied with
this Section 29, and (iii) the corrective measures, if any required of Tenant to
ensure the safe use, storage and disposal of Hazardous Materials, or to remove
Hazardous Materials. Tenant agrees to provide access and reasonable assistance
for such inspections. Such inspections may include, but are not limited to,
entering the Premises or adjacent property with drillings or other machinery for
the purpose of obtaining laboratory samples. Unless any such inspection shall
reveal reasonable cause to believe that Tenant has violated the provisions of
Section 29, or Landlord receives a notice of violation from any governmental
authority or other reasonable cause to believe that such a violation by Tenant
has occurred, Landlord shall be limited to one such inspection during each year
of the term of this Lease. Tenant shall reimburse Landlord for the cost of such
inspections within 10 days of receipt of a written statement therefor, which
cost shall in no event exceed $2,000 per inspection, unless otherwise agreed, or
except as to an inspection necessary to investigate or remedy any
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violation by Tenant of Section 29, in which event the scope of the inspection
shall be limited to that reasonably necessary to detect, evaluate and remedy the
specific violation. If such consultants determine that the Premises or the
Building are contaminated with Hazardous Materials, Tenant shall, in a timely
manner, at its expense, remove such Hazardous Materials or otherwise comply with
the recommendations of such consultants to the reasonable satisfaction of
Landlord and any applicable governmental agencies. The right granted to
Landlord herein to inspect the Premises or the Building shall not create a duty
on Landlord's part to inspect the Premises or the Building, or liability of
Landlord for Tenant's use, storage or disposal of Hazardous Materials, it being
understood that Tenant shall be solely responsible for all liability in
connection therewith.
29.6. REMOVAL. Tenant shall surrender the Premises to Landlord upon the
expiration or earlier termination of this Lease free of Hazardous Materials and
in a condition which complies with all Laws, recommendations of consultants
hired by Landlord, and such other reasonable requirements as may be imposed by
Landlord.
SECTION 30. RIGHT OF FIRST OFFER.
30.1. OFFERS. Landlord agrees that if, during the term of this Lease
(including any Extension Term) Landlord decides to list or offer the Building
for sale, Landlord shall first offer Tenant the right to purchase the Building,
at the price at which Landlord intends to list or offer the Building for sale.
Tenant may accept that offer by delivering written notice of acceptance to
Landlord within five business days after receipt of Landlord's offer. If Tenant
fails to deliver written acceptance to Landlord within that time, Landlord shall
have the right to list or offer for sale, or to solicit or accept offers to
sell, the Building at any time thereafter, at any price and upon any terms,
provided, that, for a period of 12 calendar months after the date of Landlord's
offer to Tenant, Landlord shall not list or offer to sell, or accept an offer to
sell, the Building at a price that is less than 85% of the price (the "Offering
Price") at which Landlord initially offered to sell the Building to Tenant,
except as follows: If within that 12 months, Landlord desires to offer for sale,
or accept an offer (in either case, an "Offer") for purchase of, the Building at
an amount less than 85% of the Offering Price, Landlord shall first so notify
Tenant, which notice shall include a copy of the Offer. Tenant will have the
right to purchase the Building from Landlord at the price and upon the terms set
forth in the Offer, which right may be exercised only by delivering notice of
acceptance to Landlord within three business days after Tenant's receipt of the
Offer. If Tenant fails to deliver such notice to Landlord within three business
days, Landlord shall be free to make or accept the Offer.
3.02. EXCLUDED TERMS. If Tenant does deliver notice of acceptance to
Landlord within the three business days, then, notwithstanding any other term or
provision set forth in the Offer, Tenant's obligation to purchase the Building
shall not be subject to any right of inspection, or any financing contingency,
or any requirement for the seller to provide financing, or to any conditions
regarding the physical, legal or environmental condition of the Building (other
than the condition of Landlord's title), nor shall Landlord be deemed to
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have made any warranties or representations concerning any matter which is the
subject of any obligation of Tenant under this Lease, nor shall Tenant be
entitled to any offsets against the purchase price for any matter or condition
arising out of any failure by Tenant to perform its obligations under this
Lease, including but not limited to Tenant's obligation to keep the Building
free of liens.
30.3. EXCLUDED TRANSACTIONS. The provisions of this Section 30 shall
not apply:
30.3.1. if, at the time Landlord received the Offer or desires
to list or offer the Building for sale, Tenant is in default, or has assigned
this Lease or sublet 50% or more, in the aggregate, of the Building; nor
30.3.2. to any lease, license, or occupancy of the Uppermost
Story or any part thereof, nor
30.3.3. to any transfer to (i) any child, parent, sibling, or
spouse of Landlord; or (ii) any child, parent, or spouse of any person described
in clause (i); or (iii) any trust established for the benefit of Landlord or any
person described in clause (i) or (ii); or (iv) any corporation, partnership,
limited liability company or other entity at least 50% of which is owned,
beneficially or of record, by, or which is controlled in fact by, any person
described in clauses (i) through (iv) (all of the foregoing are referred to as
an "Excluded Transferee"), but any transfer by an Excluded Transferee to a
person who is not an Excluded Transferee shall be subject to all of the terms of
this Section 30, so long as Tenant's rights under this Section 30 have not
otherwise been terminated according to the terms hereof. In no event shall the
provisions of this Section 30 apply to any sale at foreclosure or any deed or
conveyance in lieu of foreclosure, and any such foreclosure or deed in lieu
thereof shall terminate Tenant's rights under this Section 30 in all respects.
30.4. PRORATION OF RENT. If Tenant buys the Building under this Section
30, Tenant shall continue to pay all Rent and other charges through the date of
closing and Landlord's receipt of the purchase price, and all Rent and other
charges shall be adjusted as of that date.
SECTION 31. MISCELLANEOUS PROVISIONS.
31.1. NOTICES. Every consent, waiver, notice, demand, request or other
instrument required or permitted to be given under this Lease shall be in
writing and shall be sent by certified or registered United States mail, return
receipt requested, postage prepaid, or by any private courier service utilizing
a return receipt, if to Landlord, at Landlord's Notice Address, and if to
Tenant, at Tenant's Notice Address or at the Premises, and the same shall be
deemed delivered when delivery is made (or acceptance of delivery is refused),
as evidenced by the return receipt or the records of the courier service.
Either party may change its address for notices by notice in the manner set
forth above.
23
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31.2. UNAVOIDABLE DELAYS. In the event either party hereto shall be
delayed or hindered in or prevented from the performance of any act required
under this Lease by reason of strikes, lockouts, labor troubles, inability to
procure materials, failure of power, restriction of governmental law or
regulations, riots, insurrection, war or other reason of a like nature not the
fault of the party delayed in performing work or doing acts required under the
terms of this Lease, then performance of such act shall be excused for the
period of the delay, and the period for the performance of any such act shall be
extended for a period equivalent to the period of such delay. The provisions of
this Section 29.2 shall not operate to excuse Tenant from the payment of Rent.
31.3. SURRENDER; REMOVAL OF TENANT'S PROPERTY. Upon the scheduled
expiration of the term or earlier termination of this Lease, Tenant shall quit
and surrender the Premises to Landlord in the same condition as when received,
ordinary wear and tear excepted, together with all keys and combinations to
locks, safes and vaults and all improvements, alterations, additions and
equipment at any time made or installed in, upon or to the Premises (except
personal property and trade fixtures installed at Tenant's expense), all of
which shall thereupon become the property of Landlord without any claim by
Tenant therefor. Tenant agrees to repair any damage caused by the removal of
Tenant's personal property and trade fixtures. If Tenant shall fail to remove
any of Tenant's personal property or trade fixtures, said property shall, at the
option of Landlord, either be deemed abandoned and become the property of
Landlord or Landlord shall have the right to remove and store such property, at
the expense of Tenant, without further notice to or demand upon Tenant, and hold
Tenant responsible for any and all charges and expenses incurred by Landlord
therefor. The provisions of this Section 29.3 shall survive the expiration or
earlier termination of this Lease.
31.4. NO BROKER. Tenant represents and warrants to Landlord that Tenant
has had no dealings or conversations with any broker in connection with the
execution of this Lease except the Named Brokers, and agrees to indemnify
Landlord against all claims, actions, damages, liabilities, costs and expenses,
including attorneys' fees, that may arise from any breach of the foregoing.
31.5. RELATIONSHIP OF THE PARTIES. Nothing contained in this Lease
shall be deemed to constitute or be construed or implied to create the
relationship of principal and agent, partnership, joint venture or any other
relationship between the parties hereto, other than the relationship of landlord
and tenant.
31.6. WAIVERS. The waiver by Landlord of any breach of any term,
covenant or condition herein contained shall not be deemed to be a waiver of
such term, covenant or condition or any subsequent breach of the same or any
other term, covenant or condition herein contained. The subsequent acceptance
of Rent by Landlord shall not be deemed to be a waiver of any preceding breach
by Tenant of any term, covenant or condition of this Lease other than the
failure to pay the particular Rent so accepted, regardless of Landlord's
knowledge of such preceding breach at the time of acceptance of Rent.
24
<PAGE>
31.7. ACCORD AND SATISFACTION. No payment by Tenant or receipt by
Landlord of a lesser amount than the Rent herein reserved shall be deemed to be
other than on account of the earliest stipulated Rent then unpaid, nor shall any
endorsement or statement on any check or any letter accompanying any check or
payment by Tenant be deemed an accord and satisfaction, and Landlord may accept
such check or payment without prejudice to Landlord's right to recover the
balance of such Rent due or Landlord may pursue any other remedy in this Lease
provided or by law permitted.
31.8. RECORDATION. Tenant agrees not to record this Lease or any
memorandum or short form of this Lease. Tenant shall execute and deliver to
Landlord, within 10 days after request, a written memorandum of lease in
recordable form.
31.9. SUCCESSORS AND ASSIGNS. This Lease and the covenants and
conditions herein contained shall be binding upon and inure to the benefit of
Landlord and its successors and assigns, and shall be binding upon Tenant and
its successors and assigns, and shall inure to the benefit of Tenant and only
such assigns of Tenant to whom the assignment by Tenant has been consented to by
Landlord. Nothing in this Section 30.9 shall be deemed to require Landlord to
give any such consent.
31.10. JOINT AND SEVERAL LIABILITY. In the event that two or more
individuals, corporations, partnerships or other business associations (or any
combination of two or more thereof) shall execute this Lease as Tenant, the
liability of each such individual, corporation, partnership or other business
association to pay Rent due hereunder and to perform all other obligations
hereunder shall be joint and several. In like manner, if Tenant is a
partnership or other business association, the members of which are by virtue of
statute or general law subject to personal liability, the liability of each such
member shall be joint and several.
31.11. ENTIRE AGREEMENT; AMENDMENTS. This Lease and the Exhibits
attached hereto set forth the entire understanding between the parties
concerning the subject matter of this Lease and incorporate all prior
negotiations and understandings. There are no covenants, promises, agreements,
conditions or understandings, either oral or written, between them relating to
the subject matter of this Lease other than set forth herein. Tenant hereby
acknowledges that this Lease shall not be deemed, interpreted or construed to
contain, by implication or otherwise, any warranty, representation or agreement
on the part of Landlord that the layout and design of the Project will be, or
continue to be, as shown and described in Exhibit A. No alteration, amendment,
change or addition to this Lease shall be binding upon either party unless in
writing and signed by the party to be charged. This Lease shall be governed and
construed exclusively by the provisions hereof and in accordance with the laws
of the state of Ohio.
31.12. EFFECTIVENESS. The submission of this Lease for examination does
not constitute an offer to lease, or a reservation of or an option for the
Premises, and this Lease shall become effective only upon execution and delivery
thereof by Landlord and Tenant.
25
<PAGE>
31.13. THIRD PARTIES. Nothing herein expressed or implied is intended or
shall be construed to confer upon or give any person other than the parties
hereto and their successors or assigns, any rights or remedies under or by
reason of this Agreement.
31.14. JOINT PREPARATION. This Agreement is to be deemed to have been
prepared jointly by the parties hereto, and any uncertainty or ambiguity
existing herein, if any, shall not be interpreted against either party, but
shall be interpreted according to the application of the rules of interpretation
for arm's-length agreements.
31.15. GUARANTY. Contemporaneously herewith, and as a condition to
Landlord's obligations hereunder, Tenant is delivering to Landlord a guaranty
executed by Guarantor, in the form of Exhibit B attached hereto. If the
guaranty is not furnished before the Term Commencement, Landlord shall have the
right at any time thereafter to treat such failure as a continuing Default until
the guaranty has been received by Landlord.
IN WITNESS WHEREOF, the parties hereto have caused this Lease to be
executed as of the day and year first above mentioned.
Signed and acknowledged in the LANDLORD:
presence of: THOMAS R. EGGERS
/s/ H. RALPH SNODGRASS /s/ THOMAS R. EGGERS
H. Ralph Snodgrass
Signed and acknowledged in the TENANT:
presence of: PROGENITOR, INC., a Delaware
corporation
/s/ H. RALPH SNODGRASS By: /s/ DOUGLASS GIVEN
H. Ralph Snodgrass Its: President
26
<PAGE>
LANDLORD'S ACKNOWLEDGMENT
STATE OF OHIO,
COUNTY OF FRANKLIN, ss:
BEFORE me, the undersigned authority, on this date personally appeared
Thomas R. Eggers, known to me to be the person whose name is subscribed to the
foregoing instrument and being by me first duly sworn acknowledged to me that he
executed the same as his free act and deed for the purposes and consideration
therein expressed.
GIVEN UNDER MY HAND AND SEAL OF OFFICE this 5th day of Dec, 1994.
/s/ ARTHUR M. ZELLNER
Notary Public
ACKNOWLEDGMENT FOR CORPORATE OR PARTNERSHIP TENANT
STATE OF OHIO,
COUNTY OF FRANKLIN ss:
BEFORE me, the undersigned authority, on this date personally appeared D.
Given, the President of Progenitor, Inc., a Delaware corporation, known to me to
be the person whose name is subscribed to the foregoing instrument and being by
me first duly sworn acknowledged to me that (s)he executed the same as the act
and deed of such corporation for the purposes and consideration therein
expressed, and in the capacity therein stated.
GIVEN UNDER MY HAND AND SEAL OF OFFICE this 5th day of Dec, 1994.
/s/ ARTHUR M. ZELLNER
Notary Public
27
<PAGE>
EXHIBIT A
(Legal Description)
Situated in the Township of Clinton, County of Franklin, and in the State of
Ohio:
Being Lot Number Fourteen (14), Fifteen (15), Sixteen (16) and Seventeen (17) in
LINCOLN HEIGHTS ADDITION, as the same are numbered and delineated upon the
recorded plat thereof, of record in Plat Book 7, page 250, Recorder's Office,
Franklin County, Ohio.
<PAGE>
SCHEDULE 1
BASIC MAINTENANCE SCHEDULE FOR
1507 CHAMBERS RD. COLUMBUS, OH.
Tenant shall provide all maintenance for the building at 1507 Chambers
Rd., Columbus, OH. 43212, in order to maintain and preserve the building
in a good and serviceable working condition, free from undo deterioration
and excessive degeneration. In order to help accomplish- this
requirement, the Tenant shall perform, or cause to be performed, the
following items, which shall not be deemed to Limit Tenant's obligations
under Section 12 of the Lease. A record shall be kept of all such
maintenance items, and the record supplied to the Landlord semi-annually,
and produced for examination whenever requested by the Landlord or his
authorized representative.
ITEMS TO BE PERFORMED AND DOCUMENTED
I. HEATING/AIR CONDITIONING/VENTILATING SYSTEMS:
1. Change air filters in all heating systems at least every 60 days.
2. Have each heating unit and overall system inspected/cleaned before
heating season (by October 31 each year).
3. Have each air conditioning unit inspected/charged if necessary
before each cooling season (by May 1st each year).
4. Check each smoke detector/air combustion damper and alarm system
on each heating unit at least semi-annually. Repair/replace as
necessary.
5. Replace dust bags on house vacuum cleaning system at least
bimonthly, more frequently if necessary.
II. ELECTRICAL/LIGHTING SYSTEM(S)
1. Replace/repair lights, fluorescent tubes and fixtures as
necessary.
2. Check each Emergency Escape Lights monthly, for proper
functioning. Repair/replace as necessary.
3. Check exit signs monthly; replace/repair as necessary
4. Check exterior lights monthly; replace/repair as necessary
III. PLUMBING SYSTEMS:
1. Check BOTH sump pumps WEEKLY for proper functioning (lift float
mechanism to start pump). Replace/repair as necessary.
2. Check hot water heater; circulating pump; wash room "point-of use"
hot water heaters monthly. Replace/repair as necessary.
<PAGE>
IV. GROUNDS/EXTERIOR:
1. Check parking lot quarterly for hole/cracks or deterioration.
Repair as necessary.
2. Reseal parking lot every three years with high quality rubberized
asphalt or sealing material.
3. Repaint and reseal fence annually.
V. SAFETY ITEMS:
1. Check all fire extinguishers monthly for proper pressure.
2. Check fire alarms on air handlers at least every 3 months.
3 Check emergency escape lights, as noted in II.2.
4. Check exit signs monthly, as noted in II.3.
5. Check laboratory emergency showers at least monthly (pull
emergency chain and allow shower to cycle). Replace/repair as
necessary.
<PAGE>
SCHEDULE 2
ACCESS LIMITATION
Landlord and its authorized representatives shall have the night to enter
upon the Premises, subject to the following limitations:
(a) Landlord agrees to give Tenant at least twenty-four (24) hours
advance notice of its intent to enter upon the Premises, unless
such entrance is required by virtue of an emergency which, in
Landlord's reasonable judgment, requires immediate entry;
(b) Landlord agrees to follow Tenants established procedures
(applicable to Tenant's employees) which are intended to (i)
protect personnel from injury, and (ii) protect the integrity of
ongoing procedures being conducted by Tenant and Tenants employees
upon the Premises; and
(c) All such entry and related inspections conducted by Landlord shall
be in the presence of an employee or other representative of
Tenant.
<PAGE>
EXHIBIT B
GUARANTY OF LEASE
THIS GUARANTY made as of this 5th day of Dec. 1994 by INTERNEURON
PHARMACEUTICALS, INC., a Delaware corporation (collectively, "Guarantor"),
having an address at One Ledgemont Center, 99 Hayden Avenue, Suite 340,
Lexington MA 02173, in favor of THOMAS R. EGGERS ("Landlord").
RECITALS
A. PROGENITOR, INC., a DELAWARE corporation ("Tenant") is desirous of
entering into that certain lease of even date herewith with Landlord relating to
certain premises known as 1507 Chambers Rd., Columbus, Ohio (which Lease is
herein referred to as the "Lease").
B. Guarantor has requested that Landlord enter into the Lease.
C. Landlord has declined to enter into the Lease unless Guarantor
guarantees the Lease.
NOW THEREFORE, to induce Landlord to enter into the Lease, Guarantor
hereby agrees as follows:
1. UNCONDITIONAL GUARANTY OF CERTAIN OBLIGATIONS, LIMITATIONS.
Guarantor unconditionally guarantees to Landlord and the heirs, devisees,
administrators, executors, successors and assigns of Landlord the full and
punctual payment, performance and observance by Tenant of all of the terms,
covenants and conditions in the Lease to be kept, performed or observed by
Tenant. This Guaranty expires and any obligations of Guarantor expire upon the
earlier of the Termination of the Guaranty as defined in Section 3 below or when
all of the covenants, conditions and obligations in the Lease on Tenant's part
to be performed have been performed and satisfied in full. Without limiting the
foregoing, Guarantor guarantees the performance or payment of any liability of
Tenant which shall accrue under the Lease for any such period whether first
becoming known to or asserted by Landlord during or following the term of the
Lease. If, at any time, Tenant shall default in the performance or observance
of any of the terms, covenants or conditions in the Lease to be kept, performed
or observed by Tenant, including, without limitation, the payment of any rent or
other charge, Guarantor keep, perform and observe the same, as the case may be,
in place and stead of Tenant; provided, however, that in no event shall Landlord
be entitled to specific performance by Guarantor of any non-monetary obligations
under the Lease, it being understood that Guarantor's performance hereunder
shall be limited to Tenant's obligations to make payments under the Lease
(including but not limited to any reimbursement to Landlord for Landlords direct
and reasonable costs of performing any monetary or non-monetary obligation of
Tenant under the Lease if Tenant fails to perform,
<PAGE>
as more fully set forth in the Lease) and damages, costs or expenses incurred by
Landlord proximately caused by Tenant's failure to perform any monetary or
non-monetary obligations under the Lease. Guarantor's obligation hereunder
shall be limited to $350,000.00 (the "Maximum Amount"), plus attorney's fees as
set forth in Section 14 of this Guaranty. Guarantor warrants and represents to
Landlord that Tenant is a subsidiary of Guarantor, and that Guarantor will be
benefited by Tenant and Landlord entering into the Lease.
2. WAIVER OF NOTICE, NO RELEASE OF LIABILITY.
2.1. Generally. Except as set forth in Section 2.2 below, any
act of Landlord or the successors or assigns of Landlord consisting of the
giving of any consent to any matter or thing relating to the Lease, or the
granting of any indulgences or extensions of time to Tenant, may be done without
any notice to Guarantor and without releasing the obligations of Guarantor
hereunder. The obligations of Guarantor hereunder shall not be released by
Landlord's receipt, application or release of security given for the performance
and observance of covenants and conditions in the Lease to be performed or
observed by Tenant, or by any modifications of the Lease. The liability of
Guarantor hereunder shall in no way be affected by (a) the release or discharge
of Tenant in any creditors, receivership, bankruptcy or other proceedings, (b)
the impairment, limitation or modification of the liability of Tenant or the
estate of Tenant in bankruptcy, or of any remedy for the enforcement of Tenant's
liability under the Lease resulting from the operation of any present or future
provision of the Federal Bankruptcy Code or other statute or from the decision
in any court; (c) the rejection or disaffirmance of the Lease in any such
proceedings; (d) the assignment or transfer of the Lease by Tenant; (e) any
disability or other defense of Tenant; (f) the cessation from any cause
whatsoever of the liability of Tenant; or (g) the exercise by Landlord of any
rights or remedies reserved to Landlord under the Lease, provided or permitted
by law or by reason of any termination of the Lease.
2.2. LIMITATION ON CERTAIN CONSENTS. Notwithstanding Section 2.1
above, if Landlord grants its consent to any of the following without the
written consent of Guarantor, Guarantor's liability under this Guaranty shall be
excused to the extent, but only to the extent, that Guarantor proves by clear
and convincing evidence that the non-performance by Tenant of the specific
obligations for which Landlord seeks reimbursement hereunder were the proximate
result of Landlord granting such consent:
2.2.1. Any assignment or sublease.
2.2.2. Any extension of the term.
2.2.3. Any increase in the Basic Rent.
2.2.4. Any refund of any portion of the Security Deposit
prior to the expiration of the Lease, except as may otherwise be required by law
or by order of any court or administrative body.
<PAGE>
3. TERMINATION OF GUARANTY. Notwithstanding any other provision of
this Guaranty, Guarantor shall have no liability for any obligations of Tenant
under the Lease which arise after the date (the "Termination of Guaranty") which
is the earliest of such time, if any, as (i) the common stock of Tenant shall
have been listed on the NASDAQ-National Market System or the New York or
American Stock Exchange, provided that at least one million shares thereof shall
have been sold to purchasers other than Guarantor and those controlled by, in
control of or under common control with Guarantor (as determined in accordance
with the Securities Act of 1933) at a price of at least $5.00 per share; or (ii)
Guarantor furnishes Landlord with a letter of credit meeting the requirements of
Section 22.5 of the Lease, in the amount of the Maximum Amount, to be held and
applied by Landlord pursuant to Section 22.5, with any unused amount to be
refunded to Guarantor, provided that Guarantor shall remain liable as to any
amount refunded to Guarantor, or (iii) the Tenant's financial statements as
audited by a nationally recognized accounting firm meet all of the following
conditions: (a) Tangible Net Worth in excess of $5,000,000 and (b) total
liabilities no greater than 28% of Tangible Net Worth and (c) Cash Flow Ratio of
1.25 and (d) Current Assets in excess of four times current liabilities and (e)
a Quick Ratio of at least 1.4 and (f) an unqualified opinion of the accounting
firm that Tenant has met the foregoing standards, as defined in this Guaranty of
Lease. In the event that the Guaranty of Lease is terminated as a result of
this Section 3(iii) and Tenant subsequently pays one or more dividends to
shareholders or without fair consideration issues debt to shareholders or makes
any other distribution to shareholders without fair consideration to Tenant
(excluding distribution, issuance or dividend of common or preferred stock or
warrants thereon) (a "Shareholder Distribution") which in aggregate totals more
than $1,000,000, the Guaranty of Lease will not have been deemed to have been
terminated under Section 3(iii) from the date of a Shareholder Distribution.
Certain terms used in this Section 3(iii) are defined in Section 6.
4. JOINDER, SURETY DEFENSES. Guarantor agrees that it may be joined
in any action against Tenant in connection with the obligations of Tenant under
the Lease as covered by this Guaranty and recovery may be had against Guarantor
in any such action or Landlord may enforce the obligations of Guarantor
hereunder without first taking any action whatsoever against Tenant or its
successors and assigns, or pursue any other remedy or apply any security it may
hold, and Guarantor hereby waives all rights to assert or plead at any time any
and all surety or other defenses in the nature thereof.
5. LIMITATION OF CLAIMS; SUBORDINATION. Until all of the covenants
and conditions in the Lease on Tenant's part to be performed and observed are
fully performed and observed, Guarantor: (a) shall have no right of subrogation
against Tenant by reason of any payments or acts of performance by Guarantor, in
compliance with the obligations of Guarantor hereunder; (b) waives any right to
enforce any remedy which Guarantor now or hereafter shall have against Tenant by
reason of any one or more payments or acts of performance in compliance with the
obligations of guarantor hereunder; and (c) subordinates any liability or
indebtedness of Tenant now or hereafter held by Guarantor to the obligations of
Tenant to Landlord under the Lease.
<PAGE>
6. DEFINITIONS. For purposes of Section 3(iii), the following terms
have the following meanings:
"Cash Flow Ratio" means net income after taxes plus depreciation plus
amortization to current maturities of long term debt.
"Current Assets" shall be determined in accordance with GAAP and shall be
deemed to include inventory at lower of cost or current market value less any
amounts due from any officer, employee, director, shareholder or related person.
"Debt" shall be determined in accordance with GAAP and shall be deemed to
include all liabilities of Tenant including but not limited to accruals,
deferrals, and capitalized leases, less subordinated debt, if any.
"GAAP" means generally accepted accounting principles, consistently
applied. Any financial terms not specifically defined in this Section 6 shall
have the meanings given to them by GAAP.
"Intangible Assets" shall be determined in accordance with GAAP and be
deemed to include at book value, without limitation, leasehold improvements,
goodwill, patents, copyrights, secret processes, deferred expenses relating to
sales, general administrative, research and development expense, and all amounts
due from any officer, employee, director, shareholder or related person.
"Quick Ratio" shall be determined in accordance with GAAP and shall mean
the ratio of cash on hand and accounts receivable to current liabilities.
"Tangible Net Worth" shall be determined in accordance with GAAP and shall
be deemed to include the amount of total assets of Tenant excluding the amount
of Intangible Assets of Tenant minus the amount of total liabilities of Tenant,
exclusive of Subordinated Debt, if any.
7. AMENDMENT OR ASSIGNMENT OF LEASE. The provisions of the Lease may
be changed, modified, amended or waived by agreement between Landlord and Tenant
at any time, or by course of conduct, without the consent of and without notice
to Guarantor. This Guaranty shall guarantee the performance of the Lease as so
changed, modified, amended or waived, provided that, if Guarantor has not
consented in writing to such amendment or modification, this Guaranty shall
apply only to the Lease according to its original tenor (as amended or modified,
however, by any amendment or modification to which Guarantor shall have
consented in writing). If Landlord disposes of its interest in the Lease,
"Landlord," as used in this Guaranty, shall mean Landlord's successors and
assigns.
8. DEFENSES OF TENANT. Guarantor waives any defense by reason of any
legal or other disability of Tenant and any other party to the Lease, and
further waives any other defense based on the termination of Tenant's liability
for any cause, as well as any
<PAGE>
presentments, or notices of acceptance of this Guaranty, and further waives all
notices of the existence, creation, or incurring of new or additional
obligations.
9. NO WAIVER BY LANDLORD. No delay on the part of Landlord in
exercising any right hereunder or under the Lease shall operate as a waiver of
such right or of any other right of Landlord under the Lease or hereunder, nor
shall any delay, omission or waiver on any one or more occasions be deemed a bar
to or a waiver of the same or any other right on any other future occasion.
10. JOINT AND SEVERAL LIABILITY. If there is more than one
undersigned Guarantor, the term "Guarantor," as used herein, shall include all
of such undersigned and each and every provision of this Guaranty shall be
binding on each and every one of the undersigned and they shall be jointly and
severally liable hereunder and Landlord shall have the right to join one or all
of them in any proceeding or to proceed against them in any order.
11. WHOLE AGREEMENT. This instrument constitutes the entire agreement
between Landlord and Guarantor with respect to the subject matter hereof,
superseding all prior oral or written agreements or understandings with respect
thereto and may not be changed, modified, discharged or terminated orally or in
any manner other than by an agreement in writing signed by Guarantor and
Landlord.
12. APPLICABLE LAW. This Guaranty shall be governed by and construed
in accordance with the laws of the State in which the Premises are located.
13. GUARANTOR'S SUCCESSORS. Guarantor's obligations under this
Guaranty shall be binding on the successors, heirs and assigns of Guarantor.
Guarantor shall not be released by any assignment or delegation by it of its
obligations hereunder.
14. ATTORNEYS' FEES. If Landlord is required to enforce Guarantor's
obligations hereunder by legal proceedings, and if Landlord is the prevailing
party, Guarantor shall pay to Landlord all costs incurred including without
limitation, reasonable attorneys' fees.
15. CAPTIONS. The paragraph headings appearing herein are for
purposes of identification and reference only and shall not be used in
interpreting this Guaranty.
16. INTERPRETATION; SEVERABILITY. It is agreed that if any provision
of this Guaranty or the application of any provision to any person or any
circumstance shall be determined to be invalid or unenforceable, such
determination shall not affect any other provisions of this Guaranty or the
application of such provision to any other person or circumstance, all of which
other provisions shall remain in full force and effect. It is the intention of
the parties hereto that if any provision of this Guaranty is capable of two
constructions one of which would render the provision valid, the provision shall
have the meaning which renders it valid.
<PAGE>
17. EXTENSIONS AND RENEWALS. This Guaranty shall apply to the Lease,
any extension or renewal thereof (provided that Guarantor has consented to such
extension or renewal) and to any holdover term following the term granted in the
Lease or any extension or renewal thereof
18. ACKNOWLEDGMENT; ENFORCEABILITY. GUARANTOR REPRESENTS AND WARRANTS
TO LANDLORD THAT GUARANTOR HAS READ THIS GUARANTY AND UNDERSTANDS THE CONTENT
HEREOF AND THAT THIS GUARANTY IS ENFORCEABLE AGAINST GUARANTOR IN ACCORDANCE
WITH ITS TERMS.
IN WITNESS WHEREOF, Guarantor has executed this Guaranty as of the day and
year first above written.
WITNESSES: GUARANTOR:
INTERNEURON PHARMACEUTICALS,
INC.
/s/ JANE L. VANDERMOLEN By: /s/ THOMAS F. FARB
/s/ DALE RITTER Its: Senior Vice President &
Treasurer
STATE OF MASSACHUSETTS, COUNTY OF MIDDLESEX, ss:
The foregoing instrument was acknowledged before me this 2nd day of
DECEMBER, 1994 by THOMAS F. FARB the V.P. FINANCE, TREASURER & CFO of
INTERNEURON PHARMACEUTICALS, INC., a Delaware corporation, on behalf of the
corporation.
CAROLYN A. GRASSO
Notary Public
<PAGE>
PROGENITOR, Inc.
- --------------------------------------------------------------------------------
September 27, 1995
Mr. T. R. Eggers
1399 Cambridge Blvd.
Columbus, Ohio 43212
Dear Mr. Eggers:
Please use this letter as our 3 month notice that we would like to renew our
lease at 1507 Chambers Road, Columbus, Ohio 43212 for one year (January 1, 1996
through December 31, 1996).
You may contact me at (614)488-6688 should you have any questions.
Sincerely,
/s/ CONSTANCE A. RHIND, CPA
Constance A. Rhind, CPA
Accounting Manager
cc: Doug Given
Dave Bittner
<PAGE>
LEASE, SERVICE AND AFFILIATION AGREEMENT
The Ohio State University, on behalf of its Office of University Laboratory
Animal Resources ("ULAR"), agrees to lease certain facilities and to provide
certain services to Progenitor, Inc., and to enter into a cooperative
affiliation with it, on the following terms and conditions:
1. BACKGROUND; PURPOSE. Progenitor is a corporation that is engaged in
biomedical research. Its Vice President is a member of the faculty of Ohio
State's College of Medicine, where he is engaged in unrelated research. He has
disclosed his interest in Progenitor to Ohio State and has not participated in
Ohio State's decision to enter into this agreement.
ULAR is responsible for conducting and operating Ohio State's animal care
program and its animal facilities, for supporting the animal research efforts of
Ohio State faculty, staff and students, and for providing them with professional
development opportunities and training. At present, ULAR has certain animal
facilities that are not currently being used by Ohio State researchers.
The parties are entering into this agreement to provide Progenitor with the
use of those facilities and related services at ULAR's standard rates. It is
also the parties' intent to use this relationship to enrich the research,
professional development and training opportunities available to Ohio State
faculty, staff and students.
2. FACILITIES. ULAR shall provide Progenitor with three rooms for the
housing of mice, one room for the housing of rats and one office in Building 4
of Ohio State's Laboratory Animal Center, for Progenitor's exclusive use.
Progenitor shall have nonexclusive access to the lockers, showers, feed room,
bedding room, cage wash area, necropsy room, procedure/laboratory room and
environmental and physical security system in Building 4 and to the surgery,
radiology and classroom/conference rooms, fax machine and copy machine in
Building 1. Subject to availability, and by mutual agreement of the parties,
ULAR shall provide Progenitor with additional rooms for the housing of mice,
rats and other species upon the same terms and conditions and at the same rates.
3. EQUIPMENT. All necessary start-up caging, including two complete sets
of caging, waterbottles, SS lids, filtered tops and bottoms and one extra bottom
cage for each animal or group of animals to be placed in sterile housing, shall
be provided by Progenitor at its expense. All cage wash racks/dollies, refuse
dump stations, dollies, and filtered/acid water set-ups shall be provided by
ULAR on a cost-reimbursement basis. Progenitor may provide any other necessary
caging and equipment itself or may obtain it through ULAR on a cost-
reimbursement basis. Caging and equipment provided by Progenitor shall be
installed, maintained and replaced by Progenitor, must be marked with a
permanent means of identification and inventoried on a quarterly basis by
Progenitor, and shall remain the property of Progenitor. Caging and equipment
procured through ULAR shall be installed, maintained and replaced by ULAR and
shall remain the property of ULAR.
4. ANIMAL PROCUREMENT AND OTHER SERVICES. All animals to be housed in
ULAR facilities must be procured through ULAR's animal procurement program
(except for initial start-up animals, which may be transferred from Progenitor's
Athens Ohio facility, subject to any quarantine and disease surveillance
requirements that ULAR deems
1
<PAGE>
appropriate). ULAR shall make such animals available to Progenitor at ULAR's
standard rates, as set forth on the attached schedule. Progenitor may not order
animals from ULAR or house them in ULAR facilities until ULAR has certified that
the facilities and equipment are in compliance with all applicable requirements.
ULAR shall provide Progenitor with other available services on an as-requested
basis at ULAR's standard rates, as set forth on the attached schedule.
5. ANIMAL CARE PROGRAM. ULAR shall provide, and Progenitor must use, all
of the services that comprise ULAR's animal care program, including, without
limitation, animal husbandry, veterinary care support, animal disease and health
surveillance and other such services designed to ensure the humane care and use
of the animals in ULAR's facilities. All Progenitor personnel who are
associated with research projects involving animals housed at ULAR facilities
must participate in ULAR's standard training programs and must be covered by an
occupational health program substantially equivalent to that provided by Ohio
State, whether such personnel conduct their activities at ULAR facilities or
elsewhere.
6. FEES. Progenitor shall pay ULAR the following fees in connection with
this agreement:
(a) ULAR's standard animal procurement fee, as set forth on the
attached schedule, for each animal procured by ULAR;
(b) ULAR's standard per diem rate, as set forth on the attached
schedule, for each animal housed in ULAR facilities;
(c) ULAR's standard fee, as set forth on the attached schedule, for
any other available services requested by Progenitor;
(d) An overhead and ULAR support fee in an amount equal to 42% of the
total of the fees listed in sections 6(a), (b) and (c) above; and
(e) ULAR's cost for any equipment obtained through ULAR.
ULAR may, in its discretion, modify these fees as ULAR deems appropriate.
7. PAYMENT. ULAR shall invoice, and Progenitor shall pay, the fees
listed in sections 6(a), (b), (c) and (d) on a monthly basis. At Progenitor's
option, Progenitor may pay any equipment charges in full at the time of
procurement or in 12 monthly installments of one-twelfth of the fees plus ten
percent each.
8. PROGENITOR PERSONNEL. Progenitor shall provide at least one research
assistant to work with the Progenitor animals in ULAR facilities. All such
personnel shall be under the supervision and control of Dr. Diane McClure,
Associate Director of ULAR, and the ULAR Laboratory Animal Center facility
manager.
9. COMPLIANCE WITH LAWS, REGULATIONS AND POLICIES. Progenitor must
conduct all of its activities in connection with this agreement in full
compliance with the Animal Welfare Act, the ULAR animal care program, and all
other applicable laws, regulations and Ohio State and ULAR policies. All
research conducted on Progenitor animals housed in ULAR facilities must be
approved by, and shall be subject to the
2
<PAGE>
supervision and control of, Ohio State's Institutional Laboratory Animal Care
and Use Committee. Progenitor must appoint at least one Ohio State faculty
member to serve as a co-principal investigator on all such research.
10. INVENTIONS AND INTELLECTUAL PROPERTY. Title to any invention or other
intellectual property derived from any research that Progenitor conducts in
connection with this agreement shall vest in Progenitor.
11. CONFIDENTIALITY. Ohio State shall, to the extent permitted by Ohio
law, maintain the confidentiality of any information provided to Ohio State by
Progenitor and reasonably designated by it to constitute a trade secret or other
legally protectable form of information. Progenitor shall assist Ohio State as
necessary to protect the confidentiality of any such information.
12. CONFLICTS OF INTEREST. Progenitor shall not use the facilities and
services provided to it through this agreement in connection with research that
is substantially similar to or potentially competitive with any research that
its Vice President is conducting or may conduct in his capacity as a member of
Ohio State's faculty or that would place him in a conflict of interest as
defined by Ohio law or Ohio State policies.
13. COOPERATION. Ohio State and Progenitor shall cooperate in developing
additional, mutually beneficial research, professional development and training
opportunities for Ohio State's faculty, staff and students in connection with
the activities contemplated under this agreement.
14. LIMITATION OF LIABILITY. Neither party shall be liable to the other
party for any loss or damage that (a) arises out of any event that is not within
the first party's sole control and/or (b) is not the result of the negligence or
willful misconduct of the first party, its officers, its employees or its
agents, including, without limitation, any loss or damage resulting from
accidental disease outbreaks among Progenitor's animals. In no event shall
either party be liable to the other party for any indirect, special, incidental,
exemplary or consequential damages, including, without limitation, lost profits,
whether based in contract, in tort or on any other legal theory, and whether or
not the first party has been made aware of the possibility of such damages.
15. EXCLUSION OF WARRANTIES. In view of the experimental nature of
Progenitor's research, Ohio State makes no warranty or guarantee of any kind in
connection with the facilities and services to be provided by it under this
agreement. OHIO STATE SPECIFICALLY DISCLAIMS ALL WARRANTIES, WHETHER EXPRESS OR
IMPLIED, AND INCLUDING, WITHOUT LIMITATION, ALL WARRANTIES OF MERCHANTABILITY OR
FITNESS FOR A PARTICULAR PURPOSE, IN CONNECTION WITH THIS AGREEMENT.
16. INDEMNIFICATION. Notwithstanding the provisions of section 14,
Progenitor shall indemnify and hold harmless Ohio State and its Board of
Trustees, officers, employees, students and agents against any and all claims,
liabilities, damages and costs, including attorneys' fees, that result from any
claims or actions that are asserted by third parties and that arise in any way
out of Progenitor's activities in connection with this agreement. The
provisions of this section shall survive any termination of this agreement.
3
<PAGE>
17. INSURANCE. Throughout the term of this agreement, Progenitor shall
maintain an "occurrence" policy of general liability insurance providing
coverage of at least $1,000,000 for personal injury or death per person,
$1,000,000 for personal injury or death per occurrence, and $1,000,000 for
property damage per occurrence resulting from the acts or omissions of
Progenitor in connection with the activities to be conducted under this
agreement. The policy must name Ohio State and its Board of Trustees, officers,
employees, students and agents as additional insureds and must provide that no
act or omission of Progenitor shall affect or limit the obligation of the
insurer to pay on their behalf the amount of any loss sustained. The policy
must also carry an endorsement providing that it may not be canceled unless the
insurer gives Ohio State at least 30 days' prior written notice.
18. TERMINATION. Either party may terminate this agreement, upon 30 days'
written notice, for any reason, including, without limitation, a need by Ohio
State for the designated facilities for its own use. Ohio State may terminate
this agreement immediately for any failure by Progenitor to correct any
noncompliance with the provisions of section 9 as and within the time
recommended by the University's ILACUC or for nonpayment of fees when due within
three business days following written notice of delinquency. Following
termination notice, all applicable fees, including, without limitation, the
standard hourly fee for ULAR technician time, will continue to accrue until all
Progenitor animals are depopulated, all animal housing rooms assigned to
Progenitor are disinfected, and all Progenitor equipment is removed. Progenitor
must pay all outstanding charges in full within 30 days after termination.
19. NONDISCRIMINATION. Progenitor shall not discriminate against any
employee or applicant for employment with respect to hire; tenure; terms,
conditions or privileges of employment; or any matter directly or indirectly
related to employment, because of the employee's or applicant's race, color,
religion, national origin, disability, sex, age or ancestry.
20. NOTICES. All notices from Progenitor to Ohio State pertaining to this
agreement shall be sent to the following:
Dr. William P. Yonushonis
University Laboratory Animal Resources
313 Research Foundation
1960 Kenny Road
Columbus, Ohio 43210-1063
All notices from Ohio State to Progenitor pertaining to this agreement shall be
sent to the following:
Douglas B. Given, M.D., Ph.D.
President and CEO
Progenitor, Inc.
1507 Chambers Road
Columbus, Ohio 43212-1566
Notices shall be effective upon receipt.
21. RELATIONSHIP BETWEEN THE PARTIES. This agreement does not create an
employment relationship, agency, partnership or joint venture between the
parties, and
4
<PAGE>
neither party has the power to obligate or bind the other in any manner.
Neither party has any financial or other responsibility for or to the other
except as provided in this agreement.
22. USE OF NAME. Progenitor shall not advertise any connection with Ohio
State, nor make use of the Ohio State's name, symbols or other identifying marks
or property, without the prior written consent of Ohio State's Office of
Business and Administration.
23. ASSIGNMENT. Neither party may assign its rights or delegate its
duties under this agreement without the prior written consent of the other
party.
24. WAIVER. No waiver of any default in the performance of this agreement
shall be effective unless in writing and signed by the waiving party. The
waiver of a particular default in the performance of this agreement shall not
constitute a waiver of any other or subsequent default. The resort to a
particular remedy upon a default shall not constitute a waiver of any other
available remedies.
25. SEVERABILITY. If any provision of this agreement is determined to be
invalid or unenforceable, the remainder of the agreement shall not be affected
and shall remain in effect.
26. APPLICABLE LAW. This agreement shall be subject to and construed in
accordance with Ohio law. Any action based in whole or in part on this
agreement must be brought in an Ohio court of competent jurisdiction.
27. ENTIRE AGREEMENT, AMENDMENTS. This agreement constitutes the entire
agreement between the parties and supersedes all prior agreements and
understandings with respect to the same subject matter. No amendment or
modification of this agreement shall be effective unless in writing and signed
by the parties.
THE OHIO STATE UNIVERSITY PROGENITOR, INC.
/S/WILLIAM P. YONUSHONIS 2-24-95 /S/DOUGLASS GIVEN 2/24/95
- ----------------------------------- --------------------------------
William E. Yonushonis Date Douglas B. Given Date
Director, ULAR President and CEO
/S/EDWARD F. HAYES 2-27-95
- -----------------------------------
Edward F. Hayes Date
Vice President for Research
/S/JANET G. PICHETTE 2-28-95
- -----------------------------------
Janet G. Pichette Date
Vice President for
Business and
Administration
5
<PAGE>
THE OHIO STATE UNIVERSITY
UNIVERSITY LABORATORY ANIMAL RESOURCES
FEES AND CHARGES
- --------------------------------------------------------------------------------
DESCRIPTION 1995 QUTY
- --------------------------------------------------------------------------------
PER DIEM RATES:
AQUATIC TANKS (DEPENDS UPON SERVICES) VARIABLE
BIRDS, CHICKENS 0.000
BROODER UNITS 4.222 /UNIT
SINGLE 1.612 /ANIMAL
MULTIPLE IN CAGES 0.150 /ANIMAL
MULTIPLE IN RUNS 4.139 /RUN
DUCKS, GEESE 0.000
SINGLE 1.736 /ANIMAL
MULTIPLE IN RUNS 4.139 /RUN
QUAIL 0.000
STANDARD 0.447 /ANIMAL
MULTIPLE (6 OR MORE) 2.460 /UNIT
TURKEYS 4.139 /ANIMAL
WILD BIRDS (DEPENDS UPON SERVICES) 0.000 VARIABLE
CALVES 6.406 /ANIMAL
CATS 0.000 VARIABLE
SINGLE 3.370 /ANIMAL
MULTIPLE IN RUNS 2.870 /ANIMAL
MULTIPLE IN ROOMS (2-4) 2.756 /ANIMAL
6
<PAGE>
- --------------------------------------------------------------------------------
DESCRIPTION 1995 QUTY
- --------------------------------------------------------------------------------
MULTIPLE IN ROOMS (5 OR MORE) 1.279 /ANIMAL
CHINCHILLAS 0.974 /ANIMAL
DOGS 0.000
STANDARD (CAGE OR RUN) 6.597 /ANIMAL
POST-OP 10.730 /ANIMAL
QUARANTINE/MINIMUM 30 DAYS 12.499 /ANIMAL
FERRETS 3.754 /ANIMAL
FROGS 0.190 /ANIMAL
HORSES, COWS 0.000
BARRIER 17.690 /ANIMAL
STANDARD 9.838 /ANIMAL
LIZARDS (LARGE)/SNAKES 4.732 /CAGE
MUDPUPPIES 0.260 /ANIMAL
OPOSSUMS 0.000
DIDELPHIS-CAGE 3.453 /ANIMAL
DIDELPHIS-RUN 7.907 /ANIMAL
MONODELPHIS-SINGLE 0.314 /ANIMAL
MONODELPHIS-MULTIPLE 0.235 /ANIMAL
MONODELPHIS-BARRIER 0.358 /ANIMAL
MONODELPHIS-STERILE 0.381 /ANIMAL
PIGS 0.000
MULTIPLE LESS THAN 15 KG (MINIMUM 3 ANIMALS) 2.419 /ANIMAL
7
<PAGE>
- --------------------------------------------------------------------------------
DESCRIPTION 1995 QUTY
- --------------------------------------------------------------------------------
15-50 KG 6.373 /ANIMAL
>50 KG 7.437 /ANIMAL
PRIMATES 0.000
BABOONS 0.000
FEMALE 9.094 /ANIMAL
MALE 13.738 /ANIMAL
QUARANTINE (MINIMUM 6 ANIMALS) 12.186 /ANIMAL
CHIMPANZEES 0.000
SINGLE 21.185 /ANIMAL
MULTIPLE 19.417 /ANIMAL
QUARANTINE 41.694 /ANIMAL
MACAQUES/CAPUCIANS 0.000
SINGLE 7.045 /ANIMAL
MULTIPLE 6.542 /ANIMAL
QUARANTINE (MINIMUM 6 ANIMALS) 13.048/ANIMAL
TAMARINS 3.461/ANIMAL
RABBITS 0.000
SINGLE 2.755 /ANIMAL
MULTIPLE 2.195 /ANIMAL
RODENTS 0.000
GERBILS 0.000
SINGLE 0.437 /ANIMAL
8
<PAGE>
- --------------------------------------------------------------------------------
DESCRIPTION 1995 QUTY
- --------------------------------------------------------------------------------
MULTIPLE 0.302 /ANIMAL
BARRIER 0.458 /ANIMAL
STERILE 0.510 /ANIMAL
GUINEA PIGS 0.000
SINGLE 1.258 /ANIMAL
MULTIPLE 1.019 /ANIMAL
HAMSTERS 0.000
SINGLE 0.458 /ANIMAL
MULTIPLE 0.322 /ANIMAL
BARRIER 0.478 /ANIMAL
STERILE 0.530 /ANIMAL
MICE 0.000
SINGLE 0.246 /ANIMAL
MULTIPLE 0.203 /ANIMAL
BARRIER 0.302 /ANIMAL
TRANSGENIC (RIGHTMIRE HALL) 0.350 /ANIMAL
WILD 0.246 /ANIMAL
STERILE 0.336 /ANIMAL
RATS 0.000
SINGLE 0.493 /ANIMAL
MULTIPLE 0.347 /ANIMAL
BARRIER 0.515 /ANIMAL
9
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- --------------------------------------------------------------------------------
DESCRIPTION 1995 QUTY
- --------------------------------------------------------------------------------
STERILE 0.571 /ANIMAL
SHEEP, GOATS 7.176 /ANIMAL
WOODCHUCKS 3.754 /ANIMAL
MISCELLANEOUS CHARGES: 0.000
ROOM CHARGE VARIABLE /ROOM
KEY CARD REPLACEMENT 5.000 /CARD
SURGERY CHARGES: 0.000
ROOM CHARGES 0.000
ROOM SETUP 45.000 /TIME
ROOM OVERHEAD 20.000 /HOUR
PERSONNEL LABOR FEES 0.000
TECHNICIAN FEES 30.000 /HOUR
R.N. FEES 40.000 /HOUR
PACK CHARGES (STERILE) 0.000
EXTENDED PACK 100.000 /PACK
SPECIAL PACK 75.000 /PACK
GENERAL SURGERY PACK 80.000 /PACK
CUT DOWN PACK 40.000 /PACK
SUTURE SET USAGE 20.000 /SET
PACK CHARGE (NON-STERILE) 0.000
EXTENDED PACK 85.000 /PACK
GENERAL PACK 60.000 /PACK
10
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- --------------------------------------------------------------------------------
DESCRIPTION 1995 QUTY
- --------------------------------------------------------------------------------
LAPAROSCOPIC PACK 50.000 /PACK
SURGERY MISCELLANEOUS 0.000
DISPOSABLE SUPPLIES/PERSON/SURGERY 25.000 /PACK
LINEN PACK 43.000 /PACK
PRESURGICAL SERVICES (INCLUSIVE OF PERSONNEL) 0.000
ROUTINE SURGICAL PREP 0.000
PRIMATE, DOG, CAT, PIG 35.000 /PREP
RABBIT 15.000 /PREP
RODENT 5.000 /PREP
SURGICAL DRUG MEDICATION 10.000 /PREP
I.V. FLUID ADMINISTRATION 25.000 /PREP
PROCEDURES/MISCELLANEOUS 0.000
ANIMAL MODEL PREPARATION VARIABLE/EACH
TISSUE HARVEST VARIABLE/EACH
ANESTHETIC CHARGES GASES - HALOTHANE, ETC. 0.000
FIRST HOUR 40.000
EACH ADDITIONAL HOUR 25.000 /HOUR
INJECTABLE (NOT INCLUDING PERSONNEL) COST+50%
EQUIPMENT USAGE 0.000
AUTOPSY 30.000 /USE
DYNAMAP (ELECTRONIC BP) 10.000 /HOUR
FLUORO PROCEDURE 85.000 /HOUR
11
<PAGE>
- --------------------------------------------------------------------------------
DESCRIPTION 1995 QUTY
- --------------------------------------------------------------------------------
PULSE OXIMETER 10.000 /HOUR
STERILIZATION OF PACKS 20.000 /RUN
VENTILATOR 15.000 /HOUR
X-RAY FILM/PLATE 35.000 /PLATE
ELECTRO SURGERY 20.000 /HOUR
TECHNICAL CHARGES: 0.000
ATTENDING VETERINARIAN FEES N/C
TECHNICIAN FEES 0.000
ANIMAL CARE TECHNICIANS FEES 30.000 /HOUR
ANIMAL HEALTH TECHNICIANS FEES 30.000 /HOUR
R.N. FEES 40.000 /HOUR
TECHICIAN FEES (WEEKENDS, HOLIDAYS, AFTER HOURS) 45.000 /HOUR
R.N. FEES (WEEKENDS, HOLIDAYS, AFTER HOURS) 60.000 /HOUR
POST-OPERATIVE (RECOVERY) OBSERVATION 25.000 /HOUR
BASIC ICU-CARE (NOT TO EXCEED $250) 60.000 /HOUR
MEDICATIONS. INJECTIONS, TREATMENTS 0.000
ANIMALS ILL NOT DUE TO RESEARCH COMPLICATIONS N/C
ANIMALS ILL DUE TO RESEARCH COMPLICATIONS 0.000
TECHNICIAN TIME 30.000 /HOUR
12
<PAGE>
- --------------------------------------------------------------------------------
DESCRIPTION 1995 QUTY
- --------------------------------------------------------------------------------
PLUS COST OF MEDICATIONS COST+50%
EXTERNAL SERVICES: 0.000
SUPPORT (ON CAMPUS) COST UP TO +100%
SUPPORT (OFF CAMPUS) COST UP TO +100%
EQUIPMENT RENTAL (OFF CAMPUS) COST UP TO +100%
PROCUREMENT SERVICES: 0.000
ANIMAL ORDER CHARGE 12.500 /ORDER
UNCONDITIONED DOGS (ACUTE STUDIES ONLY) 25.000 /DOG
DELIVER CHARGES 0.000
ON-CAMPUS DELIVERY N/C
OFF-CAMPUS DELIVERY 0.000
VAN 40.000 /DAY
PLUS MILEAGE 0.270 /MILE
TRUCK 52.000 /DAY
PLUS MILEAGE 0.270 /MILE
PATHOLOGY 0.000
COMPLETE NECROPSY (RODENT OR RABBIT-STANDARD) 114.400 /ANIMAL
BASIC NECROPSY (PROBLEM ORIENTED) 83.200 /ANIMAL
BRIEF NECROPSY (PROBLEM ORIENTED GROSS EXAM) 31.200 /ANIMAL
BIOPSY TISSUE PREP AND INTERPRETATION 31.200 /TISSUE
SPECIAL STAINS (PREP AND INTERPRETATION 0.000
13
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- --------------------------------------------------------------------------------
DESCRIPTION 1995 QUTY
- --------------------------------------------------------------------------------
GROUP I (PAS, ACID-FAST, GIEMSA, TOLUDINE B) 15.600 /SLIDE
GROUP 2 (GRAM, IRON, ELASTIC, MUCIN, NOCARDIA) 26.000 /SLIDE
GROUP 3 (TRICHROME, MUCICARMINE, SILVER,GLD) 31.200 /SLIDE
TISSUE PREP WITH HE STAINING 8.320 /SLIDE
NECROPSY ROOM RATE FOR INVESTIGATORS 52.000 /HOUR
PATHOLOGIST CONSULTATIVE SERVICES 67.600 /HOUR
URINALYSIS 10.400 /SAMPLE
CYTOLOGY-STAINING AND INTERPRETATION 15.600 /SAMPLE
TECHNOLOGIST CONSULTATIVE SERVICES (AIR FLOW, ETC 22.880 /HOUR
HEMATOLOGY SERVICES: 0.000
CBC 16.000 /SAMPLE
WBC 8.000 /SAMPLE
CHEMISTRY 10.000 /SAMPLE
SEROLOGY: 0.000
GROUP 1- COMPLETE 0.000
MOUSE-13 PANEL SCREEN 67.600 /ANIMAL
RAT-11 PANEL SCREEN 67.600 /ANIMAL
GROUP 2-STANDARD 0.000
MOUSE-8 PANEL SCREEN 36.400 /ANIMAL
14
<PAGE>
- --------------------------------------------------------------------------------
DESCRIPTION 1995 QUTY
- --------------------------------------------------------------------------------
RAT-8 PANEL SCREEN 36.400 /ANIMAL
GROUP 3-BRIEF 0.000
MOUSE-4 PANEL SCREEN 26.000 /ANIMAL
RAT-5 PANEL SCREEN 25.000 /ANIMAL
INDIVIDUAL TESTS 10.400 /TEST
PARASITOLOGY (EXAMINATION & INTERPRETATION) 0.000
GROUP 1- FECAL FLOAT, SKIN SCRAP, BLOOD 7.280 /ANIMAL
GROUP 2- DIRECT, TAPE IMP, SIMPLE ID 5.200 /SAMPLE
CULTURE 0.000
GROUP 1- AEROBIC BACTERIA, FUNGUS 20.800 /SAMPLE
GROUP 2- MYCOPLASMA, MYCOBACTERIA BLOOD 36.400 /SAMPLE
GROUP 3- ANAEROBIC, MICROPHILIC 41.600 /SAMPLE
ANTIBIOTIC SENSITIVITY 10.400 /ISOLATE
FACILITY QUARTERLY CHECKS: 0.000
WATER QA, RODAC PLATES 15.600 /SAMPLE
STERILIZER QA 2.800 /TEST
INDIVIDUAL TESTS 10.400 /TEST
15
<PAGE>
EMPLOYMENT AGREEMENT
Agreement, dated 1-3-93, by and between Progenitor, Inc., a Delaware
corporation (the "Corporation"), and Douglas Given ("VP").
WITNESSETH:
WHEREAS, the Corporation desires to employ the VP as Executive Vice
President and member ex officio of Corporation's Scientific Advisory Board and
the VP desires to be employed by the Corporation as Executive Vice President and
member ex officio of the Corporation's Scientific Advisory Board pursuant to the
terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the foregoing and the mutual promises
and covenants herein contained, it is agreed as follows:
1. EMPLOYMENT; DUTIES
(a) The Corporation engages and employs the VP, and the VP hereby accepts
engagement and employment, as Executive Vice President of the Corporation and
member ex officio of the Corporation's Scientific Advisory Board, and to
supervise and have responsibility for the development and operation of the
Corporation, including, but not limited to the Corporation's: (i) research,
(ii) preclinical and clinical development, (iii) regulatory affairs, and
(iv) manufacturing, and to perform such other services and duties as are
normally incident to such positions and are commensurate with VP's background,
education and professional standing.
(b) The VP shall perform his duties hereunder from the Corporation's
executive offices which will be located in Ohio, provided, however, that the VP
acknowledges and agrees that the performance by the VP of his duties hereunder
may require significant domestic and international travel by the VP.
(c) The VP shall devote substantially all of his business time and efforts
to the proper discharge of his duties and responsibilities under this Agreement.
2. TERM
The VP's employment hereunder shall be for a term of four years commencing
on January 4, 1993 and continuing through the fourth anniversary of such date.
3. COMPENSATION
(a) As compensation for the performance of his duties on behalf of the
Corporation, the VP shall be compensated as follows:
<PAGE>
(i) Upon the next meeting of the Corporation's Board of Directors, the
VP shall be entitled to purchase Three Percent (3%) of the common stock of the
Corporation outstanding on the effective date of this Agreement for $0.01 per
share (the "Founders Stock");
(ii) The Founders Stock shall be subject to a repurchase option in favor
of the Corporation at $0.01 per share upon termination of this Agreement by VP
or the Corporation for any reason (the "Repurchase Option"). The Repurchase
Option shall expire equally with respect to one-quarter (1/4) of the Founders
Stock over a period of four years each January 3, 1994, 1995, 1996 and 1997 (the
"Vesting Dates"). In the event of a sale by Interneuron Pharmaceuticals, Inc.
or other corporate reorganization or business combination in which more than
fifty percent (50%) of the Corporation's outstanding voting stock is transferred
to different holders in a single transaction or a series of related transactions
other than in a public offering or to an affiliate of Interneuron
Pharmaceuticals, Inc. (a "Change in Control"), then (i) the Repurchase Option
shall continue to expire in accordance with the preceding sentence, and (ii) in
the event that the VP is still employed by the Corporation eighteen (18) months
after the Change in Control, the Repurchase Option shall expire with respect to
all of the VP's Founders Stock.
(iii) The Corporation shall pay the VP an annual base salary ("Base
Salary") of One Hundred Seventy Five Thousand Dollars ($175,000), payable in
accordance with the usual payroll period of the Corporation, which shall be
subject to annual review in the sole discretion of the Board of Directors of the
Corporation;
(v) The Corporation shall pay the VP bonuses, the amount of which shall
be in the discretion of the Corporation, upon the achievement of substantial
milestones to be mutually agreed upon from time to time by the Corporation and
VP following the start of the VP's employment;
(vi) The Corporation shall reimburse the VP for the VP's reasonable
moving costs and house-hunting expenses in Ohio;
(vii) The Corporation shall pay the monthly mortgage payment on the VP's
present house in New Jersey until the earlier of (a) one year, or (b) its sale,
provided that after three bids are placed on the house, the VP shall accept the
highest bid;
(viii) The Corporation shall loan the VP $100,000 at 7% interest on a fully
secured basis for the down payment on the purchase of a new house in Ohio.
a. The VP shall repay at least $60,000 of the loan together
with interest on such amount upon the earlier of, the sale of the VP's old house
to the extent proceeds are available, four (4) years from the date of such loan,
or the termination of the VP's employment;
2
<PAGE>
b. The remaining $40,000 together with interest on such amount
shall be forgiven in four increments of $10,000 each upon the achievement of the
following milestones:
i. $10,000 together with interest on such amount upon each
of the first two INDs filed;
ii. $10,000 together with interest on such amount upon the
first corporate joint venture;
iii. $10,000 together with interest on such amount upon the
successful initial public offering.
c. After the earlier of four (4) years, or immediately upon the
termination of the VP's employment, the remaining portion of the loan together
with interest on such amount will become due and payable.
The Corporation shall withhold all applicable federal, state and local taxes,
social security and workers' compensation contributions and such other amounts
as may be required by law or agreed upon by the parties with respect to the
compensation payable to the VP pursuant to section 3(a) hereof.
(b) The Corporation shall reimburse the VP for all normal, usual and
necessary expenses incurred by the VP in furtherance of the business and affairs
of the Corporation, including reasonable travel and entertainment, against
receipt by the Corporation of appropriate vouchers or other proof of the VP's
expenditures and otherwise in accordance with such Expense Reimbursement Policy
as may from time to time be adopted by the Board of Directors of the
Corporation. In addition, the Corporation shall provide the VP with airfare to
and from Columbus, Ohio to Philadelphia, Pennsylvania for the VP's remaining 9
weekend residencies in his final semester at the Wharton Executive MBA program.
(c) The VP shall be, during the term of this Agreement, entitled to
vacations of not less than four (4) weeks per annum.
(d) The Corporation shall make available to the VP and his dependents,
such medical, disability, life insurance and such other health benefits as
Interneuron Pharmaceuticals, Inc. makes available to its senior officers and
directors. In addition, while the VP is employed by the Corporation, the
Corporation shall also provide the VP with a $500,000 term life insurance policy
payable to the beneficiary of the VP's choice.
3
<PAGE>
4. REPRESENTATIONS AND WARRANTIES BY THE VP AND CORPORATION
The VP hereby represents and warrants to the Corporation as follows:
(a) Neither the execution and delivery of this Agreement nor the
performance by the VP of his duties and other obligations hereunder violate or
will violate any statute, law, determination or award, or conflict with or
constitute a default under (whether immediately, upon the giving of notice or
lapse of time or both) any prior employment agreement, contract, or other
instrument to which the VP is a party or by which he is bound.
(b) The VP has the full right, power and legal capacity to enter and
deliver this Agreement and to perform his duties and other obligations
hereunder. This Agreement constitutes the legal, valid and binding obligation
of the VP enforceable against him in accordance with its terms. No approvals or
consents of any persons or entities are required for the VP to execute and
deliver this Agreement or perform his duties and other obligations hereunder.
(c) The VP understands that some or all of the stock received by the VP
pursuant to section 3(a) hereof will not be registered under the Securities Act
of 1933 (the "1933 Act"), and acknowledges that he will be obligated to agree,
as a condition to the issuance thereof, that he will acquire such stock for his
own account for investment and not with a view to, or for resale in connection
with a distribution thereof, and will bear the economic risk of his investment
in such stock for an indefinite period of time.
The Corporation hereby represents and warrants to the VP as follows:
(a) The Corporation is duly organized, validly existing and in good
standing under the laws of the State of Delaware, with all requisite corporate
power and authority to own its properties and conduct its business in the manner
presently contemplated.
(b) The Corporation has full power and authority to enter into this
Agreement and to incur and perform its obligations hereunder.
(c) The execution, delivery and performance by the Corporation of this
Agreement does not conflict with or result in a breach or violation of or
constitute a default under (whether immediately, upon the giving of notice or
lapse of time or both) the certificate of incorporation or by-laws of the
Corporation, or any agreement or instrument to which the Corporation is a party
or by which the Corporation of any of its properties may be bound or affected.
4
<PAGE>
5. NON-COMPETITION
(a) The VP understands and recognizes that his services to the Corporation
are special and unique and agrees that, during the term of this Agreement and,
unless such termination is by the VP pursuant to 7(a)(iii) below, for a period
of two (2) years from the date of termination of his employment hereunder, he
shall not in any manner, directly or indirectly, on behalf of himself or any
person, firm, partnership, joint venture, corporation or other business entity
("Person"), enter into or engage in any business competitive with the
Corporation's business, proposed business or research activities, either as an
individual for his own account, or as a partner, joint venturer, executive,
agent, consultant, salesperson, officer, director or shareholder of a Person
operating or intending to operate in the areas of cellular therapeutics,
hematopoietic growth factors, genetic therapy, human blood products, or any
additional area (or lesser area) of business listed in Schedule A attached
hereto (as shall be amended from time to time by the parties to take into
account additional areas of business in which the Corporation may become
engaged), within the geographic area of the Corporation's business.
(b) During the term of this Agreement and for two (2) years thereafter, VP
shall not, directly or indirectly, without the prior written consent of the
Corporation:
(i) solicit or induce any employee of the Corporation or any
affiliate to leave the employ of the Corporation or any affiliate or hire for
any purpose any employee of the Corporation or any affiliate or any employee who
has left the employment of the Corporation or any affiliate within six months of
the termination of said employee's employment with the Corporation; or
(ii) solicit or accept employment or be retained by any party who,
at any time during the term of this Agreement, was a customer or supplier of the
Corporation any affiliate where his position will be related to the business of
the Corporation; or
(iii) solicit or accept the business of any customer or supplier of
the Corporation or any affiliate with respect to products similar to those
supplied by the Corporation.
(c) In the event that the VP breaches any provisions of this Section 5 or
there is a threatened breach, then, in addition to any other rights which the
Corporation may have, the Corporation shall be entitled, without the posting of
a bond or other security, to injunctive relief to enforce the restrictions
contained herein. In the event that an actual proceeding is brought in equity
to enforce the provisions of this Section 5, the VP shall not urge as a defense
that there is an adequate remedy at law nor shall the Corporation be prevented
from seeking any other remedies which may be available.
5
<PAGE>
6. CONFIDENTIAL INFORMATION
The VP agrees that during the course of his employment or at any time after
termination, he will not disclose or make accessible to any other person, the
Corporation's products, services and technology, both current and under
development, promotion and marketing programs, lists, trade secrets and other
confidential and proprietary business information of the Corporation or any of
its clients. The VP agrees: (i) not to use any such information for himself or
others; and (ii) not to take any such material or reproductions thereof from the
Corporation's facilities at any time during his employment by the Corporation,
except as required in the VP's duties to the Corporation. The VP agrees
immediately to return all such material and reproductions thereof in his
possession to the Corporation upon request and in any event upon termination of
employment.
(b) Except with prior written authorization by the Corporation, the VP
agrees not to disclose or publish any of the confidential, technical or business
information or material of the Corporation, its clients or any other party to
whom the Corporation owes an obligation of confidence, at any time during or
after his employment with the Corporation.
(c) VP hereby assigns to the Corporation all right, title and interest he
may have or acquire in all inventions (including patent rights) developed by the
VP during the term of this Agreement ("Inventions") and agrees that all
Inventions shall be the sole property of the Corporation and its assigns, and
the Corporation and its assigns shall be the sole owner of all patents,
copyrights and other rights in connection therewith. VP further agrees to
assist the Corporation in every proper way (but at the Corporation's expense) to
obtain and from time to time enforce patents, copyrights or other rights on said
Inventions in any and all countries.
7. TERMINATION
(a) The VP's employment hereunder shall begin on January 4, 1993
and shall continue for the period set forth in Section 2 hereof unless sooner
terminated upon the first to occur of the following events:
(i) The death of the VP;
(ii) Termination by the Board of Directors of the Corporation for just
cause. Any of the following actions by the VP shall constitute just cause:
(A) Material breach by the VP of Section 5 or Section 6 of
this Agreement;
6
<PAGE>
(B) Material breach by the VP of any provision of this
Agreement other than Section 5 or Section 6 which is not cured by the VP within
fifteen (15) days of notice thereof from the Corporation; or
(C) Any action by the VP to intentionally harm the
Corporation.
(iii) Termination by the VP for just cause. Any of the following actions
or omissions by the Corporation shall constitute just cause:
(A) Material breach by the Corporation of any provision of
this Agreement which is not cured by the Corporation within fifteen (15) days of
notice thereof from the VP; or
(B) Any action by the Corporation to intentionally harm the
VP;
(iv) Termination by the Board of Directors of the Corporation without
just cause but only as defined in Section 7(a)(ii)(A), provided that the
Corporation continues to pay the VP's base salary plus pro-rated average bonuses
subject to setoff for other employment for a period of six (6) months, or in the
case of a termination within the first year, nine (9) months.
(b) Upon termination pursuant to subparagraph (ii) of paragraph
(a) above, the VP (or his estate in the event of termination pursuant to
subparagraph (i)), shall be entitled to receive the Base Salary accrued but
unpaid as of the date of termination.
8. NOTICES
Any notice or other communication under this Agreement shall be in writing
and shall be deemed to have been given: when delivered personally against
receipt therefor; one (1) day after being sent by Federal Express or similar
overnight delivery; or three (3) days after being mailed registered or certified
mail, postage prepaid, return receipt requested, to either party at the address
set at the end of this Agreement, or to such other address as such party shall
give by notice hereunder to the other party.
9. RENEWAL OF AGREEMENT
Upon expiration of the term of this Agreement, this agreement may be
renewed for additional one (1) year periods by the parties by mutual written
agreement.
10. SEVERABILITY OF PROVISIONS
If any provision of this Agreement shall be declared by a court of
competent jurisdiction to be invalid, illegal or incapable of being enforced in
whole or in part, such provision shall be interpreted so as to remain
enforceable to the maximum extent
7
<PAGE>
permissible consistent with applicable law and the remaining conditions and
provisions or portions thereof shall nevertheless remain in full force and
effect and enforceable to the extent they are valid, legal and enforceable, and
no provision shall be deemed dependent upon any other covenant or provision
unless so expressed herein.
11. ENTIRE AGREEMENT MODIFICATION
This Agreement contains the entire agreement of the parties relating to the
subject matter hereof, and the parties hereto have made no agreements,
representations or warranties relating to the subject matter of this Agreement
which are not set forth herein. No modification of this Agreement shall be
valid unless made in writing and signed by the parties hereto.
12. BINDING EFFECT
The rights, benefits, duties and obligations under this Agreement shall
inure to, and be binding upon, the Corporation, its successors and assigns, and
upon the VP and his legal representatives. This Agreement constitutes a
personal service agreement, and the performance of the VP's obligations
hereunder may not be transferred or assigned by the VP.
13. NON-WAIVER
The failure of either party to insist upon the strict performance of any of
the terms, conditions and provisions of this Agreement shall not be construed as
a waiver or relinquishment of future compliance therewith, and said terms,
conditions and provisions shall remain in full force and effect. No waiver of
any term or condition of this Agreement on the part of either party shall be
effective for any purpose whatsoever unless such waiver is in writing and signed
by such party.
14. GOVERNING LAW
This Agreement shall be governed by, and construed and interpreted in
accordance with, the laws of the State of Ohio without regard to principles of
conflict of laws.
8
<PAGE>
15. HEADINGS
The headings of paragraphs are inserted for convenience and shall not
affect any interpretation of this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
PROGENITOR, INC.
By: /S/ GLENN L. COOPER
--------------------------------
Title: President
-----------------------------
Address: One President Street
Athens, Ohio 45701
/S/ DOUGLASS GIVEN
-----------------------------------
BY: DOUGLAS GIVEN
Address:
---------------------------
---------------------------
---------------------------
9
<PAGE>
SCHEDULE A
SCHEDULE OF BUSINESSES
OF THE CORPORATION
DATE ENTERED ADDITIONAL BUSINESSES
January 4, 1993 None.
10
<PAGE>
Exhibit 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this registration statement on Form S-1 of our
report, which includes an explanatory paragraph regarding the Company's
ability to continue as a going concern, dated June 5, 1996 on our audits of
the financial statements of Progenitor, Inc. (a Development Stage Company).
We also consent to the reference to our firm under the caption "Experts."
COOPERS & LYBRAND L.L.P.
Columbus, Ohio
June 6, 1996
<PAGE>
Exhibit 23.2
CONSENT OF PATENT COUNSEL
We hereby consent to the reference to our firm under the caption "Experts"
in the Registration Statement on Form S-1 and in the related Prospectus of
Progenitor, Inc. for the registration and initial public offering of shares
of its common stock.
PENNIE & EDMONDS
/S/ PENNIE & EDMONDS
New York, New York
June 6, 1996
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEETS AND STATEMENTS OF OPERATIONS INCLUDED IN THE REGISTRATION STATEMENT AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C> <C>
<PERIOD-TYPE> YEAR 6-MOS
<FISCAL-YEAR-END> SEP-30-1995 SEP-30-1996
<PERIOD-START> OCT-01-1994 OCT-01-1995
<PERIOD-END> SEP-30-1995 MAR-31-1996
<CASH> 1,173,743 26,695
<SECURITIES> 0 0
<RECEIVABLES> 193,898 193,897
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 1,521,859 363,368
<PP&E> 1,063,602 1,101,622
<DEPRECIATION> 409,121 536,281
<TOTAL-ASSETS> 2,395,075 1,086,597
<CURRENT-LIABILITIES> 1,790,859 1,163,853
<BONDS> 0 0
0 0
23,695 23,695
<COMMON> 2,789 2,853
<OTHER-SE> 14,546,639 14,897,701
<TOTAL-LIABILITY-AND-EQUITY> 2,395,075 1,086,597
<SALES> 0 0
<TOTAL-REVENUES> 2,821,386 911,962
<CGS> 0 0
<TOTAL-COSTS> 0 0
<OTHER-EXPENSES> 4,227,959 1,705,732
<LOSS-PROVISION> 141,010 180,408
<INTEREST-EXPENSE> 352,242 56,733
<INCOME-PRETAX> (2,875,467) (1,541,039)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (2,875,467) (1,541,039)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (2,875,467) (1,541,039)
<EPS-PRIMARY> 0<F1> 0<F1>
<EPS-DILUTED> 0<F1> 0<F1>
<FN>
<F1>Historical earnings per share have not been presented because such amounts are
not meaningful due to the significant changes in capital structure upon the
IPO.
</FN>
</TABLE>
