<PAGE> 1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Fiscal year ended December 31, 1997
Commission File No. 0-26534
VION PHARMACEUTICALS, INC.
(Name of Small Business Issuer as specified in its charter)
DELAWARE 13-3671221
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
4 SCIENCE PARK
NEW HAVEN, CONNECTICUT 06511
(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code: (203) 498-4210
SECURITIES REGISTERED UNDER SECTION 12(B) OF THE EXCHANGE ACT:
None
SECURITIES REGISTERED UNDER SECTION 12(G) OF THE EXCHANGE ACT:
TITLE OF EACH CLASS
Units
Common Stock, $0.01 par value
Class A Warrants
Class B Warrants
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act during the past 12 months (or for
such shorter period that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days. Yes[X]
No[ ]
Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure will be contained, to
the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this form 10-KSB. [X]
The Registrant's revenues for the most recent fiscal year were: $5,271,133.
The aggregate market value of voting stock held by non-affiliates of the
Registrant as of December 31, 1997 based upon of the last sale price of such
stock on that date as reported by the NASDAQ SmallCapSM Market was $30,580,218.
The number of shares of the Registrant's Common Stock outstanding as of December
31, 1997 was 9,833,934.
DOCUMENTS INCORPORATED BY REFERENCE:
Portions of Registrant's Proxy Statement for its Annual Meeting of Stockholders
to be held on May 19, 1998 are incorporated by reference in Part III of this
Report. Except as expressly incorporated by reference, Registrant's Proxy
Statement shall not be deemed to be part of this Form 10-KSB.
<PAGE> 2
PART I
ITEM 1: DESCRIPTION OF BUSINESS
GENERAL
Vion Pharmaceuticals, Inc. (the 'Company') is a development stage
biopharmaceutical company which has sponsored research projects and is engaged
primarily in research and development of therapeutic products for the treatment
of cancer. Pursuant to a license agreement entered into with Yale University
('Yale') in August 1994 (the 'Yale/OncoRx Agreement'), the Company has acquired
the rights to certain oncology and antiviral related patents and technology. The
Company believes that the licensed rights include several novel technologies
which provide a broad technology base for the future development of therapeutic
products.
Research and Development. The Company's strategy is two-fold. First,
the Company intends to engage principally in research and development with
respect to anticancer and antiviral technologies through in-house research and
through collaborative and sponsored research agreements. The Company's initial
research and development will focus on the following core technologies: (i)
porfiromycin (Promycin(R)), a hypoxic cancer cell therapeutic which targets
oxygen-depleted cells that are otherwise resistant to radiation therapy, (ii)
alkylating agent prodrugs, which are designed to be activated in cancer cells or
the surrounding area and destroy cancer cells, (iii) novel nucleoside analogs
which inhibit the Hepatitis B virus, (iv) ribonucleotide reductase inhibitors
such as Triapine(TM), which may block the formation of the precursors of DNA and
thereby inhibit the replication of cancer cells and (v) Tumor Amplified Protein
Expression Therapy, or TAPET(TM), a novel gene therapy vector for the treatment
of cancer. In addition to its core technologies, the Company has rights to
several additional product candidates, including MelasynTM, a synthetic form of
melanin. The Company's early research and development efforts were performed by
academic collaborators. Since its initial public offering in August, 1995, the
Company has recruited a scientific staff which is engaged directly in research
and development although the Company also expects to continue to sponsor
academic collaborators.
The Company has developed small molecular weight, pharmaceutical agents
with known mechanisms of activity. The Company initially intends to target
projects for such agents based upon (i) the likelihood that commercially-viable
products can successfully be developed using technology currently available to
the Company with no additional acquisition or licensing costs, (ii) the
potential commercial market for the product and (iii) the projected time to
market of the product.
Strategic Partnerships. Second, the Company has concluded and will
continue to pursue strategic partnerships with other companies to more
effectively develop and eventually market technologies in its portfolio. In
November, 1997, the Company and Boehringer Ingelheim International GmbH of
Germany entered into an exclusive worldwide licensing agreement for the
development and marketing of Promycin(R) (porfiromycin), Vion's lead anti-cancer
agent. If the Company's TAPET program proves its ability to deliver
growth-inhibiting therapy to tumor tissue, the Company intends to further
develop TAPET as a platform technology in several ways. The Company intends to
select existing effective anti-cancer agents for delivery using TAPET, and the
Company may also contract with other pharmaceutical companies to use TAPET to
deliver new, proprietary anti-cancer agents. Other technologies which are
candidates for strategic partnerships include Triapine, (beta)-L-Fd4C and
Melasyn.
OVERVIEW OF CANCER
Cancer is characterized by uncontrolled cell division resulting in the
development of a mass of cells, commonly known as a tumor, and invasion and
spread (metastasis) of the cells. Cancerous tumors can arise in almost any
tissue or organ within the human body. Cancer is believed to occur as a result
of a number of factors, such as genetic predisposition, chemical agents, viruses
and irradiation. These factors may result in genetic changes affecting the
ability of cells to normally regulate their growth and differentiation. When a
normal cell becomes cancerous
2
<PAGE> 3
it can spread (metastasize) to various sites in the body. Cancer is a
devastating disease with tremendous unmet medical needs. It has been estimated
by the American Cancer Society that there were 1.38 million new cases of cancer
and 560,000 deaths from cancer in 1997 in the United States. Sixty percent of
new cases of cancer are expected to result in death within five years. Cancer is
the second leading cause of death in the U.S., exceeded only by heart disease.
Since 1990, approximately 4 million Americans have died from cancer. The market
for cancer therapeutics was approximately $6 billion in 1992 and is projected to
total approximately $14 billion by the year 2000.
Although several types of tumors can now be effectively treated with
drugs, it is only in recent years that we have begun to see improvement in the
survival rates for the most common tumors. The Company believes that recent
developments in the understanding of the processes that regulate the
proliferation and metastasis of malignant cells provides opportunities to
discover and develop innovative products and approaches to treat cancer.
The three most common methods of treating patients with cancer are
surgery, radiation therapy and chemotherapy. A cancer patient often receives a
combination of two or all three of these modalities. Surgery and radiation
therapy are particularly effective in patients in which the disease is localized
and has not yet spread to other tissues or organs. Surgery involves the removal
of the tumor and adjacent tissue. In many cases where metastases have not yet
occurred, however, surgery still cannot be performed because of the inaccessible
location of the tumor or the danger of removing too much normal tissue along
with the cancerous tissue.
Radiation therapy involves the exposure of the tumor and surrounding
tissue to ionizing radiation. The objective of radiation therapy is to kill the
cancer cells with certain ionized molecules (free radicals) that are created in
the parts of the body exposed to the ionizing radiation. Radiation, however,
also kills or damages normal cells. Radiation therapy can result in varying
levels of effectiveness, as well as in patient weakness, loss of appetite,
nausea and vomiting, and loss of normal body functions, which may include bone
marrow depression, gastrointestinal complications, kidney damage and damage to
the peripheral nervous system. In some cases, radiation-induced mutations in
bone marrow cells can lead to new secondary cancers, such as leukemia, years
after treatment for other forms of cancer.
Chemotherapy is the principal approach used for tumors that have
metastasized. Chemotherapy seeks to interfere with the molecular and cellular
processes that control the development, growth and survival of malignant tumor
cells. Chemotherapy involves the administration of cytotoxic drugs designed to
kill cancer cells or the administration of hormone analogs to either reduce the
production of, or block the action of, certain hormones such as estrogens and
androgens which affect the growth of certain tumors. In many cases, chemotherapy
consists of the administration of several different drugs in combination.
In recent years, there have been significant advances in molecular
biology, immunology and other related fields of biotechnology which have led to
a better understanding of how malfunctioning genes can result in the formation
of tumors. It is anticipated that these advances in biotechnology will lead to
better ways to diagnose cancer and to prevent tumors from forming or becoming
malignant. Other research has focused on mechanisms to efficiently deliver
therapies to tumors. Ultimately, these emerging technologies may lead to
genetic-based therapies aimed specifically at the genes which have malfunctioned
and caused the cancer to form or spread, and to therapies that can selectively
deliver antineoplastic agents to tumors.
The Company believes that, for the foreseeable future, the principal
means of combating cancer will continue to be through the surgical removal of
tumors and the destruction of malignant cells through radiation therapy and
chemotherapy, delivered systemically or in ways that make anticancer agents
selectively more toxic to tumors. Therefore, the Company intends to take a
balanced approach in its research and development efforts. It will continue to
develop chemically defined small molecules based upon unique cellular targets
discovered through biotechnology, while also pursuing development of vectors to
deliver therapeutic agents to tumors.
3
<PAGE> 4
RESEARCH AND DEVELOPMENT
The Company is currently focusing on the following principal areas of
research: (i) hypoxic cancer cell therapeutics, (ii) alkylating agent prodrugs,
(iii) novel nucleoside analogs, (iv) ribonucleotide reductase inhibitors and (v)
Tumor Amplified Protein Expression Therapy, or TAPET. All of these technologies
were licensed by the Company pursuant to the Yale/OncoRx Agreement and/or the
Yale/MelaRx Agreement and are in the early development stage and require
significant further research, development, testing and regulatory clearances.
The Company's current research and development efforts were initiated by
academic collaborators at Yale University and are being pursued at the Company
and Yale with Company sponsorship.
Hypoxic Cancer Cell Therapeutics. Solid tumors have been shown to
contain cells with severe oxygen depletion known as hypoxic cells. The Company
believes that one possible explanation for the failure of radiation therapy is
the existence within tumors of hypoxic cells, although there is no direct proof
in humans. The hypoxic tumor cells can often constitute 1-15% of the malignant
cells contained in a tumor. Because radiation therapy requires oxygenation of
the tissue in order to be effective, hypoxic cells are less susceptible to
radiation therapy and tend to form a therapeutically resistant group within
solid tumors. Even small quantities of hypoxic cells within a tumor provide the
basis for tumor cells to survive and proliferate after most of the non-hypoxic
malignant cells in the tumor have been eradicated by radiation treatment.
Hypoxic cells also exhibit resistance to most standard chemotherapeutic agents.
Investigators in Dr. Alan C. Sartorelli's laboratory at Yale have
sought to develop chemotherapeutic agents which by virtue of their chemical and
metabolic properties could be selectively toxic to hypoxic cells. One such agent
identified by Dr. Sartorelli was Promycin, a bioreductive alkylating agent.
Laboratory studies indicated that Promycin destroyed a greater percentage of
hypoxic cells relative to oxygenated cells than other agents being tested. A
Phase I/II trial was conducted at Yale on a limited number of people. In this
initial study, of the 21 patients treated with radiation (and, in some cases,
surgery) in conjunction with Promycin for certain types of cancer of the head
and neck, seven remained alive with no evidence of the disease or the cancer
after a median follow-up of 60 months. The Company believes that these results
are better than would have been expected without the use of Promycin, although
there can be no assurance that Promycin will prove to be efficacious in a more
extensive study. Based on these findings, a Phase III trial has been initiated
of Promycin in patients with head and neck cancer, which is designed to
determine the efficacy of Promycin as an adjunct to radiation therapy for these
conditions. The Phase III trial was initially conducted at Yale and the Company
has expanded the Phase III program to include additional sites in Europe and the
United States. The Company also plans to evaluate Promycin in other tumor types.
The Company has obtained an exclusive license from Yale for the data
regarding Yale's research on Promycin and the clinical studies of Promycin
conducted by Yale. Because composition of matter patent protection is
unavailable for Promycin, the Company has received Orphan Drug status with
respect to the use of Promycin to treat head and neck cancer. In March, 1997,
the Company also received Orphan Drug status with respect to the use of Promycin
to treat cervical cancer.
Alkylating Agent Prodrugs. Alkylating agents are used to treat a
variety of cancers, with different alkylating agents being used to treat
different malignancies. These drugs are highly reactive (i.e., react with a
number of different types of cells) and, as a consequence, cause undesirable
side effects. This reactivity may be controlled by converting alkylating agents
to prodrug forms. This conversion is accomplished by the attachment of a prodrug
component to the alkylating agent so as to block the reactivity of the compound.
The prodrug component can be designed to be released by a variety of enzymes
found predominantly in tumors or in the area surrounding the tumor cells.
Cleavage of the prodrug component from the alkylating agent, so as to restore
the reactivity of the alkylating agent, occurs within the target tumor or in the
area
4
<PAGE> 5
surrounding the tumor, thus permitting greater tumor selectivity and activity
and lowering the potential for toxicity.
The Company has licensed several classes of alkylating agent prodrugs
from Yale, including certain prodrugs which are the subject of three issued
patents. Each of these alkylating agent prodrugs may target a unique property of
a cancer cell, thereby destroying it. The Company is in the process of
evaluating several lead candidates for development. The Company intends to
extend its preclinical studies, which will include analytical studies,
formulation and toxicological evaluation, and, if successful, intends to file an
Investigational New Drug Application (IND).
Novel Nucleoside Analogs. Antimetabolites are anticancer and antiviral
agents which resemble natural cellular metabolites and therefore interfere with
natural metabolic processes. Certain of the more significant antimetabolites
inhibit the function of enzymes which are necessary for the synthesis of
nucleotides (which are the building blocks of DNA and RNA) and therefore inhibit
cell growth. Pursuant to the Yale/OncoRx Agreement, the Company has licensed
from Yale a patent application relating to the nucleoside analog 3TC and its use
as an anti-hepatitis B virus ('HBV') agent, and several patent applications
relating to the nucleoside analogs (beta)-L-FddC and (beta)-L-Fd4C and their use
as anti-HBV agents. These nucleoside analogs are antimetabolites and have shown,
in preclinical studies, the ability to inhibit the replication of HBV. HBV is a
causative agent of both acute and chronic forms of hepatitis which affects about
300 million people worldwide. HBV also predisposes its victims to the
development of liver cancer. At present, no clinically useful drug is on the
market for the treatment of HBV infections.
The Company is aware of numerous patent applications and/or patents
owned by third parties that also relate to 3TC and (beta)-L-FddC, and/or their
uses as anti-HBV agents. The Company cannot predict whether its or its
competitors' patent applications will result in valid patents being issued. See
'--Patents, Licenses and Trade Secrets.' In October 1996 the U.S. Patent and
Trademark Office issued a patent to Yale University covering the composition of
matter and method of use of (beta)-L-Fd4C for treating HBV, and Yale has
licensed to the Company exclusive worldwide rights to the patent including the
use of (beta)-L-Fd4C for the treatment of HBV and AIDS. Due to the resources
required, the Company intends to seek a strategic partner to further develop
these anti-HBV agents.
Ribonucleotide Reductase Inhibitors. The conversion of ribonucleotides
to deoxyribonucleotides, which is catalyzed by ribonucleotide reductase, is a
critical step in the synthesis of DNA in cells. If DNA is not synthesized, cells
can replicate. The Company believes that a strong inhibitor of ribonucleotide
reductase which targets cancer cells could act as a therapeutic agent. The
Company has initiated a program to develop inhibitors of ribonucleotide
reductase based on technology developed by Dr. Sartorelli and licensed under the
Yale/OncoRx Agreement. The Company has licensed from Yale patented technology
related to ribonucleotide reductase inhibitors. The Company has completed animal
studies necessary to determine the pharmacological and toxicological profiles of
its lead compound, Triapine (previously known as 3-AP or OCX-0191) . Triapine
has demonstrated significant in vitro and in vivo activity against murine L1210
leukemia, the murine M109 lung carcinoma, and the human A2780 ovarian carcinoma.
The Company filed an Investigational New Drug (IND) application for Triapine in
December, 1997 and received clearance one month later from the FDA to proceed
with Phase I clinical trials. The Company is in the process of initiating these
studies at the University of Miami Hospital and Miami VA Hospital. Triapine's
target indications are for solid tumors such as lung, breast, and colorectal
cancer, and melanoma.
TAPET. TAPET stands for Tumor Amplified Protein Expression Therapy, an
enabling platform technology featuring a novel gene therapy vector for the
treatment of cancer. Originated at Yale University and advanced at Vion and Yale
with Vion's sponsorship, the TAPET system uses genetically-engineered bacteria
as vectors to effectively target cancerous tumors, amplify within tumors and
deliver prodrug converting enzymes and genes that are capable of regulating cell
growth in tumor tissue. Screened for their significant activity in tumors, TAPET
organisms selectively target and infect tumors, rapidly multiplying in them by
several orders of magnitude relative to normal tissue. Bacteria from the
5
<PAGE> 6
genus Salmonella, attenuated for virulence, were chosen because they multiply
rapidly, can be easily modified genetically and have been found to grow under
both aerobic (air) and anaerobic (lack of air) conditions, such as those that
occur within solid tumors. The microorganisms have been designed to be highly
selective for tumor tissue, greater than in normal tissue, and as an additional
safeguard, the possibility for infection of normal tissue has been attenuated by
bioengineering the organisms. In addition, TAPET vectors are designed to remain
fully sensitive to antibiotics. This sensitivity allows for greater control
since the vector can be cleared from the body in the presence of an antibiotic
at any time during therapy. Tumor localization has been shown in animal models
using TAPET strains in 12 tumor models including models of melanoma, breast,
lung, colon, renal and liver cancer. Having developed this vector, the
expression of multiple genes that are capable of regulating prodrug converting
enzymes has been achieved. For example, the program has demonstrated in vivo
activity for a bacterial strain which expresses the herpes simplex virus
thymidine kinase gene for the conversion of ganciclovir to its toxic
phosphorylated forms. To Vion's knowledge, the TAPET discovery effort is the
only vector-based research program currently underway that is studying the use
of bacterial as opposed to viral vectors for the treatment of cancer. Whereas
viral vectors are delivered locally, TAPET bacterial vectors are delivered
systemically, allowing for the potential treatment of tumors throughout the body
whether their location is known or not. As a platform technology, Vion is
developing a portfolio of TAPET organisms for itself and potential partners to
deliver prodrug converting enzymes and/or cytokines to tumors. The Company
believes that TAPET is unique in its ability to target solid tumor tissue and
the vector's ability toreproduce at high levels within tumor tissue. Vion is
developing TAPET in preclinical studies.
Other Programs. The Company also intends to pursue other research and
development projects leading to the development of anticancer therapeutics. The
Company intends to seek collaborations with academic institutions, including
additional arrangements with Yale, to obtain additional rights. The Company
believes that its relationship with Dr. Sartorelli and Dr. Yung-Chi Cheng of
Yale, both of whom are on the Company's Scientific Advisory Board, may provide
the Company with the ability to obtain rights in connection with work being done
in their laboratories. However, the Yale/OncoRx Agreement only granted to the
Company rights to specific technologies and the Company does not have any right
to obtain a license to any of the work being conducted in their laboratories and
any such rights would be subject to reaching an agreement with Yale as to the
terms of such license.
OTHER POTENTIAL PRODUCT CANDIDATES
Melasyn(TM). Pursuant to a license agreement with Yale (the "Melasyn
License"), the Company has obtained rights to a synthetic form of melanin which
the Company has named Melasyn. Melanin is a pigment formed by cells in the skin
which gives skin its color and protects it from sun damage by absorbing
ultraviolet rays. Melasyn is a readily soluble form of melanin making it a novel
and useful ingredient for formulation of skin care products and cosmeceuticals.
In February, 1998 Vion agreed to license its Melasyn technology in an exclusive
worldwide agreement with San Mar Laboratories, a leading manufacturer of private
label cosmetics and pharmaceuticals. Under the terms of the agreement, Vion will
grant an exclusive worldwide license to San Mar for the manufacture and sales of
products containing Melasyn. Vion will receive a royalty on products sold by San
Mar with guaranteed annual royalties over an initial three year period.
The Company has also funded research projects relating to compounds to
control pigmentation and chemotherapeutic products for treating melanoma. To
date, such research has not provided any other products or product candidates
which the Company presently plans to pursue, although the Company still has
substantial financial commitments to Yale pursuant to such agreement. See
'--Sponsored Research and License Agreements.'
Termination of Berkeley Agreement. In October, 1997 the Company
terminated a research agreement with The Regents of the University of California
on behalf of the Berkeley Campus with regard to certain microfiltration
technology and decided not to pursue negotiations to obtain
6
<PAGE> 7
licenses or options to obtain licenses for certain inventions resulting from
this research. There are no continuing liabilities to the Company stemming from
prior funding of this research.
COLLABORATIVE ARRANGEMENTS
The Company is seeking collaborative agreements with pharmaceutical or
biotechnology companies to develop certain of its product candidates. The
Company believes that these arrangements will permit the Company to develop
certain of its product candidates without incurring the substantial costs
associated with development and may also provide an additional source of
financing.
In November, 1997 Boehringer Ingelheim International GmbH of Ingelheim,
Germany and the Company announced that the two companies entered into an
exclusive worldwide licensing agreement for the development and marketing of
Promycin (porfiromycin), the Company's lead anti-cancer agent. Promycin, a
bioreductive alkylating agent, is currently being investigated in Phase III
clinical trials for use in combination with radiation therapy for solid tumors
of the head and neck.
The strategic agreement provides the Company with exclusive
co-promotion rights to Promycin in North America. Roxane Laboratories, Inc. (a
subsidiary of Boehringer Ingelheim) in the U.S. and the Company will co-promote
Promycin in the United States. Boehringer Ingelheim will have exclusive
worldwide rights to market and sell Promycin outside North America. In exchange
for these rights, Boehringer Ingelheim paid the Company up front licensing fees,
and is obligated to pay development milestones and royalties on future sales of
Promycin outside North America.
Both Boehringer Ingelheim and the Company will share in worldwide
development costs. In addition, Boehringer Ingelheim made an equity investment
in Vion at a premium to the then current market price. Vion will manufacture and
supply Promycin for all territories.
SPONSORED RESEARCH AND LICENSE AGREEMENTS
Yale/OncoRx Agreement. Pursuant to a License Agreement dated August 31,
1994, as amended, Yale granted to Vion an exclusive, non-transferable, worldwide
license to make, have made, use, sell and practice certain inventions and
research for therapeutic and diagnostic purposes. The licensed technology
includes several of the core technologies on which the Company initially intends
to focus. See '--Research and Development.' The term of the license is the
expiration of any patents relating to any inventions or, with respect to
non-patented inventions or research, 17 years. Yale has retained the right to
make, use and practice the inventions and research for non-commercial purposes.
The Yale/OncoRx Agreement also provides that if Yale, pursuant to its own
research, identifies potential commercial opportunities for the inventions and
research, Yale will give the Company a first option to negotiate a commercial
license for such commercial opportunities. Pursuant to the Yale/OncoRx
Agreement, the Company issued to Yale 159,304 shares of common stock, granted
certain registration rights to Yale with respect to these shares of Common Stock
and made a payment of $50,000. In addition, Yale is entitled to royalties on
sales, if any, of resulting products and sub-licensing revenues and, with regard
to one patent, milestone payments based on the status of clinical trials and
regulatory approvals. In July 1997 the Company and Yale amended this license
agreement and the Yale/MelaRx Agreement to reduce certain amounts payable by the
Company under such agreements. As a result, the Company issued an additional
150,000 shares of common stock to Yale. The Company has agreed with Yale that
the Company will plan and implement appropriate research and development with
respect to commercialization of products based on the licensed inventions and
research. In the event that the agreement is terminated for breach, all rights
under licenses previously granted terminate. Accordingly, a default as to one
product could affect the Company's rights in other products.
7
<PAGE> 8
Subsequent to entering into the Yale/OncoRx Agreement, the Company paid
$345,000 as unrestricted grants to fund certain research at Yale, including
research in Dr. Cheng's laboratory. The Company made additional unrestricted
grants to Yale of $345,000 in November 1995 and November 1996, and $86,250 in
September 1997 for continued support of this research. There can be no assurance
that these funds will be used to conduct research relating to products which the
Company desires to pursue. Additionally, to the extent that such research
results in technologies not covered by the Yale/OncoRx Agreement, the Company
may be unable to utilize such technologies unless it negotiates additional
license agreements.
Yale/MelaRx Agreement. Pursuant to a Research Agreement dated September
23, 1988, as amended and restated as of August 1, 1992, Yale has agreed to
perform a research program under the supervision of Dr. John Pawelek, while he
is employed by Yale. The research program has primarily involved synthetic
melanin and products designed to control the effects of ultraviolet radiation.
In addition, under the Company's TAPET program, Dr. Pawelek is conducting
certain research regarding the use of a bacterial vector in connection with
genetic therapy for melanoma. The Company has agreed to reimburse Yale for its
direct and indirect costs in connection with the research program in an amount
currently equal to $899,023 per year. Except to the extent of inventions made
solely by the Company's employees, Yale will be the owner of any inventions
resulting from the research and the Company will have an option to obtain an
exclusive license (to the extent Yale has the right to grant such a license)
with respect to the inventions. The Company and Yale entered into a License
Agreement dated December 15, 1995 pursuant to which the Company received a
non-transferable worldwide exclusive license to three inventions relating to
gene therapy for melanoma. Pursuant to this agreement the Company paid Yale a
$100,000 fee and has agreed to make milestone payments based on the status of
clinical trials and regulatory approvals. In addition, Yale is entitled to
royalties on sales, if any, of resulting products and sub-licensing revenues.
The Yale/MelaRx Agreement is for a term ending June 30, 1998, subject to earlier
termination by the Company if Dr. John W. Pawelek is no longer the principal
investigator. The Company is in discussions with Yale to extend this agreement.
Pursuant to the Yale/MelaRx Agreement, Yale and the Company have
entered into five license agreements which grant the Company exclusive licenses
to make, use, sell and practice the inventions covered by certain patents. Each
such license agreement requires the Company to pay to Yale royalties based on a
percentage of net sales of the products covered and sublicensing income. In
addition, the licenses provide that they are terminable in the event the Company
does not exercise due diligence in commercializing the licensed technology.
COMPETITION
Competition in the biopharmaceutical industry is intense and based
significantly on scientific and technological factors, the availability of
patent and other protection for technology and products, the ability to
commercialize technological developments and the ability to obtain governmental
approval for testing, manufacturing and marketing. Moreover, the
biopharmaceutical industry is characterized by rapidly evolving technology that
could result in the technological obsolescence of any products developed by the
Company. The Company competes with specialized biopharmaceutical firms in the
United States, Europe and elsewhere, as well as a growing number of large
pharmaceutical companies that are applying biotechnology to their operations.
Most of the Company's competitors have substantially greater financial,
technical and human resources than the Company and may be better equipped to
develop, manufacture and market products. In addition, many of these companies
have extensive experience in preclinical testing and human clinical trials and
in obtaining regulatory approvals. These companies, as well as academic
institutions, governmental agencies and private research organizations, also
compete with the Company in recruiting and retaining highly qualified scientific
personnel and consultants.
Existing therapies to treat cancer have varying degrees of success.
Many products are under development by competitors for the treatment of cancer,
some of which may compete directly with the Company's proposed products. Some of
these product candidates may be in advanced stages of clinical trials. The
existence of these products, or other products or treatments
8
<PAGE> 9
of which the Company is not aware, or products or treatments that may be
developed in the future, may adversely affect the marketability of products
developed by the Company. There can be no assurance that research and
development by others will not render the Company's potential products obsolete
or uneconomical or result in treatments or cures superior to any therapy
developed by the Company, or that any therapy developed by the Company will be
preferred to any existing or newly developed technologies.
The timing of market introduction of some of the Company's potential
products or of competitor's products may be an important competitive factor.
Accordingly, the relative speed with which the Company can develop products,
complete preclinical testing, clinical trials and regulatory approval processes
and supply commercial quantities to market are expected to be important
competitive factors. In addition, the Company may apply for Orphan Drug
designation by the FDA for its proposed products. To the extent that a
competitor of the Company develops and receives Orphan Drug designation and
marketing approval for a drug to treat the same indication prior to the Company,
the Company may be precluded from marketing its product for a period of seven
years. See '--Government Regulation.'
PATENTS, LICENSES AND TRADE SECRETS
The Company's policy is to protect its technology by, among other
things, filing patent applications for technology which it considers important
to the development of its business. The Company intends to file additional
patent applications, when appropriate, relating to new developments or
improvements in its technology and other specific products that it develops. The
Company also relies on trade secrets and improvements, unpatented know-how and
continuing technological innovation to develop and maintain its competitive
position.
In connection with the Yale/MelaRx Agreement, the Company is the
exclusive licensee of a number of filed patent applications relating to the
Company's TAPET platform technology which provide for methods for diagnosing
and/or treating various solid tumor cancers, including but not limited to
melanoma, lung cancer, breast cancer and colon cancer. The Company is also the
exclusive licensee of issued United States and foreign utility patents and
pending patent applications relating to synthetic melanins and methods for using
synthetic melanins, such as, for sunscreening or self-tanning agents. Of the
United States patents and patent applications, however, only two pending patent
applications are relevant to the Company's Melasyn product(s). The Company has
filed or plans to file corresponding applications relevant to the Melasyn
products for patent protection in foreign countries.
In connection with the Yale/OncoRx Agreement, the Company is the
exclusive licensee of four issued and one pending United States patents relating
to its alkylating agent prodrug technology, including patents relating to novel
sulfonylhydrazine methylating agents and their use for treatment of
trypanosomiasis and cancer and to novel 1-alkyl-2-acyl-1,2-disulfonylhydrazines
and their use for controlling neoplastic cell growth. The Company is also the
exclusive licensee of a number of issued and pending United States and foreign
patent applications relating to (beta)-L-Fd4C and (beta)-L-FddC, their
composition and use for the treatment of HIV and HBV infections and their use in
combination with other anti AIDS agents, a pending United States patent
application relating to 3TC and its use for the treatment of hepatitis B virus
(HBV) infection, as well as issued patents and patent applications related to
TriapineTM and other ribonucleotide reductase inhibitors.
Competitors or potential competitors have filed applications for, or
have been issued, patents and may obtain additional patents and proprietary
rights relating to compounds or processes competitive with those of the Company.
Accordingly, there can be no assurance that the patent applications licensed to
the Company will result in patents being issued or that, if issued, the patents
will afford protection against competitors with similar technology; nor can
there be any assurance that others will not obtain patents that the Company
would need to license or circumvent.
The U.S. Patent and Trademark Office has issued patents to Yale
University covering the composition of matter and method of use of (beta)-L-Fd4C
and of (beta)-L-FddC for treating HBV and
9
<PAGE> 10
HIV, and Yale has licensed to the Company exclusive worldwide rights to the
patents including the use of (beta)-L-Fd4C for the treatment of HBV and AIDS. In
addition Yale has also licensed to the company rights to a pending patent
application covering the use of these agents in combination with other
nucleoside anti-HIV drugs.
With respect to (beta)-L-FddC, the Company is aware that patent
applications have been filed by Biochem Pharma, Inc. that relate to
(beta)-L-FddC and its use as an anti-HBV agent. These patent application(s)
claim priority to a United Kingdom patent application having a filing date
earlier than the filing dates of all the applications and issued patents
relating to (beta)-L-FddC that have been licensed to the Company. In the event
that an interference were to be declared the Company believes that it may be
able to prove that it is entitled in its licensed, issued patent to priority of
invention for claims directed to the composition and use of (beta)-L-FddC as an
anti-HBV agent. However, there is a risk that the Company will not prevail in
proving that it is so entitled, and that others will be awarded patent
protection for such claims.
The Company is aware that patent applications, some of which have
issued as patents, have been filed by IAF Biochem International, Inc., Emory
University, Glaxo Group Limited and the University of Georgia Research
Foundation, that relate to, enantiomerically enriched racemic mixtures
containing 3TC, methods of preparation, and use of 3TC or racemic mixtures
containing 3TC as an antiviral agent. Some of these patent applications have
earlier filing dates than the patent applications licensed to the Company, and
thus may prevent the Company from obtaining patent protection in the
applications it has licensed. The Company believes that it may be able to prove
that it is entitled in its licensed applications to priority of invention for
claims directed to the use of 3TC as an anti-HBV agent. However, there is a
substantial risk that the Company will not prevail in proving that it is so
entitled, and that others will be awarded patent protection for such claims. The
patent applications filed by third parties that relate to 3TC will likely
prevent the Company from obtaining product claims to 3TC in the patent
applications it has licensed. If the Company were able to obtain a patent with
claims directed to the use of 3TC as an anti-HBV agent, it would have the right
to exclude only from using 3TC as an anti-HBV agent. Other third parties, in
addition to those described above, may also have filed patent applications
relating to 3TC, (beta)-L-FddC and (beta)-L-Fd4C and/or their uses as anti-HBV
agents.
The Company or its licensors is prosecuting the patent applications
licensed to the Company with the United States Patent and Trademark Office but
the Company does not know whether any of its applications will result in the
issuance of any patents or, if any patents are issued, whether any issued patent
will provide significant proprietary protection or will be circumvented or
invalidated. During the course of patent prosecution, patent applications are
evaluated, inter alia, for utility, novelty, nonobviousness and enablement. The
United States Patent and Trademark Office may require that the claims of an
initially filed patent application be amended if it is determined that the scope
of the claims include subject matter that is not useful, novel, nonobvious or
enabled. Furthermore, in certain instances, the practice of a patentable
invention may require a license from the holder of dominant patent rights. In
cases where one party believes that it has a claim to an invention covered by a
patent application or patent of a second party, the first party may provoke an
interference proceeding in the United States Patent and Trademark Office or such
a proceeding may otherwise be declared by the Patent & Trademark Office. In
general, in an interference proceeding, the Patent and Trademark Office would
review the competing patents and/or patent applications to determine the
validity of the competing claims, including but not limited to determining
priority of invention. Any such determination would be subject to appeal in the
appropriate United States federal courts.
There can be no assurance that additional patents for the Company's
products will be obtained, or that issued patents will provide substantial
protection or be of commercial benefit to the Company. The issuance of a patent
is not conclusive as to its validity or enforceability, nor does it provide the
patent holder with freedom to operate without infringing the patent rights of
others. A patent could be challenged by litigation and, if the outcome of such
litigation were adverse to the patent holder, competitors could be free to use
the subject matter covered by the patent, or the patent holder may license the
technology to others in settlement of such litigation.
10
<PAGE> 11
The invalidation of key patents owned by or licensed to the Company or
non-approval of pending patent applications could create increased competition,
with potential adverse effects on the Company and its business prospects. In
addition, there can be no assurance that any application of the Company's
technology will not infringe patents or proprietary rights of others so that, as
a result of such infringement, licenses that might be required for the Company's
processes or products would be available on commercially reasonable terms, if at
all.
The Company cannot predict whether its or its competitors' patent
applications will result in valid patents being issued. Litigation, which could
result in substantial cost to the Company, may also be necessary to enforce the
Company's patent and proprietary rights and/or to determine the scope and
validity of others proprietary rights. The Company may participate in
interference proceedings that may in the future be declared by the United States
Patent and Trademark Office to determine priority of invention, which could
result in substantial cost to the Company. There can be no assurance that the
outcome of any such litigation or interference proceedings will be favorable to
the Company or that the Company will be able to obtain licenses to technology
that it may require or that, if obtainable, such technology can be licensed at a
reasonable cost.
The patent position of biotechnology and biopharmaceutical firms
generally is highly uncertain and involves complex legal and factual questions.
To date, no consistent policy has emerged regarding the breadth of claims
allowed in biotechnology and biopharmaceutical patents. Accordingly, there can
be no assurance that patent applications owned or licensed by the Company will
result in patents being issued or that, if issued, the patents will afford
protection against competitors with similar technology.
The Company also expects to rely on unpatented technology, trade
secrets and information and no assurance can be given that others will not
independently develop substantially equivalent information and techniques or
otherwise gain access to the Company's technology or disclose such technology,
or that the Company can meaningfully protect its rights in such unpatented
technology, trade secrets and information. The Company requires each of its
employees, consultants and advisors to execute a confidentiality agreement at
the commencement of an employment or consulting relationship with the Company.
The agreements generally provide that all inventions conceived by the individual
in the course of employment or in the providing of services to the Company and
all confidential information developed by, or made known to, the individual
during the term of the relationship shall be the exclusive property of the
Company and shall be kept confidential and not disclosed to third parties except
in limited specified circumstances. There can be no assurance, however, that
these agreements will provide meaningful protection for the Company's
information in the event of unauthorized use or disclosure of such confidential
information.
GOVERNMENT REGULATION
Overview. Regulation by state and federal governmental authorities in
the United States and foreign countries is a significant factor in the
manufacture and marketing of the Company's products and in its ongoing research
and product development activities. All the Company's products will require
regulatory clearances or approvals prior to commercialization. In particular,
drugs, biologicals and medical devices are subject to rigorous preclinical
testing and other approval requirements by the FDA pursuant to the Federal Food,
Drug and Cosmetic Act (the 'FDC Act') and the Public Health Service (PHS) Act
and regulations promulgated thereunder, as well as by similar health authorities
in foreign countries. Various federal statutes and regulations also govern or
influence the testing, manufacturing, safety, labeling, packaging, advertising,
storage, registration, listing and recordkeeping related to marketing of such
products. The process of obtaining these clearances or approvals and the
subsequent compliance with appropriate federal statutes and regulations require
the expenditure of substantial resources. Any failure by the Company or its
collaborators or licensees to obtain, or any delay in obtaining, regulatory
approval could adversely affect the manufacturing and marketing of products
being developed by the Company and its ability to receive product or royalty
revenues. There can be no assurance that any required FDA or other regulatory
approval will be granted or, if granted, will not be withdrawn.
11
<PAGE> 12
Drugs and Biologicals. Preclinical development of diagnostic and
therapeutic drugs and biological products is generally conducted in the
laboratory to evaluate the safety and the potential efficacy of a compound by
relevant in vitro (e.g., cell culture) and in vivo (e.g., animal model) testing.
When a product is tested prospectively to determine its safety for purposes of
obtaining FDA approvals or clearances, such testing must be performed in
accordance with good laboratory practices for nonclinical studies. The results
of preclinical testing are submitted to the FDA as part of an investigational
new drug application (IND). The IND must become effective, informed consent must
be obtained from clinical subjects, and the study must be approved by an
institutional review board (IRB) before human clinical trials can begin.
Regulatory approval often takes a number of years and involves the
expenditure of substantial resources. Approval time also depends on a number of
factors, including the severity of the disease in question, the availability of
alternative treatments and the risks and benefits demonstrated in clinical
trials. Typically, clinical evaluation involves a three-phase process. In Phase
I, clinical trials are conducted with a small number of subjects to determine
the tolerated drug dose, early safety profile, proper scheduling, the pattern of
drug distribution, absorption and metabolism. In Phase II, clinical trials are
conducted with groups of patients afflicted with a specific disease in order to
determine efficacy, dose-response relationships and expanded evidence of safety.
In Phase III, large-scale, multi-center, controlled clinical trials are
conducted in order to (1) provide enough data for statistical proof of safety
and efficacy, (2) compare the experimental therapy to existing therapies, (3)
uncover any unexpected safety problems, such as side-effects, and (4) generate
product labeling. In the case of drugs for cancer and other life-threatening
diseases, the initial human testing is generally conducted in patients rather
than in healthy volunteers. Because these patients are already afflicted with
the target disease, it is possible that such studies will provide results
traditionally obtained in Phase II trials. These trials are referred to as
'Phase I/II' trials.
The results of the preclinical and clinical testing are submitted to
the FDA either as part of a New Drug Application ('NDA') (for drugs) or a
Product License Application ('PLA') (for biologics) for approval to commence
commercial distribution. For a biological, the manufacturer generally must also
obtain approval of an establishment license application (ELA). In responding to
an NDA or PLA, the FDA may grant marketing approval, request additional
information or deny the application if it determines that the application does
not satisfy its regulatory approval criteria. A minimum of several years is
generally required to obtain approval after submission of an NDA or PLA. There
can be no assurance that approvals will be granted on a timely basis, if at all.
The FDA also normally conducts a pre-approval inspection and other occasional
inspections of an applicant's facilities to assure compliance with current good
manufacturing practices. Further, stringent FDA regulatory requirements continue
after a product is approved for marketing, and changes to products or labeling
can require additional approvals. If products are approved for marketing, the
Company will be subject to stringent post-marketing requirements, and there can
be no assurance that regulatory or enforcement action will not occur, which
would potentially limit the Company's ability to market its products.
The Company also will be subject to widely varying foreign regulations
governing clinical trials and pharmaceutical sales. Whether or not FDA approval
has been obtained, approval of a product by the comparable regulatory
authorities of foreign countries must be obtained prior to the commencement of
marketing of the product in those countries. The approval process varies from
country to country and the time may be longer or shorter than that required for
FDA approval. The Company intends, to the extent possible, to rely on foreign
licensees to obtain regulatory approval for marketing its products in foreign
countries.
Orphan Drug Designation. Under the Orphan Drug Act, a sponsor may
obtain designation by the FDA of a drug or biologic as an 'orphan' drug for a
particular indication. Orphan Drug designation is granted to drugs for rare
diseases or conditions, including many cancers, with a prevalence of less than
200,000 cases in the U.S. The sponsor of a drug that has obtained Orphan Drug
designation and which is the first to obtain approval of a marketing application
for such drug is entitled to marketing exclusivity for a period of seven years
for the designated indication. This
12
<PAGE> 13
means that no other company can market the same Orphan Drug for the same
indication approved by the FDA for seven years after approval unless such
company proves its drug is clinically superior or the approved Orphan Drug
marketer cannot supply demand for the drug. Legislation is periodically
considered which could significantly affect the Orphan Drug law. The Company
received Orphan Drug designation for Promycin in September, 1995 to treat head
and neck cancer and in May, 1997 received FDA approval of its request for orphan
drug status for the use of Promycin to treat cervical cancer. It intends to seek
this designation for other products where appropriate. There can be no assurance
that future changes to the Orphan Drug Act would not diminish the value of any
orphan drug designation obtained by the Company.
Drugs for Life Threatening Illnesses. FDA regulatory procedures
established in 1988 are intended to speed further the availability of new drugs
intended to treat life-threatening and severely debilitating illnesses. These
procedures provide for early and continuous consultation with the FDA regarding
preclinical and clinical studies necessary to gain marketing approval. This
regulatory framework also provides that if Phase I results are promising, Phase
II clinical trials may be designed that obviate the need for lengthy, expensive
Phase III testing. Notwithstanding the foregoing, approval may be denied by the
FDA or traditional Phase III studies may be required. The FDA may also seek the
Company's agreement to perform post-approval Phase IV studies.
The FDA has announced that the accelerated approval concept is being
expanded for cancer drugs. The proposed changes are designed to speed drug
approvals by requiring less extensive preapproval testing in some circumstances.
Specifically, the FDA has stated that it may approve these drugs based on the
basis of surrogate markers. 'Partial responses,' such as a drug's effectiveness
at short-term tumor shrinkage, that the FDA believes are clear indicators of
therapeutic effect, would be sufficient to demonstrate efficacy for these drugs.
This is in contrast to requiring the traditional 'full-endpoint' measures of
improved survival or quality of life. Other provisions of the new initiatives
include proactive solicitation by the FDA of expanded access filings for
foreign- approved cancer agents and greater patient representation on the FDA's
Oncology Drugs Advisory Committee. Although agency officials have estimated that
the changes will reduce by as much as a year the normal development time for
most cancer drugs, it is uncertain whether and how these initiatives will
actually be implemented by FDA and whether they will have a significant impact
on the approval process for cancer drugs.
MANUFACTURING AND MARKETING
The Company has no experience in manufacturing or marketing products
and has not yet commercially introduced any products. The Company does not now
have resources to manufacture or market on a commercial scale any products that
it may develop. To be successful, the Company's products must be manufactured in
commercial quantities in compliance with regulatory requirements and at
acceptable costs. Initially, the Company intends to manufacture products through
contracts with manufacturers and believes that contract manufacturing will be
readily available. In the event that the Company decides to establish a
manufacturing facility, the Company will require substantial additional funds
and will be required to hire and retain significant additional personnel and
comply with the extensive GMP regulations mandated by FDA which are applicable
to such a facility.
Upon FDA approval of one of the Company's product candidates, the
Company would develop a sales force targeting oncology doctors and clinics to
market its products. The Company currently has no marketing or sales staff and
there can be no assurance that the Company will be able to establish such a
sales force or be successful in gaining market acceptance for its products.
HUMAN RESOURCES
As of December 31, 1997, the Company had 31 full-time employees,
including 22 scientists and technicians. The Company has plans to hire 11
additional employees over the next 12 months to support continuing progress in
both research and development. The Company's employees are not covered by any
collective bargaining agreement.
13
<PAGE> 14
ITEM 2. PROPERTIES
The Company is currently leasing approximately 19,000 square feet of
office and laboratory space on three floors of a building at 4 Science Park, New
Haven, Connecticut. The lease is for a three-year term ending in 1999 at a
rental of $164,245 per year, with a right to renew for an additional three
years. The Company believes that its current space will meet the Company's
requirements for the foreseeable future.
ITEM 3. LEGAL PROCEEDINGS
There is no material legal proceeding pending against the Company or
any of its property, nor was any such proceeding terminated during the fourth
quarter of the year ended December 31, 1997.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of shareholders of Vion
Pharmaceuticals, Inc. during the fourth quarter of fiscal year 1997.
14
<PAGE> 15
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND
RELATED SHAREHOLDER MATTERS
MARKET INFORMATION FOR COMMON STOCK
The Common Stock of the Company has traded on The Nasdaq SmallCap
MarketSM under the symbol VION since April 29, 1996. From August 14, 1995 to
April 26, 1996 the Common Stock traded on The Nasdaq SmallCap MarketSM under the
symbol OCRX. The following table reflects the range of high and low bid prices
of the Company's Common Stock for each of the calendar quarters in 1996 and
1997. This information is based on closing bid prices as reported by The Nasdaq
Stock MarketSM and such quotations reflect inter-dealer prices, without retail
mark-up, mark-down or commission, and may not represent actual transactions.
<TABLE>
<CAPTION>
1996 1997
---------------------------- -------------------------------
HIGH LOW HIGH LOW
<S> <C> <C> <C> <C>
First Quarter 4-3/4 3 6-1/4 3
Second Quarter 7-3/4 3-1/2 5-1/8 3-3/8
Third Quarter 5-1/4 3-3/4 5-7/16 3-5/8
Fourth Quarter 4-11/16 2-7/8 6 2-13/16
</TABLE>
RECENT SALES OF UNREGISTERED SECURITIES
On August 20, 1997, the Company completed a private placement of 4,850
shares of Class B Convertible Preferred Stock, at $1,000 per share, resulting in
net proceeds to the Company of $4,481,450. Shares of the Class B Preferred Stock
may also be eligible, under certain circumstances, to receive dividends paid in
Class C Preferred Stock. At year-end, 3,903 shares of Class B Convertible
Preferred Stock were convertible into 987,766 shares of the Company's common
stock, including an accretion of 8% per annum. In addition, 689 shares of Class
B Convertible Preferred Stock were convertible into 225,700 shares of the
Company's common stock, including an accretion of 8% per annum and dividends.
The Class C Preferred Stock is convertible into shares of common stock at the
average closing bid price of the Company's common stock for thirty consecutive
business days ended on the closing date and is not entitled to dividends.
The sale of the shares described above were private transactions not
involving a public offering and were exempt from the registration provisions of
the Securities Act of 1933, as amended, pursuant to Section 4(2) thereof. The
sale of these securities was without the use of an underwriter.
On November 24, 1997, the Company and Boehringer Ingelheim
International GmbH of Germany entered into an exclusive worldwide licensing
agreement for the development and marketing of Promycin. In connection with this
transaction, the Company received net proceeds of $2,869,801 from the sale of
448,336 shares of common stock to Boehringer Ingelheim International GmbH at a
premium to the then current market price.
HOLDERS
At February 10, 1998 there were approximately 220 holders of record of
common stock.
DIVIDENDS
15
<PAGE> 16
The Company has paid no cash dividends and does not expect to pay cash
dividends in the foreseeable future. The certificate of designations for the
Company's Class A Convertible Preferred Stock ('Class A Preferred Stock')
precludes the Company from paying cash dividends on the Common Stock so long as
shares of Class A Preferred Stock are outstanding, without the consent of
holders of a majority of the Class A Preferred Stock. The holders of the
outstanding Class A Preferred Stock are entitled to receive semi-annual
dividends, on a cumulative basis, equal to five percent (5%) (on a per annum
basis) of the Class A Preferred Stock held by such holder, payable, in arrears,
in additional shares of Class A Preferred Stock. If and when the Company
declares any dividend or distribution on the Common Stock (other than a stock
dividend), the Company is required to declare a like dividend or distribution on
the number of shares of Common Stock into which shares of Class A Preferred
Stock is then convertible.
The certificate of designations for the Company's Class B Convertible
Preferred Stock (`Class B Preferred Stock') provides that holders of Class B
Preferred Stock may receive a special dividend payable in Class C Convertible
Preferred Stock if they convert their Class B Preferred Stock into the Company's
common stock under certain circumstances. Payment of such dividends is dependent
upon the holding period of the Class B Preferred Stock. The holders of the Class
C Convertible Preferred Stock are not entitled to receive dividends on the Class
C Convertible Preferred Stock.
The Company currently intends to retain any future earnings to finance
the growth and development of its business.
ITEM 6. PLAN OF OPERATIONS
GENERAL
The Company is a development stage biopharmaceutical company. Its
activities to date have consisted primarily of research and development
sponsored by it pursuant to two separate license agreements with Yale
University, negotiating and obtaining other collaborative agreements, recruiting
management and other personnel, securing its facilities and raising equity and
debt financing. The Company's revenues consist of research grants, technology
license fees and reimbursements for research expenses. The Company has not
generated any revenues from product sales and has incurred substantial operating
losses from its activities.
The Company intends to use a substantial portion of the net proceeds of
its August, 1997 private financing, equity investment, initial payments and
reimbursed cost sharing from the November 24, 1997 exclusive worldwide licensing
agreement with Boehringer Ingelheim International GmbH to fund its plan of
operations, which includes the following elements through December 1998:
Continue to develop internal research and development capabilities and
conduct research and development with respect to the Company's core
technologies and other product candidates which may be identified by the
Company. The Company expects to incur substantial expenditures for research
and development expenses. During the next twelve months, the Company plans
to hire eleven additional employees primarily in research and development
positions.
Conduct Phase III clinical studies in the U.S. and Europe of Promycin for
treatment of cancer of the head and neck.
Continue to support research and development being performed at Yale
University and by other collaborators and seek additional collaborative
agreements.
16
<PAGE> 17
Seek to acquire, generally through in-licensing, oncology-related products
that can be marketed without significant additional development activities.
The Company currently estimates that anticipated revenues, the
remaining net proceeds of its private placement in August, 1997, equity
investment, initial payments and reimbursed cost sharing from the agreement with
Boehringer Ingelheim International GmbH and its existing cash and equivalents
will be sufficient to fund its planned operations until approximately December
1998. In the event of delays or unexpected problems in product development, cost
overruns, or other unanticipated expenses commonly associated with a company in
an early stage of development, the Company will require additional funds. In
addition, the Company will need substantial additional financing, beyond this
period to fund further research and development and the Company's working
capital requirements. As of December 31, 1997 the Company estimates that the
amount required to fund operations for the next twelve months is at
approximately $15,400,000, of which approximately $6,100,000 is subject to
reimbursement under the terms of a collaboration agreement. However, the
Company's cash requirements may vary materially from those now planned because
of results of research and development, results of product testing,
relationships with strategic partners, changes in focus and direction of the
Company's research and development programs, competitive and technological
advances, the regulatory process in the United States and abroad and other
factors.
The Company has not made an assessment of its Year 2000 issues,
although the Company believes that there will not be a material impact on its
operations.
FORWARD-LOOKING STATEMENTS - CAUTIONARY FACTORS
Statements included in this Form 10-KSB which are not historical in
nature are forward-looking statements made pursuant to the safe-harbor
provisions of the Private Securities Litigation Reform Act of 1995.
Forward-looking statements regarding the Company's future business prospects,
plans, objectives, expectations and intentions are subject to certain risks,
uncertainties and other factors that could cause actual results to differ
materially from those projected or suggested in the forward-looking statements,
including, but not limited to: the inability to raise additional capital, the
possibility that any or all of the Company's products or procedures are found to
be ineffective or unsafe, the possibility that third parties hold proprietary
rights that preclude the Company from marketing its products, and the
possibility that third parties will market a product equivalent or superior to
the Company's product candidates.
ITEM 7. FINANCIAL STATEMENTS
This information appears in a separate section of this report following
Part III.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
17
<PAGE> 18
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
WITH SECTION 16(A) OF THE EXCHANGE ACT
Incorporated herein by reference to the Registrant's Proxy Statement
for its Annual Meeting of Stockholders to be held in 1998.
ITEM 10. EXECUTIVE COMPENSATION
Incorporated herein by reference to the Registrant's Proxy Statement
for its Annual Meeting of Stockholders to be held in 1998.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Incorporated herein by reference to the Registrant's Proxy Statement
for its Annual Meeting of Stockholders to be held in 1998.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Incorporated herein by reference to the Registrant's Proxy Statement
for its Annual Meeting of Stockholders to be held in 1998.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
EXHIBIT
NUMBER DESCRIPTION
2.1 -- Agreement and Plan of Merger among MelaRx Pharmaceuticals, Inc.,
OncoRx Research Corp. andOncoRx, Inc. dated as of April 19, 1995(1)
2.2 -- Certificate of Merger, dated April 20, 1995(1)
3.1 -- Restated Certificate of Incorporation of the Registrant, as
amended(2)
3.2 -- By-laws of the Registrant(1)
4.1 -- Form of Bridge Note(1)
4.2 -- Form of Warrant Agreement for Warrants issued in connection with the
bridge financing(1)
4.3 -- Form of Underwriter's Unit Purchase Option(1)
4.4 -- Form of Placement Agent's Warrant(1)
4.5 -- Form of Warrant Agreement for Class A and Class B Warrants(1)
10.1 -- License Agreement between Yale University and Old OncoRx,
dated as of August 31, 1994(1)
10.2 -- Letter Agreement between YaleUniversity and Old OncoRx
dated August 19, 1994(1)
10.3 -- Extension Agreement between Yale University and MelaRx
Pharmaceuticals, Inc., dated as of July 1, 1992(1)
10.4 -- Form of License Agreement between Yale University and MelaRx
Pharmaceuticals, Inc.(1)
10.5 -- Letter Agreement between YaleUniversity and MelaRx
Pharmaceuticals, Inc., dated as of February 2, 1995(1)
10.6 -- Research Agreement between The Regents of the University of
California and MicroFab Biosystems, Inc., dated as of July 25, 1994
(1)
18
<PAGE> 19
10.7 -- Option Agreement between The Regents of the University of California
and MicroFab Biosystems, Inc. dated as of July 25, 1994(1)
10.8 -- Consulting Agreement between Mauro Ferrari and MicroFab Biosystems,
Inc., dated as of July 25,1994(1)
10.9 -- Option Agreement between MelaRx Diagnostics Inc. and Response
Biomedical Corp., dated as of March 30, 1995(1)
10.10 -- Distribution Agreement between MelaRx Diagnostics Inc. and Response
Biomedical Corp., dated April 4, 1995(1)
10.11 -- Employment Agreement between the Registrant and John A.
Spears, dated as of January 16, 1995(1)
10.12 -- 1995 Stock Option Plan of Old OncoRx(1)
10.13 -- Stock Option Agreement between Old OncoRx and John A. Spears, dated
February 2, 1995(1)
10.14 -- Employment Letter from MelaRx Pharmaceuticals, Inc. to Thomas
Mizelle, dated as of July 29, 1994(1)
10.15 -- Marketing Services Agreement between MelaRx Pharmaceuticals, Inc.
and Creative Polymers, Inc. dated as of March 21, 1994(1)
10.16 -- Amended and Restated 1993 Stock Option Plan of the Registrant(3)
10.17 -- Lease Agreement between Science Park Development Corporation and
Vion Pharmaceuticals, Inc., dated as of February 1, 1996
10.18 -- Option Agreement between the Registrant and PMP, Inc., dated April
27, 1995(1)
10.19 -- Agreement between MelaRx Pharmaceuticals, Inc. and certain
shareholders, dated February 17, 1995(1)
10.20 -- Consulting and Finder's Agreement between MelaRx Pharmaceuticals,
Inc. and Jacob A. Melnick, dated June 4, 1992, as amended by
Agreement dated February 17, 1995(1)
10.21 -- Form of Indemnification Agreement(1)
10.22 -- Letter Agreement between Yale University and OncoRx, Inc. (formerly
MelaRx Pharmaceuticals, Inc.), dated July 5, 1995(1)
10.23 -- Lease between Science Park Development Corporation and OncoRx, Inc.
dated August 10, 1995(4)
10.24 -- Master Lease Agreement between Citicorp Leasing, Inc. and OncoRx,
Inc. dated September 27, 1995(4)
10.25 -- Sale and Leaseback Agreement and Master Equipment Lease Agreement
between FINOVA Technology Finance, Inc. and Vion Pharmaceuticals,
Inc. dated as of October 17, 1996 (5)
10.26 -- Clinical Development Agreement between Vion Pharmaceuticals, Inc.
Covance Clinical Research Unit Ltd. and Covance Inc. (Confidential
treatment has been granted with regard to certain provisions of this
exhibit) (6)
10.27 -- Amendment No. 1 to License Agreement between Yale University and Vion
Pharmaceuticals, Inc. (f/k/a OncoRx, Inc.) dated as of June 12, 1997
(6)
10.28 -- Amendment No. 2 to License Agreement between Yale University and Vion
Pharmaceuticals, Inc. (f/k/a OncoRx, Inc.) dated as of June 12, 1997
(6)
10.29 -- Collaborative Development and Distribution Agreement between
Boehringer Ingelheim International GmbH and Vion Pharmaceuticals,
Inc. dated November 24, 1997 (Confidential treatment has been
requested with regard to certain provisions of this exhibit)
10.30 -- Sale and Leaseback Agreement between FINOVA Technology Finance, Inc.
and Vion Pharmaceuticals, Inc. dated as of December 10, 1997
21.1 -- Subsidiaries of the Registrant
23.1 -- Consent of Ernst & Young L.L.P.
27.1 -- Financial Data Schedule
(1) Incorporated by reference to the Company's Registration Statement on Form
SB-2 (File No. 33-93468), effective August 14, 1995.
19
<PAGE> 20
(2) Incorporated by reference to the Company's Quarterly Report on form 10-QSB
for the quarterly period ended September 30, 1997.
(3) Incorporated by reference to the Company's Registration Statement on Form
S-8 (File No. 333-39407), effective November 4, 1997.
(4) Incorporated by reference to the Quarterly Report on form 10-QSB for the
quarter ended September 30, 1995.
(5) Incorporated by reference to the Annual Report on form 10-KSB for the fiscal
year ended December 31, 1996.
(6) Incorporated by reference to the Quarterly Report on form 10-QSB for the
quarter ended June 30, 1997.
(b) Reports on Form 8-K.
During the final quarter of the Company's 1997 fiscal year, the
Company filed with the Commission on December 1, 1997 a Current Report on
Form 8-K dated November 28, 1997 regarding consummation of its strategic
partnership with Boehringer Ingelheim International GmbH.
20
<PAGE> 21
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Dated: MARCH 11, 1998 VION PHARMACEUTICALS, INC.
--------------
By: /S/ THOMAS E. KLEIN
-------------------
Thomas E. Klein
Vice President, Finance and
Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
/S/ WILLIAM R. MILLER Chairman of the Board March 11, 1998
- --------------------------
William R. Miller
/S/ JOHN A. SPEARS Director, President and Chief March 11, 1998
- --------------------------
John A. Spears Executive Officer (Principal
Executive Officer)
/S/ THOMAS E. KLEIN Vice President--Finance and March 11, 1998
- --------------------------
Thomas E. Klein Chief Financial Officer (Principal
Financial and Accounting Officer)
/S/ MICHEL C. BERGERAC Director March 11, 1998
- --------------------------
Michel C. Bergerac
/S/ FRANK T. CARY Director March 11, 1998
- --------------------------
Frank T. Cary
/S/ A. E. COHEN Director March 11, 1998
- --------------------------
A. E. Cohen
21
<PAGE> 22
SIGNATURE TITLE DATE
/S/ JAMES FERGUSON Director March 11, 1998
- --------------------------
James Ferguson
/S/ MICHAEL C. KENT Director March 11, 1998
- --------------------------
Michael C. Kent
/S/ ALAN C. SARTORELLI Director March 11, 1998
- --------------------------
Alan C. Sartorelli
/S/ E. DONALD SHAPIRO Director March 11, 1998
- ---------------------------
E. Donald Shapiro
/S/ WALTER WRISTON Director March 11, 1998
- ---------------------------
Walter Wriston
22
<PAGE> 23
Vion Pharmaceuticals, Inc.
(A Development Stage Company)
Audited Consolidated Financial Statements
Years ended December 31, 1997 and 1996
CONTENTS
Report of Independent Auditors...............................................F-1
Audited Consolidated Financial Statements
Consolidated Balance Sheet...................................................F-2
Consolidated Statements of Operations........................................F-3
Consolidated Statements of Changes in Shareholders' Equity...................F-4
Consolidated Statements of Cash Flows........................................F-5
Notes to Consolidated Financial Statements...................................F-6
<PAGE> 24
Report of Independent Auditors
The Board of Directors and Shareholders
Vion Pharmaceuticals, Inc.
We have audited the accompanying consolidated balance sheet of Vion
Pharmaceuticals, Inc. as of December 31, 1997 and the related consolidated
statements of operations, shareholders' equity, and cash flows for the years
ended December 31, 1997 and 1996 and the period from May 1, 1994 (inception) to
December 31, 1997. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Vion
Pharmaceuticals, Inc. at December 31, 1997 and the consolidated results of its
operations and its cash flows for the years ended December 31, 1997 and 1996 and
the period from May 1, 1994 (inception) to December 31, 1997 in conformity with
generally accepted accounting principles.
The accompanying consolidated financial statements have been prepared assuming
that Vion Pharmaceuticals, Inc. will continue as a going concern. As more fully
described in Note 1, since commencement of operations, the Company has incurred
recurring operating losses and requires substantial amounts of additional
funding to continue its operations. These conditions raise substantial doubt
about the Company's ability to continue as a going concern. The consolidated
financial statements do not include any adjustments to reflect the possible
future effect on the recoverability and classification of assets or the amounts
or classification of liabilities that may result from the outcome of this
uncertainty.
Ernst & Young LLP
Hartford, Connecticut
February 6, 1998
F-1
<PAGE> 25
CONSOLIDATED BALANCE SHEET
Vion Pharmaceuticals, Inc.
(A Development Stage Company)
<TABLE>
<CAPTION>
DECEMBER 31, 1997
------------
<S> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 3,890,621
Short-term investments (Includes $2,777,088 restricted) 7,088,540
Accounts receivable 728,899
Other current assets 118,752
------------
Total current assets 11,826,812
Property and equipment, net 1,301,680
Security deposits 34,894
Research contract prepayments 416,945
------------
Total assets $ 13,580,331
============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Obligation under capital lease - current $ 274,853
Accounts payable and accrued expenses 1,008,210
------------
Total current liabilities 1,283,063
Obligation under capital lease - long term 472,578
------------
Total Liabilities 1,755,641
------------
Shareholders' equity:
Preferred stock, $0.01 par value - 5,000,000 shares authorized consisting of:
Class A convertible preferred stock, $0.01 par value, authorized:
3,500,000 shares; issued and outstanding: 757,632 shares 7,576
Class B convertible preferred stock, $0.01 par value, authorized:
100,000 shares; issued and outstanding: 4,592 shares 46
Class C convertible preferred stock, $0.01 par value, authorized:
25,000 shares; issued and outstanding: 0 shares 0
Common stock, $0.01 par value, authorized: 35,000,000 shares;
issued and outstanding: 9,833,934 98,339
Additional paid-in capital 34,903,191
Deferred compensation (72,128)
Accumulated deficit (23,112,334)
------------
11,824,690
------------
Total liabilities and shareholders' equity $ 13,580,331
============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-2
<PAGE> 26
CONSOLIDATED STATEMENTS OF OPERATIONS
Vion Pharmaceuticals, Inc.
(A Development Stage Company)
<TABLE>
<CAPTION>
FOR THE PERIOD
FROM MAY 1, 1994
(INCEPTION)
THROUGH
YEAR ENDED DECEMBER 31, DECEMBER 31,
-------------------------------- ------------
1997 1996 1997
------------ ------------ ------------
<S> <C> <C> <C>
Revenues:
Contract research grants $ 48,221 $ 51,779 $ 100,000
Research support 1,222,912 0 1,222,912
Technology license revenues 4,000,000 0 4,000,000
------------ ------------ ------------
Total revenues 5,271,133 51,779 5,322,912
Operating expenses:
Research and development 7,675,486 5,975,089 16,783,775
General and administrative 2,639,486 2,113,077 6,837,882
Nonrecurring collaboration restructuring fee 600,000 0 600,000
Purchased research and development 0 0 4,481,405
Amortization of finance charges 0 0 345,439
Interest income (343,911) (437,993) (865,948)
Interest expense 43,666 10,285 99,113
------------ ------------ ------------
Net loss $( 5,343,594) $( 7,608,679) $(22,958,754)
============ ============ ============
Basic and diluted net loss per share $ (0.62) $ (1.00)
------------ ------------ ------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE> 27
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDER"S EQUITY
Vion Pharmaceuticals, Inc.
(A Development Stage Company)
<TABLE>
<CAPTION>
Class A Class B
Convertible Convertible
Preferred Stock Preferred Stock Common Stock
----------------- --------------- ------------
Shares Amount Shares Amount Shares Amount
<S> <C> <C> <C> <C> <C> <C>
Common stock issued for cash - July 1994 0 $0 0 $0 $2,693,244 $26,932
Common stock issued for services - August 1994 159,304 1,593
Net loss
---------- -------- --------- --- --------- ------
Balance - December 31, 1994 0 0 0 0 2,852,548 28,525
Stock options issued for compensation -
February 1995
Reverse acquisition of MelaRx
Pharmaceuticals, Inc. - April 1995 2,000,000 20,000
Shares repurchased pursuant to
employment agreements - April 1995 (274,859) (2,749)
Private placement of common stock - April 1995 76,349 763
Warrants issued with bridge notes - April 1995
Initial public offering of units of one common share,
one Class A warrant and one Class B warrant at
$4.00 per unit - August 1995 and September 1995 2,875,000 28,750
Issuance of common stock 1,250 13
Receipts from sale of unit purchase option
Net loss
---------- -------- --------- --- --------- -------
Balance at December 31, 1995 0 0 0 0 7,530,288 75,302
Issuance of Class A convertible preferred stock 1,250,000 12,500
Conversion of Class A convertible preferred stock (164,970) (1,650) 458,255 4,582
Issuance of common stock 29,418 294
Class A convertible preferred stock dividend 21,998 220
Compensation associated with stock option grants
Amortization of deferred compensation
Net loss
---------- ------- -------- --- ---------- -------
Balance at December 31, 1996 1,107,028 $11,070 0 $0 8,017,961 $80,178
---------- ------- -------- --- ---------- -------
Conversion of Class A convertible preferred stock (396,988) (3,970) 1,102,757 11,028
Conversion of Class B convertible preferred stock (258) (3) 64,642 647
Compensation associated with stock options grants
Extension/reissuance of underwriter warrants
Exercise of warrants 238 3
Issuance of common stock 598,336 5,983
Exercise of stock options 50,000 500
Class A convertible preferred stock dividend 47,592 476
Issuance of Class B convertible preferred stock 4,850 49
Accretion of dividend payable on Class B convertible
preferred stock
Amortization of deferred compensation
Net loss
---------- ------- -------- --- ---------- -------
Balance at December 31, 1997 757,632 $7,576 4,592 $46 $9,833,934 $98,339
---------- ------- -------- --- ---------- -------
</TABLE>
<TABLE>
<CAPTION>
Additional Total
Paid-In Deferred Accumulated Stockholders'
Capital Compensation Deficit Equity
<S> <C> <C> <C> <C>
Common stock issued for cash - July 1994 $0 $0 ($19,877) $7,055
Common stock issued for services - August 1994 (1,176) 417
Net loss $0 $0 (475,946) (475,946)
----------- -------- ---------- ----------
Balance - December 31, 1994 0 0 (496,999) (468,474)
Stock options issued for compensation -
February 1995 540,000 540,000
Reverse acquisition of MelaRx
Pharmaceuticals, Inc. - April 1995 4,300,000 4,320,000
Shares repurchased pursuant to
employment agreements - April 1995 2,029 (720)
Private placement of common stock - April 1995 205,237 206,000
Warrants issued with bridge notes - April 1995 200,000 200,000
Initial public offering of units of one common share,
one Class A warrant and one Class B warrant at
$4.00 per unit - August 1995 and September 1995 9,667,460 9,696,210
Issuance of common stock 488 501
Receipts from sale of unit purchase option 250 250
Net loss (9,530,535) (9,530,535)
----------- -------- ----------- -----------
Balance at December 31, 1995 14,913,435 0 (10,025,505) 4,963,232
Issuance of Class A convertible preferred stock 11,518,552 0 11,531,052
Conversion of Class A convertible preferred stock (2,932) 0
Issuance of common stock 102,426 102,720
Class A convertible preferred stock dividend (220) 0
Compensation associated with stock option grants 190,407 (190,407) 0
Amortization of deferred compensation 83,647 83,647
Net loss (7,608,679) (7,608,679)
----------- -------- ----------- -----------
Balance at December 31, 1996 $26,721,888 ($106,760) ($17,634,404) $9,071,972
----------- -------- ----------- -----------
Conversion of Class A convertible preferred stock (7,058) 0
Conversion of Class B convertible preferred stock (644) 0
Compensation associated with stock options grants 55,643 55,643
Extension/reissuance of underwriter warrants 168,249 168,249
Exercise of warrants (6) (3)
Issuance of common stock 3,463,818 3,469,801
Exercise of stock options 19,500 20,000
Class A convertible preferred stock dividend (476) 0
Issuance of Class B convertible preferred stock 4,481,801 4,481,850
Accretion of dividend payable on Class B convertible
preferred stock (133,860) (133.860)
Amortization of deferred compensation 34,632 34,632
Net loss (5,343,594) (5,343,594)
----------- --------- ----------- -----------
Balance at December 31, 1997 $34,903,191 ($72,128) ($23,112,334) $11,824,690
----------- --------- ----------- -----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE> 28
CONSOLIDATED STATEMENTS OF CASH FLOWS
Vion Pharmaceuticals, Inc.
(A Development Stage Company)
<TABLE>
<CAPTION>
FOR THE PERIOD FROM
MAY 1, 1994
(INCEPTION) THROUGH
YEAR ENDED DECEMBER 31, DECEMBER 31,
-------------------------------- ------------
1997 1996 1997
------------ ------------ ------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss $ (5,343,594) $ (7,608,679) $(22,958,754)
Adjustments to reconcile net loss to
cash flows used in operating activities
Purchased research and development 0 0 4,481,405
Amortization of financing costs 0 0 345,439
Depreciation and amortization 303,746 125,838 455,206
(Increase) in other current assets (741,016) (87,810) (846,665)
Decrease/(Increase) in other assets 192,670 (176,906) (450,124)
Increase in accounts payable and
accrued expenses 514,083 185,054 973,678
Accretion on Class B preferred stock (133,860) 0 (133,860)
Extension/reissuance of placement agent warrants 168,249 0 168,249
Stock issued for services 600,000 0 600,417
Stock options issued for compensation 90,275 83,647 713,922
------------ ------------ ------------
Net cash used in operating activities (4,349,447) (7,478,856)) (16,651,087)
------------ ------------ ------------
Cash flows used for investing activities:
Purchase of marketable securities (8,121,720) (11,796,338) (22,209,166)
Maturities of marketable securities 5,661,626 9,459,000 15,120,626
Acquisition of fixed assets (299,131) (262,907) (812,453)
Cash portion of MelaRx acquisition 0 0 4,061
------------ ------------ ------------
Net cash used in investing activities (2,759,225) (2,600,245) (7,896,932)
------------ ------------ ------------
Cash flows provided by financing activities:
Initial public offering 0 0 9,696,210
Net proceeds from issuance of common stock 2,889,801 2,720 3,206,077
Net proceeds from issuance of preferred stock 4,481,850 11,531,052 16,012,902
Repurchase of common stock 0 0 (720)
Net proceeds from bridge financing 0 0 1,704,269
Repayments of bridge financing 0 0 (2,000,000)
Advances from stockholders 0 0 250,000
Repayments to stockholders 0 0 (250,000)
Exercise of warrants (3) 0 (3)
Receipts from sale of unit purchase option 0 0 250
Repayment of equipment capital lease (160,724) (17,235) (180,345)
------------ ------------ ------------
Net cash provided by financing activities 7,210,924 11,516,537 28,438,640
------------ ------------ ------------
Net increase in cash 102,252 1,437,436 3,890,621
Cash and cash equivalents at beginning of year 3,788,369 2,350,933 0
------------ ------------ ------------
Cash and cash equivalents at end of year $ 3,890,621 $ 3,788,369 $ 3,890,621
============ ============ ============
</TABLE>
Supplemental schedule of noncash investing and financing activities:
- - Capital lease obligations of $239,866 and $593,489 were incurred for the years
ended December 31, 1996 and December 31, 1997, respectively, when the Company
entered into leases for laboratory and office equipment.
- - An investor of the Company did not exercise the option to require the Company
to repurchase shares of preferred stock for $100,000, and the investor received
23,859 shares of common stock during 1996, which had been converted from
previously held preferred stock.
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE> 29
Vion Pharmaceuticals, Inc.
(A Development Stage Company)
Notes to Financial Statements
1. THE COMPANY
Vion Pharmaceuticals, Inc., formerly OncoRx, Inc., (the "Company") was
incorporated in May 1993 and began operations on May 1, 1994. The Company is in
the development stage and is principally devoted to the research and development
of therapeutic products for the treatment of cancer and cancer related
disorders.
In April 1995, the Company merged into OncoRx Research Corp. a previously
unaffiliated company ("Research"). The stockholders of the Company were issued
shares of common and preferred stock of MelaRx Pharmaceuticals Inc. ("MelaRx"),
the 100% owner of Research, in exchange for all of the outstanding shares of the
Company. In August 1995, the Company completed an initial public offering
("IPO") (see Note 5) resulting in net proceeds to the Company of approximately
$9,696,000. On April 20, 1995, the Company merged into OncoRx Research Corp., a
wholly-owned subsidiary of MelaRx, which was renamed OncoRx, Inc. after the
merger. The stockholders of the Company were issued 2,654,038 common and 23,859
preferred shares of MelaRx in exchange for 2,000,000 shares of common stock of
the Company valued at $2.16 per share (fair value).
As the shareholders of the Company obtained a majority interest in the merged
company for accounting purposes, the Company is treated as the acquirer.
Therefore, the transaction is recorded as a purchase in the Company's financial
statements which include the results of operations of the Company from inception
and MelaRx from the date of acquisition. The excess of cost over the fair value
of MelaRx's net tangible assets, $4,481,405, was treated as purchased research
and development and expensed immediately.
The accompanying financial statements are prepared assuming the Company will
continue as a going concern; however, at its current and planned rate of
spending, the Company's cash, cash equivalents and short term investments are
not sufficient to allow it to continue operations through the 1998 calendar
year. The Company requires substantial new revenues and other sources of capital
in order to meet such budgeted expenditures and to continue its operations
throughout the year. The Company is seeking to enter into significant strategic
partnerships with pharmaceutical companies for the development of its core
technologies, through which it would anticipate receiving some of the
substantial revenues and financing required to continue operations beyond the
year end. The Company has entered into discussions with several major
pharmaceutical companies concerning such strategic alliances, but there can be
no assurance that the Company will be successful in achieving such alliances,
nor can the Company predict what funds might be available to it if it can
achieve such alliances. The Company is also seeking to raise funds through
additional means, including (1) private placements and recapitalization of its
securities; (2) spin-off, refinancing, or partial sale or disposition of its
rights to certain of its non-core technologies; and (3) equipment lease
financing. No assurance can be given that the Company will be successful in
arranging financing through any of these alternatives.
Failure to obtain such financing will require the Company to delay, renegotiate,
or omit payment on its outside research funding commitments causing it to
substantially curtail its operations, resulting in a material adverse effect on
the Company.
F-6
<PAGE> 30
Vion Pharmaceuticals, Inc.
(A Development Stage Company)
Notes to Financial Statements (continued)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CASH EQUIVALENTS
The Company considers all highly liquid investments with a maturity of three
months or less at the date of purchase to be cash equivalents.
FAIR VALUE AND CONCENTRATION OF CREDIT RISKS
The estimated fair value of amounts reported in the financial statements have
been determined by using available market information and appropriate valuation
methodologies. All current assets and current liabilities are carried at cost,
which approximates fair value, because of their short-term nature.
SHORT-TERM INVESTMENTS
The Company accounts for short-term investments in accordance with Statement of
Financial Accounting Standards No. 115, "Accounting for Certain Investments in
Debt and Equity Securities." The Company's investments in debt securities, which
typically mature in one year or less, are classified as trading and are carried
at fair value. The aggregate cost of the debt securities at December 31, 1997
was $6,978,680.
PROPERTY AND EQUIPMENT
Property and equipment is stated at cost. Depreciation of equipment is computed
under the straight-line method over the estimated useful lives of the assets
(three to seven years).
INCOME TAXES
The Company accounts for income taxes under the liability method in accordance
with Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes" (SFAS 109). Under this method, deferred income taxes are recognized for
the tax consequences of "temporary differences" by applying enacted statutory
tax rates applicable to future years to differences between the financial
statement carrying amounts and the tax bases of assets and liabilities.
DEFINED CONTRIBUTION PLAN
The Company sponsors a defined contribution plan (the "Plan") that covers all
employees who meet the eligibility conditions set forth in the Plan. Employee
contributions to the Plan are voluntary and are based on eligible compensation,
as defined therein. In accordance with the terms of the Plan, no Company
contributions are made to the Plan.
SMALL BUSINESS INNOVATION RESEARCH GRANT
On September 27, 1996 the Company was awarded a Small Business Innovation
Research ("SBIR") grant for the Inhibitors of Ribonucleotide Reductase program.
The award was for reimbursable direct costs of up to $100,000.
F-7
<PAGE> 31
Vion Pharmaceuticals, Inc.
(A Development Stage Company)
Notes to Financial Statements (continued)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
The SBIR grant expired on March 30, 1997. The Company recognized $48,221 and
$51,779 of revenue from the SBIR grant for reimbursement of expenses incurred
for the years ended December 31, 1997 and 1996, respectively.
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 amounts reported in the financial statements and accompanying notes.
Actual results could differ from those estimates. Certain 1996 amounts have been
reclassified to conform to the 1997 presentation.
PER SHARE DATA
The following table sets forth the computation of basic and diluted earnings per
share:
<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
Numerator:
Net loss ($5,343,594) ($7,608,679)
Numerator for basic and diluted
net loss per share ($5,343,594) ($7,608,679)
----------- -----------
Denominator:
Denominator for basic and diluted
net loss per share 8,670,717 7,641,546
----------- -----------
Basic and diluted net loss per share ($ 0.62) ($ 1.00)
----------- -----------
</TABLE>
For additional disclosures regarding warrants and Class A and B Convertible
Preferred Stock see Note 5. For additional disclosures regarding stock options
see Note 6. These potentially dilutive securities were not included in diluted
net loss per share as the effect would be antidilutive.
F-8
<PAGE> 32
Vion Pharmaceuticals, Inc.
(A Development Stage Company)
Notes to Financial Statements (continued)
3. PROPERTY AND EQUIPMENT
The following is a summary of property and equipment as of December 31:
<TABLE>
<CAPTION>
1997
-----------
<S> <C>
Office equipment $ 177,331
Furniture and fixtures 163,251
Laboratory equipment 202,762
Leasehold improvements 285,765
Leased equipment under capital lease 927,777
-----------
1,756,886
Less accumulated depreciation (455,206)
-----------
Net property and equipment $ 1,301,680
-----------
</TABLE>
4. RESEARCH AND LICENSE AGREEMENTS
BOEHRINGER INGELHEIM AGREEMENT
On November 24, 1997, the Company and Boehringer Ingelheim International GmbH of
Germany ("BI") entered into an exclusive worldwide licensing agreement for the
development and marketing of Promycin(R) (porfiromycin), Vion's most advanced
anticancer agent. The agreement provides the Company with exclusive co-promotion
rights to Promycin in the United States and Canada. BI will have exclusive
worldwide rights to market and sell Promycin outside the United States and
Canada. The Company is responsible for the manufacturing and supply of Promycin
for all territories.
In exchange for these rights, the Company received $4.0 million from upfront
technology access fees and net proceeds of $2,869,801 from the sale of 448,336
shares of common stock at a premium to the then current market price. BI will
also reimburse the Company for certain initial development costs to date and
will share in future worldwide development costs.
The Company has cash equivalents and short-term investments of $10,979,161 at
December 31,1997. This balance includes $2,777,088 of restricted investments for
Promycin development expenses. Pursuant to the BI Agreement the Company must use
the BI license fee of $4.0 million exclusively for Promycin development
expenses. Including permitted earlier expenses and expenses incurred subsequent
to November 24, 1997, the Company recorded $1,222,912 of Promycin development
expenses as revenue under the agreement during 1997.
COVANCE AGREEMENT
During the quarter ended June 30, 1997, the Company entered into a Clinical
Development Agreement (the "Agreement") with Covance Clinical Research Unit Ltd.
and Covance Inc. ("Covance"). Pursuant to the Agreement the Company is
contracting to Covance the selection and management of clinical sites and the
preparation of clinical trial reports arising from clinical trials performed by
Covance regarding the Company's
F-9
<PAGE> 33
Vion Pharmaceuticals, Inc.
(A Development Stage Company)
Notes to Financial Statements (continued)
4. RESEARCH AND LICENSE AGREEMENTS (CONTINUED)
product candidate Promycin for the inclusion in a regulatory submission. The
Company has incurred expenses of $1,633,974 for the year ended December 31, 1997
under this agreement which has been expensed as incurred as research and
development.
YALE/MELARX AGREEMENT
Pursuant to a License Agreement between the Company and Yale University
("Yale"), as amended and restated as of August 1, 1992, the Company has obtained
rights to a synthetic form of melanin which the Company has named Melasyn. The
Company has entered into an agreement with Creative Polymers pursuant to which
Creative Polymers has agreed to be the exclusive selling agent for Melasyn and
will be entitled to 20% of the net sales of Melasyn.
The Company has an option to obtain an exclusive license for any inventions that
result from research projects by Yale which are relating to synthetic melanin
funded by the Company. The Company has agreed to reimburse Yale for its costs in
connection with the research projects in an amount currently equal to $899,023
per year (subject to increase by up to 5% per year). The agreement is for a term
ending June 30, 1998, subject to earlier termination as defined.
The Company and Yale entered into a License Agreement dated December 15, 1995
pursuant to which the Company received a nontransferable worldwide exclusive
license, expiring over the lives of the patents, to three inventions relating to
gene therapy for melanoma. Pursuant to this agreement, the Company has paid Yale
a $100,000 fee, and has agreed to pay milestone payments based on the status of
clinical trials and regulatory approvals. In addition, Yale is entitled to
royalties on sales, if any, of resulting products and sublicensing revenues.
YALE/ONCORX AGREEMENT
Pursuant to a License Agreement dated August 31, 1994, as amended, Yale granted
the Company an exclusive, nontransferable, worldwide license to make, have made,
use, sell and practice certain inventions and research for therapeutic and
diagnostic purposes. The term of the license is the expiration of any patents
relating to any inventions or, with respect to nonpatented inventions or
research, 17 years. Yale is entitled to royalties on sales, if any, of resulting
products and sublicensing revenues and, with regard to one patent, milestone
payments based on the status of clinical trials and regulatory approvals.
YALE SUBSCRIPTION ASSIGNMENT AND ASSUMPTION AGREEMENT
On June 4, 1992, the Company entered into a Subscription, Assignment and
Assumption Agreement (the "SAAA") with Yale. Pursuant to the agreement as
amended and extended, the Company is to provide funding for certain research in
the field of dermatology by Yale. The agreement expires in June 1998 and
provides for quarterly payments to Yale in accordance with agreed upon annual
budgets. The payments are recorded as expense when incurred. The Company was
granted exclusive licenses to inventions in countries where patents are
effective and nonexclusive licenses elsewhere expiring over the lives of the
patents and 20 years, respectively. The Company is obligated to pay royalties on
sales of licensed products.
F-10
<PAGE> 34
Vion Pharmaceuticals, Inc.
(A Development Stage Company)
Notes to Financial Statements (continued)
4. RESEARCH AND LICENSE AGREEMENTS (CONTINUED)
BERKELEY AGREEMENT
In October 1997, the Company terminated a research agreement with The Regents of
the University of California on behalf of the Berkeley Campus with regard to
certain microfiltration technology and decided not to pursue negotiations to
obtain licenses or options to obtain licenses for certain inventions resulting
from this research. There are no continuing liabilities to the Company stemming
from prior funding of this research.
5. SHAREHOLDERS' EQUITY
On April 20, 1995, 2,000,000 shares of common stock valued at $2.16 per share
were issued in conjunction with the merger with MelaRx (see Note 1). Shortly
prior to the consummation of the Merger, the Company issued 76,349 shares of
common stock for net proceeds of $206,000 after deducting placement fees of
$14,000.
On August 17, 1995 and September 6, 1995, the Company completed an IPO of
2,875,000 units, consisting of an aggregate of 2,875,000 shares of common stock,
2,875,000 redeemable Class A Warrants and 2,875,000 redeemable Class B Warrants
at a price of $4.00 per unit. Each Class A Warrant entitles the holder to
purchase one share of common stock and one Class B Warrant. Each Class B Warrant
entitles the holder to purchase one share of common stock. These warrants are
exercisable through August 13, 2000. The net proceeds to the Company of the IPO
were approximately $9,696,000 before repayment of the bridge financing noted
below.
In conjunction with the Company's IPO, the Company granted the underwriter an
option, exercisable over a period of three years commencing two years from the
date of the offering, to purchase up to 250,000 units at $5.20 per unit, subject
to adjustment.
BRIDGE FINANCING
In April 1995, the Company issued $2,000,000 in 10% promissory notes and
warrants to purchase 1,000,000 shares of common stock at $3.00 per share for net
proceeds of $1,704,000. The promissory notes were recorded net of a discount of
$200,000, attributable to the fair value of the bridge warrants. The notes were
paid at the closing of the IPO of the Company's securities described above and
the warrants, which are exercisable over four years, were converted into Class A
Warrants at that time.
F-11
<PAGE> 35
Vion Pharmaceuticals, Inc.
(A Development Stage Company)
Notes to Financial Statements (continued)
5. SHAREHOLDERS' EQUITY (CONTINUED)
PRIVATE PLACEMENT OF CLASS A CONVERTIBLE PREFERRED STOCK
On May 22, 1996, the Company completed a private placement of 1,250,000 shares
of Class A Convertible Preferred Stock, at $10.00 per share, resulting in net
proceeds to the Company of $11,531,052. Each share of Class A Preferred Stock is
initially convertible into 2.777777 shares of the Company's common stock and is
entitled to vote on all matters on an "as if" converted basis. In connection
with the foregoing transaction, the Company also issued to the placement agent
warrants to purchase an aggregate of 546,875 shares of the Company's common
stock. The shares of Class A Preferred Stock pay semi-annual dividends of 5% per
annum, payable in additional shares of Class A Preferred Stock, and a 15% one
time dividend payable in additional Class A Preferred Stock if the Company
redeems the issue within 3 years. The issue also contains a provision for a
special dividend after 2 years under certain conditions if the Company's common
stock price falls below the conversion price of the Class A Preferred Stock. The
issuance of the Class A Preferred Stock at closing also triggered certain
antidilution adjustment provisions of the Company's outstanding warrants,
resulting in the issuance of additional warrants.
ANTIDILUTION ADJUSTMENT
As a result of the sale on May 22, 1996 of 1,250,000 shares of Class A
Convertible Preferred Stock, and pursuant the Warrant Agreement governing the
rights of the Class A Warrants and the Class B Warrants, an adjustment was made
to the exercise price of the Class A Warrants and the Class B Warrants and there
was a corresponding distribution of additional Class A Warrants and Class B
Warrants. Specifically, on July 12, 1996 (the "Payment Date") each holder of a
Class A Warrant at the close of business on July 3, 1996 (the "Record Date") was
issued an additional 0.1 Class A Warrant and the exercise price of the Class A
Warrants was reduced from $5.20 to $4.73. In addition, on the Payment Date each
holder of a Class B Warrant on the close of business on the Record Date was
issued an additional 0.1 Class B Warrant and the exercise price of the Class B
Warrants was reduced from $7.00 to $6.37.
PRIVATE PLACEMENT OF CLASS B CONVERTIBLE PREFERRED STOCK
On August 20, 1997, the Company completed a private placement of 4,850 shares of
non-voting Class B Convertible Preferred Stock, at $1,000 per share, resulting
in net proceeds to the Company of $4,481,450. Shares of Class B Preferred Stock
are convertible into shares of common stock including an accretion of 8% per
annum. Shares of the Class B Preferred Stock may also be eligible, under certain
circumstances, to receive dividends paid in Class C Preferred Stock. The Class C
Preferred Stock is convertible into shares of common stock at the average
closing bid price of the Company's common stock for thirty consecutive business
days ending on the private placement closing date and is not entitled to
dividends.
ISSUANCE OF COMMON STOCK TO YALE UNIVERSITY
Effective July 24, 1997, the Company and Yale amended two license agreements
between the parties pursuant to which Yale agreed to reduce certain amounts
payable by the Company under such agreements. As a result, the Company issued
150,000 shares of common stock to Yale valued at $600,000.
F-12
<PAGE> 36
Vion Pharmaceuticals, Inc.
(A Development Stage Company)
Notes to Financial Statements (continued)
5. SHAREHOLDERS' EQUITY (CONTINUED)
ISSUANCE AND EXTENSION OF PLACEMENT AGENT WARRANTS
In connection with its role as placement agent for two private financings of the
Company's predecessor MelaRx, Inc., D.H. Blair Investment Banking Corporation
was issued warrants to purchase 56,504 and 11,929 shares of common stock at
$3.56 per share, expiring August 20, 1997 and November 1, 1997, respectively,
and warrants to purchase 23,632 shares at $4.44 per share, expiring March 3,
1998. The warrants to purchase 56,504 shares of common stock at $3.56 per share
expired, however on October 31, 1997 the Company agreed to reissue the expired
warrants and extend the expiration date of all such warrants to July 5, 1998.
The extension which was approved by the Board of Directors resulted in an
expense of $168,249.
6. EMPLOYEE STOCK OPTION PLAN
The Company has elected to follow Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees" (APB 25) and related Interpretations
in accounting for its employee stock options because, as discussed below, the
alternative fair value accounting provided for under FASB Statement No. 123,
"Accounting for Stock-Based Compensation," requires use of option valuation
models that were not developed for use in valuing employee stock options. Under
APB 25, because the exercise price of the Company's employee stock options
equals the market price of the underlying stock on the date of grant, no
compensation expense is recognized.
In July 1995, the Board of Directors of the Company adopted the Amended and
Restated 1993 Stock Option Plan (the "Option Plan"). The Option Plan originally
provided for the granting of incentive stock options or non-qualified stock
options to employees, officers, directors, and consultants of the Company, to
purchase up to an aggregate of 534,750 shares of common stock. On January 31,
1996, the Board of Directors adopted, subject to stockholder approval, an
amendment to the plan increasing the number of shares which may be issued under
the plan from 534,750 to 1,000,000. The amendment to the plan was adopted by the
stockholders at the Company's annual meeting on April 18, 1996. On January 29,
1997, the Board of Directors adopted an amendment to the Plan increasing the
number of shares which may be issued under the Plan from 1,000,000 to 1,500,000
which was approved by the stockholders at the Company's annual meeting on April
16, 1997. Incentive options granted under the Option Plan are exercisable for a
period of up to ten years from the date of grant at an exercise price which is
not less than the fair market value of the common stock on the date of the grant
except that the term of an incentive option granted under the Option Plan to a
stockholder owning more than 10% of the outstanding voting power may not exceed
five years and its exercise price may not be less than 110% of the fair market
value of the Common Stock on the date of grant. Options granted under the Option
Plan become exercisable in no less than four equal annual installments
commencing no earlier than the first anniversary of the date of grant. No option
may be granted under the Option Plan after April 14, 2003.
Through December 31, 1996 and 1997, options to purchase an aggregate of 896,750
and 1,033,050 shares, respectively had been granted under the plan. The Company
recognized $55,643 of compensation expense in
F-13
<PAGE> 37
Vion Pharmaceuticals, Inc.
(A Development Stage Company)
Notes to Financial Statements (continued)
6. EMPLOYEE STOCK OPTION PLAN (CONTINUED)
1997 for options granted under the plan which was a result of stock options
granted to non-employees. The Company recognized $83,647 of compensation expense
in 1996 for options granted under the plan which was a result of stock options
granted to non-employees and the issuance of certain stock options subject to
approval by the shareholders of the Company resulting in compensation expense of
$51,907 and $31,740, respectively.
The provisions of the Option Plan provide for the automatic grant of
non-qualified stock options to purchase shares of common stock ("Director
Options") to directors of the Company who are not employees or principal
stockholders of the Company ("Eligible Directors"). Eligible Directors of the
Company elected subsequent to the public offering are granted a Director Option
to purchase 20,000 shares of common stock on the date such person is first
elected or appointed a director (an "Initial Director Option"). Each Eligible
Director, other than directors who received an Initial Director Option since the
last annual meeting, is granted a Director Option to purchase 5,000 shares of
Common Stock ("Automatic Grant") on the day immediately following the date of
each annual meeting of stockholders, as long as such director is a member of the
Board of Directors. The exercise price for each share subject to a Director
Option shall be equal to the fair market value of the common stock on the date
of grant. Director Options are exercisable in four equal annual installments,
commencing one year from the date of grant. Director Options expire the earlier
of ten years after the date of grant or ninety days after the termination of the
director's service on the Board of Directors.
Pro forma information regarding net income and earnings per share is required by
Statement 123, and has been determined as if the Company had accounted for its
employee stock options under the fair value method of that Statement. The fair
value for these options granted under the Option Plan was estimated at the date
of grant using a Black-Scholes option pricing model with the following
weighted-average assumptions for 1996 and 1997, respectively: risk-free interest
rates of 6.28% and 5.77%; volatility factors of the expected market price of the
Company's common stock of .563 and .490; and a weighted-average expected life of
the option of 7 years. The Company has assumed no dividend yield in 1996 and
1997 because it did not pay cash dividends on its common stock and does not
expect to pay cash dividends in the foreseeable future.
The Black-Scholes option valuation model was developed for use in estimating the
fair value of traded options which have no vesting restrictions and are fully
transferable. In addition, option valuation models require the input of highly
subjective assumptions including the expected stock price volatility. Because
the Company's employee stock options have characteristics significantly
different from those of traded options, and because changes in the subjective
input assumptions can materially affect the fair value estimate, in management's
opinion, the existing models do not necessarily provide a reliable single
measure of the fair value of its employee stock options.
F-14
<PAGE> 38
Vion Pharmaceuticals, Inc.
(A Development Stage Company)
Notes to Financial Statements (continued)
6. EMPLOYEE STOCK OPTION PLAN (CONTINUED)
For purposes of pro forma disclosures, the estimated fair value of the options
is amortized to expense over the options vesting period. The Company's pro forma
information follows:
<TABLE>
<CAPTION>
1996 1997
------------- -------------
<S> <C> <C>
Pro forma net loss $ (7,824,863) $ (5,650,169)
Pro forma basic and diluted loss
per share: $ (1.02) $ (0.65)
------------- -------------
</TABLE>
A summary of the Company's stock option activity under the Option Plan, and
related information for the years ended December 31 follows:
<TABLE>
<CAPTION>
1996 1997
------------------ ------------------
OPTIONS WEIGHTED-AVERAGE OPTIONS WEIGHTED-AVERAGE
(000) EXERCISE PRICE (000) EXERCISE PRICE
------- ---------------- ------- ----------------
<S> <C> <C> <C> <C>
Outstanding - beginning
of year 533 $3.86 885 $3.93
Granted 364 4.06 136 4.53
Exercised -- --
Forfeited (12) 4.25 (40) 4.26
----- ----- ----- -----
Outstanding - end of year 885 $3.93 981 $4.00
----- ----- ----- -----
Exercisable at end of year 221 $3.71 422 $3.83
----- ----- ----- -----
Weighted-average fair
value of options granted
during the year $2.60 $2.65
----- ----- ----- -----
</TABLE>
F-15
<PAGE> 39
Vion Pharmaceuticals, Inc.
(A Development Stage Company)
Notes to Financial Statements (continued)
6. EMPLOYEE STOCK OPTION PLAN (CONTINUED)
A summary of the Company's ranges of exercise prices and weighted-average
remaining contractual life of options outstanding and of weighted-average
exercise price of options currently exercisable under the Option Plan as of
December 31, 1997 follows:
<TABLE>
<CAPTION>
WEIGHT-AVERAGE
NUMBER OF NUMBER OF WEIGHTED-AVERAGE REMAINING CONTRACTUAL
OUTSTANDING WEIGHTED-AVERAGE OPTIONS EXERCISE PRICE OF LIFE OF
SHARES EXERCISE PRICE OF EXERCISABLE OPTIONS EXERCISABLE OPTIONS OUTSTANDING
RANGE (000) OPTIONS OUTSTANDING (000)
<S> <C> <C> <C> <C> <C>
$3.625- $5.625 932 $ 4.18 373 $ 4.24 7.88 years
$2.40 6 2.40 6 2.40 2.67 years
$.40 43 .40 43 .40 2.67 years
</TABLE>
A summary of the Company's stock option activity outside the Option Plan, and
related information for the years ended December 31 follows:
<TABLE>
<CAPTION>
1996 1997
------------------------------ -------------------------------
OPTIONS WEIGHTED-AVERAGE OPTIONS WEIGHTED-AVERAGE
(000) EXERCISE PRICE (000) EXERCISE PRICE
------- ---------------- ------- ----------------
<S> <C> <C> <C> <C>
Outstanding - beginning
of year 404 $.21 398 $.21
Granted -- --
Exercised (6) .40 (50) .40
Forfeited -- --
---- ---- ---- ----
Outstanding - end of year 398 $.21 348 $.18
---- ---- ---- ----
Exercisable at end of year 398 $.21 348 $.18
---- ---- ---- ----
</TABLE>
F-16
<PAGE> 40
Vion Pharmaceuticals, Inc.
(A Development Stage Company)
Notes to Financial Statements (continued)
6. EMPLOYEE STOCK OPTION PLAN (CONTINUED)
A summary of the Company's ranges of exercise prices and weighted-average
remaining contractual life of options outstanding and of weighted-average
exercise price of options currently exercisable outside the Option Plan as of
December 31, 1997 follows:
<TABLE>
<CAPTION>
NUMBER OF NUMBER OF WEIGHT-AVERAGE
OUTSTANDING WEIGHTED-AVERAGE OPTIONS WEIGHTED-AVERAGE REMAINING CONTRACTUAL
SHARES EXERCISE PRICE OF EXERCISABLE EXERCISE PRICE OF LIFE OF
RANGE (000) OPTIONS OUTSTANDING (000) OPTIONS EXERCISABLE OPTIONS OUTSTANDING
<S> <C> <C> <C> <C> <C>
$ 5.00 .5 $ 5.00 .5 $ 5.00 2.67 years
$ .40 62 .40 62 .40 2.67 years
$ .13 286 .13 286 .13 1.08 years
</TABLE>
7. INCOME TAXES
At December 31, 1997, the Company has available for federal income tax purposes
net operating loss carryforwards of approximately $2,390,000 and a general
business credit of $346,000 expiring in 2010 through 2013. The difference
between the deficit accumulated during the development stage for financial
reporting purposes and the net operating loss carryforwards for tax purposes is
primarily due to certain costs which are not currently deductible for tax
purposes and differences in accounting and tax basis resulting from the merger
described in Note 1. The ability of the Company to realize a future tax benefit
from a portion of its net operating loss carryforwards and general business
credits may be limited due to changes in ownership of the Company. The U.S.
statutory rate is 34%; however, the Company has recorded no provision or benefit
for income taxes in the financial statements due to recurring losses.
Accordingly, the Company has provided a full valuation reserve against its
deferred tax assets.
Significant components of the Company's deferred tax assets and liabilities are
as follows:
<TABLE>
<CAPTION>
DECEMBER 31
1997
-----------
<S> <C>
Deferred tax assets:
Operating loss carryforwards $ 988,629
Research and development costs 6,110,481
General business tax credit 346,407
-----------
Total deferred tax assets 7,445,517
Valuation allowance for deferred tax assets (7,445,517)
-----------
Net deferred tax assets 0
-----------
Total net deferred tax assets (liabilities) $ 0
===========
</TABLE>
F-17
<PAGE> 41
Vion Pharmaceuticals, Inc.
(A Development Stage Company)
Notes to Financial Statements (continued)
8. COMMITMENTS AND CONTINGENCIES
The Company is the lessee of equipment under capital leases expiring in 2000.
Effective February 1, 1996, the Company entered into a noncancelable operating
lease for its facility expiring in 1999. Effective April 1, 1996, the Company
entered into noncancelable operating leases for laboratory and office equipment
expiring in 2000. The future minimum lease payments under the capital and
operating leases as of December 31, 1997 are as follows:
<TABLE>
<CAPTION>
CAPITAL OPERATING
LEASE LEASE
------- ---------
<S> <C> <C>
Year ending December 31:
1998 $326,312 $216,600
1999 337,694 36,648
2000 177,626 1,616
Thereafter -- --
-------- --------
Total minimum lease payments 841,632 254,864
========
Less amount representing interest 94,201
--------
Present value of minimum lease payments $747,431
========
</TABLE>
The cost of assets under capital leases amounted to $927,777 at December 31,
1997. Accumulated amortization relating to the leased equipment amounted to
$185,204 at December 31, 1997. Amortization expense included in depreciation
expense, relating to the leased equipment, amounted to $159,791, $20,692, and
$185,204 for the year ended December 31, 1997, the year ended December 31, 1996,
and the period from May 1, 1994 (commencement of operations) through December
31, 1997, respectively.
Rent expense amounted to $249,799, $181,093 and $468,657 for the year ended
December 31, 1997, the year ended December 31, 1996, and the period from May 1,
1994 (commencement of operations) through December 31, 1997, respectively.
On December 10, 1997 the Company entered into a sale and leaseback agreement
with FINOVA Technology Finance, Inc. ("FINOVA") The cost of assets under the
capital lease is $360,284 which is being depreciated over the lease term of 3
years.
Under the terms of an employment agreement, the Company is obligated to pay the
chief executive officer of the Company an annual salary of $180,000, increased
annually by an amount no less than an annual cost-of-living adjustment, through
January 1998.
A former director of the Company is a party to a Consulting and Finder's
Agreement ("Agreement") with the Company. This Agreement entitles him to receive
an annual fee equal to 10% of the net after-tax profits of the
F-18
<PAGE> 42
Vion Pharmaceuticals, Inc.
(A Development Stage Company)
Notes to Financial Statements (continued)
8. COMMITMENTS AND CONTINGENCIES (CONTINUED)
Company attributable to the sale or licensing of products or technology licensed
pursuant to the Company's agreement with Yale (see Note 4), until the cumulative
total of such fees equal $3,000,000. Such fee continues to be payable not
withstanding the director's death or incapacity until the $3,000,000 has been
paid.
The Company has various commitments relating to its research agreements (see
Note 4).
9. RELATED PARTY TRANSACTIONS
A director of the Company is a principal of a management consulting firm that
has rendered various consulting services for the Company. The Company paid the
firm $120,000 and $60,000 for services rendered for the years ended December 31,
1996 and 1997, respectively.
The Company and one of its directors, who is affiliated with Yale University,
entered into a five year consulting agreement on September 29, 1995 which is
renewable for one additional year, providing for various advisory services.
Under the agreement, the director receives an annual fee of $48,000.
F-19
<PAGE> 1
EXHIBIT 10.17
LEASE BETWEEN
SCIENCE PARK DEVELOPMENT CORPORATION
and
OncoRx, Inc.
4 Science Park, New Haven, CT 06511
DATE: August 10, 1995
Three Year
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Article No. Description Page
<S> <C> <C>
1 Leased Premises 1
2 Term 2
3 Rent and Utilities 2
4 Taxes 3
5 Tenant's Use of Leased Premises 4
6 Alterations 5
7 Repairs 6
8 Requirements of Law; Increased Insurance Rates 7
9 Floor Load 7
10 Tenant's Obligations to Mortgage Lenders 7
11 Limitations on Landlord's Liability 8
12 Tenant's Obligation to Protect Landlord 8
13 Fire and Other Casualty 9
14 Taking by Governmental Authority 10
15 Tenant's Right to Encumber, Assign, or Sublease 11
16 Access to Leased Premises 12
17 Default and Termination 12
18 Landlord's Performance on Tenant's Behalf 14
19 Tenant's Quiet Enjoyment of the Leased Premises 14
20 No Waiver by Landlord 15
21 Inability to Perform 15
22 Notices and Other Communications 15
23 Rules and Regulations 16
24 Security Deposit 16
25 Insurance 17
26 Services Provided by Landlord 18
27 Services Provided by Tenant 18
28 Signs 19
29 Brokerage 19
30 Notice of Lease 19
31 Surrendering of Leased Premises 20
32 Additional Obligations of Tenant 20
33 Tenant's Waiver of Rights 20
34 Effect of Written Lease Agreement 21
35 Interpretation of Lease 21
</TABLE>
<TABLE>
<CAPTION>
Schedules & Exhibits
<S> <C>
A Rules and Regulations - Section 23.1
B Specifications and Blueprint for Renovations
C Equipment Supplied by Tenant
1.1 Basic Rent
</TABLE>
<PAGE> 3
This lease, made and entered into as of this lOth day of August. 1995 by
and between SCIENCE PARK DEVELOPMENT CORPORATION, a Connecticut corporation with
offices at Five Science Park, New Haven, Connecticut 06511 (herein referred to
as "Landlord") and OncoRx. Inc. of 25 Science Park. New Haven. Connecticut 06511
(herein referred to as "Tenant").
WITNESSETH:
Tenant warrants and represents to Landlord that Tenant is a corporation
organized and in good standing under the laws of the State of Delaware and that
it has full right, power and authority to enter into this lease in the manner
hereinafter subscribed. Based upon the foregoing, Landlord hereby leases to
Tenant, and Tenant hereby hires from Landlord, the Leased Premises as
hereinafter defined, for the term, rentals, and upon other conditions and
covenants as follows:
ARTICLE 1. LEASED PREMISES
1.1. Leased Premises. Landlord is the owner of the real property located at
Science Park, New Haven, Connecticut, (the "Property"). The Tenant shall lease
from Landlord that part of Building Four (the "Building") known as the 3rd and
4th floors consisting of approximately 15 000 square feet (the "Leased
Premises"). The Leased Premises shall include, in common with other tenants of
the Building, use of the land and the facilities, accesses, hallways, roadways,
sidewalks, and like service and scenic improvements and grounds (with the
exception of parking areas), which are intended for the common use of tenants of
the Building ("Common Facilities").
1.2. Parking Areas. The rental of the Leased Premises will include the use
of thirty (30) parking spaces located in Lot One . Landlord has the right to
reassign the location of parking spaces for Tenant's use. Tenant's use of the
spaces shall be subject to the reasonable rules and regulations adopted by the
Landlord, as such are adopted or amended from time to time. Tenant shall have no
right to use any other parking spaces. The parking spaces may be unassigned and
unmarked; the lot shall be unattended and parking shall be at Tenant's risk.
1.3. "As Is" Condition; No Representations by Landlord. The Leased Premises
shall be made available to Tenant in its present "as is" condition. Tenant
represents that it has inspected the Leased Premises to its full satisfaction,
accepts it "as is" and relies on no warranties or representations, express or
implied, of Landlord or any agent or other party associated with Landlord as to
its condition or repair, or as to taxes or any other matter relating to the
Leased Premises, except as otherwise expressly provided in this lease. Landlord
has renovated the Leased Premises to its present "as is" condition based on the
specifications and blueprints included in this lease as Schedule B.
<PAGE> 4
ARTICLE 2. TERM
Term of lease. The "Term" of this lease shall commence on February 1. 1996
(the "Commencement Date") and, unless sooner terminated in accordance with this
agreement, will expire on January 31. 1999 (the "Termination Date").
ARTICLE 3. RENT AND UTILITIES
3.1. Basic Rent. Tenant shall pay to Landlord a basic annual rent ("Basic
Rent") computed at the rate per gross square foot of the Leased Premises shown
on Exhibit 1.1, due and payable in twelve (12) equal monthly installments in
advance on the first (1st) day of each calendar month during the Term. If the
Commencement Date shall be any day other than the 1st day of a calendar month,
Basic Rent for such calendar month shall be pro-rated on a per diem basis.
3.2. Additional Rent. In addition to Basic Rent, Tenant shall pay to
Landlord additional rent ("Additional Rent") consisting of all other sums of
money as shall become due and payable by Tenant hereunder, including without
limitation amount due and payable under Section 3.3 and Section 4.3, for default
in the payment of which Landlord shall have the same remedies as for a default
in the payment of Basic Rent.
3.3. Utilities and Common Charges.
A. Electricity. An electricity meter to measure the amount of
electricity consumed by the Leased Premises has been installed in the
Building. Tenant shall pay for electricity directly to the electric utility
company.
B. Gas. Tenant shall pay to Landlord as Additional Rent hereunder for
gas provided to the Leased Premises an amount equal to Tenant's Pro Rata
Share of Landlord's aggregate cost to provide gas to the Building. Landlord
has the right to reasonably estimate the gas charges to be incurred at the
Building during each year of the Term and to charge Tenant its
proportionate share of such estimate each month during the lease year, with
an annual reconciliation of the amounts so paid by Tenant as follows: If
Tenant shall have paid for any lease year an amount in excess of its
proportionate share of the actual gas service charges for such period,
Landlord shall credit the amount overpaid against Tenant's next payment for
gas service, and if Tenant shall have paid for any lease year an amount
less than the actual charges for such period, Tenant shall pay the
difference to Landlord within thirty (30) days after receipt of an invoice
therefor.
C. Common Charges. Tenant shall pay to Landlord as Additional Rent
hereunder the Tenant's Pro Rata Share of the common charges and costs
incurred by the Landlord in the ordinary maintenance and operation of the
common areas in the Building and the land upon which the Building is
situated. These charges and costs include, but are not limited to,
janitorial and other cleaning services; building maintenance services;
<PAGE> 5
utilities services (other than water); trash removal; parking lot
maintenance; security and real and personal property.
3.4. Absolute Obligation to Pay; No Set-Off. Tenant's obligation to make
full and prompt payment of all rent when owed under the terms of this lease is
absolute. Rent shall be paid without set-off, withdrawal or deduction of any
nature.
3.5. Partial Payments. Any payment of rent which is less than the amount
then due and owing to Landlord will be considered a payment against the oldest
outstanding rental obligation and Landlord may accept such payment without
affecting its rights to collect the balance owed.
3.6. Interest on Late Payments of Rent or Other Amounts Due. Any rent or
other amount which is owed by Tenant under this lease and which is not paid when
due shall carry interest at an annual rate equal to the highest rate allowed by
law from the date such rent or other amount was due until the date of payment.
If there is no limit on the rate of interest allowed by law, such interest shall
run at a rate equal to eighteen percent (18%) per annum.
ARTICLE 4. TAXES
4.1. Personal Property Taxes. Tenant shall be solely responsible for and
pay within the time provide by law all taxes imposed on its inventory,
furniture, trade fixtures, apparatus, equipment and any other of Tenant's
personal or other property.
4.2. Other Taxes and License Fees. Tenant shall pay prior to delinquency
all license and permit fees and taxes that may be imposed upon the business of
Tenant on the Leased Premises.
4.3. Real Property Taxes. As used in this Section 4.3, the term "Tenant's
Pro Rata Share" means that percent, calculated by dividing the gross interior
square footage of the Leased Premises by the aggregate gross interior square
footage of the Building and expressing the fraction as a percentage. Tenant
shall pay to Landlord, as Additional Rent hereunder, the following:
A. Tenant's Pro Rata Share of the real property taxes imposed by the
City of New Haven during the Term upon the land under the Building and the
parking lot serving the Building; and
B. Tenant's Pro Rata Share of all real property taxes imposed by the
City of New Haven during the Term on the Building within which the Leased
Premises is located.
<PAGE> 6
ARTICLE 5. TENANT'S USE OF LEASED PREMISES
5.1. Use of Leased Premises. The Leased Premises will be used by Tenant for
office and laboratory purposes only. Tenant shall at all times and in all
respects comply with all local, state and federal laws, ordinances, regulations
and orders relating to land use, industrial hygiene, environmental or similar
laws, including the use, analysis, generation, manufacture, storage, disposal or
transportation of Hazardous Materials. As used in this lease, the term
"Hazardous Materials" shall mean any hazardous or toxic substances, materials or
wastes, including, but not limited to, those substances, materials and wastes
listed in the United States Department of Transportation Hazardous Materials
Table (49 CFR Part 172.101) or by the Environmental Protection Agency as
hazardous substances (40 CFR Part 302) and amendments thereto, or such
substances, materials and wastes which are or become regulated under any
applicable local, state or federal law including, without limitation, any
material, waste or substance which is (i) petroleum, (ii) asbestos, (iii)
polychlorinated biphenyls, (iv) defined as a "hazardous waste", "extremely
hazardous waste" or "restricted hazardous waste", (v) designed as a "hazardous
substance" pursuant to Section 311 of the Clean Water Act, 33 U.S.C. Section 125
1, et seq. (33 U.S.C. 1321) or listed pursuant to Section 307 of the Clean Water
Act (33 U.S.C. Section 1317), (vi) defined as a "hazardous waste" pursuant to
Section 1004 of the Resource Conservation and Recovery Act, 42 U.S.C. Section
6901, et seq. (42 U.S.C. Section 6903), or (vii) defined as a "hazardous
substance" pursuant to Section 101 of the Comprehensive Environmental Response,
Compensation, and Liability Act, 42 U.S.C. Section 9601, et. seq. (42 U.S.C.
Section 9601).
5.2. Chemicals and Hazardous Materials. Tenant shall provide Landlord with
a list of chemicals and hazardous materials Tenant intends to store or utilize
in the Leased Premises. Such list is attached hereto as Schedule A. Tenant shall
update such list whenever Tenant intends to store or utilize other chemicals or
hazardous materials than appear on such list.
5.3. Hazardous Materials Handling. Tenant shall at its own expense procure,
maintain in effect and comply with all conditions of any and all permits,
licenses and other government and regulatory approvals required for Tenant's use
of the Leased Premises, including, without limitation, discharge of materials or
wastes into or through any sanitary sewer serving the Leased Premises. Except as
so discharged in accordance with all applicable environmental laws, Tenant shall
cause any and all Hazardous Materials removed from the Leased Premises to be
removed and transported solely by duly licensed haulers to duly licensed
facilities for final disposal of such materials and wastes. Tenants shall in all
respects handle, treat, deal with and manage any and all Hazardous Materials in,
on, under or about the Leased Premises in total conformity with all applicable
Hazardous Materials laws and prudent industry practices regarding management of
such Hazardous Materials. Upon expiration or earlier termination of the term of
the lease, Tenant shall cause all Hazardous Materials to be removed from the
Leased Premises and to be transported for use, storage or disposal in accordance
and compliance with all applicable Hazardous Materials laws.
<PAGE> 7
ARTICLE 6. ALTERATIONS
6.1. Tenant May Not Make Alterations or Improvements. Tenant shall not make
any additions or improvements in or to the Leased Premises except with
Landlord's prior written consent, which consent will not be unreasonably
withheld.
6.2. Improvements to Become Property of landlord. All additions and other
improvements installed in the Leased Premises at any time, either by Tenant or
by Landlord on Tenant's behalf, shall become the property of Landlord and shall
be surrendered with the Leased Premises upon termination of this lease unless
Landlord requires otherwise. Landlord acknowledges that Tenant has supplied
certain equipment, as contained in Schedule C attached, and Tenant will remove
said equipment upon termination of the lease.
6.3. Tenant's Removal of Trade Fixtures. Nothing in this Article shall
prevent Tenant's removal of its trade fixtures upon termination of this lease or
otherwise, but upon such removal, Tenant shall promptly, and at its own expense,
repair and restore any damage caused by such removal.
6.4. Tenant's Compliance with Conditions of Construction. Tenant shall,
before making any alterations, additions or improvements permitted hereunder,
obtain all permits, approvals and certifications required by any governmental or
quasi-governmental body or authority, and (upon completion) certificates of
final approval and/or completion thereof, and shall deliver promptly copies of
all such permits, approvals and certificates to Landlord. Tenant shall comply
with all applicable laws, regulations and ordinances affecting any additions,
alterations or improvements hereunder. Tenant agrees to carry, and will cause
its contractors and subcontractors to carry, such worker's compensation, general
liability, personal injury and property damage insurance with respect to and
during the course of any alterations, improvements or additions permitted
hereunder as Landlord may reasonably require. Tenant agrees to obtain, at
Landlord's request, and to deliver to Landlord written and unconditional waivers
of mechanics' liens upon the real property in and on which the Leased Premises
are located for all work, labor and services to be performed and for materials
to be furnished in connection with such work, signed by all contractors,
subcontractors, material men and laborers to become involved in such work. Any
such alternations, additions or improvements shall be at the sole expense of
Tenant using contractors reasonably acceptable to Landlord.
6.5. Mechanic's Lien. If any mechanic's lien is filed against the Property
or the Leased Premises for work claimed to have been done or materials claimed
to have been furnished to or for the benefit of Tenant, whether related to work
done pursuant to any provision of this lease or otherwise, the lien, within
thirty (30) days of its filing, shall be discharged by Tenant at Tenant's
expense by filing a bond as required by law or by other reasonable means.
<PAGE> 8
ARTICLE 7. REPAIRS
7.1. Landlord Maintenance. Landlord shall maintain and repair the public
portions of the Building, exterior and interior, and shall make all structural
repairs to the Building. Landlord shall maintain and repair the equipment
serving the Building generally, and the utility systems serving the Building and
up to the Leased Premises, but not utility fixtures within the Leased Premises.
7.2. Tenant Maintenance. Tenant shall take good care of and maintain the
Leased Premises, shall not waste the Leased Premises, and, at its sole cost and
expense, shall make all non-structural repairs to the Leased Premises and to the
utility fixtures within the Leased Premises as and when needed to preserve the
Leased Premises and such utility fixtures in good working order and condition,
reasonable wear and tear excepted. Any contractors retained by Tenant for these
purposes shall be acceptable to Landlord.
7.3. Tenant's Liability for Damages. Tenant shall be liable for all damage
or injury to the Leased Premises or to any other part of the Property or the
Building, whether requiring structural or non-structural repairs, caused by or
resulting from any omission, negligence or improper conduct on the part of
Tenant or Tenant's servants, employees, agents, contractors, licensees and
invitees (customers and guests). All such damage or injury shall be repaired
promptly by Tenant at its sole cost and expense to the satisfaction of Landlord.
7.4. Tenant to Repair Damage. Tenant shall repair all damage to the
Property, the Building and to the Leased Premises caused by the moving or
installing of Tenant's fixtures, furniture, equipment or other personal
property.
7.5. Landlord May Make Repairs at Tenant's Expense. If Tenant fails after
fifteen(l5) days' notice to proceed with due diligence to make any repairs
required to be made by it (except in an emergency, wherein Landlord may proceed
to repair), repairs may be made by Landlord. The reasonable costs and expenses
so incurred by Landlord shall be collectible from Tenant as Additional Rent.
7.6. Tenant to Notify Landlord of Defective Conditions. Tenant shall give
Landlord prompt written notice of any defective condition in the Leased Premises
of which Tenant is aware, including but not limited to, any defective condition
in the plumbing, heating system or electrical lines located in, servicing or
passing through the Leased Premises.
7.7. Quality of Work. Any and all work required or permitted to be done to
or upon the Leased Premises by way of repairs, alterations, additions or
improvements by Landlord or Tenant, or the agents or employees of either, shall
be of a quality equal to original construction and shall be done in accordance
with all applicable laws, regulations and ordinances.
<PAGE> 9
ARTICLE 8. REQUIREMENTS OF LAW; INCREASED INSURANCE
RATES
8.1. Tenant to Comply With Laws and Regulations. Tenant, at its sole cost
and expense, shall comply with all present and future laws, orders and
regulations of all federal, state, municipal and local governments, departments,
commissions and boards, the directions of any public officer, and all orders,
rules and regulations of the Connecticut Board of Fire Underwriters or any
similar organization relating or pertaining to the conduct of Tenant's business
or its use of the Leased Premises. Tenant need not make structural repairs or
structural alterations, except to correct for violations by Tenant, arising out
of its use or operation of the Leased Premises or any such laws, ordinances,
orders, rules, regulations or requirements.
8.2. No Violation of Insurance Policies. Tenant shall not do or permit any
act to be done in or to the Leased Premises which will invalidate or be in
conflict with any policies of insurance at any time carried by or for the
benefit of Landlord with respect to the Leased Premises, Building or Property.
Tenant shall not do or permit any act which might subject Landlord to any
liability or responsibility to any person or for property damage. Tenant shall
not use the Leased Premises in a manner which will increase the rate of any
insurance applicable to the Leased Premises or Building in effect on the
Commencement Date.
8.3. Tenant to Pay Costs, Fines and Penalties. Tenant shall promptly pay
all costs, expenses, fines, interest, penalties or damages which may be imposed
upon Landlord by reason of Tenant's failure to comply with the provisions of
this lease. If insurance rates are increased during the term of this lease
because of a special risk associated with Tenant's use or occupancy, Tenant
shall promptly reimburse Landlord for said increase as Additional Rent.
ARTICLE 9. FLOOR LOAD
Tenant shall not place a load upon any floor of the Leased Premises
exceeding the established floor load which shall be set by the Landlord. All
such equipment and material installation shall be placed and maintained by
Tenant at its expense, with equipment in settings sufficient to absorb vibration
and noise and prevent annoyance to other tenants in the Building.
ARTICLE 10. TENANT'S OBLIGATIONS TO MORTGAGE LENDERS
10.1. Subordination. The rights of Tenant under this lease will always be
subject or subordinate to those of all persons now, or in the future, holding a
mortgage on the Property, Building or Leased Premises and all renewals,
modifications, replacements and extensions of any such mortgage. This provision
is automatic without any further consent or confirmation by Tenant, but at
Landlord's request Tenant will execute an agreement (a "Subordination
Agreement") confirming this provision. The Subordination Agreement will be in a
form reasonably acceptable to Landlord and Tenant. Tenant will sign the
Subordination Agreement and return it to Landlord within ten (10) days after
Landlord makes the request in writing. Tenant's failure to comply strictly with
this provision will be an Event of Default, as defined in Article 17, which
Tenant may not cure without Landlord's consent. Tenant will also be liable to
Landlord for all damages Landlord sustains because Tenant fails to perform as
required. Notwithstanding the foregoing as to any mortgage first affecting the
Leased Premises after the date hereof ("Future Mortgage"), Landlord will use
Landlord's best efforts to obtain from the holder of any Future Mortgage, an
agreement in recordable form to the effect that as long as Tenant
<PAGE> 10
shall keep, carry out, and perform all of the terms, covenants and provisions
contained in this Lease which are to be performed by Tenant, the holder of such
Future Mortgage will not disturb Tenant's occupancy of the Leased Premises.
10.2. Estoppel Certificate. Tenant agrees to execute and deliver to
Landlord within ten (10) days of Landlord's written request a certificate or
statement reasonably required to confirm that this lease is in full force and
effect, whether it has been modified, and if so, how, and whether, to Tenant's
knowledge, Landlord is in default in the performance or observance of any
covenants or conditions in this lease on Landlord's part to be performed or
observed, or any condition exists that with the passage of time would, if
uncorrected, constitute a default (an "Estoppel Certificate"). Tenant's failure
to strictly comply with this provision will be an Event of Default, as defined
in Article 17, which Tenant may not cure without Landlord's consent.
ARTICLE 11. LIMITATIONS ON LANDLORD'S LIABILITY
11.1. General Rule. Landlord shall not be liable for any damage to property
of Tenant, Tenant's employees, agents, licensees, or invitees (customers or
guests) or of others, entrusted to agents or employees of Landlord, nor for loss
of or damage to any property of Tenant, its employees, agents, licensees or
invitees by theft or otherwise.
11.2. Landlord Not Liable for Other Tenants. Landlord and its agents shall
not be liable for any injury or damage to persons or property caused by other
tenants or persons in, upon or about the Building or Property or caused by
operations in construction of any private, public or quasi-public work in or to
the Building.
ARTICLE 12. TENANT'S OBLIGATION TO PROTECT LANDLORD
12.1. Tenant to Protect and Reimburse Landlord. Tenant will indemnify and
hold Landlord harmless from and against all loss, cost, damage, expense and
liability, including attorney's fees, related to such claims which arise out of
or in connection with the following:
A. Any breach or violation by Tenant or subtenant, their respective
agents, contractors, employees, licensees or invitees of any provision of
this lease;
B. The negligence or willful act by Tenant or subtenant or their
respective agents, employees, licensees and invitees;
C. Tenant's or subtenant's use and occupancy of the Leased Premises;
or
D. Any and all claims, liabilities, penalties, fines, judgments,
forfeitures, losses (including, without limitation, diminution in the value
of the Leased Premises and damages for the loss or restriction on use of
rentable or usable space or of any amenity of the Leased Premises), costs
or expenses (including attorney's fees, consultant fees and expert fees)
for the death of or injury to any person or damage to any property
whatsoever, arising from or caused in whole or in part, directly or
indirectly, by (i) the presence in, on, under or about the Leased Premises,
or any discharge or release in or from the Leased Premises, or Tenant's
use, analysis, storage, transportation, disposal, release, threatened
release, discharge or generation of Hazardous Materials to, in, on, under,
about or from the Leased Premises or (ii) Tenant's failure to comply with
any Hazardous Materials law. Tenant's obligation under this Section shall
include, without limitation, and whether foreseeable or unforeseeable, any
and all costs incurred in connection with any investigation of site
conditions, and any and all costs of any required or necessary repair,
<PAGE> 11
cleanup, detoxification or decontamination of the Leased Premises
(including, without limitation, the soil and ground water on or under the
Landlord's Property) and the preparation and implementation of any closure,
remedial action or other required plans in connection therewith. Tenant's
obligations under this Section shall survive the expiration or earlier
termination of the term of the Lease. For purposes of the release and
indemnity provisions hereof, any acts or omissions of Tenant or by
employees, agents, assignees, contractors or subcontractors of Tenant or
others acting for or on behalf of Tenant (whether or not they are
negligent, intentional, willful or unlawful) shall be strictly attributable
to Tenant.
12.2. Tenant to Defend Claims. If any action or proceeding is brought
against Landlord by reason of a claim described in Section 12.1., Tenant, upon
written notice from Landlord, will at Tenant's sole cost and expense, defend the
action or proceeding with legal counsel approved by Landlord in writing, which
approval shall not be unreasonably withheld. Landlord shall give Tenant written
notice of any such claim within fifteen (15) days of Landlord's receiving
written notice of the claim.
ARTICLE 13. FIRE AND OTHER CASUALTY
13.1. Notification to Landlord; Obligation to Pay Rent. If the Leased
Premises or Building, or any part thereof, shall be completely or partially
damaged by fire or other casualty, Tenant shall immediately notify Landlord and
shall continue to pay rent during any period of repair or until the lease is
terminated as provided in this Article.
13.2. When Lease May Be Terminated; Apportionment of rent. If by reason of
casualty:
A. The Building is destroyed or substantially damaged, this lease
shall terminate automatically;
B. The Leased Premises are rendered wholly or substantially untenable,
this lease shall terminate automatically; or
C. Any of the Building is otherwise substantially damaged, whether or
not the Leased Premises are damaged, then Landlord may either elect to
repair the damage or may cancel this lease by notice or cancellation within
thirty (30) days after such event and thereupon this lease shall expire,
and Tenant shall vacate and surrender the Leased Premises to Landlord. If
Landlord shall have decided to repair any damage as aforesaid, the damage
(except as to Tenant's fixtures or improvements made by Tenant) shall be
repaired by and at the expense of Landlord and the rent shall be abated
according to the part of the Leased Premises which is not usable by Tenant,
but Landlord shall not be required to do such repair or restoration work
except during business hours of business days.
13.3. When Rent Not Reduced. Notwithstanding any other provisions hereof,
if by reason of some act or omission on the part of Tenant or any of its
subtenants or its or their partners, directors, officers, servants, employees,
agents or contractors, either (a) Landlord or any Mortgagee shall be unable to
collect all of the insurance proceeds (including, without limitation, rent
insurance proceeds) applicable to damage or destruction of the Leased Premises
or the Building by fire or other casualty, or (b) the Leased Premises or the
Building shall be damaged or destroyed or rendered completely or partially
untenable on account of fire or other casualty, then without prejudice to any
other remedies which may be available against Tenant, there shall be no
abatement or reduction of rent or additional rent.
<PAGE> 12
13.4. Landlord Need Not Replace Tenant's Property. Tenant acknowledges that
Landlord is not required to repair or replace any of Tenant's property or
Tenant's improvements to the Leased Premises and that Landlord will not carry
insurance on Tenant's furnishings, fixtures, equipment, improvements or other
personal property.
13.5. No Obligation to Provide Alternate Parking. In the event that Tenant
parking as provided for in this lease is temporarily unavailable because of
fire, other casualty or any other reason outside of Landlord's control, Landlord
shall be under no obligation to provide alternate parking.
ARTICLE 14. TAKING BY GOVERNMENTAL AUTHORITY
14.1. Termination of Lease; Waiver of Claim by Tenant. If the Building or
any portion of the Building which includes the Leased Premises shall be taken by
condemnation (also known as "eminent domain) by any authority having power so to
do or is conveyed to such authority in lieu of condemnation, this lease shall
terminate from the date of title vesting in such authority. If any portion of
the Building which does not include the Leased Premises shall be so taken,
Landlord shall have the option, at its sole discretion, to cancel this lease.
All proceeds from the taking will belong to Landlord and Tenant waives any
rights it might have to such proceeds. Tenant, however, may proceed with any
independent claim against the taking authority as to moving costs.
14.2. Taking Not Involving the Building. If a portion of the Property shall
be taken by condemnation as described in Section 14.1. or conveyed in lieu of
condemnation, which portion does not include any portion of the Building (or
excepting an inconsequential portion of the Building not affecting the Leased
Premises), the term of this lease shall not terminate but shall continue in full
force and effect according to its terms. Tenant shall not be entitled to any
award or damages from such taking.
ARTICLE 15. TENANT'S RIGHT TO ENCUMBER, ASSIGN, OR SUBLEASE
15.1. Tenant May Not Use Lease as Collateral. Tenant may not voluntarily or
involuntarily use this lease for collateral (known as "encumbering" the lease)
without Landlord's prior written consent, which consent will not be unreasonably
withheld.
15.2. Assignment or Subletting by Tenant. Tenant may not assign or transfer
its interest in this lease. Tenant may not sublet any portion of the Leased
Premises without Landlord's prior written consent. Such consent will be granted
or withheld in the absolute discretion of landlord. Consent to a sublease shall
not be interpreted as consent to any renewal, additional or subsequent sublease.
15.3. Conditions Precedent to Sublease. A sublease shall become effective
only if the following conditions are met:
A. Landlord has consented in writing to the sublease; and
B. Landlord receives an executed copy of the written agreement of
sublease and the agreement is in a form acceptable to Landlord.
15.4. Tenant Not Released. No sublease will release Tenant from its
obligations under this lease and Landlord may look to Tenant for continued
performance.
<PAGE> 13
15.5. Landlord May Collect Charges. Landlord may collect use and occupancy
charges from a subtenant without being considered to have consented to the
sublease.
15.6. Change in Form of Tenant Not Recognized. A change in Tenant's form
(including, but not limited to, for example, a change in form from sole
proprietorship to partnership or partnership to corporation) shall not be
recognized by Landlord without Landlord's express consent.
15.7. Shared Use By Other Entities. Without limiting the generality of
Article 12 or of this Article 15, no use of the Leased Premises by any entity
other than Tenant is permitted without the prior express written consent of
Landlord given in its sole discretion only after (1) Landlord's receipt of prior
written request therefor and proof of insurance coverage to Landlord's
satisfaction, and (2) provision has been made to Landlord's satisfaction for
payment by Tenant of any additional costs and charges occasioned by such use.
ARTICLE 16. ACCESS TO LEASED PREMISES
16.1. Landlord to Have Access in Emergency. Landlord or Landlord's agents
shall have the right to enter the Leased Premises at any time if Landlord or
Landlord's agent reasonably believes an emergency exists.
16.2. Landlord's Right to Enter. Except as provided in Article 16.1.,
Landlord or Landlord's agents shall have the right to enter the Leased Premises
upon reasonable notice to Tenant for the following purposes:
A. Examining the Leased Premises;
B. Showing the Leased Premises to prospective tenants, purchasers and
lenders; and
C. To make repairs and alterations as Landlord may deem necessary or
reasonably desirable to the Leased Premises or to any other portion of the
Building or which Landlord may elect to perform following Tenant's failure
to make repairs or perform any work which Tenant is obligated to perform
under this lease, or for the purpose of complying with laws, regulations
and other directions of governmental authorities.
16.3. Landlord May Make Changes to Building. Landlord shall have the right
at any time, without incurring any liability to Tenant, to make any changes,
deletions and additions to the Building and to the entrances, exits, stairs,
halls, elevators and common spaces as Landlord believes necessary or desirable.
No action taken by Landlord pursuant to this section shall constitute an
eviction or breach of this lease.
ARTICLE 17. DEFAULT AND TERMINATION
17.1. Events of Default. Any of the following events shall constitute an
Event of Default by Tenant:
A. Failure to pay any installment of Basic Rent, Additional Rent or
any other rent or monetary obligation under this lease within ten (10) days
of the date payment is due.
B. Voluntary recourse to any protection or procedure under the United
States Bankruptcy Code, as amended, or any similar law.
<PAGE> 14
C. There is filed against Tenant in any court pursuant to any statute,
either of the United State of America or of any state, a petition in
bankruptcy or insolvency, or for reorganization, the appointment of a
receiver or trustee of all or a portion of Tenant's property, or for other
relief of debtors, and within thirty (30) days thereof Tenant fails to
secure a dismissal thereof.
D. Failure to sign a Subordination Agreement, Estoppel Certificate or
other certificate regarding the status of this lease.
E. Intentionally Omitted.
F. Abandonment of the Leased Premises.
G. Failure to perform or comply with any other non-monetary obligation
under this lease within thirty (30) days of written notice of such failure,
provided that, if said failure is of a nature that the same cannot be
completely cured or remedied within said thirty (30) day period, Tenant
shall not have diligently commenced curing within such period and
thereafter in good faith proceeded to remedy such failure.
H. Any lien, attachment or other encumbrance is lodged against the
Leased Premises, the Building or the Property by a party claiming through
or under Tenant and such is not discharged within thirty (30) days.
I. Any act by Tenant which, in Landlord's reasonable opinion,
constitutes waste, misuse or injury to the Leased Premises.
17.2. Termination Upon Occurrence of Event of Default. Upon the occurrence
of an Event of Default, this lease and the Term thereof may, at the option of
Landlord and without further notice, terminate and expire and Tenant shall quit
and surrender the Leased Premises to Landlord but still shall remain liable to
Landlord as hereinafter provided.
17.3. Effect of Termination. Upon termination as provided for in this
Article 17, Landlord may, without further notice, re-enter the Leased Premises
either by force or otherwise and dispossess Tenant by summary process or
otherwise and remove Tenant's effects and hold the Leased Premises as if this
lease had not been made, and Tenant hereby waives the service of any notice to
quit or notice of intention to re-enter or any other notice for condition broken
as at common law.
17.4. Damages. In the case of any termination of this lease under this
Article 17, Landlord, at its sole discretion, may recover from Tenant any and
all actual damages sustained by Landlord as a result of the termination and any
re-letting of the Leased Premises. These damages include, but are not limited
to:
A. Fixed Rent and Additional Rent when due;
B. The cost of removing Tenant and its property and otherwise
recovering the Leased Premises;
C. The reasonable cost of preparing the Leased Premises for another
tenant;
D. Reasonable brokerage appraisal fees; E. Any other reasonable
expenses as Landlord may incur in connection with re-letting the Leased
Premises;
<PAGE> 15
F. The difference between all rent which would have become payable for
the remainder of the Term of this lease and that actually received for said
period; and
G. Reasonable legal fees incurred by Landlord in exercising its rights
under this Article 17.
17.5. No Mitigation of Damages. The failure or reasonable refusal of
Landlord to re-let the Leased Premises, or any part or parts thereof, shall not
release or affect Tenant's liability for damages. In such case, Landlord shall
not be liable in any way whatsoever for failure to re-let the Leased Premises
or, in the event that the Leased Premises are re-let, for failure to collect the
rent thereof under such re-letting, and in no event shall Tenant be entitled to
receive any excess, if any, of any such rents collected over the sums payable by
Tenant to Landlord under this lease.
17.6. Use and Occupancy. Any moneys received by Landlord from or on behalf
of Tenant during the pending of any proceeding of the types referred to in
subsections 17.1B and 17.1C shall be deemed paid as compensation for the use and
occupation of the Leased Premises, and the acceptance of any such compensation
by Landlord shall not be deemed an acceptance of rent or a waiver on the part of
the Landlord of any rights under Article 17.
ARTICLE 18. LANDLORD'S PERFORMANCE ON TENANT'S BEHALF
18.1. Landlord May Cure Default. If Tenant defaults under this lease,
Landlord, at its sole option, immediately or at any time thereafter, and without
notice, may correct the default on behalf of Tenant instead of declaring an
Event of Default. Any costs or expenses incurred by Landlord in curing such
default including, but not limited to, fines, penalties, interest, damages and
reasonable attorney's fees in instituting, prosecuting or defending any action
or proceeding, which sums shall carry interest at the highest rate permitted by
law until paid in full, shall be deemed to be Additional Rent. Tenant shall pay
such sums promptly upon rendition of any bill or statement to Tenant therefor.
18.2. Landlord Not Obligated to Cure Default. Nothing contained in this
Article shall be construed as to require Landlord to incur any expenses or
obligations on behalf of Tenant.
ARTICLE 19. TENANT'S QUIET ENJOYMENT OF THE LEASED PREMISES
As Tenant pays the rent and additional rent and other sums due under this
lease and complies with all of the provisions of this lease, Tenant may
peaceably and quietly have, hold and enjoy the Leased Premises for the term of
this lease subject to the provisions of this lease.
ARTICLE 20. NO WAIVER BY LANDLORD
20.1. No Waiver. If Landlord decides not to enforce any provision of this
lease or any of the rules and regulations of Landlord set forth in this lease or
hereafter adopted, on any occasion, it may nevertheless on another occasion
enforce such provision, rule or regulation. No act by Landlord or Landlord's
agents shall be deemed an acceptance of a surrender of the Leased Premises or a
waiver of any right under the lease unless Landlord has so agreed in writing.
20.2. Accepting Money Not a Waiver. Landlord will not waive any right to
enforce any provision of this lease by accepting a payment of rent from Tenant
knowing that Tenant
<PAGE> 16
has failed to comply with the terms of the lease. No endorsement or statement on
any check or any letter accompanying any check or payment shall be deemed to
effect an accord and satisfaction and Landlord may accept any such check or
payment without prejudice to Landlord's right to recover the balance of such
rent or payment due or pursue any other remedy in this lease provided.
ARTICLE 21. INABILITY TO PERFORM
This lease and the obligation of Tenant to pay rent and other payments
required hereunder and comply with all of the other provisions of this lease
shall in no way be affected, impaired or excused because Landlord is delayed in
supplying any service expressly or implied to be supplied, or is unable to make
or is delayed in making any repair, additions, alterations or decorations, or is
unable to supply or is delayed in supplying any equipment or fixtures, or is
unable to fulfill or is delayed in fulfilling any other obligation hereunder, if
Landlord is so prevented or delayed by reason of riot, strike, labor troubles,
war, act of God or any other cause whatsoever beyond Landlord's reasonable
control including, but not limited to, government preemption in connection with
a national emergency or by reason of any rule, order or regulation of any
department or subdivision thereof of any government agency, or by reason of the
conditions of supply and demand which have been or are affected by war or other
emergency.
ARTICLE 22. NOTICES AND OTHER COMMUNICATIONS
Any invoice, statement, notice or other communication permitted or required
by this lease to be given to either party shall be deemed sufficiently given if
in writing and sent by courier or by registered or certified mail, return
receipt requested, postage prepaid, to the address set forth herein or to any
other address designated by a party in writing.
If at any time Tenant shall become aware, or have reasonable cause to
believe, that any Hazardous Material has come to be located on or beneath the
Leased Premises, Tenant shall immediately notify Landlord thereof. Tenant shall
promptly deliver to Landlord copies of hazardous waste manifests reflecting the
legal and proper disposal of all Hazardous Materials removed from the Leased
Premises.
ARTICLE 23. RULES AND REGULATIONS
23.1. Compliance with Rules and Regulations. Tenant and Tenant's servants,
employees, agents, licensees and invitees shall faithfully observe and comply
strictly with the rules and regulations for occupancy of the Leased Premises
promulgated from time to time by Landlord. The current rules and regulations in
effect are attached hereto and made a part hereof as Schedule A.
23.2. Notice of Change. Landlord shall give Tenant thirty (30) days written
notice of any changes in Schedule A or of any additional rules or regulations to
be adopted.
23.3. Landlord Under No Duty to Enforce Rules and Regulations. Landlord has
no duty to enforce the rules and regulations or provisions of any other lease as
against any other tenant, and Landlord shall not be liable to Tenant for the
violation of such rules, regulations or leases by any other tenant, its
servants, employees, agents, licensees or invitees.
<PAGE> 17
ARTICLE 24. SECURITY DEPOSIT
24.1. Security Deposit. Tenant has deposited with Landlord $25.000.00 as
security for its faithful performance and observance of the provisions of this
lease. It is agreed that in the event of a default by Tenant under this lease,
Landlord may use, apply or retain the whole or any part of the security so
deposited to the extent required for the curing of such default or for paying
any sum which Landlord may expend or may be required to expend by reason of
Tenant's default.
24.2. Return of Security Deposit. In the event that Tenant shall fully and
faithfully comply with all the provisions of this lease, and providing that all
equipment and property of Landlord including, without limitation, keys, and
employee identification cards, have been returned to Landlord, the security
shall be returned to Tenant within sixty (60) days after surrender of the Leased
Premises to Landlord.
24.3. Transfer of Security to New Landlord. In the event of a sale of or
upon a transfer of Landlord's interest in the Building or Property to another
person, Landlord shall have the right to transfer the security to the other
person and Landlord upon doing so shall be released by Tenant from all liability
for the return of such security. Tenant agrees to look solely to the new
landlord for the return of its security. It is agreed that the provisions of
this Article shall apply to every transfer or assignment made of the security to
a new landlord.
24.4. No Assignment by Tenant. Tenant will not assign the security
deposited or use it as collateral or attempt to so assign or use it. Neither
Landlord nor its successors or assigns shall be bound by any assignment,
encumbrance, attempted assignment or attempted encumbrance.
24.5. No Interest on Security Deposit. No interest shall accrue on the
security deposit to Tenant's benefit, except and only to the extent required by
law.
ARTICLE 25. INSURANCE
25.1. Required Insurance. Tenant will maintain in full force and effect the
following insurance:
A. Public liability insurance in an amount of $500,000 combined single
limit death, bodily injury, personal injury and property damage for office
tenants and in an amount of $1,000,000 combined single limit death, bodily
injury, personal injury and property damage for laboratory tenants, or such
greater amount as Landlord may reasonably require. Appropriate amounts may
increase with time. Moreover, Landlord may require, for example,
substantially higher liability coverage for tenants whose use involves
laboratory or machine uses or whose Leased Premises occupy larger square
footages.
B. "All risk extended coverage insurance" insuring its personal
property and improvements to be located on the Leased Premises for full
replacement value against loss by fire, vandalism, malicious mischief and
other casualty.
C. Worker's compensation insurance as required by law.
25.2. Landlord and Mortgagee to be Named Insured. Tenant's public liability
insurance shall name Landlord, any holder of any mortgage on the Building or
Property
<PAGE> 18
and any Public party required to be named, as designed by holder, as an
additionally insured party.
26.2. Normal Operating Hours. Normal operating hours for the Building will
be 8:00 a.m. to 6:00 p.m., Monday through Friday, excluding holidays. If Tenant
desires utility services at other than established hours, Landlord, upon
reasonable notice, may, at its sole discretion, so provide. Tenant will pay the
actual costs of the additional services.
26.3. Services to Other Entities. No extra services shall be provided for
the use of any entity other than Tenant without Landlord's prior express written
consent.
ARTICLE 27. SERVICES PROVIDED BY TENANT
27.1. Services. Tenant shall provide at its expense the following services
with respect to the Leased Premises:
A. Tenant shall keep the Leased Premises in good order (subject to
Landlord's obligations set forth in Articles 7 and 26) and free from all
refuse, and shall promptly remove all debris, garbage, and refuse of any
kind from the Leased Premises;
B. Tenant shall furnish all painting, janitorial and security services
for the Leased Premises;
C. Tenant shall use all possible diligence, in accordance with the
best prevailing methods, for the prevention and extermination of vermin,
rats, mice or other pests in the Leased Premises;
D. Tenant shall be responsible for, and pay, the taxes described in
Article 4 and the insurance described in Article 23; and
E. Except as set forth in Article 26, Tenant shall make, or cause to
be made, maintenance and repairs as necessary or advisable to keep the
Leased Premises from deteriorating in value or condition, and Landlord
shall be absolutely exempt from making any maintenance or repair to the
Leased Premises during the Term of this lease, it being intended that the
purview of this clause shall extend to all maintenance and repair items of
whatsoever sort, which a judicious owner of the Leased Premises would make
for the benefit of the same whether or not herein specifically identified.
ARTICLE 28. SIGNS
Tenant shall not place any signs, lettering or advertisements anywhere on
or in the Property or Building or in the Leased Premises where such is visible
from outside the Leased Premises, except as permitted by Landlord in writing.
<PAGE> 19
ARTICLE 29. BROKERAGE
Tenant represents to Landlord that the sole and exclusive broker or agent
acting on Tenant's behalf in connection with this lease to whom any fee or
commission is due is none. Tenant agrees to indemnify and hold Landlord harmless
from and against the claims of any party claiming a fee or commission by, under
or through Tenant on account of this lease.
ARTICLE 30. NOTICE OF LEASE
At the request of either party, the Landlord and Tenant will execute in a
form which can be filed on the Land Records of New Haven, Connecticut, a notice
of this lease containing all information required under Connecticut law. The
expense of such notice shall be borne by the party requesting the document.
ARTICLE 31. SURRENDERING OF LEASED PREMISES
31.1. Surrender of Leased Premises. Tenant will promptly surrender the
Leased Premises upon any or all of the following events:
A. Expiration of the Term of this lease, as such Term may be amended.
B. Termination of this lease.
C. Landlord's repossession of the Leased Premises upon an Event of
Default.
31.2. Condition of Leased Premises. Upon the expiration of the Term or
sooner termination of this lease, Tenant shall leave the Leased Premises and
surrender it to Landlord broom clean and in good order and condition, ordinary
wear and tear excepted.
31.3. Removal of Tenant's Property. When Tenant surrenders the Leased
Premises to Landlord, all Tenant's property shall have been removed. Except
where the lease has been terminated because of fire or other casualty, Tenant
will leave the Leased Premises in good condition and repair.
31.4. Holding Over Shall Not Renew Lease. Tenant's occupancy of the Leased
Premises beyond the term of this lease or after termination will not constitute
a renewal of the lease by operation of law or otherwise for any period
whatsoever. If Tenant does so occupy the Leased Premises, it shall be deemed to
be a tenant at sufferance only and shall pay Landlord rent in an amount equal to
two hundred percent (200%) of the highest Fixed Rent and Additional Rent payable
hereunder and shall be subject to all other provisions of this lease. Regardless
of any payment made by Tenant or any payment cycle, no holding over shall under
any circumstances be deemed any more than a tenancy at sufferance.
ARTICLE 32. ADDITIONAL OBLIGATIONS OF TENANT
Tenant shall promptly reimburse Landlord, upon demand, for all costs of
Landlord, including reasonable attorney's fees, incurred in the enforcement of
this lease and in providing any consent or review of any sublease or mortgage
requested of Landlord hereunder.
<PAGE> 20
ARTICLE 33. TENANT'S WAIVER OF RIGHTS
In connection with any disputes and legal proceedings arising from this
lease, Tenant waives the following legal rights:
A. Trial by jury.
B. The right to a formal demand to leave the premises upon expiration
of this lease by lapse of time, known as a "Notice to Quit", or any other
form of notice under 047a-25 of the Connecticut General Statutes, should
Landlord use summary process to evict tenant or regain the Leased Premises.
C. Any right, under existing or future law, to gain back the Leased
Premises once Tenant is legally removed (known as "Right of
Reinstatement").
D. The right to notice and a formal hearing before a judge prior to
Landlord's legal attachment or garnishment of Tenant's property or other
legal remedy involving Tenant's property before a court judgment is entered
against Tenant (known as "Prejudgment Remedies" which are more specifically
described in Section 52-278a through Section 52-278g of the Connecticut
General Statutes).
ARTICLE 34. EFFECT OF WRITTEN LEASE AGREEMENT
34.1. Written Lease Sole Expression of Parties' Intent. All understandings,
letters of intent or agreements between Tenant and Landlord which predate this
lease are merged in this lease. No oral statements or representations or prior
written communications by or between the parties dealing with this lease shall
be binding or effective. This lease is the sole and complete expression of the
agreement between Landlord and Tenant as to this lease.
34.2. Amendment of Written Lease. This lease can be modified, altered or
amended only by a written agreement signed by both Landlord and Tenant.
ARTICLE 35. INTERPRETATION OF LEASE
35.1. Partial Invalidity. If any of the provisions of this lease, or its
application, is held by any court or in arbitration to be invalid or
inapplicable, such decision shall not affect any other term, provision, covenant
or condition of this lease. Notwithstanding the foregoing, if the invalid
provision has the effect of reducing the rent to be paid by Tenant, Landlord may
terminate this lease.
35.2. Article and Section Captions. Article and section captions will not
be given any effect in determining the meaning of this lease.
35.3. Governing Law. The laws of the State of Connecticut will govern the
interpretation of this lease.
35.4. Successors and Assigns. This lease shall be binding upon the parties
hereto and upon their heirs, administrators, executors, successors and assigns.
35.5. Continuing Obligations. Once Tenant becomes obligated under this
lease to pay Landlord money or to perform an act, these obligations will
continue until Tenant performs even though this lease is otherwise terminated.
<PAGE> 21
ARTICLE 36. OPTION TO TERMINATE
36.1. If Tenant wishes to terminate the lease at any time during the
initial term, Tenant may do so by exercising a buyout option for the remainder
of the lease. Tenant would provide Landlord with three (3) months prior written
notice of their intent to terminate. Tenant would buyout the lease by paying
rent for one full year after the termination date. The foregoing buyout payment
shall not be applicable in any situation in which Tenant terminates this Lease
simultaneously with the lease by Tenant of other property of equal or greater
area in any property owned by the Landlord.
ARTICLE 37. RENEWAL OPTION
37.1. If Tenant wishes to exercise the three year renewal option, Landlord
would need to be notified, in writing, six (6) months prior to the expiration
date of the original lease. The buyout option as outlined in Article 36 would
also be included in the renewal period. The rental rates for the renewal period
can be found in Exhibit 1.1.
<PAGE> 22
IN WITNESS WHEREOF, the parties hereto have hereunto set their hands and seals
as of the day and year first above written.
Signed, Sealed and Delivered
In the Presence of:
- ------------------------------------- For OncoRx. Inc.
By /s/ Thomas Mizelle
-------------------
- ------------------------------------- Its VICE PRESIDENT - OPERATIONS
----------------------------
TENANT
SCIENCE PARK DEVELOPMENT
CORPORATION
BY /s/ David Driver
------------------
Its PRESIDENT & CHIEF EXECUTIVE OFFICER
-----------------------------------
LANDLORD
<PAGE> 23
SCHEDULE A
RULES AND REGULATIONS
1. No sign, signal, advertisement, notice or other lettering, except as
allowed in the lease, shall be exhibited, inscribed, painted or affixed by any
tenant on any part of the outside of the Leased Premises or inside of the
Building without the prior written consent of Landlord. No signs, advertisements
or notices shall be painted or affixed on or to any windows or doors, or other
parts of the Building, except of color, size and style and in such places as
shall be first approved in writing by Landlord. Interior signs on doors and
directory tablet shall be inscribed, painted or affixed by each tenant at
Tenant's expense and shall be of a size, color and style acceptable to Landlord.
Tenant agrees that any door or directory signage shall be removed at the end of
the lease Term and all doors and walls will be restored to their original
conditions. All signs that are contracted for by Landlord will be at the rate
fixed by Landlord from time to time and Tenant will be billed and will pay for
such service accordingly.
2. Tenant will refer to Landlord all contractors, contractors'
representatives and installation technicians rendering any service to Tenant for
Landlord's supervision, approval and control before performance of any
contractual service. Except for the hanging of pictures, no boring, cutting or
stringing of wires shall be permitted, except with the prior written consent of
Landlord and as Landlord may direct. This provision shall apply to all work
performed in the Building including installations of telephones, telegraph
equipment, electrical devices and attachments and installations of any nature
affecting floors, walls, woodwork, trim, windows, ceilings, equipment or any
other physical portion of the Building.
3. Movement in or out of the Building of furniture or office equipment or
dispatch or receipt by Tenant of any merchandise or materials which require use
of elevators or stairways or movement through Building entrances or lobby shall
be restricted to hours designated by Landlord. All such movement shall be under
the supervision of Landlord and in the manner agreed between Tenant and Landlord
by arrangement before performance. Such pre-arrangement initiated by Tenant will
include determination by Landlord and subject to its decision and control as to
the time, method and routing of movement and as to limitations imposed for
safety or other concerns which may prohibit any article, equipment or any other
item from being brought into the Building. Tenant is to assume all risk as to
damage to articles moved and injury to persons or public engaged or not engaged
in such movement, including equipment, property and personnel of Landlord, if
damaged or injured as a result of acts in connection with carrying out this
service for Tenant from the time of entering the Property to completion of work.
Landlord shall not be liable for the acts of any person engaged in, or any
damage or loss to, any of said property or persons resulting from any act in
connection with such service performed for Tenant.
4. Tenant shall not deface any part of the Leased Premises, Building or
Property.
5. No portion of the Leased Premises or of any other part of the Building
shall at any time be used for cooking (except in designed areas), or occupied
for lodging or sleeping, or for any immoral or illegal purpose, or for any
purpose that will damage the Property or the reputation thereof or for any
purpose other than that specified in the lease covering the Leased Premises.
<PAGE> 24
6. Tenant shall not place, install or operate in the Leased Premises or in
any other part of the Building any engine or machinery or maintain, use or keep
any inflammable, explosive or hazardous material without consent of Landlord.
7. Landlord will not be responsible for lost or stolen personal property,
equipment, money or jewelry from Tenant's area or public rooms regardless of
whether or not such loss occurs when the area is locked against entry.
8. No birds or animals shall be brought into or kept in or about the
Building.
9. Tenants shall not hire or employ employees of Landlord without
Landlord's prior express written consent.
10. Landlord will not permit entrance to the Leased Premises by use of pass
keys controlled by Landlord to any person at any time without written permission
by Tenant, except to employees, contractors or service personnel directly
supervised by Landlord.
11. The entries, passages, doorways, elevators, elevator doors, hallways
and stairwells shall not be blocked or obstructed; no rubbish, litter, trash or
material of any nature shall be placed, emptied or thrown in these areas; and
such areas shall not be used at any time except for ingress or egress by Tenant,
Tenant's agents, employees, invitees, Tenant's equipment, furnishings and
supplies to or from the Leased Premises.
12. Tenant shall not do or permit anything to be done in or about the
Building or bring or keep anything therein that will in any way increase the
rate of fire or other insurance on the Building or on property kept therein, or
obstruct or interfere with the rights of, or otherwise injure or annoy other
tenants or do anything in conflict with the valid pertinent laws, rules or
regulations of any government authority.
13. Landlord shall have the right to determine and prescribe the weight and
proper position of any unusually heavy equipment including safes, large files,
etc. that are to be placed in the Building, and only those which in the opinion
of Landlord do not exceed acceptable floor loading and might not with reasonable
probability do damage to the floors, structure and/or freight elevator, may be
moved into said Building. Landlord's permission will not be unreasonably
withheld. Any damage occasioned in connection with the moving or installing of
such aforementioned articles in said Building or the existence of same in said
Building shall be paid for by Tenant, unless otherwise covered by insurance.
14. Landlord shall have the right to prohibit the use of the Science Park
Development Corporation name, or of the name of the Science Park project or of
any Science Park building, or any other publicity by Tenant, which, in
Landlord's opinion, tends to impair Landlord's reputation or that of the
Building or its desirability for the executive offices of Landlord or of other
tenants; and, upon written notice from Landlord, Tenant will refrain from or
discontinue such use or publicity. Landlord's permission will not be
unreasonably withheld.
15. No weapons are allowed on the Property.
16. Any device used for moving of furniture, freight, mail or paper goods
that will be used on a daily basis will be padded in such a way as to protect
from possible damage any surface with which it may come in contact. Any device
used on an occasional basis which is not padded will be operated in a safe
manner so as to prevent damage to any walls, doors, floors, ceilings or other
surfaces.
<PAGE> 25
17. All work done by service personnel, whether in-house or contracted,
shall be done in a first class manner to accepted standards of the trade and
shall conform to all codes imposed by any governmental authority.
18. No awnings or other projections shall be attached to the outside walls
of the Building without the prior written consent of Landlord. Such awnings or
other projections so permitted by Landlord must be of a quality, type, design
and color and attached in the manner approved by Landlord.
19. No show cases or other articles shall be placed in front of or affixed
to any part of the exterior of the Building, nor placed in the halls, corridors
or vestibules without the prior written consent of Landlord.
20. Water and wash closets and other plumbing fixtures shall not be used
for any purpose other than those for which they were constructed and no
sweepings, rubbish, rags or other substances shall be thrown therein. All
damages resulting from any misuse of the fixtures shall be borne by any Tenant
who, or whose servants, employees, agents, visitors or licensees, shall have
caused the same.
21. Landlord reserves the right to exclude from the Building between the
hours of 7:00 p.m. and 7:00 a.m. and at all hours on Sundays and legal holidays
all persons who do not present a pass to the Building signed by Landlord.
Landlord will furnish passes to persons for whom Tenant requests same in
writing. Each Tenant shall be responsible for all persons for whom Tenant
requests such passes and shall be liable to Landlord for all acts of such
persons.
22. The requirements of Tenant will be attended to only upon application at
the office of Landlord's building manager. Landlord's employees shall not
perform any work or do anything outside of their regular duties unless under
special instructions from Landlord.
23. Canvassing, soliciting and peddling in the Building is prohibited and
Tenant shall cooperate to prevent same.
24. Landlord reserves the right to alter and amend these Rules and
Regulations from time to time.
25. Entrance to Science Park
Tenant's employees and Landlord's personnel will be issued photo
identification cards ("IDs") which must be shown upon request at gate entrances
and anywhere on the Property if requested by Landlord's security officers. This
ID authorizes the bearer to be in or around all Science Park buildings but not
on or in property or buildings owned by U.S. Repeating Arms Company, Olin
Corporation or buildings not open to the public. The ID authorizes no one to
enter uninvited into another company's office or work area. If an ID is lost of
stolen, it should be reported to Security immediately. There is a B.00 charge
for replacement.
26. Hours of Operation
Science Park is open 24 hours a day, 7 days a week. The normal work days
are Monday through Friday from 8:00 a.m. to 6:00 p.m. Security officers are
assigned to the gate entrances from 6:00 a.m. until 6:00 p.m. on these days. On
Saturdays, Sundays and holidays and after 6:00 p.m., the gate is controlled by a
security officer from the main
<PAGE> 26
security desk in the lobby of Building Five. Any person wishing to enter the
Park during these times must ring the bell and identify him/herself to the
officer. The gate will then be opened and the person entering will be directed
to either Building Five to sign in. Tenants who are working beyond 6:00 p.m. are
asked to call the main security desk at 786-5008 and inform the officer of this
fact. This is so Security knows who is in the buildings in case of an emergency.
When leaving, please call the security desk and notify them.
27. Keys to Offices
Two keys will be issued for each tenant's space. The principal of the
Tenant will sign for the keys upon issuance. The Tenant may make additional
copies of the keys as needed. It will be the responsibility of the Tenant's
principal to keep track of those persons to whom he has issued keys. All keys
and photo IDs must be returned to the Landlord upon termination of the lease or
a $15 penalty charge will be deducted from the security deposit held by
Landlord. Replacement of locks because of lost or unreturned keys shall be
undertaken at the Tenant's expense.
28. Parking and Speed Limit
All Science Park companies and employees will be assigned to specific
parking lot areas. There are no assigned spaces other than for handicapped
parking. It is requested that individuals park between the painted lines. If for
business reasons you wish to leave your vehicle overnight or for the weekend,
the security office must be notified. No one is allowed to "deadhead" their
vehicle in the parking lots. Vehicles found improperly parked obstructing exits,
fire lanes, other spaces, etc. will be towed at the owner's expense. All
vehicles must exhibit a Science Park parking identification tag.
The speed limit for the streets within Science Park is 15 m.p.h. Please
obey this speed limit for the safety of everyone walking and driving within the
Park.
29. Reporting Emergencies or Incidents
All emergencies (fire, injury, illness, etc.) should be reported to
security immediately at 786-5007. This telephone number must only be used in
cases of emergency. Incidents such as thefts, unwanted persons, vandalism or
damage to parked vehicles in Science Park should also be reported as soon as
possible.
30. Invited Guests of Science Park Companies
Invited guests of tenants will be asked to identify themselves at the
entrance gate and sign the visitor register. The security officer will ask if
and by whom they are expected. If the answer is yes, the security officer will
allow the person to enter and will direct them to the appropriate parking lot
and building to which they have been invited. If the security officer is
uncertain whether the person has been invited, the security officer will direct
the person to the main security desk in the lobby of Building Five where a call
will be made to the company.
An invited guest is only permitted to visit the office of the Tenant who
issued the invitation, as well as clearly marked public areas such as the
restaurants, rest rooms and lobbies. Guests must be escorted by Tenant in any
other Science Park areas.
An uninvited guest, including salespeople, will be required to sign in at
the gate and will be directed to the main security desk in the lobby of Building
Five. A call will be made
<PAGE> 27
to the company notifying them that a guest or salesperson has requested to see
them. If the company does not wish to see the person at that time, the person
will be so informed and will be advised to make an appointment in advance with
the company. They will be instructed that they do not have permission to go
anywhere else in the Park. If they request information about Science Park a
marketing brochure will be given to them.
31. Tours and Meetings
Security should be notified in advance of any planned meetings or tours in
Science Park and should be provided with the following information:
(a) date and time;
(b) person in charge; and
(c) number of persons expected.
Tours accompanied by a host may go to the following areas:
(a) All outdoor areas under the supervision of Science Park Development
Corporation; and
(b) Lobby areas and the food service areas, which should be entered through
the shortest possible route so as to avoid making noise in the hallways.
32. Special Events Held by Science Park Companies
Any event held by a Science Park company which may disturb or interfere
with the security, safety or operations of other companies or which involves
more than ten (10) people entering into the Park must be registered with the
Landlord and the Landlord's security site supervisor. The host company may be
required to hire additional security or maintenance personnel. For any such
special event, the following will be required:
(a) Events will be held within the confines of the host company's Leased
Premises and only within an SPDC common area when express permission has been
granted.
(b) Participants will be restricted to a pre-determined area within which
bathroom facilities are available.
(c) A guest list must be provided to Landlord's security site supervisor at
least twenty-four (24) hours in advance of the special event.
(d) Arrangements will be made for ample parking to be available with proper
signs provided to guide and inform the guests. The host company should be
prepared to provide the signs.
(e) Alcohol consumption must be monitored by the host company for underage
persons and for excessive consumption by guests.
(f) The host company will be responsible for cleanup and for any damage and
costs incurred in restoring any area involved to its original good condition.
<PAGE> 28
EXHIBIT 1.1
BASIC RENT
During the initial three (3) year Term of this lease, Tenant shall pay to
Landlord the following Basic Rent:
<TABLE>
<CAPTION>
Period Rent Per Sq. Ft. Annual Rent Monthly Installment Due
- ------ ---------------- ----------- -----------------------
<S> <C> <C> <C>
Year 1 $10.00 $150,000.00 $12,5000
Year 2 10.00 150,000.00 12,5000
Year 3 10.00 150,000.00 12,5000
</TABLE>
If the Tenant exercises the option to renew the lease for an additional
three (3) years, Tenant shall pay to Landlord the following Basic Rent:
<TABLE>
<CAPTION>
Period Rent Per Sq. Ft. Annual Rent Monthly Installment Due
- ------ ---------------- ----------- -----------------------
<S> <C> <C> <C>
Year 1 $11.00 $165,000.00 $13,750.00
Year 2 11.55 173,250.00 14,437.50
Year 3 12.13 181,950.00 15,162.50
</TABLE>
<PAGE> 29
October 31, 1996
Mr. Thomas Mizelle
Vion Pharmaceuticals, Inc.
4 Science Park
New Haven, Connecticut 06511
Dear Tom:
This letter will sent forth the terms and conditions of the modifications
of ARTICLE 2. TERM, ARTICLE 36. OPTION TO TERMINATE AND ARTICLE 37. RENEWAL
OPTION of the lease between OncoRx, Inc. (now Vion Pharmaceuticals, Inc.) and
Science Park Development Corporation dated August 10, 1995. The modifications
are as follows:
TERM OF LEASE. The "Term" of this lease shall commence on June 1, 1996 (the
"Commencement Date") and, unless sooner terminated in accordance with this
agreement, will expire on May 30, 2001 (the "Termination Date").
36.1. Tenant may terminate this lease at the conclusion of the third year,
May 30, 1999, by providing Landlord with nine (9) months prior written
notice.
037.1. If Tenant wishes to exercise the five year renewal option, Landlord
would need to be notified, in writing, six (6) months prior to the
expiration date of the original lease. The buyout option as outlined in
ARTICLE 36 would also be included in the renewal period. The rental rates
for the renewal period can be found in EXHIBIT 1.1.
The rental rates for years four (4) and five (5) of the lease Term and
years four (4) and five (5) of the Renewal Option will be negotiated within
ninety (90) days of the signing of this letter amendment. All other terms and
conditions of the lease dated August 10, 1995 remain in full force and effect.
If the foregoing is acceptable, please acknowledge your consent where
indicated below and return an executed copy of this letter to our office. Upon
our receipt of the executed letter the lease between OncoRx, Inc. (now Vion
Pharmaceuticals, Inc.) and Science Park Development Corporation dated August 10,
1995 will be modified as noted above.
The foregoing agreed and accepted this Very truly yours
31st day of October, 1996. /s/ David C. Driver
-----------------------------
President & CEO
VION PHARMACEUTICALS, INC.
By /s/ Thomas Mizelle
---------------------
Its V.P. Operations
<PAGE> 30
November 21, 1996
Mr. Tom Mizelle
Vion Pharmaceuticals, Inc.
4 Science Park
New Haven, CT 06511
Dear Tom:
This letter will set forth the terms and conditions of Vion's expansion
into the old field office on the first floor of Four Science Park as of December
1, 1996 and, when executed, will serve as an addendum to the lease between
MelaRx Pharmaceuticals (now known as Vion Pharmaceuticals, Inc.) and Science
Park Development Corporation dated June 14, 1995.
This space consists of 205 square feet. Based on your indication that the
space will be used for storage, the rental will be at $3,00 per square foot. The
annual rental charge will be $615.00, payable at the rate of $51.25 per month.
This space will be governed by the same terms and conditions as the lease date
June 14, 1995, which remains in full force and effect, with the exception that
this space is leased on a monthly basis. Vion is, therefore, required to provide
Science Park with thirty (30) days notice prior to vacating the space.
It is Science Park's policy to hold a security deposit equal to two month's
rent. With this expansion, we will need additional $102.50 in security. We will
need to receive a check in this amount at the time an executed copy of this
letter is returned to us.
Please return an executed copy of this letter, together with the security
deposit, to our office by Monday, December 2nd. Once executed, this letter will
become an addendum to the lease between MelaRx Pharmaceuticals (now known as
Vion Pharmaceuticals, Inc.) and Science Park Development Corporation dated June
14, 1995.
Sincerely,
/s/ Karen A. Marini
-------------------------
Facilities Administrator
The foregoing agreed and accepted this 25th day of November, 1996.
VION PHARMACEUTICALS, INC.
By /s/ Thomas Mizelle
----------------------------
Its V.P. Operations
cc: David Driver
Paul McCraven
<PAGE> 1
EXHIBIT 10.29
"Confidential treatment has been requested for portions of this exhibit. The
confidential portions are designated by brackets [ ]."
<PAGE> 2
COLLABORATIVE DEVELOPMENT AND DISTRIBUTION AGREEMENT
THIS AGREEMENT is entered into as of November 24, 1997 (the "Effective
Date"), by and between BOEHRINGER INGELHEIM INTERNATIONAL GmbH, a limited
liability company organized under the laws of Germany having its principal place
of business at D-55216 Ingelheim, Rhein, Germany ("BI") and VION
PHARMACEUTICALS, INC., a Delaware corporation having offices at Four Science
Park, New Haven, Connecticut 06511 ("Vion").
WHEREAS, Vion possesses scientific and technical proprietary technology
and data and resources relating to the compound porfiromycin for the treatment
of cancer in humans pursuant to rights granted by Yale University and Dr. Alan
Sartorelli; and
WHEREAS, Vion has continued to develop proprietary technology, data and
resources relating to porfiromycin and has received orphan product designation
from the United States Food and Drug Administration for PromycinJ (porfiromycin)
in the treatment of head and neck cancer and cervical cancer; and
WHEREAS, BI possesses scientific and technical resources relating to
the development and commercialization of drug candidates for the treatment of
cancer; and
WHEREAS, BI desires to obtain certain rights to commercialize
PromycinJ; and
WHEREAS, the parties desire and are willing to establish a
collaborative relationship to further develop and commercialize PromycinJ for
the treatment of cancer in humans.
NOW, THEREFORE, the parties agree as follows:
ARTICLE 1. DEFINITIONS
As used herein, the following terms shall have the following meanings:
1.1 "Affiliate" means an individual, trust, business trust, joint
venture, partnership, corporation, limited liability
<PAGE> 3
company, association or any other entity which owns, is owned by or is under
common ownership with a party. For the purposes of this definition, the term
"owns" (including, with correlative meanings, the terms "owned by" and "under
common ownership with") as used with respect to any party, shall mean the
possession (directly or indirectly) of more than fifty percent (50%) of the
outstanding voting securities of a corporation or comparable equity interest in
any other type of entity.
1.2 "Agreement" means the present agreement together with all exhibits
and schedules.
1.3 "BI Technology" means all Know-How and Patent Rights to the extent
necessary or appropriate for the full development, use or sale of the Compound
or the Product in the Field, now or during the term hereof, (a) owned by BI or
one of its Affiliates, or (b) to the extent BI (or its Affiliate) is permitted
to grant a sublicense to Vion, licensed to BI or one of its Affiliates by a
Third Party.
1.4 "BI Trademarks" means trademarks for use on the Product (other than
the Vion Trademarks) designated by BI from time to time in accordance with
Section 5.4(b) below.
1.5 "Collaboration" means the activities of Vion and BI encompassed in
their relationship in accordance with the terms and conditions of this
Agreement.
1.6 "commercially reasonable and diligent efforts" means those efforts
consistent with the exercise of prudent scientific and business judgment, as
applied to other products of similar scientific and commercial potential in the
country in which the Product would be marketed and sold.
1.7 "Compound" means the compound porfiromycin.
1.8 "Confidential Information" means all information and materials
received by either party from the other party pursuant to this Agreement and all
information and materials developed in the course of the Collaboration,
including, without limitation, Know-How of each party, subject to the exceptions
set forth in Section 9.2.
-2-
<PAGE> 4
1.9 "Co-Promotion Agreements" shall have the meaning set forth in
Section 5.8 below.
1.10 "Co-Promotion Terms" shall have the meaning set forth in Section
5.7 below.
1.11 "Co-Promotion Territory" shall have the meaning set forth in
Section 5.6 below.
1.12 "Deductions" means: (a) trade discounts, trade credits or returns,
recalls, chargebacks, rebates and prompt payment discounts, (b) transportation
charges and insurance expenses, (c) medicare, medicaid and managed care rebates,
fees or refunds actually granted to health care organizations, governments and
their agencies, purchasers and reimbursers, all of which are granted in the
ordinary course of BI's business, and (d) sales taxes, use taxes, duties and
other similar taxes borne by BI, its Affiliates, Recognized Agents or permitted
sublicensees provided, in each case, to the extent such items are actually
included in the price charged to such Third Parties for the Product.
1.13 "Development Plan" means the plan agreed to by the Executive
Committee for clinical development of the Product. The initial Development Plan
is attached hereto as Exhibit A. The Development Plan may be amended from time
to time in writing by the Executive Committee.
1.14 "Development Work" means the research and clinical development
program performed by the parties as described in the Development Plan under the
direction of the Steering Committee and conducted in accordance with the terms
and conditions of this Agreement.
1.15 "Executive Committee" means a committee consisting of equal
numbers of representatives appointed by each of Vion and BI, whose
responsibilities include, among other duties as more specifically described
herein, the approval and direction of the Development Plan, identifying which
Development Plan tasks are to be performed by one of the parties or by a third
party, oversight of the Steering Committee and dispute resolution.
-3-
<PAGE> 5
1.16 "FDA" means the United States Food and Drug Administration (or its
substantial equivalent in any foreign country).
1.17 "FDC Act" means the United States Food, Drug and Cosmetic Act, as
amended.
1.18 "Field" means use for the prevention or treatment of cancer in
humans.
1.19 "First Commercial Sale" of the Product shall mean the first sale
for use or consumption of the Product in a country after required marketing and
pricing approval has been granted by the governing health regulatory authority
of such country. A sale to an Affiliate, Recognized Agent or permitted
sublicensee shall not constitute a First Commercial Sale unless the Affiliate,
Recognized Agent or permitted sublicensee is the end user of the Product.
1.20 "Invention" means any discovery or invention made by either party
during the course of the Collaboration after the Effective Date.
1.21 "Joint Technology" means all Know-How and Patent Rights to the
extent necessary or appropriate for the full exploitation of the Compound or the
Product in the Field acquired or made jointly (as determined in accordance with
the rules of inventorship under United States patent law) by or on behalf of
Vion and BI or one of their respective Affiliates in connection with the
Development Work.
1.22 "Know-How" means techniques; inventions; practices; methods;
knowledge; know-how; skill; experience; and test data, including, without
limitation, pharmacological, toxicological and clinical test data, analytical
and quality control data, having application in the Field.
1.23 "Licensed Technology" means the BI Technology, the Joint
Technology and the Vion Technology.
1.24 "Major Country" means any of the following: (i) the European
Union, (ii) Japan, and (iii) the United States.
-4-
<PAGE> 6
1.25 "NDA" means a New Drug Application (or the equivalent application
in any other country) and all supplements filed pursuant to the requirements of
the FDA, including all documents, data and other information concerning products
which are necessary for or included in NDA Approval.
1.26 "NDA Approval" means FDA approval of an NDA.
1.27 "Net Sales" means the gross amounts invoiced by BI, its Affiliates
or to the extent permitted under Section 5.5, Recognized Agents or permitted
sublicensees of BI or its Affiliates, to Third Parties less the Deductions as
determined in accordance with Section 6.5 below. The transfer of the Product by
BI or one of its Affiliates to (i) another Affiliate of BI, (ii) a permitted
sublicensee of BI, or (iii) a Recognized Agent shall not be considered a sale;
in such cases, Net Sales shall be determined based on the gross amounts invoiced
by the Affiliate, permitted sublicense of BI or Recognized Agent to its
customer, less the Deductions.
1.28 "Other Agreements" means the Supply Agreement, the Co-Promotion
Agreements and the Stock Purchase Agreement.
1.29 "Patent Rights" means all rights existing during or after the term
of this Agreement under (a) patents (including inventor's certificates) that
include one or more Valid Claims, including without limitation any substitution,
extension, registration, confirmation, reissue, re-examination, renewal,
supplementary protection certificate or the like and (b) pending applications
for patents, including without limitation any continuation, division or
continuation-in-part thereof and any provisional applications.
1.30 "Product" means a pharmaceutical product, in any form or dosage,
comprised of the Compound.
1.31 "Recognized Agent" shall mean an entity other than an Affiliate of
BI through which BI regularly distributes and sells its products in a particular
country or region.
1.32 "Royalty" shall have the meaning set forth in Section 6.4.
-5-
<PAGE> 7
1.33 "Royalty Term" means, in any country, the period of time equal to
the longer of: (a) if the sale of the Product in such country is covered by a
Valid Claim, the term of such Valid Claim; or (b) ten (10) years from the date
of the First Commercial Sale of the Product in such country.
1.34 "Royalty Territory" means, unless amended as provided in Section
5.7 below, all countries and territories in the world other than the
Co-Promotion Territory.
1.35 "Royalty Year" shall have the meaning set forth in Section 6.6.
1.36 "Steering Committee" means a committee of Vion and BI employees as
described in Article 3 below.
1.37 "Stock Purchase Agreement" shall have the meaning set forth in
Section 6.2.
1.38 "Supply Agreement" shall have the meaning set forth in Section
5.7.
1.39 "Third Party" means any entity other than Vion or BI or an
Affiliate or sublicensee of Vion or BI.
1.40 "Trademarks" means the Vion Trademarks and the BI Trademarks.
1.41 "Valid Claim" means, to the extent covering the Compound or the
Product, any of:
(a) a claim of an issued patent which claim has not lapsed, been
canceled or become abandoned and has not been declared invalid by an unreversed
and unappealable decision or judgment of a court or other appropriate body of
competent jurisdiction, and which has not been admitted to be invalid or
unenforceable through reissue or disclaimer;
(b) a claim of a pending patent application to the extent the invention
described in such claim has not been abandoned or finally disallowed; or
-6-
<PAGE> 8
(c) a marketing exclusivity right conferred as a result of (i) a
designation as a drug for rare diseases or condition under Sections 526 et. al.
of the FDC Act (or the equivalent rights in any country outside the United
States), (ii) an exclusive right to sell under an NDA pursuant to Section
505(j)(4) of the FDC Act (or the equivalent rights in any country outside the
United States), or (iii) any other applicable law.
1.42 "Vion Technology" means all Know-How and Patent Rights to the
extent necessary or appropriate for the full development, use or sale of the
Compound or the Product in the Field, now or during the term hereof (a) owned by
Vion or one of its Affiliates, or (b) to the extent Vion (or its Affiliate) is
permitted to grant a sublicense to BI, licensed to Vion or one of its Affiliates
by a Third Party. Vion Technology as of the Effective Date includes, but is not
limited to, the Know-How and Patent Rights listed on Schedule 1 attached hereto,
which Schedule shall be updated from time to time.
1.43 "Vion Trademarks" means PromycinJ and such other trademarks as may
be agreed to from time to time by the parties.
ARTICLE 2. COLLABORATION
2.1 Scope of Collaboration. BI and Vion will conduct research and
development on a collaborative basis with the goal of further development of the
Compound into Product for commercialization as more specifically provided in the
Development Plan.
2.2 Exclusivity. Neither Vion nor BI, nor any of their Affiliates,
shall during the term of this Agreement either directly or indirectly, enter
into any agreement, or engage in, with any sublicensee or Third Party, any
research, development or commercialization of the Compound in the Field, other
than as provided in this Agreement or such other agreements as are entered into
between the parties as the result of this Agreement. Subject to Section 5.5
below, nothing herein shall limit the ability of the parties to enter into
agreements with contract research organizations, contract manufacturers, or
other entities for the performance of research, development, manufacturing,
marketing and selling activities relating to the Compound or the Product as
-7-
<PAGE> 9
provided hereunder in the ordinary course of their respective businesses.
2.3 New Directions. The parties agree that any new direction or
approach not previously contemplated by the Development Plan and outside the
scope of the Field may be brought to the attention of the other party for
possible inclusion in the Collaboration. The parties may desire to change the
scope of the Field in response to such proposals, and the Executive Committee
will then discuss a mutually acceptable written amendment to this Agreement to
accommodate such change.
ARTICLE 3. STEERING COMMITTEE
3.1 Formation of Steering Committee. The Steering Committee shall be
comprised of an equal number of members appointed by each of BI and Vion. Either
party may appoint substitute or replacement members of the Steering Committee to
serve as their representatives. The initial members of the Steering Committee
will be appointed by the parties within 30 days following the Effective Date.
3.2 Meetings of Steering Committee. The Steering Committee will
initially meet at least four (4) times per year at times to be determined by the
Steering Committee. Such meetings will be at places agreed to by BI and Vion,
alternating between locations in Columbus, Ohio and New Haven, Connecticut, or
such other locations as the parties shall agree, with each party to bear all
travel and related costs for its members.
3.3 Decision-Making Process. Each member of the Steering Committee
shall have one vote, and decisions by the Steering Committee shall be made by a
majority vote. Any disagreement among members of the Steering Committee will be
resolved within the Steering Committee based on the efficient achievement of the
objectives of the Agreement. Any disagreement which cannot be resolved by the
Steering Committee shall be referred to the Executive Committee for resolution
under Article 14. It is the intent of the parties to resolve issues through the
Steering Committee whenever possible and to refer issues to the Executive
Committee only when resolution through the Steering Committee cannot be
achieved.
-8-
<PAGE> 10
3.4 Function of Steering Committee. The Steering Committee shall be
responsible for the supervision and coordination of the Development Work as
provided in the Development Plan approved by the Executive Committee, including:
(a) monitoring the progress of the Development Work, evaluating the
work performed and results obtained, and directing and reviewing the performance
of the tasks under the Development Work; and
(b) such other matters as the Executive Committee shall assign to the
Steering Committee from time to time.
ARTICLE 4. CONDUCT OF RESEARCH AND DEVELOPMENT
4.1 Research and Development. The parties agree that the research and
development work of BI and Vion relating to the Compound in the Field shall be
conducted in accordance with the Development Plan under the guidance of the
Steering Committee.
4.2 Allocation of Responsibility. In the United States and Canada, Vion
shall be responsible for the preparation of the NDA, for filing the NDA and for
all expenses for filing and maintaining the NDA once NDA Approval is secured. BI
shall be responsible for the preparation and filing of NDAs in all countries in
the Royalty Territory and for all expenses related to the filing and maintenance
of such NDAs.
4.3 Research and Development Efforts. Each party shall use commercially
reasonable and diligent efforts to perform its responsibilities under the
Development Plan. The Development Work shall be conducted by the parties in
compliance with all applicable good laboratory practices and other legal
requirements and in good scientific manner to attempt to achieve efficiently and
expeditiously its objectives. Except as expressly provided in the Development
Plan, or as agreed from time to time by the parties, the parties will equally
share all of the clinical development expenses reasonably incurred in connection
with the Development Work, including [] of the clinical development costs
incurred by Vion [], equal to U.S. [], which shall be paid by BI as follows: (i)
[] on the Effective Date and (ii) [] not later
-9-
<PAGE> 11
than 120 days after the Effective Date, upon receipt of copies of invoices,
canceled checks or other back-up reasonably satisfactory to BI. []In no event
shall BI be obligated to pay any late charges Vion has incurred or may incur for
failure to make any timely payments to its vendors.
4.4 Availability of Resources. Each party will maintain and, if
necessary secure, additional laboratories, offices and all other facilities
necessary to carry out the Development Work. Each party agrees to make its
employees and non-employee consultants reasonably available at their respective
places of employment and at their own cost to consult with the other party on
issues arising during the Development Work and in connection with any request
from any regulatory agency, including, without limitation, regulatory,
scientific, technical and clinical testing issues. Representatives of Vion and
BI may, upon reasonable notice and at times reasonably acceptable to the other
party (a) visit the facilities where the Development Work is being conducted;
and (b) consult informally, during such visits and by telephone, with personnel
of the other party performing the Development Work.
4.5 Disclosure; Reports. BI and Vion will make available and, upon
request, disclose to each other all Know-How, including Know-How known by BI or
Vion concerning the Compound in the course of the Development Work for use in
accordance with this Agreement. All Know-How, which is significant, will be
disclosed to the other party promptly after the later of the date that it is
learned or its significance is appreciated. The parties will exchange reports
quarterly presenting a complete summary of their research and development work.
In addition, each party will make summary presentations of the development
progress at each meeting of the Steering Committee, and the Executive Committee
will conduct a formal review on a semi-annual basis, once at BI and once at Vion
during each year. Each party will also communicate informally and through the
Steering Committee to inform the other of work done under this Agreement. Each
party will provide the other with raw data in original form or photocopies
thereof for any and all work carried out under this Agreement as reasonably
requested by the other party hereto.
ARTICLE 5. DISTRIBUTION & LICENSE RIGHTS; COMMERCIALIZATION EFFORTS
-10-
<PAGE> 12
5.1 Research and Know How Licenses. In conducting the Development Work
and for the purpose of securing regulatory approval, each party shall have a
worldwide non-exclusive, non-transferable, royalty-free license under the
Licensed Technology to the extent necessary for each party to perform its
obligations under this Agreement.
5.2 Distribution Rights. Subject to Vion's co-promotion rights in the
Co-Promotion Territory set forth in Section 5.6 below, Vion hereby grants to BI
an exclusive, worldwide, royalty-bearing right, with the right to sublicense its
rights subject to Section 5.5 below, to offer for sale and sell the Product for
indications of use in the Field. Except as provided in Section 5.8(b), Vion
reserves the exclusive right to manufacture the Compound and the Product.
Nothing in this Agreement shall limit in any respect the right of either party
to conduct research and development with respect to and market the Product or
other products outside the Field using such party's own Technology or the Joint
Technology, including Know-How and any Patent Rights; however, no license to use
the other party's Technology to do so is granted herein expressly or by
implication.
5.3 Commercialization Efforts.
(a) Subject to Section 5.3(b) below, BI and Vion (with respect to the
Co-Promotion Territory) shall use commercially reasonable and diligent efforts
to commercialize the Product. Either party may provide 90 days written notice to
the other party if, in its opinion, the other party is not using commercially
reasonable and diligent efforts, in order for the parties to discuss the
situation. In the event that the parties are unable to resolve their differences
within such 90 day period, such dispute shall be submitted for resolution in
accordance with Article 14.
(b) []BI shall identify in writing to Vion those countries outside of
the Co-Promotion Territory that neither BI, nor its Affiliates nor its permitted
sublicensees plans to market and sell the Product. Upon receipt of such written
notice, the rights granted in Sections 5.2 and 5.4 shall be considered null and
void for the countries so identified.
-11-
<PAGE> 13
5.4 Trademarks.
(a) Subject to Vion's co-promotion rights in the Co-Promotion Territory
set forth in Section 5.6 below, Vion hereby grants to BI an exclusive, worldwide
license to use the Vion Trademarks in connection with the promotion and sale of
the Product in the Field for the duration of the Agreement. Subject to Section
5.4(b) below, the Product shall be marketed and sold only under the Vion
Trademarks. Notwithstanding the foregoing, BI shall, at its option and to the
extent required by law or regulation, and otherwise where practical, be entitled
to have the BI company name or logo or the name or logo of its Affiliate on any
promotional materials (collectively, the "BI Tradenames").
(b) If BI reasonably objects to one or more of the Vion Trademarks
based on the need for different trademarks necessitated by language or other
factors pertaining to specific countries in the Royalty Territory, the parties
may agree on additional trademarks for use in connection with the promotion and
sale of the Product in the Field in the Royalty Territory (the "BI Trademarks").
(c) Each party shall own, register and maintain, at its own expense,
its own Trademarks.
(d) BI acknowledges that it has and will obtain no proprietary interest
in the Vion company name or the Vion logos (collectively, the "Vion Tradenames")
or the Vion Trademarks and agrees that it: (i) will not attempt to register the
Vion Trademarks or Tradenames, or any colorable imitation thereof, or in any way
assist a Third Party to do so; (ii) will not use the same as part of its
corporate or business name; (iii) will not make any representation that it owns
any rights in or to the Vion Trademarks or Tradenames, and to, where practical,
include on all materials which bear the Vion Trademarks a statement that the
Vion Trademarks are trademarks of Vion; (iv) will discontinue all use thereof
immediately upon termination of this Agreement (except as otherwise provided in
this Agreement or the Co-Promotion Agreements); and (v) will use the Vion
Trademarks and Vion Tradenames only as permitted under this Agreement or as
prescribed by Vion.
-12-
<PAGE> 14
(e) Vion acknowledges that it has and will obtain no proprietary
interest in the BI Trademarks or the BI Tradenames and agrees that it: (i) will
not attempt to register the BI Trademarks or Tradenames, or any colorable
imitation thereof, or in any way assist a Third Party to do so; (ii) will not
use the same as part of its corporate or business name; (iii) will not make any
representation that it owns any rights in or to the BI Trademarks or Tradenames,
and to include, where practical, on all materials which bear the BI Trademarks a
statement that the BI Trademarks are trademarks of BI; and (iv) will discontinue
all use thereof immediately upon termination or expiration of this Agreement.
(f) To the extent required by law or regulation, and if not required by
law or regulation, where practical, any package, package insert and promotional
material used by BI or its Affiliates for the Product shall include the Vion
logo and legend "the Product is licensed by Vion". Likewise, BI is entitled to
include the BI logo and name on any package, labeling or promotional material
used by BI of its Affiliates.
(g) BI shall submit, on written request of Vion, but not more than once
per year, to Vion's Quality Assurance Department for review for trademark
purposes, sample packaging of the Product and advertising materials which bear
or show the Vion Trademarks. BI shall not sell any Product or utilize any
advertising or packaging materials bearing or showing the Vion Trademarks which
in any way is inconsistent with this Agreement, or upon expiration of this
Agreement as provided in Section 12.1 below, inconsistent with Vion's generally
applicable trademark use guidelines.
(h) Vion shall submit, on written request of BI, but not more than once
per year, to BI's Quality Assurance Department for review for trademark
purposes, sample packaging of the Product and advertising materials which bear
or show the BI Trademarks. Vion shall not sell any Product or utilize any
advertising or packaging materials bearing or showing the BI Trademarks which in
any way is inconsistent with this Agreement.
-13-
<PAGE> 15
5.5 Assignment or Sublicense to Affiliates and Certain Third Parties.
(a) Either party may assign or sublicense any or all of its rights or
obligations under this Agreement to any of its Affiliates; provided, that such
assignment shall not relieve the assigning party of its responsibilities for
performance of its obligations under this Agreement.
(b) BI may also sublicense its rights to sell the Product to Recognized
Agents in the Royalty Territory.
(c) Vion may also assign or sublicense any or all of its rights or
obligations under Section 5.8 to one or more submanufacturers; provided, that
such assignment shall not relieve Vion of its responsibilities for performance
of its obligations under this Agreement.
(d) Except as otherwise provided in this Section, BI shall have the
right to sublicense its rights under Section 5.1, 5.2 and 5.4 to a Third Party
only with the prior written consent of Vion, which consent shall not be
unreasonably withheld.
5.6 Co-Promotion Rights. Vion shall have the right to co-promote the
Product with BI in the United States and Canada (the "Co-Promotion Territory")
as described in Section 5.7 below.
5.7 Co-Promotion Agreements. The parties shall within sixty (60) days
of filing the first NDA for the Product in the United States promptly enter into
one or more separate agreements containing the essential terms set forth in
Exhibit B attached hereto and such modifications or other terms as the parties
may agree are appropriate for the co-promotion of the Product (the "Co-Promotion
Agreements"). BI may assign or sublicense its rights and obligations under the
Co-Promotion Agreements to one or more Affiliates; provided that such assignment
shall not relieve BI of its responsibilities for performance of its obligations
under the Co-Promotion Agreements. It is understood and agreed that additional
terms may be required to be included to implement a co-promotion arrangement to
reflect the then existing market conditions in the Co-Promotion Territory.
Exhibit B reflects the parties' efforts to express the essential terms of the
Co-Promotion Agreements based on the currently expected market
-14-
<PAGE> 16
conditions in the United States (the "Co-Promotion Terms"). In the event of the
termination of a Co-Promotion Agreement prior to the termination or expiration
of this Agreement, the Royalty Territory shall be amended to include all
countries and territories covered by the terminated Co-Promotion Agreement and
this Agreement shall otherwise continue in full force and effect.
5.8 Manufacture of Compound and Product.
(a) Except as provided in the Supply Agreement, Vion has and shall
maintain during the term of this Agreement, responsibility for the manufacture
of the Compound and the Product at the required quality and in quantities
sufficient to conduct the Development Work and for commercial sale. Vion will
provide all documentation regarding manufacture needed to register the Product
and will arrange for pre-approval inspections and Vion and BI shall jointly
determine the appropriate FDA-approvable manufacturing sites. BI shall have the
right to inspect any proposed Vion manufacturing site. The manufacturing site
used by Vion may be changed upon the mutual agreement of Vion and BI. For
commercial sale, Vion shall supply the Product to BI pursuant to the terms and
conditions of a supply agreement to be negotiated in good faith (the "Supply
Agreement"). The Supply Agreement shall contain the essential terms set forth in
the Supply Agreement Term Sheet attached hereto as Exhibit C (the "Supply
Agreement Terms"). BI hereby grants to Vion a worldwide, exclusive, royalty-free
license under the BI and Joint Technology to make or have made the Compound and
the Product as provided in the Supply Agreement.
(b) Notwithstanding Section 5.8(a), it is the goal of the parties to
have the Product manufactured in the most economical and efficient manner.
Therefore, in the event that BI can produce the Product more economically than
Vion, BI shall have the right to do so, in which event Vion shall grant to BI,
its Affiliate or permitted sublicensee, a royalty-free, non-exclusive, license
under the Vion and Joint Technology as necessary to produce the Product on
mutually agreeable terms consistent with the Supply Agreement Terms. When
otherwise mutually agreed to by the parties that BI or a BI Affiliate or a BI
sublicensee shall manufacture the Product, Vion shall grant to BI, its Affiliate
or sublicensee, a royalty-free, non-exclusive, license under the Vion and Joint
Technology to make or have made the Compound and the Product on mutually
agreeable terms.
-15-
<PAGE> 17
5.9 Preservation of Licenses in Bankruptcy.
(a) If Vion should file a petition under bankruptcy laws, or if any
involuntary petition shall be filed against Vion, BI shall be protected in the
continued enjoyment of BI's rights as licensee hereunder to the maximum feasible
extent permitted under the law, including, without limitation, if it so elects,
the protection conferred upon licensees under Section 365(n) of Title 11 of the
United States Code, or any similar provision of any applicable law. Vion shall
give BI reasonable prior notice of the filing of any voluntary petition, and
prompt notice of the filing of any involuntary petition, under any bankruptcy
laws.
(b) The Vion Technology shall, to the extent permitted under the law,
be deemed to be "intellectual property" as that term is defined in 11 U.S.C.
Section 101 or any successor provision and shall include Patent Rights, if any.
ARTICLE 6. PAYMENT OBLIGATIONS
6.1 Initial License Fee. As partial consideration of the rights granted
by Vion to BI and the obligations undertaken herein by Vion, on the date hereof,
BI shall pay Vion an initial license fee of U.S. $4.0 million in cash
concurrently with the execution of this Agreement. Vion agrees to use the funds
provided by BI pursuant to this Section 6.1 exclusively for the Development Work
under this Agreement.
6.2 Equity Investment. Pursuant to the terms of the Stock Purchase
Agreement attached hereto as Exhibit D (the "Stock Purchase Agreement"), on the
Effective Date, BI shall purchase from Vion that number of shares (rounded to
the nearest whole number) of Vion's common stock, par value $.01 per share (the
"Common Stock") that is equal to U.S. $3,000,000.00 divided by a price per share
(the "Purchase Price") equal to the sum of (x) the average closing bid price of
a share of Common Stock on the Nasdaq SmallCap Market for the thirty (30) full
consecutive trading days preceding the Effective Date (the "Average Price"),
plus (y) a premium (the "Premium") equal to twenty-five percent (25%) of the
Average Price; provided, however, that the Purchase Price shall in no event
exceed $10.00 unless the Average Price exceeds $10.00, in
-16-
<PAGE> 18
which case the Purchase Price shall equal the Average Price without addition of
the Premium. The Premium, to the extent paid, shall be credited against payment,
if any, pursuant to Section 6.3(g) below.
6.3 Milestone Payments. Upon achievement of each of the following
milestones (in whatever order they occur), BI shall pay to Vion the
nonrefundable milestone payments set forth below:
(a) []
(b) []
(c) []
(d) []
(e) []
(f) []
(g) []
(h) []
(i) []
All such payments shall be made by wire transfer to the bank account designated
by Vion within thirty (30) days after achievement of the applicable milestone.
6.4 Royalties. BI shall pay to Vion a royalty on the Net Sales of the
Product in the Royalty Territory at a royalty rate of [] of Net Sales (the
"Royalty"). Royalty payments shall continue to accrue and be payable with
respect to sales of the Product and will automatically expire on a
country-by-country basis upon the expiration of the Royalty Term in such
country.
6.5 Net Sales and Deemed Deductions. For the twelve (12) months
following the First Commercial Sale (hereinafter, the "First Annual Period," and
each twelve (12) month period thereafter, an "Annual Period") in order to
facilitate BI's data collection and payment of Royalties, Deductions for the
First
-17-
<PAGE> 19
Annual Period shall be deemed to be equal to ten percent (10%) of the
gross invoice amount of Product (the "Deemed Amount"); provided, however, that:
(a) within thirty (30) days following the end of the First Annual Period and
each Annual Period thereafter, BI shall provide Vion with all necessary
information (in sufficient detail) to permit Vion to confirm whether the Deemed
Amount accurately reflects the actual Deductions for the applicable Annual
Period, and (b) within sixty (60) days thereafter, the parties shall: (i)
determine the actual Deductions pertaining to the sale or other disposition of
the Product for the applicable Annual Period; (ii) if the Deemed Amount is
determined to be greater than or less than the actual Deductions by more than
five percent (5%) or $50,000, whichever is larger, make prompt retroactive
adjustments to the Royalty payments made during such Annual Period on the basis
of the Deemed Amount; and (iii) determine, in good faith, any appropriate
adjustments to the Deemed Amount for the following Annual Period, or if the
parties are unable to agree on a Deemed Amount, agree that actual Deductions
shall be used to determine Net Sales thereafter.
6.6 Minimum Royalties. For each twelve (12) month period commencing
nine (9) months following the first NDA Approval in the European Union or Japan
(a "Royalty Year"), BI shall pay Vion an annual aggregate minimum royalty
payment of [] irrespective of whether any sales of the Product have been made in
the Royalty Territory provided that Vion has furnished an adequate supply of the
Product pursuant to the terms of the Supply Agreement. BI shall credit Royalty
payments against such minimum payment for each Royalty Year, and pay Vion the
short-fall, if any, in accordance with Section 7.2 below.
ARTICLE 7. PAYMENT; RECORDS; AUDITS
7.1 Payment; Reports. All Royalty payments due to Vion under this
Agreement shall be paid within 60 days of the end of each calendar quarter,
unless otherwise specifically provided herein. Each payment of Royalties shall
be accompanied by a report of Net Sales of the Product in the Royalty Territory
in sufficient detail to permit confirmation of the accuracy of the Royalty
payment made.
-18-
<PAGE> 20
7.2 Minimum Royalty Payments. Except as otherwise provided in this
Agreement, in the event that the aggregate Royalty payments for any Royalty Year
are less than [] for such year, then BI shall include in the last calendar
quarter report furnished under Section 7.1 for such Royalty Year the difference
between the aggregate Royalty payments for such Royalty Year and [], and shall
satisfy its minimum royalty obligation by paying such difference within 60 days
after the end of such last calendar quarter.
7.3 Exchange Rate; Manner and Place of Payment. Royalty payments and
reports due pursuant to this Agreement shall be calculated and reported for each
calendar quarter. Exchange conversion of foreign payments into U.S. Dollars
shall be made as necessary at the rate of exchange reported by the Deutsche
Bank, Frankfurt am Main, Germany on the date payment is made. All payments owed
under this Agreement shall be made by wire transfer, unless otherwise specified
by Vion.
7.4 Records and Audit. During the term of this Agreement and for a
period of two (2) years thereafter, the parties shall each keep complete and
accurate records pertaining to the development of the Compound and sale or other
disposition of the Product in sufficient detail to permit the other party to
confirm the accuracy of all payments due hereunder. Each party shall have the
right to cause an independent, certified public accountant to audit such records
to confirm Net Sales, Royalty and other payments for the preceding year, as well
as payments to Third Parties for Development Work (e.g., clinical research
organizations) and other obligations required of either party pursuant to the
terms of this Agreement. Such audits may be exercised during normal business
hours once a year upon notice to such other party. The party requesting the
audit shall bear the full cost of such audit unless such audit discloses a
variance of more than 5% or $50,000 (whichever is larger) from the amount of the
Net Sales, Royalties or other payments due under this Agreement. In such case,
the audited party shall bear the actual out-of-pocket cost of such audit. The
terms of this Section 7.4 shall survive any termination or expiration of this
Agreement for a period of two years.
7.5 Withholding Obligations.
-19-
<PAGE> 21
(a) Subject to Section 7.5(b), BI shall be entitled to deduct any
required withholding taxes and other statutory duties from the Royalties and the
initial license fee and milestone payments to be made pursuant to Sections 6.1
and 6.3 hereof, and pay such taxes and duties to the proper tax authorities as
required by law applicable at the time of payment.
(b) The parties shall exercise reasonable efforts to insure that any
withholding taxes are reduced to the extent possible under the provisions of the
current or any future double taxation agreement between the United States of
America and the Federal Republic of Germany, under which current law requires a
certificate of tax exemption from the German Bundesamt fur Finanzen.
(c) In order to achieve the applicable reduction in withholding, Vion
will provide BI with the application for a certificate of tax exemption for
royalties under the United States - Germany Double Taxation Treaty, on the
official form (Application for Tax Exemption) and signed by Vion. The
Certificate for Filing a tax return (IRS Form 6166) shall be enclosed with the
Application for Tax Exemption. BI will provide Vion with the official forms and
Vion will promptly complete them after the Effective Date.
(d) Every three (3) years, or on such other schedule as the parties may
agree, Vion will submit a new Application for Tax Exemption that complies with
the requirements set forth in Section 7.5(c) above.
ARTICLE 8. INTELLECTUAL PROPERTY RIGHTS AND INFRINGEMENT
8.1 Patentable Inventions. BI shall own all Inventions made solely by
its employees and agents, and all Patent Rights claiming such Inventions. Vion
shall own all Inventions made solely by its employees and agents, and all Patent
Rights claiming such Inventions. All Inventions made jointly by employees or
agents of BI and employees or agents of Vion shall be owned jointly by BI and
Vion ("Joint Inventions").
8.2 Prosecution and Maintenance of Patent Rights.
-20-
<PAGE> 22
(a) In the event that an Invention is conceived by either party, the
inventing party shall promptly notify the other party, and the parties shall
discuss such Invention and the desirability of filing patent applications
covering such Invention. Such discussions shall be subject to Article 9. The
inventing party shall have the first right to file patent applications and
prosecute such patents, at its own expense, but such party shall consider in
good faith the requests and suggestions of the other party with respect to
strategies for filing and prosecuting such patent applications. The inventing
party shall keep the other party informed of progress with regard to the filing,
prosecution, maintenance, enforcement and defense of patents and patent
applications subject to this Section 8.2(a). If the inventing party decides not
to pursue protection for any such Invention in any particular country, it shall
give the other party notice to this effect in reasonable time for the other
party to act technically and timely to prosecute. After that notice, the other
party may, at its expense, file, prosecute and maintain a patent application or
patent covering such Invention in such country and shall own such patent
applications or patents. In such case, the inventing party shall also assign, at
no cost, its rights in such patent applications or patents to the other party as
necessary to convey ownership to the other party.
(b) The parties shall jointly discuss the desirability of filing patent
applications covering Joint Inventions and determine which party shall be
responsible for filing patent applications and prosecuting patents for Joint
Inventions; provided, that the costs incurred in connection therewith shall be
shared on an equal basis. In the event that the parties fail to so determine at
least ninety (90) days prior to the date after which such applications would not
be effective, either party shall have the right, at its expense, to file the
patent applications relating to the Joint Invention, and to take such actions as
are necessary or appropriate to procure patents with respect thereto. In any
event, the party filing the patent applications and prosecuting the patents
shall keep the other informed of progress with regard to the filing,
prosecution, maintenance, enforcement and defense of patents and patent
applications subject to this Section 8.2(b).
8.3 Infringement by Third Parties.
-21-
<PAGE> 23
(a) BI and Vion shall promptly notify each other in writing of any
alleged or threatened infringement of the Trademarks or the Licensed Technology
of which they become aware. Both parties shall cooperate with each other in the
defense or prosecution of infringement matters, including if required to bring
such action, the furnishing of a power of attorney.
(b) Vion shall have the first right to bring and control any action or
proceeding with respect to any alleged or threatened infringement of the Vion
Trademarks, the Joint Technology or the Vion Technology at its own expense and
by counsel of its own choice, and BI shall have the right, at its own expense,
to be represented in any such action by counsel of its own choice. BI shall have
the first right to bring and control any action or proceeding with respect to
any alleged or threatened infringement of the BI Trademarks or BI Technology at
its own expense and by counsel of its own choice, and Vion shall have the right,
at its own expense, to be represented in any such action by counsel of its own
choice.
(c) If either party with the first right as provided herein fails to
bring an action or proceeding within (i) 90 days following the notice of alleged
infringement or (ii) 10 days before the time limit, if any, set forth in the
appropriate laws and regulations for the filing of such actions, whichever comes
first, the other party shall have the right to bring and control any such action
at its own expense and by counsel of its own choice, and the party with the
first right shall have the right, at its own expense, to be represented in any
such action by counsel of its own choice; provided, however, that Vion shall not
have the right to bring or control any such action with respect to the alleged
infringement of a BI Trademark.
(d) In the event that the party with the second right elects to bring
an action as provided in Section 8.3(c), such party shall be entitled to: (i)
reimbursement of fifty percent (50%) of its costs and expenses, or (ii) offset
fifty percent (50%) of its costs and expenses against Royalties due hereunder
(in the event that BI brings such action), but in no event shall the Royalty to
Vion be reduced by more than fifty percent (50%) of the amount due in any given
calendar quarter; provided, however, that in the event that the party with the
second right elects to bring an action as provided in Section 8.3(c) with
respect to any alleged
-22-
<PAGE> 24
or threatened infringement of any of the Trademarks, such party shall be
entitled to reimbursement of all of its costs and expenses.
(e) Neither party shall have the right to settle any infringement
litigation under this Section 8.3 in a manner that diminishes the rights or
interests of the other party without the consent of such other party. Except as
otherwise agreed to by the parties as part of a cost sharing arrangement, any
recovery realized as a result of such litigation, after reimbursement of any
litigation expenses of BI and Vion (including, any offset Royalties) shall
belong to the party who brought the action.
8.4 Infringement of Third Party Rights.
(a) BI and Vion shall promptly notify each other in writing of any
allegation or claim by a Third Party that the manufacturing, marketing or sale
of the Product in the Field infringes or may infringe the intellectual property
rights of such Third Party.
(b) Vion shall have the obligation to control any defense of such claim
if it relates to Vion Technology or the Vion Trademarks, and BI shall have the
obligation to control any defense of such claim if it relates to BI Technology
or the BI Trademarks, in each case, at its own expense. In each case, the party
not controlling the defense shall have the right, at its own expense, to be
represented in any such action by counsel of its own choice.
(c) If such claim relates to Joint Technology, the parties shall
consult and cooperate fully to determine a course of action, including but not
limited to a determination of which party shall have the right to control the
defense of such claim. In each case, the party not controlling the defense shall
have the right to be represented in any such action by counsel of its own
choice, and the reasonable costs incurred by both parties shall be shared on an
equal basis.
(d) Neither party shall have the right to settle any infringement
litigation under this Section 8.4 in a manner that diminishes the rights or
interests of the other party without the consent of such other party.
-23-
<PAGE> 25
8.5 Infringement Outside the Field. If either party becomes aware of
any alleged or threatened infringement of the Trademarks or the Licensed
Technology outside the Field, it shall promptly notify the other in writing, and
the parties shall discuss a strategy for responding to such alleged or
threatened infringement. In the absence of agreement between the parties, each
party may take such action as it deems to be in its best interests.
ARTICLE 9. CONFIDENTIALITY
9.1 Nondisclosure. During the term of this Agreement and for a period
of ten (10) years after termination hereof, each party will maintain all
Confidential Information in trust and confidence and will not disclose any
Confidential Information to any Third Party or use any Confidential Information
for any purpose except as expressly authorized by this Agreement, including
Section 9.3. Each party may use such Confidential Information only to the extent
required to accomplish the purposes of this Agreement. Each party will use at
least the same standard of care as it uses to protect proprietary or
confidential information of its own to ensure that its employees, agents,
consultants and other representatives do not disclose or make any unauthorized
use of the Confidential Information. Each party will promptly notify the other
upon discovery of any unauthorized use or disclosure of the Confidential
Information.
9.2 Exceptions. Confidential Information shall not include any
information that the receiving party can prove by competent evidence:
(a) is now, or hereafter becomes, through no act or failure to act on
the part of the receiving party, generally known or available;
(b) is known by the receiving party at the time of receiving such
information, as evidenced by its records;
(c) is hereafter furnished to the receiving party by a Third Party, as
a matter of right and without restriction on disclosure;
-24-
<PAGE> 26
(d) is independently developed by the receiving party without the aid,
application or use of Confidential Information; or
(e) is the subject of a written permission to disclose provided by the
disclosing party.
9.3 Financial Terms. Except as required by applicable law (including,
but not limited to securities laws), the parties agree that the material
financial terms of this Agreement will be considered Confidential Information of
both parties. Notwithstanding the foregoing, either party may disclose such
terms as are required to be disclosed in its financial statements. Either party
shall have the further right to disclose the material financial terms of this
Agreement under strictures of confidentiality to any potential acquiror, merger
partner or other bona fide potential strategic partner.
9.4 Publications. Each party to this Agreement recognizes that the
publication of papers regarding results of the Development Work hereunder and
other information resulting from the Development Work, including oral
presentations and abstracts, may be beneficial to both parties provided such
publications are subject to reasonable controls to protect Confidential
Information. In particular, it is the intent of the parties to maintain the
confidentiality of any Confidential Information included in any notification on
conceived inventions and patent applications until such foreign patent
application has been published. Accordingly, each party shall have the right to
review and approve any paper proposed for publication by the other party,
including oral presentations and abstracts, which utilizes data generated from
the Development Work and/or includes Confidential Information of the other
party. Before any such paper is submitted for publication, the party proposing
publication shall deliver a complete copy to the other party at least 45 days
prior to submitting the paper to a publisher. The receiving party shall review
any such paper and give its comments to the publishing party within 30 days of
the delivery of such paper to the receiving party. With respect to oral
presentation materials and abstracts, the parties shall make reasonable efforts
to expedite review of such materials and abstracts, and shall return such items
as soon as practicable to the publishing party with appropriate comments, if
any, but in no event later than 30 days
-25-
<PAGE> 27
from the date of delivery to the receiving party. The publishing party shall
comply with the other party's request to delete references to such other party's
Confidential Information in any such paper and agrees to withhold publication of
same for an additional 90 days in order to permit the parties to obtain patent
protection, if either of the parties deem it necessary, in accordance with the
terms of this Agreement.
ARTICLE 10. REPRESENTATIONS, WARRANTIES AND COVENANTS
10.1 Corporate Power. Each party represents and warrants to the other
that: (a) it has the legal right and power to enter into this Agreement and to
extend the rights and licenses granted to the other herein; and (b) the
performance of such obligations will not conflict with its charter documents or
any agreements, contracts or other arrangements to which it is a party.
10.2 Organization; Due Authorization. BI represents and warrants to
Vion that BI is a limited liability company duly organized, validly existing and
in good standing under applicable German law and has taken all necessary action
to authorize the execution, delivery and performance of this Agreement. Vion
warrants to BI that Vion is a corporation duly organized, validly existing and
in good standing under applicable Delaware law and has taken all necessary
action to authorize the execution, delivery and performance of this Agreement.
10.3 Binding Agreement. Each party represents and warrants to the other
that, upon the delivery and execution of this Agreement, this Agreement shall
constitute a valid and binding obligation of such party enforceable in
accordance with its terms, except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting
creditors' rights generally and except as enforceability may be subject to
general principles of equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law).
10.4 Intellectual Property Rights. Vion represents and warrants that,
as of the Effective Date, to the best of its knowledge and belief: (a) there are
no unexpired patents claiming the Compound, its uses or methods for its
manufacture; (b) the
-26-
<PAGE> 28
manufacture, sale and use of the Product as contemplated in this Agreement, does
not infringe the patent rights of any Third Parties; (c) Vion owns or possesses
adequate licenses or other rights to all Patents and Know-How necessary to grant
the licenses granted to BI under Article 5 hereof and fulfil its other
obligations hereunder. Vion further represents and warrants that, to the best of
its knowledge and belief, there are not now any threatened or pending
proceedings against Vion by any Third Party that would interfere with or prevent
BI from using the Vion Technology, the Compound, its uses or methods for
manufacture or the Vion Trademarks as provided herein; AND (d) NONE OF THE
RESEARCH ON THE COMPOUND CONDUCTED IN DR. ALAN SARTORELLI'S LABORATORY WAS
FUNDED BY THE UNITED STATES GOVERNMENT.
10.5 Compliance with Laws. Each party hereby represents, warrants,
covenants and agrees that it shall comply with all applicable foreign, federal,
state and local laws and regulations relating to the manufacture, use,
distribution and sale of the Product by such party as contemplated by this
Agreement, the Co-Promotion Agreements and the Supply Agreement. In addition,
Vion will fulfill all Phase IV requirements placed on the Product NDA.
10.6 Data and Information. Vion represents that, as of the Effective
Date, to the best of its knowledge and belief, all data and information provided
by Vion to BI hereunder concerning the Vion Technology and the Compound are true
and correct in all material respects.
10.7 Disclaimer of Warranties. The parties understand that the
Collaboration will involve technologies that have not been approved by any
regulatory authority and that neither party guarantees the safety or usefulness
of the Compound or the Product. EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT,
NEITHER PARTY MAKES ANY REPRESENTATION OR WARRANTY TO THE OTHER PARTY OF ANY
NATURE, EXPRESS OR IMPLIED, INCLUDING WITHOUT LIMITATION ANY WARRANTY OF
NONINFRINGEMENT, MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.
ARTICLE 11. INDEMNITY
11.1 Vion Indemnity Obligations. Vion shall indemnify, defend and hold
BI and its Affiliates and their respective
-27-
<PAGE> 29
employees and agents harmless from and against any and all claims, liability,
damage, loss, cost or expense, including without limitation reasonable legal
fees, in connection with any Third Party claims which (a) arise out of any
breach of any material provision of this Agreement or any representation or
warranty of Vion contained in this Agreement, or (b) arise out of any claim of
infringement of any patent or trademark or unauthorized use of a trade secret
(other than the BI Trademarks or the BI or Joint Technology) in connection with
the use of the Vion Technology or Vion Trademarks as contemplated by this
Agreement, the Co-Promotion Agreements or the Supply Agreement, or (c) arise out
of claims for bodily injury, death or property damage arising from the
manufacture (except when manufactured by BI or a BI Affiliate or a BI
sublicensee), distribution, use or sale of the Product hereunder, to the extent
attributable to: (i) any failure to conform with the warranties set forth in the
Supply Agreement with respect to the manufacture of the Product manufactured by
Vion or its Affiliates or sublicensees pursuant to Section 5.8 hereof, or (ii)
any failure by Vion or its Affiliates to perform their obligations hereunder in
accordance with applicable laws and regulations (except, in each case, to the
extent such claim relates to the negligence or willful misconduct of BI).
11.2 BI Indemnity Obligations. BI shall indemnify, defend and hold
Vion, its Affiliates and their respective employees and agents harmless from and
against any and all claims, liability, damage, loss, cost or expense, including
without limitation reasonable legal fees, in connection with any Third Party
claims which: (a) arise out of any breach of any material provision of this
Agreement or any representation or warranty of BI contained in this Agreement,
or (b) arise out of any claim of infringement of any patent or trademark or
unauthorized use of a trade secret (other than the Vion Trademarks or the Vion
or Joint Technology) in connection with the use of the BI Technology or BI
Trademarks as contemplated by this Agreement, the Co-Promotion Agreements or the
Supply Agreement, or (c) arise out of claims for bodily injury, death or
property damage arising from the distribution, use or sale of the Product
hereunder or manufacture or labeling of the Product when manufactured or labeled
by BI or a BI Affiliate or a BI sublicensee, to the extent attributable to any
failure by BI, its Affiliates or sublicensees to perform their obligations
hereunder in accordance with applicable laws and regulations
-28-
<PAGE> 30
(except, in each case, to the extent such claim relates to the negligence or
willful misconduct of Vion).
11.3 Procedure. A party or any of its Affiliates or their respective
employees or agents (the "Indemnitee") that intends to claim indemnification
under this Article 11 shall promptly notify the other party (the "Indemnitor")
of any loss, claim, damage, liability or action in respect of which the
Indemnitee intends to claim such indemnification, and the Indemnitor shall
assume the defense thereof with counsel mutually satisfactory to the parties;
provided, however, that the Indemnitee shall have the right to retain its own
counsel, with the fees and expenses to be paid by the Indemnitor, if
representation of such Indemnitee by the counsel retained by the Indemnitor
would be inappropriate due to actual or potential differing interests between
such Indemnitee and any other party represented by such counsel in such
proceedings. The indemnity agreement in this Article 11 shall not apply to
amounts paid in settlement of any loss, claim, damage, liability or action if
such settlement is effected without the consent of the Indemnitor, which consent
shall not be withheld unreasonably. The failure to deliver notice to the
Indemnitor within a reasonable time after the commencement of any such action,
if prejudicial to its ability to defend such action, shall relieve such
Indemnitor of any liability to the Indemnitee under this Article 11, but the
omission so to deliver notice to the Indemnitor will not relieve it of any
liability that it may have to any Indemnitee otherwise than under this Article
11. The Indemnitee under this Article 11, its employees and agents, shall
cooperate fully with the Indemnitor and its legal representatives in the
investigation of any action, claim or liability covered by this indemnification.
11.4 Insurance. BI and Vion shall each maintain appropriate product
liability insurance with respect to the development, manufacture and sales of
the Product by BI and Vion, respectively, in such amount as BI and Vion,
respectively, customarily maintain with respect to the manufacture or sales of
its other products.
ARTICLE 12. TERM AND TERMINATION
12.1 Term. Unless terminated earlier pursuant to Section 12.2, this
Agreement shall expire and the licenses granted by Vion
-29-
<PAGE> 31
to BI pursuant to Sections 5.1, 5.2 and 5.4 (subject to the terms and conditions
set forth therein) shall become fully-paid and non-exclusive, on a country by
country basis, upon the expiration of the Royalty Term in such country.
12.2 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);
(b) upon the material breach of any material provision of this
Agreement by either party (a "Material Breach"), which has not been cured within
sixty (60) days after written notice from the other party (a "Default"). The
non-Defaulting party may, in its discretion, terminate this Agreement
immediately upon written notice of such Default and proceed against the other
party for all applicable damages. Without limiting the generality of the
foregoing, the parties hereto expressly agree that in the event of a Default by
either of them, in addition to all other remedies available at law or in equity,
which may be available to the other, it is agreed that the non-Defaulting party
may, at its option, notify the Defaulting party that it wishes to proceed with
the development of the Product in the Field on an exclusive basis. []
(c) if no NDA for the Product has been filed in the United States or
Europe by December 31, 2003; or
(d) if the Executive Committee determines, based upon scientific and
regulatory prospects, that an NDA for the Product is not supportable in the
United States or Europe.
[]
12.3 Effect of Expiration or Termination.
(a) Expiration or termination of this Agreement, for whatever reason,
shall not affect any rights or obligations accrued by either party prior to the
effective date of expiration or termination, including without limitation, the
obligation to pay Royalties on Product sold prior to expiration or termination.
-30-
<PAGE> 32
(b) Termination of this Agreement under Section 12.2 shall not
prejudice any claim for damages a party may have under this Agreement or the
Other Agreements.
(c) Except as otherwise provided in Article 12, upon expiration or
termination of this Agreement both parties shall immediately cease using the
other party's Licensed Technology and Confidential Information.
(d) The obligations and rights of the parties under Articles 9, 11, 14
and 15, and Sections 5.4(g), 7.4, 10.4, 12.1 and 12.3 shall survive termination
or expiration of this Agreement.
12.4 []. In order to avoid any future disruption or delay in the
progress of the Development Work which may result from Vion's inability to meet
its financial obligations under this Agreement, the parties have agreed that
from and after the Effective Date, until Vion receives NDA approval for the
Product, Vion shall provide to BI its financial statements (including a
Statement of Cash Flow) contained in its Forms 10-KSB and 10-QSB (or any similar
form) as filed with the Securities and Exchange Commission. []
12.5 []
ARTICLE 13. PUBLICITY
13.1 Publicity Review. BI and Vion will jointly discuss and agree on
any statement to the public regarding the execution or the subject matter of
this Agreement or the Other Agreements, except with respect to disclosures
required by law or regulation. Promptly following the Effective Date, the
Parties shall issue a mutually acceptable press release. All statements made
shall be consistent with the goals of compliance with law and maximizing sales
and distribution of the Product.
ARTICLE 14. DISPUTE RESOLUTION
-31-
<PAGE> 33
14.1 Disputes. The parties recognize that disputes as to certain
matters may from time to time arise during the term of this Agreement that
relate to either party's rights and/or obligations hereunder or thereunder. It
is the objective of the parties to establish procedures to facilitate the
resolution of disputes arising under this Agreement in an expedient manner by
mutual cooperation and without resort to litigation. To accomplish this
objective, the parties agree to follow the procedures set forth in this Article
14 if and when a dispute arises under this Agreement between the parties or
among the Steering Committee.
14.2 Dispute Resolution Procedures. If the parties or the Steering
Committee cannot resolve any dispute within thirty (30) days of formal request
by either party to the other, either party may, by written notice to the other,
have such dispute referred to the Executive Committee, for attempted resolution
by good faith negotiations within 30 days after such notice is received. If any
such dispute arising out of or relating to this Agreement is not resolved
between the parties or the Steering Committee or the Executive Committee, then
the parties shall submit to non-binding mediation in New York, New York (or
another mutually acceptable location) using a neutral mediator having experience
with the industry in accordance with the rules of the Center for Public
Resources (costs to be shared equally) as a last resort to resolve such dispute
before submission to a court of competent jurisdiction. The parties hereby
submit to the jurisdiction of the federal courts located within the State of
Connecticut for the conduct of any suit, action or proceeding arising out of or
relating to this Agreement. The parties each hereby waive any and all right to a
jury trial in any such action.
-32-
<PAGE> 34
ARTICLE 15. MISCELLANEOUS
15.1 Assignment.
(a) Notwithstanding any provision of this Agreement to the contrary,
either party may assign any of its rights or obligations under this Agreement:
(i) in any country to any Affiliates; provided, however, that such assignment
shall not relieve the assigning party of its responsibilities for performance of
its obligations under this Agreement; or (ii) in connection with the sale of all
or substantially all of its assets.
(b) Except as otherwise provided in Section 15.1(a) above, neither
party may assign any of its rights or obligations under this Agreement without
the prior written consent of the other party.
(c) This Agreement shall survive any merger of either party with or
into another party and no consent for a merger or similar reorganization shall
be required hereunder; provided, that in the event of such merger or in the
event of a sale of all assets, no intellectual property rights of the acquiring
corporation shall be included in the technology licensed hereunder.
(d) This Agreement shall be binding upon and inure to the benefit of
the successors and permitted assigns of the parties. Any assignment not in
accordance with this Agreement shall be void.
15.2 Force Majeure. Neither party shall lose any rights hereunder or be
liable to the other party for damages or losses on account of failure of
performance by the defaulting party if the failure is occasioned by government
action, war, fire, explosion, flood, strike, lockout, embargo, act of God, or
any other similar cause beyond the control of the defaulting party, provided
that the party claiming force majeure has exerted all reasonable efforts to
avoid or remedy such force majeure.
15.3 Payment in U.S. Dollars. All payments due to either party under
this Agreement shall be paid in U.S. Dollars.
15.4 Notices. Any notices or communications provided for in this
Agreement to be made by either of the parties to the other
-33-
<PAGE> 35
shall be in writing, in English, and shall be made by prepaid air mail with
return receipt or by overnight or similar courier service, addressed to the
other at its address set forth below. Any such notice or communication may also
be given by hand, or facsimile to the appropriate designation. Notices shall be
sent:
If to BI, to: Boehringer Ingelheim International GmbH
Postbox 200
D-55216 Ingelheim, Rhein
Germany
Attention: Corporate Licensing
Telephone: 011 49 61 32 77 34 08
Facsimile: 011 49 61 32 77 35 83
with a copy to:
Boehringer Ingelheim International GmbH
Postbox 200
D-55216 Ingelheim, Rhein
Germany
Attention: Head of Legal Department
Telephone: 011 49 61 32 77 2106
Facsimile: 011 49 61 32 77 3583
If to Vion, to: Vion Pharmaceuticals, Inc.
Four Science Park
New Haven, Connecticut 06511
Attention: President and CEO
Telephone: 1 203 498 4210
Facsimile: 1 203 498 4211
with a copy to:
Terence Jones, Esq.
Wiggin & Dana
One Century Tower
P.O. Box 1832
New Haven, Connecticut 06508-1832
Telephone: 1 203 498 4324
Facsimile: 1 203 782 2889
-34-
<PAGE> 36
Either party may by like notice specify or change an address to which notices
and communications shall thereafter be sent. Notices sent by mail, facsimile or
cable shall be effective upon receipt and notices given by hand shall be
effective when delivered.
15.5 Governing Law. This Agreement shall be governed by the laws of the
State of Connecticut, as such laws are applied to contracts entered into and to
be performed within such state without giving effect to conflicts of laws
principles.
15.6 Waiver. Except as specifically provided for herein, the waiver
from time to time by either of the parties of any of their rights or their
failure to exercise any remedy shall not operate or be construed as a continuing
waiver of same or of any other of such party's rights or remedies provided in
this Agreement.
15.7 Severability. If any term, covenant or condition of this Agreement
or the application thereof to any party or circumstance shall, to any extent, be
held to be invalid or unenforceable, then (a) the remainder of this Agreement,
or the application of such term, covenant or condition to parties or
circumstances other than those as to which it is held invalid or unenforceable,
shall not be affected thereby and each term, covenant or condition of this
Agreement shall be valid and be enforced to the fullest extent permitted by law;
and (b) the parties hereto covenant and agree to renegotiate any such term,
covenant or application thereof in good faith in order to provide a reasonably
acceptable alternative to the term, covenant or condition of this Agreement or
the application thereof that is invalid or unenforceable, it being the intent of
the parties that the basic purposes of this Agreement are to be effectuated.
15.8 Independent Contractors. It is expressly agreed that Vion and BI
shall be independent contractors and that the relationship between the two
parties shall not constitute a partnership or agency of any kind. Neither Vion
nor BI 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 authorization of the party to do so.
-35-
<PAGE> 37
15.9 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 constitute one and the same instrument.
15.10 Entire Agreement. This Agreement and the Other Agreements between
the parties of even date herewith set forth all of the covenants, promises,
agreements, warranties, representations, conditions and understandings between
the parties hereto and supersede and terminate all prior agreements and
understanding between the parties. There are no covenants, promises, agreements,
warranties, representations conditions or understandings, either oral or
written, between the parties other than as set forth herein and therein. No
subsequent alteration, amendment, change, agreement or addition to this
Agreement shall be binding upon the parties hereto unless reduced to writing and
signed by the respective authorized officers of the parties.
IN WITNESS WHEREOF, the parties have executed this Agreement in
duplicate originals by their proper officers as of the date and year first above
written.
BOEHRINGER INGELHEIM VION PHARMACEUTICALS, INC.
INTERNATIONAL GmbH
By: /s/ Dr. H. Peter Gieseler By: /s/ John Spears
-------------------------- --------------------
Name: Dr. H. Peter Gieseler Name: John Spears
Title: Authorized Signatory Title: President & CEO
By: /s/ Hans-Peter Muller
------------------------
Name: Hans-Peter Muller
Title: Authorized Signatory
-36-
<PAGE> 38
-37-
<PAGE> 39
SCHEDULE 1
VION TECHNOLOGY
To the extent relating to the Compound or Product:
1. All clinical data generated by Vion or Yale University which Vion has
rights to, as such clinical data relates to the Product.
2 All preclinical formulation, manufacturing information or Know-How
related to proprietary formulations or manufacturing processes to which
Vion has rights.
3. All IND or equivalent regulatory approvals to which Vion has rights.
4. Orphan drug status applied for and received, or future orphan drug
requests; head and neck (received); cervical (received).
5. All Know-How regarding product development by Vion or Yale University
which Vion has rights to relating to the use of the Product in
combination with other treatment modalities or in other indications in
the Field.
6. Any invention disclosures regarding the Product which lead to patent
applications by Vion or Yale University which are owned by Vion, or to
the extent Vion is permitted to grant a sublicense to BI, licensed to
Vion by a Third Party.
7. The following specific intellectual property associated with the
development of the Compound:
a. Bulk Pharmaceutical Manufacturing Process
b. Stability Data for Bulk
c. Analytical Methods for Bulk
d. Complete Characterization Data package for Bulk Substance
e. Finished Product Manufacturing Process
f. Stability Data for Finished Drug Product
g. Analytical Methods for Finished Drug Product
h. Complete Characterization Data package for Finished Drug Product
i. Animal Pharmacokinetic Data
j. In vitro and In vivo metabolism data
k. Animal Toxicological Data
<PAGE> 40
l. IND for US Regulatory Submission
m. Clinical Trial Application (CTX) with Medicines Control Agency
(MCA) in United Kingdom
n. Clinical Trial Applications for Spain, France, Belgium, and
Germany
o. Data on Phase I/II Trial
p. Interim Toxicity Data for ongoing Phase III trial at Yale
q. Clinical Investigator's Brochure
r. Phase III, Global Clinical Protocol using Porfiromycin as an
adjuvant to Radiation
s. List of 40 centers involved with the Phase III Trial in the US
and Europe
t. Copy of Orphan Status Designation by the FDA for the Compound
for treatment of head and neck cancer
u. Copy of Orphan Status Designation by the FDA for the Compound
for treatment of Cervical Cancer
-39-
<PAGE> 41
EXHIBIT A
DEVELOPMENT PLAN
SEE ATTACHED
-40-
<PAGE> 42
DEVELOPMENT PLAN FOR PROMYCIN
The following is a summary of a possible development plan for Promycin. While
there is evidence that Promycin may be effective when used in combination with
chemotherapy we should seek to establish Promycin as the drug to be added to any
radiation therapy regimen. []While it would be possible to perform additional
studies in earlier stage (i.e. resectable) head and neck cancer I believe it
would be advantageous to extend its use into other tumor types. Should we obtain
approval in other tumors it would suggest that Promycin should be used whenever
radiation therapy is employed.
The table below summarizes the current and potential development plan for North
America and European countries. Once Vion and BI have entered into an agreement
we will need to set up a steering committee to discuss these options and develop
a detailed plan for recruitment of investigators, development protocols etc.
<TABLE>
<CAPTION>
- --------------------- --------------------------- -------- ------------ ----------------- --------------
Indication Study No. Time to Estimated Initiation
Pts. Complete Costs Date
- --------------------- --------------------------- -------- ------------ ----------------- --------------
<S> <C> <C> <C> <C> <C>
Head and Randomized trial of XRT [] [] yrs [] underway
Neck +/- Promycin
- --------------------- --------------------------- -------- ------------ ----------------- --------------
[] Pilot trial of XRT + [] [] yr $[] []
Promycin
--------------------------- -------- ------------ ----------------- --------------
Randomized trial of XRT [] [] yrs [] []
+/- Promycin
- --------------------- --------------------------- -------- ------------ ----------------- --------------
[] Pilot trial of XRT + [] [] yr [] []
Promycin
--------------------------- -------- ------------ ----------------- --------------
Randomized trial of XRT [] [] yrs [] []*
+/- Promycin
- --------------------- --------------------------- -------- ------------ ----------------- --------------
TOTAL PATIENTS []
- --------------------- --------------------------- -------- ------------ ----------------- --------------
</TABLE>
*Pending pilot and interim pivotal head and neck trial analysis
Issues relevant to Proposed Clinical Development
1. Trial Initiation -
* [] Cancer - The pilot trial in [] cancer should begin [].
Eligible patients will be those with stage [] cancer.
The pilot trial in [] cancer could begin in [].
* [] Cancer - The pilot study in [] cancer could begin [] and
would aim to accrue [] patients. This should be a multi-center
trial to lend greater credence to the results. There would be
no immediate plan to initiate a pivotal trial in [] cancer
until the Vion and BI Executive Committee have had the
opportunity to review the results of the pilot [] cancer study
and the interim analysis of the pivotal head and neck trial.
2. Ease of initiating and completing new trials - In the course of initiating
the H&N trial for Vion, Covance has recruited 40 clinical centers (28 in
Europe, 12 in US). This has provided Vion
<PAGE> 43
with access to these centers for additional clinical trials. For trials in
[] patient accrual should be [] from the majority of the centers. The
accrual of [] cancer patients will be []. []
3. []
4. Study design - Study design in the [] additional indications should
parallel the head and neck studies.
5. Patients required - For the phase III pivotal studies randomization between
XRT and XRT + Promycin would require []
6. Development in Japan - This will require additional evaluation of market,
regulatory, and cost issues. If development appears to be feasible and
attractive clinical development would begin in []. Costs for the
development in Japan are estimated to be about [].
7. Countries in need of local clinical trials before approval - The execution
of local trials in those countries i.e. Mexico, China, Taiwan etc.) will be
evaluated separately and the work would be initiated only if financially
attractive.
<PAGE> 44
EXHIBIT B
CO-PROMOTION TERMS
-41-
<PAGE> 45
EXHIBIT B
THE PARTIES CONTEMPLATE A SEPARATE CO-PROMOTION AGREEMENT FOR CANADA BASED ON
THIS TERM SHEET WHICH IS APPLICABLE FOR THE USA
CO-PROMOTION TERM SHEET
THIS CO-PROMOTION AGREEMENT is effective as of ___, by and between ROXANE
LABORATORIES, INC., a Delaware corporation having offices at 1809 Wilson Road,
Columbus, Ohio 43228 ("RLI") and VION PHARMACEUTICALS, INC., a Delaware
corporation having offices at Four Science Park New Haven, Connecticut 06511
("VION").
WITNESSETH
WHEREAS, BII GmbH and VION entered into a Collaborative Development and
Distribution Agreement on _______ ("Collaborative Agreement") relating to the
development and commercialization of the pharmaceutical product porfiromycin for
head and neck cancer and other cancers (hereinafter referred to as "Product");
and
WHEREAS, the terms and conditions of the Collaborative Agreement provide for
VION to enter into a Co-promotion Agreement with an Affiliate of BII GmbH for
the marketing of Product in the United States; and
WHEREAS, VION and BII GmbH, acting through its indirect wholly owned subsidiary
RLI wishes to enter into an agreement to market and promote Promycin(TM) in the
United States in exchange for a share of the commercial benefits of such an
undertaking.
NOW, THEREFORE, the Parties hereby agree as follows:
DEFINITIONS
All definitions shall be those set forth in the Collaboration Agreement between
VION and BII GmbH dated __________ unless specifically modified herein.
"Agreement" shall mean this Co-promotion Agreement or as it may hereafter be
supplemented or amended from time to time.
"Co-promote" or "Co-promotion" shall mean the act of marketing and Detailing the
Product in the Co-Promotion Territory during the Term.
"PSR" shall mean those professional sales representatives comprising RLI's or
VION's dedicated sales forces, who have been assigned to the promotion and
Detailing of the Product to the healthcare community.
<PAGE> 46
"Detail", "Detailed" or "Detailing" shall mean the personal, face to face
discussion by a PSR during a call wherein the Product is promoted directly to a
healthcare practitioner capable of prescribing the Product.
"Marketing Plan" shall mean the plan of action developed annually by RLI with
the assistance and cooperation of VION and reviewed and approved by the Joint
Marketing Committee to promote the Product including, but not limited to, sales
plans, pricing, allocation of Detailing, total number and identity of
institutions and prescribing practitioners targeted for promotion, advertising
and other promotional material and aids, symposia, phase IV studies, and the
preparation of various promotion programs.
"Territory" shall mean the fifty (50) states of the United States and the
District of Columbia and Puerto Rico.
"Joint Marketing Committee" shall mean the group of individuals from RLI and
VION responsible for communicating the Marketing Plan between the two companies,
and coordinating their respective field force activities to ensure the proper
implementation of the Marketing Plan. For the purpose of coordinating
promotional and marketing activities of each Party with respect to the Product
in the Territory, the Parties will set up a Joint Marketing Committee in which
both Parties will be represented. The Joint Marketing Committee will be composed
of three (3) representatives from RLI, and two (2) from VION, and will be
chaired by a representative from RLI.
OBJECTIVES
RLI and VION wish to cooperate in the promotion of the Product in the Territory
by providing Details and performing promotional activities in order to maximize
the sales of the Product to the mutual profit and advantage of both Parties as
specified in the Marketing Plan.
Structure
Nature of the Cooperation:
The cooperation between the Parties as set forth In this Agreement will not
constitute nor be construed as constituting a partnership or a relationship of
agent and principal. Neither Party shall, under any circumstances act as or
represent itself to be a partner, agent or a representative of the other.
Neither Party shall have any responsibility for the firing, compensation, or
employee benefits of the other Party's employees. No employee or representative
of either Party shall have any authority to bind or obligate the other Party to
this Agreement for any sum or in any manner whatsoever, or to create or impose a
contractual or other liability on the other Party without said Party's
authorized written consent. For all purposes, and notwithstanding
2
<PAGE> 47
any other provision of this Agreement to the contrary, the legal relationship of
the Parties under this Agreement shall be that of independent contractors.
3
<PAGE> 48
Joint Marketing Committee:
During the first year of this Agreement, the Joint Marketing Committee shall
meet every three months at alternating sites. Thereafter, meetings will be held
twice per year, at alternating sites. Each party shall bear the expenses for its
representatives to attend the Joint Marketing Committee meetings.
Strategy/Role of Parties/Commitments
Strategy
The Parties agree that the most efficient strategy to achieve the objectives of
their cooperation is through the joint promotion of the Product by their sales
forces, using a centrally coordinated marketing approach, under the trademark
Promycin(TM) with identical packaging and promotional literature. When feasible,
the logos and company names of both parties will appear on all promotional
materials.
RLI's Role
RLI shall use its reasonable efforts, consistent with accepted business
practices and legal requirements, to train, deploy, motivate through appropriate
incentives, and use it's PSRs and the PSR's of VION to promote and Detail the
Product in the Territory in accordance with the promotional programs described
In the Marketing Plan, and in a such a manner and as expeditiously as RLI
normally adopts in launching, promoting and Detailing a pharmaceutical product
having commensurate commercial potential.
RLI shall have the responsibility and authority to []
RLI shall have responsibility for []
RLI shall have authority and responsibility for []
RLI shall have authority and responsibility for []
RLI shall have authority and responsibility for []. The [] VION in accordance
with the terms of the Supply Agreement.
RLI shall have authority and responsibility for handling all []. However, VION
shall have responsibility for maintaining [].
RLI shall have authority and responsibility for handling [].
RLI shall have authority and responsibility for [].
4
<PAGE> 49
RLI staff have authority and responsibility for handling development and
production of promotional materials.
RLI shall have authority and responsibility for [].
VION's Role
VION will provide at [] sufficient supplies of the Product in finished package
form to fulfill all orders from customers in accordance with the terms of the
Supply Agreement.
VION shall use its reasonable efforts, consistent with accepted business
practices and legal requirements, to hire, train, deploy, motivate through
appropriate incentives, and use its PSRs to promote and Detail the Product in
the Territory in accordance with the promotional programs described in the
Marketing Plan, and in a manner sufficient to carry out its responsibilities
under that plan and this Agreement.
VION shall cooperate with RLI in providing information about the product and in
reviewing the Marketing Plan to permit the maximization of sale.
VION will have members of its sales training department meet with RLI as
required to gain knowledge about the Product and the promotional and marketing
strategies (an initial training program for the Product for each of VION's
PSR's, will be conducted by RLI at its facilities, with VION assuming the costs
of its own personnel).
VION will cooperate with RLI and conduct such testing as may be necessary to
assist in responding to questions or complaints about the Product.
5
<PAGE> 50
Obligations of the Parties
Government Contact Reporting
VION shall promptly notify RLI upon being contacted by the FDA or any
governmental agency relating to the manufacture, promotion and/or sale of the
Product. VION will, to the extent practical, consult with RLI so that a
coordinated response is given.
Promotional Materials
RLI shall provide VION with all required sales and promotional material in
quantities sufficient to allow VION's representatives to Detail the Product in
accordance with the Marketing Plan then in effect. VION shall use only those
sales and promotional materials provided by RLI and shall not in any manner
after such material provided by RLI or use any material not approved by the
Joint Marketing Committee.
Sales Training
RLI shall provide VION with initial training and training materials in
sufficient quantity to allow VION to maintain a trained sales force
knowledgeable in the appropriate methods for Detailing the Product. VION shall
have members of its sales training department meet with RLI to acquire knowledge
about the Product and the promotional plan and marketing strategies to
facilitate training of its representatives. VION shall, at its own cost ensure
that its representatives receive additional training as may be necessary so that
they remain effective and knowledgeable about future developments of the
Product.
Product Orders
VION shall promptly refer any orders for the Product from third parties to RLI
so that such orders can be processed on a timely basis.
Information Requests
In addition to adverse reaction reports, all questions and inquiries regarding
the Product received by VION, and all questions requiring a written response
shall be forwarded by VION to RLI as soon as practical after receipt.
Sales Incentive
Each Party shall incorporate the promotion of the Product into its own incentive
plan for its own sales force in order to foster promotion of the Product. Each
party shall use its own discretion in deciding the level of incentive
compensation to be paid for the Product. Each Party will advise its PSRs that
they are [].
6
<PAGE> 51
Label and Printed Materials
RLI represents and warrants that all sales, advertising, promotional and
training materials provided to VION by RLI will conform to the Product's
approved labeling.
Government Contact
Each party will provide to the other written notice of any inquiries from, or
positions taken by the FDA or any other government agency which may affect the
manufacture, marketing or sale of the Product.
Compensation
Profit Sharing
[] For purposes hereof, "Net Sales" shall have the meaning assigned to such term
in Section 1.27 of the Collaboration Agreement. RLI shall pay VION its
percentage of Net Sales within thirty (30) days after the end of each calendar
quarter.
Field Force Activities
Detailing Efforts
Each party's sales force shall promote the Product in a way that is both cost
efficient yet provides coverage of the target prescriber population as set forth
in the Marketing Plan.
Call Reporting
Each party will generate and maintain their own internal call reporting system
which shall be the basis for generating reports on Detailing activity to
designated institution and physician targets within 45 business days after the
end of each calendar quarter. The parties will exchange reports displaying the
call frequency by institution and target physician specialty.
7
<PAGE> 52
Institution and Physician Target Lists
In order to better manage and coordinate Detailing, RLI and VION will identify
the institutions and physicians for the purposes of optimizing the Detailing
efforts, and determining which Institutions and physicians each Party will
Detail the Product to.
Managed Health Care and VA Accounts
[ ]
Governmental Rebate Programs
[ ]
Accounting Reports and Payments
Quarterly Reports
Sales
Within 30 days after the end of each calendar quarter, RLI will provide VION
with an accounting report of the prior quarter's sales activity, including Gross
Sales, Net Sales, and VION's [] share of Net Sales.
Audits
During the term of this Agreement and for a period of two (2) years thereafter,
the parties shall each keep complete and accurate records directly related to
the sale and promotion of the Product in order to determine the accuracy of any
reports and to verify the computation of the amounts due and performance under
the Marketing Plan. Each party shall have the tight to cause an independent
certified public accountant to audit such records. Such audits may be exercised
during normal business hours once a year upon notice to such other party. The
party requesting the audit shall bear the full cost of such audit unless such
audit discloses a variance of more than 5% or $50,000 (whichever is larger). In
such case, the audited party shall bear the actual out-of-pocket cost of such
audit. The terms of this section shall survive any termination or expiration of
this Agreement.
Product Recall
8
<PAGE> 53
In the event that either Party determines that an event incident or circumstance
has occurred which may result in the need for a "recall" or "market withdrawal",
as such terms are defined in a 21 CFR 7.3, of the Product, or any lots thereof,
such Party shall advise the other and the Parties shall consult with respect
thereto.
Tradedress and Packaging
Trademark and Tradedress
The Product will bear the Trademark Promycin(R) which was registered by VION in
the US on May 20, 1997, Registration Number 2,064,076 and the tradedress of RLI
(ROXANE(R)). VION shall have the sole responsibility for maintaining the
Trademark's registration. RLI shall have the sole responsibility for maintaining
its trademarks and tradedress.
Name and Logo
Both RLI's and VION's names will appear on all promotion materials (except where
prohibited by law or regulation). Each party shall have the right to review and
approve the use of its name and/or logo on any promotional and advertising
materials. Such materials shall be furnished to the other party in reasonable
time to permit review and comment prior to final publications.
VION may use the name Roxane Laboratories, Inc., and its logo solely to the
extent required to fulfill, its obligations under this Agreement. RLI and its
Affiliates may use the name VION Pharmaceuticals, and its logo solely to the
extent required to fulfill its obligations under this Agreement or the
Collaboration Agreement.
Term and Termination
Term - This Agreement shall be effective as of the Agreement's effective date
and shall continue for a term of ten (10) years with automatic renewal for
periods of five (5) years each unless either party terminates on eighteen (18)
months prior notice.
Default - This Agreement may be terminated by written notice by either party in
the event that the other has defaulted in any manner which would materially
illustrate the purpose and continuation of this Agreement and shall have failed
to remedy such default within sixty (60) days after notice thereof from the
non-defaulting party.
Debtor Proceedings - If either party shall commence as debtor any proceedings
under any insolvency, reorganization, readjustment of debt, dissolution or
liquidation law or statute of the Federal Government or any State Government or
any subdivision of either now or hereafter in effect or if any such proceedings
shall be commenced against either party, or any trustee or receiver in respect
of either parry shall be appointed in any such proceedings, and any such party
shall by any act or failure to act indicate approval of, or consent to, or
acquiescence in
9
<PAGE> 54
such proceedings or in the appointment of any such trustee or receiver, or if
any such proceedings brought against either party shall be approved by any court
or shall remain undismissed for ninety (90) days; or if any warrant of
attachment shall be issued against all the assets of either party and shall not
be released within ninety (90) days after its levy, then, in any such case, such
other party not involved in such proceedings shall have the option to terminate
this Agreement by written notice and upon the giving of such notice this
Agreement shall Immediately terminate.
In the event of a material breach by VION of its obligations under the
Co-Promotion Agreement, RLI, at its option. may terminate the Co-Promotion
Agreement. BI or RLI would have an immediate right to continue selling the
Product on the same terms as provided in the Collaboration Agreement for the
Royalty Territory. RLI would pay VION a [] royalty on Net Sales as defined in
the Collaborative Agreement and VION would continue to supply the Product as set
forth in the Supply Agreement at cost plus []. VION would also have a continuing
obligation to use its best efforts to maintain the Products NDA and the Products
Orphan Drug Status.
A material breach under this Agreement would be VION's failure to fulfill its
obligations under the Marketing Plan or its use of promotional materials which
have not been authorized by the Joint Marketing Committee. Upon written notice
from RLI, VION would have sixty (60) days to cure a material breach resulting
from its failure to fulfill its obligations under the Marketing Plan.
Miscellaneous
Force-Majeure
The performance by either party of any covenants or obligations on its part to
be performed hereunder (other than an obligation of either to pay money to the
other) shall be excused by reason of strikes or other labor disturbances, riots,
fires, floods, accidents, wars, embargoes, delays of carriers, inability to
obtain materials from sources of supply or acts, injunctions. or restraints of
governments (whether or not now threatened), or any cause preventing such
performance whether similar or dissimilar to the foregoing and being beyond the
reasonable control of the party bound by rauch covenant or obligation, provided
however, that the party affected shall exert its reasonable diligent efforts to
eliminate or cure or overcome any of such causes and to resume performance of
its covenants with all reasonable speed.
Public Statements - Except as required by applicable law neither VION nor RLI
nor any of their Affiliates shall publicly disclose the specific terms of this
Agreement. Except as required by applicable law, the transactions contemplated
hereby or performance hereunder shall not be without first obtaining the written
consent of the other party hereto unless there has been a prior public
disclosure of the information being disclosed by the other party or with the
other party's consent.
10
<PAGE> 55
Notices - Except as otherwise provided herein, any notice or other
communications sent or delivered hereunder shall be in writing and shall be
effective if hand delivered or if sent by telex, facsimile transmission,
overnight courier or certified or registered mail, postage prepaid.
11
<PAGE> 56
If to RLI, to:
Roxane Laboratories, Inc.
1809 Wilson Road
Columbus, Ohio 43216-6532
ATTENTION:
If to VION, to:
Four Science Park
New Haven, Connecticut 06511
ATTENTION: President & CEO
Copy to: Terence Jones, Esq.
Wiggin & Dana
One Century Tower
PO Box 1832
New Haven, CT 06508-1832
or to such address as either party shall hereafter designate by notice to the
other party. A notice shall be deemed to have been given on the date of receipt
by the party.
Assignability - This Agreement shall not be assignable nor its rights hereunder
transferred in any way by either party except by prior written consent of the
other party, which consent may be withheld in such other party's sole
discretion, and except that either party may assign its rights and obligations
to any Affiliate of such party for the period it remains an Affiliate, although
no such assignment shall relieve the contracting party of its primary
responsibility for performance hereunder.
Change of Ownership - In the event of a substantial change in the ownership
control, including, but not limited to the sale, transfer or contribution to any
Third Party or Third Parties of VION's rights to the Product or all or
substantially all of the assets of VION's business or the sale or spin-off,
directly or indirectly. to any Third Party or Third Parties, of a beneficial
interest in fifty percent (50%) or more of the outstanding equity securities or
other ownership interests of VION or any affiliate of VION which owns all or
substantially all of the assets of VION's business (each, a "Change of
Control"), RLI may, (i) at its option in the absence of VION notifying RLI as
provided in the Approval Procedures or (ii) if pursuant to the Approval
Procedures RLI chooses to exercise its option to terminate in accordance with
the Approval Procedures (as defined below), terminate the Co-Promotion Agreement
and RLI would have an immediate right to use the Promycin trademark in the USA
as provided in the Collaborative Agreement for the Royalty Territory. RLI would
pay VION a [] royalty on Net Sales as defined in the Collaborative Agreement and
VION would continue to supply the Product on the terms
12
<PAGE> 57
set forth in the Supply Agreement. VION would also have a continuing obligation
to use its best efforts to maintain the Products NDA and the Products Orphan
Drug Status. For purposes hereof, a "Third Party" or 'Third Parties" shall mean
any person or entity which engages in a transaction with VION resulting in a
Change of Control of VION.
For purposes of the foregoing paragraph, "Approval Procedures" shall mean the
following: (i) VION may notify RLI in writing in advance of any proposed
Transaction (the "VION Notice") which would constitute a Change of Control, such
notice to contain the identify of the proposed acquirer(s) in the proposed
Transaction and such additional information about the proposed Transaction as
would reasonably permit RLI to assess whether it wishes to exercise its rights
to terminate hereunder, (ii) upon receipt of the VION Notice, RLI shall notify
VION in writing not later than ten (10) business days whether it would exercise
its option to terminate the Co-Promotion Agreement in the event of such
Transaction (the "RLI Response"). If RLI determines not to exercise its right of
termination, such RLI Response shall be considered binding for a period of one
(1) year from the date thereof, provided the relative relationship between VION
and such Third Party remained substantially as contemplated in the VION Notice.
Headings - The headings of the Articles or Paragraphs of this Agreement are for
the convenience of the parties only and shall not be deemed a substantive part
of this Agreement.
Waive - The failure of any party hereto at any time to require performance by
the other party of any provision of this Agreement shall not affect the right of
such aggrieved party to require future performance of that provision, and any
waiver by any party of any breach of any provision of this Agreement must be in
writing to be effective and shall not be construed as a waiver of any continuing
or succeeding breach of such provision, a waiver of the provision itself, or a
waiver of any right under this Agreement.
Governing Law - This Agreement shall be governed by and construed in accordance
with the laws of the State of Connecticut.
Partial Invalidity - In case any one or more of the provisions contained herein
shall, for any reason, be held to be invalid, illegal or unenforceable in any
respect, such invalidity, illegality or unenforceability shall not affect any
other provision of this Agreement, but this Agreement shall be construed as if
such invalid, illegal or unenforceable provision or provisions had never been
contained herein unless the deletion of such provision or provisions would
result in such a material change as to cause completion of the transactions
contemplated herein to be impossible and provided that the performance required
by this Agreement with such clause deleted remains substantially consistent with
the intent of the parties.
Execution in Counterparts - This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become a binding agreement when one or more counterparts have been signed
by each of the parties and delivered to the other party.
13
<PAGE> 58
14
<PAGE> 59
EXHIBIT C
SUPPLY AGREEMENT TERMS
-42-
<PAGE> 60
EXHIBIT C
SUPPLY AGREEMENT TERM SHEET
The following terms shall be contained in one or more separate supply agreements
that shall be entered into pursuant to Section 5.8 of the Collaborative
Development and License Agreement (the "Collaboration Agreement").
1. Vion shall manufacture or have manufactured the Product in finished,
packaged form, and supply the Product to BI for sale and distribution.
Manufacturing, processing, testing, packaging, labeling and delivering
("Production") of the Product shall be in accordance with all
applicable specifications, as agreed to by both the parties as well as
any applicable governmental laws and regulations.
2. At the beginning of each quarter, BI shall provide Vion with
projections of its needs for Product in various geographic areas for
the next four quarters (the Quarterly Projection). Projections for the
first quarter shall be binding orders for the Product; projections for
the last three quarters of the Quarterly Projection shall be
non-binding estimates of Product demand. In the event the projection
for the first quarter of the current Quarterly Projection differs from
that in the previous Quarterly Projection by more than 50%, the parties
will cooperate to facilitate the change in demand, but will not be
obligated to supply more than 150% of the prior Quarterly Projection.
3. Vion shall deliver Product to BI designated receiving points at Vion's
risk and expense, per directions in BI's purchase orders, which
directions shall not conflict with terms in this Supply Agreement.
4. Vion shall be responsible, at its sole expense for compliance with all
applicable regulatory requirements relating to the Production of
Product, as well as storage and export of Product until it is received
by BI or its Affiliate or sub-licensee.
5. Supply of Product from Vion to BI or its Affiliates in the Co-Promotion
Territory shall be at []. Supply of Product from Vion to BI or its
Affiliates in the Royalty Territory shall be at a price equal to []. BI
affiliates will provide Production services to Vion at a price equal to
BI's []. The price for the product shall be reviewed and adjusted []
and any new price shall be applicable for all orders received [].
6. In the event that Vion cannot supply Product within 90 days of BI's
requested delivery date, the parties shall cooperate to qualify another
source(s) for Product, and Vion will take whatever steps are necessary
to maintain that source of supply once it is approved.
<PAGE> 61
No source shall be selected without BI's approval which shall not be
unreasonably withheld. BI consents to Vion's current source of supply
of Product.
7. The Term, and Termination provisions in this Supply Agreement shall be
reflective of similar provisions in the Collaboration Development
Agreement.
8. Vion, the licensor and party responsible for Production, shall warrant
that the Product conforms to current Specification including production
and storage under CGMPs, and that neither Product nor Production
infringes any patents or rights of third parties as provided in the
Collaboration Agreement. Vion will bear responsibility and liability
for any real or alleged failures or actions claiming failure or
infringement, and indemnify BI from any loss, except when such failure
or infringement results directly from actions of BI as provided in the
Collaboration Agreement.
9. "Specifications" shall mean all of the specifications for the Product,
including without limitation the material, formulation, manufacturing,
packaging, labeling, testing and quality control specifications agreed
to between the parties, which shall be the same attached to the
agreement and made a part hereof, as may be amended from time to time.
The Specifications may be amended as the parties may mutually agree in
a writing dated and signed by each of them.
10. Vion shall manufacture, test, label and package the Product in
accordance with: (a) the Specifications: and (b) oil Current Good
Manufacturing Practices ("CGMPs") now in place or hereafter established
by the FDA or any other regulatory authority that are applicable to the
Product. all governmental laws and regulations as may be applicable to
Vion's manufacturing, processing, packing or storage of the Product.
11. For each batch of the Product manufactured, Vion shall assign lot
control numbers, apply (lot numbers and expiry dates (as required) to
the labeling, retention samples and stability samples. Vion shall test,
or have tested, each batch of finished Product using analytical testing
methodologies appropriate to the Product which are acceptable to BI.
Vion shall certify to BI that each batch of finished Product conforms
to the Specifications and shall provide BI with a Certificate of
Analysis for each batch of Product produced. Vion also shall perform
such other functions as required by the Specifications and any
applicable FDA regulations and FDA requirements with respect to the
Product.
12. Vion shall prepare and maintain such written procedures and records as
are required by the FDA, CGMP regulations or similar governmental
regulations, as applicable. Certified true copies of each of such
procedures or records shall be prepared by Vion and delivered to BI
upon request.
2
<PAGE> 62
13. Subject to applicable confidentiality provisions and third party
consents, BI, or its authorized representative, shall be permitted to
monitor all aspects of Vion's work under this Agreement and all
procedures or records relative to Vion's work under this Agreement
shall be made readily available to BI's authorized representatives by
Vion. Such monitoring shall include without limitation the right, at
reasonable time intervals and upon reasonable prior notice, (a) to
physically inspect all manufacturing, storage and testing laboratory
facilities used in connection with the Product and (b) to conduct
quality assurance audits. Vion shall, and shall cause each of its
officers, employees, agents and subcontractors to, cooperate fully with
all such monitoring activities. Vion shall, and shall cause each of its
officers, employees, agents and subcontractors to, use their best
efforts to correct any deficiencies that are discovered as a result of
any such monitoring activities.
14. The presence of BI monitors shall not be construed, as approval of or
acquiescence to any procedures utilized by Vion. Any "approval"
required or permitted to be given shall be in writing, dated and signed
by an authorized BI representative.
15. BI shall have the right to approve oil subcontractors, including
without limitation all contract manufacturers and testing laboratories,
that Vion utilizes in connection with the manufacture and testing of
the Product which will be unreasonably withheld. Vion agrees that it
shall not use any subcontractor that is not reasonably acceptable to BI
in connection with the manufacture and testing of the Product.
16. BI or its designee may test or cause to be tested the Product after
receipt. If after receipt of the Product by BI or its designee, BI
notifies Vion in writing that the Product does not meet Specifications,
Vion shall with reasonable promptness replace all such non-conforming
Product, with Product meeting Specifications at no cost to BI. Vion
shall bear freight. tax, insurance and any actual out-of-pocket cost
incurred by BI in transporting such replacement Product.
Notwithstanding the foregoing, it is understood and agreed by the
parties that BI or its designee shall have no obligation to test each
batch of the Product provided to it by Vion. Non-conforming Product
shall, upon mutual agreement and at Vion's sole expense, either (i) be
returned to Vion within a reasonable period of time and relabeled or
reworked as permitted in the NDA or if permitted by the FDA or other
governmental agency, or (ii) when appropriate, credit shall be issued
by Vion within thirty (30) days of agreement that the Product is
nonconforming or if such determination of non-conformance is made by an
independent testing laboratory.
If the analysis or assay of a sample of the Product performed by either
party differs from the other party's analysis or assay of its sample
from the same shipment or batch, the parties shall conduct a joint
investigation to determine whether the Product met Specifications or
the cause of the Product not meeting Specifications.
3
<PAGE> 63
17. Vion shall promptly notify BI of any problems or unusual production
situations which have the potential to adversely affect production of
the Product, or its timely delivery to BI.
18. The party responsible for the registration of the product in a country
shall be the party responsible for reporting any adverse drug
experience associated with the Product to the appropriate governmental
authorities in such country.
19. If either party receives any reports of adverse drug experience
associated with the Product, or other complaints about the Product,
such party shall provide the other with a copy of such report(s) within
three (3) business days of the receipt of same, except that reports of
serious injury or death shall be reported within two (2) business days,
with a written report to follow promptly thereafter. The parties shall
cooperate fully with each other to investigate adverse events or
product complaints involving the manufacture of the Product. The cost
of any testing undertaken by BI at Vion's request with respect to
responding to product complaints or to investigate the possible cause
of adverse drug reactions shall be paid by Vion.
20. Product shall be ordered on BI or its designees' standard purchase
order forms (the "Purchase Order"). The only function of the purchase
order is to set forth the quantities of Product desired by package size
and the desired delivery dates for the quantity of Product ordered and
destination of the Product. Vion will either acknowledge receipt of
BI's purchase order on Vions standard acknowledgment form, or contact
BI about Vion's ability to supply quantities of Product in excess of
the forecast, and/or alternative ship dates which shall be agreed to in
writing using the purchase order form and acknowledgment form. Except
as otherwise set forth above, the only function of Vion's
acknowledgment form is to acknowledge receipt of BI's purchase order.
All other terms and conditions of either the purchase orders or the
acknowledgment forms are void and of no effect, and the terms and
conditions of this Agreement shall control.
21. Effective throughout the term of this Agreement and thereafter, for a
period of not less than [], the parties shall each carry and maintain
in full force and effect insurance, or maintain adequate self-insurance
reserves, insuring themselves for Commercial General Liability,
including Product Liability. In any such insurance policy from an
insurance company, each party shall include the other as an additional
insured thereon, said insurance policies shall be obtained from on
insurance company having a Best's rating of B+, Class IV or higher. []
Each party shall furnish the other with certificates of said Commercial
General Liability and Product Liability insurance policy naming the
other as an additional insured thereon, which shall provide to each
party that thirty (30) days prior written notice of cancellation or
material changes in said insurance policies shall be given to such
other party. The indemnification obligations herein shall apply on a
first
4
<PAGE> 64
dollar basis without limitation or reduction due to any deductible or
self-insured retention which either party may have under their
respective insurance coverage.
22. Vion shall reimburse BI for any provable actual damages incurred by BI
resulting from a recall, stop sale or governmental action or direction
resulting from a breach of this Agreement by Vion or its designee or
early termination, by Vion or as the result of the removal of the
Product from the market, or the cessation of sale of the Product prior
to the expiry date of this Agreement.
23. Force majeure provisions, customary disclaimers of implied and other
express warranties, customary limitations of liabilities and mutual
disclaimers of consequential damages, payment terms, appropriate
incoterm references, governing law and other miscellaneous provisions
consistent with Collaboration Agreement
5
<PAGE> 65
ATTACHMENT A-1
ELEMENTS OF PRODUCTION IN OVERHEAD
The following departments support the production processes in the plant:
[]
6
<PAGE> 66
EXHIBIT D
FORM OF STOCK PURCHASE AGREEMENT
-43-
<PAGE> 67
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT, dated as of November 24, 1997 (the
"Effective Date"), by and between VION PHARMACEUTICALS, INC., a Delaware
corporation having its principal offices at Four Science Park, New Haven,
Connecticut 06511 ("Vion"), and BOEHRINGER INGELHEIM INTERNATIONAL, GmbH, a
limited liability company organized under the laws of Germany having its
principal place of business at D-55216 Ingelheim/Rhein, Germany ("BI").
R E C I T A L S
A. Vion is developing and conducting research on pharmaceutical
products comprising porfiromycin for the treatment of cancer in humans; and
B. Both parties wish to enter into a collaboration with each other for
the worldwide development and marketing of such products on the terms and
conditions set forth in the Collaborative Development and License Agreement of
even date between Vion and BI (the "Collaboration Agreement").
NOW THEREFORE, the parties hereto mutually agree as follows:
1. Purchase and Sale of Stock.
1.1 Sale and Issuance of Common Stock. Subject to the terms and
conditions of this Agreement, Vion agrees to issue and sell to BI, and BI agrees
to purchase from Vion, that number of shares (rounded to the nearest whole
number) of Vion's common stock, par value $.01 per share (the "Common Stock")
that is equal to U.S. $3,000,000.00 divided by a price per share (the "Purchase
Price") equal to the sum of (x) the average closing bid price of a share of
Common Stock on the Nasdaq SmallCap Market for the thirty (30) full consecutive
trading days preceding the Effective Date (the "Average Price"), plus (y) a
premium (the "Premium") equal to twenty-five percent (25%) of the Average Price;
provided that the Purchase Price shall in no event exceed $10 unless the Average
Price exceeds $10, in which case the Purchase Price shall equal the Average
Price without addition of the Premium. The shares of Common Stock purchased by
BI hereunder are referred to herein as the "Shares".
<PAGE> 68
1.2 Closing. The purchase and sale of the Shares shall take place at
the offices of Wiggin & Dana located at One Century Tower, 265 Church Street,
New Haven, Connecticut 06510-7001, on November 24, 1997 at 10:00 a.m., or such
other time (the "Closing Date") and place as Vion and BI shall mutually agree
(which time and place are designated as the "Closing"). At the Closing, Vion
shall deliver to BI a certificate representing the Shares which BI is purchasing
against delivery to Vion by BI of a check or wire transfer in the amount of U.S.
$3,000,000 payable to Vion's order.
1.3 No Registration of Shares. The Shares will be issued to BI without
registration under the Securities Act of 1933, as amended (the "Securities
Act"), in reliance on Regulation D ("Regulation D") promulgated thereunder by
the Securities and Exchange Commission (the "SEC").
2. Representations, Warranties and Covenants of Vion. Vion hereby
represents, warrants and covenants that:
2.1 Organization and Qualification. Vion: (a) is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware; (b) has all requisite corporate power and authority to conduct its
business as currently conducted; and (c) is qualified and is in good standing as
a foreign corporation in all jurisdictions in which the nature of its business
or properties require such qualification.
2.2 Authorization; Consents. All corporate action on the part of Vion
and its officers, directors and stockholders necessary for the authorization,
execution and delivery of this Agreement, the performance of all obligations of
Vion hereunder and the authorization, issuance and delivery of the Shares has
been taken, or will be taken, on or prior to the Closing. Vion's execution,
delivery and performance of this Agreement does not require any consent of any
person under, constitute or result (upon notice or lapse of time or both) in a
breach of any term, condition or provision of, or constitute a default or give
rise to any right of termination or acceleration under any material indenture,
mortgage, agreement, contract or other material instrument, or result in the
creation or imposition of any lien, security interest, mortgage, pledge, charge
or other encumbrance, of any material nature whatsoever, upon any properties or
assets of Vion or any of its subsidiaries. Upon due execution and delivery by
BI, this Agreement shall constitute a valid and legally binding obligation of
Vion, enforceable against Vion in accordance with its terms, except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors' and contracting
parties' rights generally and except as enforceability may be subject to general
principles of equity (regardless of whether such enforceability is considered in
a proceeding in equity or at law).
2
<PAGE> 69
2.3 Authorized Capital Stock. The authorized capital stock of Vion
consists of 35,000,000 shares of Common Stock and 5,000,000 shares of preferred
stock, $0.01 par value per share (the "Preferred Stock"). At the close of
business on November 19, 1997: (a) 9,374,447 shares of Common Stock were issued
and outstanding; and (b) 761,646 shares of Class A Convertible Preferred Stock
and 4,592 shares of Class B Convertible Preferred Stock were issued and
outstanding. Except as described in Exhibit 1 attached hereto, there are no
outstanding options, warrants or other convertible securities of Vion.
2.4 Issuance, Sale and Delivery of the Shares. When issued and paid for
in accordance with the terms of this Agreement, the Shares to be sold hereunder
by Vion will be validly issued, fully paid and non-assessable and issued in full
compliance with federal and state securities laws.
2.5 Additional Information. Vion has filed all required reports and
other documents with the SEC pursuant to the reporting requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"). All reports
filed by Vion with the SEC pursuant to the reporting requirements of the
Exchange Act, when filed, did not contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstance in which
they were made, not misleading, except to the extent such statements have been
modified or superseded by a later report or document filed with the SEC.
2.6 Non-Contravention. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated hereby, will
(a) violate any constitution, statute, regulation, rule, injunction, order,
decree, ruling, charge, or other restriction of any government agency, or court
to which Vion is subject or any provision of any of the charter or bylaws of
Vion, or (b) conflict with, result in a breach of, constitute a default under,
result in the acceleration of, create in any party the right to accelerate,
terminate, modify or cancel or require any notice under any agreement, contract,
lease, license, instrument or other arrangement to which Vion is a party or by
which it is bound or to which any of its assets is subject (or result in the
imposition of any security interest upon any of its assets), except where the
violation, conflict, breach, default, acceleration, termination, modification,
cancellation, failure to give notice, or security interest would not have a
material adverse effect on the financial condition of Vion or on the ability of
BI to consummate the transactions contemplated by this Agreement. Vion need not
give any notice to, make any filing with, or obtain any authorization, consent
or approval of any government agency in order for Vion and BI to consummate the
transactions contemplated by this Agreement.
2.7 Financial Statements. The audited financial statements (balance
sheet and related statements of operations, shareholders' equity and cash flows)
of Vion as of and for the year ended December 31, 1996, incorporated in Vion's
SEC Form 10-KSB for the year ended
3
<PAGE> 70
December 31, 1996, and the unaudited financial statements (balance sheet and
related statements of operations, shareholders' equity and cash flows) of Vion
as of and for the six months ended June 30, 1997, incorporated in Vion's SEC
Form 10-QSB for the quarter ended June 30, 1997, including the notes thereto,
have been prepared in accordance with generally accepted accounting principles,
consistently applied throughout the periods covered thereby, and present fairly
the financial condition of Vion as of such dates and the results of operation of
Vion for such periods provided however that the June 30, 1997 unaudited
statements are subject to normal year end adjustments and may lack footnotes and
other presentation items.
2.8 Material Changes. Since December 31, 1996 and June 30, 1997, Vion
has operated its business in the ordinary course, and there has not been:
(a) any change in the business of Vion that has had or could
reasonably be expected to have a material adverse effect on the condition,
financial or otherwise, of Vion, other than on-going losses in the ordinary
course of business which have been disclosed in applicable filings with the SEC
and which, for the period since December 31, 1996 to date are estimated to be
$8,700,000;
(b) any damage, destruction or loss (whether or not covered by
insurance) that has had or could reasonably be expected to have, individually or
in the aggregate, a material adverse effect on the condition, financial or
otherwise, of Vion;
(c) any material change in the accounting methods or
principles of Vion;
(d) any material transaction made by Vion other than in the
ordinary course of business consistent with past practice (which ordinary course
of business includes raising equity financing) or as otherwise permitted or
contemplated by this Agreement;
(e) any entering into, amendment or termination of any
contract, agreement, lease, franchise, security, instrument, permit or license
between Vion and any party that has had or could reasonably be expected to have,
individually or in the aggregate, a material adverse effect on the condition,
financial or otherwise, of Vion; or
(f) any agreement or arrangement made by Vion to take any
action that would cause any representation or warranty in this Agreement to be
untrue or incorrect.
2.9 Legal Compliance. Vion has complied with all applicable laws of
federal, state, local and foreign governments except where the failure to
comply, individually or in the aggregate, would not have a material adverse
effect upon the condition, financial or otherwise of Vion.
4
<PAGE> 71
2.10 Other Information. The information concerning Vion set forth in
this Agreement, including all schedules and exhibits hereto, and in all other
written information provided to BI by Vion regarding Vion, including without
limitation the Collaborative Development and License Agreement and all schedules
and exhibits thereto, does not contain any untrue statement of material fact or
omit to state a material fact required to be stated herein necessary to make the
statements and facts contained herein, in light of the circumstances in which
they are made, not false or misleading.
3. Representations, Warranties and Covenants of BI. BI hereby
represents, warrants and covenants that:
3.1 Authorization. BI has full power, authority and capacity to enter
into this Agreement and to consummate the transactions contemplated hereby. BI
has taken all necessary action to authorize the execution, delivery and
performance of this Agreement, and upon due execution and delivery by Vion, this
Agreement shall constitute a valid and binding obligation of BI enforceable in
accordance with its terms, except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting
creditors' and contracting parties' rights generally and except as
enforceability may be subject to general principles of equity (regardless of
whether such enforceability is considered in a proceeding in equity or at law).
3.2 Securities Laws Representations.
(a) Purchase Entirely for Own Account. The Shares are being
acquired for investment for BI's own account, not as a nominee or agent, and not
with a view to the resale or distribution of any part thereof, and BI has no
present intention of selling, granting any participation in, or otherwise
distributing the same. BI does not have any contract, undertaking, agreement or
arrangement with any person to sell, transfer or grant participation to such
person or to any third person, with respect to any of the Shares.
(b) Disclosure of Information. BI believes it has received all
information it considers necessary or appropriate for deciding whether to
purchase the Shares. BI has had an opportunity to ask questions and receive
answers from Vion regarding the terms and conditions of the offering of the
Shares.
(c) Investment Experience. BI has previously invested in
companies in the development stage, can bear the economic risks of the
investment and has such knowledge and experience in financial or business
matters that it is capable of evaluating the merits and risks of its investment
in the Shares.
5
<PAGE> 72
(d) Accredited Investor. BI is an accredited investor as
defined in Rule 501(a) of Regulation D promulgated under the Securities Act by
the SEC.
(e) Restricted Securities. BI understands that the Shares it
is purchasing pursuant to this Agreement are characterized as "restricted
securities" under the federal securities laws inasmuch as they are being
acquired from Vion in a transaction not involving a public offering and that
under such laws and applicable regulations the Shares may be resold without
registration under the Securities Act only in certain limited circumstances. In
this connection, BI is familiar with SEC Rule 144, as presently in effect, and
understands the resale limitations imposed thereby and by the Securities Act.
(f) Disposition of Shares. BI will not dispose of any of the
Shares (other than pursuant to SEC Rule 144 or any similar or analogous rule or
rules) unless and until (i) BI shall have notified Vion of the proposed
disposition and, if reasonably requested by Vion, BI shall have furnished Vion
with an opinion of counsel reasonably satisfactory in form and substance to Vion
to the effect that such disposition will not require registration under the
Securities Act; or (ii) there is in effect a registration statement under the
Securities Act covering the proposed disposition and the proposed disposition is
made in accordance with such registration statement.
3.3 Legends. The certificates evidencing the Shares may bear the
restrictive legends set forth below, except that such certificates shall not
bear such legends if the transfer was made in compliance with Rule 144 or if the
opinion of counsel, if any, referred to in Section 3.2(f)(i) is to the effect
that such legend is not required in order to establish compliance with any
provisions of the Securities Act.
(a) "THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED ("ACT"). THE
SECURITIES MAY NOT BE TRANSFERRED UNLESS A REGISTRATION STATEMENT UNDER THE ACT
IS IN EFFECT AS TO SUCH TRANSFER OR SUCH TRANSFER IS MADE PURSUANT TO RULE 144
OF THE ACT OR AN EXEMPTION TO THE REGISTRATION REQUIREMENTS OF THE ACT."
(b) Any legend required by the laws of any applicable state or
other jurisdiction governing the Shares.
3.4 Non-Contravention. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated hereby, will
violate any constitution, statute, regulation, rule, injunction, order, decree,
ruling, charge, or other restriction of any government agency or court to which
BI is subject or any provision of any of the charter or bylaws of BI, except
where the violation would not have a material adverse effect on the ability of
BI to
6
<PAGE> 73
consummate the transactions contemplated by this Agreement. BI need not
give any notice to, make any filing with, or obtain any authorization, consent
or approval of any government agency in order for Vion and BI to consummate the
transactions contemplated by this Agreement, except where the failure to give
notice, to file, or to obtain any authorization, consent, or approval would not
have a material adverse effect on the ability of BI to consummate the
transactions contemplated by this Agreement.
4. Agreement Not to Sell. Notwithstanding anything to the contrary
contained herein, BI agrees that, during the period beginning on the date of the
Closing and ending on the second anniversary of the date of the Closing, BI
shall not, without the prior written consent of Vion, directly or indirectly
sell, contract to sell (including, without limitation, any short sale), grant
any option to purchase or otherwise transfer or dispose of any securities of
Vion held by it at any time during such period. In order to enforce the
provisions of this Section 4, Vion may impose stop-transfer instructions with
respect to the securities held by BI that are subject to the foregoing
restriction until the end of such period.
5. Conditions to Closing.
5.1 Conditions to BI's Obligations. The obligations of BI under this
Agreement are subject to the fulfillment, or the waiver by BI, of the conditions
set forth in this Section 5.1 on or before the Closing Date.
(a) Accuracy of Representations and Warranties. Each
representation and warranty of Vion contained in this Agreement shall be true on
and as of the Closing Date with the same effect as though such representation
and warranty had been made on and as of that date.
(b) Performance. Vion shall have performed and complied with
all agreements and conditions contained in this Agreement required to be
performed or complied with by Vion prior to or at the Closing.
(c) Opinion of Counsel. BI shall have received an opinion from
Wiggin & Dana, counsel to Vion, dated as of the Closing Date, addressed to BI,
in form and substance satisfactory to BI in its sole discretion.
(d) Execution of the Collaboration Agreement. The
Collaboration Agreement between Vion and BI shall have been executed in a form
mutually acceptable to Vion and BI.
(e) Certificates and Documents. Vion shall have delivered to
BI:
7
<PAGE> 74
(i) a certificate of the Secretary or Assistant
Secretary of Vion dated as of the Closing Date, certifying as to (i) the
incumbency of officers of Vion executing this Agreement and all other documents
executed and delivered in connection herewith, (ii) a copy of the By-Laws of
Vion, as in effect on and as of the Closing Date, and (iii) a copy of the
resolutions of the Board of Directors of Vion authorizing and approving Vion's
execution, delivery and performance of this Agreement, all matters in connection
with this Agreement, and the transactions contemplated thereby.
(ii) a certificate, executed by the President of Vion
as of the Closing Date, certifying to the fulfillment of all of the conditions
to BI's obligations under this Agreement, as set forth in this Section 5.
(f) Other Matters. All corporate and other proceedings in
connection with the transactions contemplated at the Closing by this Agreement,
and all documents and instruments incident to such transactions, shall be
reasonably satisfactory in substance and form to BI and its counsel, and BI and
its counsel shall have received all such counterpart originals or certified or
other copies of such documents as they may reasonably request.
5.2 Conditions to Vion's Obligations. The obligations of Vion under
this Agreement are subject to the fulfillment, or the waiver by Vion, of the
conditions set forth in this Section 5.2 on or before the Closing Date.
(a) Accuracy of Representations and Warranties. Each
representation and warranty of BI contained in this Agreement shall be true on
and as of the Closing Date with the same effect as though such representations
and warranties had been made on and as of that date.
(b) Execution of the Collaboration Agreement. The
Collaboration Agreement between Vion and BI shall have been executed in a form
mutually acceptable to Vion and BI.
6. Survival; Indemnification.
6.1 Survival. Notwithstanding any investigation made by any party to
this Agreement, all covenants, agreements, representations and warranties made
by Vion and BI herein shall survive the execution of this Agreement and the
Closing; provided, that such representations and warranties shall speak only as
of the date of this Agreement and the Closing, as applicable.
8
<PAGE> 75
6.2 Indemnification by Vion. Vion shall indemnify and hold harmless BI,
its directors, officers, stockholders, partners and beneficial owners from and
against all claims, liabilities, losses, costs, deficiencies and expenses
(including reasonable attorneys' fees and expenses) in connection with any third
party claim (collectively, "Losses") which may be sustained by BI, its
directors, officers, stockholders, partners and beneficial owners, and arise
from the breach of any agreement, covenant, representation, warranty, or other
obligation of Vion made or incurred under or pursuant to this Agreement.
Notwithstanding the foregoing, Vion's obligations under this Section 6.2 shall
not exceed the amount of the Purchase Price paid by BI for the Shares pursuant
to Section 1.1 hereof.
6.3 Procedure. A party (the "Indemnitee") that intends to claim
indemnification under this Article 6 shall promptly notify Vion (the
"Indemnitor") of any Losses in respect of which the Indemnitee intends to claim
such indemnification, and the Indemnitor shall assume the defense thereof with
counsel satisfactory to the Indemnitee; provided, however, that the Indemnitee
shall have the right to retain its own counsel, with the fees and expenses to be
paid by the Indemnitor, if representation of such Indemnitee by the counsel
retained by the Indemnitor would be inappropriate due to actual or potential
differing interests between such Indemnitee and any other party represented by
such counsel in such proceedings. The indemnity agreement in this Article 6
shall not apply to amounts paid in settlement of any Losses if such settlement
is effected without the consent of the Indemnitor, which consent shall not be
withheld unreasonably. The failure to deliver notice to the Indemnitor within a
reasonable time after the commencement of any such action, if prejudicial to its
ability to defend such action, shall relieve such Indemnitor of any liability to
the Indemnitee under this Article 6, but the omission so to deliver notice to
the Indemnitor will not relieve it of any liability that it may have to the
Indemnitee otherwise than under this Article 6. The Indemnitee under this
Article 6 shall cooperate fully with the Indemnitor and its legal
representatives in the investigation of any action, claim or liability covered
by this indemnification.
7. Registration Rights.
7.1 Certain Definitions. As used in this Section, the following terms
shall have the following respective meanings:
(a) "Commission" shall mean the Securities and Exchange
Commission or any other federal agency at the time administering the Securities
Act.
(b) "Form S-3" shall mean Form S-3 issued by the Commission or
any substantially similar form then in effect.
9
<PAGE> 76
(c) The terms "Register," "Registered" and "Registration"
refer to a registration effected by preparing and filing a registration
statement in compliance with the Securities Act ("Registration Statement"), and
the declaration or ordering of the effectiveness of such Registration Statement.
(d) "Registrable Securities" shall mean (I) the Shares and
(II) all shares of Common Stock issued pursuant to stock splits, stock dividends
and similar distributions with respect to the Shares.
(e) "Registration Expenses" shall mean all expenses incurred
by Vion in complying with Sections 7.2 and 7.3 of this Agreement, including,
without limitation, all federal and state registration, qualification and filing
fees, printing expenses, fees and disbursements of counsel for Vion, blue sky
fees and expenses, fees and expenses of any management road show, and the
expense of any special audits incident to or required by such registration, but
shall not include Selling Expenses.
(f) "Securities Act" shall mean the Securities Act of 1933, as
amended, or any similar federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time.
(g) "Selling Expenses" shall mean all underwriting discounts,
selling commissions and fees and disbursements of counsel for BI, applicable to
the sale of Registrable Securities pursuant to this Agreement.
7.2 Demand Registration.
(a) Request for Registration on Form S-1. Unless all of the
Registrable Securities have previously been sold by BI pursuant to an effective
Registration Statement prepared and filed by Vion or may be sold immediately
upon the second anniversary of the Closing pursuant to a then-effective
Registration Statement, BI may at any time following the Closing request in
writing that Vion effect a Registration on Form SB-2, Form S-1 or Form S-2 (or
any successor form) of some or all of the Registrable Securities owned by BI
immediately upon the second anniversary of the Closing (or at such other time
following such second anniversary as BI may designate in its written request);
provided, however, that Vion need not effect such a Registration covering fewer
than 25% of the Shares purchased hereunder. Thereupon, Vion shall use its best
efforts to effect the Registration, on Form SB-2, Form S-1 or Form S-2 (or any
successor form), of all Registrable Securities which Vion has been requested to
so Register on the date specified in BI's written request. BI may exercise the
demand rights provided in this Section 7.2(a) no more than once; provided,
however, that if for any reason (other than the request of BI) the number of
Registrable Securities to be included in the
10
<PAGE> 77
underwriting in accordance with the foregoing is less than the total number of
shares which BI has requested to be included, then such underwriting shall not
count as BI's demand right provided in this Section 7.2(a).
(b) Request for Registration on Form S-3 Unless all of
the Registrable Securities have previously been sold by BI pursuant to an
effective Registration Statement prepared and filed by Vion or may be sold
pursuant to a then-effective Registration Statement, subject to the terms of
this Agreement , if Vion receives from BI a written request that Vion effect any
Registration on Form S-3 (or any successor form to Form S-3 regardless of its
designation) at a time when Vion is eligible to register securities on Form S-3
(or any successor form to Form S-3 regardless of its designation) for an
Offering of Registrable Securities, Vion will as soon as practicable use its
best efforts to effect a registration of the Registrable Securities specified in
such request; provided, however, that Vion need not effect such registrations
which individually cover fewer than 25% of the Shares purchased hereunder.
(c) Underwriting in Registration.
(1) Notice of Underwriting. If BI intends to
distribute the Registrable Securities covered by its request by means of an
underwriting, it shall so advise Vion as a part of its request made pursuant to
this Section 7.2.
(2) Selection of Underwriter. Vion shall, together
with BI, enter into an underwriting agreement with the representative
("Underwriter's Representative") of the underwriter or underwriters selected for
such underwriting by BI and agreed to by Vion, which agreement shall not be
unreasonably withheld provided such underwriter is experienced and reputable.
(d) Blue Sky in Registration. In the event of any
Registration pursuant to this Section 7.2, Vion will exercise its best efforts
to Register and qualify the securities covered by the Registration Statement
under such other securities or Blue Sky laws of such jurisdictions as BI shall
reasonably request and as shall be reasonably appropriate for the distribution
of such securities; provided, however, that Vion shall not be required to
qualify to do business or to file a general consent to service of process in any
such states or jurisdictions.
7.3 Piggyback Registration.
(a) Notice of Piggyback Registration and Inclusion of
Registrable Securities. In the event Vion decides to Register any of its Common
Stock (either for its own account or the account of a selling shareholder or
other security holder exercising demand registration rights), other than (i) a
Registration Statement which exclusively relates to the Registration of
securities
11
<PAGE> 78
under an employee stock option, purchase, bonus or other benefit plan, or (ii)
Registration relating solely to a transaction under Rule 145 promulgated by the
Commission, Vion will: (1) promptly give BI written notice thereof, and (2)
include in such Registration (and any related qualification under Blue Sky laws
or other compliance), and in any underwriting involved therein, all the
Registrable Securities specified in a written request delivered to Vion by BI
within 15 days after delivery of such written notice from Vion.
(b) Underwriting in Piggyback Registration. If the
Registration of which Vion gives notice is a Registered public offering
involving an underwriting, Vion shall so advise BI as a part of the written
notice given pursuant to Section 7.3(a). BI shall, together with Vion, enter
into an underwriting agreement with the Underwriter's Representative for such
offering.
(c) Blue Sky in Piggyback Registration. In the event of any
Registration of Registrable Securities pursuant to Section 7.3(a), Vion will
exercise its best efforts to Register and qualify the securities covered by the
Registration Statement under such other securities or Blue Sky laws of such
jurisdictions as BI shall reasonably request and as shall be reasonably
appropriate for the distribution of such securities; provided, however, that
Vion shall not be required to qualify to do business or to file a general
consent to service of process in any such states or jurisdictions.
7.4 Expenses of Registration. All Registration Expenses incurred
in connection with all Registrations pursuant to Section 7.2 and Section 7.3
shall be borne by Vion. All Selling Expenses incurred in connection with all
Registrations pursuant to Section 7.2 and Section 7.3, and which relate to the
Registrable Securities, shall be borne by BI.
7.5 Registration Procedures. Vion will keep BI advised as to the
initiation and completion of such Registration. At its expense Vion will (a) use
its best efforts to keep such Registration effective for a period of 180 days or
until BI has completed the distribution described in the Registration Statement
relating thereto, whichever first occurs, and (b) furnish such number of
prospectuses (including preliminary prospectuses) and other documents as BI from
time to time may reasonably request.
7.6 Indemnification.
(a) Vion's Indemnification of BI. To the extent permitted by
law, Vion will indemnify BI and each of its directors, officers, stockholders,
partners or other beneficial owners, and each person controlling BI, with
respect to which Registration, qualification or compliance of Registrable
Securities has been effected pursuant to this Agreement, against all claims,
losses, damages or liabilities (or actions in respect thereof) to the extent
such claims, losses, damages or liabilities arise out of or are based upon any
untrue statement (or alleged untrue statement) of a
12
<PAGE> 79
material fact contained in any Registration Statement, prospectus, offering
circular or other document incident to any such Registration, qualification or
compliance, or are based on any omission (or alleged omission) to state therein
a material fact required to be stated therein or necessary to make the
statements therein not misleading, or any violation by Vion of any rule or
regulation promulgated under the Securities Act applicable to Vion and relating
to action or inaction required of Vion in connection with any such Registration,
qualification or compliance; and Vion will reimburse BI and each of its
directors, officers, stockholders, partners or other beneficial owners, and each
person who controls BI, for any legal and any other expenses reasonably incurred
in connection with investigating or defending any such claim, loss, damage,
liability, or action; provided, however, that Vion will not be liable in any
such case to the extent that any such claim, loss, damage, liability or expense
arises out of or is based upon any untrue statement or omission based upon
written information furnished to Vion by BI and stated to be for use in
connection with the offering of securities of Vion.
(b) BI's Indemnification of Vion. To the extent permitted by
law, BI will, if Registrable Securities held by BI are included in the
securities as to which such Registration, qualification or compliance is being
effected pursuant to this Agreement, indemnify Vion, each of its directors and
officers, each underwriter, if any, of Vion's securities covered by such a
Registration Statement, each person who controls Vion or such underwriter within
the meaning of the Securities Act, against all claims, losses, damages and
liabilities (or actions in respect thereof) to the extent only that such claims,
losses, damages or liabilities arise out of or are based upon any untrue
statement (or alleged untrue statement) of a material fact contained in any such
Registration Statement, prospectus, offering circular or other document incident
to such Registration, qualification or compliance or are based on any omission
(or alleged omission) to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, or any
violation by BI of any rule or regulation promulgated under the Securities Act
applicable to BI and relating to action or inaction required of BI in connection
with any such Registration, qualification or compliance; and will reimburse
Vion, such directors, officers, partners, persons, underwriters or control
persons for any legal and any other expenses reasonably incurred in connection
with investigating or defending any such claim, loss, damage, liability or
action, in each case to the extent, but only to the extent, that such untrue
statement (or alleged untrue statement) or omission (or alleged omission) is
made in such Registration Statement, prospectus, offering circular or other
documents in reliance upon and in conformity with written information furnished
to Vion by BI and stated to be specifically for use in connection with the
offering of securities of Vion; provided, however, that the obligations of BI
hereunder shall be limited to an amount equal to the proceeds to BI of
Registrable Securities sold as contemplated herein.
(c) Indemnification Procedure. Promptly after receipt by an
indemnified party under this Section 7.6 of notice of the commencement of any
action, such indemnified
13
<PAGE> 80
party will, if a claim in respect thereof is to be made against an indemnifying
party under this Section 7.6 notify the indemnifying party in writing of a
commencement thereof and generally summarize such action. The indemnifying party
shall have the right to participate in and to assume the defense of such claim;
provided, however, that the indemnifying party shall be entitled to select
counsel for the defense of such claim with the approval of any parties entitled
to indemnification, which approval shall not be unreasonably withheld; provided,
further, that if any party reasonably determines that there may be a conflict
between the position of Vion and BI in conducting the defense of such action,
suit or proceeding by reason of recognized claims for indemnity under this
Section 7.6, then counsel for such party shall be entitled to conduct the
defense to the extent reasonably determined by such counsel to be necessary to
protect the interest of such party. The failure to notify an indemnifying party
promptly of the commencement of any such action, if prejudicial to the ability
of the indemnifying party to defend such action, shall relieve such indemnifying
party, to the extent so prejudiced, of any liability to the indemnified party
under this Section 7.6, but the omission so to notify the indemnifying party
will not relieve such party of any liability that such party may have to any
indemnified party otherwise other than under this Section 7.6. No indemnifying
party shall settle any claim for which indemnification could be sought hereunder
without the consent of the indemnified party unless the settlement includes an
unconditional release of the indemnified party.
7.7 Market Stand-Off. Except for such shares as are required or
permitted hereunder to be included in any Registration Statement, BI hereby
agrees that, if so requested by the Underwriter's Representative, BI shall agree
not to sell or otherwise transfer any Registrable Securities of Vion during a
maximum of 90 days following the effective date of a Registration Statement of
Vion filed under the Securities Act and relating to an underwritten offering,
provided that all shareholders holding not less than one percent (1%) of the
aggregate number of shares of Common Stock outstanding (including shares of
Common Stock issuable upon the conversion of any convertible securities or upon
the exercise of options or warrants, or other rights) and all officers and
directors of Vion enter into similar agreements.
7.8 Current Public Information. Vion will timely file all reports
required under the Securities Act or the Securities Exchange Act of 1934 and the
rules and regulations thereunder, and will take such further action as may be
reasonably required to cause Vion to be eligible to register securities on Form
S-3 and to enable any holder of "restricted securities" (as defined in Rule 144
adopted by the Commission under the Securities Act) to sell such securities
pursuant to Rule 144, as amended from time to time, or any similar rule or
regulation hereafter adopted by the Commission.
8. Miscellaneous.
14
<PAGE> 81
8.1 Notices. Any consent, 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 telephone, personal delivery or courier) or courier, postage
prepaid (where applicable), 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 addresser and shall be effective upon receipt by the
addressee.
If to Vion: Vion Pharmaceuticals, Inc.
Four Science Park
New Haven, Connecticut 06511
Telephone: 203-498-4210
Facsimile No.: 203-498-4211
Attention: President & Chief Executive Officer
with a copy to: Terence Jones, Esq.
Wiggin & Dana
One Century Tower
P.O. Box 1832
New Haven, Connecticut 06508-1832
Telephone: 203-498-4324
Facsimile No.: 203-782-2889
If to BI: Boehringer Ingelheim International GmbH
Postbox 200
D-55216 Ingelheim, Rhein
Germany
Telephone: 011-49-6132-773-408
Facsimile No.: 011-49-6132-773-583
Attention: Corporate Licensing
with a copy to: Boehringer Ingelheim International GmbH
Postbox 200
D-55216 Ingelheim, Rhein
Germany
Telephone: 011-49-6132-772-106
Facsimile No.: 011-49-6132-773-583
Attention: Head of Legal Department
15
<PAGE> 82
8.2 Entire Agreement. This Agreement, together with the Collaboration
Agreement and any agreements that the parties may execute pursuant to the
Collaboration Agreement, contains the entire understanding of the parties with
respect to the subject matter hereof. All express or implied agreements and
understandings, either oral or written, heretofore made are expressly superseded
by this Agreement.
8.3 Assignment. Neither this Agreement nor any of the rights and
obligations contained herein may be assigned or otherwise transferred by either
party without the consent of the other party; provided, however, that either
Vion or BI may, without such consent, assign its rights and obligations under
this Agreement (a) in connection with a corporate reorganization, to any
Affiliate, all or substantially all of the equity interest of which is owned and
controlled by such party or its direct or indirect parent corporation, or (b) in
connection with a merger, consolidation or sale of substantially all of such
party's assets to an unrelated third party; provided, however, that such party's
rights and obligations under this Agreement shall be assumed by its successor in
interest in any such transaction and shall not be transferred separate from all
or substantially all of its other business assets, including those business
assets that are the subject of the Collaboration Agreement. Any permitted
assignee shall assume all obligations of its assignor under this Agreement.
8.4 Amendments and Waivers. This Agreement may not be modified or
amended except pursuant to an instrument in writing signed by Vion and BI. 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.
8.5 Headings. The headings of the various sections of this Agreement
have been inserted for convenience of reference only and shall not be deemed to
be part of this Agreement.
8.6 Severability. In case any provision contained in this Agreement
should be invalid, illegal or unenforceable in any respect, the validity,
legality and enforceability of the remaining provisions contained herein shall
not in any way be affected or impaired thereby.
8.7 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Connecticut (without giving effect to
the choice of law provisions thereof) and the federal law of the United States
of America. The parties hereby submit to the jurisdiction of the federal or
state courts located within the State of Connecticut for the conduct of any
suit, action or proceeding arising out of or relating to this Agreement.
8.8 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall constitute an original, but all of which, when
taken together, shall constitute
16
<PAGE> 83
but one instrument, and shall become effective when one or more counterparts
have been signed by each party hereto and delivered to the other parties.
8.9 Expenses. Except as otherwise specifically provided herein, each
party shall bear its own expenses in connection with this Agreement.
8.10 Publicity. Neither party hereto shall issue any press releases or
otherwise make any public statement with respect to the transactions
contemplated by this Agreement without the prior written consent of the other
party, except as may be required by applicable law or regulation.
8.11 Confidentiality. (a) BI acknowledges and agrees that any
information or data it has acquired from Vion, not otherwise properly in the
public domain, was received in confidence. BI agrees not to divulge, communicate
or disclose, except as may be required by
17
<PAGE> 84
law or for the performance of this Agreement, or use to the detriment of Vion or
for the benefit of any other person or persons, or misuse in any way, any
confidential information of Vion.
(b) Vion acknowledges and agrees that any information
or data it has acquired from BI, not otherwise properly in the public domain,
was received in confidence. Vion agrees not to divulge, communicate or disclose,
except as may be required bylaw or for the performance of this Agreement, or use
to the detriment of BI or for the benefit of any other person or persons, or
misuse in any way, any confidential information of BI.
8.12 Brokers. Except for Vion's engagement of Vector Securities
International which has been previously disclosed to BI, each party represents
and warrants to the other that it has not engaged any broker or other person who
would be entitled to any fees or commissions in respect to the execution of this
Agreement or the Collaboration Agreement or the consummation of the transactions
contemplated hereby and thereby. Each party agrees to indemnify, defend and hold
harmless the other from and against any and all claims, actions, damages, costs
and expenses which may be incurred or suffered by the other as a result of any
arrangement or agreements made or alleged to have made by the indemnifying party
with any broker, finder or other agent.
IN WITNESS WHEREOF, the parties hereto have cause this
Agreement to be executed by their duly authorized representatives as of the day
and year first above written.
VION PHARMACEUTICALS, INC.
By:_____________________________________________
John A. Spears,
President and Chief Executive Officer
BOEHRINGER INGELHEIM INTERNATIONAL GmbH
By:_____________________________________________
Name:
Title:
BOEHRINGER INGELHEIM INTERNATIONAL GmbH
By:_____________________________________________
18
<PAGE> 85
Name:
Title:
19
<PAGE> 1
Exhibit 10.30
SALE AND LEASEBACK AGREEMENT
This Sale and Leaseback Agreement is entered into as of the 10TH day of
December, 1997, by and between VION Pharmaceuticals, Inc., a Delaware
corporation with its principal place of business a Four Science Park, New Haven,
Connecticut 06511 (hereinafter referred to as "Seller"), and FINOVA Technology
Finance, Inc., a Delaware corporation with its principal place of business at 10
Waterside Drive, Farmington, Connecticut 06032-3065 (hereinafter referred to as
"Buyer").
WHEREAS, Seller desires to sell to Buyer the personal property listed in
Schedule A attached hereto (such listed personal property being hereinafter
referred to as the "Equipment"), and
WHEREAS, Seller desires to use the Equipment for the exclusive benefit of
Seller under the terms and conditions of the Master Equipment Lease Agreement
dated October 17, 1996, between Buyer (as Lessor) and Seller (as Lessee) and
Rental Schedule No. 5 thereunder (hereinafter referred to together as the
"Lease"),
NOW, THEREFORE, in consideration of the premises and the covenants
contained herein, the parties agree as follows:
1. Buyer agrees to purchase the Equipment from Seller, and to lease the
Equipment to Seller pursuant to the terms and conditions contained in the Lease.
The Purchase Date for the Equipment and the date that title to the Equipment
shall pass from Seller to Buyer shall correspond with the Lease Commencement
Date as defined in the Lease.
2. Buyer and Seller agree that the Purchase Price of the Equipment is $
360,284.00, which amount shall be payable to Seller by Buyer on the Purchase
Date.
3. Seller agrees that upon payment by Buyer of the Purchase Price, Seller
will deliver to Buyer a Bill of Sale, in the form attached hereto as Exhibit A
(the "Bill of Sale"), which will convey to Buyer good and marketable title to
the Equipment, free and clear of all liens and encumbrances of any kind or
description. Seller also agrees to provide Buyer with copies of all
documentation received or executed by Seller upon the original acquisition of
the Equipment by Seller.
4. Buyer and Seller agree that the warranties, covenants and agreements
herein contained shall survive the passing of title.
5. Seller agrees to pay any and all applicable Federal, state, county or
local taxes and any and all present or future taxes or other governmental
charges levied upon or created by the sale of the Equipment hereunder, including
sales, use, or occupation taxes due upon the purchase by Buyer.
6. To induce Buyer to enter into this Sale and Leaseback Agreement ("this
Agreement") and with the knowledge that Buyer is doing so in reliance upon these
representations and warranties, Seller represents and warrants to Buyer that (i)
Seller is a corporation duly organized, validly existing and in good standing
under the laws of the jurisdiction of its incorporation, with full power to
enter into this Agreement; (ii) the person who has executed this Agreement and
who shall execute the Bill of Sale has the authority to bind Seller; (iii) the
execution, delivery and performance of this Agreement and the sale and leaseback
of the Equipment by Seller pursuant to the Lease will not conflict with or be a
breach of any provisions of the Certificate of Incorporation or By-Laws of
Seller or any law (including fraudulent conveyance laws), judgment, writ,
injunction, decree, award, rule or regulation of any court, administrative
agency or other governmental authority, or of any indenture or other agreement
to which Seller is a party or by which it is bound, or constitute a default
under any thereof; (iv) this Agreement and the Bill of Sale, when executed and
delivered to Buyer, will be a duly authorized, valid and binding agreement of
Seller enforceable against Seller in accordance with the respective terms
thereof and enforceable against purchasers from and
1
<PAGE> 2
creditors of Seller; (v) no filing, giving of notice or publication is required
in connection with the sale and leaseback or if required such filing, notice or
publication has been duly made and given; (vi) no vote or consent of, or notice
to, the holders of any class of stock of Seller is required, or if required,
such vote, consent or notice has been obtained or given, to authorize the
execution, delivery and performance of this Agreement and the Bill of Sale by
Seller; (vii) Seller has and is transferring to Buyer title to the Equipment
free and clear of all liens and encumbrances of any kind or description; and
(viii) no consent, approval, withholding of objection or other authorization of
or by any court, administrative agency, other governmental authority or any
other person is required, except such consents, approvals or other
authorizations which have been duly obtained and are in full force and effect,
in connection with the execution, delivery or performance by Seller or the
consummation by Seller, of the transactions contemplated by this Agreement.
Seller hereby agrees to deliver to Buyer, upon the Lease Commencement Date of
the Lease, an opinion of Seller's counsel, substantially in the form attached
hereto as Exhibit B, to the effect that the above representations of Seller are
true and correct.
7. Seller warrants that it has taken all action necessary to obtain all
agreements, warranties and indemnifications applicable to the Equipment which
are normally provided by the manufacturer to its customers. Seller hereby
assigns to Buyer all of its right, title and interest in and to all such
agreements, warranties and indemnifications. To the extent assignable, Seller
warrants that all such agreements, warranties and indemnifications are
assignable to Buyer.
8. Buyer and Seller agree that this Agreement and all documents attached
hereto shall inure to the benefit of and shall be binding upon Seller and Buyer,
their subsidiaries, successors and assigns, except that the assignee of Buyer
shall not be required to perform any of the obligations of Buyer and any
assignment by Buyer shall not relieve Buyer of its obligations hereunder. Seller
shall not assign any interest in this Agreement or in the documents attached
hereto without Buyer's written consent.
9. Seller agrees that all obligations of Buyer are expressly contingent
and conditional upon: (a) Seller executing and delivering the Lease for the
Equipment in a form which will constitute a valid, binding and legal obligation
and agreement of Seller and which is acceptable to Buyer; (b) Seller executing a
written Certificate of Inspection and Acceptance in the form required by the
Lease; and (c) Seller delivering any and all instruments required by Buyer under
the Lease in a form acceptable to Buyer.
10. The entire agreement between the parties with respect to the subject
matter hereof is contained in this Agreement and the Lease and the Schedules and
Exhibits referenced herein and therein. There are no understandings, agreements,
representations or warranties, express or implied, respecting this Agreement or
the Lease or the Equipment purchased hereunder and leased thereunder except as
specifically set forth in this Agreement, the Lease, and the Schedules and
exhibits hereto and thereto. Buyer shall not be liable for any indirect, special
or consequential damages, in connection with or arising out of the furnishing,
performance or use of any item of the Equipment or services provided for in this
Agreement, nor shall Buyer be liable in whole or in part for any event beyond
its control.
11. Any notice or other communication required or permitted to be given by
either party hereto to the other party shall be deemed to have been given upon
its receipt, in writing, by the receiving party at its address set forth below,
or at such other address as the receiving party shall have furnished to the
other party by notice pursuant to this paragraph.
If to Seller VION Pharmaceuticals, Inc.
Four Science Park
New Haven, CT 06511
If to Buyer FINOVA Technology Finance, Inc.
10 Waterside Drive
Farmington, CT 06032-3065
2
<PAGE> 3
12. Buyer and Seller agree that this Agreement and the Bill of Sale shall
be governed by and construed in accordance with the laws of the State of
Connecticut (other than the conflicts of laws provisions) and that any legal
action or proceeding arising out of this Agreement or the Bill of Sale shall be
brought in any state or federal court sitting in the city of Hartford in the
State of Connecticut. Buyer and Seller hereby irrevocably consent and submit to
the exclusive personal jurisdiction of said courts and irrevocably agree that
all claims in any such action or proceeding may be heard, determined in and
enforced by any such court. Seller irrevocably consents to the service of
summons, notice, or other process relating to any such action or proceeding by
delivery thereof to it by hand or by mail in the manner set forth in the
provisions of this Agreement on notices.
13. Buyer and Seller waive any and all right to trial by jury in any
action or proceeding relating in any way to this Agreement or the Bill of Sale.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed on the date set forth below by their duly authorized corporate
officers.
FINOVA TECHNOLOGY FINANCE, INC. ("Buyer") VION PHARMACEUTICALS, INC.("Seller")
<TABLE>
<CAPTION>
<S> <C>
By: /s/ Linda A Moschitto By: /s/ Thomas E. Klein
Name (typed): Linda A Moschitto Name (typed:) Thomas E. Klein
Title: Director - Contract Administration Title: Vice President Finance
Date: 12/10/97 Date: 12/8/97
</TABLE>
Attachments:
Exhibit A - Bill of Sale
Schedule A - List of Equipment
F36A(2)
3
<PAGE> 1
EXHIBIT 21
SUBSIDIARIES OF THE REGISTRANT
NAME OF SUBSIDIARY INCORPORATED IN
MicroFab Biosystems, Inc. Delaware
<PAGE> 1
Exhibit 23.1
Consent of Independent Auditors
We consent to the incorporation by reference in the Registration Statements
(Form S-8 No. 33-98738 and No. 333-39407) pertaining to the Vion
Pharmaceuticals, Inc. Amended and Restated Stock Option Plan and in the
Registration Statement (Form S-3 No.333-37941) of Vion Pharmaceuticals, Inc. and
in the related Prospectus of our report dated February 6, 1998, with respect to
the consolidated financial statements of Vion Pharmaceuticals, Inc. included in
the Annual Report (Form 10-K) for the year ended December 31, 1997.
Ernst & Young LLP
Hartford, Connecticut
March 9,1998
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 3,890,621
<SECURITIES> 7,088,540
<RECEIVABLES> 728,879
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 11,826,812
<PP&E> 1,301,680
<DEPRECIATION> 0
<TOTAL-ASSETS> 13,580,331
<CURRENT-LIABILITIES> 1,283,063
<BONDS> 0
0
7,580
<COMMON> 98,339
<OTHER-SE> 11,718,729
<TOTAL-LIABILITY-AND-EQUITY> 13,580,831
<SALES> 0
<TOTAL-REVENUES> 5,271,133
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 10,914,972
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 43,666
<INCOME-PRETAX> (5,343,594)
<INCOME-TAX> 0
<INCOME-CONTINUING> (5,343,594)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (5,343,594)
<EPS-PRIMARY> (0.62)
<EPS-DILUTED> (0.62)
</TABLE>
