<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 3, 1998
REGISTRATION NO. 333-40687
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 2
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
SCRIPTGEN PHARMACEUTICALS, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 2834 22-3193172
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
------------------------
200 BOSTON AVENUE
MEDFORD, MA 02155
(781) 393-8000
(Address, including zip code, and telephone number, including area code,
of registrant's principal executive offices)
------------------------------
MARK T. WEEDON
PRESIDENT AND CHIEF EXECUTIVE OFFICER
SCRIPTGEN PHARMACEUTICALS, INC.
200 BOSTON AVENUE
MEDFORD, MA 02155
(781) 393-8000
(Name, address, including zip code, and telephone
number, including area code, of agent for service)
------------------------------
with copies to:
<TABLE>
<S> <C>
CARL E. KAPLAN, ESQ. RICHARD R. PLUMRIDGE, ESQ.
FULBRIGHT & JAWORSKI L.L.P. LUCI STALLER ALTMAN, ESQ.
666 FIFTH AVENUE BROBECK, PHLEGER & HARRISON LLP
NEW YORK, NEW YORK 10103 1633 BROADWAY, 47TH FLOOR
(212) 318-3000 NEW YORK, NEW YORK 10019
(212) 581-1600
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF SECURITIES TO THE
PUBLIC:
As soon as practicable after this Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, as amended (the "Securities Act"), check the following box. / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. /X/
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT, OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE
ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration becomes effective.
This prospectus shall not constitute an offer to sell or the solicitation of an
offer to buy nor shall there be any sale of these securities in any State in
which such offer, solicitation or sale would be unlawful prior to registration
or qualification under the securities laws of any such State.
<PAGE>
PROSPECTUS Subject to Completion, Dated February 3, 1998
- --------------------------------------------------------------------------------
3,000,000 Shares
[LOGO]
SCRIPTGEN PHARMACEUTICALS, INC.
Common Stock
------------------------------------------------------------
All of the 3,000,000 shares of Common Stock offered hereby (the "Offering") are
being offered by Scriptgen Pharmaceuticals, Inc. ("Scriptgen" or the "Company").
Prior to the Offering, there has been no public market for the Common Stock. It
is currently estimated that the initial public offering price will be between
$11.00 and $13.00 per share. See "Underwriting" for the factors to be considered
in determining the initial public offering price.
The Common Stock has been approved for quotation on the Nasdaq National Market
under the symbol "SCRP."
Concurrent with the Offering, Hoechst Marion Roussel has agreed to purchase
250,000 shares of Common Stock directly from the Company (assuming an initial
public offering price of $12.00), for an aggregate purchase price of $3,000,000,
pursuant to an existing agreement with the Company (the "Private Placement").
See "Business--Collaborative Arrangements."
FOR A DISCUSSION OF CERTAIN RISKS OF AN INVESTMENT IN THE SHARES OF COMMON STOCK
OFFERED HEREBY, SEE "RISK FACTORS" ON PAGES 7-17.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
Price to Underwriting Discounts Proceeds to
Public and Commissions(1) Company(2)
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------
Per Common Share $ $ $
- -----------------------------------------------------------------------------------------------------
Total(3) $ $ $
- -----------------------------------------------------------------------------------------------------
</TABLE>
(1) THE COMPANY HAS AGREED TO INDEMNIFY THE UNDERWRITERS AGAINST CERTAIN
LIABILITIES, INCLUDING LIABILITIES UNDER THE SECURITIES ACT OF 1933, AS
AMENDED. SEE "UNDERWRITING."
(2) BEFORE DEDUCTING EXPENSES OF THE OFFERING PAYABLE BY THE COMPANY ESTIMATED
TO BE $1,050,000.
(3) THE COMPANY HAS GRANTED THE UNDERWRITERS A 30-DAY OPTION TO PURCHASE UP TO
450,000 ADDITIONAL SHARES OF COMMON STOCK ON THE SAME TERMS PER SHARE
SOLELY TO COVER OVER-ALLOTMENTS, IF ANY. IF SUCH OPTION IS EXERCISED IN
FULL, THE TOTAL PRICE TO PUBLIC WILL BE $ , THE TOTAL UNDERWRITING
DISCOUNTS AND COMMISSIONS WILL BE $ AND THE TOTAL PROCEEDS TO
COMPANY WILL BE $ . SEE "UNDERWRITING."
The Common Stock is being offered by the Underwriters as set forth under
"Underwriting" herein. It is expected that the delivery of the certificates
therefor will be made at the offices of SBC Warburg Dillon Read Inc., New York,
New York, on or about , 1998. The Underwriters include:
SBC WARBURG DILLON READ INC. VOLPE BROWN WHELAN & COMPANY
<PAGE>
SCRIPTGEN'S DRUG DISCOVERY PROCESS
GATE IDENTIFIES AND VALIDATES
GENE TARGETS
[GRAPHICAL DEPICTION OF TARGET RNA
AND TARGET PROTEIN]
ATLAS AND SCAN RAPIDLY SCREEN
LARGE COMPOUND LIBRARIES
[GRAPHICAL DEPICTION OF COMPOUND LIBRARY]
ATLAS AND SCAN IDENTIFY
COMPOUNDS THAT BIND TO
TARGET RNA TARGET PROTEIN
[GRAPHICAL DEPICTIONS OF COMPOUNDS
BINDING TO TARGETS]
BIOLOGICAL ASSAYS IDENTIFY LEAD
COMPOUNDS FOR DEVELOPMENT AS
DRUG CANDIDATES
[GRAPHICAL DEPICTIONS OF LEAD
COMPOUNDS]
Scriptgen's present and future drug candidates will require marketing approval
from the FDA.
CERTAIN PERSONS PARTICIPATING IN THE OFFERING MAY ENGAGE IN TRANSACTIONS THAT
STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK, INCLUDING
OVER-ALLOTMENT, ENTERING STABILIZING BIDS, EFFECTING SYNDICATE COVERING
TRANSACTIONS AND IMPOSING PENALTY BIDS. FOR A DESCRIPTION OF THESE ACTIVITIES,
SEE "UNDERWRITING."
2
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO, AND
SHOULD BE READ IN CONJUNCTION WITH, THE MORE DETAILED INFORMATION AND THE
FINANCIAL STATEMENTS AND RELATED NOTES THERETO APPEARING ELSEWHERE IN THIS
PROSPECTUS. UNLESS INDICATED OTHERWISE, ALL INFORMATION IN THIS PROSPECTUS (I)
ASSUMES THAT THE UNDERWRITERS' OVER-ALLOTMENT OPTION IS NOT EXERCISED, (II)
GIVES RETROACTIVE EFFECT TO THE CONVERSION OF THE COMPANY'S SERIES A PREFERRED
STOCK, SERIES B PREFERRED STOCK, SERIES C PREFERRED STOCK AND SERIES D PREFERRED
STOCK TO COMMON STOCK, PAR VALUE $0.01 PER SHARE (THE "COMMON STOCK") UPON THE
CONSUMMATION OF THE OFFERING, (III) GIVES EFFECT TO THE FILING OF AN AMENDMENT
TO THE COMPANY'S RESTATED CERTIFICATE OF INCORPORATION CREATING A CLASS OF
UNDESIGNATED PREFERRED STOCK AND (IV) GIVES RETROACTIVE EFFECT TO A SUBSEQUENT
1-FOR-3.07459 REVERSE SPLIT OF THE SHARES OF COMMON STOCK, TO BE EFFECTED BEFORE
THE COMPLETION OF THE OFFERING. THIS PROSPECTUS CONTAINS CERTAIN FORWARD-LOOKING
STATEMENTS WHICH INVOLVE RISKS AND UNCERTAINTIES. THE COMPANY'S ACTUAL RESULTS
COULD DIFFER MATERIALLY FROM THE RESULTS ANTICIPATED IN THOSE FORWARD-LOOKING
STATEMENTS AS A RESULT OF CERTAIN OF THE FACTORS SET FORTH IN THIS PROSPECTUS.
PROSPECTIVE INVESTORS SHOULD CAREFULLY CONSIDER THE INFORMATION SET FORTH UNDER
THE HEADING "RISK FACTORS."
THE COMPANY
Scriptgen Pharmaceuticals, Inc. ("Scriptgen" or the "Company") utilizes its
proprietary high throughput technologies to enable and accelerate the discovery
of innovative small molecule drugs. Scriptgen's technology platform allows the
Company and its collaborators to exploit the opportunities afforded by advances
in genomics and combinatorial chemistry, and opens new avenues of drug
discovery. The Company's technology platform identifies and validates novel gene
targets for therapeutic intervention, and then uses novel assay systems to
rapidly screen compounds against those targets, even before the gene targets'
characteristics or functions are well understood. The Company believes that the
application of its technologies addresses many of the limitations associated
with traditional drug discovery and provides substantial cost savings
opportunities. The Company commercializes its technology platform through (i)
collaborations with pharmaceutical and technology companies and (ii) the
Company's internal development program.
The Company's core technologies include GATE (Genetics Assisted Target
Evaluation), a family of high throughput target identification and validation
systems, and ATLAS (Any Target Ligand Affinity Screen) and SCAN (Screen for
Compounds with Affinity for Nucleic Acids), the high speed, solution based,
assay systems which identify compounds that bind to virtually any protein or
structured RNA, respectively. GATE measures the effects of transiently removing
a specific gene from a cell, and by reproducing conditions that closely resemble
drug mechanism of action, generates data more predictive of target behavior than
traditional methods. ATLAS and SCAN rapidly measure the affinity (strength) of
compounds that bind to targets even before the gene functions are well
understood, enabling the Company to work with targets that are unsuitable for
traditional high throughput screens. The Company believes ATLAS and SCAN
increase dramatically the number of targets and compounds that may be screened
in a given time period, and reduce to weeks what often requires months or years
of assay development time when using traditional high throughput functional
assays. The Company has used GATE to identify and validate novel infectious
disease targets, and has used ATLAS and SCAN to identify lead compounds, two of
which have progressed to pre-clinical development. ATLAS and SCAN are broadly
applicable to research in multiple therapeutic areas, and have demonstrated
utility in the areas of anti-infectives, oncology, cardiovascular, and
respiratory and immunologic disorders.
The Company's strategy is to maximize the commercial opportunities presented
by its technology platform and pipeline of drug candidates by entering into
multiple collaborations and retaining rights to independently develop certain
products. Scriptgen has collaborative agreements with pharmaceutical and
technology companies, and routinely evaluates opportunities to enter into
collaborations with other potential partners.
HOECHST MARION ROUSSEL. The Company is using its technology platform
to seek to identify new fungal targets and antifungal drug candidates in
a collaboration with Hoechst Marion Roussel ("HMR"). The Company expects
to have received an aggregate of $9 million from HMR under the
collaboration by the completion of the Offering, of which $6 million
will be technology access fees and $3 million will be proceeds from the
sale of Common Stock to HMR concurrent with the Offering. The Company
will also receive research and development payments, and will
3
<PAGE>
receive payments when and if certain milestones are achieved and
royalties on the sales of any new drug resulting from the collaboration.
BIOCHEM PHARMA INC. Scriptgen is using its technology platform to
identify drug candidates which are (i) active against the Hepatitis B
virus (the "HBV Program") and (ii) which act as small molecule mimics of
therapeutic proteins (the "Dimerescent Program"). Scriptgen will be
responsible for all aspects of drug discovery. BioChem Pharma Inc.
(together with its wholly owned subsidiary, BioChem Pharma Holdings
Inc., "BioChem") will be responsible for pre-clinical and clinical
development, and will retain worldwide commercialization rights. The
Company will receive milestone payments when and if BioChem exercises
options on drug candidates in the Dimerescent Program. The companies
will share any profits generated by the HBV Program or the Dimerescent
Program according to the terms of the agreement. In addition, BioChem
acquired $20 million of preferred stock of Scriptgen and a warrant to
purchase shares of Common Stock.
ELI LILLY AND COMPANY. Scriptgen is using ATLAS to identify novel
drug candidates active against two targets selected by Eli Lilly and
Company ("Eli Lilly"). Two additional targets may be selected by Eli
Lilly for high throughput screening in 1998, assuming certain milestones
are met. In October 1997, Eli Lilly and the Company expanded the scope
of the collaboration to screen additional compounds from the Company's
compound library. Under the agreement with Eli Lilly, Scriptgen receives
research and development payments and will receive payments when and if
certain milestones are achieved and royalties on the sales of any new
drug resulting from the collaboration.
HOFFMANN-LA ROCHE INC. The Company is using ATLAS to identify drug
candidates against a cancer-related target identified by Hoffmann-La
Roche Inc. ("Roche"). Under the agreement with Roche, Scriptgen receives
research and development payments and will receive payments when and if
certain milestones are achieved and royalties on the sales of any new
drug resulting from the collaboration.
MONSANTO COMPANY. Scriptgen is using its technology platform in a
collaboration with Monsanto Company ("Monsanto") to identify and
validate novel fungal targets from plant pathogens and to identify novel
antifungal agents. Under the agreement with Monsanto, Scriptgen receives
research and development payments and will receive payments when and if
certain milestones are achieved and royalties on the sales of any
product developed by Monsanto for IN PLANTA applications.
Scriptgen's internal development efforts have initially focused on
anti-infectives, where it has identified novel cidal targets and lead compounds
in the fungal, bacterial and viral areas. The Company has also completed
feasibility studies on novel targets in a number of other areas, including
oncology and immunologic disorders, and in several cases has identified drug
candidates. The Company believes that the anti-infective market is attractive as
an initial field of focus because of the large market potential, the particular
suitability of the Company's proprietary technology and the relatively low
technical and regulatory hurdles for this class of diseases. Scriptgen has
progressed rapidly in the anti-infective area and has four lead compounds in
development as well as a number of other potential drug candidates under review.
Scriptgen has identified two small molecule lead compounds which demonstrate
oral activity in animal models against a broad spectrum of fungal pathogens,
including certain strains resistant to current drugs. The Company has also
identified a small molecule lead compound which shows broad spectrum
antibacterial efficacy against drug resistant strains and is currently in animal
studies and one lead compound that has shown strong antiviral activity IN VITRO
against Hepatitis B virus. The Company is evaluating a number of other potential
development candidates.
The Company has also applied its drug discovery technologies to develop
novel coalescent compounds, which are small molecules connected by a molecular
tether that bind to both active and neutral sites. Scriptgen believes such
compounds may lead to more specific and potent therapeutics and allow for the
discovery of small molecule mimics of therapeutic proteins.
Scriptgen Pharmaceuticals, Inc. was incorporated in Delaware on September
17, 1992. The Company maintains its principal executive offices at 200 Boston
Avenue, Medford, Massachusetts 02155. The Company's telephone number is (781)
393-8000.
4
<PAGE>
THE OFFERING
<TABLE>
<S> <C>
Common Stock offered by the Company......................... 3,000,000 shares
Common Stock to be outstanding after the Offering........... 11,669,189 shares (1)(2)
Use of proceeds............................................. To fund research and
development and for general
corporate purposes, including
working capital.
Nasdaq National Market Symbol............................... SCRP
</TABLE>
- --------------
(1) Includes an aggregate of 250,000 shares of Common Stock (based on an assumed
initial public offering price of $12.00 per share) to be issued to HMR in
the Private Placement. Excludes: (i) 790,581 shares of Common Stock issuable
upon exercise of outstanding options at a weighted average exercise price of
$1.75 per share, (ii) 464,537 shares of Common Stock issuable at an exercise
price of $13.47 per share upon exercise of an outstanding warrant (the
"BioChem Warrant"), (iii) 49,763 shares of Common Stock issuable upon
exercise of an outstanding warrant at an exercise price of $3.07 per share
and 32,525 shares of Common Stock issuable upon exercise of an outstanding
warrant at an exercise price of $5.53 per share and (iv) 1,950,000 shares of
Common Stock reserved for issuance upon exercise of options or in connection
with other awards that may be granted in the future under the Company's 1997
Equity Incentive Plan (the "1997 Plan") and Non-Employee Directors Stock
Plan (the "Directors' Plan"). See "Certain Transactions--BioChem Offering,"
"Management--Employment Agreements," "--Stock Options," "--Employee Benefit
Plans--1997 Equity Incentive Plan," "--Non-Employee Directors Stock Plan"
and "--1994 Stock Option Plan," "Description of Capital Stock--Warrants" and
Notes 6, 8 and 10 of Notes to Financial Statements.
(2) In the event that the initial public offering price is less than $10.76 per
share, the Company will be required to issue to BioChem, for no additional
consideration, the number of additional shares of Common Stock equal to the
amount by which (a) 19,993,640 divided by the initial public offering price,
exceeds (b) 1,858,145. See "Certain Transactions--BioChem Offering."
------------------------
"SCRIPTGEN" AND THE SCRIPTGEN LOGO AS IT APPEARS ON THE COVER PAGE OF THIS
PROSPECTUS ARE TRADEMARKS OF THE COMPANY FOR WHICH REGISTRATION APPLICATIONS
HAVE BEEN FILED WITH THE UNITED STATES PATENT AND TRADEMARK OFFICE. ALL OTHER
TRADEMARKS AND TRADENAMES REFERENCED IN THIS PROSPECTUS ARE THE PROPERTY OF
THEIR RESPECTIVE OWNERS.
5
<PAGE>
SUMMARY FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
PERIOD FROM YEAR ENDED NINE MONTHS ENDED
SEPTEMBER 17, 1992 DECEMBER 31, SEPTEMBER 30,
TO ------------------------------------------ ------------------------
DECEMBER 31, 1992 1993 1994 1995 1996 1996 1997
------------------- --------- --------- --------- --------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue:
Collaborative agreements.............. -- -- -- -- $ 975 $ 975 $ 467
SBIR grants........................... -- -- -- $ 260 232 222 138
------ --------- --------- --------- --------- ----------- -----------
-- -- -- 260 1,207 1,197 605
------ --------- --------- --------- --------- ----------- -----------
Cost of revenue:
Collaborative agreements.............. -- -- -- -- 174 174 124
SBIR grants........................... -- -- -- 260 232 222 138
------ --------- --------- --------- --------- ----------- -----------
-- -- -- 260 406 396 261
------ --------- --------- --------- --------- ----------- -----------
Gross profit.......................... -- -- -- -- 801 801 344
Operating expenses:
Research and development.............. $ 455 $ 1,833 $ 3,157 3,152 3,958 2,757 4,273
General and administrative............ 94 652 998 1,299 906 669 831
------ --------- --------- --------- --------- ----------- -----------
549 2,485 4,155 4,451 4,865 3,427 5,104
------ --------- --------- --------- --------- ----------- -----------
Loss from operations.................. (549) (2,485) (4,155) (4,451) (4,064) (2,626) (4,761)
Other income (expense), net 1 (62) (146) (128) 19 12 (15)
------ --------- --------- --------- --------- ----------- -----------
Net loss.............................. $ (549) $ (2,547) $ (4,301) $ (4,579) $ (4,044) $ (2,614) $ (4,775)
------ --------- --------- --------- --------- ----------- -----------
------ --------- --------- --------- --------- ----------- -----------
Net loss per share (1).................. $ (0.21) $ (0.98) $ (1.25) $ (1.28) $ (1.20) $ (0.77) $ (1.35)
------ --------- --------- --------- --------- ----------- -----------
------ --------- --------- --------- --------- ----------- -----------
Weighted average common and common
equivalent shares outstanding (1)..... 2,556 2,607 3,435 3,591 3,360 3,374 3,528
------ --------- --------- --------- --------- ----------- -----------
------ --------- --------- --------- --------- ----------- -----------
Pro forma net loss per share (unaudited)
(1)................................... $ (0.49) $ (0.53)
--------- -----------
--------- -----------
Pro forma weighted average common and
common equivalent shares outstanding
(unaudited) (1)....................... 8,186 9,069
--------- -----------
--------- -----------
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 30, 1997
----------------------------------------
<S> <C> <C> <C>
PRO FORMA
ACTUAL PRO FORMA(2) AS ADJUSTED(3)
--------- ------------- --------------
BALANCE SHEET DATA:
Cash and cash equivalents............................................... $ 858 $ 20,858 $ 56,288
Working capital......................................................... (1,200) 18,800 54,230
Total assets............................................................ 2,478 22,478 57,908
Noncurrent portion of capital lease obligations......................... 501 501 501
Redeemable convertible preferred stock.................................. 20,279 -- --
Accumulated deficit..................................................... (21,169) (23,436) (23,436)
Total stockholders' equity (deficit).................................... (20,744) 19,535 54,965
</TABLE>
- --------------
(1) See Note 2 of Notes to Financial Statements for information concerning the
computation of net loss per share and shares used in computing net loss per
share.
(2) Pro forma to give effect to the issuance of Series D Preferred Stock
(convertible into 1,858,145 shares of Common Stock) to BioChem for
consideration of $20 million (the "BioChem Offering") and the application of
the proceeds therefrom, the value of the BioChem Warrant, the retirement of
358,748 shares of treasury stock and the conversion of the Series A, B, C
and D Preferred Stock into shares of Common Stock upon the closing of the
Offering. See "Use of Proceeds" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Liquidity and Capital
Resources."
(3) Adjusted to give effect to: (i) the sale of 3,000,000 shares of Common Stock
offered by the Company hereby (at an assumed initial public offering price
of $12.00 per share) and the application of the net proceeds therefrom and
(ii) the sale of 250,000 shares of Common Stock (at an assumed offering
price of $12.00 per share) to HMR in the Private Placement and the
application of the net proceeds therefrom. See "Use of Proceeds."
6
<PAGE>
RISK FACTORS
AN INVESTMENT IN THE SHARES OF COMMON STOCK OFFERED BY THIS PROSPECTUS
INVOLVES A HIGH DEGREE OF RISK. IN ADDITION TO THE OTHER INFORMATION IN THIS
PROSPECTUS, THE FOLLOWING RISK FACTORS SHOULD BE CONSIDERED CAREFULLY IN
EVALUATING AN INVESTMENT IN THE COMPANY. THIS PROSPECTUS CONTAINS CERTAIN
FORWARD-LOOKING STATEMENTS WHICH INVOLVE RISKS AND UNCERTAINTIES. THE COMPANY'S
ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THE RESULTS ANTICIPATED IN THESE
FORWARD-LOOKING STATEMENTS AS A RESULT OF CERTAIN OF THE FACTORS SET FORTH IN
THE FOLLOWING RISK FACTORS AND ELSEWHERE IN THIS PROSPECTUS.
HISTORY OF LOSSES AND EXPECTATION OF FUTURE LOSSES; UNCERTAINTY OF FUTURE
PROFITABILITY
At September 30, 1997, the Company had incurred an accumulated deficit of
approximately $21.2 million. Losses have resulted principally from costs
incurred in research and development activities related to the Company's efforts
to develop and commercialize its proprietary technology and to develop drug
candidates and from the associated administrative costs. The Company expects to
incur significant additional operating losses over the next several years and
expects cumulative losses to increase substantially due to expanded research and
development efforts, pre-clinical and clinical trials and the possible
development of manufacturing, marketing and sales capabilities. For the
foreseeable future, the Company expects that its revenues will be limited to
payments received under its drug development collaborations that it has
established or will establish (net of royalties required to be paid by the
Company with respect to such payments) and small business innovation research
("SBIR") grants. There can be no assurance, however, that the Company will be
able to establish any additional collaborative relationships on terms acceptable
to the Company or maintain in effect its current collaborative agreements. The
Company's ability to achieve significant revenue or become profitable is
dependent on the success of its collaborative arrangements and its ability to
continue to commercialize its technology platform and gain industry acceptance
of its services and technologies, to enter into additional collaborations for
the development of drugs, to identify lead compounds and successfully develop
drug candidates resulting from its own internal development programs, to obtain
patent protection for its technology and drug candidates, to obtain regulatory
approvals for drug candidates and to arrange for the manufacture and
commercialization of any drugs resulting from its operations. The Company will
not receive revenues or royalties from commercial drug sales for a significant
number of years, if at all. Failure to receive significant revenues or achieve
profitable operations would impair the Company's ability to sustain operations.
There can be no assurance that the Company will ever successfully identify,
develop, commercialize, patent, manufacture or arrange for the manufacture of,
or market or arrange for the marketing of, any products, obtain required
regulatory approvals or achieve profitability. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations."
DEPENDENCE UPON PRESENT AND FUTURE COLLABORATIVE ARRANGEMENTS
The Company's strategy for the development and commercialization of its
technology platform and drug candidates requires the Company to enter into
various collaborative arrangements. To date, substantially all revenues received
by the Company have been from its drug discovery collaborations and the Company
expects that substantially all revenues for the foreseeable future will be
limited to payments received under such collaborations and any future
collaborations the Company may enter into. Because pharmaceutical and
biotechnology companies engaged in drug discovery activities have historically
conducted drug discovery activities, including target identification and
validation and compound screening, through their own internal research
departments, these companies must be convinced that the Company's technologies
justify entering into collaborative agreements with the Company. The Company's
ability to succeed will be dependent, in part, upon the willingness of potential
collaborators to incorporate the Company's technologies into their own drug
discovery programs. There can be no assurance that the Company will be able to
negotiate additional collaborative agreements in the future on acceptable terms,
if at all, that such current or future collaborative agreements will be
successful and provide the Company
7
<PAGE>
with expected benefits, or that current or future collaborators will not pursue
or develop alternative technologies either on their own or in collaboration with
others, including the Company's competitors, as a means for identifying lead
compounds or targets. To the extent the Company chooses not to or is unable to
enter into such agreements, or to the extent the Company is unable to maintain
in effect its current collaborative agreements, it will require substantially
greater capital to undertake the research, development and commercialization of
its technologies and drug development program at its own expense. In the absence
of such collaborative agreements, the Company may be required to curtail its
research and development activities and operations to a significant extent. In
November 1996, one of the Company's collaborative partners elected not to
continue developing a program which was the subject of a collaborative agreement
with the Company, which election the Company believes was unrelated to the
Company's performance of its obligations under such arrangement.
Under the Company's current collaborative agreements, the Company has the
opportunity to receive payments upon the achievement by its collaborators of
certain drug development milestones and royalties on sales of drugs covered
under such arrangements. As a result, the Company's receipt of revenues (whether
in the form of milestone payments or royalties on sales) under the collaborative
agreements is for the most part dependent upon the decisions made by, and the
manufacturing and marketing resources of, its collaborative partners. The
Company's collaborative partners are not obligated to develop or commercialize
any drug resulting from the collaborative agreements. Development and
commercialization of drug candidates will therefore depend not only on the
achievement of research objectives by the Company and its collaborators, which
cannot be assured, but also on each collaborator's own financial, competitive,
marketing and strategic considerations, all of which are outside the Company's
control. Such strategic considerations may include the relative advantages of
alternative drugs being marketed or developed by others, including relevant
patent and proprietary positions. There can be no assurance that the interests
and motivations of the Company's collaborators are, or will remain, aligned with
those of the Company, that current or future collaborators will not pursue
alternative technology in preference to that of the Company either on their own
or in collaboration with others, including the Company's competitors, or that
such collaborators will successfully perform their development, regulatory,
compliance, manufacturing or marketing functions. In addition, there can be no
assurance that any product will be developed and commercialized as a result of
such collaborations, that any such development or commercialization would be
successful or that disputes will not arise over the application of payment
provisions for drug candidates. Failure to successfully manage existing and
future collaborative relationships, maintain confidentiality among such
relationships or prevent the occurrence of such conflicts could lead to disputes
that result in, among other things, a significant strain on management
resources, legal claims involving significant time and expense and loss of
reputation, a loss of capital or a loss of collaborators, any of which could
have a material adverse effect on the Company's business, operating results and
financial condition.
EARLY STAGE OF DRUG DEVELOPMENT; ABSENCE OF DEVELOPED PRODUCTS
Since inception, the Company has received no revenues from drug sales. The
Company's internal drug development programs and the programs on which it is
working with its collaborative partners are at an early stage, and the Company
does not expect that any drugs resulting from its internal development efforts,
or from the joint efforts of the Company and its collaborative partners, will be
commercially available for a significant number of years, if at all. The
Company's present drug candidates, and any future drug candidates developed by
the Company or developed jointly by the Company and its collaborative partners
will require significant additional research and development efforts to
establish safety and efficacy, including extensive pre-clinical (animal and IN
VITRO data) and clinical testing and regulatory approval, prior to commercial
sale. None of the Company's drug candidates have advanced to any phase of
clinical trials, and only two of the Company's drug candidates have advanced to
pre-clinical development. There can be no assurance that the approaches of the
Company or its collaborative partners to drug discovery will be effective or
will result in the development of any drug. The Company's present and potential
drug candidates or other drug candidates resulting from the joint efforts of the
Company and its
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collaborative partners, will be subject to the risks of failure inherent in the
development of pharmaceutical products based on new technologies. These risks
include the possibilities that any or all of the Company's drug candidates or
such other drug candidates will be found to be unsafe, ineffective or toxic or
otherwise fail to meet applicable regulatory standards or receive necessary
regulatory clearances, that these drug candidates, if safe and effective, will
be difficult to develop into commercially viable drugs or to manufacture on a
large scale or will be uneconomical to market, that proprietary rights of third
parties will preclude the Company or its collaborative partners from marketing
such drugs, or that third parties will market superior or equivalent drugs. The
failure to develop safe, commercially viable drugs would have a material adverse
effect on the Company's business, operating results and financial condition.
NEW AND UNCERTAIN TECHNOLOGY
The Company's drug discovery technology platform and ongoing research and
development programs incorporate new and rapidly evolving approaches to the
identification and validation of novel targets and the identification of lead
compounds. Elements of the Company's technology platform are utilized by the
Company in all of its collaborative arrangements as well as in its own internal
development program. As the Company's technology platform is used, it is
possible that previously unanticipated limitations or defects may emerge. There
can be no assurance that unforseen complications will not arise as the Company's
technologies are utilized in the drug discovery process that could materially
delay or limit their use in connection with the drug development programs of the
Company or its collaborative partners, result in the termination of the
collaborative agreements, or prevent the technologies from being utilized at the
quality and capacity levels required for success. In addition, there can be no
assurance that expenditures for research and development will lead to the
development of useful technologies. Development of new drugs is highly
uncertain, and no assurance can be given that the Company's drug discovery
technologies will be used successfully in the development of drug candidates or
result in any commercially successful drug.
COMPETITION AND THE RISK OF OBSOLESCENCE OF TECHNOLOGY
Competition among drug discovery companies, and pharmaceutical and
biotechnology companies which are involved in drug discovery, is intense.
Because the Company's technology platform incorporates a number of different
technologies, the Company competes in many areas, including target
identification and validation, assay development and high throughput screening.
The Company competes directly against other drug discovery companies, the
research departments of pharmaceutical and biotechnology companies and other
commercial enterprises, government agencies, and numerous academic and research
institutions. Such companies and other entities are conducting research in
various areas which constitute portions of the Company's technology platform,
either on their own or in collaboration with others. There can be no assurance
that drug discovery companies which currently compete with the Company in
specific areas will not merge or enter into joint ventures or other alliances
with one or more other such companies and become substantial multi-point
competitors or that the Company's collaborators will not assemble their own
competing drug discovery technologies. Genomics and combinatorial chemistry
companies, among others, may also expand their business to include compound
screening or screen development, either alone or pursuant to alliances with
others. The Company anticipates that it will face increased competition in the
future as new companies enter the market and advanced technologies, including
more sophisticated information technologies, become available. The Company's
drug discovery technologies, in particular GATE, ATLAS and SCAN, may be rendered
obsolete or uneconomical by advances in existing technological approaches or the
development of different approaches by one or more of the Company's current or
future competitors. In particular, the Company's technology faces competition
from companies engaged in gene sequencing, functional genomics and differential
gene expression technology in the area of target validation, and companies
engaged in high throughput screening. Many of the Company's competitors have
greater financial and personnel resources, and more experience in research and
development, than the Company. There can be no assurance that the Company's
competitors will not succeed in
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developing technologies and drugs that are more effective or less costly than
any which are being developed by the Company or which would render the Company's
technology and any future drugs obsolete and noncompetitive.
In addition, some of the Company's competitors have greater experience than
the Company in conducting pre-clinical and clinical trials and obtaining U.S.
Food and Drug Administration ("FDA") and other regulatory approvals.
Accordingly, the Company's competitors may succeed in obtaining FDA or other
regulatory approvals for competing drug candidates more rapidly than the
Company. Companies that complete clinical trials, obtain required regulatory
agency approvals and commence commercial sale of their drugs, before their
competitors, may achieve a significant competitive advantage, including certain
patent and FDA marketing exclusivity rights that would delay the Company's
ability to market certain products. There can be no assurance that drugs, if
any, resulting from the Company's internal development efforts or the joint
efforts of the Company and its collaborators will be able to compete
successfully with competitors' existing products or products under development
or that they will obtain regulatory approval in the United States or elsewhere.
ADDITIONAL FINANCING REQUIREMENTS; UNCERTAINTY OF AVAILABLE FUNDING
The Company will require substantial additional funds for the further
development of its drug discovery technologies, its internal development
programs, for operating expenses, for pursuing regulatory approvals, for the
possible development of manufacturing, marketing and sales capabilities and for
prosecuting and defending its intellectual property rights before it can expect
to realize significant revenues from commercial sales, if any. The Company
believes that the net proceeds of the Offering, the Private Placement and the
BioChem Offering, together with revenues from its collaborative agreements, its
existing capital resources, SBIR grants and interest income will be sufficient
to fund its operating expenses and capital requirements as currently planned
through the end of 2000. However, there can be no assurance that such funds will
be sufficient to fund its operating expenses and capital requirements during
such period. The Company's actual cash requirements may vary materially from
those now planned and will depend upon numerous factors, including the ability
of the Company to enter into additional collaborative arrangements, the
achievement of milestones under the Company's collaborative arrangements on a
timely basis or at all, changes in the Company's existing collaborative
arrangements, the results of the Company's internal development programs, the
timing and results of pre-clinical and clinical trials, the timing and costs of
obtaining regulatory approvals, the timing and level of the expansion of the
Company's facilities, the level of resources, if any, that the Company commits
to the development of manufacturing, marketing and sales capabilities, the
technological advances and activities of competitors and other factors.
Thereafter, the Company will need to raise substantial additional capital to
fund its operations. The Company intends to seek such additional funding through
public or private financing or collaborative or other arrangements with
collaborative partners. If additional funds are raised by issuing equity
securities, further dilution to existing stockholders may result and future
investors may be granted rights superior to those of existing stockholders.
There can be no assurance, however, that additional financing will be available
from any of these sources or, if available, will be available on acceptable or
affordable terms. If adequate funds are not available, the Company may be
required to delay, reduce the scope of or eliminate one or more of its research
and development programs or to obtain funds by entering into arrangements with
collaborative partners or others that require the Company to issue additional
equity securities or to relinquish rights to certain technologies or drug
candidates that the Company would not otherwise issue or relinquish in order to
continue independent operations. See "Use of Proceeds" and "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
RISK OF EXPANDING OPERATIONS AND MANAGEMENT OF GROWTH
The Company has recently experienced, and expects to continue to experience,
significant growth in the number of its employees and the scope of its
operations. This growth has placed, and may continue to
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place, a significant strain on the Company's management, operations and systems.
The Company's ability to manage such growth effectively will depend upon
attracting, hiring and retaining skilled employees. In addition, in order to
increase capacity to remain competitive and satisfy the needs of current and
future collaborative partners, the Company will be required in the near future
to obtain additional office and laboratory space, capital equipment and
resources. There can be no assurance that the Company will be able to manage its
growth, and the Company's inability to manage growth effectively could have a
material adverse effect on the Company's business, operating results and
financial condition. See "Business-- Employees" and "--Properties."
UNCERTAINTY OF PATENTS AND PROPRIETARY RIGHTS
The Company's success will depend in part on its ability to obtain U.S. and
foreign patent protection for its drug candidates and the components of its
technology platform, preserve its trade secrets and operate without infringing
the proprietary rights of third parties. Because of the length of time and
expense associated with bringing new drug candidates through the development and
regulatory approval process to the marketplace, drug discovery companies have
traditionally placed considerable importance on obtaining patent and trade
secret protection for significant new technologies, products and processes. The
Company's policy is to make diligent efforts to protect its screening
technologies, targets, compounds, and certain other technology by, among other
things, filing, or causing to be filed on its behalf, patent applications in the
United States Patent and Trademark Office ("USPTO"), and elsewhere where the
Company deems appropriate and cost effective. There can be no assurance that
patents will be granted with respect to any of the Company's or its licensors'
patent applications which are pending or may be filed in the future. Further,
there can be no assurance that any rights the Company may have under issued
patents will provide the Company with significant protection against competitive
products or otherwise be commercially viable. Legal standards relating to the
validity of patents covering pharmaceutical and biotechnological inventions and
the scope of claims made under such patents are still developing, and thus there
is no consistent policy in this regard. The patent position of a drug discovery
company such as Scriptgen is highly uncertain and involves complex legal and
factual questions. There can be no assurance that any existing or future patents
issued to, or licensed by, the Company will not subsequently be challenged,
infringed upon, invalidated or circumvented by others. In addition, patents may
have been granted, or may be granted, to others covering processes or products
that are necessary or useful to the development of the Company's technologies,
targets and compounds. If any of the Company's technologies, targets or
compounds are found to infringe upon the patents or other intellectual property
of others, the Company's ability to develop and commercialize its technologies,
targets and compounds could be severely restricted or prohibited. In such event,
the Company may be required to obtain licenses from third parties to utilize
their patents or other proprietary rights. There can be no assurance that the
Company will be able to obtain such licenses on acceptable terms, or at all.
There is significant litigation in the pharmaceutical and biotechnology industry
regarding patents and other proprietary rights. If the Company becomes involved
in litigation regarding its proprietary rights or the proprietary rights of
others, the Company could incur substantial costs in defending infringement
claims, obtaining licenses, engaging in interference and opposition proceedings
or other challenges to its patent rights or proprietary rights made by third
parties, or in bringing such proceedings or enforcing any patent rights against
third parties. The Company's inability to obtain necessary licenses or its
involvement in proceedings concerning patent rights could have a material
adverse effect on the business, operating results and financial condition of the
Company.
The Company has filed a provisional patent application claiming certain
aspects of its GATE technology. The Company is aware that another party has
applied for a patent for certain technologies which may overlap with or dominate
parts of the Company's GATE technology. The Company is in negotiations with such
party to acquire a license of such party's rights covered by its patent
application. If the Company determines to seek to obtain such license, there can
be no assurance that the Company will
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be able to obtain such a license on terms favorable to the Company, if at all.
See "Business--Patents and Proprietary Technology."
In addition to patent protection, the Company relies on trade secrets,
know-how and technological advances which it seeks to protect, in part, by
confidentiality agreements with its collaborative partners, employees, advisors
and consultants. There can be no assurance that these confidentiality agreements
will not be breached, that the Company would have adequate remedies for any such
breach, or that the Company's trade secrets, know-how and technological advances
will not otherwise become known or be independently discovered by others. See
"Business--Patents and Proprietary Technology."
DEPENDENCE UPON ACCESS TO CERTAIN MATERIALS AND INFORMATION
The Company obtains compounds and other test material, related clinical and
other biological information and animal models through collaboration with
commercial organizations and academic institutions. Use of the Company's
technology platform in connection with its collaborative arrangements and
internal development programs requires access to such materials and information
and there is substantial competition for such materials and information. There
can be no assurance that the Company will continue to be able to obtain access
to such materials and information upon terms acceptable to the Company, if at
all. Any material lack of availability of such materials and information could
have a material adverse effect on the Company's ability to perform its
obligations under one or more of its collaborative agreements, which in turn
would have a material adverse effect on the Company's business, operating
results and financial condition.
DEPENDENCE ON KEY PERSONNEL
The Company is highly dependent upon the efforts of the members of its
management team, scientific advisory board and scientific staff. The loss of the
services of one or more of these individuals might impede the Company's
development of its technology and the achievement of its business objectives.
Because of the specialized scientific nature of the Company's business, the
Company is highly dependent upon its ability to attract and retain qualified
scientific and technical personnel. There is intense competition among drug
discovery companies, pharmaceutical companies, biotechnology companies and
universities and other research institutions for qualified personnel in the
areas of the Company's activities. There can be no assurance that the Company
will be able to continue to attract and retain the qualified personnel necessary
for the development of its business. Loss of the services of, or failure to
recruit, key scientific and technical personnel could adversely affect the
Company's business, operating results and financial condition. See
"Business--Employees" and "Management--Executive Officers, Directors and Key
Employees."
SIGNIFICANT FLUCTUATIONS IN QUARTERLY AND ANNUAL RESULTS
To date, a majority of all revenue earned by the Company has been from its
collaborative agreements, and the Company expects that substantially all revenue
for the foreseeable future will result from such collaborations and any future
collaborations the Company may enter into. The timing of any fees or milestone
or other payments under such collaborations is expected to vary greatly from
quarter to quarter, depending on numerous factors. Operating results may
therefore vary substantially from quarter to quarter and will not necessarily be
indicative of results in subsequent periods. In addition, over the next several
years, the Company expects to incur non-cash compensation charges each quarter
resulting from the amortization of approximately $2.7 million in unearned
compensation recorded on the Company's balance sheet as of September 30, 1997.
Furthermore, the Company expects to incur a non-cash charge in the fourth
quarter of 1997 resulting from the issuance of the BioChem Warrant. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and Notes 6 and 10 of Notes to Financial Statements.
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LACK OF MANUFACTURING, MARKETING AND SALES CAPABILITY AND EXPERIENCE
The Company has not invested in the development of manufacturing, marketing
or sales capabilities. The Company has no experience in, and currently lacks the
facilities and personnel to engage in, the manufacture of products in accordance
with Good Manufacturing Practices ("GMP") as prescribed by the FDA or to produce
an adequate supply of compounds to meet future requirements for clinical trials.
If the Company is unable to contract for or develop manufacturing capabilities
on acceptable terms, the Company's ability to conduct pre-clinical and clinical
trials with the Company's drug candidates, will be adversely affected, resulting
in delays in the submission of drug candidates for regulatory approvals and in
the initiation of new development programs, which in turn could materially
impair the Company's competitive position and the possibility of achieving
profitability.
The Company has no experience in marketing drugs. The Company will likely
seek to collaborate with a third party to market any drugs the Company may
develop, although in certain cases it may seek to market and sell such drugs
directly. If the Company seeks to collaborate with a third party, there can be
no assurance that a collaborative arrangement would be reached on acceptable
terms, if at all. If the Company seeks to market and sell such drugs directly,
the Company will need to hire additional personnel skilled in marketing and
sales if it develops any drug with commercial potential. There can be no
assurance that the Company will be able to obtain candidates, or establish
third-party relationships to provide, any or all of these capabilities.
UNCERTAINTY ASSOCIATED WITH PRE-CLINICAL AND CLINICAL TESTING
Before obtaining regulatory approvals for the commercial sale of any of the
Company's potential drugs, the drug candidates will be subject to extensive
pre-clinical and clinical trials to demonstrate their safety and efficacy in
humans. The Company will likely be dependent on third parties to conduct
clinical trials for its internally developed drug candidates. In the event that
the Company is unable or otherwise determines not to enter into collaborative
arrangements with a third party to conduct clinical trials for its drug
candidates, the Company would need to recruit and retain the proper personnel to
manage such process. The Company has limited experience in pre-clinical
development and no experience in clinical trials, and no clinical trials have
been commenced with respect to any of the Company's potential drug candidates.
Furthermore, there can be no assurance that pre-clinical or clinical trials of
any present or future drug candidates will demonstrate the safety and efficacy
of such drug candidates at all or to the extent necessary to obtain regulatory
approvals. Companies in the biotechnology industry have suffered significant
setbacks in advanced clinical trials, even after demonstrating promising results
in earlier trials. The failure to adequately demonstrate the safety and efficacy
of a drug candidate under development could delay or prevent regulatory approval
of the drug candidate and could have a material adverse effect on the Company's
business, operating results and financial condition. See "Business--Government
Regulation."
IMPACT OF EXTENSIVE GOVERNMENT REGULATION
The FDA and comparable agencies in foreign countries impose substantial
requirements upon the introduction of pharmaceutical products through lengthy
and detailed pre-clinical, laboratory and clinical testing procedures, sampling
activities and other costly and time-consuming procedures to establish their
safety and efficacy. All of the Company's current and future drug candidates and
any drug candidates that result from the Company's collaborations will require
governmental approvals for commercialization, none of which have been obtained.
Pre-clinical and clinical trials and manufacturing of the Company's drug
candidates will be subject to the rigorous testing and approval processes of the
FDA and corresponding foreign regulatory authorities. Satisfaction of these
requirements typically takes a significant number of years and can vary
substantially based upon the type, complexity and novelty of the product. There
can be no assurance as to when the Company, independently or with its
collaborative partners, might first submit
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an investigational new drug application for FDA or other regulatory review.
Government regulation also affects the manufacturing and marketing of
pharmaceutical products.
The effect of government regulation may be to delay marketing of the
Company's potential drugs for a considerable or indefinite period of time,
impose costly procedural requirements upon the Company's activities and furnish
a competitive advantage to larger companies or companies more experienced in
regulatory affairs. Delays in obtaining governmental regulatory approval could
adversely affect the Company's marketing as well as the Company's ability to
generate significant revenues from commercial sales. There can be no assurance
that FDA or other regulatory approvals for any drug candidates developed by the
Company will be granted on a timely basis or at all. Moreover, if regulatory
approval of a drug candidate is granted, such approval will impose limitations
on the indicated use(s) for which such drug may be marketed. Even if initial
regulatory approvals for the Company's drug candidates are obtained, the
Company, its drugs and its manufacturing facilities, if any, would be subject to
continual review and periodic inspection, and later discovery of previously
unknown problems with a drug, manufacturer or facility may result in
restrictions on such drug or manufacturer, including withdrawal of the drug from
the market. In addition, the Company would be required to comply with FDA
requirements for labeling, advertising, record keeping, and reporting of adverse
experiences and other information. The regulatory standards are applied
stringently by the FDA and other regulatory authorities and failure to comply
can, among other things, result in fines, injunctions, denial or withdrawal of
regulatory approvals, product recalls or seizures, operating restrictions and
criminal prosecution.
As with many biotechnology and pharmaceutical companies, the Company is
subject to numerous environmental and safety laws and regulations. Any violation
of, and the cost of compliance with, these regulations could materially
adversely affect the Company's business, operating results and financial
condition. The Company is subject to periodic inspections and has not received
notice of any material violations of any environmental or safety law or
regulation. See "Business--Government Regulation."
USE OF HAZARDOUS MATERIALS
The research and development processes of the Company involve the controlled
use of hazardous materials, chemicals and various radioactive compounds,
including microbial organisms and other biological materials. The Company is
subject to federal, state and local laws and regulations governing the use,
manufacture, storage, handling and disposal of such materials and certain waste
products. The risk of accidental contamination or injury from these materials
cannot be completely eliminated. In the event of such an accident, the Company
could be held liable for any damages that result and any such liability could
exceed the resources of the Company. There can be no assurance that the Company
will not be required to incur significant costs to comply with environmental
laws and regulations in the future.
REIMBURSEMENT AND DRUG PRICING UNCERTAINTY
The successful commercialization of, and the interest of potential
collaborative partners to invest in, the Company's technology platform or drug
candidates will depend substantially on reimbursement of the costs of the
resulting drugs and related treatments at acceptable levels from government
authorities, private health insurers and other organizations, such as health
maintenance organizations ("HMOs"). There can be no assurance that reimbursement
in the United States or elsewhere will be available for any drugs the Company or
its collaborative partners may develop or, if available, will not be decreased
in the future, or that reimbursement amounts will not reduce the demand for, or
the price of, such drugs, thereby adversely affecting the Company's business. If
reimbursement is not available or is available only to limited levels, there can
be no assurance that the Company will be able to obtain collaborative partners
to manufacture and commercialize any future drugs, or would be able to obtain a
sufficient financial return on its own manufacture and commercialization of any
future drugs.
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Third-party payors are increasingly challenging the prices charged for
medical products and services. Also, the trend toward managed health care in the
United States and the concurrent growth of organizations such as HMOs, which can
control or significantly influence the purchase of health care services and
products, as well as legislative proposals to reform health care or reduce
government insurance programs, may result in lower prices for pharmaceutical
products. The cost containment measures that health care providers are
instituting, including practice protocols and guidelines and clinical pathways,
and the effect of any health care reform, could materially adversely affect the
Company's ability to sell its drugs, if any. Moreover, the Company is unable to
predict what additional legislation or regulation, if any, relating to the
health care industry or third-party coverage and reimbursement may be enacted in
the future or what effect such legislation or regulation would have on the
Company's business, operating results or financial condition.
POTENTIAL PRODUCT LIABILITY AND AVAILABILITY OF INSURANCE
The Company's business exposes it to potential liability risks that are
inherent in the testing, manufacturing and marketing of pharmaceutical products.
The use of the Company's drug candidates in clinical trials may expose the
Company to product liability claims and possible adverse publicity. These risks
will expand with respect to the Company's drug candidates, if any, that receive
regulatory approval for commercial sale. Product liability insurance for the
biotechnology industry is generally expensive, if available at all. The Company
does not have product liability insurance but intends to obtain such coverage if
and when its drug candidates are tested in clinical trials. However, such
coverage is becoming increasingly expensive and there can be no assurance that
the Company will be able to obtain insurance coverage at acceptable costs or in
a sufficient amount, if at all, or that a product liability claim would not
adversely affect the Company's business, operating results or financial
condition.
BROAD DISCRETION IN APPLICATION OF NET PROCEEDS
The net proceeds to the Company from the sale of the shares of Common Stock
offered hereby are estimated to be approximately $32,430,000 ($37,452,000 if the
Underwriters' over-allotment option is exercised in full) after deducting
underwriting discounts and commissions and estimated offering expenses. The
Company intends to use the net proceeds from the Offering and the Private
Placement, together with the proceeds from the BioChem Offering, principally for
research and development, working capital and general corporate purposes. The
Company's management and Board of Directors will have broad discretion with
respect to the application of such proceeds, and the amounts actually expended
by the Company for working capital purposes may vary significantly depending on
a number of factors. See "Use of Proceeds."
NO PRIOR PUBLIC MARKET; POSSIBLE VOLATILITY OF STOCK PRICE
Prior to the Offering, there has been no public market for the Common Stock.
The initial public offering price per share of the Common Stock will be
determined by negotiations between management of the Company and the managing
underwriters of the Offering. The Common Stock has been approved for quotation
on the Nasdaq National Market; however, there can be no assurance that an active
trading market will develop and be sustained subsequent to the Offering. The
market price of the Common Stock may fluctuate substantially because of a
variety of factors, including announcements concerning existing or future
collaborative arrangements, announcements of technological innovations or new
products by the Company, its collaborators or its competitors, disclosure of
results of clinical testing or regulatory proceedings, developments in patents
or other proprietary rights, quarterly fluctuations in results of operations,
changes in earnings estimates by analysts, sales of Common Stock by existing
holders, loss of key personnel and other factors. In addition, the stock market
in general, and the market for biotechnology and pharmaceutical stocks, has
historically been subject to extreme price and volume fluctuations. This
volatility has had a significant effect on the market prices of securities
issued by many companies for
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reasons unrelated to the operating performance of these companies. In the past,
following periods of volatility in the market price of a company's securities,
class action securities litigation has often been instituted against such a
company. Any such litigation instigated against the Company could result in
substantial costs and diversion of management's attention and resources, which
could have a material adverse effect on the Company's business, financial
condition and operating results. See "Underwriting."
IMMEDIATE AND SUBSTANTIAL DILUTION
The initial public offering price per share of Common Stock is substantially
higher than the net tangible book value per share of the Common Stock.
Purchasers of shares of Common Stock in the Offering will experience immediate
and substantial dilution of $7.29 in the pro forma net tangible book value per
share of Common Stock. To the extent outstanding warrants and options to
purchase Common Stock are exercised, there will be further dilution. See
"Dilution."
CONTROL BY CERTAIN PRINCIPAL STOCKHOLDERS
Following completion of the Offering, the Company's executive officers and
directors and their affiliated entities as a group (assuming that a
representative of BioChem is elected to the Board of Directors following
completion of the Offering as contemplated in a stockholders' agreement) will
beneficially own approximately 42.2% of the outstanding Common Stock. As a
result, Scriptgen's executive officers and directors as a group will have a
significant influence over the outcome of all matters submitted to a vote of the
Company's stockholders, including the election of directors and significant
corporate transactions. The shares beneficially owned by the Company's executive
officers, directors and affiliates, combined with the ability of the Board of
Directors to issue shares of preferred stock without further vote or action by
the stockholders, may have the effect of delaying, deferring or preventing a
change in control of the Company without further action by the stockholders.
BioChem has agreed with the Company that for a period of five years following
the closing of the BioChem Offering, BioChem will not own securities
representing more than 25% of the votes entitled to be cast generally for the
election of directors or to take, or to assist in taking, steps to effect a
change in control of the Company. See "Management," "Principal Stockholders" and
"Certain Transactions--BioChem Offering."
AVAILABILITY OF PREFERRED STOCK FOR ISSUANCE; ANTI-TAKEOVER PROVISIONS
The Company's Restated Certificate of Incorporation, as it is proposed to be
amended and restated (the "Restated Certificate"), authorizes the Board of
Directors of the Company, without stockholder approval, to issue additional
shares of Common Stock and to fix the rights, preferences and privileges of and
issue up to 4,000,000 shares of preferred stock with voting, conversion,
dividend and other rights and preferences that could adversely affect the voting
power or other rights of the holders of Common Stock. The issuance of preferred
stock, rights to purchase preferred stock or additional shares of Common Stock
may have the effect of delaying or preventing a change in control of the
Company. In addition, the possible issuance of preferred stock or additional
shares of Common Stock could discourage a proxy contest, make more difficult the
acquisition of a substantial block of the Common Stock or limit the price that
investors might be willing to pay for shares of the Common Stock. Further, the
Restated Certificate provides that any action required or permitted to be taken
by stockholders of the Company must be effected at a duly called annual or
special meeting of stockholders and may not be effected by any consent in
writing. Special meetings of the stockholders of the Company may be called only
by the Chairman of the Board of Directors, the President of the Company, or by a
majority of the Board of Directors pursuant to a resolution adopted by a
majority of the total number of authorized directors. These and other provisions
contained in the Restated Certificate and the Company's By-Laws, as well as
certain provisions of the Delaware General Corporation Law, could delay or make
more difficult certain types of transactions involving an actual or potential
change in control of the Company or its management (including transactions in
which stockholders might otherwise receive a premium for their shares over then
current
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market prices) and may limit the ability of stockholders to remove current
management of the Company or approve transactions that stockholders may deem to
be in their best interests and, therefore, could adversely affect the price of
the Common Stock. See "Description of Capital Stock--Preferred Stock" and
"--Delaware Anti-Takeover Law and Certain Charter Provisions."
SHARES ELIGIBLE FOR FUTURE SALE
Sales of substantial amounts of Common Stock in the public market or the
availability of such shares for future sale could adversely affect the market
price of the Common Stock and the Company's ability to raise additional capital
at a price favorable to the Company. Upon completion of the Offering and the
Private Placement, the Company will have 11,669,189 shares of Common Stock
outstanding (assuming no exercise of outstanding options or warrants). Of these
shares, the 3,000,000 shares sold pursuant to the Offering will be freely
tradable without restriction or further registration under the Securities Act of
1933, as amended (the "Securities Act"), except those shares acquired by
"affiliates" of the Company within the meaning of the Securities Act which will
be subject to the resale limitations of Rule 144 promulgated thereunder. The
remaining 8,669,189 shares (the "Restricted Shares") (including the 250,000
shares of Common Stock, based on an assumed initial public offering price of
$12.00 per share, sold in the Private Placement and the 1,858,145 shares sold
pursuant to the BioChem Offering) will be restricted securities within the
meaning of Rule 144 and may be sold only if registered under the Securities Act
or sold in accordance with an applicable exemption from registration, such as
Rule 144. The Company, its executive officers and directors and holders of
substantially all of the Common Stock have agreed not to offer, sell, contract
to sell, grant any option to sell, or otherwise dispose of, directly or
indirectly, any Common Stock or securities convertible into or exchangeable for
Common Stock or warrants or other rights to purchase Common Stock owned by them,
subject to certain limited exceptions, during the 180 days after the date of
this Prospectus (the "Lock-Up Period"), without the prior consent of SBC Warburg
Dillon Read Inc. However, SBC Warburg Dillon Read Inc. may, in its sole
discretion, and at any time without notice, release all or any portion of the
securities subject to lock-up agreements. Commencing at the end of the Lock-Up
Period, approximately 6,520,950 Restricted Shares will be eligible for sale in
the public market, subject to compliance with Rule 144. Of such shares,
approximately 5,158,797 will be eligible for sale, without limitation, pursuant
to Rule 144(k) or Rule 701 promulgated under the Securities Act, including
approximately 68,544 shares of Common Stock not subject to lock-up agreements
which will be eligible for sale following the Offering. The remaining
approximately 2,148,239 Restricted Shares will become eligible for sale at
various times over a period of six months from the end of the Lock-Up Period. In
addition, any shares issued upon exercise of the Company's outstanding warrants
may be eligible for sale pursuant to Rule 144 at various times following the
expiration of the Lock-Up Period. The Company has granted to certain
securityholders demand and/or piggyback registration rights covering an
aggregate of 8,113,670 shares of Common Stock. The Company expects to file a
Registration Statement on Form S-8 registering shares of Common Stock reserved
for issuance upon exercise of options granted under the Company's 1997 Plan,
Directors' Plan and 1994 Stock Option Plan following completion of the Offering.
See "Shares Eligible for Future Sale" and "Underwriting."
17
<PAGE>
USE OF PROCEEDS
The net proceeds to the Company from the sale of the 3,000,000 shares of
Common Stock offered by the Company hereby, at an assumed initial public
offering price of $12.00 per share, and after deducting underwriting discounts
and commissions and other estimated offering expenses, are estimated to be
approximately $32,430,000 ($37,452,000 if the Underwriters' over-allotment
option is exercised in full). The gross proceeds to the Company from the sale of
shares of Common Stock pursuant to the Private Placement are expected to be
$3,000,000.
The Company intends to use the net proceeds from the Offering, the Private
Placement and the BioChem Offering primarily to fund its research and
development activities and for general corporate purposes, including working
capital. The amounts actually expended by the Company for working capital
purposes will vary significantly depending upon a number of factors, including
the progress of the Company's collaborations and its internal development
efforts, the timing of the Company's leasing of additional laboratory and office
space, future revenue growth, if any, and the amount of cash, if any, generated
by the Company's operations. The Company's management will retain broad
discretion in the allocation of the net proceeds of the Offering, the Private
Placement and the BioChem Offering. See "Risk Factors--Broad Discretion in
Application of Net Proceeds."
Pending such uses, the Company intends to invest the net proceeds in
short-term, investment grade, interest-bearing securities.
DIVIDEND POLICY
The Company has never declared or paid any cash dividends on its Common
Stock. The Company currently anticipates that any future earnings will be
retained by the Company for the development and operations of its business.
Accordingly, the Company does not anticipate paying cash dividends on the Common
Stock in the foreseeable future.
18
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company (i) as of
September 30, 1997, (ii) pro forma to give effect to the issuance of the shares
of Series D Preferred Stock and the value of the BioChem Warrant, the retirement
of 358,748 shares of treasury stock, the conversion of the Series A Preferred
Stock, Series B Preferred Stock, Series C Preferred Stock and Series D Preferred
Stock into shares of Common Stock and the amendment of the Company's Restated
Certificate of Incorporation and (iii) pro forma as adjusted to reflect the sale
by the Company of the 3,000,000 shares of Common Stock offered hereby and the
250,000 shares of Common Stock offered pursuant to the Private Placement
(assuming an initial public offering price of $12.00 per share). See
"Description of Capital Stock." The following table should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the Financial Statements and Notes thereto
included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30, 1997
-----------------------------------------
<S> <C> <C> <C>
PRO FORMA
AS
ACTUAL PRO FORMA ADJUSTED(2)(3)
---------- ----------- ----------------
(IN THOUSANDS)
Capital lease obligations, less current portion (1).................... $ 501 $ 501 $ 501
Redeemable convertible preferred stock, $0.01 par value; 21,500,000
shares authorized and 17,036,265 shares issued and outstanding,
actual; 27,250,000 shares authorized and no shares issued and
outstanding, pro forma and pro forma as adjusted..................... 20,279 -- --
---------- ----------- --------
Stockholders' equity (deficit):
Preferred stock, $0.01 par value, no shares authorized or issued and
outstanding, actual; 4,000,000 shares authorized and no shares
issued and outstanding, pro forma and pro forma as adjusted........ -- -- --
Common stock, $0.01 par value, 30,000,000 shares authorized and
1,373,378 shares issued and 1,014,630 outstanding, actual;
35,000,000 shares authorized and 8,413,763 shares issued and
outstanding, pro forma; 35,000,000 shares authorized and 11,663,763
shares issued and outstanding, pro forma as adjusted............... 14 84 117
Additional paid-in capital........................................... 3,126 45,547 80,944
Accumulated deficit.................................................. (21,169) (23,436) (23,436)
Unearned compensation................................................ (2,660) (2,660) (2,660)
Treasury stock, at cost (358,748 shares at actual, none pro forma and
pro forma as adjusted)............................................. (55) -- --
---------- ----------- --------
Total stockholders' equity (deficit)............................... (20,744) 19,535 54,965
---------- ----------- --------
Total capitalization............................................. $ 36 $ 20,036 $ 55,466
---------- ----------- --------
---------- ----------- --------
</TABLE>
- --------------
(1) See Note 8 of Notes to Financial Statements for a description of the
Company's capital lease obligations.
(2) Excludes: (i) 790,581 shares of Common Stock issuable upon exercise of
outstanding options at a weighted average exercise price of $1.75 per share,
(ii) 464,537 shares of Common Stock issuable at an exercise price of $13.47
per share upon exercise of the BioChem Warrant, (iii) 49,763 shares of
Common Stock issuable upon exercise of an outstanding warrant at an exercise
price of $3.07 per share and 32,525 shares of Common Stock issuable upon
exercise of an outstanding warrant at an exercise price of $5.53 per share
and (iv) 1,950,000 shares of Common Stock reserved for issuance upon
exercise of options or in connection with other awards that may be granted
in the future under the 1997 Plan and the Directors' Plan. See "Certain
Transactions-- BioChem Offering," "Management--Employment Agreements,"
"--Stock Options," "Employee Benefit Plans--1997 Equity Incentive Plan,"
"--Non-Employee Directors Stock Plan" and "--1994 Stock Option Plan,"
"Description of Capital Stock-- Warrants" and Notes 6, 8 and 10 of Notes to
Financial Statements.
(3) In the event that the initial public offering price is less than $10.76 per
share, the Company will be required to issue to BioChem, for no additional
consideration, the number of additional shares of Common Stock equal to the
amount by which (a) 19,993,640 divided by the initial public offering price,
exceeds (b) 1,858,145. See "Certain Transactions--BioChem Offering."
19
<PAGE>
DILUTION
As of September 30, 1997, the pro forma net tangible book value of the
Company was approximately $19,535,000, or $2.32 per share. Pro forma net
tangible book value per share represents the amount of tangible net assets of
the Company, less total liabilities, divided by the pro forma number of shares
of Common Stock outstanding as of September 30, 1997 (giving effect to the
BioChem Offering). After giving effect to the sale by the Company of the shares
of Common Stock offered hereby and offered pursuant to the Private Placement
(assuming an initial public offering price of $12.00 per share) and the
application of the net proceeds therefrom, the pro forma net tangible adjusted
book value of the Company at September 30, 1997 would have been approximately
$54,965,000, or $4.71 per share. This amount represents an immediate increase in
pro forma net tangible book value of $2.39 per share to existing stockholders
and an immediate dilution in net tangible book value of $7.29 per share to
purchasers of Common Stock in the Offering. The following table illustrates this
per share dilution, without giving effect to any exercise of the Underwriters'
over-allotment option:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share..................... $ 12.00
Pro forma net tangible book value per share as of September 30,
1997............................................................ $ 2.32
Increase per share attributable to new investors(1)............... 2.39
---------
Pro forma net tangible book value per share after the Offering and
the Private Placement............................................. 4.71
---------
Dilution per share to new investors................................. $ 7.29
---------
---------
</TABLE>
- --------------
(1) Includes increase attributable to the sale of shares in the Offering and
the Private Placement.
The following table summarizes, on a pro forma basis as of September 30,
1997, the number of shares of Common Stock purchased from the Company (giving
effect to the BioChem Offering), the total consideration paid, and the average
price per share paid by existing stockholders of the Company and by new
investors purchasing shares from the Company in the Offering and the Private
Placement, at an assumed initial public offering price of $12.00 per share,
before deducting underwriting discounts and commissions and the estimated
offering expenses payable by the Company:
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
------------------------- -------------------------- PRICE
NUMBER PERCENT(1) AMOUNT PERCENT PER SHARE
------------ ----------- ------------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Existing stockholders...................... 8,413,763 72.1% $ 43,416,000 52.7% $ 5.16
New investors.............................. 3,250,000 27.9 39,000,000 47.3 12.00
------------ ----- ------------- -----
Total...................................... 11,663,763 100.0% $ 82,416,000 100.0%
------------ ----- ------------- -----
------------ ----- ------------- -----
</TABLE>
- --------------
(1) If exercised, the Underwriters' over-allotment option to purchase
450,000 additional shares will further reduce the percentage held by
existing stockholders to 69.5% and increase the percentage held by new
investors to 30.5%.
The foregoing tables exclude as of December 31, 1997: (i) 792,299 shares of
Common Stock issuable upon exercise of outstanding options at a weighted average
exercise price of $1.75 per share, (ii) 464,537 shares of Common Stock issuable
at an exercise price of $13.47 per share upon exercise of the BioChem Warrant,
(iii) 49,763 shares of Common Stock issuable upon exercise of an outstanding
warrant at an exercise price of $3.07 per share and 32,525 shares of Common
Stock issuable upon exercise of an outstanding warrant at an exercise price of
$5.53 per share and (iv) 1,950,000 shares of Common Stock reserved for issuance
upon exercise of options or in connection with other awards that may be granted
in the future and otherwise under the 1997 Plan and the Directors' Plan. In the
event that the initial public
20
<PAGE>
offering price is less than $10.76 per share, the Company will be required to
issue to BioChem, for no additional consideration, the number of additional
shares of Common Stock equal to the amount by which (a) 19,993,640 divided by
the initial public offering price, exceeds (b) 1,858,145. See "Certain
Transactions--BioChem Offering," "Management--Employment Agreement," "--Stock
Options," "Employee Benefit Plans--1997 Equity Incentive Plan," "--Non-Employee
Directors Stock Plan" and "--1994 Stock Option Plan," "Description of Capital
Stock--Warrants" and Notes 6, 8 and 10 of Notes to Financial Statements.
21
<PAGE>
SELECTED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
The selected financial data set forth below as of December 31, 1995 and 1996
and for the years ended December 31, 1994, 1995 and 1996 have been derived from
the Company's financial statements, which have been audited by Price Waterhouse
LLP, independent accountants, and are included elsewhere herein. The selected
financial data as set forth below as of December 31, 1992, 1993 and 1994 and for
the period from September 17, 1992 ("Inception") to December 31, 1992 and for
the year ended December 31, 1993 have been derived from the Company's audited
financial statements not included herein. The selected financial data as set
forth below as of September 30, 1997, and for the nine months ended September
30, 1996 and 1997 have been derived from the Company's unaudited financial
statements which are included elsewhere herein. The unaudited financial
statements have been prepared by the Company on a basis consistent with the
Company's audited financial statements and, in the opinion of management,
include all adjustments, consisting of only normal recurring adjustments,
necessary for a fair presentation of the Company's results of operations and
financial condition for such periods. Operating results for the nine months
ended September 30, 1997 are not necessarily indicative of results that may be
expected for the entire year ending December 31, 1997. The selected financial
data set forth below should be read in conjunction with the Financial Statements
and related Notes thereto and with "Management's Discussion and Analysis of
Financial Condition and Results of Operations," which are included elsewhere
herein.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
PERIOD FROM YEAR ENDED
INCEPTION TO DECEMBER 31, SEPTEMBER 30,
DECEMBER 31, ------------------------------------------ --------------------
1992 1993 1994 1995 1996 1996 1997
--------------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA: (UNAUDITED)
Revenue:
Collaborative agreements................. -- -- -- -- $ 975 $ 975 $ 467
SBIR grants.............................. -- -- -- $ 260 232 222 138
------ --------- --------- --------- --------- --------- ---------
-- -- -- 260 1,207 1,197 605
------ --------- --------- --------- --------- --------- ---------
Cost of revenue:
Collaborative agreements................. -- -- -- -- 174 174 124
SBIR grants.............................. -- -- -- 260 232 222 138
------ --------- --------- --------- --------- --------- ---------
-- -- -- 260 406 396 261
------ --------- --------- --------- --------- --------- ---------
Gross profit............................. -- -- -- -- 801 801 344
Operating expenses:
Research and development................. $ 455 $ 1,833 $ 3,157 3,152 3,958 2,757 4,273
General and administrative............... 94 652 998 1,299 906 669 831
------ --------- --------- --------- --------- --------- ---------
549 2,485 4,155 4,451 4,865 3,427 5,104
------ --------- --------- --------- --------- --------- ---------
Loss from operations..................... (549) (2,485) (4,155) (4,451) (4,064) (2,626) (4,761)
------ --------- --------- --------- --------- --------- ---------
Other income (expense), net................ 1 (62) (146) (128) 19 12 (15)
------ --------- --------- --------- --------- --------- ---------
Net loss................................. $ (549) $ (2,547) $ (4,301) $ (4,579) $ (4,044) $ (2,614) $ (4,775)
------ --------- --------- --------- --------- --------- ---------
------ --------- --------- --------- --------- --------- ---------
Net loss per share(1).................... $ (0.21) $ (0.98) $ (1.25) $ (1.28) $ (1.20) $ (0.77) $ (1.35)
------ --------- --------- --------- --------- --------- ---------
------ --------- --------- --------- --------- --------- ---------
Weighted average common and common
equivalent shares outstanding(1)....... 2,556 2,607 3,435 3,551 3,360 3,374 3,528
------ --------- --------- --------- --------- --------- ---------
------ --------- --------- --------- --------- --------- ---------
Pro forma net loss per share
(unaudited)(1)........................... $ (0.49) $ (0.53)
--------- ---------
--------- ---------
Pro forma weighted average common and
common equivalent shares outstanding
(unaudited)(1)........................... 8,186 9,069
--------- ---------
--------- ---------
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------------------------------------
1992 1993 1994 1995 1996
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents.................................... -- $ 1,418 $ 922 $ 241 $ 1,314
Working capital.............................................. $ (573) 2,274 (1,939) 92 3,350
Total assets................................................. 25 3,726 2,760 2,689 5,747
Noncurrent portion of capital lease obligations.............. -- 345 926 636 424
Redeemable convertible preferred stock....................... -- 6,203 6,403 12,982 20,279
Accumulated deficit.......................................... (549) (3,256) (7,685) (12,309) (16,394)
Total stockholders' deficit.................................. (549) (3,230) (7,494) (12,123) (16,126)
<CAPTION>
SEPTEMBER 30,
1997
---------------
<S> <C>
BALANCE SHEET DATA:
Cash and cash equivalents.................................... $ 858
Working capital.............................................. (1,200)
Total assets................................................. 2,478
Noncurrent portion of capital lease obligations.............. 501
Redeemable convertible preferred stock....................... 20,279
Accumulated deficit.......................................... (21,169)
Total stockholders' deficit.................................. (20,744)
</TABLE>
- --------------
(1) See Note 2 of Notes to Financial Statements for information concerning the
computation of net loss per share and shares used in computing net loss per
share.
22
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
THE FOLLOWING DISCUSSION SHOULD BE READ IN CONJUNCTION WITH "SELECTED
FINANCIAL DATA" AND THE COMPANY'S FINANCIAL STATEMENTS AND RELATED NOTES
THERETO, APPEARING ELSEWHERE IN THIS PROSPECTUS. THIS PROSPECTUS CONTAINS
CERTAIN FORWARD-LOOKING STATEMENTS WHICH INVOLVE RISKS AND UNCERTAINTIES. THE
COMPANY'S ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THE RESULTS ANTICIPATED IN
THESE FORWARD-LOOKING STATEMENTS AS A RESULT OF CERTAIN OF THE FACTORS SET FORTH
IN THIS PROSPECTUS.
OVERVIEW
Scriptgen utilizes its proprietary high throughput technologies to enable
and accelerate the discovery of innovative small molecule drugs. Scriptgen's
technology platform allows the Company and its collaborators to exploit the
opportunities afforded by advances in genomics and combinatorial chemistry, and
opens new avenues of drug discovery. The Company's strategy is to maximize the
commercial opportunities presented by its technology platform and pipeline of
drug candidates by entering into multiple collaborations and retaining rights to
independently develop certain products.
Since its incorporation and commencement of operations in September 1992,
the Company has been developing its drug discovery technologies, and has used
such technologies in its collaborations and for its internal development
programs. As of January 7, 1998, the Company has received approximately
$51,000,000 in funding through the sale of preferred stock and from payments
under the Company's collaborative agreements, and it expects to receive an
additional $3,000,000 upon the closing of the Private Placement. Additionally,
the Company has received approximately $2,100,000 in SBIR grants from the
National Institutes of Health, of which approximately $600,000 has been funded
as of September 30, 1997. The Company has a limited history of operations and
has experienced significant operating losses since Inception. The Company
expects to incur significant additional operating losses over the next several
years and expects cumulative losses to increase substantially due primarily to
expanded research and development efforts, pre-clinical and clinical trials.
To date, a majority of all revenue earned by the Company has been from its
collaborative agreements, and the Company expects that substantially all revenue
for the foreseeable future will result from such collaborations and any future
collaborations the Company may enter into. The timing of any fees or milestone
or other payments under such collaborations is expected to vary greatly from
quarter to quarter, depending on numerous factors. Operating results may
therefore vary substantially from quarter to quarter and will not necessarily be
indicative of results in subsequent periods. See "Risk Factors--Dependence Upon
Present and Future Collaborative Arrangements" and "--Significant Fluctuations
in Quarterly and Annual Results."
Revenue derived under the Company's collaborative agreements is recognized
as drug discovery activities are performed. Cash received in advance of
activities performed is recorded as deferred revenue. Certain agreements also
provide for payments to the Company upon the achievement of certain milestones
as well as royalties on the net sales of any products developed resulting from
the collaborations, as defined in the respective agreements. Any revenue related
to milestones will be recognized as the milestones are achieved and any revenue
related to royalties will be recognized as earned.
Revenue from SBIR grants to conduct research and development is recognized
as eligible costs are incurred up to the $2,100,000 funding limit described
above. Eligible grant-related costs which have been incurred in advance of cash
receipts are recorded as receivables.
23
<PAGE>
RESULTS OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
REVENUE. Total revenue in the nine months ended September 30, 1997 was
$604,784 compared to $1,196,585 in the nine months ended September 30, 1996. The
Company recognized $467,000 of revenue in the nine months ended September 30,
1997 under its collaborative agreement with Eli Lilly and $975,000 of revenue in
the nine months ended September 30, 1996 under a collaborative agreement with
Boehringer Ingelheim ("Boehringer") which was concluded in 1996 when Boehringer
elected not to continue developing the program to which such agreement related.
In addition, the Company recognized $137,784 and $221,585 of revenue related to
SBIR grants in the nine months ended September 30, 1997 and 1996, respectively.
COST OF REVENUE. Cost of revenue reflects certain direct and overhead
expenses associated with collaborations in progress in addition to eligible
expenses incurred related to SBIR grants. Cost of revenue was $261,299 in the
nine months ended September 30, 1997 compared to $395,750 in the nine months
ended September 30, 1996.
RESEARCH AND DEVELOPMENT EXPENSES. Total research and development expenses
were $4,273,149 in the nine months ended September 30, 1997 compared to
$2,757,439 in the nine months ended September 30, 1996, an increase of
$1,515,710 or 55.0%. The increase was largely due to increased costs related to
additional personnel and, to a lesser extent, increases in depreciation,
amortization and patent expenses.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
were $830,908 in the nine months ended September 30, 1997 compared to $669,108
in the nine months ended September 30, 1996, an increase of $161,800 or 24.2%.
The increase was primarily due to amortization of unearned compensation and an
increase in costs associated with additional personnel, public relations and
other administrative expenses offset by a decrease in the use of consultants.
OTHER INCOME AND EXPENSE, NET. Other income and expense, net was $(14,884)
in the nine months ended September 30, 1997 compared to $12,204 in the nine
months ended September 30, 1996, a decrease of $27,088 or 222.0%. The decrease
was primarily due to a decrease in interest income as a result of a decrease in
the average cash balance during the nine months ended September 30, 1997. In
addition, interest expense increased due to an increase in the average balance
of outstanding capital lease obligations.
YEARS ENDED DECEMBER 31, 1996 AND 1995
REVENUE. Total revenue in 1996 was $1,206,620 compared to $260,415 in 1995.
The Company recognized $975,000 of revenue in 1996 under the collaborative
agreement with Boehringer. No collaborative agreements were in progress in 1995.
In addition, the Company recognized $231,620 and $260,415 of revenue under SBIR
grants in 1996 and 1995, respectively.
COST OF REVENUE. Cost of revenue was $405,785 in 1996 compared to $260,415
in 1995.
RESEARCH AND DEVELOPMENT EXPENSES. Total research and development expenses
were $3,958,201 in 1996 compared to $3,152,494 in 1995, an increase of $805,707
or 25.6%. The increase was largely due to increased costs related to additional
personnel, laboratory materials and supplies, patent costs and depreciation and
amortization expenses.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
were $906,452 in 1996 compared to $1,298,684 in 1995, a decrease of $392,232 or
30.2%. The decrease was primarily due to expenses incurred in 1995 under a
separation agreement with a former chief executive officer of the Company.
24
<PAGE>
OTHER INCOME AND EXPENSE, NET. Other income and expense, net was $19,799 in
1996 compared to $(127,749) in 1995, an increase of $147,548, or 115.5%. This
increase was due to an increase in interest income as a result of an increase in
the average cash balance in 1996. This increase was offset by a decrease in
interest expense as a result of the decrease in the average balance of
outstanding capital lease obligations and the conversion of convertible debt
during 1995.
YEARS ENDED DECEMBER 31, 1995 AND 1994
REVENUE. Total revenue in 1995 was $260,415, consisting only of revenue
recognized under SBIR grants. No revenue was recognized in 1994.
COST OF REVENUE. Cost of revenue related to SBIR grants was $260,415 for
1995. No such grants were in place during 1994.
RESEARCH AND DEVELOPMENT EXPENSES. Total research and development expenses
were $3,152,494 in 1995 compared to $3,156,734 in 1994.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
were $1,298,684 in 1995 compared to $998,194 in 1994, an increase of $300,490 or
30.1%. The increase was primarily due to increased executive and administrative
staffing and consultant expenses used to support the growth of the Company's
research and development.
OTHER INCOME AND EXPENSE, NET. Other income and expense, net was $(127,749)
in 1995 compared to $(146,046) in 1994, a decrease of $18,297 or 12.5%. This
decrease was due to an increase in interest income as a result of an increase in
the average cash balance offset by an increase in interest expense as a result
of an increase in outstanding capital lease obligations and the issuance of
convertible debt.
INCOME TAXES
The Company has generated taxable losses from operations since Inception
and, accordingly, has no taxable income available to offset the carryback of net
operating losses. Based upon the weight of all available evidence, the Company
has provided a full valuation allowance for its deferred tax assets since, in
the opinion of management, realization of these future benefits is not
sufficiently assured (defined as a likelihood of slightly more than 50 percent).
LIQUIDITY AND CAPITAL RESOURCES
Since Inception, the Company has financed its operations through the sale of
preferred stock, payments received under the Company's collaborative
arrangements, equipment financing, SBIR grants and interest earned on invested
capital. The Company's total cash, cash equivalents and investments balance at
September 30, 1997 was $1,064,157 compared to $4,338,237 at December 31, 1996.
The Company received approximately $1,405,000 under its collaborative agreements
and $137,784 in SBIR grants during the nine months ended September 30, 1997. In
October 1997, the Company entered into a collaborative arrangement with HMR for
an initial term of three years, subject to earlier termination six months prior
to the end of such term. The Company expects that the total amounts it will have
received from HMR under its collaborative agreement from October 1997 through
February 1998 will approximate $12,000,000, of which $6,000,000 will be
technology access fees, $3,000,000 will be research and development payments and
$3,000,000 will be proceeds from the Private Placement. The Company expects to
receive additional research and development payments under its collaborative
agreements. There can be no assurance that the Company will receive any
additional payments under its present or any future collaborative agreements.
See "Risk Factors--Dependence Upon Present and Future Collaborative
Arrangements" and "Business--Collaborative Arrangements."
25
<PAGE>
On December 17, 1997 the Company issued to BioChem Pharma Inc. shares of its
Series D Preferred Stock (convertible into 1,858,145 shares of Common Stock) for
consideration of $20,000,000. The Company also issued to BioChem Pharma Inc. a
warrant to purchase 464,537 shares of Common Stock at an exercise price of
$13.47 per share. Subsequent to the closing of the BioChem Offering, such shares
and warrant were transferred to BioChem Pharma Holdings Inc., a wholly owned
subsidiary of Biochem Pharma Inc. The Company will record a non-cash charge of
approximately $2,200,000 associated with the value of such warrant in the fourth
quarter of 1997. See "Certain Transactions--BioChem Offering."
Net cash used in operating activities for the nine months ended September
30, 1997 was $2,737,087 compared to $2,555,823 for the nine months ended
September 30, 1996. Net cash used in operating activities was $3,568,031 in 1996
compared to $3,744,478 and $3,876,939 in 1995 and 1994, respectively. The cash
used in operations was primarily to fund research and development and for
general and administrative expenses.
As of September 30, 1997, the Company had invested $3,018,000 in property
and equipment, primarily in facility renovations and laboratory equipment. These
acquisitions were funded by capital lease financings which have an aggregate
outstanding principal balance of $984,627 at September 30, 1997 due at various
dates through the year 2000 with interest rates ranging between 8%-8.5% and 15%
for equipment and facility renovations, respectively. The Company expects
substantially all of its capital expenditures in 1997 to be funded through
capital lease equipment financing. In connection with these capital leases, the
Company has issued warrants for 253,000 shares of its redeemable convertible
preferred stock through November 1997.
Pursuant to several license and sponsored research agreements, the Company
has paid to date an aggregate of approximately $1,200,000 in the form of license
and research and development fees. Under existing sponsored research agreements,
the Company remains obligated to pay approximately $300,000 in additional
research payments. Under such agreements and other agreements, the Company is
required to make payments upon the achievement of certain milestones, to pay
royalties on certain drug sales, if any, and to pay other amounts in connection
with sublicenses, if any (collectively, "Contingent Payments"). To date, the
Company has not become obligated to make any Contingent Payments under such
agreements and does not anticipate becoming obligated to make any such payments
in the near future.
The Company believes that the net proceeds of the Offering, the Private
Placement and the BioChem Offering, together with revenue from its collaborative
agreements, its existing capital resources, SBIR grants and interest income will
be sufficient to fund its operating expenses and capital requirements as
currently planned through the end of 2000. The Company's actual cash
requirements may vary materially from those now planned and will depend upon
numerous factors, including the ability of the Company to enter into additional
collaborative arrangements, the achievement of milestones under the Company's
collaborative arrangements on a timely basis or at all, changes in the Company's
existing collaborative arrangements, the results of the Company's internal
development programs, the timing and results of pre-clinical and clinical
trials, the timing and costs of obtaining regulatory approvals, the timing and
level of the expansion of the Company's facilities, the level of resources, if
any, that the Company commits to the development of manufacturing, marketing and
sales capabilities, the technological advances and activities of competitors and
other factors. There can be no assurance that the net proceeds of the Offering,
the Private Placement and the BioChem Offering, together with the Company's
revenue from collaborative agreements, its existing capital resources, SBIR
grants and interest income will be sufficient to fund the Company's operating
expenses and capital requirements during such period. Thereafter, the Company
will need to raise substantial additional capital to fund its operations. The
Company intends to seek such additional funding through public or private
financing, collaborations or other arrangements. See "Use of Proceeds" and "Risk
Factors--Additional Financing Requirements; Uncertainty of Available Funding."
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BUSINESS
OVERVIEW
Scriptgen utilizes its proprietary high throughput technologies to enable
and accelerate the discovery of innovative small molecule drugs. Scriptgen's
technology platform allows the Company and its collaborators to exploit the
opportunities afforded by advances in genomics and combinatorial chemistry, and
opens new avenues of drug discovery. The Company's technology platform
identifies and validates novel gene targets for therapeutic intervention, and
then uses novel assay systems to rapidly screen compounds against those targets,
even before the gene targets' characteristics or functions are well understood.
The Company believes that the application of its technologies addresses many of
the limitations associated with traditional drug discovery and provides
substantial cost savings opportunities. The Company commercializes its
technology platform through (i) collaborations with pharmaceutical and
technology companies and (ii) the Company's internal development program.
The Company's core systems include GATE (Genetics Assisted Target
Evaluation), a family of high throughput target identification and validation
systems, and ATLAS (Any Target Ligand Affinity Screen) and SCAN (Screen for
Compounds with Affinity for Nucleic Acids), the high speed, solution based,
assay systems which identify compounds that bind to virtually any protein or
structured RNA, respectively. GATE measures the effects of transiently removing
a specific gene from a cell, and by reproducing conditions that closely resemble
drug mechanism of action, generates data more predictive of target behavior than
traditional methods. ATLAS and SCAN rapidly measure the affinity of compounds
that bind to targets even before the gene functions are well understood,
enabling the Company to work with targets that are unsuitable for traditional
high throughput screens. The Company believes ATLAS and SCAN increase
dramatically the number of targets and compounds that may be screened in a given
time period, and reduce to weeks what often requires months or years of assay
development time when using traditional high throughput functional assays. The
Company has used GATE to identify and validate novel infectious disease targets,
and has used ATLAS and SCAN to identify lead compounds, two of which have
progressed to pre-clinical development. ATLAS and SCAN are broadly applicable to
research in multiple therapeutic areas, and have demonstrated utility in
anti-infectives, oncology, cardiovascular, and respiratory and immunologic
disorders.
The Company's strategy is to maximize the commercial opportunities presented
by its technology platform and pipeline of drug candidates by entering into
multiple collaborations and retaining rights to independently develop certain
products. Scriptgen has collaborative agreements with pharmaceutical and
technology companies, and routinely evaluates opportunities to enter into
collaborations with other potential partners. The Company currently has
collaborations with HMR, BioChem, Eli Lilly, Roche, Monsanto and ArQule, Inc.
Scriptgen's internal development efforts have initially focused on anti-
infectives, where it has identified novel cidal targets and lead compounds in
the fungal, bacterial and viral areas.
DRUG DISCOVERY TECHNOLOGIES
Drug discovery and development is a complex process which, according to
sources cited in an article appearing in the October 1997 Pharmaceutical
Research and Manufacturing Association bulletin, averages 15 years from
inception to FDA approval at a cost of more than $500 million. The article also
states that only five in 5,000 compounds that enter pre-clinical testing advance
to clinical testing, and only one of those five is approved as a drug.
Consequently, technologies and methods which may make the drug discovery process
faster, less costly, and more effective are in great demand.
The Company's technology platform is complementary to emerging drug
discovery approaches, including gene sequencing, functional genomics and
differential gene expression. The chart following outlines the drug discovery
process, and indicates the steps in that process where the Company's and these
complementary technologies apply.
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[CHART]
Advances in genomics and related technologies are dramatically increasing
the number of potential drug targets available and have created a bottleneck in
the target validation phase of drug discovery. It has been estimated that there
are only approximately 400 human drug discovery targets for which drugs have
been developed. Although genomics and related technologies have the potential to
identify thousands of additional targets per year, these targets may not be
therapeutically relevant. For example, differential gene expression compares
gene transcription patterns in normal and diseased tissues, typically
identifying several hundred genes which are up or down regulated in diseased
cells relative to normal cells, but whose relevance to the cause of the
underlying disease is not apparent. Consequently, many of these targets will
require validation, a process that can consume two or more years with
conventional approaches. Further, existing gene-based technologies are limited
in screening potential because: (i) they can be used only to identify compounds
that affect transcription (the process by which DNA is transcribed into RNA),
(ii) they generally have very low throughput, (iii) they identify gene targets
which have unknown function and (iv) they do not accommodate the complexity of
gene interactions in the disease process.
SCRIPTGEN'S DRUG DISCOVERY APPROACH
Scriptgen's drug discovery technology platform enables the Company and its
collaborators to exploit the opportunities afforded by advances in genomics and
combinatorial chemistry, and opens new avenues of drug discovery. Scriptgen's
primary drug discovery technologies are GATE, a family of high throughput target
identification and validation systems, and ATLAS and SCAN, the high speed,
solution based assay systems, which identify compounds that bind to virtually
any protein or structured RNA, respectively. The Company also possesses a
diverse 250,000 compound library consisting of defined small molecule chemical
entities, including 15,000 natural product extracts, and has access to validated
IN VIVO animal models of infectious diseases through the Company's collaboration
with Boston Medical Center.
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Scriptgen's drug discovery technology platform is unique because it
identifies and validates multiple gene targets, and rapidly measures the
affinity of compounds that bind to such gene targets even before the gene
functions are well understood. This approach enables the Company and its
collaborators to work with targets that are unsuitable for traditional high
throughput screens and greatly increases the number of targets and compounds
that may be screened in a given time period.
TARGET DISCOVERY AND VALIDATION SYSTEMS (GATE)
GATE consists of a family of high throughput target identification and
validation technologies which the Company has successfully applied in fungi,
bacteria and viruses. GATE's regulated gene knockout technology measures the
effects of transient gene inactivation. It reproduces conditions that more
closely resemble drug mechanism of action than conventional gene inactivation
methods, which the Company believes makes GATE more predictive of target
behavior and hence more informative as a target validation technique. An
analogous technology for mammalian cells, CellGATE, is under development.
GATE has been applied by the Company to infectious diseases where the
desired result of drug treatment is to kill the invading pathogen without severe
side effects to the patient. GATE determines whether the pathogen dies as a
result of a specific inactivation of a gene product, how quickly it dies and how
much of the target must be modified to kill the pathogen. Because GATE focuses
on cidal targets, the Company is able to focus its efforts on identifying
compounds which the Company believes may have a high probability of being
effective against the disease with low toxicity and side effects.
HIGH THROUGHPUT ASSAY SYSTEMS (ATLAS AND SCAN)
ATLAS and SCAN are high throughput affinity assay systems that allow drug
discovery to focus rapidly on ligands, those rare compounds that bind to a
target, and therefore have the potential to become valid therapeutics. ATLAS and
SCAN are based on the thermodynamic principle that protein and RNA have
measurable stability, as well as the fact that all drugs act by binding to and
further stabilizing a specific target. Thus, ATLAS and SCAN may be applied to
virtually any identified target, even before its characteristics or functions
are well understood. These technologies are able to identify and distinguish
among ligands that bind to active and neutral sites, and measure the affinity of
binding, which indicates the potential of drug potency.
In contrast, conventional high throughput drug discovery technologies
measure the effect of test compounds only on the function of a target. Before
such a functional screening approach may be initiated, the biochemical function
of the target must be well understood. This detailed characterization often
requires extensive time and effort before a target can be screened, if at all.
ATLAS and SCAN have shown the ability to overcome many of the limitations of
high throughput drug screening and allow access to targets of unknown function,
thereby offering the following advantages:
- TARGET FLEXIBILITY. ATLAS and SCAN require essentially no pre-existing
biochemical understanding of the target molecule and are compatible with
virtually any target protein or structured RNA. Using ATLAS and SCAN,
screening can begin earlier than with conventional high throughput
methods.
- COMPOUND DIVERSITY. ATLAS and SCAN work in solution phase, and are used to
search for drug candidates from a wide diversity of chemical sources
including combinatorial, small molecule, peptide and natural product
compound libraries.
- RAPID ASSAY DEVELOPMENT. Many functional assays using biochemical, cell or
animal based methods take months or years to develop. ATLAS and SCAN can
be applied in a matter of weeks because they measure only the universal
principle of drug binding and are independent of protein and nucleic acid
function.
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- EFFICIENT, HIGH THROUGHPUT MODE. ATLAS and SCAN are compatible with modern
robotic and automated equipment, operate in high throughput mode and can
test thousands of compounds each week using minute compound amounts and
very little target protein or RNA.
- RAPID ELIMINATION OF NON-CANDIDATE COMPOUNDS. Used in a pre-screening
mode, ATLAS and SCAN rapidly eliminate compounds that are not ligands and
allow a focused and efficient development effort to be concentrated only
on those compounds with the greatest potential for therapeutic benefit. In
a typical high throughput assay using ATLAS, 99.9% of the screened
compounds are eliminated as potential drug candidates.
- QUANTITATIVE MEASURE OF DRUG BINDING. ATLAS and SCAN, unlike many drug
discovery technologies, are sensitive assay systems which identify even
weakly binding ligands, and provide a quantitative measure of how tightly
a potential drug binds to its target.
- EXPANDS DRUG DISCOVERY BEYOND REGULATION OF GENE TRANSCRIPTION. While
traditional gene expression methods are limited to measuring initial gene
transcripts, ATLAS and SCAN measure the binding to final gene products,
thereby enhancing the ability to identify promising lead compounds.
COALESCENT DRUG DESIGN. For many target proteins, it is very difficult to
develop a single molecule with both inhibitory activity and sufficient
specificity for pharmaceutical applications. This difficulty is often a
consequence of the fact that proteins with similar functions have similar active
sites. In contrast, the neutral site surfaces of related proteins are
dissimilar, and thus compounds that also bind outside of the active site can
have specificity for the target protein. The Company has applied ATLAS to
develop novel coalescent compounds, which are small molecules connected by a
molecular tether that bind to both active and neutral sites. The binding
energies of the functional groups are nearly exponentially additive, allowing
for highly specific coalescent drug candidates to be forged even from weakly
binding compounds. Coalescent drug candidates have the potential to address a
broad spectrum of heretofore intractable protein targets.
The Company is exploring the development of small molecule coalescent
compounds to mimic the action of protein drugs such as human growth hormone and
erythropoietin. The receptors for these proteins typically comprise two subunits
that span the cell membrane. The therapeutic protein binds to two distinct sites
on the extracellular portion of its receptor, one on each subunit, thereby
causing the subunits to pull together (dimerization). The dimerization of the
intracellular portions of the receptor subunits initiates a signaling pathway
which results in the intended therapeutic effect. Scientists have struggled to
design small molecule analogs of therapeutic proteins because small molecules
are unable to span the distance between the extracellular parts of the receptor
subunits. While the internal arms of the protein are much closer together, they
are not the active sites and thus have not been available as targets using
conventional assay technologies. ATLAS allows for the identification of ligands
that bind to the internal arms of these receptor subunits, making it possible to
construct small molecule coalescent compounds capable of causing dimerization of
the subunits and, hence, initiating a therapeutic response.
ADDITIONAL DRUG DISCOVERY TOOLS
COMPOUND LIBRARY. Scriptgen has a library of approximately 250,000
compounds including 15,000 mixtures of natural product extracts. These compounds
have been obtained from a variety of sources, and were selected from a larger
catalog of compounds based on their diversity and pharmacological profiles.
Through analogs of the compounds in the library, and the use of combinatorial
chemistry techniques, Scriptgen has access to more than 1,000,000 compounds. The
Company uses these compounds for high throughput screening in its internal
development program as well as in its collaborative arrangements. While the
compound library is used to identify therapeutic candidates against specific
targets, the lead compounds anticipated to be developed by Scriptgen will be
unique patented analogs, specifically designed using medicinal chemistry
techniques to optimize their efficacy.
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ANIMAL MODELS. The Company's collaboration with Boston Medical Center to
test potential antibacterial and antifungal drug candidates gives the Company
access to a number of validated and predictive animal models of infectious
diseases to evaluate the efficacy and safety of the Company's lead compounds.
STRATEGY
Scriptgen's strategy is to maximize the commercial opportunities presented
by its technology platform and pipeline of drug candidates. To implement this
strategy the Company will continue to:
ESTABLISH COLLABORATIVE RELATIONSHIPS. The Company enters into
collaborations with pharmaceutical and technology companies: (i) to perform high
throughput target identification and validation, assay development and lead
compound identification for its collaborators' drug discovery programs to
generate near-term revenue, (ii) to jointly discover and develop new drugs in
targeted areas, under agreements that provide the Company with near-term revenue
and the opportunity to receive substantial milestone payments and royalties and
(iii) to develop or commercialize selected drug candidates from the Company's
internal pipeline at such time as a collaboration is determined to represent the
best opportunity to maximize the commercial value of a particular candidate. The
Company currently has collaborations with HMR, BioChem, Eli Lilly, Roche and
Monsanto, and routinely evaluates opportunities to enter into collaborations
with other potential partners.
DEVELOP INTERNALLY A PIPELINE OF DRUG DEVELOPMENT CANDIDATES. Recognizing
that many promising drug candidates fail in subsequent stages of development,
the Company believes that it is essential to have a pipeline of new drug
candidates from which to choose. Scriptgen is developing a pipeline by using its
high throughput technologies to identify multiple lead candidates, initially
focusing in the antifungal, antibacterial and antiviral areas. The Company
develops drug candidates either alone or in conjunction with partners depending
on such factors as estimated development costs and potential regulatory approval
time and hurdles.
EXPAND PROPRIETARY DRUG DISCOVERY TECHNOLOGY PLATFORM. Scriptgen has an
ongoing research program aimed at expanding the capabilities and potential
applications for the Company's technologies, while simultaneously attempting to
increase their efficiency. In addition, the Company strives to identify, develop
and acquire other technologies, and to collaborate to obtain technologies that
can substantially enhance the drug discovery process. For example, the Company
has enhanced and expanded its core drug discovery technologies to include
technologies that allow ligands to be sorted rapidly according to the active and
neutral sites on the target. These technology enhancements have been
instrumental in the Company's obtaining SBIR funding for its coalescent drug
design program.
MAINTAIN AND ENHANCE STRONG PROPRIETARY POSITION. Scriptgen pursues an
aggressive strategy to protect its proprietary drug discovery technologies,
including certain targets, assays, lead compounds and certain other
technologies, through patents, trade secret law and confidentiality agreements.
COLLABORATIVE ARRANGEMENTS
The Company has entered into collaborative arrangements with pharmaceutical
and technology companies.
HOECHST MARION ROUSSEL. In October 1997, the Company entered into a
collaboration with HMR pursuant to which the Company will seek to identify new
fungal targets and antifungal drug candidates. In each year of the
collaboration, Scriptgen will use GATE to identify and validate fungal targets,
some of which will be screened against compounds from Scriptgen's and HMR's
compound libraries utilizing ATLAS, SCAN and other technologies. HMR will
determine whether to proceed with the development of any lead compounds
discovered, and will receive an exclusive, worldwide license to develop and
commercialize any resulting drug candidate. The collaboration agreement with HMR
has an initial term of three
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years, subject to HMR's right to terminate the agreement by giving six months'
written notice at any time after the second year of the agreement. Under such
agreement, Scriptgen has received initial cash payments, and HMR is required to
fund Scriptgen's research and development activities in connection with the
collaboration up to a specified amount for a period of three years. The Company
expects to have received payments which include an aggregate of $9 million from
HMR under the collaboration by the completion of the Offering, of which $6
million will be technology access fees and $3 million will be proceeds from the
sale of Common Stock (at a purchase price per share equal to the initial public
offering price) to HMR concurrently with the Offering. The Company will also
receive research and development payments and will receive payments when and if
certain milestones are achieved and royalties on the sales of any new drug
resulting from the collaboration. HMR may terminate the collaboration by giving
the Company six months' prior written notice at any time after the end of the
second year of the collaboration.
BIOCHEM. In December 1997, Scriptgen entered into a collaboration with
BioChem pursuant to which Scriptgen is using its technology to identify drug
candidates which are (i) active against the Hepatitis B virus and (ii) which act
as small molecule mimics of therapeutic proteins by activating dimerization of
certain receptors such as the erythropoietin receptor. The programs will involve
the use of SCAN, ATLAS and other technologies as well as Scriptgen's compound
library. The collaboration agreement with BioChem has an initial term of five
years. Scriptgen is responsible for all aspects of drug discovery and will
provide BioChem with small molecule drug candidates for novel molecular targets
in the HBV and Dimerescent Programs. BioChem is responsible for pre-clinical and
clinical development, and will retain worldwide commercialization rights.
BioChem has options to the Dimerescent Program, and is required to make a
milestone payment to Scriptgen when and if an option is exercised. Any profits
on any commercialized products emanating from the HBV and Dimerescent Programs
will be shared in accordance with the terms of the agreement. BioChem has
exclusive rights to these programs which continue as long as it performs certain
specified obligations under the agreement. In addition, BioChem acquired Series
D Preferred Stock for total consideration of $20 million and the BioChem
Warrant. See "Certain Transactions--BioChem Offering."
ELI LILLY. In May 1997, the Company entered into a collaboration with Eli
Lilly under which Scriptgen is using ATLAS to identify novel drug candidates
against two targets selected by Eli Lilly. Two additional targets may be
selected by Eli Lilly for high throughput screening in 1998, assuming certain
milestones are met. In October 1997, Eli Lilly and the Company expanded the
scope of the collaboration to screen additional compounds from the Company's
compound library. The collaboration agreement with Eli Lilly has an initial term
of 58 to 64 weeks. Under such agreement, Scriptgen receives research and
development payments and will receive payments when and if certain milestones
are achieved and royalties on the sales of any new drug resulting from the
collaboration.
ROCHE. In September 1995, the Company entered into a collaboration with
Roche pursuant to which the Company is using ATLAS to identify drug candidates
against a cancer-related target identified by Roche. The initial term of the
collaboration agreement with Roche runs through June 1998. Under the agreement
with Roche, Scriptgen receives research and development payments and will
receive payments when and if certain milestones are achieved and royalties on
the sales of any new drug resulting from the collaboration.
MONSANTO. In November 1997, the Company entered into a collaboration with
Monsanto under which Scriptgen is using its technology platform to identify and
validate novel fungal targets from plant and human pathogens and to identify
novel agents and drugs against such targets. The collaboration agreement with
Monsanto has an initial term of two years. The agreement provides Scriptgen with
68,000 small molecule compounds from Monsanto's library for use by the Company.
The Company will pay Monsanto royalties and milestones on any human
anti-infective drug developed and commercialized as a result of the
collaboration. Scriptgen receives research and development payments and will
receive payments when and
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if certain milestones are achieved and royalties on the sales of any product
developed by Monsanto for IN PLANTA applications.
ARQULE, INC. The Company has entered into a collaboration with ArQule, Inc.
("ArQule") pursuant to which the Company incorporates compounds owned by ArQule
into the Company's library. The Company is screening certain of the ArQule
compounds against the Company's fungal, bacterial and viral targets. In the
event that active compounds are identified and selected for development,
Scriptgen and ArQule may enter into an agreement to share the costs of
development and the proceeds of any resulting commercial product.
There can be no assurance that any drug candidates will be identified during
the Company's present collaborations or that, if identified, the Company's
collaborative partners will elect to proceed with the development of any drug
candidates. The Company's collaborative partners are not obligated to develop or
commercialize any drug candidates resulting from the collaborative agreements.
As a result, there can be no assurance that any of the milestone or royalty
payments contemplated by such collaborations will be made. See "Risk
Factors--Dependence Upon Present and Future Collaborative Arrangements."
SCRIPTGEN'S INTERNAL DEVELOPMENT PROGRAM
OVERVIEW
Scriptgen's internal development efforts have initially focused on
anti-infectives, where it has identified novel cidal targets and lead compounds
in the fungal, bacterial and viral areas. Scriptgen has progressed rapidly in
the anti-infective area and has four lead compounds in development as well as a
number of other potential drug candidates under review. The Company has also
completed feasibility studies on novel targets in a number of other areas,
including oncology and immunologic disorders, and in several cases has
identified drug candidates. The Company believes that the anti-infective market
is attractive as an initial field of focus because of the following:
- LARGE MARKET. Infectious diseases are the leading cause of death
worldwide. According to 1996 sales data compiled by IMS International,
anti-infective drugs generated approximately $30 billion in worldwide
sales and constituted the fourth largest pharmaceutical market worldwide.
- SCRIPTGEN TECHNOLOGY UNIQUELY SUITED FOR ANTI-INFECTIVES. The clinical
efficacy of certain anti-infective drugs is being threatened by emerging
strains of drug resistant pathogens and opportunistic infections arising
from the growing number of immunosuppressed patients. In addition,
scientists have recognized that newly identified pathogens are causing
outbreaks of disease. GATE allows a determination of whether the pathogen
dies as a result of a specific inactivation of a gene product, how quickly
it dies and how much of the target must be modified to produce the desired
effect. ATLAS and SCAN are used to quickly identify potential drug
candidates for these validated targets. These technologies allow the
Company to focus its efforts on identifying compounds with a high
probability of being effective against the disease with low toxicity and
side effects.
- FEWER TECHNICAL AND REGULATORY HURDLES TO OVERCOME. Anti-infective drug
development faces fewer technical hurdles in large part because invading
pathogens are distinct organisms that can be identified and targeted
separately from human host cells. In addition, because animal models for
anti-infectives are considered to be fairly predictive of the therapeutic
response in patients, and pharmacokinetic and pharmacodynamic parameters
can be modeled in animals, there are fewer technical and regulatory
hurdles. Initial human clinical studies to determine safety and efficacy
of new anti-infective drugs can be conducted in short-term studies.
Additionally, measures of drug efficacy are well established.
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TARGET IDENTIFICATION AND VALIDATION AND HIGH THROUGHPUT SCREENING
Scriptgen focuses on the identification and validation of targets essential
for the survival of the pathogen. Scriptgen uses GATE in its structured target
selection process to focus on targets which are predictive of the following
desirable therapeutic objectives: microbicidal, fast-acting, low toxicity, broad
spectrum activity and low resistance. Scriptgen has validated more than 45 cidal
fungal, bacterial and viral targets and is validating a number of others.
Validated targets meeting the selection criteria are screened against the
Company's compound library in a high throughput mode. Depending upon the nature
of the individual target, functional assays may be used directly, or after
pre-screening with ATLAS or SCAN. Compounds that demonstrate specific anti-
infective activity are carefully scrutinized for their suitability as drug
candidates before being advanced into preliminary development. Criteria used for
selecting development candidates include: low molecular weight, chemical
feasibility and manufacturing cost, potential toxicity, cellular uptake,
metabolic stability and specificity. Compounds selected are then subjected to
preliminary modifications using medicinal as well as directed combinatorial
chemistry techniques, and a variety of analogs are produced for testing in
animal models.
DRUG CANDIDATES IN DEVELOPMENT
Scriptgen's internal development program has made rapid progress in the
anti-infective area. The Company currently has four lead compounds in
development as well as a number of other compounds under review, even though it
has not yet screened all of its compounds against all of its targets.
ANTIFUNGALS. Scriptgen's program has identified three families of compounds
that show broad spectrum antifungal activity, including effectiveness against
drug resistant strains of CANDIDA ALBICANS, the most widespread cause of life
threatening fungal infections. Two low molecular weight compounds, ST61219 and
ST61769, have been chosen for further development. In animal studies, these
compounds have cured mice infected with CANDIDA ALBICANS, including a strain
resistant to a marketed antifungal, flucanazole, at oral doses that produced no
overt side effects.
Initial pre-clinical data, including animal studies, on ST61219 and ST61769
indicate that these compounds may have several advantages over Diflucan
(flucanazole) and Sporanox (itraconazole), the current market leaders in the
antifungal area with worldwide sales in excess of $1.0 billion in 1996. These
advantages include:
- CIDALITY. ST61219 and ST61769 kill the pathogen rather than simply inhibit
its growth temporarily (static). Cidality eliminates the need for chronic
application of static compounds which has the potential of adverse side
effects and may give rise to drug resistance. Cidality is particularly
important for that large segment of the patient population suffering from
opportunistic infections because of impaired immune systems.
- RAPID ACTIVITY. ST61219 and ST61769 act much more rapidly, which may allow
for reduced dosing over a shorter time period. This faster cidality may
result in a lower probability for the development of resistance.
- BROAD SPECTRUM. ST61219 and ST61769 are effective against a broad range of
pathogens, as well as specific strains that have developed resistance to
the current drugs.
ANTIBACTERIALS. Scriptgen's program has identified a family of compounds
which shows broad spectrum antibacterial activity, and is efficacious against
drug resistant strains of STAPHYLOCOCCUS AUREUS, a major cause of bacterial
infections. From this family, one low molecular weight compound, ST41590, has
been selected for further development. ST41590 is a natural product extract and
is amenable to an efficient chemical synthesis.
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Initial pre-clinical data on ST41590 indicate that it may have a significant
therapeutic advantage over available antibiotics because of its broad spectrum
activity, rapid cidality and efficacy against pathogenic strains resistant to
current drugs.
ANTIVIRALS. High throughput functional screening has traditionally been
unavailable to antiviral drug discovery because the small genomes of viruses
produce few potential targets for therapeutic intervention. Furthermore, most of
the targets that have been identified are not fully characterized and are
difficult to incorporate into high throughput assays. ATLAS and SCAN overcome
these difficulties and enable Scriptgen to screen compounds against novel
targets in Hepatitis B virus and Hepatitis C virus. The Company has identified
four families of compounds that have shown antiviral activity against Hepatitis
B virus. One low molecular weight compound, ST135647, has been selected for
further development. The remaining compounds are being analyzed for their
suitability as drug candidates.
Initial pre-clinical data on ST135647 indicate that it may have several
advantages over drug candidates known by the Company to be in development
("Known Drug Candidates"), including the following:
- NOVEL TARGET. ST135647 acts on a novel target of the Hepatitis B virus
that is critical for replication. The Company believes that ST135647 will
overcome problems of resistance that have already emerged with some of the
Known Drug Candidates that act on different viral targets.
- EFFICACIOUS. ST135647 has been shown in preliminary tests to be a potent
inhibitor of viral replication at concentrations that have shown minimal
toxic effects to the human liver cells in which the virus replicates. Some
of the Known Drug Candidates have shown limited efficacy or undesirable
side effects.
- POTENTIAL FOR COMBINATION THERAPY. ST135647 may act beneficially in
combination with some of Known Drug Candidates because of its novel site
of action. Many experts agree that multi-drug therapy represents the most
effective approach for treatment of Hepatitis B virus.
PATENTS AND PROPRIETARY TECHNOLOGY
Patent protection for the Company's technologies, targets and compounds is
important to its business. The Company has filed certain U.S. and foreign patent
applications and has certain issued U.S. patents and allowed U.S. patent
applications. To date, no foreign patents have been issued and no foreign patent
applications have been allowed. The Company usually employs the Patent
Cooperation Treaty ("PCT") to file foreign counterparts to its pending U.S.
patent applications. Under the PCT it is possible to defer the filing of
national patent applications in the jurisdictions in which such protection is
being sought until 30 months after the filing date of the corresponding U.S.
patent application, at which time the Company has the option of filing the
national phase patent applications that would be prosecuted according to the
procedures and practices of the respective national patent offices.
Two of the Company's U.S. patents and one of its allowed U.S. patent
applications claim aspects of the Company's ATLAS screening technology. The two
issued U.S. patents and the allowed U.S. patent application in the ATLAS field
claim certain methods whereby a target protein is incubated in the presence and
absence of several test ligands, and evaluated based on the extent to which the
target protein is folded, unfolded, or intermediately folded in the absence or
presence of the test ligands. The Company also has a notice of allowance for a
patent application that claims a certain fungal target protein complex, known as
TAF, which is important in certain gene transcription events in the model yeast
S. CEREVISIAE. This fungal protein complex may be relevant to the Company's
research because it may be used as a target protein in the Company's screening
technologies in order to identify compounds that interfere with the fungal life
cycle, and to confirm the biological activity of such compounds. A notice of
allowance is issued by the USPTO after a patent application has been examined
and it has been found that the applicant is entitled to a patent. The notice
calls for payment of a specified sum constituting the government issue fee which
must be paid within three months. The patent is generally granted (issued)
several months after the issue fee has been paid. The Company's issued patents
expire between 2013 and 2015.
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The Company's success will depend in part on its ability to obtain U.S. and
foreign patent protection for its drug candidates and the components of its
technology platform, preserve its trade secrets and operate without infringing
the proprietary rights of third parties. Because of the length of time and
expense associated with bringing new drug candidates through the development and
regulatory approval process to the marketplace, drug discovery companies have
traditionally placed considerable importance on obtaining patent and trade
secret protection for significant new technologies, products and processes. The
Company's policy is to make diligent efforts to protect its screening
technologies, targets, compounds, and certain other technology by, among other
things, filing, or causing to be filed on its behalf, patent applications in the
USPTO, and elsewhere where the Company deems appropriate and cost effective.
There can be no assurance that patents will be granted with respect to any of
the Company's or its licensors' patent applications which are pending or may be
filed in the future. Further, there can be no assurance that any rights the
Company may have under issued patents will provide the Company with significant
protection against competitive products or otherwise be commercially viable.
Legal standards relating to the validity of patents covering pharmaceutical and
biotechnological inventions and the scope of claims made under such patents are
still developing, and thus there is no consistent policy in this regard. The
patent position of a drug discovery company such as Scriptgen is highly
uncertain and involves complex legal and factual questions. There can be no
assurance that any existing or future patents issued to, or licensed by, the
Company will not subsequently be challenged, infringed upon, invalidated or
circumvented by others. In addition, patents may have been granted, or may be
granted, to others covering processes or products that are necessary or useful
to the development of the Company's technologies, targets and compounds. If any
of the Company's technologies, targets or compounds are found to infringe upon
the patents or other intellectual property of others, the Company's ability to
develop and commercialize its technologies, targets and compounds could be
severely restricted or prohibited. In such event, the Company may be required to
obtain licenses from third parties to utilize their patents or other proprietary
rights. There can be no assurance that the Company will be able to obtain such
licenses on acceptable terms, or at all. There is significant litigation in the
pharmaceutical and biotechnology industry regarding patents and other
proprietary rights. If the Company becomes involved in litigation regarding its
proprietary rights or the rights of others, the Company could incur substantial
costs in defending infringement claims, obtaining licenses, engaging in
interference and opposition proceedings or other challenges to its patent rights
or other proprietary rights, or in bringing such proceedings or enforcing any
proprietary rights against third parties. The Company's inability to obtain
necessary licenses or its involvement in proceedings concerning proprietary
rights could have a material adverse effect on the business, operating results
and financial condition of the Company.
The Company initially applies for patents on many of its inventions by
filing a provisional patent application in the USPTO. The Uruguay Round
Agreements Act (effective June 8, 1995) established a domestic priority system
and a mechanism to enable those seeking to quickly and inexpensively file
provisional applications for their inventions. Unlike regular (non-provisional)
U.S. patent applications, provisional applications do not need claims and no
oath or declaration is required. The specification of the provisional
application must describe the invention in sufficient detail to enable those
skilled in the art to practice the invention. Applicants are entitled to claim
the benefit of the priority of their provisional application in a subsequently
filed regular (non-provisional) U.S. patent application. The domestic priority
period (one year) during which the provisional patent application is pending
does not count in the measurement of the 20-year U.S. patent term. Thus, by
filing provisional applications domestic applicants are placed on an equal
footing with foreign applicants with respect to the patent term and can also
file initial patent applications for their inventions quickly and inexpensively.
Provisional applications are automatically abandoned by the USPTO 12 months
after their filing date. The Company generally converts those provisional
applications that cover subject matter of continuing commercial interest to the
Company into regular U.S. patent applications (which claim the priority of the
underlying provisional application) before the end of the 12-month priority
period.
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The Company has filed a provisional patent application claiming certain
aspects of its GATE technology. The Company is aware that another party has
applied for a patent for certain technologies which may overlap with or dominate
parts of the Company's GATE technology. The Company is in negotiations with such
party to acquire a license of such party's rights covered by its patent
application. If the Company determines to seek to obtain such license, there can
be no assurance that the Company will be able to obtain such a license on terms
favorable to the Company, if at all. Further, if the claims in the two
aforementioned patent applications are found to be sufficiently similar, the
USPTO may declare an interference proceeding which may result in the Company's
patent application being rejected. Even if the interference proceeding is
decided favorably to the Company, participation in the proceeding would likely
be costly to the Company. Whether or not an interference proceeding is declared,
the other party may be issued a patent which claims all or part of the Company's
GATE technology. If the Company determines to pursue such license and is
unsuccessful, the Company could be severely restricted or barred from using,
manufacturing and selling products resulting from the Company's GATE technology.
Such restriction or prohibition, or the failure to obtain such license could
have a material adverse effect on the Company's business, operating results and
financial condition.
The Company has filed a provisional patent application claiming certain
antitumor drug candidates. The Company has acquired certain rights in this
invention pursuant to an assignment agreement with two of the inventors (the
"Assignors"), Michael Palfreyman, Ph.D., D.Sc., and Mark Wuonola, Ph.D. The
Company is pursuing parallel assignment agreements with the remaining four
inventors, three of whom are affiliated with academic institutions. Should it be
necessary for these inventors to assign their rights to their academic
institutions, the Company would seek to obtain exclusive licenses to these
institutions' rights in the invention; however, there can be no assurance that
the Company will be able to obtain such licenses on terms favorable to the
Company, if at all.
The Company and Boston University are joint owners of two U.S. patent
applications and an international patent application covering improvements to
the synthesis of ST41590. The Company has obtained an exclusive license to
Boston University's rights under such patent applications.
The Company acquired certain rights in its ATLAS screening technology
pursuant to an Assignment Agreement with the two inventors of ATLAS (the
"Assignors"), Andrew A. Pakula, Ph.D. and James Bowie, Ph.D. Dr. Pakula is the
Company's Director of Drug Discovery Technologies and Dr. Bowie is a consultant
to the Company. Pursuant to the terms of the Assignment Agreement, as amended,
the Company is obligated to pay to the Assignors certain royalties on amounts
received by the Company from (i) net sales of products developed using ATLAS,
(ii) royalties from licenses granting third parties the right to make, use or
sell products developed using ATLAS and (iii) royalties from licenses granting
third parties the right to use ATLAS.
In addition to patent protection, the Company relies on trade secrets,
know-how and technological advances which it seeks to protect, in part, by
confidentiality agreements with its collaborative partners, employees, advisors
and consultants. There can be no assurance that these confidentiality agreements
will not be breached, that the Company would have adequate remedies for any such
breach, or that the Company's trade secrets, know-how and technological advances
will not otherwise become known or be independently discovered by others.
GOVERNMENT REGULATION
OVERVIEW
Regulations imposed by United States federal, state and local authorities,
as well as their counterparts in other countries, are a significant factor in
the conduct of the research, development, manufacturing and marketing activities
for the Company's potential drug candidates.
The development, manufacture and marketing of drugs developed by the Company
or its collaborative partners are subject to regulation by numerous governmental
agencies in the United States, principally the
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FDA, by state and local governments, and in some instances by foreign
governments. Pursuant to the Federal Food, Drug, and Cosmetic Act and the
regulations promulgated thereunder (the "FDC Act"), the FDA regulates the
pre-clinical and clinical trials, safety, effectiveness, manufacture, labeling,
storage, distribution and promotion of drugs. Noncompliance with applicable
requirements can result in, among other things, fines, injunctions, recall or
seizure of products, total or partial suspension of production, refusals to
permit products to be imported into or exported out of the United States,
failure of the government to grant approval for new drugs or antibiotic
products, withdrawal of marketing approvals, denial or suspension of government
contracts and criminal prosecution.
Product development and approval within the FDA regulatory framework usually
take a significant number of years, involve the expenditure of substantial
capital resources and are uncertain. Moreover, there is no assurance that the
current regulatory framework will not change or that additional regulatory
standards will not be promulgated at any stage of the Company's or its
collaborative partners' product development that may adversely affect approval,
delay the submission or review of an application or require additional
expenditures by the Company.
U.S. REGULATORY PROCESS
New drugs must be found safe and effective by the FDA through the approval
of a new drug application ("NDA") pursuant to section 505 of the FDC Act prior
to marketing in interstate commerce. Prior to this, the pre-clinical data
(animal and IN VITRO laboratory data) and clinical data (human data) are
regulated by the FDA pursuant to regulations and the issuance and continuing FDA
oversight of an investigational new drug application ("IND"). Post-NDA approval,
the FDA maintains continuing regulatory control over the marketing of approved
drugs, regulating most closely manufacturing, promotional activities and the
appropriate submission of adverse reaction information. Any material changes to
the indication for use, other labeling or manufacturing, require FDA approval of
a supplement to the NDA prior to any such change being made.
Before testing in the United States of any compounds with potential
therapeutic value in human test subjects may begin, stringent government
requirements for pre-clinical data must be satisfied. Pre-clinical testing
includes both IN VITRO and IN VIVO laboratory evaluation and characterization of
the safety and efficacy of a drug and its formulation. Laboratories involved in
pre-clinical testing must comply with FDA regulations regarding Good Laboratory
Practices. Pre-clinical testing results obtained from studies in several animal
species, as well as from IN VITRO studies, are submitted to the FDA as part of
the IND and are reviewed by the FDA prior to the commencement of human clinical
trials. These pre-clinical data must provide an adequate basis for evaluating
both the safety and the scientific rationale for the initial (Phase I) studies
in human volunteers. Unless the FDA objects to an IND, the IND becomes effective
30 days following its receipt by the FDA. There can be no assurance that
submission of an IND will result in the commencement of human clinical trials.
Moreover, once trials have commenced, the FDA may stop the trials by placing
them on "clinical hold" because of concerns about, for example, the safety of
the product being tested. Such clinical holds either before the clinical studies
commence or after commencement may result in either a temporary halt to the
study or abandonment of any further work whatsoever.
Clinical trials, which involve the administration of the investigational
drug to healthy volunteers or to patients under the supervision of a qualified
principal investigator, are typically conducted in three sequential phases,
although the phases may overlap with one another. Clinical trials must be
conducted in accordance with the FDA's Good Clinical Practices, under protocols
that detail the objectives of the study, the parameters to be used to monitor
safety and the efficacy criteria to be evaluated. Each protocol must be
submitted to the FDA as part of the IND. Further, each clinical study must be
conducted under the auspices of an independent Institutional Review Board (the
"IRB") at the institution where the study will be conducted. The IRB will
consider, among other things, ethical factors, the safety of human subjects,
informed consent requirements and the possible liability of the institution.
Compounds must be formulated according to the FDA's current Good Manufacturing
Practice regulations ("cGMP").
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Phase I clinical trials represent the initial administration of the
investigational drug to a small group of healthy human subjects or to a group of
selected patients with the targeted disease or disorder. The goal of Phase I
clinical trials is typically to test for safety (adverse effects), dose
tolerance, absorption, biodistribution, metabolism, excretion and clinical
pharmacology and, if possible, to gain early evidence regarding efficacy.
Phase II clinical trials involve a small sample of the actual intended
patient population and seek to assess the efficacy of the drug for specific
targeted indications, to determine dose tolerance and the optimal dose range and
to gather additional information relating to safety and potential adverse
effects.
Once an investigational drug is found to have some efficacy and an
acceptable safety profile in the targeted patient population, Phase III clinical
trials are initiated to confirm the further clinical safety and efficacy of the
investigational drug in a broader sample of the general patient population at
geographically dispersed study sites in order to determine the overall
risk-benefit ratio of the drug and to provide an adequate basis for product
labeling. The Phase III clinical development program consists of expanded,
large-scale studies of patients with the target disease or disorder to obtain
definitive statistical evidence of the efficacy and safety of the proposed
product and dosage regimen. These studies may include investigation of the
effects in subpopulations of patients, such as the elderly, children, etc. All
of the phases of clinical studies must be conducted in conformance with the
FDA's investigational new drug and bioresearch monitoring regulations (such as
IRB, informed consent and sponsor monitoring requirements).
All data obtained from a comprehensive development program including
research and product development, manufacturing, pre-clinical and clinical
trials and related information are submitted in an NDA to the FDA and the
corresponding agencies in other countries for review and approval. In addition
to reports of the trials conducted under the IND application, the NDA includes
information pertaining to the preparation of the new drug, analytical methods,
details of the manufacture of finished products and proposed product packaging
and labeling. Although the FDC Act requires the FDA to review NDAs within 180
days of their filing, in practice longer times are usually required. The FDA
also frequently requests that additional information be submitted, requiring
significant additional review time. As a result of the Prescription Drug User
Fee Act, the FDA has made commitments to speed the review of NDAs and NDA
Supplements. While implementation of this by the FDA has sped up certain
decision-making by the FDA, it has not, with regard to many drugs, sped up the
overall development and approval time. Any proposed product of the Company
likely would be subject to demanding and time-consuming NDA approval procedures
in virtually all countries where marketing of the products is intended. These
regulations define not only the form and content of safety and efficacy data
regarding the proposed product but also impose specific requirements regarding
manufacture of the product, quality assurance, packaging, storage, documentation
and record keeping, labeling, advertising and marketing procedures.
Timetables for the various phases of clinical trials and NDA approval cannot
be predicted with any certainty. The Company, its collaborative partners or the
FDA may suspend clinical trials at any time if it is believed that individuals
participating in such trials are being exposed to unacceptable health risks.
Even assuming that clinical trials are completed and that an NDA is submitted to
the FDA, there can be no assurance that the NDA will be reviewed by the FDA in a
timely manner or that once reviewed, the NDA will be approved. The approval
process is affected by a number of factors, including the severity of the
targeted indications, the availability of alternative treatments and the risks
and benefits demonstrated in clinical trials. The Company's ability to market
its products successfully is further dependent on the patent and marketing
exclusivity rights of a competitor's products.
Among the other requirements for drug product approval is the requirement
that the manufacturer conform to the FDA's cGMP regulations. Manufacturers also
must continue to expend time, money and effort in product, record keeping and
quality control to assure that the product meets applicable specifications and
other requirements. The manufacturer also has obligations to report post
marketing adverse drug experiences to the FDA. The FDA periodically inspects
manufacturing facilities in the United
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States to assure compliance with applicable cGMP and other regulatory
requirements. Failure of the Company (or manufacturer of a Company product) to
comply with cGMP regulations or other FDA regulatory requirements could have a
material adverse effect on the Company and result in one or more regulatory
actions affecting either the product, the Company and its officials, or both.
Completing the multitude of steps necessary before marketing can begin
requires the expenditure of considerable resources and can consume a long period
of time. Delay or failure in obtaining the required approvals or clearances by
the Company, its collaborative partners or its licensees would have an adverse
effect on the ability of the Company to generate sales or royalty revenue. In
addition, the impact of new or changed laws or regulations cannot be predicted.
There can be no assurance that the regulatory framework described above will
not change or that additional regulations will not arise that may affect
approval of or delay an IND or an NDA. In addition, there can be no assurance
that there will not be a change in currently accepted scientific standards that
may affect the ultimate approval of such products. Moreover, because the
Company's present collaborative partners are, and it is expected that the
Company's future collaborative partners may be, primarily responsible for
pre-clinical and clinical trials, regulatory approvals, manufacturing and
commercialization of drugs, the ability to obtain and the timing of regulatory
approvals are not within the control of the Company. Should the collaborative
partners develop regulatory problems, for example, cGMP violations, such
problems may adversely impact upon the Company's resources.
Prior to the commencement of marketing a product in other countries,
approval by the regulatory agencies in such countries is required, whether or
not FDA approval has been obtained for such product. The requirements governing
the conduct of clinical trials and product approvals vary widely from country to
country, and the time required for approval may be longer or shorter than the
time required for FDA approval. Although there are some procedures for unified
filings for certain European countries, in general, each country has its own
procedures and requirements.
The Company is also subject to regulation under other federal laws and
regulation under state and local laws, including laws relating to occupational
safety, laboratory practices, controlled substances, the use, handling and
disposition of radioactive materials, environmental protection and hazardous
materials. Although the Company believes that its safety procedures for handling
and disposing of radioactive compounds and other hazardous materials used in its
research and development activities comply with the standards prescribed by
federal, state and local regulations, the risk of accidental contamination or
injury from these materials cannot be completely eliminated. In the event of any
such accident, the Company could be held liable for any damages that result and
any such liability could exceed the resources of the Company.
COMPETITION
Competition among drug discovery companies and pharmaceutical and
biotechnology companies which are involved in drug discovery is intense. Because
the Company's technology platform incorporates a number of different
technologies, the Company competes in many areas, including target
identification and validation, assay development and high throughput screening.
The Company competes directly against other drug discovery companies, the
research departments of pharmaceutical and biotechnology companies, other
commercial enterprises, government agencies and numerous academic and research
institutions. Such companies and other entities are conducting research in
various areas which constitute portions of the Company's technology platform,
either on their own or in collaboration with others. There can be no assurance
that drug discovery companies which currently compete with the Company in
specific areas will not merge or enter into joint ventures or other alliances
with one or more other such companies and become substantial multi-point
competitors or that the Company's collaborators will not assemble their own
competing drug discovery technologies. Genomics and combinatorial chemistry
companies, among others, may also expand their business to include compound
screening or screen development, either alone or pursuant to alliances with
others. The Company anticipates that it will face increased competition in the
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future as new companies enter the market and advanced technologies, including
more sophisticated information technologies, become available. The Company's
drug discovery techologies, in particular GATE, ATLAS and SCAN, may be rendered
obsolete or uneconomical by advances in existing technological approaches or the
development of different approaches by one or more of the Company's current or
future competitors. In particular, the Company's technology faces intense
competition from drug discovery companies engaged in gene sequencing, functional
genomics, and differential gene expression technology in the area of target
validation, and companies engaged in high throughput screening. Many of the
Company's competitors have greater financial and personnel resources, and more
experience in research and development, than the Company. There can be no
assurance that the Company's competitors will not succeed in developing
technologies and drugs that are more effective or less costly than any which are
being developed by the Company or which would render the Company's technology
and any future drugs obsolete and noncompetitive.
In addition, some of the Company's competitors have greater experience than
the Company in conducting pre-clinical and clinical trials and obtaining FDA and
other regulatory approvals. Accordingly, the Company's competitors may succeed
in obtaining FDA or other regulatory approvals for competing drug candidates
more rapidly than the Company. Companies that complete clinical trials, obtain
required regulatory agency approvals and commence commercial sale of their
drugs, before their competitors may achieve a significant competitive advantage,
including certain patent and FDA marketing exclusivity rights that would delay
the Company's ability to market certain products. There can be no assurance that
drugs, if any, resulting from the Company's internal development efforts or the
joint efforts of the Company and its collaborators will be able to compete
successfully with competitors' existing products or products under development
or that they will obtain regulatory approval in the United States or elsewhere.
EMPLOYEES
As of December 31, 1997, the Company had 51 full time employees, 43 of whom
were engaged in research and development and eight of whom were engaged in
management, administration and finance. Doctorates are held by approximately 38%
of the Company's full time employees. In addition, the Company employs
individuals on a rotating, full time basis to fill a variety of research
positions. The Company's policy is to have each of its directors, officers,
employees and advisors sign an agreement which prohibits the disclosure of
confidential information to anyone outside the Company and requires disclosure
and assignment to the Company of ideas, developments, discoveries and inventions
made by the employee.
The Company's employees are not covered by a collective bargaining
agreement. The Company has never experienced an employment-related work stoppage
and considers its employee relations to be good.
PROPERTIES
The Company's headquarters and research and development facilities are
located in a 15,440 square foot facility in Medford, Massachusetts. The Company
has leased the premises through October 30, 1998. The Company plans to lease
approximately 85,000 square feet of additional office and laboratory space
within the next twelve months to support expansion of its programs.
LEGAL PROCEEDINGS
The Company is not a party to any material legal proceedings.
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MANAGEMENT
EXECUTIVE OFFICERS, DIRECTORS AND KEY EMPLOYEES
The following sets forth the name, ages and positions of the executive
officers, directors and key employees of the Company:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ----------------------------------------------------- --- -----------------------------------------------------
<S> <C> <C>
EXECUTIVE OFFICERS AND DIRECTORS:
Mark T. Weedon....................................... 46 President, Chief Executive Officer and Director
Michael G. Palfreyman, M.R.
Pharm. S., Ph.D., D.Sc............................. 52 Vice President of Research and Development
Michael W. Heslop.................................... 38 Vice President of Business Development
Karen A. Hamlin...................................... 38 Senior Director of Operations, Secretary and
Treasurer
Barry Weinberg(1).................................... 59 Chairman of the Board
David Baltimore, Ph.D.(1)............................ 59 Director
Allan R. Ferguson(2)................................. 55 Director
Jason S. Fisherman, M.D.(2).......................... 41 Director
KEY EMPLOYEES:
Jacob J. Clement, Ph.D............................... 53 Senior Director of Technology Development
Yibin Xiang, Ph.D.................................... 47 Director of Chemistry
Andrew A. Pakula, Ph.D............................... 40 Director of Drug Discovery Technologies
C. Richard Wobbe, Ph.D............................... 40 Director of Drug Discovery
</TABLE>
- --------------
(1) Member of Audit Committee
(2) Member of Compensation Committee
MARK T. WEEDON has been President, Chief Executive Officer and director of
the Company since August 1997. From 1987 to August 1997, Mr. Weedon held various
positions with Glaxo Wellcome plc, a pharmaceutical company, including Global
General Manager of OTC Operations (1995-August 1997), Director of Group
Licensing for the Wellcome Foundation plc (1993-1995) and President of Burroughs
Wellcome Inc. (Canada) (1990-1993). Mr. Weedon received a B.A. from the
University of Toronto and an M.B.A. from the University of Western Ontario.
MICHAEL G. PALFREYMAN, M.R. PHARM. S., PH.D., D.SC. joined the Company in
October 1994 as Vice President of Research and Development. From 1976 until
October 1994, Dr. Palfreyman held various positions with Marion Merrell Dow Inc.
and its predecessor, the Merrell Dow Research Institute, including Vice
President of Marion Merrell Dow Research North America (1992 to October 1994),
Vice President of Global Biological and Scientific Affairs (1991-1992) and
Director of Pharmacological Sciences (1987-1991). Dr. Palfreyman received his
undergraduate, Ph.D. and D.Sc. degrees from the University of Nottingham,
England, from which he also holds an advanced degree in Pharmacy.
MICHAEL W. HESLOP joined the Company in December 1997 as Vice President of
Business Development. From 1982 to December 1997, Mr. Heslop held various
Marketing and Sales positions at Glaxo Wellcome Inc., including Director of
Marketing-Anti-Infectives (1995-December 1997) and Director of Marketing-
Central Nervous System (1994-1995), and Director of Marketing-Corporate and
National Sales Manager for Burroughs Wellcome Inc. (Canada) (1990-1994). Mr.
Heslop received a B.S. in Biology from McGill University and an M.B.A. from
Concordia University.
KAREN A. HAMLIN joined the Company in December 1992 and serves as Senior
Director of Operations, Secretary and Treasurer. From December 1988 until
December 1992, Ms. Hamlin was Director of Operations at Transkaryotic Therapies,
Inc., a biotechnology company. From January 1987 to December 1988, Ms. Hamlin
was responsible for Laboratory Operations and Regulatory Compliance at Cambridge
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Research Laboratory, a division of Ortho-Clinical Diagnostics, an affiliate of
Johnson & Johnson. Ms. Hamlin received a B.S. in Biology from St. Anselm College
and an M.S. in Biological Sciences from Rutgers University.
BARRY WEINBERG has served as Chairman of the Board of Directors of the
Company since September 1993. Mr. Weinberg was also the Company's acting
President and Chief Executive Officer from December 1995 until August 1997. Mr.
Weinberg was a co-founder and is currently President of CW Group, a venture
capital firm specializing in the health-care industry. Mr. Weinberg holds a B.S.
in Electrical Engineering from the Massachusetts Institute of Technology and an
M.B.A. from New York University. Mr. Weinberg serves as a director of AutoImmune
Inc. and CareAdvantage, Inc.
DAVID BALTIMORE, PH.D. has served as a director of the Company since August
1994. Since July 1994, Dr. Baltimore was the Ivan R. Cottrell Professor of
Molecular Biology at the Massachusetts Institute of Technology until October
1997 when he became President of California Institute of Technology. From 1990
until July 1994, Dr. Baltimore was a professor at Rockefeller University and
served as its president from 1990 until 1991. Dr. Baltimore founded the
Whitehead Institute at the Massachusetts Institute of Technology in 1982 and
served as its Director from 1982 until 1990. Dr. Baltimore received the Nobel
Prize in 1975 for his discovery of reverse transcriptase. Dr. Baltimore holds a
B.S. in Chemistry from Swarthmore College, and a Ph.D. from Rockefeller
University.
ALLAN R. FERGUSON has served as a director of the Company since September
1993. Since 1993, Mr. Ferguson has been a general partner of Atlas Venture, a
venture capital firm, and since 1991 he has served as the Managing General
Partner of the venture capital firm of Aspen Ventures. From 1986 to 1991 he
served as President of 3i Ventures, another venture capital firm. Mr. Ferguson
currently serves as a director of ArQule, Inc. and AutoImmune Inc. He received a
B.S. in Chemical Engineering from the University of Delaware.
JASON S. FISHERMAN, M.D. has served as a director of the Company since April
1995. Dr. Fisherman is a partner at Advent International Corporation, a venture
capital firm where he specializes in biotechnology and health-care companies.
From 1991 to 1994, Dr. Fisherman was Senior Director of Medical Research at
Enzon, Inc., a biopharmaceutical company. He currently serves as a director of
ILEX Oncology, Inc. and several private health-care companies. Dr. Fisherman
received a B.A. in Molecular Biophysics and Biochemistry from Yale University,
an M.D. from the University of Pennsylvania and an M.B.A. from the Wharton
School at the University of Pennsylvania.
JACOB J. CLEMENT, PH.D. joined the Company in March 1997 and serves as
Senior Director of Technology Development. From 1988 until March 1997, Dr.
Clement held various positions with Abbott Laboratories, including Director, New
Lead Discovery Area (1993-March 1997), Head, Antitumor Development Venture
(1992-1993) and Senior Project Leader, Anti-infectives Area (1991-1993). Dr.
Clement received a B.A. in Biology from St. Mary's University and an M.S. in
Microbiology from Roosevelt University and a Ph.D. and an M.S.P.H. from the
University of North Carolina. Dr. Clement conducted research and taught at the
University of Minnesota.
YIBIN XIANG, PH.D. joined the Company in October 1997 as Director of
Chemistry. From May 1993 until October 1997, Dr. Xiang held various positions
with Genetics Institute, including Senior Scientist and Head of Medicinal
Chemistry (October 1996-October 1997) and Principal Scientist and Head of
Medicinal Chemistry (1993-October 1996) in the Small Molecule Drug Discovery
department. From 1988 until 1993 Dr. Xiang worked in the Medicinal Chemistry
Department at Merck-Frosst in Canada as Research Fellow. Dr. Xiang received a
B.A. in Chemistry from Shanghai Medical University and a Ph.D. in Chemistry from
the Swiss Federal Polytechnic Institute. Dr. Xiang conducted postdoctoral
studies with Professor E.J. Corey at Harvard University.
ANDREW A. PAKULA, PH.D. joined the Company in February 1993 and serves as
Director of Drug Discovery Technologies. Dr. Pakula received a B.S. in Biology
and Chemistry from Tufts University and a
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Ph.D. in Biology from the Massachusetts Institute of Technology. From 1989 until
the end of 1992 Dr. Pakula conducted postdoctoral studies in the laboratory of
Dr. Melvin Simon at the California Institute of Technology, where he was a
Senior Postdoctoral Fellow.
C. RICHARD WOBBE, PH.D. joined the Company in August 1994 and serves as
Director of Drug Discovery. From July 1991 until August 1994, Dr. Wobbe was with
Merck Research Laboratories, where he developed assays for analyzing the
regulation of viral gene transcription. Dr. Wobbe received a B.S. in
Biochemistry from Centre College and a Ph.D. in Biochemistry from the University
of Tennessee. Dr. Wobbe conducted postdoctoral studies at Sloan-Kettering Cancer
Center and at Harvard University.
All directors hold office until the next meeting of the stockholders of the
Company and until their successors are elected and qualified. All directors were
elected to the Board of Directors pursuant to a stockholders' agreement, which
will terminate upon consummation of the Offering. Officers are appointed to
serve, at the discretion of the Board of Directors, until their successors are
appointed.
Pursuant to the terms of the stockholders' agreement which became effective
upon the closing of the BioChem Offering, BioChem has the right to designate one
member of the Board of Directors. Such stockholders' agreement also requires
certain stockholders to vote their shares of Common Stock in favor of such
nominee at any meeting of stockholders for the election of directors. BioChem's
right to designate a director will terminate in the event that BioChem and its
permitted transferees own less than 10% of the Series D Preferred Stock and any
Common Stock issued upon conversion of such stock, or December 17, 2007. It is
expected that following the completion of the Offering, the Board of Directors
will be increased to six members and a designee of BioChem will be elected to
the Board of Directors. See "Certain Transactions--BioChem Offering."
The Board of Directors has established an Audit Committee composed of Dr.
Baltimore and Mr. Weinberg and a Compensation Committee composed of Mr. Ferguson
and Dr. Fisherman. The Audit Committee is charged with reviewing the Company's
annual audit and meeting with the Company's independent accountants to review
the Company's internal controls and financial management practices. The
Compensation Committee recommends to the Board of Directors the compensation for
the Company's key employees.
SCIENTIFIC ADVISORY BOARD
The Company has established a Scientific Advisory Board consisting of twelve
members with experience in fungal, bacterial and viral gene expression,
structural biology, pharmacology and drug design. Its members work closely with
the Company's management and scientists, assess the scientific and medical
direction of the Company, review research and development progress, and evaluate
new technologies that relate to the Company's development. The Scientific
Advisory Board meets as a group two times per year and members are available
individually on an ongoing basis. The co-chairmen of the Scientific Advisory
Board are the two founding scientists of the Company, Michael R. Green, M.D.,
Ph.D., and Peter S. Kim, Ph.D.
All of the Company's Scientific Advisory Board members have signed
consulting agreements with the Company and have either purchased shares of
Common Stock or been granted options to purchase Common Stock.
The members of Scriptgen's Scientific Advisory Board are:
MICHAEL R. GREEN, M.D., PH.D. is a Professor of Biochemistry and Molecular
Biology at the University of Massachusetts Medical Center and an Investigator at
the Howard Hughes Medical Institute. Dr. Green's expertise is in the
transcriptional control of viral, fungal and human gene expression. He is a
recipient of the Presidential Young Investigator Award, the Searle Scholar Award
and the McKnight Award in Neurosciences. Dr. Green consults with the Company on
its antifungal and antiviral programs with specific emphasis on transcription
and its role in gene expression. Dr. Green received his B.S. in
44
<PAGE>
Biochemistry from the University of Wisconsin, Madison and his M.D. and Ph.D. in
Biochemistry from Washington University in St. Louis.
PETER S. KIM, PH.D. is a Member of the Whitehead Institute, a Professor of
Biology at the Massachusetts Institute of Technology and an Associate
Investigator at the Howard Hughes Medical Institute. Dr. Kim is also a member of
the National Academy of Sciences. Dr. Kim's expertise is in macromolecular
recognition, including the interaction between transcription factors, and in
protein design, protein folding and viral membrane fusion. He has received the
1994 Eli Lilly Award in Biological Chemistry from the American Chemical Society,
the 1994 DuPont Merck Award of the Protein Society and the 1993 National Academy
of Sciences Award in Molecular Biology. Dr. Kim consults with the Company on its
drug discovery programs focusing on structural biology and protein chemistry.
Dr. Kim received his A.B. in Chemistry from Cornell University and his Ph.D. in
Biochemistry from Stanford University.
THOMAS C. ALBER, PH.D. is a Professor of Molecular and Cell Biology at the
University of California, Berkeley. Dr. Alber is an expert in X-ray
crystallography and protein structure. He consults with the Company on its
affinity programs utilizing his expertise in protein structure/function
relationships. Dr. Alber received his B.A. in Chemistry from the University of
California, Santa Cruz and his Ph.D. in Biology from the Massachusetts Institute
of Technology.
STEPHEN K. BURLEY, M.D., D. PHIL. is an investigator at the Howard Hughes
Medical Institute. Dr. Burley is an expert in structural biology. He consults
with the Company on the biochemistry and molecular biology of fungal
transcription factors and in certain target areas. Dr. Burley received his B.S.
in Physics from the University of Western Ontario and his D. Phil. from Oxford
University and his M.D. from Harvard Medical School.
FRED E. COHEN, M.D., D. PHIL. is a Professor of Medicine and Pharmaceutical
Chemistry at the University of California, San Francisco. He is an expert in the
molecular modeling of low molecular weight drugs and their interactions with
macromolecules. Dr. Cohen consults with the Company on pharmaceutical drug
design and in molecular modeling. Dr. Cohen was a Rhodes Scholar and received
his B.S. in Molecular Biochemistry and Biophysics from Yale University, his M.D.
from Stanford University and his D. Phil. in Molecular Biophysics from Oxford
University.
DANIEL S. KEMP, PH.D. is a Professor of Chemistry at the Massachusetts
Institute of Technology. Dr. Kemp is an expert in the chemical synthesis of
peptides and proteins, protein structure and function and bio-organic chemistry.
He consults with the Company on organic and medicinal chemistry. Dr. Kemp
received his B.A. in Chemistry from Reed College and his Ph.D. in Organic
Chemistry from Harvard University.
DAVID M. LIVINGSTON, M.D. is a staff member at the Brigham and Women's
Hospital and the Dana-Farber Cancer Institute, where he was Director and
Physician-in-Chief from 1991 to 1995. Dr. Livingston also holds the Emil Frei
Professor of Medicine chair at Harvard Medical School. Dr. Livingston, an expert
in Oncology, specializes in tumor suppressor gene function and cell cycle
control. He consults with the Company on the clinical aspects of pharmaceutical
drug development. Dr. Livingston received his B.A. from Harvard University and
his M.D. from Tufts University of Medicine.
BERNARD MACH, M.D., PH.D. is a Professor of Genetics and Microbiology at the
University of Geneva Medical School in Geneva, Switzerland. Dr. Mach is a Member
of the French Academy. He is an expert in the molecular and genetic basis of
immune responses. Dr. Mach discovered and first reported cDNA cloning in 1975
and introduced and developed molecular genotyping of HLA in 1985. Dr. Mach
consults with the Company on its drug development programs with an emphasis on
gene expression and cellular immunology. Dr. Mach received his M.D. from the
University of Geneva and his Ph.D. from Rockefeller University.
CAROL PRIVES, PH.D. is a Professor at Columbia University. She is an expert
on p53 and other tumor suppressor proteins and their role in the regulation of
transcription. Dr. Prives consults with the Company
45
<PAGE>
on the selection of transcription based targets and their role in the cause of
disease. Dr. Prives received her B.Sc. and Ph.D. degrees in Biochemistry from
McGill University.
ROBERT T. SAUER, PH.D. is the Edwin C. Whitehead Professor of Biology and
the Associate Head of the Department of Biology at the Massachusetts Institute
of Technology. Dr. Sauer is also a member of the National Academy of Sciences.
He is an expert in protein structure determination through genetic selection
methodology. Dr. Sauer consults with the Company on ATLAS and SCAN, as well as
bacterial transcription and its role in genetic selection. Dr. Sauer received
his B.A. in Biophysics from Amherst College and his Ph.D. in Biochemistry from
Harvard University.
KEVIN STRUHL, PH.D. holds the David Wesley Gaiser Professorship in and is
the Acting Chairman of Biological Chemistry at the Harvard Medical School. Dr.
Struhl is an expert in transcriptional regulatory mechanisms in yeast and
functional relationships between yeast and human proteins. He developed early
methods for elucidating the relationships between protein structure and function
particularly as they relate to transcriptional regulation in yeast. Dr. Struhl
consults with the Company on its antifungal program with a focus on fungal
transcription and genetic selection. Dr. Struhl received his B.S. and M.S.
degrees in Biology from the Massachusetts Institute of Technology and his Ph.D.
in Biochemistry from Stanford University.
ALAN M. SUGAR, M.D. is a Professor of Medicine at Boston University School
of Medicine and the Director of the Clinical Center Laboratory at Boston Medical
Center. Dr. Sugar's expertise is in pre-clinical and clinical antifungal drug
development and the pathogenesis of fungal diseases. He consults with the
Company on its antifungal program, with an emphasis on microbiology, animal
modeling systems and clinical evaluation. Dr. Sugar received his M.D. from
Jefferson Medical College.
DIRECTOR COMPENSATION
David Baltimore receives $10,000 annually for being a director of the
Company. No other non-employee director receives any cash compensation. Barry
Weinberg, the Chairman of the Board of the Company, was granted stock options in
1996. See "--Stock Options."
EXECUTIVE COMPENSATION
The following table sets forth information concerning all cash and non-cash
compensation awarded to, earned by or paid to the Company's Chief Executive
Officer and the next most highly compensated executive officers for services
rendered to the Company during the fiscal year ended December 31, 1997 (the
"Named Executive Officers"). No other executive officer of the Company earned in
excess of $100,000 during 1997.
46
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
-------------------------------- -------------
OTHER SECURITIES ALL
ANNUAL UNDERLYING OTHER
COMPEN- OPTIONS/ COMPEN-
NAME AND PRINCIPAL POSITION SALARY BONUS SATION SARS SATION
- ------------------------------------------------------- ---------- --------- --------- ------------- ---------
<S> <C> <C> <C> <C> <C>
Mark T. Weedon......................................... $ 90,673 $ 0 $ 6,770(2) 339,558 $ 0
President and Chief
Executive Officer(1)
Barry Weinberg......................................... $ 0 $ 0 $ 0 0 $ 0
Acting President and Chief Executive
Officer and Chairman of the Board(1)
Michael G. Palfreyman.................................. $ 175,000 $ 0 $ 14,583(3) 16,262 $ 0
Vice President of Research
and Development
Karen A. Hamlin........................................ $ 107,906 $ 0 $ 0 5,041 $ 0
Senior Director of Operations,
Secretary and Treasurer
</TABLE>
- --------------
(1) Mark T. Weedon became President and Chief Executive Officer of the Company
in August 1997. Mr. Weinberg acted as the Company's President and Chief
Executive Officer from December 1995 to August 1997. See "--Employment
Agreements."
(2) Represents reimbursement of relocation expenses of $6,770.
(3) Represents a housing allowance of $14,583.
EMPLOYMENT AGREEMENTS
In June 1997, the Company entered into an employment agreement with Mark T.
Weedon, President and Chief Executive Officer of the Company, which may be
terminated by either party upon 30 days' notice. Pursuant to such agreement, Mr.
Weedon receives an annual base salary of $230,000, subject to a review at the
end of his first year of employment. Also pursuant to such agreement, Mr. Weedon
will receive a $25,000 bonus upon the closing of the Offering and a guaranteed
$25,000 bonus no later than the first anniversary of his employment with the
Company. Pursuant to his employment agreement, Mr. Weedon was awarded options to
purchase 339,558 shares of Common Stock exercisable at $0.15 per share. Such
options vest over the first four years of his employment with the Company at the
rate of 1/48th of such shares each month, provided that all options will vest if
the Company is sold for a purchase price of at least $15.37 per share. The
options are immediately exercisable, although the shares of Common Stock issued
upon exercise are restricted, and remain subject to repurchase by the Company,
until such time as the corresponding options vest. Each vested option is
exercisable at any time after the date of vesting up until one year following
Mr. Weedon's termination of employment with the Company. Pursuant to his
employment agreement, Mr. Weedon will be reimbursed for relocation and other
expenses incurred as a result of his commencement of employment with the
Company, which are expected to total approximately $50,000. In the event that
Mr. Weedon's employment is terminated without cause during the first year of his
employment with the Company, he will continue to receive his then-current salary
and benefits for the shorter of nine months or the period during which he
remains unemployed. In the event that Mr. Weedon's employment is terminated
without cause during the second year of his employment with the Company, he will
continue to receive his then-current salary and benefits for the shorter of six
months or the period during which he remains unemployed. In the event that Mr.
Weedon's employment is terminated after his second year of employment with the
Company, he will continue to receive his then-current salary and benefits for
the shorter of four months or the period during which he remains unemployed.
47
<PAGE>
In September 1994, the Company entered into an employment agreement with Dr.
Michael G. Palfreyman, Vice President of Research and Development for the
Company. Dr. Palfreyman's employment agreement provides for the payment of an
annual base salary of $175,000 and an annual performance bonus of up to 20% of
his annual salary as of January of such year. Pursuant to his employment
agreement, Dr. Palfreyman was awarded options to purchase 53,666 shares of
Common Stock exercisable at $0.15 per share. Twenty-five percent of such options
vested in September 1995 and the remaining shares vest in equal monthly
installments through September 1998. Pursuant to his employment agreement, Dr.
Palfreyman was reimbursed for relocation expenses aggregating approximately
$38,000 and temporary living expenses aggregating approximately $12,000. Dr.
Palfreyman also received housing allowances of approximately $21,000, $18,000
and $15,000 in 1995, 1996 and 1997, respectively, and he will receive a $6,000
housing allowance for 1998. Dr. Palfreyman also received a one-time cash payment
of $30,000 as compensation for lost bonus from his previous employer. In the
event that Dr. Palfreyman's employment is terminated without cause, he will be
entitled to severance payments equal to three times his then-current monthly
base salary.
In November 1997, the Company entered into an employment agreement with
Michael W. Heslop, Vice President of Business Development for the Company. Mr.
Heslop's employment agreement provides for the payment of an annual base salary
of $165,000 and an annual performance bonus of up to 20% of his annual salary as
of January of such year. Pursuant to his employment agreement, Mr. Heslop was
awarded options to purchase 73,181 shares of Common Stock exercisable at $8.76
per share. Twenty-five percent of such options will vest in November 1998 and
the remaining shares will thereafter vest in equal monthly installments through
November 2001. Mr. Heslop also received a one-time cash payment of $40,000 as
compensation for lost bonus from his previous employer. Pursuant to his
employment agreement, Mr. Heslop will also be reimbursed for relocation and
temporary living expenses which are expected to total approximately $22,000.
In December 1992, the Company entered into an employment agreement with
Karen A. Hamlin, Senior Director of Operations, Secretary and Treasurer of the
Company. Ms. Hamlin's employment agreement provides for the payment of an annual
base salary of $75,000. Pursuant to her employment agreement, Ms. Hamlin was
awarded 11,384 shares of restricted Common Stock at a price of $0.03 per share.
Of such shares, 1,138 vested immediately, twenty-five percent of the remaining
shares vested in December 1993, and the remaining shares vested in equal monthly
installments through December 1996. In the event that Ms. Hamlin's employment is
terminated without cause at any time, she will be entitled to severance payments
equal to six times her then-current monthly base salary.
STOCK OPTIONS
The following table sets forth certain summary information concerning
individual grants of stock options made during the year ended December 31, 1997
to each of the Named Executive Officers:
48
<PAGE>
OPTION GRANTS IN YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
POTENTIAL
REALIZABLE VALUE
INDIVIDUAL GRANTS AT ASSUMED
-------------------------------------------------- ANNUAL RATES OF
NUMBER OF % OF TOTAL STOCK PRICE
SHARES OPTIONS EXERCISE APPRECIATION FOR
UNDERLYING GRANTED TO OR BASE OPTION TERM(1)
OPTIONS EMPLOYEES PRICE PER EXPIRATION ----------------------------------------
NAME GRANTED IN 1997(2) SHARE DATE 0% 5% 10%
- ------------------------ ----------- ----------- ----------- ----------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Mark T. Weedon.......... 339,558 60.9% $ 0.15 8/11/07 $ 2,349,741 $ 3,859,513 $ 6,175,799
Barry Weinberg.......... 0 0% -- -- -- -- --
Michael G. Palfreyman... 16,262 2.9% $ 0.15 6/18/07 112,533 184,839 295,769
Karen A. Hamlin......... 2,602 0.5% $ 0.15 6/18/07 18,006 29,575 47,325
2,439 0.4% $ 8.76 12/5/07 -- 13,437 34,051
</TABLE>
- --------------
(1) These amounts represent assumed rates of appreciation in the price of the
Company's Common Stock during the terms of the options in accordance with
rates specified in applicable federal securities regulations. Actual gains,
if any, on stock option exercises will depend on the future price of the
Common Stock and overall stock market conditions. There is no representation
that the rates of appreciation reflected in this table will be achieved.
(2) Based on an aggregate of options to purchase 557,425 shares of Common Stock
granted to employees in 1997, including options granted to the Named
Executive Officers.
The following table sets forth at December 31, 1997 the number of options
and the value of unexercised options held by each of the Named Executive
Officers:
AGGREGATED YEAR END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SHARES SUBJECT
TO VALUE OF UNEXERCISED
UNEXERCISED OPTIONS AT IN-THE-MONEY
YEAR END OPTIONS AT YEAR END(1)
-------------------------- --------------------------
SHARES ACQUIRED VALUE
NAME OR EXERCISED REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- --------------- --------------- --------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Mark T.
Weedon....... 33,956 $ 234,976 305,602 -- $3,621,384 --
Barry
Weinberg..... 48,787 97,574 -- -- -- --
Michael G.
Palfreyman... -- -- 68,793 77,568 814,939 $ 918,892
Karen A.
Hamlin....... -- -- 1,306 6,663 15,466 57,932
</TABLE>
- --------------
(1) The dollar values have been calculated by determining the difference between
the fair market value of the securities underlying the options at December
31, 1997 and the exercise prices of the options. Solely for purposes of
determining the value of options at December 31, 1997, the Company has
assumed that the fair market value of shares of Common Stock issuable upon
exercise of options was $12.00 per share, the assumed initial public
offering price, since the Common Stock was not traded in an established
market prior to the Offering.
49
<PAGE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Board of Directors established a Compensation Committee in December 1997
composed of Mr. Ferguson and Dr. Fisherman. Prior to that time, matters
concerning executive officer compensation were addressed by the Board of
Directors. Mr. Ferguson is a general partner of Atlas Venture, and Dr. Fisherman
is a partner of Advent International Corporation. See "Certain
Transactions--Private Placements of Securities" and "Principal Stockholders."
EMPLOYEE BENEFIT PLANS
1997 EQUITY INCENTIVE PLAN
The Company adopted the 1997 Plan in December 1997. An aggregate of
1,700,000 shares of the Company's Common Stock have been reserved for issuance
pursuant to the exercise of stock awards granted to employees, directors,
consultants and advisers under the 1997 Plan (the "Stock Awards"). The 1997 Plan
will terminate in December 2007, unless sooner terminated by the Board of
Directors.
The 1997 Plan permits the granting of options intended to qualify as
incentive stock options ("Incentive Stock Options") within the meaning of
Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"), to
employees (including officers and employee directors), and options that do not
so qualify ("Nonstatutory Stock Options," and, together with Incentive Stock
Options, the "Options") to employees (including officers and employee
directors), non-employee directors, consultants and advisers. In addition, the
1997 Plan permits the granting of stock appreciation rights appurtenant to or
independently of other Stock Awards granted under the 1997 Plan, as well as the
granting of Common Stock based upon the attainment of specified performance
goals ("Performance Awards"), rights to purchase restricted stock and any form
of equity-based or equity-related awards that the Board of Directors determines
to be consistent with the 1997 Plan and in the interests of the Company. No
person is eligible to receive Stock Awards under the 1997 Plan covering more
than 200,000 shares of the Company's Common Stock in any calendar year.
The 1997 Plan will be administered by the Board of Directors or a committee
appointed by the Board of Directors. Subject to the limitations set forth in the
1997 Plan, the Board of Directors has the authority to select the person to whom
grants are to be made, to designate the number of shares to be covered by each
Stock Awards, to determine whether an Option is to be an Incentive Stock Option
or a Nonstatutory Stock Option, to establish vesting schedules, to specify the
Option exercise price and the type of consideration to be paid to the Company
upon exercise and, subject to certain restrictions, to specify other terms of
Stock Awards.
No Incentive Stock Option may be exercised later than ten years from the
date it was granted. The aggregate fair market value, determined at the time of
grant, of the shares of Common Stock with respect to which Incentive Stock
Options are exercisable for the first time by an optionee during any calendar
year (under all such plans of the Company and its affiliates) may not exceed
$100,000. Options granted under the 1997 Plan are generally non-transferable.
Options granted under the 1997 Plan vest at the rate specified in the option
agreement. The exercise price of Options granted under the 1997 Plan is
determined by the Board of Directors in accordance with the guidelines set forth
in the 1997 Plan. The exercise price of an Incentive Stock Option cannot be less
than 100% of the fair market value of the Common Stock on the date of the grant.
The exercise price of Incentive Stock Options granted to any person who at the
time of grant owns stock representing more than 10% of the total combined voting
power of all classes of the Company's capital stock must be at least 110% of the
fair market value of such stock on the date of grant and the term of such
Incentive Stock Options cannot exceed five years.
The Board of Directors shall determine the performance goals applicable to
Performance Awards, the period during which such goals are effective and all
other limitations and conditions applicable to the
50
<PAGE>
Performance Awards. The Board of Directors shall determine the purchase price,
if any, of restricted stock awarded pursuant to the 1997 Plan, as well as the
conditions under which shares of restricted stock may be forfeited to or
repurchased by the Company and any other terms and conditions applicable to
restricted stock.
Pursuant to the 1997 Plan, the Board of Directors has full authority to
determine and specify the effect, if any, that a participant's termination of
employment will have on the terms of an outstanding Stock Award. Shares subject
to Stock Awards that have expired or otherwise terminated without having been
exercised in full again become available for award under the 1997 Plan.
The terms and provisions of all Stock Awards must be set forth in an award
agreement made available to the participant following the grant. The Board of
Directors may accelerate (i) the vesting or payment of any Stock Award, (ii) the
lapse of restrictions on any Stock Award and (iii) the date on which any Option
or stock appreciation right first becomes exercisable.
Upon certain changes in control of the Company, all outstanding Stock Awards
under the 1997 Plan must either be made exercisable immediately prior to the
change in control or substituted by the surviving entity.
The Company has not granted any Stock Awards under the 1997 Plan as of the
date of this Prospectus.
NON-EMPLOYEE DIRECTORS STOCK PLAN
The Company adopted the Directors' Plan in December 1997 to provide for the
automatic grant of options to purchase shares of Common Stock to directors of
the Company who are not current or former employees of the Company
("Non-Employee Directors"). The Directors' Plan will become effective upon the
consummation of the Offering.
The maximum number of shares of Common Stock that may be issued pursuant to
the exercise of options granted under the Directors' Plan is 250,000. Pursuant
to the terms of the Directors' Plan, each Non-Employee Director on the date of
this Prospectus will receive options to purchase 10,000 shares of Common Stock.
Thereafter, on the date of each annual meeting of the stockholders of the
Company, each Non-Employee Director continuing in office will receive options to
purchase 4,000 shares of Common Stock and each newly elected Non-Employee
Director (including each Non-Employee Director elected to office since the then
last annual meeting of stockholders) will receive options to purchase 10,000
shares of Common Stock. Additionally, each Non-Employee Director who is a member
of a committee of the Company's Board of Directors will receive options to
purchase 250 shares of Common Stock on each one-year anniversary of his or her
appointment to such committee.
No options granted under the Directors' Plan may be exercised after the
expiration of ten years from the date they were granted. Options granted under
the Directors' Plan vest yearly over a three-year period. The exercise price of
options granted under the Directors' Plan on the date of this Prospectus will
equal the initial public offering price. Thereafter, the exercise price of
options granted under the Directors' Plan will equal 100% of the fair market
value of the Common Stock on the date of the grant. Options granted under the
Directors' Plan are generally non-transferable. If options granted under the
Directors' Plan terminate without having been exercised, the number of shares of
Common Stock underlying such options becomes available for future grant under
the Directors' Plan. All options outstanding under the Directors' Plan terminate
upon certain changes in control of the Company, provided that all such options
must be made immediately exercisable 20 days prior to the effective date of any
such change in control. The Compensation Committee may terminate the Directors'
Plan at any time.
1994 STOCK OPTION PLAN
During 1994, the Company adopted the 1994 Stock Option Plan, which provides
for the issuance of incentive stock options to officers and other employees of
the Company and nonstatutory stock options,
51
<PAGE>
awards of stock, and direct stock purchase opportunities to directors, officers,
employees and consultants of the Company. No shares remain available for
issuance under the Plan. The options are exercisable at various dates and will
expire no more than ten years from the date of grant or in the case of certain
nonstatutory options, 15 years from the date of grant. The exercise price of
each option is determined by the Board of Directors. In the case of incentive
stock options, the exercise price may not be less than 100% of the fair market
value of the share at the time the option is granted. For holders of more than
10% of the Company's total combined voting power of all classes of stock,
incentive stock options may not be granted at less than 110% of the fair market
value of the Company's Common Stock at the date of grant and may not exceed a
term of five years.
401(K) PLAN
The Company adopted a retirement savings plan (the "401(k) Plan") effective
in January 1995. Employees who have attained age 18 and have completed six
months of service with the Company may participate in the 401(k) Plan.
Participants in the 401(k) Plan may defer compensation in an amount not in
excess of 15% of the employee's total annual compensation from the Company, up
to the annual statutory limit ($9,500 in 1997). The Company may make matching
contributions in an amount determined by the Board of Directors. All
contributions are credited to separate accounts maintained in trust for each
participant and are invested, at the participant's direction, in one or more of
the investment funds made available under the 401(k) Plan. Matching
contributions become 20% vested after a participant's second year of service
with the Company and are subject to 20% annual vesting thereafter. The 401(k)
Plan is intended to qualify under Section 401 of the Internal Revenue Code so
that contributions to the 401(k) Plan, and income earned on plan contributions,
are not taxable to employees until withdrawn, and so that the contribution will
be deductible by the Company when made.
STOCK RESTRICTION AGREEMENTS
The Company has executed stock restriction agreements with certain common
stockholders. Each agreement gives the Company the right to repurchase a certain
number of shares, at the original issuance price, held by such stockholder if he
or she ceases to be a director, employee or consultant, as applicable, of the
Company. The purchase option rights lapse at various dates through July 1998. At
December 31, 1997, approximately 30,378 shares of the Company's outstanding
Common Stock were subject to these repurchase options.
52
<PAGE>
CERTAIN TRANSACTIONS
PRIVATE PLACEMENTS OF SECURITIES
Since the Company's inception in September 1992 through February 1998, the
Company issued, in private placement transactions (not including the BioChem
Offering), the following shares of Common Stock and Preferred Stock (including
shares of Common Stock issued upon the exercise of options and net of shares of
Common Stock repurchased by the Company): 938,713 shares of Common Stock at
prices ranging between $0.03 and $0.15 per share; 81,312 shares of Common Stock
at a price of $0.15 in cash in connection with loans in an aggregate of
$2,500,000 to the Company (the "Bridge Loan Transaction"); 6,403,325 shares of
Series A Preferred Stock (convertible into 2,082,660 shares of Common Stock) at
a price of $1.00 per share; 6,579,086 shares of Series B Preferred Stock
(convertible into 2,139,826 shares of Common Stock) at a price of $1.00 per
share; 4,053,854 shares of Series C Preferred Stock (convertible into 1,318,502
shares of Common Stock) at a price of $1.80 per share.
In connection with the Bridge Loan Transaction, the Company became indebted
to the following parties in the following amounts from September 1994 through
February 1995: CW Ventures II, L.P. in the amount of $645,250; Atlas Venture
Fund II, L.P. in the amount of $524,250; New Enterprise Associates V in the
amount of $443,500; Accel IV L.P. in the amount of $371,210; Accel Investors '93
L.P. in the amount of $16,409; Accel Japan L.P. in the amount of $35,480; Accel
Keiretsu L.P. in the amount of $7,983; Ellmore C. Patterson Partners in the
amount of $9,757; Prosper Partners in the amount of $2,661 and Venrock
Associates in the amount of $443,500. All of such loans were evidenced by
promissory notes bearing an interest rate of 4.25% until December 31, 1994 and
9.50% from January 1, 1995 until April 15, 1995, when these notes, together with
accrued interest thereon, were converted into an aggregate of 2,579,086 shares
of Series B Preferred Stock (convertible into 838,839 shares of Common Stock).
Barry Weinberg and Allan R. Ferguson, directors of the Company, are affiliated
with CW Ventures II, L.P. and Atlas Venture Fund II, L.P., respectively. See
"Management."
In August 1997, the Company issued to Mark T. Weedon options to purchase
339,558 shares of Common Stock at an exercise price of $0.15 per share in
connection with his acceptance of employment with the Company. Mr. Weedon
subsequently exercised options to purchase 33,956 shares of Common Stock, which
shares are subject to certain restrictions. See "Management--Employment
Agreements."
In connection with certain equipment leasing agreements, the Company issued
warrants to purchase the following shares of Preferred Stock: 153,000 shares of
Series A Preferred Stock at an exercise price of $1.00 per share and 100,000
shares of Series C Preferred Stock at an exercise price of $1.80 per share. Such
warrants will be exercisable for an aggregate of 82,288 shares of Common Stock
following the Offering. See "Description of Capital Stock--Warrants."
Each outstanding share of Series A Preferred Stock, Series B Preferred
Stock, Series C Preferred Stock and Series D Preferred Stock will automatically
convert into 0.32525 shares of Common Stock upon the closing of the Offering.
53
<PAGE>
The purchasers of the Common Stock, Series A Preferred Stock, Series B
Preferred Stock and Series C Preferred Stock described above include, among
others, the following officers, directors and beneficial owners of more than
five percent of the Company's voting securities:
<TABLE>
<CAPTION>
SHARES OF PREFERRED STOCK, AS
CONVERTED (2)
COMMON ----------------------------------
PURCHASER (1) STOCK SERIES A SERIES B SERIES C
- --------------------------------------------------------------- ----------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
CW Ventures II, L.P. (3)....................................... 61,507 520,814 342,424 75,387
Atlas Venture Fund II, L.P. (4)................................ 68,789 423,136 278,211 61,249
New Enterprise Associates V.................................... 27,038 357,887 235,358 51,809
Lombard Odier & Cie............................................ -- -- -- 903,535
Advent International Investors II Limited Partnership (5)...... -- -- 3,252 277
Advent Performance Materials Limited Partnership (5)........... -- -- -- 63,242
Golden Gate Development and Investment Limited Partnership
(5).......................................................... -- -- 78,059 6,655
Rovent II Limited Partnership (5).............................. -- -- 406,558 34,662
Accel IV L.P. (6).............................................. 23,678 329,256 196,995 43,364
Accel Investors '93 L.P........................................ 534 -- 8,708 1,917
Accel Japan L.P................................................ 2,163 28,631 18,829 4,145
Accel Keiretsu L.P............................................. 260 -- 4,237 932
Ellmore C. Patterson Partners.................................. 317 -- 5,178 1,140
Prosper Partners............................................... 87 -- 1,412 311
Venrock Associates (7)......................................... 27,038 357,887 235,358 32,121
Venrock Associates II, L.P..................................... -- -- -- 19,687
Mark T. Weedon................................................. 33,956 -- -- --
Barry Weinberg (8)............................................. 89,118 -- -- --
Andrew A. Pakula............................................... 11,384 -- -- --
Karen A. Hamlin................................................ 11,384 -- -- --
</TABLE>
- --------------
(1) Certain of the purchasers are entitled to registration rights. See
"Description of Capital Stock-- Registration Rights."
(2) The number of shares under each column reflects the number of shares of
Common Stock into which the shares of Series A, Series B and Series C
Preferred Stock are convertible, giving effect to the conversion of each
share of Preferred Stock into 0.32525 shares of Common Stock.
(3) Does not include 89,118 shares of Common Stock issued to Barry Weinberg,
Chairman of the Board of Directors of the Company. Mr. Weinberg is a general
partner of CW Partners III, L.P., which is the general partner of CW
Ventures II, L.P.
(4) Allan R. Ferguson, a director of the Company, is a general partner of Atlas
Venture Associates II, L.P., which is the general partner of Atlas Venture
Fund II, L.P.
(5) Jason S. Fisherman, a director of the Company, is Vice President of Advent
International Corporation, which is the general partner of Advent
International Investors II Limited Partnership and Advent International
Limited Partnership, which is the general partner of Advent Performance
Materials Limited Partnership, Golden Gate Development and Investment
Limited Partnership and Rovent II Limited Partnership.
(6) Includes an aggregate of 1,047 shares of Common Stock and 91,330 shares of
Series A Preferred Stock (convertible into 29,705 shares of Common Stock)
subsequently transferred by Accel IV L.P. to Accel Keiretsu L.P., Accel
Investors '93 L.P., Ellmore C. Patterson Partners and Prosper Partners.
(7) Includes 8,371 shares of Common Stock, 340,628 shares of Series A Preferred
Stock (convertible into 110,788 shares of Common Stock) and 224,008 shares
of Series B Preferred Stock (convertible into
54
<PAGE>
72,858 shares of Common Stock) subsequently transferred by Venrock
Associates to Venrock Associates II, L.P.
(8) Does not include 61,508 shares of Common Stock, 1,601,289 shares of Series A
Preferred Stock (convertible into 520,814 shares of Common Stock), 1,052,812
shares of Series B Preferred Stock (convertible into 342,424 shares of
Common Stock) and 231,783 shares of Series C Preferred Stock (convertible
into 75,387 shares of Common Stock) issued to CW Ventures II, L.P. Mr.
Weinberg is a general partner of CW Partners III, L.P., which is the general
partner of CW Ventures II, L.P.
BIOCHEM OFFERING
On December 17, 1997, the Company issued to BioChem 5,713,034 shares of its
newly created Series D Preferred Stock (convertible into 1,858,145 shares of
Common Stock) for consideration of $20 million. In addition, the Company issued
the BioChem Warrant. All of the outstanding shares of Series D Preferred Stock
will convert into shares of Common Stock upon the consummation of the Offering.
In the event that the initial public offering price is less than $10.76 per
share, the Company will be required to issue to BioChem, for no additional
consideration, the number of additional shares of Common Stock equal to the
amount by which (a) 19,993,640 divided by the initial public offering price,
exceeds (b) 1,858,145.
In connection with the BioChem Offering, the Company entered into a research
and license agreement, a stockholders' agreement, a registration rights
agreement and a warrant agreement with BioChem. See "Description of Capital
Stock--Warrants" and "--Registration Rights." The research and license agreement
relates to the Company's HBV and Dimerescent Programs. See
"Business--Collaborative Arrangements." The stockholders' agreement, to which
substantially all of the Company's existing significant stockholders are a
party, permits BioChem to designate a member of the Board of Directors upon the
first to occur of a "Qualified Public Offering" (which would include the
Offering) or February 16, 1998, and requires the other parties thereto to vote
their shares in favor of such nominee at any meeting of stockholders. BioChem's
right to designate a director will terminate in the event that BioChem and its
permitted transferees own less than 10% of the Series D Preferred Stock and any
Common Stock issued upon conversion of such stock, or December 17, 2007. The
stockholders' agreement also provides for certain affirmative and negative
covenants and restrictions on the transferability of shares owned by the parties
thereto which will terminate upon the consummation of the Offering.
TRANSACTIONS WITH DIRECTORS, EXECUTIVE OFFICERS AND ADVISORS
The Company has employment agreements with Mark T. Weedon, its President and
Chief Executive Officer and a director of the Company, Michael G. Palfreyman,
its Vice President of Research and Development, Michael W. Heslop, its Vice
President of Business Development and Karen A. Hamlin, its Senior Director of
Operations, Secretary and Treasurer. See "Management--Employment Agreements."
David Baltimore receives $10,000 annually for being a director of the
Company and was granted non-statutory options to purchase 24,394, 40,656 and
8,132 shares of Common Stock in 1994, 1996 and 1997, respectively, at an
exercise price of $0.15 per share.
Under the terms of a sponsored research agreement, the Company paid the
University of Massachusetts Medical Center a total of $1,000,000 in 1992 through
1994 for research performed in Dr. Green's laboratory. The Company is not
obligated to make any additional payments for research under such agreement.
55
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of the Common Stock of the Company as of December 31, 1997, after
giving effect to the Offering and the Private Placement, by: (i) each person
known to beneficially own more than 5% of the outstanding shares of Common
Stock, (ii) each of the Company's directors, (iii) each of the executive
officers of the Company and (iv) all executive officers and directors as a
group. All persons listed have sole voting and investment power with respect to
their shares unless otherwise indicated.
<TABLE>
<CAPTION>
PERCENTAGE OF SHARES
BENEFICIALLY OWNED
------------------------
<S> <C> <C> <C>
SHARES
NAME AND ADDRESS BENEFICIALLY BEFORE AFTER
OF BENEFICIAL OWNER (1) OWNED (2) OFFERING OFFERING
- --------------------------------------------------------------------------------- ----------- ----------- -----------
BioChem Pharma Holdings Inc. (3)................................................. 2,322,682 26.1% 19.1%
275 Armond-Frappier Boulevard
Laval, Quebec H7V4A7
Canada
CW Ventures II, L.P. (4)......................................................... 1,089,575 12.9% 9.3%
c/o CW Group, Inc.
1041 Third Avenue
New York, NY 10021
Atlas Venture Fund II, L.P....................................................... 831,385 9.9% 7.1%
c/o Atlas Venture
222 Berkeley Street, 19th Floor
Boston, MA 02166
New Enterprise Associates V...................................................... 672,092 8.0% 5.8%
c/o New Enterprise Associates
1119 St. Paul Street
Baltimore, MD 21202
Lombard Odier & Cie.............................................................. 903,536 10.7% 7.7%
11 rue de la Corraterie
Geneva Switzerland
Entities affiliated with Advent International Corporation (5).................... 592,709 7.0% 5.1%
101 Federal Street
Boston, MA 02110
Entities affiliated with Accel Partners (6)...................................... 672,094 8.0% 5.8%
428 University Avenue
Palo Alto, CA 94301
Venrock Associates and Venrock Associates II, L.P. (7)........................... 672,093 8.0% 5.8%
30 Rockefeller Plaza
New York, NY 10112
Mark T. Weedon (8)............................................................... 339,558 3.9% 2.8%
Michael G. Palfreyman (9)........................................................ 74,258 * *
Michael W. Heslop................................................................ -- * *
Karen A. Hamlin (10)............................................................. 12,813 * *
Barry Weinberg (11).............................................................. 1,089,575 12.9% 9.3%
David Baltimore (12)............................................................. 30,899 * *
Allan R. Ferguson (13)........................................................... 831,385 9.9% 7.1%
Jason S. Fisherman (14).......................................................... 592,709 7.0% 5.1%
All directors and executive officers as a group (8 persons) (15)................. 2,971,197 33.6% 24.6%
</TABLE>
- --------------
*Less than 1.0%
56
<PAGE>
(1) Unless indicated otherwise, the address of the beneficial owners is: c/o
Scriptgen Pharmaceuticals, Inc., 200 Boston Avenue, Medford, Massachusetts
02155.
(2) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and generally includes voting or investment
power with respect to securities. Shares of Common Stock issuable pursuant to
options, to the extent such options are currently exercisable or convertible
within 60 days of December 31, 1997, are treated as outstanding for computing
the percentage of the person holding such securities but are not treated as
outstanding for computing the percentage of any other person. Unless otherwise
noted, each person or group identified possesses sole voting and investment
power with respect to shares, subject to community property laws where
applicable. Percentage of beneficial ownership is based on 8,417,795 shares of
Common Stock outstanding as of December 31, 1997 and 11,667,795 shares of Common
Stock outstanding after completion of the Offering and the Private Placement
(assuming an initial public offering price of $12.00 per share and in each case
after giving effect to the 1-for-3.07459 reverse split of the Common Stock to be
effected before the completion of the Offering and the conversion of all
outstanding shares of Series A Preferred Stock, Series B Preferred Stock, Series
C Preferred Stock and Series D Preferred Stock into Common Stock upon the
closing of the Offering).
(3) Includes warrants to purchase 464,537 shares of Common Stock at an
exercise price of $13.47.
(4) Includes 89,443 shares held by Barry Weinberg, Chairman of the Board of
Directors.
(5) Includes the ownership by the following venture capital funds of which
Advent International Corporation is the general partner, or the general partner
of the general partner, of: 3,530 shares held by Advent International Investors
II Limited Partnership, 63,243 shares held by Advent Performance Materials
Limited Partnership, 84,715 shares held by Golden Gate Development and
Investment Limited Partnership and 441,221 shares held by Rovent II Limited
Partnership. In its capacity as general partner, Advent International
Corporation exercises sole voting and investment power with respect to all
shares held by these funds. Advent International Corporation exercises its
voting and investment power through a group of three persons: Douglas R. Brown,
President and Chief Executive Officer, Jason S. Fisherman, Vice President, and
Janet L. Hennessy, Vice President responsible for monitoring public securities,
none of whom may act independently and a majority of whom must act in concert to
exercise voting or investment power over the beneficial holdings of such entity.
Therefore, no individual in this group other than Advent International
Corporation is deemed to have sole voting or investment power. Advent
International Corporation may be deemed to beneficially own all 592,709 shares.
(6) Includes 562,541 shares held by Accel IV L.P., 53,767 shares held by
Accel Japan L.P., 12,098 shares held by Accel Keiretsu L.P., 24,868 shares held
by Accel Investors '93 L.P., 14,787 shares held by Ellmore C. Patterson Partners
and 4,033 shares held by Prosper Partners.
(7) Includes 460,389 shares held by Venrock Associates and 211,704 shares
held by Venrock Associates II, L.P.
(8) Includes 305,602 shares issuable upon the exercise of options.
(9) Includes 74,258 shares issuable upon the exercise of options.
(10) Includes 1,429 shares issuable upon the exercise of options.
(11) Includes 1,000,132 shares held by CW Ventures II, L.P.
(12) Includes 30,899 shares issuable upon the exercise of options.
(13) Includes 831,385 shares held by Atlas Venture Fund II, L.P. Mr. Ferguson
is a general partner of Atlas Venture Associates II, L.P., the general partner
of Atlas Venture Fund II, L.P. Mr. Ferguson disclaims beneficial ownership of
such shares except to the extent of his pecuniary interest therein.
(14) Includes 3,530 shares held by Advent International Investors II Limited
Partnership, 63,243 shares held by Advent Performance Materials Limited
Partnership, 84,715 shares held by Golden Gate
57
<PAGE>
Development and Investment Limited Partnership and 441,221 shares held by Rovent
II Limited Partnership. Dr. Fisherman is the Vice President of Advent
International Corporation, which is the general partner of Advent International
Investors II Limited Partnership and Advent International Limited Partnership,
which is the general partner of Advent Performance Materials Limited
Partnership, Golden Gate Development and Investment Limited Partnership and
Rovent II Limited Partnership. Dr. Fisherman disclaims beneficial ownership of
all such shares.
(15) See notes 8 through 14 above. The number of shares shown does not
reflect any shares beneficially owned by BioChem. It is expected that following
the Offering, a designee of BioChem will be elected to the Board of Directors.
See "Certain Transactions--BioChem Offering."
58
<PAGE>
DESCRIPTION OF CAPITAL STOCK
Upon the closing of the Offering and the filing of the amendment to the
Company's Restated Certificate of Incorporation referred to below, the
authorized capital stock of the Company will consist of 35,000,000 shares of
Common Stock, $0.01 par value, and 4,000,000 shares of Preferred Stock, $0.01
par value.
As of December 31, 1997, there were 1,018,638 shares of Common Stock
outstanding, which were held of record by 59 stockholders, 6,403,325 shares of
Series A Preferred Stock outstanding, which were held of record by 12
stockholders, 6,579,086 shares of Series B Preferred Stock outstanding, which
were held of record by 15 stockholders, 4,053,854 shares of Series C Preferred
Stock outstanding, which were held of record by 17 stockholders and 5,713,034
shares of Series D Preferred Stock outstanding, which were held of record by one
stockholder. Upon the closing of the Offering, and after giving effect to the
issuance of 3,000,000 shares of Common Stock offered by the Company hereby, the
issuance of 250,000 shares of Common Stock pursuant to the Private Placement
(assuming an initial public offering price of $12.00 per share) and the
conversion of each share of the Series A Preferred Stock, Series B Preferred
Stock, Series C Preferred Stock and Series D Preferred Stock into 0.32525 shares
of Common Stock, there will be 11,669,189 shares of Common Stock and no shares
of Preferred Stock issued and outstanding. See "--Preferred Stock."
COMMON STOCK
Holders of Common Stock are entitled to one vote for each share held on all
matters submitted to a vote of stockholders. The vote required for election to
the Board of Directors is a plurality of votes properly cast at any meeting of
the stockholders at which a quorum is present. For any other action by the
stockholders, the vote required is a majority of votes properly cast at any such
meeting, unless otherwise expressly provided by law or by the Company's Restated
Certificate of Incorporation or By-Laws. Subject to the rights and preferences
of any Preferred Stock which may be outstanding, the holders of Common Stock are
entitled to receive ratably such dividends, if any, as may be declared by the
Board of Directors out of funds legally available therefor and, subject to the
rights and preferences of any Preferred Stock which may be outstanding, the
holders of Common Stock are entitled to receive ratably the net assets of the
Company upon the liquidation, dissolution or winding up of the Company after the
payment of all debts and other liabilities. Holders of Common Stock have no
preemptive, subscription, redemption or conversion rights. The outstanding
shares of Common Stock are, and the shares offered by the Company in the
Offering will be, when issued and paid for, fully paid and nonassessable. The
rights, privileges and preferences of holders of Common Stock will be subject
to, and may be adversely affected by, the rights of the holders of any shares of
Preferred Stock that are currently outstanding or that the Company may designate
and issue in the future.
At present, there is no active trading market for the Common Stock. The
Common Stock has been approved for quotation on the Nasdaq National Market under
the symbol "SCRP." See "Risk Factors--No Prior Public Market; Possible
Volatility of Stock Price."
PREFERRED STOCK
The Series A Preferred Stock, Series B Preferred Stock, Series C Preferred
Stock and Series D Preferred Stock are entitled to various preferences and
rights in the event of a liquidation, dissolution or winding-up of the Company
and upon a declaration by the Board of Directors of the payment of dividends.
Each share of Series A Preferred Stock, Series B Preferred Stock, Series C
Preferred Stock and Series D Preferred Stock is convertible into 0.32525 shares
of Common Stock, and upon the closing of the Offering, all of the outstanding
shares of Series A Preferred Stock, Series B Preferred Stock, Series C Preferred
Stock and Series D Preferred Stock will be converted automatically into an
aggregate of 7,399,133 shares of Common Stock. The holders of Common Stock,
Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and
Series D Preferred Stock have approved an amendment to the Company's Restated
Certificate, which will be filed with the Secretary of State of Delaware
immediately following the
59
<PAGE>
closing of the Offering. The Restated Certificate will, among other things,
increase the number of authorized shares of Preferred Stock to 4,000,000, and
will eliminate all references to Series A Preferred Stock, Series B Preferred
Stock, Series C Preferred Stock and Series D Preferred Stock.
The Restated Certificate will give the Board of Directors the authority to
issue 4,000,000 shares of Preferred Stock in one or more series and to fix the
rights, preferences, privileges and restrictions, including dividend,
conversion, voting, redemption (including sinking fund provisions), and other
rights, liquidation preferences, and the number of shares constituting any
series and the designations of such series, without any further vote or action
by the stockholders of the Company. Following the closing of the Offering and
the filing of the Restated Certificate, Preferred Stock could be issued by the
Board of Directors with voting and conversion rights that could adversely affect
the voting power of the holders of the Common Stock. In addition, because the
terms of the Preferred Stock may be fixed by the Board of Directors of the
Company without stockholder action, the Preferred Stock could be issued quickly
with terms calculated to defeat or delay a proposed takeover of the Company, or
to make the removal of the management of the Company more difficult. Under
certain circumstances, this would have the effect of decreasing the market price
of the Common Stock. The Company has no present plans to issue any Preferred
Stock. See "Risk Factors--Availability of Preferred Stock for Issuance;
Anti-Takeover Provisions."
WARRANTS
As of December 31, 1997, there were outstanding warrants to purchase an
aggregate of 253,000 shares of Preferred Stock, which will be exercisable for an
aggregate of 82,288 shares of Common Stock following the Offering.
In connection with a Master Leasing Agreement dated as of November 22, 1993
between the Company and Comdisco, Inc. ("Comdisco"), the Company issued to
Comdisco warrants to purchase up to 153,000 shares of Series A Preferred Stock
(to purchase up to 49,763 shares of Common Stock following the Offering) at an
exercise price of $1.00 per share, which warrants will expire in January 2004.
In February 1996, the Company executed an amendment to the Master Leasing
Agreement with Comdisco under which Comdisco will provide additional equipment
financing to the Company. In connection with this agreement, as of November 1,
1997 the Company had issued to Comdisco warrants to purchase 100,000 shares of
Series C Preferred Stock (to purchase up to 32,525 shares of Common Stock
following the Offering) at an exercise price of $1.80 per share. The warrants to
purchase Series C Preferred Stock will expire in May 2006.
The exercise price of the warrants issued to Comdisco may be paid in cash or
by the surrender of warrants pursuant to a cashless exercise provision. The
warrants issued to Comdisco contain certain anti-dilution provisions providing
for adjustments of the exercise price and number of shares of underlying
securities which may be purchased upon exercise in the event of any
reclassification, subdivision or combination of, or dividend on, the Company's
capital stock.
In connection with the BioChem Offering, the Company issued to BioChem a
warrant to purchase 464,537 shares of Common Stock at an exercise price of
$13.47 per share. The warrant is exercisable for a period of five years from the
date of issuance. The BioChem Warrant contains certain anti-dilution provisions
providing for adjustments of the exercise price and number of underlying warrant
shares in the event of any subdivision or combination of, or dividend on, the
Company's capital stock, any other dividend payable otherwise than out of
retained earnings or, prior to the Offering, upon certain issuances of the
Company's capital stock at a per share price less than the exercise price.
Pursuant to the terms of the warrant, prior to any recapitalization,
reorganization, reclassification, consolidation, merger, sale of all or
substantially all of the Company's assets or other transaction in which the
holders of Common Stock are entitled to receive stock, securities or assets, the
Company must insure that the warrant will thereafter be exercisable for the
amount of stock, securities or assets that the holder of the warrant would have
been
60
<PAGE>
entitled to receive had such holder exercised the warrant immediately prior to
such transaction. A similar provision is contained in the Comdisco warrants.
REGISTRATION RIGHTS
Pursuant to an agreement between the Company and certain of its securities
holders, 5,540,988 shares of Common Stock (the "Registrable Securities") will be
entitled to certain rights with respect to the registration of the Registrable
Securities under the Securities Act. If the Company receives from the holders of
at least 50% of the Registrable Securities a written request to effect a
registration with respect to all or a part of the Registrable Securities, the
Company must, as soon as practicable, use its best efforts to effect such
registration, for a maximum of two such registrations. Pursuant to this
provision, the holders of the Registrable Securities may choose to distribute
their securities by means of an underwriting, subject to the authority of the
underwriters to limit the number of shares to be underwritten due to marketing
factors. If such an underwriting is undertaken, a securityholder's right to
registration is conditioned upon such securityholder's participation in the
underwriting.
If the Company registers any of its securities for its own account or
pursuant to the demand of its security holders (other than certain types of
exempted registrations), the Company must include in such registration and any
underwriting relating thereto all the Registrable Securities specified by the
holders thereof for inclusion, subject to the authority of the underwriters to
limit the number of shares to be underwritten due to marketing factors. If an
underwriting is undertaken, a securityholder's right to registration is
conditioned upon such securityholder's participation in the underwriting.
Pursuant to an agreement between the Company, BioChem and certain of the
Company's securityholders, BioChem will be entitled to certain rights with
respect to the registration of its 1,858,145 shares of Common Stock, and 464,537
shares of Common Stock issuable upon exercise of the BioChem Warrant, under the
Securities Act. If, at any time after the first anniversary of the Offering, the
Company receives from BioChem a written request to effect a registration with
respect to all or a part of its Common Stock, the Company must, as soon as
practicable, use its best efforts to effect such registration, for a maximum of
two such registrations. Pursuant to this provision, BioChem may choose to
distribute securities by means of an underwriting. The agreement also provides
BioChem and other securityholders with piggyback registration rights.
The Company has granted certain piggyback registration rights to HMR in
connection with the shares of Common Stock being purchased by HMR in the Private
Placement.
DELAWARE ANTI-TAKEOVER LAW AND CERTAIN CHARTER PROVISIONS
Under Section 203 of the Delaware General Corporation Law (the "Delaware
anti-takeover law"), certain "business combinations" between a Delaware
corporation, whose stock generally is publicly traded or held of record by more
than 2,000 stockholders, and an "interested stockholder" are prohibited for a
three-year period following the date that such stockholder became an interested
stockholder, unless (i) the corporation has elected in its certificate of
incorporation or bylaws not to be governed by the Delaware anti-takeover law
(the Company has not made such an election), (ii) the business combination was
approved by the board of directors of the corporation before the other party to
the business combination became an interested stockholder, (iii) upon
consummation of the transaction that made it an interested stockholder, the
interested stockholder owned at least 85% of the voting stock of the corporation
outstanding at the commencement of the transaction (excluding voting stock owned
by directors who are also officers or held in employee stock plans in which the
employees do not have a right to determine confidentially whether to tender or
vote stock held by the plan) or (iv) the business combination was approved by
the board of directors of the corporation and ratified by two-thirds of the
voting stock which the interested stockholder did not own. The three-year
prohibition does not apply to certain business combinations proposed by an
interested stockholder following the announcement or notification of certain
extraordinary transactions involving the corporation and a person who had not
been an interested stockholder during the previous three years or who became an
interested stockholder with the approval of
61
<PAGE>
a majority of the corporation's directors. The term "business combination" is
defined generally to include mergers or consolidations between a Delaware
corporation and an interested stockholder, transactions with an interested
stockholder involving the assets or stock of the corporation or its
majority-owned subsidiaries and transactions which increase an interested
stockholder's percentage ownership of stock. The term "interested stockholder"
is defined generally as a stockholder who becomes beneficial owner of 15% or
more of a Delaware corporation's voting stock. Section 203 could have the effect
of delaying, deferring or preventing a change in control of the Company.
The Company's Restated Certificate provides that any action required or
permitted to be taken by stockholders of the Company must be effected at a duly
called annual or special meeting of stockholders and may not be effected by any
consent in writing. In addition, special meetings of the stockholders of the
Company may be called only by the Chairman of the Board, the President of the
Company, by the Board of Directors pursuant to a resolution adopted by a
majority of the total number of authorized directors. These and other provisions
contained in the Restated Certificate and the Company's By-Laws could delay or
make more difficult certain types of transactions involving an actual or
potential change in control of the Company or its management (including
transactions in which stockholders might otherwise receive a premium for their
shares over then current prices) and may limit the ability of stockholders to
remove current management of the Company or approve transactions that
stockholders may deem to be in their best interests and, therefore, could
adversely affect the price of the Common Stock.
LIMITATION OF LIABILITY AND INDEMNIFICATION MATTERS
The Company's Restated Certificate provides that directors of the Company
shall not be personally liable to the Company or its stockholders for monetary
damages for breach of fiduciary duty as a director, except for liability (i) for
any breach of the director's duty of loyalty to the Company or its stockholders,
(ii) for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii) under Section 174 of the
Delaware General Corporation Law (the "DGCL"), relating to prohibited dividends
or distribution or the repurchase or redemption of stock or (iv) for any
transaction from which the director derives an improper personal benefit. The
provision does not apply to claims against a director for violations of certain
laws, including federal securities laws. If the DGCL is amended to authorize the
further elimination or limitation of directors' liability, then the liability of
directors of the Company shall automatically be limited to the fullest extent
provided by law. The Company's Restated Certificate and By-Laws also contain
provisions requiring the Company to indemnify the directors, officers, employees
or other agents to the fullest extent permitted by the DGCL. In addition, the
Company will enter into indemnification agreements with its current directors
and executive officers. These provisions and agreements may have the practical
effect in certain cases of eliminating the ability of stockholders to collect
monetary damages from directors. The Company believes that these contractual
agreements and the provisions in its Restated Certificate and By-Laws are
necessary to attract and retain qualified persons as directors and officers.
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for the Common Stock is American Securities
Transfer & Trust, Inc., Denver, Colorado.
SHARES ELIGIBLE FOR FUTURE SALE
Prior to the Offering, there has been no public market for the Common Stock
of the Company, and no prediction can be made as to the effect, if any, that
market sales of shares or the availability of such shares for sale will have on
the market price of the Common Stock prevailing from time to time. Sales of
substantial amounts of Common Stock, or the perception that such sales could
occur, could adversely affect the prevailing market price of the Common Stock
and the ability of the Company to raise capital through a sale of its
securities.
62
<PAGE>
Upon completion of the Offering and the Private Placement, the Company will
have 11,669,189 shares of Common Stock outstanding (assuming no exercise of
outstanding options or warrants). Of these shares, the 3,000,000 shares sold
pursuant to the Offering will be freely tradable without restriction or further
registration under the Securities Act, except those shares acquired by
"affiliates" of the Company within the meaning of the Securities Act which will
be subject to the resale limitations of Rule 144 promulgated thereunder. The
remaining 8,669,189 Restricted Shares (including the 250,000 shares of Common
Stock, based on an assumed initial public offering price of $12.00 per share,
sold in the Private Placement and the 1,858,145 shares sold pursuant to the
BioChem Offering) will be restricted securities within the meaning of Rule 144
and may be sold only if registered under the Securities Act or sold in
accordance with an applicable exemption from registration, such as Rule 144. The
Company, its executive officers and directors and holders of substantially all
of the Common Stock have agreed not to offer, sell, contract to sell, grant any
option to sell, or otherwise dispose of, directly or indirectly, any Common
Stock or securities convertible into or exchangeable for Common Stock or
warrants or other rights to purchase Common Stock, subject to certain limited
exceptions, during the 180 days after the effective date of this Prospectus (the
"Lock-Up Period"), without the prior consent of SBC Warburg Dillon Read Inc.
Commencing at the end of the Lock-Up Period, approximately 6,520,950 Restricted
Shares will be eligible for sale in the public market, subject to compliance
with Rule 144. Of such shares, approximately 5,158,797 will be eligible for sale
without limitation, pursuant to Rule 144(k) or Rule 701, including approximately
68,544 shares of Common Stock not subject to lock-up agreements which will be
eligible for sale following the Offering. The remaining approximately 2,148,239
Restricted Shares will become eligible for sale at various times over a period
of six months from the end of the Lock-Up Period. In addition, any shares issued
upon exercise of the Company's outstanding warrants may be eligible for sale
pursuant to Rule 144 at various times following the expiration of the Lock-Up
Period. The Company has granted to certain security holders demand and piggyback
registration rights covering an aggregate of 8,113,670 shares of Common Stock.
The Company expects to file a Registration Statement on Form S-8 registering
shares of Common Stock reserved for issuance upon exercise of options granted
under the Company's 1997 Plan, Directors' Plan and 1994 Stock Option Plan
following completion of the Offering.
In general, under Rule 144 under the Securities Act as currently in effect,
a person (or persons whose shares are aggregated) who has beneficially owned
restricted securities within the meaning of Rule 144 ("Restricted Securities")
for at least one year, and including the holding period of any prior owner
except an affiliate, would be entitled to sell within any three-month period a
number of shares that does not exceed the greater of one percent of the then
outstanding shares of Common Stock or the average weekly trading volume of the
Common Stock on the National Association of Securities Dealers Automated
Quotation System during the four calendar weeks preceding such sale. Sales under
Rule 144 are also subject to certain manner of sale provisions, notice
requirements and the availability of current public information about the
Company. Any person (or persons whose shares are aggregated) who is not deemed
to have been an affiliate of the Company at any time during the three months
preceding a sale, and who has beneficially owned shares for at least two years
(including any period of ownership of preceding non-affiliated holders), would
be entitled to sell such shares under Rule 144(k) without regard to the volume
limitations, manner of sale provisions, public information requirements or
notice requirements. An "affiliate" is a person that directly, or indirectly
through one or more intermediaries, controls, or is controlled by, or under
common control with, such issuer.
Rule 144A under the Securities Act as currently in effect generally permits
unlimited resales of certain Restricted Securities of any issuer provided that
the purchaser is a qualified institution that owns and invests on a
discretionary basis at least $100 million in securities (and in the case of a
bank or savings and loan association, has a net worth of at least $25 million)
or is a registered broker-dealer that owns and invests on a discretionary basis
at least $10 million in securities. Rule 144A allows certain existing
stockholders of the Company to sell their shares of Common Stock to such
institutions and registered broker-dealers without regard to any volume or other
restrictions. There can be no assurance that the availability of such resale
exemption will not have an adverse effect on the trading price of the Common
Stock.
63
<PAGE>
UNDERWRITING
The underwriters named below (the "Underwriters") have severally agreed,
subject to the terms and conditions set forth in the Underwriting Agreement, to
purchase from the Company the number of shares of Common Stock set forth
opposite their names below:
<TABLE>
<CAPTION>
UNDERWRITERS NUMBER OF SHARES
- --------------------------------------------------------------------------- -----------------
<S> <C>
SBC Warburg Dillon Read Inc................................................
Volpe Brown Whelan & Company, LLC..........................................
-----------------
Total............................................................... 3,000,000
-----------------
-----------------
</TABLE>
The Managing Underwriters are SBC Warburg Dillon Read Inc. and Volpe Brown
Whelan & Company, LLC.
Subject to the terms and conditions of the Underwriting Agreement, the
Underwriters have agreed to purchase all of the shares of Common Stock being
sold pursuant to the Underwriting Agreement if any are purchased (excluding
shares covered by the over-allotment option).
The Underwriters propose to offer the Common Stock to the public initially
at the public offering price set forth on the cover page of this Prospectus and
to selected dealers (who may include Underwriters) at such price less a
concession of not more than $ per share. Additionally, the Underwriters
may allow, and such dealers may reallow, a concession of not more than
$ per share to certain other dealers. After the Offering, the public
offering price and other selling terms may be changed by the Managing
Underwriters.
The Company has granted to the Underwriters an option for 30 days from the
date of this Prospectus to purchase up to 450,000 additional shares of Common
Stock. The Underwriters may exercise such option only to cover over-allotments
of the Common Stock offered hereby, if any. To the extent that the Underwriters
exercise this option, each Underwriter will be obligated, subject to certain
conditions, to purchase the number of additional shares of Common Stock
proportionate to such Underwriter's initial commitment.
The offering of the shares is made for delivery, when, as and if accepted by
the Underwriters and subject to prior sale and to withdrawal, cancellation or
modification of the Offering without notice. The Underwriters reserve the right
to reject an order for the purchase of shares in whole or in part.
The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act and to contribute to
payments the Underwriters may be required to make in respect thereof.
The executive officers and directors of the Company and certain other
stockholders, who in the aggregate own substantially all of the shares of Common
Stock, have agreed that they will not, without the prior written consent of SBC
Warburg Dillon Read Inc., offer, sell, contract to sell, grant any option to
sell
64
<PAGE>
or otherwise dispose of, directly or indirectly, any Common Stock or securities
convertible into or exchangeable for Common Stock or warrants or other rights to
purchase Common Stock owned by them during the 180 day period following the date
of this Prospectus. The Company has agreed that it will not, without the prior
written consent of SBC Warburg Dillon Read Inc., offer, sell, contract to sell,
grant any option to sell or otherwise dispose of, directly or indirectly, any
Common Stock or securities convertible into or exchangeable for Common Stock or
warrants or other rights to purchase Common Stock during the 180 days following
the date of this Prospectus, except that the Company may issue shares of Common
Stock and options to purchase Common Stock under its 1997 Plan and Directors'
Plan and upon exercise of outstanding options and warrants.
Prior to the Offering, there has been no public market for the Common Stock.
Consequently, the initial public offering price for the Common Stock has been
determined by negotiation between the Managing Underwriters and the Company.
Factors considered in determining such price were prevailing market conditions,
the state of the Company's development, the future prospects of the Company and
its industry, market valuations of securities of companies engaged in activities
deemed by the Managing Underwriters to be similar to those of the Company, and
other factors deemed relevant.
The Underwriters may engage in over-allotment, stabilizing transactions,
syndicate-covering transactions and penalty bids in accordance with Regulation M
under the Exchange Act. Over-allotment involves syndicate sales in excess of the
offering size, which creates a syndicate short position. Stabilizing
transactions permit bids to purchase the underlying security so long as the
stabilizing bids do not exceed a specified maximum. Syndicate-covering
transactions involve purchases of the Common Stock in the open market after
distribution has been completed in order to cover syndicate short positions.
Penalty bids permit the Underwriters to reclaim a selling concession from a
syndicate member when the Common Stock originally sold by such syndicate member
is purchased in a syndicate-covering transaction to cover syndicate short
positions. Such stabilizing transactions, syndicate-covering transactions and
penalty bids may cause the price of the Common Stock to be higher than it would
otherwise be in the absence of such transactions.
The Underwriters do not intend to confirm sales to accounts over which they
exercise discretionary authority.
LEGAL MATTERS
The validity of the shares of Common Stock offered hereby will be passed
upon for the Company by Fulbright & Jaworski L.L.P., New York, New York. Certain
legal matters in connection with the Offering will be passed upon for the
Underwriters by Brobeck, Phleger & Harrison LLP, New York, New York.
EXPERTS
The financial statements of Scriptgen Pharmaceuticals, Inc. as of December
31, 1995 and 1996 and for each of the three years in the period ended December
31, 1996 included in this Prospectus have been so included in reliance on the
report of Price Waterhouse LLP, independent accountants, given on the authority
of said firm as experts in auditing and accounting.
Certain legal matters with respect to information contained in this
Prospectus under the captions "Risk Factors--Uncertainty of Patents and
Proprietary Rights" and "Business--Patents and Proprietary Technology" have been
reviewed and approved by Darby & Darby P.C., New York, New York, patent counsel
for the Company, as experts in such matters and are included herein in reliance
upon that review and approval.
65
<PAGE>
ADDITIONAL INFORMATION
The Company has filed with the Commission in Washington, D.C. a Registration
Statement, of which this Prospectus constitutes a part, on Form S-1 under the
Securities Act (herein, together with all amendments and exhibits referred to
herein as the "Registration Statement") with respect to the Common Stock offered
hereby. This Prospectus does not contain all of the information set forth in the
Registration Statement and the exhibits and schedules to the Registration
Statement, as certain parts have been omitted in accordance with rules and
regulations of the Commission. For further information with respect to the
Company and the Common Stock offered hereby, reference is made to the
Registration Statement and the exhibits and schedules filed as a part of the
Registration Statement. Statements contained in this Prospectus as to the
contents of any contract, agreement or any other document referred to are not
necessarily complete; reference is made in each instance to the copy of such
contract or document filed as an exhibit to the Registration Statement. Each
such statement is qualified in all respects by such reference to such exhibit. A
copy of the Registration Statement, including exhibits and schedules thereto,
may be inspected without charge and obtained at prescribed rates at the Public
Reference Section of the Commission at its principal offices, located at 450
Fifth Street, N.W., Washington, D.C. 20549, and may be inspected without charge
at the regional offices of the Commission located at Seven World Trade Center,
13th Floor, New York, New York 10048, and Citicorp Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661. The Registration Statement,
including the exhibits and schedules thereto, is also available at the
Commission's site on the World Wide Web at http://www.sec.gov.
The Company intends to furnish its stockholders annual reports containing
financial statements audited by its independent auditors and quarterly reports
containing unaudited financial information.
66
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
<S> <C>
Report of Independent Accountants..................................................... F-2
Balance Sheet as of December 31, 1995 and 1996, September 30, 1997 (unaudited) and pro
forma September 30, 1997 (unaudited)................................................ F-3
Statement of Operations for the three years ended December 31, 1996 and for the nine
months ended September 30, 1996 (unaudited) and 1997 (unaudited).................... F-4
Statement of Redeemable Preferred Stock and Stockholders' Equity (Deficit) for the
three years ended December 31, 1996 and for the nine months ended September 30, 1997
(unaudited) and pro forma September 30, 1997 (unaudited)............................ F-5
Statement of Cash Flows for the three years ended December 31, 1996 and for the nine
months ended September 30, 1996 (unaudited) and 1997 (unaudited).................... F-7
Notes to Financial Statements......................................................... F-8
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of
Scriptgen Pharmaceuticals, Inc.
In our opinion, the accompanying balance sheet and the related statements of
operations, of redeemable preferred stock and stockholders' equity (deficit) and
of cash flows present fairly, in all material respects, the financial position
of Scriptgen Pharmaceuticals, Inc. at December 31, 1995 and 1996, and the
results of its operations and its cash flows for each of the three years in the
period ended December 31, 1996, in conformity with generally accepted accounting
principles. 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 of these statements in
accordance with generally accepted auditing standards which 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, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for the opinion expressed
above.
PRICE WATERHOUSE LLP
Boston, Massachusetts
October 31, 1997, except as to
the 1-for-3.07459 reverse stock
split discussed in Note 5 and
paragraphs two through five
of Note 10, which are as of February 2, 1998.
F-2
<PAGE>
SCRIPTGEN PHARMACEUTICALS, INC.
BALANCE SHEET
<TABLE>
<CAPTION>
DECEMBER 31, PRO FORMA
------------------------ SEPTEMBER 30, SEPTEMBER 30,
1995 1996 1997 1997
----------- ----------- ------------- -------------
<S> <C> <C> <C> <C>
(NOTE 2)
(UNAUDITED) (UNAUDITED)
ASSETS
Current assets:
Cash and cash equivalents............................. $ 241,352 $ 1,314,305 $ 858,176 $20,858,176
Short-term investments................................ 938,002 3,023,932 205,981 205,981
Accounts and other receivables........................ 74,559 136,715 144,547 144,547
Prepaid expenses and other current assets............. 33,064 45,203 34,209 34,209
----------- ----------- ------------- -------------
Total current assets.............................. 1,286,977 4,520,155 1,242,913 21,242,913
Property and equipment, net............................. 1,262,842 1,117,714 1,132,338 1,132,338
Other assets, net....................................... 139,348 108,842 102,835 102,835
----------- ----------- ------------- -------------
$ 2,689,167 $ 5,746,711 $ 2,478,086 $22,478,086
----------- ----------- ------------- -------------
----------- ----------- ------------- -------------
LIABILITIES, REDEEMABLE PREFERRED STOCK AND
STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Current portion of capital lease obligations.......... $ 442,034 $ 559,173 $ 483,891 $ 483,891
Accounts payable...................................... 142,774 252,393 518,347 518,347
Accrued expenses...................................... 409,753 158,256 210,253 210,253
Deferred revenue...................................... 200,000 200,000 1,230,000 1,230,000
----------- ----------- ------------- -------------
Total current liabilities........................... 1,194,561 1,169,822 2,442,491 2,442,491
----------- ----------- ------------- -------------
Capital lease obligations............................... 635,539 423,895 500,736 500,736
----------- ----------- ------------- -------------
Redeemable convertible preferred stock, $.01 par value,
21,500,000 shares authorized; 12,982,411 shares issued
and outstanding at December 31, 1995 and 17,036,265
shares issued and outstanding at December 31, 1996 and
September 30, 1997 (unaudited); none issued and
outstanding on a pro forma basis at September 30, 1997
(unaudited) (liquidating preference of $20,279,348)... 12,982,411 20,279,348 20,279,348 --
----------- ----------- ------------- -------------
Stockholders' equity (deficit):
Common stock, $.01 par value, 6,504,932 shares
authorized at December 31, 1995, 30,000,000 shares
authorized at December 31, 1996 and September 30,
1997 (unaudited) and 35,000,000 shares authorized at
September 30, 1997 on a pro forma basis (unaudited);
1,112,330, 1,286,394, 1,373,378 and 8,413,763 issued
at December 31, 1995 and 1996, September 30, 1997
(unaudited) and September 30, 1997 on a pro forma
basis (unaudited), respectively; 814,485, 927,646,
1,014,630 and 8,413,763 shares outstanding at
December 31, 1995 and 1996, September 30, 1997
(unaudited) and September 30, 1997 on a pro forma
basis (unaudited), respectively..................... 11,124 12,865 13,735 84,139
Additional paid-in capital............................ 219,852 403,208 3,126,457 45,547,042
Unearned compensation................................. -- (93,744) (2,660,542) (2,660,542)
Accumulated deficit................................... (12,308,533) (16,393,533) (21,168,989) (23,435,780)
----------- ----------- ------------- -------------
(12,077,557) (16,071,204) (20,689,339) 19,534,859
Treasury stock, at cost, 297,845 shares at December 31,
1995 and 358,748 shares at December 31, 1996,
September 30, 1997 (unaudited) and none at September
30, 1997 on a pro forma basis (unaudited)............. (45,787) (55,150) (55,150) --
----------- ----------- ------------- -------------
Total stockholders' equity (deficit)................ (12,123,344) (16,126,354) (20,744,489) 19,534,859
----------- ----------- ------------- -------------
Commitments and contingencies (Note 8)
$ 2,689,167 $ 5,746,711 $ 2,478,086 $22,478,086
----------- ----------- ------------- -------------
----------- ----------- ------------- -------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE>
SCRIPTGEN PHARMACEUTICALS, INC.
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------------------- ----------------------------
1994 1995 1996 1996 1997
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
(UNAUDITED)
Revenue:
Collaborative agreements............ $ -- $ -- $ 975,000 $ 975,000 $ 467,000
SBIR grants......................... -- 260,415 231,620 221,585 137,784
------------- ------------- ------------- ------------- -------------
-- 260,415 1,206,620 1,196,585 604,784
------------- ------------- ------------- ------------- -------------
Cost of revenue:
Collaborative agreements............ -- -- 174,165 174,165 123,515
SBIR grants......................... -- 260,415 231,620 221,585 137,784
------------- ------------- ------------- ------------- -------------
-- 260,415 405,785 395,750 261,299
------------- ------------- ------------- ------------- -------------
Gross profit........................ -- -- 800,835 800,835 343,485
------------- ------------- ------------- ------------- -------------
Operating expenses:
Research and development............ 3,156,734 3,152,494 3,958,201 2,757,439 4,273,149
General and administrative.......... 998,194 1,298,684 906,452 669,108 830,908
------------- ------------- ------------- ------------- -------------
4,154,928 4,451,178 4,864,653 3,426,547 5,104,057
------------- ------------- ------------- ------------- -------------
Loss from operations................ (4,154,928) (4,451,178) (4,063,818) (2,625,712) (4,760,572)
------------- ------------- ------------- ------------- -------------
Other income (expense):
Interest income..................... 30,662 88,673 160,364 104,215 91,391
Interest expense.................... (174,434) (215,447) (138,878) (90,624) (103,514)
Other, net.......................... (2,274) (975) (1,687) (1,387) (2,761)
------------- ------------- ------------- ------------- -------------
(146,046) (127,749) 19,799 12,204 (14,884)
------------- ------------- ------------- ------------- -------------
Net loss............................ $ (4,300,974) $ (4,578,927) $ (4,044,019) $ (2,613,508) $ (4,775,456)
------------- ------------- ------------- ------------- -------------
------------- ------------- ------------- ------------- -------------
Net loss per share.................... $ (1.25) $ (1.28) $ (1.20) $ (0.77) $ (1.35)
------------- ------------- ------------- ------------- -------------
------------- ------------- ------------- ------------- -------------
Weighted average common and common
equivalent shares outstanding....... 3,435,084 3,590,895 3,360,458 3,374,007 3,528,007
------------- ------------- ------------- ------------- -------------
------------- ------------- ------------- ------------- -------------
Pro forma net loss per share
(unaudited)......................... $ (0.49) $ (0.53)
------------- -------------
------------- -------------
Pro forma weighted average common and
common equivalent shares outstanding
(unaudited)......................... 8,186,013 9,068,995
------------- -------------
------------- -------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
SCRIPTGEN PHARMACEUTICALS, INC.
STATEMENT OF REDEEMABLE PREFERRED STOCK AND STOCKHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
REDEEMABLE PREFERRED
STOCK
-----------------------
STOCKHOLDERS' EQUITY (DEFICIT)
REDEEMABLE --------------------------------------------------------------
CONVERTIBLE
PREFERRED STOCK COMMON STOCK ADDITIONAL
----------------------- ---------------------- PAID-IN UNEARNED ACCUMULATED
SHARES AMOUNT SHARES AMOUNT CAPITAL COMPENSATION DEFICIT
---------- ----------- --------- ----------- ---------- ------------ ------------
Balance at December 31, 1993............. 6,203,325 $ 6,203,325 170,755 $ 1,708 $ 24,542 $ -- $(3,376,234)
<S> <C> <C> <C> <C> <C> <C> <C>
Issuance of warrant to purchase Series A
redeemable convertible prefererred
stock................................... 100,000
Issuance of common stock................. 928,310 9,283 93,426
Issuance of Series A redeemable
convertible preferred stock, issuance
costs of $7,764......................... 200,000 200,000 (7,764)
Net loss................................. (4,300,974)
---------- ----------- --------- ----------- ---------- ------------ ------------
Balance at December 31, 1994............. 6,403,325 6,403,325 1,099,065 10,991 217,968 -- (7,684,972)
Issuance of Series B redeemable
convertible preferred stock, issuance
costs of $44,634........................ 6,579,086 6,579,086 (44,634)
Issuance of common stock................. 13,265 133 1,884
Payment on note receivable from
stockholder.............................
Acquisition of treasury stock............
Net loss................................. (4,578,927)
---------- ----------- --------- ----------- ---------- ------------ ------------
Balance at December 31, 1995............. 12,982,411 $12,982,411 1,112,330 $ 11,124 $ 219,852 $ -- ($12,308,533)
<CAPTION>
NOTE TOTAL
RECEIVABLE STOCKHOLDERS'
FROM TREASURY EQUITY
STOCKHOLDER STOCK (DEFICIT)
----------- ----------- ------------
Balance at December 31, 1993............. $ -- $ -- $(3,349,984)
<S> <C> <C> <C>
Issuance of warrant to purchase Series A
redeemable convertible prefererred
stock................................... 100,000
Issuance of common stock................. (37,500) 65,209
Issuance of Series A redeemable
convertible preferred stock, issuance
costs of $7,764......................... (7,764)
Net loss................................. (4,300,974)
----------- ----------- ------------
Balance at December 31, 1994............. (37,500) -- (7,493,513)
Issuance of Series B redeemable
convertible preferred stock, issuance
costs of $44,634........................ (44,634)
Issuance of common stock................. 2,017
Payment on note receivable from
stockholder............................. 9,375 9,375
Acquisition of treasury stock............ 28,125 (45,787) (17,662)
Net loss................................. (4,578,927)
----------- ----------- ------------
Balance at December 31, 1995............. $ -- $ (45,787) ($12,123,344)
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
SCRIPTGEN PHARMACEUTICALS, INC.
STATEMENT OF REDEEMABLE PREFERRED STOCK AND STOCKHOLDERS' EQUITY
(DEFICIT)(CONTINUED)
<TABLE>
<CAPTION>
REDEEMABLE PREFERRED
STOCK
-----------------------
STOCKHOLDERS' EQUITY (DEFICIT)
REDEEMABLE --------------------------------------------------------------
CONVERTIBLE
PREFERRED STOCK COMMON STOCK ADDITIONAL
----------------------- ---------------------- PAID-IN UNEARNED ACCUMULATED
SHARES AMOUNT SHARES AMOUNT CAPITAL COMPENSATION DEFICIT
---------- ----------- --------- ----------- ---------- ------------ ------------
Issuance of Series C redeemable
convertible preferred stock, issuance
costs of $40,981........................ 4,053,854 $ 7,296,937 $ (40,981)
<S> <C> <C> <C> <C> <C> <C> <C>
Issuance of common stock pursuant to
exercise of stock options............... 174,064 $ 1,741 $ 5,018
Acquisition of treasury stock............
Unearned compensation related to common
stock options granted................... 178,338 $ (178,338)
Amortization of unearned compensation.... 84,594
Net loss................................. (4,044,019)
---------- ----------- --------- ----------- ---------- ------------ ------------
Balance at December 31, 1996............. 17,036,265 20,279,348 1,286,394 12,865 403,208 (93,744) (16,393,533)
Issuance of common stock pursuant to
exercise of stock options (unaudited)... 86,984 870 8,499
Unearned compensation related to common
stock options granted (unaudited)....... 2,714,750 (2,714,750)
Amortization of unearned compensation
(unaudited)............................. 147,952
Net loss (unaudited)..................... (4,775,456)
---------- ----------- --------- ----------- ---------- ------------ ------------
Balance at September 30, 1997
(unaudited)............................. 17,036,265 20,279,348 1,373,378 13,735 3,126,457 (2,660,542) (21,168,989)
Pro forma effect of issuance of Series D
redeemable convertible preferred stock
(unaudited)............................. 5,713,034 20,000,000
Pro forma effect of the value associated
with the issuance of warrants
(unaudited)............................. 2,215,228 (2,215,228)
Pro forma effect of retirement of
treasury stock (unaudited).............. (358,748) (3,587) (51,563)
Pro forma effect of conversion of
redeemable preferred stock
(unaudited)............................. (22,749,299) (40,279,378) 7,399,133 73,991 40,205,357
---------- ----------- --------- ----------- ---------- ------------ ------------
-- $ -- 8,413,763 $ 84,139 $45,547,042 $(2,660,542) ($23,435,780)
---------- ----------- --------- ----------- ---------- ------------ ------------
---------- ----------- --------- ----------- ---------- ------------ ------------
<CAPTION>
NOTE TOTAL
RECEIVABLE STOCKHOLDERS'
FROM TREASURY EQUITY
STOCKHOLDER STOCK (DEFICIT)
----------- ----------- ------------
Issuance of Series C redeemable
convertible preferred stock, issuance
costs of $40,981........................ $ (40,981)
<S> <C> <C> <C>
Issuance of common stock pursuant to
exercise of stock options............... 6,759
Acquisition of treasury stock............ $ (9,363) (9,363)
Unearned compensation related to common
stock options granted................... --
Amortization of unearned compensation.... 84,594
Net loss................................. (4,044,019)
----------- ----------- ------------
Balance at December 31, 1996............. -- (55,150) (16,126,354)
Issuance of common stock pursuant to
exercise of stock options (unaudited)... 9,369
Unearned compensation related to common
stock options granted (unaudited)....... --
Amortization of unearned compensation
(unaudited)............................. 147,952
Net loss (unaudited)..................... (4,775,456)
----------- ----------- ------------
Balance at September 30, 1997
(unaudited)............................. -- (55,150) (20,744,489)
Pro forma effect of issuance of Series D
redeemable convertible preferred stock
(unaudited)............................. --
Pro forma effect of the value associated
with the issuance of warrants
(unaudited)............................. --
Pro forma effect of retirement of
treasury stock (unaudited).............. 55,150 --
Pro forma effect of conversion of
redeemable preferred stock
(unaudited)............................. 40,279,348
----------- ----------- ------------
$ -- $ -- $19,534,859
----------- ----------- ------------
----------- ----------- ------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE>
SCRIPTGEN PHARMACEUTICALS, INC.
STATEMENT OF CASH FLOWS
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
---------------------------------- ----------------------
1994 1995 1996 1996 1997
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
(UNAUDITED)
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss........................................... $(4,300,974) $(4,578,927) $(4,044,019) $(2,613,508) $(4,775,456)
Adjustments to reconcile net loss to net cash used
for operating activities:
Depreciation and amortization.................... 319,045 509,214 586,049 423,910 547,877
Amortization of unearned compensation............ -- -- 84,594 -- 147,952
Accrued interest converted to preferred stock.... -- 60,112 -- -- --
Changes in operating assets and liabilities:
Accounts receivable............................ -- (74,559) (62,156) (227,126) (7,832)
Prepaid expenses and other current assets...... 70,563 40,072 (12,139) 40,683 10,994
Other assets................................... (93,789) 20,000 21,518 (7,239) (8,573)
Accounts payable............................... 127,898 (64,191) 109,619 33,991 265,954
Accrued expenses............................... 318 143,801 (251,497) (206,534) 51,997
Deferred revenue............................... -- 200,000 -- -- 1,030,000
---------- ---------- ---------- ---------- ----------
Net cash used for operating activities......... (3,876,939) (3,744,478) (3,568,031) (2,555,823) (2,737,087)
---------- ---------- ---------- ---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of short-term investments................. (7,794,213) (1,512,583) (9,300,265) (6,199,133) (2,637,489)
Sale of short-term investments..................... 9,043,301 574,581 7,214,335 3,830,952 5,455,440
Purchase of property and equipment................. (132,657) (29,973) (56,369) (200,910) (65,053)
---------- ---------- ---------- ---------- ----------
Net cash provided by (used for) investing
activities................................... 1,116,431 (967,975) (2,142,299) (2,569,091) 2,752,898
---------- ---------- ---------- ---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of convertible debt......... 2,100,000 400,000 -- -- --
Sale of common stock............................... 65,209 2,017 6,759 -- 9,369
Repurchase of common stock......................... -- -- (9,363) (9,363) --
Sale of preferred stock, net of issuance costs..... 192,236 3,955,366 7,255,956 5,270,096 --
Sale of fixed assets............................... 129,528 38,078 -- -- --
Principal payments on capital lease obligations.... (222,650) (373,143) (470,069) (184,932) (481,309)
Payments from stockholder.......................... -- 9,375 -- -- --
---------- ---------- ---------- ---------- ----------
Net cash provided by (used for) financing
activities..................................... 2,264,323 4,031,693 6,783,283 5,075,801 (471,940)
---------- ---------- ---------- ---------- ----------
Net increase (decrease) in cash and cash
equivalents...................................... (496,185) (680,760) 1,072,953 (49,113) (456,129)
Cash and cash equivalents at beginning of period... 1,418,297 922,112 241,352 241,352 1,314,305
---------- ---------- ---------- ---------- ----------
Cash and cash equivalents at end of period......... $ 922,112 $ 241,352 $1,314,305 $ 192,239 $ 858,176
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the period for interest........... $ 135,460 $ 135,334 $ 98,599 $ 90,624 $ 103,514
SCHEDULE OF NON-CASH FINANCING ACTIVITIES
Assets recorded under capital lease................ 971,455 164,919 375,564 169,304 482,868
Purchase of treasury stock in exchange for accounts
payable.......................................... -- 26,400 -- -- --
Issuance of warrants to lessor..................... 100,000 -- -- -- --
Issuance of common stock in exchange for note
receivable....................................... 37,500 -- -- -- --
Issuance of preferred stock to cancel notes payable
and accrued interest............................. -- 2,579,086 -- -- --
</TABLE>
During 1995, the Company cancelled a note receivable from a stockholder of
$28,125 in exchange for treasury stock of $19,387 and a receivable from a
stockholder of $8,738 (Note 5).
The accompanying notes are an integral part of these financial statements.
F-7
<PAGE>
SCRIPTGEN PHARMACEUTICALS, INC.
NOTES TO FINANCIAL STATEMENTS
1. NATURE OF BUSINESS AND ORGANIZATION
Scriptgen Pharmaceuticals, Inc. (the "Company") was incorporated in
September 1992. The Company utilizes its proprietary high throughput
technologies to enable and accelerate the discovery of innovative small molecule
drugs. The Company's technology platform identifies and validates novel gene
targets for therapeutic intervention, and then uses novel assay systems to
rapidly screen compounds against those targets. The Company commercializes its
technology through collaborations with pharmaceutical and technology companies
and the Company's internal development program.
Through 1995, the Company devoted substantially all of its efforts to
research and development, business planning and financings and was considered to
be in the development stage as defined in Statement of Financial Accounting
Standards No. 7, "Accounting and Reporting by Development Stage Enterprises."
The Company is no longer considered to be a development stage enterprise as
planned operations commenced in 1996.
2. SIGNIFICANT ACCOUNTING POLICIES
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the reporting
period. Actual amounts could differ from those estimates.
CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS
The Company considers all highly liquid instruments with an original
maturity of three months or less to be cash equivalents. The Company invests its
excess cash primarily in short-term marketable securities. Accordingly, these
investments are subject to minimal credit and market risk.
The Company's cash equivalents at December 31, 1995 consisted of
approximately $82,000 in money market funds. The Company's cash equivalents at
December 31, 1996 consisted of approximately $16,000 in money market funds,
$260,000 in time deposits and $720,000 in commercial paper.
Short-term investments at December 31, 1995 consisted of approximately
$938,000 in U.S. Treasury Bills. Short-term investments at December 31, 1996
consisted of approximately $2,286,000 in U.S. Treasury Bills and $738,000 in
U.S. Agency Bonds. These securities are classified as available-for-sale and are
recorded at cost which approximates fair value. Any unrealized gains or losses
are recorded as a separate component of stockholders' equity. Gross unrealized
and realized gains and losses on sales of securities at December 31, 1995 and
1996 and for the years ended December 31, 1994, 1995 and 1996 were not
significant.
REVENUE RECOGNITION AND ACCOUNTS RECEIVABLE
The Company has entered into various collaborative agreements with
pharmaceutical and technology companies. Revenue derived from such collaborative
agreements is recognized as drug discovery activities are performed. Cash
received in advance of activities performed is recorded as deferred revenue.
Certain agreements also provide for payments to the Company upon the achievement
of certain milestones as well as royalties on the net sales of any products
developed resulting from the collaborations, as defined in the
F-8
<PAGE>
SCRIPTGEN PHARMACEUTICALS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
respective agreements. Any revenue related to milestones will be recognized as
the milestones are achieved and revenue related to royalties will be recognized
as earned.
Revenue from Small Business Innovation Research ("SBIR") government grants
to conduct research and development is recognized as eligible costs are incurred
up to the funding limit. Eligible grant-related costs which have been incurred
in advance of cash receipts are recorded as receivables.
CONCENTRATION OF CREDIT RISK AND SIGNIFICANT CUSTOMERS
Financial instruments which potentially expose the Company to concentrations
of credit risk consist primarily of trade accounts receivable. Management
believes its credit policies are prudent and reflect normal industry terms and
business risk. The Company does not anticipate non-performance by the
counterparties and, accordingly, does not require collateral.
For the years ended December 31, 1995 and 1996, certain customers accounted
for more than 10% of the Company's revenue. One customer accounted for 100% of
revenue in 1995. Two customers accounted for 81% and 19% of revenue,
respectively, in 1996. Two customers accounted for 77% and 23% of revenue,
respectively, in the nine months ended September 30, 1997.
PROPERTY AND EQUIPMENT
Equipment, furniture and fixtures are recorded at cost and are being
depreciated using the straight-line method over estimated useful lives of five
years. Leasehold improvements are stated at cost and are being amortized using
the straight-line method over the term of the lease, which is less than the
estimated useful life of the properties.
PATENT COSTS
Costs associated with patent applications have been expensed as incurred to
date primarily because recovery of these costs is uncertain. However, certain
costs associated with patent applications for products and processes where
recovery is probable will be capitalized and amortized over their estimated
economic life. Through December 31, 1996, capitalizable patent costs have not
been significant and no patent costs have been capitalized.
IMPAIRMENT OF LONG-LIVED ASSETS
The Company periodically assesses whether any events or changes in
circumstances have occurred that would indicate that the carrying amount of a
long-lived asset may not be recoverable. When such an event or change in
circumstance occurs, the Company evaluates whether the carrying amount of such
asset is recoverable by comparing the net book value of the asset to estimated
future undiscounted cash flows, excluding interest charges, attributable to such
asset. If it is determined that the carrying amount is not recoverable, the
Company recognizes an impairment loss equal to the excess of the carrying amount
of the asset over the estimated fair value of such asset.
ACCOUNTING FOR STOCK-BASED COMPENSATION
In October 1995, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 123, "Accounting for
Stock-Based Compensation." SFAS 123, which is effective for the Company's 1996
financial statements, defines a fair value based method of accounting
F-9
<PAGE>
SCRIPTGEN PHARMACEUTICALS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
for stock-based awards to employees. The Company has elected to account for
stock-based awards to its employees using the intrinsic value based method as
prescribed by APB Opinion No. 25, "Accounting for Stock Issued to Employees,"
and related Interpretations and has adopted the provisions of SFAS 123 through
disclosure only (Note 6).
NET LOSS PER SHARE, UNAUDITED PRO FORMA NET LOSS PER SHARE AND UNAUDITED PRO
FORMA INFORMATION
Net loss per share and unaudited pro forma net loss per share are determined
by dividing net loss by the weighted average number of common shares and common
share equivalents outstanding during the period. Common share equivalents,
comprised of common stock options and warrants and convertible preferred stock,
have been excluded from the calculation as their effect is anti-dilutive, except
that, pursuant to Securities and Exchange Commission Staff Accounting Bulletin
No. 83, common share equivalents issued and common stock sold at prices below
the initial public offering price in the twelve months preceding the initial
filing of the Company's Registration Statement and through the effective date of
the initial public offering have been included in the calculation as if
outstanding for all periods presented.
As described in Note 5, conversion of all redeemable convertible preferred
stock will occur upon the closing of a qualified public offering of the
Company's common stock. The unaudited pro forma net loss per share information
included in the accompanying statement of operations for the year ended December
31, 1996 and for the nine months ended September 30, 1997 reflects the impact on
unaudited pro forma net loss per share of such conversion as of the beginning of
each period or date of issuance, if later, using the if-converted method.
The unaudited pro forma information at September 30, 1997 included in the
balance sheet and the statement of redeemable preferred stock and stockholders'
equity (deficit) reflects the issuance of 5,713,034 shares of Series D
redeemable convertible preferred stock for $20,000,000, the value associated
with the issuance of a warrant to purchase 464,537 shares of common stock, the
retirement of 358,758 shares of treasury stock, all as discussed in Note 10, and
the automatic conversion of each share of the redeemable convertible preferred
stock into 0.32525 shares of common stock upon the closing of the Company's
anticipated initial public offering.
UNAUDITED INTERIM FINANCIAL DATA
The interim financial data as of September 30, 1997 and for the nine months
ended September 30, 1996 and 1997 are unaudited; however, in the opinion of
management, the interim financial data include all adjustments, consisting only
of normal recurring adjustments, necessary for a fair presentation of the
results of operations for these interim periods. The interim financial data are
not necessarily indicative of the results of operations for a full year.
RECENTLY ENACTED ACCOUNTING PRONOUNCEMENTS
In February 1997, the FASB issued SFAS No. 128, "Earnings Per Share." In
September 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive Income"
and SFAS No. 131, "Disclosures about Segments of an Enterprise and Related
Information." The Company will implement SFAS No. 128 as required in its 1997
fourth quarter and, at this time, the future adoption is not expected to have a
material effect on net loss per share. Had the Company computed net loss per
share and pro forma net loss per share for the periods ended December 31, 1996
and the nine months ended September 30, 1997 in
F-10
<PAGE>
SCRIPTGEN PHARMACEUTICALS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
accordance with SFAS No. 128 the net loss per share and pro forma net loss per
share would not have been different. The Company will implement SFAS No. 130 and
SFAS No. 131, which require the Company to report and display certain
information related to comprehensive income and operating segments,
respectively, as required in fiscal 1998. Adoption of SFAS No. 130 and SFAS No.
131 will not impact the Company's financial position or results of operations.
3. PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
<S> <C> <C>
1995 1996
------------ ------------
Furniture and fixtures............................................ $ 8,947 $ 8,947
Equipment......................................................... 1,350,895 1,782,828
Leasehold improvements............................................ 677,950 677,950
------------ ------------
2,037,792 2,469,725
Less: Accumulated depreciation and amortization................... 774,950 1,352,011
------------ ------------
$ 1,262,842 $ 1,117,714
------------ ------------
------------ ------------
</TABLE>
Depreciation and amortization expense for the years ended December 31, 1994,
1995 and 1996 was $289,557, $498,175 and $577,061, respectively.
At December 31, 1995 and 1996, the costs of equipment and leasehold
improvements held under capital leases amounted to $1,943,932 and $2,319,496,
respectively, and accumulated depreciation relating to such equipment and
leasehold improvements amounted to $485,780 and $1,028,328, respectively.
4. CONVERTIBLE DEBT
In July 1994, the Company entered into a Loan and Stock Purchase Agreement
with certain preferred stockholders to provide bridge financing for the Company.
The agreement made available to the Company up to $2,500,000 in financing.
During 1994 and 1995, the Company issued notes in the aggregate amount of
$2,100,000 and $400,000, respectively, to these investors. The notes were
interest bearing at a rate of 4.25% until December 31, 1994 and 9.50% from
January 1, 1995 until April 19, 1995, when these notes, together with accrued
interest thereon, were converted into shares of Series B Preferred Stock at
$1.00 per share.
5. CAPITALIZATION
REDEEMABLE CONVERTIBLE PREFERRED STOCK
The Company has authorized 21,500,000 shares of redeemable convertible
preferred stock designated as follows: 5,100,000 shares of Series A redeemable
convertible preferred stock ("Series A Preferred Stock"); 9,700,000 shares of
Series B redeemable convertible preferred stock ("Series B Preferred Stock");
and 6,700,000 shares of Series C redeemable convertible preferred stock ("Series
C Preferred Stock") (collectively as the "Preferred Stock"). The Series A, B and
C Preferred Stock have the following characteristics:
F-11
<PAGE>
SCRIPTGEN PHARMACEUTICALS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
5. CAPITALIZATION (CONTINUED)
CONVERSION
Each share of Preferred Stock is convertible at any time at the option of
the holder into shares of common stock at a ratio of one share of common stock
for 3.07459 shares of Preferred Stock, subject to certain stock split, stock
dividend and other adjustments. All Preferred Stock will automatically convert
to common stock upon the earlier of i) the closing of a public offering of the
Company's common stock involving aggregate proceeds of at least $10,000,000 and
a per share price of not less than $7.00 or ii) the consent of the holders of at
least 85% of the then outstanding shares of Preferred Stock.
The Company has reserved 2,082,660, 2,139,826 and 1,318,502 shares of common
stock for issuance upon the conversion of the Series A Preferred Stock, Series B
Preferred Stock and Series C Preferred Stock, respectively.
DIVIDENDS
Holders of Series C Preferred Stock are entitled to receive dividends when,
as and if declared by the Board of Directors.
Holders of Series B Preferred Stock are entitled to receive dividends when,
as and if declared by the Board of Directors, provided however that no dividends
shall be declared or paid on the Series B Preferred Stock unless the Company
shall simultaneously declare and pay an equal dividend on each outstanding share
of Series C Preferred Stock.
Holders of Series A Preferred Stock are entitled to receive dividends when,
as and if declared by the Board of Directors, provided however that no dividend
shall be declared or paid on the Series A Preferred Stock unless the Company
shall simultaneously declare and pay an equal dividend on each outstanding share
of Series B and Series C Preferred Stock. Through December 31, 1996, no
dividends have been declared or paid by the Company.
REDEMPTION
On January 15, 2004 and 2005, the Company shall redeem 50% of the then
outstanding shares of Preferred Stock at a per share price of $1.80 for each
share of Series C Preferred Stock and $1.00 for each share of Series A Preferred
Stock and Series B Preferred Stock, plus all declared but unpaid dividends,
unless such redemption is waived by holders of 75% of the then outstanding
shares of Preferred Stock.
At December 31, 1996, there are issued and outstanding 6,403,325 shares of
Series A Preferred Stock, 6,579,086 shares of Series B Preferred Stock and
4,053,854 shares of Series C Preferred Stock, which are recorded at redemption
values of $6,403,325, $6,579,086 and $7,296,937, respectively.
LIQUIDATION, DISSOLUTION OR WINDING-UP OF COMPANY
In the event of any liquidation, dissolution, or winding up of the Company,
the holders of Series A Preferred Stock, Series B Preferred Stock and Series C
Preferred Stock will be entitled to receive, in preference to the holders of the
common stock, an amount per share equal to $1.00, $1.00 and $1.80, respectively,
plus any declared but unpaid dividends. If the remaining assets of the Company
are insufficient to pay the preferred stockholders the full amount to which they
are entitled, any distribution of the remaining assets will be in proportion to
the respective amounts which would otherwise be payable if
F-12
<PAGE>
SCRIPTGEN PHARMACEUTICALS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
5. CAPITALIZATION (CONTINUED)
all amounts payable were paid in full. Any assets remaining after the initial
distribution to the holders of the Preferred Stock shall be available for
distribution ratably among the Company's common stockholders.
VOTING RIGHTS
Each holder of the Preferred Stock is entitled to vote the number of shares
of common stock into which such holder's shares are convertible at the date such
vote is taken.
RIGHTS OF FIRST REFUSAL
The holders of the Preferred Stock have the right of first refusal on all
future issuances by the Company of any of its equity securities.
STOCK RESTRICTION AGREEMENTS
The Company has executed stock restriction agreements with certain common
stockholders. Each agreement gives the Company the right to repurchase a certain
number of shares, at the original issuance price, held by such stockholder if he
or she ceases to be a director, employee or consultant, as applicable, of the
Company. The purchase option rights lapse at various dates through July 1998. At
December 31, 1996 and September 30, 1997 (unaudited), 15,395 and 28,963,
respectively, shares of the Company's outstanding common stock were subject to
these repurchase options.
REVERSE COMMON STOCK SPLIT
On December 12, 1997, the Board of Directors authorized a 1-for-3.07459
reverse stock split of the Company's common stock which became effective on
February 2, 1998. All shares of common stock, common stock options and warrants,
preferred stock conversion ratios and per share amounts included in the
accompanying financial statements have been adjusted to give retroactive effect
to the reverse stock split for all periods presented.
RELATED PARTY TRANSACTIONS
The Company entered into a stock agreement with an officer of the Company in
February 1994 whereby the Company issued 464,452 shares of common stock and
200,000 shares of Series A Preferred Stock to this individual in exchange for
cash and a promissory note totaling $271,400. Such promissory note was paid in
four quarterly equal installments commencing February 1, 1995.
The underlying stock agreement gave the Company repurchase rights to the
stock in certain increments at a price equal to the price per share paid by this
individual. Such repurchase rights lapsed at certain dates or upon the
occurrence of certain events, as defined in the agreement.
The Company entered into a separation agreement with this officer in
December 1995. Under the separation agreement, the Company was obligated to
extend the officer's salary, for a period of one year from the resignation date
or until the officer accepts full-time employment, whichever occurred first, as
well as other related costs. For the year ended December 31, 1995, the Company
recorded total compensation expense of approximately $275,000 in connection with
this agreement. The unpaid portion of the compensation expense of approximately
$265,000 was reflected in accrued expenses at December 31, 1995 and was paid in
full in 1996.
F-13
<PAGE>
SCRIPTGEN PHARMACEUTICALS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
5. CAPITALIZATION (CONTINUED)
Pursuant to the terms of the separation agreement, in 1995 the Company
exercised its repurchase rights to 297,845 shares of the Company's common stock
issued under the February 1994 stock agreement. The promissory note received in
conjunction with the stock agreement was cancelled. In 1996, the Company
exercised its repurchase rights to the remaining unvested 48,787 shares of the
Company's common stock issued under the February 1994 stock agreement.
6. STOCK PLAN
During 1994, the Company adopted its 1994 Stock Option Plan (the "Plan").
The Plan provides for the issuance of incentive stock options to officers and
other employees of the Company and non-qualified stock options, awards of stock
and direct stock purchase opportunities to directors, officers, employees and
consultants of the Company. The total number of shares which may be issued under
the Plan is 613,090. The options are exercisable at various dates and will
expire no more than ten years from their date of grant, or in the case of
certain non-qualified options, fifteen years from the date of grant. The
exercise price of each option shall be determined by the Board of Directors. In
the case of incentive stock options, the exercise price may not be less than
100% of the fair market value of the share at the time the option is granted.
For holders of more than 10% of the Company's total combined voting power of all
classes of stock, incentive stock options may not be granted at less than 110%
of the fair market value of the Company's common stock at the date of grant and
may not exceed a term of five years.
At December 31, 1996, the Company had one stock option plan, which is
described above. The Company applies APB Opinion No. 25 in accounting for awards
made under the Plan.
Had compensation cost for these awards been determined based on the fair
value of these options at their date of grant consistent with the method
prescribed by SFAS No. 123, the Company's net loss would have been as follows:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
----------------------------
<S> <C> <C>
1995 1996
------------- -------------
Net loss:
As reported................................................... $ (4,578,927) $ (4,044,019)
Pro forma..................................................... (4,578,933) (4,046,130)
</TABLE>
Because the determination of the fair value of all options granted after the
Company becomes a public entity will include an expected volatility factor,
additional option grants are expected to be made subsequent to December 31, 1996
and options vest over several years, the pro forma effects of applying the fair
value method may be material to reported net income or loss in future years.
The fair value of each option grant is estimated on the date of grant using
the Black-Scholes option-pricing model to apply the minimum value method with
the following weighted average assumptions:
<TABLE>
<CAPTION>
1995 1996
--------- ---------
<S> <C> <C>
Expected options term (years)................................................ 5 5
Risk-free interest rate...................................................... 7.02% 6.14%
Dividend yield............................................................... 0.00% 0.00%
</TABLE>
F-14
<PAGE>
SCRIPTGEN PHARMACEUTICALS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
6. STOCK PLAN (CONTINUED)
A summary of the status of the Company's fixed stock option plan as of
December 31, 1996 and changes during the three year period ended on that date is
presented below:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------------------------------
1994 1995 1996
----------------------- ----------------------- ------------------------
WEIGHTED- WEIGHTED- WEIGHTED-
AVERAGE AVERAGE AVERAGE
EXERCISE EXERCISE EXERCISE
SHARES PRICE SHARES PRICE SHARES PRICE
---------- ----------- ---------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of year.......... -- $ -- 299,015 $ .15 308,155 $ .15
Granted................................... 299,503 .15 9,953 .15 210,207 .15
Exercised................................. (335) .15 (558) .15 (174,064) .15
Forfeited................................. (153) .15 (255) .15 (11,717) .15
---------- ---------- -----------
Outstanding at end of year................ 299,015 $ .15 308,155 $ .15 332,581 $ .15
---------- ---------- -----------
Options available for future grant........ 313,740 304,042 105,552
---------- ---------- -----------
Weighted-average fair value of options
granted whose exercise price of $.15
equals the market price................. $ .03 $ .03 $ .03
---------- ---------- -----------
---------- ---------- -----------
Weighted-average fair value of options
granted whose exercise price of $.15 is
less than the market price.............. $ -- $ -- $ 1.72
---------- ---------- -----------
---------- ---------- -----------
</TABLE>
The following table summarizes information about fixed stock options
outstanding at December 31, 1996.
<TABLE>
<CAPTION>
OPTIONS
OUTSTANDING
----------------------
WEIGHTED-
AVERAGE OPTIONS
REMAINING EXERCISABLE
CONTRACTUAL -----------
EXERCISE PRICE NUMBER LIFE NUMBER
- ---------------------------------------------------------- --------- ----------- -----------
<S> <C> <C> <C>
$.15...................................................... 332,581 8.8 years 59,890
</TABLE>
UNEARNED COMPENSATION
During October 1996 through December 1996, the Company granted stock options
to purchase 105,461 shares of its common stock at an exercise price of $.15 per
share. The Company recorded unearned compensation totaling $178,338,
representing the difference between the estimated fair market value of the
common stock on the date of grant and the exercise price. Unearned compensation
related to these options is recorded as an increase to stockholders' deficit and
is being amortized over the option vesting period.
F-15
<PAGE>
SCRIPTGEN PHARMACEUTICALS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
6. STOCK PLAN (CONTINUED)
(Unaudited)
During the nine months ended September 30, 1997, the Company granted options
to purchase 407,859 shares of its common stock at exercise prices of $.15 and
$6.15 per share. The Company recorded unearned compensation totaling $2,714,750
for such options.
7. INCOME TAXES
Deferred tax assets and (liabilities) are comprised of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
<S> <C> <C>
1995 1996
------------ ------------
Net operating loss carryforwards.................................. $ 4,582,000 $ 6,210,000
Research and development credit carryforwards..................... 426,000 604,000
Property and equipment............................................ 194,000 268,000
Accrued expenses.................................................. 123,000 18,000
Deferred start-up expenses........................................ 34,000 17,000
------------ ------------
Deferred tax assets, net.......................................... 5,359,000 7,117,000
Valuation allowance............................................... (5,359,000) (7,117,000)
------------ ------------
$ -- $ --
------------ ------------
------------ ------------
</TABLE>
The Company has generated taxable losses from operations since inception
and, accordingly, has no taxable income available to offset the carryback of net
operating losses. In addition, although management's operating plans anticipate
taxable income in future periods, such plans provide for taxable losses over the
near term and make significant assumptions which cannot be reasonably assured,
including approval of the Company's products by the U.S. Food and Drug
Administration and market acceptance of the Company's products by customers.
Based upon the weight of all available evidence, the Company has provided a full
valuation allowance for its deferred tax assets since, in the opinion of
management, realization of these future benefits is not sufficiently assured
(defined as a likelihood of slightly more than 50 percent).
As of December 31, 1996, the Company has net operating loss carryforwards
and research and development credit carryforwards which may be used to offset
future federal and state taxable income and tax liabilities as follows:
<TABLE>
<CAPTION>
RESEARCH AND
DEVELOPMENT TAX
CREDIT
NET OPERATING ----------------------
YEAR OF EXPIRATION LOSS FEDERAL STATE
- ------------------------------------------------------ ------------- ---------- ----------
<S> <C> <C> <C>
2007.................................................. $ 338,000 $ 22,000 $ 12,000
2008.................................................. 2,708,000 74,000 37,000
2009.................................................. 4,076,000 124,000 62,000
2010.................................................. 4,250,000 66,000 101,000
2011.................................................. 4,085,000 121,000 87,000
------------- ---------- ----------
$ 15,457,000 $ 407,000 $ 299,000
------------- ---------- ----------
------------- ---------- ----------
</TABLE>
F-16
<PAGE>
SCRIPTGEN PHARMACEUTICALS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
7. INCOME TAXES (CONTINUED)
As a result of the issuance of redeemable convertible preferred stock (Note
5), a change in ownership has occurred as defined by the Internal Revenue code
which may significantly restrict future annual utilization of the Company's
federal NOL carryforwards. Under the provisions of the Internal Revenue Code,
certain substantial changes in the Company's ownership may limit the amount of
the net operating loss and tax credit carryforwards which could be utilized
annually to offset future taxable income and taxes payable. The amount of the
annual limitation is determined based upon the Company's value prior to an
ownership change. Subsequent significant ownership changes could further affect
the limitation in future years.
8. COMMITMENTS AND CONTINGENCIES
In November 1993, the Company entered into a five-year operating lease for
office and research space. The lease requires the Company to pay a share of real
estate taxes and building operating expenses if such expenses exceed a base
level stipulated in the lease.
In January 1994, the Company entered into a leasing arrangement whereby a
third party will provide up to $1,700,000 in equipment financing. In connection
with this agreement, the Company granted to the lessor warrants to purchase
153,000 shares of Series A Preferred Stock at a price of $1.00 per share. The
warrants expire in January 2004 or five years from the closing of the sale and
issuance of shares of the Company's common stock in an initial public offering,
whichever is later. The Company ascribed a value of $100,000 to such warrants,
which is included in other assets and is being amortized over the life of the
lease financing.
In February 1996, the Company entered into a leasing arrangement with this
same third party who will provide up to $1,436,775 in additional equipment
financing. In connection with this agreement, the Company initially granted to
the lessor warrants to purchase 32,500 shares of Series C Preferred Stock at a
price of $1.80 per share. As of December 31, 1996, the Company is committed to
grant an additional 67,500 warrants upon commencement of certain phases of the
financing. The warrants expire in May 2006 or five years from the closing of the
sale and issuance of the Company's common stock in an initial public offering,
whichever is later. The value ascribed to the warrants granted was not
significant.
Future minimum lease payments required under operating and capital leases as
of December 31, 1996 are as follows:
<TABLE>
<CAPTION>
OPERATING CAPITAL
LEASES LEASES
---------- ------------
<S> <C> <C>
1997................................................................ $ 105,308 $ 628,319
1998................................................................ 87,757 301,656
1999................................................................ -- 129,500
2000................................................................ -- 26,095
---------- ------------
Total minimum lease payments........................................ $ 193,065 1,085,570
----------
----------
Amount representing interest........................................ (102,502)
------------
Present value of minimum lease payments............................. $ 983,068
------------
------------
</TABLE>
Rent expense for the years ended December 31, 1994, 1995 and 1996 was
approximately $185,000, $108,000 and $128,000, respectively.
F-17
<PAGE>
SCRIPTGEN PHARMACEUTICALS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
8. COMMITMENTS AND CONTINGENCIES (CONTINUED)
Obligations under capital lease have interest rates which range from 8% to
15% at December 31, 1996.
Under certain licensing and other agreements, the Company is required to
make payments upon the achievement of certain milestones, to pay royalties on
certain drug sales, if any, and to pay other amounts in connection with
sublicenses, if any (collectively "Contingent Payments"). To date, the Company
has not become obligated to make any Contingent Payments under such agreements.
In addition, pursuant to several license and sponsored research agreements, the
Company is obligated to make certain payments through 1998 of up to
approximately $400,000.
9. SAVINGS PLAN
The Company has a retirement savings plan for all employees pursuant to
Section 401(k) of the Internal Revenue Code. Employees become eligible to
participate upon completion of six months of service to the Company. Employees
may contribute any whole percentage of their salary, up to a maximum annual
statutory limit. The Company is not required to contribute to this plan and has
made no contributions to date.
10. SUBSEQUENT EVENTS
In October 1997, the Company entered into a collaboration agreement with
Hoechst Marion Roussel ("HMR") to identify new fungal targets and antifungal
drug candidates. The agreement requires HMR to pay initial technology access
fees in the amount of $6 million, certain payments for research and development
and additional payments upon the attainment of certain milestones, plus
royalties on sales of any new drug resulting from the collaboration. As part of
this agreement, HMR has agreed to purchase shares of common stock having a value
of $3,000,000 (based on the initial public offering price) in a private
placement concurrently with the Company's initial public offering. The Company
has granted certain piggyback registration rights to HMR relating to such
shares.
In December 1997, the Company authorized and issued 5,713,034 shares of
Series D redeemable convertible preferred stock for $20,000,000 to BioChem
Pharma Inc. ("BioChem") which have similar terms to those of the Series A, B and
C redeemable convertible preferred stock, except that the Series D stock is
redeemable at the option of the holder at a price per share of $3.50. In the
event that the initial public offering price is less than $10.76 per share, then
the Company will be required to issue to BioChem, for no additional
consideration, the number of additional shares of common stock equal to the
amount by which (a) 19,993,640 divided by the initial public offering price,
exceeds (b) 1,858,145. The Company also entered into a collaboration agreement
with BioChem pursuant to which the Company is using its technologies to identify
drug candidates. The Company is responsible for all aspects of drug discovery
and BioChem is responsible for pre-clinical and clinical development, and will
retain worldwide commercialization rights. Any profits on any commercialized
products emanating from these programs will be shared in accordance with the
terms of the agreement. In addition, the Company issued to BioChem a warrant to
purchase 464,537 shares of common stock at an initial exercise price of $13.47
per share, which expire in December 2002. The initial exercise price may be
adjusted downward in the event the Company sells any shares of common stock at a
price below the current exercise price (with the exception of excluded stock, as
defined by the agreement, including shares being sold in the Offering). The
adjustment provisions will terminate upon the closing of an initial public
offering of the Company's common stock having an aggregate offering value of at
least $25 million. The Company has ascribed an initial value to the warrant
F-18
<PAGE>
SCRIPTGEN PHARMACEUTICALS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
10. SUBSEQUENT EVENTS (CONTINUED)
of approximately $2,200,000 which will be charged to research and development
expense in the fourth quarter of 1997.
In December 1997, the Company adopted the 1997 Equity Incentive Plan (the
"1997 Plan"). The 1997 Plan provides for the issuance of up to 1,700,000 shares
of the Company's common stock to eligible employees, directors, consultants and
advisors of the Company. Under the 1997 Plan, the Board of Directors may award
incentive and non-qualified stock options, stock appreciation rights,
performance shares and restricted and unrestricted stock. Incentive stock
options may not be granted at less than the fair market value of the Company's
common stock at the date of grant and for a term not to exceed ten years. For
holders of more than 10% of the Company's total combined voting power of all
classes of stock, incentive stock options may not be granted at less than 110%
of the fair market value of the Company's common stock at the date of grant and
for a term not to exceed five years. The exercise price under each non-qualified
stock option shall be specified by the Board of Directors, or a committee
appointed by the Board of Directors, in accordance with the guidelines set forth
in the 1997 Plan. Grants of stock appreciation rights, performance shares,
restricted stock and unrestricted stock may be made at the discretion of the
Board of Directors with terms to be defined therein.
In December 1997, the Company adopted the Non-Employee Directors Stock Plan
(the "Directors' Plan") which provides for the issuance of up to 250,000 shares
of the Company's common stock to directors of the Company who are not current or
former employees of the Company ("Non-Employee Directors"). Under the Directors'
Plan, each Non-Employee Director will receive options to purchase 10,000 shares
of common stock on the date of the final prospectus used in connection with the
Company's initial public offering. Thereafter, on the date of each annual
meeting of the stockholders of the Company, each Non-Employee Director
continuing in office will receive options to purchase 4,000 shares of common
stock and each newly elected Non-Employee Director will receive options to
purchase 10,000 shares of common stock. In addition, each Non-Employee Director
who is a member of a committee of the Company's Board of Directors will receive
options to purchase 250 shares of common stock on each one year anniversary of
his or her appointment to such committee. Options granted under the Directors'
Plan will have exercise prices equal to the fair market value of the Company's
common stock on the date of the grant. The exercise price of options granted
under the Director's Plan on the date of the final prospectus used in connection
with the Company's initial public offering will equal the offering price to the
public. All options granted under the Directors' Plan vest in three annual
installments and expire ten years from the date of grant. All options
outstanding under the Directors' Plan will become immediately exercisable upon
the occurrence of a change in control as defined in the Directors' Plan.
In December 1997, the Company cancelled all of its treasury stock and such
shares resumed the status of authorized and unissued shares of common stock. In
addition, the Company increased the number of shares of common stock authorized
for issuance to 35,000,000. In December 1997, the Board of Directors approved
the authorization of 4,000,000 shares of preferred stock available for issuance,
which will become effective after the closing of the Company's initial public
offering.
F-19
<PAGE>
No dealer, salesperson or other person has been authorized to give any
information or to make any representation other than those contained in this
Prospectus in connection with the offer contained herein, and, if given or made,
such information or representation must not be relied upon as having been
authorized by the Company or any Underwriter. This Prospectus does not
constitute an offer to sell, or a solicitation of an offer to buy, shares of
Common Stock in any jurisdiction to any person to whom it is not lawful to make
any such offer or solicitation in such jurisdiction or in which the person
making such offer or solicitation is not qualified to do so. Neither the
delivery of this Prospectus nor any sale made hereunder shall, under any
circumstances, create an implication that there has been no change in the
affairs of the Company since the date hereof or that the information contained
herein is correct as of any time subsequent to its date.
TABLE OF CONTENTS
------------------------------------------------
<TABLE>
<S> <C>
Prospectus Summary.................................................... 3
Risk Factors.......................................................... 7
Use of Proceeds....................................................... 18
Dividend Policy....................................................... 18
Capitalization........................................................ 19
Dilution.............................................................. 20
Selected Financial Data............................................... 22
Management's Discussion and Analysis of Financial Condition and
Results of Operations............................................... 23
Business.............................................................. 27
Management............................................................ 42
Certain Transactions.................................................. 53
Principal Stockholders................................................ 56
Description of Capital Stock.......................................... 59
Shares Eligible for Future Sale....................................... 62
Underwriting.......................................................... 64
Legal Matters......................................................... 65
Experts............................................................... 65
Additional Information................................................ 66
Index to Financial Statements......................................... F-1
</TABLE>
Until , 1998 (25 days after the date of this Prospectus), all dealers
effecting transactions in the registered securities, whether or not
participating in the distribution, may be required to deliver a Prospectus. This
requirement is in addition to the obligation of dealers to deliver a Prospectus
when acting as Underwriters and with respect to their unsold allotments or
subscriptions.
PROSPECTUS , 1998
[LOGO]
3,000,000 Shares
SCRIPTGEN
PHARMACEUTICALS, INC.
Common Stock
S B C W A R B U R G DILLON READ INC.
VOLPE BROWN WHELAN & COMPANY
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the costs and expenses, other than
underwriting discounts and commissions, payable by the Company in connection
with the sale of the Common Stock being registered hereby. All the amounts shown
are estimated, except the SEC registration fee, the NASD filing fee and the
Nasdaq National Market listing fee.
<TABLE>
<S> <C>
SEC Registration Fee............................................ $ 13,591
NASD Filing Fee................................................. 4,985
Nasdaq National Market Listing Fee.............................. 46,660
Printing Expenses............................................... 150,000
Legal Fees and Expenses......................................... 390,000
Accounting Fees and Expenses.................................... 270,000
Blue Sky Expenses and Counsel Fees.............................. 10,000
Transfer Agent and Registrar Fees............................... 1,000
Directors' and Officers' Insurance.............................. 95,000
Miscellaneous................................................... 68,764
---------
Total....................................................... $1,050,000
---------
---------
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145(a) of the General Corporation Law of the State of Delaware
("DGCL") provides that a Delaware corporation may indemnify any person who was
or is a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the corporation), by
reason of the fact that he is or was a director, officer, employee or agent of
the corporation or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation or enterprise,
against expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had no
cause to believe his conduct was unlawful.
Section 145(b) of the DGCL provides that a Delaware corporation may
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action or suit by or in the right of the
corporation to procure a judgment in its favor by reason of the fact that he
acted in any of the capacities set forth above, against expenses (including
attorneys' fees) actually and reasonably incurred by him in connection with the
defense or settlement of such action or suit if he acted under similar
standards, except that no indemnification may be made in respect of any claim,
issue or matter as to which such person shall have been adjudged to be liable to
the corporation unless and only to the extent that the court in which such
action or suit was brought shall determine that despite the adjudication of
liability, such person is fairly and reasonably entitled to be indemnified for
such expenses which the court shall deem proper.
Section 145 of the DGCL further provides that to the extent a director or
officer of a corporation has been successful in the defense of any action, suit
or proceeding referred to in subsections (a) and (b) or in the defense of any
claim, issue or matter therein, he shall be indemnified against expenses
actually and reasonably incurred by him in connection therewith; that
indemnification provided for by Section 145 shall not be deemed exclusive of any
other rights to which the indemnified party may be entitled; and that the
corporation may purchase and maintain insurance on behalf of any person who is
or was a director, officer, employee or agent of the corporation, or is or was
serving at the request of the corporation as a director,
II-1
<PAGE>
officer, employee or agent of another corporation or enterprise, against any
liability asserted against him or incurred by him in any such capacity or
arising out of his status as such whether or not the corporation would have the
power to indemnify him against such liabilities under such Section 145.
Section 102(b)(7) of the DGCL provides that a certificate of incorporation
may contain a provision eliminating or limiting the personal liability of a
director to the corporation or its stockholders for monetary damages for breach
of fiduciary duty as a director provided that such provision shall not eliminate
or limit the liability of a director: (i) for any breach of the director's duty
of loyalty to the corporation or its stockholders; (ii) for acts or omissions
not in good faith or which involve intentional misconduct or a knowing violation
of law; (iii) under Section 174 of the DGCL; or (iv) for any transaction from
which the director derived an improper personal benefit.
The Company's Restated Certificate provides that directors of the Company
shall not be personally liable to the Company or its stockholders for monetary
damages for breach of fiduciary duty as a director, except for liability (i) for
any breach of the director's duty of loyalty to the Company or its stockholders,
(ii) for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii) under Section 174 of the DGCL),
relating to prohibited dividends or distribution or the repurchase or redemption
of stock, or (iv) for any transaction from which the director derives an
improper personal benefit. The provision does not apply to claims against a
director for violations of certain laws, including federal securities laws. If
the DGCL is amended to authorize the further elimination or limitation of
directors' liability, then the liability of directors of the Company shall
automatically be limited to the fullest extent provided by law. The Company's
Restated Certificate and By-Laws also contain provisions requiring the Company
to indemnify the directors, officers, employees or other agents to the fullest
extent permitted by the DGCL.
The Company intends to enter into indemnification agreements with its
current directors and executive officers. The Company intends to insure its
directors and officers against losses arising from any claim against them as
such for wrongful acts or omission, subject to certain limitations.
Under Section 9 of the Underwriting Agreement, the underwriters are
obligated, under certain circumstances, to indemnify officers, directors and
controlling persons of the Company against certain liabilities, including
liabilities under the Securities Act of 1933. Reference is made to the form of
Underwriting Agreement filed as Exhibit 1.1 hereto.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
Since January 1995, the Company has sold unregistered securities in the
amounts, at the times, and for the aggregate amounts of consideration listed as
follows:
In February 1995, the Company issued a total of 13,010 shares of Common
Stock to certain stockholders of the Company in connection with the Bridge Loan
Transaction at a price of $0.15 per share for total consideration of $2,000 in
cash.
In April 1995, the Company issued a total of 6,579,086 shares of Series B
Preferred Stock (convertible into 2,139,826 shares of Common Stock) to certain
investors pursuant to a Series B Stock Purchase Agreement. For 2,579,086 of such
shares, the consideration paid per share was $1.00 of cancelled indebtedness of
the Company for total consideration of $2,579,086 of cancelled indebtedness. For
the remaining 4,000,000 shares, the consideration paid per share was $1.00 in
cash for total consideration of $4,000,000.
In April 1995, the Company issued 82 shares of Common Stock to a former
employee upon the exercise of options at the exercise price of $0.15 per share
for total consideration of $12.50.
In June 1995, the Company issued 175 shares of Common Stock to a former
employee upon the exercise of options at the exercise price of $0.15 per share
for total consideration of $26.75.
In March 1996, the Company issued 517 shares of Common Stock to a former
employee upon the exercise of options at the exercise price of $0.15 per share
for total consideration of $79.40.
II-2
<PAGE>
In April 1996, the Company issued 320 shares of Common Stock to a former
employee upon the exercise of options at the exercise price of $0.15 per share
for total consideration of $49.15.
In May 1996, the Company issued a total of 2,942,521 shares of Series C
Preferred Stock (convertible into 957,045 shares of Common Stock) to certain
investors pursuant to a Series C Preferred Stock Purchase Agreement. The
consideration paid per share of was $1.80 in cash for total consideration of
$5,296,537.
In May 1996, the Company issued warrants to purchase up to 32,500 shares of
Series C Preferred Stock at an exercise price of $1.80 per share (to purchase up
to 10,571 shares of Common Stock at an exercise price of $5.53 per share
following the Offering) to Comdisco, Inc. ("Comdisco"), in consideration for
Comdisco (i) executing and delivering certain lease agreements and schedules
thereto and (ii) making available $686,775 of lease financing.
In June 1996, the Company issued 310 shares of Common Stock to a former
employee upon the exercise of options at the exercise price of $0.15 per share
for total consideration of $47.55.
In June 1996, the Company issued 216 shares of Common Stock to a former
employee upon the exercise of options at the exercise price of $0.15 per share
for total consideration of $33.20.
In June 1996, the Company issued 7,478 shares of Common Stock to a former
employee upon the exercise of options at the exercise price of $0.15 per share
for total consideration of $1,149.50.
In October 1996, the Company issued 2,602 shares of Common Stock to a
consultant upon the exercise of options at the exercise price of $0.15 per share
for total consideration of $400.
In November 1996, the Company issued 1,111,333 shares of Series C Preferred
Stock (convertible into 361,457 shares of Common Stock) to Lombard, Odier & Cie
at $1.80 per share in cash for total consideration of $2,000,400.
In November 1996, the Company issued a total of 162,624 shares of Common
Stock to the co-chairmen of its Scientific Advisory Board upon the exercise of
options at the exercise price of $0.03 per share for total consideration of
$5,000.
In February 1997, the Company issued 48,787 shares of Common Stock to its
acting President and Chairman of the Board upon the exercise of options at the
exercise price of $0.15 per share for total consideration of $7,500.
In May 1997, the Company issued warrants to purchase up to 22,500 shares of
Series C Preferred Stock at an exercise price of $1.80 per share (to purchase up
to 7,318 shares of Common Stock at an exercise price of $5.53 per share
following the Offering) to Comdisco in consideration for Comdisco (i) executing
and delivering certain lease agreements and schedules thereto and (ii) making
available $250,000 of lease financing.
In May 1997, the Company issued 294 shares of Common Stock to a former
employee upon the exercise of options at the exercise price of $0.15 per share
for total consideration of $45.15.
In August 1997, the Company issued 33,956 shares of Common Stock to its
President and Chief Executive Officer upon the exercise of options at the
exercise price of $0.15 per share for total consideration of $5,220.
In September 1997, the Company issued 326 shares of Common Stock to a former
employee upon the exercise of options at the exercise price of $0.15 per share
for total consideration of $50.00.
In October 1997, the Company issued warrants to purchase up to 45,000 shares
of Series C Preferred Stock at an exercise price of $1.80 per share (to purchase
up to 14,636 shares of Common Stock at an exercise price of $5.53 per share
following the Offering) to Comdisco in consideration for Comdisco (i) executing
and delivering certain lease agreements and schedules thereto and (ii) making
available $500,000 of lease financing.
II-3
<PAGE>
In November 1997, the Company issued 578 shares of Common Stock to an
employee upon the exercise of options at the exercise price of $0.15 per share
for total consideration of $88.75.
In December 1997, the Company issued 5,713,034 shares of Series D Preferred
Stock (convertible into 1,858,145 shares of Common Stock) to BioChem at $3.50
per share in cash for total consideration of $20,000,000. In addition, the
Company issued a warrant to purchase 464,537 shares of Common Stock at an
exercise price of $13.47 per share.
In December 1997, the Company issued 488 shares of Common Stock to an
employee upon the exercise of options at the exercise price of $0.15 per share
for total consideration of $75.00.
In December 1997, the Company issued 248 shares of Common Stock to an
employee upon the exercise of options at the exercise price of $0.15 per share
for total consideration of $38.00.
In December 1997, the Company issued 64 shares of Common Stock to an
employee upon the exercise of options at the exercise price of $0.15 per share
for total consideration of $9.75.
In December 1997, the Company issued 58 shares of Common Stock to an
employee upon the exercise of options at the exercise price of $0.15 per share
for total consideration of $8.90.
In December 1997, the Company issued 101 shares of Common Stock to an
employee upon the exercise of options at the exercise price of $0.15 per share
for total consideration of $15.50.
In December 1997, the Company issued 245 shares of Common Stock to an
employee upon the exercise of options at the exercise price of $0.15 per share
for total consideration of $37.60.
In December 1997, the Company issued 82 shares of Common Stock to an
employee upon the exercise of options at the exercise price of $0.15 per share
for total consideration of $12.50.
In December 1997, the Company issued 62 shares of Common Stock to an
employee upon the exercise of options at the exercise price of $0.15 per share
for total consideration of $9.40.
In December 1997, the Company issued 82 shares of Common Stock to an
employee upon the exercise of options at the exercise price of $0.15 per share
for total consideration of $12.50.
In December 1997, the Company issued 61 shares of Common Stock to an
employee upon the exercise of options at the exercise price of $0.15 per share
for total consideration of $9.35.
In December 1997, the Company issued 1,036 shares of Common Stock to an
employee upon the exercise of options at the exercise price of $0.15 per share
for total consideration of $159.20.
In December 1997, the Company issued 578 shares of Common Stock to an
employee upon the exercise of options at the exercise price of $0.15 per share
for total consideration of $88.75.
In January 1998, the Company issued 82 shares of Common Stock to an employee
upon the exercise of options at the exercise price of $0.15 per share for total
consideration of $12.50.
In January 1998, the Company issued 537 shares of Common Stock to a
consultant upon the exercise of options at the exercise price of $0.15 per share
for total consideration of $82.50.
In January 1998, the Company issued 27 shares of Common Stock to a former
employee upon the exercise of options at the exercise price of $0.15 per share
for total consideration of $4.20.
In February 1998, the Company issued 102 shares of Common Stock to an
employee upon the exercise of options at the exercise price of $0.15 per share
for total consideration of $15.75.
In February 1998, the Company issued 646 shares of Common Stock to an
employee upon the exercise of options at the exercise price of $0.15 per share
for total consideration of $99.25.
As of December 31, 1997, the Company has outstanding options to purchase an
aggregate of 792,299 shares of Common Stock at exercise prices ranging from
$0.03 to $8.76.
No underwriters were engaged in connection with the foregoing sales of
securities. Such sales of Common Stock and Preferred Stock were made in reliance
upon the exemption from registration set forth
II-4
<PAGE>
in Section 4(2) of the Securities Act of 1933 and Rule 506 of Regulation D
promulgated thereunder for transactions not involving a public offering, and all
purchasers (except for certain of the purchasers described below) were
accredited investors as such term is defined in Rule 501(a) of Regulation D.
Issuances of options to the Company's employees, directors, consultants and
members of its Scientific Advisory Board were made pursuant to Rule 701
promulgated under the Securities Act of 1933.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits.
<TABLE>
<CAPTION>
NO. DESCRIPTION
- --------- ----------------------------------------------------------------------------------------------------------
<S> <C>
1.1 Form of Underwriting Agreement
3.1 Amended and Restated Certificate of Incorporation, as amended**
3.2 Amended and Restated Certificate of Incorporation**
3.3 By-Laws**
3.4 Form of Amended By-Laws**
3.5 Form of Amendment to Amended and Restated Certificate of Incorporation**
3.6 Form of Amended and Restated Certificate of Incorporation**
4.1 Specimen Common Stock Certificate
5.1 Opinion of Fulbright & Jaworski L.L.P.
10.1 Stock Purchase Agreement among the Company and the investors listed on the Schedule of Purchasers thereto
dated September 16, 1993, as amended**
10.2 Loan and Stock Purchase Agreement among the Company and the purchasers listed on Schedule I thereto dated
July 13, 1994**
10.3 Series B Stock Purchase Agreement among the Company, the investors listed on the Schedule of Purchasers
thereto, Thomas Bologna and Barry Weinberg dated April 19, 1995**
10.4 Series C Stock Purchase Agreement among the Company, the investors listed on the Schedule of Purchasers
thereto, Thomas Bologna and Barry Weinberg dated May 17, 1996**
10.5 Subsequent Series C Stock Purchase Agreement among the Company and Lombard, Odier & Cie dated November 15,
1996**
10.6 Master Lease Agreement between the Company and Comdisco, Inc. dated November 22, 1993**
10.7 Warrant Agreement between the Company and Comdisco, Inc. dated January 17, 1994, as amended**
10.8 Warrant Agreement between the Company and Comdisco, Inc. dated May 18, 1996, as amended**
10.9 Collaboration and License Agreement between the Company and Hoechst Marion Roussel dated October 24, 1997+
10.10 Stock Purchase Agreement between the Company and Hoechst Marion Roussel dated October 24, 1997**
10.11 Registration Rights Agreement between the Company and Hoechst Marion Roussel dated October 24, 1997**
10.12 Heads of Agreement between the Company and Hoffmann-La Roche Inc. dated September 22, 1995, as amended+
10.13 Collaboration Agreement between the Company and Eli Lilly and Company dated May 8, 1997+
10.14 Compound Testing and Development Agreement between the Company and Monsanto Company dated November 17,
1997+
10.15 Assignment Agreement between the Company, Andrew Pakula and James Bowie effective March 15, 1994, as
amended+
10.16 Employment Agreement between the Company and Mark T. Weedon dated June 24, 1997**
10.17 Employment Agreement between the Company and Dr. Michael G. Palfreyman dated September 10, 1994**
</TABLE>
II-5
<PAGE>
<TABLE>
<CAPTION>
NO. DESCRIPTION
- --------- ----------------------------------------------------------------------------------------------------------
<S> <C>
10.18 Employment Agreement between the Company and Karen A. Hamlin dated December 14, 1992**
10.19 Consulting Agreement between the Company and Dr. Michael R. Green dated January 30, 1998
10.20 Consulting Agreement between the Company and Dr. Peter S. Kim dated February 2, 1998
10.21 1994 Employee Stock Option Plan**
10.22 Commercial Real Property Lease between the Company and Cummings Properties Management, Inc. dated November
2, 1993**
10.23 Stock Purchase Agreement by and between the Company and BioChem Pharma Inc. dated as of December 12,
1997**
10.24 Research and License Agreement by and between the Company and BioChem Pharma Inc. dated as of December 12,
1997+
10.25 Registration Rights Agreement by and between the Company and BioChem Pharma Inc. dated as of December 12,
1997**
10.26 Stockholders Agreement among the Company, BioChem Pharma Inc. and certain other security holders dated as
of December 12, 1997
10.27 Stock Purchase Warrant issued by the Company to BioChem Pharma Inc. dated December 12, 1997**
10.28 Warrant Agreement between the Company and BioChem Pharma Inc. dated as of December 12, 1997**
10.29 License Agreement by and between Trustees of Boston University and the Company dated January 1, 1998+
10.30 1995 Stockholders' Agreement by and among the Company and certain Stockholders dated April 19, 1995**
10.31 Preferred Stockholders' Agreement by and among the Company and the Preferred Stock Purchasers dated May
17, 1996**
10.32 Amendment No. 1 to Series B Preferred Stock Purchase Agreement and Series C Preferred Stock Purchase
Agreement by and among the Company and the persons and entities listed on the signature page thereto dated
August 8, 1997**
10.33 Employment Agreement between the Company and Michael Heslop dated November 26, 1997**
10.34 1997 Equity Incentive Plan**
10.35 Non-Employee Directors Stock Plan**
10.36 Form of Indemnification Agreement**
10.37 Material Transfer and Screening Agreement between the Company and ArQule, Inc. dated August 23, 1996
11.1 Computation of Net Loss Per Share and Unaudited Pro Forma Net Loss Per Share**
23.1 Consent of Price Waterhouse LLP, Independent Accountants
23.2 Consent of Fulbright & Jaworski L.L.P. (included in Exhibit 5.1)
23.3 Consent of Darby & Darby, P.C.**
24.1 Power of Attorney (included in signature page)
27.1 Financial Data Schedule**
</TABLE>
- ------------------------
* TO BE FILED BY AMENDMENT
** PREVIOUSLY FILED.
+ PORTIONS HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT.
(b) Financial Statement Schedules. The following financial statement schedules
are filed herewith:
All other schedules are omitted because they are not required or are not
applicable or the information is included in the financial statements or notes
thereto.
II-6
<PAGE>
ITEM 17. UNDERTAKINGS
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers, and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question of whether such indemnification by it is against
public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
The undersigned Registrant hereby undertakes to provide to the underwriters
at the closing specified in the Underwriting Agreement, certificates in such
denominations and registered in such names as required by the underwriters to
permit prompt delivery to each purchaser.
The undersigned Registrant hereby undertakes that: (1) For purposes of
determining any liability under the Securities Act of 1933, the information
omitted from the form of prospectus filed as part of this Registration Statement
in reliance upon Rule 430A and contained in a form of prospectus filed by the
Registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act
shall be deemed to be part of this Registration Statement as of the time it was
declared effective. (2) For the purpose of determining any liability under the
Securities Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new Registration Statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
II-7
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Medford, State of
Massachusetts, on February 3, 1998.
SCRIPTGEN PHARMACEUTICALS, INC.
BY: /S/ MARK T. WEEDON
-----------------------------------------
Mark T. Weedon
PRESIDENT AND CHIEF EXECUTIVE OFFICER
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
SIGNATURE TITLE DATE
- ------------------------------ -------------------------- -------------------
President, Chief Executive February 3, 1998
Officer and Director
(Principal Executive
Officer)
/s/ MARK T. WEEDON
- ------------------------------
Mark T. Weedon
Senior Director of February 3, 1998
Operations, Secretary
and Treasurer (Principal
Financial and Accounting
Officer)
* /s/ KAREN A.
HAMLIN
- ------------------------------
Karen A. Hamlin
* /s/ BARRY Chairman of the Board February 3, 1998
WEINBERG
- ------------------------------
Barry Weinberg
* /s/ DAVID BALTIMORE, Director February 3, 1998
PH.D.
- ------------------------------
David Baltimore, Ph.D.
* /s/ ALLAN R. Director February 3, 1998
FERGUSON
- ------------------------------
Allan R. Ferguson
* /s/ JASON S. FISHERMAN, Director February 3, 1998
M.D.
- ------------------------------
Jason S. Fisherman, M.D.
*By: /s/ MARK T. WEEDON
-------------------------
Mark T. Weedon
ATTORNEY-IN-FACT
II-8
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
NO. DESCRIPTION PAGE
- --------- ---------------------------------------------------------------------------------------------- ---------
<S> <C> <C>
1.1 Form of Underwriting Agreement
3.1 Amended and Restated Certificate of Incorporation, as amended**
3.2 Amended and Restated Certificate of Incorporation**
3.3 By-Laws**
3.4 Form of Amended By-Laws**
3.5 Form of Amendment to Amended and Restated Certificate of Incorporation**
3.6 Form of Amended and Restated Certificate of Incorporation**
4.1 Specimen Common Stock Certificate
5.1 Opinion of Fulbright & Jaworski L.L.P.
10.1 Stock Purchase Agreement among the Company and the investors listed on the Schedule of
Purchasers thereto dated September 16, 1993, as amended**
10.2 Loan and Stock Purchase Agreement among the Company and the purchasers listed on Schedule I
thereto dated July 13, 1994**
10.3 Series B Stock Purchase Agreement among the Company, the investors listed on the Schedule of
Purchasers thereto, Thomas Bologna and Barry Weinberg dated April 19, 1995**
10.4 Series C Stock Purchase Agreement among the Company, the investors listed on the Schedule of
Purchasers thereto, Thomas Bologna and Barry Weinberg dated May 17, 1996**
10.5 Subsequent Series C Stock Purchase Agreement among the Company and Lombard, Odier & Cie dated
November 15, 1996**
10.6 Master Lease Agreement between the Company and Comdisco, Inc. dated November 22, 1993**
10.7 Warrant Agreement between the Company and Comdisco, Inc. dated January 17, 1994, as amended**
10.8 Warrant Agreement between the Company and Comdisco, Inc. dated May 18, 1996, as amended**
10.9 Collaboration and License Agreement between the Company and Hoechst Marion Roussel dated
October 24, 1997+
10.10 Stock Purchase Agreement between the Company and Hoechst Marion Roussel dated October 24,
1997**
10.11 Registration Rights Agreement between the Company and Hoechst Marion Roussel dated October 24,
1997**
10.12 Heads of Agreement between the Company and Hoffmann-La Roche Inc. dated September 22, 1995, as
amended+
10.13 Collaboration Agreement between the Company and Eli Lilly and Company dated May 8, 1997+
10.14 Compound Testing and Development Agreement between the Company and Monsanto Company dated
November 17, 1997+
10.15 Assignment Agreement between the Company, Andrew Pakula and James Bowie effective March 15,
1994, as amended+
10.16 Employment Agreement between the Company and Mark T. Weedon dated June 24, 1997**
10.17 Employment Agreement between the Company and Dr. Michael G. Palfreyman dated September 10,
1994**
10.18 Employment Agreement between the Company and Karen A. Hamlin dated December 14, 1992**
10.19 Consulting Agreement between the Company and Dr. Michael R. Green dated January 30, 1998
10.20 Consulting Agreement between the Company and Dr. Peter S. Kim dated February 2, 1998
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
NO. DESCRIPTION PAGE
- --------- ---------------------------------------------------------------------------------------------- ---------
<S> <C> <C>
10.21 1994 Employee Stock Option Plan**
10.22 Commercial Real Property Lease between the Company and Cummings Properties Management, Inc.
dated November 2, 1993**
10.23 Stock Purchase Agreement by and between the Company and BioChem Pharma Inc. dated as of
December 12, 1997**
10.24 Research and License Agreement by and between the Company and BioChem Pharma Inc. dated as of
December 12, 1997+
10.25 Registration Rights Agreement by and between the Company and BioChem Pharma Inc. dated as of
December 12, 1997**
10.26 Stockholders Agreement among the Company, BioChem Pharma Inc. and certain other security
holders dated as of December 12, 1997
10.27 Stock Purchase Warrant issued by the Company to BioChem Pharma Inc. dated December 12, 1997**
10.28 Warrant Agreement between the Company and BioChem Pharma Inc. dated as of December 12, 1997**
10.29 License Agreement by and between Trustees of Boston University and the Company dated January
1, 1998+
10.30 1995 Stockholders' Agreement by and among the Company and certain Stockholders dated April 19,
1995**
10.31 Preferred Stockholders' Agreement by and among the Company and the Preferred Stock Purchasers
dated May 17, 1996**
10.32 Amendment No. 1 to Series B Preferred Stock Purchase Agreement and Series C Preferred Stock
Purchase Agreement by and among the Company and the persons and entities listed on the
signature page thereto dated August 8, 1997**
10.33 Employment Agreement between the Company and Michael Heslop dated November 26, 1997**
10.34 1997 Equity Incentive Plan**
10.35 Non-Employee Directors Stock Plan**
10.36 Form of Indemnification Agreement**
10.37 Material Transfer and Screening Agreement between the Company and ArQule, Inc. dated August
23, 1996
11.1 Computation of Net Loss Per Share and Unaudited Pro Forma Net Loss Per Share**
23.1 Consent of Price Waterhouse LLP, Independent Accountants
23.2 Consent of Fulbright & Jaworski L.L.P. (included in Exhibit 5.1)
23.3 Consent of Darby & Darby, P.C.**
24.1 Power of Attorney (included in signature page)
27.1 Financial Data Schedule**
</TABLE>
- ------------------------
* TO BE FILED BY AMENDMENT
** PREVIOUSLY FILED.
+ PORTIONS HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT.
<PAGE>
Exhibit 1.1
BPH DRAFT
1/23/98
SCRIPTGEN PHARMACEUTICALS, INC.
3,000,000 Shares
Common Stock
($.01 Par Value)
UNDERWRITING AGREEMENT
, 1998
<PAGE>
UNDERWRITING AGREEMENT
, 1998
SBC WARBURG DILLON READ INC.
VOLPE BROWN WHELAN & COMPANY, LLC
as Managing Underwriters
535 Madison Avenue
New York, New York 10022
Dear Sirs:
Scriptgen Pharmaceuticals, Inc., (the "Company") proposes to issue and
sell to the underwriters named in Schedule A annexed hereto (the
"Underwriters") an aggregate of 3,000,000 shares (the "Firm Shares") of
Common Stock, $.01 par value (the "Common Stock"), of the Company. In
addition, solely for the purpose of covering over-allotments, the Company
proposes to grant to the Underwriters the option to purchase from the Company
up to an additional 450,000 shares of Common Stock (the "Additional Shares").
The Firm Shares and the Additional Shares are hereinafter collectively
sometimes referred to as the Shares. The Shares are described in the
Prospectus which is referred to below.
The Company has filed, in accordance with the provisions of the
Securities Act of 1933, as amended, and the rules and regulations thereunder
(collectively called the "Act"), with the Securities and Exchange Commission
(the "Commission") a registration statement on Form S-1, including a
prospectus, relating to the Shares. The Company has furnished to you, for use
by the Underwriters and by dealers, copies of one or more preliminary
prospectuses (each thereof being herein called a "Preliminary Prospectus")
relating to the Shares. Except where the context otherwise requires, the
registration statement, as amended when it becomes effective, including all
documents filed as a part thereof, and including any information contained in
a prospectus subsequently filed with the Commission pursuant to Rule 424(b)
under the Act and deemed to be part of the registration statement at the time
of effectiveness pursuant to Rule 430(A) under the Act, is herein called the
"Registration Statement", and the prospectus, in the form filed by the
Company with the Commission pursuant to Rule 424(b) under the Act or, if no
such filing is required, the form of final prospectus included in the
Registration Statement at the time it became effective, is herein called the
"Prospectus."
The Company and the Underwriters agree as follows:
1. Sale and Purchase. Upon the basis of the warranties and
representations and the other terms and conditions herein set forth, the
Company agrees to sell to the
<PAGE>
respective Underwriters and each of the Underwriters, severally and not
jointly, agrees to purchase from the Company the aggregate number of Firm
Shares set forth opposite the name of such Underwriter in Schedule A attached
hereto in each case at a purchase price of $ per Share. The Company
is advised by you that the Underwriters intend (i) to make a public offering
of their respective portions of the Firm Shares as soon after the effective
date of the Registration Statement as in your judgment is advisable and (ii)
initially to offer the Firm Shares upon the terms set forth in the
Prospectus. You may from time to time increase or decrease the public
offering price after the initial public offering to such extent as you may
determine.
In addition, the Company hereby grants to the several Underwriters the
option to purchase, and upon the basis of the warranties and representations
and the other terms and conditions herein set forth, the Underwriters shall
have the right to purchase, severally and not jointly, from the Company,
ratably in accordance with the number of Firm Shares to be purchased by each
of them, all or a portion of the Additional Shares as may be necessary to
cover over-allotments made in connection with the offering of the Firm
Shares, at the same purchase price per share to be paid by the Underwriters
to the Company for the Firm Shares. This option may be exercised at any time
(but not more than once) on or before the thirtieth day following the date
hereof, by written notice to the Company. Such notice shall set forth the
aggregate number of Additional Shares as to which the option is being
exercised, and the date and time when the Additional Shares are to be
delivered (such date and time being herein referred to as the additional time
of purchase); provided, however, that the additional time of purchase shall
not be earlier than the time of purchase (as defined below) nor earlier than
the second business day [FN1] after the date on which the option shall
have been exercised nor later than the tenth business day after the date on
which the option shall have been exercised. The number of Additional Shares to
be sold to each Underwriter shall be the number which bears the same proportion
to the aggregate number of Additional Shares being purchased as the number of
Firm Shares set forth opposite the name of such Underwriter on Schedule A
hereto bears to the total number of Firm Shares (subject, in each case, to
such adjustment as you may determine to eliminate fractional shares).
2. Payment and Delivery. Payment of the purchase price for the Firm
Shares shall be made to the Company by wire transfer, in immediately
available funds, or certified or official bank check, in New York Clearing
House funds, at the office of SBC Warburg Dillon Read Inc. in New York City,
against delivery of the certificates for the Firm Shares to you for the
respective accounts of the Underwriters. Such payment and delivery shall be
made at 10:00 A.M., New York City time, on , 1998 (unless another
time shall be agreed to by you and the Company or unless postponed in
accordance with the provisions of Section 8 hereof). The time at which such
payment and delivery are actually made is hereinafter sometimes called the
time of purchase. Certificates for the Firm Shares
- ------------------------
(1) As used herein "business day" shall mean a day on which the New York Stock
Exchange is open for trading.
2
<PAGE>
shall be delivered to you in definitive form in such names and in such
denominations as you shall specify on the second business day preceding the
time of purchase. For the purpose of expediting the checking of the
certificates for the Firm Shares by you, the Company agrees to make such
certificates available to you for such purpose at least one full business day
preceding the time of purchase.
Payment of the purchase price for the Additional Shares shall be made at
the additional time of purchase in the same manner and at the same office as
the payment for the Firm Shares. Certificates for the Additional Shares shall
be delivered to you in definitive form in such names and in such
denominations as you shall specify on the second business day preceding the
additional time of purchase. For the purpose of expediting the checking of
the certificates for the Additional Shares by you, the Company agrees to make
such certificates available to you for such purpose at least one full
business day preceding the additional time of purchase.
3. Representations and Warranties of the Company. The Company
represents and warrants to each of the Underwriters that:
(a) when the Registration Statement becomes effective, the
Registration Statement and the Prospectus will fully comply in all
material respects with the provisions of the Act, and the Registration
Statement will not contain an untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to
make the statements therein not misleading, and the Prospectus will not
contain an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were
made, not misleading; provided, however, that the Company makes no
warranty or representation with respect to any statement contained in the
Registration Statement or the Prospectus in reliance upon and in
conformity with information concerning the Underwriters and furnished in
writing by or on behalf of any Underwriter through you to the Company
expressly for use in the Registration Statement or the Prospectus;
(b) as of the date of this Agreement, the Company has an authorized
capitalization as set forth under the heading entitled "Actual" in the
section of the Registration Statement and the Prospectus entitled
"Capitalization" and, as of the time of purchase and the additional time
of purchase, as the case may be, the Company shall have an authorized
capitalization as set forth under the heading entitled "Pro Forma As
Adjusted" in the section of the Registration Statement and the Prospectus
entitled "Capitalization"; all of the issued and outstanding shares of
capital stock including Common Stock of the Company have been duly and
validly authorized and issued and are fully paid and non-assessable; the
Company has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the State of Delaware,
with full power and authority to own its properties and conduct its
business
3
<PAGE>
as described in the Registration Statement and the Prospectus, to execute
and deliver this Agreement and to issue and sell the Shares as herein
contemplated;
(c) the Company is duly qualified or licensed by and is in good
standing in each jurisdiction in which it conducts its business and in
which the failure, individually or in the aggregate, to be so licensed or
qualified would have, or would be reasonably likely to have, a material
adverse effect on the operations, business or condition (financial or
otherwise), properties or assets of the Company (a "Material Adverse
Effect"); the Company is in compliance in all material respects with the
laws, orders, rules, regulations and directives issued or administered by
such jurisdictions; and the Company has no subsidiaries;
(d) the Company is not in breach of, or in default under (nor has
any event occurred which with notice, lapse of time, or both would
constitute a breach of, or default under), its respective charter or
by-laws or in the performance or observance of any obligation, agreement,
covenant or condition contained in any license, lease, indenture,
mortgage, deed of trust, bank loan or credit agreement or other agreement
or instrument to which the Company is a party or by which it is bound,
which breach or default would have, or would be reasonably likely to
have, a Material Adverse Effect; and the execution, delivery and
performance of this Agreement and the consummation of the transactions
contemplated hereby will not conflict with, or result in any breach of or
constitute a default under (nor constitute any event which with notice,
lapse of time, or both would constitute a breach of, or default under),
any provisions of the charter or by-laws, of the Company or under any
provision of any license, lease, indenture, mortgage, deed of trust, bank
loan or credit agreement or other agreement or instrument to which the
Company is a party or by which it or its properties may be bound or
affected, or under any federal, state, local or foreign law, regulation
or rule or any decree, judgment or order applicable to the Company;
(e) the Shares have been duly authorized and, when issued and
delivered to and paid for by the Underwriters as contemplated hereby,
will be validly issued, fully paid and non assessable, and are being
issued free and clear of any pledge, lien, encumbrance, security
interest, preemptive right or other claim or interest, except for any
pledge, lien, encumbrance, security interest, preemptive right or other
claim or interest created by the Underwriters;
(f) this Agreement has been duly authorized, executed and delivered
by the Company and is a legal, valid and binding agreement of the Company
enforceable in accordance with its terms;
(g) the capital stock of the Company, including the Shares,
conforms in all material respects to the description thereof contained in
the Registration Statement and Prospectus and the certificates for the
Shares are in due and proper form and the
4
<PAGE>
holders of the Shares will not be subject to personal liability by reason
of being such holders;
(h) no approval, authorization, consent or order of or filing with
any national, state or local governmental or regulatory commission,
board, body, authority or agency is required in connection with the
issuance and sale of the Shares as contemplated hereby other than
registration of the Shares under the Act, clearance of the sale of the
Shares by the National Association of Securities Dealers, Inc. (the
"NASD") and any necessary qualification under the securities or blue sky
laws of the various jurisdictions in which the Shares are being offered
by the Underwriters;
(i) except for rights which have been effectively waived in
writing, no person has the right, contractual or otherwise, to cause the
Company to issue to it, or register pursuant to the Act, any shares of
capital stock of the Company upon the issue and sale of the Shares to the
Underwriters hereunder, nor does any person have preemptive rights,
rights of first refusal or other rights to purchase any of the Shares;
(j) the issuance and sale of Series D Preferred Stock to BioChem
Pharma Inc. ("BioChem") in the offering described in the Prospectus (the
"BioChem Offering") did not require registration under the Act;
(k) the issuance and sale of Common Stock to Hoeschst Marion
Roussel ("HMR") in the private placement described in the Prospectus (the
"HMR Private Placement") will not require registration under the Act.
(l) Price Waterhouse LLP, whose reports on the financial statements
of the Company are filed with the Commission as part of the Registration
Statement and Prospectus, are independent public accountants as required
by the Act and the applicable published rules and regulations thereunder;
(m) the Company has all necessary licenses, authorizations,
consents and approvals and has made all necessary filings required under
any federal, state, local or foreign law, regulation or rule, and has
obtained all necessary authorizations, consents and approvals from other
persons, in order to conduct its business, other than licenses,
authorizations, consents, approvals and filings which, if the Company did
not have or failed to make or obtain, would not have, or would be
reasonably likely not to have, a Material Adverse Effect on the Company;
the Company is not in violation of, or in default under, any such
license, authorization, consent or approval or any federal, state, local
or foreign law, regulation or rule or any decree, order or judgment
applicable to the Company the effect of which would have, or would be
reasonably likely to have, a Material Adverse Effect;
5
<PAGE>
(n) all legal or governmental proceedings, contracts or documents
of a character required to be described in the Registration Statement or
the Prospectus or to be filed as an exhibit to the Registration Statement
have been so described or filed as required;
(o) there are no actions, suits or proceedings pending or, to the
knowledge of the Company, threatened against the Company or any of its
properties, at law or in equity, or before or by any federal, state,
local or foreign governmental or regulatory commission, board, body,
authority or agency which could result in a judgment, decree or order
which would have, or would be reasonably likely to have, a Material
Adverse Effect;
(p) the audited financial statements included in the Registration
Statement and the Prospectus present fairly the financial position of the
Company as of the dates indicated and the results of operations and
changes in financial position of the Company for the periods specified;
such financial statements have been prepared in conformity with generally
accepted accounting principles applied on a consistent basis during the
periods involved;
(q) subsequent to the respective dates as of which information is
given in the Registration Statement and Prospectus, and except as may be
otherwise stated in the Registration Statement or Prospectus, there has
not been (A) any material and unfavorable change, financial or otherwise,
in the business, properties, prospects, regulatory environment, results
of operations or condition (financial or otherwise), present or
prospective, of the Company, (B) any transaction, which is material to
the Company, contemplated or entered into by the Company or (C) any
obligation, contingent or otherwise, directly or indirectly incurred by
the Company which is material to the Company;
(r) the Company has obtained the agreement of each of its directors
and officers and certain stockholders designated by you not to offer,
sell, contract to sell, grant any option to sell or otherwise dispose of,
directly or indirectly, any shares of Common Stock or securities
convertible into or exchangeable for Common Stock or warrants or other
rights to purchase Common Stock for a period of 180 days after the date
of the Prospectus, subject to certain exceptions.
(s) the Company has filed all federal or state income or franchise
tax returns required to be filed (after giving effect to all permissible
extensions) and has paid all taxes shown thereon as due, and there is no
tax deficiency which has been or may reasonably be asserted against the
Company which would have, or would be reasonably likely to have, a
Material Adverse Effect; and all known tax liabilities are adequately
provided for on the books of the Company;
6
<PAGE>
(t) the business, operations and facilities of the Company have
been and are being conducted in compliance with all applicable laws,
ordinances, rules, regulations, licenses, permits, approvals, plans,
authorizations or requirements relating to occupational safety and
health, pollution, protection of health or the environment, or
reclamation (including, without limitation, those relating to emissions,
discharges, releases or threatened releases of pollutants, contaminants
or hazardous or toxic substances, materials or wastes into ambient air,
surface water, groundwater or land, or relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport or
handling of chemical substances, pollutants, contaminants or hazardous or
toxic substances, materials or wastes, whether solid, gaseous or liquid
in nature) or otherwise relating to remediating real property in which
the Company has any interest, whether owned or leased, of any
governmental department, commission, board, bureau, agency or
instrumentality of the United States, any state or political subdivision
thereof or any other foreign jurisdiction and all applicable judicial or
administrative agency or regulatory decrees, awards, judgments and orders
relating thereto (collectively "Environmental Regulations"), except such
failures to comply as would not in the aggregate have a Material Adverse
Effect; and the Company has not received any notice from a governmental
instrumentality or any third party alleging any violation of any
Environmental Regulation or liability thereunder (including, without
limitation, liability for costs of investigating or remediating sites
containing hazardous substances or damages to natural resources) except
in such instances in which the alleged violation cited in any such
notices has been remedied or would not have a Material Adverse Effect;
(u) the Company is not and, upon the sale of the Shares to be
issued and sold in accordance herewith and the investment of the net
proceeds of such sale as set forth under the caption "Use of Proceeds" in
the Registration Statement and the Prospectus, will not be, an
"investment company" within the meaning of the Investment Company Act of
1940, as amended (the "Investment Company Act"), and is not, and will not
upon such sale be, subject to regulation under the Investment Company
Act;
(v) except as described in the Registration Statement and
Prospectus, the Company owns, or has obtained valid and enforceable
licenses for, or other rights to use, the inventions, patent
applications, patents, trademarks (both registered and unregistered),
tradenames, copyrights and trade secrets described in the Registration
Statement and Prospectus as being owned or licensed by it, which the
Company reasonably believes are necessary for the conduct of its business
(collectively, "Intellectual Property"). Except as described in the
Registration Statement and Prospectus, the Company (i) believes that
there are no third parties who have or will be able to establish any
rights to any of the Intellectual Property, except for the ownership
rights of the owners of the Intellectual Property which is licensed to
the Company; (ii) to the Company's knowledge there is no infringement by
third parties of
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any of the Intellectual Property; (iii) there is no pending or, to the
Company's knowledge, threatened action, suit, proceeding or claim by
others challenging the Company's rights in or to any of the Intellectual
Property, and the Company is unaware of any facts which would form a
reasonable basis for any such claim; (iv) there is no pending or, to the
Company's knowledge, threatened action, suit, proceeding or claim by
others challenging the validity or scope of any Intellectual Property,
and the Company is unaware of any facts which would form a reasonable
basis for any such claim; (v) there is no pending or, to the Company's
knowledge, threatened action, suit, proceeding or claim by others that
the Company infringes or otherwise violates any patent, trademark,
copyright, trade secret or other proprietary right of others, and the
Company is unaware of any facts which would form a reasonable basis for
any such claim; (vi) to the Company's knowledge there is no patent or
patent application which contains claims that interfere with the issued
or pending claims of any of the patents or patent applications in the
Intellectual Property; and (vii) there is no prior art of which the
Company is aware that may render any patent application in the
Intellectual Property unpatentable which has not been disclosed to the
U.S. Patent and Trademark Office.
(w) As of the date of this Agreement, the Company is not and has
not been required to file any registrations, applications, licenses,
requests for exemptions, permits or other regulatory authorizations with
the U.S. Food and Drug Administration (the "FDA") or any similar state or
local regulatory body in order to conduct its business as it is described
in the Registration Statement and Prospectus;
(x) the animal studies and other preclinical tests conducted by or
on behalf of the Company or in which the Company has participated that
are described in the Registration Statement and Prospectus or the results
of which that are referred to in the Registration Statement or
Prospectus, were and, if still pending, are being conducted in all
material respects in accordance with experimental protocols, procedures
and controls generally used by qualified experts in the preclinical study
of new drugs or diagnostics as applied to comparable products to those
being developed by the Company; the description of the results of such
studies and tests contained in the Registration Statement and Prospectus
are accurate and complete in all material respects; and the Company has
not received any notices or correspondence from the FDA or any other
governmental agency requiring the termination, suspension or modification
(other than such modifications as are normal in the regulations, any such
modifications which are material have been disclosed to you) of any
animal studies or preclinical tests conducted by or on behalf of the
Company or in which the Company has participated that are described in
the Registration Statement or Prospectus or the results of which are
referred to in the Registration Statement or Prospectus;
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(y) To the knowledge of the Company, there are no affiliations or
associations between any member of the NASD and any of the Company's
officers, directors or security holders.
4. Certain Covenants of the Company. The Company hereby agrees:
(a) to furnish such information as may be required and otherwise to
cooperate in qualifying the Shares for offering and sale under the
securities or blue sky laws of such states as you may designate and to
maintain such qualifications in effect so long as required for the
distribution of the Shares, provided that the Company shall not be
required to qualify as a foreign corporation or to consent to the service
of process under the laws of any such state (except service of process
with respect to the offering and sale of the Shares); and to promptly
advise you of the receipt by the Company of any notification with respect
to the suspension of the qualification of the Shares for sale in any
jurisdiction or the initiation or threatening of any proceeding for such
purpose;
(b) to make available to you in New York City, as soon as
practicable after the Registration Statement becomes effective, and
thereafter from time to time to furnish to the Underwriters, as many
copies of the Prospectus (or of the Prospectus as amended or supplemented
if the Company shall have made any amendments or supplements thereto
after the effective date of the Registration Statement) as the
Underwriters may request for the purposes contemplated by the Act;
(c) to advise you promptly and (if requested by you) to confirm
such advice in writing, (i) when the Registration Statement has become
effective and when any post-effective amendment thereto becomes effective
and (ii) if Rule 430A under the Act is used, when the Prospectus is filed
with the Commission pursuant to Rule 424(b) under the Act (which the
Company agrees to file in a timely manner under such Rules);
(d) to advise you promptly, confirming such advice in writing, of
any request by the Commission for amendments or supplements to the
Registration Statement or Prospectus or for additional information with
respect thereto, or of notice of institution of proceedings for, or the
entry of a stop order suspending the effectiveness of the Registration
Statement and, if the Commission should enter a stop order suspending the
effectiveness of the Registration Statement, to make every reasonable
effort to obtain the lifting or removal of such order as soon as
possible; to advise you promptly of any proposal to amend or supplement
the Registration Statement or Prospectus and to file no such amendment or
supplement to which you shall object in writing;
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(e) to furnish to you and, upon request, to each of the other
Underwriters for a period of five years from the date of this Agreement
(i) copies of any reports or other communications which the Company shall
send to its stockholders or shall from time to time publish or publicly
disseminate, (ii) copies of all annual, quarterly and current reports
filed with the Commission on Forms 10-K, 10-Q and 8-K, or such other
similar form as may be designated by the Commission, and (iii) such other
information as you may reasonably request regarding the Company;
(f) to advise the Underwriters promptly of the happening of any
event known to the Company within the time during which a prospectus
relating to the Shares is required to be delivered under the Act which,
in the judgment of the Company, would require the making of any change in
the Prospectus then being used so that the Prospectus would not include
an untrue statement of material fact or omit to state a material fact
necessary to make the statements therein, in the light of the
circumstances under which they are made, not misleading, and, during such
time, to prepare and furnish, at the Company's expense, to the
Underwriters promptly such amendments or supplements to such Prospectus
as may be necessary to reflect any such change and to furnish you a copy
of such proposed amendment or supplement before filing any such amendment
or supplement with the Commission;
(g) to make generally available to its security holders, and to
deliver to you, an earnings statement of the Company (which will satisfy
the provisions of Section 11(a) of the Act) covering a period of twelve
months beginning after the effective date of the Registration Statement
but not later than , 1999, as soon as is reasonably
practicable after the termination of such twelve-month period;
(h) to furnish to you three signed copies of the Registration
Statement, as initially filed with the Commission, and of all amendments
thereto (including all exhibits thereto) and sufficient conformed copies
of the foregoing (other than exhibits) for distribution of a copy to each
of the other Underwriters;
(i) to furnish to you as early as practicable prior to the time of
purchase and the additional time of purchase, as the case may be, but not
later than two business days prior thereto, a copy of the latest
available unaudited interim financial statements, if any, of the Company
which have been read by the Company's independent certified public
accountants, as stated in their letter to be furnished pursuant to
Section 6(b) of this Agreement;
(j) to apply the net proceeds from the sale of the Shares in the
manner set forth under the caption "Use of Proceeds" in the Prospectus;
(k) to pay all expenses, fees and taxes (other than any transfer
taxes and fees and disbursements of counsel for the Underwriters except
as set forth under
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Section 5 hereof and (iii) and (iv) below) in connection with (i) the
preparation and filing of the Registration Statement, each Preliminary
Prospectus, the Prospectus, and any amendments or supplements thereto,
and the printing and furnishing of copies of each thereof to the
Underwriters and to dealers (including costs of mailing and shipment),
(ii) the issue, sale and delivery of the Shares, (iii) the word
processing and/or printing of this Agreement, any Agreement Among
Underwriters, any dealer agreements, any Statements of Information and
Powers of Attorney and the reproduction and/or printing and furnishing of
copies of each thereof to the Underwriters and to dealers (including
costs of mailing and shipment), (iv) the qualification of the Shares for
offering and sale under state laws and the determination of their
eligibility for investment under state law as aforesaid (including the
legal fees and filing fees and other disbursements of counsel for the
Underwriters) and the printing and furnishing of copies of any blue sky
surveys or legal investment surveys to the Underwriters and to dealers,
(v) any listing of the Shares on any securities exchange or qualification
of the Shares for quotation on Nasdaq and any registration thereof under
the Securities Exchange Act of 1934, as amended, and the rules and
regulations thereunder (collectively, the "Exchange Act"), (vi) any
filing for review of the public offering of the Shares by the NASD and
(vii) the performance of the Company's other obligations hereunder;
(l) to furnish to you, before filing with the Commission subsequent
to the effective date of the Registration Statement and during the period
referred to in paragraph (f) above, a copy of any document proposed to be
filed pursuant to Sections 13, 14 or 15(d) of the Exchange Act;
(m) not to offer, sell, contract to sell, grant any option to sell
or otherwise dispose of, directly or indirectly, any shares of Common
Stock or securities convertible into or exchangeable for Common Stock or
warrants or other rights to purchase Common Stock or permit the
registration under the Act of any shares of Common Stock, except for (i)
grants of stock options pursuant to the Company's 1997 Equity Incentive
Plan and Non-Employee Directors Stock Plan, (ii) the registration of the
Shares and the sales to the Underwriters pursuant to this Agreement and
(iii) the issuances of Common Stock to HMR pursuant to the HMR Private
Placement, to BioChem (or its tranferees) in accordance with the Stock
Purchase Agreement filed as Exhibit 10.23 to the Registration Statement,
and upon the exercise of outstanding options, warrants and debentures,
for a period of 180 days after the date hereof, without the prior written
consent of SBC Warburg Dillon Read Inc.; and
(n) to use its best efforts to cause the Common Stock to be listed
on the Nasdaq National Market System.
5. Reimbursement of Underwriters' Expenses. If the Shares are not
delivered for any reason other than the termination of this Agreement
pursuant to the first two
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paragraphs of Section 8 hereof or the default by one or more of the
Underwriters in its or their respective obligations hereunder, the Company
shall reimburse the Underwriters for all of their out-of-pocket expenses,
including the fees and disbursements of their counsel.
6. Conditions of Underwriters' Obligations. The several obligations of
the Underwriters hereunder are subject to the accuracy of the representations
and warranties on the part of the Company on the date hereof and at the time
of purchase (and the several obligations of the Underwriters at the
additional time of purchase are subject to the accuracy of the
representations and warranties on the part of the Company on the date hereof
and at the time of purchase (unless previously waived) and at the additional
time of purchase, as the case may be), the performance by the Company of its
obligations hereunder and to the following conditions:
(a) The Company shall furnish to you at the time of purchase and at
the additional time of purchase, as the case may be, an opinion of
Fulbright & Jaworski L.L.P., counsel for the Company, addressed to the
Underwriters, and dated the time of purchase or the additional time of
purchase, as the case may be, with reproduced copies for each of the
other Underwriters and in form satisfactory to Brobeck, Phleger &
Harrison LLP, counsel for the Underwriters, stating that:
(i) the Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the
State of Delaware, with full corporate power and authority to own
its properties and conduct its business as described in the
Registration Statement and the Prospectus, to execute and deliver
this Agreement and to issue, sell and deliver the Shares as herein
contemplated;
(ii) the Company is duly qualified to do business as a foreign
corporation, and is in good standing, in each jurisdiction in which
it conducts its business and in which the failure, individually or
in the aggregate, to be so qualified could have a material adverse
effect on the operations, business or condition of the Company;
(iii) this Agreement has been duly authorized, executed and
delivered by the Company;
(iv) the Shares, when issued and delivered to and paid for by
the Underwriters, will be duly and validly authorized and issued and
will be fully paid and non-assessable;
(v) the Company has an authorized capitalization as set forth
in the Registration Statement and the Prospectus; based on our
examination of the stock ledger and minute books of the Company and
an officer's certificate to
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the effect that the consideration for all outstanding shares was
received by the Company in accordance with the applicable
resolutions of the Board, the outstanding shares of capital stock of
the Company have been duly and validly authorized and issued and are
fully paid, nonassessable and free of statutory preemptive rights
and, to such counsel's knowledge, other rights to purchase
securities; the Shares when issued will be free of statutory
preemptive rights and, to such counsel's knowledge, contractual
preemptive rights, rights of first refusal or other rights to
purchase any of the Shares; the certificates for the Shares are in
due and proper form under the Delaware General Corporation Law;
(vi) the authorized capital stock of the Company, including the
Shares, conforms as to legal matters in all material respects to the
description thereof contained in the Registration Statement and
Prospectus;
(vii) the Registration Statement and the Prospectus (except as
to the financial statements and schedules and other financial and
statistical data contained therein, as to which such counsel need
express no opinion) appear on their face to comply as to form in all
material respects with the requirements of the Act;
(viii) the Registration Statement has become effective under the
Act and, to such counsel's knowledge, no stop order proceedings with
respect thereto are pending or threatened under the Act;
(ix) to such counsel's knowledge no person has the right,
contractual or otherwise, which has not been waived, to cause the
Company to register pursuant to the Act, any shares of capital stock
of the Company upon the issue and sale of the Shares to the
Underwriters hereunder;
(x) the issuance and sale of Common Stock to HMR in the HMR
Private Placement did not require registration under the Act.
(xi) the statements under the captions "Risk Factors --
Availability of Preferred Stock for Issuance; Anti-Takeover
Provisions," Business -- Collaborative Arrangements," "Description
of Capital Stock" and in Item 14 of Part II of the Registration
Statement insofar as such statements constitute a summary of
documents referred to therein or matters of law fairly summarize in
all material respects the information called for with respect to
such documents.
(xii) no approval, authorization, consent or order of or filing
with any national, state or local governmental or regulatory
commission, board, body, authority or agency is required in
connection with the issuance and sale of the
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<PAGE>
Shares as contemplated hereby other than registration of the Shares
under the Act (except such counsel need express no opinion as to any
necessary qualification under the state securities or blue sky laws
of the various jurisdictions in which the Shares are being offered
by the Underwriters or the clearance of the issuance and sale of the
Shares with the NASD);
(xiii) the execution, delivery and performance of this Agreement
by the Company will not conflict with, or result in any breach of,
or constitute a default under (nor constitute any event which with
notice, lapse of time, or both, would constitute a breach of or
default under), any provisions of the charter or by-laws of the
Company or under any provision of any license, lease, indenture,
mortgage, deed of trust, bank loan, credit agreement or other
agreement or instrument to which the Company is a party or by which
its properties may be bound or affected which is filed as an exhibit
to the Registration Statement, or, to such counsel's knowledge,
under any law, regulation, rule, decree, judgment or order
applicable to the Company;
(xiv) to such counsel's knowledge, there are no contracts,
licenses, agreements, leases or documents of a character which are
required to be filed as exhibits to the Registration Statement or to
be described in the Prospectus which have not been so filed or
described;
(xv) to such counsel's knowledge, there are no actions, suits
or proceedings pending or threatened against the Company or its
properties, at law or in equity or before or by any commission,
board, body, authority or agency which are required to be described
in the Prospectus but are not so described; and
(xvi) such counsel have participated in conferences with
officers and other representatives of the Company (including other
counsel to the Company), representatives of the independent public
accountants of the Company and representatives of the Underwriters
at which the contents of the Registration Statement and Prospectus
were discussed and, although such counsel is not passing upon and
does not assume responsibility for the accuracy, completeness or
fairness of the statements contained in the Registration Statement
or Prospectus (except as and to the extent stated in subparagraph
(vi) above), on the basis of the foregoing (relying as to
materiality to a large extent upon the opinions of officers and
other representatives of the Company) nothing has come to the
attention of such counsel that causes them to believe that the
Registration Statement or any amendment thereto at the time such
Registration Statement or amendment became effective contained an
untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary to make the
statements therein not misleading, or that the Prospectus or any
supplement thereto at the date of such Prospectus or such
supplement,
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and at all times up to and including the time of purchase or
additional time of purchase, as the case may be, contained an untrue
statement of a material fact or omitted to state a material fact
required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made,
not misleading (it being understood that such counsel need express
no opinion with respect to the financial statements and schedules
and other financial and statistical data included in the
Registration Statement or Prospectus).
(b) You shall have received from Price Waterhouse LLP, letters
dated, respectively, the date of this Agreement and the time of purchase
and additional time of purchase, as the case may be, and addressed to the
Underwriters (with reproduced copies for each of the Underwriters) in the
forms heretofore approved by the Managing Underwriters.
(c) The Company shall furnish to you at the time of purchase and at
the additional time of purchase, as the case may be, an opinion of
Nutter, McClennen & Fish, LLP, counsel for the Company, addressed to the
Underwriters, and dated the time of purchase or the additional time of
purchase, as the case may be, and in a form satisfactory to Brobeck,
Phleger & Harrison LLP, counsel for the Underwriters, stating that the
issuance and sale of the Series D Preferred Stock to BioChem in the
BioChem Offering did not require registration under the Act.
(d) The Company shall furnish to you at the time of purchase and at
the additional time of purchase, as the case may be, an opinion of Darby
& Darby, patent counsel for the Company, addressed to the Underwriters,
and dated the time of purchase or the additional time of purchase, as the
case may be, and in a form reasonably satisfactory to Brobeck, Phleger &
Harrison LLP, counsel for the Underwriters, substantially in the form and
substance of the draft opinions discussed with the Managing Underwriters
and their counsel.
(e) The Company shall furnish to you at the time of purchase and at
the additional time of purchase, as the case may be, an opinion of Hyman,
Phelps & McNamara, P.C., regulatory counsel for the Company, addressed to
the Underwriters, and dated the time of purchase or the additional time
of purchase, as the case may be, and in a form reasonably satisfactory to
Brobeck, Phleger & Harrison LLP, counsel for the Underwriters,
substantially in the form and substance of the draft opinions discussed
with the Managing Underwriters and their counsel.
(f) You shall have received at the time of purchase and at the
additional time of purchase, as the case may be, the favorable opinion of
Brobeck, Phleger & Harrison LLP, counsel for the Underwriters, dated the
time of purchase or the
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<PAGE>
additional time of purchase, as the case may be, as to the matters
referred to in subparagraphs (iii), (iv) and (viii) of paragraph (a) of
this Section 6.
In addition, such counsel shall state that such counsel have participated
in conferences with officers and other representatives of the Company,
counsel for the Company, representatives of the independent public
accountants of the Company and representatives of the Underwriters at which
the contents of the Registration Statement and Prospectus and related matters
were discussed and, although such counsel is not passing upon and does not
assume any responsibility for the accuracy, completeness or fairness of the
statements contained in the Registration Statement and Prospectus (except as
to matters referred to under subparagraph (vii) of paragraph (a) of this
Section 6), on the basis of the foregoing (relying as to materiality to a
large extent upon the opinions of officers and other representatives of the
Company), no facts have come to the attention of such counsel which lead them
to believe that the Registration Statement or any amendment thereto at the
time such Registration Statement or amendment became effective contained an
untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading or that the Prospectus as of its date or any supplement thereto as
of its date contained an untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading (it being understood that such counsel need express no comment
with respect to the financial statements and schedules and other financial
and statistical data included in the Registration Statement or Prospectus).
(g) No amendment or supplement to the Registration Statement or
Prospectus shall be filed prior to the time the Registration Statement
becomes effective to which you object in writing.
(h) The Registration Statement shall have become effective not
later than 5:00 P.M., New York City Time or, in the case of a
registration statement filed pursuant to Rule 462(b) under the Act, not
later than 10:00 P.M., New York City Time, on the date of this Agreement;
if the filing of the Prospectus, or any supplement thereto, is required
pursuant to Rule 424(b) under the Act, the Prospectus shall have been
filed with the Commission pursuant to Rule 424(b) under the Act, at or
before 5:00 P.M., New York City Time, on the second full business day
after the date of this Agreement; provided, however, that the Company and
you and any group of Underwriters, including you, who have agreed
hereunder to purchase in the aggregate at least 50% of the Firm Shares
may from time to time agree on a later date.
(i) Prior to the time of purchase or the additional time of
purchase, as the case may be, (i) no stop order with respect to the
effectiveness of the Registration Statement shall have been issued under
the Act or proceedings initiated under Section
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8(d) or 8(e) of the Act; (ii) the Registration Statement and all
amendments thereto, or modifications thereof, if any, shall not contain
an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein
not misleading; and (iii) the Prospectus and all amendments or
supplements thereto, or modifications thereof, if any, shall not contain
an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they are made, not
misleading.
(j) Between the time of execution of this Agreement and the time of
purchase or the additional time of purchase, as the case may be, (i) no
material and unfavorable change, financial or otherwise (other than as
referred to in the Registration Statement and Prospectus), in the
business, condition or prospects of the Company shall occur or become
known and (ii) no transaction which is material and unfavorable to the
Company shall have been entered into by the Company.
(k) The Company will, at the time of purchase or additional time of
purchase, as the case may be, deliver to you a certificate of two of its
executive officers to the effect that the representations and warranties
of the Company as set forth in this Agreement and the conditions set
forth in paragraph (i) and paragraph (j) have been met and that they are
true and correct as of each such date.
(l) You shall have received the signed agreements described in
Section 3(r) of this Agreement.
(m) The Company shall have furnished to you such other documents
and certificates as to the accuracy and completeness of any statement in
the Registration Statement and the Prospectus as of the time of purchase
and the additional time of purchase, as the case may be, as you may
reasonably request.
(n) The Company shall have performed such of its obligations under
this Agreement as are to be performed by the terms hereof at or before
the time of purchase and at or before the additional time of purchase, as
the case may be.
(o) The Shares shall have been approved for listing on the Nasdaq
National Market System, subject only to notice of issuance at or prior to
the time of purchase.
7. Effective Date of Agreement; Termination. This Agreement shall
become effective (i) if Rule 430A under the Act is not used, when you shall
have received notification of the effectiveness of the Registration
Statement, or (ii) if Rule 430A under the Act is used, when the parties
hereto have executed and delivered this Agreement.
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<PAGE>
The obligations of the several Underwriters hereunder shall be subject to
termination in the absolute discretion of you or any group of Underwriters
(which may include you) which has agreed to purchase in the aggregate at least
50% of the Firm Shares, if, since the time of execution of this Agreement or the
respective dates as of which information is given in the Registration Statement
and Prospectus, (y) there has been any material adverse and unfavorable change,
financial or otherwise (other than as referred to in the Registration Statement
and Prospectus), in the business, condition or prospects of the Company, which
would, in your judgment or in the judgment of such group of Underwriters, make
it impracticable to market the Shares, or (z) if, at any time prior to the time
of purchase or, with respect to the purchase of any Additional Shares, the
additional time of purchase, as the case may be, trading in securities on the
New York Stock Exchange shall have been suspended or minimum prices shall have
been established on the New York Stock Exchange, or if a banking moratorium
shall have been declared either by the United States or New York State
authorities, or if the United States shall have declared war in accordance with
its constitutional processes or there shall have occurred any material outbreak
or escalation of hostilities or other national or international calamity or
crisis of such magnitude in its effect on the financial markets of the United
States as, in your judgment or in the judgment of such group of Underwriters, to
make it impracticable to market the Shares.
If you or any group of Underwriters elects to terminate this agreement as
provided in this Section 7, the Company and each other Underwriter shall be
notified promptly by letter or telegram.
If the sale to the Underwriters of the Shares, as contemplated by this
Agreement, is not carried out by the Underwriters for any reason permitted under
this Agreement or if such sale is not carried out because the Company shall be
unable to comply with any of the terms of this Agreement, the Company shall not
be under any obligation or liability under this Agreement (except to the extent
provided in Sections 4(k), 5 and 9 hereof), and the Underwriters shall be under
no obligation or liability to the Company under this Agreement (except to the
extent provided in Section 9 hereof) or to one another hereunder.
8. Increase in Underwriters' Commitments. If any Underwriter shall
default in its obligation to take up and pay for the Firm Shares to be
purchased by it hereunder and if the number of Firm Shares which all
Underwriters so defaulting shall have agreed but failed to take up and pay
for does not exceed 10% of the total number of Firm Shares, the
non-defaulting Underwriters shall take up and pay for (in addition to the
aggregate principal amount of Firm Shares they are obligated to purchase
pursuant to Section 1 hereof) the number of Firm Shares agreed to be
purchased by all such defaulting Underwriters, as hereinafter provided. Such
Shares shall be taken up and paid for by such non-defaulting Underwriter or
Underwriters in such amount or amounts as you may designate with the consent
of each Underwriter so designated or, in the event no such designation is
made, such Shares shall be taken up and paid for by all non-defaulting
Underwriters pro rata in
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<PAGE>
proportion to the aggregate number of Firm Shares set opposite the names
of such non-defaulting Underwriters in Schedule A.
Without relieving any defaulting Underwriter from its obligations
hereunder, the Company agrees with the non-defaulting Underwriters that it
will not sell any Firm Shares hereunder unless all of the Firm Shares are
purchased by the Underwriters (or by substituted Underwriters selected by you
with the approval of the Company or selected by the Company with your
approval).
If a new Underwriter or Underwriters are substituted by the Underwriters
or by the Company for a defaulting Underwriter or Underwriters in accordance
with the foregoing provision, the Company or you shall have the right to
postpone the time of purchase for a period not exceeding five business days
in order that any necessary changes in the Registration Statement and
Prospectus and other documents may be effected.
The term Underwriter as used in this agreement shall refer to and include
any Underwriter substituted under this Section 8 with like effect as if such
substituted Underwriter had originally been named in Schedule A.
9. Indemnity by the Company and the Underwriters.
(a) The Company agrees to indemnify, defend and hold harmless each
Underwriter, its directors and officers, and any person who controls any
Underwriter within the meaning of Section 15 of the Act or Section 20 of the
Exchange Act, from and against any loss, expense, liability or claim
(including the reasonable cost of investigation) which, jointly or severally,
any such Underwriter or any such person may incur under the Act, the Exchange
Act or otherwise insofar as such loss, expense, liability or claim arises out
of or is based upon any untrue statement or alleged untrue statement of a
material fact contained in the Registration Statement (or in the Registration
Statement as amended by any post-effective amendment thereof by the Company)
or in a Prospectus (the term Prospectus for the purpose of this Section 9
being deemed to include any Preliminary Prospectus, the Prospectus and the
Prospectus as amended or supplemented by the Company), or arises out of or is
based upon any omission or alleged omission to state a material fact required
to be stated in either such Registration Statement or Prospectus or necessary
to make the statements made therein not misleading, except insofar as any
such loss, expense, liability or claim arises out of or is based upon any
untrue statement or alleged untrue statement of a material fact contained in
and in conformity with information furnished in writing by any Underwriter
through you to the Company expressly for use with reference to such
Underwriter in such Registration Statement or such Prospectus or arises out
of or is based upon any omission or alleged omission to state a material fact
in connection with such information required to be stated in either such
Registration Statement or Prospectus or necessary to make such information
not misleading, provided, however, that the indemnity agreement contained in
this subsection (a) with respect to any Preliminary Prospectus or amended
Preliminary Prospectus shall not inure
19
<PAGE>
to the benefit of any Underwriter (or to the benefit of any person
controlling such Underwriter) from whom the person asserting any such loss,
expense, liability or claim purchased the Shares which is the subject thereof
if the Prospectus corrected any such alleged untrue statement or omission and
if such Underwriter failed to send or give a copy of the Prospectus to such
person at or prior to the written confirmation of the sale of such Shares to
such person.
If any action is brought against an Underwriter or any such person in
respect of which indemnity may be sought against the Company pursuant to the
foregoing paragraph, such Underwriter or such person shall promptly notify
the Company in writing of the institution of such action and the Company
shall assume the defense of such action, including the employment of counsel
reasonably satisfactory to such indemnified party and payment of all fees and
expenses, provided, however, that the omission to so notify the Company shall
not relieve the Company from any liability which they may have to any
Underwriter or any such person or otherwise. Such Underwriter or such person
shall have the right to employ its or their own counsel in any such case, but
the fees and expenses of such counsel shall be at the expense of such
Underwriter or of such person unless the employment of such counsel shall
have been authorized in writing by the Company in connection with the defense
of such action or the Company shall not have employed counsel to have charge
of the defense of such action or such indemnified party or parties shall have
reasonably concluded that there may be defenses available to it or them which
are different from or additional to those available to the Company (in which
case the Company shall not have the right to direct the defense of such
action on behalf of the indemnified party or parties), in any of which events
such fees and expenses shall be borne by the Company and paid as incurred (it
being understood, however, that the Company shall not be liable for the
expenses of more than one separate counsel in any one action or series of
related actions in the same jurisdiction representing the indemnified parties
who are parties to such action). The Company shall not be liable for any
settlement of any such claim or action effected without its written consent
but if settled with the written consent of the Company, the Company agrees to
indemnify and hold harmless any Underwriter and any such person from and
against any loss or liability by reason of such settlement. No indemnifying
party shall, without the prior written consent of the indemnified party,
effect any settlement of any pending or threatened proceeding in respect of
which any indemnified party is or could have been a party and indemnity could
have been sought hereunder by such indemnified party, unless such settlement
includes an unconditional release of such indemnified party from all
liability on claims that are the subject matter of such proceeding.
(b) Each Underwriter severally agrees to indemnify, defend and hold
harmless the Company, its directors and officers, and any person who controls
the Company within the meaning of Section 15 of the Act or Section 20 of the
Exchange Act from and against any loss, expense, liability or claim
(including the reasonable cost of investigation) which, jointly or severally,
the Company or any such person may incur under the Act or otherwise, insofar
as such loss, expense, liability or claim arises out of or is based upon any
20
<PAGE>
untrue statement or alleged untrue statement of a material fact contained in
and in conformity with information furnished in writing by or on behalf of
such Underwriter through you to the Company expressly for use with reference
to such Underwriter in the Registration Statement (or in the Registration
Statement as amended by any post-effective amendment thereof by the Company)
or in a Prospectus, or arises out of or is based upon any omission or alleged
omission to state a material fact in connection with such information
required to be stated either in such Registration Statement or Prospectus or
necessary to make such information not misleading.
If any action is brought against the Company or any such person in
respect of which indemnity may be sought against any Underwriter pursuant to
the foregoing paragraph, the Company or such person shall promptly notify
such Underwriter in writing of the institution of such action and such
Underwriter shall assume the defense of such action, including the employment
of counsel reasonably satisfactory to such indemnified party and payment of
all fees and expenses, provided, however, that the omission to so notify such
Underwriter shall not relieve such Underwriter, from any liability which they
may have to the Company or any such person or otherwise. The Company or such
person shall have the right to employ its own counsel in any such case, but
the fees and expenses of such counsel shall be at the expense of the Company
or such person unless the employment of such counsel shall have been
authorized in writing by such Underwriter in connection with the defense of
such action or such Underwriter shall not have employed counsel to have
charge of the defense of such action or such indemnified party or parties
shall have reasonably concluded that there may be defenses available to it or
them which are different from or additional to those available to such
Underwriter (in which case such Underwriter shall not have the right to
direct the defense of such action on behalf of the indemnified party or
parties, but such Underwriter may employ counsel and participate in the
defense thereof but the fees and expenses of such counsel shall be at the
expense of such Underwriter), in any of which events such fees and expenses
shall be borne by such Underwriter and paid as incurred (it being understood,
however, that such Underwriter shall not be liable for the expenses of more
than one separate counsel in any one action or series of related actions in
the same jurisdiction representing the indemnified parties who are parties to
such action). No Underwriter shall be liable for any settlement of any such
claim or action effected without the written consent of such Underwriter but
if settled with the written consent of such Underwriter, such Underwriter
agrees to indemnify and hold harmless the Company and any such person from
and against any loss or liability by reason of such settlement. No
indemnifying party shall, without the prior written consent of the
indemnified party, effect any settlement of any pending or threatened
proceeding in respect of which any indemnified party is or could have been a
party and indemnity could have been sought hereunder by such indemnified
party, unless such settlement includes an unconditional release of such
indemnified party from all liability on claims that are the subject matter of
such proceeding.
(c) If the indemnification provided for in this Section 9 is unavailable to
an indemnified party under subsections (a) and (b) of this Section 9 in respect
of any losses,
21
<PAGE>
expenses, liabilities or claims referred to therein, then each applicable
indemnifying party, in lieu of indemnifying such indemnified party, shall
contribute to the amount paid or payable by such indemnified party as a
result of such losses, expenses, liabilities or claims (i) in such proportion
as is appropriate to reflect the relative benefits received by the Company on
the one hand and the Underwriters on the other hand from the offering of the
Shares or (ii) if the allocation provided by clause (i) above is not
permitted by applicable law, in such proportion as is appropriate to reflect
not only the relative benefits referred to in clause (i) above but also the
relative fault of the Company on the one hand and of the Underwriters on the
other in connection with the statements or omissions which resulted in such
losses, expenses, liabilities or claims, as well as any other relevant
equitable considerations. The relative benefits received by the Company on
the one hand and the Underwriters on the other shall be deemed to be in the
same proportion as the total proceeds from the offering (net of underwriting
discounts and commissions but before deducting expenses) received by the
Company bear to the total underwriting discounts and commissions received by
the Underwriters. The relative fault of the Company on the one hand and of
the Underwriters on the other shall be determined by reference to, among
other things, whether the untrue statement or alleged untrue statement of a
material fact or omission or alleged omission relates to information supplied
by the Company or by the Underwriters and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission. The amount paid or payable by a party as a result of
the losses, expenses, liabilities and claims referred to above shall be
deemed to include any legal or other fees or expenses reasonably incurred by
such party in connection with investigating or defending any claim or action.
(d) The Company and the Underwriters agree that it would not be just and
equitable if contribution pursuant to this Section 9 were determined by pro
rata allocation (even if the Underwriters were treated as one entity for such
purpose) or by any other method of allocation that does not take account of
the equitable considerations referred to in subsection (c) above.
Notwithstanding the provisions of this Section 9, no Underwriter shall be
required to contribute any amount in excess of the amount by which the total
price at which the Shares underwritten by such Underwriter and distributed to
the public were offered to the public exceeds the amount of any damages which
such Underwriter has otherwise been required to pay by reason of such untrue
statement or alleged untrue statement or omission or alleged omission. No
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Act) shall be entitled to contribution from any person who was
not guilty of such fraudulent misrepresentation. The Underwriter's
obligations to contribute pursuant to this Section 9 are several in
proportion to their respective underwriting commitments and not joint.
(e) The indemnity and contribution agreements contained in this Section 9
and the covenants, warranties and representations of the Company contained in
this Agreement shall remain in full force and effect regardless of any
investigation made by or on behalf of any Underwriter, its directors or
officers or any person who controls any Underwriter within the meaning of
Section 15 of the Act or Section 20 of the Exchange Act,
22
<PAGE>
or by or on behalf of the Company, its directors and officers or any person
who controls the Company within the meaning of Section 15 of the Act or
Section 20 of the Exchange Act, and shall survive any termination of this
Agreement or the issuance and delivery of the Shares. The Company and each
Underwriter agree promptly to notify the others of the commencement of any
litigation or proceeding against it and, in the case of the Company, against
any of the Company's officers and directors in connection with the issuance
and sale of the Shares, or in connection with the Registration Statement or
Prospectus.
10. Notices. Except as otherwise herein provided, all statements,
requests, notices and agreements shall be in writing or by telegram and, if
to the Underwriters, shall be sufficient in all respects if delivered or sent
to SBC Warburg Dillon Read Inc., 535 Madison Avenue, New York, N.Y. 10022,
Attention: Syndicate Department and, if to the Company, shall be sufficient
in all respects if delivered or sent to the Company at the offices of the
Company at 200 Boston Avenue, Medford, Massachusetts 02155, Attention: Mark
T. Weedon, President and Chief Executive Officer.
11. Construction. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of New York. The Section headings in
this Agreement have been inserted as a matter of convenience of reference and
are not a part of this Agreement.
12. Parties at Interest. The Agreement herein set forth has been and is
made solely for the benefit of the Underwriters and the Company and the
controlling persons, directors and officers referred to in Section 9 hereof,
and their respective successors, assigns, executors and administrators. No
other person, partnership, association or corporation (including a purchaser,
as such purchaser, from any of the Underwriters) shall acquire or have any
right under or by virtue of this Agreement.
13. Counterparts. This agreement may be signed by the parties in
counterparts which together shall constitute one and the same agreement among
the parties.
14. Miscellaneous. SBC Warburg Dillon Read Inc., an indirect, wholly
owned subsidiary of Swiss Bank Corporation, is not a bank and is separate
from any affiliated bank, including any U.S. branch or agency of Swiss Bank
Corporation. Because SBC Warburg Dillon Read Inc. is a separately
incorporated entity, it is solely responsible for its own contractual
obligations and commitments, including obligations with respect to sales and
purchases of securities. Securities sold, offered or recommended by SBC
Warburg Dillon Read Inc. are not deposits, are not insured by the Federal
Deposit Insurance Corporation, are not guaranteed by a branch or agency, and
are not otherwise an obligation or responsibility of a branch or agency.
A lending affiliate of SBC Warburg Dillon Read Inc. may have lending
relationships with issuers of securities underwritten or privately placed by
SBC Warburg
23
<PAGE>
Dillon Read Inc. To the extent required under the securities laws,
prospectuses and other disclosure documents for securities underwritten or
privately placed by SBC Warburg Dillon Read Inc. will disclose the existence
of any such lending relationships and whether the proceeds of the issue will
be used to repay debts owed to affiliates of SBC Warburg Dillon Read Inc.
Without your prior written approval, the U.S. branches and agencies of
Swiss Bank Corporation will not share with SBC Warburg Dillon Read Inc. any
non-public information concerning you, and SBC Warburg Dillon Read Inc. will
not share any non-public information received from you with any of such U.S.
branches and agencies of Swiss Bank Corporation.
24
<PAGE>
If the foregoing correctly sets forth the understanding among the Company
and the Underwriters, please so indicate in the space provided below for the
purpose, whereupon this letter and your acceptance shall constitute a binding
agreement among the Company and the Underwriters, severally.
Very truly yours,
SCRIPTGEN PHARMACEUTICALS, INC.
By
-----------------------------
Title:
Accepted and agreed to as of the
date first above written, on
behalf of themselves and the other
several Underwriters named in
Schedule A
SBC WARBURG DILLON READ INC.
VOLPE BROWN WHELAN & COMPANY, LLC
By: SBC WARBURG DILLON READ INC.
By:
-----------------------------
Title:
By:
-----------------------------
Title
25
<PAGE>
SCHEDULE A
NUMBER OF
UNDERWRITER FIRM SHARES
- ----------- -----------
SBC WARBURG DILLON READ INC.
VOLPE BROWN WHELAN & COMPANY, LLC
---------
Total.......... 3,000,000
---------
---------
<PAGE>
Exhibit 4.1
(front)
[LOGO]
NUMBER SHARES
SCRIPTGEN PHARMACEUTICALS, INC.
INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE
35,000,000 AUTHORIZED SHARES $.01 PAR VALUE
CUSIP 811078 10 4
SEE REVERSE
FOR CERTAIN DEFINITIONS
THIS CERTIFIES THAT
Is The Owner of
FULLY PAID AND NON-ASSESSABLE SHARES OF $.01 PAR VALUE COMMON STOCK OF
SCRIPTGEN PHARMACEUTICALS, INC.
transferable on the books of the Corporation by the holder hereof in person
or by duly authorized attorney upon surrender of this Certificate properly
endorsed. This certificate is not valid unless countersigned by the Transfer
Agent and registered by the Registrar.
IN WITNESS WHEREOF, the Corporation has caused this certificate to be
executed by the facsimile signatures of its duly authorized officers and to
be sealed with the facsimile seal of the Corporation.
Dated:
/s/ Karen A. Hamlin /s/ Mark T. Weedon
[SEAL]
Karen A. Hamlin, Secretary Mark T. Weedon, President and
Chief Executive Officer
COUNTERSIGNED AND REGISTERED:
American Securities Transfer & Trust, Inc.
P.O. Box 1596
Denver, Colorado 80201
By
--------------------------------------------------
Transfer Agent & Registrar Authorized Signature
<PAGE>
Exhibit 4.1
(back)
SCRIPTGEN PHARMACEUTICALS, INC.
The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM -- as tenants in common UNIF GIFT MIN ACT--_____ Custodian______
TEN ENT -- as tenants by the entireties (Cust) (Minor)
JT TEN -- as joint tenants with right under Uniform Gifts to Minors
of survivorship and not as Act ______________
tenants in common (State)
Additional abbreviations may also be used though not in the above list.
- -------------------------------------------------------------------------------
For Value Received, ____________________ hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
--------------------
/ /
--------------------
- ------------------------------------------------------------------------------
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE)
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Shares
- -----------------------------------------------------------------------
of the Common Stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint
attorney-in-fact
- -------------------------------------------------------------
to transfer the said stock on the books of the within-named Corporation, with
full power of substitution in the premises.
Dated
-----------------------
------------------------------------------------------
------------------------------------------------------
NOTICE: THE SIGNATURE(S) TO THIS ASSIGNMENT MUST
CORRESPOND WITH THE NAME(S) AS WRITTEN UPON THE
FACE OF THE CERTIFICATE IN EVERY PARTICULAR,
WITHOUT ALTERATION OR ENLARGEMENT OR ANY
CHANGE WHATSOEVER.
Signature Guaranteed:
- -----------------------------
The signature(s) must be guaranteed by an eligible guarantor institution
(Banks, Stockbrokers, Savings and Loan Associations and Credit Unions with
membership in an approved signature guarantee Medallion Program), pursuant to
S.E.C. Rule 17Ad-15.
<PAGE>
Exhibit 5.1
[LETTERHEAD]
January 30, 1998
Scriptgen Pharmaceuticals, Inc.
200 Boston Avenue
Medford, MA 02155
Dear Sirs:
In connection with Amendment No. 2 to the Registration Statement on Form
S-1 (the "Registration Statement") filed by Scriptgen Pharmaceuticals, Inc.,
a Delaware corporation (the "Company"), under the Securities Act of 1933, as
amended (the "Act"), relating to the public offering by the Company of up to
3,450,000 shares (the "Shares") of its Common Stock ("Common Stock"), par
value $.01 per share (including up to 450,000 shares of Common Stock which
will be purchased by the underwriters if the underwriters exercise the option
granted to them to cover over-allotments), we, as counsel for the Company,
have examined such corporate records, other documents and questions of law as
we have considered necessary or appropriate for the purposes of this opinion.
Our opinion set forth below is limited to the General Corporation Law of the
State of Delaware.
We assume that appropriate action will be taken, prior to the offer and
sale of the Shares, to register and qualify the Shares for sale under all
applicable state securities or "blue sky" laws.
In our examination of the foregoing documents, we have assumed the
genuineness of all signatures and the authenticity of all documents submitted
to us as originals, the conformity to original documents of all documents
submitted to us as certified or photostatic copies, and the authenticity of
the originals of such latter documents.
Based on the foregoing, we advise you that in our opinion the Shares
have been duly and validly authorized and, when issued and sold in the manner
contemplated by the Underwriting Agreement, a form of which has been filed as
an exhibit to the Registration Statement (the "Underwriting Agreement"), and
upon receipt by the Company of payment therefor as provided in the
Underwriting Agreement, will be legally issued, fully paid and non-assessable.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and the reference to this firm under the caption
"Legal Matters"
<PAGE>
Scriptgen Pharmaceuticals, Inc.
January 30, 1998
Page
in the Prospectus contained therein. This consent is not to be construed as
an admission that we are a party whose consent is required to be filed with
the Registration Statement under the provisions of the Act or the rules and
regulations of the Securities and Exchange Commission promulgated thereunder.
The opinion expressed herein is solely for your benefit, and may be
relied upon only by you.
Very truly yours,
/s/ Fulbright & Jaworski L.L.P.
<PAGE>
Exhibit 10.9
COLLABORATION AND LICENSE AGREEMENT
between
HOECHST MARION ROUSSEL
and
SCRIPTGEN PHARMACEUTICALS, INC.
October 24, 1997
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE
CONFIDENTIAL PORTIONS HAVE BEEN REDACTED AND ARE DENOTED BY
[***]. THE CONFIDENTIAL PORTIONS HAVE BEEN SEPARATELY FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION.
<PAGE>
TABLE OF OF CONTENTS
1. DEFINITIONS........................................................-1-
1.1. "Affiliate"................................................-1-
1.2 "Back-Up Compound".........................................-1-
1.3 "Collaboration Program"....................................-1-
1.4 "Committees"...............................................-1-
1.5 "Confidential Information".................................-2-
1.6 "Contract Year"............................................-2-
1.7 "Effective Date"...........................................-2-
1.8 "Existing Compounds".......................................-2-
1.9 "Existing Targets".........................................-2-
1.10 "Field"....................................................-2-
1.11 "First Commercial Sale"....................................-2-
1.12 "HMR Owned Technology".....................................-2-
1.13 "HMR Patent Rights"........................................-2-
1.14 "IND"......................................................-2-
1.15 "IPO"......................................................-2-
1.16 "Joint Compound Library"...................................-2-
1.17 "Joint Patent Rights"......................................-2-
1.18 "Joint Technology".........................................-3-
1.19 "License Term".............................................-3-
1.20 "Licensed Compound"........................................-3-
1.21 "Licensed Compound Notice".................................-3-
1.22 "Licensed Product".........................................-3-
1.23 "NDA"......................................................-3-
1.24 "Net Sales"................................................-3-
1.25 "Non-Selected Compounds"...................................-4-
1.26 "Non-Selected Targets".....................................-4-
1.27 "Party" and "Parties"......................................-4-
1.28 "Patent Rights"............................................-4-
1.29 "Scientific Committee".....................................-4-
1.30 "SCRIPTGEN Indemnitees"....................................-4-
1.31 "SCRIPTGEN Owned Technology"...............................-4-
1.32 "SCRIPTGEN Patent Rights"..................................-4-
1.33 "SCRIPTGEN Screening Technology"...........................-4-
1.34 "Securities Act"...........................................-4-
1.35 "Steering Committee".......................................-5-
1.36 "Target"...................................................-5-
1.37 "Technology"...............................................-5-
1.38 "Work Plan"................................................-5-
2. COLLABORATION PROGRAM..............................................-5-
2.1 Implementation of Collaboration Program....................-5-
<PAGE>
2.2 Committees.................................................-6-
2.3 Term of Collaboration Program..............................-8-
2.4 Allocation of Tasks for Collaboration Program..............-8-
2.5 License Option.............................................-9-
2.6 Commercialization Rights..................................-10-
2.7 Non-Selected Targets and Non-Selected Compounds...........-11-
2.8 Existing Compounds and Existing Targets...................-12-
3. FUNDING...........................................................-13-
3.1 Up-Front Payments as a Technology Access Fee..............-13-
3.2 Funding of Collaboration Program..........................-13-
3.3 Milestone Payments........................................-13-
3.4 Determination that Milestones have been achieved..........-14-
4. INTELLECTUAL PROPERTY RIGHTS......................................-14-
4.1 Disclosure of Inventions..................................-14-
4.2 Ownership.................................................-14-
5. PROVISIONS CONCERNING THE FILING, PROSECUTION AND
MAINTENANCE OF PATENT RIGHTS....................................-15-
5.1 Filing of Patents.........................................-15-
5.2 Expenses..................................................-16-
5.3 Right to Prosecute Abandoned Rights.......................-16-
6. LICENSE RIGHTS....................................................-17-
6.1 License Grant.............................................-17-
6.2 Term of License...........................................-17-
6.3 Sublicenses...............................................-17-
6.4 Payment of Royalties and Share of Other Amounts;
Payment Dates; Accounting; Records; Other................-18-
6.5 Infringement..............................................-20-
6.6 Claimed Infringement......................................-21-
6.7 Warranty Disclaimer.......................................-22-
6.8 Limited Liability.........................................-22-
7. CONFIDENTIAL INFORMATION..........................................-22-
7.1 Treatment of Confidential Information.....................-22-
7.2 Release from Restrictions.................................-23-
7.3 Publication...............................................-23-
8. REPRESENTATION AND WARRANTIES.....................................-24-
8.1 Mutual Representations....................................-24-
8.2 HMR Representation........................................-25-
-ii-
<PAGE>
9. INDEMNIFICATION...................................................-25-
10. TERMINATION......................................................-25-
10.1 Term......................................................-25-
10.2 Termination for Insolvency or Breach......................-25-
10.3 Disposition of Licensed Products..........................-26-
10.4 Survival of Obligations; Return of
Confidential Information.................................-26-
11. EQUITY INVESTMENT................................................-26-
11.1 Timing and Amount.........................................-26-
11.2 SCRIPTGEN Representations.................................-27-
12. MISCELLANEOUS....................................................-27-
12.1 Payment Method............................................-27-
12.2 Publicity.................................................-27-
12.3 Overdue Payments..........................................-27-
12.4 Prohibition on Hiring.....................................-27-
12.5 Assignment................................................-28-
12.6 Governing Law.............................................-28-
12.7 Force Majeure.............................................-28-
12.8 Waiver....................................................-28-
12.9 Notices...................................................-29-
12.10 No Agency.................................................-29-
12.11 Entire Agreement..........................................-29-
12.12 Headings..................................................-30-
12.13 Severability..............................................-30-
12.14 Successors and Assigns....................................-30-
12.15 Counterparts..............................................-30-
12.16 Interpretation............................................-30-
12.17 Export Controls...........................................-30-
-iii-
<PAGE>
COLLABORATION AND LICENSE AGREEMENT
This COLLABORATION AND LICENSE AGREEMENT (the "Agreement") is entered
into as of October 24, 1997 by and between Hoechst Marion Roussel, a French
corporation ("HMR"), and SCRIPTGEN Pharmaceuticals, Inc., a Delaware
corporation ("SCRIPTGEN").
WHEREAS, HMR has known-how in the research and development, manufacturing
and marketing of pharmaceutical products;
WHEREAS, SCRIPTGEN has know-how and technology for discovery of
[***] pharmaceutical products; and
WHEREAS, HMR and SCRIPTGEN desire to cooperate in the discovery and
subsequent development of [***] products for the human health
market;
NOW, THEREFORE, in consideration of the mutual covenants contained
herein, and for other good and valuable consideration, HMR and SCRIPTGEN
hereby agree as follows:
1. DEFINITIONS
Whenever used in this Agreement with an initial capital letter, the terms
defined in this Section 1 shall have the meanings specified.
1.1. "Affiliate" means any corporation, firm, limited liability company,
partnership or other entity which directly or indirectly controls or is
controlled by or is under common control with a Party to this Agreement.
"Control" means ownership, directly or through one or more Affiliates, of fifty
percent (50%) or more of the shares of stock entitled to vote for the election
of directors, in the case of a corporation, or fifty percent (50%) or more of
the equity interests in the case of any other type of legal entity, status as a
general partner in any partnership, or any other arrangement whereby a Party
controls or has the right to control the Board of Directors or equivalent
governing body of a corporation or other entity.
1.2 [***]
1.3 "Collaboration Program" means the program and associated activities
contemplated by Section 2 of this Agreement.
1.4 "Committees" mean the Scientific Committee and the Steering Committee
and "Committee" means either the Scientific Committee or the Steering Committee.
<PAGE>
1.5 "Confidential Information" means any technical or business information
furnished by one Party to the other in connection with this Agreement.
Confidential Information may include, without limitation, the identity of a
compound and its chemical structure and biological profile, the use of a
compound, trade secrets, know-how, inventions, technical data or specifications,
testing methods, business or financial information, research and development
activities, product and marketing plans, manufacturing plans, formulations,
financing plans and activities, and customer and supplier information, and any
information supplied pursuant to Section 2.8.
1.6 "Contract Year" means each twelve (12) month period beginning after
the Effective Date.
1.7 "Effective Date" means October 24, 1997.
1.8 [***]
1.9 [***]
1.10 "Field" means the human healthcare market.
1.11 "First Commercial Sale" means the date of the first sale of a Licensed
Product in the ordinary course of business in any country by HMR or an Affiliate
of HMR or licensee or sublicensee of HMR or an HMR Affiliate.
1.12 "HMR Owned Technology" has the meaning set forth in Section 4.2.2.
1.13 "HMR Patent Rights" means Patent Rights with respect to HMR Owned
Technology.
1.14 "IND" means an Investigational New Drug permit, as defined by U.S.
federal regulations, or the equivalent in any other country.
1.15 "IPO" means the first underwritten public offering of shares of
capital stock of SCRIPTGEN declared effective under the Securities Act after the
Effective Date.
1.16 "Joint Compound Library" means all Non-Selected Compounds as to which
HMR has performed discovery chemistry during the Collaboration as identified on
page 4 of the Work Plan.
1.17 "Joint Patent Rights" means Patent Rights with respect to Joint
Technology.
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1.18 "Joint Technology" has the meaning set forth in Section 4.2.3.
1.19 "License Term" means the time period referenced in Section 6.2.
1.20 "Licensed Compound" means any compound (including Back-Up Compounds)
selected for licensing and development by HMR pursuant to the provisions of
Sections 2.5, 2.7(c) and 2.7(d) hereof regardless of which Party was the source
of the compound.
1.21 "Licensed Compound Notice" has the meaning set forth in Section 2.5.1.
1.22 "Licensed Product" means any product which incorporates or utilizes a
Licensed Compound (including analogs, derivatives or modifications thereof), and
any product which is discovered in whole or in part as a result of the
Collaboration Program.
1.23 "NDA" means a New Drug Application, as defined by U.S. federal
regulations, or the equivalent in any other country.
1.24 "Net Sales" means the gross invoice sales price for the Licensed
Products sold by HMR, its Affiliates and its or their sublicensees, less
discounts allowed in amounts customary in the trade; reasonable and customary
quantities of samples; returns; and customer charges, sales, taxes and
transportation costs separately invoiced. The transfer of the Licensed
Products by HMR or one of its sublicensees to (i) an Affiliate of HMR or (ii)
another sublicensee of HMR shall not be considered a sale; in such cases, Net
Sales shall be determined based on the invoiced sales price by the Affiliate
or sublicensee to its customer, less the deductions allowed under this
Section 1.21. Every other commercial use or disposition of Licensed Products
by HMR, its Affiliates and its or their sublicensees, other than reasonable
quantities of promotional samples or bona fide sale to a bona fide customer
shall be considered a sale of the Licensed Products at the weighted average
Net Sales price then being invoiced by the seller in arm's length
transactions.
HMR, its Affiliates and its or their sublicensees shall be deemed to have
sold a "Bundled Product" if the Licensed Products are sold pursuant to an
agreement with an independent customer specifying, for a combination of
products or services, (i) a single price, (ii) other terms of purchase not
separately identifying either a price per product or the effective deductions
referred to above per product or (iii) a price for units of the Licensed
Products which is discounted below the standard invoice price per unit of the
Licensed Products by at least five (5) percentage points more than the amount
that any other product or service in the Bundled Product is discounted below
such other product's or service's standard invoice price. In order to
calculate the Net Sales of the Licensed Products included in a Bundled
Product (a) in the case of the foregoing clauses (i) and (ii), the total Net
Sales of the Bundled Product shall be multiplied by a fraction, the numerator
of which shall be the product of the number of units of the Licensed Products
sold multiplied by the standard invoice price per unit of the Licensed
Products, and the denominator of which shall be the sum, for all products or
services included in the Bundled Product, of the products of the number of
units sold for each product or service in the Bundled Product multiplied by
the standard invoice price per unit for each such product or service and (b)
in the case of the foregoing clause (iii), the Parties will determine whether
an adjustment to Net Sales is appropriate and, if so, a mutually agreeable
method of calculation.
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1.25 [***]
1.26 [***]
1.27 "Party" and "Parties" means HMR or SCRIPTGEN singularly or HMR and
SCRIPTGEN collectively, respectively.
1.28 "Patent Rights" means the rights and interests in and to issued
patents, pending patents and pending patent applications in any country,
including, but not limited to, all provisional applications, substitutions,
continuations, continuations-in-part, divisions, renewals, reissues or
extensions, whether owned solely or jointly by a Party or licensed in by a Party
with the right to sublicense.
1.29 "Scientific Committee" means the Scientific Committee established
pursuant to Section 2.2 of this Agreement.
1.30 "SCRIPTGEN Indemnitees" has the meaning set forth in Section 9.
1.31 "SCRIPTGEN Owned Technology" has the meaning set forth in
Section 4.2.1.
1.32 "SCRIPTGEN Patent Rights" means Patent Rights with respect to
SCRIPTGEN Owned Technology.
1.33 "SCRIPTGEN Screening Technology" means the proprietary Any Target
Ligand Affinity Screen (ATLAS) technology and the proprietary Screen for
Compounds with Affinity for Nucleic Acid (SCAN) technology owned by SCRIPTGEN
for the screening of compounds and the proprietary high-throughput functional
technologies owned by SCRIPTGEN.
1.34 "Securities Act" means the U.S. Securities Act of 1933, as amended.
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1.35 "Steering Committee" means the Steering Committee established pursuant
to Section 2.2 of this Agreement.
1.36 [***] Target Identification, Validation and Prioritization have the
meanings set forth in Appendix 1.
1.37 "Technology" means and includes all inventions, discoveries,
improvements, proprietary materials and biological substances, data, know-how
and trade secrets, whether or not patentable, including any negative results.
1.38 "Work Plan" means the Work Plan attached to this Agreement as Appendix
1.
2. COLLABORATION PROGRAM
2.1 Implementation of Collaboration Program.
2.1.1 Basic Provisions.
The Collaboration Program shall aim at the synergistic interaction
between HMR and SCRIPTGEN for the identification of [***] drug candidates for
development and commercialization through the activities outlined in the Work
Plan. The Collaboration Program shall continue for a period of three (3)
Contract Years (subject to extension or earlier termination as provided in
Section 2.3) and each Party shall use reasonable efforts to perform such
tasks as are set forth to be performed by it as contemplated by this
Agreement. All work performed hereunder or in connection herewith shall be
performed in a good and workmanlike manner using proper and accepted
scientific procedures, and in accordance with all applicable laws.
2.1.2 Cooperation.
Each Party shall keep the Steering Committee fully informed about
the status of the Collaboration Program, and scientists at SCRIPTGEN and HMR
shall cooperate in the performance of the Collaboration Program and, subject
to any confidentiality obligations to third parties, shall exchange
information and materials as necessary to carry out the Collaboration
Program, subject to the provisions of Sections 4, 5 and 7 hereof.
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2.1.3 Ownership and Use of SCRIPTGEN Screening Technology.
HMR hereby acknowledges that it has no claim of ownership or rights
to the SCRIPTGEN Screening Technology (including any improvements thereto)
and, as between HMR and SCRIPTGEN, the SCRIPTGEN Screening Technology
(including any improvements thereto) is owned solely by SCRIPTGEN and shall
remain the exclusive property of SCRIPTGEN, and that no license or other
rights therein or to the use thereof are hereby granted to HMR.
2.2 Committees.
2.2.1 Establishment and Functions.
SCRIPTGEN and HMR shall establish a Scientific Committee and a
Steering Committee.
(a) The Scientific Committee shall (i) plan, administer and monitor
all scientific aspects of the Collaboration Program to the extent set forth
in the Work Plan, (ii) recommend to the Steering Committee compounds to be
considered for pre-clinical candidate approval and development as provided in
the Work Plan, and (iii) recommend which inventions which constitute Joint
Technology should be the subject of patent prosecution as contemplated by
Section 5.1
(b) The Steering Committee shall (i) approve those compounds which
shall be pre-clinical candidates and therefore subject to further development
as provided in the Work Plan, (ii) decide which inventions which constitute
Joint Technology shall be the subject of patent prosecution as contemplated
by Section 5.1 and (iii) make any decisions related to the Collaboration
Program beyond the decision-making authority of the Scientific Committee. The
Steering Committee shall also resolve any issue which cannot be resolved by
the Scientific Committee. Any issue which also cannot be resolved by the
Steering Committee shall be referred to the Chief Executive Officer of
Scriptgen and the Head of Research and Development of HMR AG for resolution.
2.2.2 Membership.
SCRIPTGEN and HMR each shall appoint, in its sole discretion, three
(3) members to the Scientific Committee and two (2) members to the Steering
Committee. Substitutes, alternates or replacements for the members of either
Committee appointed by a Party may be made at any time by such Party by
notice in writing to the other Party. The Parties may mutually agree to
change the size of either or both Committee as long as there shall be an
equal number of representatives of each Party on the changed Committee.
Subject to the obligations set forth in Section 7, the Parties may at their
discretion invite guests to attend meetings of either the Scientific
Committee or the Steering Committee with such guests having no voting rights.
The members of the Scientific Committee initially shall be:
HMR MEMBERS SCRIPTGEN MEMBERS
Head of disease group: (presently) Michael G. Palfreyman, Ph.D., D. Sc.
Alain Jacot C. Richard Wobbe, Ph.D.
Craig M. Thompson, Ph.D.
Head of medical chemistry: Jozsef
Aszodi
Project leader: Khalid Islam
The members of the Steering Committee initially shall be:
HMR MEMBERS SCRIPTGEN Members
Head of disease group: (presently) Mark T. Weedon
Alain Jacot Michael G. Palfreyman, Ph.D., D.Sc.
Head of research and development for
Romainville: Jacques Raynaud
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2.2.3 Meetings.
The Scientific Committee shall interact on an ongoing basis using
mail, telephone, fax, E-mail and videoconferencing and shall meet at least
four (4) times each year, with such meetings to be held, alternately, in
Medford, Massachusetts, U.S.A., and Romainville, France, unless the Parties
agree otherwise. The Steering Committee shall meet at least once a year,
with such meetings to be held, alternately, in Medford, Massachusetts, U.S.A.
and Romainville, France, unless the Parties agree otherwise. Any additional
Committee meetings shall be held on an as needed basis at places and on dates
selected by the appropriate Committee. In addition, a Committee may act
without a formal meeting by a written memorandum signed by that number of
members required to take the action if a meeting in person had been held.
2.2.4 Minutes.
The Committees shall keep accurate minutes of its deliberations
which record all proposed decisions and all actions recommended or taken.
The Scientific Committee shall provide the Steering Committee with minutes of
all of its meetings and advise the Steering Committee in writing of all
recommendations of the Scientific Committee made pursuant to Section 2.2.1.
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2.2.5 Quorum; Voting; Decisions.
At each meeting of a Committee, at least one member appointed by
each Party shall constitute a quorum. Each member of a Committee shall have
one vote on all matters before the Committee, provided that the member or
members of each Party present at a meeting of the Committee shall have the
authority to cast the votes of any of such Party's members on the Committee
who are absent from the meeting. All decisions of a Committee shall be made
by majority vote of all of the members so long as the affirmative vote of at
least one member selected by each Party is included in the majority vote.
2.2.6 Expenses.
SCRIPTGEN and HMR shall each bear all expenses of their respective
Committee members related to their participation on the Committees and
attendance at meetings of each Committee.
2.3 Term of Collaboration Program.
The Collaboration Program shall terminate at the end of third Contract
Year unless extended for up to two (2) additional Contract Years by mutual
agreement of the Parties, provided that the Collaboration Program may be
terminated by HMR upon six (6) months prior written notice given to SCRIPTGEN
no earlier than the end of the second Contract Year. In the event of early
termination, HMR shall reimburse to SCRIPTGEN any liabilities, expenses or
other payments with respect to the Collaboration Program incurred by
SCRIPTGEN and extending beyond the early termination date which SCRIPTGEN is
not able to terminate as of the early termination date and any cancellation
penalties or other charges incurred by SCRIPTGEN arising out of the early
termination of the Collaboration Program. In the event of early termination,
HMR shall retain any of its rights under this Agreement with respect to
Licensed Compounds and Back-Up Compounds, and SCRIPTGEN shall retain all
rights to all other compounds and Targets.
2.4 Allocation of Tasks for Collaboration Program.
2.4.1 Identification of Targets and Screening.
(a) During the Collaboration Program, SCRIPTGEN shall (i) identify
[***] Targets and (ii), utilizing SCRIPTGEN Screening Technology, screen up
to [***] of those Targets [***] selected by the Scientific Committee against
up to [***] compounds per Target from SCRIPTGEN's and/or part of HMR's
compound library to seek to identify potential new antifungal drug
candidates. Within the first [***] of the [***], HMR may include up to [***]
Targets from the [***] identified on Exhibit A attached to this Agreement.
The Collaboration Program shall be undertaken in accordance with the resource
allocation and timelines set forth over the three (3) year period of the Work
Plan. Any of the [***] Targets [***] shall be deemed [***] subject to the
provisions of Section 2.7. A Target shall be deemed to have been [***] when a
decision has been made to [***] for the Target as defined under [***] in the
Work Plan.
(b) Every [***] during the Collaboration Program, SCRIPTGEN shall
[***].
(c) SCRIPTGEN shall periodically, but no less often than quarterly,
report its activities and the results of its activities under this Section
2.4.1 to the Scientific Committee.
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2.4.2 Follow-on Tasks.
The additional tasks required for the Collaboration Program as
specified in the Work Plan shall be the primary responsibility of
the Party designated in said Work Plan. Any task as to which no
one Party is designated as having primary responsibility shall be the joint
responsibility of the Parties. The Party with primary responsibility (and
each Party, as to tasks as to which no single Party has primary
responsibility) shall periodically, but no less often than quarterly, report
to the Scientific Committee its activities and the results of its activities
under this Section 2.4.2.
2.5 License Option.
2.5.1 Identification of Candidates.
HMR shall review the data and information developed during the
Collaboration Program and shall notify SCRIPTGEN in writing any time during
the term of the Collaboration Program of its decision to proceed with the
development of a compound (a "Licensed Compound Notice"). The Licensed
Compound Notice will also list [***]. In the event that HMR elects to proceed
with the development of [***] it shall so notify SCRIPTGEN in writing and
such notification shall constitute a Licensed Compound Notice with respect to
[***]. Any decision not to proceed with the development of a Licensed
Compound [***] shall be accompanied by a detailed explanation of the reasons
therefor. Any compound (including a Licensed Compound [***] which HMR
decides not to develop shall be deemed a Non-Selected Compound subject to the
provisions of Section 2.7. For each compound [***] for which HMR has issued a
Licensed Compound Notice, such compound will become a "Licensed Compound"
deemed to be included in the license to HMR pursuant to Section 6 hereof.
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2.5.2 Cooperation; Reports.
SCRIPTGEN shall cooperate fully with HMR in its efforts to develop
the Licensed Compounds by providing to HMR any information reasonably
available to SCRIPTGEN which relates to SCRIPTGEN's work hereunder. HMR
shall keep SCRIPTGEN informed about the status of the development of each
Licensed Compound. In particular, without limitation, HMR shall report to
SCRIPTGEN in reasonable detail no less frequently than semi-annually
concerning all aspects of such development activities.
2.6 Commercialization Rights.
(a) As more particularly set forth in this Agreement and subject to the
terms set forth herein, HMR shall have the exclusive worldwide right to
develop and commercialize Licensed Products in the Field under the licenses
to be provided in Section 6 hereof. HMR agrees that it will diligently
develop, market, promote and sell throughout the world, at its own expense,
Licensed Products. SCRIPTGEN and HMR shall have no right to develop and
commercialize Licensed Compounds or Licensed Products outside the Field.
(b) If at any time HMR elects to discontinue the development of a
Licensed Compound or commercialization of a Licensed Product itself or
through its sublicensees or Affiliates, it shall promptly notify SCRIPTGEN,
whereupon HMR's license to such Licensed Compound and Licensed Product from
SCRIPTGEN, will be terminated, and SCRIPTGEN will have the right to develop
such Licensed Compound and commercialize such Licensed Product itself or with
a third party, provided that SCRIPTGEN shall pay to HMR (i) [***] royalty
based on net sales of such Licensed Product [***] and (ii) [***] royalty
based on net sales of such Licensed Product as any other human pharmaceutical
product. In such event, all rights to such Licensed Compound and all
Technology and knowledge and product development information of HMR and its
Affiliates with respect to such Licensed Compound and such Product will be
transferred to SCRIPTGEN within sixty (60) days of such notice, including
without limitation, any pre-clinical, clinical, process and formulation data.
2.7 [***]
(a) [***] within the Field will remain part of the Collaboration
Program for the duration of the Collaboration Program. During the
Collaboration Program, SCRIPTGEN may continue development activities with
respect to the [***] in order to maintain and protect its patent position but
shall not grant any rights to a [***] to a third party (other than an
Affiliate of SCRIPTGEN).
(b) If and when the Collaboration is terminated, the [***] as to
which during the Collaboration HMR has [***] as identified on page 4 of the
Work Plan will become the property of SCRIPTGEN. All other [***] as provided
in Section 2.7(c).
(c) Following termination of the Collaboration, HMR or SCRIPTGEN
shall each have the right to obtain exclusive rights under the terms of this
Section 2.7 to any [***] provided that either Party shall promptly notify
the other Party of such decision. Upon notification by a Party of its
decision to obtain exclusive rights to [***] the other Party agrees to
discontinue any development efforts with respect to such [***] and [***]
shall be deemed withdrawn from the [***]. If a Party elects to discontinue
its exclusive rights to [***] it shall promptly notify the other Party at
which time such [***] for use by either Party. At no time shall either Party
have exclusive rights under this Section 2.7(c) to more than [***] from the
[***].
(d) In the event that SCRIPTGEN or any of its licensees or
sublicensees generates sales of a product based on a [***] from the [***],
then SCRIPTGEN will pay to HMR a [***] royalty on sales of a [***] product
based on a [***]. In the event that SCRIPTGEN or any of its licensees or
sublicensees generates sales of a product based on a [***], then SCRIPTGEN
will pay to HMR a [***] royalty based on sales of a [***] product from a [***].
All provisions of this Agreement which relate to the payment of royalties
by HMR to SCRIPTGEN shall apply to the payment of royalties by SCRIPTGEN to
HMR.
In the event that HMR or any of its licensees or sublicensees generates
sales of a human [***] based on a [***], HMR will pay to SCRIPTGEN a
royalty in accordance with the provisions of Section 6 of this Agreement. For
any other product sold by HMR or any of its Licensees or sublicensees based
on a [***], HMR will pay to SCRIPTGEN a royalty of [***] plus the rate of
any royalty which SCRIPTGEN is obligated to pay to an unrelated third party
with respect to sales of such product. In either event, the other provisions
of this Agreement shall apply as applicable.
(e) Section 2.7(b), (c) and (d) shall not apply to any [***] as
to which HMR has [***] as identified on page 4 of the Work Plan.
(f) If either Party becomes aware of the usefulness of a [***] or
a [***] outside the Field [***], it shall promptly advise the Steering
Committee of said usefulness and provide a summary of the information in its
possession relating to such use, so that the Parties can consider discussing
a collaboration outside the Field with regard to such [***]. Within thirty
(30) days after receipt by the Steering Committee of any such advice and
summary, HMR shall have the right to notify SCRIPTGEN in writing that it
would like to enter into a collaboration outside the Field with regard to
such [***]. For a period of three (3) months after HMR furnishes such
notification, the Parties shall in good faith negotiate the terms of the
collaboration. If the Parties have not agreed to the terms of the
collaboration by the end of the three (3) month negotiating period, for a
period of six (6) months after the end of the three (3) month negotiating
period, SCRIPTGEN may not enter into a collaboration with a third party
outside the Field with regard to such [***] on terms which are over-all less
advantageous to SCRIPTGEN than the terms last offered by HMR to SCRIPTGEN
during the three (3) month negotiating period.
2.8 Existing Compounds and Existing Targets.
Within six (6) months of the Effective Date, HMR shall have the right to
negotiate a license from SCRIPTGEN of rights to [***] of the Existing
Compounds identified on Exhibit B attached to this Agreement and Existing
Targets [***]. Upon HMR's request, SCRIPTGEN shall supply to HMR the chemical
structure and biological profile of the Existing Compounds.
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3. FUNDING
3.1 Up-Front Payments as a Technology Access Fee.
Concurrently with the execution and delivery of this Agreement, HMR
shall become obligated to pay to SCRIPTGEN the sum of six million dollars
($6,000,000) (U.S.) as a technology access fee to recognize research and
development performed by SCRIPTGEN up to the Effective Date, with such
technology to be used by HMR for further research and development under and
subject to the terms of the Collaboration Programs. [***]
3.2 Funding of Collaboration Program.
To fund SCRIPTGEN's activities in connection with the Collaboration
Program, HMR shall pay to SCRIPTGEN, [***] Such payments shall be made [***]
3.3 Milestone Payments.
HMR will make the following payments to SCRIPTGEN for the first
Licensed Compound to reach each of the milestones set forth below. If any
milestone is achieved during the term of this Agreement, the payment for such
milestone will be absolutely due and payable and shall be made within thirty
(30) days after the date that the milestone is achieved.
Milestone Cash Payment (U.S.)
[***]
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3.4 Determination that Milestones have been achieved.
HMR shall promptly notify SCRIPTGEN of the achievement of each milestone.
In the event that SCRIPTGEN believes any milestone has been achieved and it
has not received timely notice from HMR, it shall so notify HMR in writing
and shall provide to HMR the basis for its belief. Within thirty (30) days,
HMR shall review the information provided by SCRIPTGEN and shall certify in
writing whether or not the milestone has been achieved. Any negative
determination shall be accompanied by a detailed explanation of the reasons
therefor. If HMR does not take action within such thirty (30) day period,
the milestone shall be deemed to have been achieved.
4. INTELLECTUAL PROPERTY RIGHTS
4.1 Disclosure of Inventions.
Each Party shall promptly inform the other and the Committees of all
inventions that are conceived, made or developed in the course of carrying
out the Collaboration Program by employees or consultants of either of them
or their Affiliates alone or jointly with employees or consultants of the
other Party or its Affiliates. The following provisions shall apply to
rights in the intellectual property developed by SCRIPTGEN or HMR, or both,
during the course of carrying out the Collaboration Program.
4.2 Ownership.
4.2.1 SCRIPTGEN Intellectual Property Rights.
SCRIPTGEN shall have sole and exclusive ownership of all right,
title and interest on a worldwide basis in and to any Technology developed or
created by
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employees, consultants or assignors of SCRIPTGEN or through the use of any
Technology of SCRIPTGEN hereunder (including, without limitation, the
SCRIPTGEN Screening Technology) (collectively, the "SCRIPTGEN Owned
Technology"), with full rights to license or sublicense, subject to HMR's
rights hereunder. Without limiting the foregoing, subject to the licenses
granted in Sections 2.7 and 6 hereof, SCRIPTGEN shall be the sole owner of
all Patent Rights, all trade secret rights and any other intellectual
property rights in the SCRIPTGEN Owned Technology.
4.2.2 HMR Intellectual Property Rights.
Subject to the provisions of Section 4.2.3, HMR shall have sole and
exclusive ownership of all right, title and interest on a worldwide basis in
and to any Technology solely developed by employees, consultants or assignors
of HMR or through the use of any Technology of HMR hereunder ("HMR Owned
Technology"), with full rights to license or sublicense, subject to
SCRIPTGEN's rights hereunder. Without limiting the foregoing, subject to the
licenses granted under this Agreement, HMR shall be the sole owner of all
Patent Rights, all trade secret rights and any other intellectual property
rights in any HMR Owned Technology.
4.2.3 Joint Technology.
HMR and SCRIPTGEN shall jointly own all Technology jointly
conceived, reduced to practice or developed jointly by employees, consultants
or assignors of both SCRIPTGEN and HMR in the Collaboration Program (the
"Joint Technology") and shall jointly own all Joint Patent Rights. Joint
Technology also includes the Joint Compound Library.
5. PROVISIONS CONCERNING THE FILING, PROSECUTION
AND MAINTENANCE OF PATENT RIGHTS
The following provisions relate to the filing, prosecution and
maintenance of Patent Rights during the term of this Agreement:
5.1 Filing of Patents.
In consultation with the Scientific Committee, SCRIPTGEN will determine
what patents will be filed on SCRIPTGEN Owned Technology and HMR will
determine what patents will be filed on HMR Owned Technology. Each Party
will be responsible for the prosecution (including the defense of
interferences and similar proceedings) of patent protection for its owned
Technology, provided that the other Party will have the opportunity to
provide substantive review and comment on any such prosecution.
Responsibility for prosecution of patent protection (including the defense of
interferences and similar proceedings) on Joint Technology will be determined
by the Committees as provided in Section 2.2.1.
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5.2 Expenses.
HMR shall reimburse SCRIPTGEN for [***] incurred by SCRIPTGEN [***]
subject to the following:
(a) The provisions of this Section 5.2 shall not apply to [***].
(b) During the Collaboration Program, Scriptgen shall bear and not be
reimbursed for [***] incurred by Scriptgen [***]. In the event the [***]
relates to a [***] HMR shall reimburse Scriptgen for all amounts incurred
pursuant to this subsection (b) promptly following completion of the
Collaboration Program.
(c) In the event [***] HMR shall have no further obligation under this
Section 5.2 with respect to [***]. In the event [***] Scriptgen shall
reimburse HMR [***] all amounts incurred by HMR pursuant to this Section 5.2
with respect to [***].
5.3 Right to Prosecute Abandoned Rights.
If either Party at any time elects not to seek or continue to seek, use
or maintain patent protection on any Technology owned by it relating to
Licensed Compounds in any country, the other Party shall have the exclusive
right, at its expense, to file, procure, maintain and enforce in such
countries patents on such Technology. Each Party agrees to advise the other
Party of all decisions taken in a timely manner in order to allow a Party to
protect its rights under this Section 5.3 If a Party elects not to file a
patent application or application for a certificate of invention, not to
maintain a patent or certificate of invention, or to abandon a pending patent
application or application for a certificate of invention, it shall advise
the other Party of such election in a timely manner, and the other Party
shall have the right, at the expense of the other Party, of filing such
application, maintaining such patent or certificate of invention or
continuing to attempt to obtain protection on the subject matter disclosed in
such pending application.
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6. LICENSE RIGHTS
6.1 License Grant.
(a) During the License Term, SCRIPTGEN hereby grants to HMR a
worldwide exclusive license, including the right to grant sublicenses, to
develop, have developed, make, have made, use, distribute for sale, offer for
sale, sell, import and have imported Licensed Products in the Field under
Patent Rights and Technology covering such Licensed Compound or Licensed
Product now or hereafter owned by or licensed (with the right to grant
sublicenses) to SCRIPTGEN.
(b) For the avoidance of doubt, it is acknowledged that, pursuant
to the terms of this Agreement (i) HMR shall have no license from SCRIPTGEN
under, access to or right to use, any Patent Rights or Technology owned by or
licensed to SCRIPTGEN, for any purpose other than those expressly set forth
in subsection (a) and (ii) SCRIPTGEN shall have no license from HMR under,
access to or right to use, any Patent Rights or Technology owned by or
licensed to HMR, for any purpose other than those expressly set forth in
Section 2.6 hereof.
6.2 Term of License.
The License Term as to each Licensed Product shall commence upon the
issuance of the relevant Licensed Compound Notice. The License Term for each
Licensed Product [***] The license for each Licensed Product
shall be deemed a license separate and severable from licenses to other
Licensed Products.
6.3 Sublicenses.
If HMR grants a sublicense to a third party, HMR guarantees that such
sublicensee will fulfill all of HMR's obligations under this Agreement, and
HMR shall not be relieved of its obligations pursuant to this Agreement as a
result of such sublicense.
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6.4 Payment of Royalties and Share of Other Amounts; Payment Dates;
Accounting; Records; Other.
6.4.1 Payment of Royalties and Share of Other Amounts.
(a) HMR shall pay to SCRIPTGEN a royalty of [***] based on Net Sales
of Licensed Products in each country during the License Term for each such
Licensed Product until such time in each fiscal year of HMR as cumulative Net
Sales of the Licensed Product for such year aggregate [***] at which time the
royalty rate for the remainder of such fiscal year shall be [***].
(b) HMR shall pay to SCRIPTGEN [***] of all amounts
received from sublicensees in consideration for rights to a Licensed Product
other than royalties and reimbursement of amounts paid by HMR.
6.4.2 Payment Dates and Reports.
(a) Royalties shall be paid by HMR to SCRIPTGEN on Net Sales
within [***] after the end of each calendar quarter in which
such Net Sales are made. Such payment shall be accompanied by a report
showing (a) the gross sales of the Licensed Product sold by HMR, its
Affiliates and any licensee or sublicensee of HMR or its Affiliates in each
country during the reporting period and the calculation of Net Sales from such
gross sales, (b) the royalty due thereon, (c) withholding taxes, if any,
required by law to be deducted in respect of such royalties, and (d) the
exchange rates used in determining the amount of U.S. dollars. If no royalty
is due for any calendar quarter, HMR shall so report.[cad 179]
(b) All amounts due SCRIPTGEN from HMR pursuant to Section
6.4.1(b) shall be paid to SCRIPTGEN by HMR within sixty (60) days after
receipt by HMR of the payment to HMR in respect of which payment is due
SCRIPTGEN under Section 6.4.1(b).
(c) All amounts due SCRIPTGEN under Sections 6.4.1(a) and
6.4.1(b) shall be paid without deduction or offset, except as otherwise
provided in Section 6.4.6.
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(d) HMR shall not solicit, authorize or accept any
consideration for or in connection with the sale of Licensed Products other
than as will be accurately reflected in Net Sales.
6.4.3 Accounting.
All amounts due SCRIPTGEN under Sections 6.4.1(a) and 6.4.1(b) shall
be computed and paid in U.S. dollars. For purposes of determining the
amounts due SCRIPTGEN, the amount of Net Sales in any foreign currency and
the amount of any payment received by HMR in respect of which a payment is
due SCRIPTGEN under Section 6.4.1(b) shall be computed by converting such
amounts into U.S. dollars at the prevailing commercial rate of exchange for
purchasing dollars with such foreign currency as reported in The Wall Street
Journal on the last business day of the period to which a royalty payment
relates or on the business day on which payment was received by HMR in
respect of which a payment is due SCRIPTGEN under Section 6.4.1(b), as the
case may be.
6.4.4 Records.
HMR and its Affiliates and the licensees and sublicensees of HMR and
its Affiliates shall keep for [***] years from the date of
each payment of royalties complete and accurate records of sales by HMR and
its Affiliates and its and their licensees and sublicensees of each Licensed
Product in sufficient detail to allow the accruing royalties to be determined
accurately. SCRIPTGEN shall have the right for a period of
[***] years after receiving any report or statement with
respect to royalties due and payable to appoint an independent certified
public accountant reasonably acceptable to HMR to inspect the relevant records
of HMR and its Affiliates and its or their licensees and sublicensees to
verify such report or statement. HMR and its Affiliates and its and their
licensees and sublicensees shall each make its records available for
inspection by such independent certified public accountant during regular
business hours at such place or places where such records are customarily
kept, upon reasonable notice from SCRIPTGEN, solely to verify the accuracy of
the reports and payments. Such inspection right shall not be exercised more
than once in any Fiscal Year nor more than once with respect to sales of any
Licensed Product in any given payment period. SCRIPTGEN agrees to hold in
strict confidence all information concerning royalty payments and reports,
and all information learned in the course of any audit or inspection, except
to the extent necessary for SCRIPTGEN to reveal such information in order to
enforce its rights under this Agreement or if disclosure is required by law or
judicial process. The results of each inspection, if any, shall be binding on
both Parties. SCRIPTGEN shall pay for such inspections, except that in the
event there is any upward adjustment in aggregate royalties payable for any
calendar quarter shown by such inspection of more than [***]
of the amount paid, HMR shall pay for such inspection.
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6.4.5 Single Royalty per Licensed Product.
Only one royalty shall be due with respect to each sale of a
Licensed Product.
6.4.6 Foreign Royalties.
Where royalties are due hereunder for sales of Licensed Products in
a country where, by reason of currency regulations or taxes of any kind, it
is impossible or illegal for HMR, and Affiliates or sublicensee to transfer
royalty payments to SCRIPTGEN for Net Sales in that country, such royalties
shall be deposited in whatever currency is allowable by the person or entity
not able to make the transfer for the benefit or credit of SCRIPTGEN in an
accredited bank in that country that is acceptable to SCRIPTGEN.
6.4.7 Minimum Annual Royalties.
Promptly following the filing of an NDA for a Licensed Product in the
U.S., Europe or Japan, the Parties shall in good faith negotiate a minimum
annual royalty for the Licensed Product taking into account [***].
6.5 Infringement.
(a) Each Party shall promptly report in writing to the other Party
during the term of this Agreement any known infringement or suspected
infringement of any Patent Rights covering Licensed Compounds or Licensed
Products by a third party of which it becomes aware, and shall provide the
other Party with all available evidence supporting said infringement or
suspected infringement.
(b) Except as provided in paragraph (d) below, HMR shall have the
right to initiate an infringement or other appropriate suit against any third
party who at any time has infringed, or is suspected of infringing, any
Patent Rights covering Licensed Compounds or Licensed Products. HMR shall
give SCRIPTGEN sufficient advance notice of its intent to file said suit and
the reasons therefor, and shall provide SCRIPTGEN with an opportunity to make
suggestions and comments regarding such suit. HMR shall keep SCRIPTGEN
properly informed, and shall from time to time consult with SCRIPTGEN,
regarding the status of any such suit.
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(c) HMR shall have the sole and exclusive right to select counsel
for any suit referred to in paragraph (b) above and shall pay all expenses of
the suit, including without limitation attorneys' fees and court costs. Any
damages, royalties, settlement fees or other consideration received by HMR or
any of its Affiliates shall be divided [***] to HMR [***] to SCRIPTGEN [***].
If necessary, SCRIPTGEN shall join as a party to the suit but shall be under
no obligation to participate except to the extent that such participation is
required as the result of being a named party to the suit. SCRIPTGEN shall
offer reasonable assistance to HMR in connection therewith at no charge to
HMR except for reimbursement of reasonable out-of-pocket expenses (not
including salaries of SCRIPTGEN personnel) incurred in rendering such
assistance. SCRIPTGEN shall have the right to participate and be represented
in any such suit by its own counsel at its own expense. HMR shall not settle
any such suit involving rights of SCRIPTGEN without obtaining the prior
written consent of SCRIPTGEN, which consent shall not be unreasonably
withheld.
(d) In the event that HMR elects not to initiate an infringement or
other appropriate suit pursuant to paragraph (b) above, HMR shall promptly
advise SCRIPTGEN of its intent not to initiate such suit, and SCRIPTGEN shall
have the right, at the expense of SCRIPTGEN, of initiating an infringement or
other appropriate suit against any third party who at any time has infringed,
or is suspected of infringing, any Patent Rights covering Licensed Compounds
or Licensed Products. In exercising its rights pursuant to this paragraph
(d), SCRIPTGEN shall have the sole and exclusive right to select counsel and
shall pay all expenses of the suit, including without limitation, attorneys'
fees and court costs, and shall be entitled to receive and retain any
damages, royalties, settlement fees or other consideration. If necessary,
HMR shall join as a party to the suit but shall be under no obligation to
participate except to the extent that such participation is required as a
result of being a named party of the suit. At SCRIPTGEN's request, HMR shall
offer reasonable assistance to SCRIPTGEN at no charge to SCRIPTGEN except for
reimbursement of reasonable out-of-pocket expenses (not including salaries of
HMR personnel) incurred in rendering such assistance. HMR shall have the
right to participate and be represented in any such suit by its own counsel
at its own expense.
6.6 Claimed Infringement.
Notwithstanding anything to the contrary in this Agreement, in the event
that any action, suit or proceeding is brought against SCRIPTGEN or any
Affiliate of SCRIPTGEN or HMR or any Affiliate, licensee or sublicensee of
HMR alleging the infringement of the intellectual property rights of a third
party by reason of the discovery, development, manufacture, use, sale,
importation or offer for sale of a Licensed Product by HMR or its Affiliates
or its or their licensees or sublicensees, HMR will have the obligation to
defend itself and SCRIPTGEN and its Affiliates in
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such action, suit or proceeding at HMR's expense. SCRIPTGEN shall have the
right to separate counsel at its own expense in any such action or
proceeding. The Parties will cooperate with each other in the defense of any
such suit, action or proceeding. The Parties will give each other prompt
written notice of the commencement of any such suit, action or proceeding or
claim or infringement and will furnish each other a copy of each
communication relating to the alleged infringement, but the failure to do so
shall not affect HMR's obligations under this Section and under Section 9
except to the extent HMR is actually damaged thereby. HMR shall not
compromise, litigate, settle or otherwise dispose of any such suit, action or
proceeding which involves the use of SCRIPTGEN Owned Technology, Joint
Technology, SCRIPTGEN Patent Rights or Joint Patent Rights without
SCRIPTGEN's advice and prior written consent, provided that SCRIPTGEN shall
not unreasonably withhold its consent to any settlement which will provide an
unconditional release of SCRIPTGEN and its Affiliates.
6.7 Warranty Disclaimer.
EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN THIS AGREEMENT, NEITHER PARTY
MAKES ANY WARRANTY WITH RESPECT TO ANY TECHNOLOGY, GOODS, SERVICES, RIGHTS OR
OTHER SUBJECT MATTER OF THIS AGREEMENT AND HEREBY DISCLAIMS WARRANTIES OR
MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE AND NONINFRINGEMENT WITH
RESPECT TO ANY AND ALL OF THE FOREGOING.
6.8 Limited Liability.
NOTWITHSTANDING ANYTHING ELSE IN THIS AGREEMENT OR OTHERWISE, NEITHER
SCRIPTGEN NOR HMR WILL BE LIABLE WITH RESPECT TO ANY SUBJECT MATTER OF THIS
AGREEMENT UNDER ANY CONTRACT, NEGLIGENCE, STRICT LIABILITY OR OTHER LEGAL OR
EQUITABLE THEORY FOR (i) ANY DIRECT, INCIDENTAL, CONSEQUENTIAL OR PUNITIVE
DAMAGES OR LOST PROFITS OR (ii) COST OF PROCUREMENT OF SUBSTITUTE GOODS,
TECHNOLOGY OR SERVICES.
7. CONFIDENTIAL INFORMATION
7.1 Treatment of Confidential Information.
Each Party shall maintain the Confidential Information of the other Party
in confidence, and shall not disclose, divulge or otherwise communicate such
Confidential Information to others, or use it for any purpose, except
pursuant to, and in order to carry out, the terms and objectives of this
Agreement, and hereby agrees to exercise every reasonable precaution to
prevent and restrain the unauthorized disclosure of such Confidential
Information by any of its directors, officers, employees,
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consultants, subcontractors, sublicensees, agents or Affiliates. Without
limiting the foregoing, each Party agrees not to make any disclosure of the
other Party's Confidential Information which will impair the other Party's
ability to obtain U.S. or foreign patents on any patentable invention or
discovery described in such Confidential Information. The Confidential
Information of each Party includes information about third parties disclosed
by one Party to this Agreement to the other Party to this Agreement.
7.2 Release from Restrictions.
The provisions of Section 7.1 shall not apply to any Confidential
Information disclosed hereunder which:
(a) was known or used by the receiving Party prior to its date of
disclosure to the receiving Party, as evidenced by the prior written
records of the receiving Party; or
(b) either before or after the date of this disclosure to the
receiving Party is lawfully disclosed to the receiving Party by an
independent, unaffiliated third party rightfully in possession of the
Confidential Information; or
(c) either before or after the date of the disclosure to the
receiving Party becomes published or generally known to the public through
no fault or omission on the part of the receiving Party or its Affiliates
and under no obligation of confidentiality; or
(d) is independently developed by a Party without use of the
Confidential Information of the other Party, as evidenced by the written
records of the developing Party; or
(e) is required to be disclosed by the receiving Party to comply with
applicable laws, to defend or prosecute litigation or to comply with
governmental regulations, provided that the receiving Party provides prior
written notice of such disclosure to the other Party and takes reasonable
and lawful actions to avoid and/or minimize the degree of such disclosure.
7.3 Publication.
It is expected that each Party may wish to publish the results of its
research and development program under this Agreement. In order to safeguard
intellectual property rights, the Party wishing to publish or otherwise
publicly disclose the results of its research hereunder shall first submit a
draft of the proposed manuscripts to the Scientific Committee during the term
of the Collaboration Program or otherwise to
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the other Party for review, comment and consideration of appropriate patent
action at least [***] weeks prior to any submission for
publication or other public disclosure. Within [***] days of
receipt of the prepublication materials, the Scientific Committee or the other
Party will advise the Party seeking publication as to whether a patent
application will be prepared and filed or whether trade secret protection
should be pursued and, if so, the Scientific Committee or the other Party
will, in cooperation with both Parties, determine the appropriate timing and
content of any such publications. In all events, there shall be deleted from
any such publication any information reasonably determined by a Party hereto to
constitute its Confidential Information.
8. REPRESENTATION AND WARRANTIES
8.1 Mutual Representations.
SCRIPTGEN and HMR each represents and warrants as follows:
8.1.1 Organization.
It is a corporation duly organized, validly existing and is in good
standing under the laws of the State of Delaware and of the country of
France, respectively, is qualified to do business and is in good standing as
a foreign corporation in each jurisdiction in which the performance of its
obligations hereunder requires such qualification and has all requisite power
and authority, corporate or otherwise, to conduct its business as now being
conducted, to own, lease and operate its properties and to execute, deliver
and perform this Agreement.
8.1.2 Authorization.
The execution, delivery and performance by it of this Agreement has
been duly authorized by all necessary corporate action and does not and will
not (a) require any consent or approval of its stockholders or (b) violate
any provision of any law, rule, regulation, order, writ, judgment,
injunction, decree, determination or award presently in effect having
applicability to it or any provision of its charter documents or any
agreement or other instrument or obligation to which it is bound or its
assets are subject.
8.1.3 Binding Agreement.
This Agreement is a legal, valid and binding obligation of it
enforceable against it in accordance with its terms and conditions.
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8.1.4 No Inconsistent Obligation.
It is not under any obligation to any person, or entity, contractual
or otherwise, that is conflicting or inconsistent in any respect with the
terms of this Agreement or that would impede the diligent and complete
fulfillment of its obligations.
8.2 HMR Representation.
HMR represents to SCRIPTGEN that no withholding tax is due on any payment
required to be made hereunder and that HMR will not withhold any amounts on
account of any tax or withholding, except for withholding, if any, required
by French tax authorities on payments of royalties pursuant to Section 6.4.6.
9. INDEMNIFICATION
HMR shall indemnify, defend and hold harmless SCRIPTGEN and its
Affiliates and its and their respective directors, officers, employees, and
agents and their respective successors, heirs and assigns (the "SCRIPTGEN
Indemnitees"), against any liability, damage, loss or expense (including
reasonable attorneys' fees and expenses of litigation) incurred by or imposed
upon the SCRIPTGEN Indemnitees, or any of them, in connection with any
claims, suits, actions, demands or judgments of third parties, including
without limitation, personal injury and product liability matters (except in
cases where such claims, suits, actions, demands or judgments result from
willful misconduct, gross negligence or material breach of this Agreement on
the part of SCRIPTGEN) arising out of the development, testing, production,
manufacture, promotion, import, sale or use by any person of any Licensed
Product manufactured or sold by HMR or by an Affiliate, licensee,
sublicensee, distributor or agent of HMR or its Affiliates. HMR shall have no
obligation under this Section 9 with respect to incidental, indirect, or
consequential damages or lost profits of Scriptgen.
10. TERMINATION
10.1 Term.
This Agreement shall remain in effect until terminated in accordance with
the provisions of this Section 10 or until the last to expire of the licenses
and rights granted under this Agreement.
10.2 Termination for Insolvency or Breach.
Each Party shall be entitled to terminate this Agreement by written
notice to the other Party (a) upon the bankruptcy, insolvency, dissolution or
winding up of the other Party or (b) in the event that the other Party shall
be in default of any of its
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obligations hereunder, and shall fail to remedy any such default within sixty
(60) days (ten (10) days in the case of failure to make payments when due)
after notice thereof by the non-breaching Party. Upon termination of this
Agreement pursuant to this Section 10.2, neither Party shall be relieved of
any obligations incurred prior to such termination and all other rights and
remedies of the terminating Party shall not be affected by such termination.
10.3 Disposition of Licensed Products.
Upon any termination of this Agreement pursuant to Section 10, HMR shall
within [***] days of the effective date of such termination
notify SCRIPTGEN in writing of the amount of Licensed Products which HMR, its
Affiliates and sublicensees then have completed on hand, the sale of which
would, but for the termination, be subject to royalty, and HMR, its Affiliates
and sublicensees shall thereupon be permitted during the [***]
months following such termination to sell that amount of Licensed Products,
provided that HMR shall pay the aggregate royalty thereon at the conclusion of
the earlier of the last such sale or such [***] month period.
Except as provided above, all sublicenses granted by HMR shall forthwith
terminate upon the termination of this Agreement.
10.4 Survival of Obligations; Return of Confidential Information.
Notwithstanding any termination of this Agreement, the obligations of the
Parties under Sections 6, 7, 8 and 9 shall survive and continue to be
enforceable. Upon any termination of this Agreement pursuant to Section 10,
each Party shall promptly destroy all written Confidential Information, and
all copies thereof.
11. EQUITY INVESTMENT
11.1 Timing and Amount.
Provided the IPO is closed no later than [***] years from
the Effective Date, concurrently with the closing of the IPO, HMR shall
purchase from SCRIPTGEN pursuant to a private placement [***]
(U.S.) of common stock of SCRIPTGEN at a price per share equal to the gross
price per share at which shares are sold to the underwriter(s) of the IPO
prior to deduction for underwriting commissions and discounts. HMR
acknowledges and agrees that such shares shall not be registered under the
Securities Act and shall be deemed to be "restricted securities" within the
meaning of Rule 144 promulgated under the Securities Act. As a condition of
such purchase, HMR and SCRIPTGEN shall enter into a written agreement that
provides [***] on customary terms with respect to such shares
satisfactory to both Parties, to be exercisable whenever the provisions of
Sections (c), (e), (f) and (h) of Rule 144 promulgated under the Securities
Act would apply to any sale of such shares in the public market.
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11.2 SCRIPTGEN Representations.
SCRIPTGEN represents and warrants that the shares of common stock which
HMR will purchase pursuant to Section 11.1 will be duly authorized, validly
issued and fully paid and non-assessable.
12. MISCELLANEOUS
12.1 Payment Method.
Each payment to SCRIPTGEN under this Agreement shall be paid by HMR in
U.S. currency by wire transfer of funds to an account of SCRIPTGEN in
accordance with instructions provided by SCRIPTGEN.
12.2 Publicity.
Neither Party may disclose the existence of terms of this Agreement
without the prior written consent of the other Party; provided, however, that
either Party may make such a disclosure to the extent required by law or
judicial process and that SCRIPTGEN may make a disclosure of the existence
and terms of this Agreement (i) in the registration statement relating to the
IPO or (ii) to investors, prospective investors, lenders and other financing
sources and parties which have entered into a confidentiality agreement with
SCRIPTGEN and with which SCRIPTGEN may enter into a commercial arrangement.
The Parties, upon the execution of this Agreement, will discuss the
possibility of a mutually acceptable news release for publication in general
circulation periodicals and newswire.
12.3 Overdue Payments.
Payments due hereunder which are not paid when due shall bear interest at
a rate of [***] per month from the due date until paid in full. Payment of
such interest shall be in addition to any other rights and remedies to which
the Party to which the payment is due may be entitled for failure to make
timely payment.
12.4 Prohibition on Hiring.
Neither Party nor its Affiliates shall, during the term of the
Collaboration Program, but in any event for at least [***] years from the
Effective Date, hire any person who was employed by the other Party or its
Affiliates during such period, whether such person is hired as an employee,
investigator, independent contractor or otherwise; provided that a person who
was employed by a Party or its Affiliates as a consultant or independent
contractor may be employed as a consultant or independent contractor by the
other Party or its Affiliates to perform services in
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furtherance of the Collaboration Program or for activities unrelated to the
collaboration contemplated by this Agreement.
12.5 Assignment.
Neither this Agreement nor any of the rights or obligations hereunder may
be assigned by either Party without the prior written consent of the other
Party, except to a Party who acquires all or substantially all of the
business of the assigning Party by merger, sale of assets or otherwise.
12.6 Governing Law.
This Agreement shall be governed by and interpreted in accordance with
the laws of the State of Delaware with regard to conflicts of law principles.
The rights and obligations of the Parties under this Agreement shall not be
governed by the provisions of the U.N. Convention on Contracts for the
International Sale of Goods.
12.7 Force Majeure.
In the event that either Party is prevented from performing or is unable
to perform any of its obligations under this Agreement (other than the
payment of money) due to any act of God; fire; casualty; flood; war; strike;
lockout; failure of public utilities; injunction or any act, exercise,
assertion or requirement of governmental authority, including any
governmental law, order or regulation permanently or temporarily prohibiting
or reducing the level of research, development or production work hereunder
or the manufacture, use or sale of Licensed Products; epidemic; destruction
of production facilities; riots; insurrection; inability to procure or use
materials, labor, equipment, transportation or energy sufficient to meet
experimentation or manufacturing needs; or any other cause beyond the
reasonable control of the Party invoking this Section 12.7, such Party shall
give notice to the other Party in writing promptly, and thereupon if such
Party shall have used its best efforts to avoid such occurrence, the affected
Party's performance shall be excused and the time for performance shall be
extended for the period of delay or inability to perform due to such
occurrence.
12.8 Waiver.
The waiver by either Party of a breach or a default of any provision of
this Agreement by the other Party shall not be construed as a waiver of any
succeeding breach of the same or any other provision, nor shall any delay or
omission on the part of either Party to exercise or avail itself of any
right, power or privilege that it has or may have hereunder operate as a
waiver of any right, power or privilege by such Party.
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12.9 Notices.
Any notice or other communication in connection with this Agreement must
be in writing and by mail, certified, return receipt requested, by electronic
facsimile transmission or courier service, and shall be effective when
delivered to the addressee at the address listed below or such other address
as the addressee shall have specified in a notice actually received by the
addressor.
If to SCRIPTGEN:
SCRIPTGEN Pharmaceuticals, Inc.
200 Boston Avenue
Suite 3000
Medford, MA 02155
Attn: President
If to HMR:
Hoechst Marion Roussel
102, Route de Noisy
93235 Romainville Cedex
FRANCE
Attn: General Counsel
12.10 No Agency.
Nothing herein shall be deemed to constitute either Party as the agent or
representative of the other Party, or both Parties as joint venturers or
partners for any purpose. SCRIPTGEN shall be an independent contractor, not
an employee or partner of HMR, and the manner in which SCRIPTGEN renders its
services under this Agreement shall be within SCRIPTGEN's sole discretion.
Neither Party shall be responsible for the acts or omissions of the other
Party, and neither Party will have authority to speak for, represent or
obligate the other Party in any way without prior written authority from the
other Party.
12.11 Entire Agreement.
This Agreement and the Appendix and Exhibits hereto contain the full
understanding of the Parties with respect to the subject matter hereof and
supersede all prior understandings and writing relating thereto. No waiver,
alteration or modification of any of the provisions hereof shall be binding
unless made in writing and signed by the Parties by their respective officers
thereunto duly authorized.
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12.12 Headings.
The headings contained in this Agreement are for convenience of reference
only and shall not be considered in construing this Agreement.
12.13 Severability.
In the event that any provision of this Agreement is held by a court of
competent jurisdiction to be unenforceable because it is invalid or in
conflict with any law of any relevant jurisdiction, the validity of the
remaining provisions shall not be affected, and the rights and obligations of
the Parties shall be construed and enforced as if the Agreement did not
contain the particular provisions held to be unenforceable.
12.14 Successors and Assigns.
This Agreement shall be binding upon and inure to the benefit of the
Parties hereto and their successors and permitted assigns.
12.15 Counterparts.
This Agreement may be executed in any number of counterparts, each of
which shall be deemed an original but all of which together shall constitute
one and the same instrument.
12.16 Interpretation.
The Parties acknowledge and agree that: (i) each Party and its counsel
reviewed and negotiated the terms and provisions of this Agreement and has
contributed to its revision; (ii) the rule of construction to the effect that
any ambiguities are resolved against the drafting Party shall not be employed
in the interpretation of this Agreement; and (iii) the terms and provisions
of this Agreement shall be construed fairly as to all Parties hereto and not
in favor of or against any Party, regardless of which Party was generally
responsible for the preparation of this Agreement.
12.17 Export Controls.
This Agreement is made subject to any restrictions concerning the export
of Licensed Products or SCRIPTGEN Owned Technology from the United States
which may be imposed upon or related to either Party to this Agreement from
time to time by the Government of the United States. HMR will not export,
directly or indirectly, any SCRIPTGEN Owned Technology or any Licensed
Products utilizing such Technology to any countries for which the United
States Government or any agency
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thereof at the time of export requires an export license or other
governmental approval, without first obtaining the written consent to do so
from the Department of Commerce or other agency of the United States
Government when required by the applicable statute or regulation.
IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed
by their duly authorized representatives.
HOECHST MARION ROUSSEL
By /s/
-------------------------------------------
(Print name)
Title:
Date:
SCRIPTGEN PHARMACEUTICALS, INC.
By /s/
-------------------------------------------
(Print name)
Title:
Date:
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EXHIBIT A
[***]
<PAGE>
EXHIBIT B
[***]
<PAGE>
Appendix 1-WORK PLAN
[***]
<PAGE>
Exhibit 10.12
[Hoffmann-La Roche Letterhead]
November 2, 1995
Mr. Thomas A. Bologna
President and Chief
Executive Officer
ScriptGen Pharmaceuticals
Medford, Massachussetts 02155
Re: September 22, 1995 Heads of Agreement between ScriptGen and
Hoffmann-La Roche Inc.(Roche)
Dear Mr. Bologna:
This letter amends the above Heads, as agreed to in your October 30,
1995 telephone conference with [***] and [***]. I understand that two
amendments were discussed, specifically that Roche would pay ScriptGen [***]
before the end of the year, and that Roche would have the option to replace
[***] of Roche's choice. Accordingly, the amendments below are made to the
Heads.
The first three lines of Paragraph 7 of the Heads (ending with the word
"individually") is replaced with the following language:
"ROCHE shall pay SCRIPTGEN the sum of [***] during the SCREENING
period. A first payment of [***] (PAYMENT 1) will be made to
SCRIPTGEN before December 31, 1995, at a time convenient to ROCHE. After
this date, [***] subsequent payments [***] of [***] each
shall individually" (the remainder of paragraph 7 remains unchanged).
The following language is added to the end of Paragraph 3 [***]:
", or may have another activity of interest to be designated by ROCHE."
The following language is added to Paragraph 4, line 1 (after the word
"activity"):
"designated by ROCHE, for example the activity"
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE
CONFIDENTIAL PORTIONS HAVE BEEN REDACTED AND ARE DENOTED BY [***]. THE
CONFIDENTIAL PORTIONS HAVE BEEN SEPARATELY FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION.
<PAGE>
The following language is added to Paragraph 4, line 3 (after the words
"another TARGET"):
"designated by ROCHE [***], or an additional TARGET"
The following language is added to the second paragraph of Paragraph 9,
after the word [***]:
"or the TARGET designated by ROCHE to [***],"
In addition, Paragraph 8 is corrected to refer to "TARGET" instead of
"ROCHE TARGET".
Thank you for your cooperation in making these amendments.
Please sign both originals of this letter on behalf of ScriptGen, retain
one, and return one fully executed original to Michael Koch.
Sincerely,
/s/ Michael Steinmetz
HOFFMANN-LA ROCHE INC.
Dr. Michael Steinmetz
Vice President
AGREED AND ACCEPTED:
SCRIPTGEN PHARMACEUTICALS
By: /s/ Thomas A. Bologna
-----------------------------
Date: 11/6/95
---------------------------
-2-
<PAGE>
HEADS OF AGREEMENT
1. PARTIES
This document sets forth the principal terms of a basic understanding
between Hoffmann-La Roche Inc. (hereinafter "ROCHE") and Scriptgen
Pharmaceuticals, Inc. (hereinafter "SCRIPTGEN")
2. DEFINITIONS
FIELD shall mean the treatment of [***].
LIBRARY shall mean ROCHE's proprietary collection of approximately [***]
compounds suitable for screening for a biological activity designated by ROCHE.
COMPOUND shall mean a compound which is part of the LIBRARY.
ROCHE PRODUCT shall mean a COMPOUND or derivative or analogue thereof
identified under this agreement as a candidate for use in the FIELD.
TECHNOLOGY shall mean SCRIPTGEN's proprietary ATLAS system for screening
for interaction with a given target protein, and does not include the target
protein.
TARGET shall mean a protein which is selected and provided by ROCHE to be
added to TECHNOLOGY to make it possible to use TECHNOLOGY as a screen for a
compound having the activity of interacting with that protein.
SCREENING shall mean the screening of the LIBRARY by SCRIPTGEN under this
agreement.
NET SALES shall mean the gross sales of the ROCHE PRODUCT to third
parties by ROCHE or by its licensees or subsidiaries less deductions of
returns (including withdrawals and recalls), rebates (price reductions,
including Medicaid and similar types of rebates e.g. chargebacks), volume
(quantity) discounts, discounts granted at the time of invoicing, sales taxes
and other taxes directly linked to and included in the gross sales amount as
computed in the central Roche's Swiss Francs Sales Statistics for the
countries concerned, whereby the amount of such sales in foreign currencies
is converted into U.S. Dollars. From the so adjusted gross sales there shall
be a lump sum deduction of [***] for those sales related deductions which are
not accounted for on a product-by-product basis (e.g. outward freights,
transportation insurance, packaging materials for dispatch of goods, custom
duties, discounts granted later than at the time of invoicing, cash discounts
and other direct sales expenses).
3. BACKGROUND
SCRIPTGEN possess expertise in screening for compounds which interact with
a target protein. ROCHE possesses expertise in the discovery, development, and
marketing of pharmaceutical agents, and owns the LIBRARY, a selected number of
COMPOUNDS in which ROCHE has reason to believe may be effective in [***].
4. PURPOSE
ROCHE wishes to have identified COMPOUNDS which have the desired
activity of interfering with [***] and SCRIPTGEN is willing to screen the
LIBRARY with TECHNOLOGY, using [***] which is a TARGET, or another TARGET
desired.
<PAGE>
5. CONDITION
ROCHE will enter into a final agreement with SCRIPTGEN based on the
understandings set forth herein, however the obligation of ROCHE to enter
into said final agreement is contingent on ROCHE's concluding arrangements
with [***] to obtain [***] for use in SCREENING as described in paragraph 3
above.
6. SCREENING PERIOD
SCREENING will begin upon on the date of receipt by SCRIPTGEN of [***],
and will be completed [***] after said date of receipt.
7. PAYMENT
ROCHE shall pay SCRIPTGEN the sum of [***] during the SCREENING period.
A first payment of [***] (PAYMENT 1) will be due [***] after the commencement
of SCREENING. Five (5) subsequent payments (PAYMENTS 2-6) OF [***] each shall
individually fall due [***] after the date on which ROCHE receives SCREENING
results for a group of approximately [***] COMPOUNDS. For example, PAYMENT 2
shall be due after ROCHE receives results for the first group of [***]
COMPOUNDS, PAYMENT 3 shall be due after ROCHE receives results for the second
group of [***] COMPOUNDS, PAYMENT 4 shall be due after ROCHE receives results
for the third group of [***] COMPOUNDS, PAYMENT 5 shall be due after ROCHE
receives results for the fourth group of [***] COMPOUNDS, and PAYMENT 6 shall
be due after ROCHE receives results for the fifth and final group of [***]
COMPOUNDS. [***] COMPOUNDS may be considered approximate for an individual
group but shall not include less than [***] COMPOUNDS or more than [***]
COMPOUNDS.
8. ROCHE'S UNDERTAKINGS
ROCHE shall provide SCRIPTGEN with the LIBRARY, which will be
considered ROCHE confidential material. ROCHE will provide the LIBRARY in a
quantity and condition which ROCHE reasonably believes is sufficient to
complete SCREENING with ROCHE TARGET within the SCREENING PERIOD as
contemplated hereunder.
9. SCRIPTGEN'S UNDERTAKINGS
As soon as reasonably possible, SCRIPTGEN shall begin SCREENING with
TARGET. SCRIPTGEN shall promptly (to be defined) [***] SCRIPTGEN will make
available sufficient resources including personnel, facilities and equipment
to perform SCREENING with TARGET during the SCREENING period.
[***] shall reimburse [***] for any actual out-of-pocket expenses
incurred [***] The parties must agree in writing to the amount of [***]
SCRIPTGEN agrees not to [***] without ROCHE's express written consent.
SCRIPTGEN agrees that [***] are proprietary to ROCHE and are to be
treated as confidential and not used by SCRIPTGEN for any purpose other than
as provided in this Agreement.
2
<PAGE>
10. COMMERCIALIZATION
A. ROCHE, at its sole discretion, may develop and market or license to third
parties any ROCHE PRODUCT anywhere in the world and without any obligations, to
SCRIPTGEN other than those payments provided below.
B. In consideration of ROCHE's payments under this agreement, any results and
inventions, patentable or not, and any resulting patent filings emanating
therefrom with regard to COMPOUNDS shall be owned exclusively by ROCHE, no
matter with which party the inventors of such inventions may be affiliated.
SCRIPTGEN agrees [***] disclose any such results or inventions to ROCHE and
further agrees to assign any right, title, or interest in and to any such
invention in the U.S. and in all foreign countries to ROCHE. The parties
agree to cooperate in the filing and prosecution of such patent filings, at
ROCHE's expense and request. Roche agrees to reasonably compensate SCRIPTGEN
for any costs related to such cooperation.
11. FEES AND ROYALTIES
ROCHE will make milestone payments to SCRIPTGEN for any ROCHE PRODUCT
being developed by ROCHE as follows:
[***]
ROCHE will also pay a royalty to SCRIPTGEN which is [***] of NET SALES, which
royalty shall be
[***]
12. ADDITIONAL PROVISIONS
The full Agreement shall contain customary and usual provisions for
agreements of this nature for pharmaceutical products including further
definitions, confidentiality, warranties, indemnification, assignment, royalty
computation and reports, reporting inventions, patent provisions, term and
termination and survival provisions and the like.
3
<PAGE>
13. PUBLICITY
No public announcement or other disclosure to other parties concerning the
existence of or the terms of this understanding or of the final agreement
entered into based on this understanding shall be made, either directly or
indirectly, by either party to this understanding or to said final agreement,
except to a third party bound by a confidentiality agreement and as may be
required by any laws or government regulations or by the rules of any stock
exchange of any country, without first informing the other party of the proposed
announcement or other disclosure within a reasonable time prior to release and
obtaining the other party's written approval of the nature and text of such
announcement or disclosure.
IN WITNESS WHEREOF, ROCHE and SCRIPTGEN have executed this Heads of
Agreement on the later of the two dates written below.
SCRIPTGEN PHARMACEUTICALS, INC. HOFFMANN-LA ROCHE INC.
By: /s/ Thomas A. Bologna By: /s/ Michael Steinmetz
---------------------------- -----------------------------
Title: President & CEO Title: Vice President
------------------------- --------------------------
Date: 8/22/95 Date: 9/22/95
-------------------------- ---------------------------
<PAGE>
Exhibit 10.13
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE
CONFIDENTIAL PORTIONS HAVE BEEN REDACTED AND ARE DENOTED BY [***]. THE
CONFIDENTIAL PORTIONS HAVE BEEN SEPARATELY FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION.
[Letterhead of Eli Lilly and Company]
October 8, 1997
Ms. Karen Hamlin
Senior Director of Operations
Scriptgen Pharmaceuticals, Inc.
200 Boston Avenue
Medford. MA 02155
Re: Amendment to ATLAS Screen Agreement
Dear Ms. Hamlin:
Pursuant to the agreement dated effective as of May 8, 1997 (the
"Agreement"), by and between Scriptgen Pharmaceuticals, Inc. ("Scriptgen"),
and Eli Lilly and Company ("Lilly"), the parties entered into a
collaboration, whereby Scriptgen, among other things, would run the ATLAS
Screens for each of the Initial Target Proteins [***] compounds for each
initial Target Protein.
Scriptgen and Lilly have recently discussed whether Lilly was interested in
running the ATLAS Screens for each of the Initial Target Proteins using
additional compounds above the initial [***] compounds set forth in the
Agreement. As you know, Lilly has determined that it is interested in using
additional compounds for such purpose. Accordingly, so that Scriptgen may
expeditiously commence running the ATLAS Screen with respect to such
additional compounds, the Parties agree as follows:
A. Section 1.22.
The parties hereby amend Section 1.22 in its entirety to read as
follows:
Section 1.22. "Project Phase II" means the phase of the Project that
follows Project Phase I which utilizes ATLAS Screening to establish the
<PAGE>
Ms. Karen Hamlin
October 8, 1997
Page 2
optimal conditions for the specific high throughput screen for each Initial
Target Protein. This phase will result in the assay being fully validated and
standard deviations established for a sub set of compounds and controls.
Assay sensitivity will also be established, during this phase, so as to
determine the Initial Target Protein requirements for the screening,
Except as otherwise provided in this Section 1.22, up to [***] Lilly
Compounds selected by Lilly shaIl be used for Project purposes as
contemplated hereunder. [***] Scriptgen Compounds will be provided by
Scriptgen for Project purposes including, without limitation, screening and
validation, [***] If Scriptgen Compounds are requested by Lilly for Project
purposes above the [***] limitation described above or for replacement of any
of the [***] described above, Lilly will be [***]. Lilly shall be given an
opportunity to select all available Scriptgen Compounds from the Scriptgen
Library prior to the commencement of Project Phase III including a reasonable
opportunity to review and screen such Scriptgen Compounds prior to such
selection, although Lilly will use its best efforts to complete the selection
process within [***]. Except as otherwise provided for in this Agreement,
such selection process shall be at no additional cost to Lilly provided Lilly
selects Scriptgen Compounds on a plate by plate basis (each plate contains
[***]). In the event, Lilly desires to select Scriptgen Compounds not on a
plate by plate basis, [***]
At the commencement of this phase, Lilly will provide to Scriptgen,
approximately [***] of each Initial Target Protein or as otherwise mutually
agreed to by the parties. This phase will take [***] (i.e., a total of [***])
to complete provided antibodies are furnished by Lilly. In the event
antibodies are not furnished by Lilly, this phase will take approximately
[***] to complete and a total of [***] For avoidance of any doubt, if Lilly
does not furnish the antibodies necessary for the Project or portions
thereof, Scriptgen shall bear the ultimate responsiblity and obligation for
furnishing the antibodies necessary for the Project at its sole expense.
Project Phase II is more fully described in the Project Plan.
<PAGE>
Ms. Karen Hamlin
October 8, 1997
Page 3
B. Section 1.23.
The parties hereby amend Section 1.23 in its entirety to read as
follows:
Section 1.23. "Project Phase III means the phase of the Project that
follows Project Phase II and involves running the ATLAS Screens for each of
the Initial Target Proteins using at Lilly's sole discretion up to [***]
and/or Natural Products for each Initial Target Protein, These compounds
and/or Natural Products will be furnished by either Lilly or the Scriptgen
Library as more fully described in Section 1.22 of this Agreement or as the
parties may otherwise mutually agree in writing. At the commencement of this
phase, Lilly will provide to Scriptgen, approximately [***] of each Initial
Target Protein or as otherwise mutually agreed to by the parties. During this
phase, Scriptgen will [***] for each compound, and determine an [***].
Scriptgen estimates that this phase will take [***] and [***]. Project Phase
III is more fully described in the Project Plan.
In addition, Scriptgen will use the ATLAS assay to evaluate [***]
samples supplied by Lilly for up to 10 Natural Product Successful Compound
extracts per Target Protein. These samples will be produced at Lilly in the
initial phases of [***] of the Natural Product extracts called [***]. The
testing of these samples may occur after the Final Comprehensive Report has
been. sent to Lilly, but in no event any later than six (6) months after
receipt by Lilly of the Final Comprehensive Report.
C. Section 2.1.
The parties hereby amend Section 2.1 in its entirety to read as
follows:
Section 2.1. Commencement and Reasonable Efforts. Upon execution of
this Agreement, Lilly and Scriptgen shall commence work on the Project that
is generally described in the Project Plan. Both parties will carry out their
respective roles and use reasonable efforts in conducting work on the Project
in order to achieve the research contemplated in this Agreement. Except as
the parties may otherwise agree in writing or as otherwise
<PAGE>
Ms. Karen Hamlin
October 8, 1997
Page 4
provided in this Agreement, Scriptgen shall use its reasonably commercial
efforts to complete the Project with respect to the Initial Target Proteins
within [***] after it receives the Initial Target Proteins. The parties
hereby acknowledge that the time period outlined in the preceding sentence
may need to be extended as may be applicable depending upon the number of
Initial Target Proteins that are substituted under Section 1.21 of this
Agreement.
D. Section 2.6.
The parties hereby amend Section 2.6 in its entirety to read as
follows:
Section 2.6 Additional Target Proteins. In the event that Proof of
Principle is achieved (either (a) or (b) as defined in Section 1.25) and
Lilly has received the Final Comprehensive Report for the last Initial Target
Protein within at least nintey (90) days after the expiration of the timeline
set forth in the last sentence of Section 2.1 of this Agreement (provided
that such period shall be extended to the extent that any delay beyond such
period was caused by Lilly), Lilly and Scriptgen hereby agree to expand the
Project to include two (2) additional Target Proteins for ATLAS Screening
(the "Additional Target Proteins") under exactly the same terms as are
applicable to the Initial Target Proteins under this Agreement except that:
(a) the Research Fee described in Section 3.1 shall be [***] for both of the
Additional Target Proteins as opposed to the [***] Research Fee that applies
to the Initial Target Proteins; (b) the first installment payment of such
Research Fee under Section 3.2 hereof, for the Additional Target Proteins
shall be paid within [***] as opposed to thirty (30) days after the execution
of this Agreement; (c) the original terms set forth in Section 1.22, 1.23 and
2.1 of the Agreement shall continue to be applicable with respect to the
Additional Target Proteins as opposed to the amended versions of Section
1.22, 1.23 and 2.1 as described in this Amendment unless Lilly elects, at its
sole discretion, to exercise its Additional Compound Option (as defined below
in this Section 2.6); and (d) Section 3.4 of this Amendment shall not be
applicable with respect to the Additional Target Proteins unless Lilly
elects, at its sole discretion, to exercise its Additional Compound Option
(as defined below in this Section 2.6) For avoidance of any doubt the second
installment payment of the Research Fee shall be paid within [***] with
respect to the Additional Target Proteins.
<PAGE>
Ms. Karen Hamlin
October 8, 1997
Page 5
Lilly may, at its sole discretion, elect to increase the compounds screened
against the Additional Target Proteins pursuant to the same terms that apply
to the Initial Target Proteins as described in Sections 1.22, 1.23, 2.1 and
3.4 of this Amendment except that the first payment installment under Section
3.4 with respect to the Additional Target Proteins shall be within ten (10)
days of Lilly exercising the Additional Compound Option as opposed to ten
(10) days within execution of this Amendment ("Additional Compound Option").
In order for Lilly to elect to exercise its Additional Compound Option, Lilly
shall provide Scriptgen with written notice of the same prior to the
commencement of Project Phase III with respect to the Additional Target
Proteins.
E. Section 3.4.
The parties hereby amend the Agreement to add the following Section
3.4:
In consideration for the additional screening services and use of
Scriptgen Compounds for Project purposes as described herein, Lilly hereby
agrees to pay Scriptgen [***] in two (2) equal installments. The first
payment shall be made within ten (10) days of execution of this Amendment.
The second payment shall be made within thirty (30) days after Lilly's
receipt of the Final Comprehensive Report.
F. Effect of Amendment. Except for the foregoing set forth in this letter
amendment, the rights and obligations of the parties under the Agreement
shall remain unaltered.
<PAGE>
Ms. Karen Hamlin
October 8, 1997
Page 6
To acknowledge Scriptgen's acceptance of the agreed terms as described
herein, please sign in the space provided below, and return a signed copy of
this letter to David P. Trummel.
Very truly yours,
/s/ August M. Watanabe
----------------------
August M. Watanabe
Executive Vice President
aw
cc. Dr. A. J. Weinstein
Mr. Rajiv Gulati
Mr. D. P. Trummel
ACCEPTED AND AGREED:
SCRIPTGEN PHARMACEUTICALS, INC
By /s/ Karen Hamlin
----------------------
Karen Hamlin
Senior Director of Operations
Date October 14, 1997
----------------
<PAGE>
AGREEMENT
This Agreement (the "Agreement") effective as of the last date of
signature hereto, (the "Effective Date") is entered into by and between Eli
Lilly And Company, an Indiana Corporation having its principal place of
business at Lilly Corporate Center, Indianapolis, Indiana 46285 (collectively
with its Affiliates "Lilly") and Scriptgen Pharmaceuticals Inc., a Delaware
Corporation, having its principal place of business at 200 Boston Avenue,
Medford MA 02155 ("Scriptgen"), agree as follows:
Recitals
1. Lilly is in the business of developing, manufacturing and marketing
pharmaceutical and veterinary agents.
2. Scriptgen is in business of, among other things, discovering and
developing pharmaceutical agents and conducting scientific research on
proteins utilizing screens developed through ATLAS Screening.
3. Lilly is interested in funding and collaborating with Scriptgen on a
research project to be carried out by Scriptgen involving certain target
proteins of Lilly and two (2) screens developed by Scriptgen.
4. Scriptgen is willing to undertake such research project aimed at,
among other things, identifying and validating [***] drug candidates in the
[***] areas.
NOW, THEREFORE, it is agreed by and between the parties
Article I
Definitions
When used in this Agreement, each of the following terms shall have the
meaning set forth in this Article. Defined terms may be used in the singular
or plural form.
Section 1.1. "Additional Target Protein" shall have the meaning as set
forth in Section 2.6 of this Agreement.
Section 1.2. "Affiliate" means (a) any corporation or business entity
of which Lilly, at the time in question, directly or indirectly owns or
controls fifty percent (50%) or more of the stock having the right to vote
for directors thereof or otherwise controls the management of the corporation
or business
<PAGE>
2
entity, or (b) any corporation, individual or business entity which now or
hereafter directly or indirectly owns or controls fifty percent (50%) or more
of the stock of Lilly having the right to vote for directors thereof or
otherwise controls the management of Lilly, or (c) any corporation,
individual or business entity which now or hereafter is under common control
with Lilly.
SECTION 1.3, "ATLAS Screening" (Any Target Ligand Affinity Screen)
means the process used to develop a screen utilizing Scriptgen's patented
proprietary high throughput screening technology which enables efficient
screening of a large library of compounds for binding affinity to a
particular protein of interest. ATLAS Screening is more fully described in
the attached Exhibit B, incorporated herein by reference. "ATLAS Screen"
means a screen developed through ATLAS Screening.
SECTION 1.4. "Confidential Information" means all non-public
information, data and materials, including, without limitation, proprietary
information and materials (whether or not patentable) regarding a party's
technology, products, business information or objectives.
SECTION 1.5. "Field" shall mean discovery of compounds for the
development of [***].
SECTION 1.6. "Final Comprehensive Report" shall have the meaning as set
forth in Section 4.1 of this Agreement.
SECTION 1.7. "Initial Target Proteins" shall mean the first two (2)
Target Proteins, or substitutes thereof, provided by Lilly to Scriptgen for
the Project.
SECTION 1.8. "Know-How" means all unpatented and unpatentable
information, data or materials, including without limitation: instructions;
processes; formulae; biological materials; and chemical, pharmacological,
toxicological, pharmaceutical, physical and analytical, clinical, safety,
manufacturing and quality control data and information related to compounds,
Target Proteins, Successful Compounds and other similar or related items
within the scope of the Project. Know-How does not include rights to ATLAS
Screening.
SECTION 1.9. "Lilly Compound means those compounds, Target Proteins
and Natural Products furnished by Lilly for Project purposes as described
under this Agreement.
SECTION 1.10. "Lilly Patent Right(s)" means a Patent Right(s) owned or
controlled by Lilly.
<PAGE>
3
SECTION 1.11. "Major Markets" shall mean the United States, United
Kingdom, Germany, France, Italy and Japan.
SECTION 1.12. "Natural Products" means natural product extracts.
SECTION 1.13. "Net Sales" means, with respect to a Product, the gross
amount invoiced by Lilly or a Lilly Affiliate or sublicensee to unrelated
third parties for the Product, in the territory, less:
a. Trade, quantity and cash discounts allowed;
b. Discounts, refunds, rebates, chargebacks, retroactive price
adjustments, and any other allowances which effectively reduce the net
selling price and are appropriately deducted from sales under generally
accepted accounting principles;
c. Product returns and allowances;
d. That portion of the sales value associated with drug delivery systems
(for avoidance of any doubt "delivery systems" does not mean the formulation
of a Product);
e. Any tax imposed on the product that is appropriately deducted from
sales under generally accepted accounting principles;
f. Allowance for distribution expenses; and
g. Any other similar, reasonable and customary deductions which are
appropriately deducted from sales under generally accepted accounting
principles.
Such amounts shall be determined from the books and records of Lilly
maintained in accordance with generally accepted accounting principles
("GAAP") consistently applied.
In the event the Product is sold as part of a combination product, the
Net Sales of the Product, for the purposes of determining royalty payments,
shall be determined by multiplying the Net Sales (as defined above in this
Section) of the combination product by the fraction, A/(A+B) where A is the
average sale price of the Product when sold separately in finished form and B
is the average sale price of the other product(s) sold separately in finished
form. In the event that such average sale price cannot be determined for both
the Product and other product(s) in combination, Net Sales for purposes of
determining royalty payments shall be calculated by multiplying the Net Sales
of the combination products by the fraction C/(C+D) where C is Lilly's cost
of goods of the Product and D is Lilly's cost of goods of the other
product(s), determined in accordance with the method of accounting normally
employed by Lilly in computing cost of goods.
SECTION 1.14. "Patent Right(s)" means a patent or patent application
and all divisions, continuations, continuations-in-part, reissues,
extensions, Supplementary Protection Certificates, foreign counterparts
thereof, and any similar intellectual
<PAGE>
4
property that is owned or controlled by Scriptgen or by Lilly, at least one
claim of which covers the making, using or selling of a Successful Compound
or Product, or methods, assays, or substances useful in discovering the
Successful Compound or Product. For avoidance of any doubt, "Patent Right(s)"
does not include rights related to Atlas Screening.
SECTION 1.15. "Phase II Clinical Trials" means human clinical trials
conducted in patients to establish proof of concept in the particular
indication tested and clinical trials conducted in patients to achieve a
statistically significant indication of efficacy in the particular indication
tested, as well as to obtain some indication of the dosage regimen required.
SECTION 1.16. "Phase III Clinical Trials" means large scale human
clinical trials conducted in patients to establish Product efficacy in the
particular indication tested and required to obtain Product registration with
health regulatory authorities.
SECTION 1.17. "Product" means any pharmaceutical composition comprising
of a Successful Compound for use as a human therapeutic in the Field.
SECTION 1.18. "Product Decision" means a decision made [***]
SECTION 1.19. "Project" means the research program to be conducted by
Scriptgen in connection with this Agreement. The Project is described more
fully in the Project Plan attached hereto as Exhibit A, and incorporated by
reference.
SECTION 1.20."Project IP-Rights" means (1) Patent Rights, (2) Know-How
and (3) patentable and unpatentable, information and inventions conceived in
the course of and within the scope of the Project and, in the case of
patentable inventions, are reduced to practice within the course of the
Project or within twelve (12) months after its expiration or termination. For
avoidance of any doubt, "Project IP-Rights" does not include rights related
to Atlas Screening.
SECTION 1.21. "Project Phase I" means the phase of the Project which
involves preliminary characterization for assay configuration for each
Initial Target Protein. Except as the parties may otherwise agree, during
this phase, Lilly will provide Scriptgen approximately [***] of each Initial
Target Proteins from which Scriptgen shall determine the technical
requirements for ATLAS Screening of each Initial Target Protein by
<PAGE>
5
characterizing the unfolding of each Initial Target Protein. In the event
that an Initial Target Protein's unfolding behavior is such that it is not
amenable to Atlas Screening, Lilly will be allowed up to [***] for each of
the Initial Target Proteins at [***] until such Initial Target Proteins are
amenable to Atlas Screening. If Lilly so desires, it may substitute Initial
Target Proteins in excess of the [***] described in the preceding sentence,
provided that it pays an additional fee of [***] to Scriptgen for each
substitution that exceeds [***] Initial Target Protein substitution. This
phase will take [***]. Scriptgen will configure the necessary assays for each
of the Initial Target Proteins received from Lilly simultaneously, provided
that Scriptgen receives each of the Initial Target Proteins from Lilly on or
about the same time. Project Phase I is more fully described in the Project
Plan. In the event Lilly substitutes Initial Target Protein as specified
above, this phase will take an additional [***] or [***] to complete for each
Initial Target Protein substituted.
SECTION 1.22. "Project Phase II" means the phase of the Project that
follows Project Phase I which utilizes ATLAS Screening to establish the
optimal conditions for the specific high throughput screen for each Initial
Target Protein. This phase will result in the assay being fully validated and
standard deviations established for a sub set of compounds and controls.
Assay sensitivity will also be established, during this phase, so as to
determine the Initial Target Protein requirements for the screening. At
Lilly's option and upon its request, up to [***] will be provided for Project
purposes including validation, [***]. If Scriptgen Compounds are requested by
Lilly for Project purposes above the [***] limitation described above, Lilly
will be charged a fee of [***]. In the event Lilly requests the use of
Scriptgen Compounds for Project purposes as described above, Lilly may select
such Scriptgen Compounds from any such Scriptgen Compounds within the
Scriptgen Library and, furthermore, shall have a reasonable opportunity to
review and screen such Scriptgen Compounds prior to such selection, although
Lilly win use its best efforts to complete the selection process within [***].
Except as otherwise provided for in this Agreement, such selection process
shall be [***] to Lilly provided Lilly selects Scriptgen Compounds on a plate
by plate basis (each plate contains [***]). In the event, Lilly desires to
select Scriptgen Compounds not on a plate by plate basis, [***]. At the
commencement of this phase, Lilly will provide to Scriptgen, approximately
[***] of each Initial Target Protein or as otherwise mutually agreed
<PAGE>
6
to by the parties. [***] to complete provided antibodies are furnished by
Lilly. In the event antibodies are not furnished by Lilly, this phase will
take approximately [***]. For avoidance of any doubt, if Lilly does not
furnish the antibodies necessary for the Project or portions thereof,
Scriptgen shall bear the ultimate responsibility and obligation for
furnishing the antibodies necessary for the Project at its sole expense.
Project Phase II is more fully described in the Project Plan.
SECTION 1.23. "Project Phase III" means the phase of the Project that
follows Project Phase II and involves running the ATLAS Screens for each of
the Initial Target Proteins using [***] compounds for each Initial Target
Protein. At Lilly's option as describe in Section 1.22 above, the compounds
and/or Natural Products will be furnished by either Lilly or the Scriptgen
Library or as the parties may otherwise mutually agree. At the commencement
of this phase, Lilly will provide to Scriptgen, approximately [***] of each
Initial Target Protein or as otherwise mutually agreed to by the parties.
During this phase, Scriptgen will [***] for each compound, and determine an
[***]. Scriptgen estimates that this phase will take [***]. Project Phase III
is more fully described in the Project Plan.
In addition, Scriptgen will use the Atlas assay to evaluate [***]
supplied by Lilly for up to [***]. These samples will be produced at Lilly in
the initial phases of fractionation and purification of the Natural Product
extracts called novelty and fingerprint determination. The testing of these
samples may occur after the Final Comprehensive Report has been sent to
Lilly, but in no event any later than six (6) months after receipt by Lilly
of the Final Comprehensive Report.
SECTION 1.24. "Project Plan" means the written plan attached hereto as
Exhibit A and incorporated by reference.
SECTION 1.25. "Proof of Principle" means that ATLAS Screening is deemed
successful with respect to the Initial Target Proteins because either: [***]
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7
SECTION 1.26. "PTAC" means the point in Lilly's development program
[***]
SECTION 1.27. "Scriptgen Compound" shall mean a compound or Natural
Product furnished by Scriptgen from its Scriptgen Library for Project
purposes as described under this Agreement.
SECTION 1.28. "Scriptgen FTEs" means a full time equivalent scientific
person week or a total of [***] of scientific work on or directly related to
the Project, carried out by a Scriptgen employee, having at least [***].
SECTION 1.29. "Scriptgen Library" means a library of approximately
250,000 compounds and 15,000 Natural Products owned and controlled by
Scriptgen.
SECTION 1.30. "Scriptgen Patent Right" means a Patent Right owned or
controlled by Scriptgen.
SECTION 1.3 1. "Successful Compound" means any compound and/or Natural
Product screened for Lilly by Scriptgen which is identified by Scriptgen
through ATLAS Screening or otherwise within the scope of the Project and
determined by Lilly as a potential pharmaceutical drug candidate.
SECTION 1.32. "Target Protein" means a purified target protein
furnished to Scriptgen by Lilly for purposes of Project research as
contemplated in this Agreement.
SECTION 1.33. "Valid Claims" means (a) any claim(s) pending in a patent
application or in an unexpired patent which has not been held unenforceable,
unpatentable or invalid by a decision of a court or other governmental agency
of competent jurisdiction, unappealable or unappealed within the time allowed
for appeal, and which has not been admitted to be invalid or unenforceable
through reissue or disclaimer, or (b) a claim of a pending patent application
which claim was filed in good faith and has not been abandoned or finally
disallowed without the possibility of appeal or refiling of said application.
If in any country there should be two or more such decisions conflicting with
respect to the validity of the same claim, the decision of the higher or
highest tribunal shall thereafter control; however, should the tribunals be
of equal rank, then the decision or decisions upholding the claim shall
prevail when the decisions are equal in number, and the majority of decisions
shall prevail when the conflicting decisions are unequal in number.
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8
ARTICLE II
STAFFING, PLANNING AND EXECUTION OF PROJECT
SECTION 2.1. COMMENCEMENT AND REASONABLE EFFORTS. Upon execution of
this Agreement, Lilly and Scriptgen shall commence work on the Project that
is generally described in the Project Plan. Both parties will carry out their
respective roles and use reasonable efforts in conducting work on the Project
in order to achieve the research contemplated in this Agreement. Except as
the parties may otherwise agree in writing or as otherwise provided in this
Agreement, Scriptgen shall use its reasonably commercial efforts to complete
the Project with respect to the Initial Target Proteins within 28 to 34 weeks
after it receives the Initial Target Proteins. The parties hereby acknowledge
that the time period outlined in the preceding sentence may need to be
extended as may be applicable depending upon the number of Initial Target
Proteins that are substituted under Section 1.21 of this Agreement.
SECTION 2.2. SCRIPTGEN EFFORT ON THE PROJECT. Except as the parties may
otherwise agree, for each Initial Target Protein provided by Lilly to
Scriptgen in accordance with the Project Plan, Scriptgen shall, subject to
increases caused by the substitution of Initial Target Proteins as described
in Section 1.21, devote at least [***] to the Project distributed by project
phase as follows:
(a) Project Phase I [***]
(b) Project Phase II [***]
(c) Project Phase III [***]
Upon a reasonable request by Lilly that a specific scientist be
assigned to the Project as part of the Scriptgen FTE's, Scriptgen will use
reasonable efforts to assign such person to the project for at least [***].
The names of the Scriptgen employees who are initially scheduled to work on
the Project are set forth in Exhibit C.
SECTION 2.3. CONDUCT OF STUDIES. All work done in connection with the
Project shall be carried out in compliance with any federal, state, or local
laws, regulations, or guidelines governing the conduct of research at the
site where such work is being conducted. In addition, any laboratory animals
covered by this Agreement shall be provided humane care and treatment in
accordance with the most acceptable current veterinary practices.
SECTION 2.4. TREATMENT OF CHEMICAL AND BIOLOGICAL MATERIALS. Each party
agrees that it will not permit any third party to observe or have access
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9
to the other party's chemical or biological materials unless a duly
authorized representative of the other party agrees in writing.
SECTION 2.5. SAFETY CONCERNS. Each party agrees to provide the other
with handling instructions, including all safety information known to such
party relating to chemical and biological material.
SECTION 2.6. ADDITIONAL TARGET PROTEINS. In the event that Proof of
Principle is achieved (either (a) or (b) as defined in Section 1.25) and
Lilly has received the Final Comprehensive Report for the last Initial Target
Protein within at least ninety (90) days after the expiration of the timeline
set forth in the last sentence of Section 2.1 of this Agreement (provided
that such period shall be extended to the extent that any delay beyond such
period was caused by Lilly), Lilly and Scriptgen hereby agree to expand the
Project to include two (2) additional Target Proteins for ATLAS Screening
(the "Additional Target Proteins") under exactly the same terms as are
applicable to the Target Proteins under this Agreement except that: (a) the
Research Fee described in Section 3.1 shall be [***] for both of the
Additional Target Proteins as opposed to the [***] Research Fee that applies
to the Initial Target Proteins; and (b) the first installment payment of such
Research Fee under Section 3.2 hereof, for the Additional Target Proteins
shall be paid within thirty (30) days of Lilly's receipt of the Final
Comprehensive Report for the last Initial Target Protein as opposed to thirty
(30) days after the execution of this Agreement. For avoidance of any doubt
the second installment payment of the Research Fee shall be paid within
thirty (30) days after Lilly's receipt of the Final Comprehensive Report with
respect to the Additional Target Proteins.
SECTION 2.7. CONSULTATION AND VISITATION. From time to time Lilly
personnel, may consult with Scriptgen personnel regarding matters relevant to
the Project and may also at reasonable times and upon reasonable prior notice
visit the facilities being used for the Project to permit observation of
procedures being employed.
ARTICLE III
FUNDING OF PROJECT
SECTION 3.1. AMOUNT OF RESEARCH FEE. In consideration for the research
to be conducted by Scriptgen as contemplated in this Agreement, Lilly shall
pay Scriptgen a research fee in the amount of [***] (the "Research Fee").
Section 3.2. Manner of Payments. The Research Fee shall be in U.S.
Dollars and payable in [***]. The first payment shall be
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10
made within thirty (30) days of execution of this Agreement. The second
payment shall be made within thirty (30) days after Lilly's receipt of the
Final Comprehensive Report.
SECTION 3.3. ACCOUNTING. Scriptgen shall maintain complete records of
all monies Lilly pays to Scriptgen for research under the Project and shall,
within sixty (60) days after the end of the calendar year during the Project
and at the end of the Project, provide Lilly with a report, stating: a) the
dollar amount of funds Lilly supplied for that year; b) the research
activities conducted during the year which account for such support, using
Scriptgen's standard project accounting procedures; and c) any supporting
details as are reasonably required by Lilly. To the extent permitted by law,
Lilly shall be entitled to any tax credits due on account of research and
development expenses for the funds paid by Lilly.
ARTICLE IV
RESULTS OF PROJECT
SECTION 4.1. RESULTS AND REPORTS. Scriptgen shall provide to Lilly
written bi-monthly reports which describes the results and progress of the
Project. Upon completion of the Project or termination of this Agreement,
Scriptgen shall promptly provide Lilly with a comprehensive written final
report describing the results of the Project with respect to each Target
Protein including, but not limited to, an [***] for all Successful Compounds
(the "Final Comprehensive Report"). A Final Comprehensive Report shall not be
complete unless, to the extent commercially reasonably possible, the
structures of Scriptgen Compounds that are Successful Compounds are revealed
and confirmed in such report and, in any event, notwithstanding Scriptgen's
commercially reasonable efforts, if Scriptgen Compounds are the only
Successful Compounds identified in the Project, at least the structure of one
such compound must be revealed and confirmed in such report (Scriptgen shall
have the primary responsibility for identifying the structure of such
compounds, however, Lilly hereby agrees to provide reasonable assistance to
Scriptgen with respect to identifying the structure of such compounds).
Furthermore, Scriptgen shall use its best efforts to provide Lilly with
reference samples [***] of all Successful Compounds that were not furnished
by Lilly for purposes of the Project. These reference samples shall be
provided to Lilly in sufficient quantity so as to enable Lilly to reasonably
replicate such Successful Compounds for development and other purposes as it
may deem appropriate. Scriptgen shall also reasonably cooperate with Lilly in
transferring Scriptgen's Know-how and other information related to the
Successful Compounds to the extent provided in Article V and subject to the
provisions of Article VIII.
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11
SECTION 4.2. OWNERSHIP. Subject to the licenses granted hereunder, an
Project IP-Rights shall be owned by the inventor of such patentable
invention, such inventorship, to be determined by the laws of inventorship,
under the United States. However, notwithstanding the foregoing, any Project
IP-Rights related to Lilly Compounds shall be owned by Lilly and Scriptgen
shall assign any and all interests that it may have in such Project IP-Rights
to Lilly. Scriptgen shall execute such documents and perform such acts as may
be reasonably necessary to convey any interest that it may have in Project
IP-Rights related to Lilly Compounds.
SECTION 4.3. JOINTLY OWNED PATENTABLE INVENTIONS. Except for Project
IP-Rights related to Lilly Compounds as described in Section 4.2, if any
Project IP-Rights are determined under Section 4.2, to be jointly invented by
Lilly and Scriptgen ("Joint Inventions"), Lilly and Scriptgen shall jointly
own such invention and shall discuss that Joint Invention and the
desirability of filing a United States patent application covering the
invention, as well as any foreign counterparts. If no decision is made
regarding whether to file and prosecute the application covering such Joint
Invention, Lilly shall make the decision. Such patent applications (including
filing, prosecution and maintenance thereof) shall be handled by a third
party mutually acceptable to both parties (such mutual acceptance shall not
be unreasonably withheld).
SECTION 4.4. SCRIPTGEN COMPOUND INVENTIONS. Except for IP-Rights
related to Lilly Compounds as described in Section 4.2, if any Project
IP-Rights are determined under Section 4.2, to be solely invented by
Scriptgen and are related to a Scriptgen Compound ("Scriptgen Compound
Invention"), Scriptgen shall own such invention and Lilly and Scriptgen shall
discuss that Scriptgen Compound Invention and the desirability of filing a
United States patent application covering the invention, as well as any
foreign counterparts. If no decision is made regarding whether to file and
prosecute the application covering such Scriptgen Compound Invention,
Scriptgen shall make the decision. Such patent applications (including
filing, prosecution and maintenance thereof) shall be handled by a third
party mutually acceptable to both parties (such mutual acceptance shall not
be unreasonably withheld).
SECTION 4.5. REVIEW AND COMMENT. In connection with any Joint
Inventions or Scriptgen Compound Inventions, each party shall provide the
other party with a copy of any patent application which first discloses any
specific invention within the scope of the Project or other relevant Project
IP-Rights and information prior to first filing the first of such
applications in any jurisdiction, if possible, for review and comment by each
party, or its respective designees, Each party and designees thereof shall
maintain any such patent application in confidence pursuant to Article VIII.
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12
SECTION 4.6. NOTICE OF DECISION If a party decides not to file,
prosecute or maintain an application or patent (including the prosecution of
any interference proceedings with respect thereto) with respect to a Joint
Invention or Scriptgen Compound Invention (the "Non-Prosecuting Party"), in
any country, it shall give the other party reasonable notice to this effect.
After such notice, the other party shall have the sole discretion to file or
maintain the application or patent with respect to such Joint Invention or
Scriptgen Compound Invention. If such other party elects to file or maintain
such application or patent, the Non-Prosecuting Party shall assign any and
all ownership rights in such invention to such other party. Furthermore, the
Non-Prosecuting Party shall execute such documents and perform such acts as
may be reasonably necessary to convey such ownership rights and for the other
party to continue prosecution or maintenance of any intellectual property
rights related thereto.
SECTION 4.7. THIRD PARTY INFRINGEMENT Scriptgen and Lilly each agrees
to take reasonable actions to protect Know-How from unauthorized use, when,
from its own knowledge or upon notice by the other party, the party with
knowledge or receiving notice becomes aware of the reasonable probability
that such unauthorized use exists.
SECTION 4.8. COOPERATION If within sixty (60) days of becoming aware of
the reasonable probability of an interference or infringement of Project
IP-Rights with respect to a Joint Invention or Scriptgen Compound Invention,
the owner (or one of the joint-owners) refuses to institute an infringement
suit or take other appropriate action (the "Non-Action Party") that the other
party feels is reasonably required to protect the Project IP-Rights, the
other party shall have the right at its sole discretion to institute such
suit or other appropriate action in the name of either or both parties. In
such event, the Non-Action Party shall cooperate with the other party to the
extent reasonably possible.
SECTION 4.9. NOTICE OF CERTIFICATION Scriptgen and Lilly each shall
immediately give notice to the other of any certification filed under the
U.S. "Drug Price Competition and Patent Term Restoration Act of 1984"
claiming that Project IP-Rights (or any portion thereof) are invalid or that
any infringement will not arise from the manufacture, use or sale of any
product that is competitive with a Product within the scope of this Agreement
by a third party. If Lilly decides not to bring infringement proceedings
against the entity making such a certification, Lilly shall give notice to
Scriptgen of its decision not to bring suit within sixty (60) days after
receipt of notice of such certification. Scriptgen may then, but is not
required to, bring suit against the party that filed the certification. Any
suit by Lilly or Scriptgen shall either be in the name of Lilly or in the
name of Scriptgen, or jointly by Lilly and Scriptgen, as may be required by
law. For this purpose, the party
<PAGE>
13
not bringing suit shall execute such legal papers necessary for the
prosecution of such suit as may be reasonably requested by the party bringing
suit. Notwithstanding the foregoing, this Section 4.9 shall not apply to
matters regarding Lilly Compounds or Atlas Screening and/or the intellectual
property rights related thereto.
SECTION 4.10. COSTS AND EXPENSES Lilly shall bear costs of filing,
prosecuting, maintaining and extending any Lilly Patent Rights and Scriptgen
shall bear the costs of filing, prosecuting, maintaining and extending any
Scriptgen Patent Rights. Lilly and Scriptgen shall equally bear the cost of
filing, prosecuting, maintaining and extending any Project IP-Rights related
to Joint Inventions.
SECTION 4.11. NOTICE OF INFRINGEMENT If the activities of either party
in connection with the Project or as the result of making, using or selling a
Product result in a claim of patent infringement or other violation of the
intellectual property rights of any third party, the party to this Agreement
first having notice of that claim shall promptly notify the other party in
writing. The notice shall set forth the facts of the claim in reasonable
detail. Except as otherwise provided herein, Lilly shall have the primary
right, in its sole discretion, to defend against said claim (whether or not
it arises as a counterclaim in any infringement action commenced by Scriptgen
hereunder) and to prosecute any counterclaims, or any other claims that may
arise in connection with such litigation. Scriptgen shall cooperate with
Lilly in such defense and prosecution and shall have the right to be
represented by counsel of its own choice. If Lilly shall fail to diligently
commence and continue defense against such claim (or prosecution of any claim
or counterclaim), Scriptgen may assume the primary right for such defense or
prosecution, and Lilly shall cooperate with Scriptgen and shall have the
right to be represented by counsel of its own choice. Notwithstanding the
foregoing, if the claim involves an allegation of a violation of the trade
secret rights of a third party, the party accused of such violation shall
have the obligation to defend against such claim and shall indemnify the
other party against all costs associated with such claim. Furthermore,
notwithstanding the foregoing, this Section 4.11 shall not apply to matters
regarding Lilly Compounds or Atlas Screening and/or the intellectual property
rights related thereto.
SECTION 4.12. LITIGATION EXPENSES Each party shall assume and pay all
of its own out-of-pocket costs incurred in connection with an litigation
described in this Article IV, including without limitation, the fees and
expenses of that party's counsel.
SECTION 4.13. SETTLEMENT APPROVAL Neither party shall settle any such
proceeding described in this Article IV without the approval of the other
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14
party, which approval shall not be unreasonably withheld. Notwithstanding the
foregoing, this Section 4.13 shall not apply to matters regarding Lilly
Compounds or Atlas Screening and/or the intellectual property rights related
thereto.
SECTION 4.14. RECOVERY Any recovery obtained by any party as a result
of any proceeding directly related to a Product (or a Successful Compound
within the Field) during the term that royalties are paid to Scriptgen
hereunder, by settlement or otherwise, shall be applied in the following
order of priority:
(a) first, to reimburse each party for all litigation costs in
connection with such proceeding paid by that party under Section
4.13 and not otherwise recovered; and
(b) second, [***]
SECTION 4.15. PATENT TERM EXTENSIONS The parties shall cooperate with
each other in gaining patent term extension wherever applicable to Project
IP-Rights covering Successful Compounds or Products. Lilly shall determine
which patents shall be extended. All filings for such extension shall be made
by Lilly provided, however, that in the event that Lilly elects not to file
for an extension, Lilly shall (i) inform Scriptgen of its intention not to
file and (ii) grant Scriptgen the right to file for such extension.
ARTICLE V
LICENSE
Subject to Section 6.9 of this Agreement, Scriptgen hereby grants to
Lilly a perpetual, exclusive (even as to Scriptgen), worldwide,
non-cancelable license, with the right to grant sublicenses, under
Scriptgen's interests in Project IP-Rights for all purposes including, but
not limited to, to make, have made, use, have used, import, offer for sale,
and have sold any Successful Compound and/or Product for any and all purposes
subject to Scriptgen retaining the rights to its ATLAS Screening technology
and retaining any rights that it may have outside the Field with respect to
Scriptgen Compounds as described in Section 6.9 of this Agreement.
ARTICLE VI
COMMERCIAL TERMS
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15
section 6.1. Milestones. As consideration for the licenses granted
hereunder, Lilly shall pay to Scriptgen within forty-five (45) days of the
occurrence of a milestone event the following milestone payments for each
Successful Compound:
(a) Upon [***] of each Successful Compound in the Field: $[***]
(b) Upon [***] for each Successful Compound in the Field: $[***]
(c) Upon [***] for each Successful Compound in the Field: $[***]
(d) Upon [***] of each Successful Compound in the Field: $[***]
*Notwithstanding the foregoing, [***]
Regardless of the number of indications or products that may be
developed by Lilly under this Agreement, [***]. In other words, [***].
Furthermore, any milestone payment made under this Section 6.1 shall [***] of
this Agreement. For avoidance of any doubt, Lilly shall [***] of this
Agreement.
SECTION 6.2. ROYALTY PAYMENTS TO SCRIPTGEN ON PRODUCTS. As additional
consideration for the licenses granted hereunder, except as otherwise
provided in this Agreement, Lilly shall pay to Scriptgen a royalty equal to
[***] of the Net Sales of Products. Royalties shall be reported and paid
quarterly in accordance with Section 6.4 of this Agreement.
SECTION 6.3. TERM OF ROYALTY PAYMENTS BY LILLY. Royalties under Section
6.2 shall be paid on a country-by-country basis from the date of the
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16
first commercial sale of each Product in a particular country [***].
SECTION 6.4. ROYALTY PAYMENT AND REPORTS. Royalty payments under this
Agreement shall be made to Scriptgen within ninety (90) days following the
end of each calendar quarter for which royalties are due. Each royalty
payment shall be accompanied by a statement summarizing the Net Sales and
royalty by United States and outside the United States showing: (i) the Net
Sales of the Products sold by Lilly, its Affiliates, and its sublicensees
during the reporting period; (ii) the royalty due thereon; and (iii)
withholding taxes, if any, required by law to be deducted in respect of such
royalties. If no royalty is due for any royalty period hereunder, Lilly shall
so report. Lilly shall keep complete and accurate records in sufficient
detail to properly reflect all gross sales and Net Sales and to enable the
royalties payable hereunder to be determined.
SECTION 6.5. TAXES. Any and all taxes levied on account of royalties
accruing under this Article shall be paid by Scriptgen. If Lilly is required
by the United States government or other authorities to withhold any tax on
the amounts payable by Lilly to Scriptgen under this Agreement, Lilly shall
be allowed to do so, and shall in such case remit royalty payments to
Scriptgen net of such withheld amount, provided that Lilly furnishes
Scriptgen with proof of payment annually within ninety (90) days following
December 31 of each year in order that Scriptgen may use the withholding tax
paid as a tax credit.
SECTION 6.6. EXCHANGE RATES All payments to be made by Lilly to
Scriptgen under this Agreement shall be made in United States dollars. In the
case of sales outside the United States by Lilly, the rate of exchange to be
used in computing the amount of currency equivalent in United States dollars
due Scriptgen shall be made using Lilly's then current standard exchange rate
methodology, which methodology shall be in conformity with generally accepted
accounting principles.
SECTION 6.7. AUDITS. Upon the written request of Scriptgen, Lilly shall
permit an independent public accountant selected by Scriptgen and acceptable
to Lilly, which acceptance shall not be unreasonably withheld or delayed, to
have access during normal business hours to such records of Lilly as may be
reasonably necessary to verify the accuracy of the royalty reports described
herein, in respect of any fiscal year ending not more than thirty-six (36)
months prior to the date of such request. All such verifications shall be
conducted at Scriptgen's expense and not more than once in each calendar
year. In the event such Scriptgen representative concludes that additional
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17
royalties were owed to Scriptgen during such period, the additional royalty
shall be paid by Lilly within thirty (30) days of the date Scriptgen delivers
to Lilly such representative's written report so concluding unless Lilly
objects thereto, specifying in writing the basis for its objection in
reasonable detail. The fees charged by such representative shall be paid by
Scriptgen unless the audit discloses that the royalties payable by Lilly for
the audited period are incorrect by more than [***], in which case Lilly
shall pay the reasonable fees and expenses charged by such representative.
Scriptgen agrees that all information subject to review under this Section
6.7 is confidential and that is representative shall only disclose to
Scriptgen the royalty amount determined from such audit and that Scriptgen
shall cause its representative to retain all such information in confidence.
SECTION 6.8. INTEREST ON LATE PAYMENTS. Any payments by Lilly to
Scriptgen that are not paid on or before the fifth day after the date such
payments are due under this Agreement shall bear interest, to the extent
permitted by applicable law, [***] above the Prime Rate of interest declared
from time to time by The First National Bank of Boston in Boston, Massachusetts,
calculated on the number of days payment is delinquent. The right to receive
interest shall be in addition to any other rights and remedies of Scriptgen.
Section 6.9. [***] After receipt by Lilly of the Final Comprehensive
Report, Lilly shall have a period of [***] during which [***]Scriptgen
Successful Compounds will be [***]. At the end of this [***] period, Lilly
agrees to [***]. Should Lilly [***], Scriptgen agrees that it will not [***].
For avoidance of any doubt, each compound referenced in this Section 6.9 of
the Agreement shall include [***] (defined below). For purposes of this
Agreement, [***] means [***] (defined below) [***]. For purposes of this
Agreement, [***].
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18
At the end of the [***] period noted above, [***]. For development of [***],
Lilly agrees to [***], upon Scriptgen's written request, [***], provided
that Scriptgen shall [***].
At the end of the [***] period, noted above, [***] and [***]. For
development of [***], Lilly agrees to [***], upon Scriptgen's written
request, [***] provided that Scriptgen shall [***].
For a period of [***], in the event that both are true: (a) [***] and (b)
[***], Lilly agrees to [***], upon Scriptgen's written request, [***]
provided that Scriptgen shall [***].
For purposes of clarity, any [***].
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19
ARTICLE VII
SAMPLES
SECTION 7.1. SUPPLY OF SAMPLES AND OTHER COMPOUNDS. Lilly shall retain
ownership in any Initial Target Proteins, compounds, Natural Product and
similar items (or portions thereof) that it supplies to Scriptgen under this
Agreement whether contained in cassettes form or otherwise (the "Samples").
Unless otherwise agreed by the parties in writing, the Samples shall be
supplied blinded.
SECTION 7.2. SAMPLE MAINTENANCE AND STRUCTURE DETERMINATION. Scriptgen
hereby agrees that it (i) [***] (ii) will, upon Lilly's request, return or
dispose of unused Samples; (iii) will not [***] except as contemplated under
this Agreement; (iv) will not attempt to determine the structures of the
Samples; and (v) will not attempt to replicate the Samples without Lilly's
prior written permission. Scriptgen, further, agrees that Lilly shall have
the ability to [***] under this Section 7.2 at such times and intervals as is
reasonably convenient to both parties.
ARTICLE VIII
CONFIDENTIALITY AND PUBLICATION
SECTION 8.1. CONFIDENTIALITY. Except as otherwise provided in writing
by the parties, both parties shall use their best efforts to retain in
confidence and not use, except as provided in this Agreement, all information
relating to the Project. Such information may, however, be disclosed insofar
as such disclosure is necessary (where possible, with adequate safeguards for
confidentiality) to allow either party to institute or defend against
litigation with a third-party, to file and prosecute patent applications or
to comply with governmental regulations, provided neither party shall use the
other party's information in any patent application without written approval
from the other party.
This obligation of confidentiality and non-use shall not apply to
information which (i) is in the public domain, (ii) comes into the public
domain through no fault of the receiving party, (iii) was known by the
receiving party prior to disclosure under this Agreement or under the prior
confidentiality agreement between Lilly and Scriptgen, (iv) is disclosed to
the receiving party without an obligation of confidentiality by a third party
having a lawful right to make the disclosure, or (v) is disclosed under the
provisions of Section 8.2 of this Agreement.
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20
In furtherance of the objectives of the Project and with the approval
of the parties, either party may disclose confidential information obtained
or generated under this Agreement to a third party who has agreed in writing
to be bound by the same or similar obligations of confidence set forth in
this Section, provided the third party agrees not to use the confidential
information without authorization from the party owning the information,
except that such authorization shall not be required in connection with the
exercise of the rights granted under any license granted under this Agreement.
All obligations of confidentiality and non-use imposed upon the parties
under this Agreement shall expire on the later of (i) the date [***]; or (ii)
the expiration of all obligations to pay royalties under Section 6.3 of this
Agreement.
Lilly agrees to mark all Lilly Information provided to Scriptgen in
documentary form as "Confidential". If such Lilly Information is provided to
Scriptgen in oral form, Lilly shall thereafter summarize the disclosure in
writing, mark it as "Confidential," and provide a copy to Scriptgen within
thirty (30) days of the oral disclosure. In the same manner, Scriptgen agrees
to mark all Scriptgen Information provided to Lilly in documentary form as
"Confidential." If such Scriptgen Information is provided to Lilly in oral
form, Scriptgen shall thereafter summarize the disclosure in writing, mark it
"Confidential," and provide a copy to Lilly within thirty (30) days of the
oral discussion.
SECTION 8.2. PUBLICATIONS. Lilly and Scriptgen agree that, during the
term of the Project and for [***] thereafter, neither party shall publish the
results of studies carried out under this Agreement without the opportunity
for prior review by the other party. During the term of the Project and for
[***], each party agrees to provide the other party the opportunity to
review any proposed abstracts or manuscripts which relate to the Project at
least [***] prior to their intended submission for publication and agrees,
upon request, not to submit such an abstract or manuscript for publication
until the other party is given a reasonable period of time to secure patent
protection for any material in such publication which it believes to be
patentable. Upon request, confidential information of the non-disclosing
party shall be removed from such proposed publication. Nothing contained in
this Section shall prohibit the inclusion of information necessary for a
patent application, provided the non-filing party is given a reasonable
opportunity to review the information to be included. During the term of the
Project and for [***] thereafter, the parties agree that all publications
relating to the results of studies carried out under this Agreement shall be
submitted for review and approval by each Party to ensure that, to the
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21
extent appropriate, scientific credit is given to researchers at both Lilly
and Scriptgen.
ARTICLE IX
INDEMNIFICATION
SECTION 9.1 INDEMNIFICATION BY LILLY. Lilly agrees to indemnify, defend
and hold Scriptgen harmless from and against any losses, including product
liability, which arise from any claim, lawsuit or other action by a third
party arising out of the manufacture and sales of Products, the execution by
Lilly of this Agreement, the performance or breach by Lilly of its warranties
or obligations under this Agreement, or the negligence or willful misconduct
of Lilly, its employees or its agents within the scope of this Agreement,
except to the extent such losses result from (i) the breach by Scriptgen of
its warranties or obligations hereunder or (ii) the negligence or willful
misconduct of Scriptgen, its employees or its agents within the scope of this
Agreement.
SECTION 9.2 INDEMNIFICATION BY SCRIPTGEN. Scriptgen agrees to
indemnify, defend and hold Lilly harmless from and against any losses which
arise from any claim, lawsuit or other action by a third party arising out of
the execution by Scriptgen of this Agreement, the performance or breach by
Scriptgen of its warranties or obligations under this Agreement, or the
negligence or willful misconduct of Scriptgen, its employees or its agents
within the scope of this Agreement, except to the extent such losses result
from (i) the breach by Lilly of its warranties or obligations hereunder or
(ii) the negligence or- willful misconduct of Lilly, its employees or its
agents within the scope of this Agreement.
SECTION 9.3 INDEMNIFICATION PROCEDURES. A party seeking indemnification
pursuant to this Article shall notify, in writing, the other party within
thirty (30) days of the assertion of any claim or discovery of any fact upon
which the party intends to base a claim for indemnification. A party's
failure to so notify the indemnifying party shall not, however, relieve such
indemnifying party from any liability under this Agreement to the indemnified
party with respect to such claim except to the extent that such indemnifying
party is actually prejudiced by such failure. The party from whom
indemnification is being sought, while reserving the right to contest its
obligation to indemnify, shall be responsible for the defense of any claim,
demand, lawsuit or other proceeding in connection with which the other party
claims indemnification hereunder. The indemnified party shall have the right
at its own expense to participate jointly with the indemnifying party in the
defense of any such claim, demand, lawsuit or other proceeding, but with
respect to any issue involved in such claim, demand, lawsuit or
<PAGE>
22
other proceeding with respect to which the indemnifying party has
acknowledged its obligation to indemnify the other party hereunder, the
indemnifying party shall have the sole right to select counsel, settle, try
or otherwise dispose of or handle such claim, demand, lawsuit or other
proceeding on such terms as the indemnifying party, in its sole discretion
shall deem appropriate.
ARTICLE X
DISPUTE RESOLUTION
SECTION 10.1 GOOD FAITH NEGOTIATIONS. The parties will attempt in good
faith to resolve any controversy or claim arising out of or relating to this
Agreement promptly by negotiations between the following senior executives of
the parties who have authority to settle the controversy (and who do not have
direct responsibility for administration of this agreement):
(i) For Lilly - Vice President of Infectious Diseases or similar
position
(ii) For Scriptgen - its Chief Executive Officer
SECTION 10.2 NOTICE AND MEETING. The disputing party(ies) shall give
the other party(ies) written notice of the dispute. Within ten (10) days
after receipt of said notice, the receiving party(ies) shall submit to the
other(s) a written response. The notice and response shall include (a) a
statement of supporting its position, and (b) the name and title of the
executive who will represent that party. The executives shall meet at a
mutually acceptable time and place within ten (10) days of the date of the
disputing party's notice and thereafter as often as they reasonably deem
necessary to exchange relevant information and to attempt to resolve the
dispute.
SECTION 10.3 LITIGATION. If the matter has not been resolved within
[***] of the disputing party's notice, or if the party receiving said notice
will not meet within [***] either party may initiate litigation upon [***]
written notice to the other party.
SECTION 10.4 DEADLINES. All deadlines specified in this Article X may
be extended by mutual agreement.
SECTION 10.5 NON-EXCLUSIVE PROCEDURES. The procedures specified in this
Article X shall be non-exclusive procedures for the resolution of disputes
between the parties arising out of or relating to this Agreement. Without
limitation of the foregoing, any party may seek a preliminary injunction or
other preliminary judicial relief if in its judgment such action is necessary
to avoid irreparable damage. Despite such action, the parties will continue to
<PAGE>
23
participate in good faith in the procedures specified in this Article X. All
applicable statutes of limitation shall be tolled while the procedures
specified in this Article X are pending. The parties will take such action,
if any, required to effectuate such tolling.
ARTICLE XI
TERM AND TERMINATION
SECTION 11.1. TERM. Except as otherwise provided for herein, this
Agreement shall become effective as of the date hereof and shall remain in
effect until the expiration of all obligations of Confidentiality under
Article VIII.
SECTION 11.2. TERM AND EXTENSION OF PROJECT. Except as otherwise
provided for herein, the Project term shall begin as of the date hereof and
continue until completion of Project Phase III for each Initial Target
Protein and Additional Target Protein and until Lilly has received the Final
Comprehensive Report for each Initial Target Protein and Additional Target
Protein.
SECTION 11.3. TERMINATION FOR DEFAULT. If either party is in default of
any of its material obligations under this Agreement and fails to remedy that
default within ninety (90) days after the other party sends written notice of
the default (thirty (30) days in the event of failure to pay monies when due)
the party not in default may terminate the Project immediately by giving
written notice of the termination. The termination date shall be the date of
the notice of termination. If either party has materially defaulted and such
default has not been cured as described herein, the licenses and royalty
obligations hereunder shall survive; however, a termination under this
Section 11.3 is neither a waiver nor will it prejudice the non-defaulting
party from seeking a legal or equitable remedy against the defaulting party
for such material default.
SECTION 11.4. TERMINATION DUE TO ASSIGNMENT. In the event Scriptgen
assigns this Agreement, pursuant to Section 15.6, to an acquiring third-party
which is a pharmaceutical or biotechnology company, Lilly may terminate the
Project upon thirty (30) days notice without terminating the licenses (and
associated royalty obligations) granted to Lilly under this Agreement.
SECTION 11.5. RESIDUAL RIGHTS. Upon expiration or termination of this
Agreement, except as provided herein to the contrary, all rights and
obligations of the parties shall cease, except as follows:
<PAGE>
24
(a) Obligations to pay royalties and other sums accruing hereunder up to
the date of termination;
(b) The obligation (if any) to pay milestones as achieved and royalties
with respect to Products;
(c) All provisions regarding confidentiality shall continue in full
force and effect;
(d) Obligations of defense and indemnity;
(e) Obligations set forth in Article XV, but only with respect to those
causes of action which accrued prior to such termination;
(f) Any cause of action or claim of Scriptgen or Lilly accrued or to
accrue because of any breach or default by the other party
hereunder;
(g) All license and audit rights granted hereunder; and
(h) All other terms, provisions, representations, rights and obligations
contained in this Agreement that by their sense and context are
intended to survive until performance thereof by either or both
parties.
ARTICLE XII
DISCLOSURE OF AGREEMENT
SECTION 12.1. DISCLOSURE OF AGREEMENT. Except as provided below,
neither Scriptgen nor Lilly shall release any information to any third party
with respect to the existence and terms of this Agreement without the prior
written consent of the other, which shall not be unreasonably withheld. This
prohibition includes, but is not limited to, press releases, educational and
scientific conferences, promotional materials, governmental filings, and
discussions with lenders, investment bankers, public officials, and the media
provided, however, that Scriptgen may disclose the existence of the Agreement
to its lenders, investors and potential investors and the existence and terms
of the Agreement to its attorneys and accountants on a confidential basis.
SECTION 12.2. RELEASES REQUIRED BY LAW. If either party determines a
release of further information is required by law or governmental regulation,
it shall notify the other in writing at least thirty (30) days (or such
shorter time where legally required) before the time of the proposed release.
The notice shall include the exact text of the proposed release and the time
and manner of the release.
If requested, the party seeking to release information shall furnish to
the other an opinion of counsel that the release of that information is
required by law. At the other party's request, and before the release, the
party desiring to release further information shall consult with the other
<PAGE>
25
party on the necessity for the disclosure and the text of the proposed
further release. In no event shall a release include further information
regarding the existence or terms of this Agreement that is not required by
law or governmental regulation.
ARTICLE XIII
REPRESENTATIONS, WARRANTIES AND ACKNOWLEDGMENTS
SECTION 13.1. WARRANTY OF TITLE. Scriptgen hereby warrants that it has
the unencumbered right to enter into this Agreement and to grant the
license(s) contained herein. Lilly hereby warrants that it has the
unencumbered right to enter into this Agreement and to perform its
obligations hereunder.
SECTION 13.2. WARRANTY DISCLAIMER. EXCEPT AS OTHERWISE EXPRESSLY
PROVIDED IN THIS AGREEMENT, (A) NEITHER PARTY MAKES ANY REPRESENTATION OR
WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR ANY OTHER
WARRANTY OR REPRESENTATION, EXPRESS OR IMPLIED, (B) NEITHER PARTY MAKES ANY
REPRESENTATION OR WARRANTY THAT EXERCISE OF THE RIGHTS GRANTED IN THIS
AGREEMENT WILL NOT INFRINGE ANY THIRD PARTY PATENT OR OTHER PROPRIETARY
RIGHT, AND (C) NEITHER PARTY ASSUMES ANY RESPONSIBILITIES WHATSOEVER WITH
RESPECT TO PROJECT IP-RIGHTS.
SECTION 13.3. LIMITATIONS. Nothing in this Agreement shall be construed
as:
(a) a warranty or representation by either party as to the validity or
scope of any Project IP-Rights.
(b) a warranty or representation that anything made, used, sold or
otherwise disposed of under the rights granted in this Agreement is or will
be free from infringement of a third-party patent or other proprietary right;
or
(c) conferring by implication, estoppel or otherwise any license or
other right under any patents or technology of either party except as
otherwise expressly provided in this Agreement.
ARTICLE XIV
GOVERNMENTAL CONTROL
<PAGE>
26
SECTION 14.1. AUTHORITY. This Agreement is made subject to any
restrictions concerning the export of products or technical information from
the United States of America which may be imposed upon or related to
Scriptgen or Lilly from time to time by the government of the United States
of America.
ARTICLE XV
MISCELLANEOUS PROVISIONS
SECTION 15.1. NO AGENCY. It is understood and agreed that Scriptgen
shall have the status of an independent contractor under this Agreement and
that nothing in this Agreement shall be construed as authorization for either
Lilly or Scriptgen to act as agent for the other.
SECTION 15.2. FORCE MAJEURE. Both parties to the Agreement shall be
excused from the performance of their obligations under this Agreement if
such performance is prevented by Force Majeure and the nonperforming party
promptly provides notice of the prevention to the other party. Such excuse
shall be continued so long as the condition constituting Force Majeure
continues and the nonperforming party takes reasonable efforts to remove the
condition.
For purposes of this Agreement, Force Majeure shall include, but not
limited to, conditions beyond the control of the parties, including without
limitation, an act of God, voluntary or involuntary compliance with any
regulation, law or order of any government, war, civil commotion, epidemic,
failure or default of public utilities or common carriers, destruction of
production facilities or materials by fire, earthquake, storm or like
catastrophe.
SECTION 15.3. AMENDMENT. This Agreement may not be amended,
supplemented, or otherwise modified except by an instrument in writing signed
by both parties.
SECTION 15.4. NOTICES. Any notice required or permitted to be given
under this Agreement shall be in writing and shall be deemed to have been
sufficiently given for all purposes if mailed by first class certified or
registered mail, postage prepaid. Unless otherwise specified in writing, the
mailing addresses of the parties shall be as described below.
For Scriptgen: Scriptgen Pharmaceuticals, Inc.
200 Boston Avenue
Medford, MA 02155
Attention: Karen A. Hamlin
<PAGE>
27
For Lilly: Eli Lilly and Company
Lilly Corporate Center
Indianapolis, Indiana 46285
Attention: General Counsel
SECTION 15.5. GOVERNING LAW. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Indiana, excluding any
choice of law rules which may direct the application of the law of any other
jurisdiction. Questions effecting the construction and effect of any Project
IP-Rights shall be determined by the laws of the country in which the Project
IP-Rights have been applied for and granted.
SECTION 15.6. ASSIGNMENT. Neither party may assign its rights and
obligations under this Agreement without the prior written consent of the
other, except a party may make such an assignment without the other party's
consent in connection with any merger, reorganization or sale of all or
substantially all of its assets to which this Agreement relates. This
Agreement shall be binding upon and shall inure to the benefit of the
successors and permitted assigns of the parties.
SECTION 15.7. CONSENTS NOT UNREASONABLY WITHHELD. Whenever provision is
made in this Agreement for either party to secure the consent or approval of
the other, that consent or approval shall not unreasonably be withheld, and
whenever in this Agreement provisions are made for one party to object to or
disapprove a matter, such objection or disapproval shall not unreasonably be
exercised.
SECTION 15.8. NO STRICT CONSTRUCTION. This Agreement has been prepared
jointly and shall not be strictly construed against either party.
SECTION 15.9. HEADINGS. The captions or headings of the Sections or
other subdivisions hereof are inserted only as a matter of convenience or for
reference and shall have no effect on the meaning of the provisions hereof.
SECTION 15.10. SEVERANCE OF CLAUSES/INSOLVENCY. Each party agrees that,
should any provision of this Agreement be determined by a court of competent
jurisdiction to violate or contravene any applicable law or policy, such
provision will be severed or modified by the court to the extent necessary to
comply with the applicable law or policy, and such modified provision and the
remainder of the provisions hereof will continue in full force and effect. In
addition the parties hereto intend that the Agreement shall not be deemed an
executory contract under the Bankruptcy/Insolvency laws of the United States.
<PAGE>
28
SECTION 15.11. NO WAIVER. The waiver of a breach hereunder may be
effected only by a writing signed by the waiving party and shall not
constitute a waiver of any other breach.
SECTION 15.12. ENTIRE AGREEMENT. The Agreement institutes the entire
agreement of the parties relating to the subject matter, and may not be
amended, modified or canceled except by written instrument executed by both
Scriptgen and Lilly.
SECTION 15.13. COUNTERPARTS. This Agreement has been executed in two
(2) counterparts, all of which shall constitute an original, but which
together shall constitute are and the same instrument.
IN WITNESS WHEREOF, the parties by their respective authorized
officers, have executed this Agreement.
SCRIPTGEN ELI LILLY AND COMPANY
PHARMACEUTICALS, INC
By: /s/ Karen L. Hamlin By: /s/ August M. Watanabe
------------------------- -------------------------
Karen L. Hamlin August M. Watanabe
Title: Senior Director of Operations Title: Executive Vice President
Date: May 8, 1997 Date: May 7, 1997
<PAGE>
Exhibit A
ATLAS Set Up and Screening Plan: Two Eli Lilly Bacterial Targets
[***]
<PAGE>
Exhibit B
[TEXT OF UNITED STATES PATENT NUMBER 5,585,277]
[***]
<PAGE>
Exhibit C
Exhibit C: Staff involved in ATLAS application to Eli Lilly targets.
[***]: Overall supervision and project contact:
ALAN CORIN, PH.D., SENIOR RESEARCH FELLOW: Biophysical chemist with sixteen
years of industrial and academic postdoctoral experience.
JULIE BRYAN, ASSOCIATE SCIENTIST II: Biochemist with four years experience in
ATLAS technology implementation.
IAN GLOMSKI: ASSISTANT SCIENTIST: Biochemist with two years ATLAS experience.
JILL HEIL, ASSISTANT SCIENTIST: One year experience in ATLAS assay
establishment and high throughput screening.
<PAGE>
Exhibit 10.14
COMPOUND TESTING AND DEVELOPMENT AGREEMENT
between
SCRIPTGEN PHARMACEUTICALS, INC.
and
MONSANTO COMPANY
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS
EXHIBIT. THE CONFIDENTIAL PORTIONS HAVE BEEN REDACTED AND ARE
DENOTED BY [***]. THE CONFIDENTIAL PORTIONS HAVE BEEN SEPARATELY
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION.
<PAGE>
COMPOUND TESTING AND DEVELOPMENT AGREEMENT
This Agreement, dated as of November 17, 1997, is between Scriptgen
Pharmaceuticals, Inc. ("Scriptgen"), a Delaware corporation, and Monsanto
Company ("Monsanto"), a Delaware corporation.
RECITALS
WHEREAS, Scriptgen has certain assays to detect activity of compounds
in the field of anti-infectives for use as human pharmaceuticals and to
counterscreen for other activity;
WHEREAS, Monsanto desires to have certain of its compounds screened by
such assays for anti-infective activity within the field of agricultural and
in planta applications and Scriptgen has heretofore begun development of an
assay for such use;
WHEREAS, Monsanto has expertise and synthesis capabilities for the
preparation of derivative compounds or homologues, which may be useful for
developing leads;
WHEREAS, in exchange for such screening, Monsanto will pay Scriptgen
certain fixed fees, and Monsanto will make certain milestone and royalty
payments to Scriptgen if such screening leads to further development by
Monsanto of a compound for commercial use within the field of agricultural,
and in planta applications, subject to the terms and conditions of this
Agreement; and
WHEREAS, Monsanto will grant a license to Scriptgen for the purpose of
performing screening and development of such Monsanto compounds for use in
the field of human anti-infectives, and in exchange Scriptgen will make
certain milestone and royalty payments to Monsanto if such screening leads to
further development by Scriptgen of a compound for commercial use within the
field of human anti-infectives, subject to the terms and conditions of this
Agreement;
NOW, THEREFORE, in consideration of the mutual covenants set forth in this
Agreement, the parties hereby agree as follows:
1. Definitions.
"Additional Equipment" shall mean a certain amount of scientific
equipment required to complete the work contemplated under this Agreement as set
forth in Section 3.3.
"Advanced Field Trials" shall mean advanced testing trials conducted
by or for Monsanto in a manner representative of actual agricultural or
industrial practices including (i) determining the performance or safety of a
Development Compound or (ii) greenhouse, growth chamber or laboratory testing
using a radio-labeled analog of an active compound and associated testing,
advanced toxicity, environmental fate, and toxicity on non-target species
including mammals and/or assembling field information necessary to obtain an
EUP.
<PAGE>
"Agreement" shall mean this Compound Testing and Development
Agreement.
"Assays" shall mean individually or together (i) the [***]
assay(s) in development by Scriptgen from material isolated from the [***]
provided to Scriptgen by Monsanto, or such other species as determined by the
Research Committee, (ii) the [***] assay(s) based on a similar target [***]
from human cells, (iii) the [***] assay(s) from relevant human pathogens, and
(iv) certain other [***] assays designed to detect activity solely within the
Scriptgen Field.
"Compound" shall mean any chemical molecule that is provided by
Monsanto to Scriptgen in the [***] for screening and development as described
below.
"Confidential Information" shall have the meaning set forth in
Section 8.1.
"Derivative Compound" shall mean a chemical compound structurally
derived in one or more steps from a Compound or another Derivative Compound by a
process of modification (either through manipulation of a compound or synthesis
from structural information provided hereunder) or partial substitution of at
least one component wherein at least one structural feature is retained at each
process step. The number of intermediate steps or compounds is not relevant to
the classification of a compound as a Derivative Compound. A compound need not
have structural similarity to another Compound or Derivative Compound in order
to be classified as a Derivative Compound.
"Development Compound" shall mean any Compound or Derivative
Compound which exhibits [***] in the Monsanto Field or Scriptgen Field and with
respect to which the Research Committee has elected to conduct Preliminary Field
Trials, with respect to Monsanto, or phase I clinical trials with respect to
Scriptgen.
"Development Homolog" shall mean any Derivative Compound that
exhibits substantial homology with a Development Compound, as determined by the
Research Committee.
"Disclosing Party" shall mean that Party disclosing Confidential
Information to the other Party under Section 8.
"Effective Date" shall mean the date of execution of this Agreement
by the Parties hereto, at which time this Agreement shall become effective.
"EPA" shall mean the Environmental Protection Agency (or its foreign
equivalent responsible for approval of commercial use of Development Compounds).
"EUP or Experimental Use Permit" shall mean a permit for field
application issued by the EPA prior to label approval or the foreign equivalent
thereof.
2
<PAGE>
"Monsanto Field" shall mean all uses or applications of a
Development Compound not included within the Scriptgen Field.
"Monsanto Patent Rights" shall mean all [***] thereof owned by
Monsanto pursuant to Section 5.1 and [***]
"Net Sales Premium":
(a) for a Royalty Bearing Product which is sold as a
separate product not in combination with another product or service, Net
Sales Premium shall mean the gross invoice price of such Royalty Bearing
Product.
(b) for a Royalty Bearing Product which is sold as a bundled
product in combination with at least one other (the "Base Product") product
or service,
(i) in the event the Royalty Bearing Product is itself
also sold in material quantities to a third party as a separate product not
in combination with any other product or service, Net Sales Premium for the
bundled Royalty Bearing Product shall be the weighted average selling price
of the Royalty Bearing Product when sold to a third party as a separate
product multiplied by the number of units of the bundled Royalty Bearing
Product that are sold,
(ii) in the event the Royalty Bearing Product is itself
not sold in material quantities to a third party as a separate product not in
combination with any other product or service, the Parties shall determine a
mutually agreeable method of calculation which fairly recognizes the value
added by the Royalty Bearing Product to the Base Product.
In each case of determining Net Sales Premium, the gross invoice
price for sales of Royalty Bearing Products shall be net of discounts allowed
in amounts customary in the trade; reasonable and customary quantities of
samples; returns; and customer charges, sales, taxes, and transportation
costs separately invoiced.
"Open Pool" shall have the meaning assigned in Section 3.5.
"Party" means Scriptgen or Monsanto or their respective Primary
Affiliates.
"Parties" means Scriptgen and Monsanto and their respective Primary
Affiliates.
"Preliminary Field Trials" shall mean, with respect to any
Development Compound, preliminary testing first conducted by or for Monsanto to
determine efficacy conducted under anticipated use conditions, generally in an
external environment. Preliminary Field Trials does not include primary testing,
which includes greenhouse, growth chamber or
3
<PAGE>
laboratory testing including associated testing for environmental fate,
toxicity, and toxicity on non-target species including mammals.
"Primary Affiliate" shall mean, with respect to Monsanto or
Scriptgen, as the case may be, any corporation 50% or more of whose outstanding
equity securities entitled to vote in the election of Directors is owned
directly or indirectly by Monsanto or Scriptgen, as the case may be, and any
entity which is not a corporation 50% or more of whose net assets or profits is
owned directly or indirectly by Monsanto or Scriptgen, as the case may be.
"Product Team" shall mean a group of Monsanto employees formed to
facilitate product development analysis following successful completion of
Advanced Field Trials.
"Receiving Party" shall mean that Party receiving Confidential
Information under Section 8.1.
"Research Committee" shall have the meaning set forth in Section
2.1.
"Research Period" shall mean the period during the term of this
Agreement.
"Restricted Pool" shall have the meaning assigned in Section 3.5.
"Royalty-Bearing Product" shall mean [***].
"Royalty Period" shall mean, with respect to each Royalty-Bearing
Product, every calendar quarter, or partial calendar quarter, commencing with
[***] and ending at the end of the quarter during which [***] provided that
if the Royalty-Bearing Product utilizes intellectual property rights licensed
hereunder, then the Royalty Period shall terminate [***].
"Scriptgen Field" shall mean [***].
"Scriptgen Patent Rights" shall mean all [***] thereof owned by
Scriptgen pursuant to Section 5.1 and [***].
"Secondary Affiliate" shall mean, with respect to Monsanto or
Scriptgen, as the case may be, any corporation 20% or more of whose outstanding
equity securities entitled to vote in the election of Directors is owned
directly or indirectly by Monsanto or Scriptgen, as the case
4
<PAGE>
may be, and any entity which is not a corporation 20% or more of whose net
assets or profits is owned directly or indirectly by Monsanto or Scriptgen, as
the case may be.
"Significant Functional Activity": In the Monsanto field,
Significant Functional Activity shall mean [***]. In the Scriptgen field,
Significant Functional Activity shall mean [***].
"Sublicensee" shall mean any third party (not including a Secondary
Affiliate) licensed by a Party to make, use (except where the implied right to
use accompanies the sale to the third party of any Royalty-Bearing Product by a
Party or its Secondary Affiliates or Sublicensees), sell, import, export,
advertise, promote and otherwise commercialize any Royalty-Bearing Product.
"Target" shall mean any biological system or biologically derived or
relevant system within the Assays as well as biological targets used for
purposes of toxicity testing, relevant to the respective field of each Party.
"Valid Claim" shall mean a claim of [***] or other tribunal of
competent jurisdiction in any unappealable or unappealed decision the time for
appeal of which has expired.
The above definitions are intended to encompass the defined terms in
both the singular and plural tenses.
2. Management of Research Program.
2.1. Composition of Research Committee. The Parties hereby establish a
Research Committee comprised of four (4) members, with two (2)
representatives appointed by each Party. The initial members of the Research
Committee shall be as follows:
Scriptgen Representatives Monsanto Representatives
------------------------- ------------------------
[***] [***]
A Party may change one or more of its representatives to the Research Committee
at any time upon notice to the other Party. Each Party will designate one of its
representatives as its team leader.
5
<PAGE>
2.2. Duties of the Research Committee. The Research Committee shall direct
and administer the screening undertaken pursuant to this Agreement. The Research
Committee shall review test reports provided by Scriptgen [***]
2.3. Meetings of the Research Committee. The Research Committee shall
[***], or at such other times and locations as the Research Committee
determines. If a designated representative of a Party cannot attend any
meeting of the Research Committee, such Party may designate a different
representative for that meeting without notice to the other Party, and the
substitute member will have full power to vote on behalf of the permanent
member. All actions and decisions of the Research Committee will require the
unanimous consent of all of its members. If the Research Committee fails to
reach agreement upon any matter, the dispute will be resolved in accordance
with the procedures set forth in Section 12.5 below. [***] following each
quarterly meeting of the Research Committee, the Research Committee shall
prepare and delivers to both Parties, a written report describing the
decisions made, conclusions and actions agreed upon.
2.4. Visits to Facilities. Members of the Research Committee shall have
reasonable access to the facilities of each Party where activities under this
Agreement are in progress, but only during normal business hours and with
reasonable prior notice. Each Party shall bear its own expenses in connection
with such site visits.
2.5 Reports to Research Committee. Scriptgen shall deliver to the Research
Committee quarterly reports disclosing the Targets screened for the previous
quarter and planned for [***] in the Scriptgen Field and Monsanto Field in the
following quarter.
3. Fees and Delivery of Compounds
3.1 Fee for Work Performed. In consideration for the work performed by
Scriptgen for Monsanto in developing certain [***] assays prior to the
Effective Date, Monsanto has paid to Scriptgen the sum of [***].
3.2 Fee. In partial consideration for Scriptgen's efforts in screening
the Compounds in the Assays, Monsanto shall pay to Scriptgen a total of [***]
in the aggregate, payable [***] Monsanto may, in its sole discretion, pay any
or all of such amounts in advance. In the event of termination of this
Agreement pursuant to Section 11.2, and if the total of the [***] payable
hereunder has not been paid, the remainder of such amount shall be paid at
the time of such termination.
3.3 Capital Costs. In recognition of the additional scientific equipment
required by Scriptgen to perform its obligations hereunder (as set forth on
Exhibit A, "Additional Equipment"), subject to the terms and conditions herein
Monsanto shall reimburse Scriptgen for the price paid by Scriptgen for such
equipment (net of any discounts or allowances), not to
6
<PAGE>
exceed [***] Prior to acquiring or making a commitment to acquire any Additional
Equipment, Scriptgen shall present to Monsanto a notice containing a detailed
list of such items proposed for acquisition, the vendor from whom Scriptgen
proposes to acquire the Additional Equipment, and the price at which Scriptgen
proposes to acquire the Additional Equipment. Monsanto shall have ten (10) days
from the date of receipt of such notice to present to Scriptgen alternative
vendors and lower prices for the acquisition of such Additional Equipment. If
alternative vendors and lower prices are identified by Monsanto, and all other
material terms of the equipment and the purchase are equal to those originally
proposed by Scriptgen, then Scriptgen shall acquire such Additional Equipment
from the alternative vendors. All Additional Equipment shall be the sole
property of Scriptgen.
3.4 Delivery. Monsanto shall provide to Scriptgen, Compounds for
screening in the Assays [***] after the execution of this Agreement. Prior to
the first delivery of Compounds, Scriptgen shall execute a Materials Transfer
Agreement in the form attached as Exhibit B hereto. [***] Monsanto will work
in good faith to provide [***] of such individual compounds. No more than
[***] or such lower percentage as agreed upon by the Research Committee, may
contain mixtures. Mixtures will be indicated as such in the shipment
documentation and will contain at least [***] of each major component.
Monsanto will work in good faith to provide [***] of individual compounds
from any mixture deemed to have sufficient activity to warrant continued
investigation, as determined by the Research Committee. If the Research
Committee cannot agree upon the number of mixture samples that are to be
screened, then [***]. Monsanto will cooperate, in good faith, to provide
additional samples and/or procedures for synthesis and/or origin of samples,
for wells identified as containing active materials. The provisions of this
Article 3.4 may be modified by the Research Committee.
3.5 Number of Compounds. Monsanto shall provide [***] Compounds to
Scriptgen for screening pursuant to this Agreement. [***] of the Compounds
shall be available for further development and commercialization by Monsanto
or Scriptgen in the Monsanto Field or Scriptgen Field pursuant to this
Agreement [***] No more than [***] may be Compounds which [***] At the time
of delivery of the Compounds Monsanto shall [***].
3.6 Disclosure. [***] Monsanto will [***] upon delivery to Scriptgen.
If Scriptgen [***] Monsanto may subsequently [***]. Scriptgen shall
concurrently disclose [***]. All such disclosed information shall be treated
as Confidential Information by both Parties. The Research Committee shall
thereafter [***]. Monsanto shall thereafter [***].
If Scriptgen detects [***], Scriptgen may subsequently request that the
Research Committee designate such Compound and up to [***] Scriptgen shall
concurrently disclose [***]. All such disclosed information shall be treated
as Confidential Information by both Parties. The Research Committee shall
[***] Scriptgen shall thereafter [***] Scriptgen shall not [***]
If Scriptgen detects [***] then the Research Committee will endeavor
to identify a series of [***] that would allow each Party to further develop
that Compound in its respective field.
3.7 Sharing Derivatives. Monsanto will use commercially reasonable
efforts to provide to Scriptgen [***] produced hereunder for use by
Scriptgen in screening in the Scriptgen Field pursuant to the license set
forth in Section 4.1(a)(iii) provided that Scriptgen recognizes that the
availability of Derivative Compounds for testing by Scriptgen may be limited
by (i) existing agreements between Monsanto and third parties, or (ii)
insufficient amounts available after Monsanto has undertaken commercially
reasonable efforts to obtain additional amounts. Scriptgen will give to
Monsanto [***] produced hereunder by Scriptgen for use by Monsanto in
screening in the Monsanto Field pursuant to the license set forth in Section
4.1(b). Thereafter, Scriptgen shall have a license, with the right to
sublicense, to permit the screening of such compounds in the Monsanto Field
by any other party. The further development of any Derivative Compounds by
Monsanto or Scriptgen so delivered by either Monsanto or Scriptgen shall be
subject to the provisions of this Agreement in the same manner as any
Derivative Compound produced by that Party for its own use in screening
within its respective Field pursuant to the terms of this Agreement.
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4. License Grants; Diligence.
4.1. Evaluation Licenses.
(a) Licenses Granted to Scriptgen. Monsanto hereby grants to
Scriptgen (i) a non-exclusive, worldwide, royalty-free license (without the
right to sublicense) to test [***] in the Monsanto Field and in the Scriptgen
Field, (ii) a non-exclusive, worldwide, royalty-free license (without the
right to sublicense) to test [***] in the Monsanto Field only, and (iii) an
exclusive worldwide, royalty-free license (without the right to sublicense) to
test [***] if available pursuant to the terms of this Agreement, against [***]
Such license in Section 4.1(a)(iii) shall be exclusive for a time sufficient
for Scriptgen to test the initial efficacy and safety of the use of such
Derivative Compounds in the Scriptgen Field, which time shall not exceed [***]
from the date of receipt of such Compounds by Scriptgen. Scriptgen agrees
not to analyze in any manner, the chemical structures, origin, or composition
of the Compounds or Derivative Compounds from the [***].
(b) Licenses Granted to Monsanto. Scriptgen hereby grants to
Monsanto an exclusive, worldwide, royalty-free license (without the right to
sublicense) to test Derivative Compounds against Targets in the Monsanto
Field. Such license in Section 4.1(b) shall be exclusive for a time
sufficient for Monsanto to test the initial efficacy and safety of the use of
such Derivative Compounds in the Monsanto Field, which time shall not exceed
[***] from the date of receipt of such Compounds by Monsanto.
4.2. Commercialization Licenses.
(a) Licenses Granted to Scriptgen. Upon the identification of [***]
and the determination by the Research Committee that such Compound or any
Homolog thereof should properly be designated as a [***] Monsanto, without
any further action, shall be deemed to have granted to Scriptgen, under
Monsanto Patent Rights, an exclusive (including to the exclusion of
Monsanto), worldwide, royalty-bearing license (with the right to grant
sublicenses) (i) to develop (including the making of Derivative Compounds),
have developed, make, or have made Royalty-Bearing Products incorporating or
using any Monsanto Patent Rights covering the composition, manufacture or use
of such Development Compound for use, distribution and sale in the Scriptgen
Field, and (ii) to distribute for sale and sell in the Scriptgen Field
Royalty-Bearing Products incorporating or using any Monsanto Patent Rights
covering the composition, manufacture or use of such [***] and (iii) to use
in the Scriptgen Field Royalty-Bearing Products incorporating or using any
Monsanto Patent Rights covering the composition, manufacture or use of such
Development Compound.
(b) Licenses Granted to Monsanto. Upon the identification of
[***] and the determination by the Research Committee that such Compound or
any Homolog thereof should properly be designated as a [***], Scriptgen,
without any further action, shall be deemed to have granted to Monsanto,
under Scriptgen Patent Rights, an exclusive (including to the exclusion of
Scriptgen), worldwide, royalty-bearing license (with the right to grant
sublicenses) (i) to develop (including the making of Derivative Compounds),
have developed, make, or have made Royalty Bearing Products incorporating or
using any Scriptgen Patent Rights covering the composition, manufacture or
use of such [***] for use, distribution and sale in the Monsanto Field, and
(ii) to distribute for sale and sell in the Monsanto Field Royalty-Bearing
Products incorporating or using any Scriptgen Patent Rights covering the
composition, manufacture or use of such [***] and (iii) to use in the
Monsanto Field Royalty-Bearing Products incorporating or using any Scriptgen
Patent Rights covering the composition, manufacture or use of such [***].
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(b) Limitation of Licenses. No provision of this Agreement shall be deemed
to grant any license to a Compound or Derivative Compound to Scriptgen outside
of the Scriptgen Field.
4.3. Termination of Licenses. The licenses granted by Scriptgen to
Monsanto pursuant to Sections 4.1 and 4.2 shall continue in perpetuity unless
this Agreement is terminated by Scriptgen pursuant to Sections 11.4 or 11.5. The
licenses granted by Monsanto to Scriptgen pursuant to Sections 4.1 and 4.2 shall
continue in perpetuity unless this Agreement is terminated by Monsanto pursuant
to Sections 11.4 or 11.5.
4.4. Commercialization of Development Compounds. Monsanto shall have the
sole and absolute discretion to make all decisions relating to the research,
development, marketing and other commercialization activities with respect to
any Development Compound or any Royalty-Bearing Product derived therefrom in the
Monsanto Field. Scriptgen shall have the sole and absolute discretion to make
all decisions relating to the research, development, marketing and other
commercialization activities with respect to any Development Compound or any
Royalty-Bearing Product derived therefrom in the Scriptgen Field.
5. Intellectual Property Rights.
5.1 Intellectual Property Ownership. Regardless of whether such patents,
inventions and/or discoveries are made by Monsanto or Scriptgen: (a) all
compound patents and composition of matter patents and all know-how and
intellectual property rights relating to the Compounds or Derivative Compounds
outside of the Scriptgen Field shall belong to Monsanto; (b) all compound
patents and composition of matter patents and all know-how and intellectual
property rights relating to the Compounds or Derivative Compounds inside the
Scriptgen Field shall belong to Scriptgen; (c) all method of making patents and
use patents and associated other intellectual property rights relating to the
Compounds or Derivative Compounds inside of the Scriptgen Field shall belong to
Scriptgen; (d) all method of making patents and use patents and associated other
intellectual property rights relating to the Compounds or Derivative Compounds
outside of the Scriptgen Field shall belong to Monsanto; and (e) know-how not
covered by (a), (b), (c) or (d) above will be owned by the party which develops
the know-how, and know-how jointly developed will be jointly owned.
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5.2 Filing Patents.
(a) Monsanto shall have the sole and exclusive right to file
and maintain all compound patents, composition of matter patents, method
of making patents and method of use patents relating to the Compounds or
Derivative Compounds outside of the Scriptgen Field. Scriptgen shall have
the sole and exclusive right to file and maintain all compound patents,
composition of matter patents, method of making patents and method of use
parents relating to the Compounds or Derivative Compounds in the Scriptgen
Field.
(b) Patent application drafting, filing and prosecution for
jointly owned inventions will be carried out by Monsanto; provided that if
Monsanto is not interested in filing or prosecuting any patent application
or maintaining a patent for a joint invention arising from the activities
undertaken pursuant to this Agreement, Monsanto shall notify Scriptgen in
a written form. Scriptgen shall then be entitled to file or prosecute the
patent application or maintain the patent, as the case may be, at its own
responsibility and own expense. The party filing the patent shall bear all
costs of filing, prosecution and maintenance of such patent applications
and resulting patents. The non-filing party shall be kept informed of all
substantive matters relating to the preparation and prosecution of patent
applications related to any and all joint inventions. The filing party
will promptly provide the other party with copies of all material
prosecution and maintenance documentation and correspondence so that the
non-filing party will be currently and promptly informed of the continuing
prosecution and maintenance of material patent applications relating to
joint inventions.
5.3. Cooperation of the Parties. Each Party agrees to cooperate fully in
the preparation, filing, and prosecution of any patent rights under this
Agreement. Such cooperation includes, but is not limited to:
(a) executing all papers and instruments, or using reasonable
efforts to cause its employees or agents, to execute such papers and
instruments, so as to effectuate the ownership of intellectual property
rights set forth in Section 5.1 above and to enable the other Party to
apply for and to prosecute patent applications in any country;
(b) promptly informing the other Party of any matters coming
to such Party's attention that may affect the preparation, filing, or
prosecution of any such patent applications; and
(c) undertaking no actions that are potentially deleterious to
the preparation, filing, or prosecution of such patent applications.
5.4. Infringement by Third Parties. Scriptgen and Monsanto shall each
promptly notify the other in writing of any alleged or threatened infringement
by a third party of any Monsanto Patent Rights or Scriptgen Patent Rights of
which they become aware.
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(a) Each Party shall promptly report in writing to the other
Party during the term of this Agreement any known infringement or
suspected infringement of any Monsanto Patent Rights or Scriptgen Patent
Rights in the Monsanto Field or the Scriptgen Field, respectively,
covering a Development Compound or a Royalty Bearing Product by a third
party of which it becomes aware, and shall provide the other Party with
all available evidence supporting said infringement or suspected
infringement.
(b) Except as provided in paragraph (d) below, Monsanto shall
have the right to initiate an infringement or other appropriate suit
against any third party who at any time has infringed, or is suspected of
infringing, any Monsanto Patent Rights or Scriptgen Patent Rights covering
a Development Compound or a Royalty Bearing Product. Monsanto shall give
Scriptgen sufficient advance notice of its intent to file said suit and
the reasons therefor, and shall provide Scriptgen with an opportunity to
make suggestions and comments regarding such suit. Monsanto shall keep
Scriptgen properly informed, and shall from time to time consult with
Scriptgen regarding the status of any such suit and shall provide
Scriptgen with copies of all documents filed in such suit.
(c) Monsanto shall have the sole and exclusive right to select
counsel for any suit referred to in paragraph (b) above and shall pay all
expenses of the suit, including without limitation attorneys' fees and
court costs. Any damages, royalties, settlement fees or other
consideration received by Monsanto shall be divided between Monsanto and
Scriptgen based on the relative value that the intellectual property
rights of a Party which are the subject of the suit have to the value of
the intellectual property rights of the other Party which are also the
subject of the suit, if any, with respect to the infringing product sold,
after all expenses of the litigation are deducted. If necessary, Scriptgen
shall join as a party to the suit but shall be under no obligation to
participate except to the extent that such participation is required as
the result of being a named party to the suit. Scriptgen shall offer
reasonable assistance to Monsanto in connection therewith at no charge to
Monsanto. Scriptgen shall have the right to participate and be represented
in any such suit by its own counsel at its own expense. Monsanto shall not
settle any such suit involving rights of Scriptgen without obtaining the
prior written consent of Scriptgen, provided that Scriptgen shall not
withhold its consent to any settlement which will provide an unconditional
release of Scriptgen and its Secondary Affiliates and which does not have
a material adverse effect on Scriptgen or Scriptgen's business.
(d) In the event that Monsanto elects not to initiate an
infringement or other appropriate suit pursuant to paragraph (b) above,
Monsanto shall promptly advise Scriptgen of its intent not to initiate
such suit, and Scriptgen shall have the right, at the expense of
Scriptgen, of initiating an infringement or other appropriate suit against
any third party who at any time has infringed, or is suspected of
infringing, any Monsanto Patent Rights or Scriptgen Patent Rights covering
a Development Compound or a Royalty Bearing Product. In exercising its
rights pursuant to this paragraph (d), Scriptgen shall have the sole and
exclusive right to select counsel for any suit referred to in paragraph
(b) above and shall pay all expenses of the suit, including without
limitation attorneys' fees and court costs. Any damages, royalties,
settlement fees or other consideration received
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by Scriptgen shall be [***] if any, with respect to the infringing product
sold, after all expenses of the litigation are deducted. If necessary,
Monsanto shall join as a party to the suit but shall be under no
obligation to participate except to the extent that such participation is
required as the result of being a named party to the suit. At Scriptgen's
request, Monsanto shall offer reasonable assistance to Scriptgen in
connection therewith at no charge to Scriptgen. Monsanto shall have the
right to participate and be represented in any such suit by its own
counsel at its own expense. Scriptgen shall not settle any such suit
involving rights of Monsanto without obtaining the prior written consent
of Monsanto, provided that Monsanto shall not withhold its consent to any
settlement which will provide an unconditional release of Monsanto and its
Secondary Affiliates and which does not have a material adverse effect on
Monsanto or Monsanto's business.
5.5 Claimed Infringement. In the event that any action, suit or proceeding
is brought against Scriptgen, Monsanto or any Secondary Affiliate, licensee or
Sublicensee of Scriptgen or Monsanto, alleging the infringement of the
intellectual property rights of a third party by reason of the discovery,
development, manufacture, use, sale, importation or offer for sale of a
Development Compound or a Royalty Bearing Product by Monsanto or its Secondary
Affiliates or its or their licensees or Sublicensees, Monsanto will have the
obligation to defend itself and its Secondary Affiliates and Scriptgen and its
Secondary Affiliates and the licensees and Sublicensees of Scriptgen and
Monsanto, in such action, suit or proceeding at Monsanto's expense. Scriptgen
shall have the right to separate counsel at its own expense in any such action
or proceeding and Monsanto will reimburse Scriptgen for all reasonable
expenditures incurred in connection therewith.
In the event that any action, suit or proceeding is brought against
Scriptgen, Monsanto or any Secondary Affiliate, licensee or Sublicensee of
Scriptgen or Monsanto, alleging the infringement of the intellectual property
rights of a third party by reason of the discovery, development, manufacture,
use, sale, importation or offer for sale of a Development Compound or a Royalty
Bearing Product by Scriptgen or its Secondary Affiliates or its or their
licensees or Sublicensees, Scriptgen will have the obligation to defend itself
and its Secondary Affiliates and Monsanto and its Secondary Affiliates and the
licensees and Sublicensees of Scriptgen and Monsanto, in such action, suit or
proceeding at Scriptgen's expense. Monsanto shall have the right to separate
counsel at its own expense in any such action or proceeding and Scriptgen will
reimburse Monsanto for all reasonable expenditures incurred in connection
therewith.
Notwithstanding any other provision of this Agreement, in the event that a
third party shall bring (i) any action, suit or proceeding against Monsanto or
any Secondary Affiliate, licensee or Sublicensee of Monsanto and (ii) any
action, suit or proceeding against Scriptgen or any Secondary Affiliate,
licensee or Sublicensee of Scriptgen, both of which actions, suits or
proceedings arise from or relate to the same facts or circumstances, Monsanto
and Scriptgen shall each have the sole and exclusive right, at their own
expense, to select counsel to represent it or its
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<PAGE>
Secondary Affiliate, licensee or Sublicensee with respect to any such action,
suit or proceeding. Expenses, costs and damages imposed on Monsanto or Scriptgen
in such action, suit or proceeding shall be shared by Monsanto and Scriptgen
based on the relative fault of each party as determined at the final outcome of
such suit, action or proceeding.
The Parties will cooperate with each other in the defense of any such
suit, action or proceeding. The Parties will give each other prompt written
notice of the commencement of any such suit, action or proceeding or claim or
infringement and will furnish each other a copy of each communication relating
to the alleged infringement, but the failure to do so shall not affect the
Parties obligations under this Section and under Section 9 except to the extent
a Party is actually damaged thereby. Neither shall not compromise, litigate,
settle or otherwise dispose of any such suit, action or proceeding which
involves the use of patent rights of the other Party without that Other Party's
advice and prior written consent, provided that such other Party shall not
unreasonably withhold its consent to any settlement which will provide an
unconditional release of that other Party and which does not have a material
adverse effect on that other Party's business.
6. Ownership of Compounds.
Monsanto shall have all ownership rights to Compounds and Derivative
Compounds, to the extent not licensed to Monsanto by a third party.
7. Payments, Reports, and Records.
7.1. Monsanto Milestone Payments. In partial consideration of the
rights granted Monsanto under this Agreement, Monsanto shall pay Scriptgen
the following amounts [***] after each occurrence of the following milestones:
Payment Milestone
------- ---------
[***] [***]
[***] [***]
- ------------------
[***]
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[***] [***]
[***] [***]
Such milestone payments shall be [***] and shall not be [***]. Monsanto
shall [***].
7.2. Scriptgen Milestone Payments. In partial consideration of the
rights granted Scriptgen under this Agreement, Scriptgen shall pay Monsanto
the following amounts within thirty (30) days after each occurrence of the
following milestones:
Payment Milestone
------- ---------
[***] [***]
[***] [***]
[***] [***]
[***] [***]
Such milestone payments shall be [***] and shall not be [***] Scriptgen shall
[***].
7.3. Royalties.
(a) In consideration of the licenses granted to Monsanto by
Scriptgen hereunder, for sales by Monsanto of Royalty-Bearing Products for
which a Valid Claim held by Monsanto under Monsanto Patent Rights or Joint
Patent Rights is in effect on a country-by-country basis, Monsanto shall pay
to Scriptgen a royalty of [***] of Royalty-Bearing Products in the
Monsanto Field containing [***] provided that in the event that
Monsanto shall make sales of Royalty Bearing Products for [***]
- ------------------------
[***]
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(b) In consideration of the licenses granted to Scriptgen by
Monsanto hereunder, for sales by Scriptgen of Royalty-bearing Products for
which a Valid Claim held by Scriptgen with respect to Scriptgen patent Rights
or Joint Patent Rights is in effect on a country-by-country basis, Scriptgen
shall pay to Monsanto a royalty of [***] of Royalty-Bearing Products in the
Scriptgen Field containing [***] provided that in the event that Scriptgen
shall make sales of Royalty Bearing Products for [***].
(c) No royalty shall accrue on sales among [***] Royalties shall
only accrue on sales by [***] and shall be payable [***].
7.4. Reports and Payments. Within [***] after the conclusion of each
Royalty Period, each Party shall deliver to the other a report containing the
following information:
(a) [***] of Royalty-Bearing Products by [***] during the
applicable [***],
(b) adjustments and calculation of [***] for the applicable [***]
and
(c) total [***] together with the [***].
All such reports shall be maintained in confidence. If no royalties are due
for any reporting period, the report shall so state. Concurrent with this
report, the reporting party shall [***]. All amounts payable under this
Section will first be calculated in the currency of sale and then converted
into U.S. dollars in accordance with Section 7.5, and such amounts shall be
paid [***].
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7.5 Invoices; Payments in U.S. Dollars. With the exception of royalty
payments due under Section 7.3, each selling Party shall submit invoices to
the other Party for each payment due hereunder, and the other Party shall pay
such invoices within [***] of receipt thereof. All payments due under this
Agreement shall, except as provided in Section 7.6 below, be payable in
United States dollars, and if not paid within [***] of their due date, shall
[***]. Conversion of foreign currency to U.S. dollars shall be made at the
conversion rate existing in the United States (as reported in The Wall Street
Journal) on the last working day of the calendar quarter preceding the
applicable calendar quarter. Such payments shall be without deduction of [***].
7.6. Payments in Other Currencies. If by law, regulation, or fiscal
policy of a particular country, conversion into United States dollars or
transfer of funds of a convertible currency to the United States is
restricted or forbidden, the selling Party shall give prompt written notice
of such restriction, which notice shall satisfy the [***] payment deadline
described in Section 7.5. Each Party shall pay any amounts due through whatever
lawful methods the non-selling Party reasonably designates; provided,
however, that if the non-selling Party fails to designate such payment method
within [***] after the non-selling Party is notified of the restriction, then
the Selling Party may deposit such payment in local currency to the credit of
the non-selling Party in a recognized banking institution selected by the
selling Party and identified by written notice to the non-selling Party, and
such deposit shall fulfill all obligations of the selling Party to the
non-selling Party with respect to such payment.
7.7 Records. Each Party and its Secondary Affiliates shall maintain
complete and accurate records of Royalty-Bearing products made, used or sold
by them or their Sublicensees under this Agreement, and any amounts payable to
the other Party in relation to such Royalty-Bearing Products, which records
shall contain [***]. The selling Party shall retain such records relating to a
given Royalty Period for at least [***] after the conclusion of that Royalty
period. Each Party (acting as the "Auditing Party") shall have the right, at
its own expense, to [***] inspect such records of the other Party (the
"Audited Party") during normal business hours for the sole purpose of
verifying any reports and payments delivered under this Agreement. Such
accountant shall not disclose to the Auditing Party any information other
than information relating to accuracy of reports and payments delivered under
this Agreement and shall provide the Audited Party with a copy of any report
given to the Auditing Party. The Parties shall reconcile any underpayment or
overpayment within [***] after the accountant delivers the results of the
audit. In the event that any audit performed under this Section reveals an
underpayment in excess of [***] in any Royalty Period, the Audited Party
shall bear the full cost of such audit. Each Party may exercise its rights
under this Section only once every year and only with reasonable prior notice
to the other party. Each Party shall use commercially reasonable efforts to
ensure that the other Party will have access to records of Royalty-Bearing
Products sold by its Secondary Affiliates.
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8. Confidential Information.
8.1. Definition of Confidential Information. Confidential Information
shall mean any technical or business information, whether orally or in writing,
furnished by the Disclosing Party to the Receiving Party in connection with this
Agreement. Such Confidential Information may include, without limitation, the
existence and terms of this Agreement, the identity of a compound, the use of a
compound, trade secrets, know-how, inventions, technical data or specifications,
testing methods, business or financial information, research and development
activities, product and marketing plans, and customer and supplier information,
including, but not limited to, such items that become known to a Party during
visits to the facilities of the other Party.
8.2. Obligations. The Receiving Party agrees that it shall:
(a) maintain all Confidential Information in strict
confidence, except that the Receiving Party may disclose or permit the
disclosure of any Confidential Information to its, and its Primary
Affiliates, directors, officers, employees, consultants, and advisors who
are obligated to maintain the confidential nature of such Confidential
Information and who need to know such Confidential Information for the
purposes set forth in this Agreement;
(b) use all Confidential Information solely for the purposes
set forth in, or as permitted by, this Agreement; and
(c) allow its Primary Affiliates, directors, officers,
employees, consultants, and advisors to reproduce the Confidential
Information only to the extent necessary to effect the purposes set forth
in this Agreement, with all such reproductions being considered
Confidential Information.
Each Party shall be responsible for any breaches of this Section 8.2 by any of
its directors, officers, employees, consultants, and advisors.
8.3. Exceptions. The obligations of the Receiving Party under Section 8.2
above shall not apply to any specific Confidential Information to the extent
that the Receiving Party can demonstrate that such Confidential Information:
(a) was in the public domain prior to the time of its
disclosure under this Agreement;
(b) entered the public domain after the time of its disclosure
under this Agreement through means other than an unauthorized disclosure
resulting from an act or omission by the Receiving Party or its Primary
Affiliates, directors, officers, employees, consultants, advisors or
agents;
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<PAGE>
(c) was independently developed or discovered by the Receiving
Party without use of the Confidential Information, and which can be
demonstrated by written record;
(d) is or was disclosed to the Receiving Party at any time,
whether prior to or after the time of its disclosure under this Agreement,
by a third party having no fiduciary relationship with the Disclosing
Party and having no obligation of confidentiality to the Disclosing Party
with respect to such Confidential Information; or
(e) is required to be disclosed to comply with applicable laws
or regulations (such as disclosure to the SEC, the EPA, the FDA, or the
United States Patent and Trademark Office or to their foreign
equivalents), or to comply with a court or administrative order, provided
that the Disclosing Party receives prior written notice of such disclosure
and that the Receiving Party takes all reasonable and lawful actions to
obtain confidential treatment for such disclosure and, if possible, to
minimize the extent of such disclosure.
8.4. Survival of Obligations. The obligations set forth in this Article
shall remain in effect after termination or expiration of this Agreement for a
period of [***]
9. Representations and Warranties.
9.1. Authorization. Each Party represents and warrants to the other that
it has the legal right and power to enter into this Agreement, to extend the
rights and licenses granted to the other in this Agreement, and to fully perform
its obligations hereunder, and that 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.
9.2. Non-Infringement. Each Party represents that to its knowledge the
conduct of its business as it is currently being conducted or as it is proposed
to be conducted pursuant to this Agreement does not conflict with or infringe on
the intellectual property of any other person, and each Party has not received
any claim or notice from any person to such effect which is still pending. Each
Party has no knowledge of any claim or fact that would give rise to a claim that
any of their respective Patents is invalid or unenforceable. To their knowledge,
each Party's Patents are not infringed by any third party.
10. Indemnification.
10.1. Indemnification. Each Party (the "Indemnitor") shall indemnify,
defend, and hold harmless the other Party and its Primary Affiliates and their
directors, officers, employees, and agents and their respective successors,
heirs and assigns (the "Indemnitees"), against any liability, damage, loss, or
expense (except to the extent otherwise provided in Section 5.5) incurred by or
imposed upon the Indemnitees or any one of them in connection with any claims,
settlements, suits, actions, demands, or judgments arising out of (i) any theory
of product liability (including, but not limited to, actions in the form of
tort, warranty, or strict liability) concerning any product
18
<PAGE>
(or any process or service) that is made, used, or sold by the Indemnitor
pursuant to any right or license granted under this Agreement and (ii)
infringement of third party rights, including claims relating to compounds
produced by a party pursuant to methods of making disclosed to that party by the
other party; provided, however, that such indemnification right shall not apply
to any liability, damage, loss, or expense to the extent directly attributable
to the negligent activities, reckless misconduct, or intentional misconduct of
the Indemnitees. An indemnified party shall not be entitled to indemnification
for the settlement of any claim pursuant to this Agreement unless it obtains the
prior written consent of the indemnifying party to such settlement.
10.2. Procedures. Any Indemnitee that intends to claim indemnification
under Section 10.1 shall promptly notify the appropriate Indemnitor of any claim
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 an Indemnitee shall have
the right to retain its own counsel, with the fees and expenses of no more than
law firm representing all Indemnitees in the proceeding or related proceeding,
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
Section 10.1. shall not apply to amounts paid in settlement of any loss, claim,
liability or action if such settlement is effected without the consent of the
Indemnitor. 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 the Indemnitor of any liability to the
Indemnitee under Section 10.1. Each party and its Primary Affiliates and their
employees and agents shall cooperate fully with the other party and its legal
representatives in the investigation of any action, claim or liability covered
by this indemnification.
11. Term and Termination.
11.1. Term. This Agreement shall commence on the Effective Date and
shall expire, with respect to the royalty obligations hereunder, on a country
by country basis when the Royalty Period for that country ends, or unless
earlier terminated as provided in this Article 11.
11.2. Termination by the Parties Upon Completion of Screening. Upon
completion of the compound screening, the Parties agree that only that
portion of this Agreement shall be deemed to have been terminated.
11.3. Termination by the Parties Upon Mutual Consent. This Agreement
may be terminated at any time by mutual written agreement of the Parties.
11.4. Breach of Payment Obligations. In the event that a Party fails
to make timely payment of any amounts due under this Agreement within [***]
business days after demand therefor, the other Party may terminate this
agreement upon [***] prior written notice given following the time interest
begins to accrue pursuant to Section 7.5, unless the non-paying Party cures
such breach by paying all past-due amounts within such thirty-day notice
period,
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provided that a Party shall be entitled to use such cure provision no more than
once in any 12 month period.
11.5. Material Breach. In the event that either Party commits a material
breach of any of its obligations under this Agreement (other than as provided in
Section 11.3) and such Party fails (i) to remedy that breach within ninety (90)
days after receiving written notice thereof from the other Party or (ii) to
commence dispute resolution pursuant to Section 12.5, within ninety (90) days
after receiving written notice of that breach from the other Party, the other
Party may immediately terminate this Agreement upon written notice to the
breaching Party.
11.6. Disposition of Confidential Information. In the event of termination
or expiration of this Agreement, the Parties shall return or destroy all forms
of Confidential Information provided to them under this Agreement, within thirty
(30) days after such termination or expiration, provided that each party may
retain one copy of such Confidential Information for the sole purpose of use in
any litigation resulting from this Agreement or the activities undertaken
pursuant to this Agreement.
11.7. Effect of Termination. Termination of this Agreement shall not
relieve the parties of any obligation accruing prior to such termination. The
provisions of Article 4, Article 5, Article 6 and Article 7 (with respect only
to milestone payments and royalties accrued at the time of termination but not
yet paid), Article 8, Article 9, Article 10 and Article 12 shall survive the
expiration or termination of this Agreement. Termination of this Agreement
pursuant to Sections 11.2, 11.3, or 11.4 shall not limit any other rights and
remedies of the terminating party.
12. Miscellaneous.
12.1. Relationship of Parties. Nothing in this Agreement is intended or
shall be deemed to constitute a partnership, agency, employer-employee or joint
venture relationship between the parties. No party shall incur any debts or make
any commitments for the other, except to the extent, if at all, specifically
provided herein.
12.2. Publicity. Neither party shall use the name of the other party or
reveal the existence of or terms of this Agreement in any publicity or
advertising without the prior written approval of the other party, except that
(i) either party may use the text of a written statement approved in advance by
both parties without further approval, and (ii) either party shall have the
right to identify the other party and to disclose the terms of this Agreement as
required by applicable securities laws or other applicable law or regulation,
provided that the receiving party takes reasonable and lawful actions to
avoid/minimize the degree of such disclosure.
12.3. Non-Solicitation. During the term of this Agreement and thereafter
for a period of two (2) years, each Party agrees not to seek to persuade or
induce any employee of the other Party to discontinue his or her employment with
that Party, or to hire any such employee.
12.4. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York.
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12.5 Dispute Resolution Procedures.
(a) The parties hereby agree that they will attempt in good
faith to resolve any controversy, claim or dispute ("Dispute") arising out
of or relating to this Agreement promptly by negotiations. Any such
Dispute which is not settled by the parties within [***] days after notice
of such Dispute is given by one party to the other in writing shall be
referred to the President of Scriptgen and the Vice President, Discovery
of Monsanto who are authorized to settle such Disputes on behalf of their
respective companies ("Senior Executives"). The Senior Executives will
meet for negotiations within [***] days of the end of the [***]
negotiation period referred to above, at a time and place mutually
acceptable to both Senior Executives. If the Dispute has not been resolved
within [***] days after the end of the [***] negotiation period referred
to above (which period may be extended by mutual agreement), unless
otherwise specifically provided for herein, any Dispute will be settled
first by non-binding mediation and thereafter by arbitration as described
in subsections (b) and (c) below.
(b) Any Dispute which is not resolved by the parties within
the time period described in subsection (a) shall be submitted to an
alternative dispute resolution process ("ADR"). Within [***] after the
expiration of the [***] period set forth in subsection (a), each party
shall select for itself a representative with the authority to bind such
party and shall notify the other party in writing of the name and title of
such representative. Within [***] days after the date of delivery of such
notice, the representatives shall schedule a date for engaging in
non-binding ADR with a neutral mediator or dispute resolution firm
mutually acceptable to both representatives. Any such mediation shall be
held in Boston, Massachusetts if brought by Monsanto and St. Louis,
Missouri if brought by Scriptgen. Thereafter, the representatives of the
parties shall engage in good faith in an ADR process under the auspices of
such individual or firm. If the representatives of the parties have not
been able to resolve the Dispute within [***] days after the conclusion of
the ADR process, or if the representatives of the parties fail to schedule
a date for engaging in non-binding ADR within the [***] day period set
forth above, the Dispute shall be settled by binding arbitration as set
forth in subsection (c) below. If the representatives of the parties
resolve the dispute within the [***] day period set forth above, then such
resolution shall be binding upon the parties. If either party fails to
abide by such resolution, the other party can immediately refer the matter
to arbitration under Section 13.5(c).
(c) If the parties have not been able to resolve the Dispute
as provided in subsections (a) and (b) above, the Dispute shall be finally
settled by binding arbitration. Any arbitration hereunder shall be
conducted under rules of the American Arbitration Association. The
arbitration shall be conducted before three arbitrators chosen according
to the following procedure: each of the parties shall appoint one
arbitrator and the two so nominated shall choose the third, provided that
in the case of a dispute as to decisions of the Research Committee each
party shall designate one (1) neutral having the following
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minimum scientific qualifications: a Ph.D. degree in chemistry or life
sciences and/or an M.D. degree plus at least ten (10) years of relevant
business or scientific research experience. These two(2) neutrals shall
select a third neutral having the same minimum scientific qualifications
within fourteen (14) days of the appointment of the first two (2)
neutrals. None of the neutrals shall be an employee, director or
shareholder of either Party or any of their subsidiaries, Secondary
Affiliates or otherwise have a materially conflicting interest in the
outcome of such proceeding. If the arbitrators chosen by the parties
cannot agree on the choice of the third arbitrator within a period of
thirty (30) days after their appointment, then the third arbitrator with
such requisite qualifications shall be appointed by the Court of
Arbitration of the American Arbitration Association. Any such arbitration
shall be held in Boston, Massachusetts if brought by Monsanto and St.
Louis, Missouri if brought by Scriptgen or such other location as the
arbitrators may agree. The arbitrators shall have the authority to grant
specific performance, and to allocate between the parties the costs of
arbitration in such equitable manner as they determine. The arbitral award
(i) shall be final and binding upon the parties; and (ii) may be entered
in any court of competent jurisdiction.
(d) Nothing contained in this Section or any other provisions
of this Agreement shall be construed to limit or preclude a party from
bringing any action in any court of competent jurisdiction for injunctive
or other provisional relief to compel the other party to comply with its
obligations hereunder before or during the pendency of mediation or
arbitration proceedings. The parties hereby irrevocably consent to submit
to the jurisdiction of the federal courts located within the Commonwealth
of Massachusetts and the state of Missouri and agree that venue is proper
in any such court and will not seek to alter or contest such venue.
12.6. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, and all of which
together shall be deemed to be one and the same instrument.
12.7. Headings. All headings in this Agreement are for convenience only
and shall not affect the meaning of any provision hereof.
12.8. Binding Effect. This Agreement shall inure to the benefit of and be
binding upon the Parties, their Primary Affiliates, and their respective lawful
successors and assigns.
12.9. Assignment. This Agreement may not be assigned by either party
without the prior written consent of the other party, except that either party
may assign this Agreement to a successor in connection with the merger,
consolidation, spin-off or sale of all or substantially all of its assets or
that portion of its business pertaining to the subject matter of this Agreement.
Monsanto has the right to extend its rights and benefits under this Agreement to
any Primary Affiliate.
12.10. Notices. All notices, requests, demands and other communications
required or permitted to be given pursuant to this Agreement shall be in writing
and shall be deemed to have
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been duly given upon the date of receipt if delivered by hand, recognized
international overnight courier, confirmed facsimile transmission, or registered
or certified mail, return receipt requested, postage prepaid to the following
addresses or facsimile numbers:
If to Monsanto: If to Scriptgen:
Monsanto Company Scriptgen, Inc.
700 Chesterfield Parkway North 200 Boston Avenue
St. Louis, Missouri 63198 Medford, MA 02155
Attention: Grace Bonner Attention: Karen A. Hamlin
[***] [***]
with a copy to: with a copy to:
[***]
Bryan Cave LLP Constantine Alexander
One Metropolitan Sq., Suite 3600 Nutter, McClennen & Fish, LLP
St. Louis, Missouri 63102 One International Place
Attention: James H. Erlinger III Boston, Massachusetts 02110-2699
[***] [***]
Either party may change its designated address and facsimile number by notice to
the other party in the manner provided in this Section.
12.11. Amendment and Waiver. This Agreement may be amended, supplemented,
or otherwise modified only by means of a written instrument signed by both
parties. Any waiver of any rights or failure to act in a specific instance shall
relate only to such instance and shall not be construed as an agreement to waive
any rights or fail to act in any other instance, whether or not similar.
12.12. Severability. In the event that any provision of this Agreement
shall, for any reason, be held to be invalid or unenforceable in any respect,
such invalidity or unenforceability shall not affect any other provision hereof,
and the parties shall negotiate in good faith to modify the Agreement to
preserve (to the extent possible) their original intent.
12.13. Entire Agreement. This Agreement and the attached Exhibits A and B
constitute the entire agreement between the parties with respect to the subject
matter hereof and supersede all prior agreements or understandings between the
parties relating to the subject matter hereof.
12.14. Force Majeure. Neither party shall be held liable or responsible to
the other party, nor be deemed to be in breach of this Agreement, for failure or
delay in fulfilling or performing any provisions of this Agreement when such
failure or delay is caused by or results from any cause whatsoever outside the
reasonable control of the party concerned including, but not limited to, fire,
explosion, breakdown of plant, strike, lock-out, labor disputes, casualty or
accident, lack
23
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or failure of transportation facilities, flood, lack or failure of sources of
supply or of labor, raw materials or energy, civil commotion, embargo, any law,
regulation, decision, demand or requirement of any national or local government
or authority. The party claiming relief shall, without delay, notify the other
party by registered airmail or by telefax of the interruption and cessation
thereof and shall use its best efforts to remedy the effects of such hindrance
with all reasonable dispatch. The onus of proving that any such Force Majeure
event exists shall rest upon the party so asserting. During the period that one
party is prevented from performing its obligations under this Agreement due to a
Force Majeure event, the other party may, in its sole discretion, suspend any
obligations that relate thereto. Upon cessation of such Force Majeure event the
parties hereto shall use their best efforts to make up for any suspended
obligations. If such Force Majeure event is anticipated to continue, or has
existed for nine (9) consecutive months or more, this Agreement may be forthwith
terminated by either party by registered airmail or by telefax. In case of such
termination the terminating party will not be required to pay to the other party
any indemnity whatsoever.
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<PAGE>
IN WITNESS WHEREOF, the undersigned have duly executed and delivered this
Agreement as a sealed instrument effective as of the date first above written.
MONSANTO COMPANY SCRIPTGEN PHARMACEUTICALS, INC.
By: /s/ Jim I. McLoughlin By: /s/ Karen A. Hamlin
-------------------------------- ----------------------------------
Name: Jim I. McLoughlin, Ph.D. Name: Karen A. Hamlin
Title: Manager, Technology Alliances Title: Senior Director of Operations
25
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EXHIBIT A
ADDITIONAL EQUIPMENT
[***]
26
<PAGE>
EXHIBIT B
FORM OF MATERIALS TRANSFER AGREEMENT
This Agreement, dated as of _______, __, _____, is between Scriptgen
Pharmaceuticals, Inc. ("Scriptgen"), a Delaware corporation, and Monsanto
Company ("Monsanto"), a Delaware corporation and ________________, a
___________________ ("Recipient").
WHEREAS, Monsanto and Scriptgen have entered into a Compound Testing
And Development Agreement pursuant to which Monsanto and Scriptgen have
agreed to provide the other with certain compounds for screening on the terms
and subject to the conditions set forth in such agreement and to perform
certain other compound development activities; and
WHEREAS, pursuant to the Compound Testing And Development Agreement,
Scriptgen and Monsanto are permitted to deliver such compounds to third parties
such as Recipient, provided such parties execute and deliver this Agreement to
__________________.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and conditions contained herein and for other good and valuable consideration,
the receipt and sufficiency of which is hereby acknowledged, the parties hereto
agree as follows:
1. SUPPLY OF MATERIALS: Within ____ days after receiving an original of
this Agreement executed by all parties, [Monsanto/Scriptgen] will supply
Recipient with the compounds set forth on Exhibit 1 (the "Materials"). Upon
written request, [Monsanto/Scriptgen] may provide the Recipient with additional
quantities of such Materials or with additional compounds, which compounds shall
also be considered Materials for the purposes of this Agreement.
2. USE AND TRANSFER RESTRICTIONS: Recipient acknowledges and agrees that
the Materials may be proprietary to and owned by Monsanto and/or Scriptgen and
are or may be covered by claims of U.S. and international patents or patent
applications of Monsanto and/or Scriptgen Recipient agrees to use the Materials
solely to screen them for _______________________ use. Recipient agrees (i) not
to transfer such Materials to any third party without the prior written consent
of [Monsanto/Scriptgen], (ii) to permit access to the Materials only to its
employees and consultants requiring such access, (iii) to inform such employees
and consultants of the proprietary nature of the Materials, (iv) to take
reasonable precautions, at least as stringent as those observed by Recipient to
protect its own proprietary materials, to ensure that such employees and
consultants observe the obligations of Recipient pursuant to this Section and
(v) to execute and deliver any documents of assignment or conveyance that may be
necessary to effectuate the ownership rights of Monsanto and/or Scriptgen in the
Materials. Upon the expiration of this Agreement, Recipient shall, at the
instruction of the party providing the Materials, either destroy or return any
unused Materials.
3. COMPLIANCE WITH LAW: Recipient agrees to comply with all federal,
state, and
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<PAGE>
local laws and regulations applicable to the use, testing, storage, disposal,
and transfer of the Materials. Recipient assumes sole responsibility for any
violation of such laws or regulations by Recipient or any of its affiliates or
sublicensees.
4. TERMINATION: This Agreement shall commence on the date last written
below and continue for a period of ____ months. Sections 3, 6 and 7 shall
survive termination of this Agreement.
5. NO WARRANTIES: Any Materials delivered pursuant to this Agreement are
understood to be experimental in nature and may have hazardous properties.
Recipient should assume that the Materials are dangerous and should use
appropriate precautions. NEITHER MONSANTO NOR SCRIPTGEN MAKES ANY
REPRESENTATIONS, OR EXTENDS ANY WARRANTIES OF ANY KIND, EITHER EXPRESS OR
IMPLIED, WITH RESPECT TO THE COMPOUNDS. THERE ARE NO EXPRESS OR IMPLIED
WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE, OR THAT THE
USE OF THE MATERIALS WILL NOT INFRINGE ANY PATENT RIGHTS OF OTHERS.
6. ASSIGNMENT OF INVENTIONS: Recipient agrees promptly to disclose to
[Monsanto/Scriptgen] any and all ideas, concepts, discoveries, inventions,
developments, improvements, trade secrets, technical data, know-how or other
materials that are conceived, devised, invented, developed or reduced to
practice or tangible medium by Recipient, or any of its agents, employees or
contractors, or under its direction, during the term of this Agreement and which
arise out of its screening or evaluation of the Materials (hereinafter
"Inventions"). Recipient hereby assigns to [Monsanto/Scriptgen] all of its
right, title and interest in and to the Inventions and any and all related
patent rights, copyrights and applications and registrations therefor. During
and after the expiration of this Agreement, Recipient shall cooperate with
[Monsanto/Scriptgen], at [Monsanto/Scriptgen] expense, in obtaining proprietary
protection for the Inventions and shall execute all documents which
[Monsanto/Scriptgen] shall reasonably request in order to perfect
[Monsanto/Scriptgen] rights in the Inventions. To the extent the terms of this
Agreement conflict or are inconsistent with the terms of the Compound Testing
and Development Agreement, the Compound Testing and Development Agreement shall
control, provided that such outcome will not result in the breach of an
agreement with a third party holding a right to or interest in the Materials.
7. INDEMNIFICATION: Recipient assumes all liability for, and agrees to
indemnify, defend, and hold harmless Scriptgen and Monsanto and their respective
directors, officers, representatives, employees, and agents against, all losses,
expenses (including without limitation any legal fees and expenses), claims,
demands, damages, judgments, suits, or other actions arising from the use,
testing, storage, or disposal of the Materials by Recipient and its agents,
employees or contractors, or from any breach of its obligations under Section 2
of this Agreement.
8. MISCELLANEOUS: This Agreement shall not be assigned or otherwise
transferred by Recipient without the prior written consent of Scriptgen and
Monsanto. This Agreement shall be governed by the laws of the State of New York.
This Agreement constitutes the entire
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<PAGE>
understanding of the parties and supersedes all prior agreements, written or
oral, with respect to the subject matter hereof.
ACCEPTED AND AGREED:
Scriptgen Pharmaceuticals, Inc.
/s/ Karen A. Hamlin
-----------------------------------------
Name: Karen A. Hamlin
Title: Senior Director of Operations
Date: 11/17/97
ACCEPTED AND AGREED:
-----------------------------------------
Name:
Title:
Date:
ACCEPTED AND AGREED:
Monsanto Company
/s/ Jim I. McLoughlin
-----------------------------------------
Name: Jim I. McLoughlin
Title: Manager, Technology Alliances
Date: 11/13/97
29
<PAGE>
Exhibit 10.15
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE
CONFIDENTIAL PORTIONS HAVE BEEN REDACTED AND ARE DENOTED BY [***]. THE
CONFIDENTIAL PORTIONS HAVE BEEN SEPARATELY FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION.
ASSIGNMENT AGREEMENT
Effective March 15, 1994, Andrew Pakula, of Lexington,
Massachusetts, and James Bowie, of Culver City, California (the "Assignors"),
and ScripTech Pharmaceuticals, Inc., a Delaware corporation ("ScripTech"),
hereby act and agree as follows:
1. Definitions.
"Affiliate" means any individual, partnership, corporation or other
legal entity that directly, or indirectly through one of more intermediaries,
controls, is controlled by, or is under common control with, the party of which
it is stated to be an Affiliate.
"Control" means possession, direct or indirect, of the power to
direct or cause the direction of the management and policies of another entity
or person, whether through the beneficial or record ownership of securities, by
contract or otherwise.
"First Commercial Sale" shall mean in each country, the first
manufacture, use or sale of any Screened Product by ScripTech, its Affiliates or
licensees, following approval of its marketing by the appropriate governmental
agency for the country in which the sale is to be made and when governmental
approval is not required, the first manufacture, use or sale in that country.
"Improvement" shall mean any invention which constitutes an
improvement of a Screening Procedure which is not Publicly Available.
"Know How" means all information, knowledge and data of the
Assignors which is necessary to practice any invention claimed by the Screening
Patent Rights or for the use of any Screening Procedure, including, but not
limited to, materials, formulations, processes, drawings, designs, test data and
results, concepts and ideas.
"Net Sales" means invoiced price less trade, quantity, cash and
prompt payment discounts; allowances; returns; Medicaid rebates or rebates to
governmental agencies; transportation costs; insurance charges; and duties
and sales taxes separately itemized on the appropriate invoice or invoices.
Sales by a person to an Affiliate of such person or by an Affiliate of such
person to such person shall be excluded from Net Sales provided that such
person or such Affiliate is purchasing for resale and any such resales, when
made, are included in determining Net Sales. Net Sales shall include the fair
market value of any other consideration received for any sales.
"Publicly Available" as to one or more Screening Procedures shall
mean that the Screening Procedure (i) has been disclosed fully and adequately
for practice thereof in a publicly
<PAGE>
available document or (ii) has been described to third parties fully and
adequately for practice thereof without being covered by an obligation of
confidentiality and, as a result of such disclosure, is in use by other(s) in
competition with ScripTech and/or its Affiliates and/or their licensees.
"Screened Product" means any product which was identified by the use
of a Screening Procedure or which is an analog or derivative of a product which
was identified by the use of a screening Procedure.
"Screening Patent Rights" means the patent applications set forth on
Exhibit A attached hereto, the inventions claimed thereby, any patents issuing
from any such patent applications, all applications for patents filed under the
laws of countries other than the United States and all patents issuing thereon
which applications and patents cover and/or claim any invention corresponding to
any invention claimed by any patent application set forth on Exhibit A attached
hereto, any continuations, continuations-in-part, divisions, reissues,
extensions and renewals of any of the foregoing, and any Improvements.
"Screening Procedure" means any screening procedure(s) described on
Exhibit B attached hereto.
"Valid Claim" shall mean a claim of an issued and unexpired patent
or a pending patent application owned by or licensed to ScripTech or any of its
Affiliates which has not been held permanently revoked, unenforceable or invalid
by a decision of a court or other governmental agency of competent jurisdiction,
unappealable or unappealed within the time allowed for appeal, or which has not
been admitted to be invalid or unenforceable through reissue or disclaimer or
otherwise.
2. Conveyance.
2.1 Assignors hereby sell, assign, convey and transfer to ScripTech,
and ScripTech hereby acquires from Assignors, all of Assignors' right, title and
interest in and to the Screening Patent Rights and Know How and the Screening
Procedure. In consideration therefor, ScripTech shall [***]
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2.2 Upon request, Assignors will sign all applications, assignments,
instruments and papers and perform all acts reasonably requested by ScripTech to
assign all the Screening Patent Rights, Know How and Screening Procedure fully
and completely to ScripTech and to enable ScripTech, its successors, assigns and
nominees, to secure and enjoy the full and exclusive benefits and advantages
thereof. In the event ScripTech is unable to secure, after reasonable efforts,
an Assignor's signature on any letters patent, copyrights or other analogous
protection relating to a Screening Patent Right, Know How or Screening Procedure
for any reason whatsoever, each Assignor hereby irrevocably designates and
appoints ScripTech and its duly authorized officers and agents as the Assignor's
agent and attorney-in-fact, to act for and in behalf and stead of the Assignor
to execute and file any such application or applications and to do all other
lawfully permitted acts to further the prosecution and issuance of letters
patent, copyright or other analogous protection thereon with the same legal
force and effect as if executed by the Assignor.
3. Representations and Warranties.
Assignors represent and warrant that they are the lawful owner
of all of the Screening Patent Rights, Know How and Screening Procedure; that
they have good and undivided title to the same and the absolute right to sell,
transfer and assign the same to ScripTech pursuant to this Agreement, free and
clear of all license, encumbrances, restrictions, rights, title or interest in
others, whether written or oral or express or implied and whether or not
relating in any way to credit or the borrowing of money (but subject to
applicable laws requiring the payment of fees in connection with the issuance or
maintenance of patents); that they are not a party to or bound by any agreement,
instrument, arrangement, contract, obligation, commitment or understanding of
any character, whether written or oral, express or implied, other than this
Agreement, relating to the Screening Patent Rights, Know How or Screening
Procedure; and that they do not have any knowledge of any material
misrepresentation in connection with the procurement of the Screening Patent
Rights.
4. Royalties.
4.1 ScripTech shall pay to Assignors a royalty of (a) [***] of
Net Sales of any Screened Product sold by ScripTech and its Affiliates (i)
the making, use or sale of which by an unlicensed third party would
constitute an infringement of a Valid Claim pertaining to the Screened
Product in the country where the Screened Product was made, used or sold and
(ii) which has been identified through a Screening Procedure (A) not Publicly
Available as of the date of the identification thereof or (B) covered by a
Valid Claim of an issued and unexpired patent or pending patent application
in the country of sale included in
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<PAGE>
the Screening Patent Rights; (b) [***] of Net Sales of any Screened Product
sold by ScripTech and its Affiliates (i) the making, use or sale of which by
an unlicensed third party would not constitute an infringement of a Valid
Claim pertaining to the Screened Product in the country where the Screened
Product was made, used or sold and (ii) which has been identified through a
Screening Procedure (A) not Publicly Available as of the date of the
identification thereof or (B) covered by a Valid Claim of an issued and
unexpired patent or pending patent application in the country of sale
included in the Screening Patent Rights; and (c) [***] of Net Sales of any
Screened Product sold by ScripTech and its Affiliates (i) the making, use or
sale of which by an unlicensed third party would constitute an infringement
of a Valid Claim pertaining to the Screened Product in the country where the
Screened Product was made, used or sold and (ii) which has been identified
through a Screening Procedure (A) Publicly Available as of the date of the
identification thereof and (B) not covered by a Valid Claim of an issued and
unexpired patent or pending patent application in the country of sale
included in the Screening Patent Rights.
4.2 In the event ScripTech or its Affiliate licenses and/or
sublicenses to a third party the right to make, use or sell a Screened
Product, ScripTech shall pay to the Assignors the greater of (a) [***] of all
royalties received by ScripTech from the licensee and/or sublicensee pursuant
to such license or sublicense and (b) the amount Assignors would have been
entitled to receive pursuant to Section 4.1 if the Screened Product had been
sold by ScripTech and/or its Affiliates; provided, however, that for the
purposes of (a) above, royalties paid to ScripTech by one of its Affiliates
in respect of a Screened Product shall not be counted if such Affiliate is
receiving royalties from a sublicensee in respect of the same Screened
Product.
4.3 In the event ScripTech or its Affiliate licenses, and/or
sublicenses to a third party the right to use the Screening Procedure,
ScripTech shall pay to Assignors the greater of (a) [***] of all royalties
received by ScripTech or its Affiliate from the licensee and/or sublicensee
pursuant to such license or sublicense and (b) the amount Assignors would
have been entitled to receive pursuant to Section 4.1 if a Screened Product
identified by the licensed Screening Procedure had been sold by ScripTech
and/or its Affiliates; provided, however, that for the purposes of (a) above,
royalties paid to ScripTech by one of its Affiliates in respect of a
Screening Procedure shall not be counted if such Affiliate is receiving
royalties from a sublicensee in respect of the same Screeninq Procedure.
4.4 All payments by ScripTech hereunder shall be paid [***] to
Andrew Pakula and [***] to
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<PAGE>
James Bowie. There shall be but a single royalty obligation under this Agreement
for each unit of product sold, and in no event shall ScripTech be obligated to
make payments under this Agreement aggregating in excess of [***]
4.5 (a) All payments provided for in this Section 4 shall be paid in
United States dollars by ScripTech within [***] following the
termination of each calendar quarter (the first such quarter to be that in which
payments first accrue pursuant to this Section 4) in an amount equal to the
payment accruing during that calendar quarter measured in currency of the
country in which sales shall have been made and converted into United States
dollars at the noon buying rate in New York City for cable transfers in such
foreign currency as announced by the Federal Reserve Bank of New York for
customs purposes on the last day of such calendar quarter.
(b) The payments shall be accompanied by reports which shall
indicate the sales by party for the previous calendar quarter and shall show the
amounts due with sufficient information to enable confirmation by Assignors of
the following:
(i) Quantity of Screened Product subject to royalty sold (by country) by
ScripTech and its Affiliates and licensees;
(ii) Total receipts for each Screened Product subject to royalty payments
hereulder (by country) and a breakdown as to whether such royalty is
payable pursuant to Section 4.1(a), 4.1(b) or 4.1(c)
hereunder;
(iii) Total royalties payable to Assignors;
(iv) Royalties received from licensees and sublicensees and data
equivalent to (i) and (ii) above as to licensee activity;
(v) All other revenue realized by ScripTech, its Affiliates and their
licensees from commercial exploitation of Screening Procedures,
Screened Products and/or Screening Patent Rights; and
(vi) Calculation of the basis of any foreign currency conversion required
hereunder in connection with each calendar quarterly payment.
ScripTech shall maintain, and shall cause its Affiliates and their licensees to
maintain, accurate books of account containing such information as may be
necessary to allow Assignors to confirm the calculations of royalties payable
hereunder. Such
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<PAGE>
books of account shall be kept at the respective principal places of business
of ScripTech, its Affiliates and their licensees and shall be available for
audit (solely for the purpose of confirming the accuracy of payments
hereunder), not more often than once in any period of eleven consecutive
months, by a firm of certified public accountants designated by Assignors at
reasonable times for three years following the end of the calendar year
during which the royalties in respect of the sales recorded in such books of
account are paid hereunder. Such audits shall be at the sole expense of
Assignors, provided that if any audit shows under-reporting of any calendar
quarter payment by more than [***] ScripTech shall reimburse Assignors for
the full cost of such audit. If Assignors do not elect within [***] of the
close of any calendar year to have the records of ScripTech and its
Affiliates audited, Assignors shall be deemed to have agreed that such
payments made by ScripTech for the preceding calendar year were complete and
accurate in all respects. Assignors agree that all information obtained
pursuant to this Section 4 shall be kept confidential.
4. 6 If by law, regulation, or fiscal policy of a particular
country, conversion or transfer into United States Dollars is restricted or
forbidden, notice thereof in writing shall be given by ScripTech to Assignors
and the payments in question shall be made through such lawful means or
methods as ScripTech may determine. If ScripTech shall fail to designate a
lawful means or method of payment within [***] after such notice is given to
ScripTech, the payment by ScripTech shall be made by the deposit thereof in
local currency to the credit of Assignors in a recognized local banking
institution designated by ScripTech. When, in any country, the laws or
regulations prohibit both the transmittal and deposit of royalties on sales
in such country, payments shall be suspended for as long as such prohibition
is in effect and, as soon as such prohibition ceases to be in effect, all
royalties that ScripTech would have been required to transmit or deposit, but
for the prohibition, shall forthwith be transmitted or deposited promptly to
the extent allowable as the case may be. An accounting of royalties due on
sales in any country where royalty payments are suspended as aforesaid shall
be provided by ScripTech to Assignors upon request, but not more frequently
than quarterly.
4.7 All turnover and other taxes levied on account of royalty
payments under this Agreement shall be borne and paid by Assignors for their own
account, including taxes levied thereon as income to Assignors and for which
provision is made in law or by regulation for withholding, in which event such
taxes shall be deducted from such payments, paid by ScripTech to the proper
taxing authority, and a receipt of payment of the tax obtained and sent to
Assignors.
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<PAGE>
4.8 Notwithstanding the provisions of this Section 4, Assignors
agree to reconsider and to renegotiate in good faith the provisions hereof from
time to time at the request of ScripTech if ScripTech can demonstrate that
despite its commercially reasonable efforts the then current royalty rates
effectively and materially diminish the capability of ScripTech and its
Affiliates and licensees to exploit any product for which a payment may be due
and owing hereunder or to respond to competitive conditions in the market(s) for
any such product. Nothing contained in this Section 4.8, however, shall obligate
the Assignors to agree to any reduction in the current royalty rates hereunder.
5. ScripTech's Efforts.
ScripTech will use reasonable commercial efforts, consistent with
its financial resources and corporate objectives as conclusively determined by
its Board of Directors, to develop, sell and market Screened Products, but no
assurances can be given that ScripTech will be successful in this regard.
6. Payment Term.
The obligation of ScripTech to make payments pursuant to Section
4 shall terminate on a country-by-country basis on the earlier of (a) such
time as there no longer exists any Valid Claim pertaining to the Screened
Product in such country or (b) [***] from the date of the First Commercial
Sale of a Screened Product in such country.
7. Arbitration; Governing Law.
7.1 Failing settlement, all disputes arising in connection with this
Agreement may only be resolved by arbitration in Boston, Massachusetts, under
the Commercial Arbitration Rules of the American Arbitration Association before
three arbitrators appointed in accordance with said Rules. The decision of the
arbitrators shall be final, binding and conclusive upon the parties and they
shall comply with such decision in good faith, provided that the arbitrators
shall have set forth in writing to the parties the reasons for their findings
and shall award the prevailing party, in addition to any other damages awarded,
the costs and expenses of the prevailing party in the arbitration, including
counsel fees. Each party hereby submits itself to the jurisdiction of the
federal district courts of the place where the arbitration is held for the entry
of judgment with respect to any arbitration hereunder. Notwithstanding the
foregoing, judgment upon the award may be entered in any court having
jurisdiction over the parties.
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<PAGE>
7.2 This Agreement shall be construed and enforced in accordance
with the laws of the Commonwealth of Massachusetts without regard to
conflicts-of-law principles.
8. Force Majeure.
Except for the obligations relating to the payment of money, neither
party shall be liable for any loss, damage or penalty resulting from delays or
failures in performance resulting from acts of God or other causes beyond its or
his control. Each party agrees to notify the other party of any circumstance
delaying its or his performance and to resume performance as soon thereafter as
is reasonably practicable.
9. Joint and Several.
The representations, warranties, agreements and obligations of the
Assignors under this Agreement shall be joint and several.
10. Waiver.
No waiver, alteration or modification of any of the provisions
hereof shall be binding unless made in writing and executed by all of the
parties hereto. No waiver of any one or more defaults in the performance of any
provision of this Agreement shall operated as a waiver of any future default
whether of a like character or not.
11. No Present intention
ScripTech represents and warrants to Assignors that it has no
present intentention to cause the Screening Procedures to become Publicly
Available.
12. Notices.
All notices, requests, demands and other communications which are
required or may be given pursuant to the terms of this Agreement shall be in
writing and shall be deemed duly given when delivered by hand or mailed by
certified or registered mail, postage prepaid and return receipt requested, as
follows:
If to ScripTech, to: One Joslin Place
Boston, MA 02215
Attn: President
If to Andrew Pakula, to: 26 Normandy Road
Lexington, MA 02173
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If to James Bowie, to 4243 Le Bourget Avenue
Culver City, California 90232
13. Entire Agreement
This Agreement embodies the entire agreement and understanding
between the parties hereto with respect to the subject matter hereof and
supersedes all prior agreements and understandings relating to such subject
matter.
14. Successors and Assigns
This Agreement shall be binding upon and shall inure to the benefit
of the parties hereto and their respective personal. representatives, successors
and assigns.
IN WITNESS WHEREOF, each of the parties has caused this Agreement,
to be executed and duly sealed by its duly authorized representative as of the
date hereof.
SCRIPTECH PHARMACEUTICALS, INC.
By /s/ Thomas A. Bologna
----------------------
Its President & CEO
/s/ Andrew Pakula
----------------------
Andrew Pakula
/s/ James Bowie
----------------------
James Bowie
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19108
<PAGE>
EXHIBIT A
UNITED STATES PATENT APPLICATION
Filing Date Serial No. Title
- ----------- ---------- -----
6/21/93 08/080,829 "A SCREENING METHOD FOR IDENTIFYING
LIGANDS FOR TARGET PROTEINS"
19108/99
<PAGE>
Exhibit B
Screening Procedure:
The screening procedures known collectively as ATLAS are based upon the
principle that [***] The Procedure involves the following steps:
[***]
<PAGE>
AMENDMENT AGREEMENT
Reference is made to that Assignment Agreement effective March 15, 1994 by
and among Andrew Pakula, James Bowie and ScripTech Pharmaceuticals, Inc. (the
"Agreement").
1. Section 4.2 of the Agreement is hereby deleted in its entirety and
the following is substituted therefor:
"4.2 In the event ScripTech or its Affiliate licenses and/or
sublicenses to a third party the right to make, use or sell a Screened
Product, ScripTech shall pay to the Assignors [***] of all royalties
received by ScripTech or its Affiliate from the licensee and/or
sublicensee pursuant to such license and/or sublicense."
2. Section 4.3 of the Agreement is hereby deleted in its entirety and
the following is substituted therefor:
"4.3 In the event ScripTech or its Affiliate licenses and/or
sublicenses to a third party the right to use the Screening Procedure,
ScripTech shall pay to Assignors [***] of all royalties received by
ScripTech or its Affiliate from the licensee and/or sublicensee pursuant
to such license and/or sublicense."
3. Except as hereby amended, the Agreement shall continue in full force
and effect.
WITNESS the execution hereof as an instrument under seal as of this 10th
day of June, 1994.
/s/ Andrew Pakula
----------------------
Andrew Pakula
----------------------
James Bowie
SCRIPTECH PHARMACEUTICALS, INC.
By /s/ Thomas A. Bologna
----------------------
Its President & CEO
44221
<PAGE>
AMENDMENT AGREEMENT
Reference is made to that Assignment Agreement effective March 15, 1994 by
and among Andrew Pakula, James Bowie and ScripTech Pharmaceuticals, Inc. (the
"Agreement").
1. Section 4.2 of the Agreement is hereby deleted in its entirety and
the following is substituted therefor:
"4.2 In the event ScripTech or its Affiliate licenses and/or
sublicenses to a third party the right to make, use or sell a Screened
Product, ScripTech shall pay to the Assignors [***] of all royalties
received by ScripTech or its Affiliate from the licensee and/or
sublicensee pursuant to such license and/or sublicense."
2. Section 4.3 of the Agreement is hereby deleted in its entirety and
the following is substituted therefor:
"4.3 In the event ScripTech or its Affiliate licenses and/or
sublicenses to a third party the right to use the Screening Procedure,
ScripTech shall pay to Assignors [***] of all royalties received by
ScripTech or its Affiliate from the licensee and/or sublicensee pursuant
to such license and/or sublicense."
5. Except as hereby amended, the Agreement shall continue in full force
and effect.
WITNESS the execution hereof as in instrument under seal as of this 10th
day of June, 1994.
---------------------------
Andrew Pakula
/s/ James Bowie
---------------------------
James Bowie
SCRIPTECH PHARMACEUTICALS, INC.
/s/ Thomas A. Bologna
---------------------------
Its President & CEO
<PAGE>
Exhibit 10.19
EXECUTION COPY
CONSULTING AGREEMENT
Agreement made this 30th day of January, 1998, by and between SCRIPTGEN
Pharmaceuticals, Inc., a corporation having a place of business at 200 Boston
Avenue, Medford, MA 02155 (hereinafter "SCRIPTGEN") and Michael R. Green, an
individual residing at 368 Green Street, Boylston, MA 01505, an Investigator of
the Howard Hughes Medical Institute ("HHMI") and a member of the faculty of the
University of Massachusetts (the "University") (hereinafter "INDIVIDUAL").
WHEREAS, SCRIPTGEN has and will have certain materials, compounds, animals,
compositions, chemicals and/or biologics which are received from third parties
(individually and collectively "SCRIPTGEN MATERIALS") and certain technical
and/or business information which is received from third parties (hereinafter
referred to individually and collectively as "SCRIPTGEN INFORMATION"); and
WHEREAS, INDIVIDUAL is desirous of providing consulting services to
SCRIPTGEN; and
WHEREAS, SCRIPTGEN is desirous of retaining INDIVIDUAL as a consultant; and
WHEREAS, in performing consulting services hereunder, INDIVIDUAL will have
access to SCRIPTGEN MATERIAL and SCRIPTGEN INFORMATION.
NOW, THEREFORE, in consideration of the mutual promises and other good and
valuable consideration, the parties hereto agree as follows:
1. INDIVIDUAL shall provide consulting services as requested by
SCRIPTGEN, such services including but not limited to:
(a) acting as Chairman of the Scientific Advisory Board for
SCRIPTGEN;
(b) advising SCRIPTGEN in the area of transcription therapeutics,
protein interaction with protein and/or DNA and/or RNA as it relates to
transcription, and such other areas as the parties hereto shall agree in writing
from time to time (hereinafter the "Field");
(c) advising on the qualifications of scientific personnel; and
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EXECUTION COPY
(d) reviewing protocols and advising SCRIPTGEN on the development of
its protocols.
INDIVIDUAL shall be engaged by SCRIPTGEN as a consultant for the exchange
of ideas only. Notwithstanding anything herein to the contrary, INDIVIDUAL
shall not direct or conduct research for or on behalf of SCRIPTGEN.
Such services shall be rendered by the INDIVIDUAL at such times as the
INDIVIDUAL and SCRIPTGEN agree but shall not exceed twenty (20) days per year
(pro rated for partial years) for a period of five (5) years from the date of
this Agreement (unless terminated earlier pursuant to Section 16 herein). No
employer-employee relationship is created by this Agreement, and INDIVIDUAL will
render his services hereunder as an independent contractor.
2.(a) As full consideration for the consulting services provided
hereunder, INDIVIDUAL will be compensated by SCRIPTGEN for said services in an
amount equal to sixty thousand dollars ($60,000) per year. Such amount shall be
paid in equal quarterly installments at the end of each calendar quarter and on
a pro rata basis for any services which are performed for less than a calendar
quarter.
(b) SCRIPTGEN agrees to reimburse INDIVIDUAL for all authorized
reasonable travel expenses and other authorized expenses incurred by him in
accordance with the policy and practice of SCRIPTGEN, upon presentation to
SCRIPTGEN of appropriate expense vouchers.
(c) SCRIPTGEN shall reimburse INDIVIDUAL for up to $2,500.00 on
account of reasonable legal fees and expenses incurred with respect to the
negotiation, preparation and signing of this Agreement and the resolution of any
conflict-of-interest and related matters which arise in connection with any this
Agreement.
3. Subject to the terms of Paragraph 15(b), INDIVIDUAL hereby agrees to
disclose to SCRIPTGEN promptly in writing any invention, development,
information or idea whether patentable or not which (i) INDIVIDUAL, alone or
with others, makes and/or conceives solely as a direct result of performing
consulting services for SCRIPTGEN under this Agreement and (ii) is not generated
in the course of INDIVIDUAL's activities as an HHMI employee or University
faculty member and is not owned by HHMI or assignable to the University
(hereinafter "DEVELOPED TECHNOLOGY"). Subject to the terms of Paragraph 15(b),
INDIVIDUAL hereby waives whatever rights he may now or hereafter have in and to
any DEVELOPED TECHNOLOGY, and agrees to execute whatever additional documents
may be necessary to perfect such waiver.
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4. Subject to the terms of Paragraph 15(b), INDIVIDUAL agrees to assign
and hereby does assign to SCRIPTGEN or its nominee or successor all right, title
and interest in and to DEVELOPED TECHNOLOGY, and further agrees to execute such
further papers, and perform all such acts, as may be necessary to perfect such
assignment.
5. In the event that SCRIPTGEN makes or proposes to make any United
States or foreign patent applications relating to DEVELOPED TECHNOLOGY owned by
SCRIPTGEN pursuant to Paragraph 4, subject to the maximum time commitment set
forth in Paragraph 1, INDIVIDUAL shall cooperate fully with SCRIPTGEN and its
patent counsel in preparing and prosecuting any such application. SCRIPTGEN
agrees to promptly reimburse INDIVIDUAL for all reasonable out-of-pocket
expenses incurred by him in providing the assistance required by this Paragraph
and Paragraph 6, upon the submission to SCRIPTGEN of an itemized statement of
such expenses. If services under this Paragraph and/or Paragraph 6 are
performed after termination of this Agreement, which services shall be performed
only after HHMI's prior written approval, SCRIPTGEN shall promptly reimburse
INDIVIDUAL for his time in performing such obligations.
6. INDIVIDUAL further agrees to execute, acknowledge and deliver all such
further papers, including applications for patents, as may be necessary to
enable SCRIPTGEN to publish or protect patents, inventions, improvements, ideas
and applications utilizing DEVELOPED TECHNOLOGY owned by SCRIPTGEN or its
nominees, successors or assigns pursuant to Paragraph 4, and, subject to the
maximum time commitment set forth in Paragraph 1, to render all such assistance
as SCRIPTGEN may require in any United States Patent and Trademark Office
proceeding or litigation involving the DEVELOPED TECHNOLOGY owned by SCRIPTGEN
pursuant to Paragraph 4.
7. (a) INDIVIDUAL may disclose to SCRIPTGEN any information that
INDIVIDUAL would normally freely disclose to other members of the scientific
community at large, whether by publication, by presentation at seminars, or in
informal scientific discussions. However, INDIVIDUAL shall not disclose to
SCRIPTGEN information that is proprietary to HHMI and is not generally available
to the public other than through formal technology transfer procedures.
(b) Unless excluded pursuant to Paragraph 8 below, DEVELOPED
TECHNOLOGY owned by SCRIPTGEN, SCRIPTGEN INFORMATION and SCRIPTGEN MATERIALS
will be considered to be confidential and will not be disclosed to any person or
entity or used by INDIVIDUAL for any purpose other than for the benefit of
SCRIPTGEN.
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8. SCRIPTGEN INFORMATION, SCRIPTGEN MATERIALS and DEVELOPED TECHNOLOGY
specifically excluded from the obligations of
confidentiality of this Agreement include:
(a) SCRIPTGEN INFORMATION, SCRIPTGEN MATERIALS and DEVELOPED
TECHNOLOGY which at the time of disclosure already are in the public domain;
(b) SCRIPTGEN INFORMATION, SCRIPTGEN MATERIALS and DEVELOPED
TECHNOLOGY which INDIVIDUAL can demonstrate by written evidence were in the
possession of INDIVIDUAL prior to disclosure by SCRIPTGEN;
(c) SCRIPTGEN INFORMATION, SCRIPTGEN MATERIALS and DEVELOPED
TECHNOLOGY which subsequently become part of the public domain through no fault
of INDIVIDUAL;
(d) SCRIPTGEN INFORMATION, SCRIPTGEN MATERIALS and DEVELOPED
TECHNOLOGY which become known to INDIVIDUAL subsequent to the disclosure by
SCRIPTGEN through a third party who is not under any obligation of
confidentiality to SCRIPTGEN; and
(e) SCRIPTGEN INFORMATION, SCRIPTGEN MATERIALS and DEVELOPED
TECHNOLOGY which is required to be disclosed by law, governmental regulation, or
court order.
In addition, DEVELOPED TECHNOLOGY, SCRIPTGEN INFORMATION and SCRIPTGEN
MATERIALS subject to Paragraph 7(b) does not include information generated by
INDIVIDUAL unless the information (i) is generated as a direct result of the
performance of consulting services under this Agreement and (ii) is not
generated in the course of the INDIVIDUAL's activities as an HHMI employee or
University faculty member.
9. The fact that general information may be in or become part of the
public domain, in and of itself, does not exclude any specific information or
specific material not yet in the public domain from the obligations imposed by
this Agreement.
10. No rights or licenses in or to SCRIPTGEN INFORMATION, SCRIPTGEN
MATERIALS and DEVELOPED TECHNOLOGY are granted to INDIVIDUAL by virtue of this
Agreement.
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11. At the request of SCRIPTGEN, INDIVIDUAL shall return to SCRIPTGEN any
and all materials and physical documents, whether prepared by SCRIPTGEN or by
INDIVIDUAL, when such materials or documents include or incorporate SCRIPTGEN
INFORMATION, SCRIPTGEN MATERIALS and DEVELOPED TECHNOLOGY. The term "document"
is used in its broadest sense and includes electronic information in the form
of discs, tapes, etc.
12. INDIVIDUAL represents and warrants that to the best of his knowledge
he is permitted to enter into this Agreement and perform the obligations
contemplated thereby, and that this Agreement and the terms and obligations
thereof are not inconsistent with any obligation he may have.
13. This Agreement constitutes the entire and exclusive Agreement between
INDIVIDUAL and SCRIPTGEN with respect to the subject matter hereof and
supersedes any prior or contemporaneous agreements, representations and
understandings of the parties with respect thereto. No supplement, modification
or amendment of this Agreement shall be binding upon SCRIPTGEN or INDIVIDUAL
unless set forth in a written agreement executed by SCRIPTGEN and INDIVIDUAL.
SCRIPTGEN and INDIVIDUAL acknowledge that any amendment of this Agreement
(including, without limitation, any extension of this Agreement or any change
from the terms of Paragraph 2 in the consideration to be provided to INDIVIDUAL
with respect to services to be provided hereunder) or any departure from the
terms or conditions hereof with respect to INDIVIDUAL's consulting services for
SCRIPTGEN is subject to HHMI's prior written approval.
14. (a) Except as hereinafter provided, INDIVIDUAL agrees that while
retained as a consultant for SCRIPTGEN he shall consult exclusively for
SCRIPTGEN in the Field and such other areas as SCRIPTGEN and INDIVIDUAL may
agree in writing, and during the consulting period and for one year thereafter
INDIVIDUAL shall not be engaged in or be or assist any business, activity or
person competing or, to the knowledge of INDIVIDUAL, intending to compete, with
the business of and/or products being developed by SCRIPTGEN as of the time of
termination of this Agreement, whether his involvement shall be as an officer,
director, owner (other than the passive ownership of up to 5% of the outstanding
securities of any public company), employee, partner, affiliate or consultant.
(b) Notwithstanding anything in this Paragraph 14 to the contrary,
none of the following shall constitute a breach of the obligations imposed by
this Paragraph 14:
(i) INDIVIDUAL's performance of his duties as an employee of HHMI, a
member of the faculty of the University, or an member of any
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hospital, academic institution, government body, or other not-for-profit,
scientific, or professional organization;
(ii) the transfer by HHMI or the University, by license or other
agreement or arrangement, of any invention, discovery or development, and
any intellectual property rights therein, developed in whole or in part by
INDIVIDUAL, or in connection with research collaborations; and
(iii) the assistance of and participation by INDIVIDUAL in a transfer
described in the preceding clause (ii) in a manner deemed necessary,
appropriate, or advisable by HHMI or the University, each in its sole
judgment.
(c) Nothing in this Paragraph 14 shall be construed to impair or
prevent the performance of INDIVIDUAL'S duties and obligations to the commercial
organizations listed on Appendix A.
(d) Nothing in this Paragraph 14 shall be construed to impair or
prevent INDIVIDUAL from engaging in unrestricted, free scientific discussions
with other scientists.
(e) SCRIPTGEN acknowledges and agrees that nothing in this Agreement
shall affect INDIVIDUAL's obligations to, or research on behalf of, HHMI or the
University, including, without limitation, obligations or research of INDIVIDUAL
in connection with a transfer by HHMI or the University of materials or
intellectual property developed in whole or in part by INDIVIDUAL, or in
connection with research collaborations.
15. (a) INDIVIDUAL represents, warrants and agrees that he can and will
perform the services required by this Agreement without disclosing or using any
confidential information and/or proprietary information of HHMI, University or
any other third party.
(b) Notwithstanding anything to the contrary herein, SCRIPTGEN shall
have no rights by reason of this Agreement in any publication, invention,
discovery, improvement, or other intellectual property whatsoever, whether or
not publishable, patentable, or copyrightable, which is developed as a result of
a program of research financed, in whole or in part, by funds provided by or
under the control of HHMI or the University. SCRIPTGEN also acknowledges and
agrees that it will enjoy no priority or advantage as a result of the
consultancy created by this Agreement in gaining access, whether by license or
otherwise, to any proprietary information or intellectual property that arises
from any research undertaken by
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INDIVIDUAL in his capacity as an employee of HHMI or a member of the faculty of
the University.
(c) All stock, stock options, rights or other equity or equity-based
securities (collectively, "Securities") issued or issuable by SCRIPTGEN to
INDIVIDUAL (either directly or indirectly) constitute (i) approximately 2.9% of
SCRIPTGEN's presently issued and outstanding common stock, as diluted by
assuming full exercise of any options and other rights held by INDIVIDUAL, and
(ii) approximately 2.5% of SCRIPTGEN's common stock on a fully diluted basis.
Indirect holdings for this purpose include without limitation (i) any Securities
issued or issuable by SCRIPTGEN to members of INDIVIDUAL's immediate family, and
(ii) any Securities issued or issuable by SCRIPTGEN to INDIVIDUAL, or Securities
allocated or allocable to INDIVIDUAL under the University's inventorship
policies, as royalties under a license by SCRIPTGEN of technology of which
INDIVIDUAL is an inventor.
16. (a) If either party materially breaches any of its obligations
hereunder, in addition to any other remedies it may have, the other party shall
have the right to terminate, this Agreement by written notice specifying the
breach and if such breach is not cured within sixty (60) days after such written
notice, this Agreement shall be terminated.
(b) Either party shall have the absolute right to terminate this
Agreement on any day on or after one year from the date of this Agreement by
thirty (30) days prior written notice.
(c) The termination of this Agreement shall terminate the consulting
services of INDIVIDUAL and INDIVIDUAL's right to compensation for the period
subsequent to the termination.
(d) Termination of this Agreement under Paragraph 16(a) or 16(b)
above shall not affect (i) SCRIPTGEN's obligation to pay for services previously
performed by INDIVIDUAL or expenses reasonably incurred by INDIVIDUAL for which
INDIVIDUAL is entitled to reimbursement under Paragraph 2, above, (ii)
SCRIPTGEN's obligations to recognize the priority of HHMI intellectual property
rights under Paragraph 15(b) above, (iii) SCRIPTGEN's obligations to defend and
indemnify INDIVIDUAL and HHMI under Paragraph 19 below, or (iv) INDIVIDUAL's
continuing obligations to SCRIPTGEN under Paragraphs 4 and 7 above.
(e) In the event that INDIVIDUAL'S consulting services are terminated
by SCRIPTGEN pursuant to Paragraph 16(b), then SCRIPTGEN shall pay INDIVIDUAL an
amount equal to sixty thousand dollars ($60,000.00) in four
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equal quarterly installments over the one year period which begins on the date
of termination and ends on the first anniversary of such date of termination,
with such payments being expressly conditioned upon INDIVIDUAL meeting all of
the obligations which survive termination of this Agreement, including but not
limited to the non-compete obligation of Paragraph 14.
17. Except as otherwise herein provided, the obligations of Paragraphs 3
through 14, Paragraphs 16(d) and (e) and Paragraph 19 of this Agreement shall
survive any termination of this Agreement or the consulting services of
INDIVIDUAL; provided, however, that the obligation of Paragraph 14(a) shall not
survive if this Agreement is terminated by INDIVIDUAL under Paragraph 16(a).
18. INDIVIDUAL represents and warrants that he is not at this time a
consultant for any entity other than those set forth in Appendix A.
19. SCRIPTGEN hereby agrees to defend INDIVIDUAL and HHMI at its sole
expense, and to indemnify and hold INDIVIDUAL and HHMI harmless from, all third
party claims or suits against INDIVIDUAL or HHMI or any liabilities or judgments
based thereon, including legal expenses arising therefrom ("CLAIMS"), which
CLAIMS arise from or as the result of or are alleged to arise from or as the
result of, this Agreement, services performed by INDIVIDUAL for SCRIPTGEN under
this Agreement or any SCRIPTGEN products which result from INDIVIDUAL's
performance of services under this Agreement; provided, however, that SCRIPTGEN
shall have no liability to INDIVIDUAL under this Paragraph 19 for any CLAIMS
which are finally determined to have arisen from the negligence or malfeasance
of INDIVIDUAL. INDIVIDUAL shall promptly notify SCRIPTGEN of any such CLAIMS
against INDIVIDUAL which are subject to indemnification, and SCRIPTGEN shall
have the sole right to defend, settle or compromise any such CLAIMS.
20. SCRIPTGEN recognizes and acknowledges that INDIVIDUAL is an employee
of HHMI, and acknowledges and agrees that:
(a) INDIVIDUAL will not use the facilities, funds or equipment of
HHMI for the benefit of SCRIPTGEN.
(b) INDIVIDUAL is subject to HHMI's policies, including, among
others, policies concerning consulting, conflicts of interest and intellectual
property.
(c) SCRIPTGEN and INDIVIDUAL shall establish procedures and use best
efforts to ensure (i) that any fees received by INDIVIDUAL under this Agreement
shall not become commingled with any funds of HHMI or any funds under the
control of HHMI and (ii) that any of INDIVIDUAL'S consulting activities
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under this Agreement shall be kept separate and apart from any research
financed, in whole or in part, by the funds of or under the control of HHMI.
21. SCRIPTGEN acknowledges and agrees that INDIVIDUAL shall not be
required to perform any consulting services under this Agreement which would
violate the conflict-of-interest laws of the Commonwealth of Massachusetts or
policies of the University.
22. SCRIPTGEN will not use INDIVIDUAL's name in any commercial
advertisement or similar material that is used to promote or sell products,
unless SCRIPTGEN obtains in advance the written consent of the named party to
such use, and in the case of the use of INDIVIDUAL's name, HHMI's consent as
well.
23. If any provision of this Agreement affecting the rights or property of
HHMI is adjudicated to be invalid, unenforceable, contrary to, or prohibited
under applicable laws or regulations of any jurisdiction, this Agreement shall
terminate as of the date such adjudication is effective. If any other provision
of this Agreement is adjudicated to be invalid, unenforceable, contrary to, or
prohibited under applicable laws or regulations of any jurisdiction, such
provision shall be severed and the remaining provisions shall continue in full
force and effect.
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IN WITNESS WHEREOF, the parties have signed this Agreement as of the date
hereof.
SCRIPTGEN PHARMACEUTICALS, INC.
By: /s/
-------------------------------
Title:
----------------------------
INDIVIDUAL
/s/ Michael R. Green
-----------------------------------
Michael R. Green
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APPENDIX A
The following are organizations or institutions to which INDIVIDUAL is
currently rendering consulting services:
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Exhibit 10.20
CONSULTING AGREEMENT
Agreement made this 2nd day of February, 1998, by and between SCRIPTGEN
Pharmaceuticals, Inc., a corporation having a place of business at 200 Boston
Avenue, Medford, MA 02155 (hereinafter "SCRIPTGEN") and Peter S. Kim, an
individual residing at 48 Baskin Road, Lexington, MA 02173, an Investigator of
the Howard Hughes Medical Institute ("HHMI") and a member of the Whitehead
Institute for Biomedical Research ("Whitehead") and a member of the faculty of
Massachusetts Institute of Technology ("MIT") (hereinafter "INDIVIDUAL").
WHEREAS, SCRIPTGEN has and will have certain materials, compounds, animals,
compositions, chemicals and/or biologics which are received from third parties
(individually and collectively "SCRIPTGEN MATERIALS") and certain technical
and/or business information which is received from third parties (hereinafter
referred to individually and collectively as "SCRIPTGEN INFORMATION"); and
WHEREAS, INDIVIDUAL is desirous of providing consulting services to
SCRIPTGEN; and
WHEREAS, SCRIPTGEN is desirous of retaining INDIVIDUAL as a consultant; and
WHEREAS, in performing consulting services hereunder, INDIVIDUAL will have
access to SCRIPTGEN MATERIAL and SCRIPTGEN INFORMATION.
NOW, THEREFORE, in consideration of the mutual promises and other good and
valuable consideration, the parties hereto agree as follows:
1. INDIVIDUAL shall provide consulting services as requested by
SCRIPTGEN, such services including but not limited to:
(a) acting as a member of the Scientific Advisory Board for
SCRIPTGEN;
(b) advising SCRIPTGEN in the area of transcription therapeutics,
protein interaction with protein and/or DNA and/or RNA as it relates to
transcription, and such other areas as the parties hereto shall agree in writing
from time to time (hereinafter the "Field");
(c) advising on the qualifications of scientific personnel; and
(d) reviewing protocols and advising SCRIPTGEN on the development of
its protocols.
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INDIVIDUAL shall be engaged by SCRIPTGEN as a consultant for the exchange
of ideas only. Notwithstanding anything herein to the contrary, INDIVIDUAL
shall not direct or conduct research for or on behalf of SCRIPTGEN.
Such services shall be rendered by the INDIVIDUAL at such times as the
INDIVIDUAL and SCRIPTGEN agree but shall not exceed twenty (20) days per year
(pro rated for partial years) for a period of five (5) years from the date of
this Agreement (unless terminated earlier pursuant to Section 16 herein). No
employer-employee relationship is created by this Agreement, and INDIVIDUAL will
render his services hereunder as an independent contractor.
2.(a) As full consideration for the consulting services provided
hereunder, INDIVIDUAL will be compensated by SCRIPTGEN for said services in an
amount equal to sixty thousand dollars ($60,000) per year. Such amount shall be
paid in equal quarterly installments at the end of each calendar quarter and on
a pro rata basis for any services which are performed for less than a calendar
quarter.
(b) SCRIPTGEN agrees to reimburse INDIVIDUAL for all authorized
reasonable travel expenses and other authorized expenses incurred by him in
accordance with the policy and practice of SCRIPTGEN, upon presentation to
SCRIPTGEN of appropriate expense vouchers.
(c) SCRIPTGEN shall reimburse INDIVIDUAL for up to $2,500.00 on
account of reasonable legal fees and expenses incurred with respect to the
negotiation, preparation and signing of this Agreement and the resolution of any
conflict-of-interest and related matters which arise in connection with any this
Agreement.
3. Subject to the terms of Paragraph 15(b), INDIVIDUAL hereby agrees to
disclose to SCRIPTGEN promptly in writing any invention, development,
information or idea whether patentable or not which (i) INDIVIDUAL, alone or
with others, makes and/or conceives solely as a direct result of performing
consulting services for SCRIPTGEN under this Agreement and (ii) is not generated
in the course of INDIVIDUAL's activities as an HHMI employee or MIT or Whitehead
faculty member and is not owned by HHMI or assignable to MIT or Whitehead
(hereinafter "DEVELOPED TECHNOLOGY"). Subject to the terms of Paragraph 15(b),
INDIVIDUAL hereby waives whatever rights he may now or hereafter have in and to
any DEVELOPED TECHNOLOGY, and agrees to execute whatever additional documents
may be necessary to perfect such waiver.
4. Subject to the terms of Paragraph 15(b), INDIVIDUAL agrees to assign
and hereby does assign to SCRIPTGEN or its nominee or successor all right, title
and interest in and to DEVELOPED TECHNOLOGY, and further agrees to execute
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such further papers, and perform all such acts, as may be necessary to
perfect such assignment.
5. In the event that SCRIPTGEN makes or proposes to make any United
States or foreign patent applications relating to DEVELOPED TECHNOLOGY owned
by SCRIPTGEN pursuant to Paragraph 4, subject to the maximum time commitment
set forth in Paragraph 1, INDIVIDUAL shall cooperate fully with SCRIPTGEN and
its patent counsel in preparing and prosecuting any such application.
SCRIPTGEN agrees to promptly reimburse INDIVIDUAL for all reasonable
out-of-pocket expenses incurred by him in providing the assistance required
by this Paragraph and Paragraph 6, upon the submission to SCRIPTGEN of an
itemized statement of such expenses. If services under this Paragraph and/or
Paragraph 6 are performed after termination of this Agreement, which services
shall be performed only after the HHMI's prior written approval, SCRIPTGEN
shall promptly reimburse INDIVIDUAL for his time in performing such
obligations.
6. INDIVIDUAL further agrees to execute, acknowledge and deliver all
such further papers, including applications for patents, as may be necessary
to enable SCRIPTGEN to publish or protect patents, inventions, improvements,
ideas and applications utilizing DEVELOPED TECHNOLOGY owned by SCRIPTGEN or
its nominees, successors or assigns pursuant to Paragraph 4, and, subject to
the maximum time commitment set forth in Paragraph 1, to render all such
assistance as SCRIPTGEN may require in any United States Patent and Trademark
Office proceeding or litigation involving the DEVELOPED TECHNOLOGY owned by
SCRIPTGEN pursuant to Paragraph 4.
7. (a) INDIVIDUAL may disclose to SCRIPTGEN any information that
INDIVIDUAL would normally freely disclose to other members of the scientific
community at large, whether by publication, by presentation at seminars, or
in informal scientific discussions. However, INDIVIDUAL shall not disclose
to SCRIPTGEN information that is proprietary to HHMI and is not generally
available to the public other than through formal technology transfer
procedures.
(b) Unless excluded pursuant to Paragraph 8 below, DEVELOPED
TECHNOLOGY owned by SCRIPTGEN, SCRIPTGEN INFORMATION and SCRIPTGEN MATERIALS
will be considered to be confidential and will not be disclosed to any person
or entity or used by INDIVIDUAL for any purpose other than for the benefit of
SCRIPTGEN.
8. SCRIPTGEN INFORMATION, SCRIPTGEN MATERIALS and DEVELOPED TECHNOLOGY
specifically excluded from the obligations of confidentiality of this
Agreement include:
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(a) SCRIPTGEN INFORMATION, SCRIPTGEN MATERIALS and DEVELOPED
TECHNOLOGY which at the time of disclosure already are in the public domain;
(b) SCRIPTGEN INFORMATION, SCRIPTGEN MATERIALS and DEVELOPED
TECHNOLOGY which INDIVIDUAL can demonstrate by written evidence were in the
possession of INDIVIDUAL prior to disclosure by SCRIPTGEN;
(c) SCRIPTGEN INFORMATION, SCRIPTGEN MATERIALS and DEVELOPED
TECHNOLOGY which subsequently become part of the public domain through no
fault of INDIVIDUAL;
(d) SCRIPTGEN INFORMATION, SCRIPTGEN MATERIALS and DEVELOPED
TECHNOLOGY which become known to INDIVIDUAL subsequent to the disclosure by
SCRIPTGEN through a third party who is not under any obligation of
confidentiality to SCRIPTGEN; and
(e) SCRIPTGEN INFORMATION, SCRIPTGEN MATERIALS and DEVELOPED
TECHNOLOGY which is required to be disclosed by law, governmental regulation
or court order.
In addition, DEVELOPED TECHNOLOGY, SCRIPTGEN INFORMATION and SCRIPTGEN
MATERIALS subject to Paragraph 7(b) does not include information generated by
INDIVIDUAL unless the information (i) is generated as a direct result of the
performance of consulting services under this Agreement and (ii) is not
generated in the course of INDIVIDUAL's activities as an HHMI employee or
Whitehead or MIT faculty member.
9. The fact that general information may be in or become part of the
public domain, in and of itself, does not exclude any specific information or
specific material not yet in the public domain from the obligations imposed
by this Agreement.
10. No rights or licenses in or to SCRIPTGEN INFORMATION, SCRIPTGEN
MATERIALS and DEVELOPED TECHNOLOGY are granted to INDIVIDUAL by virtue of
this Agreement.
11. At the request of SCRIPTGEN, INDIVIDUAL shall return to SCRIPTGEN
any and all materials and physical documents, whether prepared by SCRIPTGEN
or by INDIVIDUAL, when such materials or documents include or incorporate
SCRIPTGEN INFORMATION, SCRIPTGEN MATERIALS and DEVELOPED TECHNOLOGY. The
term "document" is used in its broadest sense
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and includes electronic information in the form of discs, tapes, etc.
12. INDIVIDUAL represents and warrants that to the best of his
knowledge he is permitted to enter into this Agreement and perform the
obligations contemplated thereby, and that this Agreement and the terms and
obligations thereof are not inconsistent with any obligation he may have.
13. This Agreement constitutes the entire and exclusive Agreement
between INDIVIDUAL and SCRIPTGEN with respect to the subject matter hereof
and supersedes any prior or contemporaneous agreements, representations and
understandings of the parties with respect thereto. No supplement,
modification or amendment of this Agreement shall be binding upon SCRIPTGEN
or INDIVIDUAL unless set forth in a written agreement executed by SCRIPTGEN
and INDIVIDUAL. SCRIPTGEN and INDIVIDUAL acknowledge that any amendment of
this Agreement (including, without limitation, any extension of this
Agreement or any change from the terms of Paragraph 2 in the consideration to
be provided to INDIVIDUAL with respect to services to be provided hereunder)
or any departure from the terms or conditions hereof with respect to
INDIVIDUAL's consulting services for SCRIPTGEN is subject to HHMI's prior
written approval.
14. (a) Except as hereinafter provided, INDIVIDUAL agrees that while
retained as a consultant for SCRIPTGEN he shall consult exclusively for
SCRIPTGEN in the Field and such other areas as SCRIPTGEN and INDIVIDUAL may
agree in writing, and during the consulting period and for one year
thereafter INDIVIDUAL shall not be engaged in or be or assist any business,
activity or person competing or, to the knowledge of INDIVIDUAL, intending to
compete, with the business of and/or products being developed by SCRIPTGEN as
of the time of termination of this Agreement, whether his involvement shall
be as an officer, director, owner (other than the passive ownership of up to
5% of the outstanding securities of any public company), employee, partner,
affiliate or consultant.
(b) Notwithstanding anything in this Paragraph 14 to the contrary,
none of the following shall constitute a breach of the obligations imposed by
this Paragraph 14:
(i) INDIVIDUAL's performance of his duties as an employee
of HHMI, a faculty member at MIT, a faculty member at Whitehead, or as
an member of any hospital, academic institution, government body, or
other not-for-profit, scientific, or professional organization;
(ii) the transfer by HHMI, MIT or Whitehead, by license or
other agreement or arrangement, of any invention, discovery or
development, and
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any intellectual property rights therein, developed in whole or in part
by INDIVIDUAL, or in connection with research collaborations; and
(iii) the assistance of and participation by INDIVIDUAL in
a transfer described in the preceding clause (ii) in a manner deemed
necessary, appropriate, or advisable by HHMI, MIT or Whitehead, each in
its or their sole judgment.
(c) Nothing in this Paragraph 14 shall be construed to impair or
prevent the performance of INDIVIDUAL'S duties and obligations to the
commercial organizations listed on Appendix A.
(d) Nothing in this Paragraph 14 shall be construed to impair or
prevent INDIVIDUAL from engaging in unrestricted, free scientific discussions
with other scientists.
(e) SCRIPTGEN acknowledges and agrees that nothing in this Agreement
shall affect INDIVIDUAL's obligations to, or research on behalf of, HHMI, MIT or
Whitehead, including, without limitation, obligations or research of INDIVIDUAL
in connection with a transfer by HHMI, MIT or Whitehead of materials or
intellectual property developed in whole or in part by INDIVIDUAL, or in
connection with research collaborations.
15. (a) INDIVIDUAL represents, warrants and agrees that he can and
will perform the services required by this Agreement without disclosing or
using any confidential information and/or proprietary information of MIT,
Whitehead, HHMI or any other third party.
(b) Notwithstanding anything to the contrary herein, SCRIPTGEN
shall have no rights by reason of this Agreement in any publication,
invention, discovery, improvement, or other intellectual property whatsoever,
whether or not publishable, patentable, or copyrightable, which is developed
as a result of a program of research financed, in whole or in part, by funds
provided by or under the control of HHMI, MIT or Whitehead. SCRIPTGEN also
acknowledges and agrees that it will enjoy no priority or advantage as a
result of the consultancy created by this Agreement in gaining access,
whether by license or otherwise, to any proprietary information or
intellectual property that arises from any research undertaken by INDIVIDUAL
in his capacity as an employee of HHMI or a member of the faculty of MIT or
Whitehead.
(c) All stock, stock options, rights or other equity or
equity-based securities (collectively, "Securities") issued or issuable by
SCRIPTGEN to INDIVIDUAL (either directly or indirectly) constitute (i)
approximately 2.4% of
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SCRIPTGEN's presently issued and outstanding common stock, as diluted by
assuming full exercise of any options and other rights held by INDIVIDUAL,
and (ii) approximately 2.0% of SCRIPTGEN's common stock on a fully diluted
basis. Indirect holdings for this purpose include without limitation (i) any
Securities issued or issuable by SCRIPTGEN to members of INDIVIDUAL's
immediate family, and (ii) any Securities issued or issuable by SCRIPTGEN to
INDIVIDUAL, or Securities allocated or allocable to INDIVIDUAL under MIT's or
Whitehead's inventorship policies, as royalties under a license by SCRIPTGEN
of technology of which INDIVIDUAL is an inventor.
16. (a) If either party materially breaches any of its obligations
hereunder, in addition to any other remedies it may have, the other party
shall have the right to terminate, this Agreement by written notice
specifying the breach and if such breach is not cured within sixty (60) days
after such written notice, this Agreement shall be terminated.
(b) Either party shall have the absolute right to terminate this
Agreement on any day on or after one year from the date of this Agreement by
thirty (30) days prior written notice.
(c) The termination of this Agreement shall terminate the
consulting services of INDIVIDUAL and INDIVIDUAL's right to compensation for
the period subsequent to the termination.
(d) Termination of this Agreement under Paragraph 16(a) or 16(b)
above shall not affect (i) SCRIPTGEN's obligation to pay for services previously
performed by INDIVIDUAL or expenses reasonably incurred by INDIVIDUAL for which
INDIVIDUAL is entitled to reimbursement under Paragraph 2, above, (ii)
SCRIPTGEN's obligations to recognize the priority of HHMI, MIT and Whitehead
intellectual property rights under Paragraph 15(b) above, (iii) SCRIPTGEN's
obligations to defend and indemnify INDIVIDUAL and HHMI under Paragraph 19
below, or (iv) INDIVIDUAL's continuing obligations to SCRIPTGEN under Paragraphs
4 and 7 above.
(e) In the event that INDIVIDUAL'S consulting services are terminated
by SCRIPTGEN pursuant to Paragraph 16(b), then SCRIPTGEN shall pay INDIVIDUAL an
amount equal to sixty thousand dollars ($60,000.00) in four equal quarterly
installments over the one year period which begins on the date of termination
and ends on the first anniversary of such date of termination, with such
payments being expressly conditioned upon INDIVIDUAL meeting all of the
obligations which survive termination of this Agreement, including but not
limited to the non-compete obligation of Paragraph 14.
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17. Except as otherwise herein provided, the obligations of Paragraphs
3 through 14, Paragraphs 16(d) and (e) and Paragraph 19 of this Agreement
shall survive any termination of this Agreement or the consulting services of
INDIVIDUAL; provided, however, that the obligation of Paragraph 14(a) shall
not survive if this Agreement is terminated by INDIVIDUAL under Paragraph
16(a).
18. INDIVIDUAL represents and warrants that he is not at this time a
consultant for any entity other than those set forth in Appendix A.
19. SCRIPTGEN hereby agrees to defend INDIVIDUAL and HHMI at its sole
expense, and to indemnify and hold INDIVIDUAL and HHMI harmless from, all
third party claims or suits against INDIVIDUAL or HHMI or any liabilities or
judgments based thereon, including legal expenses arising therefrom
("CLAIMS"), which CLAIMS arise from or as the result of, or are alleged to
arise from or as the result of, this Agreement, services performed by
INDIVIDUAL for SCRIPTGEN under this Agreement or any SCRIPTGEN products which
result from INDIVIDUAL's performance of services under this Agreement;
provided, however, that SCRIPTGEN shall have no liability to INDIVIDUAL under
this Paragraph 19 for any CLAIMS which are finally determined to have arisen
from the negligence or malfeasance of INDIVIDUAL. INDIVIDUAL shall promptly
notify SCRIPTGEN of any such CLAIMS against INDIVIDUAL which are subject to
indemnification, and SCRIPTGEN shall have the sole right to defend, settle or
compromise any such CLAIMS.
20. SCRIPTGEN recognizes and acknowledges that INDIVIDUAL is an
employee of HHMI and is affiliated with Whitehead and MIT, and acknowledges
and agrees that:
(a) INDIVIDUAL will not use the facilities, funds or equipment of
HHMI, WHITEHEAD or MIT for the benefit of SCRIPTGEN.
(b) INDIVIDUAL is subject to their respective policies, including,
among others, policies concerning consulting, conflicts of interest and
intellectual property.
(c) SCRIPTGEN and INDIVIDUAL shall establish procedures and use best
efforts to ensure (i) that any fees received by INDIVIDUAL under this Agreement
shall not become commingled with any funds of HHMI, Whitehead OR MIT or any
funds under the control of HHMI, Whitehead or MIT and (ii) that any of
INDIVIDUAL'S consulting activities under this Agreement shall be kept separate
and apart from any research financed, in whole or in part, by the funds of or
under the control of HHMI or Whitehead or MIT.
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21. SCRIPTGEN will not use INDIVIDUAL's name in any commercial
advertisement or similar material that is used to promote or sell products,
unless SCRIPTGEN obtains in advance the written consent of the named party to
such use, and in the case of the use of INDIVIDUAL's name, HHMI's consent as
well.
22. If any provision of this Agreement affecting the rights or property
of HHMI is adjudicated to be invalid, unenforceable, contrary to, or
prohibited under applicable laws or regulations of any jurisdiction, this
Agreement shall terminate as of the date such adjudication is effective. If
any other provision of this Agreement is adjudicated to be invalid,
unenforceable, contrary to, or prohibited under applicable laws or
regulations of any jurisdiction, such provision shall be severed and the
remaining provisions shall continue in full force and effect.
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IN WITNESS WHEREOF, the parties have signed this Agreement as of the date
hereof.
SCRIPTGEN PHARMACEUTICALS, INC.
By: /s/
---------------------------------
Title:
------------------------------
INDIVIDUAL
/s/ Peter S. Kim
-------------------------------------
Peter S. Kim
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APPENDIX A
The following are organizations or institutions to which INDIVIDUAL is
currently rendering consulting services:
L.G. Biomedical Research Institute
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Exhibit 10.24
RESEARCH AND LICENSE AGREEMENT
between
BIOCHEM PHARMA, INC.
and
SCRIPTGEN PHARMACEUTICALS, INC.
December 12, 1997
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE
CONFIDENTIAL PORTIONS HAVE BEEN REDACTED AND ARE DENOTED BY
[***]. THE CONFIDENTIAL PORTIONS HAVE BEEN SEPARATELY FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION.
<PAGE>
RESEARCH AND LICENSE AGREEMENT
This RESEARCH AND LICENSE AGREEMENT (the "Agreement") is made this 12th day
of December 1997 (the "Effective Date"), by and between Scriptgen
Pharmaceuticals, Inc. (SP), a company organized and existing under the laws of
the State of Delaware, and having its principal place of business at 200 Boston
Avenue, Medford, Massachusetts, and BioChem Pharma, Inc. (BIOCHEM), a company
organized and existing under the laws of Canada, and having its principal place
of business at 275 Armand-Frappier Blvd., Laval, Quebec. For the purpose of
this agreement SP and BIOCHEM shall also include the Affiliates of each.
R E C I T A L S
WHEREAS, SP has made substantial investment in high-throughput screening
technology for (i) the Hepatitis B Research Program ("HBV") [***] and (ii)
the Dimerescent Receptor Research Program;
WHEREAS, BIOCHEM possesses drug development, manufacturing and
commercialization expertise related to development and marketing of
pharmaceuticals;
WHEREAS, SP desires to provide certain drug candidates to BIOCHEM for the
purpose of further development and eventual commercial exploitation of Products
embodying the Technology;
WHEREAS, BIOCHEM desires to acquire the drug candidates and develop
Compounds provided by SP for commercial exploitation; and
WHEREAS, both BIOCHEM and SP desire to enter into a license agreement which
balances the relative contributions of each to the discovery, development and
commercialization of the Products and rewards each according to their relative
contributions;
NOW, THEREFORE, in consideration of the financial terms set forth herein,
as well as other good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, the parties hereto, intending to be legally bound,
hereby covenant, and agree as follows:
ARTICLE I
DEFINITIONS
As used in this Agreement, the following terms, whether used in the
singular or plural, shall have the respective meanings set forth below:
<PAGE>
1.1 "AFFILIATE" shall mean any Person which, directly or indirectly, owns,
is owned by, or is under common ownership with a party to this Agreement or any
Person actually controlled by, controlling, or under control of a party to this
Agreement. For the purposes of this definition, "ownership" or "control" shall
mean a Person owns or controls the lesser of (i) fifty percent (50%) and (ii)
the maximum ownership interest permitted by law, of the equity conferring votes
or rights, and/or otherwise has the ability to direct the business affairs of
another Person.
1.2 "ANNUAL RESEARCH PLAN" shall mean the written plans describing the
research in the Field to be carried out during each year, of the Hepatitis B
Research Program and the Dimerescent Receptor Research Program pursuant to this
Agreement. Each Annual Research Plan will be set forth in a written document and
contain the mutually agreed criteria for determining a Drug Candidate.
1.3 "CALENDAR QUARTER" shall mean the respective periods of three (3)
consecutive calendar months ending on March 31, June 30, September 30 and
December 31.
1.4 "CALENDAR YEAR" shall mean each successive period of twelve (12)
months commencing on January 1 and ending on December 31.
1.5 "CLINICAL DEVELOPMENT PROGRAM" shall mean the drug development program
activities of BIOCHEM for the Drug Candidates to be described in SCHEDULE 1.5 as
amended from time to time including yearly updates.
1.6 "COMMERCIAL SALE" shall mean the transfer of title to a Product to an
independent third party in a country after the Product has received all
necessary approval for sale in such country by the appropriate Regulatory
Agency.
1.7 "CONFIDENTIAL INFORMATION" shall mean any proprietary and secret
ideas, technical information, trade secrets, know-how, commercial information,
techniques, data or other information, whether in written or verbal form, or any
other information marked as "Confidential," which relate to the Compound, the
Product, the manufacturing of the Product or Compound, or the Patent Rights, and
which are in the possession of or owned by either Party. The term "Confidential
-2-
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Information" does not include information which is or was: (i) in the public
domain or becomes public domain other than through a breach of this Agreement on
the part of the receiving Party; or (ii) received by the receiving Party from a
third party that is not under a confidential obligation to the disclosing Party;
or (iii) known to the receiving Party, as shown by its written records, prior to
execution of this Agreement; or (iv) developed by the receiving Party without
access to the Confidential Information; or (v) generally made available to the
public by the disclosing Party without restrictions or disclosure
1.8 "COMPOUNDS" shall mean any compounds which SP has identified in the
Hepatitis B Research Program and the Dimerescent Receptor Research Program [***]
1.9 "DIMERESCENT COMPOUNDS" shall mean compounds for the following
receptors: [***] and any other [***] subsequently identified.
1.10 "DIMERESCENT RECEPTOR RESEARCH PROGRAM" shall mean the research
program including acceptance criteria for a Drug Candidate described in
attached SCHEDULE 1.10 which shall be prepared and delivered within [***] of
the Effective Date and amended from time to time.
1.11 "DOLLARS" and the symbol "$" shall mean lawful money of the United
States of America.
1.12 "DRUG CANDIDATE" shall mean any and all Compounds, discovered by SP in
the course of conducting the Hepatitis B Research Program or the Dimerescent
Receptor Research Program including all formulations, mixtures or compositions
thereof discovered by SP in the Hepatitis B Research Program or the Dimerescent
Receptor Research Program that meets the criteria specified for acceptance in
SCHEDULES 1.10 AND 1.19.
1.13 "EFFECTIVE DATE" shall be the date set forth in the first paragraph of
this Agreement.
-3-
<PAGE>
1.14 "FDA" shall mean the United States Food and Drug Administration or any
replacement or successor entity thereto.
1.15 "FIELD" shall mean any application in human health care.
1.16 "FIRST COMMERCIAL SALE" shall mean the date of the first Commercial
Sale in a given country.
1.17 "GAAP" shall mean generally acceptable accounting principles for the
United States.
1.18 "GROSS PROFIT" shall mean Net Sales minus manufacturing cost all as
determined in accordance with GAAP.
1.19 "HEPATITIS B RESEARCH PROGRAM" shall mean the research program
including the acceptance criteria for an antiviral Drug Candidate described
in attached SCHEDULE 1.19 which shall be prepared and delivered within [***]
of the Effective Date and may be amended from time to time.
1.20 "IND" shall mean Investigational New Drug application as that term is
used in the FDA.
1.21 "NDA" shall mean New Drug Application as that term is used in the FDA.
1.22 "NET SALES" shall mean the amount of money (other than Sub-License
Receipts) received by BIOCHEM for BIOCHEM's Commercial Sale of a Product after
deducting:
(i) the normal or customary trade and/or quantity discounts and
allowances to customers;
(ii) refunds, rebates and allowances for returned, damaged goods or
outdated Product;
(iii) excise and sales taxes, customs duties, tariffs and other
governmental charges;
(iv) costs of transportation (including without limitation packing and
insurance) paid;
(v) retroactive price reductions applicable to sale of Product that
are actually allowed or granted;
(vi) royalties paid on a Drug Candidate to a third party.
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Notwithstanding the foregoing, if a Product is sold in conjunction with or
includes Royalty Bearing Components, Net Sales for purposes of determining
royalties payable under this Agreement shall be calculated as the product
obtained by using whichever of the following formulas is applicable:
(a) if both the Product and the Royalty Bearing Components included
in the combination product or service are also sold separately
(by BIOCHEM or others), multiplying Net Sales of the combination
product or service by the fraction A/(A+B), where "A" is the
price during the royalty paying period in question of the
Product if sold separately and "B" is the price of the Royalty
Bearing Components in the combination product or service if sold
separately.
(b) if Section 1.22(a) does not apply multiplying Net Sales of such
combination product or service by the fraction C/(C+D) in which
"C" is the per unit cost of the Product portion of such
combination product or service and "D" is the per unit cost of
the Royalty Bearing Components in the combination product or
service, such costs being arrived at using the standard cost
accounting procedures of BIOCHEM which will be in accordance
with GAAP.
1.23 "OTHER COMPENSATION" shall mean any and all compensation other than
Net Sales (no matter how classified) received by BIOCHEM from a third-party
sub-licensee of Compounds or Products.
1.24 "PARTY" shall mean SP or BIOCHEM and when used in the plural, shall
mean SP and BIOCHEM.
1.25 "PERSON" shall mean and include any individual, corporation,
partnership, joint venture, trust, unincorporated organization, university,
college or government or any agency or political subdivision thereof.
1.26 "PRODUCT" shall mean any therapeutic agent which is comprised, at
least in part, of a Drug Candidate.
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1.27 "PROFIT" shall mean Net Sales minus ( manufacturing cost plus
distribution and sales cost plus marketing cost plus any reasonable expenses
incurred under SECTION 12.12) all as determined in accordance with GAAP.
1.28 "R & D RECEIPTS" shall mean all value received, regardless of how
characterized, by a Party from a third party for the performance of research and
development on a Drug Candidate.
1.29 "R & D PROFIT" shall mean R & D Receipts minus (cost of supplies,
equipment, and salary directly attributable to the research and development
covered by the R & D Receipts).
1.30 "REGULATORY AGENCY" shall mean the FDA and any corresponding agencies
in other countries where Product is to be sold or used.
1.31 "RESEARCH INVENTIONS" shall have the meaning as set forth in SECTION
8.4.
1.32 "RESEARCH PROGRAMS" shall mean both the Hepatitis B Research Program
and the Dimerescent Receptor Research Program.
1.33 "ROYALTY BEARING COMPONENTS" shall mean all components, devices or
products which are sold in conjunction with or are included as part of a Product
and for which either (i) BIOCHEM must license and pay a royalty to an unrelated
third party or (ii) BIOCHEM owns a patent covering the component, device or
product in the appropriate territory where such component, product or device is
sold.
1.34 "SP PATENT RIGHTS" shall mean any and all patents and patent
applications licensed to or owned by SP during the term of this Agreement
which relate to the Compounds, Product or know-how of the Compounds and
Product and which are listed on SCHEDULE 1.34 as amended from time to time,
and any and all patents and patent applications which claim priority from any
such patent or application including without limitation all divisional,
reissue, re-examination, continuation, and continuations-in-part, extension
and renewal application and patent thereof and any and all other counterpart
application in any countries and patent and inventor certificates, utility
model and the like issuing therefrom; provided, however, SP Patent Rights
shall not include any rights to SP's proprietary Any Target Ligand Affinity
Screen ("ATLAS") and the proprietary Screen for Compounds with Affinity for
Nucleic Acid ("SCAN") technology.
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1.35 "SP TECHNOLOGY" shall include the SP Patent Rights, know-how,
Confidential Information, and any other technology, data, compounds, processes,
formulae, materials, devices, systems, notes, records, preparations, usage
information, procedures, regulatory information, manufacturing information and
other information all of which are related to the Compound, the Product or to
the Patent Rights; provided, however, SP Technology shall not include any rights
to SP's ATLAS and SCAN technology.
1.36 "SUB-LICENSE RECEIPTS" shall mean all value received by BIOCHEM,
including license or distribution fees, milestones fees or Other Compensation
regardless of how characterized. Any non-monetary consideration shall be
afforded at fair market value as of the date of receipt of such consideration as
calculated by the Parties acting reasonably and in good faith.
1.37 "TERRITORY" shall mean all of the countries in the world, including
their respective territories and possessions.
1.38 "TRANSFER DATE" shall mean the date on which SP sends notice to
BIOCHEM that it has transferred a Drug Candidate for clinical development. If
BIOCHEM disputes SP's claim of the Transfer Date, all such disagreement shall be
settled according to Section 13.1.
1.39 "VALID PATENT CLAIM" shall mean a claim of an issued and unexpired
patent included within the SP Patent Rights or pending patent applications
claiming an invention, which has not been revoked or held unenforceable or
invalid by a decision of a court or other governmental agency of competent
jurisdiction, unappealable or unappealed within the time allowed for appeal, and
which has not been disclaimed, denied or admitted to be invalid or unenforceable
through reissue, disclaimer or otherwise.
ARTICLE II
LICENSE
2.1 LICENSE TO COMPOUNDS AND PRODUCTS. Subject to the terms and
conditions of this Agreement, effective as of the Effective Date, SP hereby
grants to BIOCHEM an exclusive, non-royalty bearing license in the Territory
under SP Technology (to the extent such SP Technology covers composition of
matter, methods of use, manufacturing and formulation of Compounds or Product
thereof) to seek governmental approvals, discover, develop, make, use, offer
to sell, sell, import and export and have developed, made, used, offered for
sale, sold, imported and exported
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any of the Compounds and Products. Such license rights will remain in effect
until (i) the expiration of the last applicable patent in such country where
there is a Valid Patent Claim covering a Product in such county; or (ii) the
tenth (10th) anniversary after the First Commercial Sale of the Product in
such country.
2.2 LIMITED RIGHTS. Subject to the terms and conditions of this
Agreement, effective as of the Effective Date, and to the limited extent
necessary for BIOCHEM to seek governmental approvals, develop, have made, make,
use, offer to sell, sell, import and export and have developed, made, used,
offered for sale, sold, imported and exported Compounds and Products, SP agrees
not to sue BIOCHEM for infringement under any of SP's patents; provided,
however, nothing in this SECTION 2.2 shall be interpreted to allow BIOCHEM to
screen for Compounds or Products using ATLAS and SCAN.
ARTICLE III
CONSIDERATION
3.1 EQUITY. BIOCHEM shall purchase such number of shares of Series D
Convertible Preferred Stock of SP which are convertible into [***] of SP's
outstanding shares of common stock on a fully diluted basis immediately
following the purchase for a payment of U.S. $20,000,000 (TWENTY MILLION
DOLLARS) as per that certain Stock Purchase Agreement of even Date hereof which
is attached as SCHEDULE 3.1.
3.2 CONTINUING PAYMENTS. BIOCHEM and SP shall share Profit with [***]
going to BIOCHEM and [***] going to SP; provided, however, after the second
anniversary of the First Commercial Sale on a country-by-country basis, the
share of Profit payable to SP shall never be less than [***] of Gross Profit.
3.3 SUB-LICENSING. All Sub-License Receipts shall be split as follows:
(a) if at the time of sub-license BIOCHEM has completed, at its
expense, clinical development of the Product covered by the
sub-license through completion of the Phase III clinical trials
to be used for the NDA for such Product, the split shall be
[***] to BIOCHEM and [***] to SP without any deductions.
(b) If a Product is sub-licensed to a third party before the
completion of the Phase III trials related to such Product, the
split shall be [***] to BIOCHEM and [***] to SP; provided,
however, that the royalty portion of said Sub-License
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Receipts payable to SP shall not exceed [***] [***] of the Net
Sales of the Product. Prior to BIOCHEM making any royalty or
milestone payments to SP under this SECTION 3.3(B), BIOCHEM
shall first be entitled to reimbursement in full for the
clinical development costs it has expended.
(c) Notwithstanding Section 3.3(b), if BIOCHEM sub-licenses its
rights under this Agreement to a related party or Affiliate of
BIOCHEM, any payments to BIOCHEM and any profit of such related
party or Affiliate shall be split [***] to BIOCHEM [***] to SP.
3.4 REDUCTION IN PROFIT SHARE. If the last of the SP Patent Rights expire
before the [***] anniversary of the First Commercial Sale of the Product, SP's
share of the Profit and Sub-Licensee Receipts after such expiration shall be
reduced by [***].
3.5 OPTION FEE. If BIOCHEM exercises its option under Section 5.2 it
shall pay SP:
[***]
[***]
Provided, however, the option fees under this section shall increase as
specified in Paragraph 5.2(ii).
3.6 R & D PROFITS. R & D Profits on a Drug Candidate which has not been
returned to SP by BIOCHEM shall be split in the same proportion as any Profits
or Sub-Licensee Receipts would be split on such Drug Candidate. If BIOCHEM
returns a Drug Candidate to SP, BIOCHEM shall not be entitled to any of the R &
D Profits which accumulate after the date of such return.
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ARTICLE IV
SUB-LICENSING
4.1 TERMS. If BIOCHEM sub-licenses its rights under this Agreement to a
third party it shall provide SP written notification of such sub-license and
provide SP a copy of such sub-license agreement within [***] of execution of
such agreement by BIOCHEM.
ARTICLE V
CLINICAL DEVELOPMENT AND MANUFACTURING
5.1 CLINICAL DEVELOPMENT. BIOCHEM shall use its best efforts based on
reasonable commercial judgment to carry out the Clinical Development Program.
Illustrative of this, after acceptance of a Drug Candidate, BIOCHEM will have
[***] from the Transfer Date to file the IND or equivalent document in an FDA
recognized country. During this period, BIOCHEM will diligently and in a
timely manner undertake the [***] of the Drug Candidate and conduct the [***]
and other activities necessary for IND or equivalent filing. If the IND or
equivalent document is not filed within such [***] period, BIOCHEM shall have
the [***] in which to file the IND or equivalent document [***]; provided,
however, if such delay beyond [***] is due to technical difficulties (mutually
recognized by the Parties) the [***] period shall be extended for a reasonable
period to allow the Parties to meet and discuss solutions addressing such
technical difficulties. Further, BIOCHEM shall provide a [***] with
appropriate [***] within [***] of the Transfer Date. BIOCHEM shall be
responsible for all costs of the Clinical Development Program.
5.2 DIMERESCENT COMPOUNDS OPTION. BIOCHEM shall have [***] to exercise
the options to Dimerescent Compound under the following schedule.
(i) Upon SP's demonstration of [***] it shall provide written
notification to BIOCHEM of such demonstration and provide a written
description of the data to support such demonstration (the
"Notification Date"). BIOCHEM shall have [***] after the
Notification Date to identify [***] in addition to [***] (the
"Identification Date"). Further, on the Identification Date, BIOCHEM
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must exercise its option for at least one of the [***] or the [***]
identified [***] (collectively these [***] shall be the [***]) and
pay the option fee(s) of Section 3.5. if BIOCHEM fails to exercise
its option to at least one such [***] then [***]. If BIOCHEM
exercises its option to [***], it shall [***].
(ii) If BIOCHEM exercises its option to at least one [***] then SP shall
begin a development program to identify Drug Candidates for all [***]
for which BIOCHEM paid the option fee. When a Drug Candidate is
identified, SP shall provide written notification to BIOCHEM of the
identify of each Drug Candidate. BIOCHEM shall then have [***] to
identify [***] additional [***]. At the end of such [***] period
BIOCHEM shall pay the option fees of Section 3.5 for such identified
[***]. Failure to pay such option fee for at least [***] shall
result in [***]. If BIOCHEM pays the option fee for [***], then it
shall have [***] to identify and exercise additional [***] for SP to
develop Dimerescent Compounds (the "[***] Option"). As long as
BIOCHEM exercises its option and pays an option fee every [***] this
option shall continue during the term of this Agreement. The option
fee for any [***] subject to the [***] Option shall [***].
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5.3 RETURN OF DRUG CANDIDATE. If a Drug Candidate, which has been
accepted by BIOCHEM is voluntarily returned to SP by BIOCHEM prior to any
default by BIOCHEM, SP shall be free to further develop such returned Drug
Candidate; provided, however, if SP further develops such returned Drug
Candidate, then SP shall pay to BIOCHEM a royalty according to the following
schedule:
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[***]
ARTICLE VI
ACCOUNTING AND RECORDS
6.1 ACCOUNTING. At the close of each calendar quarter, the Net Sales,
Profit, Gross Profit, R & D Receipts, R &D Profit and Sub-License Receipts shall
be computed by BIOCHEM, and the share of Profits, R & D Profits and Sub-License
Receipts or payments earned thereon shall be paid to SP within [***] after the
close of said quarter.
6.2 REPORTS. With each payment, BIOCHEM shall furnish to SP a written
accounting report for the closed quarter stating the Net Sales, Profit, Gross
Profit and Sub-License Receipts, the payments due and the payments made.
With each such report delivered, BIOCHEM shall pay to SP all amounts, if any,
due under this Agreement. If no payments are due, BIOCHEM shall so report.
6.3 PAYMENTS. All payments required in this Agreement shall be paid to SP
in United States dollars at the address specified in SECTION 11.1 of this
Agreement or to such other place as SP may reasonably designate consistent with
applicable laws and regulations.
6.4 RECORDS. For a period of [***] from the date covered by any report
provided under SECTION 6.2, BIOCHEM agrees to maintain written records with
respect to its operations for such period pursuant to this Agreement in
sufficient detail to enable SP or its designated accountants to compute the
amount of Gross Profit, Profit, R & D Profit, Sub-License Receipts and other
payments payable to SP, and further agrees to permit said records to be
audited from time to time, on reasonable notice during normal business hours
to the extent necessary to verify the amount of royalties or payments due
hereunder. Any such audit shall be conducted by an independent auditor
selected by SP and approved by BIOCHEM. Any such auditor shall execute a
confidentiality agreement satisfactory to BIOCHEM. Any report by such
auditor shall only state that the amounts of royalties or payments were
accurate or state the specific amount overpaid or underpaid. A copy of such
report shall be provided to both BIOCHEM and SP. SP shall pay the costs of
said
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examination unless an underpayment of greater than [***] in royalties due is
present, in which case BIOCHEM shall reimburse SP for the reasonable expenses
of the examination.
6.5 PROFIT CALCULATIONS. Profit, Gross Profit, Net Sales, R & D Profit or
Sub-License Receipts subject to payments in any country outside the United
States shall be calculated on Profits, Gross Profits, R & D Profits or Sub
License Receipts fees paid in such country as expressed in United States dollars
in accordance with BIOCHEM's standard accounting procedure used for BIOCHEM's
reporting of income to its stockholders and for other external reporting, which
procedure shall comply with GAAP.
6.6 FOREIGN CURRENCY. BIOCHEM and its Sub-Licensees shall use their best
efforts to convert the Profit, Gross Profits, R & D Profits or Sub-License
Receipts due SP on sales in any country to United States dollars; provided,
however, that if conversion to and transfer of United States dollars cannot be
made in any country for any reason, at the election of SP, all such payments (i)
may be made in the currency of the country in which such sales are made and
deposited in SP's name in a bank designated by SP in any such country; or (ii)
the obligation of BIOCHEM or its Sub-Licensees to make such payment shall be
suspended until such conversion and transfer of all funds by BIOCHEM or its
Sub-Licensees becomes possible.
6.7 INCOME TAXES. All income taxes assessed or imposed against or
required to be withheld from payments due SP shall be deducted from amounts
payable hereunder and shall be paid to appropriate fiscal or tax authorities
on behalf of SP. Tax receipts received by BIOCHEM evidencing payment of such
taxes shall be forwarded to SP.
6.8 LATE PAYMENT. Any payments due hereunder which are not paid when
due shall bear an interest at a rate of lesser of the prime as specified by
[***] and the maximum rate allowed under the law from the due date until paid
in full. Payment of such interest shall be in addition to any other rights
and remedies to which SP may be entitled for failure of BIOCHEM to make
timely payments.
ARTICLE VII
TERM AND TERMINATION
7.1 TERM OF THIS AGREEMENT. Unless sooner terminated as otherwise
provided herein, this Agreement shall terminate on the later of (i) the
expiration of the last of any issued patents in the Patent Rights to expire
and (ii) the tenth (10th) anniversary after the First Commercial Sale of the
Product for a specific country;
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and BIOCHEM shall have a fully paid-up license to make, have made, use, rent,
sell, lease, market, and otherwise commercially exploit the Compounds and
Product in such country.
7.2 TERMINATION BY SP. SP may terminate this Agreement if BIOCHEM
fails to perform any of its material obligations under this Agreement and
fails to remedy said breach within [***] after being given written notice of
the specific failure or default and termination by SP.
7.3 TERMINATION BY BIOCHEM. BIOCHEM may terminate this Agreement if SP
fails to perform any of its material obligations under this Agreement and
fails to remedy said breach within [***] after being given written notice of
the specific failure or default and termination by BIOCHEM.
7.4 RIGHTS AFTER TERMINATION DUE TO BREACH BY SP. In the event this
Agreement is terminated under SECTION 7.3, then BIOCHEM shall have a fully
paid-up license under SP Technology (to the extent such SP Technology covers
composition of matter, methods of use, manufacturing and formulation of
Compounds or Product thereof) to make, use and sell the Compounds and Products.
7.5 RIGHTS AFTER TERMINATION DUE TO BREACH BY BIOCHEM. In the event that
this Agreement is terminated under SECTION 7.2, then BIOCHEM shall sign and turn
over to SP and SP shall solely own all developments, Compounds, Products,
information, preclinical and clinical trial results and data, government filings
and other items created by BIOCHEM during the carrying out of the Clinical
Development Plan.
7.6 RIGHTS AFTER TERMINATION. In the event this Agreement is terminated
under SECTIONS 7.2 or 7.3:
(a) BIOCHEM shall have [***] to complete the manufacture and
[***] to complete sale or license of any Products in
stock or in the course of manufacture at the time of
termination, all subject, however, to payments of Profits,
Gross Profits, R & D Profits or Sub-License Receipts and
accounting as provided herein, even if such Profits, Gross
Profits, R & D Profits or Sub-License Receipts obligations
arise from transactions subsequent to the effective date of
termination;
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(b) BIOCHEM's obligation to make payments and its obligation to
keep records and to allow a final audit will survive any
termination; and
(c) Except as expressly provided herein, no Party hereunder
shall be discharged or relieved from any liability or
obligation existing prior to such termination.
7.7 MUTUAL TERMINATION. The Parties can mutually agree to terminate this
Agreement at any time.
ARTICLE VIII
PROPRIETARY RIGHTS AND TECHNOLOGY ASSISTANCE
8.1 RIGHT TO SUE. Each Party shall promptly inform the other of any
suspected infringement of any SP Patent Rights or misuse, misappropriation,
theft or breach of confidence of other proprietary rights in the SP
Technology, Compounds or Products by a third party. With respect to such
activities as are suspected and if such activities are a violation of
BIOCHEM's rights, BIOCHEM may, but shall not have the obligation, to bring
suit against a third party for infringement, misuse, misappropriation, theft
or breach of confidence of the proprietary rights against such third party.
If BIOCHEM does not bring suit within [***] of notice under this section,
then SP shall have the right to bring suit. If SP brings suit all recovery
shall belong to SP. BIOCHEM, if required by law, shall join SP as a party to
the suit at BIOCHEM's expense. In the event that BIOCHEM prosecutes any such
lawsuit, then BIOCHEM shall be entitled to deduct its costs and expenses from
any damages it is awarded. Any remaining damage awarded shall be treated as
Profit and subject to payment under SECTION 3.2. Before any action is taken
that will affect the validity of any rights or before such lawsuit is settled
or compromised, the Parties shall consult and cooperate with one another to
insure that the rights granted by this Agreement are not materially affected
by any such acts, settlement or compromise. SP shall have final approval of
all settlements, such approval shall not be unreasonably withheld.
8.2 DILIGENT PROSECUTION OF EXISTING APPLICATIONS. SP shall diligently
file, prosecute and maintain all existing and future patents and patent
applications within the Patent Rights including all pending and new patent
applications and respond to oppositions filed by third parties against the
grant of letters patent for such applications; provided however, BIOCHEM
shall reimburse SP for [***] of any expenses including filing, prosecution and
maintenance or restoration under SECTION 8.10 of patents under the SP Patent
Rights after the Effective Date.
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8.3 FURNISHING OF TECHNOLOGY. SP shall provide BIOCHEM with all the
information and documents in its possession, and which are reasonably necessary
to develop and commercially exploit the Compounds and Products and all
information in its possession which is required by the Regulatory Agency. If
any new information related to the Compounds and Products is developed by, or
comes into the possession SP and SP is not prevented from disclosing such
information by an agreement with a third party, then SP shall provide such
information in a timely manner.
8.4 IMPROVEMENTS. If any new uses for or derivatives of any Compounds or
Products developed by SP under the Research Programs hereunder are developed or
discovered by SP or BIOCHEM during the term of this Agreement (the "Research
Inventions"), ownership of such uses or derivative Compounds shall be governed
by United States Patent laws and such new uses or derivative Compounds and any
patent derived therefrom shall be included within the scope of this Agreement.
8.5 LICENSE OF RESEARCH INVENTIONS. Each Party shall promptly disclose to
the other Party the making, conception or reduction to practice of Research
Inventions. When a Research Invention has been made which may reasonably be
considered to be patentable, a patent application shall be filed as soon as
reasonably possible in accordance with SECTION 8.2. Such Research Inventions
shall be deemed to be SP Patent Rights in accordance with SECTION 1.34 herein.
With respect to Research Inventions which are not patentable, such research
information shall be deemed to be SP Technology, and shall be licensed in
accordance with the terms and conditions contained in ARTICLE III herein.
8.6 RESEARCH TERM. Except as otherwise provided herein, the term of the
Research Programs shall commence on the Effective Date and continue for a period
of [***]. The Research Program can be extended by the mutual agreement
of the Parties.
8.7 PROVIDE COPIES. SP shall provide to BIOCHEM copies of all patent
applications pertaining to the Research Programs prior to filing for the purpose
of obtaining substantive comment of BIOCHEM patent counsel and consult with
BIOCHEM regarding countries in which such patent applications should be filed
and shall file patent applications in those countries where BIOCHEM requests
that SP file.
8.8 PROSECUTION. SP shall provide to BIOCHEM copies of all documents
relating to prosecution of all patent applications in a timely manner for the
purpose of obtaining substantive comment of BIOCHEM patent counsel.
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8.9 ABANDONMENT. SP shall notify BIOCHEM in a timely manner of any
decision to abandon a pending patent application or to stop maintaining an
issued patent at which point, BIOCHEM shall have the option, at its expense, of
continuing to prosecute any pending patent application or of keeping the issued
patent in force.
8.10 PATENT TERM RESTORATION. The Parties hereto shall cooperate with each
other in obtaining patent term restoration or supplemental protection
certificates or their equivalents in any country in the Territory where
applicable to Patent Rights. In the event that elections with respect to
obtaining such patent term restoration are to be made, each of BIOCHEM and SP
shall have the right to make the election and non-selecting Party agrees to
abide by such election.
ARTICLE IX
RESEARCH PROGRAM
9.1 RESEARCH OBLIGATIONS. SP shall use its best efforts based on its
reasonable business judgment to diligently conduct the Research Programs. If SP
elects not to pursue research under the Hepatitis B Research Program and/or the
Dimerescent Receptor Research Program, SP shall have no continuing right to
pursue any research and development work on any Compounds or Products for any
purpose either in the Field or outside the Field under any such Research
Program(s) so discontinued; provided, however, it shall not be considered an
abandonment of any Research Program if SP terminates research on a target after
the Transfer Date or by mutual agreement of the Parties.
9.2 TERMINATION RIGHTS. Upon termination of any of the Research Programs
in accordance with this ARTICLE IX, SP shall immediately transfer to BIOCHEM
and/or its Affiliates, all documents, records and SP Technology in its
possession which directly relate to Compounds or Products, the development of
which is so abandoned by SP and BIOCHEM shall have the right to continue to
develop and commercialize such Compounds or Products for HBV or Dimerescent
Receptor Research Program for which an option was exercised, whichever is
abandoned by SP. In such occurrence, BIOCHEM shall be responsible, at its cost
and expense, for the filing, prosecution and maintenance of all patent rights
associated with such abandonment.
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9.3 LICENSE. SP hereby grants to BIOCHEM a limited, irrevocable,
exclusive, non-royalty bearing license in the Territory under the SP Technology
(to the extent such SP Technology covers composition of matter, methods of use,
manufacturing and formulation of Compounds or Product thereof) to the abandoned
Compounds or Products to seek governmental approvals, discover, develop, make,
use offer to sell, sell, import and export and have developed, made, used,
offered for sale, sold, imported and exported any of the abandoned Compounds or
Products arising from the Research Program(s).
9.4 WITHOUT PREJUDICE. Any termination of the Research Program(s) shall
be without prejudice to the rights of either Party against the other then
accruing or otherwise accrued under this Agreement.
9.5 NO SHARE. SP will not receive any share of the Profit, Gross Profit
or Sub-License Receipts from the Commercial Sale of abandoned Compounds or
Product.
ARTICLE X
FORCE MAJEURE
10.1 FORCE MAJEURE. Except as otherwise provided in this Agreement
(except the obligation to make payments when properly due), any delay or
failure to perform under this Agreement arising from causes beyond the
reasonable control of the Party concerned shall not be deemed to be a default
and shall not put an end to this Agreement, so that the same shall continue
in suspense or part performance until such cause shall have ceased. For the
above purpose the following causes shall be deemed to be beyond the
reasonable control of the Parties, unless conclusive evidence to the contrary
is provided by the Party alleging control, namely: strikes, lockouts, civil
commotion, riot, invasion, war, sabotage, embargo, fire, explosion, storm,
flood, earthquake; or voluntary or mandatory compliance with any direction,
request or order of any Person having or appearing to have governmental
authority, or purpose of national defense or national heath emergency. The
Party affected by an event reasonably beyond its control shall notify the
other Party within [***] and specify the event. Such Party shall take its
best efforts based on its reasonable business judgement to eliminate the
cause of such event. If a condition constituting force majeure as defined
herein exists for more than [***] the Parties shall meet to negotiate a
mutually satisfactory solution to the problem, if practicable.
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ARTICLE XI
NOTICES
11.1 NOTICES. All notices, requests, demands and other communications
under this Agreement or in connection therewith to be effective shall be in
writing in English and unless otherwise expressly provided herein shall be
deemed to have been duly given or made (i) on the date delivered in person; (ii)
on the date transmitted by facsimile if confirmation is sent by Federal Express
within one (1) day; (iii) on the date received if sent by Federal Express or
other nationally recognized overnight carrier service with service charges
prepaid; in each case (except for personal delivery) such notices, requests,
demands or other communications shall be sent to a Party at its address or
facsimile number as follows, or as otherwise designated by the Party by notice
in accordance herewith:
(i) If to SP, to:
Scriptgen Pharmaceuticals, Inc.
200 Boston Avenue
Medford, MA
Attention: President
Facsimile No.: (617) 393-8354
with copies to:
Fulbright & Jaworski
1301 McKenney Street, Suite 5100
Houston, TX 77010-3095
Attention: Thomas D Paul
Facsimile No.: (713) 651-5325
(ii) If to BIOCHEM, to:
BioChem Pharma Inc.
Armand-Frappier Boulevard
Laval, Quebec, Canada
Attention: President
Facsimile No.: (514) 978-7755
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with copies to:
BioChem Pharma Inc.
Armand-Frappier Boulevard
Laval, Quebec, Canada
Attention: Jocelyne Surprenant
Senior Legal Counsel, Legal Affairs
Facsimile No.: (514) 978-7994
ARTICLE XII
WARRANTIES, REPRESENTATION AND INDEMNITY
12.1 RIGHT TO GRANT. SP represents and warrants that it has the legal
right to grant the license set forth in this Agreement.
12.2 AUTHORIZATION. Each Party represents and warrants to the other Party
that it is duly organized and has the authority to operate where it does
business and its execution, delivery, and performance of this Agreement and the
consideration set forth in this Agreement have been duly authorized by all
necessary corporate action and that this Agreement is not in conflict with any
other agreements to which it is party.
12.3 PATENT WARRANTY. To the best knowledge of the officers of SP (i) none
of the Drug Candidates for HBV infringe patents of third parties on the Transfer
Date unless written notice is otherwise provided to BIOCHEM by SP prior to the
Transfer Date and (ii) none of the Dimerescent Compounds infringe patents of
third parties on the date of execution of the option unless written notice is
otherwise provided to BIOCHEM prior to execution of the options.
12.4 COMPLIANCE WITH APPROPRIATE LAW. Each Party warrants that it shall
comply with any applicable national or local laws and regulations related to the
subject matter of this Agreement and that a Party shall indemnify and hold
harmless the other Party from actions related to a Party's violation of such
laws and regulations to the extent permitted by law.
12.5 RESPONSIBILITY FOR COMPLIANCE. Each Party shall be responsible for
compliance with laws applicable to any sale, manufacture or other use involving
the Technology or Product.
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12.6 WARRANTY DISCLAIMER.
EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN THIS AGREEMENT, NEITHER PARTY
MAKES ANY WARRANTY WITH RESPECT TO ANY TECHNOLOGY, GOODS SERVICES, RIGHTS OR
OTHER SUBJECT MATTER OF THIS AGREEMENT AND HEREBY DISCLAIMS WARRANTIES OR
MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE AND NONINFRINGEMENT WITH
RESPECT TO ANY AND ALL OF THE FOREGOING.
12.7 LIMITED LIABILITY.
NOTWITHSTANDING ANYTHING ELSE IN THIS AGREEMENT OR OTHERWISE, NEITHER
BIOCHEM NOR SP WILL BE LIABLE WITH RESPECT TO ANY SUBJECT MATTER OF THIS
AGREEMENT UNDER ANY CONTRACT, NEGLIGENCE, STRICT LIABILITY OR OTHER LEGAL OR
EQUITABLE THEORY FOR (i) ANY INDIRECT, INCIDENTAL, CONSEQUENTIAL OR PUNITIVE
DAMAGES OR LOST PROFITS OR (ii) COST OF PROCUREMENT OF SUBSTITUTE GOODS,
TECHNOLOGY OR SERVICES.
12.8 WARRANTY INDEMNITY. Each Party agrees to indemnify and hold the other
Party and its directors, officers, trustees, employees, agents and
representatives, harmless from any liabilities, costs and expenses (including
attorney's fees and expenses), obligations or causes of action arising out of or
related to any breach of the representations and warranties made by such Party
herein.
12.9 GENERAL INDEMNITY. BIOCHEM agrees to protect, defend, indemnify
and hold SP and its directors, officers, trustees, employees, agents and
representatives harmless from and against, and to pay any and all losses,
liabilities, claims, demands, causes of action, lawsuits, or other
proceedings (whether in contract, tort, strict liability or otherwise),
fines, assessments, damages or any other amounts of whatever nature which SP,
its directors, officers, trustees, employees, agents and representatives may
sustain or incur, including all attorney's fees and court costs, as a
consequence of any third party's (including, but not limited to, BIOCHEM's
officers, directors, employees, agents, consultants, representatives or
servants) claims and demands arising from the use, testing, operation,
marketing, sale or manufacture of the Compound or Products, or Products by
BIOCHEM or its sub-licensees to the extent such liability is not due to SP'S
actions or failure to take actions or to SP's performance of the Research
Programs.
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<PAGE>
12.10 INDEMNITY PROCEDURE. SP will promptly notify BIOCHEM in writing of
notice of any claims or the commencement of any action, if a claim in respect
thereof is to be made against BIOCHEM under SECTION 12.9. SP's failure to
notify BIOCHEM will not relieve BIOCHEM from any liability to SP except to the
extent such liability results from the delay. After receiving notice of said
action, BIOCHEM provide the defense thereof by promptly notifying SP in writing.
After SP has received notice of BIOCHEM's assumption the defense of said action,
BIOCHEM will not be liable to SP under SECTION 12.9 for any legal or other
expenses subsequently incurred by SP in connection with the defense thereof.
12.11 SETTLEMENT. Neither SP nor BIOCHEM shall settle any action covered
by SECTION 12.10 without first obtaining the consent of the other Party, which
consent will not be unreasonably withheld.
12.12 INFRINGEMENT EXPENSE.Unless SP is in breach of its warranty under
SECTION 12.3, BIOCHEM shall be responsible for any expenses or damages resulting
from any patent infringement suit brought by a third party as a result of
BIOCHEM's development, manufacture, use or sale of Compounds or Products. If
BIOCHEM requests SP to provide reasonable assistance in any such infringement
suit, SP shall take reasonable efforts to provide such assistance and BIOCHEM
shall reimburse SP for any expenses incurred by SP in providing such assistance.
12.13 SURVIVAL. BIOCHEM's indemnity obligations under this Agreement
shall survive the termination of this Agreement, regardless of the reasons for
which this Agreement is terminated.
ARTICLE XIII
DISPUTE RESOLUTION
13.1 DISPUTE RESOLUTION. If a dispute arises out of or relates to this
Agreement or its breach (the "Matter"), the Parties agree to resolve the Matter
as follows:
(a) A Party shall submit written notice of the Matter to the other
Party and request negotiation;
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(b) The Parties shall attempt in good faith to resolve any Matter
arising out of or relating to this Agreement promptly by
negotiation between representatives which the Parties may
appoint; and
(c) If the Matter has not been resolved within [***] of a
Party's request for negotiation, either Party may request that
the Matter be submitted to a sole mediator selected by the
Parties for a mandatory [***] mediation;
(d) If the Matter has not been resolved by such mediation, either
Party may submit the Matter for binding arbitration in accordance
with the Commercial Rules of the American Arbitration Association
("AAA"). The panel shall be selected from the AAA's large
complex case panel, provided, however, if this panel is of
insufficient size to pick the arbitrator(s), then the regular
commercial panel shall be used to pick any additional
arbitrator(s). The award shall be made within [***] of
selection of an arbitrator(s).
The mediation and arbitration shall be held in New York, New York. The
Parties, their representatives, the mediator and the arbitrator shall hold the
existence, content and results of any negotiation, mediation or arbitration in
confidence unless disclosure is required by law or regulation, and in such case
the Parties shall take reasonable precautions to only disclose what is required
by law or governmental regulation.
Any award of the Arbitration shall be binding on the Parties and shall be
enforceable in any court having jurisdiction over the Party from whom
enforcement is requested.
ARTICLE XIV
MISCELLANEOUS
14.1 SEVERABILITY. In case any one or more of the provisions contained in
this Agreement 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 and this Agreement shall
be construed as if such invalid, illegal or unenforceable provisions had never
been contained herein.
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<PAGE>
14.2 ENTIRE AGREEMENT. This Agreement and attached Schedules sets forth
the entire agreement and understanding between the Parties as to the subject
matter of the Agreement, and merges and supersedes all prior discussions,
proposals, offers and agreements, if any, with respect to the subject matter
of this Agreement. However, the Confidentiality obligations contained in the
Non-Disclosure Agreement between the Parties dated November 13, 1997 shall
survive the termination of this Agreement for all confidential information
(as defined in the Non-Disclosure Agreement disclosed by either Party prior
to the Effective Date of this Agreement). There are no covenants, promises,
agreements, warranties, representations, conditions or understandings, either
oral or written, between the Parties other than as are set forth herein and
therein.
14.3 LIMITATION OF AUTHORITY. Neither BIOCHEM nor SP shall have any
authority arising out of this Agreement to create any implied or express
liability or obligation in the name or on behalf of the other Party, and neither
Party shall enter into any contract with any person or entity that purports to
bind the other Party.
14.4 CHOICE OF LAW. The validity and interpretation of this Agreement
shall be governed by the substantive law of the State of New York. Any national
law, United Nations treaty or convention, or law arising from any international
treaty is hereby waived in favor of the application of New York law. The
Parties hereby specifically exclude the application of The Convention for the
International Sale of Goods.
14.5 RECORDING. Each Party shall have the right, at any time, to record,
register, or otherwise notify this Agreement in appropriate governmental or
regulatory offices anywhere in the Territory, and SP or BIOCHEM, as the case may
be, shall provide reasonable assistance to the other in effecting such
recording, registering or notifying.
14.6 NO WAIVER. The failure of any Party to enforce or demand performance
of any term of this Agreement shall not be deemed a wavier of any said term or
right. A waiver may only be executed in writing and signed by the Party
granting such waiver.
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<PAGE>
14.7 ASSIGNMENT. Except as otherwise specifically provided for herein,
neither this Agreement nor any or all of the rights and obligations of a Party
hereunder shall be assigned, delegated, sold, transferred, or otherwise disposed
of, by operation of law or otherwise, to any third party other than an Affiliate
of each Party, without the prior written consent of the other Party, any
attempted assignment, delegation, sale, transfer, or other disposition, by
operation of law or otherwise, of this Agreement or of any rights or obligations
hereunder contrary to this SECTION 14.7 shall be void and without force or
effect; provided, however, BIOCHEM or SP may, without such consent, assign the
Agreement and its rights and obligations hereunder to an Affiliate or in
connection with the transfer or sale of all or substantially all of its assets
related to the division or the subject business, or in the event of its merger
or consolidation or change in control or similar transaction. Nothing in this
SECTION 14.7 shall be construed to restrict (i) BIOCHEM's right to Sub-License;
or (ii) BIOCHEM's right to engage third Persons or Affiliates. Each Party shall
be responsible for the compliance by its Affiliates with the terms and
conditions of this Agreement.
14.8 AMALGAMATION. SP acknowledges that BioChem has advised it that it
proposes to carry out a reorganization, including an amalgamation, pursuant
to which, among other things, a corporation named BioChem Holdings Inc. (the
"Successor") will own all of the assets and be liable for all liabilities of
BioChem (the "Amalgamation"). SP hereby agrees that, upon consummation of
the Amalgamation, the Successor shall have all the rights and obligations of
BioChem as if Successor had executed this Agreement on the date hereof in
lieu of BioChem and that neither BioChem nor Successor shall be required to
send any notice of any kind regarding the Amalgamation nor seek the consent
of SP to such Amalgamation.
14.9 BINDING AGREEMENT. This Agreement is binding upon and shall inure to
the benefit of each Party's Affiliates, legal representatives, administrators,
successors, sub-licensees, and permitted assigns, of BIOCHEM or SP.
14.10 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
14.11 EXPORT CONTROLS. This Agreement is made subject to any restrictions
concerning the export of Products or Compounds from the United States which may
be imposed upon or related to either Party to this Agreement from time to time
by the Government of the United States. BIOCHEM will not export, directly or
indirectly, any Compounds or any Products utilizing such Compounds to any
countries for which the United States Government or any agency thereof at the
time of export requires an export license or other governmental approval,
without first
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obtaining the written consent to do so from the Department of Commerce or other
agency of the United States Government when required by the applicable statute
or regulation.
14.12 HEADINGS. The headings contained in this Agreement are for
convenience of reference only and shall not be considered in construing this
Agreement.
14.13 NO PUBLICITY. A Party may not use the name of the other Party in
any publicity or advertising and, except as provided in this SECTION 14.12 may
not issue a press release or otherwise publicize or disclose any information
related to this Agreement or the terms or conditions hereof, without the prior
written consent of the other Party. The Parties shall agree on a form of
initial press release that may be used by either Party to describe this
Agreement. Nothing in the foregoing, however, shall prohibit a Party from
making such disclosures to the extent deemed necessary under applicable federal,
state or provincial securities laws or any rule or regulation of any nationally
recognized securities exchange; in such event, however, the disclosing Party
shall use good faith efforts to consult with the other Party prior to such
disclosure and, where applicable, shall request confidential treatment to the
extent available.
14.14 PUBLICATION. During the term of the Research Programs, each
Party recognizes the mutual interest in obtaining valid patent protection and
in protecting business interests and trade secret information. Consequently,
either Party, its employees or consultants wishing to make a publication
covering information arising from the Research Programs and in the Field
shall deliver to the other Party a copy of the proposed written publication
or an outline of an oral disclosure at least [***] prior to submission for
publication or presentation (the "Review Period"). If either Party
reasonably determines that the proposed disclosure would reveal an invention
or Confidential Information, then such Party shall notify the other of such
determination and its basis prior to the expiration of the Review Period.
With respect to disclosure of an invention, both Parties agree not to submit
the written publication or presentation of the oral public disclosure, or
otherwise disclose the results of the Research Programs in any manner that
would compromise SP's ability to obtain valid Patent Rights covering such
invention. Neither Party shall disclose results of the Research Programs
until one of the following events occurs: (i) BIOCHEM and SP agrees that no
patentable invention or protectable trade secret exists; (ii) BIOCHEM or SP
files a patent application claiming the relevant invention; or (iii) BIOCHEM
and SP jointly agree upon revisions that prevent disclosure of any invention.
The foregoing notwithstanding, in the event that either of BIOCHEM or SP
(hereinafter referred to
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as a "Notifying Party) notifies the other that a proposed publication of
results of the Research Programs contains information which is of substantial
commercial importance to the Notifying Party, the proposed publication shall be
delayed by the publishing Party (including any other form of public disclosure
of such information) for a period not to exceed [***] from the filing date of
the first patent application covering the information contained in the proposed
publication. In the event that the Notifying Party notifies the other of
evidence that an independent third Person is preparing to publish, or otherwise
publicly disclose, essentially the same information as that contained in the
proposed publication which has been delayed, the Notifying Party will seriously
consider a request by the publishing Party to allow such delayed publication
to occur on an expedited bases, provided that absent written approval from
the notifying Party no such expedited publication shall occur. Nothing in
this SECTION 14.13 shall allow one Party to disclose the other Party's
Confidential Information.
14.15 MEETINGS. The Parties agree that they shall meet approximately
[***] alternating between [***] or other mutually agreed location. [***]
The first such meeting shall take place in [***]
14.16 RESPONSIBILITY FOR EXPENSES. Each Party is responsible for its own
expenses related to the execution of this Agreement.
14.17 FURTHER ACTIONS. Each Party agrees to execute, acknowledge and
deliver such further instruments and to do all such other acts, as may be
necessary or appropriate in order to carry out the purposes and intent of this
Agreement.
14.18 AMENDMENTS. No amendment or modification to this Agreement is
effective unless in writing and signed by the Parties.
14.19 INFORMED REVIEW. Each Party acknowledges that it and its counsel
have received and reviewed this Agreement and that normal rules of construction,
to the effect that ambiguities are to be resolved against the drafting Party,
shall not apply to this Agreement or to any amendments, modifications, exhibits
or attachments to this Agreement.
14.20 EFFECTIVENESS. Notwithstanding any terms in this Agreement, this
Agreement shall not be effective until the Stock Purchase Agreement referenced
in SECTION 3.1 is consummated.
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IN WITNESS WHEREOF, the Parties hereto have executed and delivered this
Agreement in multiple originals by their duly authorized officers and
representatives on the respective dates shown below but effective as of the
Effective Date.
SCRIPTGEN PHARMACEUTICALS, INC. BIOCHEM PHARMA, INC.
By: /s/ Mark T. Weedon By: /s/ Daniel Hetu
-------------------------------- -------------------------------
Mark T. Weedon Daniel Hetu
President and Chief Executive Vice President of Corporate
Officer Development
Date: Date:
By: /s/ Francois Legault
-------------------------------
Francois Legault
Executive Vice President
Date:
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SCHEDULE 1.10
Dimerescent Compounds
Criteria for Drug Candidate Selection
A compound chosen from a SP defined chemical series shall be considered
an accepted Drug Candidate if SP provides to BIOCHEM:
1. A complete description of the [***] including [***] which may include
[***].
2. A description of the [***] for the [***] of [***] of [***].
3. A [***] of [***] by [***]. This [***] will [***].
4. [***] data on [***] and [***].
5. [***] data from the [***].
6. A [***].
7. [***] data on [***] and [***] in a [***].
8. Data showing [***] in [***] of [***] with the [***] to [***].
9. Within [***] of the Effective Date, the parties will agree on the
addition of further criteria with the degree of specificity as set out in
Section 1.19.
<PAGE>
SCHEDULE 1.19
Hepatitis B Virus Research Program
Criteria for Drug Candidate Selection
A compound chosen from a SP defined chemical series shall be considered
an accepted Drug Candidate if SP provides to BIOCHEM:
1. A complete description of the [***] including [***] which may include
[***].
2. A description of the [***] for the [***] of [***] of [***]. The [***]
should be [***] to [***].
3. A [***] of [***] by [***]. This [***] will [***].
4. [***] data on [***] and [***].
5. [***] data from the [***].
6. A [***].
7. [***] data on [***] and [***] in a [***] indicating that the [***]
would be [***] at an [***].
8. Data showing [***] in [***] of the [***] and has shown [***] and
[***] in [***] of [***].
9. The parties will agree on the criteria for [***] within [***] of the
Effective Date, it being understood that BIOCHEM will [***].
<PAGE>
Exhibit 10.26
SCRIPTGEN PHARMACEUTICALS, INC.
STOCKHOLDERS AGREEMENT
THIS AGREEMENT is made as of December 12, 1997, among SCRIPTGEN
Pharmaceuticals, Inc., a Delaware corporation (the "Company"), BioChem Pharma
Inc., a Quebec corporation (the "Investor") and each of the stockholders listed
on the Schedule of Stockholders attached hereto (the "Other Stockholders"). The
Investor and the Other Stockholders are collectively referred to as the
"Stockholders". Capitalized terms used herein are defined in Section 11 hereof.
The Investor shall purchase shares of the Company's Series D Preferred
Stock, per value $.01 per share (the "Series D Stock") pursuant to a Stock
Purchase Agreement between the Investor and the Company dated as of the date
hereof (the "Purchase Agreement").
The Company and the Stockholders desire to enter into this Agreement
for the purposes, among others, of (i) establishing the composition of the
Company's Board of Directors (the "Board"), (ii) assuring continuity in the
management and ownership of the Company, and (iii) limiting the manner and terms
by which the Stockholders' Preferred Stock and Common Stock ("Stockholder
Shares") may be transferred. The execution and delivery of this Agreement is a
condition to the Investor's purchase of the Company's Series D Stock pursuant to
the Purchase Agreement.
NOW, THEREFORE, in consideration of the mutual covenants contained
herein and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties to this Agreement hereby agree as
follows:
1. BOARD OF DIRECTORS.
(a) From and after the date of this Agreement and until the
provisions of this Section 1 cease to be effective, each holder of Stockholder
Shares shall vote all of his Stockholder Shares which are voting shares and any
other voting securities of the Company over which such Stockholder has voting
control and shall take all other reasonably necessary or desirable actions
within his control (whether in his capacity as a stockholder, director, member
of a board committee or officer of the Company or otherwise, and including,
without limitation, attendance at meetings in person or by proxy for purposes of
obtaining a quorum and execution of written consents in lieu of meetings), and
the Company shall take all reasonably necessary or desirable actions within its
control (including, without limitation, calling special board and stockholder
meetings), so that:
(i) one representative designated by Investor shall be elected
to the Board ("Investor Director");
<PAGE>
(ii) the composition of the board of directors of each of the
Company's Subsidiaries (if any) (a "Sub Board") shall be the same as that
of the Board;
(iii) the removal from the Board or a Sub Board (with or without
cause) of any Investor Director shall be at the Investor's written request,
but only upon such written request and under no other circumstances; and
(iv) in the event that any Investor Director ceases to serve as a
member of the Board or a Sub Board during his term of office, the resulting
vacancy on the Board or the Sub Board shall be filled by a representative
designated by the Investor as provided hereunder.
In all other respects, the rights and obligations of the Other Stockholders
pursuant to Section 1 of the Preferred Stockholders' Agreement, dated as of
May 17, 1996 (the "Prior Stockholders' Agreement") shall remain unaffected, and
the Investor hereby agrees to be bound by the provisions regarding voting
contained in said Section 1 of the Prior Stockholders' Agreement. The Investor
Director shall not be appointed until the earlier of (i) the consummation of a
Qualified Public Offering and (ii) February 16, 1998.
(b) The Company shall pay the reasonable out-of-pocket expenses
incurred by the Investor Director in connection with attending the meetings of
the Board, any Sub Board and any committee thereof. In addition, the Company
shall pay to the Investor Director, an annual fee not less than the amount of
any fee paid by the Company to any other director. Commencing upon consummation
of a Qualified Public Offering, the Company shall maintain directors and
officers indemnity insurance coverage in a minimum amount customary for a public
company with the Company's capitalization. The Company's certificate of
incorporation and bylaws shall provide for indemnification and exculpation of
directors to the fullest extent permitted under applicable law.
(c) The provisions of this Section 1 shall terminate
automatically and be of no further force and effect upon the tenth
anniversary of the date hereof or at such time as the Investor and its
Permitted Transferees (as defined in Section 7(d) hereof) collectively own
less than 10% of the issued and outstanding shares of (i) Series D Stock and,
(ii) the Common Stock issued upon conversion of such stock; provided that the
Investor may assign its right to designate directors hereunder to any Person
or group of affiliated Persons who acquire more than 50% of the Series D
Stock and any Common Stock issued upon conversion of such stock held by the
Investor as of the date hereof.
(d) If the Investor fails to designate the Investor Director to fill
a directorship pursuant to the terms of this Section 1, the election of an
individual to such directorship shall be accomplished in accordance with the
Company's bylaws and applicable law.
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2. MEETINGS. The Board shall hold a regularly scheduled meeting at
least once every fiscal quarter (at which such meeting the Company's financial
statements for the immediately preceding fiscal quarter or fiscal year, as the
case may be, will be discussed) at such time as may be fixed by resolution of
the Board. Special meetings of the Board may be held at any time upon the call
of the chairperson of the Board or at least one director. Notice of each
regularly scheduled and special meeting must be duly given or sent at least
three Business Days prior to such meeting by oral, telephonic, telegraphic or
facsimile notice or by written notice sent by express mail. All reasonable best
efforts shall be made to ensure that each director actually receives timely
notice of any such meeting.
3. ACTION BY THE BOARD; CERTAIN APPROVAL RIGHTS.
(a) A quorum of the Board shall consist of a majority of the persons
serving as members of the Board. All actions of the Board shall require the
affirmative vote of at least a majority of the directors at a duly convened
meeting of the Board at which a quorum is present or the unanimous written
consent of the Board; PROVIDED that, in the event there is a vacancy on the
Board and an individual has been nominated to fill such vacancy, the first order
of business shall be to fill such vacancy.
(b) Until such time as the aggregate number of shares of the Series D
Stock and any Common Stock issued upon conversion of such stock held by the
Investor and its Permitted Transferees at any time is less than the Series D
Minimum, the Company or any of its Subsidiaries (including but not limited to
any action by a Sub Board or committee thereof) shall be subject to the
following restrictive covenants:
(i) DIVIDENDS; SHARE REPURCHASES. The Company will not pay or
declare any cash dividend or distribution on any shares of capital stock of
the Company, other than the Series D Stock, or apply any of the Company's
assets to the redemption, retirement, purchase or other acquisition,
directly or indirectly, through Subsidiaries or otherwise, of any shares of
Common Stock of the Company, or any rights, options or warrants to
purchase, or securities convertible into, Common Stock of the Company,
except for (A) any repurchase of shares by the Company pursuant to any
stock option or restricted stock agreement with an employee of the Company
entered into by the Company and approved by the Board, and (B) the
redemption of any shares of Series D Stock, or the mandatory redemption of
the other Preferred Stock pursuant to the Amended and Restated Certificate
of Incorporation of the Company, as in effect as of the date hereof.
(ii) SALES OF SECURITIES. The Company will not (A) create or
issue any securities of the Company which have equity features and which
rank on a parity with or senior to the Series D Stock with respect to the
payment of dividends or upon liquidation or other distribution of assets or
with a conversion price lower than that of the Series D Stock or terms more
favorable than those of the Series D Stock or (B) sell or issue any shares
of Common Stock of the Company for which the consideration is other than
cash, except as contemplated with respect to the conversion of the Series A
Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and
Series D Stock into Common Stock.
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(iii) FOREIGN SUBSIDIARIES. Except in the ordinary course of
business, the Company will not directly or through any Subsidiary create or
acquire any Subsidiary or any interest in any corporation, partnership,
limited partnership, joint venture or similar entity located outside, or
formed pursuant to the laws of other than, the United States of America,
its territorial possessions or any political subdivision of any thereof.
(iv) MERGER, CONSOLIDATION, SALE OF ASSETS. The Company will not
merge, consolidate or dispose of all or substantially all its assets,
except a merger or consolidation pursuant to which the Company is the
surviving corporation. This section shall not in any way limit the ability
of the Company (A) to sell inventory or (B) to sell other assets, each in
the ordinary course of business.
(v) TRANSACTIONS WITH OFFICERS, DIRECTORS AND STOCKHOLDERS. The
Company will not furnish or sell services or products to or acquire or
purchase services or products from any corporation, partnership,
proprietorship, association, joint venture or other person or entity in
which any officer, director or 5% stockholder of the Company or any
Affiliate of any such officer, director, or 5% stockholder has a material
interest or enter into any material contract or arrangement (excluding
employment or option agreements with an employee approved by the Board)
with any such officer, director, 5% stockholder or Affiliate which is less
than an arms-length transaction or which transaction has or reasonably can
be expected to have a material adverse effect on the Company. For purposes
of this Section 3(b)(v), there may be disregarded any interest which arises
solely from the ownership of less than a 2% equity interest in a
corporation whose voting securities are regularly traded in any national
securities exchange or in the over-the-counter market.
(vi) INVESTMENTS, LOANS, GUARANTEES, JOINT VENTURES AND
SUBSIDIARIES. The Company will not, (A) directly or through any Subsidiary
create or acquire any interest in any partnership, limited partnership,
joint venture or similar entity and will not create or acquire any interest
in any Subsidiaries of which it does not own all the capital stock or
(B) make any investments in or loans or advances to or endorse, guarantee
or become surety for the obligations of any person, corporation or other
entity except that the Company may endorse checks for collection or deposit
in the ordinary course of business.
(vii) CERTIFICATE OF INCORPORATION AND BY-LAW AMENDMENTS;
RECLASSIFICATION OF COMMON STOCK; CHANGES TO SERIES D STOCK. The Company
may not amend its Certificate of Incorporation or By-Laws so as to affect
adversely the Series D Stock. The Company may not reclassify any shares of
its Common Stock into shares having preference or priority to dividends or
assets which are superior to the preferences and priorities of the Series D
Stock. The Company may not make any change to the rights, preferences or
privileges of the Series D Stock so as to affect adversely the rights,
preferences or privileges the Series D Stock.
(viii) CHANGE OF BUSINESS. The Company shall not enter into any
transaction or series of transactions which results in the Company engaging
in any material respect in any business other than the drug discovery,
agricultural,
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human healthcare and pharmaceutical fields and such business activities as
are incidental or related thereto.
(ix) IMPAIRMENT OF DIVIDENDS. The Company may not enter into any
contract or agreement which by its terms restricts the Company's ability to
pay dividends on the Series D Stock or which may otherwise restrict the
Company's ability to comply with and perform the terms of this Agreement.
(x) COMPLIANCE WITH ERISA. The Company will not:
(A) Engage in any transaction in connection with which the
Company or any of its Subsidiaries could be, to the knowledge of the
Company or any of its Subsidiaries could be, to the knowledge of the
Company, subject to either a civil penalty assessed pursuant to
section 502(i) of ERISA or a tax imposed by section 4975 of the Code,
based on existing regulations or published interpretations in effect
from time to time;
(B) Terminate any plan in a manner, or take any other
action, including withdrawal from any plan that is a multiemployer
plan, which could result in any material liability of the Company or
any of its Subsidiaries to the Pension Benefit Guaranty corporation or
to such plan;
(C) Fail to make full payment when due of all amounts
which, under the provisions of any plan, the Company or any of its
Subsidiaries is required to pay as contributions thereto, or permit to
exist any accumulated funding deficiency, whether or not waived, with
respect to any plan; or
(D) Permit the current value of all vested accrued benefits
under all plans which are subject to Title IV of ERISA to exceed the
current value of the assets of such plans allocable to such vested
accrued benefits.
As used in this Section 3(b)(x), the term "accumulated funding deficiency" has
the meaning specified in section 302 of ERISA an section 412 of the Code, the
term "accrued benefit" has the meaning specified in section 3 of ERISA, the term
"current value" has the meaning specified in section 4062(b)(1)(A) of ERISA and
the term "multiemployer plan" has the meaning specified in section 4001(a)(3) of
ERISA.
(xi) BORROWINGS. Neither the Company nor any of its Subsidiaries
will incur, create, assume, become or be liable in any manner with respect
to, or permit to exist, any indebtedness for borrowed money, or any other
indebtedness evidenced by, or liability evidenced by notes, bonds,
debentures or similar obligations or either directly or indirectly
guarantee, endorse or become surety for, or otherwise in any manner become
responsible for the obligations of any other person, other than
indebtedness with respect to trade and operation obligations and other
normal accruals in the ordinary course of business (which the Company
covenants will be paid in accordance with customary trade practice) or with
respect to which it is contesting in good faith the amount or
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validity thereof by appropriate proceedings, and then only to the extent it
has set aside on its books adequate reserves therefor.
(xii) CAPITAL EXPENDITURES; COMMITMENTS. The Company shall not,
and shall cause each of its Subsidiaries, if any, not to, incur capital
expenditures or make commitments for capital expenditures, services or
product development in excess of the greater of $100,000 or 110% of the
amount budgeted in the Company's yearly budget for any such capital
expenditure or commitment.
(xiii) EMPLOYEE STOCK PURCHASE ARRANGEMENTS. The Company will not
issue any of its capital stock to, or grant an option or right to subscribe
for any of its capital stock to, or purchase or acquire any of its capital
stock from, any employee, consultant, director or officer of the Company or
a Subsidiary thereof, except as provided in Section 6.11(b) of the Series C
Purchase Agreement (as defined in Section 11 hereof).
The provisions of Section 2 and this Section 3 shall terminate automatically and
be of no further force and effect upon the first to occur of (i) the tenth
anniversary of the date hereof or (ii) a Qualified Public Offering (as defined
in Section 11 hereof). The failure of the Company to comply with this Section 3
shall only be waivable by written consent of the holders of a majority of the
outstanding Series D Stock and by the Requisite C Holders (as defined in Section
11).
4. AFFIRMATIVE COVENANTS. Until such time as the Investor and its
Permitted Transferees at any time hold less than 40% of the Series D Stock, the
Company shall be subject to the following affirmative covenants:
(a) BASIC FINANCIAL INFORMATION. The Company will furnish the
following reports to the Investor (or its representatives):
(i) As soon as practicable after the end of each fiscal year of
the Company, and in any event within one hundred twenty (120) days
thereafter, a consolidated balance sheet of the Company and its
Subsidiaries, if any, as at the end of such fiscal year, and consolidated
statements of income and retained earnings and of statement of cash flows
of the Company and its Subsidiaries, if any (collectively with the balance
sheet, the "Investment Financial Statements"), for such year, prepared in
accordance with generally accepted accounting principles consistently
applied and setting forth in each case in comparative form the figures for
the previous fiscal year, all in reasonable detail and certified by
independent public accountants of nationally recognized standing selected
by and reporting to the Board and approved by the Investor, and including a
Company prepared comparison to budget.
(ii) As soon as practicable after the end of each month and each
of the first, second and third quarterly accounting periods in each fiscal
year of the Company, and in any event within thirty (30) days thereafter,
consolidated Investment Financial Statements of the Company and its
Subsidiaries, if any, for such period, prepared in accordance with
generally accepted accounting principles consistently applied, subject to
changes resulting from year-end audit adjustments, and setting forth in
comparative form the figures for the
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corresponding periods of the previous fiscal year, certified by the
principal financial or accounting officer of the Company.
(iii) If the Company becomes subject to the reporting requirements
of the Securities Exchange Act of 1934, as amended (the "Exchange Act,"
which term shall include any successor federal statute), it may in lieu of
the financial information required pursuant to this Section 4(a)(i) and
(ii) provide copies of its annual reports on Form 10-K and its quarterly
reports on Form 10-Q, respectively, or other then-equivalent report form.
(iv) Immediately upon any officer of the Company obtaining actual
knowledge of the occurrence of any material violation or default by the
Company or any of its Subsidiaries in the performance of (A) its agreements
or covenants contained herein, (B) its material agreements or covenants
contained in any other agreement to which the Company or any of its
Subsidiaries is a party or (C) its agreements or covenants contained in the
Certificate of Incorporation or of the occurrence of any condition, event
or act which, with or without notice or lapse of time, or both, would
constitute a material violation or an event of default, a written notice
specifying the nature and status thereof and, what action the Company has
taken, is taking and proposes to take with respect thereto.
(v) Annually, but in any event no later than sixty (60) days
after the commencement of each fiscal year of the Company, the yearly
budget and operating plan of the Company, in such manner and form
reasonably acceptable to the Investor and as approved by the Board, which
plan shall include a projection of income and projected Investment
Financial Statements as of the end of such fiscal year. Any material
changes in such plan shall be submitted as promptly as practicable after
such changes have been approved by the Board.
(vi) As soon as practicable after transmission or occurrence and
in any event within ten (10) days thereof, (A) copies of any reports or
communications delivered to any of the Company's security holders (in their
capacity as such), any governmental entity (excluding ordinary permit
applications or similar types of correspondence and documentation in
connection therewith), any financial institution or member of the financial
community (other than correspondence and documents delivered to such
financial institutions or members in the ordinary course of business which
do not materially adversely impact on the Investor's investment in the
Company) or to any other individual or entity who may receive such
information by law or pursuant to a contract or other agreement with the
Company (except in the ordinary course of business), including any filings
by the Company, or by any of its officers or directors relating to the
Company, with any securities exchange or the Commission or the National
Association of Securities Dealers, Inc., (B) notice of any event which has
a material adverse effect on the Company's business, prospects or
condition, financial or otherwise, or on the ability of the Company to
perform its obligations under this Agreement, or under any other agreement,
or on the Investor's investment in the Series D Stock or in the Common
Stock issuable upon conversion of the Series D Stock, and (C) notice of
material breach or failure to comply with any representation, warranty,
covenant or agreement of the Company contained herein, including the
Exhibits hereto.
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(vii) Immediately upon any principal officer of the Company or any
other officer of the Company involved in its financial administration
obtaining knowledge of the occurrence of any (A) "reportable event," as
such term is defined in section 4043 of ERISA, other than any such event
with respect to which the statutory thirty (30)-day notice requirement has
been waived by regulation, or (B) "prohibited transaction," as such term is
defined in section 4975 of the Internal Revenue Code of 1986, as amended
(the "Code"), in connection with any plan or any trust created thereunder,
a written notice specifying the nature thereof, what action the Company has
taken, is taking and proposes to take with respect thereto, and, when
known, any action taken or threatened by the internal Revenue Service or
the Pension Benefit Guaranty Corporation with respect thereto.
(viii) With reasonable promptness, such other information and data
with respect to the Company and its Subsidiaries, if any, as the Investor
may from time to time reasonably request.
(ix) The provisions of this Section 4(a)shall not be in
limitation of any rights which the Investor may have to inspect the books
and records of the Company and its Subsidiaries, or to inspect their
properties or discuss their affairs, finances and accounts; and, in the
event that the Company is unable to comply with the provisions of this
Section 4(a), the Board shall, by resolution duly adopted, authorize and
cause a firm of independent public accountants of nationally recognized
standing in the United States to prepare promptly and furnish such
information to the Investor at the Company's expense.
(b) VISITATION. The Company will permit the Investor (or
representatives of the Investor) to visit and inspect any of the properties of
the Company, including its books of account and other records (and make copies
thereof and take extracts therefrom), and to discuss its affairs, finances and
accounts with the Company's directors, officers, senior employees and its
independent public accountants, all at such reasonable times and as often as any
such person may reasonably request. Any expenses incurred by the Investor in
connection with any such visitation and inspection shall be borne by the
Investor; PROVIDED, HOWEVER, in the event such visitation is necessitated by or
is a result of a material default hereunder or under the terms of a material
contract or arrangement on the part of the Company, all such expenses shall be
borne by the Company.
(c) PROMPT PAYMENT OF TAXES, ETC. The Company will promptly pay and
discharge, or cause to be paid and discharged, when due and payable, all lawful
taxes, assessments and governmental charges or levies imposed upon the income,
profits, property or business of the Company or any Subsidiary; PROVIDED,
HOWEVER, that any such tax, assessment, charge or levy need not be paid if the
validity thereof shall currently be contested in good faith by appropriate
proceedings and if the Company shall have bonded or set aside on its books
adequate reserves with respect thereto; and PROVIDED, FURTHER, that the Company
will pay all such taxes, assessments, charges or levies, or otherwise take any
action which has the effect of preventing a foreclosure, forthwith upon the
commencement of proceedings to foreclose any lien which may have attached as
security therefor. The Company will promptly pay or cause to be paid when due
all other indebtedness incident to operations of the Company; PROVIDED, HOWEVER,
that any such indebtedness need not be paid if the validity thereof shall
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currently be contested in good faith by appropriate proceedings and if the
Company shall have bonded or set aside on its books adequate reserves with
respect thereto; and PROVIDED, FURTHER, that the Company will pay all such
indebtedness on or prior to the time when failure to pay would materially
adversely affect the Company.
(d) MAINTENANCE OF PROPERTIES AND LEASES. The Company will keep its
properties and those of its Subsidiaries, if any, in good repair, working order
and condition, reasonable wear and tear excepted, and from time to time make all
necessary and proper repairs, renewals, replacements, additions and improvements
thereto; and the Company and its subsidiaries, if any, will at all times comply
with each provision of all leases to which any of them is a party or under which
any of them occupies property if the breach of such lease would have a material
adverse effect on the condition, financial or otherwise, prospects or operations
of the Company.
(e) INSURANCE. The Company shall maintain adequate insurance, by
financially sound and reputable insurers, on its properties and assets and the
properties and assets of its Subsidiaries, if any, which are of an insurable
character and in such amounts and on such terms usually insured by corporations
engaged in the same or similar business and similarly situated, against loss or
damage by fire, explosion and other risks customarily insured against by such
corporations which amounts shall be sufficient to prevent the Company or any
such Subsidiary from becoming a co-insurer and not in any event less than 100%
of the insurable value of the property and assets insured; and the Company will
maintain, with financially sound and reputable insurers, insurance against other
hazards and risks and liability to persons, property and assets, including
without limitation insurance against claims for personal injury, death or
property damage occurring upon, in, about or in connection with the use of any
of the properties or assets of it or any Subsidiary, and in such amounts and on
such terms usually insured by corporations engaged in the same or similar
business and similarly situated, which amounts shall be sufficient to prevent
the Company or any Subsidiary from becoming a co-insurer; and the Company will
maintain such other insurance as may be required by law or other agreements to
which the Company is or shall become a party.
(f) ACCOUNTS AND RECORDS. The Company will keep true records and
books of account in which full, true and correct entries will be made of all
dealings or transactions in relation to its business and affairs in accordance
with generally accepted accounting principles applied on a consistent basis.
(g) INDEPENDENT ACCOUNTANTS. The Company will retain independent
public accountants of nationally recognized standing who shall certify the
Company's financial statements at the end of each fiscal year. In the event the
services of the independent public accountants, so selected, or any firm of
independent public accountants hereafter employed by the Company are terminated,
the Company will promptly thereafter notify the Investor and will request the
firm of independent public accountants whose services are terminated to deliver
to the Investor a letter of such firm setting forth the reasons for the
termination of their services. In the event of such termination, the Company
will promptly thereafter engage another accounting firm of similar quality. In
its notice to the Investor the Company shall state whether the change of
accountants was recommended or approved by the Board.
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(h) COMPLIANCE WITH REQUIREMENTS OF GOVERNMENTAL AUTHORITIES. The
Company and all its Subsidiaries, if any, shall duly observe and conform in all
material respects to all valid requirements of governmental authorities relating
to the conduct of their businesses or to their properties or assets.
(i) MAINTENANCE OF CORPORATE EXISTENCE, ETC. The Company shall
maintain and shall cause each Subsidiary, if any, to maintain in full force and
effect (i) its corporate existence, rights and franchises and all licenses,
privileges and other rights in or to use patents, processes, licenses,
trademarks, trade names or copyrights owned or possessed by it or any Subsidiary
and shall obtain and maintain any such right, franchise, license or privilege
deemed by the Company to be necessary on the date hereof or in the future to the
conduct of their business without any conflict with any business in or rights of
others to use such patents, processes, licenses, trademarks, trade names or
copyrights and (ii) its qualification to do business in each jurisdiction in
which the character of its properties (owned, leased or licensed) or the nature
of its business requires such qualification, except where the failure to so
qualify would not have a material adverse effect upon the business or operations
of the Company or such Subsidiary, as the case may be.
(j) NOTICE OF RECORD DATES. In the event of any taking by the
Company of a record of the holders of any class of securities (other than the
Series D Stock) for the purpose of determining the holders thereof who are
entitled to receive any dividend or other distribution, the Company shall mail
to the Investor at least ten (10) days prior to such record date specified
therein, a notice specifying the date on which any such record is to be taken
for the purpose of such dividend or distribution.
(k) PROPRIETARY INFORMATION AND INVENTIONS AGREEMENT. The Company
will cause each person currently or hereafter employed by it or any Subsidiary
with access to confidential information to enter into a proprietary information
and inventions agreement in substantially the form attached as EXHIBIT 6.13 to
the Series C Purchase Agreement.
(l) MEETINGS OF STOCKHOLDERS. The Investor shall be entitled to call
for a Stockholders' meeting upon five (5) days notice to the Company.
(m) COMPLIANCE WITH ERISA. The Company will file or cause to be
filed on a timely basis each and every return, report, statement, notice,
declaration and other document required by any governmental agency, federal,
state or local authority (including, without limitation, the Internal Revenue
Service, the Department of Labor, the Pension Benefit Guaranty Corporation and
the Commission) with respect to any plan maintained by the Company.
(n) ENVIRONMENTAL MATTERS. The Company agrees to comply in all
material respects with, and abide by, all Federal, state and local laws or
regulations relating to environmental protection or to the storage or disposal
of hazardous waste (including, but not limited to, asbestos, polychlorinated
biphenyls and petroleum products) in connection with or relating to the Company
or any of its businesses, operations or assets.
The provisions of this Section 4 shall terminate automatically and be of no
further force and effect upon the first to occur of (i) the tenth anniversary of
the date hereof or (ii)
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a Qualified Public Offering (as defined in Section 11 hereof). The failure of
the Company to comply with this Section 4 shall only be waivable by written
consent of the holders of a majority of the outstanding Series D Stock and the
Requisite C Holders.
5. CONFLICTING CHARTER OR BYLAW PROVISIONS. Each Stockholder shall
vote all of its shares, and shall take all other actions, to ensure that the
Company's Certificate of Incorporation and Bylaws and the certificate of
incorporation and bylaws of each of its Subsidiaries facilitate and do not at
any time conflict with any provision of this Agreement.
6. REPRESENTATIONS AND WARRANTIES. Each Stockholder represents and
warrants that (i) such Stockholder is the record owner of the number of
Stockholder Shares set forth opposite its name on the Schedule attached hereto,
(ii) this Agreement has been duly authorized, executed and delivered by such
Stockholder and constitutes the valid and binding obligation of such
Stockholder, enforceable in accordance with its terms, and (iii) such
Stockholder has not granted and is not a party to any proxy, voting trust or
other agreement which is inconsistent with, conflicts with or violates any
provision of this Agreement. No holder of Stockholder Shares shall grant any
proxy or become party to any voting trust or other agreement which is
inconsistent with, conflicts with or violates any provision of this Agreement.
7. RESTRICTIONS ON TRANSFER OF STOCKHOLDER SHARES.
(a) TRANSFER OF STOCKHOLDER SHARES. No Stockholder shall either,
directly or indirectly, sell, assign, mortgage, transfer, pledge, create a
security interest in or lien upon, encumber, give, place in trust, hypothecate,
or otherwise in any manner voluntarily or involuntarily dispose of (hereinafter
"Transfer"), any or all of his, her or its Stockholder Shares, now owned or
hereafter acquired, unless such Stockholder (in such capacity, the "Offeror")
shall first offer to Transfer any or all of his, her or its Stockholder Shares
to all other Stockholders (in such capacity, such Stockholders are referred to
as the "Offerees"), in their respective proportionate shares (as defined below).
In the event any Offeror proposes to Transfer Stockholder Shares, he, she or it
shall give the Offerees written notice of his, her or its intention, describing
the type of Stockholder Shares, the price and the general terms upon which the
Offeror proposes to Transfer the same. Each Offeree shall have thirty (30) days
from the date such notice is given to agree to have transferred to him, her or
it any or all of such Stockholder Shares up to such Offeree's proportionate
share, for the price and upon the general terms specified in the notice by
giving written notice to the Offeror and stating the quantity of Stockholder
Shares such Offeree desires to have transferred to him, or it. As used in this
Section 7, and except as otherwise provided, the term "proportionate share"
shall mean, with respect to each Offeree who is entitled to receive the
particular offer, the total number of Stockholder Shares proposed to be
transferred, multiplied by a fraction, the numerator of which shall be the sum
of (i) the total number of shares of Common Stock owned by such Offeree and (ii)
the total number of shares of Common Stock into which the shares of Preferred
Stock and other convertible securities of the Company held by such Offeree are
then convertible, and the denominator of which shall be the sum of (i) the total
number of shares of Common Stock owned by all Offerees and (ii) the total number
of shares of Common Stock into which the shares of Preferred Stock and other
convertible securities of the Company held by all Offerees are then convertible;
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(b) OVER-ALLOTMENT. Each Offeree shall have a right of
over-allotment such that if any Offeree fails to exercise such Offeree's right
hereunder to have transferred to him, her or it such Offeree's full
proportionate share of the Stockholder Shares proposed to be transferred (in
such capacity, an "Incomplete Purchaser" and collectively, the "Incomplete
Purchasers"), the Offerees exercising their right to have transferred to them
their full respective proportionate share of such Stockholder Shares (in such
capacity, collectively, the "Complete Purchasers" and individually, a "Complete
Purchaser") may have transferred to them the portion of such Stockholder Shares
which has not been transferred to the Incomplete Purchasers as hereinafter
provided. Each Complete Purchaser shall have fifteen (15) days from the date
notice is given by the Offeror to the Complete Purchasers that the Incomplete
Purchaser(s) have rejected or failed to accept their right to have transferred
to them their proportionate share of Stockholder Shares, to agree to have
transferred to such Complete Purchaser up to such Complete Purchaser's
proportionate share of Stockholder Shares not transferred to the Incomplete
Purchaser(s). Notwithstanding anything in Section 7 to the contrary, as used in
this Section 7(b) with respect to the Complete Purchasers only, each Complete
Purchaser's "proportionate share" shall be calculated by excluding from the
denominator of the fraction the total number of shares of Common Stock of all
Incomplete Purchasers and the total number of shares of Common Stock into which
the shares of all such Incomplete Purchasers' Preferred Stock and other
convertible securities of the Company are convertible. In the event the
Offerees fail to exercise their rights pursuant to paragraphs (a) and (b) above
within said forty-five (45) day period for the full amount of Stockholder Shares
proposed to be transferred, the Offeror shall have sixty (60) days thereafter to
Transfer the Stockholder Shares with respect to which the Offeree's options were
not exercised, at a price and upon general terms no more favorable to the
transferees thereof than specified in the Offeror's notice to the Offerees. In
the event the Offer or has not transferred the Stockholder Shares within said
60-day period, he, she or it shall not thereafter Transfer any Stockholder
Shares without first offering such Stockholder Shares to the Offerees in the
manner provided above;
(c) TAG-ALONG RIGHTS. At least thirty (30) days prior to any
Transfer of Stockholder Shares (other than a Public Sale), including the
Transfer of Stockholder Shares to the Company, the Stockholder making such
Transfer (the "Transferring Stockholder") shall deliver a written notice (the
"Sale Notice") to the Company and the other Stockholders specifying in
reasonable detail the identity of the prospective transferee(s), the number of
shares to be transferred and the terms and conditions of the Transfer (which
notice may be the same notice and given at the same time as the offer notice
under Section 7(a)). The other Stockholders (the "Electing Holders") may elect
to participate in the contemplated Transfer at the same price per share and on
the same terms by delivering written notice to the Transferring Stockholder
within thirty (30) days after delivery of the Sale Notice. If the Electing
Holders have elected to participate in such Transfer, the Transferring
Stockholder and the Electing Holders shall be entitled to sell in the
contemplated Transfer, at the same price and on the same terms, a number of
Stockholder Shares (determined on a class-by-class basis) equal to the product
of (i) the quotient determined by dividing (A) the percentage of Stockholder
Shares in any class of Stockholder Shares owned by such Person by (B) the
aggregate percentage of Stockholder Shares in such class owned, respectively, by
the Transferring Stockholder and the Electing Holders, and (ii) the number of
Stockholder Shares in such class to be sold in the contemplated Transfer.
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FOR EXAMPLE, if the Sale Notice contemplated a sale of 100 Stockholder
Shares by the Transferring Stockholder, and if the Transferring
Stockholder at such time owns 35% of all Stockholder Shares and if the
Electing Holder elects to tag-along and owns 15% of all Stockholder
Shares, the Transferring Stockholder would be entitled to sell 70
shares (35% DIVIDED BY 50% x 100 shares) and the Electing Holder would
be entitled to sell 30 shares (15% DIVIDED BY 50% 100 shares).
Each Transferring Stockholder shall use best efforts to obtain the agreement of
the prospective transferee(s) to the participation of the Electing Holders in
any contemplated Transfer, and no Transferring Stockholder shall transfer any of
its Stockholder Shares to any prospective transferee if such prospective
transferee(s) declines to allow the participation of the Electing Holders.
(d) PERMITTED TRANSFERS. Notwithstanding anything to the contrary
contained herein, the procedures specified in this Section 7 shall not be
applicable to a Transfer by (i) a Stockholder to a Permitted Transferee (as
defined below) of such Stockholder, if such Permitted Transferee agrees in
writing with the parties hereto to be bound by and comply with all provisions of
this Agreement applicable to the individual or entity transferring the
Stockholder Shares immediately prior to such Transfer, (ii) a Stockholder to any
or all of the partners (general and/or limited) of such Stockholder in which
event such Stockholder Shares shall no longer be subject to this Agreement, or
(iii) to the Company pursuant to any repurchase Agreement, right of first
refusal or other right on the part of the Company to acquire Stockholder Shares
(provided that this sub-section (iii) shall not be deemed to authorize the
Company to repurchase any Stockholder Shares if otherwise prohibited). For
purposes of this Section 7(d), a "Permitted Transferee" shall mean (i) in the
case of a Stockholder that is an individual, the spouse or immediate family
member or any partnership, corporation or other entity wholly-owned by such
individual, and (ii) in the case of a Stockholder that is a partnership, any of
its partners (general and/or limited), employees or affiliates and any
partnership, corporation or other entity controlled by or under common control
with such partnership or the parties thereof.
(e) If any Transfer or attempted Transfer of the Stockholder Shares
is made contrary to the provisions of this Section 7, each Stockholder shall
have the right, in addition to any other legal or equitable remedies which it
may have, to enforce its rights hereunder by an action for specific performance;
the parties hereto recognize the rights set forth herein as unique, the
violation of which cannot be remedied by an award of monetary damages.
Notwithstanding the foregoing, no party hereto shall avoid the
provisions of this Agreement by making one or more transfers to one or more
Permitted Transferees and then disposing of all or any portion of such party's
interest in any such Permitted Transferee.
The provisions of Section 2.1 of the Preferred Stockholders' Agreement
dated May 17, 1996 are hereby terminated.
(f) TERMINATION OF RESTRICTIONS. The restrictions set forth in this
Section 7 shall continue with respect to each Stockholder Share until the
earlier of (i) the date on which such Stockholder Share has been transferred in
a Public Sale, (ii) the
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date on which such Stockholder Share has been transferred pursuant to this
Section 7 (other than subsection 7(d)), (iii) the fifth anniversary of the date
of this Agreement or (iv) the consummation of a Qualified Public Offering.
8. LEGEND. Each certificate evidencing Stockholder Shares and each
certificate issued in exchange for or upon the transfer of any Stockholder
Shares (if such shares remain Stockholder Shares after such transfer) shall be
stamped or otherwise imprinted with a legend in substantially the following
form:
"The securities represented by this certificate are subject
to a Stockholders Agreement dated as of _____________, among
the issuer of such securities (the "Company") and certain of
the Company's stockholders, as amended and modified from
time to time. A copy of such Stockholders Agreement shall
be furnished without charge by the Company to the holder
hereof upon written request."
The Company shall imprint such legend on certificates evidencing Stockholder
Shares outstanding as of the date hereof. The legend set forth above shall be
removed from the certificates evidencing any shares which cease to be
Stockholder Shares in accordance with Section 7 hereof.
9. TRANSFER. Prior to transferring any Stockholder Shares (other
than a Public Sale) to any Person, the Stockholders shall cause the prospective
transferee to be bound by this Agreement and to execute and deliver to the
Company, the Investor and the Other Stockholders a counterpart of this
Agreement.
10. PREEMPTIVE RIGHTS.
(a) The Company hereby grants to the Stockholders the right to
purchase any or all "New Securities" (as hereinafter defined) on a proportionate
basis as defined in Section 10(b). For purposes of this Section 10, "New
Securities" shall mean any capital stock of the Company whether now authorized
or not, and rights, options or warrants to purchase capital stock, and
securities of any type whatsoever that are, or may become, convertible into
capital stock and any borrowings, direct or indirect, from financial
institutions or other persons by the Company, whether or not presently
authorized, including any type of loan or payment endorsed by any type of debt
instrument, but only to the extent such borrowings contain any equity features,
but "New Securities" shall not include (i) securities issued to employees,
directors or officers of the Company, (ii) shares of capital stock issued upon
conversion of the Series A Preferred Stock, Series B Preferred Stock, Series C
Preferred Stock, or Series D Stock (iii) securities issued as part of the
purchase price in connection with the closing of an acquisition by the Company
of all or substantially all the assets or stock of another entity or person,
approved by the Board, (iv) warrants issued in connection with business
transactions, including corporate partnerships, approved by the Board or
securities issued pursuant to such warrants and (v) the sale of Series D Stock
pursuant to the Purchase Agreement.
(b) In the event the Company proposes to undertake an issuance of New
Securities, it shall give the Stockholders written notice of its intention,
describing the type of New Securities, the price and the general terms upon
which the Company
-14-
<PAGE>
proposes to issue the same. Each Stockholder shall have thirty (30) days from
the date such notice is given to agree to purchase any or all of the New
Securities up to such Stockholder's proportionate share, for the price and upon
the general terms specified in the notice by giving written notice to the
Company and stating the quantity of New Securities to be purchased. As used in
this Section 10, and except as otherwise provided, the term "proportionate
share" shall mean, with respect to any Stockholder, the total number of New
Securities proposed to be issued, multiplied by a fraction, the numerator of
which shall be the sum of (i) the total number of shares of Common Stock owned
by the Stockholder (prior to such contemplated issuance), and (ii) the total
number of shares of Common Stock into which the shares of Series A Preferred
Stock, Series B Preferred Stock, Series C Preferred Stock, Series D Stock and
other convertible securities of the Company (including the Warrant), if any,
held by the Stockholder (prior to such contemplated issuance) are convertible,
and the denominator of which shall be the sum of (i) the total number of shares
of Common Stock owned by all Stockholders (prior to such contemplated issuance),
and (ii) the total number of shares of Common Stock into which the shares of
Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock,
Series D Stock and other convertible securities of the Company (including the
Warrant) held by all Stockholders (prior to such contemplated issuance) are
convertible.
(c) Each Stockholder shall have a right of over-allotment such that
if any such Stockholder fails to exercise his right hereunder to purchase such
full proportionate share of the New Securities proposed to be issued (the
"Incomplete Holders"), the Stockholders purchasing their full respective
proportionate share of such New Securities (the "Complete Holders") may purchase
the portion of such New Securities which has not been purchased by the
Incomplete Holders as hereinafter provided. The Complete Holders shall have
fifteen (15) days from the date notice is given by the Company to the Complete
Holders that such Incomplete Holders have rejected or failed to accept their
right to purchase their proportionate share of New Securities, to agree to
purchase up to such Complete Holder's proportionate share of such New Securities
not purchased by the Incomplete Holders. Notwithstanding anything in Section
10(b) to the contrary, as used in this Section 10(c) with respect to the
Complete Holders only, each Complete Holder's "proportionate share" shall be
calculated by excluding from the denominator of the fraction the total number of
shares of Common Stock of any Incomplete Holder and the total number of shares
of Common Stock of any Incomplete Holder and the total number of shares of
Common Stock into which the shares of such Incomplete Holder's Series A
Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D
Stock or other convertible securities, if any, are convertible.
(d) In the event the Stockholders fail to exercise the preemptive
right and right of over-allotment within said forty-five (45) day period for the
full amount of New Securities proposed to be issued, the Company shall have
sixty (60) days thereafter to sell or enter into an agreement (pursuant to which
the sale of New Securities covered thereby shall be closed, if at all, within
sixty (60) days from the date of said agreement) to sell the New Securities
respecting which the Stockholders' options were not exercised, at a price and
upon general terms no more favorable to the purchasers thereof than specified in
the Company's notice to the Stockholders. In the event the Company has not sold
within said sixty (60)-day period or entered into an agreement to sell the New
Securities within said sixty (60)-day period (or sold and issued New Securities
in accordance with the foregoing within sixty (60) days from the
-15-
<PAGE>
date of said agreement), the Company shall not thereafter issue or sell any New
Securities, without first offering such securities to the Stockholders in the
manner provided above.
(e) If, in connection with an offering of New Securities in which the
Stockholders have the right, pursuant to this Section 10, to purchase their
proportionate share of such New Securities, any Stockholder declines to purchase
such Stockholder's full proportionate share of such New Securities, then such
Stockholder's rights pursuant to this Section 10 shall terminate as to any
subsequent offering of New Securities. Any Stockholder's rights to purchase New
Securities pursuant to the Series C Purchase Agreement which has terminated
prior to the date hereof pursuant to Section 8.2 of the Series C Purchase
Agreement shall not be reinstated by reason of this Agreement, and any such
Stockholder shall have no rights under this Section 10.
(f) The preemptive right granted under this Section 10 shall expire
upon, and shall not be applicable to, the first sale of Common Stock of the
Company to the public in a Qualified Public Offering. Any preemptive rights
granted to the Other Stockholders pursuant to the Series C Purchase Agreement is
hereby terminated.
11. DEFINITIONS.
"BOARD" has the meaning set forth in the preamble.
"COMMON STOCK" means the Company's Common Stock, $.01 par value per
share.
"COMPANY" has the meaning set forth in the preamble.
"INVESTOR" has the meaning set forth in the preamble.
"INVESTOR DIRECTOR" has the meaning set forth in Section 1(a)(i).
"PERMITTED TRANSFEREE" has the meaning set forth in Section 7(d)
hereof.
"PERSON" means an individual, a partnership, a corporation, a limited
liability company, an association, a joint stock company, a trust, a joint
venture, an unincorporated organization and a governmental entity or any
department, agency or political subdivision thereof.
"PREFERRED STOCK" means the Company's Series A Preferred Stock, the
Series B Preferred Stock, the Series C Preferred Stock, and the Series D Stock.
"PUBLIC SALE" means any sale of Stockholder Shares to the public
pursuant to an offering registered under the Securities Act or to the public
through a broker, dealer or market maker pursuant to the provisions of Rule 144
adopted under the Securities Act.
"PURCHASE AGREEMENT" has the meaning set forth in the preamble.
-16-
<PAGE>
"QUALIFIED PUBLIC OFFERING" means the sale in an underwritten public
offering registered under the Securities Act of shares of the Company's Common
Stock having an aggregate offering value of at least $25 million.
"REQUISITE C HOLDERS" means the requisite holders of the issued and
outstanding Series C Preferred Stock pursuant to the Series C Purchase
Agreement.
"SECURITIES ACT" means the Securities Act of 1933, as amended from
time to time.
"SERIES C PURCHASE AGREEMENT" means the Series C Preferred Stock
Agreement dated as of May 17, 1996.
"STOCKHOLDER SHARES" means (i) any Common Stock purchased or otherwise
acquired by any Stockholder, (ii) any capital stock or other equity securities
issued or issuable directly or indirectly with respect to the Common Stock
referred to in clause (i) above by way of stock dividend or stock split or in
connection with a combination of shares, recapitalization, merger, consolidation
or other reorganization, and (iii) any other shares of any class or series of
capital stock of the Company held by a Stockholder; provided that Stockholder
Shares shall not include nonvoting stock described in (iii) for purposes of
Section 1 hereof. As to any particular shares constituting Stockholder Shares,
such shares shall cease to be Stockholder Shares when they have been (x)
effectively registered under the Securities Act and disposed of in accordance
with the registration statement covering them or (y) sold to the public through
a broker, dealer or market maker pursuant to Rule 144 (or any similar provision
then in force) under the Securities Act.
"SUB BOARD" has the meaning set forth in Section 1(a)(ii).
"SUBSIDIARY" means, with respect to any Person, any corporation,
limited liability company, partnership, association or other business entity of
which (i) if a corporation, a majority of the total voting power of shares of
stock entitled (without regard to the occurrence of any contingency) to vote in
the election of directors, managers or trustees thereof is at the time owned or
controlled, directly or indirectly, by that Person or one or more of the other
Subsidiaries of that Person or a combination thereof, or (ii) if a limited
liability company, partnership, association or other business entity, a majority
of the limited liability company, partnership or other similar ownership
interest thereof is at the time owned or controlled, directly or indirectly, by
any Person or one or more Subsidiaries of that Person or a combination thereof.
For purposes hereof, a Person or Persons shall be deemed to have a majority
ownership interest in a limited liability company, partnership, association or
other business entity if such Person or Persons shall be allocated a majority of
limited liability company, partnership, association or other business entity
gains or losses or shall be or control the managing director or general partner
of such limited liability company, partnership, association or other business
entity.
"TRANSFER" has the meaning set forth in Section 7(a).
"WARRANT" means the Warrant issued to Investor pursuant to a Warrant
Agreement of even date.
-17-
<PAGE>
12. TRANSFERS IN VIOLATION OF AGREEMENT. Any Transfer or attempted
Transfer of any Stockholder Shares in violation of any provision of this
Agreement shall be void, and the Company shall not record such Transfer on its
books or treat any purported transferee of such Stockholder Shares as the owner
of such shares for any purpose.
13. AMENDMENT AND WAIVER. Except as otherwise provided herein, no
modification, amendment or waiver of any provision of this Agreement shall be
effective against the Company, the Other Stockholders or the Investor unless
such modification, amendment or waiver is approved in writing by the Company,
85% in interest of the Other Stockholders and the holders of a majority of the
outstanding shares of Series D Stock. The failure of any party to enforce any
of the provisions of this Agreement shall in no way be construed as a waiver of
such provisions and shall not affect the right of such party thereafter to
enforce each and every provision of this Agreement in accordance with its terms.
The rights and obligations of the Other Stockholders pursuant to Section 6 of
the Series C Purchase Agreement shall not be affected by Sections 3(b) and 4 of
this Agreement.
14. SEVERABILITY. Whenever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be invalid,
illegal or unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability shall not affect
the validity, legality or enforceability of any other provision of this
Agreement in such jurisdiction or affect the validity, legality or
enforceability of any provision in any other jurisdiction, but this Agreement
shall be reformed, construed and enforced in such jurisdiction as if such
invalid, illegal or unenforceable provision had never been contained herein.
15. ENTIRE AGREEMENT. Except as otherwise expressly set forth
herein, this Agreement embodies the complete agreement and understanding among
the parties hereto with respect to the subject matter hereof and supersedes and
preempts any prior understandings, agreements or representations by or among the
parties, written or oral, which may have related to the subject matter hereof in
any way.
16. SUCCESSORS AND ASSIGNS. Except as otherwise provided herein,
this Agreement shall bind and inure to the benefit of and be enforceable by the
Company and its successors and assigns and the Stockholders and any subsequent
holders of Stockholder Shares and the respective successors and assigns of each
of them, so long as they hold Stockholder Shares.
17. COUNTERPARTS. This Agreement may be executed in multiple
counterparts, each of which shall be an original and all of which taken together
shall constitute one and the same agreement.
18. REMEDIES. The Company, the Investor and the Other Stockholders
shall be entitled to enforce their rights under this Agreement specifically, to
recover damages by reason of any breach of any provision of this Agreement and
to exercise all other rights existing in their favor. The parties hereto agree
and acknowledge that money damages would not be an adequate remedy for any
breach of the provisions of this Agreement and that the Company, any Investor
and any Stockholder may in its sole discretion apply to any court of law or
equity of competent jurisdiction for specific
-18-
<PAGE>
performance and/or injunctive relief (without posting a bond or other security)
in order to enforce or prevent any violation of the provisions of this
Agreement.
19. NOTICES. Any notice provided for in this Agreement shall be in
writing and shall be either personally delivered, or mailed first class mail
(postage prepaid) or sent by reputable overnight courier service (charges
prepaid) to the Company at the address set forth below and to any other
recipient at the address indicated on the schedules hereto and to any subsequent
holder of Stockholder Shares subject to this Agreement at such address as
indicated by the Company's records, or at such address or to the attention of
such other person as the recipient party has specified by prior written notice
to the sending party. Notices shall be deemed to have been given hereunder when
delivered personally, three (3) days after deposit in the U.S. mail and one (1)
day after deposit with a reputable overnight courier service. The Company's
address is:
SCRIPTGEN Pharmaceuticals, Inc.
200 Boston Avenue
Medford, MA 02155
Attention: Mark T. Weedon
Telecopy No.: (617) 396-1028
20. GOVERNING LAW. THE CORPORATE LAW OF THE STATE OF DELAWARE SHALL
GOVERN ALL ISSUES AND QUESTIONS CONCERNING THE RELATIVE RIGHTS OF THE COMPANY
AND ITS STOCKHOLDERS. ALL OTHER ISSUES AND QUESTIONS CONCERNING THE
CONSTRUCTION, VALIDITY, INTERPRETATION AND ENFORCEABILITY OF THIS AGREEMENT AND
THE EXHIBITS AND SCHEDULES HERETO SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO ANY
CHOICE OF LAW OR CONFLICT OF LAW RULES OR PROVISIONS (WHETHER OF THE STATE OF
NEW YORK OR ANY OTHER JURISDICTION) THAT WOULD CAUSE THE APPLICATION OF THE LAWS
OF ANY JURISDICTION OTHER THAN THE STATE OF NEW YORK. IN FURTHERANCE OF THE
FOREGOING, THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL CONTROL THE
INTERPRETATION AND CONSTRUCTION OF THIS AGREEMENT (AND ALL SCHEDULES AND
EXHIBITS HERETO), EVEN THOUGH UNDER THAT JURISDICTION'S CHOICE OF LAW OR
CONFLICT OF LAW ANALYSIS, THE SUBSTANTIVE LAW OF SOME OTHER JURISDICTION WOULD
ORDINARILY APPLY.
21. BUSINESS DAYS. If any time period for giving notice or taking
action hereunder expires on a day which is a Saturday, Sunday or legal holiday
in the state in which the Company's chief-executive office is located, the time
period shall automatically be extended to the business day immediately following
such Saturday, Sunday or legal holiday.
22. DESCRIPTIVE HEADINGS. The descriptive headings of this Agreement
are inserted for convenience only and do not constitute a part of this
Agreement.
23. MISCELLANEOUS. The Company and the Other Stockholders
acknowledge that Investor has advised them that it proposes to carry out a
reorganization, including an amalgamation, pursuant to which, among other
things, a corporation named BioChem Pharma Canada Inc. (the "Successor") will
own all of the assets and be liable for all liabilities of Investor (the
"Amalgamation") and that a new corporation, entirely owned by Investor and
named BioChem Pharma Holdings Inc. will become the owner of the Series D
Stock to be issued pursuant to the Purchase Agreement. The Company and the
Other Stockholders hereby agree that, upon consummation of the Amalgamation,
the Successor shall have all of the rights and obligations of Investor as if
Successor had executed this Agreement on the date hereof in lieu of Investor,
and that neither Investor nor Successor shall be
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<PAGE>
required to send any notice of any kind regarding the Amalgamation nor seek the
consent of the Company to such Amalgamation. The Company and the Other
Stockholders furthermore agree and acknowledge that the Successor intends to
change its corporate name to BioChem Pharma Inc. and that, prior to the
Amalgamation, Investor will transfer the Series D Stock to BioChem Pharma
Holdings, Inc.
* * * *
-20-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the day and year first above written.
SCRIPTGEN PHARMACEUTICALS, INC.
By /s/ Mark T. Weedon
-----------------------------
Name: Mark T. Weedon
Title: President and CEO
BIOCHEM PHARMA, INC.
By /s/ Francois Legault
-----------------------------
Name: Francois Legault
Title: Executive Vice President
By /s/ Daniel Hetu
-----------------------------
Name: Daniel Hetu
Title: Vice President
ACCEL IV L.P.
By: Accel IV Associates, L.P., its
General Partner
By: /s/
------------------------------
Name:
Title:
ACCEL INVESTORS '93 L.P.
By: /s/
------------------------------
Name:
<PAGE>
Title:
ACCEL JAPAN L.P.
By: Accel Japan Associates, L.P., its
General Partner
By: /s/
------------------------------
Name:
Title:
ACCEL KEIRETSU L.P.
By: Accel Partners & Co., Inc., its
General Partner
By: /s/
------------------------------
Name:
Title:
ADVENT INTERNATIONAL INVESTORS II
LIMITED PARTNERSHIP
By: Advent International Corporation,
its General Partner
By: /s/
------------------------------
Name:
Title:
ADVENT PERFORMANCE MATERIALS LIMITED
PARTNERSHIP
By: Advent International Limited
Partnership, its General Partner
By: Advent International Corporation,
its General Partner
By: /s/
------------------------------
Name:
<PAGE>
Title:
ATLAS VENTURE FUND II, L.P.
By: Atlas Venture Associates II, L.P.,
its General Partner
By: /s/
------------------------------
Name:
Title:
---------------------------------
Thomas A. Bologna
CW VENTURES II, L.P.
By: CW Partners III, L.P., its General
Partner
By: /s/
------------------------------
Name:
Title:
ELLMORE C. PATTERSON PARTNERS
By:
------------------------------
Name:
Title:
GOLDEN GATE DEVELOPMENT AND
INVESTMENT LIMITED PARTNERSHIP
By: Advent International Limited
Partnership, its General Partner
By: Advent International Corporation,
its General Partner
By: /s/
------------------------------
<PAGE>
Name:
Title:
LOMBARD ODIER & CIE
By: /s/
------------------------------
Name:
Title:
---------------------------------
Bernard Mach
NEW ENTERPRISE ASSOCIATES 5
By: /s/
------------------------------
Name:
Title:
PROSPER PARTNERS
By:
------------------------------
Name:
Title:
ROVENT II LIMITED PARTNERSHIP
By: Advent International Limited
Partnership, its General Partner
By: Advent International Corporation,
its General Partner
By: /s/
------------------------------
Name:
Title:
<PAGE>
SCRIPT PARTNERS LIMITED PARTNERSHIP
By: /s/
------------------------------
Name:
Title:
VENROCK ASSOCIATES
By: /s/
------------------------------
Name:
Title:
VENROCK ASSOCIATES II, L.P.
By: /s/
------------------------------
Name:
Title: General Partner
<PAGE>
Exhibit 10.29
LICENSE AGREEMENT
by and between
TRUSTEES OF BOSTON UNIVERSITY
and
SCRIPTGEN PHARMACEUTICALS, INC.
January 1, 1998
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE
CONFIDENTIAL PORTIONS HAVE BEEN REDACTED AND ARE DENOTED BY
[***]. THE CONFIDENTIAL PORTIONS HAVE BEEN SEPARATELY FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION.
<PAGE>
LICENSE AGREEMENT
-----------------
This agreement ("AGREEMENT") is made as of January 1, 1998 ("EFFECTIVE
DATE"), by and between TRUSTEES OF BOSTON UNIVERSITY (hereinafter referred to as
"UNIVERSITY"), a corporation duly organized and existing under the laws of the
Commonwealth of Massachusetts and having a principal office at 147 Bay State
Road, Boston, Massachusetts 02215 and Scriptgen Pharmaceuticals, Inc.,
(hereinafter referred to as "LICENSEE"), a corporation duly organized and
existing under the laws of the State of Delaware having a principal place of
business at 200 Boston Avenue Medford, MA 02155
WHEREAS, UNIVERSITY and LICENSEE entered into a sponsored research
agreement ("SPONSORED RESEARCH AGREEMENT"), pursuant to which LICENSEE was
granted an exclusive option to an exclusive license to any inventions which
resulted from the research; and
WHEREAS, UNIVERSITY and LICENSEE warrant that they are co-owners by
assignment of an invention entitled [ * * * ] more fully described in EXHIBIT
A, having [ * * * ] which resulted from the SPONSORED RESEARCH AGREEMENT; and
WHEREAS, LICENSEE now wishes to exercise its OPTION and obtain a license to
UNIVERSITY'S undivided interest in PATENT RIGHTS rights upon the terms and
conditions hereinafter set forth; and
WHEREAS, UNIVERSITY desires to have such rights utilized to promote the
public interest by granting a license hereunder; and
<PAGE>
WHEREAS, LICENSEE has represented to UNIVERSITY, in order to induce
UNIVERSITY to enter into this AGREEMENT, that LICENSEE has the strategic
commitment to commercialize such technology; and
NOW, THEREFORE, in consideration of the mutual promises and covenants
herein contained and other good and valuable consideration, the receipt of which
is acknowledged, the parties agree as follows:
ARTICLE I -- DEFINITIONS
------------------------
1.1 "FIELD OF USE" shall mean all uses.
1.2 "LICENSED PRODUCT(s)" shall mean any product or part thereof, process, or
service:
(a) the manufacture, use or sale of which, but for the license granted
hereunder, would infringe any issued, unexpired claim or a pending
claim contained in the PATENT RIGHTS; or
(b) which is employed to practice a process which, but for the license
granted hereunder, would infringe any issued, unexpired claim or a
pending claim contained in the PATENT RIGHTS in the country in which
any LICENSED PROCESS is used or in which such product or part thereof
is used or sold.
1.3 "LICENSED PROCESS" shall mean any process which is covered in whole or in
part by an issued, unexpired claim or a pending claim contained in the
PATENT RIGHTS.
1.4 "LICENSEE" shall include any related company of Scriptgen Pharmaceuticals,
Inc., the voting stock of which is directly or indirectly at least fifty
percent (50%) owned or controlled by Scriptgen Pharmaceuticals, Inc., any
organization which directly or indirectly controls more than fifty percent
(50%) of the voting stock of Scriptgen Pharmaceuticals, Inc., and any
organization, the majority ownership of which is directly or indirectly
common to the ownership of Scriptgen Pharmaceuticals, Inc.
1.5 "NET SALES" shall mean all amounts billed or invoiced by LICENSEE or a
sublicensee for LICENSED PRODUCTS, less the following:
-Page 2 of 22-
<PAGE>
(a) allowances and adjustments customary in the trade separately and
actually credited to customers for spoiled, damaged, outdated, and
returned LICENSED PRODUCTS(s);
(b) transportation charges or allowances actually paid or granted;
(c) trade, quantity, cash or other discounts customary in the trade, if
any, allowed and paid by LICENSEE to independent parties in
arms-length transactions;
(d) credits or allowances made or given on account of rejects, returns or
retroactive price reductions;
(e) any tax or governmental charge directly on sale or transportation, use
or delivery of products paid by LICENSEE and not recovered from the
purchaser.
1.6 "PATENT RIGHTS" shall mean UNIVERSITY's undivided interest in the following
intellectual property:
(a) the United States and foreign patents and/or patent applications
listed in EXHIBIT A and B;
(b) United States and foreign patents issued from the applications listed
in EXHIBIT A and B and from divisionals and continuations of these
applications;
(c) claims of U.S. and foreign continuationinpart applications, and of the
resulting patents, which are directed to subject matter specifically
described in the U.S. and foreign applications listed in EXHIBIT A and
B;
(d) claims of all foreign patent applications, and of the resulting
patents, which are directed to subject matter specifically described
in the United States patents and/or patent applications described in
(a), (b) or (c) above; and
(e) any reissues of United States patents described in (a), (b) or (c)
above.
1.7 "TECHNOLOGY" shall mean any know-how, procedure, method, technique,
clinical data, technical data and the like which are owned or controlled by
UNIVERSITY, have been or can be documented as such in writing, and which
directly relate to the LICENSED PRODUCTS LICENSED PRODCESS and/or PATENT
RIGHTS, but which are not the subject of the PATENT RIGHTS.
1.8 "TERRITORY" shall mean worldwide.
-Page 3 of 22-
<PAGE>
ARTICLE II -- GRANT
-------------------
2.1 UNIVERSITY hereby grants to LICENSEE, subject to all the terms and
conditions of this AGREEMENT the exclusive right and license under the
PATENT RIGHTS and TECHNOLOGY to make, have made, import, use, lease and/or
sell LICENSED PRODUCT(s) for use in the FIELD OF USE within the TERRITORY.
2.2 UNIVERSITY hereby grants to LICENSEE, subject to all the terms and
conditions of this AGREEMENT, the nonexclusive right and license to use the
TECHNOLOGY in the FIELD OF USE within the TERRITORY under the PATENT RIGHTS
and TECHNOLOGY. TECHNOLOGY that is independently utilized by an independent
third party and that results in the manufacture of LICENSED PRODUCTS that
are not covered by a valid claim of PATENT RIGHTS, shall not cause
UNIVERSITY to be liable to LICENSEE for failure of UNIVERSITY to provide
exclusivity to LICENSEE.
2.3 Notwithstanding the provision of Section , UNIVERSITY shall retain the
right to practice under the PATENT RIGHTS solely for its own noncommercial
research.
2.4 LICENSEE agrees that LICENSED PRODUCTS leased or sold in the United States
shall be manufactured substantially in the United States, whether leased or
sold by LICENSEE or a sublicensee.
2.5 LICENSEE shall also have the right to grant exclusive or non-exclusive
sublicenses for the rights privileges and licenses granted hereunder;
provided, however, that LICENSEE shall remain primarily responsible for the
performance of all obligations herein.
2.6 LICENSEE hereby agrees that every sublicensing agreement to which it shall
be a part and which shall relate to the rights, privileges and license
granted hereunder shall contain a statement setting forth the date upon
which LICENSEE's exclusive rights, privileges and license hereunder shall
terminate.
2.7 LICENSEE shall furnish to UNIVERSITY a true and complete copy of each
sublicense agreement and each amendment thereto, promptly after the
sublicense or amendment has been executed and delivered.
-Page 4 of 22-
<PAGE>
2.8 LICENSEE agrees that any sublicenses granted by it shall provide that the
obligations to UNIVERSITY of ARTICLE II, Section 4.5 and 4.6,ARTICLE V,
ARTICLE VII, ARTICLE VIII, ARTICLE IX,
2.9 ARTICLE XI, ARTICLE XII, ARTICLE XIII and ARTICLE XIV of this Agreement
shall be binding upon the sublicensee as if it were a party to this
Agreement. LICENSEE further agrees to attach copies of these ARTICLES and
Sections to sublicense agreements.
2.10 LICENSEE shall not receive from sublicensees anything of material value in
lieu of royalties on sales under any sublicense under this Agreement,
without the express prior written permission of UNIVERSITY.
2.11 The license granted hereunder shall not be construed to confer any rights
upon LICENSEE by implication, estoppel or otherwise as to any technology
not specifically set forth in EXHIBITS A and B hereof or of any technology
which does not constitute TECHNOLOGY.
ARTICLE III -- DUE DILIGENCE
----------------------------
3.1 LICENSEE agrees to use best efforts to effect introduction of the use of
the LICENSED PRODUCTS(s) into the United States commercial market as soon
as practical, consistent with sound and reasonable business practices and
judgments.
3.2 UNIVERSITY shall have the right, at any time after [ * * * ] from the
date of this AGREEMENT, to terminate the exclusivity and sublicensing
provisions of this AGREEMENT if LICENSEE within [ * * * ] after
written notice from UNIVERSITY of such intended termination of exclusivity
fails to provide written evidence that it has commercialized or is actively
attempting to commercialize the use of LICENSED PRODUCTS(s). UNIVERSITY
shall have the further right at any time after [ * * * ] from the
date of this AGREEMENT to terminate the AGREEMENT in its entirety if
LICENSEE within [ * * * ] after written notice from UNIVERSITY of
such intended termination fails to provide written evidence that it has
commercialized or is actively attempting to commercialize LICENSED
PRODUCTS(s). Evidence that LICENSEE has an ongoing and active research
program or marketing program, as appropriate, directed toward development,
production or sale of such product under the
-Page 5 of 22-
<PAGE>
license shall be deemed satisfactory evidence. If LICENSEE has failed to
raise funding necessary to pursue an active research program or marketing
program, as appropriate, directed toward development, production or sale of
such product, whether raising of such funding is specified as a milestone
event pursuant to Section or not, UNIVERSITY may invoke the provisions of
this Section 3.2.
ARTICLE IV -- ROYALTIES AND PAYMENTS
------------------------------------
4.1 In partial consideration for the license granted hereunder, LICENSEE agrees
to pay UNIVERSITY [ * * * ] upon execution of this AGREEMENT.
4.2 In consideration of the license herein granted, LICENSEE agrees to pay
UNIVERSITY an earned royalty equal to [ * * * ] of NET
SALES by LICENSEE or its sublicensees with respect to sales of LICENSED
PRODUCTS for the [ * * * ] in which the LICENSED PRODUCTS(s) are first
sold and [ * * * ] thereafter. The obligation of LICENSEE to pay
royalties to UNIVERSITY shall terminate on a country-by-country basis at
such time as no pending patent applications or unexpired patents remain in
the PATENT RIGHTS.
4.3 In the event that a LICENSED PRODUCT under this AGREEMENT is sold in a
combination package or kit containing other active products, then NET SALES
for purposes of determining royalty payments on the combination package
shall be calculated using one of the following methods, but in no event
shall the royalties payable to UNIVERSITY be reduced to less than
[ * * * ] of that provided for in Section 4.2 hereof:
(a) By multiplying the net selling price of that combination package by
the fraction A/A+B, where A is the current gross selling price, during
the royalty-paying period in question, of the LICENSED PRODUCT sold
separately, and B is the gross selling price, during the royalty
period in question, of the other active products sold separately; or
(b) In the event that no such separate sales are made of the LICENSED
PRODUCT or any of the active products in such combination package
during the royalty-paying period in question, NET SALES for the
purposes of determining royalty payments, shall be calculated by
dividing the net selling price of the combination package by the
number of functions performed by the combination package sold
-Page 6 of 22-
<PAGE>
where such package contains active agents other than those licensed
under this AGREEMENT.
4.4 Only a single royalty shall be paid with respect to any LICENSED PRODUCT
irrespective of the number of claims of PATENT RIGHTS utilized.
4.5 Within [ * * * ] after March 31, June 30, September 30 and
December 31 of each year in which this AGREEMENT is in effect, LICENSEE
shall deliver to UNIVERSITY full, true and accurate reports of its
activities and those of its sublicensee(s), if any, relating to this
AGREEMENT during the preceding three month period. These reports shall
include at least the following:
(a) number of LICENSED PRODUCTS manufactured and sold;
(b) total billings for LICENSED PRODUCTS sold; where applicable,
(c) deductions applicable to a determination of NET SALES;
(d) total royalties due;
(e) activities of LICENSEE directed toward promoting the sale and use of
LICENSED PRODUCTS.
4.6 LICENSEE shall keep (or cause to be kept) and maintain complete and
accurate records of its sales of the LICENSED PRODUCTS(s) in accordance
with generally accepted accounting procedures. Such records shall be
accessible to an authorized representative selected and paid for by
UNIVERSITY and acceptable to LICENSEE, not more than [ * * * ] at any
reasonable time during business hours until [ * * * ] after the end
of the royalty period to which such records relate, for the purpose of
verifying NET SALES and any royalty due thereon. Such representative shall
disclose to UNIVERSITY only information relating to the accuracy of the
records kept and the payments made, and shall be under a duty to keep
confidential any other information gleaned from such records. Any
adjustment in the amount of royalties due the UNIVERSITY on account of
overpayment or underpayment of royalties shall be made at the next date
when royalty payments are to be made to the UNIVERSITY under Section 4.5
herein. If the verification on behalf of the UNIVERSITY results in an
upward adjustment of greater than [ * * * ] of royalties due to the
UNIVERSITY for the period of time in question, LICENSEE shall pay the
out-of-pocket expenses of the UNIVERSITY relating to such verification.
-Page 7 of 22-
<PAGE>
4.7 On or before the [ * * * ] following the close of LICENSEE's
fiscal year, LICENSEE shall provide UNIVERSITY with LICENSEE's certified
financial statements for the preceding fiscal year including, at a minimum,
a balance sheet and an operating statement.
4.8 All moneys to be paid to UNIVERSITY shall be made and computed in United
States Dollars, and LICENSEE shall use its best efforts to convert royalty
payments payable on NET SALES in any country to United States Dollars;
provided, however, that if conversion to and transfer of Dollars cannot be
made by LICENSEE in any country for any reason, LICENSEE may pay such sums
in the currency of the country in which such sales are made, deposited in
UNIVERSITY's name in a bank designated by UNIVERSITY in any such country.
The rate of exchange of local currencies to United States Dollars shall be
at the rate of exchange prevailing at the Bank of Boston on the day such
payment is made pursuant to the periods specified in Section .
4.9 In the event that any payment due hereunder is not made when due, the
payment shall accrue interest beginning on the first day following the due
date as herein specified, calculated at the annual rate of the sum of (a)
[ * * * ] plus (b) the prime interest rate quoted by the Bank of
Boston on the date said payment is due, the interest being compounded on
the last day of each calendar quarter, provided that in no event shall said
annual rate exceed the maximum legal interest rate in Massachusetts. The
payment of such interest shall not foreclose UNIVERSITY from exercising any
other rights it may have as a consequence of any overdue payment.
ARTICLE V -- WARRANTIES, LIMITATIONS, AND REGULATIONS
-----------------------------------------------------
5.1 Nothing herein contained shall be construed by either party hereto as a
guarantee or warranty on the part of the other party with respect to the
results to be obtained by use of the inventions, patented or otherwise, or
TECHNOLOGY licensed hereunder.
5.2 UNIVERSITY shall not be obligated to defend or save harmless LICENSEE or
any other person against any suit, damage, claim, or demand based on actual
or alleged infringement of any patent or other rights owned by a third
party, or any unfair trade practice resulting from the exercise or use of
any right or license granted hereunder.
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<PAGE>
5.3 UNIVERSITY MAKES NO WARRANTY, EXPRESS OR IMPLIED (OTHER THAN THIS AGREEMENT
HAS BEEN DULY EXECUTED BY IT AND THAT THIS AGREEMENT CONSTITUTES
UNIVERSITY'S DINDING AND ENFORCEABLE OBLIGATION), INCLUDING, WITHOUT
LIMITATION, ANY IMPLIED WARRANTIES OF MERCHANTABILITY OR OF FITNESS FOR A
PARTICULAR PURPOSE WITH RESPECT TO ANY PATENT, TRADEMARK, SOFTWARE,
NONPUBLIC OR OTHER INFORMATION, OR TANGIBLE RESEARCH PROPERTY, LICENSED OR
OTHERWISE PROVIDED TO LICENSEE HEREUNDER AND HEREBY DISCLAIMS THE SAME.
5.4 UNIVERSITY DOES NOT WARRANT THE VALIDITY OF PATENT RIGHTS LICENSED
HEREUNDER AND MAKES NO REPRESENTATION WHATSOEVER WITH REGARD TO THE SCOPE
OF THE PATENT RIGHTS OR THAT SUCH PATENT RIGHTS MAY BE EXPLOITED BY
LICENSEE OR ANY SUBLICENSEE WITHOUT INFRINGING OTHER PATENTS. IF
BIOLOGICAL MATERIALS ARE LICENSED HEREUNDER, UNIVERSITY MAKES NO
REPRESENTATION THAT SUCH MATERIALS OR THE METHODS USED IN MAKING OR USING
SUCH MATERIALS ARE FREE FROM LIABILITY FOR PATENT INFRINGEMENT.
5.5 LICENSEE agrees to hold UNIVERSITY, its Trustees, officers, and employees
harmless against all liabilities, demands, damages, expenses, and losses
arising out of use by LICENSEE or its sublicensee(s) of LICENSED PRODUCT(s)
including without limitation the licensing, sale, or other distribution of
LICENSED PRODUCTS(s). LICENSEE agrees to require its sublicensee(s) to
hold UNIVERSITY harmless.
5.6 LICENSEE and its sublicensee(s) agree to comply with all regulations and
safety standards of government agencies such as the FDA.
5.7 LICENSEE shall defend, indemnify and hold harmless UNIVERSITY, and its
trustees, officers, employees and agents and their respective successors,
heirs and assigns (the "INDEMNITEES"), against any and all liability,
damage, loss or expense (including reasonable attorneys' fees and expenses
of litigation) that may be incurred by or imposed upon the INDEMNITEES, or
any of them, in connection with any claim, suit, demand, action or judgment
arising out of the following:
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<PAGE>
(a) the design, production, manufacture, sale, use in commerce, lease or
promotion by LICENSEE or by an Affiliate or sublicensee of LICENSEE of
any product, process or service relating to or developed pursuant to
this AGREEMENT; or
(b) any other activities of LICENSEE or a sublicensee to be carried out
pursuant to this AGREEMENT.
LICENSEE's indemnity under (a) shall apply to any liability, damage, loss
or expense whether or not it is attributable to the negligent activities of
the INDEMNITEES. LICENSEE's indemnification under (b) shall not apply to
any liability, damage, loss or expense to the extent that it is
attributable to the negligence or willful misconduct of the INDEMNITEES.
5.8 At such time as any product, process or service relating to, or developed
pursuant to, this AGREEMENT is being commercially distributed or sold
(other than for the purpose of obtaining regulatory approvals) by LICENSEE
or a sublicensee, LICENSEE shall at its sole expense, procure and maintain
policies of comprehensive general liability insurance in amounts not less
than [ * * * ] and naming the INDEMNITEES as additional insureds. Such
comprehensive general liability insurance shall provide (i) product
liability coverage and (ii) broad form contractual liability coverage for
LICENSEE's indemnification under Section 5.5 of this AGREEMENT. LICENSEE
shall provide UNIVERSITY with written evidence of such insurance upon
request of UNIVERSITY. LICENSEE shall provide UNIVERSITY with written
notice at least [ * * * ] prior to the cancellation, non-renewal or
material change in such insurance; if LICENSEE does not obtain replacement
insurance providing comparable coverage within such [ * * * ] period,
UNIVERSITY shall have the right to terminate this AGREEMENT effective at
the end of such [ * * * ] period without notice or any additional waiting
periods. In the event the product liability coverage aforesaid is not
occurrence liability, LICENSEE shall maintain such comprehensive general
liability insurance for a reasonable period of not less than [ * * * ]
after it has ceased commercial distribution or use of any product, process
or service relating to, or developed pursuant to, this AGREEMENT. If
LICENSEE is unable to obtain the required amounts of insurance at
commercially reasonable rates, UNIVERSITY will cooperate with LICENSEE to
either obtain a waiver of this provision, assist in identifying a carrier
to provide such insurance at commercially reasonable rates, or identify a
program for self-insurance or other alternative measures. This Section
shall survive the expiration or termination of this AGREEMENT.
-Page 10 of 22-
<PAGE>
5.9 LICENSEE agrees to comply, and to require its sublicensees to comply, with
all applicable laws and regulations relative to the manufacture and
marketing of LICENSED PRODUCTS.
5.10 Notwithstanding the provisions of Sections 5.1, 5.2 and 5.3, the liability
of UNIVERSITY for any and all breaches of this AGREEMENT by a party other
than UNIVERSITY, and for any and all failures of LICENSED PRODUCTS(s) in
the aggregate, shall be limited to [ * * * ] of the cumulative
royalties paid by LICENSEE and its sublicensee(s), and LICENSEE and its
sublicensee(s) hereby waive and disclaim the right to recover any damages
in excess of such amount for any and all such breaches and for any and all
such failures irrespective of whether such damages are direct, indirect,
consequential, incidental, or any other types of damages and irrespective
of whether based upon loss of investment, loss of production, lost profits,
interest on investment, interruption of business, or any other loss of any
character whatsoever. LICENSEE and its sublicensee(s) further agree that
their sole and exclusive remedy for any and all such breaches and any and
all such failures shall be to recover damages actually sustained up to, and
not in excess of, such amount. The foregoing notwithstanding, nothing in
this Section shall limit LICENSEE's right to seek equitable relief in the
event of UNIVERSITY's breach of this AGREEMENT.
ARTICLE VI -- PAYMENT OF PATENT COSTS
-------------------------------------
6.1 LICENSEE shall apply for, prosecute and maintain during the term of this
AGREEMENT the PATENT RIGHTS. The application filings, prosecution,
maintenance and payment of all fees and expenses, including legal fees,
relating to such PATENT RIGHTS shall be the sole responsibility of
LICENSEE. UNIVERSITY shall be entitled to review and comment upon all
actions undertaken in the prosecution of all patents and applications. If
LICENSEE decides not to apply for, prosecute or maintain any PATENT RIGHTS,
LICENSEE shall give sufficient and timely notice to UNIVERSITY so as to
permit UNIVERSITY to apply for, prosecute and maintain such PATENT RIGHTS.
ARTICLE VII -- INFRINGEMENT BY THIRD PARTY
------------------------------------------
7.1 LICENSEE will protect PATENT RIGHTS from infringement and prosecute
infringers when, in its judgment, such action may be reasonably necessary,
proper and justified. In
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<PAGE>
the event LICENSEE elects not to prosecute an infringer, UNIVERSITY shall
have the right to do so unless LICENSEE can demonstrate a reasonable basis
why an action against the infringer should not be pursued.
7.2 In the event one party shall initiate or carry on legal proceedings to
enforce any PATENT RIGHTS against any alleged infringer, the other party
shall fully cooperate with and supply all assistance reasonably requested
by the party initiating or carrying on such proceedings. The party which
institutes any suit to protect or enforce PATENT RIGHTS shall have sole
control of that suit and shall bear the reasonable expenses (excluding
legal fees) incurred by said other party in providing such assistance and
cooperation as is requested pursuant to this Section. The party initiating
or carrying on such legal proceedings shall keep the other party informed
of the progress of such proceedings and said other party shall be entitled
to counsel in such proceedings but at its own expense. Any award paid by
third parties as the result of such proceedings (whether by way of
settlement or otherwise) shall be divided between the parties as follows:
(a) (i) If the amount is based on lost profits, LICENSEE shall
receive an amount equal to the damages the court or the parties
determine LICENSEE has suffered as a result of the infringement less
the amount of any royalties that would have been due UNIVERSITY on
sales of LICENSED PRODUCT lost by LICENSEE as a result of the
infringement had LICENSEE made such sales; and
(ii) UNIVERSITY shall receive an amount equal to the royalties it
would have received if such sales had been made by LICENSEE; or
(b) As to awards other than those based on lost profits, [ * * * ] to the
party initiating such proceedings and [ * * * ] to the other party.
7.3 Should either party commence a suit under these provisions and thereafter
elect to abandon the same, it shall give timely notice to the other party
who, if it so desires, may continue prosecution of such suit; provided,
however, that the sharing of expenses and any recovery in such suit shall
be as agreed upon between the parties.
7.4 In the event a declaratory judgment action alleging invalidity or
non-infringement of any of the PATENT RIGHTS is brought against LICENSEE
and/or UNIVERSITY, LICENSEE shall have the right to control the defense and
settlement of the action,
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<PAGE>
provided that the expenses and costs of such action, including attorneys'
fees, shall be borne by LICENSEE.
7.5 In any infringement suit as either party may institute to enforce the
PATENT RIGHTS pursuant to this AGREEMENT, the other party hereto agrees, at
the request and expense of the party initiating the suit, to use its best
efforts to cooperate, to have its employees testify when requested and to
make available relevant records, papers, information, samples, specimens,
and the like.
7.6 No settlement or consent judgment or other voluntary and final disposition
of any suit affecting the PATENT RIGHTS may be entered into without the
consent of UNIVERSITY, which consent shall not be unreasonably withheld.
Notwithstanding the foregoing, the party controlling any suit referred to
in this shall have the right to settle any claims for infringement upon
such terms and conditions that shall be mutually agreed upon by UNIVERSITY
and LICENSEE.
7.7 In the event of an infringement or infringements by third parties of PATENT
RIGHTS on a scale that significantly affects LICENSEE's sales of LICENSED
PRODUCTS(s) and neither UNIVERSITY nor LICENSEE elect to bring an
infringement suit against such infringer, the royalties hereunder payable
by LICENSEE pursuant to shall be reduced by [ * * * ] of the sums
otherwise payable; provided, however, that LICENSEE presents information
to UNIVERSITY that such infringer has refused to enter into a
royalty-bearing, sublicensing agreement with LICENSEE on terms reasonably
acceptable to LICENSEE.
ARTICLE VIII -- BENEFITS OF LITIGATION, EXPIRATION, OR ABANDONMENT
------------------------------------------------------------------
8.1 In a case where one or more patents, or particular claims therein within
the PATENT RIGHTS expire, or are abandoned, or are declared invalid or
otherwise construed by a court of last resort, or by a lower court from
whose decree no appeal is taken, or certiorari is not granted within the
period allowed therefor, then the effect thereof hereunder shall be:
(a) that such patents or particular claims shall, as of the date of
expiration or abandonment or final decree of invalidity as the case
may be, cease to be included within the PATENT RIGHTS for the purpose
of this AGREEMENT and shall be henceforth included within TECHNOLOGY;
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<PAGE>
(b) that such construction so placed upon the PATENT RIGHTS by the courts
shall be followed from and after the date of entry of the judgment or
decree, and royalties shall thereafter be payable by LICENSEE only in
accordance with such construction; and
(c) in the event that LICENSEE challenges the validity of PATENT RIGHTS,
LICENSEE may not cease paying royalties as of the date validity of the
claims in issue are challenged, but rather may cease paying royalties
as to those claims only after a final adjudication of invalidity of
those claims.
8.2 In the event that any of the contingencies provided for in Section 8.1
herein occurs, UNIVERSITY agrees to renegotiate in good faith with
LICENSEE a reasonable royalty rate under the remaining PATENT RIGHTS which
are unexpired and in effect, and under which LICENSEE desires to retain a
license.
ARTICLE IX -- TERMINATION
-------------------------
9.1 The license granted hereunder shall continue until terminated pursuant to
one of the following events:
(a) If LICENSEE materially breaches this AGREEMENT or fails to account for
or pay royalties or minimum royalties as herein provided, UNIVERSITY
shall have the right to terminate this license including the right to
sublicense on ninety (90) days prior written notice; provided,
however, that if LICENSEE cures the said breach or default within said
ninety (90) day period, this license shall continue in full force and
effect.
(b) UNIVERSITY shall also have the right to terminate this License and the
right to sublicense forthwith by giving written notice to LICENSEE in
the event of bankruptcy, liquidation or insolvency of LICENSEE.
(c) LICENSEE may terminate this AGREEMENT at any time by giving
three (3) months prior written notice thereof to UNIVERSITY.
9.2 Upon termination of this AGREEMENT for any cause, nothing herein shall be
construed to release either party of any obligation matured prior to the
effective date of such termination, including, without limitation, payments
of accrued royalties, and LICENSEE may after the effective date of such
termination complete or sell all LICENSED PRODUCT(s) that it may have on
hand at the date of termination or which LICENSEE can clearly demonstrate
were in the process of manufacture at the time of such
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<PAGE>
termination, provided that it pays earned royalties thereon as provided in
this AGREEMENT and provided that at the time notice of termination is
provided by LICENSEE or within thirty days of receipt of notice by
LICENSEE, as the case may be, LICENSEE provides UNIVERSITY with an
accounting of LICENSED PRODUCTS then on hand and its best estimate of the
duration of such sales of LICENSED PRODUCTS.
9.3 Upon termination of this AGREEMENT for any reason, any sublicense not then
in default shall continue in full force and effect except that UNIVERSITY
shall be substituted in place of the LICENSEE.
9.4 Upon termination of this agreement for any reason, LICENSEE shall, upon
request by UNIVERSITY, make available to UNIVERSITY all non-proprietary
information then in LICENSEE's possession relevant to the commercialization
of LICENSED PRODUCTS, including, but not limited to, research results,
toxicology data, assays, preclinical data, prototypes, manufacturing
processes including cell lines and unused, unexpired amounts of LICENSED
PRODUCTS, clinical results, regulatory submissions, product licenses and
customer lists.
ARTICLE X -- NOTICE
-------------------
10.1 Any notice or communication authorized or required to be given hereunder
shall be in writing and be served by depositing the same either in the
United States mail, postage prepaid, receipt requested, or with a
recognized overnight courier service. addressed to the parties,
respectively, at the following addresses:
UNIVERSITY:
-----------
Boston University
Community Technology Fund
108 Bay State Road
Boston, MA 02215
Attn.: Director, Office of Technology Transfer
LICENSEE:
---------
SCRIPTGEN Pharmaceuticals, Inc.
200 Boston Avenue
Medford, MA 02155
Attn.: Vice President, Research & Development
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<PAGE>
ARTICLE XI -- NON-USE OF NAMES
------------------------------
11.1 LICENSEE shall not use the names of UNIVERSITY nor of any inventor of the
inventions covered by the PATENT RIGHTS nor any adaptation thereof, in any
advertising or promotional sales literature without the prior written
consent of UNIVERSITY in each case, except that LICENSEE may state that it
is licensed by UNIVERSITY under one or more patents and/or applications.
However, LICENSEE may make reference to technical publications by Dr. Panek
or his co-authors. LICENSEE shall submit to UNIVERSITY for its approval,
which approval shall not be unreasonably withheld or delayed, any
references to LICENSED PRODUCTS, this AGREEMENT, UNIVERSITY, and/or its
inventors in submissions required by the SEC and/or the rules of any stock
exchange on which its shares are listed or are being considered for
listing.
ARTICLE XII -- MEDIATION/ARBITRATION
------------------------------------
12.1 In the event a controversy or dispute arises between the parties relating
to any provision of this AGREEMENT or the breach thereof, the parties agree
to use the following procedure prior to either party pursuing other
available remedies.
(a) A meeting shall be held promptly between the parties, attended by
individuals with decision-making authority regarding the dispute, to
attempt in good faith to negotiate a resolution of the dispute.
(b) If, within [ * * * ] after such meeting, the parties have not
succeeded in negotiating a resolution of the dispute, they agree to
submit the dispute to mediation by the American Arbitration
Association and bear equally the cost of mediation.
(c) The parties agree to participate in good faith in the mediation and
negotiations related thereto for a period of [ * * * ]. If the
parties are not successful in resolving the dispute through mediation,
then the dispute shall be submitted for arbitration, unless the
parties agree to do otherwise.
12.2 Arbitration shall be subject to the following terms:
(a) The arbitration shall be held at a mutually agreeable location in the
Boston, Massachusetts metropolitan area.
(b) The arbitrator(s) shall be an independent, impartial third party(ies)
having no direct or indirect personal or financial relationship to any
of the parties to the
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<PAGE>
dispute, who has(have) agreed to accept the appointment as
arbitrator(s) on the terms set out in this .
(c) The arbitrator(s) shall be an active or retired attorney, law
professor, or judicial officer with at least [ * * * ]
experience in commercial technology transfer matters and a familiarity
with the laws governing proprietary rights in intellectual property.
(d) The arbitrator(s) shall be selected as follows:
Within [ * * * ] of the written notice set forth in Section
above, each party shall submit a description of the matter to be
arbitrated together with the terms of this to the American
Arbitration Association at its Regional Office in Boston,
Massachusetts. Said Association shall submit to the parties a list of
the qualified arbitrators available to arbitrate the matter. The
first arbitrator acceptable to both parties shall be deemed the
selected arbitrator with respect to the dispute then at issue under
this AGREEMENT. In the event of a failure to select a mutually
agreeable arbitrator, the parties will each select an arbitrator and
the two arbitrators will select a third arbitrator.
(e) Within [ * * * ] after selection of the arbitrator(s), each
party shall submit a description of the matter to be arbitrated to
said arbitrator(s).
(f) From the date the arbitrator(s) is in possession of both parties'
submitted material, the arbitrator(s) shall have [ * * * ] days
in which to hear oral testimony and render a decision. Each party
shall have a maximum of [ * * * ] during said [ * * * ] period in
which to present oral testimony.
(g) Time periods set forth in this may be altered only by mutual consent
of the parties;
(h) The arbitrator(s) shall announce the award in writing accompanied by
written findings explaining the facts determined in support of the
award and any relevant conclusions of law;
(i) The fees of the arbitrator(s) and any other costs and fees associated
with the arbitration shall be paid in accordance with the decision of
the arbitrator(s), except that the prevailing party shall pay no more
than [ * * *] of such costs.
(j) Except as provided in Section 12.2 (i) the decision of the
arbitrator(s) shall be final and binding on all parties, and judgment
may be entered thereon in any court having jurisdiction thereof.
(k) Nothing contained in this ARTICLE XII shall prohibit a party which has
complied with the provisions of Section 12.1 from seeking a
preliminary
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<PAGE>
injunction or other equitable relief without the need to post bond if,
in the party's judgement, such action is necessary to avoid
irreparable damage.
ARTICLE XIII -- EXPORT CONTROL RESTRICTIONS
-------------------------------------------
13.1 The Export Control Regulations of the United States Department of
Commerce (the "REGULATIONS") prohibit, except under a special validated
license, the exportation from the United States of technical data
relating to certain commodities listed in the REGULATIONS, unless the
exporter has received certain written assurances from the foreign
importer. In order to facilitate the exchange of technical information
under this AGREEMENT, LICENSEE therefore gives its assurance to
UNIVERSITY that LICENSEE will not knowingly, unless prior authorization
is obtained from the United States Office of Export Control, re-export
directly or indirectly any technical data received from UNIVERSITY under
this AGREEMENT and will not export directly the LICENSED PRODUCTS(s) or
such technical data to any country listed on either the Commodity Control
List or Militarily-Critical Technologies List.
13.2 UNIVERSITY neither represents that a license is not required nor that, if
required, it will be issued by the United States Department of Commerce.
ARTICLE XIV -- MISCELLANEOUS PROVISIONS
---------------------------------------
14.1 Neither party shall assign this AGREEMENT without the written consent of
the other party which consent shall not be unreasonably withheld;
provided, however, that either party, without such consent, may assign or
sell the same in connection with the transfer or sale of all or
substantially all of its business involving LICENSED PRODUCTS or in the
event of its merger, or consolidation with another company. Each
assignee shall assume all obligations of its assignor under this
AGREEMENT. No assignment shall relieve either party of responsibility
for the performance of any accrued obligations which such party then has
hereunder.
14.2 This AGREEMENT embodies the entire understanding between the parties as
to the subject matter hereof and may not be varied except by a document
in writing signed by an officer of LICENSEE and a person authorized to
sign on behalf of UNIVERSITY.
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<PAGE>
14.3 This AGREEMENT shall be construed, governed, interpreted, and applied in
accordance with the laws of the Commonwealth of Massachusetts without
regard to conflicts of laws principles except that questions affecting
the validity, construction, and effect of any foreign patent shall be
determined by the laws of the country in which the patents were granted.
14.4 The provisions of this AGREEMENT are severable, and in the event that any
of the provisions of this AGREEMENT are determined to be invalid or
unenforceable under any controlling body of law, such invalidity or
unenforceability shall not in any way affect the validity or
enforceability of the remaining provisions hereof.
14.5 LICENSEE shall mark the LICENSED PRODUCTS(s) sold in the United States
with all applicable patent numbers. All LICENSED PRODUCTS(s) shipped
and/or sold in other countries shall be marked in such a manner as to
conform with all of the laws of the country where the LICENSED
PRODUCTS(s) are shipped to and/or sold.
14.6 For the purpose of this AGREEMENT and all services to be provided
hereunder, both parties shall be, and shall be deemed to be, independent
contractors and not agents or employees of the other. Neither party
shall have authority to make any statements, representations or
commitments of any kind, or to take any action, that will be binding on
the other party.
14.7 The captions are provided for convenience and are not to be used in
construing this AGREEMENT.
14.8 The parties agree not to use the PATENT RIGHTS or TECHNOLOGY in a manner
which attempts to circumvent, avoid or bypass obligations to the other
party, directly or indirectly, or to avoid payment of fees or royalties
or other benefits, either financial or otherwise, due under this
AGREEMENT in connection with the use and commercialization of the PATENT
RIGHTS or TECHNOLOGY or related information.
14.9 The parties agree that they have participated equally in the formation of
this AGREEMENT and that the language herein should not be presumptively
construed against either of them.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have hereunder set their hands and
seals and duly executed this AGREEMENT in duplicate original copies the day and
year first written above.
SCRIPTGEN PHARMACEUTICALS, INC. TRUSTEES OF BOSTON UNIVERSITY
(LICENSEE)
By: /s/ By: /s/
-------------------------------- --------------------------
Name:______________________________ Name: Matthew J. Burns
Title:_____________________________ Title: Assistant Treasurer
-Page 20 of 22-
<PAGE>
EXHIBIT A
[ * * *]
-i-
<PAGE>
EXHIBIT B
FOREIGN PATENT RIGHTS
---------------------
PCT Patent Title Inventors Filed
- --- ------ ----- --------- -----
-ii-
<PAGE>
Exhibit 10.37
MATERIAL TRANSFER AND SCREENING AGREEMENT
This Agreement, effective as of the date last written below, is between
ArQule, Inc. ("ArQule") and Scriptgen Pharmaceuticals, Inc. ("Recipient").
1. SCREENING OF COMPOUND ARRAY: Within 30 days after receiving an executed
original of this Agreement, ArQule will send to Recipient a sample ArQule
Mapping Array -TM- (the "Compound Array"), consisting of up to 10,000 small
organic compounds ("Compounds") in the following format: one Compond per well,
80 Compounds per plate: 1Oul of 10mM stock of each Compound in 100% DMSO.
ArQule grants Recipient a nonexclusive, worldwide license (without the right
to sublicense or subcontract screening) to screen the Compound Array using
and proprietary assays selected by Recipient.
2. AVAILABILITY OF LICENSE: If Recipient detects activity in one or more
Compounds during the term of this Agreement, ArQule will enter into license
negotiations with the Recipient, and the following procedures shall apply;
(a) Upon execution of a mutually acceptable confidential disclosure
agreement (the "CDA") between ArQule and Recipient, Recipient shall
disclose to ArQule the array plate number and well number of any Compound(s)
exhibiting confirmed significant activity (the "Active Compound(s)") and the
identity of the target(s) (the "Target(s)").
(b) If any Active Compunds have been previously committed to a third
party or to an internal ArQule program, Recipient shall have no rights in or
to such Active Compound(s). In all cases. ArQule shall disclose to Recipient
the chemical composition and theoretical structure of the Active Compound(s),
subject to the CDA, and the Recipient shall have a right of first negotiation
to obtain an exclusive license (the "Negotiation Right"), in accordance with
the procedures set forth below.
(c) Recipient may exercise the Negotiation Right upon written notice
to ArQule which is received by ArQule at any time during the term of this
Agreement, whereupon the parties will engage in good faith negotiations to
establish the terms and conditions of a mutually acceptable research
collaboration agreement. The said research collaboration agreement will
provide, among other matters, for the following:
establishment of committees to manage the collaboration;
licenses under intellectual property rights of each party to
conduct preclinical development of the Active Compound;
responsibilities of the parties for specific preclinical
development activities;
commercialization strategy for the Active Compound following
preclinical development; and
sharing of commercialization revenues after recovery by each
party of its preclinical development costs.
(d) If the parties are unable to negotiate and execute a mutually
acceptable research collaboration agreement within ninety (90) days after the
date upon which Recipient exercised Negotiation Right, ArQule shall have the
right to license the Active Compound(s) to any third party subject to any
non-disclosure and non-use restrictions provided in the CDA.
3. USE AND TRANSFER RESTRICTIONS: Recipient acknowledges and agrees that
the Compounds (including without limitation all Active Compounds) and the
Compound Array are proprietarty to and owned by ArQule and are or may be
covered by claims of U.S. and international patents or patent applications of
ArQule. Recipient agrees to use the Compounds only for the purposes set forth
in this Agreement. Recipient agrees (i) not to transfer such Compounds to any
third party without the prior written consent of ArQule, (ii) to permit
access to the Compounds only to its employees and consultants requiring such
access, (iii) to inform such employees and consultants of the proprietary
nature of the Compounds, and (iv) to take reasonable precautions, at least as
stringent as those observed by Recipient to protect its own proprietary
materials, to ensure that such employees and consultants observe the
obligations of Recipient pursuant to this Section. Upon the expiration or
termination of this Agreement, Recipient shall, at the instruction of ArQule,
either destroy or return any unused Compounds.
4. COMPLIANCE WITH LAW: Recipient agrees to comply with all federal,
state, and local laws and regulations applicable to the use, storage,
disposal, and transfer of the Compounds, including without limitation the
Toxic Substances Control Act (15 USC 2601 ET SEQ.) and implementing
regulations (in particular, 40 CFR 720.36 [Research and Development
Exemption]), the Food, Drug, and Cosmetic Act (21 USC 301 ET SEQ.) and
implementing regulations, and all Export Administration Regulations of the
Department of Commerce. Recipient assumes sole responsibility for any
violation of such laws or regulations by Recipient or any of its affiliates
or sublicensees.
5. TERMINATION: This Agreement shall commence on the date last written
below and continue for a period of six (6) months. Thereafter, this
Agreement shall be automatically extended for successive additional (6) month
periods unless, either party elects to cause this Agreement to terminate with
sixty (60) days written notice. Section 2 (paragraph (d) only), 3, 4, 7 and
8, shall survive termination of this Agreement.
6. NO WARRANTIES: Any Compounds delivered pursuant to this Agreement are
understood to be experimental in nature and may have hazardous properties. The
Recipient should assume that the compounds are dangerous and should use
appropriate precautions. ARQULE MAKES NO REPRESENTATIONS, AND EXTENDS NO
WARRANTIES OF ANY KIND, EITHER EXPRESS OR IMPLIED, WITH RESPECT TO THE
COMPOUNDS. THERE ARE NO EXPRESS OR IMPLIED WARRANTIES OR MERCHANTIBILITY OR
FITNESS FOR A PARTICULAR PURPOSE, OR THAT THE USE OF THE COMPOUNDS WILL NOT
INFRINGE ANY PATENT OR OTHER INTELLECTUAL PROPERTY RIGHTS OF A THIRD PARTY.
7. INDEMNIFICATION: Recipient assumes all liablity for, and agrees to
indemnify, defend, and hold harmless ArQule and its directors, officers,
representatives, employees, and agents against all losses, expenses
(including without limitation any legal expenses), claims, demands, damages,
judgements, suits, or other actions arising from the use, storage, or
disposal of the Compounds by Recipient and its affiliates and sublicensees, or
from any breach of its obligations under Section 5 of this Agreement.
<PAGE>
8. MISCELLANEOUS: This Agreement shall not be assigned or otherwise
transferred by Recipient without the prior written consent of ArQule. This
Agreement shall be governed by the laws of the Commonwealth of Massachusetts.
This Agreement constitutes the entire understanding of the parties and
supersedes all prior agreements, written or oral, with respect to the subject
matter hereof.
ACCEPTED AND AGREED:
ArQule, Inc.
Signature: /s/ John M. Sorvillo
----------------------------------
Name: John M. Sorvillo, Ph.D.
---------------------------------------
Title: Vice President, Business Development
--------------------------------------
Date: August 23, 1996
---------------------------------------
Address:
ArQule, Inc.
200 Boston Avenue, Suite 3600
Medford, MA 02155
Tel: (800) 644-5000
Fax: (617) 395-1225
RECIPIENT:
Signature: /s/ Michael G. Palfreyman
--------------------------------------
Name: Michael G. Palfreyman, Ph.D., D.Sc.
-------------------------------------------
Title: Vice President of Research & Development
------------------------------------------
Date: August 22, 1996
-------------------------------------------
Shipping Address:
SCRIPTGEN Pharmaceuticals, Inc.
- --------------------------------------
200 Boston Ave. #3000
- --------------------------------------
Medford, MA 02155
- --------------------------------------
Tel: (617) 393-8000
- --------------------------------------
Fax: (617) 396-1028
- --------------------------------------
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part of this
Registration Statement on Form S-1 of our report dated October 31, 1997, except
as to the 1-for-3.07459 reverse stock split discussed in Note 5 and paragraphs
two through five of Note 10, which are as of February 2, 1998, relating to the
financial statements of Scriptgen Pharmaceuticals, Inc., which appears in such
Prospectus. We also consent to the references to us under the headings "Experts"
and "Selected Financial Data" in such Prospectus. However, it should be noted
that Price Waterhouse LLP has not prepared or certified such "Selected Financial
Data."
/s/ Price Waterhouse LLP
Price Waterhouse LLP
Boston, Massachusetts
February 2, 1998
