-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, DpCOGi07UacFTQYylRkb5joCrcgwVNZGSfPuz31Rt1RKJh0dEDK9lPkW9016gote FuxE6I5BsxGW9JKlLaCUWA== 0000950151-97-000204.txt : 19970617 0000950151-97-000204.hdr.sgml : 19970617 ACCESSION NUMBER: 0000950151-97-000204 CONFORMED SUBMISSION TYPE: 10-K405/A PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19961231 FILED AS OF DATE: 19970616 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: TARGETED GENETICS CORP /WA/ CENTRAL INDEX KEY: 0000921114 STANDARD INDUSTRIAL CLASSIFICATION: BIOLOGICAL PRODUCTS (NO DIAGNOSTIC SUBSTANCES) [2836] IRS NUMBER: 911549568 STATE OF INCORPORATION: WA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405/A SEC ACT: SEC FILE NUMBER: 000-23930 FILM NUMBER: 97624162 BUSINESS ADDRESS: STREET 1: 1100 OLIVE WAY STREET 2: STE 100 CITY: SEATTLE STATE: WA ZIP: 98101 BUSINESS PHONE: 2066237612 MAIL ADDRESS: STREET 1: 1100 OLIVE WAY STREET 2: STE 100 CITY: SEATTLE STATE: WA ZIP: 98101 10-K405/A 1 AMMENDMENT 1 TO FORM 10-K405 1 ================================================================================ UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------ FORM 10-K/A (AMENDMENT NO. 1) [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996 COMMISSION FILE NO. 0-23930 TARGETED GENETICS CORPORATION (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) WASHINGTON 91-1549568 (STATE OF INCORPORATION) (IRS EMPLOYER IDENTIFICATION NO.)
1100 OLIVE WAY, SUITE 100 SEATTLE, WA 98101 (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE) Registrant's telephone number, including area code: (206) 623-7612 Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: COMMON STOCK, $.01 PAR VALUE WARRANTS FOR THE PURCHASE OF SHARES OF COMMON STOCK, $.01 PAR VALUE PREFERRED STOCK PURCHASE RIGHTS, $.01 PAR VALUE Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No --- --- Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation SK is not contained herein, and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X] Indicate the aggregate market value of voting stock held by nonaffiliates of the Registrant as of March 3, 1997: $69,785,575. Indicate the number of shares outstanding of each of the Registrant's classes of common stock as of March 3, 1997:
TITLE OF CLASS NUMBER OF SHARES - -------------------------------------------------------------------------------------------- Common Stock, $.01 par value 20,161,434
================================================================================ 2 DOCUMENTS INCORPORATED BY REFERENCE (1) Portions of the Proxy Statement for the Annual Meeting of Shareholders held on May 7, 1997, are incorporated by reference into Part III of the Form 10-K that is amended by this Form 10-K/A. The Form 10-K for the fiscal year ended December 31, 1996 for Targeted Genetics Corporation is hereby amended to file certain exhibits as more fully set forth in Part IV, Item 14 below. 2 3 PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (a) 1. FINANCIAL STATEMENTS. The following Financial Statements are included in Part II, Item 8 of the Form 10-K.
PAGE(S) IN 10-K ---------- Consolidated Balance Sheets at December 31, 1996 and 1995................. 24 Consolidated Statements of Operations for the years ended December 31, 1996, 1995, and 1994 and for the period from March 9, 1989 (date of inception) through December 31, 1996.................................... 25 Consolidated Statements of Shareholders' Equity for the period from March 9, 1989 (date of inception) through December 31, 1996................... 26 - 27 Consolidated Statements of Cash Flows for the years ended December 31, 1996, 1995, and 1994 and for the period from March 9, 1989 (date of inception) through December 31, 1996.................................... 28 Notes to Consolidated Financial Statements................................ 29 - 36 Report of Ernst and Young LLP, Independent Auditors....................... 37
3 4 2. FINANCIAL STATEMENT SCHEDULES All financial statement schedules have been omitted because the required information is either included in the financial statements or the notes thereto or is not applicable. 3. EXHIBITS 2.1 Agreement and Plan of Merger dated as of April 16, 1996, by and among Targeted Genetics Corporation, TGC Acquisition Corporation and RGene Therapeutics, Inc. (Exhibit 2.1) (E) 3.1 Amended and Restated Articles of Incorporation (Exhibit 3.1) (I) 3.2 Amended and Restated Bylaws (Exhibit 3.2) (I) 4.1 Warrant to Purchase 11,000 shares of the Common Stock of Targeted Genetics Corporation, issued to MMC/GATX Partnership No. 1 on December 27, 1993, as amended (D) 4.2 Warrant to Purchase 11,000 shares of the Common Stock of Targeted Genetics Corporation, issued to LINC Capital Management, Ltd. on December 27, 1993 (Exhibit 4.3) (A) 4.3 Warrant to Purchase 18,701 shares of the Common Stock of Targeted Genetics Corporation, issued to MMC/GATX Partnership No. 1 on November 30, 1994 (Exhibit 4.3) (B) 4.4 Warrant Agreement between Targeted Genetics Corporation and First Interstate Bank of Washington, N.A., as Warrant Agent (D) 4.5 Specimen Warrant Certificate (Exhibit 4.5) (C) 4.6 Warrant to Purchase 21,315 shares of the common stock of Targeted Genetics Corporation, issued to Financing for Science International, Inc. on November 30, 1995 (D) 4.7 Rights Agreement, dated as of October 17, 1996, between Targeted Genetics Corporation and ChaseMellon Shareholder Services (H) 10.1 Form of Indemnification Agreement between the registrant and its officers and directors (Exhibit 10.6) (A) 10.2 Form of Senior Management Employment Agreement between the registrant and its executive officers (Exhibit 10.2) (I) 10.3 Non-exclusive License Agreement, dated as of November 19, 1991, between the Fred Hutchinson Cancer Research Center and Immunex Corporation* (Exhibit 10.7) (A) 10.4 Gene Transfer Technology License Agreement, dates as of February 18, 1992, between Immunex Corporation and Targeted Genetics Corporation* (Exhibit 10.8) (A) 10.5 License Agreement, dated as of June 1, 1992, between Wisconsin Alumni Research Foundation and Targeted Genetics Corporation* (Exhibit 10.9) (A) 10.6 License Agreement, dated as of August 14, 1992, between Leland Stanford Junior University and Targeted Genetics Corporation* (Exhibit 10.10) (A) 10.7 PHS Patent License Agreement -- Non-exclusive, dated as of July 13, 1993, between National Institutes of Health Centers for Disease Control and Targeted Genetics Corporation* (Exhibit 10.13) (A) 10.8 Non-exclusive Patent License Agreement, dated as of December 25, 1993, between The University of Florida Research Foundation, Inc. and Targeted Genetics Corporation* (Exhibit 10.14) (A)
4 5 10.9 Research and Exclusive License Agreement, dated as of January 1, 1994, between Targeted Genetics Corporation and the Fred Hutchinson Cancer Research Center* (Exhibit 10.19) (A) 10.10 PHS Patent License Agreement -- Exclusive, dated as of March 10, 1994, between National Institutes of Health Centers for Disease Control and Targeted Genetics Corporation* (Exhibit 10.15) (A) 10.11 Exclusive License Agreement, dated as of March 14, 1994, between Medical College of Ohio and Targeted Genetics Corporation* (Exhibit 10.16) (A) 10.12 License Agreement, dated as of March 16, 1994, between the Johns Hopkins University and Targeted Genetics Corporation* (Exhibit 10.17) (A) 10.13 License Agreement, dated as of March 28, 1994, between Targeted Genetics Corporation and the University of Michigan* (Exhibit 10.18) (A) 10.14 Exclusive License Agreement dated as of March 28, 1994, between the Fred Hutchinson Cancer Research Center and Targeted Genetics Corporation* (Exhibit 10.20) (A) 10.15 Exclusive License Agreement, dated as of August 25, 1994, between Targeted Genetics Corporation and the Fred Hutchinson Cancer Research Center* (Exhibit 10.20) (B) 10.16 Development Agreement dated April 6, 1994, by and between Argus Pharmaceuticals, Inc. and RGene Therapeutics, Inc.* (Exhibit 10.28) (F) 10.17 Patent and Technology License Agreement effective as of March 1, 1994, by and among the Board of Regents of the University of Texas M.D. Anderson Cancer Center and RGene Therapeutics, Inc.* (Exhibit 10.29) (F) 10.18 First Amended and Restated License Agreement effective October 12, 1995 between The University of Tennessee Research Corporation and RGene Therapeutics, Inc.* (Exhibit 10.30) (F) 10.19 Amendment to the First Amended and Restated License Agreement, between The University of Tennessee Research Corporation and RGene Therapeutics, Inc., dated as of June 19, 1996* (Exhibit 10.1) (G) 10.20 Exclusive Sublicense Agreement effective July 23, 1996 by and between Alkermes, Inc. and Targeted Genetics Corporation* 10.21 Revised License Agreement effective October 1, 1996, by and between the University of Pittsburgh -- of the Commonwealth System of Higher Education and Targeted Genetics Corporation* 10.22 Agreement dated as of May 28, 1996 by and between RGene Therapeutics, Inc. and Laboratoires Fournier S.C.A.* (Exhibit 10.32) (F) 10.23 Olive Way Building Lease, dated as of November 20, 1993, between Metropolitan Federal Savings and Loan Association and Targeted Genetics Corporation (Exhibit 10.21) (A) 10.24 First Amendment to Olive Way Building Lease, dated as of December 10, 1994, between Targeted Genetics Corporation and Metropolitan Federal Savings and Loan Association (Exhibit 10.22) (B) 10.25 Second Amendment to Olive Way Building Lease, dated as of June 12, 1996, between Targeted Genetics Corporation and Ironwood Apartments, Inc. (successor in interest to Metropolitan Federal Savings and Loan Association) (Exhibit 10.25) (I) 10.26 Office Lease, dated as of October 7, 1996, by and between Benaroya Capital Company, LLC and Targeted Genetics Corporation (Exhibit 10.26) (I)
5 6 10.27 MMC/GATX Partnership No. 1 Equipment Lease Agreement, dated as of December 27, 1993 (Exhibit 10.22) (A) 10.28 LINC Capital Management, Ltd. Equipment Lease Agreement, dated as of December 27, 1993 (Exhibit 10.23) (A) 10.29 Loan and Security Agreement, dated as of November 30, 1994, between MMC/GATX Partnership No. 1 and Targeted Genetics Corporation (Exhibit 10.25) (B) 10.30 Master Equipment Lease Agreement, dated as of October 17, 1995, between Financing for Science International, Inc. and Targeted Genetics Corporation (D) 10.31 Registration Rights Agreement dated as of April 27, 1992, among Targeted Genetics Corporation and the holders of Series A and Series B Convertible Preferred Stock (Exhibit 10.26) (A) 10.32 1992 Restated Stock Option Plan (Exhibit 10.32) (I) 10.33 Stock Option Plan for Nonemployee Directors (Exhibit 10.33) (I) 11.1 Computation of net loss per share (Exhibit 11.1) (I) 23.1 Consent of Ernst & Young LLP (Exhibit 23.1) (I) 27.1 Financial Data Schedule (Exhibit 27.1) (I)
- --------------- * Confidential treatment has been granted by or requested from the Securities and Exchange Commission for portions of these exhibits. (A) Incorporated by reference to the designated exhibit included with the Company's Form S-1 Registration Statement (No. 33-77054) filed on March 30, 1994, as amended. (B) Incorporated by reference to the designated exhibit included with the Company's Annual Report on Form 10-K for the year ended December 31, 1994. (C) Incorporated by reference to the designated exhibit included with the Company's Form S-1 Registration Statement (No. 33-91500) filed on April 24, 1995, as amended. (D) Incorporated by reference to the designated exhibit included with the Company's Annual Report on Form 10-K for the year ended December 31, 1995. (E) Incorporated by reference to the designated exhibit included with the Company's Form 8-K filed April 16, 1996. (F) Incorporated by reference to the designated exhibit included with the Company's Form S-1 Registration Statement (No. 333-03592) filed on April 16, 1996, as amended. (G) Incorporated by reference to the designated exhibit included with the Company's Quarterly Report on Form 10-Q for the period ended June 30, 1996. (H) Incorporated by reference to the designated exhibit included with the Company's Form 8-A filed October 22, 1996. (I) Incorporated by reference to the designated exhibit included with the Company's Annual Report on Form 10-K for the year ended December 31, 1996. (b) REPORTS ON FORM 8-K A Current Report on Form 8-K dated October 18, 1996 was filed with the Securities and Exchange Commission reporting that Targeted Genetics Corporation had adopted a Shareholder Rights Agreement. 6 7 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. TARGETED GENETICS CORPORATION By: /s/ JAMES A. JOHNSON Date: June 13, 1997 ------------------------------------- James A. Johnson, Vice President, Finance, Chief Financial Officer, Treasurer and Secretary
7 EX-10.20 2 REVISED LICENSE AGREEMENT EFFECTIVE OCT. 1 1996 1 =========================== REDACTED VERSION =========================== EXHIBIT 10.20 To Targeted Genetics Corporation's Form 10-K For the Year Ended December 31, 1996 "[ * ]" = omitted, confidential material, which material has been separately filed with the Securities and Exchange Commission pursuant to a request for confidential treatment. 101 2 EXHIBIT 10.20 EXCLUSIVE SUBLICENSE AGREEMENT THIS AGREEMENT is made and entered into this 23rd day of July 1996 ("Effective Date") by and between: Alkermes, Inc., 64 Sidney Street, Cambridge, MA 02139, (hereinafter referred to together with its subsidiaries and affiliated companies as "LICENSOR" ) and Targeted Genetics Corporation, 1100 Olive Way, Suite 100, Seattle, Washington 98101, (hereinafter referred to together with its subsidiaries and affiliated companies as "LICENSEE"). WHEREAS, LICENSOR is the exclusive licensee from the Children's Hospital Research Foundation/Children's Hospital, Inc. of certain "Licensed Patent Rights" and "Licensed Materials" relating to Adeno-Associated Virus (AAV) packaging cell lines invented by Dr. Philip R. Johnson and has the right to grant sublicenses under Licensed Patent Rights and to Licensed Materials. WHEREAS, LICENSEE desires to obtain certain sublicensing rights under the Licensed Patent Rights and to the Licensed Materials upon the terms and conditions hereinafter set forth; NOW, THEREFORE, in consideration of the premises and the mutual covenants contained herein the parties hereto agree as follows: ARTICLE I DEFINITIONS 1.1 "LICENSEE" shall include the following: (a) a related company of LICENSEE, the voting stock of which is directly or indirectly at least fifty percent (50%) owned or controlled by LICENSEE; (b) an organization which directly or indirectly owns or controls more than fifty percent (50%) of the voting stock of LICENSEE; (c) an organization, the majority ownership of which is directly or indirectly common to the majority ownership of LICENSEE. 1.2 "Licensed Patent Rights", as used herein, shall mean all of the following: (a) U.S. Patent Application Serial No. 08/254,358, filed June 6, 1994, and Serial No. 08/475,391, filed June 7, 1995, "Adeno-Associated Virus Materials", invented by Philip R. Johnson. 102 3 (b) to the extent that the following contain one or more claims to the invention or inventions claimed in (a) above: divisions, continuations and continuations-in-part of (a) above, all divisions and continuations of these continuations-in-part, divisions and continuations, and any reissues, extensions or reexaminations of the foregoing patents; (c) to the extent that the following contain one or more claims to the invention or inventions claimed in (a) above: all counterpart foreign applications and patents to (a) and (b) above; (d) any other patent applications, including divisions, continuations, continuations-in-part, reissues, extensions, reexaminations and counterpart foreign applications thereof, that contain one or more claims to the invention or inventions claimed in (a) above or any improvements to such invention or inventions; and (e) any patents issuing in respect of any of the applications, divisions, continuations, continuations-in-part, reissues, extensions, reexaminations and counterpart foreign applications referenced in clauses (a), (b), (c) and (d) above. 1.3 "Licensed Materials", as used herein, shall mean the C12 adeno-associated virus packaging cell line developed by the Children's Hospital Research Foundation/Children's Hospital, Inc. and any improvements thereto. 1.4 "Licensed Product(s)", as used herein, shall mean any product which cannot be manufactured, used or sold without utilizing Licensed Materials or which, in the course of manufacture, use or sale would, in the absence of this Agreement, infringe one or more issued claims of the Licensed Patent Rights that have not been held invalid or unenforceable by an unappealed or unappealable judgement of a court of competent jurisdiction or expired. 1.5 "Net Sales" shall mean revenue received by LICENSEE from sales of Licensed Products by LICENSEE, its sublicensee(s) or agent(s) less the sum of the following: (a) discounts allowed in amounts customary in the trade, (b) sales taxes, tariff duties, and/or use taxes which are directly imposed and are with reference to particular sales; (c) outbound transportation prepaid or allowed; 103 4 (d) amounts allowed or credited on returns; and (e) charges deemed uncollectible under generally accepted accounting principles. 1.6 "Field of Use" shall mean the following: Treatment and prevention of pulmonary diseases. 1.7 "Optioned Field(s) of Use" shall mean the following: Optioned Field 1. Treatment and prevention of infectious diseases. Optioned Field 2. Treatment of benign or malignant tumors. Optioned Field 3. Treatment and prevention of cardiovascular disorders. Optioned Field 4. Treatment and prevention of metabolic/endocrinology disorders (e.g., Gaucher disease). Optioned Field 5. Treatment and prevention of hematopoietic/immune disorders. Optioned Field 6. Systemic and mucosal delivery of secreted proteins. Optioned Field 7. Treatment and prevention of gastrointestinal diseases. ARTICLE II GRANT 2.1 LICENSOR hereby grants to LICENSEE a worldwide exclusive sublicense under Licensed Patent Rights and to Licensed Materials to make, have made, use, lease, have sold and sell Licensed Products in the Field of Use. 2.2 LICENSOR hereby grants to LICENSEE under Licensed Patent Rights and to Licensed Materials the exclusive right to grant one or more sublicenses to its rights to make, have made, use, lease, have sold and sell Licensed Products in the Field of Use. 104 5 * Confidential Treatment Requested 2.3 LICENSOR reserves unto itself the personal, non-transferable right to make, have made, and use Licensed Product(s) and Licensed Material in the Field of Use for internal research purposes only, and for no other purpose in the Field of Use. 2.4 LICENSEE hereby agrees grants to LICENSOR an exclusive, worldwide royalty-free license to make, have made, use and sell products under any patent rights owned by LICENSEE for improvements on the C12 cell line in the field of nervous system diseases including, without limitation, brain cancers. ARTICLE III COMPENSATION-ROYALTIES 3.1 For the rights, privileges and license granted hereunder, LICENSEE shall pay royalties to LICENSOR in the manner hereinafter provided to the end of the term of the Licensed Patent Rights on a country-by-country basis or until this Agreement shall be terminated as hereinafter provided, whichever occurs first. LICENSEE agrees to pay to LICENSOR a royalty of [ * ] on the amount of annual Net Sales of Licensed Products that are less than or equal to [ * ] and a royalty of [ * ] on the amount of annual Net Sales of Licensed Products that exceed [ * ]. For sales in any country in which no Licensed Patent Rights exist, such royalty shall be reduced [ * ] on the amount of annual Net Sales of Licensed Products incorporating, based upon or made by employing the Licensed Material or the technology described in the Licensed Patent Rights. 3.2 Notwithstanding the foregoing, if LICENSEE is required to pay royalties to an unaffiliated third party(ies) for sales of Licensed Products for which payments are also due to LICENSOR ("Third Party Royalties"), then the royalties to be paid by LICENSEE to LICENSOR shall be reduced by the amount that the sum of the LICENSOR's royalty percentage and Third Party royalty percentage are in excess of [ * ] of Net Sales of Licensed Products, but in no event shall the LICENSOR'S royalty percentage be reduced to less than [ * ]. 3.3 No multiple royalties shall be payable because any Licensed Product, its manufacture, use, lease or sale are or shall be covered by multiple claims or more than one Licensed Patent Right licensed under this Agreement. * Confidential Treatment Requested 105 6 * Confidential Treatment Requested 3.4 In addition to royalties, LICENSEE agrees to pay LICENSOR the following sums within thirty (30) days of the time that each of the milestones listed below: (a) The sum of [ * ] upon execution of this Agreement and [ * ] payable one (1) year from the Effective Date; (b) The sum of [ * ] for the first Phase I clinical trial, or equivalent in a foreign country, initiated by LICENSEE or one of its sublicensees for a Licensed Product; (c) The sum of [ * ] for the first Phase II clinical trial, or equivalent in a foreign country, initiated by LICENSEE or one of its sublicensees for a Licensed Product (Phase I/II or equivalent in a foreign country will be considered a Phase I trial); (d) The sum of [ * ] for the first Phase III clinical trial, or equivalent in a foreign country, initiated by LICENSEE or one of its sublicensees for a Licensed Product for which a Phase II clinical trial was initiated and, consequently, a milestone payment was made to LICENSOR pursuant to paragraph 3.4(c); (e) The sum of [ * ] for the first Phase III clinical trial, or equivalent in a foreign country, initiated by LICENSEE or one of its sublicensees for a Licensed Product for which no Phase II clinical trial was initiated and, consequently, no milestone payment was made to LICENSOR pursuant to paragraph 3.4(c); and (f) The sum of [ * ] for the first Product Licensing Application, or equivalent in a foreign country, approved for LICENSEE's or one of its sublicensee's Licensed Product. 3.5 Royalty payments made pursuant to Paragraph 3.1, supra, shall be made quarterly for the three (3) month periods ending March 31, June 30, September 30 and December 31 of each calendar year and shall be due and payable within 45 days of the termination of each calendar half year--i.e., such payments shall be due or payable on or before May 15, August 14, November 15 and February 14 in each calendar year. * Confidential Treatment Requested 106 7 *Confidential Treatment Requested 3.6 All monies due to LICENSOR hereunder shall be paid in United States dollars. LICENSEE shall be responsible for making the payment to the LICENSOR. The rate of exchange to be used in computing the amount of currency equivalent to United States dollars due to LICENSOR shall be made at the rate of exchange at Chase Manhattan Bank for the three (3) month trailing average for the calendar quarter for which payment is due. 3.7 If LICENSEE grants a sublicense to the Licensed Patent Rights or the Licensed Materials to a third party, for value other than royalties based on sales of Licensed Products, LICENSEE shall pay LICENSOR [ * ] of all proceeds paid to LICENSEE in consideration for such grant of a sublicense, including any premium paid over the market value of the LICENSEE's common stock by a sublicensee in connection with an equity purchase, but excluding such royalties paid to LICENSEE in connection therewith, up to a maximum of [ * ] per year in the year that such proceeds are paid to LICENSEE ("Non-Royalty Fees"). Any such payment shall be made within thirty (30) days after receipt of such Non-Royalty Fees by LICENSEE. Notwithstanding the foregoing, in no event shall LICENSEE: a) be obligated to pay LICENSOR a share of any proceeds that LICENSEE receives from a third party as research and development funding, milestone payments, or equity purchase, other than any premium paid on an equity purchase; or b) enter into a paid-up sublicense to Licensed Patent Rights or Licensed Materials with a third party without the written consent of LICENSOR. 3.8 In the event that LICENSEE transfers or otherwise sublicenses Licensed Patent Rights or Licensed Materials to a third party in combination with patent(s) and/or other right(s) of a third party(ies) and LICENSEE is due and receives Non-Royalty Fees, then LICENSEE shall pay LICENSOR an equitable portion of such Non-Royalty Fees as determined by the good faith negotiations of LICENSEE and LICENSOR. ARTICLE IV LICENSE OPTION 4.1 LICENSOR hereby grants to LICENSEE an exclusive right of first negotiation to sublicense on an exclusive basis the Licensed Patent Rights and the Licensed Materials for one or more of the Optioned Fields of Use ("License Option"). Upon written notification by LICENSEE to LICENSOR of an intent to acquire exclusive rights to an Optioned Field(s) * Confidential Treatment Requested 107 8 * Confidential Treatment Requested of Use, LICENSOR shall negotiate with LICENSEE in good faith to reach agreement on commercially reasonable terms for a sublicense to such Optioned Field(s) of Use. Upon notification to LICENSOR by a third party of an intent to acquire license rights to an optioned Field of Use, LICENSOR shall provide LICENSEE written notification of such notice, and LICENSEE, at its own discretion, shall have the option to negotiate with LICENSOR in good faith for a period of at least sixty (60) days from the date of such notification ("Option Period") to reach agreement on commercially reasonable terms for a sublicense to LICENSEE to such Optioned Field(s) of Use. If LICENSEE elects not to negotiate, or if the parties do not reach agreement during the Option Period, then LICENSOR may grant a sublicense in respect of such Optioned Field(s) of Use to the Third Party on terms that are no more favorable than those that were last offered by LICENSOR to LICENSEE during the Option Period. The License Option shall expire one (1) year from the Effective Date and may be renewed at LICENSEE's sole discretion for subsequent one (1) year periods at the rate of [ * ] per year, reduced pro rata in proportion to the number of Optioned Fields of Use which have previously been sublicensed either to LICENSEE or to third parties. ARTICLE V RECORD KEEPING AND REPORTS 5.1 LICENSEE agrees to keep accurate records in sufficient detail to enable the royalties payable by LICENSEE to LICENSOR hereunder to be determined, and agrees to permit said records to be examined from time to time during the life of this Agreement, and for one (1) year after the expiration and termination of this Agreement, at reasonable intervals (but not more than once per calendar year) by an independent auditor mutually agreeable to the parties, during normal business hours, and to the extent necessary to verify the reports and payments required hereunder. Such auditor shall only disclose to LICENSOR whether or not royalties payable hereunder have been accurately computed and paid, and no other information. In the event any such audit reveals an underpayment, LICENSEE shall promptly remit the deficiency to LICENSOR. In the event any such audit reveals an overpayment, the excess shall be credited against any future payments due to LICENSOR hereunder. 5.2 LICENSEE agrees to furnish LICENSOR with written Reports within two (2) months of the termination of each calendar quarter (i.e., such written Reports shall be due as in Paragraph 3.3 supra) setting forth separately by model number or other identifying * Confidential Treatment Requested 108 9 designation, the total number of Licensed Products theretofore made and sold hereunder during the preceding calendar quarter and the royalties due thereon. Each such Report shall be accompanied by a copy of any sub-sublicensee's Report received subsequent to LlCENSEE's prior Report and prior to LlCENSEE's current Report. 5.3 LICENSOR shall maintain in confidence, and shall not disclose to any third party or use for any purpose not expressly authorized by this Agreement, all information provided to LICENSOR and/or its auditor pursuant to this Article V and to Article VII. LICENSOR shall obtain written agreement from LICENSOR's auditor who shall inspect LICENSEE's records pursuant to Article 5.1, for LICENSEE's benefit, to be bound by the foregoing confidentiality obligation. Such confidentiality obligation shall survive any termination or expiration of this Agreement. Notwithstanding the foregoing, the confidentiality obligation shall not extend to the disclosure of data, documents or information to judicial, governmental or other official agencies, or in accordance with common practice, to the extent that such disclosure is required by any applicable securities laws or self regulatory agencies. ARTICLE VI PATENT RIGHTS 6.1 LICENSOR shall, in the first instance, have the sole and exclusive right to file any and all patent applications, both foreign and domestic, falling within the scope of this Agreement; and LICENSOR shall be responsible for all costs, fees and expenses incurred in connection with the filing, prosecution and maintenance of any such patent application and the maintenance of any patent issuing thereon. Any such patent shall be included within this Agreement as part of the Licensed Patent Rights. 6.2 LICENSOR shall notify LICENSEE of the issuance of any Licensed Patent Rights, and any expiration, lapse, revocation, surrender, invalidation or abandonment of any Licensed Patent Rights. 6.3 If, at any time during the term of this Agreement, LICENSOR elects not to file a patent application or to abandon any pending patent application or any patent issued thereon, either foreign or domestic, it shall notify LICENSEE of that decision at least two (2) months prior to any deadline for filing any response or taking any other action necessary to file or maintain any such application and/or patent in existence; and, thereafter, LICENSEE shall have the right and option to participate, together with other licensees to such patent application or issued patent, in the filing or prosecution of any such patent application and/or the maintenance of any such patent, at LICENSEE's expense; and, any patent issuing therefrom shall be exclusively licensed to LICENSEE in the Field of Use and any Optioned Fields of Use as to which LICENSEE has exercised its option pursuant to Article IV on a royalty-free basis. 109 10 ARTICLE VII DUE DILIGENCE 7.1 LICENSEE, during the entire term of this Agreement, shall utilize commercially reasonable efforts in proceeding with the development, manufacture, sale and commercial exploitation of Licensed Product(s), and in creating a supply and demand for same; provided, however, that LICENSEE shall be entitled to exercise prudent business judgment in meeting its reasonable diligence obligations hereunder. 7.2 LICENSEE agrees to keep LICENSOR informed of its progress on the commercial exploitation of Licensed Product(s) hereunder by annual reports due within sixty (60) days following the end of each calendar year. ARTICLE VIII PATENT MARKING 8.1 LICENSEE shall mark, and shall require its sub-licensee(s) to mark, each Licensed Product made and sold by it or by them with an appropriate patent marking identifying the pendency of any U.S. application and/or any issued U.S. or foreign patent forming any part of Licensed Patent Rights. ARTICLE IX TERM AND TERMINATION 9.1 This Agreement, and the rights, privileges and license granted herein, shall be in force from the Effective Date hereof and shall remain in full force and effect thereafter until the last to expire of Licensed Patent Rights unless sooner terminated in accordance with the provision set forth herein below. It is, however, understood by the parties hereto that LlCENSEE's obligation to pay royalties to LICENSOR under this Agreement shall terminate in the event of a judicial determination that no portion of such Licensed Patent Rights are valid, infringed and/or enforceable by a decision of a tribunal of competent authority where such decision is final or by lapse of time becomes final and unappealable. 9.2 LICENSEE may terminate this Agreement and concomitant future obligations upon thirty (30) days written notice to LICENSOR. 9.3 If LICENSEE shall cease to carry on its business, this Agreement shall terminate upon notice by LICENSOR. 9.4 Should LICENSEE fail to make any payment whatsoever due and payable to LICENSOR hereunder, LICENSOR shall have the right to terminate this Agreement effective on thirty (30) days notice, unless LICENSEE shall make all such payments to LICENSOR within said thirty (30) day period. Upon the expiration of the thirty (30) day 110 11 period, if LICENSEE shall not have made all such payments to LICENSOR, the rights, privileges and license granted hereunder shall automatically terminate. 9.5 Upon any material breach or default of this Agreement by LICENSEE other than those occurrences set out in Articles 9.3 and 9.4 hereinabove, LICENSOR shall have the right to terminate this Agreement and the rights, privileges and license granted hereunder effective on sixty (60) days notice to LICENSEE. Such termination shall become automatically effective unless LICENSEE shall have cured any such material breach or default prior to the expiration of the sixty (60) day period. In the event that LICENSOR asserts a breach of this Agreement under Article 7.1, this Agreement shall remain in full force and effect until the matter is resolved by the parties themselves or under arbitration as provided for under Article 18. ARTICLE X DISPOSITION OF LICENSED PRODUCTS ON HAND UPON TERMINATION 10.1 In the event of any termination of this Agreement, LICENSEE and its sub-licensees shall have the right to use or sell all the Licensed Products on hand at the time of such termination, provided that LICENSEE shall be obligated to pay to the LICENSOR a royalty on such sales as set forth in this Agreement if, at that time, there remains in existence any of Licensed Patent Rights covering the manufacture, use or sale of such Licensed Product(s). ARTICLE XI PATENT ENFORCEMENT 11.1 If LICENSEE shall have supplied LICENSOR with written evidence demonstrating infringement of the Licensed Patent Rights by a third party, LICENSEE may, by written notice, request LICENSOR to take steps to assert such Licensed Patent Rights against such infringing product. LICENSOR shall within six (6) months of the receipt of such notice either (a) cause such infringement to terminate or (b) initiate and continue legal proceedings against the infringer, or pursue other equivalent legal or patent remedies. If LICENSOR fails to take either of the actions specified in clause (a) or (b) above, LICENSEE may, upon notice to LICENSOR, discontinue making royalty payments to LICENSOR that are due hereunder, and have further royalty payments waived by LICENSOR until LICENSOR in good faith takes and continues such action, at which time only future royalties shall be due. Notwithstanding the foregoing, if the infringement ceases at any time, TGC's obligations shall continue at full force from the time that infringement ceases. 11.2 In the event LICENSOR fails to terminate the infringement within the six (6) months of written notification from LICENSEE informing LICENSOR of an alleged infringement, and does not institute litigation against the infringer for that purpose within such period, then LICENSEE shall have the right to bring an action against the infringer for 111 12 that purpose. LICENSOR shall cooperate fully with LICENSEE, at LICENSEE's expense, in connection with any such action. Such cooperation shall include (without limitation) LICENSOR's permitting LICENSEE to bring the action in LICENSOR's name and LICENSOR's executing any consents or assignments necessary or useful to permit LICENSEE to enforce the Licensed Patent Rights against the infringer. LICENSEE shall be entitled to deduct all expenses incurred by it in connection with any such action from the royalties and other amounts that would otherwise be payable to LICENSOR hereunder; provided that to the extent any amounts are finally awarded to LICENSEE in such action or are paid to LICENSEE in settlement thereof, such amounts shall be paid over to LICENSOR until all amounts so withheld have been repaid. Any amounts so awarded or paid in settlement in excess of the amounts so withheld shall be retained by LICENSEE. ARTICLE XII PUBLICITY 12.1 The parties agree that neither party will use the name of the other party, or any abbreviation thereof, expressly or by implication, or disclose the existence or nature of this Agreement, in any news, publicity release, advertisement or other public disclosure, without the express prior written approval of the other party. Notwithstanding the foregoing, each party hereby consent to references to it (1) in such reports or documents sent to stockholders or filed with or submitted to any governmental regulatory agencies or bodies or stock exchanges or as may be required to obtain investment capital, or (2) pursuant to any requirements of applicable law or governmental regulations, provided that, in the event of any such disclosure, the party making such disclosure shall afford the other party the prior opportunity to review the text of such disclosure, the other party shall promptly respond to the disclosing party, and the disclosing party shall use its best efforts to comply with any reasonable requests by the other party regarding changes. ARTICLE XIII WAIVER 13.1 No omission or delay of either party hereto in requiring due and punctual fulfillment of the obligations of the other party hereto shall be deemed to constitute a waiver by such party of its rights to require such due and punctual fulfillment, or of any other of its remedies hereunder. ARTICLE XIV WARRANTIES 14.1 LICENSOR warrants that it has the lawful right to grant the sublicense set forth herein. LICENSOR furthers represents and warrants to LICENSEE that, to the best of its knowledge, it is the exclusive licensee of the Children's Hospital Research Foundation/Children's Hospital, Inc. in respect of the Licensed Patent Rights and the Licensed Materials in all fields and that neither LICENSOR nor to the best of LICENSOR's knowledge, the Children's Hospital Research 112 13 Foundation/Children's Hospital, Inc. has granted any licenses, sublicenses, or other rights in respect of the Licensed Patent Rights or the Licensed Materials in the Field of Use or any Optioned Field of Use. 14.2 LICENSOR makes no express or implied warranties of merchantability or fitness of the Licensed Products for any particular purpose. 14.3 Nothing in this Agreement shall be construed as: i) a warranty or representation by the LICENSOR as to the patentability, validity or scope of any of the Licensed Patent Rights; ii) except as provided in Section 14.1, a warranty or representation that anything made, used, sold or otherwise disposed of under any license granted in this Agreement is or will be free from infringement of patents or proprietary rights of third parties; or, iii) an obligation to bring or prosecute actions or suits against third parties for infringement. ARTICLE XV SUCCESSION AND ASSIGNABILITY 15.1 This Agreement and the rights and benefits conferred upon LICENSEE hereunder may not be assigned nor transferred by LICENSEE without the prior written consent of LICENSOR, except in the event of sale of all or a portion of the business of LICENSEE, in which event LICENSEE, upon written notification to LICENSOR, may assign this Agreement to a wholly owned subsidiary or to a purchaser of substantially all of its assets relating to the subject matter of the Agreement. 15.2 This Agreement shall be binding upon and inure to the benefit of the successors, representatives and assigns of the parties hereto. ARTICLE XVI INDEMNITY 16.1 LICENSEE agrees to indemnify, hold harmless and defend LICENSOR, its officers, employees and agents, against any and all claims, suits, losses, damages, costs, fees and expenses, including reasonable attorney's fees, resulting from or arising out of LICENSEE's 113 14 exercise of its rights granted under this Agreement including, but not limited to, product liability, any damages, losses or liabilities whatsoever with respect to death or injury to any person and damage to any property arising from the production, manufacture, sale, lease, consumption, advertisement, possession, use or operation of Licensed Products by LICENSEE or its sub-licensees or their customers in any manner whatsoever. 16.2 LICENSOR agrees to indemnify, hold harmless and defend LICENSEE and its officers, employees and agents against any and all claims, suits, losses, damages, costs, fees and expenses (including attorneys' fees) resulting from or arising out of LICENSOR's grant of the sublicense granted under this Agreement including, but not limited to, any amounts payable by LICENSOR to its licensor(s) of the Licensed Patent Rights or the Licensed Materials or other persons or entities having rights in respect of the Licensed Patent Rights or the Licensed Materials. 16.3 In the event of any claim for which indemnification will be sought pursuant to Section 16.1 or 16.2, the indemnified party will give the indemnifying party prompt written notice of such claim. The indemnifying party shall have the sole right to control the defense and settlement of any such claim and shall not be liable for any settlement that the indemnifying party does not approve in writing in advance. The indemnified party will cooperate fully with the indemnifying party, at the indemnifying party's expense, in connection with the defense and settlement of any such claim. 16.4 Prior to entering clinical trials, LICENSEE further agrees to obtain and maintain in force a comprehensive or commercial form general liability insurance policy supporting its obligations under Article 16.1. This insurance shall provide LICENSOR with insurance coverage that is commensurate with the insurance coverage that LICENSOR would have otherwise been provided had the LICENSOR been named as additional insured on the LICENSEE's comprehensive general liability insurance, and provide for prior notice to LICENSOR before cancellation. The limits of such insurance shall be commercially reasonable amounts for personal injury or death, and for property damage. Upon request, LICENSEE shall provide LICENSOR with Certificates of Insurance evidencing the same. ARTICLE XVII NOTICES 17.1 Any payment, notice or other communication required or permitted to be given by either party hereto shall be deemed to have been properly given and be effective on the date of delivery if delivered, in writing, in person, by facsimile, by overnight mail or by first class certified mail with postage prepaid and return receipt requested to the respective addresses set forth below, or to such other address as either party shall designate by written notice given to the other party: In the case of LICENSOR: 114 15 Alkermes, Inc. Chief Financial Officer 64 Sidney Street Cambridge, MA 02139 In the case of LICENSEE: President, Targeted Genetics Corporation 1100 Olive Way, Suite 100 Seattle, WA 98101 ARTICLE XVIII ARBITRATION; APPLICABLE LAW 18.1 All disputes that may arise, including, but not limited to, disputes arising under Article 7.1, in connection with this agreement and that are not resolved by the parties themselves shall be submitted to binding arbitration under the commercial rules and regulations then obtaining of the American Arbitration Association relating to voluntary arbitrations. All costs of arbitration shall be divided equally between the parties. The award shall be binding and conclusive on each of the parties, and it may be enforced by the party in whose favor it runs in any court of competent jurisdiction at the option of the successful party. 18.2 In the event of any arbitration as provided in Section 18.1, (i) venue for the arbitration shall lie exclusively in the state and county of the principal executive offices of the party against whom the arbitration is initiated, and (ii) the law governing this Agreement for purposes of the arbitration shall be the law of the state of the principal executive offices of the party against whom the arbitration is initiated. ARTICLE XIX MISCELLANEOUS 19.1 The headings of the several sections of this Agreement are inserted for convenience and reference only; and, are not intended to be a part of or to affect the meaning or interpretation of this Agreement. 19.2 This Agreement will not be binding upon the parties until it has been signed by, or on behalf of, each party, in which event it shall be effective as of the Effective Date. 19.3 No amendment or modification hereof shall be valid or binding upon the parties unless made in writing and signed as aforesaid. 115 16 19.4 This Agreement embodies the entire understanding of the parties and supersedes all previous communications, representations or understandings, either oral or written, between the parties relating to the subject matter hereof. 19.5 If any provision, or provisions, of this Agreement shall be held to be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not be in any way affected or impaired thereby. 19.6 In witness whereof, both the LICENSOR and LICENSEE have executed this Agreement, in duplicate originals but collectively evidencing only a single contract, by their respective officers hereunto duly authorized, on the day and year hereinafter written. IN WITNESS WHEREOF, the parties have executed this Agreement through duly authorized representatives as of the date first above written. ALKERMES, INC. By: /s/ Michael Landine --------------------------------------------------- Title: Sr. Vice President and Chief Financial Officer TARGETED GENETICS CORPORATION By: /s/ H. Stewart Parker --------------------------------------------------- Title: President and CEO 116 EX-10.20 3 REVISED LICENSE AGREEMENT EFFECTIVE OCTOBER 1 '96 1 =========================== REDACTED VERSION =========================== EXHIBIT 10.21 To Targeted Genetics Corporation's Form 10-K For the Year Ended December 31, 1996 "[ * ]" = omitted, confidential material, which material has been separately filed with the Securities and Exchange Commission pursuant to a request for confidential treatment. 117 2 EXHIBIT 10.21 REVISED LICENSE AGREEMENT This Agreement is made and entered into this 1st day of October, 1996, (Effective Date) by and between the UNIVERSITY OF PITTSBURGH - OF THE COMMONWEALTH SYSTEM OF HIGHER EDUCATION, a non-profit corporation, organized and existing under the laws of the Commonwealth of Pennsylvania, having its principal office at 4200 Fifth Avenue, Pittsburgh, PA 15260 (UNIVERSITY) and TARGETED GENETICS CORPORATION, 1100 Olive Way, Suite 100, Seattle, Washington 98101 (LICENSEE). WHEREAS, UNIVERSITY and RGene Therapeutics, Inc. entered into a License Agreement dated October 12, 1994 (1994 LICENSE AGREEMENT) for certain intellectual property rights; WHEREAS, RGene Therapeutics, Inc. is now merged into a wholly owned subsidiary of LICENSEE; WHEREAS, UNIVERSITY and LICENSEE are desirous of revising the 1994 LICENSE AGREEMENT; WHEREAS, UNIVERSITY is the owner of certain intellectual property relating to therapeutic drug delivery technology developed by Leaf Huang, Ph.D. (Dr. Huang) a member of the faculty at UNIVERSITY, and has the right as specified herein to grant licenses to such intellectual property; WHEREAS, UNIVERSITY desires to have the LICENSED TECHNOLOGY utilized in the public interest; WHEREAS, LICENSEE has represented to UNIVERSITY, to induce UNIVERSITY to enter into this Agreement, that LICENSEE is experienced in the development, production, manufacture, marketing and sale of products and/or the use of similar products to the LICENSED TECHNOLOGY (as defined below) and that LICENSEE shall commit itself to a thorough, vigorous and diligent program of exploiting the LICENSED TECHNOLOGY so that public utilization results therefrom; WHEREAS, the LICENSED TECHNOLOGY is the subject matter of a Sponsored Research Agreement between UNIVERSITY and LICENSEE; and WHEREAS, LICENSEE desires to obtain a license under the PATENT RIGHTS and/or LICENSED TECHNOLOGY upon the terms and conditions hereinafter set forth. 117 3 * Confidential Treatment Requested NOW, THEREFORE, in consideration of the premises and the mutual covenants contained herein, the parties hereto agree as follows: ARTICLE 1 - DEFINITIONS For purposes of this Agreement, the following words and phrases shall have the following meanings: 1.1 AFFILIATE shall mean, with respect to UNIVERSITY, any clinical or research entity in Pittsburgh which is operated or managed as a facility under the University of Pittsburgh Medical Center, whether or not owned by UNIVERSITY. 1.2 LICENSEE shall mean Targeted Genetics Corporation and all entities at least fifty percent (50%) owned or controlled by Targeted Genetics Corporation, an entity which directly or indirectly owns or controls more than fifty percent (50%) of the voting stock of Targeted Genetics Corporation and any entity, the majority ownership of which is directly or indirectly common to the ownership of Targeted Genetics Corporation. 1.3 LICENSED TECHNOLOGY shall mean any product or part thereof or process which is within the FIELD OF USE and is: (a) covered in whole or in part by an issued, unexpired or pending claim contained in the PATENT RIGHTS in the country in which any such product or part thereof is made, used or sold or in which any such process is used or sold; (b) manufactured by using a process or is employed to practice a process which is covered in whole or in part by an issued, unexpired claim or a pending claim contained in the PATENT RIGHTS in the country in which any process that is included in LICENSED TECHNOLOGY is used or in which such product or part thereof is used or sold; (c) developed, manufactured or employing any part of the TECHNOLOGY or the NEW TECHNOLOGY. Notwithstanding the foregoing, LICENSED TECHNOLOGY shall not include any discovery or invention in the field of HIV transfection to the extent (and only to the extent) such discovery or invention (i) resulted from the use of materials provided under, and (ii) is subject to the right of first refusal in favor of [ * ] pursuant to that certain Statement of Investigator and Material Transfer Agreement for In Vitro or Laboratory Animal Tests, dated October 19, 1993, between [ * ] and UNIVERSITY. * Confidential Treatment Requested 118 4 1.4 NET SALES shall mean LICENSEE's and its sublicensees' gross sales revenue for products or processes included in LICENSED TECHNOLOGY and produced hereunder less the sum of the following: (a) actual cost of freight charges or freight absorption, separately stated in such invoice; (b) actual trade, quantity or cash discounts allowed, if any; (c) sales, tariff duties and/or use taxes separately stated on each invoice. 1.5 PATENT RIGHTS shall mean all UNIVERSITY United States and foreign patents, patent applications and any patents filed or issued with respect to the LICENSED TECHNOLOGY from time to time during the term of this Agreement, and any and all divisions, reissues, re-examinations, renewals, continuations, continuations-in-part, extensions and patents issued thereon. 1.6 TECHNOLOGY shall mean any and all know-how, information, processes, formulae, patterns, compilations, programs, devices, method, techniques, compounds, products, data, preparations and usage information or materials and sources thereof, whether patentable or unpatentable, in each case that relates to the PATENT RIGHTS and which have been developed in a laboratory at UNIVERSITY under the direct supervision of Dr. Huang as of the date hereof or during the term of the Sponsored Research Agreement referenced below, including that described in the patent applications listed on Exhibit A hereto. 1.7 NEW TECHNOLOGY shall mean any technology within the Field of Use, that is developed after the Effective Date and prior to the expiration of the Sponsored Research Agreement in a laboratory at UNIVERSITY under supervision of Dr. Huang or any such technology developed under the Sponsored Research Agreement between UNIVERSITY and RGene Therapeutics, Inc. dated October 12, 1994. 1.8 SPONSORED RESEARCH AGREEMENT shall mean that certain Sponsored Research Agreement dated the date hereof and attached hereto as Exhibit B by and between LICENSEE and UNIVERSITY and the Sponsored Research Agreement between UNIVERSITY and RGene Therapeutics, Inc. dated October 12, 1994 relating to certain research to be conducted under the supervision of Dr. Huang. 1.9 FIELD OF USE shall mean all therapeutic applications related to the delivery of proteins/pepides or oligonucleotides/nucleic acids, including but not limited to genes. ARTICLE 2 - GRANT 2.1 UNIVERSITY hereby grants, to the extent it may lawfully do so, the right to practice under the PATENT RIGHTS, within the FIELD OF USE only, the right and exclusive license throughout the entire world to make, have made, use and sell the 119 5 LICENSED TECHNOLOGY to the end of the term for which the PATENT RIGHTS are issued, or, if no PATENT RIGHTS are issued, for ten (10) years from the date hereof, unless this Agreement is terminated sooner as provided herein. The license granted hereby is subject to the rights of the United States government, if any, as set forth in 35 U.S.C. Article 200, et seq. 2.2 UNIVERSITY reserves the royalty-free, nonexclusive right to practice under the PATENT RIGHTS to use the LICENSED TECHNOLOGY for its own noncommercial education and research purposes. 2.3 At the end of the exclusive period hereof, the license granted hereunder shall become nonexclusive. 2.4 LICENSEE shall have the right to enter into sublicensing arrangements for the rights, privileges and licenses granted hereunder only during the exclusive period of this Agreement upon prior written notice to UNIVERSITY. Such sublicenses may extend past the expiration date of the exclusive period of this Agreement, but any exclusivity of such sublicenses shall expire upon the expiration of LICENSEE's exclusivity. 2.5 LICENSEE agrees that any sublicense granted by it shall provide that the obligations to UNIVERSITY of Articles 2, 7, 8, 9, 10, 11 and 15 of this Agreement shall be binding upon the sublicensee as if it were party to this Agreement. 2.6 LICENSEE agrees to forward to UNIVERSITY a copy of any and all sublicense agreements promptly upon execution thereof. LICENSEE further agrees to attach copies of the Articles set forth in 2.5, above, to each sublicense agreement. 2.7 The license granted hereunder shall not be construed to confer any rights upon LICENSEE by implication, estoppel or otherwise as to any technology not specifically set forth herein. ARTICLE 3 - DUE DILIGENCE 3.1 LICENSEE shall use its best efforts to bring the LICENSED TECHNOLOGY to market through a thorough, diligent program for the exploitation of LICENSED TECHNOLOGY and PATENT RIGHTS and to continue active, diligent marketing efforts for the LICENSED TECHNOLOGY throughout the life of this Agreement. 3.2 LICENSEE shall be deemed to have met the requirements contained in Article 3.1 so long as LICENSEE is conducting sales of the LICENSED TECHNOLOGY or is conducting an active clinical development program of the LICENSED TECHNOLOGY and at all times during the duration of the Sponsored Research Agreement of even date herewith by and between UNIVERSITY and LICENSEE, 120 6 * Confidential Treatment Requested provided, however, that prior to the expiration of the Sponsored Research Agreement, LICENSEE and UNIVERSITY shall agree upon specific performance milestones relating to the clinical development of the LICENSED TECHNOLOGY in accordance with a proposed development schedule submitted by LICENSEE. 3.3 LICENSEE's failure to perform in accordance with 3.1 and 3.2 hereof shall be grounds for UNIVERSITY to terminate this Agreement pursuant to the terms of Article 11.1 (a) hereof, and, upon termination, all rights to and interest in the LICENSED TECHNOLOGY and PATENT RIGHTS shall revert to UNIVERSITY. Notwithstanding the foregoing, if UNIVERSITY asserts such failure of performance by LICENSEE, the parties shall enter into negotiations to resolve the matter and, if unable to do so within sixty (60) days, the parties agree to proceed to arbitration in accordance with Article 10 hereof. ARTICLE 4 - ROYALTIES AND OTHER LICENSE CONSIDERATION 4.1 In consideration of the rights, privileges and license granted by UNIVERSITY hereunder, LICENSEE shall pay royalties and other monetary consideration as follows: (a) Initial license fee, nonrefundable and not credited against royalties, of $[ * ] payable as follows: (i) $[ * ] immediately upon execution of this Agreement; and (ii) $[ * ] immediately upon filing of the first patent application with respect to the LICENSED TECHNOLOGY; and (iii) $[ * ] immediately upon filing of the second patent application with respect to the LICENSED TECHNOLOGY. (b) Royalties in an amount equal to [ * ]% of NET SALES of the LICENSED TECHNOLOGY in any country for which PATENT RIGHTS have issued, per calendar quarter; or royalties in an amount equal to [ * ]% of NET SALES in any country where no patent issues; (c) Minimum royalty in the amount of $[ * ] per calendar year, payable beginning in 1997, at the end of each calendar year, if such minimum royalty is greater than the aggregate annual royalty computed in accordance with Article 4.1(b) above, provided that all royalty payments made under Article 4.1(b) shall be credited against such minimum royalty * Confidential Treatment Requested 121 7 * Confidential Treatment Requested amount. However, to the extent that the LICENSEE is commercially pursuing multiple products or processes incorporating the LICENSED TECHNOLOGY, then the minimum royalty specified above shall be $[ * ] per product or process incorporating the LICENSED TECHNOLOGY which are being commercially pursued by LICENSEE, on the same terms as above. (d) [ * ]% of any upfront fees received by LICENSEE pursuant to any sublicense under Article 2.4 hereof. (e) 32,111 shares of LICENSEE unregistered common stock, fully paid and non-assessable, issued under the name of the UNIVERSITY as shareholder. Of these shares, 3,211 shall be held in escrow by LICENSEE until June 19, 1997 pursuant to the Agreement and Plan of Merger among LICENSEE, TGC Acquisition Corporation and RGene Therapeutics, Inc. dated April 16, 1996, and 16,056 shares of which shall be registered by LICENSEE on or before June 19, 1997. 4.2 Royalty payments, pursuant to Article 4.1(b) above, shall be paid to UNIVERSITY in United States dollars and directed to the address set forth in Article 12 hereof within sixty (60) days after the end of each March 31, June 30, September 30 and December 31. The minimum royalty, pursuant to Article 4.1 (c) above, shall be paid to UNIVERSITY in like manner by December 15 of the calendar year in which the minimum royalty is due. 4.3 Royalty payments which are overdue shall bear interest at the rate of 8% per annum. 4.4 To the extent permissible under then applicable laws and regulations, LICENSEE shall sell products and/or processes resulting from LICENSED TECHNOLOGY to UNIVERSITY and its AFFILIATES upon request at such price(s) and on such terms and conditions as such products and/or processes are made available to LICENSEE's most favored customer. LICENSEE agrees that it will provide UNIVERSITY and its AFFILIATES the opportunity to purchase such products or processes at the same time as any other United States clinical institution. Notwithstanding the above, the parties agree that a failure by LICENSEE to comply with the terms of this Section 4.4 shall not be deemed to be a default for purposes of Section 11.1 hereof. 4.5 Sublicense upfront payments under Article 4.1(d) shall be reduced by any amount of the sublicense upfront payments that LICENSEE is required to make to the * Confidential Treatment Requested 122 8 University of Tennessee pursuant to the Amendment to the First Amended and Restated License Agreement between the University of Tennessee Research Corporation and RGene Therapeutics, Inc., effective October 12, 1995. Furthermore, if such sublicense also sublicenses rights under the License Agreement between UNIVERSITY and LICENSEE of even date, sublicense upfront payments under Article 4.1(d) after reduction for payments to the University of Tennessee shall be further reduced by 50% to reflect payments to UNIVERSITY under such License Agreement. 4.6 The License Fee in Article 4.1(a) and shares of LICENSEE stock in Article 4.1(e) are new considerations solely for this Restated License Agreement and are not applicable to the 1994 LICENSE AGREEMENT. ARTICLE 5 - REPORTS 5.1 Within thirty (30) days after each March 31, June 30, September 30 and December 31 of each year during the term of this Agreement, beginning after the first commercial sale of LICENSED TECHNOLOGY, LICENSEE shall deliver to UNIVERSITY true and accurate reports of the following information in a form acceptable to UNIVERSITY: (a) number of LICENSED TECHNOLOGY products manufactured and sold by LICENSEE and all sublicensees; (b) total billings for such products; (c) accounting for all LICENSED TECHNOLOGY processes used or sold by LICENSEE and all sublicensees; (d) deductions set forth in Article 1.4; (e) total royalties due; and (f) name and addresses of sublicensees. 5.2 If no royalties shall be due hereunder, LICENSEE shall so advise UNIVERSITY in writing within thirty (30) days after the end of any calendar quarter for which no royalties are due. 5.3 LICENSEE shall keep full, true and accurate books of account, in accordance with generally accepted accounting principles, containing all information that may be necessary for the purpose of showing the amounts payable to UNIVERSITY hereunder. Said books of account shall be kept at LICENSEE's principal place of business. Said books and the supporting data shall be open at all reasonable times for three (3) years following the end of the calendar year to which they pertain, to the inspection of UNIVERSITY or its agents for the purpose of verifying LICENSEE's royalty statement or compliance in other respects with this Agreement. 123 9 ARTICLE 6 - PATENT PROSECUTION 6.1 UNIVERSITY has or shall apply for, seek prompt issuance of and maintain during the term of this Agreement the PATENT RIGHTS in the United States and in such foreign countries as may be designated by LICENSEE within a reasonable time in advance of the required foreign filing dates. LICENSEE shall have the opportunity to advise and cooperate with UNIVERSITY in the prosecution, filing and maintenance of such patents. 6.2 All fees and costs, including attorneys' fees, relating to the filing, prosecution and maintenance of the PATENT RIGHTS shall be the responsibility of LICENSEE, whether incurred prior to or after the date of this Agreement and payments by LICENSEE therefore shall not be creditable against royalties. Such fees and costs incurred by UNIVERSITY prior to the date hereof will be payable by LICENSEE to UNIVERSITY within fifteen (15) business days of the invoicing by UNIVERSITY to LICENSEE. ARTICLE 7 - INFRINGEMENT ACTIONS 7.1 Each party shall inform the other promptly in writing of any alleged infringement of the PATENT RIGHTS by a third party and of any available evidence thereof. 7.2 During the term of this Agreement, LICENSEE shall have the right, but shall not be obligated, to prosecute at its own expense all infringements of the PATENT RIGHTS and, in furtherance of such right, UNIVERSITY hereby agrees that LICENSEE may include UNIVERSITY as a party plaintiff in any such suit, without expense to UNIVERSITY. The total cost of any such infringement action commenced or defended solely by LICENSEE shall be borne by LICENSEE and LICENSEE shall keep any recovery or damages for past infringement derived therefrom subject to payment of royalties thereon at the rate established in Article 4.1(b), after application of the costs incurred by LICENSEE in prosecuting such infringement actions, including legal fees. LICENSEE may, for such purposes, use the name of UNIVERSITY as party plaintiff. Notwithstanding the above, LICENSEE's right to bring such an infringement action shall remain in effect only for so long as the license granted herein remains exclusive. 7.3 If within six (6) months after having been notified of any alleged infringement, LICENSEE shall have been unsuccessful in persuading the alleged infringer to desist and shall not have brought and shall not be diligently prosecuting an infringement action, or if LICENSEE shall notify UNIVERSITY at any time prior thereto of its intention not to bring suit against any alleged infringer, then, and in those events only, UNIVERSITY shall have the right, but shall not be obligated, to prosecute at its own expense any infringement of the PATENT RIGHTS, and UNIVERSITY may, for such purposes, use the name of LICENSEE as party plaintiff. No settlement, consent judgment or other voluntary final disposition of the suit may be entered into by either party without the 124 10 consent of the other, which consent shall not unreasonably be withheld. In any settlement or other conclusion, by litigation or otherwise, UNIVERSITY shall be entitled to share in the monetary award therefrom in at least an amount proportional to the royalty rate established in Article 4.1(b) above, and LICENSEE shall be entitled to offset against royalties due hereunder all costs incurred by LICENSEE in prosecution of any such infringement, including legal fees. LICENSEE shall indemnify UNIVERSITY against any order for costs that may be made against UNIVERSITY in such proceedings. 7.4 In the event that a declaratory judgment action alleging invalidity or noninfringement of any of the PATENT RIGHTS shall be brought against UNIVERSITY, LICENSEE, at its option, shall have the right, within thirty (30) days after commencement of such action, to intervene and take over the sole defense of the action at its own expense. 7.5 In any infringement suit either party may institute to enforce the PATENT RIGHTS pursuant to this Agreement, the other party hereto shall, at the request and expense of the party initiating such suit, cooperate in all respects and, to the extent possible, have its employees testify when requested and make available relevant records, papers, information, samples, specimens, and the like. ARTICLE 8 - INDEMNIFICATION/INSURANCE/LIMITATION OF LIABILITY 8.1 LICENSEE shall at all times during the term of this Agreement and thereafter, indemnify, defend and hold UNIVERSITY, its trustees, officers, employees and affiliates, harmless against all claims and expenses, including legal expenses and reasonable attorneys' fees, arising out of the death of or injury to any person or persons or out of any damage to property or the environment, and against any other claim, proceeding, demand, expense and liability of any kind whatsoever resulting from the production, manufacture, sale, use, lease, consumption or advertisement of the LICENSED TECHNOLOGY by LICENSEE, its affiliates or sublicensees or arising from any obligation of LICENSEE hereunder, except to the extent caused by the negligence, recklessness or willful misconduct of UNIVERSITY or its personnel and agents, for which UNIVERSITY shall similarly hold harmless and indemnify LICENSEE, its officers, employees, agents or representatives. 8.2 Prior to such time as LICENSEE or its sublicensees commence human clinical trials for LICENSED TECHNOLOGY or otherwise commence marketing such LICENSED TECHNOLOGY, LICENSEE shall maintain in force such liability insurance policies and coverages as are required under applicable laws and regulations. At such time as LICENSEE commences marketing the LICENSED TECHNOLOGY, LICENSEE shall maintain in force such liability insurance in such amounts and for such coverages as is customarily taken by similar companies in its industry, to the extent such coverages are reasonably available. LICENSEE shall use its best efforts to have such policies provide that the insurer will give UNIVERSITY not less than 30 days' advance notice of any material changes in or cancellation of coverage, and to provide UNIVERSITY with 125 11 commensurate coverage as would be provided if UNIVERSITY were named as an additional insured thereunder. ARTICLE 9 - ASSIGNMENT 9.1 Except as provided in Article 2.4, this Agreement is not assignable and any attempt to do so shall be null and void, except in the event of sale of all or substantially all of the assets of LICENSEE. LICENSEE shall provide UNIVERSITY with prior written notice of such sale. ARTICLE 10 - ARBITRATION 10.1 Except as to issues relating to the validity, enforceability or final determination of infringement of any patent contained in the PATENT RIGHTS licensed hereunder, any and all claims, disputes or controversies arising under, out of, or in connection with this License Agreement which has not been resolved in good faith negotiations between the parties, shall be resolved by a board of three (3) arbitrators in accordance with the rules, then in effect, of the American Arbitration Association. Such independent board shall be composed of three panelists, of sufficient education, scientific experience and national reputation to address such issues. The board shall be composed of an individual selected by UNIVERSITY, an individual selected by LICENSEE and an individual selected by LICENSEE and UNIVERSITY. The decision of such panel shall be final and binding upon the parties and enforceable in any court of competent jurisdiction. ARTICLE 11 - TERMINATION 11.1 UNIVERSITY shall have the right to terminate this Agreement if: (a) LICENSEE shall default in the performance of any of the obligations herein contained and such default has not been cured within thirty (30) days after receiving written notice thereof from UNIVERSITY; or (b) LICENSEE shall cease to carry out its business, become bankrupt or insolvent, apply for or consent to the appointment of a trustee, receiver or liquidator of its assets or seek relief under any law for the aid of debtors. (c) LICENSEE shall terminate the Sponsored Research Agreement with UNIVERSITY for further work on the LICENSED TECHNOLOGY for any reason, except breach thereof by UNIVERSITY, termination by mutual consent, termination for Dr. Huang's departure from UNIVERSITY as described in Section 2.03 of the Sponsored Research Agreement, or expiration of the term of Sponsored Research Agreement. 126 12 11.2 LICENSEE may terminate this Agreement upon six (6) months' prior written notice to UNIVERSITY and upon payment of all amounts due UNIVERSITY through the effective date of the termination. 11.3 Upon termination of this Agreement neither party shall be released from any obligation that matured prior to the effective date of such termination. LICENSEE and any sublicensee may, however, after the effective date of such termination, sell all products under the LICENSED TECHNOLOGY, provided that LICENSEE shall pay to UNIVERSITY the royalties thereon as required by Article 4 hereof and submit the reports required by Article 5 hereof. ARTICLE 12 - NOTICES 12.1 Any notice or communication pursuant to this Agreement shall be sufficiently made or given if sent by certified, first-class mail, postage prepaid, addressed to the address below or as either party shall designate by written notice to the other party. In the case of UNIVERSITY: Office of Technology Transfer and Intellectual Property 911 William Pitt Union University of Pittsburgh Pittsburgh, PA 15260 In the case of LICENSEE: Targeted Genetics Corporation Suite 100 1100 Olive Way Seattle, WA 98101 ARTICLE 13 - AMENDMENT, MODIFICATION 13.1 This Agreement may not be amended or modified except by the execution of a written instrument signed by the parties hereto. 127 13 ARTICLE 14 - REPRESENTATIONS, WARRANTIES AND LIMITATIONS OF LIABILITY 14.1 University (a) UNIVERSITY is a non-profit corporation, validly existing and in good standing under the laws of the Commonwealth of Pennsylvania. (b) The execution, delivery and authority to execute and deliver this Agreement have been duly authorized by all necessary action on the part of the UNIVERSITY. (c) UNIVERSITY has the power and authority to execute and deliver this Agreement and to perform its obligations under this Agreement. (d) UNIVERSITY hereby represents and warrants that, other than the grant set forth herein, including, without limitations, any non-exclusive license that UNIVERSITY may be required by law to grant to the United States of America or to a foreign state pursuant to an existing or future treaty with the United States of America, it has not encumbered, restricted, transferred or otherwise burdened the TECHNOLOGY. (e) UNIVERSITY hereby represents and warrants that on the date hereof, it is not aware of any infringement of or by the PATENT RIGHTS or any claims by any other party in and to the TECHNOLOGY. (f) EXCEPT AS OTHERWISE EXPRESSLY SET FORTH 1N THIS AGREEMENT, UNIVERSITY MAKES NO REPRESENTATIONS AND EXTENDS NO WARRANTIES OF ANY KIND, EITHER EXPRESS OR IMPLIED, INCLUDING BUT NOT LIMITED TO WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, AND VALIDITY OF TECHNOLOGY CLAIMS, ISSUED OR PENDING. NOTHING 1N THIS AGREEMENT SHALL BE CONSTRUED AS A REPRESENTATION MADE OR WARRANTY GIVEN BY UNIVERSITY THAT THE PRACTICE BY LICENSEE OF THE LICENSE GRANTED HEREUNDER SHALL NOT INFRINGE THE TECHNOLOGY OF ANY THIRD PARTY. 14.2 Licensee. LICENSEE represents and warrants that: 128 14 (a) It is a corporation duly organized, validly existing and in good standing under the laws of the State of Washington. (b) The execution, delivery and performance of this Agreement have been duly authorized by all necessary corporate action on the part of LICENSEE. (c) It has the corporate power and authority to execute and deliver this Agreement and to perform its obligations under this Agreement. ARTICLE 15-MISCELLANEOUS 15.1 This Agreement shall be construed and interpreted in accordance with the laws of the Commonwealth of Pennsylvania. 15.2 The parties acknowledge that this Agreement together with the Sponsored Research Agreement, sets forth the entire understanding and agreement of the parties hereto as to the subject matter hereof and supersedes all previous understandings between the parties, written or oral, regarding such subject matter. 15.3 Nothing contained in this Agreement shall be construed as conferring any right to use in advertising, publicity or other promotional activities any name, trade name, trademark, or other designation (including any contraction, abbreviation, or simulation of any of the foregoing). Without the express written approval of the other party, neither party shall use any designation of the other party in any promotional activity associated with this Agreement or the LICENSED TECHNOLOGY. Neither party shall issue any press release or make any similar written public statement in regard to this Agreement without the prior written approval of the other party which approval shall not be unreasonably withheld. 15.4 If one or more of the provisions of this Agreement shall be held invalid, illegal or unenforceable, the remaining provisions shall not in any way be affected or impaired thereby. In the event any provision is held, illegal or unenforceable, the parties shall use reasonable efforts to substitute a valid, legal and enforceable provision which, insofar as is practical, implements purposes of the section held invalid, illegal and unenforceable. 15.5 Failure at any time to require performance of any of the provisions herein shall not waive or diminish a party's right thereafter to demand compliance therewith or with any other provision. Waiver of any default shall not waive any other default. A party shall not be deemed to have waived any rights hereunder unless such waiver is in writing and signed by a duly authorized officer of the party making such waiver. 129 15 ARTICLE 16 - CLINICAL TRIALS 16.1 LICENSEE recognizes the desire of UNIVERSITY and its AFFILIATES to perform Phase I clinical trials for products which incorporate the LICENSED TECHNOLOGY. LICENSEE further recognizes UNIVERSITY and its AFFILIATES wish to be granted preferential consideration in conducting Phase II and III clinical trials for such products. UNIVERSITY recognizes that products which incorporate LICENSED TECHNOLOGY will generally also incorporate technology licensed from other institutions and that LICENSEE may be obligated or deem it advisable to conduct clinical trials at such other institutions or their AFFILIATES. UNIVERSITY also recognizes that additional medical centers may be involved in Phase II and III clinical trial, as may be necessary. LICENSEE agrees to give due consideration to conducting clinical trials at UNIVERSITY and its AFFILIATES, to the extent permitted by its obligations to others. IN WITNESS WHEREOF, the parties have set their hands and seals. UNIVERSITY OF PITTSBURGH - OF THE COMMONWEALTH SYSTEM OF HIGHER WITNESS: EDUCATION /s/ Beth Dudley By /s/ Jerome Cochran - ------------------------------- ------------------------------- Jerome Cochran Interim Vice Chancellor for Business WITNESS: TARGETED GENETICS CORPORATION /s/ Tiffany D. Dolmseth By H. Stewart Parker - ------------------------------- ------------------------------- 130 16 * Confidential Treatment Requested Exhibit A to Revised License Agreement between University of Pittsburgh and Targeted Genetics Corporation "Stable Lipid-Comprising Drug Delivery Complexes and Methods for Their Production" U.S. Patent Application Serial No. 08/376,701 Filed January 23, 1995 PCT Application 2710-4000 Filed January 23, 1996 designating all countries "Novel Cationic Cholesteryl Derivatives Containing Derivatives Containing Cyclic Polar Groups" U.S. Patent Application Serial No. [ * ] Filed [ * ] "A Cytoplasmic Gene Expression System Which Utilizes a Prokaryotic RNA Polymerase Autogene" U.S. Patent Application Serial No. [ * ] Filed [ * ] "Emulsion Formulations and Their Use as Vehicles for the Delivery of Hydrophilic Biologically Active Molecules to Cells" U.S. Patent Application Serial No. [ * ] Filed [ * ] * Confidential Treatment Requested 131 -----END PRIVACY-ENHANCED MESSAGE-----