-----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, SEizDxcQRWKqZCCNFpDzxBYDbyvFitDbH7riKudgWfSm9sw86kMWF4DyLRNmb6u9 00CGB9B2Kw+qSRksUV4fIg== 0000950144-97-003475.txt : 19970401 0000950144-97-003475.hdr.sgml : 19970401 ACCESSION NUMBER: 0000950144-97-003475 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 9 CONFORMED PERIOD OF REPORT: 19961231 FILED AS OF DATE: 19970331 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: THERAPEUTIC ANTIBODIES INC /DE CENTRAL INDEX KEY: 0000944744 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-MEDICAL LABORATORIES [8071] IRS NUMBER: 621212485 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-25978 FILM NUMBER: 97569785 BUSINESS ADDRESS: STREET 1: 1500 21ST AVE SOUTH STREET 2: STE 310 CITY: NASHVILLE STATE: TN ZIP: 37212 BUSINESS PHONE: 6153271027 MAIL ADDRESS: STREET 1: 1500 21ST AVE SOUTH STREET 2: STE 310 CITY: NASHVILLE STATE: TN ZIP: 37212 10-K 1 THERAPEUTIC ANTIBODIES, INC. FORM 10-K 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K (Mark One) [x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 1996, or [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to . ---------- --------- COMMISSION FILE NO.: 0-25978 ------------- THERAPEUTIC ANTIBODIES INC. - ------------------------------------------------------------------------------- (Exact Name of Registrant as Specified in Its Charter) DELAWARE 62-1212485 ------------------------------------- ------------------- (State or Other Jurisdiction of (I.R.S. Employer Incorporation or Organization) Identification No.) 1207 17TH AVENUE SOUTH, SUITE 103 NASHVILLE, TENNESSEE 37212 - ---------------------------------------- ------------------- (Address of Principal Executive Offices) (Zip Code) Registrant's telephone number, including area code: (615) 327-1027 ------------------- Securities registered pursuant to Section 12(b) of the Act: Name of Each Exchange Title of Each Class on Which Registered - ------------------- ---------------------- None None Securities registered pursuant to Section 12(g) of the Act: COMMON STOCK; PAR VALUE $.001 PER SHARE ---------------------------------------- (TITLE OF CLASS) 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 S-K is not contained herein, and will not be contained, to the best of the 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. [ ] The aggregate market value of the shares of Common Stock of the registrant held by nonaffiliates on March 14, 1997 ($6.17 per share), was $108,795. As of March 14, 1997, the registrant's had outstanding 22,371,692 shares of Common Stock. 2 DOCUMENTS INCORPORATED BY REFERENCE Portions of Part III hereof are incorporated by reference from the Registrant's Proxy Statement for the Annual Meeting of Shareholders to be held on April 28, 1997. Certain exhibits listed in Part IV hereof are incorporated by reference to the following documents previously filed by the Registrant with the Commission: Registration Statement on Form 10, filed on May 1, 1995; Quarterly Report on Form 10-Q for the period ended September 30, 1995; Quarterly Report on Form 10-Q for the period ended March 31, 1996; Quarterly Report on Form 10-Q for the period ended June 30, 1996; Quarterly Report on Form 10-Q for the period ended September 30, 1996; Proxy Statement relating to the Special Meeting of Shareholders held on July 5, 1996. TABLE OF CONTENTS
PAGE ---- PART I ITEM - ---- 1. Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 2. Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 3. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 4. Submission of Matters to a Vote of Security Holders . . . . . . . . . . . . . . . . . . 21 PART II 5. Market for Registrant's Common Equity and Related Stockholder Matters . . . . . . . . . 22 6. Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 7. Management's Discussions and Analysis of Financial Condition and Results of Operations . 24 8. Financial Statements and Supplementary Data . . . . . . . . . . . . . . . . . . . . . . 29 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49 PART III 10. Directors and Executive Officers of the Registrant . . . . . . . . . . . . . . . . . . . 50 11. Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50 12. Security Ownership of Certain Beneficial Owners and Management . . . . . . . . . . . . . 50 13. Certain Relationships and Related Transactions . . . . . . . . . . . . . . . . . . . . . 50 PART IV 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K . . . . . . . . . . . . 51 15. Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55 EXHIBITS
3 PART I ITEM 1. BUSINESS GENERAL Therapeutic Antibodies Inc. ("TAb" or the "Company"), is a development stage biopharmaceutical company specializing in the preparation of polyclonal antibodies for the treatment of disease. Headquartered in Nashville, Tennessee, with operations in the United States, the United Kingdom, Australia and New Zealand, TAb is developing and producing a line of antibody products designed primarily to treat life-threatening medical conditions for which there currently are no satisfactory therapies. The Company was incorporated in Delaware in 1984. The Company was co-founded in 1984 by Professors John Landon and Tim Chard and Dr. Harry Browne. Both Professors Landon and Chard have been active in the development of antibodies for diagnostic purposes and the development of immunoassays. Each formerly chaired a department at St. Bartholomew's and the Royal London School of Medicine and Dentistry in London, and both have published numerous articles relating to antibody/antigen interaction and detection. Since 1984, the Company has affiliated itself with scientists at academic institutions in the United States, Europe, Australia, New Zealand and Africa, to assist in the research, testing and development of new antibody products. See "Item 1 - Principal Licensing and Other Collaborative Arrangements." TAb has developed systems for the production and purification of a new generation of polyclonal antibodies that management believes can produce suitable therapies for neutralizing a variety of toxins, including certain venoms, cytokines and drugs. Some of TAb's innovations include the preparation of unique immunogens, the purification of specific antibodies and the digestion of antibodies into fragments. Management believes that these capabilities enable TAb to produce a broad range of specific antibodies that are safer and more effective than the antibody products currently available. The Company's antibody products are in various stages of development, ranging from preclinical testing to manufacturing and distribution. TAb's executive offices are located in Nashville, Tennessee, in the vicinity of the Vanderbilt University Medical Center. Research, production and testing operations are conducted through the Company's subsidiaries. The Company operates its research and development laboratories through TAb London Ltd. ("TAb London"), one of its United Kingdom subsidiaries, including pilot production facilities at St. Bartholomew's and the Royal London School of Medicine and Dentistry in London, England. The Company's antibody production operations are situated in both Dyfed, Wales and Adelaide, Australia. These operations are conducted through TAb Wales Ltd.("TAb Wales"), Polyclonal Antibodies Ltd. ("PAL"), which the Company acquired in 1992, and TAb Australia Pty. Ltd. See "Item 2 - Properties." THE INDUSTRY The biotechnology/biopharmaceutical industry is considered a segment of the pharmaceutical industry. Management believes that advances in biotechnology research will contribute to the development of new pharmaceutical products. In the past decade medicine has benefited from advances in immunology through the use of antibodies for diagnostic purposes, to detect the presence of a variety of substances in the body. Antibodies are used for diagnostic purposes to measure various hormones, cancer markers, drugs and other materials in patient blood samples. An example of a commercial application of diagnostic antibody technology is the home pregnancy test kit, which uses antibodies to detect a pregnancy-associated hormone in samples of urine. 1 4 In addition to diagnostic applications, research has begun to focus on the therapeutic applications of antibodies, which can be used for the treatment of numerous toxic conditions including envenomation, drug overdose and infectious disease. Although one of the Company's subsidiaries produces and sells small amounts of animal antisera that is used for diagnostic purposes, TAb's primary focus is on the production of antibodies for therapeutic purposes. TECHNOLOGY AND PRODUCTION The human immune system is part of the body's protection against invasion by infectious agents such as viruses, bacteria and parasites. It acts in two main ways. One involves the direct action of certain white cells in blood and lymph glands; the other results in the production by a distinct class of white blood cells of polyclonal antibodies. Antibodies, which are a class of protein, act by binding to part of the target molecule referred to as the antigen or epitope. The reaction is usually highly specific to a particular combination of epitope and antibody, often likened to a lock and key. When the target molecule is large, it may have a number of different epitopes. Each different epitope may bind to a different population of antibodies and binding of an antibody to one or more epitopes can neutralize the biological activities of that molecule, including its toxic activities. Manipulation of the immune system for therapeutic purposes has been practiced for more than two centuries, for example vaccines against smallpox, diphtheria and tetanus. The traditional method is active immunization, where the person is vaccinated with all or part of the target molecule. The person's immune system then produces antibodies against the target molecule. Alternatively, in passive immunization, an animal is injected with the target molecule and the resulting antibodies are then extracted, purified and modified for injection into humans. There are two types of antibodies. The first, at the heart of TAb's technology, is polyclonal antibodies, which contain a variety of antibodies directed to different epitopes on the target molecule. The second type is monoclonal antibodies consisting of a population of identical antibodies all directed to a single epitope. Management believes that the combination of the following factors differentiates TAb from its competitors, whether conventional pharmaceutical companies or others developing antibody therapies: - the use of polyclonal antibodies; - the use of sheep to produce polyclonal antibodies; - the production of fragments of polyclonal antibodies; and - production systems common to TAb's existing and proposed products. These factors are described in more detail in the following sections. 2 5 POLYCLONAL ANTIBODIES. TAb's management has focused the Company's development resources on polyclonal antibodies. The Directors believe that these are effective for many therapeutic applications in humans, where many clinically significant target molecules have multiple epitopes and are therefore more effectively neutralized by polyclonal antibodies. Management believes that, unlike TAb, most immunotherapy companies in recent years have focused on monoclonal antibodies. The characteristics of monoclonal antibodies provide certain advantages in laboratory testing or immunoassays, in that they are very selective and offer specificity to a particular epitope. However, to date, Management is aware of only a limited number of monoclonal products that have been approved by any regulatory authorities for commercial therapeutic purposes and there is growing awareness among researchers and clinicians of the need for a more broader acting preparation for many therapeutic clinical uses. The directors believe that processed and purified polyclonal antibodies currently have several advantages over monoclonals in that polyclonals: - bind multiple sites, resulting in greater neutralization of toxic molecules; - usually bind more strongly; - are often more robust and can therefore better withstand the fragmentation and purification process; and - can generally be developed at less expense. PRODUCTION OF ANTIBODIES FROM SHEEP. TAb uses sheep for the production of its polyclonal antibodies. The Directors have selected sheep because of the substantial amounts of high affinity, specific antibodies which they can produce. Sheep antibody based products also have a proven safety record when used therapeutically in patients because side effects resulting from immunogenicity and allergenicity are relatively limited. Sheep are also easy to handle, inexpensive to purchase and maintain and are available in large numbers worldwide. Until recently, horses have been the most widely used source of such antibodies, but the levels of specific polyclonal antibodies attained in equine antisera are usually low, because they have been affinity purified. They have also been less than satisfactory for human treatment because their use is associated with a high incidence of side effects. TAb supplies all of the antisera required for the production of its antibody products from its own flocks of sheep from two widely separated geographical areas (Wales and Australia). Currently, Polyclonal Antibodies, Ltd. ("PAL"), TAb's subsidiary based in Wales, farms approximately 250 acres of pasture land with approximately 2,000 sheep. In addition, TAb has a flock of approximately 3,850 sheep at the Turretfield Research Centre near Adelaide in Australia, where TAb's facility is located and in adjacent properties. All animal handling procedures are subject to stringent regulations with which TAb complies, including the Animals (Scientific Procedures) Act 1986 in the United Kingdom and those stipulated by Ethics Committees in the Southern Hemisphere. The Directors' decision to expand TAb's activities into the Southern Hemisphere has two key advantages: it affords TAb a second and geographically remote source of antisera for all TAb's products in the event of disruption to production in Wales; and it provides access to less expensive and larger numbers of sheep. 3 6 In addition, due to the European Commission ban on the trade in British beef, public attention has focused on transmissible neurodegenerative diseases associated with British livestock. A similar disease has existed for many centuries in sheep. All TAb products are manufactured from sheep serum. However, serum, the raw material for manufacture, has been classified as containing "no detectable infectivity" by the Working Party on Immunological Medicinal Products set up by the Commission of the European Communities. Additionally, TAb sheep have always been sourced from closed flocks, certified to be free of scrapie by an independent veterinary surgeon. ANTIBODY FRAGMENTS. An antibody can be divided into two identical components known as the antibody binding Fab fragments and an additional Fc fragment. Each Fab fragment has a binding site which attaches to a specific epitope on the target molecule in order to neutralize its toxic effects. The Fc is potentially harmful and can cause hypersensitivity and other side effects. TAb separates and discards the potentially harmful Fc fragment and obtains the two beneficial Fab fragments, unimpaired in their ability to bind and neutralize the target molecule. Most other immunotherapy companies applying similar technology have used intact antibodies, or have used the enzyme pepsin which yields the larger F(ab')2 fragment. The latter comprises two Fab fragments joined together, but without the harmful Fc fragment. Fab fragment products are less likely to cause hypersensitivity and other side effects than intact antibodies or F(ab')2 fragment products. Furthermore, their small size ensures that the Fab fragment products are rapidly and evenly distributed throughout the body. This means that, following injection, they are expected to quickly reach the various tissues where a target molecule may be causing toxic effects. In addition, their small size allows excess unbound antibody and antibodies bound to small toxic molecules to be excreted more efficiently by the kidneys. Any foreign protein, including an antibody of animal origin, will induce an immune response if injected into a patient. Severe side-effects such as anaphalatic death were common when passive immunization was first introduced at the end of the last century for the treatment of diphtheria and tetanus. This was due to the fact that unprocessed and unpurified equine serum containing highly allergic proteins were injected. Furthermore, large volumes of such sera were administered, giving rise to a serious delayed complication known as serum sickness. The incidence and severity of side-effects were reduced significantly by separating antibodies from most of the contaminating proteins. The incidence of harmful effects was further reduced by the use of enzymatic cleavage to prepare the larger F(ab')2 based products. Removal of the Fc fragment prevented the binding and activation of various blood cells. TAb uses the more advanced papain enzyme technology to produce Fab fragments which are less likely to cause side-effects than either intact antibodies or F(ab')2. Being smaller, the Fab is less immunogenic and only has a single binding site. Therefore, it cannot form potentially harmful large, cross linked, immune complexes. COMMON PRODUCTION PROCESS. All TAb products are prepared using a very similar series of manufacturing steps. The common technology has enabled TAb to develop a number of new products in a relatively short time. 4 7 Products for pre-clinical and clinical trials have been prepared primarily in TAb's pilot production site at St. Bartholomew's and the Royal London School of Medicine and Dentistry in London. Once a new product has completed its trials, a product transfer and development group is responsible for moving manufacture to Wales and preparing for commercial production. TAb completed construction of a new, custom built 20,000 sq. ft. manufacturing plant at its facility in Wales in 1995. Internal validation by the Company is nearly complete and the plant awaits inspection and approval by the FDA and MCA for commercial use. Management believes that the production facilities will meet regulatory requirements. TAb's Australian facility has serum processing capability with Therapeutic Goods Administration approval and currently provides antisera to the manufacturing plant in Wales. It is expected that, in the longer term, further production capacity will be needed. Management currently believes that such facilities are likely to be established in Australia, although this matter will be reviewed in the future. TAb's production process can be separated into three stages: - First, immunogens, which in some cases are patentable, are created. These, together with the immunization techniques developed by TAb, are produced in order to generate high yields of antibodies from sheep. Once suitable levels of high affinity antibodies have been obtained, collection of antisera commences on a monthly basis. - Secondly, contaminating serum proteins are removed and the remaining proteins are then subjected to controlled enzymatic cleavage with papain to produce Fab fragments. - Thirdly, chromatography is used to purify Fab fragments specific to the target molecule, thus reducing the amounts of foreign protein to a minimum. PRODUCTS TAb is concentrating on a portfolio of products in three development programs with a view to balancing development risk and market potential. The three programs are the Antivenom Program, the Anti-Drug Program and the Anti-Cytokine Program. ANTIVENOM PROGRAM. It is estimated that close to 1,000,000 people worldwide are bitten each year by poisonous snakes, resulting in as many as 100,000 deaths. In addition, there are large numbers of scorpion and spider envenomations in North America and many other countries each year. It is one of TAb's objectives to become the leading producer of antivenoms worldwide. TAb has developed its first antivenoms to treat snakebites in North America, Europe, Western Africa, Southeast Asia and Australia. Management believes that there is an unsatisfied demand for safe and effective antivenom products. ViperaTAb(TM). TAb has developed ViperaTAb(TM) for treating poisonous bites by the European common adder, Vipera berus, and has entered into an agreement with Swedish Orphan, a pharmaceutical marketing company, to market this product in Scandinavia. In 1991, preclinical testing conducted on behalf of TAb at the Liverpool School of Tropical Medicine indicated that ViperaTAb(TM) was nearly 10 times more effective on a weight for weight basis than an equine derived antivenom available in Northern Europe. Clinical trials were completed in 1994. ViperaTAb(TM) was approved by the regulatory authorities in Sweden and Norway in 1994, and Finland in 1995, for use in those countries on a named patient basis. The Company commenced commercial distribution of ViperaTAb(TM) in Scandinavia in 1995. 5 8 TAb's patent attorneys are currently advising TAb on a European antivenom patent application that, if granted, may have an impact on TAb's activities. TAb's Management believes that this European patent application will not affect the commercial exploitation of ViperaTAb(TM). CroTAb(R). TAb's Crotalid ("rattlesnake") antivenom project was carried out in collaboration with scientists at the University of Arizona, USA. Preclinical tests performed on behalf of TAb at the University of Arizona indicated that the antivenom tested was demonstrated on average, to be 5 times more effective than the then existing equine derived antivenom. The Company filed an IND application with the FDA in 1992 and in 1993 was awarded an FDA grant to assist in the funding of clinical studies of CroTAb(R), which began in 1993. CroTAb(R) has been granted orphan drug status by the FDA which provides certain development, registration and marketing incentives. See "Business - Government Regulation." Phase II/III clinical studies with this product were completed in 1996. EchiTAb(TM). TAb has developed EchiTAb as an antivenom against the West African carpet viper, Echis ocellatus. TAb has entered into an agreement with the Federal Ministry of Health on behalf of the Nigerian Government under which the Nigerian Government has contributed to the costs of development and clinical trials of EchiTAb(TM). PulchellaTAb(TM) and BrownTAb(TM). TAb has also completed initial clinical testing on PulchellaTAb(TM), an antivenom for the Sri Lankan Daboia russelli pulchella snake ("Russell's viper"). TAb has also entered into an agreement with FH Faulding to market PulchellaTAb(TM) in certain countries after completion of clinical trials, if it receives the necessary marketing approvals from regulatory authorities. TAb is currently preparing an application to conduct clinical testing of BrownTAb, an antivenom for the Brown snake species, which is expected to be marketed by CSL. Other Antivenoms. TAb has several other snake, spider and scorpion products under development. ANTI-DRUG PROGRAM. DigiTAb(TM) TAb has developed DigiTAb(TM) for treating digoxin intoxication. Digoxin is a prescription drug which is used to treat certain cardiac conditions on a long-term support basis. It is the most commonly prescribed form of digitalis which has been in use worldwide for many years. However, digoxin has a narrow therapeutic range and can cause life-threatening toxicity when taken in excess. It is estimated that 12,000 cases of severe digoxin toxicity occur annually, with the majority of these in the United States. In 1986, a major multi-national pharmaceutical company introduced a specific sheep derived polyclonal antibody product (using papain cleavage) to treat life-threatening digoxin intoxication. DigiTAb(TM) will therefore be competing directly with an established product in this market. TAb has completed research and development and preclinical testing of DigiTAb(TM). The Federal Food and Drug Administration ("FDA") has accepted TAb's application for IND status and TAb is initiating Phase II/III clinical testing of DigiTAb(TM) in both Europe and the United States. 6 9 TriTAb(TM) TAb is developing TriTAb(TM) to treat tricyclic antidepressant ("TCA") toxicity. This class of drugs is one of the main causes of poisoning by drug overdose in Europe and the United States. TCAs are a family of structurally related compounds used in the treatment of severe clinical depression. Despite the recent introduction of safer non-TCA antidepressant drugs, TCAs as a group, continue to hold a large share of the antidepressant market. Typically these drugs are generic and their patents have expired. Consequently, TCAs are much less expensive than the newer non-TCA antidepressants. For this reason, Management believes that TCA therapy is likely to remain in clinical use for some time. In addition, they may exert a better clinical response in some severe forms of depression. Toxic side effects of TCA drugs are relatively common and the incidence of toxicity has been estimated to run as high as 5 percent. The most severe side effects of TCA affect the heart, necessitating prolonged intensive care treatment, and can ultimately be fatal. At present, no specific antidote for TCA poisoning is available. However, TAb has developed an antibody treatment for TCA toxicity which the Company's preclinical tests demonstrated to be effective in reversing TCA toxicity. TAb is targeting the treatment of TCA toxicity victims admitted to hospital emergency rooms with symptoms of serious toxicity. It is estimated that such cases total 60,000 per year in Europe and the United States. The Company has satisfactorily completed all preclinical testing of TriTAb(TM) and intends to file an application to initiate clinical studies in 1997. The Directors are not aware of any other competitive commercial efforts in this field. ANTI-CYTOKINE PROGRAM. CytoTAb(TM) - Sepsis. Sepsis Syndrome is a name given to a spectrum of disorders caused by the body's exaggerated response to infection or injury and is triggered by a wide variety of bacterial, viral and fungal organisms. The three defining conditions for sepsis are a site or source of inflammation, abnormal vital signs and a failure of one or more major organ systems, typically the respiratory system (lungs), central nervous system, cardiovascular system or the excretory system (kidneys). Immune suppression, invasive procedures, trauma or surgery are the usual factors that allow bacteria or their toxic products to enter the bloodstream. An estimated 800,000 to 900,000 patients suffer with Sepsis Syndrome each year in Europe and the United States alone and there is a fatality rate ranging from 20 to 60 percent, depending on severity. The current clinical management of Sepsis Syndrome is expensive, often involving intensive care measures, mechanical ventilation, hemodialysis, nutritional support and a variety of antibiotics. Furthermore, none of these interventions has significantly decreased mortality rates, despite over 15 years of intensive research. A number of companies have been actively pursuing the commercial development of antibody products to treat Sepsis Syndrome. TAb's Management believes that all have adopted monoclonal technology, some with a view to neutralizing endotoxins which often initiate the body's inflammatory response to infection, while others have introduced antibodies to target cytokines such as tumor necrosis factor (TNF), which act as mediators of Sepsis Syndrome. Management is aware of monoclonal antibody products intended to treat Sepsis Syndrome that have encountered problems in the testing stage and some that have been withdrawn from clinical trials. Through its sepsis program TAb has developed a line of polyclonal antibody products to target the inflammatory cytokines that act as mediators to Sepsis Syndrome. Management is not aware of any other company which has used or is using polyclonal antibodies for Sepsis Syndrome. 7 10 TAb has completed a number of preclinical tests with its first product in this program, CytoTAb(TM), which is directed against TNF. The results of the Company's preclinical tests indicated statistically significant neutralization of the TNF. The FDA has accepted the Company's IND application for this product. In 1993, an opportunity arose to test TAb's anti-TNF antibody in a model of human sepsis using a study designed by scientists from the University of Oxford. This model involved Louse-Borne Relapsing Fever ("LBRF"), which is a serious medical problem in Ethiopia; mortality in untreated patients has exceeded 50 percent in some epidemics. The current treatment for LBRF, while effective, is associated with a predictable pattern of side-effects, some of which are life-threatening and appear closely to resemble classic Sepsis Syndrome. TAb's first study consisted of a randomized, double blind, placebo controlled trial of TAb's anti-TNF antibody carried out in 49 patients with LBRF in Ethiopia. Subsequent studies have taken place in Ethiopia on over 90 patients. The results provide evidence that TAb's antibody product suppresses cytokine activity as seen in LBRF patients and were published in The New England Journal of Medicine in August of 1996. To the best of Management's' knowledge, this is the first time a human study of an anti-cytokine antibody has provided such successful results. In 1995, the Company entered into an agreement with scientists at Vanderbilt University Medical Center ("Vanderbilt") to coordinate initial United States clinical trials of the CytoTAb(TM) product. These trials commenced in April 1995. Vanderbilt has extensive experience in testing the impact of interventions on endotoxemia, and has studied a variety of proposed antibody products in both in vivo and in vitro models. In a Phase I study a total of 25 patients meeting criteria for severe sepsis have been treated with one of several doses of CytoTAb(TM). The results indicated that the antibody binds to its target (TNF) with high affinity. The various doses were well tolerated with no significant hypersensitivity reactions or episodes of immune complex disease. The antibody was rapidly distributed. The Company has recently concluded a Phase II clinical study in several United States centers and has published the results. The Phase II study provided data on safety and dose ranging to be used in designing further trials. The mechanisms of inflammation in sepsis are common to many immune and infectious diseases, and the Directors anticipate that these anti-cytokine antibodies may also have applications in other diseases. CytoTAb(TM) - Jarisch-Herxheimer Reaction (JHR). The Jarisch-Herxheimer Reaction occurs in some patients who have received antibiotics to treat an infection and can be fatal. The antibiotic kills the infecting organism which breaks up. The fragments of the organism cause a massive response involving a cascade of cytokine release which leads to a high temperature and rapid pulse. JHR is a model system for sepsis, but it is also an indication in its own right. Variations of JHR occur throughout the world including Europe and the United States. Four such examples are Louse-Borne Relapsing Fever in Ethiopia, Tick-Borne Relapsing Fever, Secondary Syphilis, and Lyme Disease in the United States. TAb plans to carry out Phase III trials in JHR under full Good Clinical Practice (GCP) with a view to submitting a product license application in the United States and possibly Europe for CytoTAb(TM) for JHR. CytoTAb(TM) - Transplantation. Many kidney transplant patients suffer acute rejection episodes which are sometimes treated with a monoclonal antibody. This treatment may itself be associated with side effects which are believed to be connected with the release of TNF. TAb is investigating the use of CytoTAb(TM) to prevent and treat such side effects. It is expected that trials will commence at general medical centers in the United States later in 1997. 8 11 CytoTAb(TM) - Cerebral Malaria. Severe cerebral malaria is associated with elevated concentrations of TNF. The recurring exacerbations of fever and other severe symptoms and signs of cerebral malaria represent a form of sepsis. TAb is investigating the use of CytoTAb(TM) in mitigating the morbidity and mortality of severe cerebral malaria, and the possible complications of cerebral malaria treatment. The Company's Pilot study for this indication finished in Thailand during the first quarter of 1997. TAb's position in relation to CytoTAb(TM) may be affected by two European patents. Opposition to these patents has been filed by TAb and others on various general and specific grounds including lack of patentability. If valid as granted, these European patents could be used to attempt to limit TAb's freedom to use anti-TNF antibodies, and therefore TAb's ability to market CytoTAb(TM) in certain European countries. TAb's Management does not believe that the existence of these European patents will prevent TAb from achieving the successful commercial exploitation of CytoTAb(TM). TAb has itself applied for specific patents covering the use of Fab fragments of anti-TNF antibodies, and the techniques for its preparation. PRINCIPAL LICENSING AND OTHER COLLABORATIVE ARRANGEMENTS For certain product candidates, the Company has secured, or will in the future pursue, some form of collaborative agreement as the preferred arrangement for bringing its products to market. Abundant precedents exist within the industry for such alliances. Typically, the biotechnology company handles development while a collaborator provides funding and regulatory assistance, and takes responsibility for marketing and distribution of the product. COLLABORATIVE ARRANGEMENTS The following is a summary of TAb's current agreements: Swedish Orphan. In January 1990 the Company entered into an agreement with Swedish Orphan AB, a Swedish company, appointing them as exclusive sales representative to market ViperaTAb(TM) in certain territories. The agreement was subsequently amended to include certain other antivenoms identified by the Company, and DigiTAb(TM) and TriTAb(TM). The territories are currently Sweden, Norway, Denmark and Finland. Swedish Orphan specializes in the development, regulatory handling, marketing and distribution of niche pharmaceuticals and has arranged for the Karolinska Institute to conduct clinical trials of the products which are a pre-requisite to their registration in Scandinavia. Swedish Orphan receives a commission on sales of the products in the territories. The agreement will continue until December 31, 2002 and thereafter unless terminated by 120 days' notice by either party. Helena Laboratories and Immuno Gen. In April 1993 the Company, TAb Wales and PAL entered into an agreement with Helena Laboratories (UK) Limited ("Helena") and Immuno Gen International Limited ("Immuno Gen"), appointing Helena and Immuno Gen as worldwide distributor for certain antisera products (other than those developed with a third party) for use solely in diagnostic or research diagnostic purposes. FH Faulding. In September 1995 the Company entered into an exclusive distribution agreement with FH Faulding & Co. Limited, an Australian company, appointing FH Faulding to obtain registration and marketing approvals for certain products and to be exclusive distributor of such products in Australia, New Zealand and such other countries as the Company may agree. The products are PulchellaTAb, DigiTAb(TM) and TriTAb(TM). 9 12 In October 1996 the Company signed a Clinical Trials and Registration Agreement with FH Faulding, to provide financial support for clinical trials and to seek registration and marketing approvals for CytoTAb(TM) for treatment of cerebral malaria for Thailand and other countries in South East Asia where malaria is a problem. CSL. In February 1997 the Company signed a Clinical Trials, Registration, Manufacturing, and Distribution Agreement with CSL, an Australian company. This agreement makes CSL the exclusive distributor for Brown TAb(TM) in Australia and Papua New Guinea. Federal Ministry of Health of Nigeria. In August 1995 the Company entered into an agreement with the Federal Ministry of Health on behalf of the Nigerian Government under which the Nigerian Government has contributed to the costs of development and clinical trials of EchiTAb(TM), and undertakes to purchase a minimum of 10,000 vials of antivenom. A royalty is payable to the Nigerian Government on sales of EchiTAb(TM) outside Nigeria. ACADEMIC AND CLINICAL AFFILIATIONS A proportion of the Company's research and development and product testing activities are carried out through affiliations and consulting arrangements with clinical research organizations and scientists at academic institutions in the United Kingdom, Scandinavia and North America, including St. Bartholomew's and the Royal London School of Medicine and Dentistry, the Karolinska Institute, the University of Arizona and Vanderbilt University Medical Center. These include arrangements in respect of preclinical and clinical research, consultancy, patents, royalties and facility leases. PROPRIETARY POSITION COMPETITION ANTIVENOMS. A number of organizations and companies manufacture snake antivenom throughout the world. However, Management believes most are using equine derived products based on older technology. Based on clinical results, Management believes that TAb's antivenom products are, in general, safer and have greater efficacy. There are two main European competitors to TAb's Vipera product. The European Viper Antivenom is an equine derived product made in Croatia by the Zagreb Institute for Immunology. Institut Pasteur, part of Pasteur Merieux Serums & Vaccins, also has an equine derived Vipera antivenom product. Management believes that TAb's product is superior, although both competing products are considerably cheaper. Notwithstanding the price differential, TAb has successfully competed with Institut Pasteur and the Zagreb Institute for Immunology in Sweden where ViperaTAb(TM) currently commands at least 80% of the market. Only one Crotalid antivenom product is currently approved in the United States. There are frequent toxicity problems associated with that product. Equine derived antivenom products with which EchiTAb(TM), PulchellaTAb(TM) and BrownTAb(TM) will compete are produced by, among others, Institut Pasteur and Haffkine BioPharmaceuticals. 10 13 DIGOXIN ANTIDOTE. TAb has two competitors, one of which is well-established in Europe and the other in the United States. Glaxo Wellcome plc's Digibind(R) is available in the United Kingdom and the United States and Boehringer Mannheim GmbH's Digitalis - Antidot BM(R) is available in Europe. Both of these products are Fab based and derived from sheep polyclonal antibodies. However, Management believes that DigiTAb(TM) could achieve an attractive niche position in this area. TRICYCLIC ANTIDEPRESSANT ANTIDOTE. No specific tricyclic antidepressant antidote exists and TAb's Management does not know of any company conducting research in this area. TAb intends to apply for orphan drug status in the United States which, if granted, will provide seven years of marketing exclusivity. Furthermore, TAb has been granted a United States patent for the key immunogens, the production process, the resultant product and the use of the product to treat tricyclic antidepressant toxicity. SEPSIS SYNDROME TREATMENT. Management expects to encounter significant competition from rival products for Sepsis Syndrome treatment. Many potential competitors are working on a variety of approaches. For example, Xoma Corp. and Centocor, Inc. have both had anti-endotoxin monoclonal antibody preparations to treat septic shock in Phase III clinical trials. However, the results indicated that both these products were of limited value as a treatment for life-threatening septic shock. Celltech Group plc, Chiron Corp., Knoll AG and Centocor, Inc., have developed monoclonal anti-TNF antibodies; Immunex Corp. has developed a TNF receptor; Roche Bioscience has generated a modified TNF receptor product which is in clinical trials. Synergen Inc. has developed IL-1 receptor antagonists; and Cortech, Inc. has tested a bradykinin antagonist. Two monoclonal antibodies to TNF are known to be in advanced clinical development (Phase III) but some clinicians have been disappointed with published results regarding these products and are skeptical about their ultimate success. Management knows of no other polyclonal antibody in development for the treatment of Sepsis Syndrome. Management believes that CytoTAb(TM) has a notable advantage over other products in clinical development in having been the only product so far to have been tested and demonstrated efficacy in a condition similar to Sepsis Syndrome: the Jarisch-Herxheimer Reaction. While potential competitors are abundant in this field of therapy, Management believes that TAb's approach offers greater promise of broad-range efficacy than any other product known to be under development. INTELLECTUAL PROPERTY TAb's policy is to protect and defend the intellectual property associated with its technology and products. TAb seeks patents whenever appropriate. Management also believes that sufficient steps have been taken to ensure that trade secrets such as animal husbandry techniques and processes unique to large-scale production of polyclonal antibodies are protected. 11 14 TAb has optimized the production and purification of polyclonal antibodies and has developed extensive proprietary knowledge in this area, combining scientific, veterinary and large-volume processing skills. TAb has applied for patents (United States, Europe and elsewhere) which include several key aspects of the relevant techniques; each application is now under review by the relevant patent offices. However, some parts of the process are non-patentable, and TAb has implemented policies and procedures designed to protect proprietary information concerning manufacturing techniques. TAb is pursuing a multinational patent strategy for the protection of intellectual property associated with its technology and products. TAb holds the following patents: - - A United States patent encompassing a broad set of claims in respect of the antidote to poisoning with tricyclic antidepressants. - - A United Kingdom patent on the use of Fab fragments of anti-TNF for the treatment of septic shock. - - A United Kingdom patent on the use of mixed monospecific antivenoms. - - A United States patent on the isolation and purification of antivenoms. TAb is pursuing the following patent applications: - - Various steps in the production and purification of polyclonal antibodies. - - The superiority of Fab fragments to TNF relative to other antibody fragments or intact antibodies. - - The superiority of Fab fragments to antivenoms relative to other antibody fragments or intact antibodies. There can be no assurance that the Company will receive the requested approval of these pending patent applications. MARKETING AND RESEARCH AND DEVELOPMENT STRATEGIES MARKETING STRATEGY. Collaboration agreements between large pharmaceutical companies and biotechnology companies are common. The large pharmaceutical companies seek to in-license products which are at an advanced stage of development, providing the pharmaceutical companies with lower risk investments in the development of new pharmaceuticals and access to products outside their core area of research and development expertise. This provides a biotechnology or biopharmaceutical company, such as TAb, with a source of revenue prior to the launch of a product together with access to marketing skills and to an experienced sales force. These agreements typically include an upfront payment on signing the agreement, milestone payments on reaching pre-defined stages in the development program, and royalties payable on sales by the marketing collaborator together with a margin on the supply of product. 12 15 Management intends to enter into such arrangements for TAb's products. The stage at which TAb will out-license will depend on balancing the market potential of the product with the costs and risks associated with the continuing development program. Except in certain limited circumstances, the Directors do not intend that TAb will establish its own sales force but expect to market its products through alliances with collaborators. Management groups TAb's products in two general categories: Niche Products. These products include the antivenoms and DigiTAb(TM). Niche products serve an acute medical need in a low volume market. Generally, the products have a lower commercial risk as they tend to have lower development costs, shorter lead times and potentially accelerated regulatory review. Management believes that TAb's niche products will be able to show improved safety or efficacy compared with existing products or that they will be able to present a market opportunity in an established market place. Major Market Products. These products include the anti-cytokine products and certain of the anti-drug products. Major market products are being developed to meet medical needs for life threatening conditions, which Management considers have significant market potential. For products requiring sizable later stage trials, Management intends to out-license these products at the end of Phase II clinical trials in order to optimize return. RESEARCH AND DEVELOPMENT STRATEGY. The nature of TAb's technology affords flexibility in its development of a variety of products. By varying the initial target molecule and using consistent production techniques, TAb has already demonstrated that it can create products for different therapeutic uses. Management intends to take advantage of opportunities for which United States orphan drug status might be granted given the development, registration and marketing incentives which are available from such status being granted. TAb has already established and will continue to seek new collaborative arrangements with academic institutions either sponsoring their work directly or acquiring the intellectual property rights (or rights to use the same) to complementary novel developments. This provides the Company with another source of new technology to develop further its new products. GOVERNMENT REGULATION GENERAL Regulation by government authorities in the United States, Europe and other countries in which the Company operates is a significant consideration in the development, production, marketing, labeling and reimbursement of the Company's products and in its continuing research and development activities. In the United States, Europe and most other countries there is a requirement to obtain and to maintain an approval for a product from the appropriate regulatory authority ("marketing authorization"). The Company is also subject to various laws, regulations, policies, guidelines and recommendations relating to such matters as safe working conditions, laboratory and manufacturing practices, the experimental use of animals and the protection of the environment. The general trend has been towards greater regulation of the pharmaceutical industry and its products. 13 16 The submission of an application to a regulatory authority does not guarantee that an authorization will be granted. Regulatory authorities require substantial data in connection with marketing authorization applications, resulting in a lengthy approval process. The time taken to obtain such approval varies, but can take from a few months to several years and can involve substantial expenditure. This may be due to the lack of the necessary results required by regulatory authorities or changing or additional regulation during the product development process. Furthermore, regulatory authorities of different countries may impose differing requirements and may refuse to grant, or may require additional data before granting an approval, even though the product may have been approved by the regulatory authority of another country. Even if approval is obtained, failure to comply with present or future regulatory requirements, or new information reflecting on the safety or effectiveness of the approved drug, can lead the regulator to withdraw its approval to market the product. In the United States, the principal regulatory agency is the U.S. Food and Drug Administration ("FDA"). Nearly all other countries have national regulatory authorities. The Company may have to satisfy different requirements from the FDA, European authorities and other national regulatory authorities. There is an ongoing initiative, the International Conference on Harmonization, between representatives from Japan, the United States and the European Union, to limit differences where possible, but it may be many years before its objective is achieved, if at all. In Europe, the Company must take into consideration (a) the regulatory climate within the European Union, including the stance of the International Commission for Harmonization, the European Agency for the Evaluation of Medicinal Products ("EMEA") and the European Committee for Proprietary Medicinal Products ("CPMP"), as well as (b) the position of the national regulatory authorities of other European countries. New licensing procedures were introduced in the European Union in 1995 aimed at progressively limiting the differences in requirements between the regulatory authorities of European member states in respect of the same products. However, it is too early to assess fully the impact of these new procedures. Wherever practical, the Company intends to design preclinical and clinical protocols which should generate sufficient data to be acceptable to support applications for the same product in each country where it is intended to be marketed. PRICE REGULATION In some countries it is necessary to obtain approval for the price to be charged. This is true in a number of European member states. In the United Kingdom the launch price is set by the company (subject to the constraints of the pharmaceutical price regulation system, which controls the profitability of a company's business with the United Kingdom's National Health Service). Governments may also influence the price through the control of national healthcare systems and also organizations which may bear the cost of supply of such products. In the United States, government-funded or private medical care plans can influence prices, and there are a variety of indirect controls. U.S. REGULATION REGULATORY AUTHORITIES. The development and marketing of medicinal products for human use in the United States is regulated at the federal and state levels. The principal federal regulatory agency is the FDA within the Department of Health and Human Services. Although most states maintain one or more agencies with power to regulate medicines, they commonly defer to the FDA in matters relating to product development and approval. 14 17 Due to the requirements imposed by the FDA, the development process for new pharmaceuticals in the United States is lengthy, expensive and commercially risky. The great majority of compounds screened for possible development are ultimately rejected at some stage in the pre-market testing process; total development time for successful compounds often exceeds 10 years. However, under the provisions of recent legislation the FDA has committed to reduce the review time for applications. Although the agency has achieved some reductions, especially for high-priority medicines, the review process remains lengthy and complex. There has been little or no reduction in the testing required before applications are submitted, which consumes most of the time spent in developing new medicines for the U.S. market. GOOD PRACTICE STANDARDS. Various standards are applied either by law or custom to the activities of pharmaceutical companies. These include principally Good Laboratory Practice ("GLP"), applied to studies performed during preclinical developments to identify the compound's behavior and toxicity in animals, Good Clinical Practice ("GCP"), intended to ensure the quality and integrity of clinical data and to protect the rights and safety of human subjects in clinical trials, and Good Manufacturing Practice ("GMP") which ensures the quality of drugs by setting minimum standards for all drug manufacturing facilities. Such standards have been developed by the FDA and by the United States National Committee for Clinical Laboratory Standards. Violation of these regulations can lead to invalidation of the relevant studies. In Europe they are embodied in law (GMP and GLP) or guidelines (GCP). The Company has used consulting firms in the United Kingdom and in the United States for advice on compliance with existing regulations and guidelines. CLINICAL TRIALS. All clinical trials of investigational medicines in the United States must be carried out under investigational new drug ("IND") submissions to the FDA. FDA regulations impose requirements for documenting the safety of proposed clinical trials, provide for submissions to FDA before clinical trials can commence and authorize the FDA to suspend or withdraw permission to continue clinical trials. If the drug is considered by the FDA and by prospective users to provide an important benefit in the treatment of a serious disease, the applicant may be faced with demands from patient groups, sometimes endorsed by the FDA, for release of the drug for treatment during the investigative stage. The supply of such treatment is termed treatment use. Supplying drugs on this basis can involve significant expense and resource demands for the sponsor of the drug, which must administer the pre-approval release program. This may, in some situations, interfere with the ability to complete controlled clinical trials of the drug. APPROVAL PROCEDURES AND CRITERIA. The FDA applies essentially the same requirements for approval of all products: proof of safety and efficacy, demonstration of adequate controls in the manufacturing process and conformity with requirements for labeling. Efficacy must usually be demonstrated by two well-controlled clinical trials carried out in accordance with FDA regulations. The FDA has discretion to determine whether the data submitted are adequate for approval. The time taken for this approval process is related to the quality of the submission, the potential contribution of the compound in improving the treatment of the target disease and the workload at the FDA. There can be no assurance that any new drug will successfully proceed through this approval process or that it will be approved in any specific period of time. 15 18 During its review, the FDA may ask for additional test data. If the FDA approves the product, it may require post-marketing testing, including potentially expensive Phase IV studies. This phase assesses further the product's therapeutic value and provides additional information about the safety and efficacy of the product across a broader patient base. In addition, the FDA can impose restrictions on the use of the drug that may be difficult and expensive to administer. ORPHAN DRUG STATUS. The Orphan Drug Act encourages manufacturers to seek approval of products intended to treat diseases with a prevalence of under 200,000 patients per annum in the United States. This Act provides tax incentives, FDA assistance with protocol design, and a period of seven years of marketing exclusivity for the product. The Company expects some of its proposed products to be designated as orphan drugs by the FDA. TAb's Crotalid antivenom CroTAb(R) has already been designated by the FDA as an orphan drug. ACCELERATED APPROVAL. The FDA may accelerate approval of medicines that offer a significant improvement in the treatment of fatal or life-threatening conditions, or conditions for which there is no alternative therapy. In certain cases, the FDA may permit Phase II and Phase III studies to be compressed into a single study. It is unusual for the FDA to base an approval on such compressed studies and, although many of the Company's products would be included in this category, there can be no assurance that such combined testing would be considered acceptable for any of the Company's products. ACCEPTANCE OF FOREIGN CLINICAL DATA. The FDA will accept reports of foreign clinical trials if they meet requirements for GCP and are relevant to U.S. medical practice. It is, however, uncommon for the agency to approve a product without some evidence from clinical trials conducted in the United States, and most sponsors carry out at least one pivotal trial there. Studies conducted outside the United States are subject to special audits by FDA inspectors and may be rejected if U.S. requirements for record-keeping, protection of human subjects and other matters relating to GCP are not met. NON-PATENT MARKET EXCLUSIVITY. In U.S. medicines law there are two forms of non-patent market exclusivity. First, the law prohibits approval of abbreviated new drug applications or literature-based applications for copies of innovative products for a period of five years after the approval of a new chemical entity, and three years after the approval of a new indication or dosage form for which substantial clinical trials were required. These provisions do not preclude approval of competitive applications based on original data, and they apply only to new drugs, rather than antibodies or biological products. Second, the law provides for a seven-year period of protection for orphan drugs (see above). During this period, the FDA is precluded (subject to complex exceptions) from approving any application for the same drug, even if it is based on original data. These provisions apply to all drugs, including antibiotics and biological products. MANUFACTURING CONTROLS. The FDA inspects pharmaceutical manufacturing establishments for compliance with current GMP and conformity with specifications in marketing approvals. Biological manufacturing establishments must be licensed by the FDA. The agency inspects foreign manufacturing facilities that supply bulk or finished products for the United States market. If companies cannot meet FDA requirements, their products may be excluded from the United States. 16 19 ADVERTISING AND PROMOTION. The FDA regulates advertising and promotion of prescription medicines. Promotion for unapproved uses is prohibited, and sponsorship of medical symposia and publications is restricted. Financial incentives to prescribers are regulated under federal and state criminal laws as well as codes of practice for the medical professions. ENFORCEMENT POWERS. The federal government has extensive powers to compel compliance with medicines laws. Volative products are subject to seizure, and imported products may be detained. Companies and individuals that violate the law are subject to injunctions and criminal penalties with no requirement for proof of negligence or intent. Persons and companies convicted of certain offenses can be barred from involvement in the medicines approval process. The federal government can suspend or withdraw approval of products if questions arise concerning safety or effectiveness. PRODUCT LIABILITY. Companies that market medicines in the United States are subject to suit in state and federal courts for personal injuries caused by their products. The risk of product liability litigation is significantly greater in the United States than in most European jurisdictions, and damage awards can be substantial. FDA approval is not a defense to liability, and failure to comply with FDA requirements may constitute evidence of negligence. EUROPEAN REGULATION The Company's activities in Europe are regulated by national and local laws and European Union law. There are European Directives governing the development, manufacture and marketing (including wholesale) of medicinal products which member states are required to implement into local law and which must be interpreted in line with the European provisions. However, failure to implement them properly by national governments may allow companies to rely upon provisions of pre-existing local laws. Certain areas of regulation continue to be regulated by national law, for example, the regulation of clinical research. CLINICAL TRIALS. Clinical trials of new product candidates are designed to establish their safety and efficacy in treating a specific disease and are usually conducted in three phases, although there are not always distinct divisions between the objectives and activities undertaken in each phase. The clinical trial process may take from two to six years or more to complete. Phase I trials are normally conducted in a small number of healthy human subjects or patients with the specific condition targeted. Their purpose is to provide a preliminary evaluation of the product candidate's safety, toxicity and behavior when administered to humans. In Phase II trials, the product candidate is assessed for its short-term safety and preliminary efficacy in a limited number of patients with the targeted disease or disorder. The appropriate dose ranges and regimens for Phase III are also determined during this Phase. Phase III trials involve a comprehensive evaluation of safety, efficacy and toxicity that might not have been seen in smaller studies. The trials are carried out, typically on a multi-center basis, on a sufficient number of patients to obtain statistically significant results. All adverse reactions are investigated in detail and special features of the product candidate are explored. 17 20 When adequate preclinical data are available, application will usually be made to the regulatory authority in the country where the trial is to be conducted. In most developed countries, clinical trials may only be commenced after notification to and/or approval by the competent regulatory authority and an independent ethics committee. In European Union member states, marketing authorizations must be supported by clinical trial data as set out in European Directives and guidelines, but the approval process and criteria for commencement of clinical trials are not yet harmonized by European Union law. The International Commission for Harmonization is developing proposals for new legislation harmonizing national laws and practices. MARKETING AUTHORIZATIONS. When clinical trial data supporting safety and efficacy and the necessary manufacturing and formulation data are available, an application for a marketing authorization may be submitted. If a regulatory authority is satisfied that the criteria of safety, quality and efficacy are met, a marketing authorization will be granted although European Union law does allow member states, exceptionally, to prohibit product use on grounds connected with public order or morality. Marketing authorizations are granted subject to certain generally applicable conditions and may also be subject to product-specific restrictions determined by the regulatory authorities. From January 1, 1995, two new procedures for the registration of medicinal products in the European Union came into effect; the "centralized" and "mutual recognition" systems. Until January 1, 1998, national applications may also be made in several member states either in parallel, or in sequence if the product is not subject to compulsory licensing under the centralized system. The centralized system is compulsory for certain biotechnology products, and optional for certain other products, including new active substances not previously authorized in the European Union, products administered by innovative and novel delivery systems and significant new indications for existing products. The EMEA coordinates the registration process, but the CPMP, a body of scientific experts drawn from each member state, undertakes the scientific assessment of the product dossier and gives an opinion as to whether the product meets the criteria for authorization. Time periods are laid down for various stages in the approval process, including allowances for questions and appeals. The decision to grant or refuse a marketing authorization is taken by the Commission and, when granted, the single authorization obtained is valid throughout all member states and the European Free Trade Association. The mutual recognition system is based upon a marketing authorization granted by one national regulatory authority, the "Reference Member State" or "RMS". Having obtained a marketing authorization from the RMS, the authorization holder may apply to the regulatory authorities of other member states to "recognize" that prior authorization and to issue national authorizations on the same terms. Such applications can be made sequentially. There are procedures and time limits according to which objections by member states can be raised and appeals may be heard, although these may significantly lengthen the time from initial application to approval. Arbitrations are handled by the CPMP whose decision, when adopted by the Commission, is binding on all member states. Consequently, arbitration may adversely affect prior authorizations. The passage of a product through the approval system can therefore be long and drawn out. Although the procedures impose time limits upon the authorities, these limits do not run if the applicant delays in providing additional data or responses to queries raised. In addition, the regulatory authorities can suspend, vary or revoke a marketing authorization at any time after it has been granted if they are no longer satisfied as to the product's safety, quality or efficacy. Increasing harmonization of decision-making in the European Union through the CPMP means that, in the future, concerns raised by any one member state are likely to be examined at CPMP level and the outcome of its deliberations will affect the product in all member states. 18 21 Marketing authorizations are generally granted for a period of five years and require renewal. During that period, should new developments occur, the holder of the authorization is required to update the product dossier. There is an obligation on the holder of the authorization to report adverse events to the regulatory authorities and to keep product safety under review. MANUFACTURING AUTHORIZATIONS AND FACILITIES LICENSES. European Union law requires that companies manufacturing medicinal products must hold a manufacturer's authorization and must comply with the requirements of GMP. These standards are enforced by inspection. Failure to comply may result in the suspension or revocation of the manufacturer's authorization and may lead to suspension of product marketing. In the United Kingdom facilities licenses are issued after an application to, and inspection by, the Medicines Control Agency (MCA), and similarly in Australia by the Therapeutic Goods Administration. REGULATION IN OTHER COUNTRIES In general, regulation is similar in countries outside the United States and Europe, with the approval system regulated by specific agencies in each geographic area. However, approval by one agency does not ensure approval in other countries. In Australia successful marketing of a therapeutic substance may be dependent on receiving marketing approval from the Therapeutic Goods Administration and also on obtaining Commonwealth Government subsidy for use of the product via either the Pharmaceutical Benefit Scheme or the Special Access Scheme. Applications for listing on either of these Schemes requires additional information, in particular economic analysis data, and approval for this second step may lag behind obtaining marketing approval. The Australian Government is able to exercise considerable power over price control through this process. EMPLOYEES As of December 31, 1996, the Company had 150 full-time employees, including 34 scientists and 60 technicians engaged in research and development, 4 regulatory personnel, and 27 management and 25 administrative personnel. In addition, the Company employed 24 part-time employees at year end 1996. The Company believes that its future success will depend, in part, on its ability to attract and retain highly skilled technical, marketing, support, and management personnel. None of the Company's employees in the United States is subject to a collective bargaining agreement, and the Company has never experienced a work stoppage. Management believes that its employee relations are good. 19 22 ITEM 2. PROPERTIES The Company's physical properties are primarily owned or leased through its subsidiaries. TAb London Ltd. operates the Company's research and development laboratories and its pilot manufacturing facility at St. Bartholomew's and the Royal London School of Medicine and Dentistry in London. TAb London leases 3,400 square feet of laboratory space from St. Bartholomew's. The lease has an expiration date of September 30, 1997, but permits TAb to renew the lease for an additional six year term. This option has been exercised and the landlord's response is awaited. TAb London also leases 4,000 square feet of office space at 14-15 Newbury Street in Central London, which lease expires in 1999. TAb Wales Ltd. owns and operates production offices, quality control laboratories and a new manufacturing facility in Dyfed, Wales. In 1992, TAb acquired Polyclonal Antibodies Ltd. ("PAL"), which owned the initial Welsh facilities, including approximately 250 acres of pasture land, animal stock, and production and ancillary facilities. The Welsh facilities were established with financial support of the Welsh government in the form of grants and investments. In 1995, TAb Wales completed construction of a new 20,000 square foot manufacturing plant within its existing Welsh facilities. In 1994, TAb organized a production subsidiary, TAb Australia Pty. Ltd., in Adelaide, Australia, which produces additional antisera. In 1995, TAb Australia leased offices and laboratories and acquired grazing rights over 250 hectares of land at the Turretfield Research Center. The flocks of sheep were moved to this location and a bleeding shed constructed. In the fourth quarter of 1996, TAb Australia Pty. Ltd. completed construction of new facilities on the property. The new facilities include offices, a cleanroom and a manufacturing plant, located adjacent to the Company's existing facilities. The lease of the Turretfield Research Center property will expire in 2015. The Company's corporate headquarters is located in 7,941 square feet of leased office space in the vicinity of Vanderbilt University Medical Center in Nashville, Tennessee. The lease expires on January 31, 2001. All of the Company's laboratories, production facilities and farms are suitably equipped for their intended purposes. 20 23 ITEM 3. LEGAL PROCEEDINGS There are no pending legal proceedings involving the Company or any of its subsidiaries. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None 21 24 PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS The Company's Common Stock began trading publicly on the London Stock Exchange (under the symbol TAb) effective July 23, 1996. Prior to that date there was no public market for the Company's Common Stock. There is no public trading market for the Company's Common Stock within the United States. The following table presents quarterly information on the price range of the Company's Common Stock. This information indicates the high and low sale prices reported by the London Stock Exchange.
QUARTER ENDING HIGH LOW - -------------- ---- --- September 30, 1996 (commencing July 23, 1996) L.5.30 ($8.27) L.4.45 ($6.94) December 31, 1996 L.5.23 ($8.18) L.3.55 ($6.08)
As of March 14, 1997, there were approximately 900 holders of record of the Company's Common Stock. On March 14, 1997, the last sale prices reported on the London Stock Exchange for the Company's Common Stock was L.3.85 ($6.17). The Company to date has paid no dividends on its Common Stock. The declaration and payment of future dividends will be determined by the Board of Directors in light of conditions existing in the future and are expected to depend upon earnings, financial condition, capital requirements, and other relevant factors not presently determinable. The Company does not expect to pay dividends in the foreseeable future. - -------------------- (1) Currency translations were calculated based upon the currency exchange rates in effect on the date the price disclosed was reported on the London Stock Exchange. 22 25 ITEM 6. SELECTED FINANCIAL DATA The following selected consolidated financial data at and for each of the five years in the period ended December 31, 1996 have been derived from the Company's consolidated financial statements. The data set forth below should be read in conjunction with the consolidated financial statements and notes thereto included elsewhere herein and also with "Management's Discussion and Analysis of Financial Condition and Results of Operations."
Years Ended December 31, 8/10/84 ------------------------------------------------------------------ (Inception) through 12/31/96 -------- 1996 1995 1994 1993 1992 ------------ ----------- ----------- ----------- ----------- STATEMENT OF OPERATIONS DATA: Total Revenues . . . . . . . . . . . . . . (1) $ 3,268,368 $ 750,490 $ 1,130,323 $ 290,315 $ 163,011 $ 6,708,814 Expenses: Research and development . . . . . . . . . . 9,682,263 6,449,494 5,107,894 3,597,555 2,404,560 31,205,062 General, administrative, marketing . . . . . 2,586,014 2,119,652 1,619,824 1,055,971 763,139 10,118,624 Depreciation and amortization . . . . . . . 1,387,916 856,756 864,288 533,244 99,875 3,867,748 Interest expense and debt conversions . . . 2,002,932 388,258 137,018 781,097 182,621 3,530,221 Other . . . . . . . . . . . . . . . . . . . 355,360 36,368 119,052 25,873 1,914 551,824 ------------ ----------- ---------- ----------- ----------- ------------- Total expenses . . . . . . . . . . . . . 16,014,485 9,850,528 7,848,076 5,993,740 3,452,109 49,273,479 Net loss . . . . . . . . . . . . . . . . . . . $(12,746,117) $(9,100,038) $(6,717,753) $(5,703,425) $(3,289,098) $ (42,564,665) ============ =========== =========== =========== =========== ============ Net loss per share . . . . . . . . . . . . . . $ (0.68) $ (0.57) $ (0.47) $ (0.48) $ (0.33) $ (4.79) ============ =========== =========== =========== =========== ============ BALANCE SHEET DATA: Cash and cash equivalents . . . . . (1) (3) $ 20,502,536 $ 3,397,082 $ 593,154 $ 103,842 $ 434,963 Total assets . . . . . . . . . . . . . (2) 37,179,990 15,157,099 12,103,994 4,978,617 4,931,993 Long term debt, net of current portion . (2) 8,592,755 9,595,420 2,917,251 282,555 2,563,125 Deficit accumulated during development stage . . . . . . . . . . . . (42,564,665) (29,818,548) (20,718,510) (14,000,757) (8,297,332) Stockholders' equity . . . . . . . . . . (3) 25,215,530 894,479 4,862,404 1,917,332 1,621,629
Notes: (1) At December 31, 1996, the Company had cash and cash equivalents totaling $20,503,000 of which approximately $17,300,000 was denominated in British pounds. As a result of improvement in the exchange rate between the British pound and the U.S. dollar, the Company experienced a foreign currency transaction gain of $1,730,000 for the year ended December 31, 1996. (2) In 1994 and 1995, the Company constructed a pilot production facility in London and a manufacturing facility in Wales. These facilities were funded through financing arrangements provided by Aberlyn Capital Management Company, Inc. and the Welsh Development Agency. See Note 4 to the consolidated financial statements for further information. (3) On July 23, 1996, the Company completed an initial public offering of 4,190,477 shares of its common stock on the London Stock Exchange at L.5.25 ($8.14) per share. See Note 1 to the consolidated financial statements for further information. 23 26 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion and analysis of the financial condition and results of operations of the Company should be read in conjunction with the financial statements and notes thereto. Statements made in this Annual Report on Form 10-K which are not historical fact are forward-looking statements. In addition, the Company, through its senior management, from time to time makes forward looking public statements concerning its expected future operations and performance and other developments. Such forward-looking statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and are necessarily estimates reflecting the Company's best judgment based on current information and involve a number of risks and uncertainties, and there can be no assurance that other factors will not affect the accuracy of such forward-looking statements. While it is impossible to identify all such factors, factors which could cause actual results to differ materially from those estimated by the Company include but are not limited to, changes on the regulation of the pharmaceutical industry, both in the United States and internationally, changes in pharmaceutical product testing or approval standards, both in the United States and internationally, competitive pressures on the pharmaceutical industry and the Company's response thereto, general conditions in the economy and capital markets, and other factors which may be identified from time to time in the Company's Securities and Exchange Commission filings and other public announcements. GENERAL Since its inception, Therapeutic Antibodies Inc. ("TAb" or the "Company") has been in the development stage, devoting its efforts and resources to drug discovery and development programs relating to the development of highly purified, polyclonal antibodies for the treatment of disease. Since inception the Company's revenues have been from contract agreements with corporate partners, product sales, grant income, interest income, and insurance and value added tax recoveries. Net losses have been incurred each year since its inception and the Company expects to continue to incur operating losses during at least the next year due to continued spending on research, product development and increasing requirements for process development, preclinical and clinical testing, regulatory affairs, initial manufacturing activities and administration. To fund these activities, the Company conducted additional financings in the first nine months of 1996. See "Liquidity and Capital Resources". The Company conducts its operations from its headquarters in the United States and through subsidiaries located in the United Kingdom, Australia and New Zealand. For a discussion of the Company's international operations for the past three fiscal years, see Note 9 to the Company's financial statements. RESULTS OF OPERATIONS Year ended December 31, 1996 Compared to Year ended December 31, 1995 TAb's revenues for 1996 increased by 335% to $3,268,000 from $750,000 for 1995. During the year ended December 31, 1996, the Company received approximately $97,000 more in contract revenue over the amount received in the year ended December 31, 1995, which was attributable primarily to the Company's Nigerian EchiTAb(TM) contract. Grant revenue increased $79,000 due to a grant received from the Economic Development Authority of the Government of South Australia for expansion of the Company's Australian operations. Interest income in the year ended December 31, 1996, increased 527% to $607,000 from $97,000 due to additional cash and short term investment holdings from the proceeds of the UK Placement (defined below). See "Liquidity and Capital Resources". As a result of improvement in the 24 27 exchange rate between the British pound and the U.S. dollar, the Company experienced a foreign currency transaction gain of $1,730,000 for the year ended December 31, 1996. See Note 2b to the Company's financial statements included as Item 8. The Company conducts research, development, manufacturing and/or distributes its products in the United States, the United Kingdom, New Zealand and Australia. In 1996 and 1995 the New Zealand and Australian operations did not have a material impact on the results of operations. Trade revenues from international operations increased 23% to $350,000 in 1996 from $283,000 in 1995. Expenses for the year ended December 31, 1996 increased by 63% to $16,014,000 from $9,851,000 for the same period in 1995. Research and development expenses during the same periods increased by 50% to $9,682,000 from $6,449,000 as a result of increased clinical trial activities for DigiTAb(TM) and CytoTAb(TM) for malaria as well as the progression through the more advanced trial phases for CytoTAb(TM) for Sepsis and CroTAb(TM). These costs are related to manufacturing TAb's products for clinical trials, conducting clinical trials and ensuring that the necessary quality control and assurance procedures are in place. The cost of regulatory compliance has also increased as the Company's products advance through the development stages. Additionally, the Australian facility has increased the number of sheep in its flock during 1996 to meet the need for increased serum requirements for the clinical trials. The Company expects 1997 research and development expenses to increase at a smaller rate of growth as compared to 1996. General and administrative expenses for the year ended December 31, 1996 increased by 39% to $2,225,000 from $1,601,000 for the year ended December 31, 1995. This increase relates primarily to expanded staffing and related overhead expenses. Marketing and distribution expenses decreased for the year ended December 31, 1996 by 30% to $361,000 from $518,000 in the year ended December 31, 1995 due to a temporary reduction in marketing personnel. It is expected that the marketing department will hire additional personnel during 1997. Depreciation and amortization expense for the year ended December 31, 1996, increased by 62% to $1,388,000 from $857,000 compared to the year ended December 31, 1995. This increase is the result of the depreciation of the $4,000,000 capital expenditure for the Welsh production facility, which was placed in service in December 1995. Interest expense for the year ended December 31, 1996 increased by 209% to $1,201,000 from $388,000 in the year ended December 31, 1995 due to increased borrowings by the Company including the issuance of the Company's 6% and 15% Notes. See "Liquidity and Capital Resources". The Company repaid approximately $4,750,000 of its debt obligations in 1996 and, absent additional borrowings by the Company, therefore, expects interest expense to decrease during 1997. In the first quarter of 1996, the Company recorded a one-time debt conversion expense of $801,597, relating to the conversion of an aggregate of $2,565,000 of principal and interest on the Company's 6% Notes into shares of Common Stock, which represents the difference between the stated conversion price on the debt of $8.00 per share and the actual conversion price of $5.50. The Company's net loss for the year ended December 31, 1996, was $12,746,000 compared to a net loss of $9,100,000 for the year ended December 31, 1995. This increase was due to the one-time debt conversion expense and the other factors described above. 25 28 Year Ended December 31, 1995 Compared to Year Ended December 31, 1994 Revenues for the year ended December 31, 1995 decreased by 34% to $750,000 from $1,130,000 for the year ending December 31, 1994. In 1994, the Company recognized a one-time value added tax (VAT) recovery of $476,000 relating to taxes paid to the United Kingdom in prior years. The decrease in revenues is also attributed to a reduction in grant income from $321,000 in 1994 to $40,000 in 1995. In 1994, TAb recognized the full amount of a $269,000 job creation grant from the Welsh Government. TAb received a $405,000 construction grant from the Welsh Government in 1995 for its Welsh manufacturing facility. The Company is recognizing income from the construction grant over the depreciable life of the facility, approximately ten years. Contract revenues and sales of the Company's products grew by 71% in 1995 to $488,000 from $286,000 in 1994 primarily due to increased sales of ViperaTAb(TM) (formerly called BeriTAb(TM)), the Company's European antivenom. Sales of ViperaTAb(TM) increased to $243,000, from the initial sales of ViperaTAb(TM) of $14,000 in 1994. 1995 represented the first full year of sales of ViperaTAb(TM), which was sold in three Scandinavian countries (Sweden, Finland and Norway). In 1995, the Company also earned $70,000 in contract revenue under its Basic Cooperation Agreement with the Nigerian government, providing for clinical trial collaboration on EchiTAb(TM), the Company's West African antivenom. TAb earned $90,000 from this same contract in 1994. The Company recorded as "Other Income" in 1995 a one-time $100,000 registration and distribution fee from F.H. Faulding & Co. Limited, a multinational pharmaceutical company headquartered in Australia, with whom the Company entered into an agreement on August 31, 1995 to develop, register and distribute certain of the Company's antivenoms and drug antidote products in Australia and Southeast Asia. Trade revenues from international operations decreased 69% to $283,000 in 1995 from $920,000 in 1994 due to the one-time $476,000 VAT recovery from the United Kingdom recorded in 1994 and less grant income in 1995. Of the 1994 amount, $269,000 consisted of the Welsh Government job creation grant. Domestic trade revenue as a percentage of total trade revenue increased from 18% in 1994 to 62% in 1995. This shift is attributable to the Company earning more domestic contract and sale revenue in 1995, particularly on sales of ViperaTAb(TM) and EchiTAb(TM), and less international VAT recovery and grant income. Expenses increased by 26% in 1995 to $9,851,000 from $7,848,000 in 1994. Research and development expenses, the largest component of TAb's expenses, increased by 26% to $6,450,000 from $5,108,000 in 1994 as a result of increased domestic and foreign clinical trial activity, including production of clinical trial materials. General and administrative expenses increased by 14% in 1995 to $1,601,000 from $1,409,000 in 1994 as a result of an increase in the number of personnel and related expenses. Marketing expenses in 1995 increased by 146% to $518,000 compared to $211,000 in 1994 due to a major expansion of TAb's marketing and business development departments resulting in an aggregate increase in salary, travel and sales expenses. 26 29 Interest expenses in 1995 increased by 183% to $388,000 from $137,000 in 1994 due to increased borrowing by the Company to finance the plant expansions in London and Wales and to fund working capital. See "Liquidity and Capital Resources." The net loss for 1995 increased to $9.1 million from a net loss of $6.7 million in 1994. This increase was due to the factors described above. LIQUIDITY AND CAPITAL RESOURCES Since its inception, TAb has been in the development stage, devoting its efforts and resources to drug discovery and development programs. Capital resources have been used for the establishment and expansion of production facilities, research and development, clinical testing and to meet TAb's increased working capital needs in connection with such activities. Management does not expect revenues from product sales to be a significant source of funding until additional products receive regulatory approval. Future capital requirements will depend on numerous factors, including the progress of its research programs and clinical trials, the development of regulatory submissions, the commercial viability of the Company's products, the development of sales, distribution and marketing capabilities, and the terms of any new licensing arrangements. Financing for the Company's operating and capital requirements historically has been provided by the sale of equity, convertible debt and through other financings. At December 31, 1996, the Company had cash and cash equivalents totaling $20,503,000, of which approximately $17,300,000 was denominated in British pounds, and short term investments of $2,002,000. The Company's net cash used in operating activities during the year ended December 31, 1996, totaled $12,667,000, an increase of 168% from the year ended December 31, 1995. Capital expenditures of $2,760,000 in 1996 related to the expansion of the Company's production facilities in Australia and Wales. TAb has accelerated the expansion of its initial production facility in Australia and expects total capital expenditures at such facility to be $1,590,000. These capital expenditures are funded through a loan from the South Australian Minister for Primary Industries (discussed below). On July 23, 1996, the Company completed an initial public offering of 4,190,477 shares of its Common Stock on the London Stock Exchange at L.5.25 ($8.14) per share raising total gross and net proceeds of approximately $34,100,000 and $30,360,000, respectively. Approximately $4,750,000 was used to repay the Company's 15% Notes and certain other indebtedness. The remainder of the net proceeds will be utilized to fund working capital, operations and capital expenditures in 1997. During the year ended December 31, 1996, TAb Australia Pty. Ltd., the Company's Australian operating subsidiary ("TAb Australia"), made a $1,282,000 draw on its collateralized loan from the South Australian Minister for Primary Industries. Under this loan agreement, TAb Australia may draw up to $1,590,000 to assist with construction and equipping of buildings at its Turretfield location in South Australia. The loan bears interest at an annual rate of 11%, payable annually. Principal is to be repaid in ten equal annual installments. As of December 31, 1996, the Company had outstanding draws of $1,576,000 on this loan. In June 1996, the Company completed a private placement of $5,000,000 principal amount of the Company's 15% Subordinated Promissory Notes due May 1, 1997 (the "15% Notes"), of which $4,250,000 were purchased for cash and $750,000 were issued upon conversion of indebtedness. Each $250,000 unit of the 15% Notes was accompanied by a Stock Purchase Warrant to purchase 18,000 shares of Common Stock 27 30 at $8.00 per share. Warrants to purchase 360,000 shares of Common Stock were issued in connection with the 15% Notes. On August 24, 1996, the Company redeemed, for cash, $4,250,000 principal amount of the 15% Notes and accrued interest thereon. In April 1996, an officer of the Company made a short-term unsecured loan to the Company of $1,000,000. Interest was charged at 12%. In May, the officer converted $750,000 principal of the 12% Note into an equal amount of the Company's 15% Notes. The $250,000 principal balance on the 12% Note is payable in full together with accrued interest on December 1998. In September 1996, the Company repaid in full the outstanding $500,000 principal amount of a promissory note due to Lakewood Partners along with $3,400 accrued interest thereon. In October 1996, the Company's indebtedness to the Welsh Development Authority of L.300,000 British pounds was paid in full by converting L.250,000 principal of the note into TAb Inc. common stock and repaying L.50,000 and accrued interest thereon of L.12,000. TAb uses sheep for the production of its polyclonal antibodies and supplies all the antisera required from its own flocks. Currently, TAb's subsidiaries have approximately 6,000 sheep and TAb expects to substantially increase the size of its flocks over several years to meet full scale production requirements once additional products are approved for sale. TAb's subsidiary, TAb London, Ltd., leases 3,400 square feet of laboratory space from the Medical College of St. Bartholomew's Hospital in London. The lease has an expiration date of September 30, 1997, but permits TAb to renew the lease for an additional six year term. The Company expects to exercise the option to renew this lease. NET OPERATING LOSS CARRYFORWARDS As of December 31, 1996, the Company had approximately $39.3 million of net operating loss carryforwards for income tax purposes, of which $28.2 million are available for U.S. Federal taxes and expire from 1999 through 2011. In addition, the Company has approximately $207,000 of research and development tax credits available to offset future federal income tax, subject to limitations for alternative minimum tax. The Internal Revenue Code of 1986, as amended, contains certain provisions that limit the net operating loss carryforward available to be used in any given year if certain events occur, including significant changes in ownership. At present the Company's net operating loss carryforward is not subject to these limitations. No assets have been recognized in the Company's financial statements for these net operating loss carryforwards because management believes the generally accepted accounting principle criteria for recognition have not been met. 28 31 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA THERAPEUTIC ANTIBODIES INC. AND SUBSIDIARIES (A Development Stage Company) INDEX TO CONSOLIDATED FINANCIAL STATEMENTS the years ended December 31, 1996, 1995 and 1994 and the cumulative development stage from August 10, 1984 (inception) through December 31, 1996
PAGE ---- Report of Independent Accountants . . . . . . . . . . . . . . . . . . . . . . . . . . 30 Consolidated Financial Statements: Balance Sheets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31 Statements of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32 Statements of Stockholders' Equity . . . . . . . . . . . . . . . . . . . . . . . 33 Statements of Cash Flows . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 Notes to Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . 35
29 32 REPORT OF INDEPENDENT ACCOUNTANTS Board of Directors Therapeutic Antibodies Inc. We have audited the accompanying consolidated balance sheets of Therapeutic Antibodies Inc. and Subsidiaries (A Development Stage Company) as of December 31, 1996 and 1995, and the related consolidated statements of operations, stockholders' equity, and cash flows for each of the three years in the period ended December 31, 1996 and for the period from August 10, 1984 (inception) through December 31, 1996. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. As discussed in Note 1, the Company has been in the development stage with its primary activities being research and development and has not yet commenced planned principal operations. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Therapeutic Antibodies Inc. and Subsidiaries as of December 31, 1996 and 1995, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 1996 and for the period from August 10, 1984 (inception) through December 31, 1996 in conformity with generally accepted accounting principles. /s/ Coopers & Lybrand, L.L.P. Louisville, Kentucky March 7, 1997 30 33 THERAPEUTIC ANTIBODIES INC. AND SUBSIDIARIES (A Development Stage Company) CONSOLIDATED BALANCE SHEETS December 31, 1996 and 1995
1996 1995 ------------ ------------ ASSETS Current assets: Cash and cash equivalents $ 20,502,536 $ 3,397,082 Short-term investments 2,002,266 - Trade receivables 101,281 109,435 Value-added tax receivable 251,186 162,655 Inventories 400,167 393,094 Other current assets 474,412 338,760 ------------ ------------ Total current assets 23,731,848 4,401,026 Property and equipment, net 12,682,680 10,119,160 Patent costs, net 529,228 342,246 Other assets, net 236,234 294,667 ------------ ------------ $ 37,179,990 $ 15,157,099 ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable and accrued expenses $ 936,591 $ 1,506,124 Accrued interest 161,367 177,493 Current portion of notes payable 1,446,327 2,478,858 ------------ ------------ Total current liabilities 2,544,285 4,162,475 Notes payable, net of current portion 8,592,755 9,595,420 Deferred revenue 656,170 349,425 Other liabilities 171,250 155,300 ------------ ------------ Total liabilities 11,964,460 14,262,620 Commitments Stockholders' equity: Common stock - par value $.001 per share; 30,000,000 shares authorized; 22,353,692 and 16,556,603 outstanding in 1996 and 1995, respectively 22,354 16,557 Additional paid-in capital 67,082,048 30,879,879 Deficit accumulated during development stage (1984-1996) (42,564,665) (29,818,548) Cumulative translation adjustment 675,793 (183,409) ------------ ------------ Total stockholders' equity 25,215,530 894,479 ------------ ------------ $ 37,179,990 $ 15,157,099 ============ ============
The accompanying notes are an integral part of the financial statements. 31 34 THERAPEUTIC ANTIBODIES INC. AND SUBSIDIARIES (A Development Stage Company) CONSOLIDATED STATEMENTS OF OPERATIONS
For the Cumulative For the Years Ended Development Stage December 31, From August 10, 1984 ----------------------------------------------- (Inception) Through 1996 1995 1994 December 31, 1996 ------------- ------------ ------------ ----------------- Revenues: Sales and contract revenue $ 600,607 $ 488,347 $ 285,654 $ 2,398,229 Interest income 607,479 96,917 37,692 1,036,175 Grant income 118,535 39,509 320,906 526,950 Value-added tax and insurance recoveries - - 475,760 577,170 Foreign currency gains 1,733,357 3,054 509 1,785,984 Other 208,390 122,663 9,802 384,306 ------------- ------------ ------------ --------------- 3,268,368 750,490 1,130,323 6,708,814 ------------- ------------ ------------ --------------- Expenses: Cost of sales and contract revenue 334,989 31,360 48,041 434,417 Research and development 9,682,263 6,449,494 5,107,894 31,205,062 General and administrative 2,224,752 1,601,442 1,408,800 8,756,669 Marketing and distribution 361,262 518,210 211,024 1,361,955 Depreciation and amortization 1,387,916 856,756 864,288 3,867,748 Interest expense 1,201,335 388,258 137,018 2,728,624 Debt conversion expense 801,597 - - 801,597 Other 20,371 5,008 71,011 117,407 ------------- ------------ ------------ --------------- 16,014,485 9,850,528 7,848,076 49,273,479 ------------- ------------ ------------ --------------- Net loss $ (12,746,117) $ (9,100,038) $ (6,717,753) $ (42,564,665) ============= ============ ============ =============== Net loss per share $ (0.68) $ (0.57) $ (0.47) $ (4.79) ============= ============ ============ =============== Weighted average shares used in computing net loss per share 18,821,524 15,938,219 14,377,456 8,894,667 ============= ============ ============ ===============
The accompanying notes are an integral part of the financial statements. 32 35 THERAPEUTIC ANTIBODIES INC. AND SUBSIDIARIES (A Development Stage Company) CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY for the years ended December 31, 1996, 1995 and 1994 and for the Cumulative Development Stage from August 10, 1984 (inception) through December 31, 1996
Common Stock Additional Stock ------------------------- Common Stock Paid-In Subscriptions Shares Par Value Subscribed Capital Receivable ---------- ------------ ----------- -------------- ---------- Sale of common stock 1985 - 1993 6,869,290 $ 6,869 1,949 $ 13,684,730 (2,838,499) One thousand-for-one stock split 1985 2,797,200 2,797 (2,797) Exercise of stock warrants at $.75 per share 1989 66,667 67 49,933 Issuance of shares 1990 and 1992 1,673,998 1,674 (1,674) (13,677) 1,736,999 Issuance of shares for acquisition of PAL 1992 1,415,875 1,416 3,155,984 Issuance of warrants 1992 and 1993 212,000 Translation adjustment 1992 and 1993 Net loss from August 10, 1984 (inception) to December 31, 1993 ---------- ------------ ------ -------------- ---------- Balance, December 31, 1993 12,823,030 12,823 275 17,086,173 (1,101,500) Issuance of shares 275,375 275 (275) 1,101,500 Sale of common stock 2,164,329 2,165 173 8,936,740 (690,038) Net loss 1994 Translation adjustment ---------- ------------ ------ -------------- ---------- Balance, December 31, 1994 15,262,734 15,263 173 26,022,913 (690,038) Issuance of shares 172,510 173 (173) 690,038 Exercise of stock warrants at $.50-$.75 per share 99,735 100 60,201 Sale of common stock 1,021,624 1,021 4,796,765 Net 1oss 1995 Translation adjustment ---------- ------------ ------ -------------- ---------- Balance, December 31, 1995 16,556,603 16,557 - 30,879,879 - Issuance of shares upon debt conversion 466,383 466 2,564,639 Debt conversion charge 801,597 Sale of common stock, net 164,332 165 933,384 Initial public offering, net 4,190,477 4,190 30,370,518 Exercise of stock warrants 942,897 943 1,332,989 at $.75-$4.50 per share Exercise of stock options 33,000 33 89,667 Issuance of warrants 46,944 Compensation expense 62,431 Net loss 1996 Translation adjustment ---------- ------------ ------ -------------- ---------- Balance, December 31, 1996 22,353,692 $ 22,354 - $ 67,082,048 - ========== ============ ====== ============== ========== Deficit Accumulated During Cumulative Development Translation Stage Adjustment Total ------------------ ------------ ------------- Sale of common stock 1985 - 1993 - - $ 10,855,049 One thousand-for-one stock split 1985 Exercise of stock warrants at $.75 per share 1989 50,000 Issuance of shares 1990 and 1992 1,723,322 Issuance of shares for acquisition of PAL 1992 3,157,400 Issuance of warrants 1992 and 1993 212,000 Translation adjustment 1992 and 1993 $ (79,682) (79,682) Net loss from August 10, 1984 (inception) to December 31, 1993 $ (14,000,757) (14,000,757) ------------- ------------ ------------- Balance, December 31, 1993 (14,000,757) (79,682) 1,917,332 Issuance of shares 1,101,500 Sale of common stock 8,249,040 Net loss 1994 (6,717,753) (6,717,753) Translation adjustment 312,285 312,285 ------------- ------------ ------------- Balance, December 31, 1994 (20,718,510) 232,603 4,862,404 Issuance of shares 690,038 Exercise of stock warrants - at $.50-$.75 per share 60,301 Sale of common stock 4,797,786 Net 1oss 1995 (9,100,038) (9,100,038) Translation adjustment (416,012) (416,012) ------------- ------------ ------------- Balance, December 31, 1995 (29,818,548) (183,409) 894,479 Issuance of shares upon debt conversion 2,565,105 Debt conversion charge 801,597 Sale of common stock, net 933,549 Initial public offering, net 30,374,708 Exercise of stock warrants 1,333,932 at $.75-$4.50 per share Exercise of stock options 89,700 Issuance of warrants 46,944 Compensation expense 62,431 Net loss 1996 (12,746,117) (12,746,117) Translation adjustment 859,202 859,202 ------------- ------------ ------------- Balance, December 31, 1996 $ (42,564,665) $ 675,793 $ 25,215,530 ============= ============ =============
The accompanying notes are an integral part of the financial statements. 33 36 THERAPEUTIC ANTIBODIES INC. AND SUBSIDIARIES (A Development Stage Company) CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Cumulative For the Years Ended Development Stage December 31, From August 10, 1984 ------------------------------------------- (Inception) Through 1996 1995 1994 December 31, 1996 ------------ ------------ ------------- ----------------- Cash flow from operating activities: Net loss $(12,746,117) $ (9,100,038) $ (6,717,753) $ (42,564,665) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 1,387,916 856,756 864,288 3,867,748 Foreign Currency Gain (1,733,357) (3,054) (509) (1,785,984) Warrant expense 46,944 - - 193,994 Compensation expense 62,431 - - 62,431 Debt conversion expense 801,597 - - 801,597 Changes in: Trade receivable (52,373) 1,106,727 (1,104,753) (75,092) Inventories (7,073) (332,559) 54,290 (285,993) Other current assets (128,813) (334,980) 22,035 (468,723) Accounts payable and accrued expenses (340,411) (84,553) 905,514 906,832 Accrued interest (37,512) 154,858 (101,129) 777,002 Deferred revenue 313,670 - - 313,670 Other (234,301) 236,139 5,573 (43,489) ------------ ------------ ------------- -------------- Net cash used in operating activities (12,667,399) (7,500,704) (6,072,444) (38,300,672) ------------ ------------ ------------- -------------- Cash flows from investing activities: (Increase) decrease in restricted cash - 1,126,000 (1,126,000) - Purchase of property and equipment (2,760,397) (2,379,405) (4,682,869) (11,986,443) Patent costs (198,502) (127,042) (78,368) (551,288) Purchase of short term investments (2,002,266) - - (2,002,266) Other - - (94,365) 69,750 ------------ ------------ ------------- -------------- Net cash used in investing activities (4,961,165) (1,380,447) (5,981,602) (14,470,247) ------------ ------------ ------------- -------------- Cash flows from financing activities: Proceeds from notes payable 2,518,239 4,989,452 3,252,139 15,791,400 Payments on notes payable (1,969,138) (2,144,704) (574,418) (4,878,260) Proceeds from line of credit 123,371 1,311,053 1,311,848 3,309,381 Payments on line of credit (1,018,738) (1,741,540) (448,659) (3,208,937) Proceeds from convertible debt, net 5,432,500 4,222,500 - 9,655,000 Payments on convertible debt (4,320,325) - - (4,320,325) Proceeds from issuance of stock, net 32,326,264 5,548,125 8,999,848 55,653,494 Proceeds from issuance of warrants - - - 65,000 Other (5,628) (151,032) (30,122) (186,782) ------------ ------------ ------------- -------------- Net cash provided by financing activities 33,086,545 12,033,854 12,510,636 71,879,971 ------------ ------------ ------------- -------------- Effect of exhange rate changes on cash and cash equivalents 1,647,473 (348,775) 32,722 1,393,484 ------------ ------------ ------------- -------------- Net increase in cash and cash equivalents 17,105,454 2,803,928 489,312 20,502,536 Cash and cash equivalents, beginning of period 3,397,082 593,154 103,842 - ------------ ------------ ------------- -------------- Cash and cash equivalents, end of period $ 20,502,536 $ 3,397,082 $ 593,154 $ 20,502,536 ============ ============ ============= ============== Supplemental cash flow disclosures: Cash payments for interest (net of amount capitalized) $ 1,142,738 $ 250,616 $ 263,897 $ 1,738,516 ============ ============ ============= ==============
The accompanying notes are an integral part of the financial statements. 34 37 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. ORGANIZATION AND OPERATIONS OF THE COMPANY: Therapeutic Antibodies Inc. (the Company) was incorporated on August 10, 1984 for the purpose of engaging in the research, development, production and marketing of therapeutic antibodies that provide protection against venoms, drugs, toxins and infectious diseases. The Company is a development stage company as defined in Statement of Financial Accounting Standards (SFAS) No. 7, Accounting and Reporting by Development Stage Enterprises, and is devoting substantially all of its present efforts to research and development, including pre-production activities. Certain of the Company's research and development and product testing activities are carried out through affiliations with scientists at academic institutions around the world. These affiliations include preclinical and clinical research agreements, consulting agreements, patent and royalty agreements and facility leases. Inherent in the development stage is a range of risks including the need for, and uncertainty of, future financing. The Company also faces risks stemming from the nature of the biopharmaceutical industry, such as the risk of competition, the risk of regulatory change, including potential changes in health care coverage, uncertainties associated with obtaining and enforcing patents and proprietary technology, uncertainty of the approval of products by governmental agencies and risks related to fluctuations in interest rates and foreign currencies. Net losses have been incurred each year since its inception and the Company expects to incur operating losses during at least the next year due to continued spending on research, product development and increasing requirements for process development, preclinical and clinical testing, regulatory affairs, initial manufacturing activities, and administration. The Company will require additional financing until product sales or licensing fees are sufficient to generate positive cash flows from operations. On July 23, 1996, the Company completed an initial public offering of 4,190,477 shares of its Common Stock on the London Stock Exchange at L.5.25 ($8.14) per share raising total gross and net proceeds of approximately $34,100,000 and $30,400,000, respectively. Approximately $4,750,000 was used to repay the Company's 15% Notes and certain other indebtedness. The remainder of the net proceeds is being utilized to fund working capital, operations and capital expenditures. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: a. PRINCIPLES OF CONSOLIDATION: The consolidated financial statements of the Company include the accounts of the Company and its wholly-owned subsidiaries. All intercompany accounts and transactions have been eliminated. 35 38 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED: b. FOREIGN CURRENCY TRANSLATION: Assets and liabilities of foreign subsidiaries denominated in foreign currencies are translated to U.S. dollars at period-end exchange rates. Revenues and expenses denominated in foreign currencies are translated at average exchange rates for the period. Translation adjustments are reported as a separate component of stockholders' equity. The effects of translation of intercompany loans to international subsidiaries which have been designated as long-term investments are also included in the separate component of stockholders' equity. The Company's initial public offering on the London Stock Exchange raised total proceeds of L.22,000,000 of which L.8,000,000 was converted to U.S. dollars and the balance was left in sterling. At December 31, 1996, the Company had approximately L.10,000,000 which were translated to U.S. dollars at the year end currency rate of 1.71, therefore, significantly increasing foreign currency gains for 1996. At March 7, 1997, the exchange rate had fallen to 1.60. Foreign currency transaction gains for the years ended December 31, 1996, 1995 and 1994 were $1,733,357, $3,054, and $509, respectively. c. CASH EQUIVALENTS AND SHORT TERM INVESTMENTS: All highly-liquid investments with an original maturity of three months or less when purchased are classified as cash equivalents. Financial instruments which potentially subject the Company to concentrations of credit risk consists principally of cash and temporary cash investments. The Company places substantially all of its cash and temporary cash investments with one major financial institution. As of December 31, 1996, and at times throughout the period, cash balances were in excess of Federal Deposit Insurance Corporation (FDIC) insurance limits. The Company has not experienced any losses in such accounts and believes no significant exposure from this concentration exists with respect to cash and temporary cash investments. The Company also maintains balances at a U.S. institution denominated in British sterling pounds. Short term investments consists of debt instruments. The carrying values of these short term investments approximates fair value at December 31, 1996. d. INVENTORIES: Inventories are stated at the lower of cost (first-in, first-out) or market. e. PROPERTY AND EQUIPMENT: Property and equipment is stated at cost and is depreciated using the straight-line method over the estimated useful life of the asset ranging from 5 to 20 years. Leasehold improvements are amortized over the shorter of their estimated life or the period of the related leases, including anticipated renewals for which the Company has an option. 36 39 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED: f. CARRYING VALUE OF LONG LIVED ASSETS: The carrying value of long lived assets is reviewed if the facts and circumstances suggest that they may be impaired. If this review indicates that the carrying value will not be recoverable, the carrying value is reduced to fair value. g. PATENT COSTS: Patent costs consist of legal fees associated with patent applications and filings. Once a patent is granted, costs are amortized using the straight-line method over 17 years from the patent grant date. Accumulated amortization was $22,059, $10,539 and $1,987 as of December 31, 1996, 1995 and 1994, respectively. h. REVENUE RECOGNITION: Revenues from sales of products are recognized at the time of shipment. The Company has received grants from the United Kingdom and Australia as a result of reaching certain employment levels and constructing production facilities. Grants related to employment levels and conducting clinical trials are recognized as income at the point in time that the conditions of the grant are satisfied. Grants related to construction of production facilities are recognized over the life of the facility. i. RESEARCH AND DEVELOPMENT COSTS: Research and development costs, costs for developing and improving manufacturing processes, pilot plant operations and inventories of products not yet approved for sale by governmental regulatory authorities are expensed when incurred. j. NET LOSS PER SHARE: The Company's net loss per share calculations for the years ended December 31, 1996, 1995 and 1994, and from inception through December 31, 1996, are based upon the weighted average number of shares of common stock outstanding during each period. Common equivalent shares from stock options, warrants and other dilutive securities are excluded from the computations as their effect is antidilutive. k. VALUE-ADDED TAX RECEIVABLE: The Company's operations in the United Kingdom (U.K.) are subject to value-added tax (VAT) whereby the Company pays tax at a rate of 17.5% on most goods and services purchased. These VAT taxes are subject to refund based on returns which are filed quarterly with U.K. taxing authorities. In 1994, the Company determined it could file refunds for VAT paid in prior years in the amount of $475,760 which was recorded as revenue in 1994. 37 40 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED: l. FINANCIAL STATEMENTS 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 dates of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates. 3. PROPERTY AND EQUIPMENT: Property and equipment at December 31 consists of the following:
1996 1995 --------------- -------------- Land $ 639,266 $ 584,074 Buildings and improvements 6,420,062 5,443,978 Construction in progress 1,420,018 0 Furniture, fixtures and equipment 7,078,837 5,721,990 Livestock 861,286 366,126 --------------- -------------- 16,419,469 12,116,168 Accumulated depreciation 3,736,789 1,997,008 --------------- -------------- $ 12,682,680 $ 10,119,160 =============== ==============
Buildings and improvements includes $38,288 of capitalized interest associated with the construction of a building in Australia in 1996 and $491,408 with the construction of buildings in the United Kingdom in 1995. 38 41 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED 4. NOTES PAYABLE: Notes payable at December 31 consist of:
1996 1995 ------------- ----------- 6% convertible notes payable, principal due October 1, 2000, interest due semi-annually on April 1 and October 1 $ 2,905,000 $ 4,222,500 Capital lease payable to Aberlyn Capital Management Limited Partnership, interest at 14.5%-18%, collateralized by equipment in the United Kingdom with a net book value of $3.3 million with monthly payments of $113,000 required through January 2000 2,714,413 3,591,895 8.5% note payable to Sun Trust Bank, collateralized by personal guarantees of certain of the Company's directors; principal and accrued interest was repaid in April 1996 - 950,000 11.5% note payable to Equitas, LP, principal due July 2000, interest due quarterly in November, February, May, and August, collateralized by various assets of the Company's subsidiaries and common shares of the Company's subsidiary, Polyclonal Antibodies, Ltd. 800,000 800,000 13% note payable to Lakewood Partners, principal due December 1997, interest due monthly; - 500,000 outstanding principal and accrued interest paid in September 1996 9% to 12% unsecured notes payable to officers of the Company, principal and interest due December 1998 250,000 375,000 Notes payable to Welsh Development Agency, interest at 1% over Barclays Bank base lending rate, repayable by conversion of 150,000 warrants to purchase the Company's common stock ; on October 21, 1996 outstanding debt and accrued interest was repaid by conversion to 150,000 shares of the Company's stock - 465,900 Note payable to Bank of Wales PLC, collateralized by certain real property in the United Kingdom, interest at 2.5% over Bank of Wales lending rate (effective rate of 8.5% at December 31, 1996), principal and interest due monthly over 10 years beginning February 1995 450,239 443,527 11% note payable to South Australian Minister for Primary Industries, collateralized by building and equipment, principal repayable in annual installments over ten years beginning in 1996 1,576,193 259,526 15% unsecured promissory notes payable to an officer of the Company, interest due quarterly, principal due December 1998 750,000 - Capital equipment leases, interest rates from 13.2% to 19.5%, principal and interest payable monthly through 2001 266,682 190,330 8% unsecured note payable to Avantec, Inc., interest due monthly, principal due October 1998 100,000 100,000 6% note payable to CATO, Inc., interest due semi-annually, principal due December 31, 2000 100,000 - Other 126,555 175,600 ------------- ----------- 10,039,082 12,074,278 Less current portion 1,446,327 2,478,858 ------------- ----------- $ 8,592,755 $ 9,595,420 ============= ===========
39 42 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED 4. NOTES PAYABLE, CONTINUED: In August 1995, the Company initiated a private placement of its 6% Convertible Notes due October 1, 2000 (the "6% Notes"). Interest on the 6% Notes is payable semi-annually and the notes are convertible into shares of the Company's common stock at $8.00 per share at any time prior to maturity upon the election of the holder. The 6% Notes are not collateralized. In January 1996, the Company offered each holder of the 6% Notes the opportunity to exchange all or a portion of their 6% Notes for shares of the Company's common stock at the rate of $5.50 per share until February 9, 1996. Pursuant to this offer, the holders of $2,565,105 aggregate amount of principal and accrued interest on the 6% Notes elected to tender their 6% Notes to the Company in exchange for 466,383 shares of common stock. This exchange conversion resulted in a non-cash debt conversion expense of $801,597. The Company has entered into capital lease agreements with Aberlyn Capital Management Limited Partnership under which it has financed $1,000,000 at 18% and $3,203,573 at 14.5%. Principal amounts mature from October 1998 through January 2000. Payments of $113,000 are due monthly. In connection with the agreement, the Company issued warrants in 1995 and 1994 to purchase a total of 102,514 shares of the Company's common stock at $5.00 per share. In addition, if the Company chooses to retire early any of the $1,000,000 financed under the agreements, the Company is required to issue warrants to Aberlyn to purchase up to 12,500 shares at $8.00 per share. In 1995, the Company obtained the proceeds of an $800,000 loan from Equitas LP. The loan agreement provides for interest at an annual rate of 11.5% to be paid quarterly. Principal is due in full at maturity on July 24, 2000. The lender received warrants to purchase 22,198 shares of the Company's common stock at $8.00 per share. The loan is collateralized by accounts receivable, antisera inventory, and livestock from certain of the Company's subsidiaries as well as limited guarantees from those subsidiaries. This loan is additionally collateralized by the common shares of the Company's subsidiary, Polyclonal Antibodies, Limited (PAL). In 1995 the Company executed a $500,000 promissory note with Lakewood Partners, a Tennessee general partnership. In connection with the financing, the Company issued warrants to purchase a total of 25,000 shares of the Company's common stock at $8.00 per share. On September 3, 1996, the Company repaid the $500,000 principal amount along with accrued interest to date. 40 43 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED 4. NOTES PAYABLE, CONTINUED: The Company had a 150,000 British pounds sterling note payable to Welsh Development Agency. The Welsh Development Agency had the right to convert 90,000 warrants into the Company's common stock at 1.11 British pounds sterling per share in lieu of repayment of L.100,000 of the outstanding balance. In October 1996, the Company repaid L.50,000 and accrued interest thereon and issued 90,000 shares of the Company's common stock as payment in full for the outstanding loan. During 1995, TAb Wales, Ltd. obtained additional funds of 150,000 British pounds sterling from the Welsh Development Agency in the form of a note payable which was repayable by conversion of warrants to purchase 60,000 shares of the Company's common stock at 2.50 British pounds sterling per share. In October 1996, the Company issued 60,000 shares of its common stock as repayment in full for the note. In January 1995, financing of $465,900 was obtained from Bank of Wales PLC collateralized by certain property in the United Kingdom. The note is repayable over 10 years beginning in February 1995. Interest is paid at 2.5% over Bank of Wales base lending rate (effective rate of 8.5% at December 31, 1996). The Company's subsidiary, TAb Australia Pty. Ltd., has a loan agreement with the South Australian Minister for Primary Industries. The agreement allows TAb Australia Pty. Ltd. to draw up to $2,000,000 Australian dollars ($1,589,400 U.S. dollars) to assist with construction and equipment of buildings at its Turretfield location in South Australia. The loan is to be repaid over ten years in equal annual installments of principal. Interest is due annually at 11% per annum. The loan is collateralized by a mortgage on the building and equipment purchased. As of December 31, 1996, the Company had drawn approximately $1,576,000 U.S. dollars on this loan. In June 1996, the Company completed a private placement of $5,000,000 principal amount of the Company's 15% Subordinated Promissory Notes due May 1, 1997, of which $4,250,000 were issued for cash and $750,000 were issued upon conversion of existing indebtedness. Each $250,000 unit of the 15% Notes was accompanied by a Stock Purchase Warrant to purchase 18,000 shares of Common Stock at $8.00 per share. Warrants to purchase 360,000 shares of Common Stock were issued in connection with the 15% Notes. On August 24, 1996, the Company redeemed, for cash, $4,250,000 principal amount of the 15% Notes and accrued interest thereon. In April 1996, an officer of the Company made a short-term unsecured loan to the Company of $1,000,000. Interest was charged at 12%. In May, the officer converted $750,000 principal amount of the 12% Note into an equal amount of the Company's 15% Notes. The $250,000 principal balance on the 12% Note is payable in full together with accrued interest in December 1998. 41 44 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED 4. NOTES PAYABLE, CONTINUED: The Company has available lines of credit at December 31, 1996 totaling 100,000 British pounds sterling with the Bank of Scotland and its subsidiary, Bank of Wales PLC, in the United Kingdom. These lines of credit are collateralized by the guarantee of the Company and are due on demand. Interest is paid at 2.5% over the relevant bank's base lending rate (effective rate of 8.5% at December 31, 1996). At December 31, 1996, there were no outstanding borrowings on these lines of credit. The weighted average interest rate on all short-term borrowings outstanding at December 31, 1996 and 1995 was 11.6% and 9.7%, respectively. Aggregate maturities of fixed payment on notes payable for the next five years follow:
YEARS ENDING DECEMBER 31: ------------ 1997 $ 1,446,327 1998 2,477,890 1999 826,833 2000 4,049,496 2001 201,420 Thereafter 1,037,116 ----------------- $ 10,039,082 =================
At December 31, 1996 and 1995, $2,250,896 and $1,345,408, respectively, of the Company's debt obligations were denominated in British pounds sterling or Australian dollars and were translated to U.S. dollars at year-end exchange rates. The Company is subject to foreign currency risk to the extent that exchange rates between the U.S. dollar and the foreign currencies change. For accounting purposes, changes in exchange rates for the debt obligations result in translation adjustments which are reported as part of the separate component of stockholders' equity. At December 31, 1996 and 1995, the amount included in the cumulative translation adjustment related to the Company's debt obligations was $97,019 of loss and $16,547 of gain, respectively. The Company does not hedge its exposure to foreign currency risks. The Company estimates that the fair value of its long-term debt is not substantially different from its book value. 42 45 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED 5. INCOME TAXES: Under SFAS No. 109, Accounting for Income Taxes, deferred income taxes are recognized for future tax consequences of differences between the tax bases of assets and liabilities and their financial reporting amounts based on enacted laws and statutory rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. The Company determined that at December 31, 1996 and 1995 its ability to realize future benefits of deferred tax assets did not meet the "more likely than not" criteria in SFAS No. 109. The components of the net deferred tax liability recognized in the accompanying consolidated balance sheet are as follows:
DECEMBER 31, 1996 1995 ---------------- -------------- Deferred tax liability $ (409,636) $ (398,541) Deferred tax asset 13,587,078 9,542,970 Valuation allowance (13,177,442) (9,144,429) ---------------- -------------- $ - $ - ================ ==============
The deferred tax liability arose due to tax differences in the bases of assets and liabilities relative to the acquisition of Polyclonal Antibodies, Ltd. The deferred tax asset arises primarily from the Company's net operating loss carryforwards of approximately $39,315,000. The Company has approximately $207,000 of research and development tax credits available to offset future federal income tax. United States net operating losses carryforwards (NOLs) and research and development tax credits (R&D credits) expire as follows:
R&D YEARS ENDING DECEMBER 31, NOL CREDITS ------------------------- ----------------- ---------------- 1999 $ 74,000 2000 148,000 2001 52,000 2002 225,000 2003 572,000 $ 1,000 2004 683,000 13,000 2005 1,290,000 39,000 2006 1,987,000 19,000 2007 2,372,000 25,000 2008 3,763,000 23,000 2009 3,441,000 36,000 2010 5,683,000 25,000 2011 7,899,000 26,000 ----------------- ---------------- $ 28,189,000 $ 207,000 ================= ================
43 46 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED 1. INCOME TAXES, CONTINUED: United Kingdom NOLs of $10,467,000, Australian NOLs of $562,000 and New Zealand NOLs of $97,000, which are not included in the table above, may be carried forward indefinitely. 6. STOCK WARRANTS AND STOCK OPTIONS: At December 31, 1996 there were warrants outstanding to purchase 1,726,738 shares of the Company's common stock at prices ranging from $.60 to $8.00 (average price of $3.59) per share. All outstanding warrants expire from 1997 to 2000. Activity in stock warrants is as follows:
EXERCISE PRICE NUMBER OF PER SHARE WARRANTS ------------- ---------- Outstanding at December 31, 1993 $ .50-$3.50 2,100,333 Granted $ 4.50-$5.00 61,250 Forfeited - - Exercised - - --------- Outstanding at December 31, 1994 $ .50-$5.00 2,161,583 Granted $ 4.00-$8.00 241,287 Forfeited - - Exercised $ .50-$ .75 (99,735) --------- Outstanding at December 31, 1995 $ .60-$8.00 2,303,135 Granted $8.00 366,500 Forfeited - - Exercised $ .75-$4.50 (942,897) --------- Outstanding at December 31, 1996 $ .60-$8.00 1,726,738 =========
On April 26, 1996, the Board of Directors of the Company amended the Therapeutic Antibodies Inc. 1990 Stock Incentive Plan (the Plan). Up to 1,650,000 shares of the Company's common stock may be subject to incentives under the Plan. The Plan provides for the grant to key employees, advisors, officers and directors of the Company of stock options complying with Section 422A of the Internal Revenue Code (qualified options) or options not qualifying under such provision (nonqualified options) as well as stock appreciation rights (SARs). The Plan provides for adjustment of the number of shares available 44 47 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED 6. STOCK WARRANTS AND STOCK OPTIONS, CONTINUED: under the Plan in the event of stock splits, stock dividends and certain other events. The Plan also provides that if the Company shall not be the surviving corporation in a business combination, the holder of an outstanding option will be entitled to purchase stock in the surviving corporation on the same terms and conditions as the options. Options are nontransferable, and options and SARs are subject to any restrictions contained in the grant and applicable securities laws. Options to purchase 1,612,376 shares of the Company's common stock were outstanding at December 31, 1996 at prices ranging from $1.25 to $8.18 under the Plan (average price of $4.12). All options granted since 1992 have a five year contractual life. The average contractual life of all the options at December 31, 1996 is approximately 3.9 years. Generally, the Company grants options with a graded vesting requirement which typically vests ratably over one to five years. The options are issued at or above the fair value of the underlying stock at date of grant. At December 31, 1996, 927,426 options were exercisable at a weighted average price of $2.81. All options expire from 1997 to 2002. Activity in stock options is as follows:
EXERCISE PRICE NUMBER OF WEIGHTED PER SHARE OPTIONS AVERAGE PRICE -------------------------------------------------- Outstanding at December 31, 1993 $1.25-$3.50 799,647 Granted $4.50 136,000 Forfeited - - Exercised - - --------- Outstanding at December 31, 1994 $1.25-$4.50 935,647 Granted $4.50-$6.00 245,550 Forfeited $2.40-$4.50 (72,571) Exercised - - --------- Outstanding at December 31, 1995 $1.25-$6.00 1,108,626 $3.10 Granted $6.00-$8.18 538,050 $6.12 Forfeited $6.00 (1,300) $6.00 Exercised $2.40-$3.00 (33,000) $2.49 --------- Outstanding at December 31, 1996 $1.25-$8.18 1,612,376 $4.12 =========
As permitted by SFAS No. 123, Accounting for Stock Based Compensation, the Company follows the provisions of APB Opinion 25 and related interpretations in accounting for its stock option grants. Compensation cost has not been recognized for options issued under the plan. If compensation cost had been determined based on the fair value of the awards at the grant date consistent with the provisions of SFAS No. 123 there would not have been a material impact on the reported amount of the Company's net income and net income per share. 45 48 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED 7. COMMITMENTS: ROYALTY COMMITMENT: In 1992, the Company entered into a patent sale and royalty agreement with scientists who at the time worked at the University of Arizona. Under the agreement, the Company purchased the scientists' rights under their U.S. patent and certain U.S. patent applications. The Company agreed to pay royalties to the sellers with respect to products developed and sold under the patents. Currently, no royalty payments have yet been required under this agreement. LEASES: The Company leases laboratory and office space under operating leases. Aggregate rent expense incurred under these leases was approximately $190,248 in 1996, $126,000 in 1995 and $62,000 in 1994. Future minimum rental commitments under noncancelable operating leases as of December 31, 1996 are as follows:
YEARS ENDING DECEMBER 31, ------------ 1997 $ 283,173 1998 251,143 1999 233,956 2000 145,904 Thereafter 11,421 ------------ $ 925,596 ============
8. RELATED PARTY TRANSACTIONS: The Company incurred interest expense and loan guarantee fees of $115,241, $17,380 and $50,695 in the years ended December 31, 1996, 1995 and 1994, respectively, on notes payable to certain directors of the Company and loan guarantees made by certain directors on behalf of the Company in order to obtain short-term loan financing. 46 49 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED 9. INTERNATIONAL OPERATIONS: The Company conducts its activities in the U.S., the United Kingdom, New Zealand and Australia. International operations are primarily located in the United Kingdom. Intercompany sales between regions are made at cost plus markup. Summarized financial data by region are as follows:
1996 U.S. INTERNATIONAL ELIMINATIONS NET ---- ------------- --------------- ------------ --------------- Revenues: Trade $ 1,184,619 $ 350,392 $ - $ 1,535,011 Foreign Currency Gain 1,733,357 - - 1,733,357 Intercompany (a) 1,301,702 5,318,319 (6,620,021) - ------------- --------------- ----------- --------------- $ 4,219,678 $ 5,668,711 $(6,620,021) $ 3,268,368 ============= =============== =========== =============== R & D expense (a) $ 5,279,302 $ 7,357,849 $(2,954,888) $ 9,682,263 ============= =============== =========== =============== Net loss $ (5,468,662) $ (5,223,305) $(2,054,150) $ (12,746,117) ============= =============== =========== =============== Capital expenditures $ 97,011 $ 2,663,386 $ - $ 2,760,397 ============= =============== =========== =============== Identifiable assets $ 24,048,275 $ 13,143,715 $ (12,000) $ 37,179,990 ============= =============== =========== ===============
1995 U.S. INTERNATIONAL ELIMINATIONS NET ---- ------------ -------------- ------------ ------------- Revenues: Trade $ 466,945 $ 283,545 $ - $ 750,490 Intercompany (a) 1,017,517 3,415,826 (4,433,343) - ------------ -------------- ------------ ------------- $ 1,484,462 $ 3,699,371 $ (4,433,343) $ 750,490 ============ ============== ============ ============= R & D expense (a) $ 4,455,668 $ 5,436,117 $ (3,442,291) $ 6,449,494 ============ ============== ============ ============= Net loss $ (5,039,977) $ (4,108,795) $ 48,734 $ (9,100,038) ============ ============== ============ ============= Capital expenditures $ 213,894 $ 2,165,511 $ - $ 2,379,405 ============ ============== ============ ============= Identifiable assets $ 5,049,705 $ 10,385,116 $ (277,722) $ 15,157,099 ============ ============== ============ =============
47 50 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED 9. INTERNATIONAL OPERATIONS, CONTINUED:
1994 U.S. INTERNATIONAL ELIMINATIONS NET ---- ------------- --------------- ------------ -------------- Revenues: Trade $ 210,543 $ 919,780 $ - $ 1,130,323 Intercompany (a) 404,614 2,805,289 (3,209,903) - ------------- --------------- ------------ -------------- $ 615,157 $ 3,725,069 $ (3,209,903) $ 1,130,323 ============= =============== ============ ============== R & D expense (a) $ 2,752,658 $ 4,912,720 $ (2,557,484) $ 5,107,894 ============= =============== ============ ============== Net loss $ (3,728,193) $ (2,741,268) $ (248,292) $ (6,717,753) ============= =============== ============ ============== Capital expenditures $ 20,664 $ 4,662,205 $ - $ 4,682,869 ============= =============== ============ ============== Identifiable assets $ 1,787,953 $ 10,595,179 $ (279,138) $ 12,103,994 ============= =============== ============ ==============
(a) Intercompany revenues include interest income earned by the U.S. parent company on loans made to international subsidiaries and sales of product to, and the performance of contract research and development for, the U.S. parent company by international subsidiaries on a cost plus markup basis. The intercompany account associated with this activity is eliminated in consolidation. 10. NONCASH INVESTING AND FINANCING ACTIVITIES: During 1994, the Company issued 95,901 shares of the Company's common stock in settlement of notes payable by the Company in the amounts of $383,604. On February 9, 1996, the Company issued 466,383 shares of common stock in exchange for $2,500,000 of principal and $65,105 of accrued interest on the 6% Notes. In May, 1996 an officer of the Company converted $750,000 principal of the 12% Note into an equal principal amount of the Company's 15% Notes. On October 21, 1996 the Company issued 150,000 shares of common stock in exchange for L.250,000 of principal on the two notes payable to the Welsh Development Agency. 48 51 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None 49 52 PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT Information with respect to the executive officers and directors of the Company is incorporated by reference from the Company's Proxy Statement relating to the Annual Meeting of Shareholders to be held on April 28, 1997. ITEM 11. EXECUTIVE COMPENSATION Information with respect to the compensation of the Company's executive officers is incorporated by reference from the Company's Proxy Statement relating to the Annual Meeting of Shareholders to be held on April 28, 1997, except that the Comparative Performance Graph and the Compensation Committee Report on Executive Compensation included in the Proxy Statement are expressly not incorporated herein by reference. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT Information with respect to the security ownership of certain beneficial owners of the Company's common stock and management is incorporated by reference from the Company's Proxy Statement relating to the Annual Meeting of Shareholders to be held on April 28, 1997. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS This information is incorporated by reference to the Company's Proxy Statement relating to the Annual Meeting of Shareholders to be held on April 28, 1997. 50 53 PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K (a). The following documents are being filed as part of this Report. 1. Financial Statements. See Item 8 herein. 2. Financial Statement Schedules Independent Auditors Report (see Item 8 herein). All schedules are omitted, because they are not applicable or not required, or because the required information is included in the consolidated financial statements or notes thereto. 3. Exhibits.
EXHIBIT NUMBER DESCRIPTION OF EXHIBITS - -------- ----------------------- 3.1 - Amended and Restated Articles of Incorporation of Therapeutic Antibodies Inc. (6) 3.2 - Amended and Restated Bylaws of Therapeutic Antibodies Inc. (6) 4.1 - Form of Note Purchase Agreement with respect to the Company's 15% Promissory Note due May 1, 1997. (4) 4.2 - Specimen of 15% Promissory Note due May 1, 1997. (4) 10.1 - Marketing Agreement, as amended, dated January 1, 1990, between Swedish Orphan AB and the Company. (1) 10.2 - Contract for the Production of Sheep Anti-Human IgG, dated October 5, 1992, between Baxter Germany and the Company. (1) 10.3 - Distribution Agreement, as amended, dated April 1, 1993, among Helena Laboratories and the Company. (1) 10.4 - Contract Services Agreement, dated December 16, 1991, between Ministry of Agriculture and Fisheries and the Company. (1) 10.5 - Agreement, dated December 16, 1991, between Ministry of Fisheries (now AgResearch) and the Company. (1) 10.6 - Office Lease Agreement. as amended, dated August 28, 1990, between Summit Place Limited and the Company. (1)
51 54 10.7 - Lease, dated January 9, 1992, between The Medical College of St. Bartholomew's Hospital in the City of London and the Company. (1) 10.8 - Office Lease Agreement, dated January 29, 1997, between Vanderbilt University and the Company. (filed herewith) 10.9 - Sublease, dated January 29, 1997, between Platinum Entertainment, Inc., as Sublessor, and the Company, as Sublessee. (filed herewith) 10.10 - Assignment of 14/15 Newbury Street London EC1A 7HU, dated February 1, 1996, between Immunogen International Limited, as Assignor, and TAb London Limited, as Assignee. (filed herewith) 10.11 - 1990 Stock Incentive Plan, as amended. (6) 10.12 - Basic Cooperation/Joint Program Agreement, dated August 30, 1995, between Nigerian Federal Ministry of Health and Therapeutic Antibodies Inc. (2) 10.13 - Memorandum of Lease, dated August 1, 1995, between Minister for Primary Industries, as Lessor, and TAb Australia Pty. Limited, as Lessee (Turretfield lease). (2) 10.14 - Registration and Distribution Agreement, dated August 31, 1995, between Therapeutic Antibodies Inc. and F.H. Faulding & Co. Limited. (2) 10.15 - Loan Agreement, dated July 10, 1995, between Minister for Primary Industries and TAb Australia Pty. Ltd. and Deed of Charge, dated July 10, 1995, between Minister for Primary Industries and TAb Australia Pty. Ltd. (2) 10.16 - Lease Assignment, dated February 1, 1996, between Immunogen International Limited and TAb London Limited (3) 10.17 - Assignment, dated April 29, 1996, between Minister for Industry, Manufacturing, Small Business and Regional Development and TAb Australia, Pty. Ltd. (4) 10.18 - Agistment Agreement, dated August 29, 1996, between Martindale Holdings Pty Ltd. and TAb. Australia Pty Ltd. (5) 10.19 - Clinical Trials and Registration Agreement, dated October 4, 1996, between Therapeutic Antibodies Inc. and F.H. Faulding & Co. Limited. (filed herewith) 10.20 - Service Agreement, dated July 5, 1996, between Professor John Landon and the Company. (filed herewith) 10.21 - Service Agreement, dated July 5, 1996, between Professor Tim Chard and the Company. (filed herewith) 11.1 - Statement re: computation of per share earnings. 21.1 - List of subsidiaries of the Registrant. (1) 27 - Financial Data Schedule (for SEC use only)
52 55 (1) Incorporated by reference to exhibits filed with the Company's Registration Statement on Form 10, filed on May 1, 1995, File No. 0-25978. (2) Incorporated by reference to exhibits filed with the Company's Quarterly Report on From 10-Q for the quarterly period ended September 30, 1995, File No. 0-25978. (3) Incorporated by reference to exhibits filed with the Company's Quarterly Report on From 10-Q for the quarterly period ended March 31, 1996, File No. 0-25978. (4) Incorporated by reference to exhibits filed with the Company's Quarterly Report on From 10-Q for the quarterly period ended June 30, 1996, File No. 0-25978. (5) Incorporated by reference to exhibits filed with the Company's Quarterly Report on From 10-Q for the quarterly period ended September 30, 1996, File No. 0-25978. (6) Incorporated by reference to appendices filed with the Company's Proxy Statement relating to the Special Meeting of Shareholders held on July 5, 1996. File No. 0-25978. 53 56 (b). Reports on Form 8-K. None. (c). Compensatory Plans or Arrangements. The following is a list of all executive compensation plans and arrangements filed as exhibits to this Annual Report on Form 10-K.
Exhibit Number Exhibit -------------- ------- 10.11 1990 Stock Incentive Plan, as amended. (6) 10.20 Service Agreement, dated July 5, 1996, between Professor John Landon and the Company 10.21 Service Agreement, between July 5, 1996, between Professor Tim Chard and the Company
(6) Incorporated by reference to appendices filed with the Company's Proxy Statement relating to the Special Meeting of Shareholders held on July 5, 1996. File No. 0-25978. (d). Financial Statement Schedules Excluded from Annual Report to Shareholders. None. 54 57 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. THERAPEUTIC ANTIBODIES INC. By: /s/ Martin S. Brown ----------------------------------- Martin S. Brown Chairman of the Board and Chief Executive Officer Date: MARCH 27, 1997 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
NAME TITLE DATE - ---- ----- ---- /s/ Martin S. Brown Chairman of the Board and March 27, 1997 - ----------------------------------------------- Chief Executive Officer Martin S. Brown /s/ Robert D. Brown Vice President and Controller March 27, 1997 - ----------------------------------------------- (Principal financial and accounting officer) Robert D. Brown /s/ A. J. Kazimi President and Director March 27, 1997 - ----------------------------------------------- A.J. Kazimi /s/ Harry G. Browne, M.D. Vice Chairman, Director, Secretary and March 27, 1997 - ----------------------------------------------- Senior Vice President-Scientific Affairs Harry G. Browne, M.D. /s/ John Landon, M.D. Executive Vice President-Research March 27, 1997 - ----------------------------------------------- and Development and Director John Landon, M.D. /s/ Tim Chard, M.D. Senior Vice President-Research and March 27, 1997 - ----------------------------------------------- Development Administration and Director Tim Chard, M.D. /s/ Thomas G. Andrews Director March 27, 1997 - ----------------------------------------------- Thomas G. Andrews /s/ Robin Baillie Director March 27, 1997 - ----------------------------------------------- Robin Baillie /s/ Robert C. Hilton Director March 27, 1997 - ----------------------------------------------- Robert C. Hilton /s/ John W. Robb Director March 27, 1997 - ----------------------------------------------- John W. Robb /s/ Steven L. Stroup, M.D. Director March 27, 1997 - ----------------------------------------------- Steven L. Stroup, M.D. /s/ Joseph D. Williams Director March 27, 1997 - ----------------------------------------------- Joseph D. Williams
55 EX-10.8 2 OFFICE LEASE AGREEMENT 1 EXHIBIT 10.8 Standard Office Lease Agreement Therapeutic Antibodies, Inc. Memphis, TN, June 1985 1207 17th Avenue South Suite 103 Nashville, Tennessee 37212 O F F I C E L E A S E A G R E E M E N T STATE OF: TENNESSEE COUNTY OF: DAVIDSON THIS AGREEMENT, made in multiple copies and entered into between The Vanderbilt University, herein designated as Landlord, and Therapeutic Antibodies, Inc., a Delaware corporation, herein designated as Tenant. WITNESSETH: That Landlord in consideration of the covenants and agreements to be performed by Tenant and upon the terms and conditions hereinafter stated does hereby lease, demise and let unto Tenant the following described space IN SPECIAL PROVISIONS, PARAGRAPH 33, (hereinafter known as the "demised premises") in the building known as 1207 17th Avenue, located at 1207 17th Avenue South, Nashville, Tennessee 37212 (hereinafter referred to as the "Building"). TO HAVE AND TO HOLD the same for a term of forty eight (48) months commencing on February 1, 1997 and ending on January 31, 2001. By occupying the demised premises Tenant shall be deemed to have accepted the same as suitable for the purpose herein intended and to have acknowledged that the same comply fully with Landlord's covenants and obligations hereunder. If this lease is executed before the demised premises become vacant, or if any present tenant or occupant of the premises holds over, and Landlord cannot acquire possession of the demised premises prior to the date above recited as the commencement date of this lease, Landlord shall not be deemed to be in default hereunder, and Tenant agrees to accept possession of the demised premises at such time as Landlord is able to tender the same. Landlord hereby waives payment of rent covering any period prior to the tendering of possession to Tenant hereunder. 1. RENT. In consideration of this lease, Tenant agrees to pay to Landlord rent for the demised premises, in advance, without demand, deduction or set off at the rate described in SPECIAL PROVISIONS, PARAGRAPH 34. One such monthly installment shall be payable by Tenant to Landlord in advance, without demand, upon Tenant's execution of this lease, and a like monthly installment shall be due and payable on or before the first day of each succeeding calendar month during the term hereof. Rent for any fractional month at the beginning or end of the lease term shall be prorated. In the event Tenant fails to pay any installment of rent or other incurred expense hereunder as and when such installment is due, to help defray the additional cost to Landlord for processing such late payments Tenant shall pay to Landlord on demand a late charge in an amount equal to ten percent (10%) of such installment and the failure to pay such amount within ten (10) days after demand thereof shall be an event of default hereunder. The provision for such late charge shall be in addition to all of Landlord's other rights and remedies hereunder and shall not be construed as liquidated damages or as limiting Landlord's remedies in any manner. 2. USE. The demised premises shall be used and occupied by Tenant as general office space. Tenant shall not use, or permit to be used, the demised premises for any other purpose. Tenant will not occupy or use, nor permit to be occupied or used any portion of the demised premises for any business or purpose which is unlawful in part or in whole or deemed to be disreputable in any manner, or hazardous on account of fire, nor permit anything to be done which will in any way increase the rate of fire insurance on the Building or its contents. In the event that there shall be any increase in the rate of insurance on the Building or contents created by Tenant's acts or conduct of business, then such acts shall be deemed to be an event of default hereunder and Tenant hereby agrees to pay the amount of such increase on demand, and acceptance of such payment shall not constitute a waiver of any of Landlord's rights hereunder. Tenant shall comply with all laws, orders, rules and regulations relating to the use, condition and occupancy of the Premises. 3. LANDLORD'S OBLIGATIONS. Landlord agrees to furnish Tenant while occupying the demised premises water, hot and cold, at those points of supply provided for general use of tenants of the Building; heated and refrigerated air conditioning in season, at such times as Landlord normally furnishes these services to all tenants of the Building; (which hours are: Mon.-Fri. from 1 2 approx. 7:30 a.m. - 6 p.m. and Sat. from approx. 8 a.m. - 12 p.m.) and at such temperatures and in such amounts as are considered by Landlord to be standard, such service on Sundays and holidays to be optional on the part of Landlord; janitor service on weekdays other than holidays; elevator service; and electric service in the manner and to the extent deemed by Landlord to be standard; but failure to any extent to furnish or any stoppage of these defined services, resulting from causes beyond control of Landlord or from any cause, shall not render Landlord liable in any respect for damages to person, property or business, nor be construed as an eviction of Tenant nor relieve Tenant from fulfillment of any covenant or agreement hereof. Should any equipment or machinery furnished by Landlord break down, or for any cause cease to function properly, Landlord shall use reasonable diligence to repair same promptly, but Tenant shall have no claim for rebate of rent or damages on account of any interruptions in service occasioned thereby or resulting therefrom. Tenant shall pay to Landlord on demand such charges as Landlord may reasonably prescribe for any electric service required by Tenant for computers if Tenant consumes more than the average use by Tenants in the Building, after hours or additional air conditioning and heating and other electrical equipment or other electric service deemed by Landlord not to be standard. 4. TENANT'S REPAIRS AND ALTERATIONS. Tenant will not in any manner deface, damage or injure the Building, and will pay the cost of repairing any damage or injury done to the Building or any part thereof by Tenant or Tenant's agents, employees or invitees. Tenant shall throughout the term of this lease take good care of the demised premises and keep them free from waste and nuisance of any kind. Tenant agrees to keep the demised premises, including all fixtures installed by Tenant and any plate glass, in good condition and make all necessary repairs. At the end or other termination of this lease, Tenant shall deliver the demised premises with all improvements located thereon, except as provided in this paragraph, in good repair and condition, reasonable wear and tear excepted. Tenant shall not make or allow to be made any alterations or physical additions in or to the demised premises without the prior written consent of Landlord. At the termination of this lease Tenant shall, if Landlord so elects, remove all alterations, physical additions or improvements erected by Tenant and restore the demised premises to their original condition, otherwise such improvements shall be delivered to Landlord with the demised premises. All furniture and moveable trade fixtures installed by Tenant may be removed by Tenant at the termination of this lease if Tenant so elects, and shall be removed if Landlord so elects. All such removals and restoration shall be accomplished in a good workmanlike manner so as not to damage the primary structure or structural qualities of the Building. 5. ASSIGNMENT OR SUBLEASE. Landlord shall have the right to transfer and assign, in whole or in part, its rights and obligations in the Building and property that are the subject of this lease. Tenant shall not assign this lease or sublet all or any part of the demised premises without the prior written consent of Landlord, which shall not be unreasonably withheld or delayed. Landlord shall have the option, upon receipt from Tenant of written request for Landlord's consent to subletting or assignment, to cancel this lease as of the date the requested subletting or assignment is to be effective and to enter into a new lease agreement directly with the proposed sublessee or assignee. The option shall be exercised if at all, within fifteen (15) days following Landlord's receipt of written notice by delivery to Tenant of written notice of Landlord's intention to exercise the option. In the event of any assignment or subletting, Tenant shall nevertheless at all times, remain fully responsible and liable for the payment of the rent specified and for compliance with all of its other obligations under the terms, provisions and covenants of this lease. Upon the occurrence of an "event of default" if all or any part of the demised premises are then assigned or sublet, Landlord, in addition to any other remedies provided by this lease or provided by law, may at its option collect directly from the assignee or subtenant all rents becoming due to Tenant by reason of the assignment or sublease, and Landlord shall have a security interest in all properties on the demised premises to secure payment of such sums. 6. MAINTENANCE. Tenant will maintain the demised premises in a clean and healthful condition, and comply with all laws, ordinances, orders, rules and regulations (state, federal, municipal and other agencies or bodies having any jurisdiction thereof) with reference to use, condition, or occupancy of the demised premises. 7. INDEMNITY. Landlord shall not be liable for and Tenant will indemnify and save harmless Landlord from any and all fines, suits, claims, demands, and actions of any kind (including attorney's fees) by reason of any negligence, misconduct, or any breach, violation, or non-performance of any covenant hereof on the part of Tenant or Tenant's agents, employees, or invitees. Tenant shall not be liable for and Landlord will indemnify and save harmless Tenant from any and all fines assessed against Landlord or Landlord's agents because of the acts or ommissions of the Landlord or Landlord's agents. Landlord shall not be liable or responsible for any loss or damage to any property or person occasioned by theft, fire, act of God, public enemy, injunction, riot, strike, insurrection, war, court order, requisition or order of governmental body or authority or other matter beyond the reasonable control of Landlord, or for any damage or inconvenience which may arise through repair or alteration of any part of the Building, or failure to make repairs, or from any cause whatsoever except Landlord's negligence. 8. RULES AND REGULATIONS. Tenant and Tenant's agents, employees and invitees, will comply fully with all requirements of the rules of the Building which are attached hereto and are made a part as though fully set out herein. Landlord shall 2 3 at all times have the right to change such rules and regulations or to amend them in such reasonable manner as may be deemed advisable for safety, care, and cleanliness of the Building and for preservation of good order therein, all of which rules and regulations, changes, and amendments, will be forwarded to Tenant in writing and shall be carried out and observed by Tenant. Tenant shall further be responsible for the compliance with such rules and regulations by the employees, servants, agents, visitors and invitees of Tenant. The rules shall be uniformly applied to all tenants in the Building. 9. INSPECTION. Landlord, or its officers, agents, and representatives, shall have the right to enter into and upon any and all parts of the demised premises, (a) at all reasonable hours to inspect same or clean or make repairs or alterations or additions as Landlord may deem necessary, or (b) during business hours to show the demised premises to prospective tenants, purchasers or lenders, and Tenant shall not be entitled to any abatement or reduction of rent by reason thereof. 10. CONDUCT OF BUSINESS. Tenant will conduct his business, and control his agents, employees, and invitees in such a manner as not to create any nuisance or interfere with, annoy or disturb other tenants or Landlord in the management of the Building. 11. CONDEMNATION. If the demised premises shall be taken or condemned in whole or part for public purposes, then the term of this lease shall at the option of Landlord forthwith cease and terminate. 12. FIRE & OTHER CASUALTY. In the event that the Building should be totally destroyed by fire, tornado or other casualty, or should be so damaged that rebuilding or repairs cannot be completed within two hundred forty (240) days after the date of such damage, Landlord may at its option terminate this lease in which event the rent shall be abated during the unexpired portion of this lease effective with the date of such damage, or Landlord may proceed to rebuild and repair the Building and the demised premises. In the event the Building should be damaged by fire, tornado or other casualty, but only to such extent that rebuilding or repairs can be completed within two hundred forty (240) days after the date of such damage, or if the damage should be more serious but Landlord does not elect to terminate this lease, in either such event Landlord shall within thirty (30) days after the date of such damage commence to rebuild or repair the Building and shall proceed with reasonable diligence to restore the Building to substantially the same condition in which it was immediately prior to the happening of the casualty, except that Landlord shall not be required to rebuild, repair or replace any part of the partitions, fixtures, and other improvements which may have been placed by Tenant or other tenants within the Building. If the fire or other casualty was not due to the fault of Tenant, it's agents or employees, payment of rent and operating expenses shall abate during the time the demised premises are unfit for occupancy. In the event any mortgagee under a deed of trust, security agreement or mortgage on the Building should require that the insurance proceeds be used to retire the mortgage debt, Landlord shall have no obligation to rebuild and this lease shall terminate upon notice to Tenant. Any insurance which may be carried by Landlord or Tenant against loss or damage to the Building or to the demised premises shall be for the sole benefit of the party carrying such insurance and under its sole control. 13. HOLDING OVER. Should Tenant, or any of its successors in interest, hold over the demised premises, or any part thereof, after the expiration of the term of this lease, unless otherwise agreed to in writing, such holding over shall constitute and be construed as a tenancy from month to month only, at a rental equal to the rent paid for the last month of the term of this lease plus fifty percent (50%) of such amount. The inclusion of the preceding sentence shall not be construed as the Landlord's consent for the Tenant to hold over. 14. TAXES ON TENANT'S PROPERTY. Tenant shall be liable for all taxes levied or assessed against personal property, furniture or fixtures placed by Tenant in the demised premises. If any such taxes for which Tenant is liable are levied or assessed against Landlord or Landlord's property and if Landlord elects to pay the same or if the assessed value of Landlord's property is increased by inclusion of personal property, furniture or fixtures placed by Tenant in the demised premises, and Landlord elects to pay the taxes based on such increase, Tenant shall pay to Landlord upon demand that part of such taxes for which Tenant is primarily liable hereunder. Upon request by Tenant, Landlord shall furnish within a reasonable period of time, all relevant documents related to the increased tax assessment. 15. RENT ADJUSTMENT - OPERATING EXPENSES. In the event that operating expenses for the Building for any calendar year during the term of this lease (including without limitation the calendar year in which the lease term commences) exceed the amount described in SPECIAL PROVISIONS, PARAGRAPH 35 per square foot, Tenant agrees to pay the Landlord, as additional rental, a prorated share of such increased expenses for the entire Building, based on the ratio that the Tenant's area bears to the total area of the Building determined by a consistent method of measurement. Within one hundred fifty (150) days after the close of the calendar year, Landlord shall give Tenant a statement of the operating expenses for the Building for such calendar year. If such operating expenses exceed the amount described in SPECIAL 3 4 PROVISIONS, PARAGRAPH 35 per square foot of area within the demised premises, Tenant will pay Landlord, within thirty (30) days of statement receipt, Tenant's proportionate share of such increased expenses for the entire year immediately preceding issuance of said statement and for the previous months in the then current year. Thereafter, Tenant will pay an adjusted monthly rental which reflects the most recent year's operating expense increases, subject to further increases as aforesaid. If at lease commencement or termination a partial calendar year is involved, operating expenses shall be computed as though a full calendar year was involved and prorated for such partial year. If the lease terminates other than at the end of a calendar year, an estimate of current annual operating expenses shall be computed for the year of termination and any increased rental based on such estimate shall be billed to the Tenant at termination. Landlord will furnish Tenant an itemized statement of the actual operating expenses at the end of the calendar year as outlined in the preceding paragraph. In the event the Tenant payments exceed Tenant's proportionate share of the operating expenses Landlord will refund the excess amount. If the proportionate share has been understated the Tenant agrees to reimburse Landlord the additional cost as outlined in the preceding paragraph. For the purposes of this lease, operating expenses shall include those expenses paid or incurred by the Landlord for maintaining, operating and repairing the real property of which the demised premises are a part, the Building and other improvements thereon and the personal property used in conjunction therewith (hereafter collectively referred to as "Project") including but not limited to the cost of ad valorem taxes, any value added or similar tax, electricity, natural gas, ventilation, heating and air conditioning, water, window cleaning, janitorial service, insurance, including but not limited to fire, extended coverage, liability, worker's compensation, elevator or any other insurance carried in good faith by the Landlord and applicable to the Project, painting, uniforms, customary property management fees, supplies, sundries, sales or use taxes on supplies or services, cost of wages and salaries of all persons engaged in the operation, maintenance and repair of the Project and so-called fringe benefits, or any other cost or expenses which the Landlord pays or incurs to provide benefits for employees so engaged in the operation, maintenance and repair of the Project, the charges of any independent contractor who under contract with the Landlord or its representatives does any of the work of operating, maintaining or repairing the Project, legal and accounting expenses, including but not limited to such expenses as relate to seeking or obtaining reductions in and refunds of real estate taxes, or any other expense or charge, whether or not hereinbefore mentioned, which in accordance with generally accepted accounting and management principles would be considered as an expense of maintaining, operating or repairing the Project. If any Project expense, though paid in one year, relates to more than one calendar year, at the option of the Landlord such expense may be proportionately allocated among such related calendar years. Tenant at its expense shall have the right at all reasonable times to review Landlord's books and records relating to this lease for any year or years for which additional rental payments become due. 16. EVENTS OF DEFAULT. The following events shall be deemed to be events of default by Tenant under this lease: (a) Tenant shall fail to pay any installment of the rent hereby reserved and such failure shall continue for a period of ten (10) days following receipt of written notice of the same. (b) Tenant shall fail to comply with any term, provision or covenant of this lease, other than the payment of rent, and shall not cure such failure within thirty (30) days after written notice thereof to Tenant, provided if such term or provision is not capable of being complied with in said thirty (30) day period, and Tenant is being reasonable diligent then there shall be no event of default. (c) Tenant shall make an assignment for the benefit of creditors. (d) Tenant shall file a petition under any section or chapter of the National Bankruptcy Act, as amended, or under any similar law or statute of the United States or any State thereof; or Tenant shall be adjudged bankrupt or insolvent in proceedings filed against Tenant thereunder and such adjudication shall not be vacated or set aside or stayed within the time permitted by law. (e) A receiver or Trustee shall be appointed for all or substantially all of the assets of Tenant and such receivership shall not be terminated or stayed within the time permitted by law. (f) Tenant shall desert or vacate any substantial portion of the demised premises for a period of fifteen (15) days or more. 17. REMEDIES. Upon the occurrence of any event of default specified in Paragraph 16 hereof, Landlord shall have the option to pursue any one or more of the following remedies without any notice or demand whatsoever: (a) Terminate this lease in which event Tenant shall immediately surrender the demised premises to Landlord, and if Tenant 4 5 fails to do so, Landlord may, without prejudice to any other remedy which it may have for possession or arrearages in rent, enter upon and take possession and expel or remove Tenant and any other person who may be occupying the demised premises or any part thereof, by force if necessary, without being liable for prosecution or any claim of damages therefor; and Tenant agrees to pay to Landlord on demand the amount of all loss and damage which Landlord may suffer by reason of such termination, whether through inability to relet the demised premises on satisfactory terms or otherwise. (b) Enter upon and take possession of the demised premises and expel or remove Tenant and any other person who may be occupying the demised premises or any part thereof by force, if necessary, without being liable for prosecution or any claim for damages, and if Landlord elects to relet the demised premises and receive the rent therefore, then Tenant agrees to pay Landlord on demand any deficiency that may arise by reason of such reletting. (c) Enter upon the demised premises by force if necessary without being liable for prosecution or any claim for damages therefor, and do whatever the Tenant is obligated to do under the terms of this lease; and Tenant agrees to reimburse Landlord on demand any expenses which Landlord may incur in thus effecting compliance with Tenant's obligations under this lease, and Tenant further agrees that Landlord shall not be liable for any damages resulting to the Tenant from such action. Pursuit of any of the foregoing remedies shall not preclude pursuit of any of the other remedies herein provided or any other remedies provided by law, nor shall pursuit of any remedy herein provided constitute a forfeiture or waiver of any rent due to Landlord hereunder or any other damages occurring to Landlord by reason of the violation of any of the terms, provisions and covenants herein contained. Landlord's acceptance of rent following an event of default hereunder shall not be construed as Landlord's waiver of such event of default. No waiver by Landlord of any violation or breach of any of the terms, provisions and covenants herein shall be deemed or construed to constitute a waiver of any other violation or breach of any of the terms, provisions and covenants herein contained. Forbearance by Landlord to enforce one or more of the remedies herein provided upon an event of default shall not be deemed or construed to constitute a waiver of such default. 18. SURRENDER OF PREMISES. No action of the Landlord or its agents during the term hereby granted shall be deemed an acceptance of a surrender of the demised premises, and no agreement to accept a surrender of the demised premises shall be valid unless the same be made in writing and subscribed to by the Landlord. 19. ATTORNEY'S FEES. In case it should be necessary or proper for either Landlord or Tenant to bring any action under this lease or to consult or place said lease, or any amount payable by Landlord or Tenant hereunder, with an attorney concerning or for the enforcement of any of Landlord's or Tenant's rights hereunder, then Landlord and Tenant each agree in each and any such case to pay to the other a reasonable attorney's fee. 20. RECEIPTS FROM ASSIGNEE OR SUBTENANT. The receipt by the Landlord of rent from any assignee, subtenant or occupant of the demised premises shall not be deemed a waiver of the covenant contained in this lease against assignment and subletting or an acceptance of the assignee, subtenant or occupant as tenant or a release of the Tenant from the further observance or performance by the Tenant of the covenants in this lease contained, on the part of the Tenant to be observed and performed. No provision of this lease shall be deemed to have been waived by the Landlord unless such waiver be in writing signed by the Landlord. 21. LANDLORD'S LIEN. In addition to any statutory Landlord's lien, Landlord shall have, at all times, a valid security interest to secure payment of all rentals and other sums of money becoming due hereunder from Tenant, and to secure payment of any damages or loss which Landlord may suffer by reason of the breach by Tenant of any covenant, agreement, or condition contained herein, upon all goods, wares, equipment, fixtures, furniture, improvements and other personal property of Tenant presently, or which may hereafter be situated on the demised premises, and all proceeds therefrom, and such property shall not be removed therefrom without the consent of Landlord until all arrearages in rent as well as any and all other sums of money then due to Landlord hereunder shall first have been paid and discharged and all of the covenants, agreements and conditions hereof have been fully complied with and performed by Tenant. Upon the occurrence of an event of default by Tenant, Landlord may, in addition to any other remedies provided herein, enter upon the demised premises and take possession of any and all goods, wares, equipment, fixtures, furniture, improvements and other personal property of Tenant situated on the premises, without liability for trespass or conversion, and sell the same at public or private sale, with or without having such property at the sale, after giving Tenant reasonable notice of the time and place of any public sale or of the time after which any private sale is to be made, at which sale the Landlord or its assigns may purchase unless otherwise prohibited by law. Unless otherwise provided by law, and without intending to exclude any other manner of giving Tenant reasonable notice, the requirement of reasonable notice shall be met if such notice is given in the manner prescribed in Paragraph 26 of this lease at least ten (10) days before the time of sale. Any sale made pursuant to the provision of this Paragraph 21 shall be deemed to have been a public sale conducted in a commercially reasonable manner if held in the demised premises or 5 6 where the property is located after the time, place and method of sale and a general description of the types of property to be sold have been advertised in a local daily newspaper for five (5) consecutive days before the date of the sale. The proceeds from any such disposition, less any and all expenses connected with the taking of possession, holding and selling of the property (including reasonable attorney's fees and legal expenses), shall be applied as a credit against the indebtedness secured by the security interest granted in this paragraph. Any surplus shall be paid to Tenant or as otherwise required by law; the Tenant shall pay any deficiencies forthwith. Upon request by Landlord, Tenant agrees to execute and deliver to Landlord a financing statement in form sufficient to perfect the security interest of Landlord in the aforementioned property and proceeds thereof under the provisions of the Uniform Commercial Code in force in this state. Any statutory lien for rent is not hereby waived, the security interest herein granted being in addition and supplementary thereto. 22. SUBORDINATION. At the option of Landlord's mortgagee, the Tenant agrees to subordinate this lease to any mortgage or encumbrance which Landlord may have placed, or may hereafter place, on the premises. Tenant agrees to execute on demand any instrument which may be deemed necessary or desirable to render such mortgage or encumbrance, whenever made, superior and prior to this lease. 23. ESTOPPEL CERTIFICATE. Tenant shall promptly furnish Landlord on Landlord's request after delivery of the demised premises an estoppel agreement addressed to Landlord and Landlord's mortgagee in such form as said mortgagee shall reasonably request: (a) That the demised premises have been satisfactorily completed, (a list of any incomplete items may be attached) and that Tenant has accepted the premises. (b) The commencement date of the lease and the date rent commenced. (c) That the lease is in full force and effect and that Landlord is not in default thereunder. (d) That there are no offsets or other conditions precedent for the effectiveness of the lease. This condition is a covenant of this lease agreement and a failure to comply with same shall constitute a default hereunder. 24. INSURANCE. Tenant at its expense is required to carry for the protection of the Tenant, Landlord and Landlord's agents as their interests may appear, general public liability and vandalism insurance with limitations of not less than $300,000.00 for any one person injured in any one accident and not less than $500,000.00 for more than one person injured in any one accident and not less than $50,000.00 for property damage per accident covering any accidents for which Tenant is legally liable, with a responsible insurance company, qualified to do business in the State of Tennessee, copy of certificates of insurance to be furnished to Landlord. 25. QUIET ENJOYMENT. Landlord represents and covenants that it has full right, power, and authority to make this lease and that Tenant, upon payment of the rentals and performing the covenants on Tenant's part to be performed hereunder, shall and may peaceably and quietly have, hold and enjoy the demised premises during the term hereof and any extensions thereof, free from interference or disturbance from Landlord, but subject to the terms and conditions of this lease. Landlord agrees to make reasonable efforts to enforce building rules and regulations so as to protect Tenant from interference or disturbance by other tenants or third persons; however, Landlord shall not be liable for any such interference or disturbance, nor shall Tenant be released from any of the obligations of this lease because of such interference or disturbance. 26. NOTICES. Each provision of this lease, or of any applicable governmental laws, ordinances, regulations, and other requirements with reference to the sending, mailing or delivery of any notice, or with reference to the making of any payment by Tenant to Landlord, shall be deemed to be complied with when and if the following steps are taken: (a) All rent and other payments required to be made by Tenant to Landlord hereunder, shall be payable to Landlord at the address hereinbelow set forth, or at such other address as Landlord may specify from time to time by written notice delivered in accordance herewith; (b) Any notice or document required to be delivered hereunder shall be deemed to be delivered, whether actually received or not, when deposited in the United States mail, postage prepaid, certified or registered mail, (with or without return receipt requested), addressed to the parties hereto at the respective addresses set out opposite their names below, or at such other address as they have theretofore specified by written notice delivered in accordance herewith: 6 7 Tenant: Therapeutic Antibodies, Inc. Landlord: The Vanderbilt University 1207 17th Avenue South c/o Trammell Crow SE, Inc. Suite 103 110 21st Avenue South, Nashville, TN 3721 Suite 704 Nashville, Tennessee 37203 27. FORCE MAJEURE. Whenever a period of time is herein prescribed for action to be taken by Landlord, Landlord shall not be liable or responsible for, and there shall be excluded from the computation for any such period of time, any delays due to strikes, riots, acts of God, shortages of labor materials, war, governmental laws, regulations, or restrictions, or any other causes of any kind whatsoever which are beyond the control of Landlord. 28. SEPARABILITY. If any clause or provision of this lease is illegal, invalid or unenforceable under present or future laws effective during the term of this lease, then and in that event, it is the intention of the parties hereto that the remainder of this lease shall not be affected thereby, and it is also the intention of the parties to this lease that in lieu of each clause or provision of this lease that is illegal, invalid or unenforceable, there be added as a part of this lease a clause or provision as similar in terms to such illegal, invalid, or unenforceable clause or provision as may be possible and be legal, valid and enforceable. 29. AMENDMENTS; BINDING EFFECT. This lease may not be altered, changed, or amended, except by instrument in writing signed by both parties hereto. The terms, provisions, covenants, and conditions contained in this lease shall apply to, insure to the benefit of, and be binding upon the parties hereto, and upon their respective successors in interest and legal representatives, except as otherwise herein expressly provided. 30. GENDER. Words of any gender used in this lease shall be held and construed to include any other gender, and words in the singular number shall be held to include the plural, unless the context otherwise requires. 31. CAPTIONS. The captions contained in this lease are for convenience of reference only, and in no way limit or enlarge the terms and conditions of this lease. 32. ADDITIONAL PROVISIONS. See Special Provisions, Exhibits "A & B" and Rules and Regulations attached hereto and by reference made a part hereof. WITNESS, the signature of the parties hereto in multiple copies, this the _______ day of ______________________ A.D. 19_____. TENANT: THERAPEUTIC ANTIBODIES, INC. LANDLORD: VANDERBILT UNIVERSITY 1207 17th Avenue South, Suite 103 c/o Trammell Crow Company Nashville, Tennessee 37212 110 21st Avenue South, Suite 704 Nashville, TN 37203 By: /s/ Martin Brown By: /s/ [Illegible] ---------------------- ----------------------- WITNESS AS TO TENANT: WITNESS AS TO LANDLORD: /s/ Jean Marstiller /s/ [Illegible] - --------------------------------- ------------------------------------ 7 8 RULES AND AGREED REGULATIONS 1. Tenant agrees to make deposit, in amount fixed by Landlord from time to time, for each key issued by Landlord to Tenant for his offices, and upon termination of the lease, to return all keys to Landlord. Landlord will refund amount deposited on each key returned. Tenant shall not alter any lock or install a new or additional lock or bolt on any door of the demised premises without the prior written consent of Landlord. 2. Landlord will provide and maintain an alphabetical directory board in the Building. 3. Tenant will refer all contractors, contractor's representatives and installation technicians rendering any service to Tenant, to Landlord for Landlord's supervision, approval, and control before performance of any contractual service. This provision shall apply to all work performed in the Building including installations of telephones, telegraph equipment, electrical devices and attachments, and installments of any nature affecting floors, walls, woodwork, trim, windows, ceilings, equipment or any other physical portion of the Building. 4. Movement in or out of the Building of furniture or office equipment, or dispatch or receipt by Tenant of any merchandise or materials which requires use of elevators or stairways or movement through Building entrances or lobby shall be restricted to hours designated by Landlord. All such movement shall be under supervision of Landlord and in the manner agreed between Tenant and Landlord by prearrangement before performance. Such prearrangement initiated by Tenant will include determination by Landlord and subject to his decision and control, of the time, method and routing of movement, and limitations imposed by safety or other concerns which may prohibit any article, equipment or any other item from being brought into the Building. Tenant is to assume all risk as to the damage of articles moved and injury to persons or public engaged or not engaged in such movement, including equipment, property and personnel of Landlord, if damaged or injured as a result of acts in connection with carrying out this service for Tenant from time of entering the tract on which the Building stands to completion of work, and Landlord shall not be liable for acts of any person engaged in, or any damage or loss to any of said property or persons resulting from any act in connection with such service performed for Tenant. 5. No signs will be allowed in any form on exterior of Building or windows inside or out, and no signs except in uniform location and uniform styles fixed by Landlord will be permitted in the public corridors or on corridor doors or entrances to Tenant's space. All signs will be contracted for by Landlord for Tenant at the rate fixed by Landlord from time to time, and Tenant will be billed and pay for such service accordingly. 6. No draperies, shutters or other window covering shall be installed on exterior windows or walls and doors facing public corridors without Landlord's prior written approval. 7. No portion of the demised premises or any other part of Building shall at any time be used or occupied as sleeping or lodging quarters. 8. Tenant shall not place, install or operate on the demised premises or in any part of the Building, any engine, stove, or machinery, or conduct mechanical operations or cook thereon or therein, or place or use in or about premises any explosive, gasoline, kerosene, oil, acids, caustics or any other flammable, explosive, or hazardous materials without written consent of Landlord. 9. Landlord will not be responsible for lost or stolen personal property, equipment, money or jewelry from the demised public rooms regardless of whether such loss occurs when area is locked against entry or not. 10. No birds or animals shall be brought into or kept in or about the Building. 11. Employees of Landlord shall not receive or carry messages for or to Tenant or other person, nor contract with or render fee or paid services to Tenant or Tenant's agents, employees, or invitees. 12. Landlord will not permit entrance to the demised premises by use of pass keys controlled by Landlord, to any person at any time without written permission by Tenant, except employees, contractors or service personnel directly supervised by Landlord. 13. None of the entries, passages, doors, elevators, elevator doors, hallways or stairways shall be blocked or obstructed, or any rubbish, litter, trash or material of any nature placed, emptied or thrown into these areas, or such areas be used at any time except 8 9 for ingress by Tenant, Tenant's agents, employees or invitees. 14. Tenant and its employees, agents, and invitees, shall observe and comply with the driving and parking signs and markers on the premises surrounding the Building. 15. Landlord shall have the right to prescribe the weight and position of safes, computers, and other heavy equipment which shall, in all cases, in order to distribute their weight, stand on supporting devices approved by Landlord. All damage done to the Building by placing in or taking out any property of Tenant while in the Building shall be repaired promptly at the expense of Tenant. 16. To insure orderly operation of the Building, no ice, mineral water or other beverages, food, towels, newspapers, etc., shall be delivered to the demised premises except by persons and at times approved by Landlord. 17. Should Tenant require telegraphic, telephonic, annunciator, or other communication services, Landlord shall direct where and how wires are to be introduced and placed and none shall be introduced or placed except as Landlord shall direct. 18. Without Landlord's prior approval, Tenant shall not install any radio or television antenna, loudspeaker, music system or other device on the roof or exterior walls of the Building or on common walls with adjacent tenants. 19. No hand trucks or other vehicles of any kind shall be used in or brought into the Building of the demised premises by Tenant or others unless such vehicle shall have been inspected and approved in writing by Landlord. 20. Tenant shall store all of its trash and garbage within its demised premises. No material shall be placed in the trash boxes or receptacles if such material is of such natures that it may not be disposed of in the ordinary and customary manner of removing and disposing of trash and garbage and without being in violation of any law or ordinance governing such disposal. All garbage and refuse disposal shall be made only through entryways and elevators provided for such purposes and at such times as Landlord shall designate. 21. The Rules and Regulations are in addition to, and shall not be construed to in any way modify, alter or amend, in whole or in part, the terms, covenants, agreements and conditions of any lease covering premises in the Building. 22. Landlord reserves the right to make such other reasonable rules and regulations as in its judgment may from time to time be needed for the safety, care and cleanliness of the Building, and for the preservation of good order therein. 9 10 THERAPEUTIC ANTIBODIES, INC SPECIAL PROVISIONS 7,941 R.S.F. 33. Demised Premises. Effective February 1, 1997, the demised premises will be, suite 305 containing 1,799 rentable square feet (herein known as "initial space"). Effective November 15, 1997, the demised premises will also include suite 103 containing 6,142 rentable square feet on floors 1 and 2 of named building (herein referred to as "Expansion Space"). See "Exhibits A & B" for description of demised premises. 34. Rent. Base monthly rental amount shall be as follows:
Year Initial Space Expansion Space Total monthly rental ---- ------------- --------------- -------------------- February 1, 1997 - February 28,1997 -0- -0- -0- March 1, 1997 - November 14, 1997 $2,398.67 -0- $ 2,398.67 November 15, 1997 - January 31, 1998 $2,398.67 $8,189.33 $10,588.00 February 1, 1998 - January 31, 1999 $2,436.15 $8,317.29 $10,753.44 February 1, 1999 - January 31, 2000 $2,473.63 $8,445.25 $10,918.88 February 1, 2000 - January 31, 2001 $2,511.10 $8,573.21 $11,084.31
35. Operating Expense Stop. The Operating Expense Stop applicable in Paragraph 15 of the Lease, shall be determined as the actual operating expenses for the calendar year 1996. Operating expenses shall not include (a) expenses for repairs for which Landlord is reimbursed by insurance, (b) expenses incurred in leasing or procuring new tenants, (c) tenant space preparation or alteration costs, (c) interest or amortization payments on any mortgage or mortgages, (e) cost of any capital improvement determined in accordance of generally accepted accounting principles except such costs as reasonably amortized by Landlord of any capital improvement completed after the commencement date which is intended to reduce other operating expenses (f) leasing commissions, attorney's fees, space planning costs and other costs and expenses incurred in connection with new or existing space leases in the Building or with negotiations or disputes with present or prospective Tenants or other occupants other than Tenant of the Building; and (g) interest, principal, points or fees on any mortgage encumbering the Building. 36. Tenant Improvement Allowance. Landlord understands that Tenant shall require certain construction and renovation work to the Demised Premises in order for the Demised Premises to be suitable as office space for Tenant's business purposes (the "Tenant Work"). Landlord shall provide to Tenant an allowance for the Tenant Work of Twenty-Three Thousand Eight Hundred Twenty-Three Dollars ($23,823.00) ($3.00 per rentable square foot for the Demised Premises) (the "Tenant Improvement Allowance"). The Tenant Improvement Allowance shall be available for use by Tenant throughout the Term of the Agreement and for any space currently leased by Tenant. Tenant shall have the right to select any contractor or subcontractors to perform the Tenant Work, so long as Tenant provides Landlord advance notice of the name of the contractor or subcontractors to perform the Tenant Work and Landlord approves the contractor and the contractor provides Landlord with a liability insurance certificate indicating a minimum of $1,000,000.00 in liability insurance protection. Prior to commencement of the Tenant Work, Tenant shall submit to Landlord a description of the Tenant Work in reasonable detail, including building plans and specifications for the Demised Premises (if any) (the "Plans") for approval by Landlord, which approval shall not be unreasonably withheld or delayed. The Tenant Improvement Allowance or any portion thereof shall be paid by Landlord within thirty (30) days following submittal by Tenant to Landlord of invoices or other reasonable documentation evidencing the cost for the Tenant Work or any portion thereof. If the Tenant Improvement Allowance is not paid by Landlord within the time provided for in this Section/but only if Tenant is not in default as to any of the terms, provisions and covenants of this Agreement, Tenant shall have the right to offset the monthly payment of Rent as provided for in this Agreement up to the amount of the Tenant Improvement Allowance. Any costs incurred in performing the 10 11 Tenant Work in excess of the Tenant Improvement Allowance shall be paid for by Tenant. Tenant agrees to provide to Landlord upon request reasonable documentation evidencing payment to all contractors or subcontractors in connection with the Tenant's carrying out of the Tenant Work. 37. First Right of Refusal Space. Landlord will provide a First Right of Refusal on any contiguous space on the 1st or 2nd floor. This is a one time option to be exercised within 10 days of written notification of availability. The exact square footage, rental rate and tenant improvements associated with this space will be specified by Landlord in its Notice of Availability and shall be based on the amount offered to any prospective tenants of such space. 38. Termination Option. Landlord shall allow a one time option to terminate the initial space, suite 305, if, and only if, the Tenant exercises it's First Right of Refusal on an amount of square footage to be mutually agreed upon. Such termination must occur simultaneously with the execution of a lease for the new space. 39. Visitor Parking. Landlord shall provide 3 designated visitor spaces located adjacent to the exterior entrance to suite 103. 40. Renewal Option. Landlord shall provide one renewal option to extend the lease term for a 3 year period. The rental rate for the extension to be mutually agreed upon but in no event will be less than the rental rate charged during the last year of the initial lease. 41. Brokers. Landlord and Tenant each warrant to the other that there are not brokers involved in the Lease Agreement except RCM Realty and Trammell Crow Company. Landlord agrees to pay a cash-out commission of six percent (6%) of the aggregate Base Rent payable pursuant to the Lease Agreements initial term. The commission shall be payable within 30 days of execution of the Lease Agreement and shall be payable one half (3%) to RCM Realty and one half (3%) to Trammell Crow Company. 42. Hazardous Wastes. Tenant shall not cause or permit the use, generation, storage or disposal in or about the demised premises of any substance, materials or wastes subject to regulation under any federal, state or local law from time to time in effect concerning hazardous, toxic or radioactive materials (hereinafter "Hazardous Materials") unless Tenant shall have received Landlord's prior written consent, which consent Landlord may withhold or at any time revoke at its sole discretion. If Tenant uses, generates, stores or disposes of an Hazardous Materials in or about the demised premises, Tenant shall obtain all necessary permits and comply with all statutes, regulations and rules applicable to such activity. Upon termination of this Lease, Tenant shall remove all Hazardous Materials, along with all storage and disposal facilities, from the demised premises, such removal to be in accordance with procedures approved by the proper governmental authority. Tenant shall indemnify and hold Landlord harmless from and against all liability, cost, claim, penalty, expense and fees (including court costs and attorneys' fees) arising from Tenant's use, generation, storage, or disposal of Hazardous Materials in or about the demised premises. Landlord shall indemnify and hold Tenant harmless from and against all liability, costs and expenses relating to Hazardous Materials which were existing in the Demised Premises or Building as of the Commencement Date of this Lease other than Hazardous Materials encountered by Tenant in the course of Tenant's Work (as defined above). This section shall survive the expiration or earlier termination of this Lease. 43. Compliance with Public Accommodation Laws. Intentionally Ommitted 44. Landlord's Liability. The liability of Landlord to Tenant for any default by Landlord under the terms of this Lease shall be limited to Tenant's actual direct, but not consequential, damages therefor and shall be recoverable from the interest of Landlord in the Building and the Land, and Landlord shall not be personally liable for any deficiency. This section shall not be deemed to limit or deny any remedies which Tenant may have in the event of default by Landlord hereunder which do not involve the personal liability of Landlord. 45. No Offer. The submission of this Lease to Tenant shall not be construed as an offer, nor shall Tenant have any rights under this Lease unless Landlord executes a copy of this Lease and delivers it to Tenant. 46. Financial Statements. This Lease is contingent upon the Landlord's receipt of satisfactory financial statements for Therapeutic Antibodies, Inc.. If, in the Landlord's sole determination at the date of execution, the financial statements do not indicate ability to pay rent, then their Lease document will be null and void. 11 12 47. Condemnation. The entire award of damages or compensation for a taking of the Premises, whether such taking would be in hole or in part, shall belong to and be the property of Landlord, except for such compensation as maybe made for Tenant's moving or relocation expenses, Tenant's business interruption losses, and for the taking of Tenant's trade fixtures, which compensation shall belong to and be the property of Tenant. 12 13 THERAPEUTIC ANTIBODIES, INC EXHIBIT A INITIAL SPACE 1,799 R.S.F. 13 14 THERAPEUTIC ANTIBODIES, INC EXHIBIT B EXPANSION SPACE 6,142 R.S.F. 14 EX-10.9 3 SUBLEASE 1 EXHIBIT 10.9 SUBLEASE THIS AGREEMENT made the 29th day of January, 1997, between Platinum Entertainment, Inc., a Delaware Corporation, having an office at 2001 Butterfield Rd, Suite 1400, Downers Grove, IL 60515, hereinafter referred to as "Sublessor", - and - Therapeutic Antibodies, Inc., a Delaware Corporation, having an office at 1207 17th Avenue South, Suite 103, Nashville, TN 37212, hereinafter referred to as "Sublessee", WITNESSETH: WHEREAS, Sublessor, as Lessee, entered into a lease with Vanderbilt University, as Lessor, dated September 28, 1994, with such term commencing November 15, 1994 and expiring November 14, 1997, leasing certain space, consisting of 6,142 rentable square feet on the first and second floors of the building located at 1207 17th Avenue, Nashville, TN 37212 (the "Subleased Premises"), which Lease Agreement is attached hereto as Exhibit A and incorporated herein by reference (said lease agreement is hereinafter referred to as the "Prime Lease"), and WHEREAS, the parties hereto have agreed that Sublessor shall sublet all of such space to Sublessee; NOW, THEREFORE, the parties hereto hereby covenant and agree as follows: 1. TERM; RENT - Sublessor hereby leases to Sublessee the 6,142 rentable square feet, more or less, of the space on the 1st and 2nd floors of said building, leased by Sublessor, shown on Exhibit A attached hereto and made a part hereof, for a term of 10 months beginning on January 15, 1997, and ending on November 14, 1997, unless sooner terminated in accordance herewith, yielding and paying to Sublessor a rent at the rate of 2 Ninety-Eight Thousand Two Hundred Seventy Two and 00/100 Dollars ($98,272.00) per annum, plus the additional rent outlined in paragraph 5 of the Prime Lease. Sublessee shall pay the rent and additional rent provided for hereunder in equal monthly installments of Eight Thousand, One Hundred Eighty-Nine and 33/100 Dollars ($8,189.33) in advance and without demand on the first day of each and every month during the term. Rent and additional rent will be prorated for any partial month of the term. The payment of rent shall be made directly to: Vanderbilt University, 110 21st Avenue South, Suite 704, Nashville, TN 37203. 2. USE OF SUBLEASED PREMISES - The demised premises shall be used for offices and for no other purpose. 3. ASSIGNMENT, SUBLETTING - Sublessee shall not assign this lease nor sublet the demised premises in whole or in part and shall not permit Sublessee's interest in this lease to be vested in any third party by operation of law or otherwise. 4. ADDITIONAL RENT - If Sublessor shall be charged for additional rent or other sums pursuant to the provisions of the Prime Lease, including without limitation Article 5 thereof (rent escalation), Sublessee shall be liable for 100% of such additional rent or sums. If any such rent or sums shall be due to additional use by Sublessee of electrical current in excess of Sublessee's proportionate part of additional use in the premises demised under the Prime Lease, such excess shall be paid in entirety by Sublessee. If Sublessee shall procure any additional services from the building, such as alterations or after-hour air conditioning, Sublessee shall pay for same at the rates charged therefor by the Lessor and shall make such payment to the Sublessor or Lessor, as Sublessor shall direct. Any rent or other sums payable by Sublessee under this Article 5 shall be additional rent and collectable as such. If Sublessor 3 shall receive any refund under said Article 5 of the Prime Lease concerning payment of Additional Rent, Sublessee shall be entitled to a credit for the overpayment of so much thereof as shall be attriibutable to prior payments by Sublessee. 5. SUBORDINATION - This lease is subject to and subordinate to the Prime Lease. Except as may be inconsistent with the terms hereof, all the terms, covenants, and conditions contained in the Prime Lease shall be applicable to this Agreement with the same force and effect as if Sublessor were the lessor under the Prime Lease and Sublessee were the lessee thereunder, and in case of any breach hereof by Sublessee, Sublessor shall have all the rights against Sublessee as would be available to the lessor against the lessee under the Prime Lease if such breach were by the lessee thereunder. 6. PRIME LEASE - Notwithstanding anything herein contained, the only services or rights to which Sublessee is entitled to hereunder are those to which Sublessor is entitled under the Prime Lease and that for all such services and rights Sublessee will look solely to the Lessor under the Prime Lease. Sublessor will have no liability for Lessor's failure to provide any such services or for the cost of such services. 7. COVENANT AS TO TERMINATION OF PRIME LEASE - Sublessee shall neither do nor permit anything to be done which would cause the Prime Lease to be terminated or forfeited by reason of any right of termination or forfeiture reserved or vested in the Lessor under the Prime Lease, and Sublessee shall indemnify and hold Sublessor harmless from and against all claims of any kind whatsoever by reason of any breach or default on the part of Sublessee by reason of which the Prime Lease may be terminated or forfeited. 8. SECURITY DEPOSIT - Sublessee has paid Sublessor on the execution and delivery of the lease the sum of Eight Thousand, One Hundred Eighty Nine and 33/100 Dollars 4 ($8,189.33) as security for the full and faithful performance of the terms, covenants, and conditions of this lease on Sublessee's part to be performed or observed, including but not limited to payment of rent and additional rent or for any other sum which Sublessor may expend or be required to expend by reason of Sublessee's default, including any damages or deficiency in reletting the Subleased Premises, in whole or in part, whether such damages shall accrue before or after summary proceedings or other re-entry by Sublessor. If Sublessee shall fully and faithfully comply with all the terms, covenants, and conditions of this lease on Sublessee's part to be performed or observed, the security, or any unapplied balance thereof, shall be returned to Sublessee after the time fixed as the expiration of the Term. 9. TENANT'S RIGHT TO CANCEL - If actual possession of the Subleased Premises shall not be available by January 15, 1997, Sublessee may elect, within thirty (30) days thereafter, to cancel this lease. If this lease shall be so canceled, Sublessor shall refund to Sublessee any rent or security deposit theretofore paid or delivered to Sublessor hereunder, and upon such refund this lease shall be of no further force and effect. 10. KNOWLEDGE OF LEASE TERMS; REPRESENTATION OF PRIME LEASE - Sublessee represents that is has read and is familiar with the terms of the Prime Lease. Sublessor represents that there are no other agreements with respect to the Prime Lease (whether written or oral) other than as shown on the copy of the Prime Lease attached hereto and incorporated herein by reference as Exhibit A. 11. FULL AGREEMENT - All prior understandings and agreements between the parties are merged within this Agreement, which alone fully and completely sets forth the understanding of the parties and this lease may not be changed or terminated orally or in any manner other than by an agreement in writing and signed by the party against whom 5 enforcement of the change or termination is sought. 12. NOTICES - Any notice or demand which either party may or must give to the other hereunder shall be in writing and delivered personally or sent by registered mail addressed if to Sublessor, as follows: Platinum Entertainment, Inc. c/o Douglas Laux 2001 Butterfield Road, Suite 1400 Downers Grove, IL 60515 and if to Sublessee, as follows: Therapeutic Antibodies, Inc. 1207 17th Avenue South, Suite 103 Nashville, TN 37212 Either party may, by notice in writing, direct that future notices or demands be sent to a different address. 13. CONTINGENCY FOR SUBLESSOR'S CONSENT - The obligations of Sublessor and Sublessee under this Sublease are conditioned upon the Lessor under the Prime Lease giving its consent to this Sublease in form and substance acceptable to Sublessor and Sublessee. 14. ACCEPTANCE OF THE PREMISES - Sublessee will accept the Subleased Premises in their condition on the date of Sublessee's occupancy of the Subleased Premises. Sublessor disclaims any representation or warranty, express or implied, about the demised premises, their suitability for Sublessee, fitness or Sublesseeability without limitation. Sublessee will be solely responsible for the cost and arrangement of its signage and the cost of locks and keys for the Subleased Premises. 15. BROKERS - Sublessor warrants to Sublessee that it has not dealt with any broker 6 in connection with this Sublease other than Trammell Crow Company, and Sublessee warrants to Sublessor that it has not dealt with any broker in connection with this Sublease other than The Mathews Company; Sublessor will be responsible for the payment of commissions to Trammell Crow Company and The Mathews Company. Sublessor and Sublessee will indemnify each other and hold each other harmless from any other claims for commissions on account of this Sublease. 16. QUIET ENJOYMENT - So long as the Sublessee is not in default in the performance of its covenants and agreement in this Sublease, Sublessee's quiet enjoyment of the Subleased Premises will be not disturbed or interfered with by Sublessor or by any person claiming by, through or under Sublessor. 17. SUCCESSORS AND ASSIGNS - The covenants and agreements herein contained shall bind and inure to the benefit of Sublessor, the Sublessee, and their respective executors, administrators, successors, and assigns. 18. CONSENT TO SUBLEASE AGREEMENT. (a) Vanderbilt University, as Lessor under the Prime Lease, hereby consents to and approves the subletting of the Sublease Premises to Sublessee pursuant to Section 17 of the Prime Lease. Lessor further consents to and approves herewith the form of the Sublease Agreement. (b) REPRESENTATIONS AND WARRANTIES OF LANDLORD. Lessor and Sublessor hereby warrant to Sublessee that the Prime Lease, and all amendments and addenda thereto, as attached hereto as Exhibit A, is a complete, true and accurate description of the terms and conditions of the rental of the Subleased Premises which is the subject of the Sublease Agreement. Lessor and Sublessor further warrant and represent to Sublessee, and its 7 successors and assigns, that the Prime Lease is in full force and effect, and as of the date hereof Lessor and Sublessor are not aware of any default on the part of Lessor or Sublessor under the Prime Lease, and are not aware of any default which, with the passage of time or the giving of notice or both, would constitute a default by Lessor or Sublessor under the Sublease Agreement. (c) NOTICE OF DEFAULT TO TENANT; RIGHT TO CURE. Notwithstanding any provision in the Sublease Agreement herein to the contrary, no default in the performance of any of the Sublessor's obligations under the Prime Lease that is of such a nature as to give Lessor a right to terminate the Prime Lease, whether on the occurrence of an event of default or otherwise, shall entitle Lessor to exercise any such right, power or remedy unless and until notice of such default is given to Sublessee specifying the act or omission which constitutes such default and the action required of Sublessee to cure the same and thirty (30) days shall have elapsed following Sublessor's receipt of such notice of default, during which period Sublessee shall have the right, but not the obligation, to remedy or cure such default. If such default cannot reasonably be cured within said thirty (30) days, the Tenant shall have such longer period of time as may be reasonably necessary to cure such default so long as Tenant commits action to cure the default within such thirty (30) days and thereafter diligently pursues the cure of the default. (d) WAIVER OF SUBLESSOR'S OPTION TO RENEW PRIME LEASE. Sublessor understands and acknowledges that Lessor and Sublessee are executing simultaneously herewith a lease agreement for the lease by Tenant of the Subleased Premises for a term beginning immediately following the expiration of this Sublease (November 15, 1997). Sublessor by execution of this Sublease herewith specifically waives any right or option it 8 may have to renew the term of the Prime Lease as provided for in Sections 3 and 4 of the Prime Lease. IN WITNESS WHEREOF, the parties hereto have caused those present to be executed the day and year first above written. SUBLESSOR: PLATINUM ENTERTAINMENT, INC. BY: /s/ [Illegible] --------------------------- TITLE: C.F.O. --------------------------- WITNESS: BY: /s/ [Illegible] --------------------------- SUBLESSEE: THERAPEUTIC ANTIBODIES, INC. BY: /s/ Martin S. Brown --------------------------- TITLE: Chairman --------------------------- WITNESS: BY: /s/ Jeannie Marstiller --------------------------- LESSOR: VANDERBILT UNIVERSITY BY: /s/ [Illegible] --------------------------- TITLE: --------------------------- WITNESS: BY: /s/ [Illegible] --------------------------- 9 EXHIBIT "A" [Image Omitted] EX-10.10 4 ASSIGNMENT 1 Exhibit 10.10 Dated: 1st February 1996 - -------------------------------------------------------------------------------- IMMUNOGEN INTERNATIONAL LIMITED (1) -AND- TAB LONDON LIMITED (2) - -------------------------------------------------------------------------------- ASSIGNMENT OF 14/15 NEWBURY STREET LONDON EC1A 7HU - -------------------------------------------------------------------------------- MAXWELL BATLEY SOLICITORS 27 Chancery Lane London WC2A 1PA 2 THIS ASSIGNMENT is made the 1st day of February One Thousand Nine Hundred and Ninety-six BETWEEN IMMUNOGEN INTERNATIONAL LIMITED whose registered office is at Seventh Avenue Team Valley Trading Estate Gateshead Tyne & Wear NE11 OLH Company Number 1231945 (hereinafter called "the Assignor") of the one part and TAb LONDON LIMITED whose registered office is at Blaenwaun Farm Ffostrasol Llyandysul Dyfed SA44 5JT (hereinafter called "the Assignee") of the other part WHEREAS:- (1) By a Lease (hereinafter called "the Lease") short particulars whereof are set out in the First Schedule hereto the property described in the Second Schedule hereto (hereinafter called "the property") was demised for a term of twenty-one years from 25th December 1978 at an initial annual rent of L.1.00 subject to review and subject to the performance and observance of the covenants on the part of the Tenant and the Surety and the conditions provisos agreements and declarations therein contained (2) The Property is now vested in the Assignor for all the residue now unexpired on the said term free from encumbrances (3) The Assignor has agreed with the Assignee to assign the property to the Assignee for all the residue now unexpired of the term created by the Lease and in consideration of the covenants by the Assignee contained in this assignment 3 (4) The consent of the Landlord to this Assignment has been duly obtained as required by the Lease NOW THIS DEED WITNESSETH as follows:- 1. IN consideration of the covenants by the Assignee contained in Clause 2 the Assignor as beneficial owner HEREBY ASSIGNS unto the Assignee all the property as the same is comprised in and demised by the Lease TO HOLD unto the Assignee for all the residue now unexpired of the term created by the Lease subject to the payment of the rent reserved by and the performance and observance of the covenants on the part of the Tenant and the conditions provisos agreements and declarations contained in the Lease 2. THE Assignee HEREBY COVENANTS with the Assignor with the object and intention of affording to the Assignor a full and sufficient indemnity but not further or otherwise the Assignee will duly pay all rent becoming due under the Lease and perform and observe the covenants and conditions provisos agreements and declarations therein contained and henceforth on the part of the Tenant to be performed and observed and will save harmless and keep indemnified the Assignor from and against all proceedings costs claims demands damages liabilities and expenses whatsoever in respect of any future non-payment of the said rent or breach non-observance or non-performance of the said covenants and conditions provisos agreements and declarations or any of them or in anywise relating thereto 2 4 3. IT is agreed that the covenants which are implied by section 4(i)(b) Law of Property (Miscellaneous Provisions) Act 1994 are excluded from this assignment 4. IT is hereby certified that the transaction hereby effected does not form part of a larger transaction or a series of transactions in respect of which the amount or value or the aggregate amount or value of the consideration exceeds L.60,000 IN WITNESS whereof this Deed has been duly executed the day and year first before written THE FIRST SCHEDULE before referred to Date of Lease:- 23rd October 1978 Parties to Lease:- Andrew Sturgis and Antoinette Imbert Harland (1) I.L.S. Limited (2) Timothy Chard and John Landon (3) Current Rental: - L.40,000 per annum THE SECOND SCHEDULE before referred to ALL THAT building and premises situate and being numbered 14 and 15 Newbury Street Aldersgate in the City of London as the same is more specifically described in the Lease 3 5 EXECUTED as a DEED under ) COMMON SEAL of IMMUNOGEN ) INTERNATIONAL LIMITED ) in the presence of:- ) Director /s/ [ILLEGIBLE] Director/Secretary /s/ [ILLEGIBLE] EXECUTED by TAb LONDON ) LIMITED as a Deed acting by ) /s/ J. Landon John Landon ) and ) Michael Haublon ) /s/ Michael Haublon ) 4 6 FIRST SCHEDULE DATED 23rd OCTOBER 1978 ANDREW STURGIS and ANTOINETTE IMBERT HARLAND - to - I.L.S. LIMITED L E A S E - of - 14 and 15 Newbury Street, Aldersgate in the City of London. 7 THIS LEASE is made the twenty-third day of October One thousand nine hundred and seventy-eight BETWEEN ANDREW STURGIS of 1 Bedford Row London W.C.l. Solicitor and ANTOINETTE IMBERT HARLAND of 123 Putnoe Lane Bedford (hereinafter called "the Landlords") which expression where the context so admits shall include the reversioner for the time being immediately expectant on the term hereby created of the first part I.L.S. LIMITED whose registered office is at Collingwood House 99 New Cavendish Street London WlM 7FQ (hereinafter called "the Tenant") which expression where the context so admits shall include the successors in title and assigns of the Tenant of the second part and TIMOTHY CHARD of "Little Ames" Bushey Avenue South Woodford London E.18 Professor of Reproductive Physiology and JOHN LANDON of "Mannin" Mount Park Road Harrow on the Hill in the London Borough of Harrow Professor of Clinical Pathology (hereinafter called "the Sureties") which expression shall include their Executors and Administrators of the third part. WITNESSETH as follows:- 1. (1) THE Landlords hereby demise unto the Tenant ALL THAT building and premises situate and being numbered 14 and 15 Newbury Street Aldersgate in the City of London together with the Landlords' fittings and fixtures on the premises except and reserved and subject to the rights of the owners of adjoining and neighbouring premises in respect of party walls and lights including in particular (and without limiting the generality hereof) the rights referred to in the documents listed in the Schedule hereto and also excepting and reserving to the Landlords 8 and to any other person or persons entitled thereto the free passage and running of gas and electricity water and soil through and along the pipes wires channels drains and water courses already or hereafter to be built or placed in through over or under the said premises to and from all or any of the adjoining premises TO HOLD the same unto the Tenant for a term of twenty-one years commencing on the twenty fifth day of March One thousand nine hundred and seventy-eight paying therefor during the first two years of the term the yearly rent of One Pound (L.1.00) (if demanded) and thereafter paying yearly during the said term and so in proportion for any less time than a year the respective rents following (that is to say):- (a) Until the twenty-fifth day of March one thousand nine hundred and eighty-four the yearly rent of Two thousand five hundred pounds (L.2,500-00) and (b) From the twenty fifth day of March One thousand nine hundred and eighty-four and until the twenty-fifth day of March One thousand nine hundred and eighty-nine a yearly rent of Two thousand five hundred pounds (L.2,500-00) or such amount (whichever be the greater) as may be agreed between the Landlords and the Tenant before the first day of January One thousand nine hundred and eight-four or in the absence of such agreement as may be determined by an expert valuer such valuer to be a Fellow of the Royal Institution of Chartered 2 9 Surveyors and to be agreed between the Landlords and the Tenant or in default of agreement nominated by the President for the time being of that Institution on the application of the Landlords made before the twenty-fifth day of March One thousand nine hundred and eighty-four but not before the first day of January One thousand nine hundred and eighty-four and (c) From the twenty fifty day of March One thousand nine hundred and eighty-nine and until the twenty- fifth day of march One thousand nine hundred and ninety-four the yearly rent equal to the sum payable under Sub-Clause (b) above or such amount (whichever be the greater) as may be agreed between the Landlords and the Tenant before the first day of January One thousand nine hundred and eighty- nine or in the absence of such agreement as may be determined by an expert valuer such valuer to be a Fellow of the Royal Institution of Chartered Surveyors and to be agreed between the Landlords and the Tenant or in default of agreement nominated by the President for the time being of that Institution on the application of the Landlord made before the twenty-fifth day of March One thousand nine hundred and eighty-nine but not before the 3 10 first day of January One thousand nine hundred and eighty-nine (d) During the residue of the said term a yearly rent equal to the highest rent payable during the period from the twenty-fifth day of March One thousand nine hundred and seventy-eight to the twenty-fifth day of March One thousand nine hundred and ninety-four or such amount (whichever be the greater) as may be agreed between the Landlords and the Tenant before the first day of January One thousand nine hundred and ninety four or in the absence of such agreement as may be determined by an expert valuer such valuer to be a Fellow of the Royal Institution of Chartered Surveyors and to be agreed between the Landlords and the Tenant or in default of agreement to be nominated by the President for the time being of that Institution on the application of the Landlords made before the twenty-fifth day of March One thousand nine hundred and ninety-four but not before the first day of January One thousand nine hundred and ninety-four AND SO THAT in case of any such valuation the amount to be determined by the valuer shall be the amount which shall in his opinion represent a fair yearly rent for the demised premises having regard to the rental values then current for property of a similar nature in the same area let without a premium with vacant 4 11 possession and to the provisions of this Lease (other than the rent hereby reserved) PROVIDED THAT in determining the fair yearly rent there shall be disregarded (i) the matters mentioned in paragraphs (a) (b) and (c) of Section 34 (1) of the Landlord and Tenant Act 1954 and (ii) any works of alteration or adaption of or to the demised premises or any part thereof carried out by the Tenant in connection with the initial conversion of the demised premises into laboratories with offices ancillary thereto PROVIDED FURTHER that in the case of a reference to an expert valuer the parties shall bear equally between them the fees and expenses of such valuer but shall be responsible for their own costs and so that the said respective rents shall be paid without any deduction (except such as may be authorised by statute) by equal quarterly payments in advance to be made on the usual quarter days. (2) The right of re-entry hereby reserved shall be exercisable by the Landlords as well in the case of non-payment of any increased rent payable under the provisions of this Clause as in the case of non-payment of the rent originally reserved by the Lease. 2. THE Tenant hereby covenants with the Landlords as follows:- (i) To pay the reserved rents at the times and in the manner aforesaid (ii) To pay for all gas and electricity consumed on the demised premises and the standing and meter charges therefor and all other charges in respect thereof 5 12 (iii) To pay all existing and future rates taxes assessments duties charges and outgoings imposed or charged in respect of the demised premises or any part thereof (iv) To repair and keep the demised premises and every part thereof including the whole of the drains sanitary and water apparatus both interior and exterior and all additions thereto and the Landlords' fixtures thereon in good and substantial repair and condition and to forthwith replace all glass broken in the doors and windows and to yield up the demised premises with the fixtures and additions thereto but not such trade or other tenant's fixtures as shall belong to the Tenant at the determination of the said term in good and substantial repair and condition in accordance with the covenants hereinbefore contained (v) To paint with two coats of good oil paint in a workmanlike manner all the wood iron and other parts of the demised premises heretofore or usually painted as to the external work once in every three years of the term and as to the internal work once in every seven years and in each case the painting be done in the last year of the term as well and after every internal painting to grain varnish 6 13 distemper wash stop whiten and colour all such parts as have previously been so dealt with (vi) To permit the Landlords and their duly authorised agents surveyors and others with or without workmen at all reasonable times in the daytime to enter upon the demised premises and to view the condition thereof and upon notice being given by the Landlords to repair in accordance with the covenants on the part of the Tenant herein contained PROVIDED THAT if the Tenant shall at any time make default in the performance of any of the covenants hereinbefore contained for or relating to the repair of the demised premises it shall be lawful for the Landlords (but without prejudice to the right of re-entry under the clause hereinafter contained) to enter upon the said premises and repair the same at the expense of the Tenant in accordance with the covenants and provisions of these presents and the proper expenses of such repairs shall be repaid by the Tenant to the Landlords on demand (vii) To permit the Landlords and their agents at all reasonable times upon prior written notice being given to enter upon the demised premises to take inventories of the fixtures therein 7 14 (viii) To pay a fair proportion (to be conclusively determined by the Surveyor for the time being of the Landlords) of the expenses incurred in respect of making supporting repairing and cleansing all party walls fences sewers drains channels and passageways the use of which is common to the demised premises and to other premises and to pay the reasonable charges of the Surveyor in respect of the determination of such expenses as aforesaid (ix) To insure forthwith and keep insured the demised premises and fixtures against loss or damage by fire aircraft and tempest and other normal comprehensive risks to the full insurable value thereof such insurance to be effected in the joint names of the Landlords and the Tenant in the Norwich Union Fire Insurance Society Limited or in some insurance office or offices or with underwriters to be approved by the Landlords and to pay all premiums necessary for the above purpose within seven days after the same shall respectively have become due whenever required to produce to the Landlords or their Agents the Policy or Policies of such insurance and the receipt for the current year's premium and in the case of destruction or damage to any part of the demised premises from any cause covered by any such insurance immediately it 8 15 is lawful so to do to expend all monies received by virtue of such insurance in rebuilding or reinstating the same as nearly as may be possible in accordance with the then existing regulations by laws and planning schemes and to make up any deficiency out of its own monies PROVIDED ALWAYS that if the Tenant shall fail to make and maintain any such insurances as aforesaid the Landlords may from time to time at their own discretion effect and keep on foot such insurance and the Tenant will on demand repair to the Landlords all money expended by them for that purpose (x) Not without the written consent of the Landlords (which shall not be unreasonably withheld or delayed) to erect any other building on the demised premises nor to alter the plan height elevation or appearance of the demised premises nor to make or permit or suffer to be made any alteration or any addition to the same or cut maim or injure or permit or suffer to be cut maimed or injured any of the walls or main timbers thereof without the written consent of the Landlords PROVIDED that no such consent shall be required for any works (a) carried out by the Lessee in order to comply with its obligations under this Lease or (b) of alteration adaption or improvement of or to the 9 16 demised premises or any part thereof in connection with the initial conversion of the demised premises into laboratories with offices ancillary thereto in accordance with the specification dated July One thousand nine hundred and seventy-eight prepared by Messrs. John Shreeves and Partners a copy of which has been supplied to the Landlords (xi) Not to do or permit or suffer anything in or upon the demised premises or any part thereof which may be or become a nuisance annoyance or damage to the Landlords or the tenants or occupiers of the property in the neighbourhood (xii) (a) Not to use or permit the demised premises or any part thereof to be used otherwise than as: (aa) laboratories either with or without ancillary uses (bb) light industrial or (cc) such other use or uses as shall be previously approved in writing by the Landlords (such approval not to be unreasonably withheld or delayed) (b) Not to hold or permit or suffer to be held any sale by auction on the demised premises 10 17 (xiii) Not to allow permit or suffer any part of the premises to be let or used for residential purposes so that a regulated tenancy under the provisions of the Rent Act 1968 or any statutory re-enactment or modification thereof is created (xiv) Not to place or exhibit or suffer to be placed or exhibited on any part of the exterior of the exterior walls of the demised premises on of the rails or fences thereof any placard poster signboard or other advertisement except such as shall be approved in writing by the Landlords or their Surveyor for the time being such consent not to be unreasonably withheld (xv) To comply with all obligations imposed by and do and execute or cause to be done or executed all such works acts deeds matters and things as under or by virtue of any Act or Acts of Parliament for the time being in force and Bye-laws rules and regulations thereunder are or shall be properly directed or necessary to be done or executed upon or in respect of the demised premises or any part thereof by the lessee tenant or occupier and in particular but without prejudice to the generality of this clause to comply with all obligations imposed on the owner lessee tenant or occupier under or by virtue of the Offices Shops and Railway 11 18 Premises Act 1963 the Factories Act 1961 and the Town and Country Planning Acts 1962/71 and to obtain all necessary planning and other permissions for the proposed use of the demised premises hereby authorised and any other use from time to time authorised by the Landlords before commencing such use and at all times to keep the Landlords indemnified against all claims demands and liability in respect thereof and to pay all costs charges and expenses incurred by the Landlords in abating a nuisance or for remedying any other matter in connection with the demised premises in obedience to a Notice served by a Local Authority (xvi) Not to assign underlet or part with the possession of any lesser part of the demised premises than two whole floors thereof (xvii)(a) Not to assign underlet or part with or share the possession of the whole of the demised premises or two whole floors thereof without the licence in writing of the Landlords which shall not be unreasonably withheld or delayed PROVIDED THAT the Landlords may as a condition of giving their licence as aforesaid for an assignment or underletting of the whole aforementioned premises require the Tenant to procure the intended assignee or underlessee to execute and deliver to the 12 19 Landlords a deed to be prepared at the cost of the Tenant containing a covenant by the intended assignee or underlessee directly with the Landlords to perform and observe during the term assigned or granted to the assignee or underlessee the covenants (including this present covenant) by the Tenant and conditions contained in this Lease (and in the case of an assignment to pay the rents hereby reserved) in the same manner as if such covenants and conditions were repeated in extenso in such deed with the substitution of the name of the intended assignee or underlessee for the name of the Tenant and with such other alterations as the deaths of parties or as other circumstances shall render necessary PROVIDED ALSO that in respect of an assignment of the whole of the demised premises when (a) the said Licence (if required) has been obtained (b) the said Deed of Covenant has been delivered to the Landlords or their solicitors and (c) the relevant assignment has been completed the Tenant (meaning the party who made such assignment) and (in respect of the first of such assignments) the Sureties shall as 13 20 from the date of the relevant assignment and without any further act or deed on the part of the Landlords be released from all liability hereunder AND PROVIDED FURTHER THAT no more than two underleases of part only of the demised premises shall be permitted in accordance with the provisions of this sub-clause (b) Provided further that if such intended assignee as aforesaid shall be a limited liability company then upon the Landlords' demand in that behalf at least two of its directors or two other persons of satisfactory standing shall join in such deed as sureties for such company in order jointly and severally to covenant with the Landlords as sureties that such company will pay the said rents and perform and observe the said covenants and to indemnify and save harmless the Landlords against all loss damages costs and expenses arising by reason of any default by the company and such covenant shall further provide in the usual form that any neglect or forbearance of the Landlords shall not release or exonerate the sureties and shall further provide for the sureties to accept a new lease of the demised premises upon disclaimer of these presents by the Company or on its behalf 14 21 if so required by the Landlords within three months of such disclaimer such new lease to be for the residue then unexpired of the term hereby granted and at the rents payable and subject to the same Tenant's covenants and to the same provisos and conditions as those in force immediately before such disclaimer and to be granted at the cost of the sureties in exchange for a counterpart duly executed by the sureties (c) On the grant of any permitted underlease to obtain therein and at all times thereafter to enforce performance and observance of covenants on the part of the underlessee as follows:- (i) an absolute covenant not to assign demise underlet or otherwise part with possession of any part of the sub-demised premises (here meaning a portion only and not the whole thereof) or to share occupation of the whole or any part thereof for all or any part of the sub-term (ii) a qualified covenant not to assign demise underlet or otherwise part with possession of the whole of the sub-demised premises without the licence in writing of the Landlords (the grant of which shall be 15 22 subject to the same provisos as hereinbefore set forth in this clause). (iii) a covenant that the underlessees will cause to be inserted in every sub-underlease whether immediate or derivative covenants on the part of the relevant sub-underlessee corresponding to the covenants numbered (i) and (ii) above and that the underlessee will at all times thereafter enforce the same (d) Notwithstanding anything herein contained the Tenant shall not create or permit the creation of any interest derived out of the term hereby granted howsoever remote or inferior upon the payment of a fine or premium or at a rent less than the full market rent (obtainable without taking a fine or premium) of the demised premises and shall not create or permit the creation of any such derivative interest as aforesaid save by instrument in writing containing such absolute prohibition as aforesaid on the part of the underlessee and those that may derive title under such underlessee (xviii) Within twenty-one days next after any transfer of assignment or underlease of the demised premises or any part thereof or the assignment of an underlease or after any devolution by Will or otherwise or 16 23 mortgage affecting the demised premises or any part thereof to produce to the Landlords the deed or instrument affecting the same and to pay to them the fee of Ten Pounds together with Value Added Tax thereon for the registration thereof (xix) Upon receipt of any notice order or direction or other communication whatsoever from any competent authority likely to affect the demised premises forthwith to deliver to the Landlords a copy of such notice direction order or other communication (xx) To permit the Landlords during the last three months immediately preceding the determination of the term hereby granted to affix and retain without interference upon some suitable part of the demised premises a notice for re-letting the same and to permit persons with written authority from the Landlords or their agents at reasonable times of the day to view the demised premises (xxi) To pay all expenses (including solicitors' and surveyors' fees) incurred by the Landlords in or in contemplation of any proceedings in respect of this Lease under Section 146 and 147 of the Law of Property Act 1925 or any re-enactment or modification thereof notwithstanding that forfeiture is avoided otherwise than by relief granted by the Court 17 24 (xxii) To permit the Landlords at any time during the term hereby granted to affix and retain without interference upon some suitable part of the demised premises a Notice for the sale of the freehold of the demised premises and to permit persons with written authority from the Landlords or their Agents at reasonable times of the day to view the demised premises 3. THE Landlords hereby covenant with the Tenant that the Tenant paying the rent hereby reserved and performing and observing the several covenants on the Tenants part herein contained shall peaceably hold and enjoy the demised premises during the said term without any interruption by the Landlords or any person rightfully claiming under or in trust for them 4. PROVIDED ALWAYS and it is hereby agreed as follows: - (i) If the rent hereby reserved or any part thereof shall at any time be unpaid for twenty-one days after becoming payable (whether formally demanded or not) or if any of the covenants on the Tenant's part herein contained shall not be or if any tenant for the time being shall become bankrupt performed or observed or being a Company shall enter into liquidation whether compulsory or voluntary (save for the purpose of reconstruction or amalgamation) or if any tenant for the time being shall enter into any arrangement or composition for the benefit 18 25 of the tenants creditors or shall suffer any distress or execution to be levied on the tenant's goods then and in any such case it shall be lawful for the Landlords at any time thereafter to re-enter upon the demised premises or any part thereof in the name of the whole and thereupon this demise shall absolutely determine but without prejudice to the right of action of the Landlords in respect of any antecedent breach of the tenants covenants herein contained (ii) The provisions of Section 196 of the Law of Property Act 1925 as amended by the Recorded Delivery Service Act 1962 shall apply to any notice under this Lease 5. THE Tenant shall pay the reasonable costs of the Landlords' solicitors in respect of deducing title and the preparation settling and execution of this Lease and the counterpart thereof and also the Landlord's reasonable disbursements incurred in connection therewith 6. THE Sureties in consideration of the demised hereinbefore contained having been made at their request hereby jointly and severally covenant with the Landlords that the Tenant shall pay the rents hereby reserved on the days and in manner aforesaid and shall duly perform and observe all the covenants hereinbefore on the Tenant's part contained and that in case of default in such payment of rent or performance or observance of any of the covenants as 19 26 aforesaid during the currency of the said term and also thereafter during such period as the Tenant remains in occupation of the demised premises the sureties will pay and make good to the Landlords on demand all loss damages costs and expenses thereby arising or incurred by the Landlords PROVIDED ALWAYS and it is hereby agreed that any neglect or forbearance of the Landlords in endeavouring to obtain payment of the said several rents when the same become payable or to enforce performance or observance of the several stipulations herein on the Tenant's part contained and any time which may be given by the Landlords to the Tenant shall not release or exonerate or in any way affect the liability of the Sureties under this covenant and PROVIDED FURTHER and it is hereby further agreed that in the event of this Lease being disclaimed by the Tenant or on behalf of the Tenant under any statutory or other power the Sureties will take from the Landlords but only if so required by the Landlords by written notice to the Sureties within three months after such disclaimer a grant of another Lease of the demised premises for the residue of the said term unexpired at the date of such disclaimer at the same several rents hereinbefore reserved and subject to the like covenants and provisos as are herein contained and at the expense of the Sureties and on the execution of such further Lease the Sureties shall execute and deliver to the Landlords a counterpart thereof 20 27 IN WITNESS whereof the Landlords and the Sureties have set their respective hands and seals and the Tenant has caused its Common Seal to be hereunto affixed the day and year first before written SCHEDULE 1. 6th March 1936 Party Wall Award relating to 15 and 16 Newbury Street 2. 30th March 1936 Party Wall Agreement M.L. Collingridge re. 15 Newbury Ltd. (1) H.I.P. Street Hallett (2) 3. 5th June 1936 Party Wall Award Relating to 13 and 14 Newbury Street 4. 5th June 1936 Duplicate Wall Award relating to 13 and 14 Newbury Street 5. 12th June 1936 Party Wall Agreement H.I.P. Hallett (1) re. 13 and 14 H.W. Wagstaff (2) Newbury Street 6. 30th August 1937 Agreement as to Ellerman Property Light and Air - 15 Trust (1) H.I.P. and 16 Newbury Hallett (2) Street SIGNED SEALED AND DELIVERED by ) /s/ Andrew Sturgis the said ANDREW STURGIS in the ) presence of :- ) /s/ [ILLEGIBLE] 1 Bedford Row London WC1 Solicitor SIGNED SEALED AND DELIVERED by ) /s/ Antoinette I. Harland the said ANTOINETTE IMBERT ) HARLAND in the presence of :- ) /s/ D. Sharp 121 Putnoe Lane Bedford Housewife 21 EX-10.19 5 CLINICAL TRIALS AND REGISTRATION AGREEMENT 1 EXHIBIT 10.19 THERAPEUTIC ANTIBODIES INC. F.H. FAULDING & CO. LIMITED CLINICAL TRIALS AND REGISTRATION AGREEMENT OCTOBER 4, 1996 2 TABLE OF CONTENTS
Page ---- 1. Recitals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 2. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 3. Clinical Trials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 4. Registration and Marketing Approvals In the New Territories . . . . . . . . . . . . . . . . . . . . . . . . 4 5. Exclusive Distribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 6. Compliance and Subcontractors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 7. Initial Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 8. Confidentiality, Trademarks, and Proprietary Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 9. Duration and Termination of Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 10. Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 11. Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 12. Disclaimer of Warranties Limited Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 13. Enforcement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 14. General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
3 CLINICAL TRIALS AND REGISTRATION AGREEMENT This Clinical Trials and Registration Agreement ("Agreement") is entered into and effective as of ______________ 1996, by and between F.H. Faulding & Co. Limited (ACN 007 870 984), a company incorporated and carrying on business in South Australia ("FHF"), and Therapeutic Antibodies Inc., a Delaware corporation, located in Nashville, Tennessee, USA ("TAb"). 1. Recitals. 1.1 TAb has developed and is the sole owner of all worldwide right, title, and interest in and to an anti-tumor necrosis factor product which may be used for, among other applications, treatment of cerebral malaria, more particularly described in Schedule 1.1 (the "Product"). 1.2 TAb is attempting to obtain registration and marketing approval for the Product for various uses in the territories referred to in Schedule 1.2 (the "Registration Territories"). 1.3 TAb has requested that (a) FHF or its nominee provide financial support for clinical trials to be conducted by TAb in connection with registrations and marketing approvals in the territories referred to in Schedule 1.3 (the "New Territories"), and that (b) FHF or its nominee obtain registrations and marketing approvals for the Product for treatment of cerebral malaria from the relevant health authorities in the New Territories. 2. Definitions. 2.1 "Clinical Trials" shall mean any and all investigations, evaluations, or experiments relating to the potential use of the Product, that are conducted on human beings. 2.2 "Confidential Information of TAb" means all information obtained or developed by FHF or any third party which relates to TAb's business or the Product, regardless of the form in which such information is transmitted, including, without limitation, all such information previously obtained by FHF pursuant to a Confidentiality Agreement dated July l, 1992, between TAb and FHF (the "Confidentiality Agreement"), all information provided to FHF pursuant to a Registration and Distribution Agreement dated August 31, 1995, between TAb and FHF, all information furnished to FHF or any Subcontractor pursuant to Section 4 below, all Results, and all Trade Secrets. The following shall not be considered Confidential Information of TAb for purposes hereof: (a) Information that is already in the possession of FHF or the Subcontractor at the time it is received from TAb or developed on TAb's behalf, and the receiving party promptly notifies TAb of its belief that the information is excepted under the terms of this subsection; (b) Information received by FHF or a Subcontractor from a Person which has the right to disclose the same, and the receiving party promptly notifies TAb of its belief that the information is excepted under the terms of this subsection; or (c) Information that is or becomes published, or is or becomes otherwise publicly available without the fault of FHF or a Subcontractor. 4 In the event of a dispute regarding the applicability of the above exceptions to the definition of Confidential Information of TAb, FHF shall have the burden of producing clear and convincing proof that the information should be excepted from the definition of Confidential Information of TAb. 2.3 "Confidential Information of FHF" means all information obtained by TAb which relates to FHF's business; provided, however, that this definition does not include or apply to either the Confidential Information of TAb or: (a) Information that is already in the possession of TAb at the time it is received from FHF, and the receiving party promptly notifies FHF of its belief that the information is excepted under the terms of this subsection; (b) Information received by TAb from a Person which has the right to disclose the same, and the receiving party promptly notifies FHF of its belief that the information is excepted under the terms of this subsection; or (c) Information that is or becomes published, or is or becomes otherwise publicly available without the fault of TAb. In the event of a dispute regarding the applicability of the above exceptions to the definition of Confidential Information of FHF, TAb shall have the burden of producing clear and convincing proof that the information should be excepted from the definition of Confidential Information of FHF. 2.4 "Confidential Information" means collectively Confidential Information of TAb and Confidential Information of FHF. 2.5 "Documentation" means any and all labels, instructions, manuals, specifications, warnings and similar documentation regarding the Product prepared by or for TAb. 2.6 "Person" means an individual, corporation, company, partnership, trust, association, entity, governmental authority or other entity. 2.7 "Product" means the Product listed on Schedule 1.1. 2.8 "Proprietary Rights" means the rights and properties described in Section 8.6. 2.9 "Regulatory Filing" shall mean any filing outside of the United States that is equivalent to Notice of Claimed Investigational Exemption for a New Drug ("IND"), Product License Application ("PLA"), Establishment License Application ("ELA"), or New Drug Application ("NDA") in the United States pursuant to the regulations and procedures required by any regulatory authority for any country for the testing, manufacture, distribution, sale, or specific use of a Product. 2.10 "Results" means all technology, ideas (whether or not copyrightable), know-how, data, improvements, modifications, innovations, inventions, methodology, processes, techniques, and results, tangible and intangible, developed or discovered by TAb, FHF or any Subcontractor in connection with the clinical trials, registrations, and approvals contemplated by Sections 3 and 4, or otherwise in connection with the Product or this Agreement. 2 5 2.11 "Subcontractor" means a Person approved by TAb pursuant to Section 6 below, to whom FHF has delegated responsibilities regarding registration and approval. 2.12 "Trademarks" means all trademarks, trade names, and other designations of origin used on or in connection with the Product, including, without limitation, CytoTAb(TM). 2.13 "Trade Secrets" means all techniques, technology, processes, and know-how related to production and purification of polyclonal antibodies developed by or on behalf of TAb, including (a) the design and syntheses of immunogens which can produce high affinity antibodies in large quantities, (b) the selection, immunization, and handling of animals to produce therapeutic polyclonal antibodies (including breed comparison studies), (c) the aseptic collection and handling of antisera, and (d) closed systems for fully processing and purifying antibodies; types and configuration of processing equipment; lists of suppliers; development plans; methods of operation and management; cost control methods; methods of setting prices; reporting methods; quality assurance programs; information systems; training manuals; databases; production solutions; financial information; customer and prospective customer lists; and all other trade secrets of TAb. 2.14 "TAb" includes any related corporation of TAb where that corporation controls, is controlled by, or is under common ownership with TAb. 3. Clinical Trials. 3.1 TAb shall submit a budget and clinical protocol to FHF for written approval by FHF before TAb begins to conduct clinical trials or to incur any clinical trial expenses in any country in the New Territories. Variations in the budget or clinical protocol must be approved by FHF in writing before they are undertaken or incurred for FHF to be liable to reimburse TAb for them, but such consent shall not be unreasonably withheld. 3.2 TAb shall be solely responsible for the conduct of the clinical trials in any country in the New Territories; provided, however, TAb agrees to comply with the protocol (the "Protocol") attached hereto as Schedule 3.2, consult in good faith with FHF and to provide reports to FHF upon FHF's reasonable request regarding the conduct of each clinical trial. TAb shall not subcontract the performance of any clinical trials without FHF's prior written consent (not to be unreasonably withheld). TAb shall conduct all clinical trials accounted for in the budget approved by FHF as necessary to enable registration to be obtained in the New Territories. In such clinical trials, TAb shall use its best efforts to develop all clinical information and data which it is reasonably able to obtain as may be necessary in connection with any registration and marketing approvals in the New Territories. TAb shall provide for the clinical trials all necessary quantities of Product, which shall be manufactured in accordance with current Good Manufacturing Practices as set forth in the United States Food and Drug Administration regulations and any applicable laws in appropriate facilities. Products used in clinical trials shall be supplied by TAb at no cost to FHF. TAb shall maintain books of account and other records relating to the clinical trials during the term of this Agreement that TAb reasonably believes will be sufficient for FHF to ascertain upon inspection thereof an accurate and detailed knowledge of the allocation of its funds and the status of the trials. Upon reasonable notice and during TAb's normal business hours, FHF may inspect all of TAb's books of account and other records relating to the subject matter of this Agreement for the purpose of ascertaining or confirming their accuracy. TAb shall request that any third parties performing any clinical trials permit FHF to inspect the locations of the clinical trials upon reasonable notice. 3 6 3.3 FHF agrees to reimburse TAb for the costs of clinical trials for the Product in any country in the New Territories. TAb shall prepare and send to FHF an invoice of actual costs incurred by TAb each month. FHF shall make full payment of the stated amount within thirty (30) days of receipt of TAb's invoice. FHF shall not be liable for any expenses in excess of the budgeted amount in any clinical trial budget approved by FHF or any expenditures not included in such an approved budget. 3.4 TAb shall promptly disclose to FHF any information that it has regarding an adverse drug experience and shall also make any reports regarding such adverse experiences as are required by law. FHF shall not be liable for any claims, actions, or demands arising out of any adverse drug experiences or injuries occurring to any person as a result of his or her involvement in clinical trials for the Product in any country in the New Territories. 4. Registration and Marketing Approvals In the New Territories. 4.1 FHF shall exercise all commercially reasonable efforts, on a continuous basis, to obtain all necessary registration and marketing approvals for the Product and with the least possible delay from all relevant governmental authorities in each country within the New Territories, at FHF's sole cost and expense. FHF shall prepare and submit all necessary Regulatory Filings for the Product in the New Territories. TAb shall promptly supply FHF with all information and data in its possession or which it is reasonably able to obtain as may be necessary or useful in connection with any registrations and approvals, including relevant information prepared for treatment of cerebral malaria in other countries. TAb shall permit the release by FHF to government officials with TAb's prior written consent of such of its Confidential Information as is necessary to obtain registration of the Product. FHF shall provide TAb with written certification that the Product has obtained all registrations and approvals necessary in order for distribution and sale of the Product in a given country to commence, promptly upon receipt of the requisite registrations and/or approvals. FHF agrees that neither it nor any Subcontractor shall modify or alter the Product in any respect, whether in relation to design, content, manufacture, use or otherwise, without the prior written consent of TAb. If FHF reasonably forms a view that registration cannot be obtained in a particular country within the Territory, FHF may cease its efforts to seek registration as set forth in this Section 4 provided that FHF consults with TAb prior to ceasing such registration efforts in the particular country at issue. In the event of such a cessation, the rights and obligations set forth in Section 9.2 hereof shall apply to the parties' activities in that particular country. 4.2 All registrations and approvals obtained by FHF hereunder shall be the sole and exclusive property of TAb. All registrations and approvals shall be held in the name of TAb or, if required by applicable law or regulatory authorities, in the name of FHF or a third party on TAb's behalf. All Results shall be the sole and exclusive property of TAb, and FHF hereby assigns to TAb any and all right, title, and interest it may now or in the future have in the Results. 4.3 As FHF receives any information relating to the status of applications for registration and marketing approval and requests for the Product, it shall promptly provide such information to TAb. 4.4 FHF may delegate its responsibilities under this Section 4 to any Subcontractor, with TAb's prior written approval pursuant to Section 6. 4 7 4.5 Set forth as Schedule 4.5 hereto is the time and events schedule for the registration and approval activities contemplated by this Section 4. The schedule will be reviewed and revised, if necessary, as the parties shall mutually agree. The time and events schedule is intended to be a guideline only and is not a binding legal obligation. 5. Exclusive Distribution. 5.1 As soon as FHF certifies to TAb that the Product has obtained all necessary registration and approval rights for distribution and sale in a particular country in the New Territories, FHF shall have an exclusive option, which FHF may exercise or refuse to exercise at its sole discretion during the period set forth in Section 5.2 hereof, to enter into an exclusive ten-year agreement (the "Distribution and Profit Sharing Agreement") based upon the key commercial terms set forth in Schedule 5.1 and pursuant to which FHF or its nominee would distribute a form of the Product intended solely for treatment of cerebral malaria in such country, and TAb and FHF would share in the profits arising from the exploitation of the Product. The reimbursements by FHF of approved clinical trial expenses as set forth in Section 3 are not refundable to FHF for any reason; however, if the parties enter into a Distribution and Profit Sharing Agreement, the reimbursements by FHF to TAb of clinical trial expenses, and the US[$ * ] fee referred to in Section 7, are jointly creditable against a maximum, when combined, of [ * ]% of earned royalties per year under the Distribution and Profit Sharing Agreement during the first [ * ] years following the date on which total sales of the Product in the New Territories exceed US$[ * ]. The parties acknowledge that the Product has other applications, and the Distribution and Profit Sharing Agreement shall grant no rights to FHF and impose no restrictions on TAb with regard to such additional applications. 5.2 In the event that the parties have not executed a Distribution and Profit Sharing Agreement within ninety (90) days after the date on which FHF certifies receipt of all necessary registration and marketing approvals for the applicable country in the New Territories, TAb or one of its affiliates may market the Product in the respective country within the New Territories or TAb may enter into similar arrangements with one or more third parties, provided such arrangements are on no more favorable terms than those offered to FHF. 6. Compliance and Subcontractors. 6.1 FHF shall insure that its conduct in performing its obligations under this Agreement complies with all applicable laws and regulations of the countries within the New Territories, and of the United States to the extent that FHF, as a foreign corporation located outside the United States, seeking registration solely outside the United States, for a Product that is manufactured by a U.S. registered corporation, would be subject to U.S. jurisdiction and statutes, including, without limitation, laws and regulations governing bribery of foreign officials, labels for pharmaceutical products, applicable export controls, and antitrust and unfair competition. If any approval shall be required at any time during the term of this Agreement with respect to compliance with exchange regulations or other requirements so as to assure the right of remittance abroad of U.S. dollars, FHF shall immediately take whatever steps may be necessary in this respect, and any charges incurred in connection therewith shall be borne by FHF. 6.2 TAb shall insure that its conduct in performing its obligations under this Agreement complies with all applicable laws and regulations of the countries within the New Territories and of the United States. - ------------- * Confidential treatment requested. Omitted material filed separately. 5 8 6.3 FHF agrees that during the term of this Agreement, it may make such arrangements with third parties which it, in its reasonable judgment, believes necessary to maximize its ability to obtain registration and approval of all Product in all countries within the New Territories, and TAb agrees that it will provide FHF with such assistance as FHF may reasonably require. Any such arrangements made with third parties shall be made only with third parties which, after due inquiry, FHF knows to be reputable and competent. Any such third parties selected by FHF for registration and approval work shall be referred to as "Subcontractors." FHF shall be responsible for ensuring that each Subcontractor complies with all applicable provisions of this Agreement and all applicable laws and regulations of the U.S., and of foreign governments (and political subdivisions thereof). In addition, FHF agrees that it will not enter into any agreements, understandings, or other arrangements, with any Subcontractor, without the prior written approval of TAb, which approval shall not be unreasonably withheld if: (a) TAb shall have received from FHF reasonable and satisfactory information concerning the business activities and qualifications of the Subcontractor, the reputation of the Subcontractor, and the number of years FHF has done business with the Subcontractor; and (b) FHF shall have furnished TAb with (i) an undertaking of the Subcontractor, in form reasonably satisfactory to TAb, to respect the rights of TAb in and to the Product and the Proprietary Rights (defined herein), and to treat confidentially the Confidential Information of TAb; and (ii) an acknowledgement by the Subcontractor that TAb shall have the rights of an express third party beneficiary of any agreement, understanding, or other arrangement between FHF and such Subcontractor. 7. Initial Payment. In consideration for the rights granted to FHF hereunder, FHF shall pay TAb a US$[ * ] licensing fee on signing the Agreement. The foregoing payment is fully earned on the date hereof and is not refundable; however, if the parties subsequently enter into a Distribution and Profit Sharing Agreement, this payment and the creditable reimbursements by FHF to TAb of the clinical trials expenses referred to in Section 5.1 are jointly creditable against a maximum, when combined, of [ * ]% of earned royalties per year under the Distribution and Profit Sharing Agreement during the first [ * ] years following the date on which total sales of the Product in the New Territories exceed US$[ * ]. 8. Confidentiality, Trademarks, and Proprietary Rights. 8.1 Neither party shall use or permit the use of the other party's Confidential Information by any Person other than for the limited purposes expressly permitted by this Agreement. 8.2 Neither party shall disclose or disseminate the other party's Confidential Information to any Person or entity other than to employees, officers, and directors of that party or an affiliate (as defined in the regulations promulgated under the Securities Exchange Act of 1934) of that party and to Subcontractors who require access thereto in order to perform that party's obligations hereunder ("Recipients"). Recipients shall be granted access to the Confidential Information strictly on a "need to know" basis. Each party shall take all reasonable steps to ensure that Recipients comply with the terms of this Agreement, including all restrictions on use, disclosure, and dissemination of Confidential Information. Such steps shall include, without limitation, measures to insure that each Recipient has read, understands, and agrees to the provisions hereof. Each party shall notify the other immediately upon becoming aware of any breach hereof and shall take reasonable steps to prevent any further disclosure or unauthorized use. - ------------ * Confidential treatment requested. Omitted material filed separately. 6 9 8.3 Upon termination or expiration of this Agreement, each party shall deliver to the other party (a) all of the other party's Confidential Information, all copies thereof, and all documents or data storage media containing such Confidential Information, (b) the names and addresses of all Recipients, and (c) a written certification that the party has complied with its obligations under this Section 8. 8.4 During the term of this Agreement and for a period of ten (10) years after the termination date of this Agreement, each Recipient shall keep confidential and not use, except as provided herein, all Confidential Information. 8.5 FHF agrees that it shall not adopt or use for any purpose the Trademarks or any variation of the Trademarks until and unless the parties execute a Distribution and Profit Sharing Agreement and then only on the terms set forth in such Agreement. 8.6 FHF acknowledges that all Trademarks and all rights and goodwill pertaining thereto are the exclusive property of TAb. FHF further acknowledges that TAb is the sole and exclusive owner of all present and future right, title, and interest in and to (a) all worldwide patent rights, registrations and registration rights, copyrights, and related rights, in or related to the Product and any present and future renewals thereof, (b) all rights (including copyrights) in the appearance, packaging, design, trade dress, and other identifying features of the Product and the promotional and packaging materials, (c) the Trade Secrets and the Results, (d) any adaptations, additions, derivatives, translations, and/or improvements to any of the foregoing, and (e) all other intangible rights in the Product. The Trademarks and other rights and properties described in this Section 8.6 are referred to collectively as the "Proprietary Rights." 8.7 FHF agrees it will not challenge, oppose or cancel, or permit any act or thing that would endanger any right of TAb in the Product or the Proprietary Rights, nor will FHF claim any proprietary interest in the Product or the Proprietary Rights. 8.8 FHF acknowledges that no Trademarks are presently registered in the New Territories. 8.9 TAb shall exercise its best efforts to both pursue and, if obtained, maintain necessary and appropriate intellectual property protection for the Product to be distributed in the New Territories without infringement of any third party's intellectual property rights. 9. Duration and Termination of Agreement 9.1 The effective date of this Agreement is as set forth above and, unless earlier terminated in accordance with the provisions hereof, this Agreement shall terminate five (5) years from the effective date of this Agreement. 9.2 FHF may terminate this Agreement, with TAb's prior consent which may not be unreasonably withheld, with respect to a country within the New Territories by sixty (60) days' prior written notice to TAb in the event that (i) FHF reasonably forms an opinion that all relevant governmental authorities in such country within the New Territories will refuse to issue all necessary registration and marketing approvals for the Product, or (ii) FHF determines that to continue the clinical trials and registration process for the Product in the New Territories is no longer commercially viable. Upon any such 7 10 termination, FHF shall only be responsible for the costs of ongoing clinical trials incurred by TAb during the sixty (60) day period following the date of notice of termination as well as reasonable termination costs incurred by TAb (including reasonable severance payments and reasonable buy-outs of pre-existing contracts reasonably entered into); provided, however, TAb shall use its best efforts to mitigate and control such termination costs, and FHF must approve in writing any expenditures for obligations that are entered into after TAb receives notice of termination. If the termination notice applies to all countries within the New Territories, then FHF will immediately return to TAb all Confidential Information upon providing notice of termination, and TAb or one of its affiliates may seek registration and marketing approvals for the Product or may enter into agreements with one or more third parties to seek such approvals, immediately upon receipt of notice of termination. As of the termination date, FHF will have no rights, and TAb will have no obligations with respect to the Distribution and Profit Sharing Agreement. 9.3 If either party breaches any of its obligations under this Agreement, the other party may give notice of such breach in accordance with the provisions of Section 14.2 hereof. If the breaching party does not cure the breach to the satisfaction of the notifying party within thirty (30) days from the date of receipt of the notice, then the notifying party may terminate this Agreement. 9.4 Either party hereto shall have the right to terminate this Agreement immediately and without prior notice in the event that the other party files a petition for voluntary bankruptcy, has a petition for involuntary bankruptcy filed against it (which petition is not withdrawn within sixty (60) days of such filing), is adjudicated to be or becomes bankrupt, places any of its property in liquidation for the purpose of meeting claims of its creditors, is otherwise unable to pay its debts as such debts become due (including, but not limited to, payments due hereunder), or ceases to function as a going concern. 9.5 If the parties fail to enter into a Distribution and Profit Sharing Agreement, TAb shall be free to enter into similar arrangements with one or more third parties. 9.6 The obligations of FHF under Sections 6, 8, 9.2, 10, and 13 hereof shall survive the expiration or termination of this Agreement. The obligations of TAb under Sections 6 and 13 hereof shall survive the expiration or termination of this Agreement. 9.7 Upon termination or expiration of this Agreement for any reason, TAb shall have no liability for actual or alleged loss of goodwill, prospective profits or anticipated orders, or on account of any expenditures, investments, leases, or commitments made by FHF. Upon termination or expiration of this Agreement for any reason, FHF shall have no liability for actual or alleged loss of goodwill, prospective profits or anticipated orders, or on account of any expenditures, investments, leases, or commitments made by TAb. 9.8 Upon FHF's issuing notice of termination or upon termination by TAb or expiration of this Agreement for any reason, FHF shall immediately return all Documentation and Confidential Information to TAb. 9.9 Except in the event of intellectual property infringement, neither party shall be liable to the other for any incidental, consequential, or special damages of any nature whatsoever, including, without limitation, lost profits. As of the date of termination of this Agreement for any reason, neither party will have any rights or obligations with respect to the Distribution and Profit Sharing Agreement. 8 11 10. Indemnification. 10.1 FHF shall indemnify and hold harmless TAb and its subsidiaries, affiliates, officers, and directors, notwithstanding termination of this Agreement, against any liability, damage, loss, cost, or expense (including reasonable attorneys' fees) relating to any third party claims arising from: (a) default under any provision of the Agreement by FHF or any Subcontractor; or (b) any negligence, gross negligence, or intentional misconduct of FHF, provided that upon receipt of notice by TAb of any such claims, TAb shall immediately notify FHF. TAb shall permit FHF to handle such claims at FHF's sole cost, and TAb shall give FHF all reasonable assistance (except financial assistance) in the conduct of any such claims. In no event is FHF authorized to settle or compromise any claim, or to consent to the entry of any order or judgment, without the prior written consent of TAb. 10.2 TAb shall indemnify and hold harmless FHF, its subsidiaries and affiliates, officers, and directors, notwithstanding termination of this Agreement, against any liability, damage, loss, cost, or expense (including reasonable attorneys' fees) relating to any third party claims arising from: (a) any supply or use of Product in the New Territories by FHF consequent upon any act or omission in the manufacture, storage, or shipment of Product by TAb; (b) default under any provision of the Agreement by TAb; (c) any suit against FHF arguing that the Product as provided to FHF by TAb infringes the intellectual property rights of any third party as enforceable in the New Territories; and (d) any negligence, gross negligence, or intentional misconduct of TAb; provided that upon receipt of notice by FHF of any such claims, FHF shall immediately notify TAb. FHF shall permit TAb to handle such claims at TAb's sole cost and discretion and shall give TAb all assistance (except financial assistance) it can in the conduct of any such claims. In no event is TAb authorized to settle or compromise any claim, or to consent to the entry of any order or judgment, without the prior written consent of FHF. 11. Representations and Warranties. 11.1 FHF represents and warrants that (a) it is a company duly organized and validly existing under the laws of Australia; (b) the execution and delivery by FHF of this Agreement, the performance by FHF of all the terms and conditions thereof to be performed by it and the consummation of the transactions contemplated hereby have been duly authorized by all necessary action, and no other act or approval of any person or entity is required to authorize such execution, delivery, and performance, other than the registrations and approvals referred to in Section 4 of this Agreement; (c) the Agreement constitutes a valid and binding obligation of FHF, enforceable in accordance with its terms; (d) this Agreement and the execution and delivery thereof by FHF, does not, and the fulfillment and compliance with the terms and 9 12 conditions hereof and the consummation of the transactions contemplated hereby will not, (i) conflict with any of, or require the consent of any person or entity under, the terms, conditions, or provisions of the memorandum and articles of association of FHF or its company charter, (ii) violate any provision of, or require any consent, authorization, or approval under, any law or administrative regulation or any judicial, administrative, or arbitration order, award, judgment, writ, injunction, or decree applicable to FHF other than the registrations and approvals referred to in Section 4 of this Agreement, or (iii) conflict with, result in a breach of, or constitute a default under, any material agreement or obligation to which FHF is a party. 11.2 TAb represents and warrants that (a) it is a corporation duly organized and validly existing under the laws of the State of Delaware; (b) the execution and delivery by TAb of this Agreement, the performance by TAb of all the terms and conditions thereof to be performed by it and the consummation of the transactions contemplated hereby have been duly authorized by all necessary action, and no other act or approval of any person or entity is required to authorize such execution, delivery, and performance; (c) the Agreement constitutes a valid and binding obligation by TAb, enforceable in accordance with its terms; (d) this Agreement and the execution and delivery thereof by TAb, does not, and the fulfillment and compliance with the terms and conditions hereof and the consummation of the transactions contemplated hereby will not (i) conflict with any of, or require the consent of any person or entity under, the terms, conditions, or provisions of the organizational documents of TAb, (ii) violate any provision of, or require any consent, authorization, or approval under, any law or administrative regulation or any judicial, administrative, or arbitration order, award, judgment, writ, injunction, or decree applicable to TAb, or (iii) conflict with, result in a breach of, or constitute a default under, any material agreement or obligation to which TAb is a party; and (e) as of the date of this Agreement, TAb has no knowledge of any third party proprietary rights that would prevent the sale of the Product in the New Territories. 12. Disclaimer of Warranties Limited Liability. Under no circumstances shall either party be liable to the other party on account of any claim (whether based upon principles of contract, warranty, negligence or other tort, breach of any statutory duty, principles of indemnity, the failure of any limited remedy to achieve its essential purpose, or otherwise) for any special, consequential, incidental or exemplary damages, including but not limited to lost profits, or for any damages or sums paid by a party to third parties, even if the other party has been advised of the possibility of such damages. 13. Enforcement. Each party agrees that (a) the restrictions contained in Section 8 of this Agreement represent reasonable and necessary protection of the legitimate interests of the other party, and that the first party's failure to observe and comply with the covenants and agreements in that section will cause irreparable harm to the other party and its affiliates; (b) it is and will continue to be difficult to ascertain the nature, scope, and extent of the harm; and (c) a remedy at law for such failure will be inadequate. Accordingly, it is the intention of the parties that, in addition to any other rights and remedies which either party may have in the event of any breach or threatened breach of such Section, each party shall be entitled, and is expressly and irrevocably authorized by the party in breach, to demand and obtain specific performance, including, without limitation, temporary and permanent injunctive relief and all other appropriate equitable relief against the party in breach in order to enforce against the party in breach the covenants and agreements contained in such Section. Such right to obtain injunctive relief may be exercised concurrently with, prior to, after, or in lieu of, any other rights resulting from any such breach or threatened breach. The party in breach shall 10 13 account for and pay over to the other party all compensation, profits, and other benefits, after taxes enuring to the benefit of the party in breach, which are derived from or received by the party in breach or any person or business entity controlled by it resulting from any action or transaction constituting breach of such Section. 14. General. 14.1 No waiver or modification of the Agreement shall be effective unless in writing and signed by the party against whom such waiver or modification is asserted. Waiver by either party in any instance of any breach of any term or condition of this Agreement shall not be construed as a waiver of any subsequent breach of the same or of any other term or condition hereof. None of the terms or conditions of this Agreement shall be deemed to have been waived by course of dealing or trade usage. 14.2 All notices and demands hereunder shall be in writing and shall be served by personal delivery, by registered mail, by recognized international courier, or by facsimile transmission at the address of the receiving party set forth below (or at such different address as may be designated by such party by written notice to the other party).
TAb: FHF: Therapeutic Antibodies Inc. F.H. Faulding & Co. Limited 1500 21st Avenue South G.P.O. Box 1618 Nashville, Tennessee 37212 USA Adelaide, SA 5001 Australia Attention: President Attention: Company Secretary Fax: 1-615-320-1212 Fax: 61-8-373-3120
All notices or demands shall be deemed received on the earlier of actual receipt or seven (7) days after posting if sent by mail, three days after delivery to international courier, or upon receipt of fax-back confirmation if sent by facsimile. 14.3 In the event any litigation is brought by either party in connection with this Agreement, the prevailing party in such litigation shall be entitled to recover from the other party all the costs, attorneys fees and other expenses incurred by such prevailing party in the litigation. 14.4 This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware, United States of America. The parties agree that any claim asserted in any legal proceeding by one party against the other shall be commenced and maintained in any state or federal court in Nashville, Tennessee, having subject matter jurisdiction with respect to the dispute between the parties. Both parties hereby submit to the jurisdiction of such courts over each of them personally in connection with such litigation, and waive any objection to venue in such courts and any claim that such forum is an inconvenient forum. 14.5 In the event that any provision of this Agreement shall be held by a court or other tribunal of competent jurisdiction to be unenforceable, such provision will be enforced to the maximum extent permissible and the remaining portions of this Agreement shall remain in full force and effect. 14.6 Neither party shall be responsible for any failure to perform due to unforeseen circumstances or to cause beyond such party's control, including but not limited to acts of God, war, riot, 11 14 embargoes, acts of civil or military authorities, fire, floods, accidents, strikes, or shortages reasonably beyond the control of such party with regard to transportation facilities, fuel, energy, labor or materials, and where no reasonable alternative means of obtaining these are available. 14.7 This Agreement constitutes the entire agreement between the parties pertaining to the subject matter hereof, and supersedes in their entirety any and all written or oral agreements previously existing between the parties with respect to such subject matter. 14.8 The terms of this Agreement are intended solely for the benefit of the parties hereto. They are not intended to confer upon any Subcontractor the status of a third party beneficiary. Except as otherwise provided for by this Agreement, the terms hereto shall inure to the benefit of, and be binding upon, the respective successors and assigns of the parties hereto. 14.9 The parties expressly acknowledge and agree that FHF shall act only as an independent contractor of TAb and that this Agreement shall not be deemed to create an agency, partnership, employment, or joint venture relationship between TAb and FHF. Nothing in this Agreement shall be construed as a grant of authority to either party to accept any order, waive any right, incur any obligation or liability, enter into any agreement, grant any release or otherwise purport to act in the name of the other party. Except as expressly set forth herein, the parties agree that TAb shall neither exercise control over FHF's method of operations nor provide assistance to FHF. The operations, policies and procedures of FHF, including those related to FHF's performance of this Agreement, are subject to the sole management and control of FHF. 14.10 This Agreement may be executed in one or more counterparts, each of which shall constitute an original. 14.11 Nothing contained herein shall be construed as conferring by implication, estoppel, or otherwise any license or right under any patent, whether or not the exercise of any right herein granted necessarily employs an invention or any existing or later issued patent. 14.12 In the event that performance of any obligation pursuant to this Agreement would cause either party to contravene applicable laws or regulations, failure to take such action shall not constitute default hereunder. 14.13 The terms of this Agreement can be modified only by a writing which is signed by both parties. 14.14 No party to this Agreement may assign its obligations hereunder without the prior written consent of the other parties. 12 15 IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first set forth above. F.H. FAULDING & CO. LIMITED By: /s/ [ILLEGIBLE] ----------------------------------- Title: Chief Operations Executive ------------------------------- Date: 17th October, 1996 -------------------------------- THERAPEUTIC ANTIBODIES INC. By: /s/ Martin S. Brown --------------------------------- Title: Chairman -------------------------------- Date: October 22, 1996 -------------------------------- 13 16 SCHEDULE 1.1 THE PRODUCT Purified ovine anti-tumor necrosis factor alpha, Fab, (lyophilized) which TAb has identified as CytoTAb(TM) and which is being tested for treatment of cerebral malaria in human beings 17 SCHEDULE 1.2 REGISTRATION TERRITORIES United States of America Certain European Countries 18 SCHEDULE 1.3 NEW TERRITORIES Thailand (other Southeast Asian countries where malaria is a problem) [list of such countries to be supplied by FHF] 19 SCHEDULE 3.2 PROTOCOL 20 SCHEDULE 4.5 REGISTRATIONS AND APPROVALS 1. [Schedule will include (a) time for start of trials required for registration, (b) time for completion of trials, and (c) time for receiving registrations. The Schedule will be designed on a country-by-country basis.] 21 SCHEDULE 5.1 KEY COMMERCIAL TERMS Key Terms for Inclusion into Distribution Agreement in addition to those contained in the Clinical Trials Registration Agreement. 1. Term of Agreement: Exclusive distribution rights for ten years in each country in which the product is distributed, with automatic rights of renewal for successive two-year periods. 2. TAb to supply fully finished pharmaceutical product. 3. Each party shall receive [ * ]% of FHF's gross profit. TAb's portion shall be derived from FHF's purchase price and payment of royalties. 4. Territory: Thailand plus the ability to add countries approved by TAb as per the digitalis agreement. 5. Price: to be denominated in U.S. dollars. 6. Terms of delivery - FOB TAb's production facility. 7. Out of pocket registration expenses to be set off against a maximum of [ * ]% of earned royalties per year. 8. FHF to promote the Product in the Territory diligently and in a commercially appropriate manner aimed at maximizing the benefits for both FHF and TAb. 9. FHF to provide annual forecasts of its requirements for the Product. TAb to be required to supply orders that fit within the forecasts. TAb to use best efforts to supply the Product for orders that exceed the forecasts by more than 30%. 10. TAb to manufacture the Product in compliance with agreed manufacturing specifications which: (a) comply with and reflect all applicable regulatory requirements and conditions of approval agreed or imposed by the relevant regulatory authorities; (b) specify that the Product will have an adequate shelf life at the time of delivery to FHF so as to enable it to readily be sold in the ordinary course of business; and (c) ensure that the external presentation and appearance of the Product, including its packaging, is such as to enable it to be sold by FHF in the ordinary course of business. 11. TAb to provide assurances of both continuity of supply of Product and quality of Product, subject to events genuinely and entirely outside of its control. - ------------ * Confidential treatment requested. Omitted material filed separately. 22 12. Mutual indemnification for defaults and for acts or omissions in each party's obligations under the Agreement. 13. FHF to pay one-half the purchase price in advance for its first order in order to provide TAb with working capital. 14. Limits on reducing FHF's ability to reduce purchase orders a certain percentage below sales forecasts. 15. FHF to meet annual minimum sales as agreed by the parties. 16. The terms set forth in this Schedule 5.1 shall be developed more fully, and other terms must be negotiated for inclusion within such agreement. EX-10.20 6 SERVICE AGREEMENT 1 EXHIBIT 10.20 From: TAb Wales Limited To: Professor John Landon Dear Professor Landon This letter sets out particulars of your employment with TAb Wales Limited (the "Company") which are issued in accordance with Section 1 of the Employment Protection (Consolidation) Act of 1978 as amended. 1. Commencement of Employment Your employment commenced on 1 October 1995 and prior to that you were employed the Group Companies, on a part-time basis, from June 1989. 2. Remuneration Your remuneration is L.82,000 per annum, payable monthly in arrears by direct transfer to your bank, not later than the last day of the month. Your salary will be reviewed in or about January of each year based on performance as judged in part by your supervisor. 3. Job Title 4. You will be employed as a Director with particular responsibility for research and development of the TAb Inc Group (as defined below) either at the research facility of TAb London Ltd in London or at TAb Wales Ltd in Wales and in such capacity you shall give to the Company and to the TAb Inc Group the full benefit of your knowledge, expertise, technical skill and ingenuity at all times. The Company reserves the right to employ you in any reasonable capacity within your place of employment and you shall undertake such duties in relation to the business of the Company as the management of the Company shall from time to time reasonably assign to or vest in you (being duties reasonably appropriate to your seniority and expertise). The Company may require you to undertake additional or other duties at any time to meet the needs of the Company's business. 5. You may not without the prior written consent of the Company (which will not be unreasonably withheld) engage, whether directly or indirectly, in any business or employment which is similar 2 or in any way connected to or competitive with the business of the Company in which you work or which could or might reasonably be considered by others to impair your ability to act at all times in the best interest of the Company. 6. You represent to the Company that you have the requisite skill, knowledge and experience of the work for which you have been employed to carry out to enable you to perform your duties under your employment with the Company and you represent that by virtue of entering into employment with the Company you will not be in breach of any express or implied terms of any contract with, or of any other obligation to, any third party binding upon you. 7. Reporting and location You will report to the President of Therapeutic Antibodies Inc, the Company's parent company. Your usual place of work is at the Company's facility in Wales but you may also be required to work at any other locations of the Company or any other member of the TAb Inc Group (namely Therapeutic Antibodies Inc and any Subsidiary Company (within the meaning of Section 736 of the Companies Act 1985) of Therapeutic Antibodies Inc) anywhere in the World for temporary periods up to three month(s). 8. Hours of Work Your normal working week will consist of thirty-seven and a half hours and is from Monday to Friday inclusive. Your hours of work shall be established by your supervisor. You will be expected to devote additional time on occasions when it is necessary to meet the demands of the business of the Company; however, you may take time off to compensate for extra hours worked the scheduling of which shall be subject to your supervisor's approval. Up to an hour can be taken during the day for breaks. 9. Holidays 10. Your holiday entitlement is 22 working days per year plus the normal public holidays. 11. The holiday year runs from 1 January to 31 December. 2 3 12. Subject to the need to ensure the efficient operation of the Company, holidays may normally be taken at any time with prior approval from your appropriate Manager. 13. No more than ten working days holidays may be taken at any one time unless permission is given to you by your appropriate Manager. 14. Staff joining the Company during the year will be entitled to holidays on a pro rata basis for complete months that will be worked during that holiday year. 15. When holiday entitlement is not taken during the relevant year, the balance may be taken the following year, up to 30 March, but not joined to that year's holiday entitlement to provide an extended holiday. 16. When staff leave the Company, holiday entitlement will be on a pro rata basis for complete months worked during the prevailing holiday year. 17. If actual holiday exceed entitlement at the time of leaving, a deduction amounting to the unqualified holiday pay will be made from the final salary. 18. Sickness or Injury. 19. When you are absent from work due to sickness/injury, you or someone on your behalf should ring the office as soon as possible, to inform the Company of the reason for absence and in any event no later than the end of the working day on which absence first occurs. You will be advised of the administrative procedures necessary to ensure your eligibility for Sick Pay. 20. In respect of absence lasting 7 or fewer calendar days, you need not produce a medical certificate unless you are specifically requested to do so. You must, however, complete the Company's self-certification form immediately you return to work after such absence. 21. In respect of absence lasting more than 7 calendar days, you must on the 8th calendar day of absence provide a medical certificate stating the reason for absence and thereafter provide a 3 4 like certificate each week to cover any subsequent period of absence. 22. The Company reserves the right to ask you at any stage of absence to produce a medical certificate and/or to undergo a medical examination. 23. You will be paid your normal basic remuneration less the amount of any Statutory Sick Pay or social security sickness benefit to which you may be entitled for 14 working days in total in any one sick pay year which runs from 1 January to 31 December. Any payment of salary in respect of absence in excess of 14 days is at the discretion of the Company. 24. Entitlement to payment is subject to notification of absence and production of self-certification forms or medical certificates as referred to above. 25. The Company operates the Statutory Sick Pay scheme and you are required to cooperate in the maintenance of necessary records. For the purposes of calculating your entitlement to Statutory Sick Pay "qualifying days" are those days on which you are normally required to work. Payments made to you by the Company under its sick pay provisions in satisfaction of any other contractual entitlement will go towards discharging the Company liability to make payment to you under the Statutory Sick Pay scheme. 26. The Company will be entitled to terminate your employment by written notice to you if you are unable or prevented through illness, injury or other incapacity from carrying out the duties of your employment with the Company for any period or periods exceeding sixteen weeks (consecutive or in aggregate) in any consecutive period of 12 months. 27. Pension Arrangements The Company does not operate its own Staff Pension Scheme. It administers personal pension plans for employees but does not make any contribution to them. A contracting out certificate under the Social Security Pensions Act 1975 is not in force in respect of this employment. 4 5 28. Grievance Procedure If you have a grievance relating to your employment, you should discuss this with your immediate Manager. If you remain dissatisfied, you may take up your grievance with your Manager's superior, whose decision will be final. 29. Disciplinary Procedures 30. Whilst it is the policy of the Company to keep its rules to a minimum, it is necessary to have a disciplinary procedure available should satisfactory standards of performance not be reached or should cases of misconduct occur. The disciplinary procedure adopted by the Company has been designed to: 31. Take disciplinary action in as uniform and consistent a manner as possible. 32. Take disciplinary action with a view to improving the performance/behaviour, rather than just punishing the person. 33. Take all relevant circumstances into consideration and act in a fair and unbiased manner. 34. The Procedure is: 35. In the case of minor Verbal warning by breaches of discipline or immediate Manager failure to reach standards 36. If verbal warning has not A written warning by the brought improvement or a immediate Manager separate complaint of a similar nature is made OR 37. In the case of more serious The member of staff matters where no previous renders himself/herself verbal warning has been liable to dismissal by given the Managing Director]/Company] without notice. 5 6 38. If the same complaints or The member of staff complaints of a similar renders himself/herself nature continue after a liable to dismissal by written warning, or a the [Managing separate complaint of a Director]/Company] similar nature is made. without notice. OR 39. If gross misconduct occurs The member of staff where no warning has renders himself/herself been given. liable to dismissal by the [Managing Director]/Company] without notice. 40. For the purposes of this Agreement the following will be treated as gross misconduct, although the list is not exhaustive: (i) falsification of records (ii) drunkenness on duty (iii) refusal to obey reasonable instructions (iv) theft or other criminal offence (v) a serious or persistent breach of the provisions herein contained or (vi wilful neglect in the discharge of your duties. 41. Staff have the right to appeal in the same manner as outlined under the Grievance Procedure. 42. All cases of disciplinary action under these procedures will be recorded and placed in the Company's records. 43. Notwithstanding anything herein contained, your employment shall be subject to termination by the Company by summary notice of dismissal if you: 44. become bankrupt or make any composition or deed of arrangement with your creditors, or 45. are convicted of any offence, other than any offence which in the opinion of the Board of Directors does not materially affect the business or goodwill of the Company and the performance of your duties hereunder, or 46. persistently or wilfully neglect or become incapable of efficiently performing your duties hereunder, or 47. become of unsound mind, or 6 7 48. refuse to carry out the instructions of your manager provided that the instructions which you refuse to carry out are lawful and are such as you may reasonably and properly be expected to perform, or 49. commit any serious breach or repeat or continue (after warning) any material breach of your obligations hereunder or be guilty of conduct which in the reasonable opinion of the Board of Directors tends to bring you or the Company into disrepute, or 50. cease to be a Director of the Company. And the Company shall not be liable in damages/compensation or otherwise to you by reason of any such termination for the reasons specified in this paragraph. PROVIDED ALWAYS that if any such act of misconduct or breach or non-observance is capable of being remedied you shall first be offered in writing a reasonable opportunity to remedy the same prior to termination as aforesaid and if and when so remedied your employment hereunder shall continue without interruption. With the exception of cases entitling the Company to dismiss you summarily, as stated above, the Company will implement the Disciplinary Procedures when you contravene any of the Company's rules, any of the provisions of these Terms and Conditions, you are guilty of misconduct or you fall short of the performance required of you. The Company also reserves the right to suspend an employee without pay while cases of misconduct are being investigated. 51. Confidentiality 52. You acknowledge that certain information not generally known, and proprietary to the Company, about the Company or the Company's products, processes, machines and services, including but not limited to, information relating to research, development, manufacturing, engineering and marketing (together "Confidential Information" which shall include reference to any such Confidential Information the property of any other member of TAb Inc Group as if reference to the Company referred to such member of the TAb Inc Group) may be made available to you during your term of employment with the Company. You will treat as trade secrets all Confidential Information acquired by you during the course of your 7 8 employment with the Company, and will not use any such trade secrets for your own benefit nor disclose them to any other third party during the period of your employment with the Company or thereafter, except as authorised in writing by the Company or as required by law or by any court of competent jurisdiction. 53. You must not remove any documents, or tangible items which belong to the Company or which obtain any confidential information from the Company's premises at any time without proper advance authorisation. 54. You must return to the Company upon request and, in any event, upon termination of your employment, all documents and tangible items which belong to the Company or which contain or refer to any confidential information and which are in your possession or under your control. 55. You must, if requested by the Company, delete all confidential information from any re-usable material and destroy all other documents and tangible items which contain or refer to any confidential information and which are in your possession or under your control. 56. Inventions 57. It shall be part of your normal duties at all times to consider in what manner and by what new methods or devices the products, services, processes, equipment or systems of the Company might be improved and promptly to give your immediate manager full details of any invention or improvement which you may from time to time make or discover in the course of your duties, and to further the interests of the Company's undertaking with regard thereto. 58. Any invention developed by you, individually or jointly: 59. during the period of your employment with the Company or 60. which is based (in whole or in part) on Confidential Information. shall be promptly and fully disclosed to the Company and, whether or not so disclosed, shall (subject to any contrary provisions 8 9 of the Patents Act of 1977 or any other statutes where applicable) become the property of the Company. 61. The rights of the Company stated above shall apply only to inventions that 62. relate (a) to the business of the Company or (b) to the Company's actual or demonstrably anticipated research or development or 63. result from any work performed by you for the company, or 64. are developed by using any equipment, supplies, facilities, personnel or Confidential Information (in whole or in part). 65. In addition, you will upon request assign all intellectual property rights of whatever nature and however arising in any such invention to the Company (without charge to the Company but at the Company's expense). 66. Except with the prior written approval of the Company, you will refrain (during the term of your employment with the Company and thereafter) from submitting for publication or publishing any information with respect to any invention. 67. Subject as aforesaid, you shall forthwith on request from time to time both during your employment hereunder and thereafter at the request and cost of the Company apply for and execute and do all such documents, acts and things as may in the opinion of the management of the Company be necessary or conducive to obtain letters patent or other protection for any such invention or improvement in any part of the world, and to vest such letters patent or other protection in the Company or its nominees. 68. You hereby irrevocably authorise the Company for the purposes aforesaid to make use of your name and to sign and execute any documents or to do anything on your behalf (or where permissible to obtain the patent or other protection in its own name or in that of its nominees). You shall not knowingly do anything to imperil the validity of any such patent or protection or any application therefor, but on the contrary shall at the cost and request of the Company render all reasonable assistance to the Company 9 10 both in obtaining and in maintaining such patents or other protection. You shall not either during the continuance of your employment hereunder or thereafter at any time exploit or assist others to exploit any such invention or improvement or give any information in respect thereof except to the Company or as it may direct. 69. You hereby waive all "Moral Rights" as defined in the Copyright, Designs & Patents Act 1988 in respect of any acts of the Company or any acts of third parties done with the Company's authority in relation to any property which is the property of the Company by virtue of this paragraph 12. 70. Rights and obligations under this paragraph shall continue in force after termination of your employment in respect of any inventions or intellectual property made during your employment and shall be binding upon your personal representatives. 71. If the Company applies for a patent on an invention made by you as described in the preceding paragraph, you will be eligible for a (pound)500 incentive bonus, the granting of which will be at management's discretion. 72. Non-Solicitation and Non-Competition 73. You hereby covenant with the Company that you will not (without the prior consent of the Company in writing under the hand of a Director) within one year after the termination (howsoever caused or arising) of your Employment in connection with the carrying on of any business similar to the business of the Company as carried on during the period of twelve months prior to the date on which such termination of your employment took effect on your own behalf or on behalf of any person, firm or company and whether directly or indirectly: 74. seek to procure orders from or to do business with any person, firm or company who has at any time during the twelve months immediately preceding such termination done business with the Company and with whom in the course of your employment you shall have had dealings; or 75. offer employment to or procure employment for any person who has at any time during the twelve months immediately preceding such termination been employed by 10 11 the Company or any Member of the TAb Inc Group (whether or not such person would commit any breach of his contract of employment with the Company or such Member of the TAb Inc Group by reason of his leaving service) Provided always that nothing contained in this paragraph 13.1 shall prohibit the seeking or procuring of orders or the doing of business not relating or similar to the business or businesses aforesaid or any of them 76. You hereby further covenant with the Company in identical terms to paragraph 13.1 hereof save that the reference to a client or customer shall refer only to a person who is or was during the period specified therein a client or customer of any other Member of the TAb Inc Group and with whom in the course of your employment you shall have had dealings. 77. You hereby covenant with the Company that you will not in the Restricted Area within one year after termination of your employment (save where such termination shall be by the Company in breach of contract or in circumstances constituting constructive dismissal in breach of contract by the Company of you) without such consent as is specified in paragraph 13.1 hereof either alone or jointly with or as manager or agent consultant or employee for any person firm or company and whether directly or indirectly carry on or be engaged in any business similar to the business or businesses carried on by the Company (or (as a separate and independent covenant) any other Member of the TAb Inc Group to whom you have provided services hereunder at any time within the period of twelve months prior to such date of termination) at the date of termination of the employment. 78. The "Restricted Area" means the area described within a radius of 25 miles from the location of the Company's facility described in paragraph 4. 79. The restrictions contained in subparagraphs 13.1 to 13.4 are considered reasonable by the parties but in the event that any such restriction shall be found to be void but would be valid if some part thereof were deleted or the period or an area of application reduced such restriction shall apply with such modifications as may be necessary to make it valid and effective. 11 12 80. Future Employer The Company may notify any future or prospective future employer of yours as to the provisions of these terms and conditions and as to the Company's intention to enforce its rights hereunder. 81. Termination of Employment Your employment is terminable by not less than twelve months prior written notice given by the Company to you or given by you to the Company. The Company reserves the right to make payments of salary in lieu of notice. 82. Sole Agreement This Agreement supersedes all prior agreements between the Company and you with respect to the matters addressed herein and can only be modified by a written amendment. 83. Governing Law This Agreement shall be governed by and construed in accordance with the laws of England and Wales. Please acknowledge receipt of this statement by signing the acknowledgement on the duplicate of this letter and returning it to me. Yours sincerely, /s/ T. Chard Director - for and on behalf of the Company I, John Landon, acknowledge that I have received a statement of the particulars of my employment as required by the Employment Protection (Consolidation) Act 1978 Section 1 and confirm my agreement that these constitute my contract of employment with TAb Wales Limited. Dated: 5th July 1996 Signed: /s/ J. Landon -------------------------------------- John Landon 12 EX-10.21 7 SERVICE AGREEMENT 1 EXHIBIT 10.21 From: TAb London Limited To: Professor Tim Chard Dear Professor Chard This letter sets out particulars of your employment with TAb London Limited (the "Company") which are issued in accordance with Section 1 of the Employment Protection (Consolidation) Act of 1978 as amended. 1. Commencement of Employment Your employment commenced on 1st April 1989 and no employment with a previous employer counts as part of a period of continuous employment. 2. Remuneration Your remuneration is L.25,700 per annum, payable monthly in arrears by direct transfer to your bank, not later than the last day of the month. Your salary will be reviewed in or about January of each year based on performance as judged in part by your supervisor. 3. Job Title 4. You will be employed as a Director with particular responsibility for the administration and patient affairs of the research and development work of the TAb Inc Group (as defined below). In such capacity you shall give to the Company and to the TAb Inc Group the full benefit of your knowledge, expertise, technical skill and ingenuity at all times. The Company reserves the right to employ you in any reasonable capacity within your place of employment and you shall undertake such duties in relation to the business of the Company as the management of the Company shall from time to time reasonably assign to or vest in you (being duties reasonably appropriate to your seniority and expertise). The Company may require you to undertake additional or other duties at any time to meet the needs of the Company's business. 5. You may not without prior written consent of the Company (which will not be unreasonably withheld) engage, whether directly or indirectly, in any business or employment which is similar or in any way connected to or competitive with the business of the Company in which you work or which could or might reasonably be 2 considered by others to impair your ability to act at all times in the best interest of the Company. 6. You represent to the Company that you have the requisite skill, knowledge and experience of the work for which you have been employed to carry out to enable you to perform your duties under your employment with the Company and you represent that by virtue of entering into employment with the Company you will not be in breach of any express or implied terms of any contract with, or of any other obligation to, any third party binding upon you. 7. Reporting and location You will report to the President of Therapeutic Antibodies Inc, the Company's parent company. Your usual place of work is at the Company's facility in London England but you may also be required to work at any other locations of the Company or any other member of the TAb Inc Group (namely Therapeutic Antibodies Inc and any Subsidiary Company (within the meaning of Section 736 of the Companies Act 1985) of Therapeutic Antibodies Inc) anywhere in the World for temporary periods up to three month(s). 8. Hours of Work Your normal working week will consist of the provision to us of your services for an average period of nine and a half hours during each week. Clearly in some weeks you will be providing your services for periods for in excess of that, and in other weeks for periods of less than nine and a half hours in aggregate. The timing of provision by you of your services will be agreed from time to time between the Board of Directors and you. 9. Holidays 10. Your holiday entitlement is 20 working days per year plus the normal public holidays. 11. The holiday year runs from 1 January to 31 December. 12. Subject to the need to ensure the efficient operation of the Company, holidays may normally be taken at any time with prior approval from your appropriate Manager. 2 3 13. No more than ten working days holidays may be taken at any one time unless permission is given to you by your appropriate Manager. 14. Staff joining the Company during the year will be entitled to holidays on a pro rata basis for complete months that will be worked during that holiday year. 15. When holiday entitlement is not taken during the relevant year, the balance may be taken the following year, up to 30 March, but not joined to that year's holiday entitlement to provide an extended holiday. 16. When staff leave the Company, holiday entitlement will be on a pro rata basis for complete months worked during the prevailing holiday year. 17. If actual holiday exceed entitlement at the time of leaving, a deduction amounting to the unqualified holiday pay will be made from the final salary. 18. Sickness or Injury. 19. When you are absent from work due to sickness/injury, you or someone on your behalf should ring the office as soon as possible, to inform the Company of the reason for absence and in any event no later than the end of the working day on which absence first occurs. You will be advised of the administrative procedures necessary to ensure your eligibility for Sick Pay. 20. In respect of absence lasting 7 or fewer calendar days, you need not produce a medical certificate unless you are specifically requested to do so. You must, however, complete the Company's self-certification form immediately you return to work after such absence. 21. In respect of absence lasting more than 7 calendar days, you must on the 8th calendar day of absence provide a medical certificate stating the reason for absence and thereafter provide a like certificate each week to cover any subsequent period of absence. 3 4 22. The Company reserves the right to ask you at any stage of absence to produce a medical certificate and/or to undergo a medical examination. 23. You will be paid your normal basic remuneration less the amount of any Statutory Sick Pay or social security sickness benefit to which you may be entitled for 14 working days in total in any one sick pay year which runs from 1 January to 31 December. Any payment of salary in respect of absence in excess of 14 days is at the discretion of the Company. 24. Entitlement to payment is subject to notification of absence and production of self-certification forms or medical certificates as referred to above. 25. The Company operates the Statutory Sick Pay scheme and you are required to cooperate in the maintenance of necessary records. For the purposes of calculating your entitlement to Statutory Sick Pay "qualifying days" are those days on which you are normally required to work. Payments made to you by the Company under its sick pay provisions in satisfaction of any other contractual entitlement will go towards discharging the Company liability to make payment to you under the Statutory Sick Pay scheme. 26. The Company will be entitled to terminate your employment by written notice to you if you are unable or prevented through illness, injury or other incapacity from carrying out the duties of your employment with the Company for any period or periods exceeding sixteen weeks (consecutive or in aggregate) in any consecutive period of 12 months. 27. Pension Arrangements The Company does not operate its own Staff Pension Scheme. It administers personal pension plans for employees but does not make any contribution to them. A contracting out certificate under the Social Security Pensions Act 1975 is not in force in respect of this employment. 28. Grievance Procedure If you have a grievance relating to your employment, you should discuss this with your immediate Manager. If you remain dissatisfied, you may 4 5 take up your grievance with your Manager's superior, whose decision will be final. 29. Disciplinary Procedures 30. Whilst it is the policy of the Company to keep its rules to a minimum, it is necessary to have a disciplinary procedure available should satisfactory standards of performance not be reached or should cases of misconduct occur. The disciplinary procedure adopted by the Company has been designed to: 31. Take disciplinary action in as uniform and consistent a manner as possible. 32. Take disciplinary action with a view to improving the performance/behaviour, rather than just punishing the person. 33. Take all relevant circumstances into consideration and act in a fair and unbiased manner. 34. The Procedure is: 35. In the case of minor Verbal warning by breaches of discipline or immediate Manager failure to reach standards 36. If verbal warning has not A written warning by the brought improvement or a immediate Manager separate complaint of a similar nature is made OR 37. In the case of more serious The member of staff matters where no previous renders himself/herself verbal warning has been liable to dismissal by given the Managing Director]/Company] without notice. 38. If the same complaints or The member of staff complaints of a similar renders himself/herself nature continue after a liable to dismissal by written warning, or a the [Managing separate complaint of a Director]/Company] similar nature is made. without notice. 5 6 OR 39. If gross misconduct occurs The member of staff where no warning has renders himself/herself been given. liable to dismissal by the [Managing Director]/Company] without notice. 40. For the purposes of this Agreement the following will be treated as gross misconduct, although the list is not exhaustive: (i) falsification of records (ii) drunkenness on duty (iii) refusal to obey reasonable instructions (iv) theft or other criminal offence (v) a serious or persistent breach of the provisions herein contained or (vi) wilful neglect in the discharge of your duties. 41. Staff have the right to appeal in the same manner as outlined under the Grievance Procedure. 42. All cases of disciplinary action under these procedures will be recorded and placed in the Company's records. 43. Notwithstanding anything herein contained, your employment shall be subject to termination by the Company by summary notice of dismissal if you: 44. become bankrupt or make any composition or deed of arrangement with your creditors, or 45. are convicted of any offence, other than any offence which in the opinion of the Board of Directors does not materially affect the business or goodwill of the Company and the performance of your duties hereunder, or 46. persistently or wilfully neglect or become incapable of efficiently performing your duties hereunder, or 47. become of unsound mind, or 48. refuse to carry out the instructions of your manager provided that the instructions which you refuse to carry out are lawful and are such as you may reasonably and properly be expected to perform, or 49. commit any serious breach or repeat or continue (after warning) any material breach of your obligations hereunder or be guilty of 6 7 conduct which in the reasonable opinion of the Board of Directors tends to bring you or the Company into disrepute, or 50. cease to be a Director of the Company. And the Company shall not be liable in damages/compensation or otherwise to you by reason of any such termination for the reasons specified in this paragraph. PROVIDED ALWAYS that if any such act of misconduct or breach or non-observance is capable of being remedied you shall first be offered in writing a reasonable opportunity to remedy the same prior to termination as aforesaid and if and when so remedied your employment hereunder shall continue without interruption. With the exception of cases entitling the Company to dismiss you summarily, as stated above, the Company will implement the Disciplinary Procedures when you contravene any of the Company's rules, any of the provisions of these Terms and Conditions, you are guilty of misconduct or you fall short of the performance required of you. The Company also reserves the right to suspend an employee without pay while cases of misconduct are being investigated. 51. Confidentiality 52. You acknowledge that certain information not generally known, and proprietary to the Company, about the Company or the Company's products, processes, machines and services, including but not limited to, information relating to research, development, manufacturing, engineering and marketing (together "Confidential Information" which shall include reference to any such Confidential Information the property of any other member of TAb Inc Group as if reference to the Company referred to such member of the TAb Inc Group) may be made available to you during your term of employment with the Company. You will treat as trade secrets all Confidential Information acquired by you during the course of your employment with the Company, and will not use any such trade secrets for your own benefit nor disclose them to any other third party during the period of your employment with the Company or thereafter, except as authorised in writing by the Company or as required by law or by any court of competent jurisdiction. 7 8 53. You must not remove any documents, or tangible items which belong to the Company or which obtain any confidential information from the Company's premises at any time without proper advance authorisation. 54. You must return to the Company upon request and, in any event, upon termination of your employment, all documents and tangible items which belong to the Company or which contain or refer to any confidential information and which are in your possession or under your control. 55. You must, if requested by the Company, delete all confidential information from any re-usable material and destroy all other documents and tangible items which contain or refer to any confidential information and which are in your possession or under your control. 56. Inventions 57. It shall be part of your normal duties at all times to consider in what manner and by what new methods or devices the products, services, processes, equipment or systems of the Company might be improved and promptly to give your immediate manager full details of any invention or improvement which you may from time to time make or discover in the course of your duties, and to further the interests of the Company's undertaking with regard thereto. 58. Any invention developed by you, individually or jointly: 59. during the period of your employment with the Company or 60. which is based (in whole or in part) on Confidential Information. shall be promptly and fully disclosed to the Company and, whether or not so disclosed, shall (subject to any contrary provisions of the Patents Act of 1977 or any other statutes where applicable) become the property of the Company. 61. The rights of the Company stated above shall apply only to inventions that 8 9 62. relate (a) to the business of the Company or (b) to the Company's actual or demonstrably anticipated research or development or 63. result from any work performed by you for the company, or 64. are developed by using any equipment, supplies, facilities, personnel or Confidential Information (in whole or in part). 65. In addition, you will upon request assign all intellectual property rights of whatever nature and however arising in any such invention to the Company (without charge to the Company but at the Company's expense). 66. Except with the prior written approval of the Company, you will refrain (during the term of your employment with the Company and thereafter) from submitting for publication or publishing any information with respect to any invention. 67. Subject as aforesaid, you shall forthwith on request from time to time both during your employment hereunder and thereafter at the request and cost of the Company apply for and execute and do all such documents, acts and things as may in the opinion of the management of the Company be necessary or conducive to obtain letters patent or other protection for any such invention or improvement in any part of the world, and to vest such letters patent or other protection in the Company or its nominees. 68. You hereby irrevocably authorise the Company for the purposes aforesaid to make use of your name and to sign and execute any documents or to do anything on your behalf (or where permissible to obtain the patent or other protection in its own name or in that of its nominees). You shall not knowingly do anything to imperil the validity of any such patent or protection or any application therefor, but on the contrary shall at the cost and request of the Company render all reasonable assistance to the Company both in obtaining and in maintaining such patents or other protection. You shall not either during the continuance of your employment hereunder or thereafter at any time exploit or assist others to exploit any such invention or improvement or give any information in respect thereof except to the Company or as it may direct. 9 10 69. You hereby waive all "Moral Rights" as defined in the Copyright, Designs & Patents Act 1988 in respect of any acts of the Company or any acts of third parties done with the Company's authority in relation to any property which is the property of the Company by virtue of this paragraph 12. 70. Rights and obligations under this paragraph shall continue in force after termination of your employment in respect of any inventions or intellectual property made during your employment and shall be binding upon your personal representatives. 71. If the Company applies for a patent on an invention made by you as described in the preceding paragraph, you will be eligible for a (pound)500 incentive bonus, the granting of which will be at management's discretion. 72. Non-Solicitation and Non-Competition 73. You hereby covenant with the Company that you will not (without the prior consent of the Company in writing under the hand of a Director) within one year after the termination (howsoever caused or arising) of your Employment in connection with the carrying on of any business similar to the business of the Company as carried on during the period of twelve months prior to the date on which such termination of your employment took effect on your own behalf or on behalf of any person, firm or company and whether directly or indirectly: 74. seek to procure orders from or to do business with any person, firm or company who has at any time during the twelve months immediately preceding such termination done business with the Company and with whom in the course of your employment you shall have had dealings; or 75. offer employment to or procure employment for any person who has at any time during the twelve months immediately preceding such termination been employed by the Company or any Member of the TAb Inc Group (whether or not such person would commit any breach of his contract of employment with the Company or such Member of the TAb Inc Group by reason of his leaving service) Provided always that nothing contained in this paragraph 13.1 shall prohibit the seeking or procuring 10 11 of orders or the doing of business not relating or similar to the business or businesses aforesaid or any of them 76. You hereby further covenant with the Company in identical terms to paragraph 13.1 hereof save that the reference to a client or customer shall refer only to a person who is or was during the period specified therein a client or customer of any other Member of the TAb Inc Group and with whom in the course of your employment you shall have had dealings. 77. You hereby covenant with the Company that you will not in the Restricted Area within one year after termination of your employment (save where such termination shall be by the Company in breach of contract or in circumstances constituting constructive dismissal in breach of contract by the Company of you) without such consent as is specified in paragraph 13.1 hereof either alone or jointly with or as manager or agent consultant or employee for any person firm or company and whether directly or indirectly carry on or be engaged in any business similar to the business or businesses carried on by the Company (or (as a separate and independent covenant) any other Member of the TAb Inc Group to whom you have provided services hereunder at any time within the period of twelve months prior to such date of termination) at the date of termination of the employment. 78. The "Restricted Area" means the area described within a radius of 25 miles from the location of the Company's facility described in paragraph 4. 79. The restrictions contained in subparagraphs 13.1 to 13.4 are considered reasonable by the parties but in the event that any such restriction shall be found to be void but would be valid if some part thereof were deleted or the period or an area of application reduced such restriction shall apply with such modifications as may be necessary to make it valid and effective. 80. Future Employer The Company may notify any future or prospective future employer of yours as to the provisions of these terms and conditions and as to the Company's intention to enforce its rights hereunder. 11 12 81. Termination of Employment Your employment is terminable by not less than twelve months prior written notice given by the Company to you or given by you to the Company. 82. Sole Agreement This Agreement supersedes all prior agreements between the Company and you with respect to the matters addressed herein and can only be modified by a written amendment. 83. Governing Law This Agreement shall be governed by and construed in accordance with the laws of England and Wales. Please acknowledge receipt of this statement by signing the acknowledgement on the duplicate of this letter and returning it to me. Yours sincerely, Director - for and on behalf of the Company 12 13 16. Sole Agreement This Agreement supersedes all prior agreements between the Company and you with respect to the matters addressed herein and can only be modified by a written amendment. 17. Governing Law This Agreement shall be governed by and construed in accordance with the laws of England and Wales. Please acknowledge receipt of this statement by signing the acknowledgement on the duplicate of this letter and returning it to me. Yours sincerely, Director - for and on behalf of the Company I Timothy Chard, acknowledge that I have received a statement of the particulars of my employment as required by the Employment Protection (Consolidation) Act 1978 Section 1 and confirm my agreement that these constitute my contract of employment with TAb London Limited. Dated: 5.7 1996 Signed: /s/ T. Chard ----------------------------------- T. Chard 13 EX-11.1 8 COMPUTATION OF PER SHARE EARNINGS 1 EXHIBIT 11.1 THERAPEUTIC ANTIBODIES INC. STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS
For the Cumulative Development Stage For the Years Ended December 31, From August 10, 1984 ------------------------------------------- (Inception)Through 1996 1995 1994 December 31, 1996 ------------ ----------- ----------- ----------------- ACTUAL Weighted average shares outstanding 18,821,524 15,938,219 14,377,456 8,894,667 ============ =========== =========== ============ Net loss $(12,746,117) $(9,100,038) $(6,717,753) $(42,564,665) ============ =========== =========== ============ Net loss per share $ (0.68) $ (0.57) $ (0.47) $ (4.79) ============ =========== =========== ============ PRIMARY Weighted average shares outstanding 18,821,524 15,938,219 14,377,456 8,894,667 Dilutive effect of stock options and warrants 1,463,483 1,775,392 1,674,178 1,463,483 ------------ ----------- ----------- ------------ 20,285,007 17,713,611 16,051,634 10,358,150 ============ =========== =========== ============ Net loss $(12,746,117) $(9,100,038) $(6,717,753) $(42,564,665) ============ =========== =========== ============ Net loss per share $ (0.63) $ (0.51) $ (0.42) $ (4.11) ============ =========== =========== ============ FULLY DILUTED Weighted average shares outstanding 18,821,524 15,938,219 14,377,456 8,894,667 Dilutive effect of stock options and warrants 1,463,483 1,974,990 1,674,178 1,463,483 ------------ ----------- ----------- ------------ 20,285,007 17,913,209 16,051,634 10,358,150 ============ =========== =========== ============ Net loss $(12,746,117) $(9,100,038) $(6,717,753) $(42,564,665) ============ =========== =========== ============ Net loss per share $ (0.63) $ (0.51) $ (0.42) $ (4.11) ============ =========== =========== ============
The dilutive effect of stock options and warrants is determined under the treasury stock method utilizing fair values per share of $6.51 in 1996 for primary and fully diluted earnings per share; $4.75 for primary earnings per share and $5.50 for fully diluted earnings per share in 1995; and $4.00 for both primary and fully diluted earnings per share in 1994. EX-27 9 FINANCIAL DATA SCHEDULE
5 YEAR DEC-31-1996 DEC-31-1996 20,502,536 2,002,266 101,281 0 400,167 23,731,848 16,139,606 3,456,926 37,179,990 2,544,285 8,592,755 0 0 22,354 25,193,176 37,179,990 600,607 3,268,368 334,989 696,251 15,318,234 0 1,201,335 0 0 12,746,117 0 0 0 12,746,117 .63 .63
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