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Agreement of Lease Assignment

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EXHIBIT 10.03


AGREEMENT OF LEASE ASSIGNMENT


This AGREEMENT OF LEASE ASSIGNMENT ("Agreement"), dated as of August 4, 2000, is by and between John Wayne Cancer Institute, a non-profit corporation (the "Institute"), and CancerVax Corporation, a Delaware corporation ("CancerVax"). The Institute and CancerVax are each referred to herein as a "Party" and collectively referred to as the "Parties."


RECITALS


A. The Institute's mission, in part, is to continue the research and development of useful technologies for the treatment of cancer and, through collaboration with Saint John's Health Center ("Saint John's"), to apply such technologies to the treatment of patients and for the benefit of mankind. CancerVax's mission is to commercialize immunotherapies for cancer, including a melanoma vaccine and other allogeneic cellular vaccines for cancer.


B. Donald L. Morton, M.D. ("Dr. Morton"), a principal director and shareholder of CancerVax, has been working in the field of vaccines for cancer since 1960. Between 1960 and 1971, while at the National Cancer Institute ("NCI"), he developed and tested the first autologous cell cancer vaccines derived from patients' own tumors. From 1971 to 1991, while a faculty member at the University of California, Los Angeles ("UCLA"), he developed and commenced human clinical studies of an allogeneic cellular vaccine for cancer. As a result of these studies, Dr. Morton discovered a new concept for a vaccine for human melanoma and other cancers. According to University procedures, in the spring of 1989, Dr. Morton submitted this invention to the Intellectual Property Division at UCLA requesting that a patent application be filed on this discovery. The University of California office declined to file a patent application and according to University policy, released the rights to the invention to Dr. Morton and informed the National Institutes of Health ("NIH") of its decision. This created a dilemma for Dr. Morton because, due to the great cost of obtaining FDA approval for new drugs, no biopharmaceutical company would be likely to ever commercialize and bring to the benefit of cancer patients the results of his life's work without the ability to obtain patent protection for the commercial rights to the vaccine. Consequently, Dr. Morton filed the patent application at his own expense, and in accordance with federal law, petitioned the NIH to release the rights to the invention to him. The NIH released the rights to Dr. Morton and a patent application was filed on November 3, 1989. The patent


application on the vaccine was filed prior to the formation of the Institute and has been prosecuted at the personal expense of Dr. Morton.


C. Prior to moving to the Institute, Dr. Morton disclosed to the Board of Directors of the Institute (the "Institute's Board") and to appropriate individuals, including the President and CEO of Saint John's, his proprietary interest in allogeneic cellular vaccine technology developed at UCLA and his interest in continuing research in the field at the Institute. It was recognized that, even though the Institute was being allowed to use the vaccine technology for research purposes relating to melanoma, the commercialization of the melanoma vaccine technology would be subject to any patents issued on Dr. Morton's patent applications.


D. The Institute and Saint John's have performed additional research on the melanoma vaccine and treated patients with it. As a result of such activities and scientific medical publications, the Institute and Saint John's have become the largest center in the United States for treating melanoma cancer and have received international recognition. Patients from thirty-two (32) countries and forty-eight (48) states have been treated for melanoma cancer at Saint John's using the melanoma vaccine.


E. The Institute and CancerVax, Inc., a California corporation ("CancerVax, Inc.") entered into that certain Cross-License Agreement dated as of July 24, 1998 (the "Cross-License Agreement") relating to the melanoma vaccine, among other things. CancerVax, Inc. has or will assign its interest in the Cross-License Agreement to CancerVax.


F. Dr. Morton will be exclusively licensing, directly or indirectly, all of his interest in the melanoma vaccine technology (including patents, patent applications and related vaccine cell lines) to CancerVax, which has the right to sublicense them.


G. The Institute applied to the NCI for research funds to undertake clinical trials with the melanoma vaccine and was granted funding by the NCI of more than Thirty Four Million Dollars ($34,000,000) to carry out Phase III multicenter trials with the melanoma vaccine in patients with Stage III or Stage IV melanoma.


H. The Institute leased property commonly known as Suite 100 of the Marina Business Center, located at 4503 Glencoe Avenue, Marina Del Rey, California (the "Premises"). The Premises consists of approximately 25,600 rentable square feet and is leased pursuant to that certain Lease dated as of July 22, 1999, by and between Spieker Properties, L.P. ("Spieker"), as landlord, and the Institute, as tenant (the "Lease").


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I. In order to manufacture the melanoma vaccine according to FDA specifications under Good Manufacturing Practices for use in clinical trials, the Institute has constructed or planned to construct certain improvements ("Improvements") to the Premises. The Institute desires that, subject to the terms and conditions of this Agreement: (a) the Institute's interest under the Lease be assigned to and assumed by CancerVax; and (b) CancerVax take over the construction of the Improvements and assume all obligations associated with such construction.


J. CancerVax has agreed to assume the obligations of the Institute under the Lease and with respect to the construction of the Improvements subject to the terms and conditions of this Agreement.


K. Because Dr. Morton is a principal shareholder, officer, and director of CancerVax, as well as an officer and director of the Institute, this Agreement has been reviewed and recommended by an independent special committee of the Institute's Board (with the advice of consultants and legal counsel representing the Institute and Dr. Morton) and approved by the independent members of the Institute's Board. To avoid any perception of conflict of interest, Dr. Morton has taken a 6-month leave of absence from his duties as an officer and director of the Institute during the time period this Agreement is being completed and various other contractual relationships or other arrangements between the Institute and CancerVax are being completed.


NOW, THEREFORE, in reliance on the preceding recitals, and in consideration of the terms and conditions of this Agreement, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties hereby agree as follows:


I. ASSIGNMENT OF LEASE


1.1 Assignment and Assumption of Lease. The Institute hereby assigns as of the Effective Date (defined below) to CancerVax all of the Institute's right, title, interest, and obligations under the Lease, and CancerVax hereby accepts such assignment and assumes all of the Institute's right, title, interest and obligations under the Lease. CancerVax further agrees as of the Effective Date to keep, perform, comply with, and fulfill all the terms, representations, agreements, covenants, conditions, and obligations required to be kept, performed and fulfilled by the Institute under the Lease, including the timely payment of all amounts due by the tenant under the Lease. CancerVax, through the officer executing this instrument on its behalf, acknowledges that it has received a counterpart original or a copy of the Lease, that it has read the Lease, and that it understands the Lease terms including all obligations which CancerVax will be required to perform under the Lease.


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1.2 No Modification. CancerVax hereby agrees that it will not amend or modify the Lease without the prior written consent of the Institute, which consent will not be unreasonably withheld; provided that this Section 1.2 will have no further force or effect after the date on which the Institute is relieved from liability under the Lease.


1.3 Notice to Landlord. The Parties acknowledge and agree that, under the terms of Section 21(F) of the Lease, written notice of this assignment must be provided to Spieker thirty (30) days before the Lease assignment. The Parties hereby acknowledge that the Institute has delivered such notice, and the Parties will provide any financial or other information reasonably requested by Spieker in connection with the Lease assignment.


1.4 Release of Liability. CancerVax acknowledges that the Institute will request that Spieker agree to release the Institute from liability under the Lease as of the Effective Date. CancerVax agrees to use commercially reasonable efforts to assist the Institute in obtaining such a release, including the execution of documents reasonably requested by Spieker; provided that CancerVax will not be required to incur costs or liabilities in connection with the release in addition to the monetary obligations and liabilities it is incurring or assuming in this Agreement. The Institute agrees to use its best efforts to cause Spieker to consent to the assignment of the Lease from the Institute to CancerVax; provided, however, that the Institute shall not be required to expend any funds in connection with such efforts.


1.5 Condition of the Premises. The Premises will be delivered to CancerVax by the Institute in an "As Is" condition, without representations or warranties relating to its condition or suitability for any particular use.


1.6 CancerVax Indemnity. CancerVax hereby agrees to indemnify, defend, and hold harmless the Institute and the Institute's officers, directors, and employees from any costs, claims, liabilities, damages, or expenses (including reasonable attorneys' fees) arising from: (i) CancerVax's breach of the Lease or failure to perform any obligation of the tenant under the Lease after the Effective Date; and (ii) third party claims arising from the Premises after the Effective Date.


1.7 Institute Indemnity. The Institute hereby agrees to indemnify, defend, and hold harmless CancerVax and CancerVax's officers, directors, employees, and affiliates from any costs, claims, liabilities, damages, or expenses (including reasonable attorneys' fees) arising from: (i) the Institute's breach of the Lease or failure to perform any obligation of the tenant under the Lease prior to the Effective Date; and (ii) third party claims arising from the Premises prior to the Effective Date.


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