ImmunoGen, Inc.
IMMUNOGEN INC (Form: 10-Q, Received: 01/30/2013 15:06:35)

Table of Contents

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

x

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended December 31, 2012

 

OR

 

o

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from           to           

 

Commission file number 0-17999

 

ImmunoGen, Inc.

 

Massachusetts

 

04-2726691

(State or other jurisdiction of incorporation or
organization)

 

(I.R.S. Employer Identification No.)

 

830 Winter Street, Waltham, MA 02451

(Address of principal executive offices, including zip code)

 

(781) 895-0600

(Registrant’s telephone number, including area code)

 

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.    x  Yes  o  No

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). x   Yes     o   No

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

 

Large accelerated filer x

 

Accelerated filer o

 

 

 

Non-accelerated filer o

 

Smaller reporting company o

(Do not check if a smaller reporting company)

 

 

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). o Yes    x   No

 

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

 

Shares of common stock, par value $.01 per share:  84,222,024 shares outstanding as of January 22, 2013.

 

 

 



Table of Contents

 

IMMUNOGEN, INC.

FORM 10-Q

FOR THE QUARTER ENDED DECEMBER 31, 2012

TABLE OF CONTENTS

 

Item

 

 

Page Number

 

 

 

Part I

1.

Financial Statements (Unaudited):

 

 

 

 

1a.

Consolidated Balance Sheets as of December 31, 2012 and June 30, 2012

3

 

 

 

1b.

Consolidated Statements of Operations and Comprehensive Loss for the three and six months ended December 31, 2012 and 2011

4

 

 

 

1c.

Consolidated Statements of Cash Flows for the six months ended December 31, 2012 and 2011

5

 

 

 

1d.

Notes to Consolidated Financial Statements

6

 

 

 

2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

15

 

 

 

3.

Quantitative and Qualitative Disclosures about Market Risk

24

 

 

 

4.

Controls and Procedures

24

 

 

 

Part II

 

 

 

1A.

Risk Factors

25

 

 

 

6.

Exhibits

25

 

 

 

 

Signatures

26

 

2



Table of Contents

 

ITEM 1. Financial Statements

 

IMMUNOGEN, INC.

CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

In thousands, except per share amounts

 

 

 

December 31,
2012

 

June 30,
2012

 

ASSETS

 

 

 

 

 

Cash and cash equivalents

 

$

211,021

 

$

160,938

 

Accounts receivable

 

1,286

 

129

 

Unbilled revenue

 

2,006

 

1,196

 

Inventory

 

450

 

1,288

 

Restricted cash

 

319

 

319

 

Prepaid and other current assets

 

1,976

 

2,400

 

Total current assets

 

217,058

 

166,270

 

 

 

 

 

 

 

Property and equipment, net of accumulated depreciation

 

11,352

 

11,633

 

Long-term restricted cash

 

2,231

 

2,231

 

Other assets

 

196

 

174

 

 

 

 

 

 

 

Total assets

 

$

230,837

 

$

180,308

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

 

 

 

Accounts payable

 

$

4,706

 

$

3,395

 

Accrued compensation

 

3,173

 

4,942

 

Other accrued liabilities

 

4,467

 

4,589

 

Current portion of deferred lease incentive

 

979

 

979

 

Current portion of deferred revenue

 

1,303

 

2,349

 

Total current liabilities

 

14,628

 

16,254

 

 

 

 

 

 

 

Deferred lease incentive, net of current portion

 

6,116

 

6,605

 

Deferred revenue, net of current portion

 

70,365

 

69,761

 

Other long-term liabilities

 

3,733

 

3,798

 

Total liabilities

 

94,842

 

96,418

 

Commitments and contingencies (Note E)

 

 

 

 

 

Shareholders’ equity:

 

 

 

 

 

Preferred stock, $.01 par value; authorized 5,000 shares; no shares issued and outstanding

 

 

 

Common stock, $.01 par value; authorized 150,000 shares; issued and outstanding 84,188 and 77,759 shares as of December 31, 2012 and June 30, 2012, respectively

 

842

 

778

 

Additional paid-in capital

 

688,694

 

587,068

 

Accumulated deficit

 

(553,541

)

(503,956

)

Total shareholders’ equity

 

135,995

 

83,890

 

Total liabilities and shareholders’ equity

 

$

230,837

 

$

180,308

 

 

The accompanying notes are an integral part of the consolidated financial statements.

 

3



Table of Contents

 

IMMUNOGEN, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(UNAUDITED)

In thousands, except per share amounts

 

 

 

Three Months Ended
December 31,

 

Six Months Ended
December 31,

 

 

 

2012

 

2011

 

2012

 

2011

 

 

 

 

 

 

 

 

 

 

 

Revenues:

 

 

 

 

 

 

 

 

 

Research and development support

 

$

2,036

 

$

945

 

$

3,413

 

$

2,013

 

License and milestone fees

 

429

 

6,025

 

1,362

 

7,212

 

Clinical materials revenue

 

147

 

647

 

1,928

 

928

 

 

 

 

 

 

 

 

 

 

 

Total revenues

 

2,612

 

7,617

 

6,703

 

10,153

 

 

 

 

 

 

 

 

 

 

 

Operating Expenses:

 

 

 

 

 

 

 

 

 

Research and development

 

21,656

 

15,559

 

45,356

 

32,720

 

General and administrative

 

5,464

 

4,834

 

11,103

 

9,675

 

 

 

 

 

 

 

 

 

 

 

Total operating expenses

 

27,120

 

20,393

 

56,459

 

42,395

 

 

 

 

 

 

 

 

 

 

 

Loss from operations

 

(24,508

)

(12,776

)

(49,756

)

(32,242

)

 

 

 

 

 

 

 

 

 

 

Other income, net

 

115

 

23

 

171

 

6

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

$

(24,393

)

$

(12,753

)

$

(49,585

)

$

(32,236

)

 

 

 

 

 

 

 

 

 

 

Basic and diluted net loss per common share

 

$

(0.29

)

$

(0.17

)

$

(0.59

)

$

(0.42

)

 

 

 

 

 

 

 

 

 

 

Basic and diluted weighted average common shares outstanding

 

84,147

 

76,523

 

83,748

 

76,443

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Comprehensive Loss

 

$

(24,393

)

$

(12,753

)

$

(49,585

)

$

(32,236

)

 

The accompanying notes are an integral part of the consolidated financial statements.

 

4



Table of Contents

 

IMMUNOGEN, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

In thousands, except per share amounts

 

 

 

Six Months ended December 31,

 

 

 

2012

 

2011

 

 

 

 

 

 

 

Cash flows from operating activities:

 

 

 

 

 

Net loss

 

$

(49,585

)

$

(32,236

)

Adjustments to reconcile net loss to net cash used for operating activities:

 

 

 

 

 

Depreciation and amortization

 

2,336

 

2,317

 

Gain on sale/disposal of fixed assets

 

(17

)

(23

)

Amortization of deferred lease incentive obligation

 

(489

)

(489

)

(Gain) loss on forward contracts

 

(163

)

56

 

Stock and deferred share unit compensation

 

6,848

 

5,521

 

Deferred rent

 

(54

)

(54

)

Changes in operating assets and liabilities:

 

 

 

 

 

Accounts receivable

 

(1,157

)

(16,546

)

Unbilled revenue

 

(810

)

513

 

Inventory

 

838

 

(626

)

Prepaid and other current assets

 

480

 

1,058

 

Restricted cash

 

 

700

 

Other assets

 

(22

)

17

 

Accounts payable

 

1,311

 

(1,729

)

Accrued compensation

 

(1,769

)

(1,937

)

Other accrued liabilities

 

(14

)

(364

)

Deferred revenue

 

(442

)

19,788

 

Net cash used for operating activities

 

(42,709

)

(24,034

)

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

Purchases of property and equipment, net

 

(2,038

)

(834

)

Payments from settlement of forward contracts

 

(12

)

(56

)

Net cash used for investing activities

 

(2,050

)

(890

)

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

Proceeds from common stock issuance, net

 

93,991

 

 

Proceeds from stock options exercised

 

851

 

2,090

 

Net cash provided by financing activities

 

94,842

 

2,090

 

 

 

 

 

 

 

Net change in cash and cash equivalents

 

50,083

 

(22,834

)

 

 

 

 

 

 

Cash and cash equivalents, beginning balance

 

160,938

 

191,206

 

 

 

 

 

 

 

Cash and cash equivalents, ending balance

 

$

211,021

 

$

168,372

 

 

The accompanying notes are an integral part of the consolidated financial statements.

 

5



Table of Contents

 

IMMUNOGEN, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2012

 

A.    Summary of Significant Accounting Policies

 

Basis of Presentation

 

The accompanying unaudited consolidated financial statements at December 31, 2012 and June 30, 2012 and for the three and six months ended December 31, 2012 and 2011 include the accounts of ImmunoGen, Inc., or the Company, and its wholly owned subsidiaries, ImmunoGen Securities Corp. and ImmunoGen Europe Limited. The consolidated financial statements include all of the adjustments, consisting only of normal recurring adjustments, which management considers necessary for a fair presentation of the Company’s financial position in accordance with accounting principles generally accepted in the U.S. for interim financial information. Certain information and footnote disclosures normally included in the Company’s annual financial statements have been condensed or omitted. The preparation of interim financial statements requires the use of management’s estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the interim financial statements and the reported amounts of revenues and expenditures during the reported periods. The results of the interim periods are not necessarily indicative of the results for the entire year. Accordingly, the interim financial statements should be read in conjunction with the audited financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended June 30, 2012.

 

Subsequent Events

 

The Company has evaluated all events or transactions that occurred after December 31, 2012 up through the date the Company issued these financial statements. During this period, the Company did not have any material recognizable or unrecognizable subsequent events.

 

Revenue Recognition

 

The Company enters into licensing and development agreements with collaborative partners for the development of monoclonal antibody-based anticancer therapeutics. The terms of these agreements contain multiple deliverables which may include (i) licenses, or options to obtain licenses, to the Company’s Targeted Antibody Payload, or TAP, technology, (ii) rights to future technological improvements, (iii) research activities to be performed on behalf of the collaborative partner, (iv) delivery of cytotoxic agents and (v) the manufacture of preclinical or clinical materials for the collaborative partner. Payments to the Company under these agreements may include non-refundable license fees, option fees, exercise fees, payments for research activities, payments for the manufacture of preclinical or clinical materials, payments based upon the achievement of certain milestones and royalties on product sales. The Company follows the provisions of the Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 605-25, “Revenue Recognition — Multiple-Element Arrangements,” and ASC Topic 605-28, “Revenue Recognition — Milestone Method,” in accounting for these agreements. In order to account for these agreements, the Company must identify the deliverables included within the agreement and evaluate which deliverables represent separate units of accounting based on if certain criteria are met, including whether the delivered element has stand-alone value to the collaborator. The consideration received is allocated among the separate units of accounting, and the applicable revenue recognition criteria are applied to each of the separate units.

At December 31, 2012, the Company had the following two types of agreements with the parties identified below:

 

·               Exclusive development and commercialization licenses to use the Company’s TAP technology and/or certain other intellectual property to develop compounds to a single target antigen (referred to herein as single-target licenses, as distinguished from the Company’s right-to-test agreements described elsewhere):

 

Amgen (three single-target licenses)

 

Bayer HealthCare (one single-target license)

 

Biotest (one single-target license)

 

Roche, through its Genentech unit (five single-target licenses)

 

Sanofi (license to multiple individual targets)

 

6



Table of Contents

 

·               Option/research agreement for a defined period of time to secure development and commercialization licenses to use the Company’s TAP technology to develop anticancer compounds to specified targets on established terms (referred to herein as right-to-test agreements):

 

Amgen

 

Sanofi

 

Novartis

 

Eli Lilly and Company

 

There are no performance, cancellation, termination or refund provisions in any of the arrangements that contain material financial consequences to the Company.

 

Exclusive Licenses

 

The deliverables under an exclusive license agreement generally include the exclusive license to the Company’s TAP technology with respect to a specified antigen target, and may also include deliverables related to rights to future technological improvements, research activities to be performed on behalf of the collaborative partner and the manufacture of preclinical or clinical materials for the collaborative partner.

 

Generally, exclusive license agreements contain non-refundable terms for payments and, depending on the terms of the agreement, provide that the Company will (i) at the collaborator’s request, provide research services at negotiated prices which are generally consistent with what other third parties would charge, (ii) at the collaborator’s request, manufacture and provide to it preclinical and clinical materials or deliver cytotoxic agents at negotiated prices which are generally consistent with what other third parties would charge, (iii) earn payments upon the achievement of certain milestones and (iv) earn royalty payments, generally until the later of the last applicable patent expiration or 10 to 12 years after product launch. In the case of trastuzumab emtansine (T-DM1), however, the minimum royalty term is 10 years and the maximum royalty term is 12 years on a country-by-country basis. Royalty rates may vary over the royalty term depending on the Company’s intellectual property rights. The Company may provide technical assistance and share any technology improvements with its collaborators during the term of the collaboration agreements. The Company does not directly control when any collaborator will request research or manufacturing services, achieve milestones or become liable for royalty payments. As a result, the Company cannot predict when it will recognize revenues in connection with any of the foregoing.

 

In determining the units of accounting, management evaluates whether the exclusive license has stand-alone value from the undelivered elements to the collaborative partner based on the consideration of the relevant facts and circumstances for each arrangement. Factors considered in this determination include the research capabilities of the partner and the availability of TAP technology research expertise in the general marketplace. If the Company concludes that the license has stand alone value and therefore will be accounted for as a separate unit of accounting, the Company then determines the estimated selling prices of the license and all other units of accounting based on market conditions, similar arrangements entered into by third parties, and entity-specific factors such as the terms of the Company’s previous collaborative agreements, recent preclinical and clinical testing results of therapeutic products that use the Company’s TAP technology, the Company’s pricing practices and pricing objectives, the likelihood that technological improvements will be made, the likelihood that technological improvements made will be used by the Company’s collaborators and the nature of the research services to be performed on behalf of its collaborators and market rates for similar services.

 

Upfront payments on single-target licenses are deferred if facts and circumstances dictate that the license does not have stand-alone value. Prior to the adoption of Accounting Standards Update (ASU) No. 2009-13, “Revenue Arrangements with Multiple Deliverables” on July 1, 2010, the Company determined that its licenses lacked stand-alone value and were combined with other elements of the arrangement and any amounts associated with the license were deferred and amortized over a certain period, which the Company refers to as the Company’s period of substantial involvement. The determination of the length of the period over which to defer revenue is subject to judgment and estimation and can have an impact on the amount of revenue recognized in a given period. Historically the Company’s involvement with the development of a collaborator’s product candidate has been significant at the early stages of development, and lessens as it progresses into clinical trials. Also, as a drug candidate gets closer to commencing pivotal testing the Company’s collaborators have sought an alternative site to manufacture the product, as the Company’s facility does not produce pivotal or commercial drug product. Accordingly, the Company generally estimates this period of substantial involvement to begin at the inception of the collaboration agreement and conclude at the end of non-pivotal Phase II testing. The Company believes this period of substantial involvement is, depending on the nature of the license, on average six and one-half years. Quarterly, the

 

7



Table of Contents

 

Company reassesses its periods of substantial involvement over which the Company amortizes its upfront license fees and makes adjustments as appropriate. In the event a collaborator elects to discontinue development of a specific product candidate under a single target license, but retains its right to use the Company’s technology to develop an alternative product candidate to the same target or a target substitute, the Company would cease amortization of any remaining portion of the upfront fee until there is substantial preclinical activity on another product candidate and its remaining period of substantial involvement can be estimated. In the event that a single target license were to be terminated, the Company would recognize as revenue any portion of the upfront fee that had not previously been recorded as revenue, but was classified as deferred revenue, at the date of such termination.

 

Subsequent to the adoption of ASU No. 2009-13, the Company determined that its research licenses lack stand-alone value and are considered for aggregation with the other elements of the arrangement and accounted for as one unit of accounting.

 

Upfront payments on single-target licenses may be recognized upon delivery of the license if facts and circumstances dictate that the license has stand-alone value from the undelivered elements, which generally include rights to future technological improvements, research services, delivery of cytotoxic agents and the manufacture of preclinical and clinical materials.

 

The Company recognizes revenue related to research services that represent separate units of accounting as they are performed, as long as there is persuasive evidence of an arrangement, the fee is fixed or determinable, and collection of the related receivable is probable. The Company recognizes revenue related to the rights to future technological improvements over the estimated term of the applicable license.

 

The Company may also provide cytotoxic agents to its collaborators or produce preclinical and clinical materials at negotiated prices which are generally consistent with what other third parties would charge. The Company recognizes revenue on cytotoxic agents and on preclinical and clinical materials when the materials have passed all quality testing required for collaborator acceptance and title and risk of loss have transferred to the collaborator. Arrangement consideration allocated to the manufacture of preclinical and clinical materials in a multiple-deliverable arrangement is below the Company’s full cost, and the Company’s full cost is not expected to ever be below its contract selling prices for its existing collaborations. During the six months ended December 31, 2012 and 2011, the difference between the Company’s full cost to manufacture preclinical and clinical materials on behalf of its collaborators as compared to total amounts received from collaborators for the manufacture of preclinical and clinical materials was $755,000 and $31,000, respectively. The majority of the Company’s costs to produce these preclinical and clinical materials are fixed and then allocated to each batch based on the number of batches produced during the period. Therefore, the Company’s costs to produce these materials are significantly impacted by the number of batches produced during the period. The volume of preclinical and clinical materials the Company produces is directly related to the number of clinical trials the Company and its collaborators are preparing for or currently have underway, the speed of enrollment in those trials, the dosage schedule of each clinical trial and the time period such trials last. Accordingly, the volume of preclinical and clinical materials produced, and therefore the Company’s per batch costs to manufacture these preclinical and clinical materials, may vary significantly from period to period.

 

The Company may also produce research material for potential collaborators under material transfer agreements. Additionally, the Company performs research activities, including developing antibody specific conjugation processes, on behalf of its collaborators and potential collaborators during the early evaluation and preclinical testing stages of drug development. The Company records amounts received for research materials produced or services performed as a component of research and development support revenue. The Company also develops conjugation processes for materials for later stage testing and commercialization for certain collaborators. The Company is compensated at negotiated rates and may receive milestone payments for developing these processes which are recorded as a component of research and development support revenue.

 

The Company’s license agreements have milestone payments which for reporting purposes are aggregated into three categories: (i) development milestones, (ii) regulatory milestones, and (iii) sales milestones. Development milestones are typically payable when a product candidate initiates or advances into different clinical trial phases. Regulatory milestones are typically payable upon submission for marketing approval with the FDA or other countries’ regulatory authorities or on receipt of actual marketing approvals for the compound or for additional indications. Sales milestones are typically payable when annual sales reach certain levels.

 

At the inception of each agreement that includes milestone payments, the Company evaluates whether each milestone is substantive and at risk to both parties on the basis of the contingent nature of the milestone. This evaluation includes an assessment of whether (a) the consideration is commensurate with either (1) the entity’s performance to achieve the milestone, or (2) the enhancement of the value of the delivered item(s) as a result of a specific outcome resulting from the entity’s performance to achieve the milestone, (b) the consideration relates solely to past performance and (c) the consideration is reasonable relative to all of the deliverables and payment terms within the arrangement. The Company evaluates factors such as the scientific, regulatory, commercial and other risks that must be overcome to achieve the respective milestone, the level of effort and investment required to achieve the respective milestone and whether the milestone consideration is reasonable relative to all deliverables and payment terms in the arrangement in making this assessment.

 

8



Table of Contents

 

Non-refundable development and regulatory milestones that are expected to be achieved as a result of the Company’s efforts during the period of substantial involvement are considered substantive and are recognized as revenue upon the achievement of the milestone, assuming all other revenue recognition criteria are met. Milestones that are not considered substantive because we do not contribute effort to the achievement of such milestones are generally achieved after the period of substantial involvement and are recognized as revenue upon achievement of the milestone, as there are no undelivered elements remaining and no continuing performance obligations, assuming all other revenue recognition criteria are met.

 

Right-to-Test Agreements

 

The Company’s right-to-test agreements provide collaborators the right to (a) test the Company’s TAP technology for a defined period of time through a right-to-test, or research, license, (b) take options, for a defined period of time, to specified targets and (c) upon exercise of those options, secure or “take” licenses to develop and commercialize products for the specified targets on established terms. Under these agreements, fees may be due to the Company (i) at the inception of the arrangement (referred to as “upfront” fees or payments), (ii) upon taking an option with respect to a specific target (referred to as option fees or payments earned, if any, when the option is “taken”), (iii) upon the exercise of a previously taken option to acquire a development and commercialization license(s) (referred to as exercise fees or payments earned, if any, when the development and commercialization license is “taken”), or (iv) some combination of all of these fees.

 

The accounting for right-to-test agreements is dependent on the nature of the options granted to the collaborative partner. Options are considered substantive if, at the inception of a right-to-test agreement, the Company is at risk as to whether the collaborative partner will choose to exercise the options to secure development and commercialization licenses. Factors that are considered in evaluating whether options are substantive include the overall objective of the arrangement, the benefit the collaborator might obtain from the agreement without exercising the options, the cost to exercise the options relative to the total upfront consideration, and the additional financial commitments or economic penalties imposed on the collaborator as a result of exercising the options.

 

For right-to-test agreements where the options to secure development and commercialization licenses to the Company’s TAP technology are considered substantive, the Company does not consider the development and commercialization licenses to be a deliverable at the inception of the agreement. For those right-to-test agreements entered into prior to the adoption of ASU No. 2009-13 where the options to secure development and commercialization licenses are considered substantive, the Company has deferred the upfront payments received and recognizes this revenue over the period during which the collaborator could elect to take options for development and commercialization licenses. These periods are specific to each collaboration agreement. If a collaborator takes an option to acquire a development and commercialization license under these agreements, any substantive option fee is deferred and recognized over the life of the option, generally 12 to 18 months. If a collaborator exercises an option and takes a development and commercialization license to a specific target, the Company attributes the exercise fee to the development and commercialization license. Upon exercise of an option to acquire a development and commercialization license, the Company would also attribute any remaining deferred option fee to the development and commercialization license and apply the multiple-element revenue recognition criteria to the development and commercialization license and any other deliverables to determine the appropriate revenue recognition, which will be consistent with the Company’s accounting policy for upfront payments on single-target licenses. In the event a right-to-test agreement were to be terminated, the Company would recognize as revenue any portion of the upfront fee that had not previously been recorded as revenue, but was classified as deferred revenue, at the date of such termination. None of the Company’s right-to-test agreements entered into subsequent to the adoption of ASU No. 2009-13 has been determined to contain substantive options.

 

For right-to-test agreements where the options to secure development and commercialization licenses to the Company’s TAP technology are not considered substantive, the Company considers the development and commercialization licenses to be a deliverable at the inception of the agreement and applies the multiple-element revenue recognition criteria to determine the appropriate revenue recognition. None of the Company’s right-to-test agreements entered into prior to the adoption of ASU No. 2009-13 has been determined to contain non-substantive options.

 

The Company does not directly control when any collaborator will exercise its options for development and commercialization licenses. As a result, the Company cannot predict when it will recognize revenues in connection with any of the foregoing.

 

9



Table of Contents

 

Fair Value of Financial Instruments

 

Fair value is defined under ASC Topic 820, “Fair Value Measurements and Disclosures,” as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.  Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs.  The standard describes a fair value hierarchy to measure fair value which is based on three levels of inputs, of which the first two are considered observable and the last unobservable, as follows:

 

·                             Level 1 - Quoted prices in active markets for identical assets or liabilities.

 

·                             Level 2 - Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

 

·                             Level 3 - Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

 

As of December 31, 2012, the Company held certain assets that are required to be measured at fair value on a recurring basis.  The following table represents the fair value hierarchy for the Company’s financial assets measured at fair value on a recurring basis as of December 31, 2012 (in thousands):

 

 

 

Fair Value Measurements at December 31, 2012 Using

 

 

 

 

 

Quoted Prices in
Active Markets for
Identical Assets

 

Significant Other
Observable Inputs

 

Significant
Unobservable
Inputs

 

 

 

Total

 

(Level 1)

 

(Level 2)

 

(Level 3)

 

Cash, cash equivalents and restricted cash

 

$

213,571

 

$

213,571

 

$

 

$

 

 

As of June 30, 2012, the Company held certain assets that are required to be measured at fair value on a recurring basis. The following table represents the fair value hierarchy for the Company’s financial assets measured at fair value on a recurring basis as of June 30, 2012 (in thousands):

 

 

 

Fair Value Measurements at June 30, 2012 Using

 

 

 

 

 

Quoted Prices in
Active Markets for
Identical Assets

 

Significant Other
Observable Inputs

 

Significant
Unobservable
Inputs

 

 

 

Total

 

(Level 1)

 

(Level 2)

 

(Level 3)

 

Cash, cash equivalents and restricted cash

 

$

163,488

 

$

163,488

 

$

 

$

 

 

The fair value of the Company’s cash equivalents is based primarily on quoted prices from active markets.

 

Unbilled Revenue

 

The majority of the Company’s unbilled revenue at December 31, 2012 and June 30, 2012 represents research funding earned prior to those dates based on actual resources utilized under the Company’s agreements with various collaborators.

 

Inventory

 

Inventory costs relate to clinical trial materials being manufactured for sale to the Company’s collaborators. Inventory is stated at the lower of cost or market as determined on a first-in, first-out (FIFO) basis.

 

10



Table of Contents

 

Inventory at December 31, 2012 and June 30, 2012 is summarized below (in thousands):

 

 

 

December 31,
2012

 

June 30,
2012

 

 

 

 

 

 

 

Raw materials

 

$

450

 

$

129

 

Work in process

 

 

1,159

 

 

 

 

 

 

 

Total

 

$

450

 

$

1,288

 

 

Raw materials inventory consists entirely of DM1 or DM4, the Company’s proprietary cell-killing agents, which are included in all TAP product candidates currently in preclinical and clinical testing with the Company’s collaborators. The Company considers more than a twelve month supply of raw materials that is not supported by firm, fixed orders and/or projections from its collaborators to be excess and establishes a reserve to reduce to zero the value of any such excess raw material inventory with a corresponding charge to research and development expense. In accordance with this policy, the Company recorded $798,000 of expense related to excess inventory during the six-month period ended December 31, 2012 compared to $748,000 recorded during the same period last year.  The Company recorded $408,000 of expense related to excess inventory during the three-month period ended December 31, 2012.  There were no expenses recorded for excess inventory during the same period last year.

 

Work in process inventory consists of bulk drug substance manufactured for sale to the Company’s collaborators to be used in preclinical and clinical studies.  All bulk drug substance is made to order at the request of the collaborators and subject to the terms and conditions of respective supply agreements.  As such, no reserve for work in process inventory is required.

 

Computation of Net Loss per Common Share

 

Basic and diluted net loss per share is calculated based upon the weighted average number of common shares outstanding during the period. The Company’s common stock equivalents, as calculated in accordance with the treasury-stock method, are shown in the following table (in thousands):

 

 

 

Three Months Ended
December 31,

 

Six Months Ended
December 31,

 

 

 

2012

 

2011

 

2012

 

2011

 

Options outstanding to purchase common stock

 

8,157

 

7,524

 

8,157

 

7,524

 

 

 

 

 

 

 

 

 

 

 

Common stock equivalents under treasury stock method

 

2,149

 

2,729

 

2,387

 

2,680

 

 

The Company’s common stock equivalents have not been included in the net loss per share calculation because their effect is anti-dilutive due to the Company’s net loss position.

 

Stock-Based Compensation

 

As of December 31, 2012, the Company is authorized to grant future awards under one employee share-based compensation plan, which is the ImmunoGen, Inc. 2006 Employee, Director and Consultant Equity Incentive Plan, or the 2006 Plan. At the annual meeting of shareholders on November 13, 2012, an amendment to the 2006 Plan was approved and an additional 3,500,000 shares were authorized for issuance under this plan.  As amended, the 2006 Plan provides for the issuance of Stock Grants, the grant of Options and the grant of Stock-Based Awards for up to 12,000,000 shares of the Company’s common stock, as well as any shares of common stock that are represented by awards granted under the previous stock option plan, the ImmunoGen, Inc. Restated Stock Option Plan, or the Former Plan, that are forfeited, expire or are cancelled without delivery of shares of common stock; provided, however, that no more than 5,900,000 shares shall be added to the Plan from the Former Plan, pursuant to this provision. Option awards are granted with an exercise price equal to the market price of the Company’s stock at the date of grant. Options vest at various periods of up to four years and may be exercised within ten years of the date of grant.

 

The stock-based awards are accounted for under ASC Topic 718, “Compensation—Stock Compensation.” Pursuant to Topic 718, the estimated grant date fair value of awards is charged to the statement of operations and comprehensive loss over the requisite service period, which is the vesting period. Such amounts have been reduced by an estimate of forfeitures of all unvested awards. The fair value of each stock option is estimated on the date of grant using the Black-Scholes option-pricing model with the assumptions noted in the following table. As the Company has not paid dividends since inception, nor does it expect to pay any dividends for the

 

11



Table of Contents

 

foreseeable future, the expected dividend yield assumption is zero. Expected volatility is based exclusively on historical volatility data of the Company’s stock. The expected term of stock options granted is based exclusively on historical data and represents the period of time that stock options granted are expected to be outstanding. The expected term is calculated for and applied to one group of stock options as the Company does not expect substantially different exercise or post-vesting termination behavior among its option recipients. The risk-free rate of the stock options is based on the U.S. Treasury rate in effect at the time of grant for the expected term of the stock options.

 

 

 

Three Months Ended
December 31,

 

Six Months Ended
December 31,

 

 

 

2012

 

2011

 

2012

 

2011

 

Dividend

 

None

 

None

 

None

 

None

 

Volatility

 

60.44

%

59.61

%

60.44

%

59.79

%

Risk-free interest rate

 

0.93

%

1.48

%

0.85

%

2.22

%

Expected life (years)

 

6.3

 

7.0

 

6.3

 

7.1

 

 

Using the Black-Scholes option-pricing model, the weighted average grant date fair values of options granted during the three months ended December 31, 2012 and 2011 were $6.81 and $7.64 per share, respectively, and $8.60 and $9.10 per share for options granted during the six months ended December 31, 2012 and 2011, respectively.

 

Stock compensation expense related to stock options and restricted stock awards granted under the 2006 Plan was $2.9 million and $6.7 million during the three and six months ended December 31, 2012, respectively, compared to stock compensation expense of $2.9 million and $5.4 million for the three and six months ended December 31, 2011, respectively.

 

As of December 31, 2012, the estimated fair value of unvested employee awards was $21.4 million, net of estimated forfeitures. The weighted-average remaining vesting period for these awards is two and a quarter years.

 

During the six months ended December 31, 2012, holders of options issued under the Company’s equity plans exercised their rights to acquire an aggregate of approximately 128,000 shares of common stock at prices ranging from $2.91 to $15.20 per share.  The total proceeds to the Company from these option exercises were approximately $851,000.

 

Financial Instruments and Concentration of Credit Risk

 

The Company’s cash equivalents consist principally of money market funds with underlying investments primarily being U.S. Government-issued securities and high quality, short-term commercial paper. All of the Company’s cash and cash equivalents are maintained with three financial institutions in the U.S.

 

Derivative instruments include a portfolio of short duration foreign currency forward contracts intended to mitigate the risk of exchange fluctuations for existing or anticipated receivable and payable balances denominated in foreign currency. Derivatives are estimated at fair value and classified as other current assets or liabilities. The fair values of these instruments represent the present value of estimated future cash flows under the contracts, which are a function of underlying interest rates, currency rates, related volatility, counterparty creditworthiness and duration of the contracts. Changes in these factors or a combination thereof may affect the fair value of these instruments.

 

The Company does not designate foreign currency forward contracts as hedges for accounting purposes, and changes in the fair value of these instruments are recognized in earnings during the period of change.  Because the Company enters into forward contracts only as an economic hedge, any gain or loss on the underlying foreign-denominated existing or anticipated receivable or payable balance would be offset by the loss or gain on the forward contract. For the three and six months ended December 31, 2012, net gains recognized on forward contracts were $165,000 and $163,000, respectively, and are included in the accompanying consolidated statements of operations and comprehensive loss as other income, net.  For the three and six months ended December 31, 2011, net losses recognized on forward contracts were $(12,000) and $(56,000), respectively.  As of December 31, 2012, the Company had outstanding forward contracts with notional amounts equivalent to approximately $4.1 million (€3.1 million), all maturing on or before October 7, 2013. As of June 30, 2012, the Company had outstanding forward contracts with notional amounts equivalent to approximately $3.3 million (€2.5 million). The Company does not anticipate using derivative instruments for any purpose other than hedging exchange rate exposure.

 

Segment Information

 

During the six months ended December 31, 2012, the Company continued to operate in one reportable business segment which is the business of discovery of monoclonal antibody-based anticancer therapeutics.

 

12



Table of Contents

 

The percentages of revenues recognized from significant customers of the Company in the three months ended December 31, 2012 and 2011 are included in the following table:

 

 

 

Three Months Ended
December 31,

 

Six Months Ended
December 31,

 

Collaborative Partner:

 

2012

 

2011

 

2012

 

2011

 

Amgen

 

15

%

33

%

20

%

31

%

Bayer HealthCare

 

%

7

%

12

%

10

%

Biotest

 

13

%

11

%

19

%

10

%

Novartis

 

58

%

8

%

37

%

11

%

Sanofi

 

6

%

41

%

5

%

34

%

 

There were no other customers of the Company with significant revenues in the three and six months ended December 31, 2012 and 2011.

 

B.     Collaborative Agreements

 

Amgen

 

In September 2000, the Company entered into a ten-year right-to-test agreement with Abgenix, Inc. which was later acquired by Amgen. The agreement provides Amgen with the right to (a) test the Company’s maytansinoid TAP technology with Amgen’s antibodies under a right-to-test, or research, license, (b) take options, with certain restrictions, to individual targets selected by Amgen on either an exclusive and non-exclusive basis for specified option periods and (c) upon exercise of those options, take exclusive or non-exclusive licenses to use the Company’s maytansinoid TAP technology to develop and commercialize products for the specified targets on previously agreed-upon terms. For each exclusive development and commercialization license taken, the Company is entitled to receive an exercise fee of $1 million and up to a total of $34 million in milestone payments, plus royalties on the commercial sales of any resulting products. The total milestones per development and commercialization license are categorized as follows: development milestones — $9 million; regulatory milestones — $20 million; and sales milestones — $5 million.

 

Under the right-to-test agreement, in September 2009, November 2009 and December 2012, Amgen took three development and commercialization licenses and the Company received an exercise fee of $1 million for each license taken.  The Company has deferred each $1 million exercise fee and is recognizing these amounts as revenue ratably over the respective estimated periods of its substantial involvement.  In November 2011, the IND applications to the FDA for two compounds developed under the September 2009 and November 2009 development and commercialization licenses became effective, which triggered two $1 million milestone payments to the Company.  These payments are included in license and milestone fees for the three and six months ended December 31, 2011.  At the time of execution of each of these development and commercialization licenses, there was significant uncertainty as to whether these milestones would be achieved.  In consideration of this, as well as the Company’s past involvement in the research and manufacturing of these product candidates, these milestones were deemed substantive.  The next potential milestone the Company will be entitled to receive under either of these two development and commercialization licenses will be a development milestone for the first dosing of a patient in a Phase II clinical trial, which will result in a $3 million payment being due.  The next potential milestone the Company will be entitled to receive under the December 2012 development and commercialization license will be a development milestone for IND approval which will result in a $1 million payment being due to the Company.

 

Sanofi

 

In July 2003, the Company entered into a broad collaboration agreement with Sanofi (formerly Aventis) to discover, develop and commercialize antibody-based products. The product candidates (targets) currently in the collaboration include SAR3419 (CD19), SAR650984 (CD38), SAR566658 (DS6, also known as CA6) and at least one earlier-stage compound that has yet to be disclosed. For each of the targets included in the collaboration at this time, the Company is entitled to receive up to a total of $21.5 million in milestone payments, plus royalties on the commercial sales of any resulting products.  The total milestones are categorized as follows: development milestones — $7.5 million; and regulatory milestones — $14 million.  Through December 31, 2012, the Company has received and recognized an aggregate of $16 million in milestone payments for compounds covered under this agreement now or in the past, including a $3 million milestone payment related to the initiation of a Phase IIb clinical trial (as defined in the agreement) for SAR3419, which is included in license and milestone fee revenue for the three and six months ended December 31, 2011.  At the time of execution of this agreement, there was significant uncertainty as to whether this milestone would be achieved.  In consideration of this, as well as the Company’s past involvement in the research and manufacturing of these product candidates, the milestone was deemed substantive. The next potential milestone the Company will be entitled to receive with respect to SAR3419 will be for initiation of a Phase III clinical trial, which will result in a $3 million payment being due to the Company.

 

13



Table of Contents

 

For additional information related to these agreements, as well as the Company’s other significant collaborative agreements, please read Note C, Agreements to our consolidated financial statements included within the Company’s 2012 Form 10-K.

 

C.     Capital Stock

 

2001 Non-Employee Director Stock Plan

 

During the three and six months ended December 31, 2012 and 2011, the Company recorded approximately $(12,000) and $(25,000) in expense reduction, respectively, related to stock units outstanding under the Company’s 2001 Non-Employee Director Stock Plan, or the 2001 Plan, compared to $23,000 and $4,000 in expense recorded during the three and six months ended December 31, 2011, respectively. The value of the stock units is adjusted to market value at each reporting period as the redemption amount of stock units for this plan will be paid in cash. No stock units have been issued under the 2001 Plan subsequent to June 30, 2004.

 

Compensation Policy for Non-Employee Directors

 

During the three and six months ended December 31, 2012 and 2011, the Company recorded approximately $78,000 and $155,000 in compensation expense, respectively, related to deferred share units issued and outstanding under the Company’s Compensation Policy for Non-Employee Directors, compared to $85,000 and $170,000 in compensation expense recorded during the three and six months ended December 31, 2011, respectively. Pursuant to the Compensation Policy for Non-Employee Directors, the redemption amount of deferred share units issued will be paid in shares of common stock of the Company on the date a director ceases to be a member of the Board. Annual retainers vest quarterly over approximately one year from the date of grant, contingent upon the individual remaining a director of ImmunoGen as of each vesting date, and the number of deferred share units awarded is based on the market value of the Company’s common stock on the date of the award. All unvested deferred stock awards will automatically vest immediately prior to the occurrence of a change of control.

 

In addition to the deferred share units, the Non-Employee Directors are also entitled to receive stock option awards having a grant date fair value of $30,000, determined using the Black-Scholes option pricing model measured on the date of grant, which would be the date of the annual meeting of shareholders.  These options will vest quarterly over approximately one year from the date of grant.  Any new directors will receive a pro-rated award, depending on their date of election to the Board.  The directors received a total of 41,805, 33,187 and 49,688 options in fiscal 2013, 2012 and 2011, respectively, and the related compensation expense for the three and six months ended December 31, 2012 and 2011 is included in the amounts discussed in the “Stock-Based Compensation” section of footnote A above.

 

D.    Cash and Cash Equivalents

 

As of December 31, 2012 and June 30, 2012, the Company held $211.0 million and $160.9 million, respectively, in cash, and money market funds consisting principally of U.S. Government-issued securities and high quality, short-term commercial paper which were classified as cash and cash equivalents.

 

E.     Commitments and Contingencies

 

Leases

 

Effective July 27, 2007, the Company entered into a lease agreement with Intercontinental Fund III for the rental of approximately 89,000 square feet of laboratory and office space at 830 Winter Street, Waltham, MA. The Company uses this space for its corporate headquarters, research and other operations. The initial term of the lease is for twelve years with an option for the Company to extend the lease for two additional terms of five years. The Company is required to pay certain operating expenses for the leased premises subject to escalation charges for certain expense increases over a base amount.  The Company entered into a sublease in December 2009 for 14,100 square feet of this space in Waltham through January 2015, with the sublessee having a conditional option to extend the term for an additional two years.

 

Effective April 2012, the Company entered into a sublease agreement for the rental of 7,310 square feet of laboratory and office space at 830 Winter Street, Waltham, MA from Histogenics Corporation. The initial term of the sublease is for three years with a conditional option for the Company to extend the lease through October 2017.  The Company is required to pay certain operating expenses for the leased premises subject to escalation charges for certain expense increases over a base amount.

 

At December 31, 2012, the Company also leases a facility consisting of 43,850 square feet in Norwood, MA under an agreement through 2018 with an option to extend the lease for an additional term of five years. The Company is required to pay certain operating expenses for the leased premises subject to escalation charges for certain expense increases over a base amount.

 

14



Table of Contents

 

The minimum rental commitments for the Company’s facilities, including real estate taxes and other expenses, for the next five fiscal years and thereafter under the non-cancelable operating lease agreements discussed above are as follows (in thousands):

 

2013 (six months remaining)

 

$

3,192

 

2014

 

6,473

 

2015

 

6,587

 

2016

 

6,352

 

2017

 

6,418

 

Thereafter

 

16,551

 

Total minimum lease payments

 

$

45,573

 

Total minimum rental payments from sublease

 

(1,419

)

Total minimum lease payments, net

 

$

44,154

 

 

Collaborative Agreements

 

The Company is contractually obligated to make potential future success-based regulatory milestone payments in conjunction with certain collaborative agreements. These payments are contingent upon the occurrence of certain future events and, given the nature of these events, it is unclear when, if ever, the Company may be required to pay such amounts. Further, the timing of any future payment is not reasonably estimable. During the first quarter of fiscal 2013, the Company’s license agreement with Janssen Biotech was terminated and, accordingly, the Company is no longer obligated to make $41.0 million of potential future success-based milestone and third-party payments under such agreement.  As of December 31, 2012, the maximum amount that may be payable in the future under the Company’s current collaborative agreements is approximately $2.0 million.

 

ITEM 2.       Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

OVERVIEW

 

Since our inception, we have been principally engaged in the development of novel, targeted antibody-based therapeutics for the treatment of cancer using our expertise in cancer biology, monoclonal antibodies, highly potent cytotoxic, or cell-killing, agents, and the design of linkers that enable these agents to remain stably attached to the antibodies while in the blood stream and released in their fully active form after delivery to a cancer cell. An anticancer compound made using our Targeted Antibody Payload, or TAP, technology consists of a monoclonal antibody that binds specifically to an antigen target found on cancer cells with multiple copies of one of our proprietary cell-killing agents attached to the antibody using one of our engineered linkers. Its antibody component enables a TAP compound to bind specifically to cancer cells that express its target antigen, the highly potent cytotoxic agent serves to kill the cancer cell, and the engineered linker controls the release and activation of the cytotoxic agent inside the cancer cell. With some TAP compounds, the antibody component also has anticancer activity of its own. Our TAP technology is designed to enable the creation of highly effective, well-tolerated anticancer product candidates. All of the TAP compounds currently in clinical testing contain either DM1 or DM4 as the cytotoxic agent. Both DM1 and DM4, collectively DMx, are our proprietary derivatives of a cytotoxic agent called maytansine. We also have expertise in antibodies and cancer biology to develop “naked,” or non-conjugated, antibody anticancer product candidates.

 

We have used our proprietary TAP technology in conjunction with our in-house antibody expertise to develop our own anticancer product candidates. We have also entered into collaborative agreements that enable companies to use our TAP technology to develop commercial product candidates to specified targets. Under the terms of our collaborative agreements, we are generally entitled to upfront fees, milestone payments and royalties on any commercial product sales. In addition, under certain agreements we are compensated for research and development activities performed at our collaborative partner’s request at negotiated prices which are generally consistent with what other third parties would charge. We are compensated to manufacture preclinical and clinical materials and deliver cytotoxic agent at negotiated prices which are generally consistent with what other third parties would charge. Currently, our collaborative partners are Amgen, Bayer HealthCare, Biotest, Lilly, Novartis, Roche and Sanofi. We expect that substantially all of our revenue for the foreseeable future will result from payments under our collaborative arrangements.  Details for some of our collaborative agreements with recent activity follow. Details for our other significant agreements can be found in our 2012 Annual Report on Form 10-K

 

Amgen — In September 2000, we entered into a ten-year right-to-test agreement with Abgenix, Inc. which was later acquired by Amgen.  The agreement provides Amgen with the right to (a) test our maytansinoid TAP technology with Amgen’s antibodies under a right-to-test, or research, license, (b) take options, with certain restrictions, to individual targets selected by Amgen on either an exclusive or non-exclusive basis for specified option periods and (c) upon exercise of those options, take exclusive or non-exclusive licenses to use our maytansinoid TAP technology to develop and commercialize products for the specified targets on

 

15



Table of Contents

 

previously agreed-upon terms.  Under the right-to-test agreement, in September 2009, November 2009 and December 2012, Amgen took three development and commercialization licenses and we received an exercise fee of $1 million for each license taken. We have deferred each $1 million exercise fee and are recognizing these amounts as revenue ratably over the respective estimated periods of our substantial involvement. For each development and commercialization license taken, we are entitled to receive an exercise fee of $1 million and up to a total of $34 million in milestone payments, plus royalties on the commercial sales of any resulting products.  The total milestones per development and commercialization license are categorized as follows: development milestones — $9 million; regulatory milestones — $20 million; and sales milestones — $5 million. In November 2011, the Investigational New Drug (IND) applications for two compounds developed under the September 2009 and November 2009 development and commercialization licenses became active, which triggered two $1 million milestone payments to us. These payments are included in license and milestone fees for the three and six months ended December 31, 2011.

 

Sanofi —In July 2003, we entered into a broad collaboration agreement with Sanofi (formerly Aventis) to discover, develop and commercialize antibody-based products. The product candidates (targets) currently in the collaboration include SAR3419 (CD19), SAR650984 (CD38), SAR566658 (DS6, also known as CA6) and at least one earlier-stage compound that has yet to be disclosed. For each of the targets included in the collaboration at this time, we are entitled to receive up to a total of $21.5 million in milestone payments, plus royalties on the commercial sales of any resulting products. The total milestones are categorized as follows: development milestones — $7.5 million; and regulatory milestones — $14 million.  Through December 31, 2012, we have received and recognized an aggregate of $16 million in milestone payments under this agreement for compounds covered under this agreement now or in the past, including a $3 million milestone payment earned related to the initiation of a Phase IIb clinical trial (as defined in the agreement) for SAR3419, which is included in license and milestone fee revenue for the three and six months ended December 31, 2011.

 

To date, we have not generated revenues from commercial product sales and we expect to incur significant operating losses for the foreseeable future. As of December 31, 2012, we had approximately $211.0 million in cash and cash equivalents compared to $160.9 million in cash and cash equivalents as of June 30, 2012.

 

We anticipate that future cash expenditures will be partially offset by collaboration-derived proceeds, including milestone payments, royalties and upfront fees. Accordingly, period-to-period operating results may fluctuate dramatically based upon the timing of receipt of the proceeds. We believe that our established collaboration agreements, while subject to specified milestone achievements, will provide funding to assist us in meeting obligations under our collaborative agreements while also providing funding for the development of internal product candidates and technologies. However, we can give no assurances that such collaborative agreement funding will, in fact, be realized in the time frames we expect, or at all. Should we or our partners not meet some or all of the terms and conditions of our various collaboration agreements, we may be required to pursue additional strategic partners, secure alternative financing arrangements, and/or defer or limit some or all of our research, development and/or clinical projects. However, we cannot provide assurance that any such opportunities presented by additional strategic partners or alternative financing arrangements will be entirely available to us, if at all.

 

Critical Accounting Policies

 

We prepare our consolidated financial statements in accordance with accounting principles generally accepted in the U.S. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosure of contingent assets and liabilities. On an on-going basis, we evaluate our estimates, including those related to our collaborative agreements, inventory and stock-based compensation. We base our estimates on historical experience and various other assumptions that we believe to be reasonable under the circumstances. Actual results may differ from these estimates.

 

There were no significant changes to our critical accounting policies from those disclosed in our Annual Report on Form 10-K for the fiscal year ended June 30, 2012.

 

RESULTS OF OPERATIONS

 

Comparison of Three Months ended December 31, 2012 and 2011

 

Revenues

 

Our total revenues for the three months ended December 31, 2012 and 2011 were $2.6 million and $7.6 million, respectively. The $5.0 million decrease in revenues in the three months ended December 31, 2012 from the same period in the prior year is attributable to a decrease in license and milestone fees and clinical materials revenue, partially offset by an increase in research and development support revenue, all of which are discussed below.

 

16



Table of Contents

 

Research and development support revenue was $2.0 million for the three months ended December 31, 2012 compared with $945,000 for the three months ended December 31, 2011. These amounts primarily represent research funding earned based on actual resources utilized under our agreements with our collaborators shown in the table below. Also included in research and development support revenue are fees for developing antibody-specific conjugation processes on behalf of our collaborators and potential collaborators during the early evaluation and preclinical testing stages of drug development. The amount of research and development support revenue we earn is directly related to the number of our collaborators and potential collaborators, the stage of development of our collaborators’ product candidates and the resources our collaborators allocate to the development effort. As such, the amount of research and development support revenue may vary widely from quarter to quarter and year to year. Total revenue recognized from research and development support from each of our collaborative partners in the three-month periods ended December 31, 2012 and 2011 is included in the following table (in thousands):

 

 

 

Three Months Ended December 31,

 

Research and Development Support

 

2012

 

2011

 

Collaborative Partner:

 

 

 

 

 

Amgen

 

$

128

 

$

201

 

Biotest

 

338

 

160

 

Lilly

 

200

 

8

 

Novartis

 

1,370

 

576

 

Total

 

$

2,036

 

$

945

 

 

Revenues from license and milestone fees for the three months ended December 31, 2012 decreased $5.6 million to $429,000 from $6.0 million in the same period ended December 31, 2011. The amount of license and milestone fees we earn is directly related to the number of our collaborators and potential collaborators, the resources our collaborators allocate to the advancement of the product candidates, the number of clinical trials our collaborators conduct and the speed of enrollment and overall success in those trials. As such, the amount of license and milestone fees may vary widely from quarter to quarter and year to year. Total revenue from license and milestone fees recognized from each of our collaborative partners in the three-month periods ended December 31, 2012 and 2011 is included in the following table (in thousands):

 

 

 

Three Months Ended December 31,

 

License and Milestone Fees

 

2012

 

2011

 

Collaborative Partner:

 

 

 

 

 

Amgen

 

$

256

 

$

2,300

 

Bayer HealthCare

 

 

521

 

Biotest

 

6

 

32

 

Centocor

 

 

5

 

Sanofi

 

167

 

3,167

 

Total

 

$

429

 

$

6,025

 

 

Deferred revenue of $71.7 million as of December 31, 2012 primarily represents payments received from our collaborators pursuant to our license agreements, including a $20 million upfront payment received from Lilly during fiscal 2012 and a $45 million upfront payment received from Novartis during fiscal 2011, both of which we have yet to earn pursuant to our revenue recognition policy.

 

Clinical materials revenue decreased $500,000 in the three months ended December 31, 2012, to $147,000 from $647,000 in the three months ended December 31, 2011. We are compensated at negotiated prices which are generally consistent with what other third-parties would charge. The amount of clinical materials revenue we earn, and the related cost of clinical materials charged to research and development expense, is directly related to the number of clinical trials our collaborators are preparing or have underway, the speed of enrollment in those trials, the dosage schedule of each clinical trial and the time period, if any, during which patients in the trial receive clinical benefit from the clinical materials, and the supply of clinical-grade material to our collaborators for process development and analytical purposes. As such, the amount of clinical materials revenue and the related cost of clinical materials charged to research and development expense may vary significantly from quarter to quarter and year to year.

 

Research and Development Expenses

 

Our research and development expenses relate to (i) research to evaluate new targets and to develop and evaluate new antibodies, linkers and cytotoxic agents, (ii) preclinical testing of our own and, in certain instances, our collaborators’ product candidates, and the cost of our own clinical trials, (iii) development related to clinical and commercial manufacturing processes and (iv) manufacturing operations which also includes raw materials.

 

Research and development expense for the three months ended December 31, 2012 increased $6.1 million to $21.7 million from $15.6 million for the three months ended December 31, 2011. The increase was primarily due to (i) increased antibody

 

17



Table of Contents

 

development and supply expenses; (ii) increased clinical trial costs; (iii) decreased overhead utilization absorbed by the manufacture of clinical materials on behalf of our collaborators; and (iv) increased salaries and related expenses due primarily to additional headcount, increased health insurance costs and a sign-on bonus awarded to the newly appointed Chief Development Officer. The number of our research and development personnel increased to 225 as of December 31, 2012 compared to 207 at December 31, 2011. The higher stock compensation costs in the current period are driven primarily by higher stock prices resulting in higher fair values. A more detailed discussion of research and development expense in the period follows.

 

We are unable to accurately estimate which potential product candidates, if any, will eventually move into our internal preclinical research program. We are unable to reliably estimate the costs to develop these products as a result of the uncertainties related to discovery research efforts as well as preclinical and clinical testing. Our decision to move a product candidate into the clinical development phase is predicated upon the results of preclinical tests. We cannot accurately predict which, if any, of the discovery stage product candidates will advance from preclinical testing and move into our internal clinical development program. The clinical trial and regulatory approval processes for our product candidates that have advanced or that we intend to advance to clinical testing are lengthy, expensive and uncertain in both timing and outcome. As a result, the pace and timing of the clinical development of our product candidates is highly uncertain and may not ever result in approved products. Completion dates and development costs will vary significantly for each product candidate and are difficult to predict. A variety of factors, many of which are outside our control, could cause or contribute to the prevention or delay of the successful completion of our clinical trials, or delay or prevent our obtaining necessary regulatory approvals. The costs to take a product through clinical trials are dependent upon, among other factors, the clinical indications, the timing, size and design of each clinical trial, the number of patients enrolled in each trial, and the speed at which patients are enrolled and treated. Product candidates may be found to be ineffective or to cause unacceptable side effects during clinical trials, may take longer to progress through clinical trials than anticipated may fail to receive necessary regulatory approvals or may prove impractical to manufacture in commercial quantities at reasonable cost or with acceptable quality.

 

The lengthy process of securing FDA approvals for new drugs requires the expenditure of substantial resources. Any failure by us to obtain, or any delay in obtaining regulatory approvals would materially adversely affect our product development efforts and our business overall. Accordingly, we cannot currently estimate, with any degree of certainty, the amount of time or money that we will be required to expend in the future on our product candidates prior to their regulatory approval, if such approval is ever granted. As a result of these uncertainties surrounding the timing and outcome of our clinical trials, we are currently unable to estimate when, if ever, our product candidates that have advanced into clinical testing will generate revenues and cash flows.

 

We do not track our research and development costs by project. Since we use our research and development resources across multiple research and development projects, we manage our research and development expenses within each of the categories listed in the following table and described in more detail below (in thousands):

 

 

 

Three Months Ended December 31,

 

Research and Development Expense

 

2012

 

2011

 

Research

 

$

4,280

 

$

4,204

 

Preclinical and Clinical Testing

 

6,998

 

4,991

 

Process and Product Development

 

1,874

 

1,769

 

Manufacturing Operations

 

8,504

 

4,595

 

Total Research and Development Expense

 

$

21,656

 

$

15,559

 

 

Research :    Research includes expenses associated with activities to identify and evaluate new targets and to develop and evaluate new antibodies, linkers and cytotoxic agents for our products and in support of our collaborators. Such expenses primarily include personnel, contract services, facilities and lab supplies. Research expenses for the three months ended December 31, 2012 increased $76,000 compared to the three months ended December 31, 2011. This increase is primarily the result of an increase in salaries and related expenses.  We expect research expenses for fiscal 2013 to be slightly higher than fiscal 2012.

 

Preclinical and Clinical Testing :   Preclinical and clinical testing includes expenses related to preclinical testing of our own and, in certain instances, our collaborators’ product candidates, regulatory activities, and the cost of our own clinical trials. Such expenses include personnel, patient enrollment at our clinical testing sites, consultant fees, contract services, and facility expenses. Preclinical and clinical testing expenses for the three months ended December 31, 2012 increased $2.0 million to $7.0 million compared to $5.0 million for the three months ended December 31, 2011. This increase is primarily the result of an increase in clinical trial costs due primarily to site expansion and higher patient enrollment for the IMGN901 007 study, increased costs incurred for the IMGN853 trial which was initiated during the second half of fiscal 2012, and data management costs incurred to finalize the IMGN388 study, as well as an increase in salaries and related expenses.  We expect preclinical and clinical testing expenses for fiscal 2013 to be significantly higher than fiscal 2012 due to increased activities to advance our wholly owned product candidates.

 

Process and Product Development :   Process and product development expenses include costs for development of clinical and commercial manufacturing processes for our own and collaborator compounds. Such expenses include the costs of personnel, contract services and facility expenses. For the three months ended December 31, 2012, total development expenses increased

 

18



Table of Contents

 

$105,000 compared to the three months ended December 31, 2011. This increase is primarily the result of an increase in salaries and related expenses and an increase in disposable costs driven by increased activities. We expect process and product development expenses for fiscal 2013 to be slightly higher than fiscal 2012.

 

Manufacturing Operations:   Manufacturing operations expense includes costs to manufacture preclinical and clinical materials for our own and our collaborator’s product candidates, and quality control and quality assurance activities and costs to support the operation and maintenance of our conjugate manufacturing facility. Such expenses include personnel, raw materials for our and our collaborators’ preclinical studies and clinical trials, development costs with contract manufacturing organizations, manufacturing supplies, and facilities expense. For the three months ended December 31, 2012, manufacturing operations expense increased $3.9 million to $8.5 million compared to $4.6 million in the same period last year. The increase in the three months ended December 31, 2012 as compared to the three months ended December 31, 2011 is primarily the result of (i) an increase in antibody development and supply expense driven primarily by our IMGN901, IMGN853 and IMGN289 programs; (ii) a decrease in overhead utilization absorbed by the manufacture of clinical materials on behalf of our collaborators; and (iii) an increase in salaries and related expenses. We expect manufacturing operations expense for fiscal 2013 to be significantly higher than fiscal 2012 due primarily to increased third-party costs to produce finished drug product for clinical use.

 

General and Administrative Expenses

 

General and administrative expenses for the three months ended December 31, 2012 increased $630,000 to $5.5 million compared to $4.8 million for the three months ended December 31, 2011. This increase is primarily due to an increase in patent expenses and an increase in recruitment fees.  We expect general and administrative expenses for fiscal 2013 to be slightly higher than fiscal 2012.

 

Other Income, net

 

Other income, net for the three months ended December 31, 2012 and 2011 is included in the following table (in thousands):

 

 

 

Three Months Ended December 31,

 

Other Income, net

 

2012

 

2011

 

Interest Income

 

$

39

 

$

9

 

Other Income, net

 

76

 

14

 

Total Other Income, net

 

$

115

 

$

23

 

 

Comparison of Six Months ended December 31, 2012 and 2011

 

Revenues

 

Our total revenues for the six months ended December 31, 2012 and 2011 were $6.7 million and $10.2 million, respectively. The $3.5 million decrease in revenues in the six months ended December 31, 2012 from the same period in the prior year is attributable to a decrease in license and milestone fees, partially offset by an increase in research and development support revenue and clinical materials revenue, all of which are discussed below.

 

Research and development support revenue was $3.4 million for the six months ended December 31, 2012 compared with $2.0 for the six months ended December 31, 2011. These amounts primarily represent research funding earned based on actual resources utilized under our agreements with our collaborators shown in the table below. Also included in research and development support revenue are fees for developing antibody-specific conjugation processes on behalf of our collaborators and potential collaborators during the early evaluation and preclinical testing stages of drug development. The amount of research and development support revenue we earn is directly related to the number of our collaborators and potential collaborators, the stage of development of our collaborators’ product candidates and the resources our collaborators allocate to the development effort. As such, the amount of research and development support revenue may vary widely from quarter to quarter and year to year. Total revenue recognized from research and development support from each of our collaborative partners in the six-month periods ended December 31, 2012 and 2011 is included in the following table (in thousands):

 

19



Table of Contents

 

 

 

Six Months Ended December 31,

 

Research and Development Support

 

2012

 

2011

 

Collaborative Partner:

 

 

 

 

 

Amgen

 

$

212

 

$

541

 

Bayer HealthCare

 

 

6

 

Biotest

 

453

 

304

 

Lilly

 

423

 

8

 

Novartis

 

2,318

 

1,144

 

Sanofi

 

7

 

10

 

Total

 

$

3,413

 

$

2,013

 

 

Revenues from license and milestone fees for the six months ended December 31, 2012 decreased $5.8 million to $1.4 million from $7.2 million in the same period ended December 31, 2011. The amount of license and milestone fees we earn is directly related to the number of our collaborators and potential collaborators, the resources our collaborators allocate to the advancement of the product candidates, the number of clinical trials our collaborators conduct and the speed of enrollment and overall success in those trials. As such, the amount of license and milestone fees may vary widely from quarter to quarter and year to year. Total revenue from license and milestone fees recognized from each of our collaborative partners in the six-month periods ended December 31, 2012 and 2011 is included in the following table (in thousands):

 

 

 

Six Months Ended December 31,

 

License and Milestone Fees

 

2012

 

2011

 

Collaborative Partner:

 

 

 

 

 

Amgen

 

$

496

 

$

2,599

 

Bayer HealthCare

 

521

 

797

 

Biogen Idec

 

 

270

 

Biotest

 

12

 

65

 

Centocor

 

 

19

 

Sanofi

 

333

 

3,462

 

Total

 

$

1,362

 

$

7,212

 

 

Clinical materials revenue increased $1.0 million in the six months ended December 31, 2012, to $1.9 million from $928,000 in the six months ended December 31, 2011. We are compensated at negotiated prices which are generally consistent with what other third-parties would charge. The amount of clinical materials revenue we earn, and the related cost of clinical materials charged to research and development expense, is directly related to the number of clinical trials our collaborators are preparing or have underway, the speed of enrollment in those trials, the dosage schedule of each clinical trial and the time period, if any, during which patients in the trial receive clinical benefit from the clinical materials, and the supply of clinical-grade material to our collaborators for process development and analytical purposes. As such, the amount of clinical materials revenue and the related cost of clinical materials charged to research and development expense may vary significantly from quarter to quarter and year to year.

 

Research and Development Expenses

 

Our research and development expenses relate to (i) research to evaluate new targets and to develop and evaluate new antibodies, linkers and cytotoxic agents, (ii) preclinical testing of our own and, in certain instances, our collaborators’ product candidates, and the cost of our own clinical trials, (iii) development related to clinical and commercial manufacturing processes and (iv) manufacturing operations which also includes raw materials.

 

Research and development expense for the six months ended December 31, 2012 increased $12.6 million to $45.3 million from $32.7 million for the six months ended December 31, 2011. The increase was primarily due to (i) increased antibody development and supply expenses; (iii) increased clinical trial costs; (iv) increased fill/finish costs; (v) increased cost of clinical materials revenue related to increased orders of such clinical materials from our partners due to timing of supply requirements; and (vi) increased salaries and related expenses due primarily to additional headcount, increased health insurance costs, a sign-on bonus awarded to the newly appointed Chief Development Officer and higher stock compensation cost. A more detailed discussion of research and development expense in the period follows.

 

We are unable to accurately estimate which potential product candidates, if any, will eventually move into our internal preclinical research program. We are unable to reliably estimate the costs to develop these products as a result of the uncertainties related to discovery research efforts as well as preclinical and clinical testing. Our decision to move a product candidate into the clinical development phase is predicated upon the results of preclinical tests. We cannot accurately predict which, if any, of the discovery stage product candidates will advance from preclinical testing and move into our internal clinical development program. The clinical trial and regulatory approval processes for our product candidates that have advanced or that we intend to advance to

 

20



Table of Contents

 

clinical testing are lengthy, expensive and uncertain in both timing and outcome. As a result, the pace and timing of the clinical development of our product candidates is highly uncertain and may not ever result in approved products. Completion dates and development costs will vary significantly for each product candidate and are difficult to predict. A variety of factors, many of which are outside our control, could cause or contribute to the prevention or delay of the successful completion of our clinical trials, or delay or prevent our obtaining necessary regulatory approvals. The costs to take a product through clinical trials are dependent upon, among other factors, the clinical indications, the timing, size and design of each clinical trial, the number of patients enrolled in each trial, and the speed at which patients are enrolled and treated. Product candidates may be found to be ineffective or to cause unacceptable side effects during clinical trials, may take longer to progress through clinical trials than anticipated may fail to receive necessary regulatory approvals or may prove impractical to manufacture in commercial quantities at reasonable cost or with acceptable quality.

 

The lengthy process of securing FDA approvals for new drugs requires the expenditure of substantial resources. Any failure by us to obtain, or any delay in obtaining regulatory approvals would materially adversely affect our product development efforts and our business overall. Accordingly, we cannot currently estimate, with any degree of certainty, the amount of time or money that we will be required to expend in the future on our product candidates prior to their regulatory approval, if such approval is ever granted. As a result of these uncertainties surrounding the timing and outcome of our clinical trials, we are currently unable to estimate when, if ever, our product candidates that have advanced into clinical testing will generate revenues and cash flows.

 

We do not track our research and development costs by project. Since we use our research and development resources across multiple research and development projects, we manage our research and development expenses within each of the categories listed in the following table and described in more detail below (in thousands):

 

 

 

Six Months Ended December 31,

 

Research and Development Expense

 

2012

 

2011

 

Research

 

$

8,589

 

$

8,388

 

Preclinical and Clinical Testing

 

13,849

 

9,873

 

Process and Product Development

 

3,836

 

3,567

 

Manufacturing Operations

 

19,082

 

10,892

 

Total Research and Development Expense

 

$

45,356

 

$

32,720

 

 

Research :    Research includes expenses associated with activities to identify and evaluate new targets and to develop and evaluate new antibodies, linkers and cytotoxic agents for our products and in support of our collaborators. Such expenses primarily include personnel, contract services, facilities and lab supplies. Research expenses for the six months ended December 31, 2012 increased $201,000 compared to the six months ended December 31, 2011. This increase is primarily the result of an increase in salaries and related expenses.  We expect research expenses for fiscal 2013 to be slightly higher than fiscal 2012.

 

Preclinical and Clinical Testing :    Preclinical and clinical testing includes expenses related to preclinical testing of our own and, in certain instances, our collaborators’ product candidates, regulatory activities, and the cost of our own clinical trials. Such expenses include personnel, patient enrollment at our clinical testing sites, consultant fees, contract services, and facility expenses. Preclinical and clinical testing expenses for the six months ended December 31, 2012 increased $4.0 million to $13.9 million compared to $9.9 million for the six months ended December 31, 2011. This increase is primarily the result of an increase in clinical trial costs due primarily to site expansion and higher patient enrollment for the IMGN901 007 study, increased costs incurred for the IMGN853 trial which was initiated during the second half of fiscal 2012, and data management costs incurred to finalize the IMGN388 study, as well as an increase in salaries and related expenses.  We expect preclinical and clinical testing expenses for fiscal 2013 to be significantly higher than fiscal 2012 due to increased activities to advance our wholly owned product candidates.

 

Process and Product Development :    Process and product development expenses include costs for development of clinical and commercial manufacturing processes for our own and collaborator compounds. Such expenses include the costs of personnel, contract services and facility expenses. For the six months ended December 31, 2012, total development expenses increased $269,000 compared to the six months ended December 31, 2011. This increase is primarily the result of an increase in salaries and related expenses. We expect process and product development expenses for fiscal 2013 to be slightly higher than fiscal 2012.

 

Manufacturing Operations:   Manufacturing operations expense includes costs to manufacture preclinical and clinical materials for our own and our collaborator’s product candidates, and quality control and quality assurance activities and costs to support the operation and maintenance of our conjugate manufacturing facility. Such expenses include personnel, raw materials for our and our collaborators’ preclinical studies and clinical trials, development costs with contract manufacturing organizations, manufacturing supplies, and facilities expense. For the six months ended December 31, 2012, manufacturing operations expense increased $8.2 million to $19.1 million compared to $10.9 million in the same period last year. The increase in the six months ended December 31, 2012 as compared to the six months ended December 31, 2011 is primarily the result of (i) an increase in antibody development and supply expense driven primarily by our IMGN901, IMGN853 and IMGN289 programs; (ii) a decrease in overhead utilization absorbed by the manufacture of clinical materials on behalf of our collaborators; (iii) an increase in fill/finish costs driven by increased activities performed for our internal programs; (iv) an increase in salaries and related expenses;

 

21



Table of Contents

 

and (v) an increase in cost of clinical materials revenue due to increased shipments of such clinical materials to our partners due to timing of supply requirements. We expect manufacturing operations expense for fiscal 2013 to be significantly higher than fiscal 2012 due primarily to increased third-party costs to produce finished drug product for clinical use.

 

General and Administrative Expenses

 

General and administrative expenses for the six months ended December 31, 2012 increased $1.4 million to $11.1 million compared to $9.7 million for the six months ended December 31, 2011. This increase is primarily due to an increase in salaries and related expenses, particularly stock compensation cost, and an increase in patent expenses.  We expect general and administrative expenses for fiscal 2013 to be slightly higher than fiscal 2012.

 

Other Income, net

 

Other income, net for the six months ended December 31, 2012 and 2011 is included in the following table (in thousands):

 

 

 

Six Months Ended December 31,

 

Other Income, net

 

2012

 

2011

 

Interest Income

 

$

85

 

$

22

 

Other Income (Expense), net

 

86

 

(16

)

Total Other Income, net

 

$

171

 

$

6

 

 

LIQUIDITY AND CAPITAL RESOURCES

 

 

 

December 31,

 

June 30,

 

 

 

2012

 

2012

 

 

 

(In thousands)

 

Cash and cash equivalents

 

$

211,021

 

$

160,938

 

Working capital

 

202,430

 

150,016

 

Shareholders’ equity

 

135,995

 

83,890

 

 

 

 

Six Months Ended December 31,

 

 

 

2012

 

2011

 

 

 

(In thousands)

 

Cash used for operating activities

 

$

(42,709

)

$

(24,034

)

Cash used for investing activities

 

(2,050

)

(890

)

Cash provided by financing activities

 

94,842

 

2,090

 

 

Cash Flows

 

We require cash to fund our operating expenses, including the advancement of our own clinical programs, and to make capital expenditures. Historically, we have funded our cash requirements primarily through equity financings in public markets and payments from our collaborators, including equity investments, license fees, milestones and research funding. As of December 31, 2012, we had approximately $211.0 million in cash and cash equivalents. Net cash used for operations was $42.7 million and $24.0 million for the six months ended December 31, 2012 and 2011, respectively. The principal use of cash in operating activities for all periods presented was to fund our net loss.

 

Net cash used for investing activities was $2.1 million and $890,000 for the six months ended December 31, 2012 and 2011, respectively, and primarily represents cash outflows for capital expenditures. Capital expenditures, primarily for the purchase of new equipment and leasehold improvements, were $2.0 million and $834,000 for the six-month periods ended December 31, 2012 and 2011, respectively.

 

Net cash provided by financing activities was $94.8 million and $2.1 million for the six months ended December 31, 2012 and 2011, respectively, which represents proceeds from the exercise of approximately 128,000 and 370,000 stock options, respectively. Also, pursuant to a public offering in the current period, we issued and sold 6,250,000 shares of our common stock resulting in net proceeds of $94.0 million.

 

We anticipate that our current capital resources and expected future collaborator payments under existing collaborations will enable us to meet our operational expenses and capital expenditures through fiscal year 2015. However, we cannot provide assurance that such future collaborative agreement funding will, in fact, be received. Should we or our partners not meet some or all of the terms

 

22



Table of Contents

 

and conditions of our various collaboration agreements, we may be required to pursue additional strategic partners, secure alternative financing arrangements, and/or defer or limit some or all of our research, development and/or clinical projects.

 

Contractual Obligations

 

We are contractually obligated to make potential future success-based regulatory milestone payments in conjunction with certain collaborative agreements. These payments are contingent upon the occurrence of certain future events and, given the nature of these events, it is unclear when, if ever, we may be required to pay such amounts. Further, the timing of any future payment is not reasonably estimable. During the current period, our license agreement with Janssen Biotech was terminated and, accordingly, we are no longer obligated to make $41.0 million of potential future success-based milestone and third-party payments under such agreement.  As of December 31, 2012, the maximum amount that may be payable in the future under our current collaborative agreements is approximately $2.0 million.

 

There have been no other material changes to our contractual obligations during the current period from those disclosed in our Annual Report on Form 10-K for the fiscal year ended June 30, 2012.

 

Forward-Looking Statements

 

This quarterly report includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements relate to analyses and other information which are based on forecasts of future results and estimates of amounts that are not yet determinable. There are a number of factors that could cause actual events or results to be significantly different from those described in the forward-looking statements. Forward-looking statements might include, but are not limited to, one or more of the following subjects:

 

·                   future products revenues, expenses, liquidity and cash needs;

·                   anticipated agreements with collaboration partners;

·                   anticipated clinical trial timelines or results;

·                   anticipated research and product development results;

·                   projected regulatory timelines;

·                   descriptions of plans or objectives of management for future operations, products or services;

·                   forecasts of future economic performance; and

·                   descriptions or assumptions underlying or relating to any of the above items.

 

Forward-looking statements can be identified by the fact that they do not relate to historical or current facts. They use words such as “anticipate,” “estimate,” “expect,” “project,” “intend,” “opportunity,” “plan,” “potential,” “believe” or words of similar meaning. They may also use words such as “will,” “would,” “should,” “could” or “may”. Given these uncertainties, you should not place undue reliance on these forward-looking statements, which speak only as of the date of this report. You should review carefully the risks and uncertainties identified in this Quarterly Report on Form 10-Q, including the cautionary information set forth under Part II, Item 1A., Risk Factors, and our Annual Report on Form 10-K for the year ended June 30, 2012. We may not revise these forward-looking statements to reflect events or circumstances after the date of this report or to reflect the occurrence of unanticipated events.

 

OFF-BALANCE SHEET ARRANGEMENTS

 

None.

 

23



Table of Contents

 

ITEM 3.                         Quantitative and Qualitative Disclosure about Market Risk

 

Our market risks, and the ways we manage them, are summarized in Part II, Item 7A, “Quantitative and Qualitative Disclosures About Market Risk” of our Annual Report on Form 10-K for the fiscal year ended June 30, 2012. Since then there have been no material changes to our market risks or to our management of such risks.

 

ITEM 4.                         Controls and Procedures

 

(a)          Disclosure Controls and Procedures

 

The Company’s management, with the participation of its principal executive officer and principal financial officer, has evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) or 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on such evaluation, the Company’s principal executive officer and principal financial officer have concluded that, as of the end of such period, the Company’s disclosure controls and procedures were adequate and effective.

 

(b)          Changes in Internal Controls

 

There have not been any changes in the Company’s internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the quarter ended December 31, 2012 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

 

24



Table of Contents

 

PART II. OTHER INFORMATION

 

ITEM 1A.                Risk Factors

 

You should carefully review and consider the information regarding certain factors that could materially affect our business, financial condition or future results set forth under Item 1A. (Risk Factors) in our Annual Report on Form 10-K for the fiscal year ended June 30, 2012. There have been no material changes from the factors disclosed in our 2012 Annual Report on Form 10-K, although we may disclose changes to such factors or disclose additional factors from time to time in our future filings with the Securities and Exchange Commission.

 

ITEM 6.                         Exhibits

 

Exhibit No.

 

Description

3.1

 

Articles of Amendment

10.1

 

Change in Control Severance Agreement dated as of November 30, 2012 between the Registrant and Craig Barrows

10.2

 

Change in Control Severance Agreement dated as of November 30, 2012 between the Registrant and Daniel M. Junius

10.3

 

Change in Control Severance Agreement dated as of November 30, 2012 between the Registrant and John M. Lambert

10.4

 

Change in Control Severance Agreement dated as of November 30, 2012 between the Registrant and Charles Q. Morris

10.5

 

Change in Control Severance Agreement dated as of November 30, 2012 between the Registrant and James J. O’Leary

10.6

 

Change in Control Severance Agreement dated as of November 30, 2012 between the Registrant and Gregory D. Perry

10.7

 

Change in Control Severance Agreement dated as of November 30, 2012 between the Registrant and Peter Williams

10.8

 

Change in Control Severance Agreement dated as of November 30, 2012 between the Registrant and Theresa G. Wingrove

10.9

 

Employment offer letter between the Registrant and Charles Q. Morris

10.10

 

Employment Agreement dated as of November 26, 2012 between the Registrant and Charles Q. Morris

10.11

 

Third Amendment to License Agreement for Anti-HER2 Antibodies made effective as of December 18, 2012 by and between the Registrant and Genentech, Inc.

31.1

 

Certification of Principal Executive Officer under Section 302 of the Sarbanes-Oxley Act of 2002.

31.2

 

Certification of Principal Financial Officer under Section 302 of the Sarbanes-Oxley Act of 2002.

32†

 

Certifications of Principal Executive Officer and Principal Financial Officer under Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS

 

XBRL Instance Document

101.SCH

 

XBRL Taxonomy Extension Schema

101.CAL

 

XBRL Taxonomy Extension Calculation Linkbase

101.DEF

 

XBRL Taxonomy Extension Definition Linkbase

101.LAB

 

XBRL Taxonomy Extension Label Linkbase

101.PRE

 

XBRL Taxonomy Extension Presentation Linkbase

 


                                         Furnished, not filed.

 

25



Table of Contents

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

 

ImmunoGen, Inc.

 

 

Date: January 30, 2013

By:

/s/ Daniel M. Junius

 

 

Daniel M. Junius

 

 

President, Chief Executive Officer (Principal Executive Officer)

 

 

Date: January 30, 2013

By:

/s/ Gregory D. Perry

 

 

Gregory D. Perry

 

 

Executive Vice President, Chief Financial Officer (Principal Financial and Accounting Officer)

 

26


Exhibit 3.1

 

D

The Commonwealth of Massachusetts

 

William Francis Galvin

PC

Secretary of the Commonwealth

 

One Ashburton Place, Boston, Massachusetts 02108-1512

 

FORM MUST BE TYPED

Articles of Amendment

FORM MUST BE TYPED

(General Laws Chapter 156D, Section 10.06; 950 CMR 113.34)

 

(1) Exact name of corporation: ImmunoGen, Inc.

 

(2) Registered office address: 830 Winter Street, Waltham, MA 02451

(number, street, city or town, state, zip code)

 

(3) These articles of amendment affect article(s): 3

(specify the number(s) of article(s) being amended (I-VI))

 

(4) Date adopted: November 13, 2012

(month, day, year)

 

(5) Approved by:

 

(check appropriate box)

 

o

 

the incorporators.

o

 

the board of directors without shareholder approval and shareholder approval was not required.

x

 

the board of directors and the shareholders in the manner required by law and the articles of organization.

 

(6) State the article number and the text of the amendment. Unless contained in the text of the amendment, state the provisions for implementing the exchange, reclassification or cancellation of issued shares.

 


P.C.

 



 

To change the number of shares and the par value, * if any, of any type, or to designate a class or series, of stock, or change a designation of class or series of stock, which the corporation is authorized to issue, complete the following:

 

Total authorized prior to amendment:

 

WITHOUT PAR VALUE

 

WITH PAR VALUE

 

TYPE

 

NUMBER OF SHARES

 

TYPE

 

NUMBER OF SHARES

 

PAR VALUE

 

 

 

Common

 

100,000,000

 

$

.01

 

 

 

Preferred

 

5,000,000

 

$

.01

 

 

Total authorized after amendment:

 

WITHOUT PAR VALUE

 

WITH PAR VALUE

 

TYPE

 

NUMBER OF SHARES

 

TYPE

 

NUMBER OF SHARES

 

PAR VALUE

 

 

 

Common

 

150,000,000

 

$

.01

 

 

 

Preferred

 

5,000,000

 

$

.01

 

 

(7) The amendment shall be effective at the time and on the date approved by the Division, unless a later effective date not more than 90 days from the date and time of filing is specified:                                  

 


*G.L. Chapter 156D eliminates the concept of par value, however a corporation may specify par value in Article III. See G.L. Chapter 156D, Section 6.21, and the comments relative thereto.

 



 

Signed by:

/s/ Daniel M. Junius

,

(signature of authorized individual)

 

o

Chairman of the board of directors,

 

 

x

President,

 

 

o

Other officer,

 

 

o

Court-appointed fiduciary,

 

on this 13th day of November, 2012.

 



 

COMMONWEALTH OF MASSACHUSETTS

 

William Francis Galvin

Secretary of the Commonwealth

One Ashburton Place, Boston, Massachusetts 02108-1512

 

Articles of Amendment

(General Laws Chapter 156D, Section 10.06; 950 CMR 113.34)

 

I hereby certify that upon examination of these articles of amendment, it appears that the provisions of the General Laws relative thereto have been complied with, and the filing fee in the amount of $             having been paid, said articles are deemed to have been filed with me this                day of                          , 20           , at     time    a.m./p.m.

 

Effective date:

(must be within 90 days of date submitted)

 

WILLIAM FRANCIS GALVIN
Secretary of the Commonwealth

 

Filing fee: Minimum filing fee $100 per article amended, stock increases $100 per 100,000 shares, plus $100 for each additional 100,000 shares or any fraction thereof.

 

Examiner

 

TO BE FILLED IN BY CORPORATION

Contact Information:

Name approval

 

C                                                                                        Craig Barrows

 

M                                                                                     ImmunoGen, Inc.

 

830 Winter Street, Waltham, MA 02451

 

Telephone: (781) 895-0600

 

Email: craig.barrows@immunogen.com

 

Upon filing, a copy of this filing will be available at www.sec.state.ma.us/cor. If the document is rejected, a copy of the rejection sheet and rejected document will be available in the rejected queue.

 


Exhibit 10.1

 

CHANGE IN CONTROL SEVERANCE AGREEMENT

 

This Agreement is entered into as of the 30th day of November, 2012 (the “ Effective Date ”) by and between ImmunoGen, Inc., a Massachusetts corporation (the “ Company ”), and Craig Barrows (the “ Executive ”).

 

WHEREAS, the Company recognizes that the Executive’s service to the Company is very important to the future success of the Company;

 

WHEREAS, the Executive desires to enter into this Agreement to provide the Executive with certain financial protection in the event that his employment terminates under certain conditions following a change in control of the Company; and

 

WHEREAS the Board of Directors of the Company (the “ Board ”) has determined that it is in the best interests of the Company to enter into this Agreement.

 

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company and the Executive hereby agree as follows:

 

1.                                       Definitions .

 

(a)                                  Cause .  For purposes of this Agreement, “ Cause ” shall mean that the Executive has (i) willfully committed an act or omission that materially harms the Company; (ii) been grossly negligent in the performance of the Executive’s duties to the Company; (iii) willfully failed or refused to follow the lawful and proper directives of the Board; (iv) been convicted of, or pleaded guilty or nolo contendere , to a felony; (v) committed an act involving moral turpitude that is or is reasonably expected to be injurious to the Company or its reputation; (vi) committed an act relating to the Executive’s employment or the Company involving, in the good faith judgment of the Board, material fraud or theft; (vii) breached any material provision of this Agreement or any nondisclosure or non-competition agreement between the Executive and the Company, as all of the foregoing may be amended prospectively from time to time; or (viii) breached a material provision of any code of conduct or ethics policy in effect at the Company, as all of the foregoing may be amended prospectively from time to time.

 

(b)                                  Change in Control .  For purposes of this Agreement, a “ Change in Control ” shall mean the occurrence of any of the following events; provided that “Change in Control” shall be interpreted in a manner, and limited to the extent necessary, so that it will not cause adverse tax consequences for either party with respect to Section 409A of the Internal Revenue Code of 1986, as amended (the “ Code ”), and Treasury Regulations 1.409A-3(i)(5), and any successor statute, regulation and guidance thereto:

 

(i)                                      Ownership.  Any “Person” (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended) becomes the “Beneficial Owner” (as defined in Rule 13d-3 under said Act), directly or indirectly, of securities of the Company representing 50% or more of the total voting power represented by the Company’s then outstanding voting securities (excluding for this purpose any such voting

 



 

securities held by the Company or its Affiliates (as defined in the Company’s 2006 Employee, Director and Consultant Equity Incentive Plan) or by any employee benefit plan of the Company) pursuant to a transaction or a series of related transactions which the Board does not approve; or

 

(ii)                                   Merger/Sale of Assets.  (A) A merger or consolidation of the Company whether or not approved by the Board, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity or the parent of such corporation) at least 50% of the total voting power represented by the voting securities of the Company or such surviving entity or parent of such corporation, as the case may be, outstanding immediately after such merger or consolidation; or (B) the stockholders of the Company approve an agreement for the sale or disposition by the Company of all or substantially all of the Company’s assets; or

 

(iii)                                Change in Board Composition.  A change in the composition of the Board, as a result of which fewer than a majority of the directors are Incumbent Directors.  “Incumbent Directors” shall mean directors who either (A) are directors of the Company as of November 11, 2006, or (B) are elected, or nominated for election, to the Board with the affirmative votes of at least a majority of the Incumbent Directors at the time of such election or nomination (but shall not include an individual whose election or nomination is in connection with an actual or threatened proxy contest relating to the election of directors to the Company).

 

(c)                                   Disability .  For purposes of this Agreement, “ Disability ” shall mean that the Executive (i) is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months, or (ii) is, by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months, receiving income replacement benefits for a period of not less than three (3) months under a Company-sponsored group disability plan.  Whether the Executive has a Disability will be determined by a majority of the Board based on evidence provided by one or more physicians selected by the Board and approved by the Executive, which approval shall not be unreasonably withheld.  In any case, if a disability is determined to trigger the payment of any “deferred compensation” as defined in Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”), disability shall be determined in accordance with Section 409A of the Code.

 

(d)                                  Good Reason .  For purposes of this Agreement, “ Good Reason ” shall mean the occurrence of one or more of the following without the Executive’s consent: (i) a change in the principal location at which the Executive performs his duties for the Company to a new location that is at least forty (40) miles from the prior location; (ii) a material change in the Executive’s authority, functions, duties or responsibilities as an executive of the Company, which would cause his position with the Company to become of less responsibility, importance or scope than

 

2



 

his highest position with the Company at any time from the date of this Agreement to immediately prior to the Change in Control, provided , however , that such material change is not in connection with the termination of the Executive’s employment by the Company for Cause or death or Disability and further provided that it shall not be considered a material change if the Company becomes a subsidiary of another entity and the Executive continues to hold a position in the subsidiary that is at least as high (in both title and scope of responsibilities) as the highest position he held with the Company at any time from the date of this Agreement to immediately prior to the Change in Control; (iii) a material reduction in the Executive’s annual base salary or (iv) a material reduction in the Executive’s target annual bonus as compared to the target annual bonus set for the previous fiscal year.

 

2.                                       Term of Agreement .  The term of this Agreement (the “ Term ”) shall commence on the Effective Date and shall continue in effect for two (2) years; provided , however , that commencing on second anniversary of the Effective Date and continuing each anniversary thereafter, the Term shall automatically be extended for one (1) additional year unless, not later than nine (9) months before the conclusion of the Term, the Company or the Executive shall have given notice not to extend the Term; and further provided , however , that if a Change in Control shall have occurred during the Term, the Term shall expire on the last day of the twelfth (12 th ) month following the month in which such Change in Control occurred.  Notice of termination or termination of this Agreement shall not constitute Cause or Good Reason (both terms as defined above).

 

3.                                       Termination; Notice; Severance Compensation .

 

(a)                                  In the event that within a period of two (2) months before or twelve (12) months following the consummation of a Change in Control the Company elects to terminate the Executive’s employment other than for Cause (but not including termination due to the Executive’s Disability), then the Company shall give the Executive no less than sixty (60) days advance notice of such termination (the “Company’s Notice Period”); provided that the Company may elect to require the Executive to cease performing work for the Company so long as the Company continues the Executive’s full salary and benefits during the Company’s Notice Period.

 

(b)                                  In the event that within a period of two (2) months before or twelve (12) months following the consummation of a Change in Control the Executive elects to terminate his employment for Good Reason, then the Executive shall give the Company no less than thirty (30) days and no more than sixty (60) days advance notice of such termination (the “Executive’s Notice Period”); provided that the Company may elect to require the Executive to cease performing work for the Company so long as the Company continues the Executive’s full salary and benefits during the Executive’s Notice Period.  In order to effect a termination for Good Reason pursuant to this Agreement, the Executive must notice his intent to terminate for Good Reason not later than ninety (90) days following the occurrence of the Good Reason.

 

(c)                                   In the event that within a period of two (2) months before or twelve (12) months following the consummation of a Change in Control the Executive’s employment with the Company is terminated by the Company other than for Cause (but not including termination due to the Executive’s death or Disability), or by the Executive for Good Reason, then, contingent

 

3



 

upon the Executive’s execution of a release of claims against the Company in substantially the form attached hereto as Exhibit A (the “ Release ”) the Executive shall be entitled to, in addition to any amounts due to the Executive for services rendered prior to the termination date:

 

(i)  a lump sum payment from the Company in an amount equal to one and one-half (1.5) times the sum of the Executive’s Annual Salary and the Executive’s target annual bonus for the fiscal year in which the termination occurs (without giving effect to any event or circumstance constituting Good Reason) at one hundred percent (100%) of such target annual bonus, which shall be paid on the sixtieth (60 th ) day following the Executive’s termination of employment, provided that the Release is executed and effective by then or the Executive shall forfeit the payment of such amount;

 

(ii)  all outstanding options, restricted stock and other similar rights held by the Executive, which shall become one hundred percent (100%) vested; and

 

(iii)  continuation of medical insurance coverage for the Executive and the Executive’s family subject to and in accordance with Section 4980B of the Code (“ COBRA ”), and subject to the Executive’s payment of the applicable COBRA coverage premium (“ COBRA Coverage Premium ”) during the applicable COBRA coverage period (“ COBRA Period ”); and

 

(iv)  payment to the Executive of a taxable amount on a monthly basis equal to the COBRA Premium for eighteen (18) months from the Separation Date; provided that the Company shall have no obligation to provide such benefit if the Executive fails to elect COBRA benefits in a timely fashion or if the Executive becomes eligible for medical coverage with another employer; and provided that if the COBRA Period is otherwise ( i.e., for reasons not described in the immediately preceding proviso) earlier terminated under applicable law during the period that the Executive would otherwise be entitled to receive the benefit under this subsection (v), the Company will continue to pay to the Executive the same taxable amount it paid on a monthly basis during the COBRA Period each month for the remainder of the relevant period.

 

For purposes of this Agreement, “ Annual Salary ” shall mean the Executive’s annual base salary then in effect or, if higher, in effect at the time of the Change in Control, excluding reimbursements and amounts attributable to stock options and other non-cash compensation; and the “ Severance Compensation ” shall mean the compensation set forth in (i), (ii), and (iv) above.

 

(d)                                  If any of the benefits set forth in this Agreement are deferred compensation as defined in Section 409A of the Code, any termination of employment triggering payment of such benefits must constitute a “separation from service” under Section 409A of the Code before, subject to subsection (e) below, a distribution of such benefits can commence.  For purposes of clarification, this paragraph shall not cause any forfeiture of benefits on the part of the Executive, but shall only act as a delay until such time as a “separation from service” occurs. In addition, the Company Notice Period and the Executive Notice Period shall be interpreted and administered in

 

4



 

accordance with Section 409A of the Code and the “separation from service” rules thereunder.  In particular, if a waiver of the Company Notice Period or the Executive Notice Period triggers a “separation from service,” such waiver shall constitute a termination and any amounts due to the Executive over the remaining portion of the applicable notice period shall be deemed additional severance under Section 3(c)(ii) of this Agreement and paid accordingly.  In addition, any applicable notice or release periods and dates of payment shall be adjusted accordingly.

 

(e)                                   Notwithstanding any other provision with respect to the timing of payments, if, at the time of the Executive’s termination, the Executive is deemed to be a “specified employee” (within the meaning of Code Section 409A, and any successor statute, regulation and guidance thereto) of the Company, then solely to the extent necessary to comply with the requirements of Code Section 409A, any payments to which the Executive may become entitled under this Agreement which are subject to Code Section 409A (and not otherwise exempt from its application) will be withheld until the first (1 st ) business day of the seventh (7 th ) month following the termination of the Executive’s employment, at which time the Executive shall be paid an aggregate amount equal to the accumulated, but unpaid, payments otherwise due to the Executive under the terms of this Agreement.

 

(f)                                    I f any payment or benefit the Executive would receive under this Agreement, when combined with any other payment or benefit the Executive receives pursuant to a Change in Control (“Payment”) would (i) constitute a “parachute payment” within the meaning of Code Section 280G, and (ii) but for this sentence, be subject to the excise tax imposed by Section 4999 of the Code (the “Excise Tax”), then such Payment shall be either (x) the full amount of such Payment or (y) such less amount as would result in no portion of the Payment being subject to the Excise Tax, whichever of the foregoing amounts, taking into account the applicable federal, state, and local employments taxes, income taxes, and the Excise Tax results in the Executive’s receipt, on an after-tax basis, of the greater amount of the Payment, notwithstanding that all or some portion of the Payment may be subject to the Excise Tax.  The Company shall, in a manner compliant with Code Section 409A, determine in good faith which payment(s) or benefit(s) to reduce based on what provides the best economic result for the Executive.  The Company shall provide the Executive with sufficient information to support its determination and to allow the Executive to file and pay any required taxes.

 

4.                                       No Duplication of Compensation .  The Severance Compensation shall replace, and be provided in lieu of, any severance or similar compensation that may be provided to the Executive under any other agreement or arrangement in relation to termination of employment; provided , however , that this prohibition against duplication shall not be construed to otherwise limit the Executive’s rights to payments or benefits provided under any pension plan (as defined in Section 3(2) of the Employee Retirement Income Security Act of 1974, as amended), deferred compensation, stock, stock option or similar plan sponsored by the Company.  This Agreement supersedes any other agreements or representations, oral or otherwise, express or implied, with respect to the subject matter hereof which may have been made by either party, including, without limitation, the Severance Agreement dated as of December 1, 2010 between the Company and the Executive.

 

5



 

5.                                       No Mitigation .  If the Executive’s employment with the Company terminates following a Change in Control, the Executive is not required to seek other employment or to attempt in any way to reduce any amounts payable to the Executive by the Company pursuant to Section 3 or Section 15.  Except as set forth in Section 4, the amount of any payment or benefit provided for in this Agreement shall not be reduced by any compensation earned by the Executive as the result of employment by another employer, by retirement benefits, by offset against any amount claimed to be owed by the Executive to the Company, or otherwise.

 

6.                                       Confidentiality, Non-Competition, and Assignment of Inventions.   The Company’s obligations under this Agreement are contingent upon the Executive’s execution of the Company’s Proprietary Information, Inventions, and Competition Agreement (the “ Proprietary Information Agreement ”).  The parties agree that the obligations set forth in the Proprietary Information Agreement shall survive termination of this Agreement and termination of the Executive’s employment, regardless of the reason for such termination.

 

7.                                       Enforceability .  If any provision of this Agreement shall be deemed invalid or unenforceable as written, this Agreement shall be construed, to the greatest extent possible, or modified, to the extent allowable by law, in a manner which shall render it valid and enforceable.  No invalidity or unenforceability of any provision contained herein shall affect any other portion of this Agreement.

 

8.                                       Notices .  Except as otherwise specifically provided herein, any notice required or permitted by this Agreement shall be in writing and shall be delivered as follows with notice deemed given as indicated: (i)  by personal delivery when delivered personally; (ii) by overnight courier upon written verification of receipt; (iii) by telecopy or facsimile transmission upon acknowledgment of receipt of electronic transmission; or (iv) by certified or registered mail, return receipt requested, upon verification of receipt.  Notices to the Executive shall be sent to the last known address in the Company’s records or such other address as the Executive may specify in writing.  Notices to the Company shall be sent to the Company’s Chairman of the Board (or if the Chairman of the Board is also the CEO, to the Company’s Lead Director), or to such other Company representative as the Company may specify in writing.

 

9.                                       Claims for Benefits.   All claims by the Executive for benefits under this Agreement shall be directed to and determined by the Board and shall be in writing.  Any denial by the Board of a claim for benefits under this Agreement shall be delivered to the Executive in writing and shall set forth the specific reasons for the denial and the specific provisions of this Agreement relied upon.  The Board shall afford a reasonable opportunity to the Executive for a review of the decision denying a claim and shall further allow the Executive to appeal to the Board a decision of the Board within sixty (60) days after notification by the Board that the Executive’s claim has been denied.  In no event shall the Board’s claims or appeals determination be given any deference or weight in any subsequent legal proceeding.

 

10.                                Modifications and Amendments .  The terms and provisions of this Agreement may be modified or amended only by written agreement executed by the Company and the Executive.  The Company and the Executive agree that they will jointly execute an amendment to modify this Agreement to the extent necessary to comply with or be exempt from the requirements of

 

6



 

Code Section 409A, or any successor statute, regulation and guidance thereto; provided that no such amendment shall increase the total financial obligation of the Company under this Agreement.

 

11.                                Waivers and Consents .  The terms and provisions of this Agreement may be waived, or consent for the departure therefrom granted, only by a written document executed by the party entitled to the benefits of such terms or provisions.  No such waiver or consent shall be deemed to be or shall constitute a waiver or consent with respect to any other terms or provisions of this Agreement, whether or not similar.  Each such waiver or consent shall be effective only in the specific instance and for the purpose for which it was given, and shall not constitute a continuing waiver or consent.

 

12.                                Binding Effect; Assignment .  The Agreement will be binding upon and inure to the benefit of (a) the heirs, executors and legal representatives of the Executive upon the Executive’s death and (b) any successor of the Company.  Any such successor of the Company will be deemed substituted for the Company under the terms of the Agreement for all purposes.  For this purpose, “successor” means any person, firm, corporation or other business entity which at any time, whether by purchase, merger or otherwise, directly or indirectly acquires all or substantially all of the assets or business of the Company.  None of the rights of the Executive to receive any form of compensation payable pursuant to the Agreement may be assigned or transferred except by will or the laws of descent and distribution.  Any other attempted assignment, transfer, conveyance or other disposition of the Executive’s right to compensation or other benefits will be null and void.

 

13.                                Governing Law .  This Agreement and the rights and obligations of the parties hereunder shall be construed in accordance with and governed by the law of the Commonwealth of Massachusetts, without giving effect to the conflict of law principles thereof.

 

14.                                Jurisdiction and Service of Process .  Any legal action or proceeding with respect to this Agreement shall be brought in the courts of the Commonwealth of Massachusetts or of the United States of America for the District of Massachusetts.  By execution and delivery of this Agreement, each of the parties hereto accepts for itself and in respect of its property, generally and unconditionally, the jurisdiction of the aforesaid courts.

 

15.                                Attorneys’ Fees .  The Company shall pay to the Executive all legal fees and expenses incurred by the Executive in disputing in good faith any issue hereunder relating to the termination of the Executive’s employment, in seeking in good faith to obtain or enforce any benefit or right provided by this Agreement.  Such payments shall be made within five (5) business days after delivery of the Executive’s written requests for payment accompanied with such evidence of fees and expenses incurred as the Company reasonably may require.

 

16.                                Withholding .  The Company is authorized to withhold, or to cause to be withheld, from any payment or benefit under the Agreement the full amount of any applicable withholding taxes.

 

17.                                Tax Consequences .  The Company does not guarantee the tax treatment or tax consequences associated with any payment or benefit arising under this Agreement.

 

7



 

18.                                Acknowledgment .  The Executive acknowledges that he has had the opportunity to discuss this matter with and obtain advice from his private attorney, has had sufficient time to, and has carefully read and fully understands all the provisions of the Agreement, and is knowingly and voluntarily entering into the Agreement.

 

19.                                Counterparts .  This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

 

20.                                Section 409A .  The parties hereto intend that the payments and benefits provided by this Agreement shall comply with or be exempt from the requirements of Code Section 409A and related regulations and Treasury pronouncements, and this Agreement shall be interpreted accordingly.  Each separately identified payment or benefit hereunder shall be deemed to be a separately determinable payment for purposes of Code Section 409A, and each payment to be made in installments shall be deemed a series of separate payments.  If any provision provided herein could result in the imposition of an additional tax under the provisions of Code Section 409A, the Executive and the Company agree that such provision will be reformed to avoid imposition of any such additional tax in the manner that the Executive and the Company mutually agree is appropriate to comply with or be exempt from Code Section 409A.

 

21.                                Reimbursements .  To the extent there are any reimbursements of expenses under this Agreement including, without limitation, under Section 15 hereof, payments with respect to such reimbursements shall be made no later than on or before the last day of the calendar year following the calendar year in which the relevant expense is incurred.  The amount of expenses eligible for reimbursement during a calendar year may not affect the expenses eligible for reimbursement in any other calendar year and any such reimbursements may not be exchanged or liquidated for any other benefit or payment.

 

IN WITNESS WHEREOF, the parties have executed and delivered this Change in Control Severance Agreement as of the day and year first above written.

 

 

 

COMPANY:

 

 

 

 

 

IMMUNOGEN, INC.

 

 

 

 

 

/s/ Daniel M. Junius

 

 

Name: Daniel M. Junius

 

 

Title: President and Chief Executive Officer

 

 

 

 

 

 

 

 

EXECUTIVE:

 

 

 

 

 

/s/ Craig Barrows

 

 

Name:  Craig Barrows

 

8



 

Exhibit A

 

GENERAL RELEASE

 

1.                                       General Release .  In consideration of the payments and benefits to be made under that certain Change in Control Severance Agreement, dated                          , (the “ Agreement ”),                                          (the “ Executive ”), with the intention of binding the Executive and the Executive’s heirs, executors, administrators and assigns, does hereby release, remise, acquit and forever discharge ImmunoGen, Inc. (the “ Company ”) and each of its subsidiaries and affiliates (the “ Company Affiliated Group ”), their present and former officers, directors, executives, agents, attorneys, employees and employee benefits plans (and the fiduciaries thereof), and the successors, predecessors and assigns of each of the foregoing (collectively, the “ Company Released Parties ”), of and from any and all claims, actions, causes of action, complaints, charges, demands, rights, damages, debts, sums of money, accounts, financial obligations, suits, expenses, attorneys’ fees and liabilities of whatever kind or nature in law, equity or otherwise, whether accrued, absolute, contingent, unliquidated or otherwise and whether now known or unknown, suspected or unsuspected which the Executive, individually or as a member of a class, now has, owns or holds, or has at any time heretofore had, owned or held, against any Company Released Party in any capacity, including, without limitation, any and all claims (i) arising out of or in any way connected with the Executive’s service to any member of the Company Affiliated Group (or the predecessors thereof) in any capacity, or the termination of such service in any such capacity, (ii) for severance or vacation benefits, unpaid wages, salary or incentive payments, (iii) for breach of contract, wrongful discharge, impairment of economic opportunity, defamation, intentional infliction of emotional harm or other tort and (iv) for any violation of applicable state and local labor and employment laws (including, without limitation, all laws concerning unlawful and unfair labor and employment practices), any and all claims based on the Employee Retirement Income Security Act of 1974 (“ ERISA ”), any and all claims arising under the civil rights laws of any federal, state or local jurisdiction, including, without limitation, Title VII of the Civil Rights Act of 1964 (“ Title VII ”), the Age Discrimination in Employment Act (“ ADEA ”), the Americans with Disabilities Act (“ ADA ”), Sections 503 and 504 of the Rehabilitation Act the Family and Medical Leave Act, the Massachusetts Fair Employment Practices Act, and any and all claims under any whistleblower laws or whistleblower provisions of other laws.

 

2.                                       No Admissions .  The Executive acknowledges and agrees that this General Release is not to be construed in any way as an admission of any liability whatsoever by any Company Released Party, any such liability being expressly denied.

 

3.                                       Application to all Forms of Relief .  This General Release applies to any relief no matter how called, including, without limitation, wages, back pay, front pay, compensatory damages, liquidated damages, punitive damages for pain or suffering, costs and attorney’s fees and expenses.

 

4.                                       Specific Waiver .  The Executive specifically acknowledges that his acceptance of the terms of this General Release is, among other things, a specific waiver of his rights, claims

 

9



 

and causes of action under Title VII, ADEA, ADA, the Massachusetts Fair Employment Practices Act and any state or local law or regulation in respect of discrimination of any kind; provided, however, that nothing herein shall be deemed, nor does anything herein purport, to be a waiver of any right or claim or cause of action which by law the Executive is not permitted to waive.

 

5.                                       No Complaints or Other Claims .  The Executive acknowledges and agrees that he has not, with respect to any transaction or state of facts existing prior to the date hereof, filed any complaints, charges or lawsuits against any Company Released Party with any governmental agency, court or tribunal.  This General Release does not: (i) prohibit or restrict Executive from communicating, providing relevant information to or otherwise cooperating with the U.S. Equal Employment Opportunity Commission or any other governmental authority with responsibility for the administration of fair employment practices laws regarding a possible violation of such laws or responding to any inquiry from such authority, including an inquiry about the existence of this General Release or its underlying facts, or (ii) require Executive to notify the Company of such communications or inquiry.

 

6.                                       Conditions of General Release .

 

(a)   Terms and Conditions .  From and after the date of termination of employment, the Executive shall abide by all the terms and conditions of this General Release and the terms and any conditions set forth in any employment or confidentiality agreements signed by the Executive, which is incorporated herein by reference.

 

(b)   Confidentiality .  The Executive shall not, without the prior written consent of the Company or as may otherwise be required by law or any legal process, or as is necessary in connection with any adversarial proceeding against any member of the Company Affiliated Group (in which case the Executive shall cooperate with the Company in obtaining a protective order at the Company’s expense against disclosure by a court of competent jurisdiction), communicate, to anyone other than the Company and those designated by the Company or on behalf of the Company in the furtherance of its business, any trade secrets, confidential information, knowledge or data relating to any member of the Company Affiliated Group, obtained by the Executive during the Executive’s employment by the Company that is not generally available public knowledge (other than acts by the Executive in violation of this General Release).  This confidentiality obligation is in addition to, and not in lieu of, any other contractual, statutory and common law confidentiality obligation of the Executive to the Company.

 

(c)   Return of Company Material .  The Executive represents that he has returned to the Company all Company Material (as defined below).  For purposes of this Section 6(c), “ Company Material ” means any documents, files and other property and information of any kind belonging or relating to (i) any member of the Company Affiliated Group, (ii) the current and former suppliers, creditors, directors, officers, employees, agents and customers of any of them or (iii) the businesses, products, services and operations (including without limitation, business, financial and accounting practices) of any of them, in each case whether tangible or intangible

 

10



 

(including, without limitation, credit cards, building and office access cards, keys, computer equipment, cellular telephones, pagers, electronic devices, hardware, manuals, files, documents, records, software, customer data, research, financial data and information, memoranda, surveys, correspondence, statistics and payroll and other employee data, and any copies, compilations, extracts, excerpts, summaries and other notes thereof or relating thereto), excluding only information (x) that is generally available public knowledge or (y) that relates to the Executive’s compensation or Executive benefits.

 

(d)   Cooperation .  Following the date of termination of employment, the Executive shall reasonably cooperate with the Company upon reasonable request of the Board of Directors and be reasonably available to the Company with respect to matters arising out of the Executive’s services to the Company Affiliated Group.

 

(e)   Nondisparagement .  The Executive acknowledges and agrees that he shall not make any statements that are professionally or personally disparaging about or adverse to the interests of the Company or any Company Released Party, including, but not limited to, any statements that disparage in any way whatsoever the Company’s products, services, businesses, finances, financial condition, capabilities or other characteristics.

 

(f)   Ownership of Inventions, Non-Disclosure, Non-Competition and Non-Solicitation .  The Executive expressly acknowledges and agrees that the Proprietary Information, Inventions, and Competition Agreement executed by him is incorporated herein by reference, and shall survive the execution of this General Release in full force and effect pursuant to its terms.

 

(g)   No Representation .  The Executive acknowledges that, other than as set forth in this General Release and the Agreement, (i) no promises have been made to him and (ii) in signing this General Release the Executive is not relying upon any statement or representation made by or on behalf of any Company Released Party and each or any of them concerning the merits of any claims or the nature, amount, extent or duration of any damages relating to any claims or the amount of any money, benefits, or compensation due the Executive or claimed by the Executive, or concerning the General Release or concerning any other thing or matter.

 

(h)   Injunctive Relief .  In the event of a breach or threatened breach by the Executive of this Section 6, the Executive agrees that the Company shall be entitled to injunctive relief in a court of appropriate jurisdiction to remedy any such breach or threatened breach, the Executive acknowledging that damages would be inadequate or insufficient.

 

7.                                       Voluntariness .  The Executive agrees that he is relying solely upon his own judgment; that the Executive is over eighteen years of age and is legally competent to sign this General Release; that the Executive is signing this General Release of his own free will; that the Executive has read and understood the General Release before signing it; and that the Executive is signing this General Release in exchange for consideration that he believes is satisfactory and adequate.

 

11



 

8.                                       Legal Counsel .  The Executive acknowledges that he has been informed of the right to consult with legal counsel and has been encouraged to do so.

 

9.                                       Complete Agreement/Severability .  Other than the agreements and/or obligations specifically referenced as surviving herein, this General Release constitutes the complete and final agreement between the parties and supersedes and replaces all prior or contemporaneous agreements, negotiations, or discussions relating to the subject matter of this General Release.  All provisions and portions of this General Release are severable.  If any provision or portion of this General Release or the application of any provision or portion of the General Release shall be determined to be invalid or unenforceable to any extent or for any reason, all other provisions and portions of this General Release shall remain in full force and shall continue to be enforceable to the fullest and greatest extent permitted by law.

 

10.                                Acceptance .  The Executive acknowledges that he has been given a period of twenty-one (21) days within which to consider this General Release, unless applicable law requires a longer period, in which case the Executive shall be advised of such longer period and such longer period shall apply.  The Executive may accept this General Release at any time within this period of time by signing the General Release and returning it to the Company.

 

11.                                Revocability .  This General Release shall not become effective or enforceable until seven (7) calendar days after the Executive signs it.  The Executive may revoke his acceptance of this General Release at any time within that seven (7) calendar day period by sending written notice to the Company.  Such notice must be received by the Company within the seven (7) calendar day period in order to be effective and, if so received, would void this General Release for all purposes.

 

12.                                Governing Law .  Except for issues or matters as to which federal law is applicable, this General Release shall be governed by and construed and enforced in accordance with the laws of the Commonwealth of Massachusetts without giving effect to the conflicts of law principles thereof.

 

IN WITNESS WHEREOF, the Executive has executed this General Release as of the date last set forth below.

 

EXECUTIVE

 

 

 

 

 

 

Date:

 

Name:

 

 

 

12


Exhibit 10.2

 

CHANGE IN CONTROL SEVERANCE AGREEMENT

 

This Agreement is entered into as of the 30th day of November, 2012 (the “ Effective Date ”) by and between ImmunoGen, Inc., a Massachusetts corporation (the “ Company ”), and Daniel M. Junius (the “ Executive ”).

 

WHEREAS, the Company recognizes that the Executive’s service to the Company is very important to the future success of the Company;

 

WHEREAS, the Executive desires to enter into this Agreement to provide the Executive with certain financial protection in the event that his employment terminates under certain conditions following a change in control of the Company; and

 

WHEREAS the Board of Directors of the Company (the “ Board ”) has determined that it is in the best interests of the Company to enter into this Agreement.

 

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company and the Executive hereby agree as follows:

 

1.                                       Definitions .

 

(a)                                  Cause .  For purposes of this Agreement, “ Cause ” shall mean that the Executive has (i) willfully committed an act or omission that materially harms the Company; (ii) been grossly negligent in the performance of the Executive’s duties to the Company; (iii) willfully failed or refused to follow the lawful and proper directives of the Board; (iv) been convicted of, or pleaded guilty or nolo contendere , to a felony; (v) committed an act involving moral turpitude that is or is reasonably expected to be injurious to the Company or its reputation; (vi) committed an act relating to the Executive’s employment or the Company involving, in the good faith judgment of the Board, material fraud or theft; (vii) breached any material provision of this Agreement or any nondisclosure or non-competition agreement between the Executive and the Company, as all of the foregoing may be amended prospectively from time to time; or (viii) breached a material provision of any code of conduct or ethics policy in effect at the Company, as all of the foregoing may be amended prospectively from time to time.

 

(b)                                  Change in Control .  For purposes of this Agreement, a “ Change in Control ” shall mean the occurrence of any of the following events; provided that “Change in Control” shall be interpreted in a manner, and limited to the extent necessary, so that it will not cause adverse tax consequences for either party with respect to Section 409A of the Internal Revenue Code of 1986, as amended (the “ Code ”), and Treasury Regulations 1.409A-3(i)(5), and any successor statute, regulation and guidance thereto:

 

(i)                                      Ownership.  Any “Person” (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended) becomes the “Beneficial Owner” (as defined in Rule 13d-3 under said Act), directly or indirectly, of securities of the Company representing 50% or more of the total voting power represented by the Company’s then outstanding voting securities (excluding for this purpose any such voting

 



 

securities held by the Company or its Affiliates (as defined in the Company’s 2006 Employee, Director and Consultant Equity Incentive Plan) or by any employee benefit plan of the Company) pursuant to a transaction or a series of related transactions which the Board does not approve; or

 

(ii)                                   Merger/Sale of Assets.  (A) A merger or consolidation of the Company whether or not approved by the Board, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity or the parent of such corporation) at least 50% of the total voting power represented by the voting securities of the Company or such surviving entity or parent of such corporation, as the case may be, outstanding immediately after such merger or consolidation; or (B) the stockholders of the Company approve an agreement for the sale or disposition by the Company of all or substantially all of the Company’s assets; or

 

(iii)                                Change in Board Composition.  A change in the composition of the Board, as a result of which fewer than a majority of the directors are Incumbent Directors.  “Incumbent Directors” shall mean directors who either (A) are directors of the Company as of November 11, 2006, or (B) are elected, or nominated for election, to the Board with the affirmative votes of at least a majority of the Incumbent Directors at the time of such election or nomination (but shall not include an individual whose election or nomination is in connection with an actual or threatened proxy contest relating to the election of directors to the Company).

 

(c)                                   Disability .  For purposes of this Agreement, “ Disability ” shall mean that the Executive (i) is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months, or (ii) is, by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months, receiving income replacement benefits for a period of not less than three (3) months under a Company-sponsored group disability plan.  Whether the Executive has a Disability will be determined by a majority of the Board based on evidence provided by one or more physicians selected by the Board and approved by the Executive, which approval shall not be unreasonably withheld.  In any case, if a disability is determined to trigger the payment of any “deferred compensation” as defined in Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”), disability shall be determined in accordance with Section 409A of the Code.

 

(d)                                  Good Reason .  For purposes of this Agreement, “ Good Reason ” shall mean the occurrence of one or more of the following without the Executive’s consent: (i) a change in the principal location at which the Executive performs his duties for the Company to a new location that is at least forty (40) miles from the prior location; (ii) a material change in the Executive’s authority, functions, duties or responsibilities as an executive of the Company, which would cause his position with the Company to become of less responsibility, importance or scope than

 

2



 

his highest position with the Company at any time from the date of this Agreement to immediately prior to the Change in Control, provided , however , that such material change is not in connection with the termination of the Executive’s employment by the Company for Cause or death or Disability and further provided that it shall not be considered a material change if the Company becomes a subsidiary of another entity and the Executive continues to hold a position in the subsidiary that is at least as high (in both title and scope of responsibilities) as the highest position he held with the Company at any time from the date of this Agreement to immediately prior to the Change in Control; (iii) a material reduction in the Executive’s annual base salary or (iv) a material reduction in the Executive’s target annual bonus as compared to the target annual bonus set for the previous fiscal year.

 

2.                                       Term of Agreement .  The term of this Agreement (the “ Term ”) shall commence on the Effective Date and shall continue in effect for two (2) years; provided , however , that commencing on second anniversary of the Effective Date and continuing each anniversary thereafter, the Term shall automatically be extended for one (1) additional year unless, not later than nine (9) months before the conclusion of the Term, the Company or the Executive shall have given notice not to extend the Term; and further provided , however , that if a Change in Control shall have occurred during the Term, the Term shall expire on the last day of the twelfth (12 th ) month following the month in which such Change in Control occurred.  Notice of termination or termination of this Agreement shall not constitute Cause or Good Reason (both terms as defined above).

 

3.                                       Termination; Notice; Severance Compensation .

 

(a)                                  In the event that within a period of two (2) months before or twelve (12) months following the consummation of a Change in Control the Company elects to terminate the Executive’s employment other than for Cause (but not including termination due to the Executive’s Disability), then the Company shall give the Executive no less than sixty (60) days advance notice of such termination (the “Company’s Notice Period”); provided that the Company may elect to require the Executive to cease performing work for the Company so long as the Company continues the Executive’s full salary and benefits during the Company’s Notice Period.

 

(b)                                  In the event that within a period of two (2) months before or twelve (12) months following the consummation of a Change in Control the Executive elects to terminate his employment for Good Reason, then the Executive shall give the Company no less than thirty (30) days and no more than sixty (60) days advance notice of such termination (the “Executive’s Notice Period”); provided that the Company may elect to require the Executive to cease performing work for the Company so long as the Company continues the Executive’s full salary and benefits during the Executive’s Notice Period.  In order to effect a termination for Good Reason pursuant to this Agreement, the Executive must notice his intent to terminate for Good Reason not later than ninety (90) days following the occurrence of the Good Reason.

 

(c)                                   In the event that within a period of two (2) months before or twelve (12) months following the consummation of a Change in Control the Executive’s employment with the Company is terminated by the Company other than for Cause (but not including termination due to the Executive’s death or Disability), or by the Executive for Good Reason, then, contingent

 

3



 

upon the Executive’s execution of a release of claims against the Company in substantially the form attached hereto as Exhibit A (the “ Release ”) the Executive shall be entitled to, in addition to any amounts due to the Executive for services rendered prior to the termination date:

 

(i)  a lump sum payment from the Company in an amount equal to two (2) times the sum of the Executive’s Annual Salary and the Executive’s target annual bonus for the fiscal year in which the termination occurs (without giving effect to any event or circumstance constituting Good Reason) at one hundred percent (100%) of such target annual bonus, which shall be paid on the sixtieth (60 th ) day following the Executive’s termination of employment, provided that the Release is executed and effective by then or the Executive shall forfeit the payment of such amount;

 

(ii)  all outstanding options, restricted stock and other similar rights held by the Executive, which shall become one hundred percent (100%) vested; and

 

(iii)  continuation of medical insurance coverage for the Executive and the Executive’s family subject to and in accordance with Section 4980B of the Code (“ COBRA ”), and subject to the Executive’s payment of the applicable COBRA coverage premium (“ COBRA Coverage Premium ”) during the applicable COBRA coverage period (“ COBRA Period ”); and

 

(iv)  payment to the Executive of a taxable amount on a monthly basis equal to the COBRA Premium for twenty-four (24) months from the Separation Date; provided that the Company shall have no obligation to provide such benefit if the Executive fails to elect COBRA benefits in a timely fashion or if the Executive becomes eligible for medical coverage with another employer; and provided that if the COBRA Period is otherwise ( i.e., for reasons not described in the immediately preceding proviso) earlier terminated under applicable law during the period that the Executive would otherwise be entitled to receive the benefit under this subsection (v), the Company will continue to pay to the Executive the same taxable amount it paid on a monthly basis during the COBRA Period each month for the remainder of the relevant period.

 

For purposes of this Agreement, “ Annual Salary ” shall mean the Executive’s annual base salary then in effect or, if higher, in effect at the time of the Change in Control, excluding reimbursements and amounts attributable to stock options and other non-cash compensation; and the “ Severance Compensation ” shall mean the compensation set forth in (i), (ii), and (iv) above.

 

(d)                                  If any of the benefits set forth in this Agreement are deferred compensation as defined in Section 409A of the Code, any termination of employment triggering payment of such benefits must constitute a “separation from service” under Section 409A of the Code before, subject to subsection (e) below, a distribution of such benefits can commence.  For purposes of clarification, this paragraph shall not cause any forfeiture of benefits on the part of the Executive, but shall only act as a delay until such time as a “separation from service” occurs. In addition, the Company Notice Period and the Executive Notice Period shall be interpreted and administered in

 

4



 

accordance with Section 409A of the Code and the “separation from service” rules thereunder.  In particular, if a waiver of the Company Notice Period or the Executive Notice Period triggers a “separation from service,” such waiver shall constitute a termination and any amounts due to the Executive over the remaining portion of the applicable notice period shall be deemed additional severance under Section 3(c)(ii) of this Agreement and paid accordingly.  In addition, any applicable notice or release periods and dates of payment shall be adjusted accordingly.

 

(e)                                   Notwithstanding any other provision with respect to the timing of payments, if, at the time of the Executive’s termination, the Executive is deemed to be a “specified employee” (within the meaning of Code Section 409A, and any successor statute, regulation and guidance thereto) of the Company, then solely to the extent necessary to comply with the requirements of Code Section 409A, any payments to which the Executive may become entitled under this Agreement which are subject to Code Section 409A (and not otherwise exempt from its application) will be withheld until the first (1 st ) business day of the seventh (7 th ) month following the termination of the Executive’s employment, at which time the Executive shall be paid an aggregate amount equal to the accumulated, but unpaid, payments otherwise due to the Executive under the terms of this Agreement.

 

(f)                                    I f any payment or benefit the Executive would receive under this Agreement, when combined with any other payment or benefit the Executive receives pursuant to a Change in Control (“Payment”) would (i) constitute a “parachute payment” within the meaning of Code Section 280G, and (ii) but for this sentence, be subject to the excise tax imposed by Section 4999 of the Code (the “Excise Tax”), then such Payment shall be either (x) the full amount of such Payment or (y) such less amount as would result in no portion of the Payment being subject to the Excise Tax, whichever of the foregoing amounts, taking into account the applicable federal, state, and local employments taxes, income taxes, and the Excise Tax results in the Executive’s receipt, on an after-tax basis, of the greater amount of the Payment, notwithstanding that all or some portion of the Payment may be subject to the Excise Tax.  The Company shall, in a manner compliant with Code Section 409A, determine in good faith which payment(s) or benefit(s) to reduce based on what provides the best economic result for the Executive.  The Company shall provide the Executive with sufficient information to support its determination and to allow the Executive to file and pay any required taxes.

 

4.                                       No Duplication of Compensation .  The Severance Compensation shall replace, and be provided in lieu of, any severance or similar compensation that may be provided to the Executive under any other agreement or arrangement in relation to termination of employment; provided , however , that this prohibition against duplication shall not be construed to otherwise limit the Executive’s rights to payments or benefits provided under any pension plan (as defined in Section 3(2) of the Employee Retirement Income Security Act of 1974, as amended), deferred compensation, stock, stock option or similar plan sponsored by the Company.  This Agreement supersedes any other agreements or representations, oral or otherwise, express or implied, with respect to the subject matter hereof which may have been made by either party, including, without limitation, the Severance Agreement dated as of December 1, 2010 between the Company and the Executive.

 

5



 

5.                                       No Mitigation .  If the Executive’s employment with the Company terminates following a Change in Control, the Executive is not required to seek other employment or to attempt in any way to reduce any amounts payable to the Executive by the Company pursuant to Section 3 or Section 15.  Except as set forth in Section 4, the amount of any payment or benefit provided for in this Agreement shall not be reduced by any compensation earned by the Executive as the result of employment by another employer, by retirement benefits, by offset against any amount claimed to be owed by the Executive to the Company, or otherwise.

 

6.                                       Confidentiality, Non-Competition, and Assignment of Inventions.   The Company’s obligations under this Agreement are contingent upon the Executive’s execution of the Company’s Proprietary Information, Inventions, and Competition Agreement (the “ Proprietary Information Agreement ”).  The parties agree that the obligations set forth in the Proprietary Information Agreement shall survive termination of this Agreement and termination of the Executive’s employment, regardless of the reason for such termination.

 

7.                                       Enforceability .  If any provision of this Agreement shall be deemed invalid or unenforceable as written, this Agreement shall be construed, to the greatest extent possible, or modified, to the extent allowable by law, in a manner which shall render it valid and enforceable.  No invalidity or unenforceability of any provision contained herein shall affect any other portion of this Agreement.

 

8.                                       Notices .  Except as otherwise specifically provided herein, any notice required or permitted by this Agreement shall be in writing and shall be delivered as follows with notice deemed given as indicated: (i)  by personal delivery when delivered personally; (ii) by overnight courier upon written verification of receipt; (iii) by telecopy or facsimile transmission upon acknowledgment of receipt of electronic transmission; or (iv) by certified or registered mail, return receipt requested, upon verification of receipt.  Notices to the Executive shall be sent to the last known address in the Company’s records or such other address as the Executive may specify in writing.  Notices to the Company shall be sent to the Company’s Chairman of the Board (or if the Executive is also the Chairman of the Board, to the Company’s Lead Director), or to such other Company representative as the Company may specify in writing.

 

9.                                       Claims for Benefits.   All claims by the Executive for benefits under this Agreement shall be directed to and determined by the Board and shall be in writing.  Any denial by the Board of a claim for benefits under this Agreement shall be delivered to the Executive in writing and shall set forth the specific reasons for the denial and the specific provisions of this Agreement relied upon.  The Board shall afford a reasonable opportunity to the Executive for a review of the decision denying a claim and shall further allow the Executive to appeal to the Board a decision of the Board within sixty (60) days after notification by the Board that the Executive’s claim has been denied.  In no event shall the Board’s claims or appeals determination be given any deference or weight in any subsequent legal proceeding.

 

10.                                Modifications and Amendments .  The terms and provisions of this Agreement may be modified or amended only by written agreement executed by the Company and the Executive.  The Company and the Executive agree that they will jointly execute an amendment to modify this Agreement to the extent necessary to comply with or be exempt from the requirements of

 

6



 

Code Section 409A, or any successor statute, regulation and guidance thereto; provided that no such amendment shall increase the total financial obligation of the Company under this Agreement.

 

11.                                Waivers and Consents .  The terms and provisions of this Agreement may be waived, or consent for the departure therefrom granted, only by a written document executed by the party entitled to the benefits of such terms or provisions.  No such waiver or consent shall be deemed to be or shall constitute a waiver or consent with respect to any other terms or provisions of this Agreement, whether or not similar.  Each such waiver or consent shall be effective only in the specific instance and for the purpose for which it was given, and shall not constitute a continuing waiver or consent.

 

12.                                Binding Effect; Assignment .  The Agreement will be binding upon and inure to the benefit of (a) the heirs, executors and legal representatives of the Executive upon the Executive’s death and (b) any successor of the Company.  Any such successor of the Company will be deemed substituted for the Company under the terms of the Agreement for all purposes.  For this purpose, “successor” means any person, firm, corporation or other business entity which at any time, whether by purchase, merger or otherwise, directly or indirectly acquires all or substantially all of the assets or business of the Company.  None of the rights of the Executive to receive any form of compensation payable pursuant to the Agreement may be assigned or transferred except by will or the laws of descent and distribution.  Any other attempted assignment, transfer, conveyance or other disposition of the Executive’s right to compensation or other benefits will be null and void.

 

13.                                Governing Law .  This Agreement and the rights and obligations of the parties hereunder shall be construed in accordance with and governed by the law of the Commonwealth of Massachusetts, without giving effect to the conflict of law principles thereof.

 

14.                                Jurisdiction and Service of Process .  Any legal action or proceeding with respect to this Agreement shall be brought in the courts of the Commonwealth of Massachusetts or of the United States of America for the District of Massachusetts.  By execution and delivery of this Agreement, each of the parties hereto accepts for itself and in respect of its property, generally and unconditionally, the jurisdiction of the aforesaid courts.

 

15.                                Attorneys’ Fees .  The Company shall pay to the Executive all legal fees and expenses incurred by the Executive in disputing in good faith any issue hereunder relating to the termination of the Executive’s employment, in seeking in good faith to obtain or enforce any benefit or right provided by this Agreement.  Such payments shall be made within five (5) business days after delivery of the Executive’s written requests for payment accompanied with such evidence of fees and expenses incurred as the Company reasonably may require.

 

16.                                Withholding .  The Company is authorized to withhold, or to cause to be withheld, from any payment or benefit under the Agreement the full amount of any applicable withholding taxes.

 

17.                                Tax Consequences .  The Company does not guarantee the tax treatment or tax consequences associated with any payment or benefit arising under this Agreement.

 

7



 

18.                                Acknowledgment .  The Executive acknowledges that he has had the opportunity to discuss this matter with and obtain advice from his private attorney, has had sufficient time to, and has carefully read and fully understands all the provisions of the Agreement, and is knowingly and voluntarily entering into the Agreement.

 

19.                                Counterparts .  This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

 

20.                                Section 409A .  The parties hereto intend that the payments and benefits provided by this Agreement shall comply with or be exempt from the requirements of Code Section 409A and related regulations and Treasury pronouncements, and this Agreement shall be interpreted accordingly.  Each separately identified payment or benefit hereunder shall be deemed to be a separately determinable payment for purposes of Code Section 409A, and each payment to be made in installments shall be deemed a series of separate payments.  If any provision provided herein could result in the imposition of an additional tax under the provisions of Code Section 409A, the Executive and the Company agree that such provision will be reformed to avoid imposition of any such additional tax in the manner that the Executive and the Company mutually agree is appropriate to comply with or be exempt from Code Section 409A.

 

21.                                Reimbursements .  To the extent there are any reimbursements of expenses under this Agreement including, without limitation, under Section 15 hereof, payments with respect to such reimbursements shall be made no later than on or before the last day of the calendar year following the calendar year in which the relevant expense is incurred.  The amount of expenses eligible for reimbursement during a calendar year may not affect the expenses eligible for reimbursement in any other calendar year and any such reimbursements may not be exchanged or liquidated for any other benefit or payment.

 

IN WITNESS WHEREOF, the parties have executed and delivered this Change in Control Severance Agreement as of the day and year first above written.

 

 

COMPANY:

 

 

 

IMMUNOGEN, INC.

 

 

 

/s/ Stephen C. McCluski

 

Name: Stephen C. McCluski

 

Title: Chairman of the Board

 

 

 

 

 

EXECUTIVE:

 

 

 

/s/ Daniel M. Junius

 

Name: Daniel M. Junius

 

8



 

Exhibit A

 

GENERAL RELEASE

 

1.                                       General Release .  In consideration of the payments and benefits to be made under that certain Change in Control Severance Agreement, dated                          , (the “ Agreement ”),                                          (the “ Executive ”), with the intention of binding the Executive and the Executive’s heirs, executors, administrators and assigns, does hereby release, remise, acquit and forever discharge ImmunoGen, Inc. (the “ Company ”) and each of its subsidiaries and affiliates (the “ Company Affiliated Group ”), their present and former officers, directors, executives, agents, attorneys, employees and employee benefits plans (and the fiduciaries thereof), and the successors, predecessors and assigns of each of the foregoing (collectively, the “ Company Released Parties ”), of and from any and all claims, actions, causes of action, complaints, charges, demands, rights, damages, debts, sums of money, accounts, financial obligations, suits, expenses, attorneys’ fees and liabilities of whatever kind or nature in law, equity or otherwise, whether accrued, absolute, contingent, unliquidated or otherwise and whether now known or unknown, suspected or unsuspected which the Executive, individually or as a member of a class, now has, owns or holds, or has at any time heretofore had, owned or held, against any Company Released Party in any capacity, including, without limitation, any and all claims (i) arising out of or in any way connected with the Executive’s service to any member of the Company Affiliated Group (or the predecessors thereof) in any capacity, or the termination of such service in any such capacity, (ii) for severance or vacation benefits, unpaid wages, salary or incentive payments, (iii) for breach of contract, wrongful discharge, impairment of economic opportunity, defamation, intentional infliction of emotional harm or other tort and (iv) for any violation of applicable state and local labor and employment laws (including, without limitation, all laws concerning unlawful and unfair labor and employment practices), any and all claims based on the Employee Retirement Income Security Act of 1974 (“ ERISA ”), any and all claims arising under the civil rights laws of any federal, state or local jurisdiction, including, without limitation, Title VII of the Civil Rights Act of 1964 (“ Title VII ”), the Age Discrimination in Employment Act (“ ADEA ”), the Americans with Disabilities Act (“ ADA ”), Sections 503 and 504 of the Rehabilitation Act the Family and Medical Leave Act, the Massachusetts Fair Employment Practices Act, and any and all claims under any whistleblower laws or whistleblower provisions of other laws.

 

2.                                       No Admissions .  The Executive acknowledges and agrees that this General Release is not to be construed in any way as an admission of any liability whatsoever by any Company Released Party, any such liability being expressly denied.

 

3.                                       Application to all Forms of Relief .  This General Release applies to any relief no matter how called, including, without limitation, wages, back pay, front pay, compensatory damages, liquidated damages, punitive damages for pain or suffering, costs and attorney’s fees and expenses.

 

4.                                       Specific Waiver .  The Executive specifically acknowledges that his acceptance of the terms of this General Release is, among other things, a specific waiver of his rights, claims

 

9



 

and causes of action under Title VII, ADEA, ADA, the Massachusetts Fair Employment Practices Act and any state or local law or regulation in respect of discrimination of any kind; provided, however, that nothing herein shall be deemed, nor does anything herein purport, to be a waiver of any right or claim or cause of action which by law the Executive is not permitted to waive.

 

5.                                       No Complaints or Other Claims .  The Executive acknowledges and agrees that he has not, with respect to any transaction or state of facts existing prior to the date hereof, filed any complaints, charges or lawsuits against any Company Released Party with any governmental agency, court or tribunal.  This General Release does not: (i) prohibit or restrict Executive from communicating, providing relevant information to or otherwise cooperating with the U.S. Equal Employment Opportunity Commission or any other governmental authority with responsibility for the administration of fair employment practices laws regarding a possible violation of such laws or responding to any inquiry from such authority, including an inquiry about the existence of this General Release or its underlying facts, or (ii) require Executive to notify the Company of such communications or inquiry.

 

6.                                       Conditions of General Release .

 

(a)   Terms and Conditions .  From and after the date of termination of employment, the Executive shall abide by all the terms and conditions of this General Release and the terms and any conditions set forth in any employment or confidentiality agreements signed by the Executive, which is incorporated herein by reference.

 

(b)   Confidentiality .  The Executive shall not, without the prior written consent of the Company or as may otherwise be required by law or any legal process, or as is necessary in connection with any adversarial proceeding against any member of the Company Affiliated Group (in which case the Executive shall cooperate with the Company in obtaining a protective order at the Company’s expense against disclosure by a court of competent jurisdiction), communicate, to anyone other than the Company and those designated by the Company or on behalf of the Company in the furtherance of its business, any trade secrets, confidential information, knowledge or data relating to any member of the Company Affiliated Group, obtained by the Executive during the Executive’s employment by the Company that is not generally available public knowledge (other than acts by the Executive in violation of this General Release).  This confidentiality obligation is in addition to, and not in lieu of, any other contractual, statutory and common law confidentiality obligation of the Executive to the Company.

 

(c)   Return of Company Material .  The Executive represents that he has returned to the Company all Company Material (as defined below).  For purposes of this Section 6(c), “ Company Material ” means any documents, files and other property and information of any kind belonging or relating to (i) any member of the Company Affiliated Group, (ii) the current and former suppliers, creditors, directors, officers, employees, agents and customers of any of them or (iii) the businesses, products, services and operations (including without limitation, business, financial and accounting practices) of any of them, in each case whether tangible or intangible

 

10



 

(including, without limitation, credit cards, building and office access cards, keys, computer equipment, cellular telephones, pagers, electronic devices, hardware, manuals, files, documents, records, software, customer data, research, financial data and information, memoranda, surveys, correspondence, statistics and payroll and other employee data, and any copies, compilations, extracts, excerpts, summaries and other notes thereof or relating thereto), excluding only information (x) that is generally available public knowledge or (y) that relates to the Executive’s compensation or Executive benefits.

 

(d)   Cooperation .  Following the date of termination of employment, the Executive shall reasonably cooperate with the Company upon reasonable request of the Board of Directors and be reasonably available to the Company with respect to matters arising out of the Executive’s services to the Company Affiliated Group.

 

(e)   Nondisparagement .  The Executive acknowledges and agrees that he shall not make any statements that are professionally or personally disparaging about or adverse to the interests of the Company or any Company Released Party, including, but not limited to, any statements that disparage in any way whatsoever the Company’s products, services, businesses, finances, financial condition, capabilities or other characteristics.

 

(f)   Ownership of Inventions, Non-Disclosure, Non-Competition and Non-Solicitation .  The Executive expressly acknowledges and agrees that the Proprietary Information, Inventions, and Competition Agreement executed by him is incorporated herein by reference, and shall survive the execution of this General Release in full force and effect pursuant to its terms.

 

(g)   No Representation .  The Executive acknowledges that, other than as set forth in this General Release and the Agreement, (i) no promises have been made to him and (ii) in signing this General Release the Executive is not relying upon any statement or representation made by or on behalf of any Company Released Party and each or any of them concerning the merits of any claims or the nature, amount, extent or duration of any damages relating to any claims or the amount of any money, benefits, or compensation due the Executive or claimed by the Executive, or concerning the General Release or concerning any other thing or matter.

 

(h)   Injunctive Relief .  In the event of a breach or threatened breach by the Executive of this Section 6, the Executive agrees that the Company shall be entitled to injunctive relief in a court of appropriate jurisdiction to remedy any such breach or threatened breach, the Executive acknowledging that damages would be inadequate or insufficient.

 

7.                                       Voluntariness .  The Executive agrees that he is relying solely upon his own judgment; that the Executive is over eighteen years of age and is legally competent to sign this General Release; that the Executive is signing this General Release of his own free will; that the Executive has read and understood the General Release before signing it; and that the Executive is signing this General Release in exchange for consideration that he believes is satisfactory and adequate.

 

11



 

8.                                       Legal Counsel .  The Executive acknowledges that he has been informed of the right to consult with legal counsel and has been encouraged to do so.

 

9.                                       Complete Agreement/Severability .  Other than the agreements and/or obligations specifically referenced as surviving herein, this General Release constitutes the complete and final agreement between the parties and supersedes and replaces all prior or contemporaneous agreements, negotiations, or discussions relating to the subject matter of this General Release.  All provisions and portions of this General Release are severable.  If any provision or portion of this General Release or the application of any provision or portion of the General Release shall be determined to be invalid or unenforceable to any extent or for any reason, all other provisions and portions of this General Release shall remain in full force and shall continue to be enforceable to the fullest and greatest extent permitted by law.

 

10.                                Acceptance .  The Executive acknowledges that he has been given a period of twenty-one (21) days within which to consider this General Release, unless applicable law requires a longer period, in which case the Executive shall be advised of such longer period and such longer period shall apply.  The Executive may accept this General Release at any time within this period of time by signing the General Release and returning it to the Company.

 

11.                                Revocability .  This General Release shall not become effective or enforceable until seven (7) calendar days after the Executive signs it.  The Executive may revoke his acceptance of this General Release at any time within that seven (7) calendar day period by sending written notice to the Company.  Such notice must be received by the Company within the seven (7) calendar day period in order to be effective and, if so received, would void this General Release for all purposes.

 

12.                                Governing Law .  Except for issues or matters as to which federal law is applicable, this General Release shall be governed by and construed and enforced in accordance with the laws of the Commonwealth of Massachusetts without giving effect to the conflicts of law principles thereof.

 

IN WITNESS WHEREOF, the Executive has executed this General Release as of the date last set forth below.

 

EXECUTIVE

 

 

 

 

 

 

 

 

 

 

Date:

 

Name:

 

 

 

12


Exhibit 10.3

 

CHANGE IN CONTROL SEVERANCE AGREEMENT

 

This Agreement is entered into as of the 30th day of November, 2012 (the “ Effective Date ”) by and between ImmunoGen, Inc., a Massachusetts corporation (the “ Company ”), and John M. Lambert (the “ Executive ”).

 

WHEREAS, the Company recognizes that the Executive’s service to the Company is very important to the future success of the Company;

 

WHEREAS, the Executive desires to enter into this Agreement to provide the Executive with certain financial protection in the event that his employment terminates under certain conditions following a change in control of the Company; and

 

WHEREAS the Board of Directors of the Company (the “ Board ”) has determined that it is in the best interests of the Company to enter into this Agreement.

 

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company and the Executive hereby agree as follows:

 

1.                                       Definitions .

 

(a)                                  Cause .  For purposes of this Agreement, “ Cause ” shall mean that the Executive has (i) willfully committed an act or omission that materially harms the Company; (ii) been grossly negligent in the performance of the Executive’s duties to the Company; (iii) willfully failed or refused to follow the lawful and proper directives of the Board; (iv) been convicted of, or pleaded guilty or nolo contendere , to a felony; (v) committed an act involving moral turpitude that is or is reasonably expected to be injurious to the Company or its reputation; (vi) committed an act relating to the Executive’s employment or the Company involving, in the good faith judgment of the Board, material fraud or theft; (vii) breached any material provision of this Agreement or any nondisclosure or non-competition agreement between the Executive and the Company, as all of the foregoing may be amended prospectively from time to time; or (viii) breached a material provision of any code of conduct or ethics policy in effect at the Company, as all of the foregoing may be amended prospectively from time to time.

 

(b)                                  Change in Control .  For purposes of this Agreement, a “ Change in Control ” shall mean the occurrence of any of the following events; provided that “Change in Control” shall be interpreted in a manner, and limited to the extent necessary, so that it will not cause adverse tax consequences for either party with respect to Section 409A of the Internal Revenue Code of 1986, as amended (the “ Code ”), and Treasury Regulations 1.409A-3(i)(5), and any successor statute, regulation and guidance thereto:

 

(i)                                      Ownership.  Any “Person” (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended) becomes the “Beneficial Owner” (as defined in Rule 13d-3 under said Act), directly or indirectly, of securities of the Company representing 50% or more of the total voting power represented by the Company’s then outstanding voting securities (excluding for this purpose any such voting

 



 

securities held by the Company or its Affiliates (as defined in the Company’s 2006 Employee, Director and Consultant Equity Incentive Plan) or by any employee benefit plan of the Company) pursuant to a transaction or a series of related transactions which the Board does not approve; or

 

(ii)                                   Merger/Sale of Assets.  (A) A merger or consolidation of the Company whether or not approved by the Board, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity or the parent of such corporation) at least 50% of the total voting power represented by the voting securities of the Company or such surviving entity or parent of such corporation, as the case may be, outstanding immediately after such merger or consolidation; or (B) the stockholders of the Company approve an agreement for the sale or disposition by the Company of all or substantially all of the Company’s assets; or

 

(iii)                                Change in Board Composition.  A change in the composition of the Board, as a result of which fewer than a majority of the directors are Incumbent Directors.  “Incumbent Directors” shall mean directors who either (A) are directors of the Company as of November 11, 2006, or (B) are elected, or nominated for election, to the Board with the affirmative votes of at least a majority of the Incumbent Directors at the time of such election or nomination (but shall not include an individual whose election or nomination is in connection with an actual or threatened proxy contest relating to the election of directors to the Company).

 

(c)                                   Disability .  For purposes of this Agreement, “ Disability ” shall mean that the Executive (i) is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months, or (ii) is, by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months, receiving income replacement benefits for a period of not less than three (3) months under a Company-sponsored group disability plan.  Whether the Executive has a Disability will be determined by a majority of the Board based on evidence provided by one or more physicians selected by the Board and approved by the Executive, which approval shall not be unreasonably withheld.  In any case, if a disability is determined to trigger the payment of any “deferred compensation” as defined in Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”), disability shall be determined in accordance with Section 409A of the Code.

 

(d)                                  Good Reason .  For purposes of this Agreement, “ Good Reason ” shall mean the occurrence of one or more of the following without the Executive’s consent: (i) a change in the principal location at which the Executive performs his duties for the Company to a new location that is at least forty (40) miles from the prior location; (ii) a material change in the Executive’s authority, functions, duties or responsibilities as an executive of the Company, which would cause his position with the Company to become of less responsibility, importance or scope than

 

2



 

his highest position with the Company at any time from the date of this Agreement to immediately prior to the Change in Control, provided , however , that such material change is not in connection with the termination of the Executive’s employment by the Company for Cause or death or Disability and further provided that it shall not be considered a material change if the Company becomes a subsidiary of another entity and the Executive continues to hold a position in the subsidiary that is at least as high (in both title and scope of responsibilities) as the highest position he held with the Company at any time from the date of this Agreement to immediately prior to the Change in Control; (iii) a material reduction in the Executive’s annual base salary or (iv) a material reduction in the Executive’s target annual bonus as compared to the target annual bonus set for the previous fiscal year.

 

2.                                       Term of Agreement .  The term of this Agreement (the “ Term ”) shall commence on the Effective Date and shall continue in effect for two (2) years; provided , however , that commencing on second anniversary of the Effective Date and continuing each anniversary thereafter, the Term shall automatically be extended for one (1) additional year unless, not later than nine (9) months before the conclusion of the Term, the Company or the Executive shall have given notice not to extend the Term; and further provided , however , that if a Change in Control shall have occurred during the Term, the Term shall expire on the last day of the twelfth (12 th ) month following the month in which such Change in Control occurred.  Notice of termination or termination of this Agreement shall not constitute Cause or Good Reason (both terms as defined above).

 

3.                                       Termination; Notice; Severance Compensation .

 

(a)                                  In the event that within a period of two (2) months before or twelve (12) months following the consummation of a Change in Control the Company elects to terminate the Executive’s employment other than for Cause (but not including termination due to the Executive’s Disability), then the Company shall give the Executive no less than sixty (60) days advance notice of such termination (the “Company’s Notice Period”); provided that the Company may elect to require the Executive to cease performing work for the Company so long as the Company continues the Executive’s full salary and benefits during the Company’s Notice Period.

 

(b)                                  In the event that within a period of two (2) months before or twelve (12) months following the consummation of a Change in Control the Executive elects to terminate his employment for Good Reason, then the Executive shall give the Company no less than thirty (30) days and no more than sixty (60) days advance notice of such termination (the “Executive’s Notice Period”); provided that the Company may elect to require the Executive to cease performing work for the Company so long as the Company continues the Executive’s full salary and benefits during the Executive’s Notice Period.  In order to effect a termination for Good Reason pursuant to this Agreement, the Executive must notice his intent to terminate for Good Reason not later than ninety (90) days following the occurrence of the Good Reason.

 

(c)                                   In the event that within a period of two (2) months before or twelve (12) months following the consummation of a Change in Control the Executive’s employment with the Company is terminated by the Company other than for Cause (but not including termination due to the Executive’s death or Disability), or by the Executive for Good Reason, then, contingent

 

3



 

upon the Executive’s execution of a release of claims against the Company in substantially the form attached hereto as Exhibit A (the “ Release ”) the Executive shall be entitled to, in addition to any amounts due to the Executive for services rendered prior to the termination date:

 

(i)  a lump sum payment from the Company in an amount equal to one and one-half (1.5) times the sum of the Executive’s Annual Salary and the Executive’s target annual bonus for the fiscal year in which the termination occurs (without giving effect to any event or circumstance constituting Good Reason) at one hundred percent (100%) of such target annual bonus, which shall be paid on the sixtieth (60 th ) day following the Executive’s termination of employment, provided that the Release is executed and effective by then or the Executive shall forfeit the payment of such amount;

 

(ii)  all outstanding options, restricted stock and other similar rights held by the Executive, which shall become one hundred percent (100%) vested; and

 

(iii)  continuation of medical insurance coverage for the Executive and the Executive’s family subject to and in accordance with Section 4980B of the Code (“ COBRA ”), and subject to the Executive’s payment of the applicable COBRA coverage premium (“ COBRA Coverage Premium ”) during the applicable COBRA coverage period (“ COBRA Period ”); and

 

(iv)  payment to the Executive of a taxable amount on a monthly basis equal to the COBRA Premium for eighteen (18) months from the Separation Date; provided that the Company shall have no obligation to provide such benefit if the Executive fails to elect COBRA benefits in a timely fashion or if the Executive becomes eligible for medical coverage with another employer; and provided that if the COBRA Period is otherwise ( i.e., for reasons not described in the immediately preceding proviso) earlier terminated under applicable law during the period that the Executive would otherwise be entitled to receive the benefit under this subsection (v), the Company will continue to pay to the Executive the same taxable amount it paid on a monthly basis during the COBRA Period each month for the remainder of the relevant period.

 

For purposes of this Agreement, “ Annual Salary ” shall mean the Executive’s annual base salary then in effect or, if higher, in effect at the time of the Change in Control, excluding reimbursements and amounts attributable to stock options and other non-cash compensation; and the “ Severance Compensation ” shall mean the compensation set forth in (i), (ii), and (iv) above.

 

(d)                                  If any of the benefits set forth in this Agreement are deferred compensation as defined in Section 409A of the Code, any termination of employment triggering payment of such benefits must constitute a “separation from service” under Section 409A of the Code before, subject to subsection (e) below, a distribution of such benefits can commence.  For purposes of clarification, this paragraph shall not cause any forfeiture of benefits on the part of the Executive, but shall only act as a delay until such time as a “separation from service” occurs. In addition, the Company Notice Period and the Executive Notice Period shall be interpreted and administered in

 

4



 

accordance with Section 409A of the Code and the “separation from service” rules thereunder.  In particular, if a waiver of the Company Notice Period or the Executive Notice Period triggers a “separation from service,” such waiver shall constitute a termination and any amounts due to the Executive over the remaining portion of the applicable notice period shall be deemed additional severance under Section 3(c)(ii) of this Agreement and paid accordingly.  In addition, any applicable notice or release periods and dates of payment shall be adjusted accordingly.

 

(e)                                   Notwithstanding any other provision with respect to the timing of payments, if, at the time of the Executive’s termination, the Executive is deemed to be a “specified employee” (within the meaning of Code Section 409A, and any successor statute, regulation and guidance thereto) of the Company, then solely to the extent necessary to comply with the requirements of Code Section 409A, any payments to which the Executive may become entitled under this Agreement which are subject to Code Section 409A (and not otherwise exempt from its application) will be withheld until the first (1 st ) business day of the seventh (7 th ) month following the termination of the Executive’s employment, at which time the Executive shall be paid an aggregate amount equal to the accumulated, but unpaid, payments otherwise due to the Executive under the terms of this Agreement.

 

(f)                                    I f any payment or benefit the Executive would receive under this Agreement, when combined with any other payment or benefit the Executive receives pursuant to a Change in Control (“Payment”) would (i) constitute a “parachute payment” within the meaning of Code Section 280G, and (ii) but for this sentence, be subject to the excise tax imposed by Section 4999 of the Code (the “Excise Tax”), then such Payment shall be either (x) the full amount of such Payment or (y) such less amount as would result in no portion of the Payment being subject to the Excise Tax, whichever of the foregoing amounts, taking into account the applicable federal, state, and local employments taxes, income taxes, and the Excise Tax results in the Executive’s receipt, on an after-tax basis, of the greater amount of the Payment, notwithstanding that all or some portion of the Payment may be subject to the Excise Tax.  The Company shall, in a manner compliant with Code Section 409A, determine in good faith which payment(s) or benefit(s) to reduce based on what provides the best economic result for the Executive.  The Company shall provide the Executive with sufficient information to support its determination and to allow the Executive to file and pay any required taxes.

 

4.                                       No Duplication of Compensation .  The Severance Compensation shall replace, and be provided in lieu of, any severance or similar compensation that may be provided to the Executive under any other agreement or arrangement in relation to termination of employment; provided , however , that this prohibition against duplication shall not be construed to otherwise limit the Executive’s rights to payments or benefits provided under any pension plan (as defined in Section 3(2) of the Employee Retirement Income Security Act of 1974, as amended), deferred compensation, stock, stock option or similar plan sponsored by the Company.  This Agreement supersedes any other agreements or representations, oral or otherwise, express or implied, with respect to the subject matter hereof which may have been made by either party, including, without limitation, the Severance Agreement dated as of December 1, 2010 between the Company and the Executive.

 

5



 

5.                                       No Mitigation .  If the Executive’s employment with the Company terminates following a Change in Control, the Executive is not required to seek other employment or to attempt in any way to reduce any amounts payable to the Executive by the Company pursuant to Section 3 or Section 15.  Except as set forth in Section 4, the amount of any payment or benefit provided for in this Agreement shall not be reduced by any compensation earned by the Executive as the result of employment by another employer, by retirement benefits, by offset against any amount claimed to be owed by the Executive to the Company, or otherwise.

 

6.                                       Confidentiality, Non-Competition, and Assignment of Inventions.   The Company’s obligations under this Agreement are contingent upon the Executive’s execution of the Company’s Proprietary Information, Inventions, and Competition Agreement (the “ Proprietary Information Agreement ”).  The parties agree that the obligations set forth in the Proprietary Information Agreement shall survive termination of this Agreement and termination of the Executive’s employment, regardless of the reason for such termination.

 

7.                                       Enforceability .  If any provision of this Agreement shall be deemed invalid or unenforceable as written, this Agreement shall be construed, to the greatest extent possible, or modified, to the extent allowable by law, in a manner which shall render it valid and enforceable.  No invalidity or unenforceability of any provision contained herein shall affect any other portion of this Agreement.

 

8.                                       Notices .  Except as otherwise specifically provided herein, any notice required or permitted by this Agreement shall be in writing and shall be delivered as follows with notice deemed given as indicated: (i)  by personal delivery when delivered personally; (ii) by overnight courier upon written verification of receipt; (iii) by telecopy or facsimile transmission upon acknowledgment of receipt of electronic transmission; or (iv) by certified or registered mail, return receipt requested, upon verification of receipt.  Notices to the Executive shall be sent to the last known address in the Company’s records or such other address as the Executive may specify in writing.  Notices to the Company shall be sent to the Company’s Chairman of the Board (or if the Chairman of the Board is also the CEO, to the Company’s Lead Director), or to such other Company representative as the Company may specify in writing.

 

9.                                       Claims for Benefits.   All claims by the Executive for benefits under this Agreement shall be directed to and determined by the Board and shall be in writing.  Any denial by the Board of a claim for benefits under this Agreement shall be delivered to the Executive in writing and shall set forth the specific reasons for the denial and the specific provisions of this Agreement relied upon.  The Board shall afford a reasonable opportunity to the Executive for a review of the decision denying a claim and shall further allow the Executive to appeal to the Board a decision of the Board within sixty (60) days after notification by the Board that the Executive’s claim has been denied.  In no event shall the Board’s claims or appeals determination be given any deference or weight in any subsequent legal proceeding.

 

10.                                Modifications and Amendments .  The terms and provisions of this Agreement may be modified or amended only by written agreement executed by the Company and the Executive.  The Company and the Executive agree that they will jointly execute an amendment to modify this Agreement to the extent necessary to comply with or be exempt from the requirements of

 

6



 

Code Section 409A, or any successor statute, regulation and guidance thereto; provided that no such amendment shall increase the total financial obligation of the Company under this Agreement.

 

11.                                Waivers and Consents .  The terms and provisions of this Agreement may be waived, or consent for the departure therefrom granted, only by a written document executed by the party entitled to the benefits of such terms or provisions.  No such waiver or consent shall be deemed to be or shall constitute a waiver or consent with respect to any other terms or provisions of this Agreement, whether or not similar.  Each such waiver or consent shall be effective only in the specific instance and for the purpose for which it was given, and shall not constitute a continuing waiver or consent.

 

12.                                Binding Effect; Assignment .  The Agreement will be binding upon and inure to the benefit of (a) the heirs, executors and legal representatives of the Executive upon the Executive’s death and (b) any successor of the Company.  Any such successor of the Company will be deemed substituted for the Company under the terms of the Agreement for all purposes.  For this purpose, “successor” means any person, firm, corporation or other business entity which at any time, whether by purchase, merger or otherwise, directly or indirectly acquires all or substantially all of the assets or business of the Company.  None of the rights of the Executive to receive any form of compensation payable pursuant to the Agreement may be assigned or transferred except by will or the laws of descent and distribution.  Any other attempted assignment, transfer, conveyance or other disposition of the Executive’s right to compensation or other benefits will be null and void.

 

13.                                Governing Law .  This Agreement and the rights and obligations of the parties hereunder shall be construed in accordance with and governed by the law of the Commonwealth of Massachusetts, without giving effect to the conflict of law principles thereof.

 

14.                                Jurisdiction and Service of Process .  Any legal action or proceeding with respect to this Agreement shall be brought in the courts of the Commonwealth of Massachusetts or of the United States of America for the District of Massachusetts.  By execution and delivery of this Agreement, each of the parties hereto accepts for itself and in respect of its property, generally and unconditionally, the jurisdiction of the aforesaid courts.

 

15.                                Attorneys’ Fees .  The Company shall pay to the Executive all legal fees and expenses incurred by the Executive in disputing in good faith any issue hereunder relating to the termination of the Executive’s employment, in seeking in good faith to obtain or enforce any benefit or right provided by this Agreement.  Such payments shall be made within five (5) business days after delivery of the Executive’s written requests for payment accompanied with such evidence of fees and expenses incurred as the Company reasonably may require.

 

16.                                Withholding .  The Company is authorized to withhold, or to cause to be withheld, from any payment or benefit under the Agreement the full amount of any applicable withholding taxes.

 

17.                                Tax Consequences .  The Company does not guarantee the tax treatment or tax consequences associated with any payment or benefit arising under this Agreement.

 

7



 

18.                                Acknowledgment .  The Executive acknowledges that he has had the opportunity to discuss this matter with and obtain advice from his private attorney, has had sufficient time to, and has carefully read and fully understands all the provisions of the Agreement, and is knowingly and voluntarily entering into the Agreement.

 

19.                                Counterparts .  This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

 

20.                                Section 409A .  The parties hereto intend that the payments and benefits provided by this Agreement shall comply with or be exempt from the requirements of Code Section 409A and related regulations and Treasury pronouncements, and this Agreement shall be interpreted accordingly.  Each separately identified payment or benefit hereunder shall be deemed to be a separately determinable payment for purposes of Code Section 409A, and each payment to be made in installments shall be deemed a series of separate payments.  If any provision provided herein could result in the imposition of an additional tax under the provisions of Code Section 409A, the Executive and the Company agree that such provision will be reformed to avoid imposition of any such additional tax in the manner that the Executive and the Company mutually agree is appropriate to comply with or be exempt from Code Section 409A.

 

21.                                Reimbursements .  To the extent there are any reimbursements of expenses under this Agreement including, without limitation, under Section 15 hereof, payments with respect to such reimbursements shall be made no later than on or before the last day of the calendar year following the calendar year in which the relevant expense is incurred.  The amount of expenses eligible for reimbursement during a calendar year may not affect the expenses eligible for reimbursement in any other calendar year and any such reimbursements may not be exchanged or liquidated for any other benefit or payment.

 

IN WITNESS WHEREOF, the parties have executed and delivered this Change in Control Severance Agreement as of the day and year first above written.

 

 

COMPANY:

 

 

 

IMMUNOGEN, INC.

 

 

 

/s/ Daniel M. Junius

 

Name: Daniel M. Junius

 

Title: President and Chief Executive Officer

 

 

 

 

 

EXECUTIVE:

 

 

 

/s/ John M. Lambert

 

Name:  John M. Lambert

 

8



 

Exhibit A

 

GENERAL RELEASE

 

1.                                       General Release .  In consideration of the payments and benefits to be made under that certain Change in Control Severance Agreement, dated                          , (the “ Agreement ”),                                          (the “ Executive ”), with the intention of binding the Executive and the Executive’s heirs, executors, administrators and assigns, does hereby release, remise, acquit and forever discharge ImmunoGen, Inc. (the “ Company ”) and each of its subsidiaries and affiliates (the “ Company Affiliated Group ”), their present and former officers, directors, executives, agents, attorneys, employees and employee benefits plans (and the fiduciaries thereof), and the successors, predecessors and assigns of each of the foregoing (collectively, the “ Company Released Parties ”), of and from any and all claims, actions, causes of action, complaints, charges, demands, rights, damages, debts, sums of money, accounts, financial obligations, suits, expenses, attorneys’ fees and liabilities of whatever kind or nature in law, equity or otherwise, whether accrued, absolute, contingent, unliquidated or otherwise and whether now known or unknown, suspected or unsuspected which the Executive, individually or as a member of a class, now has, owns or holds, or has at any time heretofore had, owned or held, against any Company Released Party in any capacity, including, without limitation, any and all claims (i) arising out of or in any way connected with the Executive’s service to any member of the Company Affiliated Group (or the predecessors thereof) in any capacity, or the termination of such service in any such capacity, (ii) for severance or vacation benefits, unpaid wages, salary or incentive payments, (iii) for breach of contract, wrongful discharge, impairment of economic opportunity, defamation, intentional infliction of emotional harm or other tort and (iv) for any violation of applicable state and local labor and employment laws (including, without limitation, all laws concerning unlawful and unfair labor and employment practices), any and all claims based on the Employee Retirement Income Security Act of 1974 (“ ERISA ”), any and all claims arising under the civil rights laws of any federal, state or local jurisdiction, including, without limitation, Title VII of the Civil Rights Act of 1964 (“ Title VII ”), the Age Discrimination in Employment Act (“ ADEA ”), the Americans with Disabilities Act (“ ADA ”), Sections 503 and 504 of the Rehabilitation Act the Family and Medical Leave Act, the Massachusetts Fair Employment Practices Act, and any and all claims under any whistleblower laws or whistleblower provisions of other laws.

 

2.                                       No Admissions .  The Executive acknowledges and agrees that this General Release is not to be construed in any way as an admission of any liability whatsoever by any Company Released Party, any such liability being expressly denied.

 

3.                                       Application to all Forms of Relief .  This General Release applies to any relief no matter how called, including, without limitation, wages, back pay, front pay, compensatory damages, liquidated damages, punitive damages for pain or suffering, costs and attorney’s fees and expenses.

 

4.                                       Specific Waiver .  The Executive specifically acknowledges that his acceptance of the terms of this General Release is, among other things, a specific waiver of his rights, claims

 

9



 

and causes of action under Title VII, ADEA, ADA, the Massachusetts Fair Employment Practices Act and any state or local law or regulation in respect of discrimination of any kind; provided, however, that nothing herein shall be deemed, nor does anything herein purport, to be a waiver of any right or claim or cause of action which by law the Executive is not permitted to waive.

 

5.                                       No Complaints or Other Claims .  The Executive acknowledges and agrees that he has not, with respect to any transaction or state of facts existing prior to the date hereof, filed any complaints, charges or lawsuits against any Company Released Party with any governmental agency, court or tribunal.  This General Release does not: (i) prohibit or restrict Executive from communicating, providing relevant information to or otherwise cooperating with the U.S. Equal Employment Opportunity Commission or any other governmental authority with responsibility for the administration of fair employment practices laws regarding a possible violation of such laws or responding to any inquiry from such authority, including an inquiry about the existence of this General Release or its underlying facts, or (ii) require Executive to notify the Company of such communications or inquiry.

 

6.                                       Conditions of General Release .

 

(a)   Terms and Conditions .  From and after the date of termination of employment, the Executive shall abide by all the terms and conditions of this General Release and the terms and any conditions set forth in any employment or confidentiality agreements signed by the Executive, which is incorporated herein by reference.

 

(b)   Confidentiality .  The Executive shall not, without the prior written consent of the Company or as may otherwise be required by law or any legal process, or as is necessary in connection with any adversarial proceeding against any member of the Company Affiliated Group (in which case the Executive shall cooperate with the Company in obtaining a protective order at the Company’s expense against disclosure by a court of competent jurisdiction), communicate, to anyone other than the Company and those designated by the Company or on behalf of the Company in the furtherance of its business, any trade secrets, confidential information, knowledge or data relating to any member of the Company Affiliated Group, obtained by the Executive during the Executive’s employment by the Company that is not generally available public knowledge (other than acts by the Executive in violation of this General Release).  This confidentiality obligation is in addition to, and not in lieu of, any other contractual, statutory and common law confidentiality obligation of the Executive to the Company.

 

(c)   Return of Company Material .  The Executive represents that he has returned to the Company all Company Material (as defined below).  For purposes of this Section 6(c), “ Company Material ” means any documents, files and other property and information of any kind belonging or relating to (i) any member of the Company Affiliated Group, (ii) the current and former suppliers, creditors, directors, officers, employees, agents and customers of any of them or (iii) the businesses, products, services and operations (including without limitation, business, financial and accounting practices) of any of them, in each case whether tangible or intangible

 

10



 

(including, without limitation, credit cards, building and office access cards, keys, computer equipment, cellular telephones, pagers, electronic devices, hardware, manuals, files, documents, records, software, customer data, research, financial data and information, memoranda, surveys, correspondence, statistics and payroll and other employee data, and any copies, compilations, extracts, excerpts, summaries and other notes thereof or relating thereto), excluding only information (x) that is generally available public knowledge or (y) that relates to the Executive’s compensation or Executive benefits.

 

(d)   Cooperation .  Following the date of termination of employment, the Executive shall reasonably cooperate with the Company upon reasonable request of the Board of Directors and be reasonably available to the Company with respect to matters arising out of the Executive’s services to the Company Affiliated Group.

 

(e)   Nondisparagement .  The Executive acknowledges and agrees that he shall not make any statements that are professionally or personally disparaging about or adverse to the interests of the Company or any Company Released Party, including, but not limited to, any statements that disparage in any way whatsoever the Company’s products, services, businesses, finances, financial condition, capabilities or other characteristics.

 

(f)   Ownership of Inventions, Non-Disclosure, Non-Competition and Non-Solicitation .  The Executive expressly acknowledges and agrees that the Proprietary Information, Inventions, and Competition Agreement executed by him is incorporated herein by reference, and shall survive the execution of this General Release in full force and effect pursuant to its terms.

 

(g)   No Representation .  The Executive acknowledges that, other than as set forth in this General Release and the Agreement, (i) no promises have been made to him and (ii) in signing this General Release the Executive is not relying upon any statement or representation made by or on behalf of any Company Released Party and each or any of them concerning the merits of any claims or the nature, amount, extent or duration of any damages relating to any claims or the amount of any money, benefits, or compensation due the Executive or claimed by the Executive, or concerning the General Release or concerning any other thing or matter.

 

(h)   Injunctive Relief .  In the event of a breach or threatened breach by the Executive of this Section 6, the Executive agrees that the Company shall be entitled to injunctive relief in a court of appropriate jurisdiction to remedy any such breach or threatened breach, the Executive acknowledging that damages would be inadequate or insufficient.

 

7.                                       Voluntariness .  The Executive agrees that he is relying solely upon his own judgment; that the Executive is over eighteen years of age and is legally competent to sign this General Release; that the Executive is signing this General Release of his own free will; that the Executive has read and understood the General Release before signing it; and that the Executive is signing this General Release in exchange for consideration that he believes is satisfactory and adequate.

 

11



 

8.                                       Legal Counsel .  The Executive acknowledges that he has been informed of the right to consult with legal counsel and has been encouraged to do so.

 

9.                                       Complete Agreement/Severability .  Other than the agreements and/or obligations specifically referenced as surviving herein, this General Release constitutes the complete and final agreement between the parties and supersedes and replaces all prior or contemporaneous agreements, negotiations, or discussions relating to the subject matter of this General Release.  All provisions and portions of this General Release are severable.  If any provision or portion of this General Release or the application of any provision or portion of the General Release shall be determined to be invalid or unenforceable to any extent or for any reason, all other provisions and portions of this General Release shall remain in full force and shall continue to be enforceable to the fullest and greatest extent permitted by law.

 

10.                                Acceptance .  The Executive acknowledges that he has been given a period of twenty-one (21) days within which to consider this General Release, unless applicable law requires a longer period, in which case the Executive shall be advised of such longer period and such longer period shall apply.  The Executive may accept this General Release at any time within this period of time by signing the General Release and returning it to the Company.

 

11.                                Revocability .  This General Release shall not become effective or enforceable until seven (7) calendar days after the Executive signs it.  The Executive may revoke his acceptance of this General Release at any time within that seven (7) calendar day period by sending written notice to the Company.  Such notice must be received by the Company within the seven (7) calendar day period in order to be effective and, if so received, would void this General Release for all purposes.

 

12.                                Governing Law .  Except for issues or matters as to which federal law is applicable, this General Release shall be governed by and construed and enforced in accordance with the laws of the Commonwealth of Massachusetts without giving effect to the conflicts of law principles thereof.

 

IN WITNESS WHEREOF, the Executive has executed this General Release as of the date last set forth below.

 

EXECUTIVE

 

 

 

 

Date:

 

Name:

 

 

 

12


Exhibit 10.4

 

CHANGE IN CONTROL SEVERANCE AGREEMENT

 

This Agreement is entered into as of the 30th day of November, 2012 (the “ Effective Date ”) by and between ImmunoGen, Inc., a Massachusetts corporation (the “ Company ”), and Charles Q. Morris (the “ Executive ”).

 

WHEREAS, the Company recognizes that the Executive’s service to the Company is very important to the future success of the Company;

 

WHEREAS, the Executive desires to enter into this Agreement to provide the Executive with certain financial protection in the event that his employment terminates under certain conditions following a change in control of the Company; and

 

WHEREAS the Board of Directors of the Company (the “ Board ”) has determined that it is in the best interests of the Company to enter into this Agreement.

 

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company and the Executive hereby agree as follows:

 

1.             Definitions .

 

(a)           Cause .  For purposes of this Agreement, “ Cause ” shall mean that the Executive has (i) willfully committed an act or omission that materially harms the Company; (ii) been grossly negligent in the performance of the Executive’s duties to the Company; (iii) willfully failed or refused to follow the lawful and proper directives of the Board; (iv) been convicted of, or pleaded guilty or nolo contendere , to a felony; (v) committed an act involving moral turpitude that is or is reasonably expected to be injurious to the Company or its reputation; (vi) committed an act relating to the Executive’s employment or the Company involving, in the good faith judgment of the Board, material fraud or theft; (vii) breached any material provision of this Agreement or any nondisclosure or non-competition agreement between the Executive and the Company, as all of the foregoing may be amended prospectively from time to time; or (viii) breached a material provision of any code of conduct or ethics policy in effect at the Company, as all of the foregoing may be amended prospectively from time to time.

 

(b)           Change in Control .  For purposes of this Agreement, a “ Change in Control ” shall mean the occurrence of any of the following events; provided that “Change in Control” shall be interpreted in a manner, and limited to the extent necessary, so that it will not cause adverse tax consequences for either party with respect to Section 409A of the Internal Revenue Code of 1986, as amended (the “ Code ”), and Treasury Regulations 1.409A-3(i)(5), and any successor statute, regulation and guidance thereto:

 

(i)            Ownership.  Any “Person” (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended) becomes the “Beneficial Owner” (as defined in Rule 13d-3 under said Act), directly or indirectly, of securities of the Company representing 50% or more of the total voting power represented by the Company’s then outstanding voting securities (excluding for this purpose any such voting

 



 

securities held by the Company or its Affiliates (as defined in the Company’s 2006 Employee, Director and Consultant Equity Incentive Plan) or by any employee benefit plan of the Company) pursuant to a transaction or a series of related transactions which the Board does not approve; or

 

(ii)           Merger/Sale of Assets.  (A) A merger or consolidation of the Company whether or not approved by the Board, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity or the parent of such corporation) at least 50% of the total voting power represented by the voting securities of the Company or such surviving entity or parent of such corporation, as the case may be, outstanding immediately after such merger or consolidation; or (B) the stockholders of the Company approve an agreement for the sale or disposition by the Company of all or substantially all of the Company’s assets; or

 

(iii)          Change in Board Composition.  A change in the composition of the Board, as a result of which fewer than a majority of the directors are Incumbent Directors.  “Incumbent Directors” shall mean directors who either (A) are directors of the Company as of November 11, 2006, or (B) are elected, or nominated for election, to the Board with the affirmative votes of at least a majority of the Incumbent Directors at the time of such election or nomination (but shall not include an individual whose election or nomination is in connection with an actual or threatened proxy contest relating to the election of directors to the Company).

 

(c)           Disability .  For purposes of this Agreement, “ Disability ” shall mean that the Executive (i) is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months, or (ii) is, by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months, receiving income replacement benefits for a period of not less than three (3) months under a Company-sponsored group disability plan.  Whether the Executive has a Disability will be determined by a majority of the Board based on evidence provided by one or more physicians selected by the Board and approved by the Executive, which approval shall not be unreasonably withheld.  In any case, if a disability is determined to trigger the payment of any “deferred compensation” as defined in Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”), disability shall be determined in accordance with Section 409A of the Code.

 

(d)           Good Reason .  For purposes of this Agreement, “ Good Reason ” shall mean the occurrence of one or more of the following without the Executive’s consent: (i) a change in the principal location at which the Executive performs his duties for the Company to a new location that is at least forty (40) miles from the prior location; (ii) a material change in the Executive’s authority, functions, duties or responsibilities as an executive of the Company, which would cause his position with the Company to become of less responsibility, importance or scope than

 

2



 

his highest position with the Company at any time from the date of this Agreement to immediately prior to the Change in Control, provided , however , that such material change is not in connection with the termination of the Executive’s employment by the Company for Cause or death or Disability and further provided that it shall not be considered a material change if the Company becomes a subsidiary of another entity and the Executive continues to hold a position in the subsidiary that is at least as high (in both title and scope of responsibilities) as the highest position he held with the Company at any time from the date of this Agreement to immediately prior to the Change in Control; (iii) a material reduction in the Executive’s annual base salary or (iv) a material reduction in the Executive’s target annual bonus as compared to the target annual bonus set for the previous fiscal year.

 

2.             Term of Agreement .  The term of this Agreement (the “ Term ”) shall commence on the Effective Date and shall continue in effect for two (2) years; provided , however , that commencing on second anniversary of the Effective Date and continuing each anniversary thereafter, the Term shall automatically be extended for one (1) additional year unless, not later than nine (9) months before the conclusion of the Term, the Company or the Executive shall have given notice not to extend the Term; and further provided , however , that if a Change in Control shall have occurred during the Term, the Term shall expire on the last day of the twelfth (12 th ) month following the month in which such Change in Control occurred.  Notice of termination or termination of this Agreement shall not constitute Cause or Good Reason (both terms as defined above).

 

3.             Termination; Notice; Severance Compensation .

 

(a)           In the event that within a period of two (2) months before or twelve (12) months following the consummation of a Change in Control the Company elects to terminate the Executive’s employment other than for Cause (but not including termination due to the Executive’s Disability), then the Company shall give the Executive no less than sixty (60) days advance notice of such termination (the “Company’s Notice Period”); provided that the Company may elect to require the Executive to cease performing work for the Company so long as the Company continues the Executive’s full salary and benefits during the Company’s Notice Period.

 

(b)           In the event that within a period of two (2) months before or twelve (12) months following the consummation of a Change in Control the Executive elects to terminate his employment for Good Reason, then the Executive shall give the Company no less than thirty (30) days and no more than sixty (60) days advance notice of such termination (the “Executive’s Notice Period”); provided that the Company may elect to require the Executive to cease performing work for the Company so long as the Company continues the Executive’s full salary and benefits during the Executive’s Notice Period.  In order to effect a termination for Good Reason pursuant to this Agreement, the Executive must notice his intent to terminate for Good Reason not later than ninety (90) days following the occurrence of the Good Reason.

 

(c)           In the event that within a period of two (2) months before or twelve (12) months following the consummation of a Change in Control the Executive’s employment with the Company is terminated by the Company other than for Cause (but not including termination due to the Executive’s death or Disability), or by the Executive for Good Reason, then, contingent

 

3



 

upon the Executive’s execution of a release of claims against the Company in substantially the form attached hereto as Exhibit A (the “ Release ”) the Executive shall be entitled to, in addition to any amounts due to the Executive for services rendered prior to the termination date:

 

(i)  a lump sum payment from the Company in an amount equal to one and one-half (1.5) times the sum of the Executive’s Annual Salary and the Executive’s target annual bonus for the fiscal year in which the termination occurs (without giving effect to any event or circumstance constituting Good Reason) at one hundred percent (100%) of such target annual bonus, which shall be paid on the sixtieth (60 th ) day following the Executive’s termination of employment, provided that the Release is executed and effective by then or the Executive shall forfeit the payment of such amount;

 

(ii)  all outstanding options, restricted stock and other similar rights held by the Executive, which shall become one hundred percent (100%) vested; and

 

(iii)  continuation of medical insurance coverage for the Executive and the Executive’s family subject to and in accordance with Section 4980B of the Code (“ COBRA ”), and subject to the Executive’s payment of the applicable COBRA coverage premium (“ COBRA Coverage Premium ”) during the applicable COBRA coverage period (“ COBRA Period ”); and

 

(iv)  payment to the Executive of a taxable amount on a monthly basis equal to the COBRA Premium for eighteen (18) months from the Separation Date; provided that the Company shall have no obligation to provide such benefit if the Executive fails to elect COBRA benefits in a timely fashion or if the Executive becomes eligible for medical coverage with another employer; and provided that if the COBRA Period is otherwise ( i.e., for reasons not described in the immediately preceding proviso) earlier terminated under applicable law during the period that the Executive would otherwise be entitled to receive the benefit under this subsection (v), the Company will continue to pay to the Executive the same taxable amount it paid on a monthly basis during the COBRA Period each month for the remainder of the relevant period.

 

For purposes of this Agreement, “ Annual Salary ” shall mean the Executive’s annual base salary then in effect or, if higher, in effect at the time of the Change in Control, excluding reimbursements and amounts attributable to stock options and other non-cash compensation; and the “ Severance Compensation ” shall mean the compensation set forth in (i), (ii), and (iv) above.

 

(d)           If any of the benefits set forth in this Agreement are deferred compensation as defined in Section 409A of the Code, any termination of employment triggering payment of such benefits must constitute a “separation from service” under Section 409A of the Code before, subject to subsection (e) below, a distribution of such benefits can commence.  For purposes of clarification, this paragraph shall not cause any forfeiture of benefits on the part of the Executive, but shall only act as a delay until such time as a “separation from service” occurs. In addition, the Company Notice Period and the Executive Notice Period shall be interpreted and administered in

 

4



 

accordance with Section 409A of the Code and the “separation from service” rules thereunder.  In particular, if a waiver of the Company Notice Period or the Executive Notice Period triggers a “separation from service,” such waiver shall constitute a termination and any amounts due to the Executive over the remaining portion of the applicable notice period shall be deemed additional severance under Section 3(c)(ii) of this Agreement and paid accordingly.  In addition, any applicable notice or release periods and dates of payment shall be adjusted accordingly.

 

(e)           Notwithstanding any other provision with respect to the timing of payments, if, at the time of the Executive’s termination, the Executive is deemed to be a “specified employee” (within the meaning of Code Section 409A, and any successor statute, regulation and guidance thereto) of the Company, then solely to the extent necessary to comply with the requirements of Code Section 409A, any payments to which the Executive may become entitled under this Agreement which are subject to Code Section 409A (and not otherwise exempt from its application) will be withheld until the first (1 st ) business day of the seventh (7 th ) month following the termination of the Executive’s employment, at which time the Executive shall be paid an aggregate amount equal to the accumulated, but unpaid, payments otherwise due to the Executive under the terms of this Agreement.

 

(f)            If any payment or benefit the Executive would receive under this Agreement, when combined with any other payment or benefit the Executive receives pursuant to a Change in Control (“Payment”) would (i) constitute a “parachute payment” within the meaning of Code Section 280G, and (ii) but for this sentence, be subject to the excise tax imposed by Section 4999 of the Code (the “Excise Tax”), then such Payment shall be either (x) the full amount of such Payment or (y) such less amount as would result in no portion of the Payment being subject to the Excise Tax, whichever of the foregoing amounts, taking into account the applicable federal, state, and local employments taxes, income taxes, and the Excise Tax results in the Executive’s receipt, on an after-tax basis, of the greater amount of the Payment, notwithstanding that all or some portion of the Payment may be subject to the Excise Tax.  The Company shall, in a manner compliant with Code Section 409A, determine in good faith which payment(s) or benefit(s) to reduce based on what provides the best economic result for the Executive.  The Company shall provide the Executive with sufficient information to support its determination and to allow the Executive to file and pay any required taxes.

 

4.             No Duplication of Compensation .  The Severance Compensation shall replace, and be provided in lieu of, any severance or similar compensation that may be provided to the Executive under any other agreement or arrangement in relation to termination of employment; provided , however , that this prohibition against duplication shall not be construed to otherwise limit the Executive’s rights to payments or benefits provided under any pension plan (as defined in Section 3(2) of the Employee Retirement Income Security Act of 1974, as amended), deferred compensation, stock, stock option or similar plan sponsored by the Company.  This Agreement supersedes any other agreements or representations, oral or otherwise, express or implied, with respect to the subject matter hereof which may have been made by either party.

 

5



 

5.             No Mitigation .  If the Executive’s employment with the Company terminates following a Change in Control, the Executive is not required to seek other employment or to attempt in any way to reduce any amounts payable to the Executive by the Company pursuant to Section 3 or Section 15.  Except as set forth in Section 4, the amount of any payment or benefit provided for in this Agreement shall not be reduced by any compensation earned by the Executive as the result of employment by another employer, by retirement benefits, by offset against any amount claimed to be owed by the Executive to the Company, or otherwise.

 

6.             Confidentiality, Non-Competition, and Assignment of Inventions.   The Company’s obligations under this Agreement are contingent upon the Executive’s execution of the Company’s Proprietary Information, Inventions, and Competition Agreement (the “ Proprietary Information Agreement ”).  The parties agree that the obligations set forth in the Proprietary Information Agreement shall survive termination of this Agreement and termination of the Executive’s employment, regardless of the reason for such termination.

 

7.             Enforceability .  If any provision of this Agreement shall be deemed invalid or unenforceable as written, this Agreement shall be construed, to the greatest extent possible, or modified, to the extent allowable by law, in a manner which shall render it valid and enforceable.  No invalidity or unenforceability of any provision contained herein shall affect any other portion of this Agreement.

 

8.             Notices .  Except as otherwise specifically provided herein, any notice required or permitted by this Agreement shall be in writing and shall be delivered as follows with notice deemed given as indicated: (i)  by personal delivery when delivered personally; (ii) by overnight courier upon written verification of receipt; (iii) by telecopy or facsimile transmission upon acknowledgment of receipt of electronic transmission; or (iv) by certified or registered mail, return receipt requested, upon verification of receipt.  Notices to the Executive shall be sent to the last known address in the Company’s records or such other address as the Executive may specify in writing.  Notices to the Company shall be sent to the Company’s Chairman of the Board (or if the Chairman of the Board is also the CEO, to the Company’s Lead Director), or to such other Company representative as the Company may specify in writing.

 

9.             Claims for Benefits.   All claims by the Executive for benefits under this Agreement shall be directed to and determined by the Board and shall be in writing.  Any denial by the Board of a claim for benefits under this Agreement shall be delivered to the Executive in writing and shall set forth the specific reasons for the denial and the specific provisions of this Agreement relied upon.  The Board shall afford a reasonable opportunity to the Executive for a review of the decision denying a claim and shall further allow the Executive to appeal to the Board a decision of the Board within sixty (60) days after notification by the Board that the Executive’s claim has been denied.  In no event shall the Board’s claims or appeals determination be given any deference or weight in any subsequent legal proceeding.

 

10.          Modifications and Amendments .  The terms and provisions of this Agreement may be modified or amended only by written agreement executed by the Company and the Executive.  The Company and the Executive agree that they will jointly execute an amendment to modify this Agreement to the extent necessary to comply with or be exempt from the requirements of

 

6



 

Code Section 409A, or any successor statute, regulation and guidance thereto; provided that no such amendment shall increase the total financial obligation of the Company under this Agreement.

 

11.          Waivers and Consents .  The terms and provisions of this Agreement may be waived, or consent for the departure therefrom granted, only by a written document executed by the party entitled to the benefits of such terms or provisions.  No such waiver or consent shall be deemed to be or shall constitute a waiver or consent with respect to any other terms or provisions of this Agreement, whether or not similar.  Each such waiver or consent shall be effective only in the specific instance and for the purpose for which it was given, and shall not constitute a continuing waiver or consent.

 

12.          Binding Effect; Assignment .  The Agreement will be binding upon and inure to the benefit of (a) the heirs, executors and legal representatives of the Executive upon the Executive’s death and (b) any successor of the Company.  Any such successor of the Company will be deemed substituted for the Company under the terms of the Agreement for all purposes.  For this purpose, “successor” means any person, firm, corporation or other business entity which at any time, whether by purchase, merger or otherwise, directly or indirectly acquires all or substantially all of the assets or business of the Company.  None of the rights of the Executive to receive any form of compensation payable pursuant to the Agreement may be assigned or transferred except by will or the laws of descent and distribution.  Any other attempted assignment, transfer, conveyance or other disposition of the Executive’s right to compensation or other benefits will be null and void.

 

13.          Governing Law .  This Agreement and the rights and obligations of the parties hereunder shall be construed in accordance with and governed by the law of the Commonwealth of Massachusetts, without giving effect to the conflict of law principles thereof.

 

14.          Jurisdiction and Service of Process .  Any legal action or proceeding with respect to this Agreement shall be brought in the courts of the Commonwealth of Massachusetts or of the United States of America for the District of Massachusetts.  By execution and delivery of this Agreement, each of the parties hereto accepts for its