<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 28, 1997
REGISTRATION NO. 333-23407
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 2
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
AURORA BIOSCIENCES CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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DELAWARE 8731 33-0669859
(STATE OR JURISDICTION (PRIMARY STANDARD INDUSTRIAL I.R.S. EMPLOYER
OF INCORPORATION OR CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER
ORGANIZATION)
</TABLE>
11149 NORTH TORREY PINES ROAD
LA JOLLA, CALIFORNIA 92037
(619) 452-5000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
TIMOTHY J. RINK
CHAIRMAN OF THE BOARD, PRESIDENT AND CHIEF EXECUTIVE OFFICER
AURORA BIOSCIENCES CORPORATION
11149 NORTH TORREY PINES ROAD
LA JOLLA, CALIFORNIA 92037
(619) 452-5000
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
------------------------
COPIES TO:
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<S> <C>
THOMAS A. COLL, ESQ. JEFFREY S. MARCUS, ESQ.
ERIC J. LOUMEAU, ESQ. TAMARA POWELL TATE, ESQ.
COOLEY GODWARD LLP MORRISON & FOERSTER LLP
4365 EXECUTIVE DRIVE, SUITE 1100 1290 AVENUE OF THE AMERICAS
SAN DIEGO, CA 92121 NEW YORK, NY 10104
(619) 550-6000 (212) 468-8000
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box: [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ] ________
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act of 1933, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ] ________
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT THAT SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(a), MAY DETERMINE.
================================================================================
<PAGE> 2
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.
SUBJECT TO COMPLETION
MAY 28, 1997
3,000,000 SHARES
[AURORA LOGO]
COMMON STOCK
------------------------
All of the 3,000,000 shares of Common Stock offered hereby are being sold
by Aurora Biosciences Corporation, a Delaware corporation ("Aurora" or the
"Company"). Prior to this offering, there has been no public market for the
Common Stock of the Company. It is currently estimated that the initial public
offering price of the Common Stock will be between $9.00 and $11.00 per share.
See "Underwriting" for the factors to be considered in determining the initial
public offering price. The Common Stock has been approved for quotation on the
Nasdaq National Market under the symbol ABSC.
------------------------
THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" COMMENCING ON PAGE 6.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
=================================================================================================
PRICE UNDERWRITING PROCEEDS
TO DISCOUNTS AND TO
PUBLIC COMMISSIONS(1) COMPANY(2)
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Share......................... $ $ $
- -------------------------------------------------------------------------------------------------
Total(3).......................... $ $ $
=================================================================================================
</TABLE>
(1) See "Underwriting" for information relating to indemnification of the
Underwriters.
(2) Before deducting expenses of the offering estimated at $600,000.
(3) The Company has granted the Underwriters a 30-day option to purchase up to
450,000 additional shares of Common Stock solely to cover over-allotments,
if any. To the extent that the option is exercised, the Underwriters will
offer the additional shares at the Price to Public shown above. If the
option is exercised in full, the total Price to Public, Underwriting
Discounts and Commissions and Proceeds to Company will be $ ,
$ and $ , respectively. See "Underwriting."
------------------------
The shares of Common Stock are offered by the several Underwriters, subject
to prior sale, when, as and if delivered to and accepted by them, and subject to
the right of the Underwriters to reject any order in whole or in part. It is
expected that delivery of the shares of Common Stock will be made at the offices
of Alex. Brown & Sons Incorporated, Baltimore, Maryland, on or about
, 1997.
ALEX. BROWN & SONS
INCORPORATED
HAMBRECHT & QUIST
ROBERTSON, STEPHENS & COMPANY
THE DATE OF THIS PROSPECTUS IS , 1997
<PAGE> 3
[GRAPHIC DEPICTION OF UHTS SYSTEM]
[Items depicted will be identified by the following labels:]
Genomic Targets
Combinatorial Chemistry Libraries
Automated Storage and Retrieval System
Miniaturized Fluorescent Assays
NanoPlate(TM)
Microfluidics
Fluorescence Detector
Lead Compounds
Informatics
Mammalian Cells
Depicted above is a schematic representation of Aurora's integrated
technology platform designed to take advantage of the great number of targets
being identified through genomics and the large, diverse libraries of compounds
being generated from combinatorial chemistry. Aurora's ultra-high throughput
screening ("UHTS") system is designed to incorporate a store of over 1,000,000
compounds and is expected to screen in excess of 100,000 compounds per day in
miniaturized assays. The UHTS system is expected to be operational in three to
four years.
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK OF
THE COMPANY, INCLUDING THE ENTRY OF STABILIZING BIDS, OR SYNDICATE COVERING
TRANSACTIONS OR THE IMPOSITION OF PENALTY BIDS. FOR A DESCRIPTION OF THESE
ACTIVITIES, SEE "UNDERWRITING."
NanoPlate(TM) is a trademark of the Company and Packard Instrument Company.
All other trade names or trademarks appearing in this Prospectus are the
property of their respective holders.
2
<PAGE> 4
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and Financial Statements and Notes thereto appearing elsewhere in
this Prospectus. This Prospectus contains certain statements of a
forward-looking nature relating to future events or the future financial
performance of the Company. Prospective investors are cautioned that such
statements are only predictions and that actual events or results may differ
materially. In evaluating such statements, prospective investors should
specifically consider the various factors identified in this Prospectus,
including the matters set forth under the caption "Risk Factors," which could
cause actual results to differ materially from those indicated by such
forward-looking statements.
THE COMPANY
Aurora Biosciences Corporation ("Aurora" or the "Company") designs and
develops proprietary drug discovery systems, services and technologies to
accelerate and enhance the discovery of new medicines. Aurora is developing an
integrated technology platform comprised of a portfolio of proprietary
fluorescent assay technologies and an ultra-high throughput screening ("UHTS")
system designed to allow assay miniaturization and to overcome many of the
limitations associated with the traditional drug discovery process. The Company
believes that this platform will enable Aurora and its collaborators, which
include Bristol-Myers Squibb ("BMS") and Eli Lilly and Company ("Lilly"), to
take advantage of the opportunities created by recent advances in genomics and
combinatorial chemistry that have generated many new therapeutic targets and an
abundance of new small molecule compounds. Aurora believes its integrated
platform will accelerate the drug discovery process by shortening the time
required to identify high quality lead compounds and to optimize those compounds
into drug development candidates.
The discovery and development of new medicines historically has been an
expensive, time-consuming and often unsuccessful process. Recent developments in
molecular biology and genomics as well as combinatorial chemistry have created
significant opportunities to discover greater numbers of high quality lead
compounds for development into new medicines. The advances in molecular biology
and genomics have resulted in a greater understanding of the molecular and
genetic basis of disease and have led to the identification of many new genes as
potential therapeutic targets for drug discovery. Many companies have used
combinatorial chemistry to quickly create libraries of hundreds of thousands or
even millions of small molecules for screening against established and novel
targets. However, the increasing numbers of targets and compounds have created
severe bottlenecks in the drug discovery process. These bottlenecks result from
the difficulty of quickly analyzing the function and disease relevance of newly
discovered targets, the complexity of incorporating the many different types of
targets into screening assays, and the inability to screen extensive compound
libraries quickly and at a reasonable cost. In order to address these issues,
the Company is integrating advanced technologies to develop superior assays, to
enable analysis of gene function in mammalian cells and to miniaturize and
accelerate compound screening.
Aurora's proprietary fluorescent assay technologies are being used today to
facilitate drug discovery by the Company's collaborators and in the Company's
existing high throughput screening system. Aurora's portfolio of fluorescent
assay technologies is designed to enable screening of compounds against nearly
all major classes of human drug targets, including receptors, ion channels and
enzymes, in most therapeutic areas. The Company's fluorescent assay technologies
are highly sensitive, and are designed to permit more rapid screen development
and the development of miniaturized assays important for cost-effective high
throughput screening. Additionally, many of the Company's screens are being
designed to be performed with living mammalian cells to better model human
disease processes.
The second principal component of Aurora's integrated technology platform
is its UHTS system, which is being designed to screen over 100,000 discrete
compounds per day in miniaturized assays.
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<PAGE> 5
The UHTS system will combine an automated storage and retrieval system,
microfluidic dispensing devices, and NanoPlates in which miniaturized assays are
performed. Specialized fluorescence detectors are designed to record and process
the signals from the NanoPlates, with advanced software and informatics to
capture the resulting data. In developing the UHTS system, the Company is
applying to the drug discovery process technological advances that have already
been deployed successfully in other industrial processes, while adding its own
proprietary innovations. In this regard, the Company has entered into strategic
technology alliances with several technology leaders, including Packard
Instrument Company and Carl Creative Systems, Inc. The Company expects the UHTS
system to be fully integrated and operational within the next three to four
years.
Aurora's goal is to become the leader in the development and
commercialization of technologies that will accelerate and enhance the discovery
of new medicines. The Company seeks to diversify business risk by generating
revenue from multiple collaborators seeking to exploit Aurora's fluorescent
assay technologies and UHTS system in many different drug discovery programs.
The Company expects to generate revenue by developing screens, providing
screening services, developing and providing UHTS systems to syndicate members,
licensing its proprietary technologies, and realizing royalty and milestone
payments from the development and commercialization of drug candidates
identified using Aurora's technologies. To date, the Company has entered into
collaborative agreements with BMS and Lilly to license the Company's fluorescent
assay technologies for their internal discovery research, to collaborate on
screen development and as initial members of a syndicate to co-develop Aurora's
UHTS system. In addition, Aurora has also entered into agreements to develop
screens for or provide screening services to Sequana Therapeutics, Inc., Allelix
Biopharmaceuticals, Inc. and Roche Bioscience. The Company has also entered into
agreements with Alanex Corporation and ArQule, Inc. providing Aurora with
non-exclusive access to certain of their combinatorial chemistry libraries.
The Company was incorporated in California in May 1995 and reincorporated
in Delaware in January 1996. Unless the context otherwise requires, references
in this Prospectus to "Aurora" and the "Company" refer to Aurora Biosciences
Corporation, a Delaware corporation, and, where applicable, to its California
predecessor. The Company's executive offices are located at 11149 North Torrey
Pines Road, La Jolla, California 92037, and its telephone number is (619)
452-5000.
THE OFFERING
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<S> <C>
Common Stock offered hereby........................... 3,000,000 shares
Common Stock to be outstanding after the offering..... 15,895,240 shares(1)
Use of proceeds....................................... Working capital and general corporate
purposes, including enhancement of
internal research and development
capabilities, the acquisition of
chemical libraries, and facilities
expansion and improvements. See "Use
of Proceeds."
Nasdaq National Market symbol......................... ABSC
</TABLE>
- ---------------
(1) Based on shares outstanding as of March 31, 1997. Includes (i) an aggregate
of 45,290 shares of Common Stock to be issued upon exercise of outstanding
warrants and (ii) an aggregate of 9,915,975 shares of Common Stock to be
issued upon conversion of all outstanding shares of Preferred Stock, in each
case upon the closing of this offering. Excludes 581,320 shares of Common
Stock issuable upon exercise of outstanding stock options as of March 31,
1997 at a weighted average exercise price of $1.28 per share and 1,627,408
shares of Common Stock reserved for future grant under the Company's 1996
Stock Plan, Employee Stock Purchase Plan and Non-Employee Directors' Stock
Option Plan. See "Capitalization," "Management," "Description of Capital
Stock" and Notes 6 and 11 of Notes to Financial Statements.
4
<PAGE> 6
SUMMARY FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS
PERIOD FROM ENDED
MAY 8, 1995 MARCH 31,
(INCEPTION) TO YEAR ENDED ----------------
DECEMBER 31, 1995 DECEMBER 31, 1996 1996 1997
----------------- ----------------- ------ -------
(UNAUDITED)
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue:
UHTS system development............ $ -- $ 2,117 $ -- $ 650
Screening services................. -- 100 -- 405
License fees....................... -- -- -- 487
------- ------- ------ -------
Total revenue...................... -- 2,217 -- 1,542
Operating Expenses:
Cost of UHTS system development.... -- -- -- 688
Cost of screening services......... -- -- -- 287
Research and development........... 366 4,396 405 911
General and administrative......... 46 1,275 137 642
Interest income, net.................. -- 521 43 144
Net loss.............................. (412) (2,933) (499) (842)
Pro forma net loss per share(1)....... $ (0.26) $ (0.06)
Shares used in computing pro forma net
loss per share(1).................. 11,139 13,399
</TABLE>
<TABLE>
<CAPTION>
MARCH 31, 1997
-------------------------------------
ACTUAL AS ADJUSTED(2)
----------------- -----------------
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BALANCE SHEET DATA:
Cash, cash equivalents and investment securities
available for sale..................................... $13,639 $40,939
Total assets............................................. 18,344 45,644
Capital lease obligations, less current portion.......... 1,389 1,389
Accumulated deficit...................................... (4,187) (4,187)
Total stockholders' equity............................... 14,685 41,985
</TABLE>
- ---------------
(1) See Note 1 of Notes to Financial Statements for a description of the
computation of the pro forma net loss per share and the number of shares
used in the pro forma net loss per share calculation.
(2) As adjusted to give effect to the sale by the Company of 3,000,000 shares of
Common Stock offered hereby at an assumed initial public offering price of
$10.00 per share and the application of the estimated net proceeds therefrom
and the exercise upon the closing of this offering of warrants to purchase a
total of 45,290 shares of Common Stock. See "Use of Proceeds" and
"Capitalization."
Except as otherwise specified, all information contained in this Prospectus
assumes no exercise of the Underwriters' over-allotment option. See
"Underwriting." Except as otherwise noted, all information in this Prospectus
has been adjusted to give effect to (i) the four-for-five reverse split of the
Common Stock effected on April 25, 1997 and (ii) the conversion of all
outstanding shares of Preferred Stock into Common Stock upon the completion of
this offering. See "Capitalization" and "Description of Capital Stock."
5
<PAGE> 7
RISK FACTORS
In addition to the other information in this Prospectus, the following
factors should be considered carefully in evaluating an investment in the shares
of Common Stock offered by this Prospectus. This Prospectus contains certain
statements of a forward-looking nature relating to future events or the future
financial performance of the Company. Prospective investors are cautioned that
such statements are only predictions and that actual events or results may
differ materially. In evaluating such statements, prospective investors should
specifically consider the various factors identified in this Prospectus,
including the matters set forth below, which could cause actual results to
differ materially from those indicated by such forward-looking statements.
Limited Operating History; History of Operating Losses; Uncertainty of
Future Profitability. The Company was formed in May 1995, has a limited
operating history and is at an early stage of development. To date, the Company
has not yet generated significant revenue from its systems, services or
technologies. For the period ended December 31, 1995, the year ended December
31, 1996 and the three months ended March 31, 1997, the Company had net losses
of approximately $412,000, $2.9 million and $842,000, respectively. As of March
31, 1997, the Company had an accumulated deficit of $4.2 million. The Company's
expansion of its operations and continued development of its ultra-high
throughput screening ("UHTS") system and fluorescent assay technologies will
require a substantial increase in expenditures for at least the next several
years. The Company currently expects to continue to incur operating losses at
least through 1998. The Company's ability to achieve profitability will depend
in part on its ability to successfully develop and install its UHTS system,
provide screen development and screening services to pharmaceutical and
biotechnology companies, achieve acceptable performance specifications for its
UHTS system and gain industry acceptance of its systems, services and
technologies. Accordingly, the extent of future losses and the time required to
achieve profitability is highly uncertain. The Company has completed less than
two years of operations and is subject to the risks inherent in the operation of
a new business, such as the difficulties and delays often encountered in the
development and production of new, complex technologies. There can be no
assurance that the Company will be able to address these risks. Payments from
corporate collaborators and interest income are expected to be the only sources
of revenue for the foreseeable future. The Company has not yet generated any
revenue from milestones under its collaborative agreements. Royalties or other
revenues from commercial sales of products based upon any compound identified by
using the Company's technologies are not expected for at least several years, if
at all. The time required to reach or sustain profitability is highly uncertain,
and there can be no assurance that the Company will be able to achieve or
maintain profitability. Moreover, if profitability is achieved, the level of
such profitability cannot be predicted and may vary significantly from quarter
to quarter. See "Selected Financial Data" and "Management's Discussion and
Analysis of Financial Condition and Results of Operations."
New and Uncertain Technology. The Company's UHTS technology and its methods
of screening molecular targets are new and unproven approaches to the
identification of lead compounds with therapeutic potential. The Company intends
to use its UHTS system and fluorescent assay technologies to rapidly identify
for itself and its collaborators as many compounds with commercial potential as
possible. Historically, because of the highly proprietary nature of such
activities, the importance of these activities to drug discovery and development
efforts and the desire to obtain maximum patent and other proprietary protection
on the results of their programs, pharmaceutical and biotechnology companies
have conducted molecular target screening and lead compound identification
within their own internal research departments. The Company's ability to succeed
will be dependent, in part, upon the willingness of potential collaborators to
use the Company's systems, services and technologies as a tool in the discovery
and development of compounds with commercial potential.
The Company's fluorescent assay technologies are novel for use in the drug
discovery process and have never been utilized in the discovery of any compound
that has been commercialized. The
6
<PAGE> 8
Company has not yet completed the development of a screen for any collaborator.
There can be no assurance that the Company's fluorescent assay technologies will
result in the successful development of broadly applicable screens for
collaborators or lead compounds that will be safe or efficacious. Furthermore,
there can be no assurance that the Company can develop, validate or consistently
reproduce its biochemical and cell-based assays or reagents or substrates
required for their use in volumes sufficient to fulfill the requirements of its
collaborative agreements or to meet the Company's needs for internal use.
Development of new pharmaceutical products is highly uncertain, and no assurance
can be given that the Company's drug discovery technology will result in any
commercially successful compound.
The Company's UHTS technology has never been implemented as a fully
operational system. The Company's UHTS system is not expected to be fully
integrated and operational for at least three to four years. The Company's UHTS
system will require significant additional investment and research and
development prior to commencement of full-scale commercial operation, including
integration of complex instrumentation and software and testing to validate
performance and cost effectiveness, and is subject to substantial risks. Complex
instrumentation systems that appear to be promising at early stages of
development may not become fully operational for a number of reasons. These
systems may be found ineffective, be difficult or uneconomical to produce, fail
to achieve expected performance levels or industry acceptance, or be precluded
from commercialization by the proprietary rights of third parties. Much of the
instrumentation and software expected to comprise the Company's UHTS system are
not now and have not previously been used in commercial applications. Many of
these technologies have not been validated or developed at levels necessary to
screen miniaturized assays, and there can be no assurance that UHTS
technologies, if developed, will achieve expected performance levels at these
scales. The successful implementation and operation of the Company's UHTS system
will be a complex process requiring integration and coordination of a number of
factors, including integration of and successful interface between complex
advanced robotics, microfluidics, automated storage and retrieval systems,
fluorescence detector technologies and software and information systems. The
liquid dispensing requirements for the NanoPlates being designed for the UHTS
system are far beyond current high throughput screening practices for dispensing
small volumes. The development of microfluidics to accurately and rapidly
aspirate and dispense the microscopic volumes necessary for the UHTS system is
particularly challenging. There can be no assurance that the Company will be
able to successfully engineer and implement this microfluidics technology or all
of the other instrumentation needed for the UHTS system.
As the system is developed, integrated and used, it is possible that
previously unanticipated limitations or defects may emerge. In addition,
operators using the system may require substantial new technical skills and
training. There can be no assurance that unforeseen complications will not arise
in the development, delivery and operation of the UHTS system that could
materially delay or limit its use by the Company and its corporate
collaborators, substantially increase the anticipated cost of development of the
system, result in the breach by the Company of its contractual obligations to
its collaborators and others, or render the system unable to perform at the
quality and capacity levels required for success. Such complications or delays
could subject the Company to litigation and have other material adverse effects
on the Company's business, financial condition and results of operations. There
can be no assurance that the Company will be able to successfully develop its
UHTS system, achieve anticipated throughputs, gain industry acceptance of the
Company's approach to the identification of lead compounds or develop a
sustainable profitable business.
Dependence on Pharmaceutical and Biotechnology Collaborations. The
Company's strategy for the development and commercialization of its integrated
technology platform involves the formation of multiple corporate collaborations.
To date, all revenue received by the Company has been from its collaborations
and technology alliances. The Company expects that substantially all revenue for
the foreseeable future will come from collaborators. Furthermore, the Company's
ability to achieve profitability will be dependent upon the ability of the
Company to enter into additional
7
<PAGE> 9
corporate collaborations for co-development of the UHTS system as well as for
development of screens and for screening services. Because pharmaceutical and
biotechnology companies engaged in drug discovery activities have historically
conducted drug discovery and screening activities through their own internal
research departments, these companies must be convinced that the Company's UHTS
technologies justify entering into collaborative agreements with the Company.
There can be no assurance that the Company will be able to negotiate additional
collaborative agreements in the future on acceptable terms, if at all, that such
current or future collaborative agreements will be successful and provide the
Company with expected benefits, or that current or future collaborators will not
pursue or develop alternative technologies either on their own or in
collaboration with others, including the Company's competitors, as a means for
identifying lead compounds or targets. To the extent the Company chooses not to
or is unable to enter into such agreements, it will require substantially
greater capital to undertake the research, development and marketing of systems,
services and technologies at its own expense. In the absence of such
collaborative agreements, the Company may be required to delay or curtail its
research and development activities to a significant extent.
In addition, the amount and timing of resources that current and future
collaborators, if any, devote to collaborations with the Company are not within
the control of the Company. There can be no assurance that such collaborators
will perform their obligations as expected or that the Company will derive any
additional revenue from such agreements. Further, the Company's collaborations
generally may be terminated by its collaborators without cause upon short
notice, which terminations would result in loss of anticipated revenue.
Termination of the Company's existing or future collaboration agreements, or the
failure to enter into a sufficient number of additional collaborative agreements
on favorable terms, could have a material adverse effect on the Company's
business, financial condition and results of operations.
The Company's strategy involves obtaining access to libraries of compounds
from third parties to be screened against multiple targets. Because of the
potential overlap of compounds and targets provided by the Company's
collaborators, there can be no assurance that conflicts will not arise among
collaborators as to rights to particular products developed as a result of being
identified through the use of the Company's technologies. Failure to
successfully manage existing and future collaborator relationships, maintain
confidentiality among such relationships or prevent the occurrence of such
conflicts could lead to disputes that result in, among other things, a
significant strain on management resources, legal claims involving significant
time and expense and loss of reputation, a loss of capital or a loss of
collaborators, any of which could have a material adverse effect on the
Company's business, financial condition and results of operations. See
"-- Uncertainty of Milestone Payments on Pharmaceutical Products."
Future Capital Needs; Uncertainty of Additional Funding. The Company may be
required to raise substantial additional capital over a period of several years
in order to conduct its operations. Such capital may be raised through
additional public or private equity financings, as well as collaborative
arrangements, borrowings and other available sources. The Company depends upon
its corporate collaborators for research and development funding. As of March
31, 1997, the Company had received approximately $4.6 million from its
collaborators. The Company believes that the net proceeds of this offering,
expected revenue from collaborations, existing capital resources and interest
income should be sufficient to fund its anticipated levels of operations at
least through mid-1999. No assurance can be given that the Company's business or
operations will not change in a manner that would consume available resources
more rapidly than anticipated, or that substantial additional funding will not
be required before the Company can achieve profitable operations. There can be
no assurance that the Company will continue to receive funding under the
existing collaborative agreements or that the Company's existing or potential
future collaborative agreements will be adequate to fund the Company's
operations. The Company's capital requirements depend on numerous factors,
including the ability of the Company to enter into additional collaborative
agreements, competing technological and market developments, changes in the
Company's existing
8
<PAGE> 10
collaborative relationships, the cost of filing, prosecuting, defending and
enforcing patent claims and other intellectual property rights, the purchase of
additional capital equipment, the development of the Company's UHTS system and
the progress of the Company's collaborators' drug development activities. There
can be no assurance that additional funding, if necessary, will be available on
favorable terms, if at all. If adequate funds are not available, the Company may
be required to curtail operations significantly or to obtain funds by entering
into arrangements with collaborators or others that may require the Company to
relinquish rights to certain of its systems, services, technologies or potential
markets that the Company would not otherwise relinquish, which would have a
material adverse effect on the Company's business, financial condition and
results of operations. To the extent that additional capital is raised through
the sale of equity or securities convertible into equity, the issuance of such
securities would result in dilution to the Company's stockholders. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
Management of Growth. The Company's success will depend on its ability to
expand and manage its operations and facilities. To be cost-effective and timely
in the development and installation of its systems, services and technologies,
the Company must coordinate the integration of multiple technologies in complex
systems, both internally and for its collaborators. The Company's officers and
employees have been with the Company for only a limited period of time, and many
of them came to the Company with limited or no experience integrating multiple
technologies into complex systems. There can be no assurance that the Company
will be able to manage its growth, to meet the staffing requirements of current
or additional collaborative relationships or to successfully assimilate and
train its new employees. In addition, to manage its growth effectively, the
Company will be required to expand its management base and enhance its operating
and financial systems. If the Company continues to grow, there can be no
assurance that the management skills and systems currently in place will be
adequate or that the Company will be able to manage any additional growth
effectively. Failure to achieve any of these goals could have a material adverse
effect on the Company's business, financial condition or results of operations.
Dependence on Technology Alliances. In order to further the development of
its UHTS system, the Company has formed and intends to continue to form
technology alliances with certain companies in the areas of informatics,
robotics, automated storage and retrieval, liquid handling systems,
microfluidics and detection devices. The Company relies on these companies, many
of which are single-source vendors, for the development, manufacture and supply
of certain components of the Company's UHTS system. Although the Company
believes that alternative sources for UHTS system components could be made
available, any interruption in the development, manufacture or supply of a
sole-sourced component could have a material adverse effect on the Company's
ability to develop its UHTS system until a new source of supply is qualified,
could subject the Company to penalties for delays in delivery of the UHTS system
and, as a result, could have a material adverse effect on the Company's
business, financial condition and results of operations. There can be no
assurance the Company will be able to enter into additional technology alliances
on commercially reasonable terms, if at all, or that the Company's current or
future technology suppliers will meet the Company's requirements for quality,
quantity or timeliness.
Dependence on Patents and Proprietary Rights. The Company's success will
depend in part on its ability to obtain patent protection for its systems,
services and technologies, and to operate without infringing the proprietary
rights of third parties. The Company has had one patent issued to date. The
Company is dependent, in part, on the patent rights licensed from third parties
with respect to its fluorescent assay technologies. There can be no assurance
that patent applications filed by the Company or its licensors will result in
patents being issued, that the claims of such patents will offer significant
protection of the Company's technology, or that any patents issued to, or
licensed by, the Company will not be challenged, narrowed, invalidated, or
circumvented. The Company may also be subject to legal proceedings that result
in the revocation of patent rights previously owned by or licensed to the
Company, as a result of which the Company may be required
9
<PAGE> 11
to obtain licenses from others to continue to develop, test or commercialize its
systems, services or technologies. There can be no assurance that the Company
will be able to obtain such licenses on acceptable terms, if at all.
The drug discovery industry, including screening technology companies, has
a history of patent litigation and will likely continue to have patent
litigation suits concerning drug discovery technologies. The patent positions of
pharmaceutical, biotechnology and drug discovery companies, including the
Company, are generally uncertain and involve complex legal and factual
questions. A number of patents have issued and may issue on certain targets or
their use in screening assays that could prevent the Company and its
collaborators from developing screens using such targets, or relate to certain
other aspects of technology utilized or expected to be utilized by the Company.
The Company has received invitations from third parties to license patents owned
or controlled by third parties. The Company evaluates these requests and intends
to obtain licenses that are compatible with its business objectives. There can
be no assurance, however, that the Company will be able to obtain any licenses
on acceptable terms, if at all. The Company's inability to obtain or maintain
patent protection or necessary licenses could have a material adverse effect on
the business, financial condition and results of operations of the Company.
The Company is aware of a third party Patent Cooperation Treaty application
that claims certain uses of green fluorescent protein including its use in
protein kinase assays. If a patent were to issue from such application that
relates to the Company's GFP kinase reporters, the Company believes that such
patent would be unlikely to require the Company to obtain a license. However,
the Company may need to obtain such a license and there can be no assurance that
any such license would be available on commercially reasonable terms, if at all.
The Company is also aware of third party patents and published patent
applications that contain issued or issuable claims that may cover certain
aspects of the Company's or its collaborators' technologies, including certain
types of fluorescent assay methods, certain assays for ligands to certain
classes of targets such as certain cell surface and intracellular receptors, and
certain transcription based assays for chemicals that modulate transcription of
a gene encoding a protein related to disease. There can be no assurance that the
Company would not be required to take a license under any such patents to
practice certain aspects of its fluorescent assay technologies or that such
license would be available on commercially reasonable terms, if at all. Any
action against the Company or its collaborators claiming damages and seeking to
enjoin commercial activities relating to the affected technologies could, in
addition to subjecting the Company to potential liability for damages, require
the Company or its collaborators to obtain a license in order to continue to
develop, manufacture or market the affected technologies. The Company could
incur substantial costs in defending patent infringement claims, obtaining
patent licenses, engaging in interference and opposition proceedings or other
challenges to its patent rights or intellectual property rights made by third
parties, or in bringing such proceedings or enforcing any patent rights against
third parties. The Company's inability to obtain necessary licenses or its
involvement in proceedings concerning patent rights could have a material
adverse effect on the business, financial condition and results of operations of
the Company.
In addition to patent protection, Aurora also relies on copyright
protection, trade secrets, know-how, continuing technological innovation and
licensing opportunities. In an effort to maintain the confidentiality and
ownership of trade secrets and proprietary information, the Company requires
employees, consultants and certain collaborators to execute confidentiality and
invention assignment agreements upon commencement of a relationship with the
Company. There can be no assurance, however, that these agreements will provide
meaningful protection for the Company's trade secrets or other confidential
information in the event of unauthorized use or disclosure of such information
or that adequate remedies would exist in the event of such unauthorized use or
disclosure. The loss or exposure of trade secrets possessed by the Company could
adversely affect its business. Like many high technology companies, the Company
may from time to time hire scientific personnel formerly employed by other
companies involved in one or more areas similar to the activities conducted by
the Company. Although the Company requires its employees to maintain the
10
<PAGE> 12
confidentiality of all confidential information of previous employers, there can
be no assurance that the Company or these individuals will not be subject to
allegations of trade secret misappropriation or other similar claims as a result
of their prior affiliations.
Competition and the Risk of Obsolescence of Technology. Competition among
pharmaceutical and biotechnology companies which attempt to identify compounds
for development is intense. Because the Company's UHTS system is being designed
to integrate a number of different technologies, the Company competes in many
areas, including assay development, high throughput screening and functional
genomics. In the pharmaceutical industry, the Company competes with the research
departments of pharmaceutical and biotechnology companies and other commercial
enterprises, as well as numerous academic and research institutions.
Pharmaceutical and biotechnology companies, academic institutions, governmental
agencies and other research organizations are conducting research in various
areas which constitute portions of the Company's technology platform, either on
their own or in collaboration with others. There can be no assurance that
pharmaceutical and biotechnology companies which currently compete with the
Company in specific areas will not merge or enter into joint ventures or other
alliances with one or more other such companies and become substantial
multi-point competitors or that the Company's collaborators will not assemble
their own ultra-high throughput screening systems by purchasing components from
competitors. Genomics and combinatorial chemistry companies may also expand
their business to include compound screening or screen development, either alone
or pursuant to alliances with others. The Company anticipates that it will face
increased competition in the future as new companies enter the market and
advanced technologies, including more sophisticated information technologies,
become available. The Company's technological approaches, in particular its UHTS
system, may be rendered obsolete or uneconomical by advances in existing
technological approaches or the development of different approaches by one or
more of the Company's current or future competitors. Many of these competitors
have greater financial and personnel resources, and more experience in research
and development, than the Company. Historically, pharmaceutical and
biotechnology companies have maintained close control over their research
activities, including the synthesis, screening and optimization of chemical
compounds. Many of these companies, which represent the greatest potential
market for the Company's systems, services and technologies, have developed or
are developing internal programs and other methodologies to improve
productivity, including major investments in robotics technology to permit the
automated screening of compounds.
Uncertainty of Milestone Payments on Pharmaceutical Products. The Company's
future revenue will depend in part on the realization of milestone payments and
royalties, if any, triggered by the successful development and commercialization
of lead compounds identified through the use of the Company's technologies. The
Company's screens may result in developed and commercialized pharmaceutical
products generating milestone payments and royalties only after lengthy and
costly preclinical and clinical development efforts, the receipt of requisite
regulatory approvals, and the integration of manufacturing capabilities and
successful marketing efforts, all of which must be performed by the Company's
collaborators. The commercialization of any such products is highly uncertain
due to the significant research, development, market, regulatory and other risks
associated with the drug development process. With the exception of certain
aspects of preclinical development, the Company does not currently intend to
perform any of these activities. The Company's agreements with its collaborators
do not obligate those parties to develop or commercialize lead compounds
identified through the use of the Company's technologies. Development and
commercialization of lead compounds will therefore depend not only on the
achievement of research objectives by the Company and its collaborators, which
cannot be assured, but also on each collaborator's own financial, competitive,
marketing and strategic considerations, all of which are outside the Company's
control. Such strategic considerations may include the relative advantages of
alternative products being marketed or developed by others, including relevant
patent and proprietary positions. There can be no assurance that the interests
and motivations of the Company's collaborators are, or will remain, aligned with
those of the Company, that current or future
11
<PAGE> 13
collaborators will not pursue alternative technology in preference to that of
the Company or that such collaborators will successfully perform their
development, regulatory, compliance, manufacturing or marketing functions.
Should a collaborator fail to develop or commercialize a lead compound
identified through the use of the Company's technologies, or should such a
compound be determined to be unsafe or of no therapeutic benefit, the Company
will not receive any future milestone payments or royalties associated with such
compound, and the Company may have only limited or no rights to independently
develop and commercialize such compounds or products. In addition, there can be
no assurance that any product will be developed and commercialized as a result
of such collaborations, that any such development or commercialization would be
successful or that disputes will not arise over the application of payment
provisions to such drugs.
Government Regulation. Regulation by the U.S. Food and Drug Administration
(the "FDA") and other governmental entities in the United States and other
countries will be a significant factor in the production and marketing of any
pharmaceutical products that may be developed by a collaborator. It is not
currently anticipated that the Company will develop its own drugs through
clinical trials. However, pharmaceutical products, if any, developed by the
Company's collaborators will require lengthy and costly pre-clinical and
clinical trials and regulatory approval by governmental agencies prior to
commercialization. The process of obtaining these approvals and the subsequent
compliance with appropriate federal, state and foreign statutes and regulations
are time consuming and require the expenditure of substantial resources. Delays
in obtaining regulatory approvals would adversely affect the marketing of any
drugs developed by the Company's collaborators, diminish any competitive
advantages that the Company's collaborators may attain and therefore adversely
affect the Company's ability to receive royalties or milestone payments. If the
product is classified as a new drug, a New Drug Application will be required to
be filed with, and product approval must be obtained from, the FDA before
commercial marketing of the drug. These testing and approval processes require
substantial time and effort and there can be no assurance that any approval will
be granted on a timely basis, if at all.
Attraction and Retention of Key Employees and Consultants. The Company is
highly dependent on the principal members of its scientific and management
staff, as well as its scientific consultants, particularly Drs. Timothy J. Rink,
J. Gordon Foulkes, Harry G. Stylli, Frank F. Craig and Roger Y. Tsien. The loss
of one or more members of its staff could have a material adverse effect on the
Company's business, financial condition and results of operations. The Company
does not maintain "key person" insurance on any of its employees. The Company's
future success will also depend in part on its ability to identify, recruit and
retain additional qualified personnel, including individuals holding doctoral
degrees in the basic sciences. There is intense competition for such personnel
in the areas of the Company's activities, and there can be no assurance that the
Company will be able to continue to attract and retain personnel with the
advanced technical qualifications necessary for the development of the Company's
business. Failure to attract and retain key personnel could have a material
adverse effect on the Company's business, financial condition and results of
operations. See "Business -- Scientific Advisors" and "Management."
Significant Fluctuations in Quarterly Results. To date, all revenue
received by the Company has been from the payment of license and up-front fees
and research and co-development funding paid pursuant to collaborative
agreements. The Company expects that a significant portion of its revenue for
the foreseeable future will be comprised of such payments. The timing of such
payments in the future will depend upon the completion of certain milestones as
provided for in such collaborative agreements. In any one quarter the Company
may receive multiple or no payments from its several collaborators. Operating
results may therefore vary substantially from quarter to quarter and will not
necessarily be indicative of results in subsequent periods.
Hazardous Materials. The research and development processes of the Company
involve the controlled use of hazardous materials, chemicals and various
radioactive compounds, including microbial organisms and other biological
materials. The Company is subject to federal, state and local laws and
regulations governing the use, manufacture, storage, handling and disposal of
such
12
<PAGE> 14
materials and certain waste products. The risk of accidental contamination or
injury from these materials cannot be completely eliminated. In the event of
such an accident, the Company could be held liable for any damages that result
and any such liability could exceed the resources of the Company. There can be
no assurance that the Company will not be required to incur significant costs to
comply with environmental laws and regulations in the future.
Control By Management and Existing Stockholders. Upon completion of this
offering, after giving effect to the conversion of all outstanding shares of
Preferred Stock into Common Stock, the Company's principal stockholders,
executive officers, directors and affiliated individuals and entities together
will beneficially own approximately 56.0% of the outstanding shares of Common
Stock (54.5% if the Underwriters' over-allotment option is exercised in full).
As a result, these stockholders, acting together, will be able to influence
significantly and possibly control most matters requiring approval by the
stockholders of the Company, including approvals of amendments to the Company's
Certificate of Incorporation, mergers, a sale of all or substantially all of the
assets of the Company, going private transactions and other fundamental
transactions. In addition, the Company's Certificate of Incorporation, as it is
proposed to be amended and restated concurrently with the closing of this
offering (the "Restated Certificate"), does not provide for cumulative voting
with respect to the election of directors. Consequently, the present directors
and executive officers of the Company, together with the Company's principal
stockholders, will be able to control the election of the members of the Board
of Directors of the Company. Such a concentration of ownership could have an
adverse effect on the price of the Common Stock, and may have the effect of
delaying or preventing a change in control of the Company, including
transactions in which stockholders might otherwise receive a premium for their
shares over then current market prices.
Broad Discretion in Application of Net Proceeds. The net proceeds to the
Company from the sale of the shares of Common Stock offered hereby at an assumed
initial public offering price of $10.00 per share are estimated to be
approximately $27.3 million ($31.5 million if the Underwriters' overallotment
option is exercised in full) after deducting underwriting discounts and
commissions and estimated offering expenses. The Company intends to use the net
proceeds from this offering principally for working capital and general
corporate purposes, including approximately $10.0 million for enhancement of
internal research and development capabilities and the acquisition of chemical
libraries, and approximately $3.5 million for facilities expansion and
improvements. The Company's management and Board of Directors will have broad
discretion with respect to the application of such proceeds, and the amounts
actually expended by the Company for working capital purposes may vary
significantly depending on a number of factors, including future revenue growth,
if any, and the amount of cash, if any, generated by the Company's operations.
See "Use of Proceeds."
No Prior Public Market for Common Stock; Possible Volatility of Stock
Price. Prior to this offering, there has been no public market for the Common
Stock and there can be no assurance that an active public market for the Common
Stock will develop or be sustained after this offering. The initial public
offering price will be determined by negotiations between the Company and the
Underwriters and is not necessarily indicative of the market price at which the
Common Stock of the Company will trade after this offering. See "Underwriting"
for a discussion of the factors considered in determining the initial public
offering price. The market prices for securities of comparable companies have
been highly volatile and the market has experienced significant price and volume
fluctuations that are often unrelated to the operating performance of particular
companies. Announcements of technological innovations or new commercial products
by the Company or its competitors, disputes or other developments concerning
proprietary rights, including patents and litigation matters, publicity
regarding actual or potential results with respect to systems, services or
technologies under development by the Company, its collaborative partners or its
competitors, regulatory developments in both the United States and foreign
countries, public concern as to the efficacy of new technologies, general market
conditions, as well as quarterly fluctuations in the Company's revenues and
financial results and other factors, may have a significant impact on the
13
<PAGE> 15
market price of the Common Stock. In particular, the realization of any of the
risks described in these "Risk Factors" could have a dramatic and materially
adverse impact on such market price.
Availability of Preferred Stock for Issuance; Anti-Takeover Provisions. The
Restated Certificate authorizes the Board of Directors of the Company, without
stockholder approval, to issue additional shares of Common Stock and to fix the
rights, preferences and privileges of and issue up to 7,500,000 shares of
preferred stock with voting, conversion, dividend and other rights and
preferences that could adversely affect the voting power or other rights of the
holders of Common Stock. The issuance of preferred stock, rights to purchase
preferred stock or additional shares of Common Stock may have the effect of
delaying or preventing a change in control of the Company. In addition, the
possible issuance of preferred stock or additional shares of Common Stock could
discourage a proxy contest, make more difficult the acquisition of a substantial
block of the Company's Common Stock or limit the price that investors might be
willing to pay for shares of the Company's Common Stock. Further, the Restated
Certificate provides that any action required or permitted to be taken by
stockholders of the Company must be effected at a duly called annual or special
meeting of stockholders and may not be effected by any consent in writing.
Special meetings of the stockholders of the Company may be called only by the
Chairman of the Board of Directors, the President of the Company, by the Board
of Directors pursuant to a resolution adopted by a majority of the total number
of authorized directors, or by the holders of 10% of the outstanding voting
stock of the Company. These and other provisions contained in the Restated
Certificate and the Company's Bylaws, as well as certain provisions of Delaware
law, could delay or make more difficult certain types of transactions involving
an actual or potential change in control of the Company or its management
(including transactions in which stockholders might otherwise receive a premium
for their shares over then current market prices) and may limit the ability of
stockholders to remove current management of the Company or approve transactions
that stockholders may deem to be in their best interests and, therefore, could
adversely affect the price of the Company's Common Stock.
Shares Eligible for Future Sale and Potential Adverse Effect on Market
Price. Sales of Common Stock in the public market following this offering could
adversely affect the market price of the Common Stock. Upon completion of this
offering, the Company will have 15,895,240 shares of Common Stock outstanding,
assuming no exercise of currently outstanding options, but including warrants to
purchase an aggregate of 45,290 shares of Common Stock to be exercised upon the
closing of this offering. Of these shares, the 3,000,000 shares sold in this
offering (plus any additional shares sold upon exercise of the Underwriters'
over-allotment option) will be freely transferable without restriction under the
Securities Act of 1933, as amended (the "Securities Act"), unless they are held
by "affiliates" of the Company as that term is used under the Securities Act and
the regulations promulgated thereunder. Approximately 10,826,367 shares of
Common Stock will be fully vested and eligible for sale under Securities Act
Rules 144 and 701 on the ninety-first day after the effectiveness of this
offering. Stockholders of the Company, holding an aggregate of 10,762,778 of
these 10,826,367 shares of Common Stock, have agreed pursuant to lock-up
agreements with the Underwriters, subject to certain limited exceptions, not to
sell or otherwise dispose of any of the shares held by them as of the date of
this Prospectus for a period of 180 days after the date of this Prospectus
without the prior written consent of Alex. Brown & Sons Incorporated. At the end
of such 180-day period, an additional 217,722 shares of Common Stock (plus
approximately 15,985 shares issuable upon exercise of vested options) will be
eligible for immediate resale, subject to compliance with Rule 144 or Rule 701.
The remainder of the approximately 1,849,725 shares of Common Stock held by
existing stockholders will become eligible for sale at various times over a
period of two years and could be sold earlier if the holders exercise any
available registration rights. The holders of 9,915,975 shares of Common Stock
have the right in certain circumstances to require the Company to register their
shares under the Securities Act for resale to the public beginning at the end of
the 180 day lock-up period. If such holders, by exercising their demand
registration rights, cause a large number of shares to be registered and sold in
the public market, such sales could have an adverse effect on the market price
for the Company's Common Stock. If the Company were required to include in a
Company-initiated registration shares held by such holders pursuant to
14
<PAGE> 16
the exercise of their piggyback registration rights, such sales may have an
adverse effect on the Company's ability to raise needed capital. In addition,
the Company expects to file a registration statement on Form S-8 registering a
total of approximately 2,170,168 shares of Common Stock subject to outstanding
stock options or reserved for issuance under the Company's stock option plans.
Such registration statement is expected to be filed and to become effective as
soon as practicable after the effective date of this offering. Shares registered
under such registration statement will, subject to Rule 144 volume limitations
applicable to affiliates, be available for sale in the open market, unless such
shares are subject to vesting restrictions with the Company or the lock-up
agreements described above. See "Management," "Description of Capital
Stock -- Registration Rights," "Shares Eligible for Future Sale" and
"Underwriting."
Immediate and Substantial Dilution. Purchasers of the shares of Common
Stock offered hereby will experience immediate and substantial dilution in the
net tangible book value of their investment from the initial public offering
price. Additional dilution will occur upon exercise of outstanding options. See
"Dilution" and "Shares Eligible for Future Sale."
15
<PAGE> 17
USE OF PROCEEDS
The net proceeds to the Company from the sale of the 3,000,000 shares of
Common Stock offered hereby at an assumed public offering price of $10.00 per
share are estimated to be $27.3 million ($31.5 million if the Underwriters'
over-allotment option is exercised in full) after deducting underwriting
discounts and commissions and estimated offering expenses.
The Company intends to use the net proceeds from this offering principally
for working capital and general corporate purposes, including approximately
$10.0 million for enhancement of internal research and development capabilities
and the acquisition of chemical libraries, and approximately $3.5 million for
facilities expansion and improvements. The amounts actually expended by the
Company for working capital purposes will vary significantly depending on a
number of factors, including future revenue growth, if any, and the amount of
cash, if any, generated by the Company's operations. The Company's management
will retain broad discretion in the allocation of the net proceeds of this
offering. The Company may also use a portion of the net proceeds to fund
acquisitions of complementary technologies, products or businesses, although the
Company has no current agreements or commitments for any such acquisition.
Pending such uses, the Company intends to invest the net proceeds of this
offering in short-term, interest-bearing, investment-grade securities.
DIVIDEND POLICY
To date, the Company has never declared nor paid any cash dividends on its
Common Stock. The Company currently intends to retain any earnings for funding
growth and, therefore, does not intend to pay any cash dividends on its Common
Stock in the foreseeable future.
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<PAGE> 18
CAPITALIZATION
The following table sets forth the capitalization of the Company as of
March 31, 1997 (i) on an actual basis after giving effect to the conversion of
all outstanding Preferred Stock into 9,915,975 shares of Common Stock and (ii)
as adjusted to give effect to the receipt by the Company of the estimated net
proceeds from the sale of 3,000,000 shares of Common Stock offered hereby at an
assumed initial public offering price of $10.00 per share, after deducting
underwriting discounts and commissions and estimated offering expenses, and the
exercise upon the closing of this offering of outstanding warrants to purchase
an aggregate of 45,290 shares of Common Stock:
<TABLE>
<CAPTION>
MARCH 31, 1997
-----------------------
ACTUAL AS ADJUSTED
------- -----------
(IN THOUSANDS)
<S> <C> <C>
Capital lease obligations, less current portion(1)................... $ 1,389 $ 1,389
Stockholders' equity:
Preferred stock, $.001 par value, 25,000,000 shares authorized,
actual, and 7,500,000 shares authorized, as adjusted; no shares
issued or outstanding, actual and as adjusted................... -- --
Common stock, $.001 par value, 50,000,000 shares authorized;
12,849,950 shares issued and outstanding, actual; 15,895,240
shares issued and outstanding, as adjusted (2).................. 13 16
Additional paid-in capital......................................... 22,336 49,633
Deferred compensation, net......................................... (3,477) (3,477)
Accumulated deficit................................................ (4,187) (4,187)
------- -------
Total stockholders' equity...................................... 14,685 41,985
------- -------
Total capitalization....................................... $16,074 $43,374
======= =======
</TABLE>
- ---------------
(1) See Note 5 of Notes to Financial Statements for a description of the
Company's capital lease obligations.
(2) Excludes 581,320 shares of Common Stock issuable upon exercise of
outstanding stock options as of March 31, 1997 at a weighted average
exercise price of $1.28 per share and 1,627,408 shares of Common Stock
reserved for future grant under the Company's 1996 Stock Plan, Employee
Stock Purchase Plan and Non-Employee Directors' Stock Option Plan. See
"Capitalization," "Management," "Description of Capital Stock" and Notes 6
and 11 of Notes to Financial Statements.
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<PAGE> 19
DILUTION
The pro forma net tangible book value of the Company as of March 31, 1997
was approximately $14.6 million, or $1.13 per share. Pro forma net tangible book
value per share represents the amount of the Company's total tangible assets
less total liabilities divided by 12,895,240 shares of Common Stock outstanding
after giving effect to the conversion of all outstanding shares of Preferred
Stock into Common Stock and the exercise upon the closing of this offering of
outstanding warrants to purchase an aggregate of 45,290 shares of Common Stock.
Pro forma net tangible book value dilution per share represents the
difference between the amount per share paid by purchasers of shares of Common
Stock in the offering and the pro forma net tangible book value per share of
Common Stock immediately after completion of the Offering. After giving effect
to the sale of the 3,000,000 shares of Common Stock offered by the Company
hereby at an assumed initial public offering price of $10.00 per share and the
application of the net proceeds therefrom, the Company's pro forma net tangible
book value at March 31, 1997 would have been approximately $41.9 million, or
$2.63 per share. This represents an immediate increase in pro forma net tangible
book value of $1.50 per share to existing stockholders and an immediate dilution
in pro forma net tangible book value of $7.37 per share to new investors
purchasing Common Stock in this offering, as illustrated in the following table:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share........................... $10.00
Pro forma net tangible book value per share as of March 31, 1997........ $1.13
Increase per share attributable to new investors........................ 1.50
-----
Pro forma net tangible book value per share after this offering........... 2.63
------
Net tangible book value dilution per share to new investors............... $ 7.37
======
</TABLE>
The following table summarizes on a pro forma basis, as of March 31, 1997,
the differences between the existing stockholders and the purchasers of shares
in this offering (at an assumed initial public offering price of $10.00 per
share) with respect to the number of shares purchased from the Company, the
total consideration paid and the average price per share paid.
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
-------------------- --------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
----------- ------- ----------- ------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders(1)............. 12,895,240 81.1% $18,881,000 38.6% $ 1.46
New investors........................ 3,000,000 18.9 30,000,000 61.4 $ 10.00
---------- ----- ----------- -----
Total.............................. 15,895,240 100.0% $48,881,000 100.0%
========== ===== =========== =====
</TABLE>
- ---------------
(1) Excludes 581,320 shares of Common Stock issuable upon exercise of
outstanding stock options as of March 31, 1997 at a weighted average
exercise price of $1.28 per share and 1,627,408 shares of Common Stock
reserved for future grant under the Company's 1996 Stock Plan, Employee
Stock Purchase Plan and Non-Employee Directors' Stock Option Plan. See
"Capitalization," "Management," "Description of Capital Stock" and Notes 6
and 11 of Notes to Financial Statements. To the extent that outstanding
options are exercised in the future, there may be further dilution to new
stockholders.
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<PAGE> 20
SELECTED FINANCIAL DATA
The selected financial data presented below for the period from May 8, 1995
(inception) to December 31, 1995 and the year ended December 31, 1996 and at
December 31, 1995 and 1996 are derived from the Company's financial statements
audited by Ernst & Young LLP, independent auditors, which are included elsewhere
in this Prospectus. The statement of operations data for the three months ended
March 31, 1996 and 1997 and the balance sheet data at March 31, 1997 are derived
from unaudited financial statements also included elsewhere in this Prospectus,
which, in the opinion of management, include all adjustments (consisting only of
normal recurring adjustments) necessary for a fair presentation of the financial
position and results of operations of the Company for the unaudited interim
periods. The statement of operations data for the interim periods are not
necessarily indicative of results that may be expected for any other interim
period or for the year as a whole. The data set forth below should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the financial statements and related notes
thereto appearing elsewhere in this Prospectus.
<TABLE>
<CAPTION>
THREE MONTHS
PERIOD FROM ENDED
MAY 8, 1995 MARCH 31,
(INCEPTION) TO YEAR ENDED -----------------
DECEMBER 31, 1995 DECEMBER 31, 1996 1996 1997
------------------- ----------------- ------ ------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS DATA:
Revenue:
UHTS system development......... $ -- $ 2,117 $ -- $ 650
Screening services.............. -- 100 -- 405
License fees.................... -- -- -- 487
----- ------- ------ ------
Total revenue................... -- 2,217 -- 1,542
Operating expenses:
Cost of UHTS system
development................... -- -- -- 688
Cost of screening services...... -- -- -- 287
Research and development........ 366 4,396 405 911
General and administrative...... 46 1,275 137 642
----- ------- ------ ------
Total operating expenses........ 412 5,671 542 2,528
Interest income, net............... -- 521 43 144
----- ------- ------ ------
Net loss........................... $ (412) $(2,933) $ (499) $ (842)
===== ======= ====== ======
Pro forma net loss per share (1)... $ (0.26) $(0.06)
Shares used in computing pro forma
net loss per share (1).......... 11,139 13,399
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------------------------
1995 1996 MARCH 31, 1997
------------------- ----------------- --------------
(IN THOUSANDS)
<S> <C> <C> <C>
BALANCE SHEET DATA:
Cash, cash equivalents and investment
securities available for sale...... $ 11 $13,167 $ 13,639
Total assets......................... 115 17,515 18,344
Capital lease obligations, less
current portion.................... -- 1,111 1,389
Accumulated deficit.................. (412) (3,345) (4,187)
Total stockholders' equity........... (412) 15,184 14,685
</TABLE>
- ---------------
(1) See Note 1 of Notes to Financial Statements for a description of the
computation of the pro forma net loss per share and the number of shares
used in the pro forma net loss per share calculation.
19
<PAGE> 21
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This Prospectus contains certain statements of a forward-looking nature
relating to future events or the future financial performance of the Company.
Prospective investors are cautioned that such statements are only predictions
and that actual events or results may differ materially. In evaluating such
statements, prospective investors should specifically consider the various
factors identified in this Prospectus, including the matters set forth under the
caption "Risk Factors," which could cause actual results to differ materially
from those indicated by such forward-looking statements.
OVERVIEW
Aurora Biosciences Corporation ("Aurora" or the "Company") designs and
develops proprietary drug discovery systems, services and technologies to
accelerate and enhance the discovery of new medicines. From May 8, 1995
(inception) to December 31, 1995, the Company's operating activities related
primarily to recruitment of personnel and raising capital. Operating activities
since the beginning of 1996 have focused on the development of Aurora's
portfolio of proprietary fluorescent assay technologies, as well as the
development of its ultra-high throughput screening ("UHTS") system, designed to
integrate advanced instrumentation and miniaturized assays. The Company has
incurred losses since inception and, as of March 31, 1997, had an accumulated
deficit of $4.2 million.
The Company's ability to achieve profitability will depend in part on its
ability to successfully develop the UHTS system, provide screen development and
screening services to pharmaceutical and biotechnology companies, achieve
acceptable performance specifications for its UHTS system, and gain industry
acceptance of its systems, services and technologies. Payments from corporate
collaborators and interest income are expected to be the only sources of revenue
for the foreseeable future. The Company has not yet generated any revenue from
milestones under its collaborative agreements. Royalties or other revenue from
commercial sales of products developed from any compound identified by using the
Company's technologies are not expected for at least several years, if at all.
Payments under collaborative agreements will be subject to significant
fluctuation in both timing and amount and therefore the Company's results of
operations for any period may not be comparable to the results of operations for
any other period.
In November 1996 and December 1996, Aurora announced collaborative
agreements with Bristol-Myers Squibb ("BMS") and Eli Lilly and Company
("Lilly"). Under the terms of each of the BMS and Lilly agreements, the Company
is required to develop and separately install three components to be integrated
into one complete UHTS system. The Company will also co-develop with each party
high throughput screening assays for use by such party. Each party will also
have the right to use the Company's fluorescent assay technologies for internal
research and drug development, including the development of screening assays.
Aurora has also entered into drug discovery collaborations with Sequana
Therapeutics, Inc., Alanex Corporation and ArQule, Inc. and into strategic
technology alliances for UHTS system development with several companies
including Packard Instrument Company ("Packard") and Carl Creative Systems, Inc.
Additionally, in December 1996 Aurora signed a collaborative agreement with
Roche Bioscience Corporation ("Roche") to access one of the Company's
fluorescent assay technologies and to develop specialized instrumentation, and
in February 1997 an agreement was entered into with Allelix Biopharmaceuticals,
Inc. ("Allelix") requiring Aurora to develop screening assays and perform
screening services. See "Business -- Corporate Collaborations" and "-- UHTS
Technology Alliances."
Revenue typically consists of non-refundable up-front fees, ongoing
research and co-development payments, and milestone, royalty and other
contingent payments. Revenue from non-refundable up-front fees is recognized
upon signing of the agreement. Revenue from ongoing research and
20
<PAGE> 22
co-development payments is recognized ratably over the term of the agreement,
and the Company believes such payments will approximate the research and
development expense being incurred in connection with the agreement. Revenue
from milestone, royalty and other contingent payments will be recognized as
earned. Revenue from screen development and screening and other services is
recognized as earned. Advance payments received under any agreements in excess
of amounts earned are classified as unearned revenue. Revenue under cost
reimbursement contracts is recognized as the related costs are incurred. The
Company records and amortizes over the related vesting periods deferred
compensation representing the difference between the price of stock issued or
options granted and the deemed fair market value of the Common Stock at the time
of issue or grant. Stock and options generally vest over a four-year period.
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1997 AND 1996
Revenue related to UHTS system development, screening services and license
fees totaled $650,000, $405,000 and $488,000, respectively, for the three months
ended March 31, 1997. There was no revenue in the three months ended March 31,
1996. The first quarter 1997 revenue resulted from the Company's collaborative
agreements with BMS, Lilly, Roche and Allelix and the technology alliance with
Packard.
Costs of UHTS system development and screening services totaled $688,000
and $287,000, respectively, for the three months ended March 31, 1997. There was
no cost of revenue for the three months ended March 31, 1996.
Research and development expenses increased to $911,000 for the three
months ended March 31, 1997 from $405,000 in the three months ended March 31,
1996. The increase in research and development expenses was attributable to
increased research and development personnel expenses, increased equipment and
depreciation and facilities expenses in connection with the expansion of
operations, payments under technology development and license agreements and the
purchase of laboratory supplies.
General and administrative expenses increased to $642,000 in the three
months ended March 31, 1997 from $137,000 in the three months ended March 31,
1996. The increase was primarily attributable to increased management and
administrative personnel expenses, increased depreciation expense from the
acquisition of equipment in connection with the expansion of operations, and
legal and professional fees incurred in connection with the overall scale-up of
the Company's operations and business development efforts.
Deferred compensation of approximately $3.2 million was recorded in the
three months ended March 31, 1997, of which $106,000 was recognized as expense
during the period.
The Company had net interest income of $144,000 in the three months ended
March 31, 1997 resulting from interest earned on proceeds from private
placements of equity securities and payments received under collaborative
agreements, partially offset by interest expense incurred on capital lease
obligations entered into in 1996 and 1997. The Company had interest income of
$43,000 in the three months ended March 31, 1996.
YEAR ENDED DECEMBER 31, 1996 AND PERIOD FROM MAY 8, 1995 (INCEPTION) TO
DECEMBER 31, 1995
Revenue related to UHTS system development and screening services totaled
$2.1 million and $100,000, respectively, for the year ended December 31, 1996.
The 1996 revenue resulted from the Company's collaborative agreements with BMS,
Lilly and Roche and the technology alliance with Packard. There was no license
fee revenue during 1996. The Company had no revenue during the period from May
8, 1995 (inception) through December 31, 1995 ("the 1995 Period").
Because the Company's collaborative agreements with BMS and Lilly were not
entered into until late 1996, and called for actual research and development to
begin in January 1997, there were no costs of UHTS system development recognized
in 1996 or in the 1995 Period. All costs associated with the Company's internal
development of its UHTS system technology in 1996 and the 1995 Period are
included in research and development expenses for the applicable period.
21
<PAGE> 23
Research and development expenses increased to $4.4 million in 1996 from
$366,000 in the 1995 Period as the Company began the development of its UHTS
system and fluorescence technologies. The increase in research and development
expenses was attributable to increased research and development personnel
expenses, increased equipment and depreciation and facilities expenses in
connection with the establishment of operations, payments under technology
development and license agreements, purchase of laboratory supplies and
increased expenses associated with the compensation paid to the Company's
scientific advisors.
General and administrative expenses increased to $1.3 million in 1996 from
$46,000 in the 1995 Period. The increase was primarily attributable to increased
management and administrative personnel expenses, increased depreciation
expenses from the acquisition of equipment in connection with the establishment
of operations and legal and professional fees incurred in connection with the
overall scale-up of the Company's operations and business development efforts.
Deferred compensation in the amount of approximately $374,000 was recorded
as of December 31, 1996.
The Company had net interest income of $521,000 in 1996 resulting from
interest earned on cash and investment securities derived from private
placements of equity securities, partially offset by interest expense incurred
on capital lease obligations entered into in 1996. The Company did not earn
interest income or incur interest expense in the 1995 Period.
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 1997, Aurora held cash, cash equivalents and investment
securities available for sale of $13.6 million and working capital of $12.3
million. The Company has funded its operations to date primarily through private
placements of equity securities with aggregate net proceeds of approximately
$18.7 million, capital equipment lease financing totaling $2.1 million and
interest income earned on the net proceeds of its private placements. Receipts
from corporate collaborations and strategic technology alliances totaled $4.7
million through March 31, 1997.
The Company has entered into various strategic technology agreements with
third parties regarding the development of instrumentation technology which
require the Company to make future payments totaling $1.2 million in 1997 and
1998 if all milestones are met. In addition, the Company has entered into
license agreements with third parties regarding certain inventions and
technologies for which the Company is obligated to make future payments totaling
$830,000 over the next seven years.
To date, all revenue received by the Company has been from its
collaborations and technology alliances. The Company expects that substantially
all revenue for the foreseeable future will come from collaborators and interest
income. Furthermore, the Company's ability to achieve profitability will be
dependent upon the ability of the Company to enter into additional corporate
collaborations. There can be no assurance that the Company will be able to
negotiate additional collaborative agreements in the future on acceptable terms,
if at all, or that such current or future collaborative agreements will be
successful and provide the Company with expected benefits.
The Company believes that the net proceeds from this offering, expected
revenue from collaborations, existing capital resources and interest income
should be sufficient to fund its anticipated levels of operations at least
through mid-1999. No assurance can be given that the Company's business or
operations will not change in a manner that would consume available resources
more rapidly than anticipated, or that substantial additional funding will not
be required before the Company can achieve profitable operations. The Company's
capital requirements depend on numerous factors, including the ability of the
Company to enter into additional collaborative agreements, competing
technological and market developments, changes in the Company's existing
collaborative relationships, the cost of filing, prosecuting, defending and
enforcing patent claims and other intellectual property rights, the purchase of
additional capital equipment, the develop-
22
<PAGE> 24
ment of the Company's UHTS system and the progress of the Company's
collaborators' milestone and royalty-producing activities. There can be no
assurance that additional funding, if necessary, will be available on favorable
terms, if at all. If adequate funds are not available, the Company may be
required to curtail operations significantly or to obtain funds by entering into
arrangements with collaborators or others that may require the Company to
relinquish rights to certain of its systems, services, technologies or potential
markets that the Company would not otherwise relinquish, which would have a
material adverse effect on the Company's business, financial condition and
results of operations.
23
<PAGE> 25
BUSINESS
OVERVIEW
Aurora Biosciences Corporation ("Aurora" or the "Company") designs and
develops proprietary drug discovery systems, services and technologies to
accelerate and enhance the discovery of new medicines. Aurora is developing an
integrated technology platform comprised of a portfolio of proprietary
fluorescent assay technologies and an ultra-high throughput screening ("UHTS")
system designed to allow assay miniaturization and to overcome many of the
limitations associated with the traditional drug discovery process. The Company
believes that this platform will enable Aurora and its collaborators, which
include Bristol-Myers Squibb ("BMS") and Eli Lilly and Company ("Lilly"), to
take advantage of the opportunities created by recent advances in genomics and
combinatorial chemistry that have generated many new therapeutic targets and an
abundance of new small molecule compounds. Aurora believes its integrated
platform will accelerate the drug discovery process by shortening the time
required to identify high quality lead compounds and to optimize those compounds
into drug development candidates.
Aurora's goal is to become the leader in the development and
commercialization of technologies that will accelerate and enhance the discovery
of new medicines. The Company seeks to diversify business risk by generating
revenue from multiple collaborators seeking to exploit Aurora's fluorescent
assay technologies and UHTS system in many different drug discovery programs.
The Company expects to generate revenue by developing screens, providing
screening services, developing and providing UHTS systems to syndicate members,
licensing its proprietary technologies, and realizing royalty and milestone
payments from the development and commercialization of drug candidates
identified using Aurora's technologies. To date, the Company has entered into
collaborative agreements with BMS and Lilly to license the Company's fluorescent
assay technologies for their internal discovery research, to collaborate on
screen development and as initial members of a syndicate to co-develop Aurora's
UHTS system. In addition, Aurora has also entered into agreements to develop
screens for or provide screening services to Sequana Therapeutics, Inc.
("Sequana"), Allelix Biopharmaceuticals, Inc. ("Allelix") and Roche Bioscience
("Roche"). The Company has also entered into agreements with Alanex Corporation
("Alanex") and ArQule, Inc. ("ArQule") providing Aurora with non-exclusive
access to certain of their combinatorial chemistry libraries.
THE DISCOVERY OF NEW MEDICINES
Drug discovery methods generally involve the synthesis and testing of large
libraries of different compounds in relatively simple assays, or tests,
containing targets designed to mimic aspects of a disease process. Assays are
employed to determine the effect of a compound upon a particular target. When
applied methodically, assays can be used as screens to identify active
chemicals, referred to as "hits," that may produce a desired effect upon a
target's function. Lead compounds can be identified by additional screening of
hits and may then be optimized to generate candidate compounds for development
as potential medicines.
- --------------------------------------------------------------------------------
ELEMENTS OF THE DRUG DISCOVERY PROCESS
Targets Assays SCREENING Libraries of Compounds
Hits
Lead Compounds
Candidate Compounds
Drug Development
- --------------------------------------------------------------------------------
24
<PAGE> 26
TARGETS
Targets are specific biological molecules, often proteins such as
receptors, enzymes or ion channels, which are believed to play a role in the
onset or progression of disease. Most drugs work by binding to a target and
modulating the target's biological function or activity. Thus, most drugs are
discovered by identifying compounds that modulate an established target's
biological function. Until recently, pharmacologists and molecular biologists
had identified only a few hundred targets using conventional methods.
Recent developments in molecular biology and genomics have led to a
dramatic increase in the number of potential therapeutic targets available for
drug discovery. The chemical information required for cells to produce proteins
is encoded in genes. It is currently estimated that several thousand of the
roughly 100,000 different human genes encode potential targets. Industrial and
academic researchers have already identified tens of thousands of new genes as
they decipher the genomes of both humans and disease-causing organisms.
Determining the function of these genes and the proteins they encode, including
their evaluation as potential targets, is known as functional genomics and can
be a rate-limiting step in the selection of novel targets for drug discovery.
The large number of newly discovered targets has created the need for faster
screen development and higher throughput screening.
COMPOUNDS
Traditionally, chemists laboriously synthesized new compounds one at a
time, or painstakingly isolated them from natural sources, such as plants or
microbial fermentation broths. Over decades, chemists in major pharmaceutical
and chemical companies built up collections, or libraries, of hundreds of
thousands of compounds. During the last few years, however, many industrial and
academic groups have developed combinatorial chemistry techniques to greatly
increase the supply and diversity of small molecules for screening. Already,
many companies have used combinatorial chemistry to quickly create libraries of
hundreds of thousands, or even millions, of small molecules, which are now
available to be tested against both established and novel targets to yield
potential lead compounds for new medicines. These vast numbers of compounds
present a substantial challenge to the drug discovery process and create a need
for faster and more efficient screening.
ASSAYS
Targets can be incorporated into either biochemical or cell-based assays. A
biochemical assay consists of a target which is isolated from its natural
cellular environment. If enough of the target can be isolated, such assays can
be relatively simple to develop and perform. It is often desirable, however, to
test compounds on targets functioning in the environment of living human or
other mammalian cells. Such cell-based assays provide a number of advantages,
including in many cases greater predictive value of therapeutic effect and
potential toxicity. In addition, cell-based assays may be required to screen
certain targets not readily amenable to biochemical assays. However, cell-based
assays have typically been more difficult and time consuming both to develop and
to perform due to difficulties in detecting the function of a target in a living
cell and the inherent technical complexities of using human or other mammalian
cells in drug screens.
SCREENING
Screening is the process of methodically testing libraries of compounds for
potential therapeutic value by using assays to determine if any compounds affect
a selected target. Primary screening determines if any of the compounds tested
are hits. Re-testing confirms initial hits and secondary screening refines the
initial evaluation of hits. For example, secondary screening may measure a hit's
potency (the amount of the hit compound required to exert its effect) and
specificity (the degree to which the hit does not affect unintended targets).
These secondary screens help in selecting lead compounds for further discovery
efforts to identify candidate compounds for development.
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<PAGE> 27
Until the last five to ten years, screening was a labor intensive manual
process in which it was generally possible to test only tens of compounds per
day. Today, pharmaceutical and biotechnology companies with advanced drug
discovery programs use semi-automated or robotic high throughput screening
systems with microtiter plates that contain 96 separate wells for assays.
Certain current best practice screening systems can operate at throughputs of up
to approximately 10,000 discrete compounds per day per system, but typically
such systems operate at throughputs of less than 3,000 discrete compounds per
day.
THE NEED TO IMPROVE THE DRUG DISCOVERY PROCESS
The discovery and development of new medicines remains an expensive,
time-consuming and often unsuccessful process. Although many pharmaceutical,
biotechnology and clinical research organizations have significantly improved
the efficiency of the drug development phase, only about five to ten percent of
candidate compounds entering development will ultimately be approved for
marketing. Candidate compounds that are identified in discovery frequently fail
in the development phase due to insufficient therapeutic benefit or unexpected
side effects. To date, efforts to improve the initial discovery process have
been inadequate. If the discovery process were sufficiently improved,
pharmaceutical and biotechnology companies could more quickly and efficiently
discover larger numbers of higher quality candidate compounds that have a
greater chance of development into medicines that meet significant unmet needs.
The dramatic increases in the number of potential targets and the size of
compound libraries resulting from advances in genomics and combinatorial
chemistry, respectively, have created a significant opportunity to discover
greater numbers of higher quality lead compounds for development into medicines.
However, the increasing numbers of targets and compounds have created severe
bottlenecks in the drug discovery process. These bottlenecks result from the
difficulty of quickly analyzing function and disease relevance of newly
discovered targets, the complexity of incorporating the many different types of
targets into screens, and the inability to screen extensive compound libraries
quickly and at a reasonable cost.
AURORA'S APPROACH
TECHNOLOGY PLATFORM
Aurora is developing an integrated technology platform designed to allow
assay miniaturization and to overcome many of the limitations associated with
traditional drug discovery and enable the Company and its collaborators to take
advantage of the recent advances in genomics and combinatorial chemistry. The
two principal components of Aurora's platform are its proprietary fluorescent
assay technologies and its highly automated ultra-high throughput screening
system that is being designed to screen over 100,000 discrete compounds per day
per system in miniaturized assays.
Aurora's fluorescent assay technologies are being used today to facilitate
drug discovery by the Company's collaborators and in the Company's existing high
throughput screening system. In addition, the Company is currently developing
screens for collaborators which it expects to deliver in the next several
months. To significantly advance current high throughput screening capabilities
and to exploit the power of its fluorescent assay technologies, Aurora is
developing an ultra-high throughput screening system over the next three to four
years. Aurora believes that this integrated technology platform will allow
Aurora and its collaborators to accelerate the drug discovery process by
shortening the time required to identify higher quality lead compounds and to
optimize those compounds into drug development candidates.
26
<PAGE> 28
AURORA'S INTEGRATED TECHNOLOGY PLATFORM
[FLUORESCENT ASSAY TECHNOLOGIES] [ULTRA-HIGH THROUGHPUT SCREENING SYSTEM]
POTENTIAL BENEFITS
<TABLE>
<S> <C>
Applicable to most targets Reduced assay volumes
Cell-based and biochemical assays Simplified screening process
Faster assay development Versatile screening platform
Functional genomics in mammalian cells Automated access to compound libraries
Miniaturized assays Throughputs of 100,000 compounds per day
</TABLE>
The following are key features of Aurora's integrated technology platform:
Ability to Design Assays for a Broad Range of Targets. Aurora's portfolio
of novel fluorescent assay technologies is designed to enable screening
against nearly all major classes of human drug targets, including
receptors, ion channels and enzymes, in most therapeutic areas.
Ability to Conduct Both Cell-based and Biochemical Assays. Aurora's
fluorescent assay technologies include both cell-based and biochemical
approaches. Many of the Company's screens are being designed to be
performed with living mammalian cells to better model human disease
processes. In addition a cell-based approach may be needed because certain
important targets may not be amenable to biochemical assays.
Reduction in Time and Investment Required to Develop Cell-based
Assays. Aurora's fluorescent reporter technologies are highly sensitive.
The b-lactamase reporter system, for example, enables the measurement of
certain activation responses within a single living mammalian cell. For
many drug targets, this feature permits the rapid genetic selection and
multiplication of cells with optimal properties for particular screens,
which can reduce the time required for screen development from months, with
conventional methods, down to a few weeks.
Ability to Analyze Gene Function in Living Mammalian Cells. Certain of the
Company's fluorescent assay technologies may facilitate the understanding
of gene function in human and other mammalian cells. The Company believes
that this approach complements genetic approaches which employ fruit flies,
worms or yeast, and allows the functional analysis of human genes in a more
appropriate cellular context. This technology, if fully developed, could
prove valuable to companies with significant involvement in the genomics
area.
Increased Throughput and Reduced Costs Through Miniaturization of
Assays. The sensitivity and ratiometric readouts of Aurora's fluorescent
reporter technologies permit development of miniaturized assays, important
for cost-effective ultra-high throughput screening. The Company's
scientists have miniaturized both cell-based and biochemical assays for
certain applications. The Company believes that its assays will allow
increased throughput with decreased costs.
Advanced Instrumentation for Small Volumes. The Company is developing novel
screening plates (NanoPlates) and innovative microfluidics to enable
miniaturized assays in volumes approximately 100 times smaller than
conventional screens. Smaller volumes reduce the amount of expensive or
scarce reagents that may be required in a screen.
Simplified Screening Process. Most conventional high throughput screens
require special liquid handling devices to perform liquid dispensing and
washing steps before the data can be
27
<PAGE> 29
obtained from a screen. Liquid handling and washing often cause such long
delays in screening that it may be impossible to measure certain events as
they happen in real time. The Company's screens are designed to function
with a significantly reduced number of liquid handling steps and without
washing steps.
Versatile Ultra-high Throughput Screening Platform. The Company is
developing novel fluorescence instrumentation and NanoPlates to enable a
wide variety of targets to be screened in cell-based or biochemical assays
in the UHTS system. The Company believes that other systems being designed
for ultra-high throughput screening may be more restricted to certain
target classes and assay types.
Automated Access to Compound Libraries. Ultra-high throughput screening
requires automated rapid access both to organized collections of large
compound libraries, as well as to individual compounds in the collection
for re-testing. Aurora is unaware of any system currently available with
such capabilities. The Company is developing a compound storage and
retrieval system designed to allow fully automated access to over 1,000,000
compounds, for itself and each of its syndicate members.
Ultra-high Throughput. Aurora's technology platform is designed to
integrate the Company's proprietary fluorescent assays and automated
miniaturized systems with advanced informatics to create an ultra-high
throughput screening system capable of testing more than 100,000 discrete
compounds per day per system. If realized, this throughput would be over
ten times faster than current best practice high throughput screening
systems and would test each compound at a fraction of current costs.
BUSINESS STRATEGY
Aurora's goal is to become the leader in the development and
commercialization of technologies to accelerate and enhance the discovery of new
medicines. The Company seeks to diversify business risk by generating revenue
from multiple collaborators seeking to exploit Aurora's fluorescent assay
technologies and ultra-high throughput screening system in many different drug
discovery programs. To implement this strategy, the Company intends to:
Generate Multiple Revenue Streams from Screen Development and Screening
Services. Aurora generates revenue from multiple collaborators by
developing screens, primarily on a non-exclusive basis, for diverse targets
and providing screening services. To date, Aurora has entered into
agreements for screen development with pharmaceutical and biotechnology
companies, including BMS, Lilly, Roche and Allelix. The Company develops
screens with respect to specific targets rather than for broad therapeutic
areas. The developed screen is then either transferred to the collaborator
for internal research or is utilized by Aurora to provide screening
services. When Aurora provides such screening services, it will use a high
throughput screening system to screen the compounds for and provide
information and potential lead candidates to its collaborators.
Additionally, the Company is entitled to receive milestone payments and
royalties if any compound discovered through such screening is developed
and commercialized. Aurora plans to greatly enhance such screening services
once its own UHTS system is available for screening.
Establish a Syndicate for the Co-development of Aurora's UHTS
System. Aurora is currently establishing a syndicate consisting of up to
six leading pharmaceutical companies to co-develop Aurora's UHTS system.
Aurora has entered into collaborative agreements with BMS and Lilly as
initial syndicate members. Each member is scheduled to receive its own UHTS
system over a three- to four-year period for use in its internal drug
discovery programs. Through the syndicate, Aurora is able to share the cost
of the development of the UHTS system and offer to its syndicate members
co-exclusive access to the system. The Company believes that the payments
made by each syndicate member will be significantly lower than the cost for
any one company to develop a similar system on its own.
28
<PAGE> 30
Expand Compound Libraries. In providing screening services, Aurora will
utilize compounds that are either supplied by its collaborators or from
compound libraries to which Aurora has access. In order to provide
additional opportunity for Aurora and its collaborators, the Company is
obtaining access to libraries of compounds focused on small molecules, but
also including selected natural product extracts, peptides and proteins. To
gain access to these diverse sets of compounds, the Company plans to enter
into collaborations with companies specializing in combinatorial chemistry
and natural extract discovery and purification, and to purchase compounds
from available commercial sources. To date, Aurora has entered into
agreements with Alanex and ArQule, providing Aurora with non-exclusive
access to certain of their combinatorial chemistry libraries.
Form Biotechnology Collaborations. Aurora is seeking to collaborate with
genomics companies that may have access to considerable numbers of
potentially important new targets, and with therapeutically focused
companies that have promising discovery programs with validated targets,
for which Aurora's screening technology could substantially accelerate the
identification of lead or candidate compounds. To date, Aurora has entered
into such collaborations with Allelix and Sequana. Aurora is also
considering providing screening services in three-party collaborations
among Aurora, genomics companies or other companies that provide targets
and specialized biologic expertise, and combinatorial chemistry companies
that provide compounds and chemical optimization expertise.
Develop Information Tools and Databases. Utilizing the fluorescent assay
technologies and the UHTS system, the Company expects to have the ability
to generate and analyze large amounts of complex information on molecular
and genomic targets and large numbers of chemical structures. Aurora
intends to exploit these applications of its technology either directly or
in collaborations with leaders in the areas of informatics, genomics and
drug discovery. Ultimately, the Company plans to leverage this information
to create new revenue opportunities in the future.
Maintain Technology Leadership. The Company has assembled a unique
multi-disciplinary team of scientists from leading companies in the
biology, chemistry, instrumentation, automation and computer science
industries. Aurora intends to continue investing significantly in research
and development in order to make advances in its core technologies and to
maintain its technology leadership. The Company also intends to continue to
form strategic technology alliances with leading companies from each of
these industries and with leading academic institutions to provide the
Company with access to those parties' technologies and expertise.
AURORA'S TECHNOLOGY
The two principal components of Aurora's integrated technology platform are
its proprietary fluorescent assay technologies and its highly automated
ultra-high throughput system that is being developed for screening miniaturized
assays. This unique platform results from the Company's innovative integration
of many different disciplines, including fluorescence chemistry, biophysics,
molecular biology, protein engineering, automation, process control, optics,
microfluidics, informatics and software development.
AURORA'S PROPRIETARY FLUORESCENT ASSAY TECHNOLOGIES
The Company has internally developed or licensed a broad range of
proprietary fluorescent assay technologies which the Company believes exhibit
significant advantages over existing screening assays. The Company's fluorescent
assay technologies utilize light glowing from fluorescent molecules to reveal
molecular and cellular activity with precision and sensitivity. Fluorescence is
the property of certain molecules to absorb and be excited by light of one color
(excitation wavelength) and to send, or emit, light of another color having a
longer wavelength (emission wavelength). Aurora's fluorescent assay technologies
allow monitoring of the function of tiny
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<PAGE> 31
amounts of biomolecules in a non-destructive manner, and therefore many aspects
of cell function can now be observed in single living cells.
Aurora's fluorescent assay technologies generally exploit certain special
types of fluorescence measurements, including ratiometric and fluorescence
resonance energy transfer measurements. These features enable highly accurate
data to be obtained in high throughput screening, significantly reducing the
number of replicates and the cost required to carry-out such screens. As used in
the Company's fluorescent assay technologies, these approaches provide a change
in color of the emitted light rather than just a change in the intensity of the
emitted light. Ratiometric measurements, the ratio of the signal at two
wavelengths, provide a measure that greatly reduces unwanted artifacts. These
artifacts may result from a variable number of cells in an assay, instrumental
fluctuation, photo-bleaching (light-induced degradation) of the probe molecules,
or the presence of quenching substances. Fluorescence resonance energy transfer
can occur when two fluorescent molecules interact as donor and acceptor over
very short distances. When the donor is illuminated with light at its wavelength
of excitation, instead of giving its usual color of emitted light, it transfers
energy to the acceptor that now emits at the acceptor's characteristic
wavelength. This transfer rapidly decreases if the two molecules move apart, for
example if a chemical linker is cleaved, and the fluorescence emission now
changes to the wavelength of the donor. The ratiometric signal change generated
can give a highly sensitive and reliable readout of molecular proximity.
Aurora's portfolio of fluorescent assay technologies is designed to enable
screening of compounds against nearly all major classes of human drug targets,
including receptors, ion channels and enzymes, in most therapeutic areas. The
following chart summarizes several of Aurora's key fluorescent assay
technologies, together with examples of the classes of targets and therapeutic
areas to which they may be applicable:
<TABLE>
<S> <C> <C>
-------------------------------------------------------------------------------------------------
ASSAY TECHNOLOGY TARGET CLASSES THERAPEUTIC AREA
-------------------------------------------------------------------------------------------------
BETA-LACTAMASE REPORTER GENE cell surface receptors, intra- most areas, including
SYSTEM cellular receptors, and intra- cardiovascular diseases,
(cell-based assays) cellular signaling proteins inflammation, cancer, central
nervous system diseases and
endocrine diseases
-------------------------------------------------------------------------------------------------
PROMISCUOUS G-PROTEINS G-protein coupled receptors most areas, including
(cell-based assays) cardiovascular diseases,
inflammation, cancer, central
nervous system diseases and
endocrine diseases
-------------------------------------------------------------------------------------------------
MEMBRANE VOLTAGE REPORTERS ion channels cardiac diseases, central
(cell-based assays) nervous system conditions and
gastro-intestinal diseases
-------------------------------------------------------------------------------------------------
GFP PROTEASE REPORTERS proteases AIDS, cardiovascular diseases
(biochemical and cell-based and degenerative brain diseases
assays)
-------------------------------------------------------------------------------------------------
GFP KINASE REPORTERS protein kinases cancer and autoimmune diseases
(biochemical and cell-based
assays)
-------------------------------------------------------------------------------------------------
</TABLE>
To date, only a limited number of targets have been incorporated into
assays utilizing the Company's fluorescent assay technologies. There can be no
assurance that the Company will be able to develop screening assays for each
target selected by its collaborators in a timely and cost-effective manner, or
if developed, that such assays will function as anticipated.
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<PAGE> 32
Beta-lactamase Reporter Gene System
Reporter genes can be genetically engineered into cells to monitor the
activation of a particular signaling pathway that alters the expression (the
production of the protein coded by that gene) of the reporter gene. Reporter
genes are chosen to code for proteins that can be readily measured under
particular experimental conditions. Most reporter genes typically encode enzymes
that can act on reporter substrates to give some form of optical signal, such as
a colored product, or an enzyme-induced discharge of light. Reporter genes are
now used by many pharmaceutical and biotechnology companies to facilitate drug
discovery.
Over recent years, it has been discovered that many natural ligands (such
as hormones, growth factors and neurotransmitters) that act via receptors on the
surface membrane of cells can increase, or sometimes decrease, the expression of
particular genes. Thus, it is now possible to genetically engineer cell lines in
which a wide range of receptor targets are functionally linked to an
intracellular reporter gene. Such cells can then be used to screen for agonists
and antagonists, compounds that, respectively, activate or inhibit the receptor.
The Company utilizes an engineered bacterial enzyme, b-lactamase, as a
reporter gene in mammalian cells. The Company believes that its b-lactamase
reporter system is an important advance in reporter gene technology that can be
used to design drug screens for a number of major classes of drug targets
including growth factors, cytokine or G-protein coupled receptors, transcription
factors and signal transduction pathways. Functional cell-based assays have a
number of advantages over the commonly used binding assays that detect
interaction of test compounds with targets isolated from their natural cellular
environment. The Company's b-lactamase reporter system allows drug screens to be
constructed in the more physiological environment of mammalian cells, does not
require the use of radioactivity and can readily distinguish between agonists
and antagonists. In addition, the b-lactamase reporter system can facilitate the
search for compounds acting on newly discovered target receptors where no
natural ligands have been identified, also known as orphan receptors. Certain
aspects of the b-lactamase reporter system were exclusively licensed from the
Regents of the University of California.
The Company's b-lactamase reporter system was originally designed to
measure gene expression, including measurement of genes of great interest that
may be expressed only at very low levels, in single living cells and in real
time. These stringent criteria are critical for both rapid assay development and
ultra-high throughput miniaturized drug screens and call for the following
features:
- a reporter enzyme not naturally present in mammalian cells that can be
expressed in those cells with high efficiency, and with well researched
biochemical properties;
- the substrate that actually reports the enzyme activity should provide
extreme sensitivity and precision, coupled with advanced fluorescence
properties providing a ratiometric readout; and
- the substrate must be non-fluorescent when first added to the cells, be
able to freely enter living cells and then be trapped inside a cell with
a distinct fluorescence, and expression of the reporter must then change
the substrate's fluorescent properties.
The Company believes that these features have been demonstrated in its
proprietary forms of b-lactamase reporter gene and the proprietary substrate,
CCF2-AM. This reporter system signals activation by a green to blue ratio change
that can be readily measured in single cells. The Company has now linked the
b-lactamase reporter system to cell surface receptors in assays suitable for
high throughput screening.
The Company's b-lactamase reporter system has the potential to greatly
reduce both the time and cost of developing cell-based screens. This feature
derives from the ability to measure activation responses in single living cells.
Even with modern techniques for making genetically engineered
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<PAGE> 33
cells, cell line development is an unpredictable process. Making cell lines for
reporter gene assays with current methods usually takes many months and involves
testing hundreds or even thousands of individual cell "clones" to generate a
usable screening assay. In contrast, the b-lactamase reporter system employs the
power of fluorescence-activated cell sorting, which can rapidly isolate the
living cells in which the reporter gene is connected to the right signaling
elements. Thus, with the Company's b-lactamase reporter system, incorporation of
a target into a cell-based assay can be reduced to weeks instead of months.
Promiscuous G-proteins
Cell surface receptors are important targets because they transfer
information from the surface to the inside of the cell. One major class of cell
surface receptors is termed G-protein coupled receptors because G-proteins,
attached to the inner face of the cell membrane, transmit the information from
these receptors into the cell interior. These receptors are the targets of
numerous valuable medicines such as Zantac and Inderal, and many are the targets
of current drug discovery programs. It is believed that there are over 1,000
G-protein coupled receptors. Many new members of this class of receptor have
been cloned in recent years. However, for many of these receptors, the natural
activator and the biological function are not known. These are the so-called
orphan receptors, which could prove to be important targets.
Normally each receptor must couple to a specific type of G-protein to have
a biological effect. In order to engineer a cell-based assay for a G-protein
coupled receptor, it is necessary for that receptor to couple via its specific
sub-type of G-protein to a signaling pathway that provides a robust signal for
screening. For example, activation of many G-protein coupled receptors can be
measured with the b-lactamase reporter system. However, for many G-protein
coupled receptors, it is not yet known with which G-protein they communicate.
Even when this is known, many G-proteins produce signals that are difficult to
incorporate into assays in current practice. The Company has an exclusive
license from the California Institute of Technology to the use of novel
"promiscuous" G-proteins, which are "universal adapters" that couple to a wide
range of receptors of this family of targets to a signaling pathway that is well
suited to certain of the Company's fluorescent assays. Thus, the Company
believes that its proprietary promiscuous G-protein methods can be helpful in
developing screens containing G-protein coupled receptors previously difficult
to incorporate into mammalian cell-based assays. The promiscuous G-proteins may
also be useful in constructing screens for orphan receptors that can be used to
search for compounds that activate such receptors as tools to help analyze the
function of these newly discovered genes. To date, the Company has limited
experience developing G-protein coupled receptor assays based on its proprietary
promiscuous G-protein methods.
Membrane Voltage Reporters
Membrane voltage, a fundamental property of cells, is controlled by
membrane proteins. Unregulated membrane voltage can cause serious medical
conditions. Thus membrane proteins, particularly ion channels, help regulate
membrane voltage and can be targets for drug discovery in major disease areas
such as neurology and cardiology. Important medicines acting on ion channels
include certain anti-epileptic and anti-arrhythmic medicines. However, screening
in this area is typically limited to testing compounds with an electrical
measuring apparatus, which requires skilled scientists and has a low throughput
of only tens of compounds per day. There has been some success in adapting an
existing type of fluorescent probe of membrane voltage for semi-automated
screening. The Company believes that this approach is likely to have too slow of
a response to report on many relevant ion channel targets, and can be highly
susceptible to severe artifacts which limit assay performance.
Aurora's proprietary membrane voltage reporters incorporate fluorescence
resonance energy transfer and ratiometric readout to permit more reliable
detection of changes in membrane voltage. With Aurora's approach, two different
fluorescent probes are confined to the surface membrane of the cells in the
assay. When the membrane voltage changes due to cell stimulation, the two probes
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<PAGE> 34
move further apart, or closer together, depending on whether the stimulation
increases or decreases the voltage. Thus the degree of fluorescence energy
transfer between the probes varies and a ratiometric readout may be obtained.
These key features and other aspects of the Company's membrane voltage reporters
should provide faster responses, which should be less susceptible to the
artifacts that can defeat the older methods. The Company believes that assays
incorporating its membrane voltage reporters will be adaptable for sub-types of
ion channels, several of which are currently the targets of screening programs
in pharmaceutical company research departments and in certain specialized
biotechnology companies. The Company is currently developing a screen for an ion
channel subtype for one of its corporate collaborators.
Proprietary Variants of Green Fluorescent Protein
Green Fluorescent Protein ("GFP") is a naturally fluorescent protein
discovered in light-producing jellyfish. The fluorescence of GFP is an intrinsic
property of the protein and, therefore, the protein requires no additional
chemicals to make it fluoresce. This feature of GFP allows it to be expressed
within genetically engineered mammalian cells and to provide an intracellular
reporter with its own intrinsic fluorescence. Using various techniques of
protein engineering, Aurora has developed several mutants, or variants, of the
naturally occurring type of GFP, which are readily expressed in mammalian cells
and provide much brighter fluorescence than that of the naturally occurring GFP
protein. The Company has also engineered variants that have significantly
different excitation and emission wavelengths and hence they fluoresce with
different colors. This provides the basis for GFP-based reporters that use
fluorescence resonance energy transfer to give ratiometric signals. At present,
the Company utilizes three main proprietary GFP variants: blue, green and
yellow. The Company believes that the main application for GFP in drug discovery
requires the further engineering of GFP variants to produce reporters of
important biologic modifications to proteins, such as protein cleavage by
proteases and protein phosphorylation by protein kinases. Accordingly, the
Company is developing GFP protease assays and GFP kinase assays as summarized
below. Certain aspects of Aurora's technology related to GFP reporters are
exclusively licensed from the Regents of the University of California and from
the University of Oregon.
GFP Protease Reporters. Proteases are enzymes that break proteins into
smaller pieces, sometimes to create a functional product and sometimes to
degrade the protein. A number of diseases involve proteases, such as infectious
diseases and cardiovascular disorders. For example, several HIV medicines target
HIV protease. Aurora's proprietary protease reporters are designed to detect
protease activity in cell-based or biochemical assays. Aurora's protease
substrates change their color of fluorescence when they are cleaved by a
protease. Such changes can be detected with current high throughput screening
systems. While there are currently several approaches to developing screens for
proteases, these are nearly all biochemical. However, because some proteases
operate in the interior of the cell, the ability to screen for protease
inhibitors in a cell-based assay could be an important advance. To date, in
addition to research into this class of reporters, the Company has made
prototype biochemical assays for two different proteases.
GFP Kinase Reporters. Protein kinases are a family of enzymes that can add
phosphate groups to proteins and can thereby modulate the protein's biological
function. Aurora's ultra-bright variants of GFP may be engineered to provide
fluorescent assays for protein kinase activity. A number of companies have
targeted protein kinases to discover therapeutics to treat a wide range of
diseases, including cancer and autoimmune disease. These companies typically use
kinase screens involving biochemical assays that often require washing steps or
radioactivity. These types of assays can be difficult to adapt to high
throughput screening and may be less predictive than cell-based assays, because
kinases are often regulated by intra-cellular modulators, which are missing in a
biochemical assay. Aurora's fluorescent kinase reporters are designed to detect
kinase activity in cell-based or biochemical assays. These reporters use novel
fluorescent substrates that are designed to measure kinase activity through
changes in the fluorescence readout, without washing steps or radioactivity. To
date, Aurora has developed a prototype biochemical kinase assay, is researching
the incorpora-
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<PAGE> 35
tion of this reporter into cell-based assays and is developing reporters for
other types of protein kinases.
AURORA'S ULTRA-HIGH THROUGHPUT SCREENING SYSTEM
Over the last five years, many of the major pharmaceutical companies and
some biotechnology companies have assembled high throughput screening systems
that incorporate varying degrees of robotics and automation to facilitate their
drug discovery efforts. These current systems, however, are unable to
accommodate miniaturized assays that are critical for screening at increasing
rates against the large number of new targets identified through genomics and
the growing libraries of test compounds being generated by combinatorial
chemistry. The Company believes that because most current systems have been
developed without an adequately integrated design concept, it can be challenging
to improve performance at certain rate-limiting steps without creating almost
equally limiting bottlenecks elsewhere in the process. In addition, the Company
believes that many of these systems are designed to screen only one class of
target or one type of assay.
To overcome limitations of present high throughput screening and to exploit
the power of its fluorescent assay technologies, Aurora is developing an
ultra-high throughput screening system over the next three to four years. Using
a fully integrated approach, the Company has combined a wide array of expertise
and technologies to develop its UHTS system. The Company is combining key
internally developed advances with the technologies accessed through its
strategic technology alliances, such as those with Packard and Carl Creative.
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<PAGE> 36
The following diagram summarizes the currently planned features of the UHTS
system:
[CHART]
35
<PAGE> 37
Automated Storage and Retrieval System
The UHTS system's automated storage and retrieval system is designed to
house over 1,000,000 compounds in solution for immediate access. The robotic
systems for storage and retrieval of compounds are being adapted from other
industrial settings where automated, rapid access to very large stores of small
items have been reliably deployed. Aurora is customizing the system for ultra-
high throughput screening. This approach exemplifies the Company's strategy of
bringing to the drug discovery process technological advances that have already
been deployed successfully in other industrial processes, while adding Aurora's
own proprietary innovations to adapt these advanced technologies to the UHTS
system.
The system is designed to allow ready replenishment of the compound store
from libraries in the master store. The robot that operates between the racks of
compound storage plates is designed to deliver (and once sampled, return to the
store for further use) over 100,000 selected compounds per day for primary
screening and over 2,000 hits for re-test and potency determination. This
capability should relieve a significant bottleneck in current screening
operations which have largely failed to automate these steps. The ability to
deliver selected compounds to the screen at ultra-high rates under computer
control is a key advance expected to be offered by the Aurora platform. The
automated storage and retrieval system is also being designed to facilitate high
throughput screening in conventional 96-well plates. The Company's automated
storage and retrieval system is expected to be available in 1998.
Microfluidics: Compound and Assay Component Dispensing
Current technologies for dispensing small volumes of liquid cannot meet the
requirements for screening in NanoPlates. The Company, together with Packard, is
developing microfluidic technologies to accurately and rapidly transfer
microscopic volumes of the compounds into the miniature assay wells of the
NanoPlates at rates of up to 10,000 wells per hour. While current screening
systems can dispense volumes down to a microliter (one millionth of a liter),
Aurora is developing miniaturized screening dispensers capable of accurately
dispensing sub-nanoliter volumes (less than one billionth of a liter) required
for the UHTS system. These sample dispensing devices are designed to remove
small amounts of the compounds from the storage plates and dispense at high
speed precise sub-nanoliter volumes into the appropriate wells of the
NanoPlates. The Company intends to incorporate these devices into proprietary
robotic platforms that are being co-developed with Carl Creative. These
platforms are designed to enable the precise location of the various components
in a manner superior to available compound dispensing technology. To date, the
Company has used prototype nanoliter dispensing devices to perform test assays
in prototype NanoPlates. The Company believes that its microfluidic systems
suitable for ultra-high throughput screening will be operational in 1999.
NanoPlates for Miniaturized Screening Assays
Another key component of Aurora's UHTS system is the NanoPlate, which has
3,456 miniaturized wells in which fluorescent assay screens may be performed.
The Company, in collaboration with Packard Instrument Company and specialized
manufacturers, has developed prototype proprietary NanoPlates. The diagram below
compares the new design with a conventional 96-well plate currently used in
almost all high throughput screening. A key feature is the small assay volume
(approximately 100 times smaller than conventional screening assays), which is
critical for reducing cost per test and conserving compounds made by
combinatorial methods that produce only very small amounts of each test
compound. In addition, the Company is developing technologies to reduce
evaporation that might occur in such small assay volumes. The Company is
developing its NanoPlates to be compatible with most of Aurora's fluorescent
assay technologies. Certain cell-based
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and biochemical assays, based on the Company's fluorescent reporters, have
already been shown to work in a prototype NanoPlate.
[ASSAY PLATES GRAPHIC]
Fluorescence Detector for NanoPlates
There are a number of fluorescence plate readers presently available which
enable the use of Aurora's proprietary fluorescent assays for high throughput
screening in 96-well plates. However, none of these provide the necessary
sensitivity and precision to enable ultra-high throughput miniaturized screens.
Aurora is collaborating with Packard to develop highly sensitive fluorescence
detectors capable of measuring miniaturized fluorescent assays in NanoPlates.
The detector is designed to record and process, in real time, data from more
than 100,000 assays in 24 hours. Aurora's detector is designed to measure the
signals generated from the various fluorescent assays over the range of
different wavelengths that the Company's various reporters require and to
rapidly acquire ratiometric data. The Company believes that the resulting
quality of the fluorescent assays should minimize the number of replicates
required compared to traditional screening, thereby increasing throughput and
decreasing costs. Currently the Company is finalizing the design of its detector
and believes that detectors operational with a NanoPlate can be developed within
a two-year time frame.
Informatics and System Integration
Successful overall integration of the UHTS system will require a strategy
for user-friendly computer control. The Company will be required to link the
operation of the automated storage and retrieval system to existing chemistry
information databases and master compound store inventories in the discovery
operations of its syndicate members. The integration of the entire system will
need to ensure that the large amount of screening data from the UHTS system is
efficiently captured, processed and deposited in a centralized database. The
Company plans to integrate advanced software tools and systems from leading
providers. While the basic building blocks are being
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acquired from leading suppliers, the supervisory control systems, the subsystem
controllers for the instruments, the data analysis tools and overall system
architecture and database structure for the UHTS system are being developed by
the Company's in-house informatics team.
The Company's UHTS system is not expected to be fully integrated and
operational for at least three to four years. The Company's UHTS system will
require significant additional investment and research and development prior to
commencement of full-scale commercial operation, including integration of
complex instrumentation and software and testing to validate performance and
cost effectiveness, and is subject to substantial risks. Much of the
instrumentation and software that will comprise the Company's UHTS system are
not now and have not previously been used in commercial applications. Many of
these technologies have not been developed or validated at levels necessary to
screen miniaturized assays, and there can be no assurance that UHTS technologies
will achieve expected performance levels at these scales. The successful
implementation and operation of the Company's UHTS system will be a complex
process requiring integration and coordination of a number of factors, including
integration of and successful interfacing among complex advanced robotics,
microfluidics, automated storage and retrieval systems, fluorescence detector
technologies and software and information systems.
CORPORATE COLLABORATIONS
Aurora has entered into corporate collaborations with a number of companies
relating to screen development, functional genomics, screening services, access
to compound libraries and the co-development with its syndicate members of the
Company's UHTS system. The Company's significant collaborations and their major
features are summarized below:
<TABLE>
<S> <C>
----------------------------------------------------------------------------------------
BRISTOL-MYERS SQUIBB Member of UHTS system syndicate
Screen development
License to fluorescent assay technologies
----------------------------------------------------------------------------------------
ELI LILLY AND COMPANY Member of UHTS system syndicate
Screen development
License to fluorescent assay technologies
----------------------------------------------------------------------------------------
ROCHE BIOSCIENCE Screen development
Specialized instrumentation
----------------------------------------------------------------------------------------
SEQUANA THERAPEUTICS Screen development
Functional genomics
Screening services
----------------------------------------------------------------------------------------
ALLELIX BIOPHARMACEUTICALS Screen development
Screening services
----------------------------------------------------------------------------------------
ARQULE Screening of combinatorial chemistry libraries
----------------------------------------------------------------------------------------
ALANEX CORPORATION Screening of combinatorial chemistry libraries
----------------------------------------------------------------------------------------
</TABLE>
Bristol-Myers Squibb. In November 1996, the Company and Bristol-Myers
Squibb Pharmaceutical Research Institute entered into a Collaborative Research
and License Agreement (the "BMS Agreement") regarding the development of the
Company's UHTS system and the installation of a UHTS system at BMS. Under the
terms of the BMS Agreement, the Company is required to develop and separately
install three components to be integrated into one complete UHTS system. In
return, BMS is obligated to make certain payments to the Company in the form of
non-refundable up-front fees, installation payments and ongoing research and
co-development funding. The Company is obligated to provide service and support
for the UHTS system installed at BMS for a limited period of time.
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<PAGE> 40
The Company and BMS will also co-develop high throughput screening assays
for use by BMS. In connection with such screen development, BMS is required to
pay Aurora certain fees. Certain target screens developed by the Company for BMS
will be exclusive for a limited period of time. In exchange for certain payments
to Aurora, BMS will also have the right to use the Company's fluorescent assay
technologies for internal research and drug development, including the
development of screening assays. BMS will also make certain milestone and
royalty payments to Aurora if BMS develops and commercializes any compound
identified using a screen based on Aurora's fluorescent assay technologies.
Under the terms of the BMS Agreement, subject to certain conditions, the
UHTS syndicate is restricted to six members for a limited period. BMS may
withdraw from the development of the UHTS system at any time without cause,
provided that certain withdrawal payments have been made. BMS may also withdraw
from the development of the UHTS system for "good cause," as defined in the
agreement, without obligation to make further payments relating to development
of the UHTS system. Each party also has the right to terminate the agreement
upon the material breach by the other party of its obligations under the
agreement. The BMS Agreement also provides for penalties payable by the Company
if it fails to deliver the completed UHTS system by a specified time.
Eli Lilly and Company. In December 1996, the Company and Lilly entered into
a Collaborative Research and License Agreement (the "Lilly Agreement") regarding
the development of the Company's UHTS system and the installation of a UHTS
system at Lilly. Under the terms of the Lilly Agreement, the Company is required
to develop and separately install three components to be integrated into one
complete UHTS system. In return, Lilly is obligated to make certain payments to
the Company in the form of non-refundable up-front fees, delivery payments and
ongoing co-development funding. The Company is obligated to provide service and
support for the UHTS system installed at Lilly for a limited period.
The Company and Lilly will also co-develop high throughput screening assays
for use by Lilly. In connection with such development, Lilly is required to pay
Aurora certain fees. In exchange for certain payments to Aurora, Lilly will also
have the right to use the Company's fluorescent assay technologies for internal
research and drug development, including the development of screening assays.
Lilly will also make certain milestone and royalty payments to Aurora if Lilly
develops and commercializes any compound identified using a screen based on
Aurora's fluorescent assay technologies, subject to certain limitations on the
royalties payable to Aurora.
Under the terms of the Lilly Agreement, subject to certain conditions, the
UHTS syndicate is restricted to six members for a limited period of time. Lilly
may terminate the agreement at any time without cause upon 45 days written
notice to Aurora, provided that certain withdrawal payments are made. Each party
has the right to terminate the agreement upon the material breach by the other
party of its obligations under the agreement. The Lilly Agreement also provides
for penalties payable by the Company if it fails to deliver the completed UHTS
system by a specified time.
Roche Bioscience. In December 1996, the Company and Roche entered into a
Collaborative Research and License Agreement ("Roche Agreement") regarding the
development and delivery of a certain screening instrument by Aurora. Roche is
obligated to make certain payments to the Company in the form of non-refundable
up-front fees and delivery payments. For a limited period of time specified in
the agreement, the Company is obligated to provide service and support for any
instrument delivered to Roche. The Company and Roche will also co-develop a
screening assay for use with a target identified in the Roche Agreement. In
connection with such development, Roche is obligated to make certain payments to
the Company in the form of non-refundable up-front fees and ongoing research and
co-development funding. Aurora is prohibited, for a period of time specified in
the agreement, from entering into any third-party collaboration with respect to
the specific target set forth in the Roche Agreement. Roche may elect to
terminate the agreement at any time without cause upon 30 days written notice to
Aurora, provided that certain payments are made.
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Sequana Therapeutics, Inc. In April 1996, the Company and Sequana entered
into a Research Agreement (the "Sequana Agreement") regarding the screening of
certain targets to be selected by Sequana. Under the terms of the Sequana
Agreement, Sequana may require the Company to provide functional analysis, assay
development and screening for such targets, and Sequana would then be obligated
to make certain payments to the Company in the form of non-refundable up-front
fees, delivery payments and ongoing research funding. Sequana will also be
obligated to make certain milestone and royalty payments to the Company if any
pharmaceutical product is developed and commercialized as a result of work
performed by the Company pursuant to the agreement.
During the term of the agreement, and subject to certain provisions, Aurora
is prohibited from performing services for third parties related to a limited
number of targets selected by Sequana and discovered as a result of positional
cloning or statistical genetics. Unless terminated earlier in accordance with
its provisions, the Sequana Agreement will terminate on June 17, 1999, subject
to Sequana's right to extend such term for up to two one-year periods. Each
party has the right to terminate the agreement in the event of a material breach
of the agreement by the other party by giving the other party notice of its
intention to terminate if within 90 days of such notice such party does not cure
the breach. In connection with the execution of the Sequana Agreement, Sequana
made a $1.5 million equity investment in Aurora. See "Certain Transactions."
Allelix Biopharmaceuticals, Inc. In February 1997, the Company and Allelix
entered into a Collaboration Agreement (the "Allelix Agreement") regarding the
development over a three-year period of screening assays for use with targets
identified by Allelix and agreed to by Aurora. Under the terms of the Allelix
Agreement, the Company is required to develop such screening assays and to
perform screening services, and Allelix is obligated to make certain payments to
the Company in the form of up-front fees, development payments and fees for
screening services. Allelix is also required to make certain milestone and
royalty payments to Aurora in the event of development and commercialization of
a compound identified using a screen based on Aurora's fluorescent assay
technologies.
ArQule, Inc. In September 1996, the Company and ArQule entered into a
Material Transfer and Screening Agreement (the "ArQule Agreement"), which was
amended in March 1997. The ArQule Agreement, as amended, provides for the
enrollment of the Company in ArQule's Mapping Array Program and entitles the
Company to receive a sample of each Mapping Array compound set that ArQule
develops and ships ("ArQule Compounds"). ArQule's Mapping Array Program consists
of up to 100,000 individual compounds per year. Should the Company detect
activity in one or more of the ArQule Compounds, the Company and ArQule under
certain conditions may enter into negotiations to establish a research
collaboration agreement. Unless terminated earlier in accordance with its
provisions, the ArQule Agreement is in effect for a period of six months
following the effective date of the agreement. The ArQule Agreement
automatically extends for successive additional six-month periods unless the
Company or ArQule provides 30 days written notice of termination prior to the
expiration of any such period.
Alanex Corporation. In November 1996, the Company and Alanex entered into a
Material Transfer and Screening Agreement (the "Alanex Agreement") regarding the
screening of the Alanex compound library consisting of 150,000 compounds
("Alanex Compounds"). Should the Company detect activity in one or more of the
Alanex Compounds during the term of the Alanex Agreement, the Company and Alanex
under certain conditions may enter into negotiations to establish a research
collaboration agreement. Unless terminated earlier in accordance with its
provisions, the Alanex Agreement shall be in effect for a period of six months
following the effective date of the agreement. Thereafter, the Alanex Agreement
will automatically extend for successive additional six-month periods unless the
Company or Alanex provides 30 days written notice prior to the expiration of any
such period.
To date, all revenue received by the Company has been from its
collaborations and technology alliances. The Company expects that substantially
all revenue for the foreseeable future will come
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from collaborators. Furthermore, the Company's ability to achieve profitability
will be dependent upon the ability of the Company to enter into additional
corporate collaborations. Because pharmaceutical and biotechnology companies
engaged in drug discovery activities have historically conducted drug discovery
and screening activities through their own internal research departments, these
companies must be convinced that the Company's UHTS technologies justify
entering into collaborative agreements with the Company. There can be no
assurance that the Company will be able to negotiate additional collaborative
agreements in the future on acceptable terms, if at all, that such current or
future collaborative agreements will be successful and provide the Company with
expected benefits, or that current or future collaborators will not pursue or
develop alternative technologies either on their own or in collaboration with
others, including the Company's competitors, as a means for identifying lead
compounds or targets. To the extent the Company chooses not to or is unable to
enter into such agreements, it will require substantially greater capital to
undertake the research, development and marketing of its systems, services and
technologies at its own expense. In the absence of such collaborative
agreements, the Company may be required to delay or curtail its research and
development activities to a significant extent.
In addition, the amount and timing of resources that current and future
collaborators, if any, devote to collaborations with the Company are not within
the control of the Company. There can be no assurance that such collaborators
will perform their obligations as expected or that the Company will derive any
additional revenue from such agreements. Termination of the Company's existing
or future collaboration agreements, or the failure to enter into a sufficient
number of additional collaborative agreements on favorable terms, could have a
material adverse effect on the Company's business, financial condition and
results of operations.
UHTS TECHNOLOGY ALLIANCES
Aurora has entered into strategic technology alliances to design, develop
and implement its UHTS system with leading companies in the areas of
instrumentation, storage and retrieval systems and microfluidics, including the
alliances with Packard, Carl Creative and Universal Technologies, Inc. ("UTI")
summarized below.
Packard Instrument Company. In April 1996, the Company entered into a
Collaboration and License Agreement with Packard (the "Packard Agreement")
regarding the joint development of microfluidic components, NanoPlates and
fluorescence detectors for use, among other things, in the Company's UHTS
system. Under the terms of the Packard Agreement, Packard is required to develop
and deliver such components, and Aurora is obligated to make certain payments to
Packard in the form of non-refundable up-front fees and delivery payments.
Aurora was granted, for a period of two to three years from Aurora's acceptance
of an operational component, an exclusive right to use, market, lease and sell,
for use in certain applications defined in the agreement, the components
developed under the agreement. Packard was granted a worldwide, exclusive
sublicense under the Company's license with the University of California Regents
to make, have made and sell certain fluorescent reagents covered by such license
to non-profit organizations for their internal, non-commercial research. In
connection with the execution of the Packard Agreement, Packard made a $1.0
million equity investment in Aurora. Packard is also providing the Company with
research funding for the development of certain instrumentation.
The Packard Agreement, unless terminated earlier in accordance with its
terms, has an initial term of ten years. If either party fails to satisfy
certain milestones applicable to it under the agreement, and the parties fail to
reach a mutually satisfactory resolution within 90 days after such failure, the
other party shall have the right to terminate the agreement, unless the party
who failed to satisfy such milestone used reasonable good faith efforts to
accomplish such milestone, in which case the other party shall only have the
right to modify the agreement as specified therein. Each party has the right to
terminate the agreement, upon 90 days written notice, for a material breach by
the other party of its obligations under the agreement which is not cured within
such 90-day period.
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Carl Creative Systems, Inc. In November 1996, the Company entered into a
Development Agreement with Carl Creative (the "CCS Agreement") regarding the
development and sale of, among other things, liquid handling components and
robotics for use with the Company's UHTS system. Under the terms of the CCS
Agreement, Carl Creative is required to develop and deliver such components, and
the Company is obligated to make certain development payments to Carl Creative
in accordance with the payment schedule set forth in the CCS Agreement. A
portion of such development payments will be credited towards any purchases by
Aurora of components or services from Carl Creative. During the term of the CCS
Agreement, provided certain price and supply criteria are satisfied, the Company
is obligated to utilize Carl Creative as the primary manufacturer of certain
components. The Company was granted, for a period of time specified in the
agreement, an exclusive right to such components. The CCS Agreement, unless
terminated earlier in accordance with its terms, has an initial term of two
years, which shall automatically renew for successive six-month periods unless
either party provides at least 30 days written notice of its intent to terminate
at the end of the then-current term. Each party has the right to terminate the
agreement if the other party breaches or defaults in the performance of any of
its material obligation under the agreement, and such breach or default
continues for 60 days after written notice thereof.
Universal Technology, Inc. In December 1996, the Company entered into a
Development Agreement with UTI (the "UTI Agreement") regarding the development
and sale of storage and retrieval systems for use with the Company's UHTS
system. Under the terms of the UTI Agreement, UTI is required to develop and
deliver a storage and retrieval system for use with the Company's UHTS system,
and Aurora is obligated to make certain payments to UTI. Aurora was granted, for
a period of time specified in the agreement, an exclusive right to make, use,
and sell certain UTI technology, including the storage and retrieval system
developed under the agreement. The UTI Agreement, unless terminated earlier in
accordance with its terms, has an initial term of two years, which shall
automatically renew for successive six-month periods unless either party
provides at least 30 days written notice of its intent to terminate at the end
of the then-current term. Each party has the right to terminate the agreement if
the other party breaches or defaults in the performance of any material
obligation under the agreement, and such breach or default continues for 60 days
after written notice thereof.
The Company relies on these companies, many of which are single-source
vendors, for the development, manufacture and supply of certain components of
the Company's UHTS system. Although the Company believes these technology
alliances should provide the Company with a competitive advantage, the Company's
competitive advantage could be substantially weakened or displaced by other
technologies that supplant those made available to the Company through its
alliances. To the extent possible and commercially reasonable, the Company has,
and will continue to seek, alternative sources for various components of its
UHTS system, and may also develop various components of its UHTS system
utilizing its internal engineering capabilities. Although the Company believes
that alternative sources for UHTS system components could be made available, any
interruption in the development, manufacture or supply of a sole-sourced
component could have a material adverse effect on the Company's ability to
develop its UHTS system until a new source of supply is qualified, could subject
the Company to penalties for delays in delivery of the UHTS system and, as a
result, could have a material adverse effect on the Company's business,
financial condition and results of operations. There can be no assurance the
Company will be able to enter into additional technology alliances on
commercially reasonable terms, if at all, or that the Company's current or
future allies or suppliers will meet the Company's requirements for quality,
quantity or timeliness.
PATENTS AND PROPRIETARY RIGHTS
The Company's patent portfolio includes 28 patent applications filed in the
United States and foreign patent jurisdictions. One United States patent
relating to the Company's Green Fluorescent Protein assay technology has
recently been issued, and one of the United States applications relating
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to the Company's fluorescent assay technology has recently been allowed. The
Company is either the assignee or exclusive licensee of these patent rights.
Certain aspects of the Company's technology related to GFP reporters,
b-lactamase based reporters, protease reporters, kinase reporters, and membrane
voltage reporters are exclusively licensed from The Regents of the University of
California ("The Regents"). Pursuant to the terms of the Exclusive License
Agreement between the Company and The Regents, the Company is obligated to pay
expenses associated with patent prosecution and maintenance, certain license
issue fees and royalties to the Regents. Certain aspects of the Company's
technology related to GFP reporters are exclusively licensed from the University
of Oregon ("UO"). Pursuant to the terms of the License Agreement between the
Company and UO, the Company is obligated to pay to UO expenses associated with
patent prosecution and maintenance, certain annual payments and, upon the
issuance of a patent related to the subject technology, to issue shares of the
Company's Common Stock to UO. Certain aspects of the Company's technology
related to G-protein coupled receptor reporters are exclusively licensed from
the California Institute of Technology ("Cal Tech"). In connection with the
execution of the License Agreement between the Company and Cal Tech, the Company
became obligated to pay certain expenses associated with patent prosecution and
maintenance, and the Company issued shares of its Common Stock to Cal Tech.
Additionally, the Company has obtained a non-exclusive license from SIBIA
Neurosciences, Inc. ("SIBIA"), with limited rights to sublicense, under patent
rights covering certain transcription-based assay technology (which relates to
certain uses of reporter genes) for screening. Pursuant to the terms of the
Non-Exclusive Cross-License Agreement between the Company and SIBIA, the Company
granted SIBIA a non-exclusive license to certain of Aurora's technologies, and
the Company issued to SIBIA shares of the Company's Common Stock. The Company
and SIBIA are also obligated to pay each other certain royalties. The Company is
dependent on the rights licensed from such parties. Any challenge to,
invalidation or loss of such rights could have a material adverse effect on the
business, financial condition and results of operation of the Company.
The Company's success will depend in part on its ability to obtain patent
protection for its systems, services and technologies, and to operate without
infringing the proprietary rights of third parties. The Company has had no
patents issued to date. The Company is dependent, in part, on the patent rights
licensed from third parties with respect to its fluorescent assay technologies.
There can be no assurance that patent applications filed by the Company or its
licensors will result in patents being issued, that the claims of such patents
will offer significant protection of the Company's technology, or that any
patents issued to, or licensed by, the Company will not be challenged, narrowed,
invalidated, or circumvented. The Company may also be subject to legal
proceedings that result in the revocation of patent rights previously owned by
or licensed to the Company, as a result of which the Company may be required to
obtain licenses from others to continue to develop, test or commercialize its
systems, services or technologies. There can be no assurance that the Company
will be able to obtain such licenses on acceptable terms, if at all.
The drug discovery industry, including screening technology companies, has
a history of patent litigation and will likely continue to have patent
litigation suits concerning drug discovery technologies. The patent positions of
pharmaceutical, biotechnology and drug discovery companies, including the
Company, are generally uncertain and involve complex legal and factual
questions. A number of patents have issued and may issue on certain targets or
their use in screening assays that could prevent the Company and its
collaborators from developing screens using such targets, or relate to certain
other aspects of technology utilized or expected to be utilized by the Company.
The Company has received invitations from third parties to license patents owned
or controlled by third parties. The Company evaluates these requests and intends
to obtain licenses that are compatible with its business objectives. There can
be no assurance, however, that the Company will be able to obtain any licenses
on acceptable terms, if at all. The Company's inability to obtain or maintain
patent protection or necessary licenses could have a material adverse effect on
the business, financial condition and results of operations of the Company.
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The Company is aware of a third party Patent Cooperation Treaty application
that claims certain uses of green fluorescent protein including its use in
protein kinase assays. If a patent were to issue from such application that
relates to the Company's GFP kinase reporters, the Company believes that such
patent would be unlikely to require the Company to obtain a license. However,
the Company may need to obtain such a license and there can be no assurance that
any such license would be available on commercially reasonable terms, if at all.
The Company is also aware of third party patents and published patent
applications that contain issued or issuable claims that may cover certain
aspects of the Company's or its collaborators' technologies, including certain
types of fluorescent assay methods, certain assays for ligands to certain
classes of targets such as certain cell surface and intracellular receptors, and
certain transcription based assays for chemicals that modulate transcription of
a gene encoding a protein related to disease. There can be no assurance that the
Company would not be required to take a license under any such patents to
practice certain aspects of its fluorescent assay technologies or that such
license would be available on commercially reasonable terms, if at all. Any
action against the Company or its collaborators claiming damages and seeking to
enjoin commercial activities relating to the affected technologies could, in
addition to subjecting the Company to potential liability for damages, require
the Company or its collaborators to obtain a license in order to continue to
develop, manufacture or market the affected technologies. The Company could
incur substantial costs in defending patent infringement claims, obtaining
patent licenses, engaging in interference and opposition proceedings or other
challenges to its patent rights or intellectual property rights made by third
parties, or in bringing such proceedings or enforcing any patent rights against
third parties. The Company's inability to obtain necessary licenses or its
involvement in proceedings concerning patent rights could have a material
adverse effect on the business, financial condition and results of operations of
the Company.
In addition to patent protection, Aurora also relies on copyright
protection, trade secrets, know-how, continuing technological innovation and
licensing opportunities. In an effort to maintain the confidentiality and
ownership of trade secrets and proprietary information, the Company requires
employees, consultants and certain collaborators to execute confidentiality and
invention assignment agreements upon commencement of a relationship with the
Company. There can be no assurance, however, that these agreements will provide
meaningful protection for the Company's trade secrets or other confidential
information in the event of unauthorized use or disclosure of such information
or that adequate remedies would exist in the event of such unauthorized use or
disclosure. The loss or exposure of trade secrets possessed by the Company could
adversely affect its business. Like many high technology companies, the Company
may from time to time hire scientific personnel formerly employed by other
companies involved in one or more areas similar to the activities conducted by
the Company. Although the Company requires its employees to maintain the
confidentiality of all confidential information of previous employers, there can
be no assurance that the Company or these individuals will not be subject to
allegations of trade secret misappropriation or other similar claims as a result
of their prior affiliations.
COMPETITION
Competition among pharmaceutical and biotechnology companies which attempt
to identify compounds for development is intense. Because the Company's UHTS
system is being designed to integrate a number of different technologies, the
Company competes in many areas, including assay development, high throughput
screening and functional genomics. In the pharmaceutical industry, the Company
competes with the research departments of pharmaceutical and biotechnology
companies and other commercial enterprises, as well as numerous academic and
research institutions. Pharmaceutical and biotechnology companies, academic
institutions, governmental agencies and other research organizations are
conducting research in various areas which constitute portions of the Company's
technology platform, either on their own or in collaboration with others. There
can be no assurance that pharmaceutical and biotechnology companies which
currently compete with the Company in specific areas will not merge or enter
into joint ventures or other alliances with one or more other such companies and
become substantial multi-point competitors or that the
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Company's collaborators will not assemble their own ultra-high throughput
screening systems by purchasing components from competitors. Genomics and
combinatorial chemistry companies may also expand their business to include
compound screening or screen development, either alone or pursuant to alliances
with others. The Company anticipates that it will face increased competition in
the future as new companies enter the market and advanced technologies,
including more sophisticated information technologies, become available. The
Company's technological approaches, in particular its UHTS system, may be
rendered obsolete or uneconomical by advances in existing technological
approaches or the development of different approaches by one or more of the
Company's current or future competitors. Many of these competitors have greater
financial and personnel resources, and more experience in research and
development, than the Company. Historically, pharmaceutical and biotechnology
companies have maintained close control over their research activities,
including the synthesis, screening and optimization of chemical compounds. Many
of these companies, which represent the greatest potential market for the
Company's systems, services and technologies, have developed or are developing
internal programs and other methodologies to improve productivity, including
major investments in robotics technology to permit the automated screening of
compounds.
GOVERNMENT REGULATION
Regulation by the FDA and other governmental entities in the United States
and other countries will be a significant factor in the production and marketing
of any pharmaceutical products that may be developed by a collaborator. It is
not currently anticipated that the Company will develop its own drugs through
clinical trials and marketing. However, pharmaceutical products, if any,
developed by the Company's collaborators will require lengthy and costly
pre-clinical and clinical trials and regulatory approval by governmental
agencies prior to commercialization. The process of obtaining these approvals
and the subsequent compliance with appropriate federal, state and foreign
statutes and regulations are time consuming and require the expenditure of
substantial resources. Delays in obtaining regulatory approvals would adversely
affect the marketing of any drugs developed by the Company's collaborators,
diminish any competitive advantages that the Company's collaborators may attain
and therefore adversely affect the Company's ability to receive royalties or
milestone payments. If the product is classified as a new drug, a New Drug
Application will be required to be filed with, and product approval must be
obtained from, the FDA before commercial marketing of the drug. These testing
and approval processes require substantial time and effort and there can be no
assurance that any approval will be granted on a timely basis, if at all.
The Company is subject to federal, state and local laws and regulations
governing the use, manufacture, storage, handling and disposal of certain
materials and waste products used and produced by the Company. The risk of
accidental contamination or injury from these materials cannot be eliminated and
in the event of such an accident, the Company could be held liable for any
damages that result and any liability could exceed the resources of the Company
and, in addition, there can be no assurance that the Company will not be
required to incur significant costs to comply with environmental laws and
regulations in the future.
EMPLOYEES
As of March 31, 1997, the Company had a total of 54 employees, 20 of whom
hold M.D. or Ph.D. degrees and 10 of whom hold other advanced degrees. Of these,
39 were engaged in research, screen development, screening services and UHTS
system development. The remainder were engaged in legal, business development,
general administration and finance. The Company's future success depends in
significant part upon the continued service of its key scientific, technical and
senior management personnel and its continuing ability to attract and retain
highly qualified technical and managerial personnel. None of the Company's
employees is represented by a labor union or covered by a collective bargaining
agreement. The Company has not experienced any work stoppages and considers its
relations with its employees to be good.
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FACILITIES
The company's facilities are located in La Jolla, California. The Company
leases approximately 22,245 square feet of space used for laboratory and
administrative purposes. These facilities are leased through October 15, 1999.
The Company recently entered into an 11-year lease for approximately 55,000
square feet of laboratory and office space and plans to relocate its operations
to such facility in the fourth quarter of 1997. The Company believes that, upon
such relocation, the Company's facilities will be adequate for its current and
projected needs and that additional space at a nearby location will be available
as needed.
LEGAL PROCEEDINGS
Aurora is not a party to any legal proceedings.
SCIENTIFIC ADVISORS
The Company's scientific advisors, who have demonstrated expertise in
various fields, advise the Company from time to time concerning long-term
scientific planning, research and development. The scientific advisors also
evaluate the Company's research programs, recommend personnel to the Company,
and advise the Company on specific scientific and technical issues. The
scientific advisors are compensated by retainer and on a time and expenses basis
and have received shares of Common Stock of the Company. The Company has entered
into consulting agreements with a number of the scientific advisors.
None of the scientific advisors is employed by the Company, and they may
have other commitments to or consulting or advisory contracts with their
employers or other entities that may conflict or compete with their obligations
to the Company. Accordingly, such persons are expected to devote only a small
portion of their time to the Company. The Company's scientific advisors are:
Roger Y. Tsien, Ph.D. -- Investigator, Howard Hughes Medical Institute;
Professor, Department of Pharmacology, School of Medicine, University of
California, San Diego; Professor, Department of Chemistry and Biochemistry,
University of California, San Diego
Charles S. Zuker, Ph.D. -- Investigator, Howard Hughes Medical Institute;
Professor, Departments of Biology and Neurosciences, School of Medicine,
University of California, San Diego
Lubert Stryer, M.D. -- Winzer Professor in the School of Medicine and
Professor of Neurobiology, Stanford University
Michael Geoffrey Rosenfeld, M.D. -- Investigator, Howard Hughes Medical
Institute; Professor of Medicine, University of California, San Diego
Burton G. Christensen, Ph.D. -- former Senior Vice President for Chemistry,
Merck Sharp & Dohme
Tom Curran, Ph.D. -- Chairman, Department of Developmental Neurobiology, St.
Jude's Hospital Medical Center, Memphis; formerly Associate Director, Roche
Institute of Molecular Biology
Melvin I. Simon, Ph.D. -- Professor of Biological Sciences and Chairman of
the Biology Division, California Institute of Technology
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MANAGEMENT
DIRECTORS, EXECUTIVE OFFICERS AND KEY EMPLOYEES
The following table sets forth certain information regarding the Company's
directors, executive officers and key employees as of March 31, 1997:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------------------------ --- ------------------------------------------
<S> <C> <C>
Timothy J. Rink, M.D., Sc.D............... 50 Chairman of the Board, President and Chief
Executive Officer
J. Gordon Foulkes, Ph.D................... 43 Chief Technical Officer, Director
Paul A. Grayson........................... 32 Vice President, Corporate Development
Harry G. Stylli, Ph.D..................... 35 Vice President, Screen Technology
Frank F. Craig, Ph.D...................... 35 Senior Director, Screen Development
Deborah J. Tower.......................... 35 Senior Director, Finance and
Administration, Secretary and Treasurer
John D. Mendlein, Ph.D.................... 37 Senior Legal Counsel and Director,
Intellectual Property
James C. Blair, Ph.D. (1)................. 57 Director
Kevin J. Kinsella (1)..................... 51 Director, Co-founder
Hugh Y. Rienhoff, Jr., M.D.(1)(2)......... 44 Director
Lubert Stryer, M.D........................ 59 Director
Timothy J. Wollaeger (2).................. 53 Director
</TABLE>
- ---------------
(1) Member of the Compensation Committee
(2) Member of the Audit Committee
All directors hold office until the next annual meeting of stockholders of
the Company and until their successors have been elected and qualified.
Directors do not receive any fees for services on the Board. Board members are
reimbursed for their expenses for each meeting attended. Officers serve at the
discretion of the Board of Directors. There are no family relationships between
any directors or executive officers of the Company.
Timothy J. Rink has served as Chairman of the Board, President and Chief
Executive Officer of the Company since February 1996. From 1990 through 1995,
Dr. Rink served as President and Chief Technical Officer of Amylin
Pharmaceuticals, Inc., a publicly held biopharmaceutical company. Dr. Rink was
Vice President, Research at SmithKline Beecham in the U.K. from 1984 to 1989,
and previously was Lecturer in Physiology at the University of Cambridge. Dr.
Rink currently serves on the Scientific Advisory Board of Amylin, and he is a
director of CoCensys, Inc. and NPS Pharmaceuticals, Inc., all publicly held
biopharmaceutical companies. Dr. Rink received his M.A., M.D. and Sc.D. in
Medical Sciences from the University of Cambridge, England.
J. Gordon Foulkes has been Chief Technical Officer and a director of the
Company since November 1996. From 1987 to 1996, Dr. Foulkes served in several
capacities at Oncogene Science, Inc., where he was a director and most recently
held the position of Chief Scientific Officer. Prior to joining Oncogene
Science, Dr. Foulkes led a research group at National Institute for Medical
Research in the U.K., and was previously a post-doctoral fellow in Dr. David
Baltimore's laboratory at the Massachusetts Institute of Technology. Dr. Foulkes
obtained his B.Sc. in Biochemistry at the University College, Cardiff, U.K. and
his Ph.D. in Biochemistry in Professor Philip Cohen's laboratory at the
University of Dundee, Scotland.
Paul A. Grayson joined the Company in April 1996 and currently serves as
Vice President, Corporate Development. From 1994 to 1996, Mr. Grayson served as
Director of Business Development for Advanced Tissue Sciences, Inc. From 1987 to
1994, Mr. Grayson held various research, marketing and business development
positions at Allergan Pharmaceuticals and Gensia Inc. Mr.
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Grayson received his B.S. in Biochemistry and Computer Science from the
University of California, Los Angeles, and his M.B.A. from the University of
California, Irvine.
Harry G. Stylli joined the Company in November 1995 and currently serves as
Vice President, Screen Technology. From 1987 to 1995, Dr. Stylli held several
positions at Glaxo Wellcome plc, where he was integrally involved in the
International Screening and Technology Program. Dr. Stylli obtained a Ph.D. in
Pharmaceutical Chemistry from Kings College London University, an M.B.A. from
Open University, Milton Keynes, U.K. and a B.Sc. in Biochemical Pharmacology,
with honors, from the University of East London.
Frank F. Craig joined the Company in November 1995 and currently serves as
Senior Director, Screen Development. From 1993 to 1995, Dr. Craig held several
positions in the Lead Discovery Division of Glaxo Wellcome plc. From 1989 to
1992 he worked as a Project Leader in the Life Sciences Division of Amersham
International plc. Dr. Craig received B.Sc. and Ph.D. degrees in Microbiology
from the University of Glasgow, U.K., and a Diploma in Business Studies and
Political Economy from the University of Westminster, U.K.
Deborah J. Tower joined the Company in May 1996 and currently serves as
Senior Director, Finance and Administration, Secretary and Treasurer. From 1994
to 1996, Ms. Tower served as Director of Finance and Accounting of Sequana
Therapeutics, Inc. From 1989 to 1993, she served as Controller of Vical Inc. Ms.
Tower received a B.S. in Accounting, with honors, from San Diego State
University and is a Certified Public Accountant.
John D. Mendlein has been Senior Legal Counsel and Director, Intellectual
Property since August 1996. From 1990 to 1996, Dr. Mendlein worked at Cooley
Godward LLP, Palo Alto, California, where he specialized in intellectual
property law. Dr. Mendlein received his Ph.D. in Physiology from the University
of California, Los Angeles, his J.D. from the University of California, Hastings
College of Law and his B.S. in Biology from the University of Miami, Florida.
James C. Blair has been a director of the Company since March 1996. Dr.
Blair has been a general partner of Domain Associates, a venture capital
investment firm, since 1985. Domain Associates manages Domain Partners III, L.P.
and DP III Associates, L.P. and is the U.S. venture capital advisor to
Biotechnology Investments Limited. From 1969 to 1985, Dr. Blair was an officer
of three investment banking and venture capital firms. Dr. Blair is a director
of Amylin Pharmaceuticals, Inc., CoCensys, Inc., Dura Pharmaceuticals, Inc.,
Gensia, Inc., Trega Biosciences, Inc. and Vista Medical Technologies, Inc. Dr.
Blair received a B.S.E. from Princeton University and M.S.E. and Ph.D. degrees
in Electrical Engineering from the University of Pennsylvania.
Kevin J. Kinsella, a co-founder of the Company, has been a director of the
Company since its inception in May 1995. Mr. Kinsella was the founder of Sequana
Therapeutics, Inc. in February 1993, where he currently serves as President,
Chief Executive Officer and a director. He was the Managing General Partner of
Avalon Ventures, a venture capital firm. Avalon Ventures has financed over
thirty companies, many of which are in the biopharmaceutical field, including
Pharmacopeia, Inc., Athena Neurosciences Inc., ONYX Pharmaceuticals and Vertex
Pharmaceuticals Inc. He is also a director of ONYX Pharmaceuticals. He received
a B.S. from the Massachusetts Institute of Technology and an M.A. from the Johns
Hopkins School of Advanced International Studies.
Hugh Y. Rienhoff, Jr. has been a director of the Company since March 1996.
Dr. Rienhoff is a director of Abingworth Management Limited, a venture capital
investment firm. From 1992 to 1997, Dr. Rienhoff held various positions at New
Enterprise Associates Development Corporation, where he most recently served as
Partner. He is a director of Healtheon, Hexagen plc., Microcide Pharmaceuticals,
Inc., VacTex and Sensors for Medicine and Science. Dr. Rienhoff received an M.D.
degree from The John Hopkins University and a B.A. degree in English Literature
and Biology, with honors, from Williams College.
Lubert Stryer has been a director of the Company since March 1996, and
currently serves as a scientific advisor of the Company. He is a Winzer
Professor in the School of Medicine and Professor
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<PAGE> 50
of Neurobiology at Stanford University. He is a director of Affymetrix, Inc.
From 1989 to 1990, Dr. Stryer served as President and Director of Affymax
Research Institute. He is co-inventor of Affymetrix's light-directed synthesis
technology. Dr. Stryer has pioneered the development of novel fluorescence
detection techniques and holds ten patents involving fluorescence and
light-activated chemical syntheses. Dr. Stryer is the author of Biochemistry, a
major text used widely in colleges and universities around the world. Dr. Stryer
received the American Chemical Society Award in Biological Chemistry (the Eli
Lilly Award) and is a member of the National Academy of Sciences and received an
honorary Doctor of Science from The University of Chicago. Dr. Stryer received
his M.D. degree from Harvard University and his B.S. degree from the University
of Chicago.
Timothy J. Wollaeger has been a director of the Company since March 1996.
He has been the general partner of Kingsbury Associates and the general partner
of Kingsbury Capital Partners, L.P. and Kingsbury Capital Partners, L.P. II
venture capital investment partnerships since 1993. From 1990 to 1993, Mr.
Wollaeger served as Senior Vice President and was a director of Columbia
Hospital Corporation, a hospital management company now known as Columbia/HCA
Healthcare Corporation. From 1986 until 1993, he was a general partner of the
general partner of Biovest Associates, a venture capital investment firm. He is
a director of Amylin Pharmaceuticals, Inc., Chairman and a director of Biosite
Diagnostics, Inc. and a director of Phamis, Inc. He received an M.B.A. from
Stanford University and a B.A. in Economics from Yale University.
The Company and certain of its stockholders are party to a Voting Agreement
dated March 8, 1996 (the "Voting Agreement"). Pursuant to the terms of the
Voting Agreement, subject to certain conditions, each of Avalon Bioventures II,
L.P. ("Avalon"), Kingsbury Capital Partners, L.P. II ("Kingsbury"), Abingworth
Bioventures SICAV ("Abingworth"), New Enterprise Associates VI, L.P. ("NEA") and
Domain Partners III, L.P. ("Domain III") are entitled to designate a nominee for
election as one of the directors of the Company (collectively, the "Venture
Nominees"). Each party to the Voting Agreement has agreed to vote, at each
meeting (or action by written consent in lieu thereof) of stockholders of the
Company at or by which directors were to be elected, all or their respective
shares of the Company's capital stock to elect, as directors of the Company, (i)
the Venture Nominees, (ii) the Chief Executive Officer of the Company and (iii)
an individual designated jointly by Roger Y. Tsien and Charles S. Zuker. Venture
Nominees currently serving on the Board of Directors include Kevin J. Kinsella,
nominee of Avalon, Timothy J. Wollaeger, nominee of Kingsbury, Hugh Y. Rienhoff,
Jr., nominee of Abingworth, and James C. Blair, nominee of Domain III. Lubert
Stryer currently serves as the nominee of Roger Y. Tsien and Charles S. Zuker.
Timothy J. Rink, as Chief Executive Officer of the Company, was elected as a
director pursuant to the Voting Agreement. In accordance with its terms, the
Voting Agreement will terminate upon the conversion of the outstanding shares of
Preferred Stock into Common Stock upon the completion of the Offering.
COMMITTEES OF THE BOARD OF DIRECTORS
The Compensation Committee consists of Dr. Blair, Mr. Kinsella and Dr.
Rienhoff. The Compensation Committee makes recommendations regarding the
Company's 1996 Stock Plan, Non-Employee Directors' Stock Option Plan and
Employee Stock Purchase Plan and makes decisions concerning salaries and
incentive compensation for employees and consultants of the Company.
The Audit Committee consists of Dr. Rienhoff and Mr. Wollaeger. The Audit
Committee makes recommendations to the Board of Directors regarding the
selection of independent auditors, reviews the results and scope of the audit
and other services provided by the Company's independent auditors and reviews
and evaluates the Company's audit and control functions.
DIRECTOR COMPENSATION
The Company's directors do not currently receive any cash compensation for
services on the Board of Directors or any committee thereof, but directors may
be reimbursed for certain expenses
49
<PAGE> 51
in connection with attendance at Board and committee meetings. All directors are
eligible to participate in the Company's 1996 Stock Plan. Non-employee directors
receive automatic grants of options under the Company's Non-Employee Directors'
Stock Option Plan as described below. See "-- Equity Incentive Plan" and
"-- Non-Employee Directors' Stock Option Plan."
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
No executive officer of the Company serves as a member of the board of
directors or compensation committee of any entity that has one or more executive
officers serving as a member of the Company's Board of Directors or Compensation
Committee. See "Certain Transactions" for a description of transactions between
the Company and entities affiliated with members of the Compensation Committee.
EXECUTIVE COMPENSATION
The following table sets forth summary information concerning compensation
paid by, or accrued for services rendered to, the Company during the fiscal year
ended December 31, 1996 to the Company's Chief Executive Officer. No other
executive officer of the Company earned in excess of $100,000 in salary and
bonus during the fiscal year ended December 31, 1996.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL
COMPENSATION(1)
------------------- ALL OTHER
NAME AND PRINCIPAL POSITION SALARY BONUS COMPENSATION(2)
- ------------------------------------------------------- -------- ------- ---------------
<S> <C> <C> <C>
Timothy J. Rink, M.D., Sc.D.
President, Chief Executive Officer and Chairman of
the Board............................................ $229,649 $50,000 $27,188
</TABLE>
- ---------------
(1) In accordance with the rules of the Securities and Exchange Commission (the
"Commission"), the compensation described in this table does not include
medical, group life insurance or other benefits received by the Chief
Executive Officer which are available generally to all salaried employees of
the Company and certain perquisites and other personal benefits received by
the Chief Executive Officer which do not exceed the lesser of $50,000 or 10%
of any such officer's salary and bonus disclosed in this table. There were
no long-term compensation awards granted to the Chief Executive Officer
during the year ended December 31, 1996. As of December 31, 1996, the Chief
Executive Officer held 222,000 shares of restricted common stock having an
aggregate value of $83,250.
(2) Represents fees paid for consulting services rendered prior to employment
with the Company from January to March 1996.
EMPLOYMENT AGREEMENTS AND SEVERANCE ARRANGEMENTS
The Company has entered into employment agreements with Drs. Rink and
Foulkes dated as of January 23, 1996 (as amended on March 8, 1996) and August 6,
1996, respectively. Dr. Rink's employment agreement provides for the payment of
an annual base salary of $275,000. In the event that Dr. Rink's employment is
terminated, other than "for cause" (as defined in his employment agreement),
prior to March 1, 1999, Dr. Rink will be entitled to severance payments equal to
six times his then-current monthly base salary. Dr. Foulkes' employment
agreement provides for the payment of an annual base salary of $250,000. In the
event that Dr. Foulkes' employment is terminated, other than "for cause" (as
defined in his employment agreement), prior to the second anniversary of his
commencement of employment with the Company, Dr. Foulkes will be entitled to
severance payments equal to 12 times his then-current monthly base salary, plus
$100,000. In the event that Dr. Foulkes' employment is terminated, other than
"for cause," after the second anniversary of his commencement of employment with
the Company, Dr. Foulkes will be entitled to severance payments equal to nine
times his then-current monthly base salary. Pursuant to his employment
agreement, Dr. Foulkes was reimbursed for relocation expenses aggregating
approxi-
50
<PAGE> 52
mately $19,000. He was also paid a mortgage allowance of $7,500, and was loaned,
on an interest-free basis, $150,000 for use in connection with the purchase of a
home in San Diego, California. Such loan is payable on the earlier of one year
following termination of employment or four years following the loan date. So
long as Dr. Foulkes is then employed with the Company, he will receive a bonus
in the amount of $150,000 from the Company upon such four-year anniversary. See
"Certain Transactions."
EQUITY INCENTIVE PLAN
The Company adopted its 1996 Stock Plan in January 1996 and amended and
restated the 1996 Stock Plan in February 1997 (as amended and restated, the
"Stock Plan"). An aggregate of 2,000,000 shares of the Company's Common Stock
have been reserved for issuance pursuant to the exercise of stock awards granted
to employees, directors and consultants under the Stock Plan. The Stock Plan
will terminate in January 2006, unless sooner terminated by the Board.
The Stock Plan permits the granting of options intended to qualify as
incentive stock options ("Incentive Stock Options") within the meaning of
Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"), to
employees (including officers and employee directors), and options that do not
so qualify ("Nonstatutory Stock Options," and, together with Incentive Stock
Options, the "Options") to employees (including officers and employee
directors), directors and consultants (including non-employee directors). In
addition, the Stock Plan permits the granting of stock appreciation rights
("SARs") appurtenant to or independently of Options, as well as stock bonuses
and rights to purchase restricted stock (Options, SARs, stock bonuses and rights
to purchase restricted stock are hereinafter referred to as "Stock Awards"). No
person is eligible to be granted Options and SARs covering more than 200,000
shares of the Company's Common Stock in any 12-month period.
The Stock Plan is administered by the Board or a committee appointed by the
Board. Subject to the limitations set forth in the Stock Plan, the Board has the
authority to select the persons to whom grants are to be made, to designate the
number of shares to be covered by each Stock Award, to determine whether an
Option is to be an Incentive Stock Option or a Nonstatutory Stock Option, to
establish vesting schedules, to specify the Option exercise price and the type
of consideration to be paid to the Company upon exercise and, subject to certain
restrictions, to specify other terms of Stock Awards. In addition, the Board has
delegated to Timothy J. Rink the authority to grant Stock Awards to certain
non-executive officer employees of the Company.
The maximum term of Options granted under the Stock Plan is ten years. The
aggregate fair market value, determined at the time of grant, of the shares of
Common Stock with respect to which Incentive Stock Options are exercisable for
the first time by an optionee during any calendar year (under all such plans of
the Company and its affiliates) may not exceed $100,000. Options granted under
the Stock Plan generally are non-transferable and expire three months after the
termination of an optionee's service to the Company. In general, if an optionee
is permanently disabled or dies during his or her service to the Company, such
person's Options may be exercised up to 12 months following such disability and
up to 18 months following such death.
The exercise price of Options granted under the Stock Plan is determined by
the Board of Directors in accordance with the guidelines set forth in the Stock
Plan. The exercise price of an Incentive Stock Option cannot be less than 100%
of the fair market value of the Common Stock on the date of the grant. The
exercise price of a Nonstatutory Stock Option cannot be less than 85% of the
fair market value of the Common Stock on the date of grant. Options granted
under the Stock Plan vest at the rate specified in the option agreement. The
exercise price of Incentive Stock Options granted to any person who at the time
of grant owns stock representing more than 10% of the total combined voting
power of all classes of the Company's capital stock must be at least 110% of the
fair market value of such stock on the date of grant and the term of such
Incentive Stock Options cannot exceed five years.
51
<PAGE> 53
Any stock bonuses or restricted stock purchase awards granted under the
Stock Plan shall be in such form and will contain such terms and conditions as
the Board deems appropriate. The purchase price under any restricted stock
purchase agreement will not be less than 85% of the fair market value of the
Company's Common Stock on the date of grant. Stock bonuses and restricted stock
purchase agreements awarded under the Stock Plan are generally non-transferable.
Pursuant to the Stock Plan, shares subject to Stock Awards that have
expired or otherwise terminated without having been exercised in full again
become available for grant, but shares subject to exercised stock appreciation
rights will not again become available for grant. The Board of Directors has the
authority to reprice outstanding Options and SARs and to offer optionees and
holders of SARs the opportunity to replace outstanding options and SARs with new
options or SARs for the same or a different number of shares.
Upon certain changes in control of the Company, all outstanding Stock
Awards under the Stock Plan must either be assumed or substituted by the
surviving entity. In the event the surviving entity determines not to assume or
substitute such Stock Awards, with respect to persons then performing services
as employees, directors or consultants, the time during which such Stock Awards
may be exercised will be accelerated and such Stock Awards will be terminated if
not exercised prior to such change in control.
As of March 31, 1997, the Company had issued 431,272 shares of Common Stock
pursuant to the exercise of purchase rights granted under the Stock Plan, and
had granted Incentive Stock Options to purchase an aggregate of 501,320 shares
of Common Stock. As of March 31, 1997, 1,067,408 shares of Common Stock remained
available for future grants under the Stock Plan.
NON-EMPLOYEE DIRECTORS' STOCK OPTION PLAN
In February 1997, the Company adopted its Non-Employee Directors' Stock
Option Plan (the "Directors' Plan") to provide for the automatic grant of
options to purchase shares of Common Stock to non-employee directors of the
Company. The Directors' Plan is administered by the Board, unless the Board
delegates administration to a committee of at least two disinterested directors.
The maximum number of shares of Common Stock that may be issued pursuant to
options granted under the Directors' Plan is 240,000. Pursuant to the terms of
the Directors' Plan: (i) each person who upon the effective date of the
Directors' Plan was a Non-Employee Director automatically was granted a one-time
option to purchase 16,000 shares of Common Stock; (ii) each person who, after
the effective date of this offering, for the first time becomes a Non-Employee
Director automatically will be granted, upon the date of his or her initial
appointment or election to be a Non-Employee Director, a one-time option to
purchase 16,000 shares of Common Stock; and (iii) on the date of each annual
meeting of the stockholders of the Company after the effective date of this
offering (other than any such annual meeting held in 1997), each person who is
elected at such annual meeting to serve as a Non-Employee Director (other than a
person who receives a grant in accordance with (ii) above on or during the
three-month period preceding such date) automatically will be granted an option
to purchase 4,000 shares of Common Stock.
No options granted under the Directors' Plan may be exercised after the
expiration of ten years from the date it was granted. Options granted under the
Directors' Plan vest monthly over a four-year period. The exercise price of
options under the Directors' Plan will equal 100% of the fair market value of
the Common Stock on the date of grant. Options granted under the Directors' Plan
are generally non-transferable. Unless otherwise terminated by the Board of
Directors, the Directors' Plan automatically terminates on the tenth anniversary
of the date of this offering. As of the date hereof, options to purchase an
aggregate of 80,000 shares of Common Stock have been granted under the
Directors' Plan.
52
<PAGE> 54
EMPLOYEE STOCK PURCHASE PLAN
In February 1997, the Company adopted the Employee Stock Purchase Plan (the
"Purchase Plan") covering an aggregate of 400,000 shares of Common Stock. The
Purchase Plan is intended to qualify as an employee stock purchase plan within
the meaning of Section 423 of the Code. Under the Purchase Plan, the Board may
authorize participation by eligible employees, including officers, in periodic
offerings following the commencement of the Purchase Plan. The initial offering
under the Purchase Plan will commence on the date of this Prospectus and
terminate on April 30, 1999.
Unless otherwise determined by the Board, employees are eligible to
participate in the Purchase Plan only if they are employed by the Company or a
subsidiary of the Company designated by the Board for at least 20 hours per week
and are customarily employed by the Company or a subsidiary of the Company
designated by the Board for at least five months per calendar year. Employees
who participate in an offering may have up to 15% of their earnings withheld
pursuant to the Purchase Plan. The amount withheld is then used to purchase
shares of the Common Stock on specified dates determined by the Board. The price
of Common Stock purchased under the Purchase Plan will be equal to 85% of the
lower of the fair market value of the Common Stock at the commencement date of
each offering period or the relevant purchase date. Employees may end their
participation in the offering at any time during the offering period, and
participation ends automatically on termination of employment with the Company.
In the event of a merger, reorganization, consolidation or liquidation
involving the Company, the Board has discretion to provide that each right to
purchase Common Stock will be assumed or an equivalent right substituted by the
successor corporation, or the Board may shorten the offering period and provide
for all sums collected by payroll deductions to be applied to purchase stock
immediately prior to such merger or other transaction. The Board has the
authority to amend or terminate the Purchase Plan, provided, however, that no
such action may adversely affect any outstanding rights to purchase Common
Stock.
401(K) PLAN
In January 1996, the Board adopted an employee retirement savings plan (the
"401(k) Plan") covering certain of the Company's employees who have at least 30
days of service with the Company and work a minimum of 1,000 hours during the
plan year. Pursuant to the 401(k) Plan, eligible employees may elect to reduce
their current compensation by up to the statutorily prescribed annual limit
($9,500 in 1996) and have the amount of such reduction contributed to the 401(k)
Plan. In addition, eligible employees may make roll-over contributions to the
401(k) Plan from a tax-qualified retirement plan. The 401(k) Plan allows for the
Company to make discretionary matching and additional profit sharing
contributions, each as determined by a committee of the Board of Directors. No
discretionary or profit sharing contributions were made by the Company in 1996
and the Company has no intention of making such contributions in the near
future. Company contributions, if any, become 20% vested after two years of
service, with an additional 20% becoming vested for each year of service
thereafter. The 401(k) Plan is intended to qualify under Section 401 of the
Code, so that contributions by employees and the Company to the 401(k) Plan, and
income earned on the 401(k) Plan contributions, are not taxable to employees
until withdrawn from the 401(k) Plan, and so that contributions by the Company,
if any, will be deductible by the Company when made. The trustee under the
401(k) Plan, at the direction of each participant, invests the 401(k) Plan
employee salary deferrals in selected investment options.
LIMITATIONS ON DIRECTORS' AND EXECUTIVE OFFICERS' LIABILITY AND INDEMNIFICATION
The Company's Amended and Restated Bylaws provide that the Company will
indemnify its directors and executive officers and may indemnify its other
officers, employees and other agents to the fullest extent permitted by Delaware
law. The Company is also empowered under its Amended and Restated Bylaws to
enter into indemnification contracts with its directors and officers and to
53
<PAGE> 55
purchase insurance on behalf of any person it is required or permitted to
indemnify. Pursuant to this provision, the Company has entered into
indemnification agreements with each of its directors and executive officers and
certain of its key employees.
In addition, the Company's Restated Certificate of Incorporation provides
that directors of the Company will not be personally liable to the Company or
its stockholders for monetary damages for any breach of fiduciary duty as a
director, except for liability (i) for any breach of the directors' duty of
loyalty to the Company or its stockholders, (ii) for acts or omissions not in
good faith or which involve intentional misconduct or a knowing violation of
law, (iii) in respect of certain unlawful payments of dividends or unlawful
stock repurchases or redemptions as provided in Section 174 of the Delaware
General Corporation Law or (iv) for any transaction from which the director
derives any improper personal benefit. The Restated Certificate of Incorporation
also provides that if the Delaware General Corporation Law is amended after the
approval by the Company's stockholders of the Restated Certificate of
Incorporation to authorize corporate action further eliminating or limiting the
personal liability of directors, then the liability of the Company's directors
shall be eliminated or limited to the fullest extent permitted by the Delaware
General Corporation Law. The provision also does not affect a director's
responsibilities under any other law, such as the federal securities laws or
state or federal environmental laws.
54
<PAGE> 56
CERTAIN TRANSACTIONS
The Company was incorporated in California in May 1995 and reincorporated
in Delaware in January 1996. In connection with its reincorporation, the Company
issued 80 shares of Common Stock to Avalon Medical Partners L.P. ("AMP"). From
May 1995 to March 1996, AMP and Avalon Bioventures II L.P. ("ABV") loaned the
Company an aggregate of $425,000 and $500,000, respectively, pursuant to
Convertible Promissory Notes issued by the Company to AMP and ABV. Such
Convertible Promissory Notes were canceled, and the interest thereon forgiven,
in connection with the sale and issuance of shares of Series A Preferred Stock
to AMP and ABV in March 1996. Kevin J. Kinsella, a member of the Board of
Directors of the Company and its Chairman of the Board and Acting Chief
Executive Officer at the time of these transactions, was a general partner of
AMP and ABV until their dissolution in February 1997.
Subsequent to its reincorporation in Delaware in January 1996 and through
March 31, 1997, the Company sold the following shares of its Common Stock and
Preferred Stock in private placement transactions: 2,006,800 shares of Common
Stock at a price of $.00125 per share; 215,720 shares of Common Stock at a price
of $.0875 per share; 529,040 shares of Common Stock at a price of $.125 per
share; 284,672 shares of Common Stock at a price of $.375 per share; 7,200
shares of Common Stock at a price of $1.50 per share; 8,191,282 shares of Series
A Preferred Stock at a price of $1.6625 per share; 666,665 shares of Series B
Preferred Stock at a price of $2.25 per share; 600,000 shares of Series C
Preferred Stock at a price of $2.50 per share; and 458,028 shares of Series D
Preferred Stock at a price of $4.50 per share. Upon the closing of this
offering, each share of Series A, Series B, Series C and Series D Preferred
Stock will automatically convert into one share of Common Stock.
The purchasers of Common and Preferred Stock described above included,
among others, the following officers and directors of the Company, entities
affiliated with certain of the Company's directors, and holders of more than 5%
of the Company's voting securities:
<TABLE>
<CAPTION>
SHARES OF PREFERRED STOCK(1)
COMMON ------------------------------------------
PURCHASER STOCK SERIES A SERIES B SERIES C SERIES D
- -------------------------------------------- ------- --------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Abingworth Bioventures SICAV(2)............. -- 2,105,262 -- -- --
Avalon Medical Partners L.P.(3)............. 348,000 255,638 -- -- --
Avalon Bioventures II L.P.(3)............... -- 300,751 -- -- --
Biotechnology Investments Limited(4)........ -- 1,142,856 -- -- --
DP III Associates, L.P.(4).................. -- 57,324 -- -- --
Domain Partners III, L.P.(4)................ -- 1,656,961 -- -- --
J. Gordon Foulkes, Ph.D..................... 208,000 -- -- -- --
Kingsbury Capital Partners, L.P. II(5)...... -- 601,503 -- -- --
Kevin J. Kinsella(3)........................ -- 30,074 -- -- --
NEA Ventures 1996, L.P.(6).................. -- 6,014 -- -- --
New Enterprise Associates VI
Limited Partnership(6).................... -- 1,654,135 -- -- --
Timothy J. Rink, M.D., Sc.D................. 492,000 15,036 -- -- --
Sequana Therapeutics, Inc.(3)............... -- -- -- 600,000 --
Lubert Stryer, M.D.......................... 60,000 45,112 -- -- --
</TABLE>
- ---------------
(1) Certain of these entities are parties to a voting agreement. See
"Management." The Purchasers of these securities are entitled to
registration rights after this offering. See "Description of Capital
Stock -- Registration Rights."
(2) Dr. Stephen W. Bunting, a Director of the Company from March 1996 until
February 1997, is a director of Abingworth Management Limited, the
investment adviser to Abingworth Bioventures SICAV.
55
<PAGE> 57
(3) Kevin J. Kinsella, a director of the Company and its Chairman of the Board
and Acting Chief Executive Officer until March 1996, was a general partner
of Avalon Medical Partners L.P. and Avalon Bioventures II L.P. until such
partnerships dissolved in February 1997. Mr. Kinsella is also the President,
Chief Executive Officer and a director of Sequana Therapeutics, Inc.
("Sequana").
(4) Dr. James C. Blair, a director of the Company, is a general partner of
Domain Associates, a venture capital investment firm. Domain Associates
manages Domain Partners III, L.P. and DP III Associates, L.P. and is the
U.S. venture capital advisor to Biotechnology Investments Limited.
(5) Timothy J. Wollaeger, a director of the Company, is the general partner of
Kingsbury Capital Partners, L.P. II.
(6) Dr. Hugh Y. Rienhoff, Jr., a director of the Company, was a partner of New
Enterprise Associates Development Corporation at the time of the
transactions listed above. New Enterprise Associates Development Corporation
manages NEA Ventures 1996, L.P. and New Enterprise Associates VI Limited
Partnership.
In connection with Sequana's purchase of Series C Preferred Stock, the
Company and Sequana entered into a Research Agreement dated April 2, 1996. See
"Business -- Corporate Collaborations." As noted above, Kevin J. Kinsella, a
director of the Company and its Chairman of the Board and Acting Chief Executive
Officer until February 1996, is the President and Chief Executive Officer of
Sequana.
The Company has employment agreements with Timothy J. Rink, its Chief
Executive Officer and President, and J. Gordon Foulkes, its Chief Technical
Officer. See "Management -- Employment Agreements and Severance Arrangements."
In October 1996, the Company loaned $150,000 to J. Gordon Foulkes, the
Company's Chief Technical Officer and a director of the Company, to assist with
the purchase of a residence in connection with Dr. Foulkes' relocation to San
Diego, California from Long Island, New York. The loan is interest-free and is
secured by a second deed of trust on the property purchased in part by such
funds. Such loan is payable on the earlier of one year following termination of
employment or four years following the loan date. So long as Dr. Foulkes is then
employed with the Company, he will receive a bonus in the amount of $150,000
from the Company upon such four-year anniversary. See "Management."
The Company has granted options to certain of its directors and executive
officers. The Company has also entered into an Indemnification Agreement with
each of its directors and executive officers.
The Company believes that all of the transactions set forth above were made
on terms no less favorable to the Company than could have been obtained from
unaffiliated third parties. All future transactions between the Company and its
officers, directors, principal stockholders and their affiliates will be
approved by a majority of the Board of Directors, including a majority of the
disinterested directors, and will continue to be on terms no less favorable to
the Company than could be obtained from unaffiliated third parties.
56
<PAGE> 58
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information with respect to the
beneficial ownership of the Company's Common Stock as of March 31, 1997, and as
adjusted to reflect the sale of the shares of Common Stock offered hereby, by
(i) the Company's Chief Executive Officer, (ii) each of the Company's directors,
(iii) each holder of more than 5% of the Company's Common Stock and (iv) all
current directors and executive officers as a group.
<TABLE>
<CAPTION>
PERCENTAGE OF SHARES
BENEFICIALLY OWNED (1)
SHARES --------------------------------
5% STOCKHOLDERS, DIRECTORS BENEFICIALLY BEFORE AFTER
AND NAMED EXECUTIVE OFFICERS OWNED(1) OFFERING OFFERING
- ----------------------------------------------------- ------------ --------------- --------------
<S> <C> <C> <C>
Abingworth Bioventures SICAV......................... 2,105,262 16.4% 13.2%
c/o Sanne & Cie
Boite Postale 566
L-2015 Luxemberg
Biotechnology Investments Limited.................... 1,142,856 8.9% 7.2%
St. Peter Port House
Saus Marez Street
St. Peter Port, Guernsey
GY1 3PH
Entities affiliated with Domain Partners III,
L.P.(2)............................................ 1,715,284 13.3% 10.8%
One Palmer Square, Suite 515
Princeton, NJ 08542
Entities affiliated with New Enterprise Associates
Development Corporation(3)......................... 1,660,149 12.9% 10.4%
1119 St. Paul Street
Baltimore, MD 21202
Timothy J. Rink, M.A., M.D., Sc.D.(4)................ 491,036 3.8% 3.1%
J. Gordon Foulkes, Ph.D.............................. 208,000 1.6% 1.3%
James C. Blair, Ph.D.(5)............................. 1,715,284 13.3% 10.8%
Kevin J. Kinsella(6)................................. 779,221 6.1% 4.9%
Hugh Y. Rienhoff, Jr., M.D.(7)....................... 2,109,268 16.4% 13.3%
Lubert Stryer, M.D.(8)............................... 106,111 * *
Timothy J. Wollaeger(9).............................. 602,502 4.7% 3.8%
All directors and executive officers as a group (9
persons)........................................... 6,106,622 47.5% 38.4%
</TABLE>
- ---------------
* Represents beneficial ownership of less than 1%.
(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and generally includes voting or
investment power with respect to securities. Except as indicated by
footnote, and subject to community property laws where applicable, the
persons named in the table above have sole voting and investment power with
respect to all shares of Common Stock shown as beneficially owned by them.
Percentage of beneficial ownership is based on 12,849,950 shares of Common
Stock outstanding as of March 31, 1997 and 15,895,240 shares of Common Stock
outstanding after completion of this offering (in each case after giving
effect to the four-for-five reverse split of the Common Stock effected on
April 25, 1997 and the conversion of all outstanding shares of Preferred
Stock into Common Stock upon the completion of this offering).
(2) Represents 57,324 shares held by DP III Associates, L.P. ("DP III") and
1,656,961 shares held by Domain Partners III., L.P. ("Domain III"). One
Palmer Square Associates III, L.P. is the general partner of DP III and
Domain III.
(3) Represents 1,654,135 shares held by New Enterprise Associates VI Limited
Partnership and 6,014 shares held by NEA Ventures 1996, L.P. New Enterprise
Associates Development
57
<PAGE> 59
Corporation manages New Enterprise Associates VI Limited Partnership and NEA
Ventures 1996, L.P.
(4) Includes 222,000 shares held by Dr. Rink's spouse, Norma J. Rink, as her
separate property. Also includes 32,000 shares held by Dr. Rink as custodian
for two of his minor children. Dr. Rink disclaims beneficial ownership of
all of such shares.
(5) Represents 57,324 shares held by DP III and 1,656,961 shares held by Domain
III. Dr. Blair is a general partner of One Palmer Square Associates III,
L.P., the general partner of DP III and Domain III. Dr. Blair disclaims
beneficial ownership of such shares except to the extent of his partnership
interest therein. Also includes 999 shares subject to stock options granted
to Dr. Blair which are exercisable within 60 days of the date of this
Prospectus.
(6) Includes 600,000 shares held by Sequana Therapeutics, Inc., of which Mr.
Kinsella is the President and Chief Executive Officer and a member of the
board of directors. Mr. Kinsella disclaims beneficial ownership of such
shares. Also includes 999 shares subject to stock options granted to Mr.
Kinsella which are exercisable within 60 days of the date of this
Prospectus.
(7) Includes 2,105,262 shares held by Abingworth Bioventures SICAV. Dr. Rienhoff
is a director of Abingworth Management Limited, the investment adviser to
Abingworth Bioventures SICAV. Dr. Rienhoff disclaims beneficial ownership of
such shares except to the extent of his partnership interest therein. Also
includes 999 shares subject to stock options granted to Dr. Rienhoff which
are exercisable within 60 days of the date of this Prospectus.
(8) Includes 22,556 shares held by Dr. Stryer's spouse, Andrea S. Stryer. Also
includes 999 shares subject to stock options granted to Dr. Stryer which are
exercisable within 60 days of the date of this Prospectus.
(9) Includes 601,503 shares held by Kingsbury Capital Partners, L.P. II
("Kingsbury"). Mr. Wollaeger is the general partner of Kingsbury. Mr.
Wollaeger disclaims beneficial ownership of such shares except to the extent
of his partnership interest therein. Also includes 999 shares subject to
stock options granted to Mr. Wollaeger which are exercisable within 60 days
of the date of this Prospectus.
DESCRIPTION OF CAPITAL STOCK
The authorized capital stock of the Company consists of 50,000,000 shares
of Common Stock, $.001 par value, and, effective upon the closing of this
offering, 7,500,000 shares of Preferred Stock, $.001 par value.
COMMON STOCK
As of March 31, 1997, there were 12,849,950 shares of Common Stock
outstanding, after giving effect to the conversion of all outstanding shares of
Preferred Stock into 9,915,975 shares of Common Stock.
The holders of Common Stock are entitled to one vote per share on all
matters to be voted on by the stockholders. Subject to preferences that may be
applicable to any outstanding shares of Preferred Stock, holders of Common Stock
are entitled to receive ratably such dividends as may be declared by the Board
of Directors out of funds legally available therefor. In the event of a
liquidation, dissolution or winding up of the Company, holders of Common Stock
are entitled to share ratably in all assets remaining after payment of
liabilities and the liquidation preferences of any outstanding shares of
Preferred Stock. Holders of Common Stock have no preemptive, conversion,
subscription or other rights. There are no redemption or sinking fund provisions
applicable to the Common Stock. All outstanding shares of Common Stock are, and
all shares of Common Stock to be outstanding upon completion of this offering
will be, fully paid and nonassessable.
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<PAGE> 60
PREFERRED STOCK
Upon the closing of this offering, all outstanding shares of Preferred
Stock will be converted into 9,915,975 shares of Common Stock. See Notes 6 and
11 of Notes to Financial Statements for a description of the currently
outstanding Preferred Stock. Following the conversion, the Company's Restated
Certificate of Incorporation will be amended and restated to delete all
references to such shares of Preferred Stock. Under the Certificate of
Incorporation, as amended and restated upon the closing of this offering (the
"Restated Certificate"), the Board has the authority, without further action by
stockholders, to issue up to 7,500,000 shares of Preferred Stock in one or more
series and to fix the rights, preferences, privileges, qualifications and
restrictions granted to or imposed upon such Preferred Stock, including dividend
rights, conversion rights, voting rights, rights and terms of redemption,
liquidation preference and sinking fund terms, any or all of which may be
greater than the rights of the Common Stock. The issuance of Preferred Stock
could adversely affect the voting power of holders of Common Stock and reduce
the likelihood that such holders will receive dividend payments and payments
upon liquidation. Such issuance could have the effect of decreasing the market
price of the Common Stock. The issuance of Preferred Stock could have the effect
of delaying, deterring or preventing a change in control of the Company. The
Company has no present plans to issue any shares of Preferred Stock.
REGISTRATION RIGHTS
After this offering, the holders of 9,915,975 shares of Common Stock will
be entitled to certain rights with respect to the registration of such shares
under the Securities Act, pursuant to that certain Amended and Restated Investor
Rights Agreement dated December 27, 1996 (the "Investors' Rights Agreement").
Under the terms of the Investors' Rights Agreement, if the Company proposes to
register any of its securities under the Securities Act, either for its own
account or for the account of other security holders exercising registration
rights, such holders are entitled to notice of such registration and are
entitled, subject to certain limitations, to include shares therein. Commencing
with the date that is one year after this offering, the holders may also require
the Company to file a registration statement under the Securities Act with
respect to their shares, and the Company is required to use its best efforts to
effect to such registration. Furthermore, the holders may require the Company to
register their shares on Form S-3 when such form becomes available to the
Company. Generally, the Company is required to bear all registration and selling
expenses incurred in connection with any such registrations. These rights are
subject to certain conditions and limitations, among them the right of the
underwriters of an offering to limit the number of shares included in such
registration. Such registration rights terminate on the seventh anniversary of
the effective date of the Offering.
DELAWARE ANTI-TAKEOVER LAW AND CERTAIN CHARTER PROVISIONS
The Company is governed by the provisions of Section 203 of the Delaware
General Corporation Law. In general, Section 203 prohibits a public Delaware
corporation from engaging in a "business combination" with an "interested
stockholder" for a period of three years after the date of the transaction in
which the person became an interested stockholder, unless the business
combination is approved in a prescribed manner. A "business combination"
includes mergers, asset sales or other transactions resulting in a financial
benefit to the stockholder. An "interested stockholder" is a person who,
together with affiliates and associates, owns (or within three years, did own)
15% or more of the corporation's voting stock. The existence of this provision
would be expected to have anti-takeover effects with respect to transactions not
approved in advance by the Board of Directors, such as discouraging takeover
attempts that might result in a premium over the market price of the Common
Stock.
The Company's Restated Certificate provides that any action required or
permitted to be taken by stockholders of the Company must be effected at a duly
called annual or special meeting of stockholders and may not be effected by any
consent in writing. In addition, special meetings of the
59
<PAGE> 61
stockholders of the Company may be called only by the Chairman of the Board, the
President of the Company, by the Board of Directors pursuant to a resolution
adopted by a majority of the total number of authorized directors, or by the
holders of 10% of the outstanding voting stock of the Company. The Company's
Restated Certificate also specifies that the authorized number of directors may
be changed only by resolution of the Board of Directors. These and other
provisions contained in the Restated Certificate and the Company's Amended and
Restated Bylaws could delay or make more difficult certain types of transactions
involving an actual or potential change in control of the Company or its
management (including transactions in which stockholders might otherwise receive
a premium for their shares over then current prices) and may limit the ability
of stockholders to remove current management of the Company or approve
transactions that stockholders may deem to be in their best interests and,
therefore, could adversely affect the price of the Company's Common Stock.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Company's Common Stock is Harris
Trust Company of California.
SHARES ELIGIBLE FOR FUTURE SALE
Prior to the Offering, there has been no public market for the Common Stock
of the Company. Future sales of substantial amounts of Common Stock in the
public market could adversely affect prevailing market prices. Furthermore,
since only a limited number of shares will be available for sale shortly after
the Offering because of certain contractual and legal restrictions on resale
described below, sales of substantial amounts of Common Stock of the Company in
the public market after the restrictions lapse could adversely affect the
prevailing market price and the ability of the Company to raise equity capital
in the future.
Upon completion of the Offering, the Company will have 15,895,240 shares of
Common Stock outstanding, assuming no exercise of currently outstanding options,
but including warrants to purchase an aggregate of 45,290 shares of Common Stock
to be exercised upon the closing of this offering. Of these shares, the
3,000,000 shares sold in this offering (plus any additional shares sold upon
exercise of the Underwriters' over-allotment option) will be freely transferable
without restriction under the Securities Act of 1933, as amended (the
"Securities Act"), unless they are held by "affiliates" of the Company as that
term is used under the Securities Act and the regulations promulgated thereunder
("Affiliates"). Approximately 10,826,367 shares of Common Stock will be fully
vested and eligible for sale under Securities Act Rules 144 and 701 on the
ninety-first day after the effectiveness of this offering. Stockholders of the
Company holding an aggregate of 10,762,778 of these 10,826,367 shares have
agreed pursuant to lock-up agreements with the Underwriters, subject to certain
limited exceptions, not to sell or otherwise dispose of any of the shares held
by them for a period of 180 days after the effective date of this offering
without the prior written consent of Alex. Brown & Sons Incorporated. At the end
of such 180-day period, an additional 217,722 shares of Common Stock (plus
approximately 15,985 shares issuable upon exercise of vested options) will be
eligible for immediate resale, subject to compliance with Rule 144 and Rule 701.
The remainder of the approximately 1,849,725 shares of Common Stock held by
existing stockholders will become eligible for sale at various times over a
period of two years and could be sold earlier if the holders exercise any
available registration rights. The holders of 9,915,977 shares of Common Stock
have the right in certain circumstances to require the Company to register their
shares under the Securities Act for resale to the public beginning one year from
the effective date of this offering. If such holders, by exercising their demand
registration rights, cause a large number of shares to be registered and sold in
the public market, such sales could have an adverse effect on the market price
for the Company's Common Stock. If the Company were required to include in a
Company-initiated registration shares held by such holders pursuant to the
exercise of their piggyback registration rights, such sales may have an adverse
effect on the Company's ability to raise needed capital. In
60
<PAGE> 62
addition, the Company expects to file a registration statement on Form S-8
registering a total of approximately 2,170,168 shares of Common Stock subject to
outstanding stock options or reserved for issuance under the Company's stock
option plans. Such registration statement is expected to be filed and to become
effective as soon as practicable after the effective date of this offering.
Shares registered under such registration statement will, subject to Rule 144
volume limitations applicable to Affiliates, be available for sale in the open
market, unless such shares are subject to vesting restrictions with the Company
or the lock-up agreements described above.
In general, under Rule 144 as in effect on the date of this Prospectus,
beginning 90 days after the effective date of the Offering, an Affiliate of the
Company, or a person (or persons whose shares are aggregated) who has
beneficially owned Restricted Shares (as defined under Rule 144) for at least
one year is entitled to sell within any three-month period a number of shares
that does not exceed greater of (i) one percent of the then outstanding shares
of the Company's Common Stock or (ii) the average weekly trading volume of the
Company's Common Stock in the Nasdaq National Market during the four calendar
weeks immediately preceding the date on which notice of the sale is filed with
the Commission. Sales pursuant to Rule 144 are subject to certain requirements
relating to the manner of sale, notice, and the availability of current public
information about the Company. A person (or persons whose shares are aggregated)
who was not an Affiliate of the Company at any time during the 90 days
immediately preceding the sale and who has beneficially owned Restricted Shares
for at least two years is entitled to sell such shares under Rule 144(k) without
regard to the limitations described above.
An employee, officer or director of or consultant to the Company who
purchased or was awarded shares or options to purchase shares pursuant to a
written compensatory plan or contract is entitled to rely on the resale
provisions of Rule 701 under the Securities Act, which permits Affiliates and
non-Affiliates to sell their Rule 701 shares without having to comply with Rule
144's holding period restrictions, in each case commencing 90 days after the
date of this Prospectus. In addition, non-Affiliates may sell Rule 701 shares
without complying with the public information, volume and notice provisions of
Rule 144.
61
<PAGE> 63
UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement, the
Underwriters named below (the "Underwriters"), through their Representatives,
Alex. Brown & Sons Incorporated, Hambrecht & Quist LLC and Robertson, Stephens &
Company LLC, have severally agreed to purchase from the Company the following
respective numbers of shares of Common Stock at the initial public offering
price less the underwriting discounts and commissions set forth on the cover
page of this Prospectus:
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER SHARES
---------
<S> <C>
Alex. Brown & Sons Incorporated.................................................
Hambrecht & Quist LLC...........................................................
Robertson, Stephens & Company LLC...............................................
---------
Total................................................................. 3,000,000
=========
</TABLE>
The Underwriting Agreement provides that the obligations of the
Underwriters are subject to certain conditions precedent and that the
Underwriters will purchase all the shares of the Common Stock offered hereby if
any of such shares are purchased.
The Company has been advised by the Representatives that the Underwriters
propose to offer the shares of Common Stock to the public at the initial public
offering price set forth on the cover page of this Prospectus and to certain
dealers at such price less a concession not in excess of $ per share.
The Underwriters may allow, and such dealers may reallow, a concession not in
excess of $ per share to certain other dealers. After the initial
public offering, the offering price and other selling terms may be changed by
the Representatives of the Underwriters.
The Company has granted to the Underwriters an option, exercisable not
later than 30 days after the date of this Prospectus, to purchase up to 450,000
additional shares of Common Stock at the initial public offering price less the
underwriting discounts and commissions set forth on the cover page of this
Prospectus. To the extent that the Underwriters exercise such option, each of
the Underwriters will have a firm commitment to purchase approximately the same
percentage thereof that the number of shares of Common Stock to be purchased by
it in the above table bears to 3,000,000, and the Company will be obligated,
pursuant to the option, to sell such shares to the Underwriters. The
Underwriters may exercise such option only to cover over-allotments made in
connection with the sale of Common Stock offered hereby. If purchased, the
Underwriters will offer such additional shares on the same terms as those on
which the 3,000,000 shares are being offered.
The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as amended.
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<PAGE> 64
Stockholders of the Company, holding in the aggregate 10,681,219 shares of
Common Stock, have agreed not to offer, sell, contract to sell or otherwise
dispose of (or enter into any transaction which is designed to, or could be
expected to, result in the disposition of any portion of) any Common Stock for a
period of 180 days after the date of this Prospectus without the prior written
consent of Alex. Brown & Sons Incorporated. The Company has entered into a
similar agreement, except that it may issue, and grant options to purchase,
shares of Common Stock under its 1996 Stock Plan, Employee Stock Purchase Plan
and Non-Employee Directors' Stock Option Plan and pursuant to currently
outstanding warrants. See "Shares Eligible for Future Sale."
In May 1996, Hambrecht & Quist Group, an entity affiliated with Hambrecht &
Quist LLC, purchased 222,221 shares of the Company's Series B Preferred Stock
for a purchase price of $2.25 per share, or an aggregate of $500,000. Such
shares will convert into 222,221 shares of Common Stock upon the closing of this
offering.
The Representatives have advised the Company that the Underwriters do not
intend to confirm sales to any account over which they exercise discretionary
authority.
Prior to this offering, there has been no public market for the Common
Stock of the Company. Consequently, the initial public offering price for the
Common Stock will be determined by negotiation among the Company and the
Representatives. The factors to be considered in such negotiations include
prevailing market conditions, the results of operations of the Company in recent
periods, the market capitalizations and stages of development of other companies
which the Company and the Representatives believe to be comparable to the
Company, estimates of the business potential of the Company, the present stage
of the Company's development and other factors deemed relevant.
In order to facilitate the offering of the Common Stock, the Underwriters
may engage in transactions that stabilize, maintain or otherwise affect the
price of the Common Stock. Specifically, the Underwriters may over-allot in
connection with the offering, creating a short position in the Common Stock for
their own account. In addition, to cover over-allotments or to stabilize the
price of the Common Stock, the Underwriters may bid for, and purchase, shares of
the Common Stock in the open market. The Underwriters may also reclaim selling
concessions allowed to an underwriter or a dealer for distributing the Common
Stock in the offering, if the Underwriters repurchase previously distributed
Common Stock in transactions to cover their short positions, in stabilization
transactions or otherwise. Finally, the Underwriters may bid for, and purchase,
shares of the Common Stock in market making transactions and impose penalty
bids. These activities may stabilize or maintain the market price of the Common
Stock above market levels that may otherwise prevail. The Underwriters are not
required to engage in these activities, and may end any of these activities at
any time.
LEGAL MATTERS
The validity of the shares of Common Stock offered hereby will be passed
upon for the Company by Cooley Godward LLP, San Diego, California. As of the
date of this Prospectus, certain members and associates of Cooley Godward own an
aggregate of 30,074 shares of Common Stock through an investment partnership.
Certain legal matters will be passed upon for the Underwriters by Morrison &
Foerster LLP, New York, New York.
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<PAGE> 65
EXPERTS
The financial statements of the Company as of December 31, 1995 and 1996
and for the period from May 8, 1995 (inception) through December 31, 1995 and
for the year ended December 31, 1996 included in this Prospectus and elsewhere
in the Registration Statement have been audited by Ernst & Young LLP,
independent auditors, as set forth in their report thereon appearing elsewhere
herein, and are included in reliance upon such report given upon the authority
of such firm as experts in accounting and auditing.
The statements in this Prospectus under the captions "Risk
Factors -- Dependence on Patents and Proprietary Rights," "Business -- Patents
and Proprietary Rights," and other references herein to intellectual property of
the Company have been reviewed and approved by Fish & Richardson, PC, San Diego,
California, patent counsel for the Company, as experts on such matters, and are
included herein in reliance upon that review and approval.
ADDITIONAL INFORMATION
The Company has filed with the Commission a Registration Statement on Form
S-1 under the Securities Act, with respect to the Common Stock offered hereby.
As permitted by the rules and regulations of the Commission, this Prospectus,
which is a part of the Registration Statement, omits certain information,
exhibits, schedules and undertakings set forth in the Registration Statement.
For further information pertaining to the Company and the Common Stock offered
hereby, reference is made to such Registration Statement and the exhibits and
schedules thereto. Statements contained in this Prospectus as to the contents or
provisions of any contract or other document referred to herein are not
necessarily complete, and in each instance reference is made to the copy of such
contract or other document filed as an exhibit to the Registration Statement,
each such statement being qualified in all respects by such reference. A copy of
the Registration Statement may be inspected without charge at the office of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, and at the
Commission's regional offices located at the Northwestern Atrium Center, 500
West Madison Street, Suite 1400, Chicago, Illinois 60661 and Seven World Trade
Center, 13th Floor, New York, New York 10048. Copies of all or any part of the
Registration Statement may be obtained from such offices upon the payment of the
fees prescribed by the Commission. In addition, registration statements and
certain other filings made with the Commission through its Electronic Data
Gathering, Analysis and Retrieval ("EDGAR") system are publicly available
through the Commission's web site on the Internet's World Wide Web, located at
http://www.sec.gov. The Registration Statement, including all exhibits thereto
and amendments thereof, has been filed with the Commission through EDGAR.
64
<PAGE> 66
AURORA BIOSCIENCES CORPORATION
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Ernst & Young LLP, Independent Auditors..................................... F-2
Balance Sheets as of December 31, 1995 and 1996 and March 31, 1997 (unaudited)........ F-3
Statements of Operations for the period from May 8, 1995 (inception) to December 31,
1995, the year ended December 31, 1996, and the three month periods ended March 31,
1996 and 1997 (unaudited)........................................................... F-4
Statements of Stockholders' Equity for the period from May 8, 1995 (inception) to
December 31, 1995, the year ended December 31, 1996 and the three month period ended
March 31, 1997 (unaudited).......................................................... F-5
Statements of Cash Flows for the period from May 8, 1995 (inception) to December 31,
1995, the year ended December 31, 1996 and the three month periods ended March 31,
1996 and 1997 (unaudited)........................................................... F-6
Notes to Financial Statements......................................................... F-7
</TABLE>
F-1
<PAGE> 67
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
The Board of Directors and Stockholders
Aurora Biosciences Corporation
We have audited the accompanying balance sheets of Aurora Biosciences
Corporation as of December 31, 1995 and 1996, and the related statements of
operations, stockholders' equity, and cash flows for the period from May 8, 1995
(inception) to December 31, 1995 and for the year ended December 31, 1996. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Aurora Biosciences
Corporation at December 31, 1995 and 1996, and the results of its operations and
its cash flows for the period from May 8, 1995 (inception) to December 31, 1995
and for the year ended December 31, 1996, in conformity with generally accepted
accounting principles.
ERNST & YOUNG LLP
San Diego, California
April 7, 1997,
except as to Note 11, as to which the date is
April 25, 1997
F-2
<PAGE> 68
AURORA BIOSCIENCES CORPORATION
BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31, PRO FORMA
----------------------- MARCH 31, STOCKHOLDERS' EQUITY
1995 1996 1997 AT MARCH 31, 1997
--------- ----------- ----------- --------------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Current assets:
Cash and cash equivalents................... $ 11,119 $ 3,914,038 $ 4,500,743
Investment securities, available-for-sale -- 9,252,870 9,137,891
Accounts receivable under collaborative
agreements............................... -- 1,116,523 150,000
Notes receivable from officers and
employees................................ 69,798 -- --
Prepaid expenses............................ 18,333 228,029 358,131
Other current assets........................ -- 169,175 450,437
--------- ----------- -----------
Total current assets................ 99,250 14,680,635 14,597,202
Equipment, furniture and leaseholds, net...... 9,110 1,901,515 2,792,643
Notes receivable from officers and
employees................................... -- 200,000 260,000
Other assets.................................. 6,440 732,374 693,903
--------- ----------- -----------
$ 114,800 $17,514,524 $18,343,748
========= =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable............................ $ 41,589 $ 299,819 $ 540,850
Accrued compensation........................ 9,938 319,770 152,140
Notes payable............................... 475,000 -- --
Unearned revenue -- 250,000 1,105,000
Capital lease obligations, current
portion.................................. -- 350,247 472,190
--------- ----------- -----------
Total current liabilities........... 526,527 1,219,836 2,270,180
Capital lease obligations, less current
portion..................................... -- 1,110,897 1,388,912
Commitments
Stockholders' equity:
Convertible preferred stock, $.001 par
value, 25,000,000 shares authorized, no
shares issued and outstanding at December
31, 1995 and 9,915,975 shares issued and
outstanding at December 31, 1996 and
March 31, 1997 (7,500,000 shares
authorized and no shares issued and
outstanding pro forma); aggregate
liquidation preference of $18,679,128 at
December 31, 1996 and March 31, 1997..... -- 9,916 9,916 $ --
Common stock, $.001 par value, 50,000,000
shares authorized, 80, 2,865,160 and
2,933,975 shares issued and outstanding
at December 31, 1995, 1996 and March 31,
1997, respectively (12,849,950 shares pro
forma)................................... -- 2,865 2,934 12,850
Additional paid-in capital.................. -- 18,887,790 22,335,939 22,335,939
Deferred compensation....................... -- (371,573) (3,477,298) (3,477,298)
Accumulated deficit......................... (411,727) (3,345,207) (4,186,835) (4,186,835)
--------- ----------- ----------- -----------
Total stockholders' equity.......... (411,727) 15,183,791 14,684,656 $ 14,684,656
--------- ----------- ----------- ===========
$ 114,800 $17,514,524 $18,343,748
========= =========== ===========
</TABLE>
See accompanying notes.
F-3
<PAGE> 69
AURORA BIOSCIENCES CORPORATION
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
PERIOD FROM
MAY 8, 1995 YEAR ENDED THREE MONTHS ENDED MARCH
(INCEPTION) TO DECEMBER 31,
DECEMBER 31, 31, --------------------------
1995 1996 1996 1997
-------------- ----------- ---------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C>
Revenue (Note 9):
UHTS system development........ $ -- $ 2,116,523 $ -- $ 650,000
Screening services............. -- 100,000 -- 405,000
License fees................... -- -- -- 487,500
---------- ----------- ---------- -----------
Total revenue.......... -- 2,216,523 -- 1,542,500
Operating expenses:
Cost of UHTS system
development................. -- -- -- 687,612
Cost of screening services..... -- -- -- 287,440
Research and development....... 365,548 4,395,914 405,138 910,829
General and administrative..... 46,179 1,275,032 137,246 642,168
---------- ----------- ---------- -----------
Total operating
expenses............. 411,727 5,670,946 542,384 2,528,049
---------- ----------- ---------- -----------
Loss from operations............. (411,727) (3,454,423) (542,384) (985,549)
Interest income.................. -- 580,382 43,173 203,183
Interest expense................. -- (59,439) - (59,262)
---------- ----------- ---------- -----------
Net loss......................... $ (411,727) $(2,933,480) $ (499,211) $ (841,628)
========== =========== ========== ===========
Pro forma net loss per share..... $ (0.26) $ (0.06)
=========== ===========
Shares used in computing pro
forma net loss per share....... 11,139,402 13,398,643
=========== ===========
</TABLE>
See accompanying notes.
F-4
<PAGE> 70
AURORA BIOSCIENCES CORPORATION
STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
CONVERTIBLE
PREFERRED STOCK COMMON STOCK ADDITIONAL TOTAL
------------------ ------------------ PAID-IN DEFERRED ACCUMULATED STOCKHOLDERS'
SHARES AMOUNT SHARES AMOUNT CAPITAL COMPENSATION DEFICIT EQUITY
--------- ------ --------- ------ ----------- ------------ ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Issuance of common stock..... -- $ -- 80 $ -- $ -- $ -- $ -- $ --
Net loss..................... -- -- -- -- -- -- (411,727) (411,727)
--------- ------ --------- ------ ----------- ----------- ----------- -----------
Balance at December 31,
1995..................... -- -- 80 -- -- -- (411,727) (411,727)
Issuance of Series A
preferred stock, net....... 7,634,895 7,635 -- -- 12,617,058 -- -- 12,624,693
Issuance of Series A
preferred stock for
cancellation of notes
payable.................... 556,387 556 -- -- 924,441 -- -- 924,997
Issuance of Series B
preferred stock, net....... 666,665 667 -- -- 1,494,889 -- -- 1,495,556
Issuance of Series C
preferred stock, net....... 600,000 600 -- -- 1,496,800 -- -- 1,497,400
Issuance of Series D
preferred stock, net....... 458,028 458 -- -- 2,054,943 -- -- 2,055,401
Issuance of common stock,
net........................ -- -- 2,677,077 2,677 90,847 -- -- 93,524
Issuance of common stock for
acquired technology........ -- -- 188,000 188 63,312 -- -- 63,500
Deferred compensation related
to stock and stock
options.................... -- -- -- -- 145,500 (373,742) -- (228,242)
Amortization of deferred
compensation............... -- -- -- -- -- 2,169 -- 2,169
Net loss..................... -- -- -- -- -- -- (2,933,480) (2,933,480)
--------- ------ --------- ------ ----------- ----------- ----------- -----------
Balance at December 31,
1996..................... 9,915,975 9,916 2,865,157 2,865 18,887,790 (371,573) (3,345,207) 15,183,791
Costs incurred in connection
with issuance of Series D
preferred stock
(unaudited)................ -- -- -- -- (36,528) -- -- (36,528)
Issuance of common stock, net
(unaudited)................ -- -- 68,818 69 44,273 -- -- 44,342
Deferred compensation related
to stock and stock options
(unaudited)................ -- -- -- -- 3,440,404 (3,212,162) -- 228,242
Amortization of deferred
compensation (unaudited)... -- -- -- -- -- 106,437 -- 106,437
Net loss (unaudited)......... -- -- -- -- -- -- (841,628) (841,628)
--------- ------ --------- ------ ----------- ----------- ----------- -----------
Balance at March 31, 1997
(unaudited).............. 9,915,975 $9,916 2,933,975 $2,934 $22,335,939 $(3,477,298) $(4,186,835) $14,684,656
========= ====== ========= ====== =========== =========== =========== ===========
</TABLE>
See accompanying notes.
F-5
<PAGE> 71
AURORA BIOSCIENCES CORPORATION
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
PERIOD FROM THREE MONTHS ENDED MARCH
MAY 8, 1995 31,
(INCEPTION) TO YEAR ENDED -------------------------
DECEMBER 31, 1995 DECEMBER 31, 1996 1996 1997
----------------- ----------------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C>
OPERATING ACTIVITIES:
Net loss....................................... $(411,727) $(2,933,480) $ (499,211) $ (841,628)
Adjustments to reconcile net loss to net cash
(used in) provided by operating activities:
Depreciation and amortization................ 1,822 156,861 1,098 152,449
Forgiveness of notes receivable from officers
and employees.............................. -- 93,129 -- --
Issuance of common stock in exchange for
acquired technology........................ -- 63,500 -- --
Amortization of deferred compensation........ -- 2,169 -- 106,437
Changes in operating assets and liabilities:
Accounts receivable under collaborative
agreements............................... -- (1,116,523) -- 966,523
Prepaid expenses and other current
assets................................... (18,333) (378,871) (127,084) (411,364)
Accounts payable and accrued compensation...... 51,527 339,820 70,953 301,643
Unearned revenue............................... -- 250,000 -- 855,000
--------- ----------- ----------- -----------
Net cash (used in) provided by operating
activities................................... (376,711) (3,523,395) (554,244) 1,129,060
--------- ----------- ----------- -----------
INVESTING ACTIVITIES:
Purchases of investment securities............. -- (12,147,818) (6,642,110) (1,485,021)
Sales and maturities of investment
securities................................... -- 2,894,948 -- 1,600,000
Purchases of equipment, furniture and
leaseholds................................... (10,932) (458,657) (102,741) (537,431)
Notes receivable from officers and employees... (69,798) (223,331) (23,331) (60,000)
Other assets................................... (6,440) (725,934) (72,209) 38,399
--------- ----------- ----------- -----------
Net cash used in investing activities.......... (87,170) (10,660,792) (6,840,391) (444,053)
--------- ----------- ----------- -----------
FINANCING ACTIVITIES:
Issuance (cost) of convertible preferred stock,
net.......................................... -- 17,673,050 12,624,694 (36,528)
Issuance of common stock, net of repurchases... -- 93,524 2,509 44,342
Issuance of notes payable...................... 475,000 449,997 449,997 --
Principal payments on capital lease
obligations.................................. -- (129,465) -- (106,116)
--------- ----------- ----------- -----------
Net cash provided by (used in) financing
activities................................... 475,000 18,087,106 13,077,200 (98,302)
--------- ----------- ----------- -----------
Net increase in cash and cash equivalents...... 11,119 3,902,919 5,682,565 586,705
Cash and cash equivalents at beginning of
period....................................... -- 11,119 11,119 3,914,038
--------- ----------- ----------- -----------
Cash and cash equivalents at end of period..... $ 11,119 $ 3,914,038 $ 5,693,684 $ 4,500,743
========= =========== =========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Interest paid.................................. $ -- $ 59,439 $ -- $ 59,262
========= =========== =========== ===========
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND
FINANCING ACTIVITIES:
Equipment acquired under capital leases........ $ -- $ 1,590,609 $ -- $ 506,074
========= =========== =========== ===========
Conversion of notes payable to convertible
preferred stock.............................. $ -- $ 924,997 $ 924,997 $ --
========= =========== =========== ===========
</TABLE>
See accompanying notes.
F-6
<PAGE> 72
AURORA BIOSCIENCES CORPORATION
NOTES TO FINANCIAL STATEMENTS
(INFORMATION SUBSEQUENT TO DECEMBER 31, 1996 AND PERTAINING TO MARCH 31, 1997
AND THE
THREE-MONTH PERIODS ENDED MARCH 31, 1996 AND 1997 IS UNAUDITED)
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization and Business Activity
Aurora Biosciences Corporation (the "Company" or "Aurora") was incorporated
in California on May 8, 1995 and subsequently re-incorporated in Delaware on
January 22, 1996. The Company designs and develops proprietary drug discovery
systems, services and technologies to accelerate and enhance the discovery of
new medicines. Aurora is developing an integrated technology platform comprised
of a portfolio of proprietary fluorescent assay technologies and an ultra-high
throughput screening ("UHTS") system designed to allow assay miniaturization and
to overcome many of the limitations associated with the traditional drug
discovery process. This integrated technology platform will support functional
genomics in mammalian cells, facile assay development and extremely rapid
screening of molecular targets to identify lead compounds with novel therapeutic
potential.
Interim Financial Information (Unaudited)
The financial statements at March 31, 1997 and for the three-month periods
ended March 31, 1996 and 1997 are unaudited, but include all adjustments
(consisting only of normal recurring adjustments) which management considers
necessary for a fair statement of the financial position at such dates and the
operating results and cash flows for those periods. Results for interim periods
are not necessarily indicative of results for the entire year or any future
periods.
Cash, Cash Equivalents and Investment Securities
The Company considers all highly-liquid investments with maturities of
three months or less from the date of purchase to be cash equivalents.
Management determines the appropriate classification of its cash equivalents and
investment securities at the time of purchase and re-evaluates such
determination as of each balance sheet date. Management has classified the
Company's cash equivalents and investment securities as available-for-sale
securities in the accompanying financial statements. Available-for-sale
securities are carried at fair value, with unrealized gains and losses reported
in a separate component of stockholders' equity. The cost of debt securities
classified as available-for-sale is adjusted for amortization of premiums and
accretion of discounts to maturity. Such amortization and accretion, as well as
interest and dividends, are included in interest income. Realized gains and
losses are also included in interest income. The cost of securities sold is
based on the specific identification method.
The Company invests its excess cash in U.S. Government and agency
securities and debt instruments of financial institutions and corporations with
strong credit ratings. The Company has established guidelines regarding
diversification of its investments and their maturities which should maintain
safety and liquidity.
Equipment, Furniture and Leaseholds
Equipment, including capitalized leased equipment, furniture and leaseholds
is stated at cost less accumulated depreciation and amortization. Depreciation
and amortization is calculated using the straight-line method over the shorter
of the estimated useful lives of the respective assets (generally three to five
years) or the term of the applicable lease.
F-7
<PAGE> 73
AURORA BIOSCIENCES CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Revenue Recognition
Revenue under collaborative agreements typically consists of non-refundable
up-front fees, ongoing research and co-development payments, and milestone,
royalty and other contingent payments. Revenue from non-refundable up-front fees
is recognized upon signing of the agreement. Revenue from ongoing research and
co-development payments is recognized ratably over the term of the agreement,
and the Company believes such payments will approximate the research and
development expense being incurred associated with the agreement. Revenue from
milestone, royalty and other contingent payments will be recognized as earned.
Revenue from screen development and screening and other services is
recognized as earned. Advance payments received under any agreements in excess
of amounts earned are classified as unearned revenue. Revenue under cost
reimbursement contracts is recognized as the related costs are incurred.
Substantially all of the revenue recorded to date has been derived from
agreements with two collaborators (Note 9).
Research and Development Expense
All research and development costs are expensed in the period incurred.
Pro Forma Net Loss Per Share
Pro forma net loss per share is computed using the weighted average number
of common shares outstanding during the period. Pursuant to certain requirements
of the Securities and Exchange Commission, ("SEC"), common and common equivalent
shares issued by the Company during the twelve months immediately preceding the
initial filing of the Company's Registration Statement, including common and
common equivalent shares issued after December 31, 1996, have been included in
the calculation of the shares used in computing pro forma net loss per share as
if these shares were outstanding for all periods presented, using the treasury
stock method and assumed public offering price of $10 per share. In addition,
the calculation of the shares used in computing pro forma net loss per share
includes convertible preferred stock not included above that will automatically
convert into common stock upon completion of an initial public offering, as if
they were converted into common stock as of the original date of issuance.
Accounting Standard on Impairment of Long-Lived Assets
Effective January 1, 1996, the Company adopted Statement of Financial
Accounting Standards No. 121, "Accounting for Impairment of Long-Lived Assets
and for Long-Lived Assets to be Disposed Of," regarding the impairment of
long-lived assets, identifiable intangibles and goodwill related to those assets
when there are indications that the carrying values of those assets may not be
recoverable. The adoption of this standard had no impact on the Company's
financial position.
Accounting Standard on Earnings per Share
In February 1997, the Financial Accounting Standards Board issued Statement
No. 128, "Earnings per Share," which is required to be adopted on December 31,
1997. At that time, the Company will be required to change the method currently
used to compute loss per share and to restate all prior periods. Under the new
requirements for calculating primary earnings per share, the dilutive effect of
stock options will be excluded. The impact is not expected to be material.
F-8
<PAGE> 74
AURORA BIOSCIENCES CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the reporting
period. Actual results could differ from those estimates.
2. CASH EQUIVALENTS AND INVESTMENT SECURITIES
A summary of the estimated fair value of cash equivalents and investment
securities is shown below:
<TABLE>
<CAPTION>
DECEMBER
31, MARCH 31,
1996 1997
----------- -----------
<S> <C> <C>
Money market funds............................. $ 3,141,747 $ 2,707,137
U.S. government securities..................... 3,738,755 3,146,731
U.S. corporate securities...................... 5,012,834 6,190,810
Other debt securities.......................... 1,000,241 1,500,343
----------- -----------
Total debt securities..................... 12,893,577 13,545,021
Less amounts classified as cash equivalents.... (3,640,707) (4,407,130)
----------- -----------
Total investment securities.......... $ 9,252,870 $ 9,137,891
=========== ===========
</TABLE>
The estimated fair value of cash equivalents and investment securities
approximates cost and no unrealized gains or losses were reported as of December
31, 1996 or March 31, 1997. Realized gains or losses on sales of
available-for-sale securities in 1996 were not significant. There were no
realized gains or losses in the period from May 8, 1995 (inception) to December
31, 1995 or the three month period ended March 31, 1997. The estimated fair
value of available-for-sale debt securities as of December 31, 1996 by
contractual maturity is as follows: $9.7 million due within one year and $3.2
million due in one to two years.
3. NOTES RECEIVABLE FROM OFFICERS AND EMPLOYEES
Notes receivable from officers and employees generally consist of
relocation and housing loans to assist in the relocation of new employees. These
notes are generally secured by all shares of the Company's common stock owned by
the individual or by a deed of trust on the individual's principal residence.
During 1996, the notes outstanding at December 31, 1995 were forgiven. Notes
receivable as of December 31, 1996 and March 31, 1997 include an interest-free
$150,000 loan to an officer and director of the Company which is secured by a
deed of trust on the individual's principal residence.
F-9
<PAGE> 75
AURORA BIOSCIENCES CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
4. EQUIPMENT, FURNITURE AND LEASEHOLDS
Equipment, furniture and leaseholds consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
---------------------- ----------
1995 1996 1997
------- ---------- ----------
<S> <C> <C> <C>
Scientific equipment........................ $ -- $1,255,749 $1,957,593
Office furniture, computers and equipment... 10,932 731,423 1,063,522
Leasehold improvements...................... -- 73,026 78,721
------- ---------- ----------
10,932 2,060,198 3,099,836
Less accumulated depreciation and
amortization............................. (1,822) (158,683) (307,193)
------- ---------- ----------
$ 9,110 $1,901,515 $2,792,643
======= ========== ==========
</TABLE>
Equipment, furniture and leaseholds at December 31, 1996 and March 31, 1997
includes scientific equipment acquired under capital leases of $1,065,173 and
$1,281,972, respectively, and office furniture, computers and equipment acquired
under capital leases of $525,436 and $814,711, respectively. The amount of
related amortization included in accumulated depreciation and amortization at
December 31, 1996 and March 31, 1997 was $120,550 and $247,074, respectively.
5. COMMITMENTS
Consulting Agreements
The Company has entered into various consulting agreements with its
Scientific Advisors and others for aggregate minimum annual fees of
approximately $215,000. The agreements generally provide for four or five-year
terms and are cancelable by either party upon 60 or 90 days written notice.
During the period from May 8, 1995 (inception) through December 31, 1995, the
year ended December 31, 1996 and the three month period ended March 31, 1996 and
1997, the Company expensed approximately $95,000, $332,000, $158,000 and
$67,000, respectively, of fees and expense reimbursements related to these
agreements.
In February 1996, in connection with the various consulting agreements, the
Company issued 48,000 shares of common stock for $.001 per share, representing
the fair value on the date of grant as determined by the Board of Directors,
pursuant to restricted stock purchase agreements, excluding shares issued to
founders and directors of the Company who also serve as consultants as the
Scientific Advisors.
Technology and Licensing Agreements
The Company has entered into various strategic technology agreements with
third parties regarding the development of instrumentation technology. These
agreements contain varying terms and provisions which require the Company to
make payments to the third parties. Pursuant to these agreements, the Company
paid approximately $550,000 in 1996 and $179,000 during the three month period
ended March 31, 1997 and is obligated to make future payments totaling
approximately $1.2 million in 1997 and 1998 if all milestones are met.
The Company has also entered into various license agreements with academic
institutions regarding certain inventions and technologies. Most such agreements
may be terminated by the Company with 60 days written notice without significant
financial penalty. Pursuant to these agreements, the Company paid approximately
$120,000 in 1996 and $24,000 during the three month period ended March 31, 1997
and is obligated to make future payments totaling approxi-
F-10
<PAGE> 76
AURORA BIOSCIENCES CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
mately $830,000 over the next seven years. In addition, the Company is required
to make royalty payments upon the sale of products incorporating inventions or
technologies covered under these agreements.
Leases
The Company leases its facilities and certain equipment under operating
lease agreements which expire at dates through September 2008. Lease payments
are subject to future increases based upon increases in the Consumer Price
Index, taxes and insurance. Rent expense totaled approximately $462,000 in the
year ended December 31, 1996 and $17,000 and $214,000 for the three month
periods ended March 31, 1996 and 1997, respectively.
The Company leases certain equipment under a $4.5 million capital lease
line which expires in December 1997. At December 31, 1996 and March 31, 1997,
the Company had $1.9 million and $2.4 million, respectively, available under the
capital lease line for future equipment acquisitions.
Annual future minimum lease payments for operating and capital leases as of
December 31, 1996, including payments required under operating leases entered
into during 1997, are as follows:
<TABLE>
<CAPTION>
OPERATING LEASES CAPITAL LEASES
---------------- --------------
<S> <C> <C>
Years ended December 31,
1997........................................... $ 1,059,040 $ 542,652
1998........................................... 2,001,947 542,652
1999........................................... 1,969,414 548,469
2000........................................... 1,377,325 237,413
2001........................................... 1,418,645 --
Thereafter..................................... 10,676,814 --
----------- -----------
Total minimum lease payments................... $ 18,503,185 1,871,186
===========
Less amounts representing interest............. (410,042)
-----------
Present value of capital lease payments........ 1,461,144
Less current portion........................... (350,247)
-----------
Capital lease obligations, noncurrent.......... $1,110,897
===========
</TABLE>
In connection with a facility lease agreement entered into during April
1997, the Company is required to place a Letter of Credit restricting $1.25
million of its cash balance and the Company will be required to increase the
restricted cash balance by an additional $1.25 million upon the occurrence of
certain events. The Letter of Credit will be released over the next three to
four years on a predetermined schedule.
F-11
<PAGE> 77
AURORA BIOSCIENCES CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
6. STOCKHOLDERS' EQUITY
Convertible Preferred Stock
Convertible preferred stock issued and outstanding at December 31, 1996 and
March 31, 1997 is as follows:
<TABLE>
<CAPTION>
SHARES
ISSUED AND PREFERENCE IN
AUTHORIZED OUTSTANDING PAR VALUE LIQUIDATION
---------- ----------- --------- --------------
<S> <C> <C> <C> <C>
Series A....................... 10,500,000 8,191,282 $ 8,191 $ 13,618,006
Series B....................... 833,332 666,665 667 1,499,996
Series C....................... 800,000 600,000 600 1,500,000
Series D....................... 572,536 458,028 458 2,061,126
--------- ------ -----------
9,915,975 $ 9,916 $ 18,679,128
========= ====== ===========
</TABLE>
The Company issued shares of Series A, B and C preferred stock at $1.66,
$2.25 and $2.50 per share, respectively, pursuant to March 1996 preferred stock
purchase agreements. The Company issued Series D preferred stock at $4.50 per
share pursuant to a December 1996 preferred stock purchase agreement.
The preferred stock is convertible into equal shares of common stock,
subject to certain anti-dilution provisions, at any time at the option of the
holder or automatically upon (i) the consent of not less than 67% of the
preferred stockholders, or (ii) the closing of an underwritten public offering
of common stock with gross proceeds of not less than $10,000,000 at not less
than $7.50 per common share. The holder of each share of preferred stock is
currently entitled to one vote for each share of common stock into which it
would convert.
Holders of Series A, B, C and D preferred stock are entitled to
noncumulative annual dividends of $0.133, $0.18, $0.20 and $0.36 per share,
respectively. These dividends are payable prior and in preference to any
declaration or payment of any dividend or other distribution on common stock
payable other than in common stock, when and if declared by the Board of
Directors. The Company has never declared or paid dividends on its capital stock
and does not intend to pay dividends in the foreseeable future.
In March 1996, the Company issued 556,389 shares of Series A preferred
stock in exchange for the cancellation of promissory notes payable totaling
approximately $925,000 (see Note 10).
Common Stock
The majority of the outstanding shares of common stock have been issued to
founders, directors and employees of, and consultants to, the Company. In
connection with certain stock purchase agreements, the Company has the option to
repurchase, at the original issuance price, the unvested shares in the event of
termination of employment or engagement. Shares issued under these agreements
generally vest over four years. At December 31, 1996 and March 31, 1997,
1,652,853 and 1,626,747 shares, respectively, of common stock were subject to
repurchase by the Company.
During 1996, the Company issued 188,000 shares of common stock in exchange
for certain licenses and rights. Research and development expense of $63,500 was
recorded related to such issuances, representing the fair value of such shares
as determined by the Board of Directors on the date of grant.
In December 1996, the Board of Directors committed to issue 71,072 shares
of common stock under stock purchase agreements to employees of the Company on
the date of grant. The shares were priced at $0.38 per share. In connection with
this commitment, the Company recorded
F-12
<PAGE> 78
AURORA BIOSCIENCES CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
deferred compensation of approximately $151,000 representing the difference
between the deemed fair value of such shares for SEC purposes and the fair value
as determined by the Board of Directors.
Warrants
In May 1996, the Company issued warrants to purchase 54,320 shares of
Series A preferred stock at $1.66 per share to a leasing company in connection
with the execution of a $3.5 million capital lease agreement (Note 5). The
warrants expire in May 2002, subject to certain extensions based on the
utilization of the capital lease line. The warrants remain outstanding at
December 31, 1996 and March 31, 1997.
Deferred Compensation
The Company records and amortizes over the related vesting periods deferred
compensation representing the difference between the price per share of
restricted stock issued or the exercise price of stock options granted and the
deemed fair value (for SEC purposes) of the Company's common stock at the date
of issuance or grant. Shares included in the computation of deferred
compensation at December 31, 1996 include restricted stock issued or committed
and stock options granted or committed from April 1996 through December 1996.
Gross deferred compensation at December 31, 1996 and March 31, 1997 totaled
$373,742 and $3,585,904, respectively, and related amortization expense totaled
$2,169 and $106,437 in 1996 and 1997, respectively.
Stock Option Plans; Stock Purchase Plan
In January 1996, the Company adopted the 1996 Stock Plan (the "Stock
Plan"), under which 800,000 shares of the Company's common stock were reserved
for future issuance. During February 1997, the Board of Directors increased the
number of shares reserved under the Plan to 2,000,000. The Company's
stockholders approved this increase in April 1997. The Stock Plan provides for
the grant of incentive stock options and stock appreciation rights to employees
and nonstatutory stock options and stock purchase rights to employees, directors
and consultants.
All options and stock appreciation rights granted under the Stock Plan
expire not later than ten years from the date of grant and vest and become fully
exercisable after not more than five years of continued employment or
engagement. Options generally vest either monthly over four years or with
one-fourth of the shares vesting after one year and the remainder vesting
ratably over the next three years. The exercise price of incentive stock options
must be equal to at least the fair market value on the date of grant, and the
exercise price of nonstatutory options may be no less than 85% of the fair
market value on the date of grant.
In February 1997, the Board of Directors adopted a Non-Employee Directors'
Stock Option Plan (the "Directors' Plan"), under which 240,000 shares of the
Company's Common Stock were reserved for future issuance. The Company's
stockholders approved the adoption of the Directors' Plan in April 1997.
All options granted under the Directors' Plan expire no later than ten
years from the date of grant and vest and become fully exercisable after not
more than four years of continued service. Options generally vest monthly over
four years. The exercise price of each option must be equal to the fair market
value on the date of grant.
F-13
<PAGE> 79
AURORA BIOSCIENCES CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
The following table summaries stock option activity under the Stock and
Directors' Plans:
<TABLE>
<CAPTION>
WEIGHTED-
OPTIONS AVERAGE EXERCISE
OUTSTANDING PRICE
----------- ----------------
<S> <C> <C>
Granted..................................... 4,000 $ 0.09
-------
Balance at December 31,1996................... 4,000 $ 0.09
Granted..................................... 577,720 $ 1.28
Cancelled................................... (400) $ 0.75
-------
Balance at March 31, 1997 (unaudited)......... 581,320 $ 1.28
=======
</TABLE>
At December 31, 1996 and March 31, 1997, options to purchase no shares and
1,668 shares, respectively, of common stock were exercisable. The weighted
average exercise price of common stock exercisable was $1.50 per share at March
31, 1997. The weighted average remaining contractual life of the options
outstanding at December 31, 1996 and March 31, 1997 was 9.5 years and 9.8 years,
respectively.
In December 1996, the Board of Directors committed to grant options to
purchase 36,336 shares of common stock to employees of the Company on the date
of grant. The shares were priced at $0.38 per share. In connection with this
commitment, the Company recorded deferred compensation of approximately $77,000
representing the difference between the deemed fair value of such shares for SEC
purposes and the fair value as determined by the Board of Directors.
During 1996, the Company issued 393,960 shares of restricted common stock
at prices ranging from $.09 to $.40 per share. Of the 393,960 shares issued,
353,960 shares were issued under the Plan and 52,800 shares were issued at
prices below fair value on the date of issuance. The weighted average fair value
of these issuances was $2.75 per share and the total fair value has been
included in deferred compensation as of December 31, 1996.
Effective January 1, 1996, the Company adopted Statement of Financial
Accounting Standards No. 123, "Accounting for Stock-Based Compensation" ("SFAS
123"). In accordance with the provisions of SFAS 123, the Company has elected to
follow Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued
to Employees" ("APB 25") and related Interpretations in accounting for its
employee stock options. Under APB 25, when the purchase price of restricted
stock or the exercise price of the Company's employee stock options equals or
exceeds the fair value of the underlying stock on the date of issuance or grant,
no compensation expense is recognized.
Pro forma information regarding net loss and loss per share is required by
SFAS 123, and has been determined as if the Company had accounted for its
employee stock options under the fair value method of that Statement. The fair
value of these options was estimated at the date of grant using the minimum
value method with the following weighted average assumptions for 1996: risk-free
interest rate of 6.22%; no annual dividends; and an expected option life of five
years. The effect of applying the minimum value method of SFAS 123 to options
granted in 1996 did not result in pro forma net loss and loss per share amounts
that are materially different from amounts reported. Accordingly, such pro forma
information is not presented herein. Should the Company successfully complete an
initial public offering, it would no longer be able to utilize the minimum value
method and, therefore, the pro forma effect determined in 1996 may not be
representative of the pro forma effect to be reported in future years.
In February 1997, the Board of Directors adopted an Employee Stock Purchase
Plan which reserves 400,000 shares of common stock for issuance thereunder. The
Company's stockholders approved the adoption of the Employee Stock Purchase Plan
in April 1997.
F-14
<PAGE> 80
AURORA BIOSCIENCES CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Common Stock Reserved for Future Issuance
Common stock reserved for future issuance is as follows:
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1996 1997
------------ ----------
<S> <C> <C>
Conversion of Series A, B, C and D convertible preferred
stock................................................. 9,915,975 9,915,975
Warrants to purchase Series A convertible preferred
stock................................................. 54,320 54,320
Common stock and stock options under 1996 Stock Plan.... 446,040 1,568,728
Stock options under Directors' Plan..................... -- 240,000
Common stock under Employee Stock Purchase Plan......... -- 400,000
Other obligations....................................... 4,000 4,000
---------- ----------
10,420,335 12,183,023
========== ==========
</TABLE>
7. INCOME TAXES
At December 31, 1996, the Company had federal and California income tax net
operating loss carryforwards of approximately $3,210,000 and $3,286,000,
respectively. Federal and California tax loss carryforwards will begin to expire
in 2010 and 2003, respectively, unless previously utilized. The Company also had
federal and California research tax credit carryforwards of approximately
$165,000 and $89,000, respectively, which will begin to expire in 2010 unless
previously utilized.
Pursuant to Sections 382 and 383 of the Internal Revenue Code, use of these
net operating loss and credit carryforwards may be substantially limited because
of cumulative changes in the Company's ownership of more that 50%. However, the
Company does not believe such limitations will have a material impact upon the
utilization of these carryforwards.
Significant components of the Company's net deferred tax assets as of
December 31, 1995 and 1996 are shown below. A valuation allowance of $1,548,000
at December 31, 1996 has been recognized to offset the net deferred tax assets
as realization of such assets is uncertain.
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1995 1996
-------- -----------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards........................ $ 86,000 $ 1,321,000
Tax credit carryforwards................................ -- 223,000
Other................................................... -- 114,000
-------- -----------
Total deferred tax assets............................ 86,000 1,658,000
Deferred tax liability:
Depreciation............................................ -- (110,000)
-------- -----------
Net deferred tax assets................................... 86,000 1,548,000
Valuation allowance for deferred tax assets............... (86,000) (1,548,000)
-------- -----------
Net deferred taxes.............................. $ -- $ --
======== ===========
</TABLE>
8. 401(k) RETIREMENT SAVINGS PLAN
In January 1996, the Company adopted a 401(k) Retirement Savings Plan
covering substantially all employees who have completed certain service
requirements. Participants may contribute a portion of their compensation to the
Plan through payroll deductions. Company matching contributions, if any, are
determined by the Company at its sole discretion. To date, there have been no
Company contributions under the Plan.
F-15
<PAGE> 81
AURORA BIOSCIENCES CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
9. COLLABORATIVE AGREEMENTS
The Company entered into the following collaborative agreements in 1996 and
1997:
Ultra High-throughput Screening System and Screen Development Agreements
The Company entered into collaborative agreements ("the Agreements") in
November and December 1996 with Bristol-Myers Squibb Pharmaceutical Research
Institute and Eli Lilly and Company, respectively (collectively, "the
Collaborators"), regarding the development and installation of the Company's
UHTS system at each of the Collaborators. Under the terms of the Agreements, the
Company is required to develop and separately install three components to be
integrated into one complete UHTS system. In return, the Collaborators are
obligated to make certain payments to the Company in the form of non-refundable
up-front fees, delivery or installation payments and ongoing research and
co-development funding. The Company is obligated to provide service and support
for the installed UHTS systems for a limited period of time.
The Company and the Collaborators will also co-develop high throughput
screening assays for use by the Collaborators. In addition to certain payments
to be made by the Collaborators for the use of these assays and assay
technologies, the Collaborators will also make certain milestone and royalty
payments to the Company if the Collaborators develop and commercialize any
compound identified using a screen based on the Company's fluorescent assay
technologies.
The Collaborators may terminate the agreement at any time without cause
upon written notice, provided that certain withdrawal payments are made. The
Agreements also provide for penalties payable by the Company if it fails to
deliver the completed UHTS system by a specified time.
Screen Development and Specialized Instrumentation Agreement
In December 1996, the Company and Roche Bioscience ("Roche") entered into a
Collaborative Research and License Agreement ("Roche Agreement") regarding the
development and delivery of a certain screening instrument by the Company. Roche
is obligated to make certain payments to the Company in the form of
non-refundable up-front fees and delivery payments. For a limited period of time
specified in the agreement, the Company is obligated to provide service and
support for any instrument delivered to Roche. The Company and Roche will also
co-develop a screening assay for use with a target identified in the Roche
Agreement. In connection with such development, Roche is obligated to make
certain payments to the Company in the form of non-refundable up-front fees and
ongoing research and co-development funding.
Screen Development Agreement, Functional Genomics, and Screening Services
Agreement
In April 1996, the Company and Sequana Therapeutics, Inc. ("Sequana")
entered into a Research Agreement (the "Sequana Agreement") regarding the
screening of certain targets to be selected by Sequana. Under the terms of the
Sequana Agreement, Sequana may require the Company to provide functional
analysis, assay development and screening for such targets, and Sequana would
then be obligated to make certain payments to the Company in the form of
non-refundable upfront fees, delivery payments and ongoing research funding.
Sequana will also be obligated to make certain milestone and royalty payments to
the Company if any pharmaceutical product is developed and commercialized as a
result of work performed by the Company pursuant to the agreement. Concurrent
with the execution of the agreement, Sequana purchased $1.5 million of the
Company's Series C preferred stock (Note 10).
In February 1997, the Company and Allelix Biopharmaceuticals, Inc.
("Allelix") entered into a collaborative agreement (the "Allelix Agreement")
regarding the development over a three-year period of screening assays for use
with targets identified by Allelix and agreed to by Aurora. Under the terms of
the Allelix Agreement, the Company is required to develop such screening assays
and to
F-16
<PAGE> 82
AURORA BIOSCIENCES CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
perform screening services, and Allelix is obligated to make certain payments to
the Company in the form of up-front fees, development payments and fees for
screening services. Allelix is also required to make certain milestone and
royalty payments to Aurora in the event of development and commercialization of
a compound identified using a screen based on Aurora's fluorescent assay
technologies.
Screening Services Agreements
The Company has entered into collaborative agreements with ArQule, Inc. and
Alanex Corporation to screen compounds provided by these companies. Should the
Company detect activity in one or more of the compounds, the Company and the
collaborative partner under certain conditions may enter into negotiations to
establish a research collaboration agreement.
Strategic Technology Alliances
The Company has entered into strategic technology alliances with Packard
Instrument Company ("Packard"), Carl Creative Systems, Inc. and Universal
Technologies, Inc. to design, develop and implement certain instrumentation,
storage and retrieval systems and microfluidics. The alliances require the
Company to make certain payments for development work performed by these
companies (Note 5).
Pursuant to the agreement with Packard, Aurora receives certain payments
for development work it performs and Packard receives certain sublicense rights.
In addition, Packard purchased $1 million of the Company's Series B preferred
stock in May 1996 in connection with the collaboration.
10. RELATED PARTY TRANSACTIONS
During the period from May 8, 1995 (inception) to December 31, 1995 and the
year ended December 31, 1996, one of the Company's founding stockholders and an
affiliated venture fund loaned the Company $475,000 and $449,997, respectively.
The notes were converted into 556,387 shares of Series A preferred stock in
March 1996.
The general partner of the venture funds which made these loans was the
Company's Chairman of the Board and Acting Chief Executive Officer at the time
of these transactions. This individual and stockholder continues to serve on the
Company's Board of Directors and is also the President, Chief Executive Officer
and member of the Board of Directors of Sequana, a company which is both a
stockholder of and a party to a collaboration agreement with Aurora (see Note
9).
11. SUBSEQUENT EVENTS
Stockholders' Equity
In February 1997, the Board of Directors also authorized management of the
Company to file a registration statement with the Securities and Exchange
Commission permitting the Company to sell shares of its common stock to the
public. If the initial public offering is consummated under the terms presently
anticipated, all of the preferred stock outstanding at December 31, 1996 will
automatically convert into 9,915,975 shares of common stock. Unaudited pro forma
stockholders' equity, as adjusted for the assumed conversion of the preferred
stock, is set forth on the accompanying balance sheet.
On April 25, 1997, the Company effected a four-for-five reverse split of
its outstanding common stock. All share and per share amounts, including those
relating to preferred stock, in the accompanying financial statements have been
retroactively restated to reflect the reverse stock split.
F-17
<PAGE> 83
AURORA BIOSCIENCES CORPORATION
[COMPANY LOGO]
SELECTED FEATURES OF AURORA'S INTEGRATED TECHNOLOGY PLATFORM
FLUORESCENT ASSAY TECHNOLOGIES
POTENTIAL BENEFITS
- Applicable to most targets
- Cell-based and biochemical assays
- Faster assay development
- Functional genomics in mammalian cells
- Miniaturized assays
GREEN FLUORESCENT PROTEIN (GFP)
COMPUTER MODEL OF THREE DIMENSIONAL STRUCTURE
[DEPICTED IS A COMPUTER MODEL OF THE THREE DIMENSIONAL STRUCTURE OF GFP]
BETA-LACTAMASE CELL-BASED ASSAY
GREEN TO BLUE CHANGE IDENTIFIES HIT COMPOUND
[DEPICTED ARE PHOTOGRAPHS OF CELLS UNDERGOING A GREEN TO BLUE COLOR
CHANGE]
MINIATURIZATION TECHNOLOGIES
- Photograph of drops, one billionth of a liter, being dispensed through
the eye of a needle (Right)
- Assays in volumes of one millionth of a liter, in each well of the 3,456
well NanoPlate(TM) (Far Right)
MICROFLUIDICS
NANOPLATE(TM) [DEPICTED IS A PHOTOGRAPH OF FLUID DROPLETS PASSING THROUGH
THE EYE OF A NEEDLE, AND A NANOPLATE(TM)]
ADVANCED AUTOMATION
- Automated store designed to hold in excess of 1,000,000 compounds
- Expected throughput in excess of 100,000 compounds per day
AUTOMATED STORAGE AND RETRIEVAL SYSTEM
[DEPICTED IS AURORA'S AUTOMATED STORAGE AND RETRIEVAL SYSTEM]
<PAGE> 84
======================================================
NO PERSON HAS BEEN AUTHORIZED IN CONNECTION WITH THE OFFERING MADE HEREBY TO
GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION REPRESENTATION MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY UNDERWRITER. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF ANY OFFER
TO BUY ANY OF THE SECURITIES OFFERED HEREBY TO ANY PERSON OR BY ANYONE IN ANY
JURISDICTION IN WHICH IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER
THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS
CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE HEREOF.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.................... 3
Risk Factors.......................... 6
Use of Proceeds....................... 16
Dividend Policy....................... 16
Capitalization........................ 17
Dilution.............................. 18
Selected Financial Data............... 19
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 20
Business.............................. 24
Management............................ 47
Certain Transactions.................. 55
Principal Stockholders................ 57
Description of Capital Stock.......... 58
Shares Eligible for Future Sale....... 60
Underwriting.......................... 62
Legal Matters......................... 63
Experts............................... 64
Additional Information................ 64
Index to Financial Statements......... F-1
</TABLE>
------------------------
UNTIL , 1997 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK OFFERED HEREBY, WHETHER OR
NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
======================================================
======================================================
3,000,000 SHARES
(AURORA LOGO)
COMMON STOCK
-------------------
PROSPECTUS
-------------------
ALEX. BROWN & SONS
INCORPORATED
HAMBRECHT & QUIST
ROBERTSON, STEPHENS & COMPANY
, 1997
======================================================
<PAGE> 85
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth all expenses payable by the Registrant in
connection with the sale of the Common Stock being registered. All the amounts
shown are estimates except for the SEC registration fee and the NASD filing fee.
<TABLE>
<S> <C>
SEC Registration fee............................................. $ 11,500
NASD filing fee.................................................. 4,300
Nasdaq Stock Market Listing Application fee...................... 50,000
Blue sky qualification fees and expenses......................... 10,000
Printing and engraving expenses.................................. 150,000
Legal fees and expenses.......................................... 250,000
Accounting fees and expenses..................................... 100,000
Transfer agent and registrar fees................................ 10,000
Miscellaneous.................................................... 14,200
--------
Total.................................................. $600,000
=========
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Under Section 145 of the Delaware General Corporation Law, the Registrant
has broad powers to indemnify its Directors and officers against liabilities
they may incur in such capacities, including liabilities under the Securities
Act.
The Registrant's Restated Certificate of Incorporation and Amended and
Restated Bylaws include provisions to (i) eliminate the personal liability of
its directors for monetary damages resulting from breaches of their fiduciary
duty to the extent permitted by Section 102(b)(7) of the General Corporation Law
of Delaware (the "Delaware Law") and (ii) require the Registrant to indemnify
its Directors and officers to the fullest extent permitted by Section 145 of the
Delaware Law, including circumstances in which indemnification is otherwise
discretionary. Pursuant to Section 145 of the Delaware Law, a corporation
generally has the power to indemnify its present and former directors, officers,
employees and agents against expenses incurred by them in connection with any
suit to which they are or are threatened to be made, a party by reason of their
serving in such positions so long as they acted in good faith and in a manner
they reasonably believed to be in or not opposed to, the best interests of the
corporation and with respect to any criminal action, they had no reasonable
cause to believe their conduct was unlawful. The Registrant believes that these
provisions are necessary to attract and retain qualified persons as Directors
and officers. These provisions do not eliminate the Directors' duty of care,
and, in appropriate circumstances, equitable remedies such as injunctive or
other forms of non-monetary relief will remain available under Delaware Law. In
addition, each Director will continue to be subject to liability for breach of
the Director's duty of loyalty to the Registrant, for acts or omissions not in
good faith or involving intentional misconduct, for knowing violations of law,
for acts or omissions that the Director believes to be contrary to the best
interests of the Registrant or its stockholders, for any transaction from which
the Director derived an improper personal benefit, for acts or omissions
involving a reckless disregard for the Director's duty to the Registrant or its
stockholders when the Director was aware or should have been aware of a risk of
serious injury to the Registrant or its stockholders, for acts or omissions that
constitute an unexcused pattern of inattention that amounts to an abdication of
the Director's duty to the Registrant or its stockholders, for improper
transactions between the Director and the Registrant and for improper
distributions to stockholders and loans to Directors and officers. The provision
also does not affect a Director's responsibilities under any other law, such as
the federal securities law or state or federal environmental laws.
II-1
<PAGE> 86
The Registrant has entered into indemnity agreements with each of its
Directors and executive officers that require the Registrant to indemnify such
persons against expenses, judgments, fines, settlements and other amounts
incurred (including expenses of a derivative action) in connection with any
proceeding, whether actual or threatened, to which any such person may be made a
party by reason of the fact that such person is or was a Director or an
executive officer of the Registrant or any of its affiliated enterprises,
provided that such person acted in good faith and in a manner such person
reasonably believed to be in or not opposed to the best interests of the
Registrant and, with respect to any criminal proceeding, had no reasonable cause
to believe his conduct was unlawful. The indemnification agreements also set
forth certain procedures that will apply in the event of a claim for
indemnification thereunder. The Registrant has entered into similar indemnity
agreements with certain of its key employees.
At present, there is no pending litigation or proceeding involving a
Director, officer or key employee of the Registrant as to which indemnification
is being sought nor is the Registrant aware of any threatened litigation that
may result in claims for indemnification by any officer or Director.
The Registrant has an insurance policy covering the officers and Directors
of the Registrant with respect to certain liabilities, including liabilities
arising under the Securities Act or otherwise.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
Since its inception in May 1995, the Registrant has sold and issued the
following unregistered securities:
(a) From May 1995 to March 1996, Avalon Medical Partners, L.P. ("AMP") and
Avalon Bioventures II L.P. ("ABV") loaned the Registrant an aggregate of
$425,000 and $500,000, respectively, pursuant to Convertible Promissory Notes
issued by the Registrant to AMP and ABV. Such Convertible Promissory Notes were
canceled, and the interest thereon forgiven, in connection with the sale and
issuance of shares of Series A Preferred Stock to AMP and ABV in March 1996. The
Registrant issued such Convertible Promissory Notes in reliance on the exemption
provided by Section 4(2) of the Act.
(b) In connection with its reincorporation in Delaware in January 1996, the
Registrant issued 100 shares of Common Stock to AMP. The Registrant issued such
shares in reliance on the exemption provided by Section 4(2) of the Act.
(c) Subsequent to its reincorporation in Delaware and on various dates
through February 28, 1997, the Registrant sold an aggregate of 2,744,535 shares
of its Common Stock to 56 directors, officers, employees and consultants
pursuant to restricted stock purchase agreements. The purchase price for such
sales ranged from $.00125 to $1.50 per share. The Registrant issued such shares
of Common Stock in reliance upon the exemption provided by Rule 701 under the
Act.
(d) Subsequent to its reincorporation in Delaware and on various dates
through February 28, 1997, the Registrant issued incentive and nonstatutory
stock options to purchase an aggregate of 452,920 shares of Common Stock to 55
directors, officers, employees and consultants. The exercise price for such
options ranges from $.0875 to $1.50 per share. The Registrant issued such
options in reliance upon the exemption provided by Rule 701 under the Act.
(e) On March 8, 1996, the Registrant sold 8,191,282 shares of Series A
Preferred Stock at a price of $1.6625 per share to certain investors. On April
2, 1996, the Registrant sold 600,000 shares of Series C Preferred Stock at a
price of $2.50 per share to Sequana Therapeutics, Inc. On May 6, 1996, the
Registrant sold 666,665 shares of Series B Preferred Stock at a price of $2.25
per share to certain investors. Upon the closing of this offering, the shares of
Series A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock
will automatically convert into 8,191,282, 600,000 and 666,665 shares of Common
Stock, respectively. The Registrant issued such shares of Preferred Stock in
reliance upon the exemption provided by Rule 506 promulgated under Regulation D
under the Act.
II-2
<PAGE> 87
(f) On August 13, 1996, the Registrant issued 28,000 shares of Common
Stock, valued at $3,500.00, to California Institute of Technology in connection
with the execution of a license agreement. The Registrant issued such shares of
Common Stock in reliance upon the exemption provided by Section 4(2) under the
Act.
(g) On December 20, 1996, the Registrant issued 160,000 shares of Common
Stock, valued at $60,000.00, to SIBIA Neurosciences, Inc. in connection with the
execution of a license agreement. The Registrant issued such shares of Common
Stock in reliance upon the exemption provided by Section 4(2) under the Act.
(h) On December 27, 1996, the Registrant sold 458,028 shares of Series D
Preferred Stock at a price of $4.50 per share to certain investors. Upon the
closing of this offering, the shares of Series D Preferred Stock will
automatically convert into 458,028 shares of Common Stock. The Registrant issued
such shares of Preferred Stock in reliance upon the exemption provided by Rule
506 promulgated under Regulation D under the Act.
The recipients of the above-described securities represented their
intention to acquire the securities for investment only and not with a view to
distribution thereof. Appropriate legends were affixed to the stock certificates
issued in such transactions. All recipients had adequate access, through
employment or other relationships, to information about the Registrant.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
------ -------------------------------------------------------------------------
<S> <C>
1.1+ Form of Underwriting Agreement.
3.1+ Restated Certificate of Incorporation.
3.2+ Amended and Restated Bylaws.
3.3+ Certificate of Amendment of Restated Certificate of Incorporation.
3.4+ Form of Restated Certificate of Incorporation, to be filed and become
effective upon completion of the offering.
3.5+ Form of Restated Bylaws to become effective upon completion of the
offering.
4.1 Reference is made to Exhibits 3.1, 3.2, 3.3, 3.4 and 3.5.
4.2+ Form of Common Stock Certificate.
4.3+ Amended and Restated Investors' Rights Agreement dated as of December 27,
1996 between the Registrant and the individuals and entities listed in
the signature pages thereto.
5.1+ Opinion of Cooley Godward LLP.
10.1+ Form of Indemnity Agreement entered into between Registrant and its
directors and officers.
10.2+ Registrant's 1996 Stock Plan, as amended and restated (the "1996 Stock
Plan").
10.3+ Form of Incentive Stock Option Agreement under the 1996 Stock Plan.
10.4+ Form of Nonstatutory Stock Option Agreement under the 1996 Stock Plan.
10.5+ Form of Restricted Stock Purchase Agreement under the 1996 Stock Plan.
10.6+ Registrant's Employee Stock Purchase Plan and related offering document.
10.7+ Registrant's Non-Employee Directors' Stock Option Plan.
10.8+ Form of Nonstatutory Stock Option under Registrant's Non-Employee
Directors' Stock Option Plan.
10.9+ Employment Agreement dated January 23, 1996 between the Registrant and
Timothy J. Rink, as subsequently amended on March 8, 1996.
10.10+ Employment Agreement dated August 6, 1996 between the Registrant and J.
Gordon Foulkes.
</TABLE>
II-3
<PAGE> 88
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
------ -------------------------------------------------------------------------
<S> <C>
10.11+ Preferred Stock Purchase Agreement dated as of March 8, 1996 between the
Registrant and the individuals and entities listed in the signature pages
thereto.
10.12+ Series D Preferred Stock Purchase Agreement dated as of December 27, 1996
between the Registrant and the individual and entities listed in the
signature pages thereto.
10.13+ SubLease dated May 29, 1996 between the Registrant and Torrey Pines
Science Center Limited Partnership, as subsequently amended on August 31,
1996.
10.14+ Master Lease Agreement dated May 17, 1996 between the Registrant and
Lease Management Services Incorporated.
10.15+ Equipment Financing Agreement dated May 17, 1996 between the Registrant
and Lease Management Services Incorporated.
10.16+ Security Deposit Pledge Agreement dated May 17, 1996 between the
Registrant and Lease Management Services Incorporated.
10.17* Exclusive License Agreement for Fluorescent Assay Technologies dated June
17, 1996 between the Registrant and The Regents of the University of
California.
10.18* License Agreement dated August 2, 1996 between the Registrant and
California Institute of Technology.
10.19* License Agreement dated October 4, 1996 between the Registrant and the
State of Oregon, acting by and through the State Board of Higher
Education on behalf of the University of Oregon.
10.20* Research Agreement dated April 2, 1996 between the Registrant and Sequana
Therapeutics, Inc.
10.21* Collaboration and License Agreement effective as of April 24, 1996
between the Registrant and Packard Instrument Company, Inc.
10.22* Collaborative Research and License Agreement dated November 26, 1996
between the Registrant and Bristol-Myers Squibb Pharmaceutical Research
Institute.
10.23* Collaborative Research and License Agreement dated December 18, 1996
between the Registrant and Eli Lilly and Company.
10.24* Collaboration Agreement effective as of February 1, 1997 between the
Registrant and Allelix Biopharmaceuticals Inc.
10.25+ Multi-Tenant Industrial Lease dated April 7, 1997 between the Registrant
and AEW/LBA Acquisition Co. II, LLC.
11.1+ Computation of Net Loss per Share.
23.1 Consent of Ernst & Young LLP, Independent Auditors.
23.2+ Consent of Cooley Godward LLP. Reference is made to Exhibit 5.1.
23.3+ Consent of Fish & Richardson P.C.
24.1+ Power of Attorney. Reference is made to page II-6.
</TABLE>
- ---------------
* Confidential Treatment has been requested with respect to certain portions of
this exhibit. Omitted portions have been filed separately with the Securities
and Exchange Commission.
+ Previously filed.
(b) SCHEDULES.
All schedules are omitted because they are not required, are not applicable
or the information is included in the consolidated financial statements or notes
thereto.
II-4
<PAGE> 89
ITEM 17. UNDERTAKINGS.
Insofar as indemnification for liabilities arising under the Act may be
permitted to directors, officers and controlling persons of the registrant
pursuant to provisions described in Item 15 or otherwise, the registrant has
been advised that in the opinion of the Commission such indemnification is
against public policy as expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities (other
than the payment by the registrant of expenses incurred or paid by a director,
officer or controlling person of the registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the registrant will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
The undersigned Registrant hereby undertakes:
(1) To provide to the Underwriters at the closing specified in the
Underwriting Agreement, certificates in such denominations and registered
in such names as required by the Underwriters to permit prompt delivery to
each purchaser.
(2) That, for purposes of determining any liability under the Act, the
information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form
of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Act shall be deemed to be part of this Registration
Statement as of the time it was declared effective.
(3) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-5
<PAGE> 90
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-1 and has duly caused this Amendment No. 2 to
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of San Diego, County of San Diego, State of
California, on the 28th day of May, 1997.
By: /s/ TIMOTHY J. RINK
------------------------------------
Timothy J. Rink
President and Chief Executive
Officer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 2 to Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------------------------------------------- ----------------------------- ----------------
<S> <C> <C>
/s/ TIMOTHY J. RINK Chairman of the Board, May 28, 1997
- --------------------------------------------- President and Chief Executive
Timothy J. Rink, M.A., M.D., Sc.D. Officer (Principal Executive
Officer)
* Senior Director of Finance May 28, 1997
- --------------------------------------------- and Administration
Deborah J. Tower (Principal Financial and
Accounting Officer)
* Director May 28, 1997
- ---------------------------------------------
J. Gordon Foulkes, Ph.D.
* Director May 28, 1997
- ---------------------------------------------
James C. Blair, Ph.D.
* Director May 28, 1997
- ---------------------------------------------
Kevin J. Kinsella
* Director May 28, 1997
- ---------------------------------------------
Hugh Y. Rienhoff, Jr., M.D.
* Director May 28, 1997
- ---------------------------------------------
Lubert Stryer
* Director May 28, 1997
- ---------------------------------------------
Timothy J. Wollaeger
* By: /s/ TIMOTHY J. RINK
- ---------------------------------------------
Timothy J. Rink, M.A., M.D., Sc.D.
Attorney-In-Fact
</TABLE>
II-6
<PAGE> 91
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT PAGE
- ------ --------------------------------------------------------------------------- ----
<C> <S> <C>
1.1+ Form of Underwriting Agreement. ...........................................
3.1+ Restated Certificate of Incorporation. ....................................
3.2+ Amended and Restated Bylaws. ..............................................
3.3+ Certificate of Amendment of Restated Certificate of Incorporation. ........
3.4+ Form of Restated Certificate of Incorporation, to be filed and become
effective upon completion of the offering. ................................
3.5+ Form of Restated Bylaws to become effective upon completion of the
offering. .................................................................
4.1 Reference is made to Exhibits 3.1, 3.2, 3.3, 3.4 and 3.5. .................
4.2+ Form of Common Stock Certificate. .........................................
4.3+ Amended and Restated Investors' Rights Agreement dated as of December 27,
1996 between the Registrant and the individuals and entities listed in the
signature pages thereto. ..................................................
5.1+ Opinion of Cooley Godward LLP. ............................................
10.1+ Form of Indemnity Agreement entered into between Registrant and its
directors and officers. ...................................................
10.2+ Registrant's 1996 Stock Plan, as amended and restated (the "1996 Stock
Plan"). ...................................................................
10.3+ Form of Incentive Stock Option Agreement under the 1996 Stock Plan. .......
10.4+ Form of Nonstatutory Stock Option Agreement under the 1996 Stock Plan. ....
10.5+ Form of Restricted Stock Purchase Agreement under the 1996 Stock Plan. ....
10.6+ Registrant's Employee Stock Purchase Plan and related offering
document. .................................................................
10.7+ Registrant's Non-Employee Directors' Stock Option Plan. ...................
10.8+ Form of Nonstatutory Stock Option under Registrant's Non-Employee
Directors' Stock Option Plan. .............................................
10.9+ Employment Agreement dated January 23, 1996 between the Registrant and
Timothy J. Rink, as subsequently amended on March 8, 1996. ................
10.10+ Employment Agreement dated August 6, 1996 between the Registrant and J.
Gordon Foulkes. ...........................................................
10.11+ Preferred Stock Purchase Agreement dated as of March 8, 1996 between the
Registrant and the individuals and entities listed in the signature pages
thereto. ..................................................................
10.12+ Series D Preferred Stock Purchase Agreement dated as of December 27, 1996
between the Registrant and the individual and entities listed in the
signature pages thereto. ..................................................
10.13+ SubLease dated May 29, 1996 between the Registrant and Torrey Pines Science
Center Limited Partnership, as subsequently amended on August 31, 1996. ...
10.14+ Master Lease Agreement dated May 17, 1996 between the Registrant and Lease
Management Services Incorporated. .........................................
10.15+ Equipment Financing Agreement dated May 17, 1996 between the Registrant and
Lease Management Services Incorporated. ...................................
10.16+ Security Deposit Pledge Agreement dated May 17, 1996 between the Registrant
and Lease Management Services Incorporated. ...............................
10.17* Exclusive License Agreement for Fluorescent Assay Technologies dated June
17, 1996 between the Registrant and The Regents of the University of
California. ...............................................................
</TABLE>
<PAGE> 92
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT PAGE
- ------ --------------------------------------------------------------------------- ----
<C> <S> <C>
10.18* License Agreement dated August 2, 1996 between the Registrant and
California Institute of Technology. .......................................
10.19* License Agreement dated October 4, 1996 between the Registrant and the
State of Oregon, acting by and through the State Board of Higher Education
on behalf of the University of Oregon. ....................................
10.20* Research Agreement dated April 2, 1996 between the Registrant and Sequana
Therapeutics, Inc. ........................................................
10.21* Collaboration and License Agreement effective as of April 24, 1996 between
the Registrant and Packard Instrument Company, Inc. .......................
10.22* Collaborative Research and License Agreement dated November 26, 1996
between the Registrant and Bristol-Myers Squibb Pharmaceutical Research
Institute. ................................................................
10.23* Collaborative Research and License Agreement dated December 18, 1996
between the Registrant and Eli Lilly and Company. .........................
10.24* Collaboration Agreement effective as of February 1, 1997 between the
Registrant and Allelix Biopharmaceuticals Inc. ............................
10.25+ Multi-Tenant Industrial Lease dated April 7, 1997 between the Registrant
and AEW/LBA Acquisition Co. II, LLC.
11.1+ Computation of Net Loss per Share. ........................................
23.1 Consent of Ernst & Young LLP, Independent Auditors. .......................
23.2+ Consent of Cooley Godward LLP. Reference is made to Exhibit 5.1. ..........
23.3+ Consent of Fish & Richardson P.C. .........................................
24.1+ Power of Attorney. Reference is made to page II-6. ........................
</TABLE>
- ---------------
* Confidential Treatment has been requested with respect to certain portions of
this exhibit. Omitted portions have been filed separately with the Securities
and Exchange Commission.
+ Previously filed.
<PAGE> 1
Certain confidential portions of this Exhibit were omitted by means of blackout
of the text (the "Mark"). This Exhibit has been filed separately with the
Secretary of the Commission without the Mark pursuant to the Company's
Application Requesting Confidential Treatment under Rule 406 under the
Securities Act.
EXHIBIT 10.17
Exclusive License Agreement
between
The Regents of the University of California
and
Aurora Biosciences, Corp.
for
Fluorescent Assay Technologies
U.C. Case Nos. 93-289, 95-110, 95-219, 96-044, 96-160, 96-161, 96-162, 96-191
<PAGE> 2
Table of Contents
<TABLE>
<CAPTION>
ARTICLE PAGE
------- ----
<S> <C>
1. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2. Grant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3. License Issue Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4. Royalties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
5. Due Diligence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
6. Progress and Royalty Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
7. Books and Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
8. Life of the Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
9. Termination by The Regents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
10. Termination by Licensee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
11. Supply of the Biological Materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
12. Maintenance of the Biological Materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
13. Disposition of the Biological Materials, Biological Products, . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
14. Use of Names and Trademarks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
15. Limited Warranty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
16. Patent Prosecution and Maintenance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
17. Patent Marking . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
18. Patent Infringement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
19. Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
20. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
21. Assignability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
22. Late Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
23. Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
24. Failure to Perform . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
25. Governing Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
26. Government Approval or Registration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
27. Export Control Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
28. Force Majeure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
29. Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
30. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
</TABLE>
<PAGE> 3
U.C. Case Nos. 93-289, 95-110, 95-219, 96-044, 96-160, 96-161, 96-162, and
96-191
Exclusive License Agreement
for
Fluorescent Assay Technologies
This license agreement ("Agreement") is effective this ______ day of
____________, 1996, (the Effective Date") by and between The Regents of the
University of California ("The Regents"), a California corporation, having its
statewide administrative offices at 300 Lakeside Drive, 22nd Floor, Oakland,
California 94612-3550 and Aurora Biosciences Corporation ("Licensee"), a
Delaware corporation, having a principal place of business at 11149 North
Torrey Pines Road, La Jolla, CA 92037.
Recitals
Whereas, certain inventions, generally characterized as fluorescent
assay technologies, including DNA encoding a green fluorescent protein and
fluorogenic substrates for Beta-lactamase ("Inventions"), useful for cell
screening, were made at the University of California, San Diego ("UCSD") by Dr.
Roger Tsien, et al., and are claimed in Patent Rights or within the Property
Rights as defined below;
Whereas, Licensee entered into secrecy agreements ("Secrecy
Agreements") with The Regents covering UC Case Nos. *** on August 10, 1994; ***
on January 1, 1995; *** on December 8 1995; and *** on February 22, 1996 for the
purpose of evaluating the Invention;
***CONFIDENTIAL TREATMENT REQUESTED
1
<PAGE> 4
Whereas, Licensee entered into an option agreement ("Option
Agreement") with The Regents on June 1, 1995 and ending on December 1, 1995 in
order to evaluate its commercial interest in the Invention;
Whereas, Licensee entered into a letter agreement with The Regents on
March 6, 1996 covering certain negotiated provisions that are contained in this
Agreement and a letter agreement with The Regents on April 26, 1996, with
respect to the Biological Materials ("Letter Agreements");
Whereas, the Invention was made under research funding provided in
part by the Department of Health and Human Services (DHHS) and in part by the
Howard Hughes Medical Institute (HHMI), and as a consequence, this Agreement is
subject to overriding obligations to the federal government and to HHMI;
Whereas, under 35 USC Section 200-212, The Regents may elect to retain
title to any invention (including the Invention) made by it under U.S.
Government funding;
Whereas, if The Regents elects to retain title to the Invention, then
the law requires that The Regents grant to the U.S. Government a
nontransferable, paid-up, nonexclusive, irrevocable license to use the
Invention by or on behalf of the U.S. Government throughout the world;
Whereas, The Regents elected to retain title to the Invention covered
by UC Case Nos. *** on November 19, 1993; *** on February 5, 1996; ***
on October 25, 1995; and *** and *** on January 8, 1996, and granted the
required licenses to the U.S. Government;
Whereas, The Regents has acquired the right to grant this license from
the Howard Hughes Medical Institute (HHMI) under the terms of the
interinstitutional agreement ("Interinstitutional Agreement"), having UC
Control No. 86-18-0017;
*** CONFIDENTIAL TREATMENT REQUESTED
2
<PAGE> 5
Whereas, The Regents is required under the terms of Interinstitutional
Agreement to grant to the HHMI a paid-up, non-exclusive, irrevocable license to
use the Invention for its non-commercial purposes, but with no right to
sublicense;
Whereas, the Licensee is a "small entity" as defined in 37 CFR Section
1.9 and a "small-business concern" defined in 15 U.S.C. Section 632;
Whereas, it is the intent of the parties to this Agreement to create a
bailment (as provided for in Sections 2.2, 2.3 and 2.4 herein), among other
things, for the Biological Materials as defined below subject to Licensee's
rights as set forth herein;
Whereas, both parties recognize that royalties due under this
Agreement will be paid on pending patent applications and issued patents;
Whereas, Licensee requested certain rights from The Regents to
commercialize the Invention; and
Whereas, The Regents responded to the request of Licensee by granting
the following rights to Licensee so that the products and other benefits
derived from the Invention can be enjoyed by the general public.
- - oo 0 oo - -
The parties agree as follows:
1. Definitions
As used in this Agreement, the following terms will have the meaning
set forth below:
3
<PAGE> 6
1.1 "Patent Rights" means all U.S. patents and patent applications
and foreign patents and patent applications assigned to The Regents, and in the
case of foreign patents and patent applications, those requested under Section
16.4 herein, including any reissues, extensions, substitutions, continuations,
divisions, and continuation-in-part applications (only to the extent, however,
1) that such continuation-in-part applications are covered in Section 1.1.9
below; or 2) that claims in the continuation-in-part applications are entitled
to the priority filing date of one or more of the following patent
applications listed in Sections 1.1.1 through 1.1.8 below) based on and
including any subject matter claimed in or covered by the following:
1.1.1. Pending U.S. Patent Application Serial No. ***,
entitled *** filed ***, by Dr. Roger Tsien, et al.
and assigned to The Regents ***;
1.1.2. Pending U.S. Patent Application Serial No. *** filed
***, by Dr. Roger Tsien, et al. and assigned to The
Regents ***;
1.1.3. Pending U.S. Patent Application Serial No. *** filed
***, by Dr. Roger Tsien, et al. and assigned to The
Regents ***.
1.1.4. Pending PCT Application Serial No. ***, filed *** by
Dr. Roger Tsien, et al. and assigned to The Regents
***;
1.1.5. Pending U.S. Patent Application Serial No. *** filed
***, by Dr. Roger Tsien, et al. and assigned to The
Regents ***;
1.1.6. Any U.S. Patent Application based on subject matter
described in UC Case Number ***
*** CONFIDENTIAL TREATMENT REQUESTED
4
<PAGE> 7
*** disclosed by Dr. Roger Tsien, et al. and assigned
to The Regents; and
1.1.7. Any U.S. Patent Application based on subject matter
described in *** disclosed by Dr. Roger Tsien, et al.
and assigned to The Regents; and
1.1.8. Any U.S. Patent Application based on subject matter
described in ***************************************
*********************************," disclosed by Dr.
Roger Tsien, et al. and assigned to The Regents.
1.1.9 Any continuation-in-part applications that are filed
by *** where such continuation-in-part applications
disclosed Inventions at UCSD and name Roger Tsien or
an employee of The Regents in Roger Tsien's laboratory
at UCSD as an inventor, and are based on one or more
of the patent applications described in Sections
1.1.1 through 1.1.8 immediately above.
1.2. "Biological Materials" means ***
1.3. "Biological Product" means any product containing: (a) a
plasmid, a protein structure, a cDNA clone, a promoter, a gene or a chimeric
gene, antibodies, or fragments thereof and their sequences derived from or
containing the Biological Materials; (b) any protein structure produced or
encoded by the Biological Materials; or (c) a compound (substantially similar
or identical to a compound in (a) or (b) above), produced by chemical synthesis
or by any other method which could not have been produced but for the use of
the Biological Materials. Biological Products may either be Patent Products or
Proprietary Products.
1.4. "Identified Product" means any product, compound, biological
agent, or other material not claimed by the Patent Rights and not comprising a
Biological Product,
***CONFIDENTIAL TREATMENT REQUESTED
5
<PAGE> 8
but identified by Licensee or a sublicensee using the Biological Materials or
Biological Products.
1.5. "Patent Products" means:
1.5.1. any kit, composition of matter, material, product, or
Biological Product;
1.5.2. any kit, composition of matter, material, product, or
Biological Product to be used in a manner requiring
the performance of the Patent Method; or
1.5.3. any kit, composition of matter, material, product, or
Biological Product produced by the Patent Method;
the extent that the manufacture, use, or sale of such kit, composition of
matter, material, product, or Biological Product, in a particular country,
would be covered by or infringe, but for the license granted to Licensee
pursuant to this Agreement, an unexpired claim of a patent or pending claim of
a patent application were it issued as a claim in a patent under Patent Rights
in that country in which such patent has issued or application is pending.
1.6. "Patent Method" means any process or method covered by the
claims of a patent application or patent within Patent Rights or the use or
practice of which would constitute in a particular country, but for the license
granted to Licensee pursuant to this Agreement, an infringement of an unexpired
claim of a patent or pending claim of a patent application were it issued as a
claim in a patent within Patent Rights in that country in which the Patent
Method is used or practiced.
1.7. "Proprietary Products" means any kit, composition of matter,
material, or product containing a Biological Product, the manufacture, use, or
sale of which in a particular country is not within an unexpired, valid claim
of a patent or a pending claim of a patent application under Patent Rights in
such country.
1.8. "Products" means Patent Products, Identified Product,
Proprietary Products, and Services.
6
<PAGE> 9
1.9. "Property Rights" means all personal proprietary rights of The
Regents covering the tangible personal property in the Biological Materials.
In no case, however, will Property Rights include Patent Rights.
1.10. "Research Reagent" means the *** . A Research Reagent may be a
Patent Product or a Proprietary Product.
1.11. "Net Sales" means the *** . Where Licensee distributes
Products to an Affiliate, a Joint Venture, or a sublicensee for end use by such
Affiliate, Joint Venture, or sublicensee, then such distribution will be
considered a sale at list price normally charged to independent third parties,
and The Regents will be entitled to collect a royalty on such sale in accordance
with Article 4. (Royalties).
1.12. "Services" means services provided by Licensee or its
sublicensees to its customers when such services require the use of the Patent
Rights or Property Rights.
1.13. "Service Revenues" means revenues paid to Licensee or its
sublicensees for Services.
***CONFIDENTIAL TREATMENT REQUESTED
7
<PAGE> 10
1.14. "Affiliate(s)" of Licensee means any entity which, directly or
indirectly, controls Licensee, is controlled by Licensee, or is under common
control with Licensee ("control" for these purposes being defined as the
actual, present capacity to elect a majority of the directors of such
affiliate, or if not, the capacity to elect the members that control forty
percent of the outstanding stock or other voting rights entitled to elect
directors) provided, however, that in any country where the local law will not
permit foreign equity participation of a majority, then an "Affiliate" will
include any company in which Licensee will own or control, directly or
indirectly, the maximum percentage of such outstanding stock or voting rights
permitted by local law. Each reference to Licensee herein will be meant to
include its Affiliates.
1.15. "Joint Venture" means any separate entity established pursuant
to an agreement between a third party and Licensee to constitute a vehicle for
a joint venture, in which the separate entity manufactures, uses, purchases,
sells, or acquires Products from Licensee. Each reference to Licensee herein
will be meant to include its Joint Venture(s).
2. Grant
2.1. Subject to the limitations set forth in this Agreement and
subject to the license granted to the U.S. Government and to HHMI as set forth
in the Recitals above, where Patent Rights exists, The Regents hereby grants to
the licensee an exclusive license under Patent Rights to (i) make, have made,
and use the Biological Materials and Biological Products; (ii) to make, have
made, use, import, offer for sale, and sell Patent Products; (iii) to practice
the Patent Methods; and (iv) to provide services to others.
2.2. Subject to the limitations set forth in this Agreement and
subject to the licenses granted to the U.S. Government and to HHMI as set forth
in the Recitals above, where The Regents may lawfully grant such a license, The
Regents hereby
8
<PAGE> 11
grants to Licensee ***.
2.3. Licensee acknowledges that title to the tangible material
comprising the Biological Materials is owned by The Regents and is not
transferred to Licensee under this Agreement, except that Licensee may transfer
title of such Biological Materials as are sold as Biological Products or
Research Reagents under the terms of this Agreement.
2.4. The licenses granted under Property Rights set forth in
Section 2.2 above expressly limit the rights granted to Licensee to those
licenses expressly stated in this Agreement and for no other purpose.
2.5. The licenses granted hereunder will be subject to the
overriding obligations to the U.S. Government including those set forth in 35
U.S.C. Section 200-212 and applicable governmental implementing regulations.
2.6. The manufacture of Products and the practice of the Patent
Method will be subject to applicable government importation laws and
regulations.
2.7. The Regents also grants to Licensee the right to issue
sublicenses under the rights granted in Sections 2.1 and 2.2 above to third
parties, provided Licensee retains current exclusive rights thereto under this
Agreement. To the extent applicable, such sublicenses will include all of the
rights of and obligations due to The Regents (and, if applicable, the United
States Government) that are contained in this Agreement including payment of
fees and royalties at the rates provided for in Section 3.2 and Article 4.
(Royalties).
2.8. Licensee will notify The Regents of each sublicense granted
hereunder and provide The Regents with a copy of each sublicense, which shall
be treated as
***CONFIDENTIAL TREATMENT REQUESTED
9
<PAGE> 12
Proprietary Information of Licensee as defined in Article 29.
(Confidentiality). Licensee will collect and pay all such fees and royalties
due The Regents from sublicensees as set forth in Sections 3.2 and 4.1 below
(and guarantee all such payments due from sublicensees). Licensee will require
sublicensees to provide it with progress and royalty reports in accordance with
the provisions herein, and Licensee will collect and deliver to The Regents all
such reports due from sublicensees.
2.9. Upon termination of this Agreement for any reason, all
sublicenses granted by Licensee in accordance with this Agreement will remain
subject to the terms of such sublicenses in effect, and shall be assigned to
and assumed by The Regents except that sublicenses which: (i) are in a state of
breach as yet uncured by the sublicensee; or (ii) sublicenses which conflict
with state, or federal law, or the previously established written policy of The
Regents, shall not be assigned to and assumed by The Regents. The Regents will
not be bound by any duties and obligations contained in the sublicenses that
extend beyond the duties and obligations assumed by The Regents in this
Agreement and shall have no right to receive any payment from such sublicensees
except the amounts due under this Agreement for the activities of such
sublicensees.
2.10. The Regents may, at its own discretion, disclose to Licensee
certain chemical and biological materials relating to the Patent Rights and
Property Rights that are developed in Dr. Roger Tsien's laboratory at UCSD.
The Regents hereby grants to Licensee the right to elect to include under this
Agreement any or all of such chemicals and biological materials.
2.11. In accordance with Section 2.10, Licensee will notify The
Regents in writing within 60 days of the disclosure by The Regents of any such
further chemicals and/or biological materials which Licensee elects to be
included under this Agreement, and such chemicals and biological materials
shall be Biological Materials for all purposes of this Agreement.
10
<PAGE> 13
2.12. Because this Agreement grants the exclusive right to use or
sell the Products in the United States, Licensee acknowledges that any
component of a Product which embodies a patented Invention or is produced
through the use thereof for sale in the United States will be manufactured
substantially in the United States to the extent required by 35 U.S.C. Section
204.
2.13. Nothing in this Agreement will be deemed to limit the right of
The Regents to publish any and all technical data resulting from any research
performed by The Regents relating to the Invention, Biological Materials,
Biological Products, and Patent Methods and to make and use the Invention,
Biological Materials, Biological Products, and Patent Methods, and associated
technology owned by The Regents solely for educational and research purposes.
3. License Issue Fee
3.1. As partial consideration for all the rights and licenses
granted to Licensee, Licensee will pay to The Regents a license issue fee of
***, payable according to the following schedule:
3.1.1. *** will be sent by Licensee to The Regents together
with two copies of this Agreement executed by
Licensee;
3.1.2. *** will be sent by Licensee to The Regents on or
before ***;
3.1.3. *** will be sent by Licensee to The Regents on or
before ***;
3.1.4. *** will be sent by Licensee to The Regents on or
before ***;
***CONFIDENTIAL TREATMENT REQUESTED
11
<PAGE> 14
3.1.5. *** will be sent by Licensee to The Regents on or
before ***;
3.1.6. *** will be sent by Licensee to The Regents on or
before ***;
3.1.7. *** will be sent by Licensee to The Regents on or
before ***; and
3.1.8. *** will be sent by Licensee to The Regents on or
before ***.
3.2. Licensee will also pay to The Regents fees equal to *** of
Service Revenues and *** of the Service Revenues *** received by Licensee from
each third party with which it enters into a corporate alliance for screening
services using Patent Rights and Property Rights. Notwithstanding the above,
Licensee shall have no obligation to pay to The Regents any amounts it receives
from a third party for the purchase of equity, research funding, debt financing,
reimbursement of patent filing, prosecution, and/or maintenance expenses or
other expenses.
3.3. ***
4. Royalties
4.1. As further consideration for all the rights and licenses
granted to Licensee, Licensee will also pay to The Regents an earned royalty
based on Net Sales according to the following:
4.1.1. (a) A royalty rate of *** of the Net Sales paid to
Licensee and its sublicensees with respect to each
Identified Product ***
***CONFIDENTIAL TREATMENT REQUESTED
12
<PAGE> 15
*** for each Identified Product, and a royalty rate of
*** of the Net Sales paid to Licensee and its
sublicensees of each Identified Product *** for each
such Identified Product.
(b) Notwithstanding Section 4.1.1(a) above, if
Licensee and a particular sublicensee are unable to
agree on a royalty *** of Identified Products by such
sublicensee *** and a royalty rate *** of Identified
Products for ***, then the royalty due to The Regents
*** will be equal to ***, if any, agreed to between
Licensee and such sublicensee *** of such Identified
Product by such sublicensee.
(c) In the event Licensee is unable to negotiate
with a particular sublicensee any royalty on the Net
Sales of Identified Products, then in such case
Licensee will not be entitled to take, in lieu of
royalties on Net Sales by such sublicensee of
Identified Products, consideration in any form for:
(i) equity in Licensee above fair market value; (ii)
research funding for screening to identify Identified
Products in excess of fully burdened direct and
indirect costs therefore; or (iii) reimbursement of
patent filing, prosecution, and maintenance expenses;
and
(d) For the avoidance of doubt, it is understood
and agreed that, except as provided in Section
4.1.1(a) and (b) above, The Regents shall not be
entitled to any royalty on Net Sales of Identified
Products, and if Section 4.1.1(c) applies to a
particular sublicense, the consideration received by
Licensee from such sublicensee will be in the form of
Service Revenues, and the only amounts due The
Regents under this Agreement with respect thereto
shall be the amounts set forth in Section 3.2, and
not a royalty based on the Net Sales of Identified
Products.
4.1.2. (a) A royalty rate *** by Licensee and its
sublicensees of Research Reagents and any other
Product that is not an Identified Product or Services.
Licensee will be entitled to reduce the royalty due
The Regents
***CONFIDENTIAL TREATMENT REQUESTED
13
<PAGE> 16
on the Net Sales of such Research Reagents and other
Products if Licensee must pay a royalty to The
Regents on Patent Rights and Property Rights and a
third party with respect to intellectual property
rights in which The Regents has no ownership
interest. In such event, if the combined royalties
due The Regents and the third party(s) ***, Licensee
may reduce the royalty due The Regents ***, provided,
however, that in no event will the royalty rate due
The Regents on the Research Reagent or such Product
be ***.
(b) For the avoidance of doubt, it is understood
and agreed that Licensee shall have no obligation to
sell or have sold any Research Reagents except those
listed on Appendix E hereto.
4.2. Licensee will not be entitled to apply the royalty reduction
specified in Section 4.1.2(a) of this section to royalties due The Regents
under Section 4.1.1 of this Article 4. (Royalties) or any other provisions of
this Agreement except the provisions set forth in Section 4.1.2(a).
4.3. Sections 1.1, 1.5, and 1.6 define Patent Rights, Patent
Products, and Patent Methods so that royalties will be payable on Patent
Products and Patent Methods covered by both pending patent applications and
issued patents. Earned royalties will accrue on Patent Products on a
Product-by-Product basis in each country for the duration of Patent Rights in
that country and will be payable to The Regents when Patent Products are
invoiced, or if not invoiced, when delivered to a third party or to itself, an
Affiliate, Joint Venture, or sublicensee in the case where such delivery of the
Patent Products to Licensee, an Affiliate, Joint Venture, or sublicensee is
intended for end use. If no Patent Rights exist in a country, earned royalties
will accrue on a Proprietary Product, on a Product-by-Product basis, until the
*** CONFIDENTIAL TREATMENT REQUESTED
14
<PAGE> 17
tenth anniversary of the first commercial sale of a particular Proprietary
Product in such country. Earned royalties will accrue on Identified Products,
on a Product-by-Product basis, until the tenth anniversary of the first
commercial sale of a particular Identified Product in such country.
4.4. Royalties accruing to The Regents will be paid to The Regents
***:
# ***
# ***
# ***
# ***
Each such payment will be for royalties which accrued ***.
4.5. Beginning ***, and in each succeeding calendar year after ***,
Licensee will pay *** and thereafter for the life of this Agreement. This ***
will be paid to The Regents by *** of each year and will be credited against the
earned royalty due and owing for the calendar year in which the minimum payment
was made.
4.6. All monies due The Regents will be payable in United States
funds collectible at par in San Francisco, California. When Products are sold
for monies other than United States dollars, the earned royalties will first be
determined in the foreign currency of the country in which such Products were
sold and then converted into equivalent United States funds. The exchange rate
will be that rate quoted in the Wall Street Journal on the last business day of
the reporting period.
4.7. *** Notwithstanding the foregoing, if the Regents
*** CONFIDENTIAL TREATMENT REQUESTED
15
<PAGE> 18
is required to pay taxes on its royalties under the laws of any country, then
Licensee will pay such amounts to the proper authorities, withhold such amounts
from royalties paid to The Regents, and provide The Regents with all documents
and assistance reasonably necessary to enable The Regents to recover all or
part of such amounts pursuant to any double taxation treaty or otherwise.
Licensee will also be responsible for all bank transfer charges.
4.8. Notwithstanding the provisions of Article 28. (Force Majeure),
if at any time legal restrictions prevent prompt remittance of part or all
royalties owed to The Regents by Licensee with respect to any country where a
Product is sold or distributed, Licensee will convert the amount owed to The
Regents into United States funds and will pay The Regents directly from another
source of funds for the amount impounded.
4.9. In the event that any patent or any claim thereof included
within the Patent Rights is held invalid or unenforceable in a final decision
by a court of competent jurisdiction and last resort and from which no appeal
has or can be taken, all obligation to pay royalties based on such patent or
claim or any claim patentably indistinct therefrom will cease as of the date of
such final decision. Licensee will not, however, be relieved from paying any
royalties that accrued before such decision or that are based on another patent
or claim that has not expired or that is not involved in such decision or that
are based on Property Rights.
4.10. No royalties will be collected or paid hereunder to The
Regents on Products sold to the account of the U.S. Government. Licensee and
its sublicensee will reduce the amount charged for Products distributed to the
United States Government by an amount equal to the royalty for such Products
otherwise due The Regents as provided herein.
4.11. ***
*** CONFIDENTIAL TREATMENT REQUESTED
16
<PAGE> 19
************************. No royalty shall be payable under Section 4.1 above
with respect to sales of Products among Licensee and its sublicensees where such
sales are not for end use by such Licensee or its sublicensees, nor shall a
royalty be payable under this Article 4. (Royalties) with respect to Products
distributed for use in research and/or development in clinical trials, or as
promotional samples.
5. Due Diligence
5.1. Licensee, upon execution of this Agreement, will diligently
proceed to develop and provide Services, and to develop, manufacture, and sell
Research Reagents and will earnestly and diligently market the same after
execution of this Agreement and in quantities sufficient to meet the market
demands therefor.
5.2. Licensee will be entitled to exercise prudent and reasonable
business judgment in the manner in which it meets its due diligence obligations
hereunder. In no case, however, will Licensee be relieved of its obligations
to meet the due diligence provisions of this Article 5. (Due Diligence).
5.3. Licensee will obtain all necessary governmental approvals in
each country in which Licensee elects to manufacture or commercialize Research
Reagents and provide Services.
5.4. If Licensee is unable to perform any of the following:
5.4.1. Obtain at least Ten Million Dollars ($10m) in funding
by August 31, 1996; and
5.4.2. Complete at least one Corporate Alliance with a
pharmaceutical or biotechnology company for Services
to identify Identified Products using patent Rights
and Property Rights before April 1, 1997; and
5.4.3. Fill the market demand for Services and Identified
Products that are marketed by licensee following
commencement of marketing at any time during the
exclusive period of this Agreement.
*** Confidential Treatment Requested
17
<PAGE> 20
then The Regents will have the right and option, subject to Section 5.7 below,
to terminate this Agreement or reduce the exclusive licenses granted to
Licensee to non-exclusive licenses in accordance with Section 5.6 hereof. The
exercise of this right and option by The Regents will supersede the rights
granted in Article 2 (Grant).
5.5. In addition to the provisions of Section 5.4 above, Licensee
shall also market each of the Research Reagents listed on Appendix E attached
hereto to nonprofit/academic institutions solely for their internal,
noncommercial research use either within: (i) two years following the Effective
Date of this Agreement; or (ii) six months following the publication of the
first paper describing the use of the Research Reagent, whichever is earlier.
This Section 5.5 may be satisified by Licensee or its sublicenseees.
5.6. If Licensee fails to market a particular Research Reagent in
accordance with Section 5.5 above, then The Regents will have the right and
option, subject to Section 5.7 below, to terminate all rights granted to
Licensee under this Agreement with respect to that particular Research Reagent.
This termination includes Licensee's right to use the particular Research
Reagent for its own internal use. The Regents will thereafter be free to
dispose of the particular Research Reagent as it wishes. The exercise of this
right and option by The Regents will supersede the rights granted in Article 2
(Grant).
5.7. To exercise either the right to terminate this Agreement in
whole or with respect to any portion of Patent Rights or Property Rights, or
reduce the exclusive licenses granted to Licensee to non-exclusive licenses for
lack of diligence required in this Article 5. (Due Diligence), The Regents will
give Licensee written notice of the deficiency stating its intent to terminate
this Agreement in whole or with respect to any portion of Patent Rights or
Property Rights, or to reduce the licenses to non-exclusive licenses. Licensee
thereafter shall have 60 days to cure the deficiency. If The Regents
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<PAGE> 21
has not received written tangible evidence satisfactory to The Regents that the
deficiency has been cured by the end of the 60-day period, then The Regents
may, at its option, terminate this Agreement in whole or with respect to any
portion of Patent Rights or Property Rights, or reduce the exclusive licenses
granted to Licensee to non-exclusive licenses by giving written notice to
Licensee. These notices will be subject to Article 20. (Notices).
6. Progress and Royalty Reports
6.1. Beginning August 31, 1996, and semi-annually thereafter,
Licensee will submit to The Regents a progress report covering activities by
Licensee and its sublicensees related to the development and testing of all
their Products and the obtaining of the governmental approvals necessary for
marketing them, but Licensee will not be required to report on Products for
which a royalty is not due The Regents. These progress reports will be
provided to The Regents to cover the progress of the research and development
of the Products until the first commercial sale of Products in the United
States.
6.2. The progress reports submitted under Section 6.1 will include,
but not be limited to, the following topics so that The Regents may be able to
determine the progress of the development of Products on which a royalty is due
The Regents and may also be able to determine whether or not Licensee has met
its diligence obligations set forth in Article 5. (Due Diligence) above:
# summary of work in progress in anticipation of providing
Services and Research Reagents
# summary of work completed in anticipation of providing
Services and Research Reagents
# summary of Services completed
# current schedule of anticipated events or milestones
specified in Section 5.4 and 5.5
19
<PAGE> 22
# anticipated market introduction date of Products on which
a royalty is due The Regents
# sublicenses granted, if any
6.3. Licensee also will report to The Regents in its immediately
subsequent progress and royalty report the date of first commercial sale of
each Product for which a royalty is due to The Regents in each country.
6.4. After the first commercial sale of a Product on which a
royalty is due The Regents, Licensee will provide The Regents with quarterly
royalty reports to The Regents on or before each February 28, May 31, August
31, and November 30 of each year. Each such royalty report will cover the most
recently completed calendar quarter of Licensee (October through December,
January through March, April through June, and July through September) and will
show:
6.4.1. the gross sales and Net Sales of such Products sold
by Licensee and reported to Licensee as sold by its
sublicensees during the most recently completed
calendar quarter;
6.4.2. the number of such Products sold or distributed by
Licensee and reported to Licensee as sold or
distributed by its sublicensees;
6.4.3. the royalties, in U.S. dollars, payable hereunder
with respect to Net Sales; and
6.4.4. the exchange rates used, if any.
6.5. If no sales of Products for which a royalty is due to The
Regents have been made during any reporting period after the first commercial
sale of such Product, then a statement to this effect is required.
7. Books and Records
7.1. Licensee will keep books and records accurately showing all
Products manufactured, used, and/or sold with respect to which Licensee owes
royalties to The Regents under the terms of this Agreement. Such books and
records will be preserved
20
<PAGE> 23
for at least five years after the date of the royalty payment to which they
pertain and will be open to inspection by representatives or agents of The
Regents during normal business hours at agreed upon times to determine the
accuracy of the books and records and to determine compliance by Licensee with
the terms of this Agreement. Such independent certified public accountant
shall be bound to hold all information in confidence except as necessary to
communicate Licensee's non-compliance with this Agreement to The Regents. The
only purpose of any inspection and audit pursuant to this Paragraph 7.1 shall
be to verify Licensee's royalty statement or payment under this Agreement and
to determine Licensee's compliance with the other provisions thereunder.
7.2. The fees and expenses of representatives of The Regents
performing such an examination will be borne by The Regents. However, if an
error in royalties of *** of the total royalties due for any year is
discovered, then the fees and expenses of these representatives will be borne
by Licensee.
8. Life of the Agreement
8.1. Unless otherwise terminated by operation of law or by acts of
the parties in accordance with the terms of this Agreement, this Agreement will
be in force from the Effective Date and will remain in effect for the life of
the last-to-expire patent licensed under this Agreement, or until the last
patent application licensed under this Agreement is abandoned, or in the event
no patent issues, for a period of fifteen (15) years from market introduction
for the last to be introduced Proprietary Product in the United States.
8.2. In the event this Agreement remains in effect for the entire
term specified in Paragraph 8.1 above, and is not otherwise terminated under
the provisions of Articles 5. (Due Diligence), 9. (Termination by The Regents),
or 10. (Termination by Licensee), Licensee is hereby granted an option for
renewal of this Agreement for a period of twenty (20) years from the date of
its termination. Said option for renewal shall be
*** CONFIDENTIAL TREATMENT REQUESTED
21
<PAGE> 24
automatically exercised provided that the Licensee has not notified The Regents
to the contrary prior to the option renewal date. The renewal licenses will be
for the same terms and conditions as set forth in this Agreement, except that
***.
8.3. Any termination of this Agreement will not affect the rights
and obligations set forth in the following Articles:
Article 7 Books and Records
Article 13 Disposition of Products on Hand Upon Termination
Article 14 Use of Names and Trademarks
Article 19 Indemnification
Article 22 Late Payments
Article 24 Failure to Perform
Article 29 Confidentiality
8.4. Termination of this Agreement for any reason shall not release
any party hereto from any liability which, at the time of such termination, has
already accrued to the other party or which is attributable to a period prior
to such termination, or preclude either party from pursuing any rights and
remedies it may have hereunder or at law or in equity which accrued or are
based upon any event occurring prior to such termination.
9. Termination by The Regents
9.1. If Licensee should violate or fail to perform any term or
covenant of this Agreement, then The Regents may give written notice of such
default ("Notice of Default") to Licensee. If Licensee should fail to repair
such default within 60 days after the date of such notice takes effect, The
Regents will have the right to terminate this Agreement and the licenses herein
by a second written notice ("Notice of Termination") to Licensee. If a Notice
of Termination is sent to Licensee, this Agreement will
*** CONFIDENTIAL TREATMENT REQUESTED
22
<PAGE> 25
automatically terminate on the date such notice takes effect. Such termination
will not relieve Licensee of its obligation to pay any royalty or license fees
owing at the time of such termination and will not impair any accrued right of
The Regents. These notices will be subject to Article 20. (Notices).
10. Termination by Licensee
10.1. Licensee will have the right at any time to terminate this
Agreement in whole or as to any portion of Patent Rights or Property Rights by
giving notice in writing to The Regents. Such Notice of Termination will be
subject to Article 20. (Notices) and termination of this Agreement in whole or
with respect to any portion of the Patent Rights or Property Rights will be
effective 60 days after the effective date thereof.
10.2. Any termination pursuant to the above paragraph will not
relieve Licensee of any obligation or liability accrued hereunder prior to such
termination or rescind anything done by Licensee or any payments made to The
Regents hereunder prior to the time such termination becomes effective, and
such termination will not affect in any manner any rights of The Regents
arising under this Agreement prior to such termination.
11. Supply of the Biological Materials
and Biological Products
11.1. The Regents will initially supply Licensee with viable samples
of the Biological Materials set forth in Appendix D within thirty (30) days of
the Effective Date or as soon as reasonably practicable, and additional
Biological Materials elected by Licensee pursuant to Section 2.11 promptly
after Licensee's notice to The Regents pursuant to such Section. To the extent
Licensee requires and requests additional samples from The Regents during the
term hereof (due to failure of the initial supply of Biological Material(s)),
and The Regents has such additional samples in its possession,
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<PAGE> 26
The Regents agrees to supply such additional samples. Licensee will pay the
actual handling and shipping costs for any additional samples provided.
12. Maintenance of the Biological Materials
12.1. The Regents shall instruct Dr. Roger Tsien that if The Regents
circulates any of the Biological Materials to third parties for noncommercial
research purposes, it shall only do so under the terms and conditions set forth
in the biological material transmission letter attached hereto as Appendix A.
The Regents expressly reserves the right to transfer the Biological Materials
to non-profit entities strictly for noncommercial research purposes in the
manner set forth above. The Regents agrees that it will not otherwise transfer
the Biological Materials. The Licensee acknowledges that The Regents' right to
so transfer the Biological Materials could lead to the inadvertent loss or
diminution of the proprietary commercial value of the Biological Materials.
13. Disposition of the Biological Materials, Biological Products,
and Products on Hand Upon Termination
13.1. Upon termination of this Agreement prior to the expiration of
its full term, the Licensee shall have the privilege of disposing all
previously made or partially made Products, but no more, for a period of one
hundred and twenty (120) days following the effective date of termination,
provided, however, that the sale of such Products shall be subject to the terms
of this Agreement including, but not limited to, the payment of royalties at
the rate and at the time provided herein and the rendering of reports in
connection therewith.
13.2. Upon termination of this Agreement for any reason, Licensee,
at its sole discretion, shall destroy or transfer to The Regents any Biological
Materials in its possession within thirty (30) days following the effective
date of termination. Licensee
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<PAGE> 27
shall provide The Regents within sixty (60) days following said termination
date with written notice that the Biological Materials have been destroyed.
14. Use of Names and Trademarks
14.1. Nothing contained in this Agreement will be construed as
conferring any right to use in advertising, publicity, or other promotional
activities any name, trade name, trademark, or other designation of either
party hereto by the other (including contraction, abbreviation or simulation of
any of the foregoing). Unless required by law, the use by Licensee of the name
"The Regents of the University of California" or the name of any campus of the
University of California for use in advertising, publicity, or other
promotional activities is expressly prohibited.
14.2. It is understood that The Regents will be free to release to
the inventors, HHMI, and senior administrative officials employed by The
Regents the terms of this Agreement upon their request. If such release is
made, The Regents will request that such terms will be kept in confidence in
accordance with the provisions of Article 29. (Confidentiality) and not be
disclosed to others. It is further understood that should a third party
inquire whether a license to Patent Rights is available, The Regents may
disclose the existence of this Agreement and the extent of the grant in Article
2. (Grant) to such third party, but will not disclose the name of Licensee,
except where The Regents is required to release such information under either
the California Public Records Act or other applicable law.
15. Limited Warranty
15.1. The Regents warrants to Licensee that it has the lawful right
to grant these licenses and bailment.
15.2. This license and the associated Invention, Biological
Materials, Products, and Patent Method are provided WITHOUT WARRANTY OF
MERCHANTABILITY OR
25
<PAGE> 28
FITNESS FOR A PARTICULAR PURPOSE OR ANY OTHER WARRANTY, EXPRESS OR IMPLIED.
THE REGENTS MAKES NO REPRESENTATION OR WARRANTY THAT THE INVENTION, BIOLOGICAL
MATERIALS, PRODUCTS, OR PATENT METHOD WILL NOT INFRINGE ANY PATENT OR OTHER
PROPRIETARY RIGHT.
15.3. IN NO EVENT WILL THE REGENTS BE LIABLE FOR ANY INCIDENTAL,
SPECIAL, OR CONSEQUENTIAL DAMAGES RESULTING FROM EXERCISE OF THIS LICENSE OR
THE USE OF THE INVENTION, BIOLOGICAL MATERIALS, PRODUCTS, OR PATENT METHOD.
15.4. Nothing in this Agreement will be construed as:
15.4.1. a warranty or representation by The Regents as to the
validity, enforceability, or scope of any Patent
Rights or Property Rights; or
15.4.2. a warranty or representation that anything made,
used, sold, or otherwise disposed of under any
license granted in this Agreement is or will be
free from infringement of patents of third parties;
or
15.4.3. an obligation to bring or prosecute actions or suits
against third parties for patent infringement
except as provided in Article 18. (Patent
Infringement); or
15.4.4. conferring by implication, estoppel, or otherwise any
license or rights under any patents of The Regents
other than Patent Rights as defined herein,
regardless of whether such patents are dominant or
subordinate to Patent Rights; or
15.4.5. an obligation to furnish any know-how not provided in
Patent Rights and Property Rights.
16. Patent Prosecution and Maintenance
16.1. The Regents will diligently prosecute and maintain the United
States and foreign patents comprising Patent Rights using counsel of its
choice. The Regents will promptly provide Licensee with copies of all relevant
documentation so that Licensee
26
<PAGE> 29
may be currently and promptly informed and apprised of the continuing
prosecution, and may comment upon such documentation sufficiently in advance of
any initial deadline for filing a response, provided, however, that if Licensee
has not commented upon such documentation prior to the initial deadline for
filing a response with the relevant government patent office or The Regents
must act to preserve Patent Rights, The Regents will be free to respond
appropriately without consideration of comments by Licensee, if any. Both
parties hereto will keep this documentation in confidence in accordance with
the provisions of Article 29. (Confidentiality) herein. Counsel for The
Regents will take instructions only from The Regents.
16.2. The Regents will use all reasonable efforts to amend any
patent application to include claims requested by Licensee and required to
protect the Products contemplated to be sold or Patent Method to be practiced
under this Agreement.
16.3. The Regents and Licensee will cooperate in applying for an
extension of the term of any patent included within Patent Rights, if
appropriate, under the Drug Price Competition and Patent Term Restoration Act
of 1984. Licensee will prepare all such documents, and The Regents will
execute such documents and will take such additional action as Licensee may
reasonably request in connection therewith.
16.4. The Regents will, at the request of Licensee, file, prosecute,
and maintain patent applications and patents covered by Patent Rights in
foreign countries if available. Licensee must notify The Regents within seven
months of the filing of the corresponding United States application of its
decision to request The Regents to file foreign counterpart patent
applications. This notice concerning foreign filing must be in writing and must
identify the countries desired. The absence of such a notice from Licensee to
The
27
<PAGE> 30
Regents within the seven-month period will be considered an election by
Licensee not to request The Regents to secure foreign patent rights on behalf
of Licensee; provided, however, that the absence of such notice from Licensee
to The Regents within the seven-month period with respect to United States
applications filed within eight months prior to the Effective Date of this
Agreement will not be considered an election by licensee not to request The
Regents not to secure foreign patent rights. In such event, Licensee must
notify The Regents of its decision to request The Regents to file foreign
counterpart patent applications within ninety (90) days of the conventional
filing date of such applications. The Regents will have the right to file
patent applications at its own expense in any country Licensee has not included
in its list of desired countries, and such applications and resultant patents,
if any, will not be included in the licenses granted under this Agreement.
16.5. All past, present and future costs of preparing, filing,
prosecuting and maintaining all United States and foreign patent applications
and all costs and fees relating to the preparation and filing of patents
covered by Patent Rights in Section 1.1 will be borne by Licensee. This
includes patent preparation and prosecution costs for this Invention incurred
by The Regents prior to the execution of this Agreement. Such costs will be
due upon execution of this Agreement and will be payable at the time that the
license issue fee is payable. The costs of all interferences and oppositions
will be considered prosecution expenses and also will be borne by Licensee.
Licensee will reimburse The Regents for all costs and charges within 30 days
following receipt of an itemized invoice from The Regents for same.
16.6. The obligation of Licensee to underwrite and to pay patent
preparation, filing, prosecution, maintenance, and related costs will continue
for costs incurred until three months after receipt by either party of a Notice
of Termination with respect to a particular patent application or patent within
the Patent Rights provided, however, that The Regents provides Licensee with
written notification, at least three months prior to the effective date of the
termination, that such costs are anticipated. Licensee will reimburse The
Regents for all patent costs incurred during the term of the Agreement and for
three months thereafter whether or not invoices for such costs are received
during the three-month period after receipt of a Notice of Termination.
Licensee may
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with respect to any particular patent application or patent terminate its
obligations with the patent application or patent in any or all designated
countries upon three months written notice to The Regents. The Regents may
continue prosecution and/or maintenance of such application(s) or patent(s) at
its sole discretion and expense, provided, however, that Licensee will have no
further right or licenses thereunder.
16.7. Licensee will notify The Regents of any change of its status
as a small entity (as defined by the United States Patent and Trademark Office)
and of the first sublicense granted to an entity that does not qualify as a
small entity as defined therein.
16.8. The Regents acknowledges that Licensee will be conducting
independent research and development activities with respect to the Biological
Materials, Biological Products, and/or the Patent Rights, and recognizes that
such independent research and development may result in patentable inventions
and other intellectual property owned by Licensee. The Regents hereby consents
to the filing of any patent applications, even if any Biological Materials or
Biological Products are within the scope of one or more claims of any such
patent application.
17. Patent Marking
17.1. Licensee will mark all Products made, used, or sold under the
terms of this Agreement, or their containers, in accordance with the applicable
patent marking laws.
18. Patent Infringement
18.1. In the event that Licensee, or The Regents' licensing
associate responsible for administering this Agreement, or Resident Counsel of
the Regents' Office of Technology Transfer learns of the substantial
infringement of any patent licensed under this Agreement, to the extent
contractually able to, it will call the attention to the other party hereto in
writing and will provide reasonable evidence of
29
<PAGE> 32
such infringement. Both parties to this Agreement acknowledge that during the
period and in a jurisdiction where Licensee has exclusive rights under this
Agreement, neither will notify a third party of the infringement of any of
Patent Rights without first obtaining consent of the other party, which consent
will not be unreasonably withheld. Both parties will use their best efforts in
cooperation with each other to terminate such infringement without litigation.
18.2. Licensee may request that The Regents take legal action
against the infringement of Patent Rights. Such request must be made in
writing and must include reasonable evidence of such infringement and damages
to Licensee. If the infringing activity has not been abated within 90 days
following the effective date of such request, The Regents will have the right
to elect to:
18.2.1. commence suit on its own account; or
18.2.2. refuse to participate in such suit.
18.3. The Regents will give notice of its election in writing to
Licensee by the end of the 100th day after receiving notice of such request
from Licensee. Licensee may thereafter bring suit for patent infringement if
and only if The Regents elects not to commence suit and if the infringement
occurred during the period and in a jurisdiction where Licensee had exclusive
rights under this Agreement. However, in the event Licensee elects to bring
suit in accordance with this paragraph, The Regents may thereafter join such
suit at its own expense.
18.4. Such legal action as is decided upon will be at the expense of
the party on account of whom suit is brought and all recoveries recovered
thereby will belong to such party, provided, however, that legal action brought
jointly by The Regents and Licensee and participated in by both will be at the
joint expense of the parties and all recoveries will be allocated in the
following order: ***
*** CONFIDENTIAL TREATMENT REQUESTED
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***
18.5. Each party will cooperate with the other in litigation
proceedings instituted hereunder but at the expense of the party on account of
whom suit is brought. Such litigation will be controlled by the party bringing
the suit, except that The Regents may be represented by counsel of its choice
in any suit brought by Licensee.
19. Indemnification
19.1. Licensee will (and require its sublicensees to) indemnify,
hold harmless, and defend The Regents and HHMI, their officers, employees, and
agents; the sponsors of the research that led to the Invention; the inventors
of any invention covered by patents or patent applications in Patent Rights
(including the Products and Patent Method contemplated thereunder) and their
employers against any and all claims, suits, losses, damage, costs, fees, and
expenses resulting from or arising out of exercise of this license or any
sublicense. This indemnification will include, but will not be limited to, any
product liability.
19.2. Licensee, at its sole cost and expense, will insure its
activities in connection with the work under this Agreement and obtain, keep in
force, and maintain insurance as follows: (or an equivalent program of self
insurance)
Comprehensive or Commercial Form General Liability Insurance
(contractual liability included) with limits as follows:
# Each Occurrence $1,000,000
# Products/Completed Operations Aggregate $1,000,000
*** CONFIDENTIAL TREATMENT REQUESTED
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# Personal and Advertising Injury $1,000,000
# General Aggregate (commercial form only) $1,000,000
19.3. As of and following the date of commencement of any clinical
trial with respect to a Product marketed by Licensee, Licensee shall increase
insurance coverage under Section 19.2 immediately above from $1,000,000 to an
aggregate of $3,000,000. As of and following the date of commencement of any
sales of such Products, Licensee shall increase insurance coverage under
Section 19.2 to an aggregate of $5,000,000. It should be expressly understood,
however, that the coverages and limits referred to under the above will not in
any way limit the liability of Licensee. Licensee will furnish The Regents
with certificates of insurance evidencing compliance with all requirements.
Such certificates will:
19.3.1. Provide for 30 day advance written notice to The
Regents of any modification;
19.3.2. Indicate that The Regents has been endorsed as an
additional Insured under the coverages referred
to under the above; and
19.3.3. Include a provision that the coverages will be
primary and will not participate with nor will be
excess over any valid and collectable insurance
or program of self-insurance carried or
maintained by The Regents.
19.4. The Regents will promptly notify Licensee in writing of any
claim or suit brought against The Regents in respect of which The Regents
intends to invoke the provisions of this Article 19. (Indemnification).
Licensee will keep The Regents informed on a current basis of its defense of
any claims pursuant to this Article 19. (Indemnification). It is understood
that Licensee shall have the right to control the defense and settlement of any
such claim or suit, except Licensee shall not enter into any settlement which
(i) makes any admission of wrongdoing on the part of The Regents, or (ii)
admits that any of the Patent Rights of The Regents are invalid, unenforceable,
or not infringed without prior written consent of The Regents.
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20. Notices
20.1. Any notice or payment required to be given to either party
will be deemed to have been properly given and to be effective (a) on the date
of delivery if delivered in person or (b) five days after mailing if mailed by
first-class certified mail, postage paid, to the respective addresses given
below, or to another address as it may designate by written notice given to the
other party.
In the case of Licensee: AURORA BIOSCIENCES, CORP.
11149 North Torrey Pines Road
La Jolla, CA 92037
Attention: President
(619) 452-5000
In the case of The Regents: THE REGENTS OF THE UNIVERSITY
OF CALIFORNIA
1320 Harbor Bay Parkway, Suite 150
Alameda, California 94502
Tel: (510) 748-6600
Fax: (510) 748-6639
Attention: Executive Director;
Research Administration
and Office of Technology
Transfer
Referring to: U.C. Case Nos. 93-289,
95-110, 95-219, 96-044, 96-160, 96-161,
96-162, and 96-191
21. Assignability
21.1. This Agreement is binding upon and will inure to the benefit
of The Regents, its successors and assigns, but shall be personal to Licensee
and assignable by Licensee only with the written consent of The Regents, which
consent shall not be unreasonably withheld; provided, however, Licensee may
assign this Agreement to an Affiliate or Joint Venture or in connection with
the sale or transfer of substantially all the
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assets of Licensee relating to the subject matter of this Agreement, without
written consent of The Regents.
22. Late Payments
22.1. In the event royalty payments or fees or patent prosecution
costs are not received by The Regents when due, Licensee will pay to The
Regents interest charges at a rate of ten percent (10%) simple interest per
annum. Such interest will be calculated from the date payment was due until
actually received by The Regents. Acceptance by The Regents of any late
payment interest from Licensee under this Section 22.1 will in no way affect
the provision of Article 23. (Waiver) herein.
23. Waiver
23.1. It is agreed that no waiver by either party hereto of any
breach or default of any of the covenants or agreements herein set forth will
be deemed a waiver as to any subsequent and/or similar breach or default.
24. Failure to Perform
24.1. In the event of a failure of performance due under the terms
of this Agreement and if it becomes necessary for either party to undertake
legal action against the other on account thereof, then the prevailing party
will be entitled to reasonable attorney's fees in addition to costs and
necessary disbursements.
25. Governing Laws
25.1. THIS AGREEMENT WILL BE INTERPRETED AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF CALIFORNIA, excluding any choice of law rules
that would direct the application of the laws of another jurisdiction,
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<PAGE> 37
but the scope and validity of any patent or patent application will be governed
by the applicable laws of the country of such patent or patent application.
26. Government Approval or Registration
26.1. If this Agreement or any associated transaction is required by
the law of any nation to be either approved or registered with any governmental
agency, Licensee will assume all legal obligations to do so. Licensee will
notify The Regents if it becomes aware that this Agreement is subject to a
United States or foreign government reporting or approval requirement.
Licensee will make all necessary filings and pay all costs including fees,
penalties, and all other out-of-pocket costs associated with such reporting or
approval process.
27. Export Control Laws
27.1. Licensee will observe all applicable United States and foreign
laws with respect to the transfer of Products and related technical data to
foreign countries, including, without limitation, the International Traffic in
Arms Regulations (ITAR) and the Export Administration Regulations.
28. Force Majeure
28.1. The parties to this Agreement will be excused from any
performance required hereunder if such performance is rendered impossible or
unfeasible due to any acts of God, catastrophes, or other major events beyond
their reasonable control, including, without limitation, war, riot, and
insurrection; laws, proclamations, edicts, ordinances, or regulations; strikes,
lock-outs, or other serious labor disputes; and floods, fires, explosions, or
other natural disasters. However, any party to this Agreement will have the
right to terminate this Agreement upon 30 days' prior written notice if either
party is unable to fulfill its obligations under this Agreement due to any of
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<PAGE> 38
the causes mentioned above and such inability continues for a period of one
year. Notices will be subject to Article 20. (Notices). When such events
have abated, the parties' respective obligations hereunder shall resume.
29. Confidentiality
29.1. Licensee and The Regents respectively will treat and maintain
the proprietary business, patent prosecution, software, engineering drawings,
process and technical information, and other proprietary information
("Proprietary Information") of the other party in confidence using at least the
same degree of care as that party uses to protect its own proprietary
information of a like nature for a period from the date of disclosure until
five years after the date of termination of this Agreement. This
confidentiality obligation will apply to the information defined as "Data"
under the Secrecy Agreement, and such Data will be treated as Proprietary
Information hereunder.
29.2. All Proprietary Information will be labeled or marked
confidential or as otherwise similarly appropriate by the disclosing party, or
if the Proprietary Information is orally disclosed, it will be reduced to
writing or some other physically tangible form, marked and labeled as set forth
above by the disclosing party, and delivered to the receiving party within 30
days after the oral disclosure as a record of the disclosure and the
confidential nature thereof. Notwithstanding the foregoing, Licensee and The
Regents may use and disclose Proprietary Information to its employees, agents,
consultants, contractors, and, in the case of Licensee, its sublicensees,
provided that any such parties are bound by a like duty of confidentiality.
29.3. Nothing contained herein will in any way restrict or impair
the right of Licensee or The Regents to use, disclose, or otherwise deal with
any Proprietary Information:
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<PAGE> 39
29.3.1. that recipient can demonstrate by written records was
previously known to it;
29.3.2. that is now, or becomes in the future, public
knowledge other than through acts or omissions of
recipient;
29.3.3. that is lawfully obtained without restrictions by
recipient from sources independent of the disclosing
party;
29.3.4. that is required to be disclosed to a governmental
entity or agency in connection with seeking any
governmental or regulatory approval, or pursuant
to the lawful requirement or request of a
governmental entity or agency;
29.3.5. that is furnished to a third party by the recipient
with similar confidentiality restrictions imposed
on such third party, as evidenced in writing; or
29.3.6. that The Regents is required to disclose pursuant to
the California Public Records Act or other applicable
law.
29.4. Upon termination of this Agreement, Licensee and The Regents
will destroy or return to the disclosing party proprietary information received
from the other in its possession within 15 days following the effective date of
termination. Licensee and The Regents will provide each other, within 30 days
following termination, with a written notice that Proprietary Information has
been returned or destroyed. Each party may, however, retain one copy of
Proprietary Information for archival purposes in nonworking files.
30. Miscellaneous
30.1. The headings of the several sections are inserted for
convenience of reference only and are not intended to be a part of or to affect
the meaning or interpretation of this Agreement.
30.2. This Agreement will not be binding upon the parties until it
has been signed below on behalf of each party, in which event, it will be
effective as of the date recited on page one.
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<PAGE> 40
30.3. No amendment or modification hereof will be valid or binding
upon the parties unless made in writing and signed on behalf of each party.
30.4. This Agreement embodies the entire understanding of the
parties and will supersede all previous communications, representations or
understandings, either oral or written, between the parties relating to the
subject matter hereof. The Letter Agreements, the Option Agreement, and the
Secrecy Agreements specified in the Recitals of this Agreement are hereby
terminated.
30.5. In case any of the provisions contained in this Agreement are
held to be invalid, illegal, or unenforceable in any respect, such invalidity,
illegality, or unenforceability will not affect any other provisions hereof,
but this Agreement will be construed as if such invalid or illegal or
unenforceable provisions had never been contained herein.
The Regents and Licensee execute this Agreement in duplicate originals
by their respective, authorized officers on the date indicated.
Aurora Biosciences Corporation The Regents of the University
of California
By__________________________________ By_________________________________
(Signature) (Signature)
Name________________________________ Name Terence A. Feuerborn
(Please Print)
Title_______________________________ Title Executive Director
Research Administration
and Office of Technology
Transfer
Date________________________________ Date_______________________________
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APPENDIX A - PAGE 1A
University of California/San Diego (UCSD)
Instructions for Standard Letter Transmitting
Biological Materials to Universities and
Non-Profit Institutions
The attached letter is authorized for use by University of California,
UCSD Principal Investigators and Administrators only with Scientists and other
universities and nonprofit research institutions when transmitting cell lines,
plasmids and the like for non-commercial research purposes.
1. Choose the appropriate form of university or nonprofit research
institution in paragraph 2.
2. Choose whether or not to include the phrase "our cooperative" in
paragraph 2.
3. Insert in paragraph 4 the amount of processing charge. If the
material is to be shipped at no charge, insert the words "no charge".
4. Send the letter in duplicate to the other scientists.
5. Do not send biological materials until you receive the duplicate copy
executed by both the scientist and the other institution.
6. Send a copy of the fully executed letter agreement to:
Terence A. Feuerborn
Executive Director
Research Administration
and Technology Transfer
1320 Harbor Bay Parkway
Suite 150
Alameda, CA 94501
7. Any changes in the wording of this standard letter must be reviewed by
the Executive Director of the Office of Technology Transfer before
acceptance.
Note: Do not use this letter for the exchange of living plants. A separate
"Testing Agreement for the Plant Varieties" is available for that purpose.
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<PAGE> 42
APPENDIX A - PAGE 2A
SAMPLE LETTER FOR USE PRIOR TO TRANSMISSION OF BIOLOGICAL
MATERIALS TO INVESTIGATORS AT UNIVERSITIES OR NON-PROFIT
RESEARCH INSTITUTIONS
(date)
IN DUPLICATE
To:_____________________
This is to (acknowledge receipt of your letter) (confirm our telephone
conversation) in which you requested certain research materials developed in
this laboratory be sent to you for scientific research purposes. The materials
concerned, which belong to The Regents of the University of California/San
Diego Campus (UCSD) are _______________.
While I cannot transfer ownership of these materials to you, I will be
pleased to permit your use of these materials within your (university)
(Non-Profit Research Institution) laboratory for (our cooperative) scientific
research. However, before forwarding them to you, I require your agreement
that the materials will be received by you only for use in (our cooperative
work) (scientific research), that you will bear all risk to you or any others
resulting from your use, and that you will not pass these materials, their
progeny or derivatives, on to any other party or use them for commercial
purposes without the express written consent of The Regents of the University
of California. You understand that no other right or license to these
materials, their progeny or derivatives, is granted or implied as a result of
our transmission of these materials to you.
These materials are to be used with caution and prudence in any
experimental work, since all of their characteristics are not known.
As you recognize, there is a processing cost to us involved in
providing these materials to you. We will bill you for our processing costs,
which will amount to $_________________.
If you agree to accept these materials under the above conditions,
please sign the enclosed duplicate copy of this letter, then have it signed by
an authorized representative of your institution, and return it to me. Upon
receipt of that confirmation I will forward the material(s) to you.
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<PAGE> 43
APPENDIX A - PAGE 3A
(Note: other paragraphs discussing the relevant literature, the nature of the
work, hazards relating to materials to be sent etc. may be appropriate. These
will vary depending on the individual circumstances and the relationship
between the two parties previously established. Be sure to retain a signed
copy when received and send a photocopy of the completed agreement to the
University of California Patent Administrator, Office of Technology Transfer,
Systemwide Administration, 1320 Harbor Bay Parkway, Suite 150, Alameda, CA
94502)
Sincerely yours,
ACCEPTED:
RESEARCH INVESTIGATOR
______________________
Printed Name
______________________
(Signature)
______________________
Date
RESEARCH UNIVERSITY OR
NON-PROFIT INSTITUTION
______________________
Printed Name
_______________________
(Signature)
_______________________
Date
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<PAGE> 44
APPENDIX B - PAGE 1B
The INVENTORS listed below understand and agree to abide by the terms
and conditions of Article 12 (MAINTENANCE OF THE BIOLOGICAL MATERIALS) of the
Exclusive License Agreement between The Regents of the University of California
and Aurora Biosciences, Corp. effective ______________________, 1996, and to
instruct all relevant personnel working within their laboratory to act
accordingly. Said paragraph reads, in part, as follows:
"12.1 The Regents shall instruct Roger Tsien that if The Regents
circulates any of the Biological Materials to third parties for noncommercial
research purposes, it shall only do so under the terms and conditions set forth
in the biological material transmission letter attached hereto as Appendix A.
The Regents expressly reserves the right to transfer the Biological Materials
to non-profit entities strictly for noncommercial research purposes in the
manner set forth above. The Regents agrees that it will not otherwise transfer
the Biological Materials. The Licensee acknowledges that The Regents' right to
so transfer the Biological Materials could lead to the inadvertent loss or
diminution of the proprietary commercial value of the Biological Materials."
The Biological Materials is defined in said Agreement as follows:
"1.2 Biological Materials" means (i) the chemical reagents and
biological materials owned by The Regents and listed in Appendix D attached
hereto and provided to Licensee by The Regents pursuant to the April 26, 1996
Letter Agreement, and (ii) any other chemical reagents or biological materials
elected for inclusion under this Agreement by Licensee pursuant to Section 2.11
below."
By:
______________________________ _____________________________
(Inventor) Date
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<PAGE> 45
APPENDIX C - PAGE 1C
CHANCELLOR APPROVAL OF COMMERCIAL RESTRICTIONS OF TANGIBLE RESEARCH PRODUCTS
In May 1989, the University of California issued the Guidelines on
University-Industry Relations ("Guidelines"). Guideline 10 entitled "Tangible
Research Products" requires that when the commercial availability of tangible
research products resulting from the conduct of research are restricted by a
license, approval must be obtained from the Chancellor of the campus where the
research took place.
The License Agreement between THE REGENTS OF THE UNIVERSITY OF
CALIFORNIA ("The Regents") and AURORA BIOSCIENCES, CORP. ("Licensee") entitled
"Fluorescent Assay Technologies" contains provisions that restrict the transfer
of certain tangible research products to commercial competitors of the Aurora
Biosciences, Corp. and requires that tangible research products transferred for
educational and research purposes be conveyed under a biological material
transfer agreement that permits the University to retain the discretion to
publish any results of research at any time and to disseminate the tangible
materials for educational and research purposes.
Approval of the provisions of the License Agreement that restrict the
commercial availability of tangible research products is indicated below.
Approval:
______________________________ _____________________________
Majorie C. Caserio Date
Interim Chancellor
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APPENDIX D - PAGE 1D
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APPENDIX D - PAGE 2D
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APPENDIX D - PAGE 3D
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APPENDIX D - PAGE 4D
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APPENDIX D - PAGE 5D
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APPENDIX D - PAGE 6D
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APPENDIX D - PAGE 7D
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APPENDIX D - PAGE 8D
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APPENDIX D - PAGE 9D
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APPENDIX D - PAGE 10D
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APPENDIX D - PAGE 11D
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APPENDIX D - PAGE 12D
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APPENDIX D - PAGE 13D
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APPENDIX D - PAGE 14D
***CONFIDENTIAL TREATMENT REQUESTED
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APPENDIX D - PAGE 15D
GREEN FLUORESCENT PROTEINS
***
***CONFIDENTIAL TREATMENT REQUESTED
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APPENDIX D - PAGE 16D
***CONFIDENTIAL TREATMENT REQUESTED
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APPENDIX D - PAGE 17D
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APPENDIX D - PAGE 18D
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APPENDIX D - PAGE 19D
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APPENDIX D - PAGE 20D
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APPENDIX D - PAGE 21D
***CONFIDENTIAL TREATMENT REQUESTED
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APPENDIX E - PAGE 1E
Research Reagents
***
060596
***CONFIDENTIAL TREATMENT REQUESTED
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<PAGE> 1
Certain confidential portions of this Exhibit were omitted by means of blackout
of the text (the "Mark"). This Exhibit has been filed separately with the
Secretary of the Commission without the Mark pursuant to the Company's
Application Requesting Confidential Treatment under Rule 406 under the
Securities Act.
EXHIBIT 10.18
LICENSE AGREEMENT
This AGREEMENT (the "Agreement") is effective as of the 2nd day of
August, 1996 (the "Effective Date"), between California Institute of
Technology, 1201 East California Boulevard, Pasadena, California 91125
("CALTECH") and Aurora Biosciences Corporation, a Delaware corporation, having
a principal place of business at 11149 North Torrey Pines Road, La Jolla,
California 92037 (hereinafter called "LICENSEE").
WHEREAS, CALTECH has been engaged in basic research in biotechnology
conducted for the National Institutes of Health ("NIH") under Grant No. GM
34236 between CALTECH and NIH;
WHEREAS, that research led to that United States provisional patent
application described in Paragraph 1.6.2, which is owned by CALTECH;
WHEREAS, LICENSEE is desirous of obtaining, and CALTECH wishes to
grant to LICENSEE, an exclusive license to the Licensed Patent Rights (as
defined in Paragraph 1.6); and
WHEREAS, on an even date herewith LICENSEE and CALTECH have entered
into a Stock Transfer Agreement pursuant to which CALTECH shall receive shares
of LICENSEE's common stock.
<PAGE> 2
NOW, THEREFORE, the parties agree as follows:
ARTICLE I
DEFINITIONS
I.1 "Confidential Information" means (i) any proprietary or
confidential nformation or material in tangible form disclosed hereunder that
is marked as "Confidential" at the time it is delivered to the receiving party,
or (ii) proprietary or confidential information disclosed orally hereunder
which is identified as confidential or proprietary when disclosed and such
disclosure of confidential information is confirmed in writing within thirty
(30) days by the disclosing party. To protect the confidentiality of such
information, LICENSEE may request the Principal Investigator, who has the right
to refuse to accept such information, to sign a confidentiality agreement with
LICENSEE in the form of Exhibit B hereto.
I.2 "Dominating Patent" means an unexpired patent that has not
been invalidated by a court or governmental agency which is owned by a third
party under circumstances such that the LICENSEE or its sublicensee has no
commercially reasonable alternative to obtaining a royalty-bearing license
under such patent in order to practice the Licensed Methods or make, use, sell
or otherwise commercialize Licensed Products.
I.3 "Field" means ***
*** CONFIDENTIAL TREATMENT REQUESTED
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<PAGE> 3
candidates.
I.4 "Licensed Method" means any method, procedure, or process, the
use of which is covered by any Valid Claim.
I.5 "Licensed Product" means *** .
I.6 "Licensed Technology" means Licensed Know-How and Licensed
Patent Rights.
I.6.1 "Licensed Know-How" means all information and data,
processes, formulas, and materials, including but not limited to those which
relate to nucleic acid constructions, genes, DNA or RNA fragments, gene
sequences, bacterial or yeast strains, mammalian cell lines, biological
material, chemical compounds, proteins, products, substances, experimental
plans, formulations, techniques, methods, designs, and drawings which are
conceived, reduced to practice, or otherwise developed (i) in the laboratory of
Dr. Melvin I. Simon ("Dr. Simon"), a faculty member CALTECH, or by Dr. Simon or
another person employed by or affiliated with CALTECH who is working under Dr.
Simon's supervision, or (ii) jointly by any of the foregoing and any person
employed by or affiliated with LICENSEE, and which are specifically and
directly related to experiments or embodiments of inventions covered by or
within the scope of a Valid Claim of the Licensed Patent Rights.
***CONFIDENTIAL TREATMENT REQUESTED
-3-
<PAGE> 4
I.6.2 "Licensed Patent Rights" means (i) U.S. provisional
patent application ***, filed ***, and entitled ***; (ii) any patent application
claiming an invention useful in the Field which is conceived, reduced to
practice, or otherwise developed on or before *** in Dr. Simon's laboratory or
by Dr. Simon and/or another person employed by or affiliated with CALTECH who is
working under Dr. Simon's supervision; (iii) any patent application claiming an
invention useful in the Field which is conceived, reduced to practice, or
otherwise developed on or before *** in jointly by Dr. Simon and/or another
person employed by or affiliated with CALTECH who is working under Dr. Simon's
supervision and any person employed by or affiliated with LICENSEE; (iv) any
substitution, provisional, regular utility application, division, or
continuation (in whole or in part) claiming priority to any patent application
in (i), (ii), or (iii); (v) any patent issuing on any of the preceding,
including without limitation any reissue, re-examination, or extension; and (vi)
any foreign patent application or patent claiming priority to any of the
foregoing, including any confirmation, registration, revalidation, or addition.
I.7 "Related Company" means any corporation or other entity which
is directly or indirectly controlling, controlled by, or under the common
control with LICENSEE. For the purpose of this Agreement, "control" shall mean
the direct or indirect ownership of at least fifty percent (50%) of the
outstanding shares or other voting rights of the subject entity to elect
*** CONFIDENTIAL TREATMENT REQUESTED
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directors, or if not meeting the preceding, any entity owned or controlled by
or owning or controlling at the maximum control or ownership right permitted in
the country where such entity exists.
I.8 "Stock Transfer Agreement" means that certain Stock Transfer
Agreement entered into by the parties on an even date herewith, a copy of which
is appended hereto as Exhibit A.
I.9 "Valid Claim" means a claim of (i) a pending patent
application within the Licensed Patent Rights, or (ii) an issued and unexpired
patent included within the Licensed Patent Rights.
ARTICLE II
PATENT LICENSE GRANT
II.1 CALTECH hereby grants to LICENSEE an exclusive license under
the Licensed Technology throughout the world to (i) practice the Licensed
Methods and provide services entailing the practice thereof, and (ii) make, have
made, use, have used, import, have imported, sell, offer for sale, and have sold
and otherwise exploit Licensed Products in the field. This license is subject
to:
II.1.1 the reservation of CALTECH's right, on the part of
itself and the Jet
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<PAGE> 6
Propulsion Laboratory ("JPL"), to make, have made, and use Licensed Methods for
noncommercial educational and research purposes, but not for sale, licensure,
or other distribution to third parties;
II.1.2 the rights of the U.S. Government under Title 35,
United States Code, Sections 203-204, including but not limited to the grant to
the U.S. Government of a nonexclusive, nontransferable, irrevocable, paid-up
license to practice or have practiced any invention conceived or first actually
reduced to practice in the performance of work under NIH Grant GM 34236 for or
on behalf of the U.S. Government throughout the world; and
II.1.3 with respect to any technology developed after the
effective date, the right of any third party which sponsors research in Dr.
Simon's laboratory at CALTECH. It is understood and agreed that CALTECH will
use all reasonable efforts to assist LICENSEE in obtaining an exclusive license
or other transfer of such third party rights in and to the results and related
intellectual property which arise from or in connection with the research
sponsored by such third party.
II.2 This license is not transferable by LICENSEE except as
provided in Paragraph 13.2, but LICENSEE shall have the right to grant and
authorize nonexclusive and/or exclusive sublicenses hereunder, provided that
LICENSEE shall furnish CALTECH within thirty (30) days of the execution thereof
a true and complete copy of each sublicense and any changes or additions
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thereto. Any such sublicense (including, without limitation, any non-exclusive
sublicense) shall remain in effect in the event of any termination of this
Agreement.
II.3 The license granted herein, and the term of this Agreement,
shall commence on the Effective Date and continue, unless terminated in
accordance with the provisions of this Agreement, until the last of the patents
within the Licensed Patent Rights expires.
II.4 LICENSEE shall have a paid-up option to acquire, upon mutually
agreeable terms, a royalty bearing, exclusive or non-exclusive, world-wide
license, including the right to sublicense, to make, have made, use, lease, and
sell products and services embodying or produced through the use of any
inventions, discoveries, or improvements in the Field conceived, reduced to
practice or otherwise developed in Dr. Simon's laboratory at CALTECH in the
period from the third anniversary of the Effective Date until the sixth
anniversary of the Effective Date, subject to the rights of any third party
which sponsors research in Dr. Simon's laboratory at CALTECH. Said option must
be exercised by written notice to CALTECH within six (6) months after receiving
from CALTECH written notice of the filing of a patent application with respect
thereto. If LICENSEE elects to exercise its option to acquire a license on
mutually agreeable terms within the prescribed time period, both parties agree
to negotiate license terms in good faith. All such negotiations, including the
execution of a license agreement, shall be completed within six (6) months of
written notice to CALTECH of LICENSEE's exercise of said option. If LICENSEE
fails to agree to terms and conditions within the six (6) month time period,
LICENSEE shall be
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<PAGE> 8
deemed to have waived said option, and CALTECH shall be free to license a third
party; provided, however, that for a period of three (3) years after written
notice of LICENSEE's exercise of its option to any such invention, discovery, or
improvement, CALTECH shall not agree to license a third party on more favorable
terms than were last offered to LICENSEE without first offering LICENSEE a
license on those more favorable terms and providing LICENSEE with ninety (90)
days in which to accept such offer. If LICENSEE fails to notify CALTECH within
the ninety (90) days that it has accepted such terms, LICENSEE shall be deemed
to have rejected the offer, and CALTECH shall, thereafter, be free to license
its rights in such invention, discovery, or improvement to other parties. If
LICENSEE notifies CALTECH within the ninety (90) days that it accepts such an
offer, CALTECH shall be deemed to have entered into a binding license agreement
with LICENSEE with respect to such terms.
ARTICLE III
USE OF NAME
III.1 LICENSEE agrees that it shall not use the name of CALTECH, the
California Institute of Technology, the Jet Propulsion Laboratory, or JPL in
any advertising or publicity material, or make any form of representation or
statement which would constitute an express or implied endorsement by CALTECH
of any Licensed Product, and that it shall not authorize others to do so,
without first having obtained written approval from CALTECH. LICENSEE may make
further disclosures containing information previously approved for release by
CALTECH without
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any need for further approvals by CALTECH.
III.2 Notwithstanding Paragraph 3.1, LICENSEE may make such
disclosures as may be required by law or court order, and disclose to its
professional advisors and actual and prospective investors that it has entered
into this Agreement with CALTECH.
ARTICLE IV
DUE DILIGENCE
IV.1 LICENSEE shall have discretion over the commercialization of
Licensed Methods and Licensed Products. LICENSEE shall be deemed to have
satisfied its obligations under this Paragraph if LICENSEE has an ongoing and
active research program or marketing program, as appropriate, directed toward
the use of Licensed Methods in the Field. Any efforts of LICENSEE's
sublicensees shall be considered efforts of LICENSEE for the purpose of
determining LICENSEE's compliance with its obligation under this Paragraph.
IV.2 ***, CALTECH shall have the right, exercisable no more often
than ***, to require LICENSEE to report to CALTECH in writing on its progress in
using Licensed Methods in the United States.
ARTICLE V
*** CONFIDENTIAL TREATMENT REQUESTED
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<PAGE> 10
INFRINGEMENT BY THIRD PARTY
V.1 CALTECH shall, at its expense, have the initial right, but not
the obligation, to protect Licensed Technology solely owned by CALTECH from
infringement or misappropriation and prosecute infringers or others when, in
its sole judgment, such action may be reasonably necessary, proper, and
justified. Notwithstanding the foregoing, LICENSEE shall have the right to
sublicense any alleged infringer pursuant to Paragraph 2.2. LICENSEE shall, at
its expense, have the initial right, but not the obligation, to protect
Licensed Technology jointly owned by CALTECH and LICENSEE from infringement or
misappropriation and prosecute infringers or others when, in its sole judgment,
such action may be reasonably necessary, proper, and justified.
V.2 If LICENSEE shall have supplied CALTECH with evidence of
infringement or misappropriation by a third party of Licensed Technology solely
owned by CALTECH, LICENSEE may by notice request CALTECH to take steps to
enforce such Licensed Technology. If LICENSEE does so, and CALTECH does not,
within three (3) months of the receipt of such notice, either (i) cause the
infringement or misappropriation to terminate or (ii) initiate a legal action
against the infringer or misappropriating third party, LICENSEE may, upon
notice to CALTECH, initiate an action against the infringer or misappropriating
third party at LICENSEE's expense, either in LICENSEE's name or in CALTECH's
name if so required by law. If LICENSEE does so for infringement or
misappropriation within the Field, LICENSEE shall have sole control of the
action.
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<PAGE> 11
V.3 If a declaratory judgment action alleging invalidity,
unenforceability, or noninfringement of any of the Licensed Patent Rights is
brought against LICENSEE and/or CALTECH, LICENSEE shall have sole control of
the action if LICENSEE agrees to bear all the costs of the action.
V.4 In the event one party shall carry on a legal action pursuant
to Paragraph 5.2 or 5.3, the other party shall fully cooperate with and supply
all assistance reasonably requested by the party carrying on such action,
including by using its best efforts to have its employees testify when
requested and to make available relevant records, papers, information, samples,
specimens, and the like. A party controlling an action pursuant to Paragraph
5.2 or 5.3 shall bear the reasonable expenses incurred by said other party in
providing such assistance and cooperation as is requested pursuant to this
Paragraph. A party controlling such an action shall keep the other party
informed of the progress of such action, and said other party shall be entitled
to be represented by counsel in connection with such action at its own expense.
V.5 The party controlling any action referred to in this Article V
shall have the right to settle any claim, but only upon terms and conditions
that are reasonably acceptable to the other party. Should either party elect
to abandon such an action other than pursuant to a settlement with the alleged
infringer that is reasonably acceptable to the other party, the party
controlling the action shall give timely notice to the other party who, if it
so desires, may continue the action; provided, however, that the sharing of
expenses and any recovery in such suit shall be as agreed
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upon between the parties.
V.6 Any amounts paid to a party hereto by a third party as the
result of such an action (such as in satisfaction of a judgment or pursuant to
a settlement) shall first be applied to reimbursement of the unreimbursed
expenses (including, without limitation, attorneys' and expert fees) incurred
by either party. Any remainder shall be divided between the parties as follows:
V.6.1 *** and
V.6.2 ***
ARTICLE VI
ALLEGATION OF INFRINGEMENT AGAINST LICENSEE
VI.1 If the practice by LICENSEE of the license granted herein
results in any allegation or claim of infringement of an intellectual property
right of third party against LICENSEE, LICENSEE shall have the exclusive right
to defend any such claim, suit, or proceeding, at its own expense, by counsel
of its own choice, and shall have the sole right and authority to settle any
such suit; provided, however, that CALTECH shall cooperate with
*** CONFIDENTIAL TREATMENT REQUESTED
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LICENSEE, at LICENSEE's reasonable request, in connection with the defense of
such claim.
ARTICLE VII
PAYMENT OF PATENT COSTS
VII.1 Starting from the Effective Date, LICENSEE shall, in
connection with the preparation, filing, prosecution, issuance, and maintenance
of the Licensed Patent Rights both in the United States and foreign
jurisdictions:
VII.1.1 pay all reasonable attorneys fees for services
performed to obtain the issuance of the Licensed Patent Rights, and all patent
and government fees for services performed after the issuance of Licensed
Patent Rights, and
VII.1.2 pay all domestic and foreign patent office
maintenance fees.
VII.2 Payment shall be made to CALTECH within thirty (30) days
following receipt by LICENSEE from CALTECH of (i) an invoice covering such fees
and (ii) evidence reasonably satisfactory to LICENSEE that such fees were paid.
To the extent that LICENSEE terminates this Agreement pursuant to Paragraph
9.1, LICENSEE shall have no further liability under Paragraph 7.1 for fees
relating to applications or patents affected by the termination.
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VII.3 CALTECH shall apply for, prosecute, and maintain during the
term of this Agreement the Licensed Patent Rights; provided, however, that
LICENSEE shall have reasonable opportunity to advise and consult with CALTECH
on such matters and may instruct CALTECH to take such action as LICENSEE
reasonably believes necessary to protect the Licensed Patent Rights. The
preparation, filing, prosecution, maintenance, and payment of all fees and
expenses, including legal fees, relating to such Licensed Patent Rights shall
be the responsibility of CALTECH, provided that LICENSEE shall reimburse
CALTECH for all reasonable fees and expenses, including reasonable legal fees,
incurred by CALTECH in such application preparation filing, prosecution, and
maintenance preparation, as provided in Paragraph 7.1. Patent attorneys chosen
by CALTECH and acceptable to LICENSEE shall handle all patent preparation,
filing, prosecution, and maintenance on behalf of CALTECH; provided, however,
that LICENSEE shall be entitled to review and comment upon and approve all
actions undertaken in the prosecution of all patents and applications. Patent
counsel shall concurrently provide CALTECH and LICENSEE with copies of all
material correspondence related to the prosecution and maintenance of the
patent applications and patents within the Licensed Patent Rights. In the
event CALTECH declines to apply for, prosecute, or maintain any Licensed Patent
Rights as requested by LICENSEE, LICENSEE shall have the right to pursue the
same in CALTECH's name and at LICENSEE's expense, and CALTECH shall give
sufficient and timely notice to LICENSEE so as to permit LICENSEE to apply for,
prosecute, and/or maintain such Licensed Patent Rights.
ARTICLE VIII
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<PAGE> 15
CONFIDENTIALITY
VIII.1 Dr. Simon shall provide to LICENSEE copies of any proposed
publication or abstract relating to Licensed Technology prior to the submission
of such documents. Proposed publications and abstracts shall be supplied at
least thirty (30) days in advance of submission to a journal, editor, or third
party. In addition, if Dr. Simon submits a copy of the proposed publication to
LICENSEE less than thirty (30) days prior to submission for publication, then
LICENSEE can request CALTECH to file, at CALTECH's expense, a provisisonal
patent application enabling the technology disclosed in the proposed
publication at the United States Patent and Trademark Office, and shall provide
LICENSEE with evidence of the filing of such provisional patent application.
All such documents are to be forwarded to the address given in Paragraph 13.8.
LICENSEE may request reasonable changes and/or deletions be made in any
proposed publication. The Principal Investigator will consider such changes
but retains the sole right to determine whether such changes or deletions will
be made. Dr. Simon agrees that he will honor LICENSEE's reasonable requests to
remove Confidential Information of LICENSEE included in any such public
disclosure. If LICENSEE believes that the subject matter to be published
warrants patent protection, it will identify the subject matter requiring
protection and notify CALTECH. CALTECH agrees to use its best efforts to file
a U.S. patent application prior to any date that would result in preventing the
obtaining of valid patent rights throughout the world when LICENSEE so
identifies subject matter requiring patent protection from a review of the
planned publication. Notwithstanding any other provision of this Paragraph
8.1, if CALTECH is unable to
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<PAGE> 16
file a U.S. patent application in accordance with the preceding sentence,
CALTECH shall file a U.S. provisional patent application prior to the date
that would result in preventing the obtaining of valid patent rights throughout
the world when LICENSEE so identifies subject matter requiring patent
protection from a review of a planned publication.
VIII.2 Except as expressly provided herein, each party agrees not to
disclose any terms of this Agreement to any third party without the consent of
the other party; provided, however, that disclosures may be made as required by
securities or other applicable laws, or to actual or prospective investors or
corporate partners, or to a party's accountants, attorneys, and other
professional advisors.
ARTICLE IX
TERMINATION
IX.1 If either party materially breaches this Agreement, the other
party may elect to give the breaching party written notice describing the
alleged breach. If the breaching party has not cured such breach within sixty
(60) days after receipt of such notice, the notifying party will be entitled,
in addition to any other rights it may have under this Agreement, to terminate
this Agreement effective immediately; provided, however, that if either party
receives notification from the other of a material breach and if the party
alleged to be in default notifies the other party in writing within thirty (30)
days of receipt of such default notice that it disputes the asserted
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<PAGE> 17
default, the matter will be submitted to arbitration as provided in Article XI
of this Agreement. In such event, the nonbreaching party shall not have the
right to terminate this Agreement until it has been determined in such
arbitration proceeding that the other party materially breached this Agreement,
and the breaching party fails to cure such breach within ninety (90) days after
the conclusion of such arbitration proceeding.
IX.2 LICENSEE shall have the right to terminate this Agreement
either in its entirety or as to any jurisdiction or any part of the Licensed
Technology upon sixty (60) days written notice.
IX.3 Termination of this Agreement for any reason shall not release
any party hereto from any liability which, at the time of such termination, has
already accrued to the other party or which is attributable to a period prior
to such termination, nor preclude either party from pursuing any rights and
remedies it may have hereunder or at law or in equity which accrued or are
based upon any event occurring prior to such termination.
IX.4 In the event of any termination of this Agreement, it is
understood that LICENSEE shall retain its ownership interest in any jointly
owned intellectual property within the Licensed Technology and shall have the
right to exploit the same for any purpose without having to account to CALTECH
therefor.
IX.5 The last sentence of Paragraph 2.2, Paragraphs 9.3, 9.4, and 9.5, and
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Articles III, VIII, XI, XII, and XIII of this Agreement shall survive
termination of this Agreement for any reason.
ARTICLE X
WARRANTIES AND NEGATION OF
WARRANTIES, IMPLIED LICENSES AND AGENCY
X.1 CALTECH represents and warrants that: (i) it owns all right,
title, and interest in and to the Licensed Technology, subject to the license
and march-in rights of the United States Government under Title 35, United
States Code, Sections 203-204, and ARPA Grant No. MDA972-93-1-0009, except as
for such right, title, and interest as may be owned by LICENSEE; (ii) it has
complied with all of its obligations under NIH Grant No. GM 34236, such as
those described in Title 35, United States Code, Section 202, with respect to
all of the Licensed Patent Rights; (iii) it has not granted and during the term
of this Agreement will not grant any right or interest in any of the Licensed
Technology that is inconsistent with the rights granted to LICENSEE herein;
(iv) the execution, delivery, and performance of this Agreement have been duly
authorized by all necessary corporate action on the part of CALTECH; (v) it is
the sole and exclusive owner of all right, title, and interest in the Licensed
Technology, except for such right, title, and interest therein as may be owned
by LICENSEE; (vi) it has the right to grant the rights and licenses granted
herein, and the Licensed Technology is free and clear of any lien, encumbrance,
security interest, or restriction on license; and (vii) there are no threatened
or pending actions, suits, investigations, claims, or proceedings in any way
relating to the Licensed
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Technology.
X.2 Nothing in this Agreement shall be construed as:
X.2.1 a representation or warranty of CALTECH as to the
validity or scope of Licensed Patent Rights or any claim thereof; or
X.2.2 a representation or warranty that any Licensed
Product is or will be free from infringement of rights of third parties; or
X.2.3 an obligation to bring or prosecute actions or suits
against third parties for infringement; or
X.2.4 conferring by implication, estoppel, or otherwise any
license or rights under any patents of CALTECH other than Licensed Patent
Rights, regardless of whether such other patents are dominant or subordinate to
the Licensed Patent Rights.
X.3 CALTECH MAKES NO EXPRESS OR IMPLIED WARRANTIES OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE, AND ASSUMES NO
RESPONSIBILITIES WHATEVER WITH RESPECT TO THE USE, SALE, OR OTHER DISPOSITION
BY LICENSEE OF LICENSED PRODUCT(S).
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<PAGE> 20
ARTICLE XI
ARBITRATION
XI.1 CALTECH and LICENSEE agree that any dispute or controversy
arising out of, in relation to, or in connection with this Agreement, or the
validity, enforceability, construction, performance or breach hereof, shall be
settled by binding arbitration in Los Angeles, California, United States of
America, under the then-current Commercial Arbitration Agreement Rules of the
American Arbitration Association by one (1) arbitrator appointed in accordance
with such Rules. The arbitrators shall determine what discovery will be
permitted, based on the principle of limiting the cost and time which the
parties must expend on discovery; provided, however, that the arbitrator shall
permit such discovery as he/she deems necessary to achieve an equitable
resolution of the dispute. The decision and/or award rendered by the
arbitrator shall be written, final, and non-appealable and may be entered in
any court of competent jurisdiction. The parties agree that, any provision of
applicable law notwithstanding, they will not request, and the arbitrator shall
have no authority to award, punitive or exemplary damages against any party.
The costs of any arbitration, including administrative fees and fees of the
arbitrator, shall be shared equally by the parties. Each party shall bear the
cost of its own attorneys' fees and expert fees.
ARTICLE XII
PRODUCT LIABILITY
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XII.1 LICENSEE agrees that CALTECH shall have no liability to
LICENSEE or to any purchasers or users of Licensed Products made or sold by
LICENSEE or its sublicensees for any claims, demands, losses, costs, or damages
suffered by LICENSEE, or purchasers or users of Licensed Products, or any other
party, which may result from personal injury, death, or property damage related
to the manufacture, use, or sale of such Licensed Products ("Claims").
LICENSEE agrees to defend, indemnify, and hold harmless CALTECH, its trustees,
officers, agents, and employees from any such Claims, provided that (i)
LICENSEE is notified promptly of any Claims, (ii) LICENSEE has the sole right
to control and defend or settle any litigation within the scope of this
indemnity, and (iii) all indemnified parties cooperate fully in the defense of
any Claims. No indemnified party shall voluntarily make any payment or incur
any expense with respect to any claims without the prior written consent of
LICENSEE.
XII.2 At such time as LICENSEE begins to sell or distribute or
sublicense Licensed Products (other than for the purpose of obtaining
regulatory approvals) based upon use of Licensed Methods, LICENSEE shall, at
its sole expense, procure and maintain policies of comprehensive general
liability insurance in amounts not less than $2,000,000 per incident and
$2,000,000 in annual aggregate and naming those indemnified under Paragraph
12.1 as additional insureds. Such comprehensive general liability insurance
shall provide (i) product liability coverage and (ii) broad form contractual
liability coverage for LICENSEE's indemnification under Paragraph 12.1. In the
event the aforesaid product liability coverage does not provide for
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occurrence liability, LICENSEE shall maintain such comprehensive general
liability insurance for a reasonable period of not more than seven (7) years
after it has ceased commercial distribution or use of any Licensed Product or
Licensed Method.
XII.3 LICENSEE shall provide CALTECH with written evidence of such
insurance upon request of CALTECH. LICENSEE shall provide CALTECH with notice
at least fifteen (15) days prior to any cancellation, non-renewal, or material
change in such insurance, to the extent LICENSEE receives advance notice of
such matters from its insurer. If LICENSEE does not obtain replacement
insurance providing comparable coverage within sixty (60) days following the
date of such cancellation, non-renewal, or material change, CALTECH shall have
the right to terminate this Agreement effective at the end of such sixty (60)
day period without any additional waiting period; provided, however, that if
LICENSEE uses reasonable efforts but is unable to obtain the required insurance
at commercially reasonable rates, CALTECH shall not have the right to terminate
this Agreement, and CALTECH instead shall cooperate with LICENSEE to either
grant a waiver of LICENSEE's obligations under this Article XII, assist
LICENSEE in identifying a carrier to provide such insurance, or in developing a
program for self-insurance or other alternative measures.
ARTICLE XIII
MISCELLANEOUS
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XIII.1 This Agreement sets forth the complete agreement of the
parties concerning the subject matter hereof. No claimed oral agreement in
respect thereto shall be considered as any part hereof. No waiver of or change
in any of the terms hereof subsequent to the execution hereof claimed to have
been made by any representative of either party shall have any force or effect
unless in writing, signed by duly authorized representatives of the parties.
XIII.2 This Agreement shall be binding upon and inure to the benefit
of any successor or assignee of CALTECH. This Agreement is not assignable by
LICENSEE without the prior written consent of CALTECH, except that LICENSEE may
assign this Agreement without the prior written consent of CALTECH to (i) any
Related Company, or (ii) any successor or purchaser of a substantial part of
the assets of the business to which this Agreement pertains. Any permitted
assignee shall succeed to all of the rights and obligations of LICENSEE under
this Agreement.
XIII.3 CALTECH and LICENSEE are independent parties in this
Agreement. Accordingly, there is no agency relationship between CALTECH and
LICENSEE under this Agreement with respect to any products made or sold, or any
methods used, by LICENSEE under this Agreement.
XIII.4 Nothing in this Agreement will impair LICENSEE's right to
independently acquire, license, develop for itself, or have others develop for
it, intellectual property and technology performing similar functions as the
Licensed Technology or to market and distribute
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products other than Licensed Products based on such other intellectual property
and technology.
XIII.5 NEITHER PARTY SHALL BE LIABLE TO THE OTHER FOR ANY SPECIAL,
CONSEQUENTIAL, INCIDENTAL, OR INDIRECT DAMAGES ARISING OUT OF THIS AGREEMENT,
HOWEVER CAUSED, UNDER ANY THEORY OF LIABILITY.
XIII.6 This Agreement is subject in all respects to the laws and
regulations of the United States of America, including the Export
Administration Act of 1979, as amended, and any regulations thereunder.
XIII.7 This Agreement shall be deemed to have been entered into in
California and shall be construed and enforced in accordance with California
law.
XIII.8 Any notice or communication required or permitted to be given
or made under this Agreement shall be addressed as follows:
CALTECH: Office of Technology Transfer
California Institute of Technology
1201 East California Boulevard (MC 315-6)
Pasadena, California 91125
FAX No.: (818) 577-2528
LICENSEE: Aurora Biosciences Corporation
11149 Torrey Pines Road
La Jolla, CA 92037
Phone No.: (619) 452-5000
FAX No.: (619) 452-5723
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Either party may notify the other in writing of a change of address or FAX
number, in which event any subsequent communication relative to this Agreement
shall be sent to the last said notified address or number. All notices and
communications relating to this Agreement shall be deemed to have been given
when received.
XIII.9 Neither party shall lose any rights hereunder or be liable to
the other party for damages or losses (except for payment obligations) on
account of failure of performance by the defaulting party if the failure is
occasioned by war, strike, fire, Act of God, earthquake, flood, lockout,
embargo, governmental acts or orders or restrictions, failure of suppliers, or
any other reason where failure to perform is beyond the reasonable control and
not caused by the negligence or intentional conduct or misconduct of the
nonperforming party, and such party has exerted all reasonable efforts to avoid
or remedy such force majeure; provided, however, that in no event shall a party
be required to settle any labor dispute or disturbance.
XIII.10 In the event that any provisions of this Agreement are
determined to be invalid or unenforceable by a court of competent jurisdiction,
the remainder of the Agreement shall remain in full force and effect without
said provision. The parties shall in good faith negotiate a substitute clause
for any provision declared invalid or unenforceable, which shall most nearly
approximate the intent of the parties in entering this Agreement.
XIII.11 This Agreement may not be altered, amended, or modified in any
way except by a writing signed by both parties. The failure of a party to
enforce any provision of
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the Agreement shall not be construed to be a waiver of the right of such party
to thereafter enforce that provision or any other provision or right.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed:
CALIFORNIA INSTITUTE OF TECHNOLOGY
(CALTECH)
Date: _______________ By:
------------------------------------
Name: Lawrence Gilbert
Title: Director, Office of Technology
Transfer
AURORA BIOSCIENCES CORPORATION
Date: _______________ By:
------------------------------------
Name: Tim Rink
Title: President and CEO
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<PAGE> 27
EXHIBIT A
STOCK TRANSFER AGREEMENT
<PAGE> 28
AURORA BIOSCIENCES CORPORATION
STOCK TRANSFER AGREEMENT
THIS AGREEMENT is made as of August , 1996 in San Diego, California,
between AURORA BIOSCIENCES CORPORATION, a Delaware corporation (the "Company"),
and the California Institute of Technology (the "Purchaser").
WHEREAS, The Company and Purchaser have entered into a license
agreement of even date herewith regarding the use of certain Promiscuous
G-protein technology (the "License Agreement"); and
WHEREAS, as partial consideration for Purchaser's execution of the
License Agreement, the Company has agreed to issue shares of the Company's
Common Stock to Purchaser according to the terms and conditions contained
herein.
NOW, THEREFORE, the parties agree as follows:
1. ISSUANCE OF STOCK. As partial consideration for Purchaser's
execution of the License Agreement and the Company's rights thereunder, the
Company hereby agrees to issue to Purchaser an aggregate of 35,000 shares of the
Company's Common Stock (the "Shares"). Upon execution of this Agreement, the
Company shall promptly issue and deliver to Purchaser a share certificate
evidencing the Shares in accordance with the terms of this Agreement.
2. RESTRICTIONS ON TRANSFER.
(a) The Shares may not be sold, offered for sale, pledged,
hypothecated or otherwise transferred in the absence of an effective
registration Statement under the Securities Act of 1933, as amended (the
"Securities Act"), with respect to such Shares or an opinion of counsel
reasonably acceptable to the Company that such registration is not required. The
Company shall not be required to transfer on its books any portion of such
Shares purchased hereunder which shall have been sold or transferred in
violation of any of the provisions set forth in this Agreement, or to treat as
the owner of such shares or to accord the right to vote as such owner or to pay
dividends to any transferee to whom such shares shall have been so transferred.
(b) The Purchaser hereby agrees that if so requested by the
Company or any representative of the underwriters in connection with any
registration of the offering of any securities of the Company under Section 7 of
the Securities Act, the Purchaser shall not sell, transfer or otherwise dispose
of any Shares or other securities of the Company during a period of up to 180
days (as specified by such representative) following the effective date of a
registration statement of the Company filed under the Securities Act; provided,
however, that such restriction shall only apply to the first two registration
statements of the Company to become effective
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<PAGE> 29
under the Securities Act which include securities to be sold on behalf of the
Company to the public in an underwritten public offering under the Securities
Act. The Company may impose stop-transfer instructions with respect to
securities subject to the foregoing restrictions until the end of such 180-day
period.
(c) The Shares are subject to a Right of First Refusal as set
forth in Article XIV of the Company's Bylaws.
3. ADJUSTMENT FOR STOCK SPLIT. All references to the number of Shares
and the purchase price of the Shares in this Agreement shall be appropriately
adjusted to reflect any stock split, stock dividend or other change in the
Shares which may be made by the Company after the date of this Agreement.
4. GENERAL PROVISIONS.
(a) Purchaser acknowledges that it is aware that the Shares
have not been registered under the Securities Act of 1933, as amended (the
"Act") and that the Shares are deemed to constitute "restricted securities"
under Rule 144 and Rule 701 promulgated under the Act. In this connection,
Purchaser warrants and represents to the Company that Purchaser is purchasing
the Shares for Purchaser's own account and Purchaser has no present intention of
distributing or selling said Shares except as permitted under the Act and
Section 25102(f) of the California Corporations Code. Purchaser further warrants
and represents that Purchaser has either (i) preexisting personal or business
relationships with the Company or any of its officers, directors or controlling
persons, or (ii) the capacity to protect its own interests in connection with
the purchase of the Shares by virtue of the business or financial expertise of
Purchaser or of any professional advisors to Purchaser who are unaffiliated with
and who are not compensated by the Company or any of its affiliates, directly or
indirectly. Purchaser further acknowledges that the exemption from registration
under Rule 144 will not be available for at least three years from the date of
sale of the Shares unless at least two years from the date of sale (i) a public
trading market then exists for the Common Stock of the Company, (ii) adequate
information concerning the Company is then available to the public, and (iii)
other terms and conditions of Rule 144 are complied with; and that any sale of
the Shares may be made only in limited amounts in accordance with such terms and
conditions.
(b) All certificates representing any shares of Common Stock
of the Company subject to the provisions of this Agreement shall have endorsed
thereon legends in substantially the following form:
(i) The securities represented by this certificate
have not been registered under the Act. They may not be sold or offered for sale
or otherwise distributed unless the securities are registered under the Act or
an exemption therefrom is available.
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<PAGE> 30
(ii) Any other legend required to be placed thereon
by the Company's Bylaws or applicable state, federal or foreign securities laws.
(c) This Agreement shall inure to the benefit of, and be
enforceable by, the successors and assigns of the Company, and, subject to the
restrictions on transfer herein set forth, shall be binding upon Purchaser, its
successors and assigns.
(d) Any notice, demand or request required or permitted to be
given by either the Company or the Purchaser pursuant to the terms of this
Agreement shall be in writing and shall be deemed given when delivered
personally or deposited in the U.S. Mail, First Class with postage prepaid, and
addressed to the parties at the addresses of the parties set forth at the end of
this Agreement or such other address as a party may request by notifying the
other in writing.
(e) The Purchaser agrees to execute upon request any further
documents or instruments necessary or desirable to carry out the purposes or
intent of this Agreement.
(f) This Agreement shall be governed by and determined and
interpreted in accordance with the laws of the State of California as such laws
are applied by California courts to contracts made and to be performed entirely
in California by residents of that state.
(g) This Agreement sets forth the entire understanding between
the Company and Purchaser regarding shares of the Company's securities, and
supersedes all prior agreements and/or understandings regarding the same.
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of
the day and year first set forth above.
AURORA BIOSCIENCES CORPORATION CALIFORNIA INSTITUTE OF TECHNOLOGY
By:___________________________________ By:_________________________
Timothy J. Rink
President Name:_______________________
11149 North Torrey Pines Road Address:____________________
La Jolla, CA 92037 ____________________________
3
<PAGE> 31
EXHIBIT B
CONFIDENTIALITY AGREEMENT
<PAGE> 32
CONFIDENTIAL
MUTUAL NONDISCLOSURE AGREEMENT
This MUTUAL NONDISCLOSURE AGREEMENT ("Agreement") is made effective as
of the ______________, 1997, by and between AURORA BIOSCIENCES CORPORATION AND
MELVIN I. SIMON, PH.D., to assure the protection and preservation of the
confidential and/or proprietary nature of information to be disclosed or made
available between the parties in connection with certain negotiations or
discussions in contemplation or furtherance of a business or scientific
relationship between the parties.
WHEREAS, in order to pursue these negotiations or discussions, the
parties have agreed to mutual disclosures of certain data and other information
which are of a proprietary and confidential nature (as defined in paragraph 1
below and referred to herein as "Confidential Information").
NOW, THEREFORE, in reliance upon and in consideration of the following
undertakings, and for other good and valuable consideration, the receipt of
which is hereby acknowledged, the parties to this Agreement hereby agree as
follows:
1. Subject to the limitations set forth in Paragraph 2, Confidential
Information shall mean any information, process, technique, compound, library,
bioreagents, chemical probes, instrumentation, imaging technology, software,
biological assays, high throughput and ultra-high throughput synthesis and
screening, method of synthesis, program, design, drawing, formula or test data
relating to any research project, work in process, development, engineering,
manufacturing, marketing, servicing, financing or personnel matter relating to
the disclosing party, its present or future products, suppliers, employees,
investors, or business. In order to be deemed Confidential Information
hereunder, all information disclosed shall be in some type of written form,
including graphic or electronic, and marked "Confidential" or; if disclosed
orally, visually and/or in another tangible form, shall be identified as
confidential prior to, or within a reasonable time of, disclosure and summarized
in a writing marked "Confidential" and provided by the disclosing party to the
recipient within forty-five (45) days of the initial disclosure.
2. The term "Confidential Information" shall not be deemed to include
information which, to the extent that the recipient can establish by competent
written proof:
a. at the time of disclosure is in the public domain;
b. after disclosure, becomes part of the public domain by
publication or otherwise, except by (i) breach of this
Agreement by the recipient or (ii) disclosure by any person or
affiliate company to whom Confidential Information was
disclosed under this Agreement.
<PAGE> 33
CONFIDENTIAL
c. was (i) in recipient's possession in documentary form at the
time of disclosure by the disclosing party or (ii)
independently developed by or for recipient by people who had
no knowledge of or access to the Confidential Information.
d. recipient received from a third party who had the lawful right
to disclose the Confidential Information and who did not
obtain the Confidential Information either directly or
indirectly from the disclosing party; or
e. is required by law or regulation to be disclosed.
In the event that Confidential Information is required to be disclosed
pursuant to subsection (e), the party required to make disclosure shall notify
the other party to allow that other party to assess whatever exclusions or
exemptions may be available to the other party under such law or regulation.
3. Each party shall maintain in trust and confidence and not disclose
to any third party or use for any unauthorized purpose any Confidential
Information received from the other party. Each party may use such Confidential
Information only to the extent required for the purposes described herein.
Confidential Information shall not be used for any purpose or in any manner that
would constitute a violation of any laws or regulations, including, without
limitation, the export control laws of the United States. No other rights or
licenses to trademarks, inventions, copyrights, or patents are implied or
granted under this Agreement and no Confidential Information disclosed by Aurora
Biosciences Corporation will be used by Melvin I. Simon, Ph.D. to file a patent
application.
4. Confidential Information supplied shall not be reproduced in any
form, except as required to continue discussions or to accomplish the purposes
described herein.
5. The responsibilities of the parties are limited to using their
reasonable and best efforts to protect the Confidential Information from
unauthorized use or disclosure. Both parties shall advise their employees or
agents who might have access to such Confidential Information of the
confidential nature thereof. No Confidential Information shall be disclosed to
any officer, employee or agent of either party who does not have a need to know
such information for the purposes described herein and who is not bound by a
written agreement with that party to maintain Confidential Information in
confidence.
6. All Confidential Information (including copies thereof) shall remain
the property of the disclosing party, and shall be returned to the disclosing
party after the recipient's need for it to accomplish the purposes of this
Agreement has expired, or within twenty (20) days of a written request by the
disclosing party. However, the recipient may retain one complete copy of the
Confidential Information in a secure location for recipient's archival purposes
to assure compliance with this Agreement.
2.
<PAGE> 34
CONFIDENTIAL
7. This Agreement may be terminated at any time upon ten (10) days
written notice to the other party. The termination of this Agreement shall not
relieve either party of the obligations imposed by this Agreement with respect
to Confidential Information disclosed prior to the effective date of such
termination and the provisions hereof shall survive for a period of seven (7)
years from the date hereof.
8. This Agreement shall be governed by the laws of the State of
California as those laws are applied to contracts entered into and to be
performed in California.
9. Neither party shall reveal the fact that Confidential Information
has been disclosed pursuant to this Agreement, nor that either party is
conducting, or has conducted, discussions or negotiations in contemplation or
furtherance of a business relationship. It is understood that disclosure
pursuant to this Agreement is not a public disclosure or sale or offer for sale
of any product, but is made for the limited purposes relating to potential joint
business activities stated herein.
10. This Agreement contains the entire agreement of the parties and may
not be changed, modified, amended or supplemented, except by a written
instrument signed by both parties. The unenforceability of any provision on this
Agreement shall not affect the enforceability of any provision of this
Agreement. Neither this Agreement nor the disclosure of any Confidential
Information pursuant to this Agreement by any party shall restrict such party
from disclosing any of its Confidential Information to any third party.
11. Each party hereby acknowledges and agrees that in the event of any
breach of this Agreement, including, without limitation, the actual or
threatened disclosure of a disclosing party's Confidential Information without
the prior express written consent of the disclosing party, the disclosing party
will suffer an irreparable injury, such that no remedy at law will afford it
adequate protection against, or appropriate compensation for, such injury.
Accordingly, each party hereby agrees that the other party shall be entitled to
specified performance of recipient's obligations under this Agreement, as well
as such further injunctive relief as may be granted by a court of competent
jurisdiction.
AGREED TO AS OF THE FIRST DATE ABOVE:
AURORA BIOSCIENCES CORPORATION MELVIN I. SIMON, PH.D.
11149 N. Torrey Pines Road
La Jolla, CA 92037
By: __________________________ By: __________________________
Print Name: __________________ Print Name: __________________
Title: _______________________ Title: _______________________
Initial if authorized to bind the Company:
3
<PAGE> 1
Certain confidential portions of this Exhibit were omitted by means of blackout
of the text (the "Mark"). This Exhibit has been filed separately with the
Secretary of the Commission without the Mark pursuant to the Company's
Application Requesting Confidential Treatment under Rule 406 under the
Securities Act.
EXHIBIT 10.19
EXCLUSIVE LICENSE AGREEMENT
BETWEEN
THE UNIVERSITY OF OREGON
AND
AURORA BIOSCIENCES CORPORATION
FOR
LONG WAVELENGTH ENGINEERED FLUORESCENT PROTEINS
<PAGE> 2
CONFIDENTIAL
LICENSE AGREEMENT
This Agreement is made this 4th day of October, 1996, by and between the State
of Oregon, acting by and through the State Board of Higher Education on behalf
of the University of Oregon, an institute of higher education located in
Eugene, Oregon ("OREGON"), and Aurora Biosciences Corporation ("LICENSEE"), a
Delaware corporation with principal offices at 11149 North Torrey Pines Road,
La Jolla, CA 92037 to license certain technology.
RECITALS
WHEREAS, OREGON and LICENSEE seek commercialization of certain inventions,
technology, and intellectual property owned by OREGON and LICENSEE which form
the basis of U.S. Patent Application; *** and
WHEREAS, LICENSEE is well-positioned in the Biotechnology industry and intends
to use its best efforts to utilize the licensed technology; and
WHEREAS, UNIVERSITY wishes to grant LICENSEE and LICENSEE wishes to accept from
UNIVERSITY a license under any and all inventions embodied in the patent
application(s).
The parties do agree as follows:
1.0 DEFINITIONS
1.1 The term "INVENTIONS" means the novel useful ideas, reduced to
practice, which form the basis of U.S. Patent Application ***, filed
on ***, any follow-on patent applications, patents issuing worldwide,
and patents claiming priority based thereon.
1.2 "Licensed Product" means ***
1.3 The term "Field of Use" means ***
*** CONFIDENTIAL TREATMENT REQUESTED
<PAGE> 3
CONFIDENTIAL
1.5 "Affiliate" or "Affiliated Company" means any corporation or
other business entity controlled by or in common control of LICENSEE.
Control as used herein means the ownership directly or indirectly of
fifty percent (50%) or the maximum interest permitted by local law of
the voting stock of the corporation or fifty percent (50%) or greater
interest in the income of such corporation or other business entity or
the ability otherwise of LICENSEE to secure that the affairs of such
corporation or other business entity are managed in accordance with
LICENSEE's wishes.
2.0 LICENSE
2.1 Grant. OREGON grants LICENSEE an exclusive,
worldwide license, with the right to grant and authorize
sublicenses, to use INVENTIONS, and to make, have made, use,
import, offer for sale, and sell Licensed Products
2.2 Royalties. Royalties shall be payable as follows:
2.2.1 An up-front fee of *** .
Payments due under this paragraph shall be paid to OREGON in
addition to any other royalty payments arising under this
Agreement and may not be credited toward, or made in lieu of,
any other such payments.
2.2.2 An *** until
*** the first such payment being due on
*** . Upon *** , an
*** of *** payable ***
2.2.3 Upon *** LICENSEE grants OREGON the rights to 5,000 shares of common
stock in LICENSEE. LICENSEE will issue these shares at OREGON's direction
to OREGON's
*** CONFIDENTIAL TREATMENT REQUESTED
3
<PAGE> 4
CONFIDENTIAL
institution foundation for the benefit of OREGON, or to such other person or
entity as OREGON may designate. LICENSEE may require OREGON's designee to sign
such representations as will demonstrate compliance with securities laws.
2.3 Due Diligence. LICENSEE shall use reasonable efforts to bring
Licensed Products to market or provide services using the Licensed
Products in an expedient and timely fashion (in the context of
necessary regulatory approvals) or to sublicense entities which will
use their reasonable efforts to bring Licensed Products to market on
the same timely basis, and to provide Licensed Products in quantities
sufficient to meet the market demands therefor.
2.3.1 At least annually, beginning one year after the date
this Agreement is signed, LICENSEE shall report to OREGON
concerning the commercialization of Licensed Products. All
reports given by LICENSEE to OREGON shall be regarded as
Confidential Information hereunder.
2.5 Residual Rights. Notwithstanding any grant provision to the
contrary in this Agreement, OREGON retains the non-transferable right
to use the INVENTIONS for its instructional and noncommercial research
purposes.
2.6 Infringement
2.6.1 Should a third party appear to infringe any of the
intellectual property rights embodied in the INVENTIONS
licensed herein, LICENSEE shall have the right, fully at its
expense, to challenge such infringement, and may use OREGON's
name if required by applicable law, and may retain the
proceeds recovered thereby. However, that should LICENSEE fail
to challenge a commercially significant instance of alleged
infringement within six (6) months from its initial discovery
by or disclosure to LICENSEE, OREGON shall have the right to
challenge such infringement and
4
<PAGE> 5
CONFIDENTIAL
retain all proceeds recovered thereby; provided further that
the parties can agree to proceed jointly against such an
infringer on terms to be negotiated.
2.6.2 Should a third party claim that any patents, know-how,
or intellectual property licensed to LICENSEE under or as a
result of the terms of this Agreement infringes its
intellectual property rights, at Licensee's request LICENSEE
and OREGON shall (i) engage in negotiations for a settlement
and license, (ii) use their best efforts to obtain for
LICENSEE all rights necessary for it to continue using the
INVENTIONS and licensed patent rights, and (iii) otherwise
assist each other in resolving reasonably any such dispute.
LICENSEE shall pay all reasonable out-of-pocket expenses
related to these endeavors including related license fees.
5
<PAGE> 6
CONFIDENTIAL
2.7 Warranty Disclosure and Limitation of Liability
2.7.1 OREGON MAKES NO WARRANTIES, EXPRESS OR IMPLIED, AND
HEREBY DISCLAIMS ALL SUCH WARRANTIES, AS TO ANY MATTER
WHATSOEVER, INCLUDING, WITHOUT LIMITATION, ANY INVENTION(S) OR
LICENSED PRODUCTS, WHETHER TANGIBLE OR INTANGIBLE, SUBJECT TO
THIS AGREEMENT AND INCLUDING THE OWNERSHIP, MERCHANTABILITY,
OR FITNESS FOR A PARTICULAR PURPOSE OF THE RESEARCH OR ANY
SUCH INVENTION OR PRODUCT OR THAT THE USE OF LICENSED PRODUCT
WILL NOT INFRINGE ANY PATENT, COPYRIGHT, TRADEMARK OR OTHER
RIGHTS. OREGON SHALL NOT BE LIABLE FOR ANY DIRECT,
CONSEQUENTIAL OR OTHER DAMAGES SUFFERED BY ANY LICENSEE,
INCLUDING SUBLICENSEE, OR ANY THIRD PARTIES TO THE EXTENT THAT
THEY RESULT FROM THE USE OF THE INVENTION AND DISCOVERY,
PROVIDED THAT THE INVENTION AND DISCOVERY WAS NOT PROVIDED TO
THE THIRD PARTY BY OREGON. NEITHER PARTY SHALL BE LIABLE TO
THE OTHER PARTY FOR ANY SPECIAL, CONSEQUENTIAL, INCIDENTAL OR
INDIRECT DAMAGES ARISING OUT OF THIS AGREEMENT.
2.7.2 The provisions of this paragraph shall survive the
termination of this Agreement.
2.7.3 At the time of the execution of this Agreement,
LICENSEE represents and warrants to OREGON as follows:
2.7.3.1 LICENSEE is a corporation duly organized,
validly existing and in good standing under the laws
of the State of Delaware. LICENSEE has all requisite
corporate power and authority to carry on business,
to execute and deliver this Agreement, and to perform
its obligations hereunder. The execution and
delivery of this Agreement by LICENSEE and the
consummation by it of the transactions contemplated
hereby have been duly authorized by all necessary
corporate action on the part of LICENSEE, and this
Agreement constitutes a valid and legally binding
obligation of LICENSEE enforceable against it in
accordance with its respective terms.
6
<PAGE> 7
CONFIDENTIAL
2.7.4 OREGON represents and warrants that: (i)it owns all
rights, title, and interest in and to the INVENTIONS, except
as for such right, title, and interest as may be owned by
LICENSEE and the University of California, (ii) it has not
granted and during the term of this Agreement will not grant
any right or interest in any of the Licensed Products that is
inconsistent with the rights granted to LICENSEE herein; (iii)
the execution, delivery, and performance of this Agreement
have been duly authorized by all necessary corporate action on
the part of OREGON; (iv) it is the sole and exclusive owner of
all right, title, and interest therein as may be owned by
LICENSEE and the University of California; (v) it has the
right to grant the rights and licenses granted herein, and the
Licensed Products is free and clear of any lien, encumbrance,
security interest, or restriction on license; and (vi) there
are no threatened or pending actions, suits, investigations,
claims, or proceedings in any way relating to the Licensed
Products.
2.8 Indemnification and Insurance
2.8.1 LICENSEE shall indemnify and hold OREGON and its
officers, employees and agents harmless against all costs,
damages, judgments, attorney fees, license fees, settlement
costs, and other defense expenses incurred, arising out of
claims brought by third parties, including, but not limited
to, personal injury, property damage, intellectual property
infringement, dilution, or misappropriation, due to LICENSEE'S
development, manufacture, use, clinical trials, testing,
marketing or sale of Licensed Products, or sublicensing of
INVENTIONS.
2.8.2 In the event any third-party claim is made or lawsuit
is initiated, the party against whom such lawsuit is brought
or claim is made shall promptly notify the other party hereto
in writing, and shall cooperate fully in the defense of such
lawsuit.
7
<PAGE> 8
CONFIDENTIAL
2.8.3 During the term of this Agreement, LICENSEE shall
maintain in effect commercial general liability insurance and
(in any period when LICENSEE is commercially transferring
Licensed Products to third parties) products liability
insurance in the combined amount of One Million Dollars
($1,000,000) per occurrence, or such greater amount as may be
usual and customary for companies selling or testing similar
products. The general liability insurance required hereunder
shall cover contractual liability and bodily injury, death and
property damage against any claims, demands, or causes of
action or damages, including reasonable attorney fees. The
products liability insurance shall cover similar claims and
forms of damage arising out of negligent design or
manufacture, including without limitation failure to warn,
deficient use instruction or any alleged defects in Licensed
Products or the use or possession of Licensed Products. The
policy(ies) shall name OREGON as a co-insured, and provide
that notice shall be given to OREGON at least thirty (30) days
prior to cancellation, non-renewal or material change in the
form of such policy(ies). If any of the required liability
insurance is arranged on a "claims made" basis, "tail"
coverage will be required at the completion of that insurance
contract for a duration of 24 months or the maximum time
period the insurer will provide if less than 24 months.
2.8.4 The provisions of this section shall survive the
termination of this Agreement.
2.9 Protection and Maintenance of Patent Rights
2.9.1 LICENSEE shall use all reasonable efforts to continue to
prosecute Patent Application ***, to file continuations-in-part
("CIP's") based upon that Application, and to pay all
maintenance fees necessary to protect the INVENTIONS where
patents have issued.
2.9.2 LICENSEE shall control the prosecution of all patent
applications related to the Inventions. OREGON may provide
the Licensee with comments on the
*** CONFIDENTIAL TREATMENT REQUESTED
8
<PAGE> 9
CONFIDENTIAL
prosecution of the patent applications.
2.9.3 LICENSEE agrees to keep OREGON informed in a timely
manner of the contents, status and progress of all amended
patent applications and CIP's filed by LICENSEE. LICENSEE
agrees to notify OREGON in writing in a timely manner that it
does not desire to support the continued prosecution or
appeals or maintenance of such amended application, CIP or
patent. In the event LICENSEE declines to provide, or is
delinquent in providing, support for filing, prosecution, and
maintenance of any Patent Rights in any country other than the
U.S.A., LICENSEE forfeits its associated licensing rights and
OREGON shall have the right, but not an obligation, to file
for, prosecute and maintain such patent rights at Oregon's
expense.
2.10 Sublicenses. Any sublicenses shall not be inconsistent with the
terms of this license (including, but not limited to, OREGON's
disclaimers and rights to terminate) and in case of conflict, the
rights of OREGON as against any sublicensee shall be governed by this
license. Any sublicenses granted by LICENSEE shall survive the
expiration of this agreement and be assigned to OREGON.
2.11 Termination
2.11.1 This Agreement shall be continued on a country by
country basis, unless sooner terminated as provided in this
Section 2.11, until the last expiration date of all patents
licensed under this Agreement.
2.11.2 If LICENSEE materially breaches any term, condition or
agreement hereof, or if LICENSEE fails to pay the minimum
royalties due under clause 2.3.1, OREGON may serve written
notice of a breach upon LICENSEE and unless such breach is
fully cured within ninety (90) days from the receipt of notice
by LICENSEE, OREGON may thereupon, at its option, serve notice
of cancellation on LICENSEE, whereupon this Agreement shall
immediately terminate.
9
<PAGE> 10
CONFIDENTIAL
2.11.3 Termination of this Agreement for any reason
whatsoever shall not excuse LICENSEE from paying to OREGON all
royalties earned and all patent costs incurred prior to the
date of such termination, and all royalties thus earned, but
unpaid, shall immediately become due and payable. LICENSEE may
terminate at will with respect to any country or patent with
sixty (60) days notice OREGON.
2.11.4 Upon expiration of this license or termination as
outlined in this 2.11, OREGON shall be free to license its
INVENTIONS to any other party.
3.0 MISCELLANEOUS
3.1 Merger Clause. This Agreement constitutes the entire
understanding between the parties with respect to the subject matter
within and supersedes all previous agreements, whether written or
oral, relating to the subject matter herein. Amendments to this
Agreement shall be effective only if in writing and signed by an
authorized representative of both OREGON and LICENSEE.
3.2 Assignment. This Agreement shall not be assignable by either
party without the prior written consent of the other party, except
that LICENSEE may assign this Agreement to an Affiliate or any
successor to substantially all the assets and business of LICENSEE,
whether by sale, merger or otherwise.
3.3 Relationship of the Parties. For the purposes of this Agreement,
the parties shall be deemed to be independent contractors and not
agents or employees of the other party. Neither party shall have
authority to make any representations or commitments of any kind or to
take any action which shall be binding on the other party, except as
may be explicitly provided for herein or authorized by the other party
in writing and except as required by law.
3.4 Manufacturing. LICENSEE agrees that, to the extent required
by Federal laws or regulations then in effect and
10
<PAGE> 11
CONFIDENTIAL
to the extent Licensed Products are sold within the United States, if
such Licensed Products are based upon INVENTIONS developed through
research supported by a Federal Agency, such Licensed Products will be
manufactured substantially in the United States.
3.5 Exporting. LICENSEE assures OREGON it does not intend and
will not knowingly, without prior written consent and approvals (if
required) of the Office of Export Administration of the U.S.
Department of Commerce, transmit, transfer, sell, give, or deliver
directly or indirectly any INVENTIONS or Licensed Products to any
foreign government, or to any company or entity operating under the
aegis of, or on behalf of, any foreign government, or to any other
entity whose purpose is to facilitate the transfer of INVENTIONS or
Licensed Products to any foreign government, in any manner contrary to
or in violation of the Export Administration Regulations of the U.S.
Department of Commerce or the International Traffic in Arms
Regulations of the U.S. Department of Defense or the U.S. State
Department. The obligations under this clause shall survive
notwithstanding termination of this Agreement.
3.6 Effect of Waiver. No waiver of any default, condition,
provisions or breach of this Agreement shall be deemed to imply or
constitute a waiver of any other like default, condition, provision or
breach of this Agreement.
3.7 Confidential Information. To the extent permitted by law, each
party shall use the same degree of care as it employs in protecting
its own confidential information to maintain in confidence and not use
or disclose, other than for purposes in accordance with this
Agreement, all information provided by the other party that are
identified in writing as confidential and acknowledged to be
confidential, except to the extent the party receiving the information
establishes that such information or materials (a) are already in the
public domain or (b) otherwise became known to the receiving party
from a third party who has the right to disclose such information.
The foregoing obligations of the parties with respect to any
confidential information shall survive any termination of this
Agreement
11
<PAGE> 12
CONFIDENTIAL
and shall continue for a period of three (3) years from the date such
confidential information was disclosed hereunder.
3.7.1 If the inventor or OREGON desires to disclose any
confidential information received from LICENSEE in
publications or presentations at scientific meetings, the
inventor or OREGON shall provide LICENSEE a copy of such
manuscript to be published or presented. Upon receipt of the
manuscript, LICENSEE shall have thirty (30) days to review and
determine whether or not to seek a patent therefor. If
LICENSEE determines that it does wish to seek a patent, it may
require delay in publication or presentation to permit filing
of the patent, provided that such delay will not exceed thirty
days after notifying OREGON of its desire to patent the
disclosed invention. LICENSEE will work with OREGON in good
faith to accommodate shorter deadlines, if needed by OREGON
and reasonably possible for LICENSEE.
3.8 Notices. All Notices under this Agreement shall be given in
writing and shall be addressed to the parties at the following
addresses:
For OREGON:
Director, Technology Transfer
1238 University of Oregon
Eugene, OR 97403-1238
For LICENSEE:
Director, Business Development
11149 North Torrey Pines Road
La Jolla California
3.8.1 Notices shall be in writing and shall be deemed
delivered when received, if delivered by a courier, or
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<PAGE> 13
CONFIDENTIAL
on the second business day following mailing, if sent by
first-class certified or registered mail, postage prepaid.
3.9 Governing Law. This Agreement shall be governed by the laws
of the state of OREGON.
3.10 Use of Names. LICENSEE shall not use OREGON'S name in any
advertising, promotional or sales literature without the prior written
assent to such use by OREGON.
3.11 Severability. In the event that any provision hereof is found
to be invalid or unenforceable pursuant to a final judgment or decree,
the remainder of this Agreement shall remain valid and enforceable
according to its terms.
3.12 OREGON and LICENSEE agree that any dispute or controversy
arising out of, in relation to, or in connection with this Agreement,
or the validity, enforceability, construction, performance or breach
hereof, shall be settled by binding arbitration under the then-
current American Arbitration Association by one (1) arbitrator
appointed in accordance with such Rules. The arbitrator shall permit
such discovery as he/she deems necessary to achieve an equitable
resolution of this dispute. The decision and/or award rendered by the
abritrator shall be written, final, and non-appealable and may be
entered in any court of competent jurisdiction. The parties agree
that, any provision of applicable law notwithstanding, they will not
request, and the arbitrator shall have no authority to award, punitive
or exemplary damages against any party. The cost of any arbitration,
including administrative fees and fees of the arbitrator, shall be
shared equally by the parties. Each party shall bear the cost of its
own attorney's fees and expert fees.
3.13 NEITHER PARTY SHALL BE LIABLE TO THE OTHER FOR ANY SPECIAL,
CONSEQUENTIAL, INCIDENTIAL, OR INDIRECT DAMAGES ARISING OUT OF THIS
AGREEMENT, HOWEVER CAUSED, UNDER ANY THEORY OF LIABILITY.
3.14 Neither party shall lose any rights hereunder or be
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CONFIDENTIAL
liable to the other party for damages or losses (except for payment
obligations) on account of failure of performance by the defaulting
party if the failure is occasioned by war, strike, fire, Act of God
earthquake, flood, lockout, embargo, governmental acts or orders or
restrictions, failure of suppliers, or any other reason where failure
to perform is beyond the reasonable control and not caused by the
negligence or intentional conduct or misconduct of the nonperforming
party, and such party has exerted all reasonable efforts to avoid or
remedy such force majeure; provided, however, that in no event shall a
party be required to settle any labor dispute or disturbance. IN
WITNESS WHEREOF, the parties have executed this Agreement.
By:__________________________
Timothy J. Rink
President, CEO and Chairman
Aurora Bioscience Corporation
Date:________________________
STATE OF OREGON, ACTING BY
AND THROUGH THE OREGON STATE
BOARD OF HIGHER EDUCATION ON
BEHALF OF THE UNIVERSITY OF
OREGON
By:___________________________
Melinda Grier
OSSHE Contracts Officer
Date:________________________
By:___________________________
Steadman Upham
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<PAGE> 15
CONFIDENTIAL
Vice Provost for Research
and Graduate Education
Date:__________________________
15
<PAGE> 1
Certain confidential portions of this Exhibit were omitted by means of blackout
of the text (the "Mark"). This Exhibit has been filed separately with the
Secretary of the Commission without the Mark pursuant to the Company's
Application Requesting Confidential Treatment under Rule 406 under the
Securities Act.
EXHIBIT 10.20
RESEARCH AGREEMENT
THIS RESEARCH AGREEMENT("Agreement") is entered into as of this 2nd
day of April 1996 (the "Effective Date") by and between AURORA BIOSCIENCES
CORPORATION, a company organized under the laws of the State of Delaware,
having an office at 1020 Prospect Street, Suite 405, La Jolla, CA 92037
(hereinafter referred to as "Aurora"), and SEQUANA THERAPEUTICS, INC., a
California corporation having its principal place of business at 11099 North
Torrey Pines Road, Suite 160, La Jolla, CA 92037 (hereinafter referred to as
"Sequana").
RECITALS
WHEREAS, Aurora is a start-up drug discovery company focused on
exploiting novel, highly sensitive fluorescence assays for use in genetically
engineered mammalian cells and the development of ultra-high throughput
screening systems. Aurora desires to obtain additional capital resources and
customers with novel genomic based targets for developing cell-based assays in
high-throughput screens.
WHEREAS, Sequana is a company engaged in the discovery,
characterization and positional cloning of disease genes, which desires to
extend its discovery capabilities into functional analysis of newly identified
genes, cell-based or other systems for screening such gene targets and methods
for high throughput screening of potential drug candidates.
WHEREAS, In connection with the execution of this Agreement, Sequana
will purchase Preferred Stock of Aurora as set forth in a separate Stock
Purchase Agreement between the parties of even date herewith (the "Stock
Purchase Agreement").
NOW, THEREFORE, the parties agree as follows:
AGREEMENT
ARTICLE 1 - DEFINITIONS
As used in this Agreement, the following terms shall have the
following meanings.
1.1 "AFFILIATE" shall mean any entity that directly or indirectly
owns, is owned by, or is under common ownership, with a party, where "owns" or
"ownership" means direct or indirect possession and/or control of at least 50%
of the outstanding voting securities of a corporation or a comparable equity
interest in any other type of entity.
1.
<PAGE> 2
1.2 "AURORA PATENT" means the rights granted by any governmental
authority under a Patent which covers a Product or a method of use, apparatus,
material or manufacture useful in the discovery, development, manufacture, use
or sale of a Product, which Patent Aurora (i) owns, controls or has a license
to (with a right to sublicense) as of the Effective Date or (ii) acquires
ownership, control or license rights to (with a right to sublicense) during the
term of the Agreement or in the course of carrying out the Research Program.
1.3 "AURORA TECHNOLOGY" shall mean the ***
1.4 "COMPOUND" means a compound provided by Sequana to Aurora to
be used in screening activities in the Research Program.
1.5 "FTE" means 1880 hours of work per year by a full time
equivalent scientific or technical researcher, appropriately qualified for the
tasks assigned under the Research Plan.
1.6 "FUNCTIONAL ANALYSIS" means background research ***
1.7 "NET SALES" means the ***
1.8 "PATENT" means (i) unexpired letters patent (including
inventor's certificates and utility models, petty patents and similar
intellectual property rights) which have not been held invalid or unenforceable
by a court of competent jurisdiction from which no appeal can be taken or has
been taken within the required time period, including without limitation any
substitution, extension, registration, confirmation, reissue, re-examination,
renewal or any like filing thereof and (ii) pending applications for letters
patent, including without limitation any continuation, division or
continuation-in-part thereof and any provisional applications.
1.9 "PRODUCT" shall have the meaning assigned in Section 4.2.
1.10 "RESEARCH PLAN" shall mean the plan established pursuant to
Section 3.3 describing the research activities to be undertaken regarding a
particular Target.
1.11 "RESEARCH PROGRAM" means the program described in Article 3.
***CONFIDENTIAL TREATMENT REQUESTED
2.
<PAGE> 3
1.12 "SEQUANA PATENT" means the rights granted by any governmental
authority under a Patent which covers a Product or a method of use, apparatus,
material or manufacture useful in the discovery development, manufacture, use or
sale of a Product, which Patent Sequana (i) owns, controls or has a license to
(with a right to sublicense) as of the Effective Date or (ii) acquires
ownership, control or license rights to (with a right to sublicense) during the
term of the Agreement or in the course of carrying out the Research Program.
1.13 "SEQUANA TECHNOLOGY" shall mean the Sequana Patents and all
know-how, technology, trade secrets, processes, data, methods or other
information and any physical, chemical or biological material that is useful in
the discovery development, manufacture, use or sale of Products which Sequana
(i) owns, controls or has a license to (with a right to sublicense) as of the
Effective Date or (ii) acquires ownership, control or license rights to (with a
right to sublicense) in the course of carrying out the Research Program.
1.14 "TARGET" means a positionally cloned disease gene referred to
in Section 2.1 or an additional target gene referred to in Section 2.2, or the
protein-encoded by such a gene.
1.15 "TECHNICAL COMMITTEE" shall have the meaning assigned in
Section 3.2.
ARTICLE 2 - SELECTION OF TARGETS
2.1 POSITIONALLY CLONED DISEASE GENES. Sequana may select ***
genes or genetically validated molecular targets, discovered as a result of
positional cloning or statistical genetics of specified familial lineages, to
which Aurora will apply all scientifically applicable Aurora Technology,
including Functional Analysis, screen development and screening, pursuant to an
agreed Research Plan as provided in Section 3.2, during the term of this
Agreement.
2.2 ADDITIONAL TARGET GENES. During the term of this Agreement,
Aurora will also apply all scientifically applicable Aurora Technology
including, related to Functional Analysis, screen development and screening for
*** additional newly identified genes or genetically validated molecular
targets, discovered by any method, including but not limited to positional
cloning, provided that: (i) Sequana specifies each such Target in writing to
Aurora; (ii) notwithstanding any other provision of this Agreement (including
but not limited to Section 3.3), within *** days of the date of such notice the
parties agree on an appropriate Research Plan for such Target (which agreement
shall not be unreasonably withheld by Aurora); and (iii) prior to Sequana's
delivery of any such notice Aurora has not already commenced work for, or good
faith negotiations with, another party, as demonstrated by written
correspondence, with respect to such Target. With regard to the foregoing
clause (iii), if negotiations are not concluded with such a third party within
*** of delivery of Sequana's notice, Sequana shall be entitled to include the
relevant additional target gene in the Research Program subject to the terms of
this Agreement.
2.3 CHANGE IN CONTROL. Notwithstanding Section 2.2, in the event
of a Sequana change in control (defined below) at any time during the term of
this Agreement, Sequana's rights
***CONFIDENTIAL TREATMENT REQUESTED
3.
<PAGE> 4
and Aurora's obligations to include Targets in the Research Program shall
thereafter be limited to Targets discovered by positional cloning or
statistical genetics of specified familial lineages. In such event, new
Targets not discovered by positional cloning or statistical genetics of
specified familial lineages may not be added to the Research Program. Work in
progress under the Research Program on Targets not discovered by positional
cloning or statistical genetics of specified familial lineages shall continue
according to the agreed Research Plan. Each party's rights and obligations
under this Agreement shall continue following an Aurora change in control.
For purposes of this Section 2.3, "change in control" of an entity
shall mean (i) a merger or consolidation in which the shareholders of such
entity immediately prior to such merger or consolidation do not own at least
fifty percent (50%) of the surviving entity, (ii) the sale, transfer or other
disposition of all or substantially all of the assets of such entity, or (iii)
any transaction or series of related transactions in which a third party
acquires the beneficial ownership (as defined under the Securities Exchange Act
of 1934, as amended) of more than fifty percent (50%) of the voting power of
such entity's outstanding voting securities.
ARTICLE 3 - RESEARCH PROGRAM
3.1 OBJECTIVES; DILIGENCE. Following the selection of Targets in
accordance with Article 2, the parties agree to conduct a research program (the
"Research Program") in accordance with this Article 3 involving Functional
Analysis by Aurora of Targets, development of screens for such Targets,
screening of Compounds or any combination thereof. Aurora shall use
commercially reasonable diligence to pursue work under the Research Program so
long as Sequana is in compliance with its funding commitments under Section
4.1.
3.2 TECHNICAL COMMITTEE. A technical committee (the "Technical
Committee") consisting of two senior research and development executives from
each of Sequana and Aurora shall review opportunities for research projects to
be conducted under this Agreement and monitor and assess the status of work
being conducted pursuant to this Agreement. The Technical Committee shall
provide a quarterly written report regarding such matters to each party. The
Technical Committee shall meet at least quarterly at such times and places as
shall be mutually agreed upon by the members of the Technical Committee.
3.3 RESEARCH PLANS. The Research Program will be conducted in
accordance with a research plan (the "Research Plan") for each Target. Each
Research Plan shall by devised by the Technical Committee in accordance with
the terms of this Agreement, but Sequana shall have the determining vote on
disputed decisions (subject to clause (ii) of Section 2.2 and except with
respect to the allocation of work among Aurora, Sequana and/or third parties
under Research Plans as provided in Section 3.4 below). Each Research Plan
shall provide for *** FTEs to perform such work through the term of such
Research Plan, however in the event of early completion of the Research Plan or
a determination by Sequana that a Target is not commercially viable, Sequana
will have the right to substitute a new Target under the Research Plan. Work
may additionally be done by Sequana scientists or third parties to the extent
the parties agree that such work is more appropriately done by Sequana or such
third parties, and Sequana and/or such
*** CONFIDENTIAL TREATMENT REQUESTED
4.
<PAGE> 5
third parties shall have a non-exclusive, non-assignable, royalty-free license
for the term of the applicable research contract to Aurora Technology to the
extent necessary to perform such work. It is the understanding of the parties,
however, that Aurora will be primarily responsible for performing research under
applicable Research Plans. Notwithstanding the foregoing, however, to the
extent any Research Plan with respect to Targets selected under Section 2.1 or
Section 2.2 is directed solely toward Functional Analysis, then such Research
Plan shall involve *** FTEs through the term of such Research Plan, however in
the event of early completion of the Research Plan, or a determination by
Sequana that a Target is not commercially viable, Sequana will have the right to
substitute a new Target under the Research Plan.
3.4 RESEARCH COMMITMENTS. Aurora shall not be required to
provide, at any one time, *** Aurora appropriately qualified scientists at any
one time under this Agreement for research programs directed to Targets
selected under Section 2.1 above or *** Aurora appropriately qualified
scientists at any one time under this Agreement for research programs directed
to Targets selected under Section 2.2 above. Further, Aurora shall not be
obligated to provide *** appropriately qualified scientists at any one time
under this Agreement for Functional Analysis of Targets where the Research
Plans under which such scientists are working are directed solely toward
Function Analysis.
3.5 SPECIAL EQUIPMENT. Aurora may require Sequana to provide to
Aurora, at Sequana's expense (including but not limited to delivery charges to
and from Aurora's facilities, and insurance costs), any specific equipment (to
be owned by Sequana) that Aurora requires for work under a Research Plan.
Aurora shall not use such equipment for other purpose except with the consent
of Sequana.
3.6 EXCLUSIVITY. During the term of this Agreement Aurora will not
apply Aurora technology to any gene or genetically Validated Molecular Targets
discovered as a result of positional cloning or statistical genetics of
specified familial lineages, other than those provided by Sequana hereunder. ***
The exclusivity provisions of this Section 3.6 will continue so long as, within
*** of the effective date of the UC License Agreement (defined below), Sequana
shall have either (i) selected Targets and agreed to related Research Plans
providing for research to be conducted by Aurora requiring at least *** Aurora
FTEs or (ii) paid Aurora an additional exclusivity fee of ***. If this
exclusivity obligation has been maintained throughout the initial term of this
Agreement, it will continue to apply through any extension of the term of the
Agreement under Section 7.1.
3.7 RESEARCH LICENSE TO AURORA. Sequana hereby grants to Aurora a
non-exclusive, non-transferable, fully-paid license under the Sequana
Technology solely for the purpose of carrying out the Research Program in
accordance with this Agreement.
***CONFIDENTIAL TREATMENT REQUESTED
5.
<PAGE> 6
ARTICLE 4 - COMPENSATION
4.1 RESEARCH PAYMENTS. Sequana shall make research funding
payments to Aurora a rate equal to *** per FTE for each FTE provided for
in any Research Plan. Such payments shall be made on a quarterly basis in
advance.
If the Agreement is extended as provided in Section 7.1, the research
funding rate per FTE for such extension years will be *** per FTE ***.
4.2 MILESTONES AND ROYALTIES.
(A) If any Compound screened by Aurora under the Research
Program, or any derivative thereof, is developed and commercialized as a drug
product, or any assay development or screening work performed by Aurora under
this Agreement otherwise directly or indirectly leads to the development and
commercialization of any drug products (collectively, "Products"), Aurora shall
be entitled to receive from Sequana, subject to paragraph (c) below, *** of all
license fees, milestone payments and other fees and compensation received by
Sequana from third parties (if any) with respect to such Products and (ii)
royalties on Net Sales of such Products equal to the *** (if any) with respect
to such Products; provided, however, that with respect to any Product, the
amounts to which the percentages under the foregoing clauses (i) and (ii) are
applied shall be *** in connection with the discovery, development or
commercialization of such Product.
(B) With respect to any Target on which Aurora performs
Functional Analysis but not screening or assay development work referred to
under Section 4.2(a), if the Functional Analyses of any such Targets performed
by Aurora under this Agreement directly or indirectly lead to the development or
commercialization of any Products acting substantially on any such Target,
Aurora shall be entitled to receive from Sequana, subject to paragraph (c)
below, (i) *** of all license fees, milestone fees and other fees and
compensation received by Sequana from third parties (if any) with respect to
such Products and (ii) royalties on Net Sales of such Products equal to *** (if
any) with respect to such Products; provided, however, that the amounts to which
the percentages under the foregoing clauses (i) and (ii) are applied shall be
********* in connection with the discovery, development or commercialization
of such Products.
In no event shall any license fees, milestone payments,
royalties or other payments paid by Sequana and referred to in the provisos in
Sections 4.2(a) and 4.2(b) be applied on more than one occasion to reduce the
amounts upon which percentages are payable to Aurora under this Section 4.2.
***CONFIDENTIAL TREATMENT REQUESTED
6.
<PAGE> 7
(C) Aurora shall not be entitled to receive any amount of
(i) license fees, milestone payments, royalties or other fees or compensation
received by Sequana from third party collaborators to the extent such payments
are received solely and specifically in consideration of Sequana's research
activities in connection with and including discovering the gene with respect
to which screening services are being provided by Aurora to Sequana, or (ii)
payments from third party collaborators (a) for research or development work
performed by Sequana or (b) as reimbursement of patient collection costs, or
(iii) equity investments in Sequana even if at a premium to market price. The
provisions of this paragraph (c) and the provisos contained in Sections 4.2(a)
and 4.2(b) shall not apply to the extent the parties shall both otherwise agree
in writing to an alternative compensation arrangement with respect to any
Products, such as in the event that Sequana has not entered into a separate
gene discovery agreement with a commercial partner, after considering in good
faith the relative contributions by the parties (Aurora, Sequana and third
parties) of intellectual property, specialist know how and prior work done and
any unusual or special features of the contractual arrangements to which
Sequana is subject for a particular project, including but not limited to the
fact that no substantial milestones or royalties are payable to Sequana
pursuant to such arrangements. Notwithstanding anything in this Agreement to
the contrary, Aurora shall not be entitled to receive any amounts of any
payments received by Sequana under the following agreements as in effect on the
date hereof: (i) the Collaborative Research Agreement between Sequana and
Glaxo Wellcome Inc. dated July 27, 1994; (ii) the Collaborative Research
Agreement dated June 30, 1995 between Sequana and Corange International, Ltd.;
and (iii) the Collaborative Research Agreement dated June 12, 1995 between
Sequana and Boehringer Ingelheim International GmbH; provided, however, that
notwithstanding any other provision of this Agreement, Aurora shall not be
required to provide screening or assay development services or Functional
Analysis under this Agreement with respect to any genes or molecular targets
identified (or with respect to which Sequana may otherwise receive
compensation) under such agreements unless, with respect to any such gene or
molecular target under any such agreement, such agreement is hereafter amended
to provide for the payment of compensation to Sequana for the provision of such
services or Functional Analysis, in which case this sentence shall no longer
apply with respect to such agreement (it being understood that the payments
payable to Sequana under such agreements as in effect on the date hereof shall
be deemed to be payments referred to under clauses (i), (ii) and (iii) of this
Section 4.2(c)).
4.3 PAYMENTS. Sequana shall provide reports to Aurora within 60
days after the end of each calendar quarter during this Agreement stating the
quantity and description of Products subject to royalty sold the preceding
calendar half year, the Net Sales thereof and the calculation of the royalty
due, as well the amount of any other payments due under Section 4.2 and the
basis for determining such amount. All payments due hereunder shall be paid
simultaneously with the submission of such reports. Payments shall be made in
United States Dollars. If any taxes are imposed and required to be withheld
from such payments, the taxes withheld shall be for the account of Aurora and
shall reduce the payments required to be made hereunder. Sequana shall make
any required withholding payments to appropriate tax authorities and forward to
Aurora all appropriate receipts and other documents necessary to enable Aurora
to recover such withheld taxes to the extent permissible under applicable law.
7.
<PAGE> 8
4.4 RECORDS AND AUDITS. Sequana shall keep true and accurate
records and/or books of account containing information reasonably required for
the computation and verification of all payments to be made hereunder, which
records and/or books shall at all reasonable and mutually convenient times
during ordinary business hours be open for periodic inspection, not more than
once each calendar year and for inspection of no more than the three prior years
of records and/or books, by an independently certified public accounting firm of
nationally recognized standing selected by Aurora who is reasonably acceptable
to Sequana, for the sole purpose of and only to the extent reasonably necessary
for verification of the amounts due and payable under this Agreement. The
accounting firm shall disclose to Sequana all information gathered or concluded,
and to Aurora only whether the records are correct or not and the specific
details concerning any discrepancies. The expense of the audit shall be borne
by Aurora, unless the audit reveals a deficiency *** in payments due hereunder,
in which case Sequana shall bear the expenses of the audit. The results of the
audit shall be binding on both parties. Any deficiency in payments revealed by
the audit shall be due and payable within thirty (30) days of the audit results
being disclosed to the parties, with simple interest from the date originally
due at a rate of eight percent (8%) per annum.
ARTICLE 5 - INTELLECTUAL PROPERTY RIGHTS
5.1 INVENTIONS AND DATA. Inventions made by Aurora using
Compounds supplied by Sequana under this Agreement, all data generated by
Aurora in connection with the evaluation of Compounds pursuant to this
Agreement and all rights in such inventions and data shall be owned by Sequana
and Sequana shall have the right to obtain Patents thereon at its own expense
and using counsel of its selection. Inventions made by Aurora pertaining
generally to assay development technology and screening technology shall be
owned by Aurora and Aurora shall have the right to obtain Patents thereon at
its own expense and using counsel of its selection. Aurora's rights shall,
however, be subject to any Patent rights owned by Sequana and no rights or
license under Sequana Patents shall inure to Aurora except as expressly
provided in this Agreement. All inventions made by Sequana in connection with
the Research Program shall be owned by Seqana.
For the avoidance of doubt, as between Aurora and Sequana, Sequana
shall own all rights to any Compounds identified as potential drug candidates,
and any assays containing a Target developed, in the course of the Research
Program.
5.2 COMMERCIAL LICENSE TO SEQUANA. Sequana shall use commercially
reasonable diligence to pursue product opportunities arising out of the
Research Program. Subject to the terms of this Agreement, Aurora hereby grants
to Sequana a worldwide, exclusive license under the Aurora Technology to
develop, make, use and sell Products covered by Section 4.2. Sequana may
sublicense such rights to third parties, provided that payments received by
Sequana pursuant to such sublicenses shall be covered by Section 4.2.
5.3 ***
***CONFIDENTIAL TREATMENT REQUESTED
8.
<PAGE> 9
***
The licenses granted under this Section 5.3 shall terminate upon the
expiration of the Agreement, provided that following the expiration of the
Agreement, Aurora and Sequana shall negotiate in good faith with regard to
extending the licenses set forth above on reasonable terms to be mutually
agreed upon by the parties.
5.4 PATENT ENFORCEMENT. Each party shall have the right at its
own expense to protect the Patents owned by it and licensed to the other party
under this Agreement from infringement by third parties and to control any
litigation initiated to prosecute such infringers. The decision to undertake
litigation shall be in the sole discretion of such party and its decision to
enter into litigation shall be binding on the other party. In the event that
party shall recover profits and/or damages from an infringer based upon the
infringer's sales of a Product, such party agrees to pay the other party a
percentage of such profit and/or damages equal to the percentage the other
party would have received hereunder in the absence of infringement, after
deducting the recovering party's expenses of litigation, including costs and
legal fees incurred therein.
***CONFIDENTIAL TREATMENT REQUESTED
9.
<PAGE> 10
ARTICLE 6 - CONFIDENTIALITY
6.1 The parties contemplate that during the course of their
relationship arising under this Agreement, it may be necessary to provide the
other with confidential information to facilitate the performance of their
obligations pursuant to this Agreement. The parties agree, therefore, that
information received from the other shall be maintained in confidence and that
reasonable and prudent practices shall be followed to maintain the information
in confidence, including, where necessary, obtaining written confidentiality
agreement from employees and consultants not already bound by such agreements
who have access to the confidential information. Information received in
confidence shall be used by a party only for the purpose of and in connection
with its performance of this Agreement. The obligation to maintain information
in confidence shall survive expiration or termination of this Agreement for a
period of five (5) years thereafter.
However, a party shall not be obliged to maintain information in
confidence which it can show by written documentation: (a) to have been
publicly known prior to submission to it by the other party; (b) to have been
known or available to it prior to submission by the other party; (c) to have
become publicly known without fault on its part subsequent to submission by the
other party; (d) to have been received by it from a third party having
possession of the information without obligations of confidentiality; (e) to
have independently developed it without reference to or use of the confidential
information; or (f) to be required to be disclosed pursuant to applicable law
or the order of any court or governmental agency having jurisdiction thereof
after notice to the other party sufficient to afford it an opportunity to
intervene in the proceeding where disclosure is required.
ARTICLE 7 - TERM AND TERMINATION
7.1 TERM OF AGREEMENT; OPTION TO EXTEND. The term of the Agreement
shall be three years from the effective date of the UC License Agreement,
subject to Sequana's right to extend such term for up to two one-year periods
for a fee of *** for each such one-year extension (but only for an additional
*** Targets discovered by Sequana as a result of positional cloning or
statistical genetics of specified familial lineages under Section 2.1 and an
additional *** targets under Section 2.2 per extension year. Up to one-half of
such extension fee ***. In the event that Aurora has not established
fluorescence- based screening equipment referred to in the Recitals to this
Agreement with a capacity of *** tests per week within *** months of the
Effective Date, no fee will be payable upon any extension of the Agreement under
this Section 7.1. Following the expiration of the initial three year term, or
any extension thereof, Sequana shall retain the license granted in Section 5.2
of this Agreement and shall remain subject to the terms of Section 4.2, 4.3 and
4.4, as well as Articles 6 and 8.
7.2 TERMINATION FOR MATERIAL BREACH. Each party can terminate
this Agreement in the event of a material breach of this Agreement by the other
party by giving the other party notice of its intention to terminate if within
ninety (90) days of such notice such party does not cure the breach.
*** CONFIDENTIAL TREATMENT REQUESTED
10.
<PAGE> 11
7.3 CONSEQUENCES OF TERMINATION FOR MATERIAL BREACH.
(A) BREACH BY SEQUANA. If Aurora terminates this
Agreement pursuant to Section 7.2, then in addition to any other remedies that
may be available, all rights and obligations of the parties under this
Agreement (including but not limited to all licenses) shall terminate as of the
effective date of such termination and each party shall promptly return to the
other party all documentation and materials in such party's possession;
provided, however, that Sequana shall remain obligated to pay milestones and
royalties under this Agreement, and the provisions of Sections 4.2, 4.3, 4.4
and 5.2 of this Agreement shall survive such termination, with respect to work
done hereunder by Aurora through the effective date of such termination, and
nothing shall relieve any party of any payment obligations accrued prior to the
effective date of such termination.
(B) BREACH BY AURORA. If Sequana terminates this
Agreement pursuant to Section 7.2, then in addition to any other remedies that
may be available, all rights and obligations of the parties under this Agreement
(including but not limited to all licenses) shall terminate as of the effective
date of such termination and each party shall promptly return to the other party
all documentation and materials in such party's possession; provided, however,
that (i) the provisions of Sections 4.2, 4.3, 4.4, and 5.2 of this Agreement
shall survive such termination, with respect to work done hereunder by Aurora
through the effective date of such termination (Section 5.3 shall survive for 3
years from the effective date of the UC License Agreement and thereafter as
Sequana may elect subject to clause (ii) of this Section 7.3(b) below) and (ii)
Sequana may elect to continue the license grant under Section 5.3 and Aurora's
exclusivity obligation under Section 3.6 for up to two (2) one-year periods
after expiration of the initial 3 year period after the effective date of the UC
License Agreement following such termination by delivery to Aurora on or prior
to the effective date of such termination cash in the amount of *** for each
such year and (iii) nothing shall relieve any party of any payment obligations
accrued prior to the effective date of such termination.
The provisions of Sections 5.1, 5.2, 5.4, 6.1, this 7.3 and 8.1 and Article 9
shall in any event survive termination of this Agreement.
7.4 DISPUTE RESOLUTION. In the event of any disputes under this
Agreement, the Technical Committee shall first attempt to resolve such disputes
in good faith. If the members of the Technical Committee cannot resolve such
matters, such matters shall be referred to the Chief Executive Officers of each
party for resolution. If such persons are unable to resolve such matters, then
such matters shall be resolved by Arbitration pursuant to Section 9.6.
ARTICLE 8 - INDEMNIFICATION
8.1 INDEMNIFICATION. Sequana shall defend, indemnify and hold
Aurora harmless from and against all claims and expenses, including reasonable
attorneys' fees, arising out of the development, manufacture, use or sale of
Products by Sequana and its Affiliates and sublicensees, except to the extent
caused by the negligence or misconduct of Aurora; provided that (i) Aurora
*** CONFIDENTIAL TREATMENT REQUESTED
11.
<PAGE> 12
provides Sequana prompt notice of any such claim, (ii) Sequana shall not be
obligated to indemnify Aurora for any loss in connection with any settlement
unless Sequana consents in writing to such settlement and (iii) Sequana shall
have the exclusive right to defend and settle any such claim.
8.2 INDEMNIFICATION. Aurora shall defend, indemnify and hold
Sequana harmless from and against all claims and expenses, including reasonable
attorneys' fees, arising out of the development, manufacture, use or sale of
Products by Aurora and its Affiliates and sublicensees, except to the extent
caused by the negligence or misconduct of Sequana; provided that (i) Sequana
provides Aurora prompt notice of any such claim, (ii) Aurora shall not be
obligated to indemnify Sequana for any loss in connection with any settlement
unless Aurora consents in writing to such settlement and (iii) Aurora shall
have the exclusive right to defend and settle any such claim.
ARTICLE 9 - MISCELLANEOUS
9.1 NO AGENCY OR PARTNERSHIP. Neither party shall be deemed to be
an agent of the other party as the result of any transaction under or related
to this Agreement and shall not in any way incur any obligations on behalf of
the other party. This Agreement shall not constitute a partnership or a joint
venture, and neither party may be bound by the other to any contract,
arrangement or understanding except as specifically stated herein.
9.2 PUBLICITY. Neither party shall, in connection with its
activities under this Agreement, use the name of the other party in any
advertising, promotional sales literature, or other publicity without prior
written consent obtained from the other party, which consent shall not be
unreasonably withheld.
9.3 NOTICES. All written notices, payment, reports and the like
required or permitted hereunder shall be deemed to be effective when mailed,
postage prepaid, by first class, registered or certified mail to the address of
the applicable party set forth above or to such other person or by such other
means as to which the parties may from time to time have agreed.
9.4 ASSIGNMENT. This Agreement, in whole or in part, shall be
assignable by each party in the case of a transfer of all the assets of such
party or to a successor entity by merger, acquisition or other reorganization.
Any other assignment shall require the consent of the other party, which
consent shall not be unreasonably withheld, and any attempted assignment other
than is provided herein without such consent shall be void.
9.5 GOVERNING LAW. This Agreement shall be governed and construed
in accordance with the laws of the State of California as applied to contracts
entered into and performed entirely in California among California residents.
9.6 ARBITRATION. Subject to Section 7.4, any and all disputes
arising hereunder shall be resolved through binding and nonappealable
arbitration to be held in San Diego County administered by the American
Arbitration Association ("AAA"). Any such arbitration shall be
12.
<PAGE> 13
conducted before a single arbitrator to be appointed by the parties from the
AAA roster. If the parties fail to agree as to the identity of the single
arbitrator within fifteen (15) days after notice by any party of any dispute
hereunder, the AAA shall make such appointment within ten (10) days of the
expiration of such fifteen (15) day period, provided that in any event the
arbitrator shall be an active member of the California bar who is reasonably
familiar with the biotechnology industry and is experienced with transactions
of this type. The conduct of the arbitration hearing and discovery prior
thereto shall be in accordance with the California Code of Civil Procedure,
California Rules of Court, and California Rules of Evidence. The arbitrator
shall be empowered to make appropriate orders and rulings and shall be
empowered to award legal and equitable relief deemed appropriate thereby;
provided that notwithstanding any other provision of this Agreement, in no
event shall punitive damages be awarded. The parties shall complete any and
all discovery with respect to any such dispute within thirty (30) days after
the selection of the arbitrator and the arbitrator shall be instructed to issue
any and all orders and/or rulings within sixty (60) days after selection of the
arbitrator (subject in each case to extension if the arbitrator determines
extenuating circumstances exist which justify such extension). Notwithstanding
the foregoing provisions of this paragraph 9.6 however, the parties shall be
entitled to seek and obtain appropriate injunctive relief with respect to
Article 6 in any court of competent jurisdiction pending the results of the
arbitration.
9.7 NO WAIVER. The failure of either party to enforce at any time
any of the provisions of this Agreement, or any rights in respect thereto, or
to exercise any election herein provided, shall in no way be considered to be a
waiver of such provisions, rights or elections, or in any way to affect the
validity of this Agreement. Exercise by either party any of its rights herein
or any of its elections under the terms or covenants herein shall not preclude
either party from exercising the same or any other rights in this Agreement,
irrespective of any previous action or proceeding taken by either party
hereunder.
9.8 SEVERABILITY. If any provision of this Agreement is
judicially determined to be void or unenforceable, such provision shall be
deemed to be severable from the other provisions of this Agreement which shall
remain in full force and effect. Either party may request that a provision
otherwise void or unenforceable be reformed so as to be valid and enforceable
to the maximum extent permitted by law.
9.9 FORCE MAJEURE. No liability hereunder shall result to a party
by reason of delay in performance caused by force majeure, that is,
circumstances beyond the reasonable control of the party, including, without
limitation, acts of God, fire, flood, war, civil unrest, labor unrest, or
shortage of or inability to obtain material as equipment.
9.10 ASSURANCES AND WARRANTIES. The parties agree to execute,
acknowledge and deliver all such further instruments, and to do all such other
acts, as may be necessary or appropriate in order to carry out the intent and
purpose of this Agreement. Each party warrants that it has the authority to
enter into this Agreement on the basis of the terms and conditions herein and
that it has not made any other Agreement inconsistent with its obligations
under this Agreement.
13.
<PAGE> 14
9.11 ENTIRE AGREEMENT; AMENDMENTS. The terms and conditions herein
constitute the entire Agreement between the parties and shall supersede all
previous Agreements, either oral or written, between the parties hereto with
respect to the subject matter hereof. No amendment, modification or other
understanding bearing on this Agreement shall be binding upon either party
hereto unless it shall be in writing and signed by the duly authorized officer
or representative of each of the parties and shall expressly refer to this
Agreement.
9.12 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original and all of which
together shall constitute one instrument.
IN WITNESS WHEREO, the parties hereto have caused this Agreement to be
duly executed by their duly authorized representatives.
AURORA BIOSCIENCES CORPORATION
By:
------------------------------------
Name:
----------------------------------
Title:
--------------------------------
SEQUANA THERAPEUTICS, INC.
By:
------------------------------------
Name:
----------------------------------
Title:
--------------------------------
14.
<PAGE> 1
EXHIBIT 10.21
COLLABORATION AND LICENSE AGREEMENT
THIS AGREEMENT, effective as of April 24, 1996 ("Effective Date"), is
made by and between:
PACKARD INSTRUMENT COMPANY, INC., a State of Delaware corporation,
having its principal office at 800 Research Parkway, Meriden, Connecticut 06450
(hereinafter referred to as "PACKARD").
and
AURORA BIOSCIENCES CORPORATION, a State of Delaware corporation, with
its principal office at 11149 Torrey Pines Road, La Jolla, California 92037
(hereinafter referred to as "AURORA").
RECITALS
WHEREAS, AURORA possesses bioreagents, chemical probes,
instrumentation and imaging technology for miniaturization and high-throughput
analysis of cell-based and biochemical assays.
WHEREAS, PACKARD possesses instrumentation, reagents and assay
technology for the high-throughput sample preparation and analysis of
biological assays.
WHEREAS, PACKARD and AURORA desire to collaborate to develop and
commercialize high-throughput systems using miniaturized automated screens.
In consideration for the payments and mutual undertakings detailed
herein, PACKARD and AURORA agree as follows:
I. DEFINITIONS
In this Agreement, the following terms shall have the following
meanings:
1.1 "AFFILIATE" shall mean any entity which controls, is controlled
or is under common control with AURORA or PACKARD. An entity shall be regarded
as in control of another entity if it owns or controls at least fifty percent
(50%) of the shares of the subject entity entitled to vote in the election of
directors (or, in the case of an entity that is not a corporation, for the
election of the corresponding managing authority).
1.2 "ASSAY" shall mean any ***
*** CONFIDENTIAL TREATMENT REQUESTED
<PAGE> 2
1.3 "AURORA REAGENTS" shall mean *** *** *** . For purposes
of the foregoing, "controlled by" means possession of the ability to grant a
license or sublicense as provided for herein without violating the terms of any
agreement with or other arrangement with any third party.
1.4 "AURORA TECHNOLOGY" shall mean ***. For purposes of the
foregoing, "controlled by" means possession of the ability to grant a license or
sublicense as provided for herein without violating the terms of any agreement
with or other arrangement with any third party.
1.5 "AURORA UC REAGENTS" shall mean ***
1.6 ***
1.7 "CONFIDENTIAL INFORMATION" shall mean (i) any proprietary or
confidential information or material in tangible form disclosed hereunder that
is marked as "Confidential" at the time it is delivered to the receiving party,
or (ii) proprietary or confidential information disclosed orally hereunder
which is identified as confidential or proprietary when disclosed and such
disclosure of confidential information is confirmed in writing within thirty
(30) days by the disclosing party.
1.8 "DETECTOR" shall mean a ***
1.9 "HTS" shall mean the ***
1.10 "IMAGER" shall mean a high resolution fluorescence imager and
associated software.
*** CONFIDENTIAL TREATMENT REQUESTED
<PAGE> 3
1.11 "JOINT TECHNOLOGY" shall have the meaning set forth in Article
8.1.2.
1.12 "LIQUID-HANDLING HEAD" shall mean a device containing arrays
of two (2) or more PIEZO-DEVICES.
1.13 "NANO-PLATE" shall mean ***
1.14 "NET SALES" shall mean the *** . A "sale" shall also include a
transfer or other disposition for consideration other than cash, in which case
such consideration shall be valued at the fair market value thereof.
1.15 "PACKARD TECHNOLOGY" shall mean *** . For purposes of the
foregoing, "controlled by" means possession of the ability to grant a license
or sublicense as provided for herein without violating the terms of any
agreement with or other arrangement with any third party.
1.16 "PIEZO-DEVICE" shall mean ***
1.17 "PRODUCT(S)" shall mean the LIQUID-HANDLING HEADS, DETECTORS,
and NANO-PLATES which are jointly developed by AURORA and PACKARD under this
Agreement.
1.18 "UC LICENSE" shall mean a license agreement entered by AURORA
and the Regents of the University of California ("UC") which shall be attached
hereto as Addendum 2, based on that certain Letter Agreement dated March 4,
1996 between AURORA and UC, a copy of which is attached as Addendum 1.
II. COLLABORATION PROGRAM
2.1 OBJECTIVE. PACKARD and AURORA hereby commit to undertake and
pursue a collaboration program with the primary objective to develop and
commercialize
***CONFIDENTIAL TREATMENT REQUESTED
<PAGE> 4
high-throughput screening systems using PRODUCTS and ASSAYS for the purpose of
drug or agrochemical discovery in the pharmaceutical, biotechnology and
agrochemical market sectors (the "Collaboration Program"). It is understood
that the initial goal of the Collaboration Program shall be the development of
PRODUCTS, but the parties anticipate that the Collaboration Program will be
expanded to include the development of improved versions of the initial
PRODUCTS.
2.2 STANDARD. AURORA and PACKARD each will use commercially
reasonable efforts to achieve the objectives of the Collaboration Program as
specified in this Agreement.
2.3 MANAGEMENT.
2.3.1 A research and development steering committee (the
"R&D Steering Committee") and a marketing steering committee (the "Marketing
Steering Committee") will be established after the Effective Date. Each
Committee shall consist of two (2) members from each of AURORA and PACKARD, and
each of the parties may replace their respective Committee members at any time,
upon written notice to the other party. With respect to each Committee, AURORA
and PACKARD shall have one vote on the respective Committee and decisions of
each Committee shall be made by unanimous vote; provided, however, that any
matter that a Committee is unable to resolve shall be referred to the president
of each of AURORA and PACKARD, who shall meet within thirty (30) days to
resolve such matter.
2.3.2 The R&D Steering Committee shall annually prepare a
written description and plan of the research and development activities to be
conducted pursuant to the Collaboration Program, oversee the implementation of
the research and development to be undertaken, monitor and review the progress
thereof, and redirect the activities of the Collaboration Program as may be
required during the term of this Agreement. The Marketing Steering Committee
shall be responsible for providing guidance, support and coordination of the
PRODUCT commercialization activities of the parties and the activities of
PACKARD with regard to AURORA UC REAGENTS.
2.3.3 During the term of this Agreement, each Committee
shall meet at least quarterly, or as otherwise agreed. Such meetings shall
alternate between the parties' principal places of business, or may be held at
such other locations as the parties agree. Each party shall pay its own
expenses associated with such meetings.
2.3.4 AURORA and PACKARD will each designate a liaison
officer, each of whom shall be a member of the R&D Steering Committee to lead
an alliance management team to ensure effective communication and
collaboration. The alliance management team will submit a quarterly written
report to the Board of Directors of each company.
2.3.5 During the term of this Agreement, the president of
each of AURORA and PACKARD will meet annually at a mutually agreed location.
The R&D Steering
<PAGE> 5
Committee and Marketing Steering Committee shall each make a presentation at
such meeting describing their activities in the past year and proposed
activities in the next year.
2.4 RECORDS. Each party shall maintain records of the
Collaboration Program (or cause such records to be maintained) in sufficient
detail so as to properly reflect all work done and results achieved in the
performance of the Collaboration Program.
2.5 INVENTIONS AND DISCOVERIES. During the term of this
Agreement and for a period of one (1) year thereafter, each party shall
promptly notify the other party in writing of any invention or discovery,
whether or not patentable, conceived, reduced to practice, or otherwise
developed in connection with the Collaboration Program. In addition, each
party shall promptly provide the R&D Steering Committee with a detailed written
description of any such invention or discovery.
III. OBLIGATIONS
3.1 OBLIGATIONS OF AURORA.
3.1.1 AURORA shall use commercially reasonable efforts to
achieve the objectives of the Collaboration Program and, shall cooperate with
and assist PACKARD in the performance of its obligations hereunder. Without
limiting the generality of the foregoing, AURORA shall seek to achieve the
following milestones:
(a) ***.
(b) within *** after the Effective Date, *** or more.
(c) ***
3.1.2 UC REAGENT SUPPLY. AURORA will supply PACKARD with
initial aliquots of the AURORA UC REAGENTS listed on Addendum 4 hereto, and
such other AURORA UC REAGENTS as the parties may agree in writing, in
sufficient amounts to facilitate the manufacture and commercialization of such
AURORA UC REAGENTS by PACKARD under this Agreement.
3.2 OBLIGATIONS OF PACKARD.
*** CONFIDENTIAL TREATMENT REQUESTED
<PAGE> 6
3.2.1 PACKARD shall use commercially reasonable efforts to
achieve the objective of the Collaboration Program and, to that end, shall
cooperate with and assist AURORA in the performance of AURORA's obligations
hereunder. Without limiting the generality of the foregoing, PACKARD shall
seek to achieve the following milestones:
(a) ***, as specified in and subject to the conditions
of this Agreement.
(b) within***after the Effective Date,
(c) ***
(i) ***
(ii) ***
(iii) ***
(iv) ***
In addition, PACKARD shall ***within***
As used herein, a "functional prototype" shall mean a prototype instrument
which (i) is fully operational and (ii) meets sufficient performance
specifications to permit effective beta-testing by AURORA or a third party.
As soon as practicable, but in any case within ninety (90) days following the
delivery of a functional prototype for a particular PRODUCT, AURORA shall
notify PACKARD (a) that the
*** CONFIDENTIAL TREATMENT REQUESTED
<PAGE> 7
functional prototype conforms in all respects to the applicable PRODUCT
performance specifications set forth in Addendum 3, in which case such
prototype design shall be deemed an "accepted functional prototype", or (b)
that the functional prototype fails to perform in accordance with the
applicable performance specifications, identifying specific deficiencies. In
the event that AURORA provides PACKARD notice pursuant to (a) above, the date
of dispatch of such notice shall be the Acceptance Date for such accepted
functional prototype PRODUCT. PACKARD shall use its best efforts to correct
any deficiencies identified by AURORA pursuant to (b) above and provide AURORA
a corrected functional prototype within such period , but in the event that
despite such efforts PACKARD is unable to provide AURORA with an accepted
functional prototype within such ninety (90) day period, then the parties shall
negotiate appropriate and reasonable changes to the Development Program
Schedule, pursuant to Section 3.4.
All prototypes delivered by PACKARD pursuant to this Article 3.2.1(c) shall be
deemed for all purposes to have been consigned by PACKARD to AURORA and title
and ownership thereto shall remain with PACKARD. At PACKARD's election, AURORA
shall execute and deliver to PACKARD such financing statements or other notices
or other documentation required to reflect PACKARD's interest and to reflect
and secure PACKARD's interest.
3.2.2 PACKARD shall provide AURORA, at AURORA's request,
with a reasonable quantity (of at least six (6) and such greater quantity as
may be mutually agreed) of additional accepted functional prototypes of
LIQUID-HANDLING HEADS and DETECTORS for development, evaluation, and use by
AURORA or its customers, at ***.
3.2.3 Upon delivery of a subsequent generation of functional
prototype for a particular PRODUCT or PACKARD's notice of availability of a
production model of a particular PRODUCT, the previous generation functional
prototype of such PRODUCT provided under Article 3.2.1 shall within ninety (90)
days, at AURORA's election, be returned to PACKARD or purchased by AURORA at
PACKARD's fully burdened manufacturing cost.
3.3 JOINT OBLIGATIONS. AURORA and PACKARD will use commercially
reasonable efforts to have designed and arranged for evaluation, production and
delivery of experimental NANO-PLATES to AURORA *** after the Effective Date and
to arrange for commencement of manufacture of NANO-PLATES *** after the
Effective Date. PACKARD and AURORA contemplate that the development and
production of NANO-PLATES will be outsourced to a suitable manufacturer
acceptable to both AURORA and PACKARD. PACKARD shall be responsible for any
costs associated with such development and manufacture. It is understood and
agreed that AURORA and PACKARD will each own an undivided one-half interest in
all intellectual property relating to the NANO-PLATES.
3.4 MODIFICATIONS TO DEVELOPMENT SCHEDULE. The parties recognize
that circumstances may require adjustment to or modification of the development
schedules set forth
*** CONFIDENTIAL TREATMENT REQUESTED
<PAGE> 8
above. Any such adjustment or modification shall be subject to mutual
agreement by AURORA and PACKARD.
3.5 SPECIFICATIONS. The parties shall use commercially reasonable
efforts to ensure that the PRODUCTS will meet AURORA's requirements as defined
in Addendum 3 hereto.
3.6 STAFF. The projects may involve AURORA staff being temporarily
assigned to work at PACKARD facilities and/or PACKARD staff being temporarily
assigned to work at AURORA facilities. Each party will bear the costs of its
own staff and any liabilities incurred thereby.
IV. FINANCING
4.1 GENERAL. Except as expressly provided herein, AURORA and
PACKARD each agrees to bear all costs and expenses incurred in complying with
its obligations under this Agreement.
4.2 PACKARD CONTRIBUTION. On the Effective Date, PACKARD will
purchase One Million Dollars ($1,000,000) worth of AURORA preferred stock at a
thirty five percent (35%) premium over the price per share paid by investors in
AURORA'S first round financing, per the Preferred Stock Purchase
Agreement attached as Addendum 5.
4.3 AURORA CONTRIBUTIONS. AURORA shall pay to PACKARD the
following amounts during the Collaboration Program:
4.3.1 *** shall be paid *** and *** shall be paid ***.
4.3.2 *** shall be paid *** and *** shall be paid ***.
4.3.3 *** shall be paid *** and *** shall be paid ***
***CONFIDENTIAL TREATMENT REQUESTED
<PAGE> 9
4.3.4 If the scope of the Collaboration Program shall be
modified by mutual agreement, for example, to encompass the development of a
technically distinct imaging system for NANO-PLATES, then the parties shall
negotiate on a case-by-case basis such further contributions by AURORA as may
be mutually agreed. Any agreement by AURORA to make additional contributions
may include such other terms as shall be mutually agreed, such as, for example,
the payment of additional negotiated royalties.
V. LICENSES
5.1 UC LICENSE. AURORA agrees to use its best efforts to negotiate
and execute on or before June 30, 1996 an exclusive license agreement with UC
as contemplated by the Letter Agreement attached as Addendum 1. Within seven
(7) days after execution thereof, AURORA shall deliver to PACKARD a true copy
of such UC LICENSE and the parties shall also cause a true copy thereof to be
attached to this Agreement as Addendum 2.
5.2 UC REAGENTS.
5.21 SUBLICENSE. Subject to the terms and conditions of
this Agreement and the execution of the UC License, effective upon execution of
the UC LICENSE, AURORA ***
5.2.2 RUNNING ROYALTIES. In consideration of the foregoing
sublicense, PACKARD hereby agrees to pay to AURORA royalties on the sale of
AURORA UC REAGENTS to non-profit organizations pursuant to this sublicense equal
to *** *** of such AURORA UC REAGENTS. It is understood and agreed that AURORA
shall be solely responsible for all royalties and other payments due or payable
to the UC under the UC LICENSE, and AURORA hereby agrees to indemnify, defend,
and hold PACKARD harmless from and against any claim or liability arising from
any failure of AURORA to fulfill its obligations to the UC, except if caused by
any action or inaction by PACKARD.
***CONFIDENTIAL TREATMENT REQUESTED
<PAGE> 10
5.2.3 MINIMUM ANNUAL ROYALTIES. PACKARD shall exercise
reasonable diligence to market AURORA UC REAGENTS hereunder and, for so long as
the sublicense remains exclusive, agrees to pay to AURORA *** royalties
according to the following schedule:
***
Such amounts shall be paid on the applicable anniversary of the UC License
Effective Date, and shall be fully creditable against running royalties due in
the year such minimum annual royalty payment is made.
5.2.4 ***
5.3 ADDITIONAL RIGHTS. PACKARD will have the right of first
negotiation with respect to:
5.3.1 the right to make, have made and/or sell AURORA UC
REAGENTS to for-profit organizations; and
5.3.2 the right to make, have made and/or sell AURORA
REAGENTS other than AURORA UC REAGENTS, including, but not limited to,
promiscuous G-proteins which AURORA may own or otherwise control, in the event
that AURORA wishes such AURORA REAGENTS to be sold and does not wish to conduct
such activities itself.
5.3.3 If PACKARD wishes to exercise its right of first
negotiation with respect to a particular AURORA REAGENT, including any AURORA
UC REAGENT, it shall notify AURORA, and in such event AURORA and PACKARD shall
negotiate exclusively in good faith for a period of ninety (90) days with
respect to an agreement with respect thereto. If AURORA and PACKARD fail to
enter into a written letter of intent for such an agreement or agreement within
such period, or such longer period as the parties may agree, then AURORA shall
be free to enter into negotiations and definitive agreements with a third party
regarding such a license to such AURORA REAGENTS, and PACKARD shall have no
further rights with respect thereto.
5.4 CROSS LICENSES.
*** CONFIDENTIAL TREATMENT REQUESTED
<PAGE> 11
5.4.1 AURORA hereby grants ***
***
***
5.4.2 PACKARD hereby grants ***
VI. PRODUCT COMMERCIALIZATION AND EXCLUSIVITY
6.1 MANUFACTURING RIGHTS. During the term of this Agreement,
PACKARD shall *** During the term of this Agreement, the parties agree that
production quality NANO-PLATES shall be produced by a mutually agreed
independent third party manufacturer.
6.2 SUPPLY AGREEMENT. During the term of this Agreement, PACKARD
agrees to sell to AURORA such PRODUCTS as AURORA may wish to purchase. At
least three (3) months prior to the launch of any PRODUCT, AURORA and PACKARD
shall negotiate in good faith and enter into a Supply Agreement which shall
contain reasonable terms for the purchase by AURORA of PRODUCTS from PACKARD
including warranties, indemnities and the like.
6.3 PRODUCT COMMERCIALIZATION.
6.3.1 Unless otherwise agreed by the parties, all
production PRODUCTS purchased by AURORA from PACKARD shall be sold by PACKARD
***
6.3.2 PACKARD will have responsibility for distribution,
installation, and service support for all production PRODUCTS in line with
PACKARD's customary practice in territories where PACKARD has a subsidiary as
of the Effective Date, or as otherwise mutually agreed. The parties agree that
PACKARD shall have responsibility for such activities in Korea.
*** CONFIDENTIAL TREATMENT REQUESTED
<PAGE> 12
6.4 LIQUID-HANDLING HEADS.
6.4.1 For a period of *** from and after the Acceptance Date
of an accepted functional prototype LIQUID-HANDLING HEAD containing arrays of
ninety-six (96) or more PIEZO-DEVICES, AURORA shall have the *** After the
foregoing *** , PACKARD and AURORA ***
6.4.2 If within ***
6.4.3 Except as provided in Articles 6.4.1 and 6.4.2,
PACKARD shall ***
6.4.4 For purposes of this Article 6.4, "accepted functional
prototype" shall have the meaning set forth in the last paragraph of
Article 3.2.1.
6.5 DETECTOR.
6.5.1 For a period of ***
*** CONFIDENTIAL TREATMENT REQUESTED
<PAGE> 13
***. For purposes of this Article 6.5, "accepted functional prototype" shall
have the meaning set forth in the last paragraph of Article 3.2.1.
6.5.2 Except as provided in Article 6.5.1, PACKARD shall
have the exclusive worldwide rights to make, have made and sell (including the
right to sublicense others) DETECTORS for all assays, applications, sample
densities and markets.
6.6 NANO-PLATES.
6.6.1 For a period of ***. After the foregoing ***. During
the initial term of this Agreement, neither party may grant any third party a
license with respect to any intellectual property relating to the NANO-PLATES or
have the NANO-PLATES made by a third party, without the prior written consent of
the other party hereto.
6.6.2 PACKARD shall pay royalties to AURORA of *** of
NANO-PLATES to third parties.
6.6.3 AURORA and PACKARD will equally share ownership and
the right to use the "NANO-PLATE" trademark and any variant thereof. Each
party shall notify the other and provide the other samples of any intended use
of such trademarks, and agrees to make any changes reasonably requested by the
other party in order to protect the value of such trademarks. Neither party
shall grant any third party any right to use any such trademarks without the
prior written consent of the other party, and neither shall attempt to solely
register any trademarks, service marks, logos or tradenames confusingly similar
to the "NANO-PLATE" or any variant thereof.
6.7 AURORA RIGHTS.
6.7.1 If a DETECTOR which does not use any AURORA
TECHNOLOGY, including, without limitation, any AURORA patent rights, is
developed based upon JOINT TECHNOLOGY, and if AURORA shall contribute
financially, as mutually agreed, in excess of its initial financial
contribution set forth in Article 4.3, PACKARD shall pay to AURORA royalties
on the Net Sales of such DETECTORS in an amount to be negotiated in
***CONFIDENTIAL TREATMENT REQUESTED
<PAGE> 14
good faith and agreed to by the parties at the time of such further
contribution, *** and ***.
6.7.2 If the parties shall co-develop IMAGERS or DETECTORS
that substantially use any AURORA TECHNOLOGY, which the parties agree may
require a further financial contribution from AURORA in excess of its initial
contribution set forth in Article 4.3, PACKARD shall pay to AURORA royalties on
the Net Sales of such IMAGERS or DETECTORS in an amount to be negotiated in
good faith and agreed to by the parties *** and ***.
6.7.3 If PACKARD decides within six (6) months of delivery
of a DETECTOR which meets agreed performance specifications not to
commercialize such DETECTOR, AURORA shall have a right, exercisable for a
period of three (3) months, to obtain from PACKARD an exclusive license, with
the right to grant and authorize sublicenses, to make, have made and sell such
DETECTOR. Such license shall provide for payment of royalties to PACKARD on
net sales of such DETECTORS by AURORA, its AFFILIATES and sublicensees in an
amount to be mutually agreed upon equal to the sum of ***. In the event
of exercise of such right, PACKARD will provide, at AURORA's cost, all
specifications, plans, protocols, technical drawings, component lists, etc.
required for the manufacture, quality control and service support of the
DETECTOR.
6.7.4 AURORA will have the right of first negotiation with
respect to the co-development or commercialization of any PRODUCT which PACKARD
does not wish to commercialize for HTS or AUTOMATED CHEMISTRY which utilizes
any PACKARD TECHNOLOGY, provided AURORA shall have made a contribution to
development costs of those new technologies as mutually agreed. If AURORA
wishes to exercise its right of first negotiation, it shall notify PACKARD, and
in such event PACKARD and AURORA shall negotiate exclusively in good faith for
a period of ninety (90) days with respect to an agreement with respect thereto.
If PACKARD and AURORA fail to enter into a written letter of intent for such an
agreement or agreement within such period, or such longer period as the parties
may agree, then PACKARD shall be free to enter into negotiations and definitive
agreements with a third party regarding a co-development or commercialization
of such technology and AURORA shall have no further rights with respect
thereto.
6.7.5 If AURORA desires to purchase PACKARD's proprietary
reagents for its ***. AURORA's access to such PACKARD reagents will not be
subject to a licensing fee or royalty. On a case-by-case basis, AURORA will
have first right of negotiation for exclusive rights for the use, market and
sell PACKARD'S HTRF homogenous time resolved fluorescence technology, associated
reagents, and instrumentation and/or luminescent technology and associated
reagents for HTS in NANO PLATES for a period of *** from the
***CONFIDENTIAL TREATMENT REQUESTED
<PAGE> 15
Effective Date, but AURORA may not sublicense such intellectual property
without prior written consent from PACKARD.
6.8 RESIDUAL RIGHTS. Except as hereinabove expressly granted to
AURORA, PACKARD shall have the exclusive rights with respect to the PRODUCTS.
VII. ROYALTY REPORTS AND PAYMENTS
7.1 After the first commercial sale of a PRODUCT or AURORA'S UC
REAGENTS on which royalties are required hereunder, PACKARD shall make
quarterly written reports to AURORA within thirty (30) days after the end of
each calendar quarter, stating in each such report the aggregate Net Sales of
the PRODUCTS and AURORA UC REAGENTS sold during the calendar quarter upon which
a royalty is payable hereunder, and an annual report on or before February 28
of each year stating the number, description and aggregate Net Sales of
PRODUCTS and AURORA UC REAGENTS sold during the preceding calendar year.
AURORA shall treat all such reports as confidential information of PACKARD.
Concurrently with the making of such reports, PACKARD shall pay to AURORA the
applicable royalties specified in this Agreement.
7.2 Royalties due hereunder shall be paid in U.S. dollars. All
checks and bank drafts shall be drawn on United States banks and shall be
payable to AURORA at the address listed herein.
7.3 If any currency conversion shall be required in connection
with the calculation of royalties hereunder, such conversion shall be made
using the selling exchange rate for conversion of the foreign currency into
U.S. dollars, quoted for current transactions reported in The Wall Street
Journal for the last business day of the calendar quarter to which such payment
pertains.
7.4 PACKARD shall keep complete, true, and accurate books of account
and records, including number and description of PRODUCTS and AURORA UC REAGENTS
sold, for the purpose of determining the royalty amounts payable under this
Agreement. Such books and records shall be kept at the principal place of
business of PACKARD for at least three (3) years following the end of the
calendar quarter to which such books and records pertain. Such books and
records shall be open for inspection at the principal place of business of
PACKARD during such three (3) year period by a representative selected by AURORA
for the purpose of verifying the royalty statements. Such inspections shall be
made at reasonable times as mutually agreed. The representative will be obliged
to execute a reasonable confidentiality agreement on terms consistent with the
terms of this Agreement prior to commencing any such inspection. Inspections
conducted under this Article shall be at the expense of AURORA, unless a
variation or error producing *** of the amount stated as having been due by
PACKARD for any period covered by the inspection is established in the course of
any such inspection, or through arbitration under Article 12.1, whereupon all
costs relating to the inspection for such period and any unpaid amounts that are
so established shall be paid by PACKARD.
*** CONFIDENTIAL TREATMENT REQUESTED
<PAGE> 16
VIII. INTELLECTUAL PROPERTY RIGHTS
8.1 OWNERSHIP.
8.1.1 Except as otherwise expressly provided in this
Agreement, AURORA shall retain all right, title and interest in and to any
intellectual property invented, developed or acquired solely by AURORA
employees during the term of this Agreement, and PACKARD shall retain all
right, title and interest in and to any intellectual property invented,
developed or acquired solely by PACKARD employees during the term of this
Agreement.
8.1.2 Except as provided in Article 8.1.3, all right, title
and interest in and to intellectual property, whether or not patentable, that
is invented or developed by at least one employee or agent of AURORA and at
least one employee or agent of PACKARD in connection with the Collaboration
Program shall be owned jointly by PACKARD and AURORA ("JOINT TECHNOLOGY").
Inventorship of inventions and other intellectual property conceived and
reduced to practice in connection with the Collaboration Program, and the
rights of ownership with respect to such inventions and other intellectual
property, whether such JOINT TECHNOLOGY is patentable or not, shall be
determined in accordance with United States patent law.
8.1.3 All right, title and interest to the JOINT TECHNOLOGY
having specific and direct application only to the PACKARD TECHNOLOGY and any
new techniques and methods used to apply the PACKARD TECHNOLOGY and having
specific and direct application only to the PACKARD TECHNOLOGY, whether made
solely by PACKARD or by AURORA, or jointly by any employees or agents of any of
PACKARD and AURORA, and resulting from the collaboration hereunder shall be
owned exclusively by PACKARD, and all rights, title and interests to any JOINT
TECHNOLOGY having specific and direct application only to the AURORA TECHNOLOGY
and any new techniques and methods used to apply the AURORA TECHNOLOGY and
having specific and direct application only to the AURORA TECHNOLOGY, whether
made solely by AURORA or by PACKARD, or jointly by any employees or agents of
any of AURORA and PACKARD, and resulting from the collaboration hereunder shall
be owned exclusively by AURORA. Each party shall, upon the request of the
other, execute and deliver to the requesting party an assignment and release,
or other appropriate document, with respect to all such rights owned by the
requesting party.
8.2 PATENT PROSECUTION.
8.2.1 AURORA will be responsible for the preparation,
prosecution and maintenance of the AURORA TECHNOLOGY and conducting
oppositions, re-examination and interferences with respect thereto, using
patent counsel of its choice and according to AURORA's reasonable business and
scientific judgment. AURORA will pay all costs of conducting such activities
with respect to the AURORA TECHNOLOGY.
8.2.2 PACKARD will be responsible for the preparation,
prosecution and maintenance of the PACKARD TECHNOLOGY and conducting
oppositions,
<PAGE> 17
re-examination and interferences with respect thereto, using patent counsel of
its choice and according to PACKARD's reasonable business and scientific
judgment. PACKARD will pay all costs of conducting such activities with
respect to the PACKARD TECHNOLOGY.
8.2.3 Each party will cooperate with the other as reasonably
requested in obtaining patent protection for JOINT TECHNOLOGY and shall agree
on which party shall have principal authority for conducting such activities
with respect to such patent application. Each party shall keep the other
informed as to material developments in this regard. AURORA and PACKARD shall
equally share the expenses related to obtaining and maintaining patents with
regard to any inventions within the JOINT TECHNOLOGY in the names of AURORA
and PACKARD; provided, with ninety (90) days notice either party may decline
to fund such activities with regard to any patent application or patent within
the JOINT TECHNOLOGY, in which event the other party shall have ninety (90)
days to decide to pursue such patent application or patent at its expense.
8.3 PATENT ENFORCEMENT.
8.3.1 AURORA and PACKARD will immediately inform each other
of any actual or suspected infringement of the AURORA TECHNOLOGY, PACKARD
TECHNOLOGY or JOINT TECHNOLOGY by third parties which such party hereto would
reasonably believe would effect the commercial success of a PRODUCT or an
AURORA REAGENT.
8.3.2 Unless otherwise agreed between the parties, each
shall have the right, but not the obligation, to bring proceedings against any
infringer of the technology solely owned by it, at its risk and expense, and
shall be entitled to retain any award or damages obtained in any such suit or
proceeding. At the request and expense of either party, the other party shall
give the requesting party all reasonable assistance required to institute and
carry on any such suit or proceeding.
8.3.3 The parties shall confer to determine how to abate
any infringement with respect to JOINT TECHNOLOGY, and how any recovery from
such an action shall be allocated between the parties.
8.4 COOPERATION. The parties shall cooperate with each other and
keep each other informed of all material developments regarding activities
relating to preparation, filing, prosecution and maintenance of patents and
patent applications in the JOINT TECHNOLOGY and in AURORA TECHNOLOGY and
PACKARD TECHNOLOGY, to the extent such technology was conceived, reduced to
practice, or otherwise developed after the Effective Date and which relates to
the Collaboration Program.
8.5 INFRINGEMENT CLAIMS.
8.5.1 If the manufacture, sale or use of a UC REAGENT
results in any claim, suit or proceeding brought by a third party alleging
patent infringement against a party
<PAGE> 18
hereto, such party shall promptly notify the other party. AURORA shall have
the initial right, but not the obligation, to defend and control the defense of
any such claim, suit or proceeding, using counsel of its own choice, and at its
expense. If any such claim, suit or proceeding is made or brought against
PACKARD, AURORA shall promptly confirm to PACKARD in writing that it is
undertaking the defense thereof hereunder. If AURORA shall not elect to defend
any claim, suit or proceeding, or fails to so confirm to PACKARD, PACKARD may
elect to defend and control the defense of such claim, suit or proceeding at
its expense and with counsel of its choice, but shall have no obligation to
provide a defense for AURORA. Each party shall cooperate with the other in any
matter arising hereunder and shall keep the other reasonably informed of all
material developments in connection with any such claim, suit or proceeding.
8.5.2 If the manufacture, sale or use of a PRODUCT results
in any claim, suit or proceeding alleging patent infringement against a party
hereto, such party shall promptly notify the other party. PACKARD shall defend
and control the defense of any such claim, suit or proceeding, using counsel of
its own choice, and shall keep AURORA reasonably informed of all material
developments in connection with any such claim, suit or proceeding.
IX. INDEMNITY
9.1 AURORA. AURORA shall indemnify, defend and hold harmless
PACKARD and its AFFILIATES, and the directors, officers, employees, agents and
counsel of PACKARD and such AFFILIATES, and the successors and assigns of any
of the foregoing (the "PACKARD Indemnitees"), from and against any and all
liabilities, damages, losses, costs or expenses (including reasonable
attorneys' and professional fees and other expenses of litigation and/or
arbitration) resulting from a claim, suit or proceeding brought by a third
party against a PACKARD Indemnitee, arising from or occurring as a result of
(a) activities performed by AURORA in the Collaboration Program, except to the
extent caused by the negligence or willful misconduct of a PACKARD Indemnitee;
or (b) use by PACKARD of AURORA TECHNOLOGY (other than patent rights subject to
the UC LICENSE as to which no indemnification is provided); or (c) the use by
PACKARD of, or the manufacture or commercialization by PACKARD of, any AURORA
REAGENTS (other than AURORA UC REAGENTS as to which no indemnification is
provided) or any PRODUCT to the extent it embodies AURORA TECHNOLOGY (other
than patent rights subject to the UC LICENSE as to which no indemnification is
provided).
9.2 PACKARD. PACKARD shall indemnify, defend and hold harmless
AURORA and its AFFILIATES and the directors, officers, employees, agents and
counsel of AURORA and such AFFILIATES and the successors and assigns of any of
the foregoing (the "AURORA Indemnitees"), from and against any and all
liabilities, damages, losses, costs or expenses (including reasonable
attorneys' and professional fees and other expenses of litigation and/or
arbitration) resulting from a claim, suit or proceeding brought by a third
party against a AURORA Indemnitee, arising from or occurring as a result of (a)
activities performed by PACKARD in the Collaboration Program, except to the
extent caused by the negligence or willful misconduct of an AURORA Indemnitee;
or (b) use by AURORA of PACKARD
<PAGE> 19
TECHNOLOGY; or (c) the use by AURORA of, or the commercialization by AURORA of,
any PRODUCT to the extent it embodies PACKARD TECHNOLOGY.
9.3 PROCEDURE. If any party intends to claim indemnification
under this Article IX, it shall promptly notify the other party (the
"Indemnitor") in writing of any loss, claim, damage, liability or action and
the Indemnitor shall have the right to assume the defense thereof with counsel
mutually satisfactory to the parties. The indemnity agreement in this Article
IX shall not apply to amounts paid in settlement of any loss, claim, damage,
liability or action if such settlement is effected without the consent of the
Indemnitor, which consent shall not be withheld unreasonably. The failure to
deliver written notice to the Indemnitor within a reasonable time after the
commencement of any such action, if prejudicial to its ability to defend such
action, shall relieve such Indemnitor of any liability to the Indemnitee under
this Article IX. At the Indemnitor's request, the Indemnitee under this
Article IX, and its employees and agents, shall cooperate fully with the
Indemnitor and its legal representatives in the investigation of any action,
claim or liability covered by this indemnification and provide full information
with respect thereto.
X. TERM; TERMINATION
10.1 TERM.
10.1.1 The initial term of this Agreement shall be for ten
(10) years from the Effective Date, unless terminated earlier pursuant to
Section 10.2. The parties may renew the Agreement beyond ten (10) years if key
objectives are substantially achieved, on terms to be negotiated in good faith.
10.1.2 If this Agreement is not terminated pursuant to
Section 10.2 or the mutual consent of the parties prior to the end of the
initial term, at the end of the initial term, except as otherwise expressly set
forth herein, all rights granted under this Agreement shall terminate;
provided, the license granted PACKARD under Section 5.2.1 shall convert to a
non-exclusive license and shall remain in effect, subject to the royalty and
other obligations set forth in this Agreement, until the expiration of the last
to expire patent within the UC LICENSE relating to the AURORA UC REAGENTS being
sold at the end of the initial term.
10.2 TERMINATION FOR BREACH.
10.2.1 Either party shall have the right to terminate this
Agreement at any time for a material breach of this Agreement by the other
party, provided that the non-breaching party shall have first given ninety (90)
days prior written notice to the breaching party describing such breach and
stating the non-breaching party's intention to terminate this Agreement if such
breach remains uncured, and the breaching party thereafter fails to cure same.
Upon any such termination of this Agreement, all licenses and sublicenses in
force at the time of termination shall terminate concurrently.
<PAGE> 20
10.2.2 Either party shall have the right to terminate this Agreement
pursuant to this Section 10.2 if the other party has failed to meet any
milestone applicable to it as specified in Article 3.1.1 or 3.2.1 above and the
parties fail to reach a mutually satisfactory resolution after good faith
negotiation within ninety (90) days after such failure; provided, in the event
that the party which failed to meet the milestone used reasonable good faith
efforts to accomplish such milestone, then the Agreement shall not terminate,
but, at the election of the non-breaching party may be modified as follows:
(a) if PACKARD fails to meet any milestone, except if such
failure is caused by a failure by AURORA to meet an earlier milestone,
AURORA may with notice to PACKARD elect to convert the exclusive
license granted in Section 5.2.1 to a non-exclusive license, in which
event the non-exclusive license shall have a term of *** from the date
that AURORA notified PACKARD of its intent to convert the license to a
non-exclusive license; and
(b) if AURORA fails to meet any milestone, except if such
failure is caused by a failure by PACKARD to meet any earlier
milestone, PACKARD may, with notice to AURORA elect itself to market,
lease or sell PRODUCTS into the HTS and AUTOMATED CHEMISTRY markets
during the periods that AURORA would otherwise have exclusive rights to
conduct such activities pursuant to Sections 6.4.1 and 6.4.2.
10.3 SURVIVAL. No termination hereunder shall constitute a waiver
of any rights or causes of action that either party may have for any acts or
omissions or breach hereunder by the other party prior to the termination date.
Articles 2.5, 4.1, 6.6.3, 6.8, 8.1, 8.2, 8.4, 8.5, and VII, IX, X, XI and XII
(all paragraphs) shall survive any termination of this Agreement.
10.4 RETURN OF MATERIALS. Upon any termination of this Agreement,
each party shall promptly return to the other party all CONFIDENTIAL
INFORMATION received from the other party (except one copy of which may be
retained for archival purposes).
10.5 FORCE MAJEURE. Except as expressly provided otherwise herein,
any delays in or failures of performance by either party under this Agreement
shall not be considered a breach of this Agreement if and to the extent caused
by occurrences beyond the reasonable control of the party affected, including
but not limited to: acts of God, earthquake, new regulations or laws of any
government; strikes or other concerted acts of workers; fire, floods,
explosions; riots; wars; rebellion; and, sabotage, and any time for
performances hereunder shall be extended by the time of delay reasonable
occasioned by such occurrence.
XI. CONFIDENTIALITY
11.1 CONFIDENTIAL INFORMATION. Except as expressly provided
herein, the parties agree that, for the term of this Agreement and for five (5)
years thereafter, the receiving party shall keep completely confidential and
shall not publish or otherwise disclose and shall not use for any purpose
except for the purposes contemplated by this Agreement any CONFIDENTIAL
INFORMATION furnished to it by the disclosing party hereto pursuant to this
***CONFIDENTIAL TREATMENT REQUESTED
<PAGE> 21
Agreement, except that to the extent that it can be established by the
receiving party by competent proof that such CONFIDENTIAL INFORMATION:
11.1.1 was already known to the receiving party, other than
under an obligation of confidentiality, at the time of disclosure;
11.1.2 was generally available to the public or otherwise
part of the public domain at the time of its disclosure to the receiving party;
11.1.3 became generally available to the public or otherwise
part of the public domain after its disclosure and other than through any act
or omission of the receiving party in breach of this Agreement; or
11.1.4 was subsequently lawfully disclosed to the receiving
party by a person other than a party hereto.
11.2 PERMITTED USE AND DISCLOSURES. Each party hereto may use or
disclose CONFIDENTIAL INFORMATION disclosed to it by the other party to the
extent such use or disclosure is reasonably necessary in prosecuting or
defending litigation, or complying with applicable governmental regulations or
otherwise submitting information to tax or other governmental authorities,
provided that if a party is required to make any such disclosure of another
party's confidential information, other than pursuant to a confidentiality
agreement, it will give reasonable advance notice to the latter party of such
disclosure and, save to the extent inappropriate in the case of patent
applications, will use its best efforts to secure confidential treatment of
such information prior to its disclosure (whether through protective orders or
otherwise).
11.3 PUBLICITY. Neither party shall, in connection with its
activities under this Agreement, use the name of the other party in any
advertising, promotional or sales literature, or other publicity, without prior
written consent obtained from the other party, which consent shall not be
unreasonably withheld; provided, once consent is obtained with respect to a
particular disclosure, further disclosures which do not materially differ may
be made without any requirement for the further consent of the other party.
11.4 CONFIDENTIAL TERMS. Except as expressly provided herein, each
party agrees not to disclose any terms of this Agreement to any third party
without the consent of the other party; provided, disclosures may be made as
required by securities or other applicable laws, or to actual or prospective
investors or corporate partners, or to a party's accountants, attorneys and
other professional advisors.
XII. GENERAL
12.1 ARBITRATION. Except as otherwise provided specifically
herein, any controversy or claim under this Agreement shall be settled by
arbitration by one arbitrator pursuant to the Commercial Arbitration Rules of
the Association of the American Arbitration Association (the
<PAGE> 22
"Association"); provided that the parties shall first use their best efforts to
resolve such dispute by negotiation. The arbitration shall be conducted in
Dallas, Texas, or such other site as may be agreed by the parties. The
arbitrator shall be selected by the joint agreement of the parties, but if they
do not so agree within twenty (20) days of the date of a request for
arbitration, the selection shall be made pursuant to the rules of the
Association. The decision reached by the arbitrator shall be conclusive and
binding upon the parties hereto and may be filed with the clerk of any court of
competent jurisdiction, and a judgment confirming such decision may, if desired
by any party to the arbitration, be entered in such court. Each of the parties
shall pay its own expenses of arbitration and the expenses of the arbitrator(s)
shall be equally shared; provided, however, that if in the opinion of the
arbitrator(s) any claim hereunder or any defense or objection thereto was
unreasonable, the arbitrator(s) may assess, as part of the award, all or any
part of the arbitration expenses (including reasonable attorneys' fees) against
the party raising such unreasonable claim, defense or objection. Nothing
herein set forth shall prevent the parties from settling any dispute by mutual
agreement at any time.
12.2 BINDING EFFECT; ASSIGNMENT. This Agreement shall be binding
upon the parties' respective successors and permitted assigns. Neither party
may assign this Agreement or any of its rights or obligations hereunder without
the prior written consent of the other party (not to be unreasonably withheld),
and any such attempted assignment shall be void; provided, that either party
may assign this Agreement as part of a merger or consolidation in which the
surviving entity assumes all of such party's rights and obligations hereunder
or a sale of substantially all of the assets of such party to which this
Agreement relates.
12.3 NOTICES. Any legal or other formal notices under this
Agreement shall be in writing and shall be hand delivered, or sent either by
registered mail, return receipt requested, or other method capable of providing
reasonable proof of receipt thereof, to the attention of the party receiving
such communication at the address first set forth or at such other address as
either party may in the future specify to the other party.
12.4 GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of California, without
regard or giving effect to its principles of conflict of laws.
12.5 AMENDMENT. No modification, supplement to or waiver of this
Agreement or any Addendum hereto or any of their provisions shall be binding
upon a party hereto unless made in writing and duty signed by the party to be
charged herewith. In no event may the terms of this Agreement be changed,
deleted, supplemented or waived by any notice, purchase order, receipt,
acceptance, bill of lading or other similar form of document. A failure of
either party to exercise any right or remedy hereunder, in whole or in party,
or on one or more occasions, shall not be deemed either a waiver of such right
or remedy to the extent not exercised, or of any other right or remedy, on such
occasion or a waiver of any right or remedy on any succeeding occasion.
12.6 ENTIRE AGREEMENT. This Agreement, and each Addendum attached
hereto, and each supplemental written agreement contemplated hereunder, sets
forth the entire understanding and agreement of the parties as to the subject
matter thereof, and there are no other
<PAGE> 23
understandings, representations or promises, written or verbal, not set forth
therein or on which either party has relied. If any provisions of any such
Addendum or supplemental written agreement conflict with any provisions set
forth in this Agreement, the provisions of this Agreement shall take
precedence, unless such Addendum or supplemental written agreement expressly
refers to the specific provision(s) of this Agreement that it is intended to
replace or modify (and which shall be limited in force and effect to such
Addendum or supplemental written agreement only).
12.7 SEVERABILITY. This Agreement is intended to be severable. If
any provision(s) of this Agreement are or become invalid, are ruled illegal by
a court of competent jurisdiction or are deemed unenforceable under the current
applicable law from time to time in effect during the term hereof, it is the
intention of the parties that the remainder of the Agreement shall not be
affected thereby and shall continue to be construed to the maximum extent
permitted by law at such time. It is further the intention of the parties that
in lieu of each such provision which is invalid, illegal, or unenforceable,
there shall be substituted or added as part of this Agreement by such court of
competent jurisdiction a provision which shall be as similar as possible, in
economic and business objectives as intended by the parties to such invalid,
illegal or unenforceable provision, but shall be valid, legal and enforceable.
12.8 INDEPENDENT CONTRACTORS. The parties hereto are acting as
independent contractors and shall not be considered partners, joint venturers
or agents of the other. Neither shall have the right to act on behalf of, or
to bind, the other.
12.9 PATENT MARKING. PACKARD agrees to mark all AURORA UC REAGENTS
sold pursuant to this Agreement in accordance with the applicable statute or
regulations relating to patent marking in the country or countries of
manufacture and sale thereof.
12.10 HEADINGS. Captions and paragraph headings are for convenience
only and shall not form an interpretative part of this Agreement. Unless
otherwise specifically provided, all references to an Article incorporate all
Articles or subsections thereunder. This Agreement shall not be strictly
construed against either party hereto.
<PAGE> 24
IN WITNESS WHEREOF, the undersigned parties, acting through their duly
authorized representatives, have executed this Agreement in multiple
counterparts.
PACKARD INSTRUMENT COMPANY, INC.
By:____________________________________
Name: _________________________________
Title: __________________________________
Date: __________________________________
AURORA BIOSCIENCES CORPORATION
By: ____________________________________
Name: __________________________________
Title: __________________________________
Date: ___________________________________
<PAGE> 25
APPENDIX A
*** CONFIDENTIAL TREATMENT REQUESTED
<PAGE> 26
ADDENDUM 1
[UNIVERSITY OF CALIFORNIA LETTERHEAD]
OFFICE OF THE SENIOR VICE-PRESIDENT-- OFFICE OF TECHNOLOGY TRANSFER
BUSINESS AND FINANCE 1320 Harbor Bay Parkway,Suite 150
Alameda, California 94302
tel.: (510) 748-6600
fax: (510) 748-6639
March 4 1996
Michael Rabson, Esq.
Wilson, Sonsini, Goodrich, & Rosati
Two Palo Alto Square
Palo Alto, CA 94304
Re: Roger Tsien's Technologies
UCC Case No. ***
Dear Michael:
The purpose of this letter agreement ("Letter Agreement") is to confirm the
offer by The Regents of the University of California ("The Regents") to license
Aurora Biosciences Corporation. ("Aurora") the exclusive patent rights of
The Regents in the inventions described in *** generally referred
to as GFP and Beta Lactamase technologies ("Regents' Patent Rights") and
property rights covering the associated biological materials owned by The
Regents ("Regents' Property Rights"), under, but not limited to, those terms and
conditions specified in this Letter Agreement. During the period that this
Letter Agreement is in effect, The Regents will not license Regents' Patent
Rights and Regents' Property Rights to any other party other than the U.S.
Government, and will otherwise not encumber Regents' Patent Rights and Regents'
Property Rights in a manner inconsistent with the provisions of this Letter
Agreement.
The license agreement resulting from the negotiations will contain the following
terms and conditions:
GRANT: ***
U.C. AGREEMENT
CONTROL NUMBER
96-30-0558
**CONFIDENTIAL TREATMENT REQUIRED
<PAGE> 27
***
License Issue Fee: Aurora will pay to The Regents a license issue fee of
*** payable according to the following schedule:
***
***
***
***
Such amounts paid to The Regents will not be
refundable, creditable, or reimbursable against any
other fees, royalties, and reimbursements due The
Regents.
Milestone Payments: Aurora will pay to The Regents *** and *** from
each third party with which it enters into a corporate
alliance for screening services utilizing Regents'
Patent Rights and Regents' Property Rights. Aurora
will not pay to The Regents any royalty on any amounts
it receives for equity, research funding, debt
financing, reimbursement of patent filing, prosecution,
and maintenance expenses, or other expenses (as agreed
upon by the parties). The amounts paid to The Regents
under this section will not be creditable or
reimbursable against any other royalties and fees due
The Regents.
Royalties: Aurora will pay to The Regents the following royalties:
A. A royalty of *** by Aurora or its sublicensees of
each product identified with the use of the
technology covered by Regents' Patent Rights and
Regents' Property Rights, and a royalty of *** of
each such product; provided, however, that *** up to
*** as specified immediately above, then the royalty
due to The Regents will be ***. In the event Aurora
is unable to negotiate a royalty based on the net
sales of a product identified with the use of the
technology covered by Regents' Patent Rights and
Regents' Property Rights, then in no case will Aurora
be entitled to take, in lieu of royalties on net
sales of identified products, consideration in any
form for equity in Aurora above fair market value,
research funding for screening to identify products
in excess of fully
*** CONFIDENTIAL TREATMENT REQUESTED
2
<PAGE> 28
burdened direct and indirect costs therefore, or reimbursement
of patent filing, prosecution, and maintenance expenses, or
other expenses (as agreed upon by the parties.)
B. A royalty of *** and its sublicensees of a research reagent and
any other product covered by Regents' Patent Rights and Regents'
Property Rights. Aurora will be entitled to reduce the royalty
due The Regents on the sale of such products if Aurora must
license Regents' Patent Rights, Regents' Property Rights, and
intellectual property rights in which The Regents has no
ownership interest from a third party. In such event, *** Aurora
may *** provided, however, that *** .
Aurora will not be entitled to apply the royalty reduction
specified in Paragraph B of this section to royalties due The
Regents under Paragraph A of this section or any other sections of
the Letter Agreement.
Minimum Annual
Royalties: Beginning *** of the license agreement, Aurora will pay
to The Regents ***. The *** will be paid to The Regents
whether or not a product covered by the license
agreement is available for sale in any country on that
date. Such amount will be credited against earned
royalties due The Regents.
Patent Prosecution
Reimbursement: Aurora will reimburse The Regents for all legal costs
associated with obtaining U.S. and foreign patent
protection comprising The Regents' Patent Rights.
Research Reagents: The Parties have also agreed to the following:
A. Aurora will make available, or have made available, the
research reagents listed on Exhibit A which comprise
biological materials covered by Regents' Property Rights
to nonprofit/academic institutions solely for this
internal, noncommercial research use within one year
following the effective date of the license agreement or
six months after
*** CONFIDENTIAL TREATMENT REQUESTED
3
<PAGE> 29
publication of the first paper describing the use of the
reagent, whichever is later.
B. The Regents will initially supply Aurora with aliquots of
chemical and biological materials and reagents covered by the
Regents' Patent Rights and Regents' Property Rights currently
held in Dr. Tsien's laboratory at UCSD, in sufficient amounts
(to be agreed upon by the parties), to facilitate the
development and commercialization by Aurora of products and
services contemplated under the license agreement.
In addition to the terms and conditions specified in this Letter Agreement, the
license agreement will also contain other terms and conditions agreed upon by
the parties that are normally found in exclusive license agreements executed by
The Regents.
Unless otherwise terminated by the parties hereto, the term of this Letter
Agreement will be for a period commencing on February 6, 1996, and terminating
on June 30, 1996, unless terminated by Aurora prior to that date. If Aurora and
The Regents have not executed the licence agreement on or before June 30, 1996,
The Regents will withdraw its offer to license Aurora under the terms and
conditions specified in this Letter Agreement on that date without further
obligation to Aurora.
If you accept The Regents' offer under the terms and conditions stated herein,
please execute this Letter Agreement, signifying your acceptance, below and
return both fully-executed originals of this Letter Agreement to me. We will
co-execute the Letter Agreement and return one fully-executed original to you.
Agreed to by:
AURORA BIOSCIENCES CORPORATION THE REGENTS OF THE UNIVERSITY OF
CALIFORNIA
By Timothy V. Rink By Candace Voelker
--------------------------- ---------------------------------
(Signature) (Signature)
Name: Timothy V. Rink Name: Candace Voelker
-------------------------
(Please Print)
Title: President and CEO Title: Licensing Manager
------------------------ Office of Technology Transfer
Date: 3/6/96 Date: 3/6/96
------------------------- -----------------------------
<PAGE> 30
Certain confidential portions of this Exhibit were omitted by means of blackout
of the text (the "Mark"). This Exhibit has been filed separately with the
Secretary of the Commission without the Mark pursuant to the Company's
Application Requesting Confidential Treatment under Rule 406 under the
Securities Act.
Exclusive License Agreement
between
The Regents of the University of California
and
Aurora Biosciences, Corp.
for
Fluorescent Assay Technologies
U.C. Case Nos. 93-289, 95-110, 95-219, 96-044, 96-160, 96-161, 96-162, 96-191
<PAGE> 31
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<S> <C>
1. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2. Grant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3. License Issue Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4. Royalties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
5. Due Diligence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
6. Progress and Royalty Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
7. Books and Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
8. Life of the Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
9. Termination by The Regents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
10. Termination by Licensee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
11. Supply of the Biological Materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
12. Maintenance of the Biological Materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
13. Disposition of the Biological Materials, Biological Products, . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
14. Use of Names and Trademarks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
15. Limited Warranty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
16. Patent Prosecution and Maintenance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
17. Patent Marking . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
18. Patent Infringement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
19. Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
20. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
21. Assignability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
22. Late Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
23. Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
24. Failure to Perform . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
25. Governing Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
26. Government Approval or Registration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
27. Export Control Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
28. Force Majeure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
29. Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
30. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
</TABLE>
<PAGE> 32
U.C. Case Nos. 93-289, 95-110, 95-219, 96-044, 96-160, 96-161, 96-162, and
96-191
Exclusive License Agreement
for
Fluorescent Assay Technologies
This license agreement ("Agreement") is effective this ______ day of
____________, 1996, (the Effective Date") by and between The Regents of the
University of California ("The Regents"), a California corporation, having its
statewide administrative offices at 300 Lakeside Drive, 22nd Floor, Oakland,
California 94612-3550 and Aurora Biosciences Corporation ("Licensee"), a
Delaware corporation, having a principal place of business at 11149 North
Torrey Pines Road, La Jolla, CA 92037.
Recitals
Whereas, certain inventions, generally characterized as fluorescent
assay technologies, including DNA encoding a green fluorescent protein and
fluorogenic substrates for Beta-lactamase ("Inventions"), useful for cell
screening, were made at the University of California, San Diego ("UCSD") by Dr.
Roger Tsien, et al., and are claimed in Patent Rights or within the Property
Rights as defined below;
Whereas, Licensee entered into secrecy agreements ("Secrecy
Agreements") with The Regents covering UC Case Nos. *** on August 10, 1994; ***
on January 1, 1995; *** on December 8 1995; and *** on February 22, 1996 for the
purpose of evaluating the Invention;
***CONFIDENTIAL TREATMENT REQUESTED
1
<PAGE> 33
Whereas, Licensee entered into an option agreement ("Option
Agreement") with The Regents on June 1, 1995 and ending on December 1, 1995 in
order to evaluate its commercial interest in the Invention;
Whereas, Licensee entered into a letter agreement with The Regents on
March 6, 1996 covering certain negotiated provisions that are contained in this
Agreement and a letter agreement with The Regents on April 26, 1996, with
respect to the Biological Materials ("Letter Agreements");
Whereas, the Invention was made under research funding provided in
part by the Department of Health and Human Services (DHHS) and in part by the
Howard Hughes Medical Institute (HHMI), and as a consequence, this Agreement is
subject to overriding obligations to the federal government and to HHMI;
Whereas, under 35 USC Section 200-212, The Regents may elect to retain
title to any invention (including the Invention) made by it under U.S.
Government funding;
Whereas, if The Regents elects to retain title to the Invention, then
the law requires that The Regents grant to the U.S. Government a
nontransferable, paid-up, nonexclusive, irrevocable license to use the
Invention by or on behalf of the U.S. Government throughout the world;
Whereas, The Regents elected to retain title to the Invention covered
by UC Case Nos. *** on November 19, 1993; *** on February 5, 1996; ***
on October 25, 1995; and *** and *** on January 8, 1996, and granted the
required licenses to the U.S. Government;
Whereas, The Regents has acquired the right to grant this license from
the Howard Hughes Medical Institute (HHMI) under the terms of the
interinstitutional agreement ("Interinstitutional Agreement"), having UC
Control No. 86-18-0017;
*** CONFIDENTIAL TREATMENT REQUESTED
2
<PAGE> 34
Whereas, The Regents is required under the terms of Interinstitutional
Agreement to grant to the HHMI a paid-up, non-exclusive, irrevocable license to
use the Invention for its non-commercial purposes, but with no right to
sublicense;
Whereas, the Licensee is a "small entity" as defined in 37 CFR Section
1.9 and a "small-business concern" defined in 15 U.S.C. Section 632;
Whereas, it is the intent of the parties to this Agreement to create a
bailment (as provided for in Sections 2.2, 2.3 and 2.4 herein), among other
things, for the Biological Materials as defined below subject to Licensee's
rights as set forth herein;
Whereas, both parties recognize that royalties due under this
Agreement will be paid on pending patent applications and issued patents;
Whereas, Licensee requested certain rights from The Regents to
commercialize the Invention; and
Whereas, The Regents responded to the request of Licensee by granting
the following rights to Licensee so that the products and other benefits
derived from the Invention can be enjoyed by the general public.
- - oo 0 oo - -
The parties agree as follows:
1. Definitions
As used in this Agreement, the following terms will have the meaning
set forth below:
3
<PAGE> 35
1.1 "Patent Rights" means all U.S. patents and patent applications
and foreign patents and patent applications assigned to The Regents, and in the
case of foreign patents and patent applications, those requested under Section
16.4 herein, including any reissues, extensions, substitutions, continuations,
divisions, and continuation-in-part applications (only to the extent, however,
1) that such continuation-in-part applications are covered in Section 1.1.9
below; or 2) that claims in the continuation-in-part applications are entitled
to the priority filing date of one or more of the following patent
applications listed in Sections 1.1.1 through 1.1.8 below) based on and
including any subject matter claimed in or covered by the following:
1.1.1. Pending U.S. Patent Application Serial No. ***,
entitled *** filed ***, by Dr. Roger Tsien, et al.
and assigned to The Regents ***;
1.1.2. Pending U.S. Patent Application Serial No. *** filed
***, by Dr. Roger Tsien, et al. and assigned to The
Regents ***;
1.1.3. Pending U.S. Patent Application Serial No. *** filed
***, by Dr. Roger Tsien, et al. and assigned to The
Regents ***.
1.1.4. Pending PCT Application Serial No. ***, filed *** by
Dr. Roger Tsien, et al. and assigned to The Regents
***;
1.1.5. Pending U.S. Patent Application Serial No. *** filed
***, by Dr. Roger Tsien, et al. and assigned to The
Regents ***;
1.1.6. Any U.S. Patent Application based on subject matter
described in UC Case Number ***
*** CONFIDENTIAL TREATMENT REQUESTED
4
<PAGE> 36
*** disclosed by Dr. Roger Tsien, et al. and assigned
to The Regents; and
1.1.7. Any U.S. Patent Application based on subject matter
described in *** disclosed by Dr. Roger Tsien, et al.
and assigned to The Regents; and
1.1.8. Any U.S. Patent Application based on subject matter
described in ***************************************
*********************************," disclosed by Dr.
Roger Tsien, et al. and assigned to The Regents.
1.1.9 Any continuation-in-part applications that are filed
by *** where such continuation-in-part applications
disclosed Inventions at UCSD and name Roger Tsien or
an employee of The Regents in Roger Tsien's laboratory
at UCSD as an inventor, and are based on one or more
of the patent applications described in Sections
1.1.1 through 1.1.8 immediately above.
1.2. "Biological Materials" means ***
1.3. "Biological Product" means any product containing: (a) a
plasmid, a protein structure, a cDNA clone, a promoter, a gene or a chimeric
gene, antibodies, or fragments thereof and their sequences derived from or
containing the Biological Materials; (b) any protein structure produced or
encoded by the Biological Materials; or (c) a compound (substantially similar
or identical to a compound in (a) or (b) above), produced by chemical synthesis
or by any other method which could not have been produced but for the use of
the Biological Materials. Biological Products may either be Patent Products or
Proprietary Products.
1.4. "Identified Product" means any product, compound, biological
agent, or other material not claimed by the Patent Rights and not comprising a
Biological Product,
***CONFIDENTIAL TREATMENT REQUESTED
5
<PAGE> 37
but identified by Licensee or a sublicensee using the Biological Materials or
Biological Products.
1.5. "Patent Products" means:
1.5.1. any kit, composition of matter, material, product, or
Biological Product;
1.5.2. any kit, composition of matter, material, product, or
Biological Product to be used in a manner requiring
the performance of the Patent Method; or
1.5.3. any kit, composition of matter, material, product, or
Biological Product produced by the Patent Method;
the extent that the manufacture, use, or sale of such kit, composition of
matter, material, product, or Biological Product, in a particular country,
would be covered by or infringe, but for the license granted to Licensee
pursuant to this Agreement, an unexpired claim of a patent or pending claim of
a patent application were it issued as a claim in a patent under Patent Rights
in that country in which such patent has issued or application is pending.
1.6. "Patent Method" means any process or method covered by the
claims of a patent application or patent within Patent Rights or the use or
practice of which would constitute in a particular country, but for the license
granted to Licensee pursuant to this Agreement, an infringement of an unexpired
claim of a patent or pending claim of a patent application were it issued as a
claim in a patent within Patent Rights in that country in which the Patent
Method is used or practiced.
1.7. "Proprietary Products" means any kit, composition of matter,
material, or product containing a Biological Product, the manufacture, use, or
sale of which in a particular country is not within an unexpired, valid claim
of a patent or a pending claim of a patent application under Patent Rights in
such country.
1.8. "Products" means Patent Products, Identified Product,
Proprietary Products, and Services.
6
<PAGE> 38
1.9. "Property Rights" means all personal proprietary rights of The
Regents covering the tangible personal property in the Biological Materials.
In no case, however, will Property Rights include Patent Rights.
1.10. "Research Reagent" means the *** . A Research Reagent may be a
Patent Product or a Proprietary Product.
1.11. "Net Sales" means the *** . Where Licensee distributes
Products to an Affiliate, a Joint Venture, or a sublicensee for end use by such
Affiliate, Joint Venture, or sublicensee, then such distribution will be
considered a sale at list price normally charged to independent third parties,
and The Regents will be entitled to collect a royalty on such sale in accordance
with Article 4. (Royalties).
1.12. "Services" means services provided by Licensee or its
sublicensees to its customers when such services require the use of the Patent
Rights or Property Rights.
1.13. "Service Revenues" means revenues paid to Licensee or its
sublicensees for Services.
***CONFIDENTIAL TREATMENT REQUESTED
7
<PAGE> 39
1.14. "Affiliate(s)" of Licensee means any entity which, directly or
indirectly, controls Licensee, is controlled by Licensee, or is under common
control with Licensee ("control" for these purposes being defined as the
actual, present capacity to elect a majority of the directors of such
affiliate, or if not, the capacity to elect the members that control forty
percent of the outstanding stock or other voting rights entitled to elect
directors) provided, however, that in any country where the local law will not
permit foreign equity participation of a majority, then an "Affiliate" will
include any company in which Licensee will own or control, directly or
indirectly, the maximum percentage of such outstanding stock or voting rights
permitted by local law. Each reference to Licensee herein will be meant to
include its Affiliates.
1.15. "Joint Venture" means any separate entity established pursuant
to an agreement between a third party and Licensee to constitute a vehicle for
a joint venture, in which the separate entity manufactures, uses, purchases,
sells, or acquires Products from Licensee. Each reference to Licensee herein
will be meant to include its Joint Venture(s).
2. Grant
2.1. Subject to the limitations set forth in this Agreement and
subject to the license granted to the U.S. Government and to HHMI as set forth
in the Recitals above, where Patent Rights exists, The Regents hereby grants to
the licensee an exclusive license under Patent Rights to (1) make, have made,
and use the Biological Materials and Biological Products; (ii) to make, have
made, use, import, offer for sale, and sell Patent Products; (iii) to practice
the Patent Methods; and (iv) to provide Services to others.
2.2. Subject to the limitations set forth in this Agreement and
subject to the licenses granted to the U.S. Government and to HHMI as set forth
in the Recitals above, where The Regents may lawfully grant such a license, The
Regents hereby
***CONFIDENTIAL TREATMENT REQUESTED
8
<PAGE> 40
grants to Licensee ***.
2.3. Licensee acknowledges that title to the tangible material
comprising the Biological Materials is owned by The Regents and is not
transferred to Licensee under this Agreement, except that Licensee may transfer
title of such Biological Materials as are sold as Biological Products or
Research Reagents under the terms of this Agreement.
2.4. The licenses granted under Property Rights set forth in
Section 2.2 above expressly limit the rights granted to Licensee to those
licenses expressly stated in this Agreement and for no other purpose.
2.5. The licenses granted hereunder will be subject to the
overriding obligations to the U.S. Government including those set forth in 35
U.S.C. Section 200-212 and applicable governmental implementing regulations.
2.6. The manufacture of Products and the practice of the Patent
Method will be subject to applicable government importation laws and
regulations.
2.7. The Regents also grants to Licensee the right to issue
sublicenses under the rights granted in Sections 2.1 and 2.2 above to third
parties, provided Licensee retains current exclusive rights thereto under this
Agreement. To the extent applicable, such sublicenses will include all of the
rights of and obligations due to The Regents (and, if applicable, the United
States Government) that are contained in this Agreement including payment of
fees and royalties at the rates provided for in Section 3.2 and Article 4.
(Royalties).
2.8. Licensee will notify The Regents of each sublicense granted
hereunder and provide The Regents with a copy of each sublicense, which shall
be treated as
***CONFIDENTIAL TREATMENT REQUESTED
9
<PAGE> 41
Proprietary Information of Licensee as defined in Article 29.
(Confidentiality). Licensee will collect and pay all such fees and royalties
due The Regents from sublicensees as set forth in Sections 3.2 and 4.1 below
(and guarantee all such payments due from sublicensees). Licensee will require
sublicensees to provide it with progress and royalty reports in accordance with
the provisions herein, and Licensee will collect and deliver to The Regents all
such reports due from sublicensees.
2.9. Upon termination of this Agreement for any reason, all
sublicenses granted by Licensee in accordance with this Agreement will remain
subject to the terms of such sublicenses in effect, and shall be assigned to
and assumed by The Regents except that sublicenses which: (i) are in a state of
breach as yet uncured by the sublicensee; or (ii) sublicenses which conflict
with state, or federal law, or the previously established written policy of The
Regents, shall not be assigned to and assumed by The Regents. The Regents will
not be bound by any duties and obligations contained in the sublicenses that
extend beyond the duties and obligations assumed by The Regents in this
Agreement and shall have no right to receive any payment from such sublicensees
except the amounts due under this Agreement for the activities of such
sublicensees.
2.10. The Regents may, at its own discretion, disclose to Licensee
certain chemical and biological materials relating to the Patent Rights and
Property Rights that are developed in Dr. Roger Tsien's laboratory at UCSD.
The Regents hereby grants to Licensee the right to elect to include under this
Agreement any or all of such chemicals and biological materials.
2.11. In accordance with Section 2.10, Licensee will notify The
Regents in writing within 60 days of the disclosure by The Regents of any such
further chemicals and/or biological materials which Licensee elects to be
included under this Agreement, and such chemicals and biological materials
shall be Biological Materials for all purposes of this Agreement.
10
<PAGE> 42
2.12. Because this Agreement grants the exclusive right to use or
sell the Products in the United States, Licensee acknowledges that any
component of a Product which embodies a patented Invention or is produced
through the use thereof for sale in the United States will be manufactured
substantially in the United States to the extent required by 35 U.S.C. Section
204.
2.13. Nothing in this Agreement will be deemed to limit the right of
The Regents to publish any and all technical data resulting from any research
performed by The Regents relating to the Invention, Biological Materials,
Biological Products, and Patent Methods and to make and use the Invention,
Biological Materials, Biological Products, and Patent Methods, and associated
technology owned by The Regents solely for educational and research purposes.
3. License Issue Fee
3.1. As partial consideration for all the rights and licenses
granted to Licensee, Licensee will pay to The Regents a license issue fee of
***, payable according to the following schedule:
3.1.1. *** will be sent by Licensee to The Regents together
with two copies of this Agreement executed by
Licensee;
3.1.2. *** will be sent by Licensee to The Regents on or
before ***;
3.1.3. *** will be sent by Licensee to The Regents on or
before ***;
3.1.4. *** will be sent by Licensee to The Regents on or
before ***;
***CONFIDENTIAL TREATMENT REQUESTED
11
<PAGE> 43
3.1.5. *** will be sent by Licensee to The Regents on or
before ***;
3.1.6. *** will be sent by Licensee to The Regents on or
before ***;
3.1.7. *** will be sent by Licensee to The Regents on or
before ***; and
3.1.8. *** will be sent by Licensee to The Regents on or
before ***.
3.2. Licensee will also pay to The Regents fees equal to *** of
Service Revenues and *** of the Service Revenues *** received by Licensee from
each third party with which it enters into a corporate alliance for screening
services using Patent Rights and Property Rights. Notwithstanding the above,
Licensee shall have no obligation to pay to The Regents any amounts it receives
from a third party for the purchase of equity, research funding, debt financing,
reimbursement of patent filing, prosecution, and/or maintenance expenses or
other expenses.
3.3. ***
4. Royalties
4.1. As further consideration for all the rights and licenses
granted to Licensee, Licensee will also pay to The Regents an earned royalty
based on Net Sales according to the following:
4.1.1. (a) A royalty rate of *** of the Net Sales paid to
Licensee and its sublicensees with respect to each
Identified Product ***
***CONFIDENTIAL TREATMENT REQUESTED
12
<PAGE> 44
*** for each Identified Product, and a royalty rate of
*** of the Net Sales paid to Licensee and its
sublicensees of each Identified Product *** for each
such Identified Product.
(b) Notwithstanding Section 4.1.1(a) above, if
Licensee and a particular sublicensee are unable to
agree on a royalty *** of Identified Products by such
sublicensee *** and a royalty rate *** of Identified
Products for ***, then the royalty due to The Regents
*** will be equal to ***, if any, agreed to between
Licensee and such sublicensee *** of such Identified
Product by such sublicensee.
(c) In the event Licensee is unable to negotiate
with a particular sublicensee any royalty on the Net
Sales of Identified Products, then in such case
Licensee will not be entitled to take, in lieu of
royalties on Net Sales by such sublicensee of
Identified Products, consideration in any form for:
(i) equity in Licensee above fair market value; (ii)
research funding for screening to identify Identified
Products in excess of fully burdened direct and
indirect costs therefore; or (iii) reimbursement of
patent filing, prosecution, and maintenance expenses;
and
(d) For the avoidance of doubt, it is understood
and agreed that, except as provided in Section
4.1.1(a) and (b) above, The Regents shall not be
entitled to any royalty on Net Sales of Identified
Products, and if Section 4.1.1(c) applies to a
particular sublicense, the consideration received by
Licensee from such sublicensee will be in the form of
Service Revenues, and the only amounts due The
Regents under this Agreement with respect thereto
shall be the amounts set forth in Section 3.2, and
not a royalty based on the Net Sales of Identified
Products.
4.1.2. (a) A royalty rate *** by Licensee and its
sublicensees of Research Reagents and any other
Product that is not an Identified Product or Services.
Licensee will be entitled to reduce the royalty due
The Regents
***CONFIDENTIAL TREATMENT REQUESTED
13
<PAGE> 45
on the Net Sales of such Research Reagents and other
Products if Licensee must pay a royalty to The
Regents on Patent Rights and Property Rights and a
third party with respect to intellectual property
rights in which The Regents has no ownership
interest. In such event, if the combined royalties
due The Regents and the third party(s) ***, Licensee
may reduce the royalty due The Regents ***, provided,
however, that in no event will the royalty rate due
The Regents on the Research Reagent or such Product
be ***.
(b) For the avoidance of doubt, it is understood
and agreed that Licensee shall have no obligation to
sell or have sold any Research Reagents except those
listed on Appendix E hereto.
4.2. Licensee will not be entitled to apply the royalty reduction
specified in Section 4.1.2(a) of this section to royalties due The Regents
under Section 4.1.1 of this Article 4. (Royalties) or any other provisions of
this Agreement except the provisions set forth in Section 4.1.2(a).
4.3. Sections 1.1, 1.5, and 1.6 define Patent Rights, Patent
Products, and Patent Methods so that royalties will be payable on Patent
Products and Patent Methods covered by both pending patent applications and
issued patents. Earned royalties will accrue on Patent Products on a
Product-by-Product basis in each country for the duration of Patent Rights in
that country and will be payable to The Regents when Patent Products are
invoiced, or if not invoiced, when delivered to a third party or to itself, an
Affiliate, Joint Venture, or sublicensee in the case where such delivery of the
Patent Products to Licensee, an Affiliate, Joint Venture, or sublicensee is
intended for end use. If no Patent Rights exist in a country, earned royalties
will accrue on a Proprietary Product, on a Product-by-Product basis, until the
*** CONFIDENTIAL TREATMENT REQUESTED
14
<PAGE> 46
tenth anniversary of the first commercial sale of a particular Proprietary
Product in such country. Earned royalties will accrue on Identified Products,
on a Product-by-Product basis, until the tenth anniversary of the first
commercial sale of a particular Identified Product in such country.
4.4. Royalties accruing to The Regents will be paid to The Regents
***:
# ***
# ***
# ***
# ***
Each such payment will be for royalties which accrued ***.
4.5. Beginning ***, and in each succeeding calendar year after ***,
Licensee will pay *** and thereafter for the life of this Agreement. This ***
will be paid to The Regents by *** of each year and will be credited against the
earned royalty due and owing for the calendar year in which the minimum payment
was made.
4.6. All monies due The Regents will be payable in United States
funds collectible at par in San Francisco, California. When Products are sold
for monies other than United States dollars, the earned royalties will first be
determined in the foreign currency of the country in which such Products were
sold and then converted into equivalent United States funds. The exchange rate
will be that rate quoted in the Wall Street Journal on the last business day of
the reporting period.
4.7. *** Notwithstanding the foregoing, if the Regents
*** CONFIDENTIAL TREATMENT REQUESTED
15
<PAGE> 47
is required to pay taxes on its royalties under the laws of any country, then
Licensee will pay such amounts to the proper authorities, withhold such amounts
from royalties paid to The Regents, and provide The Regents with all documents
and assistance reasonably necessary to enable The Regents to recover all or
part of such amounts pursuant to any double taxation treaty or otherwise.
Licensee will also be responsible for all bank transfer charges.
4.8. Notwithstanding the provisions of Article 28. (Force Majeure),
if at any time legal restrictions prevent prompt remittance of part or all
royalties owed to The Regents by Licensee with respect to any country where a
Product is sold or distributed, Licensee will convert the amount owed to The
Regents into United States funds and will pay The Regents directly from another
source of funds for the amount impounded.
4.9. In the event that any patent or any claim thereof included
within the Patent Rights is held invalid or unenforceable in a final decision
by a court of competent jurisdiction and last resort and from which no appeal
has or can be taken, all obligation to pay royalties based on such patent or
claim or any claim patentably indistinct therefrom will cease as of the date of
such final decision. Licensee will not, however, be relieved from paying any
royalties that accrued before such decision or that are based on another patent
or claim that has not expired or that is not involved in such decision or that
are based on Property Rights.
4.10. No royalties will be collected or paid hereunder to The
Regents on Products sold to the account of the U.S. Government. Licensee and
its sublicensee will reduce the amount charged for Products distributed to the
United States Government by an amount equal to the royalty for such Products
otherwise due The Regents as provided herein.
4.11. ***
*** CONFIDENTIAL TREATMENT REQUESTED
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************************. No royalty shall be payable under Section 4.1 above
with respect to sales of Products among Licensee and its sublicensees where such
sales are not for end use by such Licensee or its sublicensees, nor shall a
royalty be payable under this Article 4. (Royalties) with respect to Products
distributed for use in research and/or development in clinical trials, or as
promotional samples.
5. Due Diligence
5.1. Licensee, upon execution of this Agreement, will diligently
proceed to develop and provide Services, and to develop, manufacture, and sell
Research Reagents and will earnestly and diligently market the same after
execution of this Agreement and in quantities sufficient to meet the market
demands therefor.
5.2. Licensee will be entitled to exercise prudent and reasonable
business judgment in the manner in which it meets its due diligence obligations
hereunder. In no case, however, will Licensee be relieved of its obligations
to meet the due diligence provisions of this Article 5. (Due Diligence).
5.3. Licensee will obtain all necessary governmental approvals in
each country in which Licensee elects to manufacture or commercialize Research
Reagents and provide Services.
5.4. If Licensee is unable to perform any of the following:
5.4.1. obtain at least Ten Million dollars ($10M) in funding
by August 31, 1996; and
5.4.2. complete at least one corporate alliance with a
pharmaceutical or biotechnology company for Services to
identify Identified Products using Patent Rights and Property
Rights before April 1, 1997; and
5.4.3. fill the market demand for Services and Identified
Products that are marketed by licensee following commencement
of marketing at any time during the exclusive period of this
Agreement.
*** CONFIDENTIAL TREATMENT REQUESTED
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then The Regents will have the right and option, subject to Section 5.7 below,
to terminate this Agreement or reduce the exclusive licenses granted to
Licensee to non-exclusive licenses in accordance with Section 5.6 hereof. The
exercise of this right and option by The Regents will supersede the rights
granted in Article 2 (Grant).
5.5. In addition to the provisions of Section 5.4 above, Licensee
shall also market each of the Research Reagents listed on Appendix E attached
hereto to nonprofit/academic institutions solely for their internal,
noncommercial research use either within: (i) two years following the Effective
Date of this Agreement; or (ii) six months following the publication of the
first paper describing the use of the Research Reagent, whichever is earlier.
This Section 5.5 may be satisified by Licensee or its sublicenseees.
5.6. If Licensee fails to market a particular Research Reagent in
accordance with Section 5.5 above, then The Regents will have the right and
option, subject to Section 5.7 below, to terminate all rights granted to
Licensee under this Agreement with respect to that particular Research Reagent.
This termination includes Licensee's right to use the particular Research
Reagent for its own internal use. The Regents will thereafter be free to
dispose of the particular Research Reagent as it wishes. The exercise of this
right and option by The Regents will supersede the rights granted in Article 2
(Grant).
5.7. To exercise either the right to terminate this Agreement in
whole or with respect to any portion of Patent Rights or Property Rights, or
reduce the exclusive licenses granted to Licensee to non-exclusive licenses for
lack of diligence required in this Article 5. (Due Diligence), The Regents will
give Licensee written notice of the deficiency stating its intent to terminate
this Agreement in whole or with respect to any portion of Patent Rights or
Property Rights, or to reduce the licenses to non-exclusive licenses. Licensee
thereafter shall have 60 days to cure the deficiency. If The Regents
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has not received written tangible evidence satisfactory to The Regents that the
deficiency has been cured by the end of the 60-day period, then The Regents
may, at its option, terminate this Agreement in whole or with respect to any
portion of Patent Rights or Property Rights, or reduce the exclusive licenses
granted to Licensee to non-exclusive licenses by giving written notice to
Licensee. These notices will be subject to Article 20. (Notices).
6. Progress and Royalty Reports
6.1. Beginning August 31, 1996, and semi-annually thereafter,
Licensee will submit to The Regents a progress report covering activities by
Licensee and its sublicensees related to the development and testing of all
their Products and the obtaining of the governmental approvals necessary for
marketing them, but Licensee will not be required to report on Products for
which a royalty is not due The Regents. These progress reports will be
provided to The Regents to cover the progress of the research and development
of the Products until the first commercial sale of Products in the United
States.
6.2. The progress reports submitted under Section 6.1 will include,
but not be limited to, the following topics so that The Regents may be able to
determine the progress of the development of Products on which a royalty is due
The Regents and may also be able to determine whether or not Licensee has met
its diligence obligations set forth in Article 5. (Due Diligence) above:
# summary of work in progress in anticipation of providing
Services and Research Reagents
# summary of work completed in anticipation of providing
Services and Research Reagents
# summary of Services completed
# current schedule of anticipated events or milestones
specified in Section 5.4 and 5.5
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# anticipated market introduction date of Products on which
a royalty is due The Regents
# sublicenses granted, if any
6.3. Licensee also will report to The Regents in its immediately
subsequent progress and royalty report the date of first commercial sale of
each Product for which a royalty is due to The Regents in each country.
6.4. After the first commercial sale of a Product on which a
royalty is due The Regents, Licensee will provide The Regents with quarterly
royalty reports to The Regents on or before each February 28, May 31, August
31, and November 30 of each year. Each such royalty report will cover the most
recently completed calendar quarter of Licensee (October through December,
January through March, April through June, and July through September) and will
show:
6.4.1. the gross sales and Net Sales of such Products sold
by Licensee and reported to Licensee as sold by its
sublicensees during the most recently completed
calendar quarter;
6.4.2. the number of such Products sold or distributed by
Licensee and reported to Licensee as sold or
distributed by its sublicensees;
6.4.3. the royalties, in U.S. dollars, payable hereunder
with respect to Net Sales; and
6.4.4. the exchange rates used, if any.
6.5. If no sales of Products for which a royalty is due to The
Regents have been made during any reporting period after the first commercial
sale of such Product, then a statement to this effect is required.
7. Books and Records
7.1. Licensee will keep books and records accurately showing all
Products manufactured, used, and/or sold with respect to which Licensee owes
royalties to The Regents under the terms of this Agreement. Such books and
records will be preserved
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for at least five years after the date of the royalty payment to which they
pertain and will be open to inspection by representatives or agents of The
Regents during normal business hours at agreed upon times to determine the
accuracy of the books and records and to determine compliance by Licensee with
the terms of this Agreement. Such independent certified public accountant
shall be bound to hold all information in confidence except as necessary to
communicate Licensee's non-compliance with this Agreement to The Regents. The
only purpose of any inspection and audit pursuant to this Paragraph 7.1 shall
be to verify Licensee's royalty statement or payment under this Agreement and
to determine Licensee's compliance with the other provisions thereunder.
7.2. The fees and expenses of representatives of The Regents
performing such an examination will be borne by The Regents. However, if an
error in royalties of *** of the total royalties due for any year is
discovered, then the fees and expenses of these representatives will be borne
by Licensee.
8. Life of the Agreement
8.1. Unless otherwise terminated by operation of law or by acts of
the parties in accordance with the terms of this Agreement, this Agreement will
be in force from the Effective Date and will remain in effect for the life of
the last-to-expire patent licensed under this Agreement, or until the last
patent application licensed under this Agreement is abandoned, or in the event
no patent issues, for a period of fifteen (15) years from market introduction
for the last to be introduced Proprietary Product in the United States.
8.2. In the event this Agreement remains in effect for the entire
term specified in Paragraph 8.1 above, and is not otherwise terminated under the
provisions of Articles 5. (Due Diligence), 9. (Termination by The Regents), or
10. (Termination by Licensee), Licensee is hereby granted an option for renewal
of this Agreement for a period of twenty (20) years from the date of its
termination. Said option for renewal shall be
*** CONFIDENTIAL TREATMENT REQUESTED
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automatically exercised provided that the Licensee has not notified The Regents
to the contrary prior to the option renewal date. The renewal licenses will be
for the same terms and conditions as set forth in this Agreement, except that
***.
8.3. Any termination of this Agreement will not affect the rights
and obligations set forth in the following Articles:
Article 7 Books and Records
Article 13 Disposition of Products on Hand Upon Termination
Article 14 Use of Names and Trademarks
Article 19 Indemnification
Article 22 Late Payments
Article 24 Failure to Perform
Article 29 Confidentiality
8.4. Termination of this Agreement for any reason shall not release
any party hereto from any liability which, at the time of such termination, has
already accrued to the other party or which is attributable to a period prior
to such termination, or preclude either party from pursuing any rights and
remedies it may have hereunder or at law or in equity which accrued or are
based upon any event occurring prior to such termination.
9. Termination by The Regents
9.1. If Licensee should violate or fail to perform any term or
covenant of this Agreement, then The Regents may give written notice of such
default ("Notice of Default") to Licensee. If Licensee should fail to repair
such default within 60 days after the date of such notice takes effect, The
Regents will have the right to terminate this Agreement and the licenses herein
by a second written notice ("Notice of Termination") to Licensee. If a Notice
of Termination is sent to Licensee, this Agreement will
*** CONFIDENTIAL TREATMENT REQUESTED
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<PAGE> 54
automatically terminate on the date such notice takes effect. Such termination
will not relieve Licensee of its obligation to pay any royalty or license fees
owing at the time of such termination and will not impair any accrued right of
The Regents. These notices will be subject to Article 20. (Notices).
10. Termination by Licensee
10.1. Licensee will have the right at any time to terminate this
Agreement in whole or as to any portion of Patent Rights or Property Rights by
giving notice in writing to The Regents. Such Notice of Termination will be
subject to Article 20. (Notices) and termination of this Agreement in whole or
with respect to any portion of the Patent Rights or Property Rights will be
effective 60 days after the effective date thereof.
10.2. Any termination pursuant to the above paragraph will not
relieve Licensee of any obligation or liability accrued hereunder prior to such
termination or rescind anything done by Licensee or any payments made to The
Regents hereunder prior to the time such termination becomes effective, and
such termination will not affect in any manner any rights of The Regents
arising under this Agreement prior to such termination.
11. Supply of the Biological Materials
and Biological Products
11.1. The Regents will initially supply Licensee with viable samples
of the Biological Materials set forth in Appendix D within thirty (30) days of
the Effective Date or as soon as reasonably practicable, and additional
Biological Materials elected by Licensee pursuant to Section 2.11 promptly
after Licensee's notice to The Regents pursuant to such Section. To the extent
Licensee requires and requests additional samples from The Regents during the
term hereof (due to failure of the initial supply of Biological Material(s)),
and The Regents has such additional samples in its possession,
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<PAGE> 55
The Regents agrees to supply such additional samples. Licensee will pay the
actual handling and shipping costs for any additional samples provided.
12. Maintenance of the Biological Materials
12.1. The Regents shall instruct Dr. Roger Tsien that if The Regents
circulates any of the Biological Materials to third parties for noncommercial
research purposes, it shall only do so under the terms and conditions set forth
in the biological material transmission letter attached hereto as Appendix A.
The Regents expressly reserves the right to transfer the Biological Materials
to non-profit entities strictly for noncommercial research purposes in the
manner set forth above. The Regents agrees that it will not otherwise transfer
the Biological Materials. The Licensee acknowledges that The Regents' right to
so transfer the Biological Materials could lead to the inadvertent loss or
diminution of the proprietary commercial value of the Biological Materials.
13. Disposition of the Biological Materials, Biological Products,
and Products on Hand Upon Termination
13.1. Upon termination of this Agreement prior to the expiration of
its full term, the Licensee shall have the privilege of disposing all
previously made or partially made Products, but no more, for a period of one
hundred and twenty (120) days following the effective date of termination,
provided, however, that the sale of such Products shall be subject to the terms
of this Agreement including, but not limited to, the payment of royalties at
the rate and at the time provided herein and the rendering of reports in
connection therewith.
13.2. Upon termination of this Agreement for any reason, Licensee,
at its sole discretion, shall destroy or transfer to The Regents any Biological
Materials in its possession within thirty (30) days following the effective
date of termination. Licensee
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shall provide The Regents within sixty (60) days following said termination
date with written notice that the Biological Materials have been destroyed.
14. Use of Names and Trademarks
14.1. Nothing contained in this Agreement will be construed as
conferring any right to use in advertising, publicity, or other promotional
activities any name, trade name, trademark, or other designation of either
party hereto by the other (including contraction, abbreviation or simulation of
any of the foregoing). Unless required by law, the use by Licensee of the name
"The Regents of the University of California" or the name of any campus of the
University of California for use in advertising, publicity, or other
promotional activities is expressly prohibited.
14.2. It is understood that The Regents will be free to release to
the inventors, HHMI, and senior administrative officials employed by The
Regents the terms of this Agreement upon their request. If such release is
made, The Regents will request that such terms will be kept in confidence in
accordance with the provisions of Article 29. (Confidentiality) and not be
disclosed to others. It is further understood that should a third party
inquire whether a license to Patent Rights is available, The Regents may
disclose the existence of this Agreement and the extent of the grant in Article
2. (Grant) to such third party, but will not disclose the name of Licensee,
except where The Regents is required to release such information under either
the California Public Records Act or other applicable law.
15. Limited Warranty
15.1. The Regents warrants to Licensee that it has the lawful right
to grant these licenses and bailment.
15.2. This license and the associated Invention, Biological
Materials, Products, and Patent Method are provided WITHOUT WARRANTY OF
MERCHANTABILITY OR
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FITNESS FOR A PARTICULAR PURPOSE OR ANY OTHER WARRANTY, EXPRESS OR IMPLIED.
THE REGENTS MAKES NO REPRESENTATION OR WARRANTY THAT THE INVENTION, BIOLOGICAL
MATERIALS, PRODUCTS, OR PATENT METHOD WILL NOT INFRINGE ANY PATENT OR OTHER
PROPRIETARY RIGHT.
15.3. IN NO EVENT WILL THE REGENTS BE LIABLE FOR ANY INCIDENTAL,
SPECIAL, OR CONSEQUENTIAL DAMAGES RESULTING FROM EXERCISE OF THIS LICENSE OR
THE USE OF THE INVENTION, BIOLOGICAL MATERIALS, PRODUCTS, OR PATENT METHOD.
15.4. Nothing in this Agreement will be construed as:
15.4.1. a warranty or representation by The Regents as to the
validity, enforceability, or scope of any Patent
Rights or Property Rights; or
15.4.2. a warranty or representation that anything made,
used, sold, or otherwise disposed of under any
license granted in this Agreement is or will be
free from infringement of patents of third parties;
or
15.4.3. an obligation to bring or prosecute actions or suits
against third parties for patent infringement
except as provided in Article 18. (Patent
Infringement); or
15.4.4. conferring by implication, estoppel, or otherwise any
license or rights under any patents of The Regents
other than Patent Rights as defined herein,
regardless of whether such patents are dominant or
subordinate to Patent Rights; or
15.4.5. an obligation to furnish any know-how not provided in
Patent Rights and Property Rights.
16. Patent Prosecution and Maintenance
16.1. The Regents will diligently prosecute and maintain the United
States and foreign patents comprising Patent Rights using counsel of its
choice. The Regents will promptly provide Licensee with copies of all relevant
documentation so that Licensee
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may be currently and promptly informed and apprised of the continuing
prosecution, and may comment upon such documentation sufficiently in advance of
any initial deadline for filing a response, provided, however, that if Licensee
has not commented upon such documentation prior to the initial deadline for
filing a response with the relevant government patent office or The Regents
must act to preserve Patent Rights, The Regents will be free to respond
appropriately without consideration of comments by Licensee, if any. Both
parties hereto will keep this documentation in confidence in accordance with
the provisions of Article 29. (Confidentiality) herein. Counsel for The
Regents will take instructions only from The Regents.
16.2. The Regents will use all reasonable efforts to amend any
patent application to include claims requested by Licensee and required to
protect the Products contemplated to be sold or Patent Method to be practiced
under this Agreement.
16.3. The Regents and Licensee will cooperate in applying for an
extension of the term of any patent included within Patent Rights, if
appropriate, under the Drug Price Competition and Patent Term Restoration Act
of 1984. Licensee will prepare all such documents, and The Regents will
execute such documents and will take such additional action as Licensee may
reasonably request in connection therewith.
16.4. The Regents will, at the request of Licensee, file, prosecute,
and maintain patent applications and patents covered by Patent Rights in
foreign countries if available. Licensee must notify The Regents within seven
months of the filing of the corresponding United States application of its
decision to request The Regents to file foreign counterpart patent
applications. This notice concerning foreign filing must be in writing and must
identify the countries desired. The absence of such a notice from Licensee to
The
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Regents within the seven-month period will be considered an election by
Licensee not to request The Regents to secure foreign patent rights on behalf
of Licensee; provided, however, that the absence of such notice from Licensee
to The Regents within the seven-month period with respect to United States
applications filed within eight months prior to the Effective Date of this
Agreement will not be considered an election by licensee not to request The
Regents not to secure foreign patent rights. In such event, Licensee must
notify The Regents of its decision to request The Regents to file foreign
counterpart patent applications within ninety (90) days of the conventional
filing date of such applications. The Regents will have the right to file
patent applications at its own expense in any country Licensee has not included
in its list of desired countries, and such applications and resultant patents,
if any, will not be included in the licenses granted under this Agreement.
16.5. All past, present and future costs of preparing, filing,
prosecuting and maintaining all United States and foreign patent applications
and all costs and fees relating to the preparation and filing of patents
covered by Patent Rights in Section 1.1 will be borne by Licensee. This
includes patent preparation and prosecution costs for this Invention incurred
by The Regents prior to the execution of this Agreement. Such costs will be
due upon execution of this Agreement and will be payable at the time that the
license issue fee is payable. The costs of all interferences and oppositions
will be considered prosecution expenses and also will be borne by Licensee.
Licensee will reimburse The Regents for all costs and charges within 30 days
following receipt of an itemized invoice from The Regents for same.
16.6. The obligation of Licensee to underwrite and to pay patent
preparation, filing, prosecution, maintenance, and related costs will continue
for costs incurred until three months after receipt by either party of a Notice
of Termination with respect to a particular patent application or patent within
the Patent Rights provided, however, that The Regents provides Licensee with
written notification, at least three months prior to the effective date of the
termination, that such costs are anticipated. Licensee will reimburse The
Regents for all patent costs incurred during the term of the Agreement and for
three months thereafter whether or not invoices for such costs are received
during the three-month period after receipt of a Notice of Termination.
Licensee may
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with respect to any particular patent application or patent terminate its
obligations with the patent application or patent in any or all designated
countries upon three months written notice to The Regents. The Regents may
continue prosecution and/or maintenance of such application(s) or patent(s) at
its sole discretion and expense, provided, however, that Licensee will have no
further right or licenses thereunder.
16.7. Licensee will notify The Regents of any change of its status
as a small entity (as defined by the United States Patent and Trademark Office)
and of the first sublicense granted to an entity that does not qualify as a
small entity as defined therein.
16.8. The Regents acknowledges that Licensee will be conducting
independent research and development activities with respect to the Biological
Materials, Biological Products, and/or the Patent Rights, and recognizes that
such independent research and development may result in patentable inventions
and other intellectual property owned by Licensee. The Regents hereby consents
to the filing of any patent applications, even if any Biological Materials or
Biological Products are within the scope of one or more claims of any such
patent application.
17. Patent Marking
17.1. Licensee will mark all Products made, used, or sold under the
terms of this Agreement, or their containers, in accordance with the applicable
patent marking laws.
18. Patent Infringement
18.1. In the event that Licensee, or The Regents' licensing
associate responsible for administering this Agreement, or Resident Counsel of
the Regents' Office of Technology Transfer learns of the substantial
infringement of any patent licensed under this Agreement, to the extent
contractually able to, it will call the attention to the other party hereto in
writing and will provide reasonable evidence of
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such infringement. Both parties to this Agreement acknowledge that during the
period and in a jurisdiction where Licensee has exclusive rights under this
Agreement, neither will notify a third party of the infringement of any of
Patent Rights without first obtaining consent of the other party, which consent
will not be unreasonably withheld. Both parties will use their best efforts in
cooperation with each other to terminate such infringement without litigation.
18.2. Licensee may request that The Regents take legal action
against the infringement of Patent Rights. Such request must be made in
writing and must include reasonable evidence of such infringement and damages
to Licensee. If the infringing activity has not been abated within 90 days
following the effective date of such request, The Regents will have the right
to elect to:
18.2.1. commence suit on its own account; or
18.2.2. refuse to participate in such suit.
18.3. The Regents will give notice of its election in writing to
Licensee by the end of the 100th day after receiving notice of such request
from Licensee. Licensee may thereafter bring suit for patent infringement if
and only if The Regents elects not to commence suit and if the infringement
occurred during the period and in a jurisdiction where Licensee had exclusive
rights under this Agreement. However, in the event Licensee elects to bring
suit in accordance with this paragraph, The Regents may thereafter join such
suit at its own expense.
18.4. Such legal action as is decided upon will be at the expense of
the party on account of whom suit is brought and all recoveries recovered
thereby will belong to such party, provided, however, that legal action brought
jointly by The Regents and Licensee and participated in by both will be at the
joint expense of the parties and all recoveries will be allocated in the
following order: ***
*** CONFIDENTIAL TREATMENT REQUESTED
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***
18.5. Each party will cooperate with the other in litigation
proceedings instituted hereunder but at the expense of the party on account of
whom suit is brought. Such litigation will be controlled by the party bringing
the suit, except that The Regents may be represented by counsel of its choice
in any suit brought by Licensee.
19. Indemnification
19.1. Licensee will (and require its sublicensees to) indemnify,
hold harmless, and defend The Regents and HHMI, their officers, employees, and
agents; the sponsors of the research that led to the Invention; the inventors
of any invention covered by patents or patent applications in Patent Rights
(including the Products and Patent Method contemplated thereunder) and their
employers against any and all claims, suits, losses, damage, costs, fees, and
expenses resulting from or arising out of exercise of this license or any
sublicense. This indemnification will include, but will not be limited to, any
product liability.
19.2. Licensee, at its sole cost and expense, will insure its
activities in connection with the work under this Agreement and obtain, keep in
force, and maintain insurance as follows: (or an equivalent program of self
insurance)
Comprehensive or Commercial Form General Liability Insurance
(contractual liability included) with limits as follows:
# Each Occurrence $1,000,000
# Products/Completed Operations Aggregate $1,000,000
*** CONFIDENTIAL TREATMENT REQUESTED
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# Personal and Advertising Injury $1,000,000
# General Aggregate (commercial form only) $1,000,000
19.3. As of and following the date of commencement of any clinical
trial with respect to a Product marketed by Licensee, Licensee shall increase
insurance coverage under Section 19.2 immediately above from $1,000,000 to an
aggregate of $3,000,000. As of and following the date of commencement of any
sales of such Products, Licensee shall increase insurance coverage under
Section 19.2 to an aggregate of $5,000,000. It should be expressly understood,
however, that the coverages and limits referred to under the above will not in
any way limit the liability of Licensee. Licensee will furnish The Regents
with certificates of insurance evidencing compliance with all requirements.
Such certificates will:
19.3.1. Provide for 30 day advance written notice to The
Regents of any modification;
19.3.2. Indicate that The Regents has been endorsed as an
additional Insured under the coverages referred
to under the above; and
19.3.3. Include a provision that the coverages will be
primary and will not participate with nor will be
excess over any valid and collectable insurance
or program of self-insurance carried or
maintained by The Regents.
19.4. The Regents will promptly notify Licensee in writing of any
claim or suit brought against The Regents in respect of which The Regents
intends to invoke the provisions of this Article 19. (Indemnification).
Licensee will keep The Regents informed on a current basis of its defense of
any claims pursuant to this Article 19. (Indemnification). It is understood
that Licensee shall have the right to control the defense and settlement of any
such claim or suit, except Licensee shall not enter into any settlement which
(i) makes any admission of wrongdoing on the part of The Regents, or (ii)
admits that any of the Patent Rights of The Regents are invalid, unenforceable,
or not infringed without prior written consent of The Regents.
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20. Notices
20.1. Any notice or payment required to be given to either party
will be deemed to have been properly given and to be effective (a) on the date
of delivery if delivered in person or (b) five days after mailing if mailed by
first-class certified mail, postage paid, to the respective addresses given
below, or to another address as it may designate by written notice given to the
other party.
In the case of Licensee: AURORA BIOSCIENCES, CORP.
11149 North Torrey Pines Road
La Jolla, CA 92037
Attention: President
(619) 452-5000
In the case of The Regents: THE REGENTS OF THE UNIVERSITY
OF CALIFORNIA
1320 Harbor Bay Parkway, Suite 150
Alameda, California 94502
Tel: (510) 748-6600
Fax: (510) 748-6639
Attention: Executive Director;
Research Administration
and Office of Technology
Transfer
Referring to: U.C. Case Nos. 93-289,
95-110, 95-219, 96-044, 96-160, 96-161,
96-162, and 96-191
21. Assignability
21.1. This Agreement is binding upon and will inure to the benefit
of The Regents, its successors and assigns, but shall be personal to Licensee
and assignable by Licensee only with the written consent of The Regents, which
consent shall not be unreasonably withheld; provided, however, Licensee may
assign this Agreement to an Affiliate or Joint Venture or in connection with
the sale or transfer of substantially all the
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assets of Licensee relating to the subject matter of this Agreement, without
written consent of The Regents.
22. Late Payments
22.1. In the event royalty payments or fees or patent prosecution
costs are not received by The Regents when due, Licensee will pay to The
Regents interest charges at a rate of ten percent (10%) simple interest per
annum. Such interest will be calculated from the date payment was due until
actually received by The Regents. Acceptance by The Regents of any late
payment interest from Licensee under this Section 22.1 will in no way affect
the provision of Article 23. (Waiver) herein.
23. Waiver
23.1. It is agreed that no waiver by either party hereto of any
breach or default of any of the covenants or agreements herein set forth will
be deemed a waiver as to any subsequent and/or similar breach or default.
24. Failure to Perform
24.1. In the event of a failure of performance due under the terms
of this Agreement and if it becomes necessary for either party to undertake
legal action against the other on account thereof, then the prevailing party
will be entitled to reasonable attorney's fees in addition to costs and
necessary disbursements.
25. Governing Laws
25.1. THIS AGREEMENT WILL BE INTERPRETED AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF CALIFORNIA, excluding any choice of law rules
that would direct the application of the laws of another jurisdiction,
34
<PAGE> 66
but the scope and validity of any patent or patent application will be governed
by the applicable laws of the country of such patent or patent application.
26. Government Approval or Registration
26.1. If this Agreement or any associated transaction is required by
the law of any nation to be either approved or registered with any governmental
agency, Licensee will assume all legal obligations to do so. Licensee will
notify The Regents if it becomes aware that this Agreement is subject to a
United States or foreign government reporting or approval requirement.
Licensee will make all necessary filings and pay all costs including fees,
penalties, and all other out-of-pocket costs associated with such reporting or
approval process.
27. Export Control Laws
27.1. Licensee will observe all applicable United States and foreign
laws with respect to the transfer of Products and related technical data to
foreign countries, including, without limitation, the International Traffic in
Arms Regulations (ITAR) and the Export Administration Regulations.
28. Force Majeure
28.1. The parties to this Agreement will be excused from any
performance required hereunder if such performance is rendered impossible or
unfeasible due to any acts of God, catastrophes, or other major events beyond
their reasonable control, including, without limitation, war, riot, and
insurrection; laws, proclamations, edicts, ordinances, or regulations; strikes,
lock-outs, or other serious labor disputes; and floods, fires, explosions, or
other natural disasters. However, any party to this Agreement will have the
right to terminate this Agreement upon 30 days' prior written notice if either
party is unable to fulfill its obligations under this Agreement due to any of
35
<PAGE> 67
the causes mentioned above and such inability continues for a period of one
year. Notices will be subject to Article 20. (Notices). When such events
have abated, the parties' respective obligations hereunder shall resume.
29. Confidentiality
29.1. Licensee and The Regents respectively will treat and maintain
the proprietary business, patent prosecution, software, engineering drawings,
process and technical information, and other proprietary information
("Proprietary Information") of the other party in confidence using at least the
same degree of care as that party uses to protect its own proprietary
information of a like nature for a period from the date of disclosure until
five years after the date of termination of this Agreement. This
confidentiality obligation will apply to the information defined as "Data"
under the Secrecy Agreement, and such Data will be treated as Proprietary
Information hereunder.
29.2. All Proprietary Information will be labeled or marked
confidential or as otherwise similarly appropriate by the disclosing party, or
if the Proprietary Information is orally disclosed, it will be reduced to
writing or some other physically tangible form, marked and labeled as set forth
above by the disclosing party, and delivered to the receiving party within 30
days after the oral disclosure as a record of the disclosure and the
confidential nature thereof. Notwithstanding the foregoing, Licensee and The
Regents may use and disclose Proprietary Information to its employees, agents,
consultants, contractors, and, in the case of Licensee, its sublicensees,
provided that any such parties are bound by a like duty of confidentiality.
29.3. Nothing contained herein will in any way restrict or impair
the right of Licensee or The Regents to use, disclose, or otherwise deal with
any Proprietary Information:
36
<PAGE> 68
29.3.1. that recipient can demonstrate by written records was
previously known to it;
29.3.2. that is now, or becomes in the future, public
knowledge other than through acts or omissions of
recipient;
29.3.3. that is lawfully obtained without restrictions by
recipient from sources independent of the disclosing
party;
29.3.4. that is required to be disclosed to a governmental
entity or agency in connection with seeking any
governmental or regulatory approval, or pursuant
to the lawful requirement or request of a
governmental entity or agency;
29.3.5. that is furnished to a third party by the recipient
with similar confidentiality restrictions imposed
on such third party, as evidenced in writing; or
29.3.6. that The Regents is required to disclose pursuant to
the California Public Records Act or other applicable
law.
29.4. Upon termination of this Agreement, Licensee and The Regents
will destroy or return to the disclosing party proprietary information received
from the other in its possession within 15 days following the effective date of
termination. Licensee and The Regents will provide each other, within 30 days
following termination, with a written notice that Proprietary Information has
been returned or destroyed. Each party may, however, retain one copy of
Proprietary Information for archival purposes in nonworking files.
30. Miscellaneous
30.1. The headings of the several sections are inserted for
convenience of reference only and are not intended to be a part of or to affect
the meaning or interpretation of this Agreement.
30.2. This Agreement will not be binding upon the parties until it
has been signed below on behalf of each party, in which event, it will be
effective as of the date recited on page one.
37
<PAGE> 69
30.3. No amendment or modification hereof will be valid or binding
upon the parties unless made in writing and signed on behalf of each party.
30.4. This Agreement embodies the entire understanding of the
parties and will supersede all previous communications, representations or
understandings, either oral or written, between the parties relating to the
subject matter hereof. The Letter Agreements, the Option Agreement, and the
Secrecy Agreements specified in the Recitals of this Agreement are hereby
terminated.
30.5. In case any of the provisions contained in this Agreement are
held to be invalid, illegal, or unenforceable in any respect, such invalidity,
illegality, or unenforceability will not affect any other provisions hereof,
but this Agreement will be construed as if such invalid or illegal or
unenforceable provisions had never been contained herein.
The Regents and Licensee execute this Agreement in duplicate originals
by their respective, authorized officers on the date indicated.
Aurora Biosciences Corporation The Regents of the University
of California
By__________________________________ By_________________________________
(Signature) (Signature)
Name________________________________ Name Terence A. Feuerborn
(Please Print)
Title_______________________________ Title Executive Director
Research Administration
and Office of Technology
Transfer
Date________________________________ Date_______________________________
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APPENDIX A - PAGE 1A
University of California/San Diego (UCSD)
Instructions for Standard Letter Transmitting
Biological Materials to Universities and
Non-Profit Institutions
The attached letter is authorized for use by University of California,
UCSD Principal Investigators and Administrators only with Scientists and other
universities and nonprofit research institutions when transmitting cell lines,
plasmids and the like for non-commercial research purposes.
1. Choose the appropriate form of university or nonprofit research
institution in paragraph 2.
2. Choose whether or not to include the phrase "our cooperative" in
paragraph 2.
3. Insert in paragraph 4 the amount of processing charge. If the
material is to be shipped at no charge, insert the words "no charge".
4. Send the letter in duplicate to the other scientists.
5. Do not send biological materials until you receive the duplicate copy
executed by both the scientist and the other institution.
6. Send a copy of the fully executed letter agreement to:
Terence A. Feuerborn
Executive Director
Research Administration
and Technology Transfer
1320 Harbor Bay Parkway
Suite 150
Alameda, CA 94501
7. Any changes in the wording of this standard letter must be reviewed by
the Executive Director of the Office of Technology Transfer before
acceptance.
Note: Do not use this letter for the exchange of living plants. A separate
"Testing Agreement for the Plant Varieties" is available for that purpose.
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<PAGE> 71
APPENDIX A - PAGE 2A
SAMPLE LETTER FOR USE PRIOR TO TRANSMISSION OF BIOLOGICAL
MATERIALS TO INVESTIGATORS AT UNIVERSITIES OR NON-PROFIT
RESEARCH INSTITUTIONS
(date)
IN DUPLICATE
To:_____________________
This is to (acknowledge receipt of your letter) (confirm our telephone
conversation) in which you requested certain research materials developed in
this laboratory be sent to you for scientific research purposes. The materials
concerned, which belong to The Regents of the University of California/San
Diego Campus (UCSD) are _______________.
While I cannot transfer ownership of these materials to you, I will be
pleased to permit your use of these materials within your (university)
(Non-Profit Research Institution) laboratory for (our cooperative) scientific
research. However, before forwarding them to you, I require your agreement
that the materials will be received by you only for use in (our cooperative
work) (scientific research), that you will bear all risk to you or any others
resulting from your use, and that you will not pass these materials, their
progeny or derivatives, on to any other party or use them for commercial
purposes without the express written consent of The Regents of the University
of California. You understand that no other right or license to these
materials, their progeny or derivatives, is granted or implied as a result of
our transmission of these materials to you.
These materials are to be used with caution and prudence in any
experimental work, since all of their characteristics are not known.
As you recognize, there is a processing cost to us involved in
providing these materials to you. We will bill you for our processing costs,
which will amount to $_________________.
If you agree to accept these materials under the above conditions,
please sign the enclosed duplicate copy of this letter, then have it signed by
an authorized representative of your institution, and return it to me. Upon
receipt of that confirmation I will forward the material(s) to you.
40
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APPENDIX A - PAGE 3A
(Note: other paragraphs discussing the relevant literature, the nature of the
work, hazards relating to materials to be sent etc. may be appropriate. These
will vary depending on the individual circumstances and the relationship
between the two parties previously established. Be sure to retain a signed
copy when received and send a photocopy of the completed agreement to the
University of California Patent Administrator, Office of Technology Transfer,
Systemwide Administration, 1320 Harbor Bay Parkway, Suite 150, Alameda, CA
94502)
Sincerely yours,
ACCEPTED:
RESEARCH INVESTIGATOR
______________________
Printed Name
______________________
(Signature)
______________________
Date
RESEARCH UNIVERSITY OR
NON-PROFIT INSTITUTION
______________________
Printed Name
_______________________
(Signature)
_______________________
Date
41
<PAGE> 73
APPENDIX B - PAGE 1B
The INVENTORS listed below understand and agree to abide by the terms
and conditions of Article 12 (MAINTENANCE OF THE BIOLOGICAL MATERIALS) of the
Exclusive License Agreement between The Regents of the University of California
and Aurora Biosciences, Corp. effective ______________________, 1996, and to
instruct all relevant personnel working within their laboratory to act
accordingly. Said paragraph reads, in part, as follows:
"12.1 The Regents shall instruct Roger Tsien that if The Regents
circulates any of the Biological Materials to third parties for noncommercial
research purposes, it shall only do so under the terms and conditions set forth
in the biological material transmission letter attached hereto as Appendix A.
The Regents expressly reserves the right to transfer the Biological Materials
to non-profit entities strictly for noncommercial research purposes in the
manner set forth above. The Regents agrees that it will not otherwise transfer
the Biological Materials. The Licensee acknowledges that The Regents' right to
so transfer the Biological Materials could lead to the inadvertent loss or
diminution of the proprietary commercial value of the Biological Materials."
The Biological Materials is defined in said Agreement as follows:
"1.2 Biological Materials" means (i) the chemical reagents and
biological materials owned by The Regents and listed in Appendix D attached
hereto and provided to Licensee by The Regents pursuant to the April 26, 1996
Letter Agreement, and (ii) any other chemical reagents or biological materials
elected for inclusion under this Agreement by Licensee pursuant to Section 2.11
below."
By:
______________________________ _____________________________
(Inventor) Date
42
<PAGE> 74
APPENDIX C - PAGE 1C
CHANCELLOR APPROVAL OF COMMERCIAL RESTRICTIONS OF TANGIBLE RESEARCH PRODUCTS
In May 1989, the University of California issued the Guidelines on
University-Industry Relations ("Guidelines"). Guideline 10 entitled "Tangible
Research Products" requires that when the commercial availability of tangible
research products resulting from the conduct of research are restricted by a
license, approval must be obtained from the Chancellor of the campus where the
research took place.
The License Agreement between THE REGENTS OF THE UNIVERSITY OF
CALIFORNIA ("The Regents") and AURORA BIOSCIENCES, CORP. ("Licensee") entitled
"Fluorescent Assay Technologies" contains provisions that restrict the transfer
of certain tangible research products to commercial competitors of the Aurora
Biosciences, Corp. and requires that tangible research products transferred for
educational and research purposes be conveyed under a biological material
transfer agreement that permits the University to retain the discretion to
publish any results of research at any time and to disseminate the tangible
materials for educational and research purposes.
Approval of the provisions of the License Agreement that restrict the
commercial availability of tangible research products is indicated below.
Approval:
______________________________ _____________________________
Majorie C. Caserio Date
Interim Chancellor
43
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APPENDIX D - PAGE 1D
*** CONFIDENTIAL TREATMENT REQUESTED
44
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APPENDIX D - PAGE 2D
*** CONFIDENTIAL TREATMENT REQUESTED
45
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APPENDIX D - PAGE 3D
*** CONFIDENTIAL TREATMENT REQUESTED
46
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APPENDIX D - PAGE 4D
***CONFIDENTIAL TREATMENT REQUESTED
47
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APPENDIX D - PAGE 5D
***CONFIDENTIAL TREATMENT REQUESTED
48
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APPENDIX D - PAGE 6D
***CONFIDENTIAL TREATMENT REQUESTED
49
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APPENDIX D - PAGE 7D
***CONFIDENTIAL TREATMENT REQUESTED
50
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APPENDIX D - PAGE 8D
***CONFIDENTIAL TREATMENT REQUESTED
51
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APPENDIX D - PAGE 9D
***CONFIDENTIAL TREATMENT REQUESTED
52
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APPENDIX D - PAGE 10D
***CONFIDENTIAL TREATMENT REQUESTED
53
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APPENDIX D - PAGE 11D
***CONFIDENTIAL TREATMENT REQUESTED
54
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APPENDIX D - PAGE 12D
***CONFIDENTIAL TREATMENT REQUESTED
55
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APPENDIX D - PAGE 13D
***CONFIDENTIAL TREATMENT REQUESTED
56
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APPENDIX D - PAGE 14D
***CONFIDENTIAL TREATMENT REQUESTED
57
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APPENDIX D - PAGE 15D
GREEN FLUORESCENT PROTEINS
***
***CONFIDENTIAL TREATMENT REQUESTED
58
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APPENDIX D - PAGE 16D
***CONFIDENTIAL TREATMENT REQUESTED
59
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APPENDIX D - PAGE 17D
***CONFIDENTIAL TREATMENT REQUESTED
60
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APPENDIX D - PAGE 18D
***CONFIDENTIAL TREATMENT REQUESTED
61
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APPENDIX D - PAGE 19D
***CONFIDENTIAL TREATMENT REQUESTED
62
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APPENDIX D - PAGE 20D
***CONFIDENTIAL TREATMENT REQUESTED
63
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APPENDIX D - PAGE 21D
***CONFIDENTIAL TREATMENT REQUESTED
64
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APPENDIX E - PAGE 1E
Research Reagents
***
060596
***CONFIDENTIAL TREATMENT REQUESTED
66
<PAGE> 97
ADDENDUM 3A
"LIQUID HANDLING HEAD"
PRODUCT REQUIREMENT SPECIFICATIONS
I. GENERAL
A. The specifications set forth herein are preliminary and reflect the
parties' expectations as of the Effective Date of the minimum performance
requirements for the PRODUCTS. However, the parties recognize that in the
course of the Collaboration Program the specifications herein may need to be
revised in consideration of (i) engineering or manufacturing difficulties or
costs, and/or (ii) to fulfill commercial expectations of demands.
B. ***
C. ***
D. It is understood that "Best Effort..." statements imply optimization of
desirable characteristics of performance. The efforts surrounding any one
parameter may be inconsistent with, and in some cases detrimental to, the
performance of other features of the system. PACKARD will make every effort to
keep AURORA informed of these tradeoffs and negotiate improvement goals in good
faith.
II. PIEZO-DEVICE SPECIFICATIONS
A. ***
B. ***
*** CONFIDENTIAL TREATMENT REQUESTED
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***
*** CONFIDENTIAL TREATMENT REQUESTED
4
<PAGE> 99
ADDENDUM 3B
"DETECTOR"
PRODUCT REQUIREMENT SPECIFICATIONS
I. GENERAL
A. The specifications set forth herein are preliminary and reflect the
parties' expectations as of the Effective Date of the minimum
performance requirements for the PRODUCTS. However, the parties
recognize that in the course of the Collaboration Program the
specifications herein may need to be revised in considerations of (i)
engineering or manufacturing difficulties or costs, and/or (ii) to
fulfill commercial expectations of demands.
B. ***
C. It is understood that "Best Effort" statements imply optimization of
desirable characteristics of performance. These efforts surrounding one
parameter may be inconsistent with, and in some cases detrimental to,
the performance of other features of the system. PACKARD will make every
effort to keep AURORA informed of such possible tradeoffs and negotiate
improvements goals in good faith.
II. CAMERA
A. ***
B. ***
C. ***
D. ***
***CONFIDENTIAL TREATMENT REQUESTED
5
<PAGE> 100
III. OPTICS
A. ***
B. ***
C. ***
D. ***
E. ***
F. ***
G. ***
IV. DETECTOR
A. ***
B. ***
C. ***
D. ***
E. ***
***CONFIDENTIAL TREATMENT REQUESTED
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<PAGE> 101
ADDENDUM 3C
"NANO-PLATES"
PRODUCT REQUIREMENT SPECIFICATIONS
I. GENERAL
A. The specifications set forth herein are preliminary and reflect the
parties' expectations as of the Effective Date of the minimum
performance requirements for the PRODUCTS. However, the parties
recognize that in the course of the Collaboration Program the
specifications herein may need to be revised in consideration of (i)
engineering or manufacturing difficulties or costs, and/or (ii) to
fulfill commercial expectations of demands.
B. Since the NANO-PLATE will be jointly developed by AURORA and PACKARD,
both will jointly define the final NANO-PLATE specification.
C. ***
II. REQUIREMENTS
A. ***
B. ***
C. ***
D. ***
*** CONFIDENTIAL TREATMENT REQUESTED
<PAGE> 102
ADDENDUM 4
AURORA UC REAGENTS
***
***
***
***
*** CONFIDENTIAL TREATMENT REQUESTED
<PAGE> 103
ADDENDUM 5
<PAGE> 104
EXHIBIT 10.11
AURORA BIOSCIENCES CORPORATION
PREFERRED STOCK PURCHASE AGREEMENT
MARCH 8, 1996
<PAGE> 105
<TABLE>
<S> <C>
SECTION 1 Sale of Shares....................................................1
1.2 Closing Date.......................................................1
1.3 Delivery...........................................................2
SECTION 2 Representations and Warranties of the Company.....................2
2.1 Organization and Standing..........................................2
2.2 Corporate Power....................................................3
2.3 Subsidiaries.......................................................3
2.4 Capitalization.....................................................3
2.5 Authorization......................................................4
2.6 Contracts and Other Commitments....................................5
2.7 Compliance with Other Instruments, etc.............................5
2.8 Litigation, etc....................................................5
2.9 Registration Rights................................................6
2.10 Permits...........................................................6
2.11 Governmental Consent, etc.........................................6
2.12 Disclosure........................................................6
2.13 Offering..........................................................7
2.14 Liabilities.......................................................7
2.15 Changes...........................................................7
2.16 Title to Properties and Assets; Liens, Leases, etc................9
2.17 Patents and Trademarks............................................9
2.18 Tax Returns; Taxes...............................................10
2.19 Employees........................................................10
2.20 No Defaults......................................................11
2.21 Insurance........................................................11
2.22 Brokers or Finders...............................................12
2.23 Environmental and Safety Laws....................................12
2.24 No Dividends.....................................................12
2.25 Employee Benefit Plan Obligations................................12
2.26 Qualification as a Qualified Small Business......................12
2.27 Financial Statements.............................................12
2.28 Transactions with Affiliates.....................................12
2.29 Proprietary Information and Inventions Agreements................13
2.30 U.S. Real Property Holding Corporation...........................13
SECTION 3 Investment Representations.......................................13
3.1 Power and Authority...............................................13
3.2 Due Execution.....................................................13
3.3 Experience; Accredited Investor...................................14
3.4 Investment........................................................14
3.5 Rule 144..........................................................14
3.6 No Public Market..................................................14
</TABLE>
i.
<PAGE> 106
<TABLE>
<S> <C>
3.7 Disclosure of Information.........................................14
SECTION 4 Conditions of the Purchaser's Obligations at Closing ............15
4.1 Representations and Warranties....................................15
4.2 Covenants.........................................................15
4.3 No Material Adverse Change........................................15
4.4 Securities Laws...................................................15
4.5 Compliance Certificate............................................15
4.6 Opinion of Counsel................................................15
4.7 Investors' Rights Agreement.......................................15
4.8 Proceedings and Documents.........................................15
4.9 Supporting Documents..............................................16
4.10 Management Rights Agreements.....................................16
4.11 Voting Agreement.................................................16
4.12 Amendment to Employment Agreement................................17
4.13 Charter..........................................................17
4.14 Bylaws...........................................................17
4.14 Proprietary Information Agreements...............................17
4.15 Election of Directors............................................17
4.16 Certificate as to Disqualified Persons...........................17
4.18 Fees of Purchasers' Counsel......................................17
SECTION 5 Conditions of the Company's Obligations at Closing...............18
5.1 Representations and Warranties....................................18
5.2 Covenants.........................................................18
SECTION 6 Miscellaneous....................................................18
6.1 Governing Law.....................................................18
6.2 Successors and Assigns............................................18
6.3 Entire Agreement..................................................18
6.4 Notices, etc......................................................18
6.5 Expenses..........................................................19
6.6 Counterparts......................................................19
6.7 Severability......................................................19
6.8 Survival of Agreements............................................19
6.9 Brokerage.........................................................19
6.10 Amendments.......................................................20
</TABLE>
ii.
<PAGE> 107
<TABLE>
<CAPTION>
EXHIBIT
<S> <C>
A RESTATED CERTIFICATE OF INCORPORATION
B SCHEDULE OF EXCEPTIONS
C INVESTORS' RIGHTS AGREEMENT
D FORM OF MANAGEMENT RIGHTS LETTER
E FORM OF VOTING AGREEMENT
F FORM OF PROPRIETARY INFORMATION AND INVENTIONS AGREEMENT
G FORM OF LEGAL OPINION OF COMPANY COUNSEL
</TABLE>
iii.
<PAGE> 108
AURORA BIOSCIENCES CORPORATION
PREFERRED STOCK PURCHASE AGREEMENT
THIS AGREEMENT is made as of March 8, 1996 between Aurora Biosciences
Corporation, a Delaware corporation (the "COMPANY"), with its principal office
at 1020 Prospect Street, Suite 405, La Jolla, California 92037, and the
purchasers listed on Schedule A hereto who execute this Agreement (each a
"Purchaser", and collectively, the "Purchasers").
WHEREAS, the Company has authorized the issuance and sale of up to
10,239,115 shares of its Series A Preferred Stock (the "SERIES A PREFERRED"),
555,555 shares of Series B Preferred Stock (the "SERIES B PREFERRED"), and
750,000 shares of Series C Preferred Stock (the "SERIES C PREFERRED")
(collectively, the "SHARES") having the rights, preferences, privileges and
restrictions set forth in the Restated Certificate of Incorporation of the
Company in the form attached to this Agreement as Exhibit A (the "RESTATED
CERTIFICATE").
NOW, THEREFORE, in consideration of the foregoing premises and the mutual
covenants and conditions set forth below, and for other good and valuable
consideration, the receipt of which is hereby acknowledged, the parties to this
Agreement agree as follows:
SECTION 1
SALE OF SHARES
1.1 SALE OF SHARES. Subject to the terms and conditions hereof, at the
Closing (as hereinafter defined), each Purchaser (severally but not jointly)
agrees to purchase from the Company, and the Company agrees to sell and issue,
shares of Preferred Stock of the Company being of the number, Series, and price
per share as set forth opposite each Purchaser's name on Schedule A hereto.
1.2 CLOSING DATE. The purchase and sale of the Shares hereunder shall take
place in up to three (3) closings, each of which shall be held at the law
offices of Cooley Godward Castro Huddleson & Tatum, 4365 Executive Drive, Suite
1100, San Diego, California 92121. The first closing of such purchase and sale
hereunder, at which the shares of Series A Preferred to be purchased and sold
hereunder shall be so purchased and sold (the "FIRST CLOSING"), shall be held on
the date of this Agreement or at such other time upon which the Company and the
Purchasers participating in the First Closing shall agree. The closing of the
purchase and sale of the Series B Preferred hereunder (the "SERIES B CLOSING")
and the closing of the purchase and sale of the Series C Preferred hereunder
(the "SERIES C CLOSING") (the Series B Closing and the Series C Closing are
1
<PAGE> 109
hereinafter collectively referred to as the "SUBSEQUENT Closings" and the First
Closing and the Subsequent Closings are hereinafter collectively referred to as
the "Closings") shall be held as soon as practicable but in each case not more
than thirty (30) days following the date hereof as agreed upon by the Company
and Purchasers purchasing at least a majority of the Shares to be purchased and
sold in such Subsequent closing.
Upon delivery of a duly executed copy of this Agreement, the Investor's
Rights Agreement (defined below) and the Voting Agreement (defined below), any
purchaser of Shares at a Subsequent Closing shall be deemed to be a party to
this Agreement, the Investors' Rights Agreement and the Voting Agreement, such
purchaser shall be deemed to be a "Purchaser" for purposes of this Agreement, a
"Stockholder" for purposes of the Investor's Rights Agreement and a "Purchaser"
for purposes of the Voting Agreement, and the Shares acquired by such purchaser
shall be deemed to have been acquired pursuant to this Agreement.
1.3 DELIVERY. At each Closing, the Company will deliver to each Purchaser
purchasing Shares in such Closing a certificate representing the Shares being
purchased upon payment of the aggregate purchase price therefor (as set forth
opposite each Purchaser's name on Schedule A hereto) by (i) check payable to the
order of the Company, (ii) wire transfer of immediately available funds made
payable to the order of the Company or (iii) cancellation of outstanding
principal and accrued interest under promissory notes issued by the Company, or
any combination of the foregoing, as provided on Schedule A.
Section 2
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth in the Schedule of Exceptions attached
hereto as Exhibit B, the Company hereby represents and warrants to the
Purchasers as follows:
2.1 ORGANIZATION AND STANDING. The Company is a corporation duly
organized and validly existing under, and by virtue of, the laws of the State of
Delaware and is in good standing under such laws. The Company has all requisite
corporate power to own and operate its assets and to carry on its business as
presently conducted and as proposed to be conducted. The Company is qualified to
do business as a foreign corporation, and is in good standing, under the laws of
all jurisdictions where the nature of its business requires such qualification
or where the failure to so qualify would have a Material Adverse Effect. As used
in this Agreement, "Material Adverse Effect" shall mean material adverse effect
on the Company's business as presently conducted or planned to be conducted or
the Company's financial condition, operations or prospects.
2
<PAGE> 110
2.2 CORPORATE POWER. The Company has, and at the time of each Closing
will have, all requisite legal and corporate power to execute and deliver this
Agreement, the Investors' Rights Agreement in substantially the form attached
hereto as Exhibit C (the "INVESTORS' RIGHTS AGREEMENT"), the Management Rights
letter agreements between the Company and certain of the Purchasers
substantially in the form attached hereto as Exhibit D (the "MANAGEMENT RIGHTS
AGREEMENTS") and the Voting Agreement in substantially the form attached hereto
as Exhibit E (this Agreement, the Investors' Rights Agreement, the Management
Rights Agreements and the Voting Agreement are hereinafter collectively referred
to as the "AGREEMENTS"), to sell and issue the Shares under this Agreement, to
issue the Common Stock issuable upon conversion of the Shares and to carry out
and perform its obligations under the terms of the Agreements, including all
exhibits and schedules hereto and thereto.
2.3 SUBSIDIARIES. The Company does not own (of record or beneficially)
or control, directly or indirectly, any equity interest in any other
corporation, association or business entity (other than investments in
marketable securities). The Company is not a participant in any joint venture,
partnership or similar arrangement.
2.4 CAPITALIZATION. The authorized capital stock of the Company
consists of 50,000,000 shares of Common Stock, of which 2,508,500 shares will be
issued and outstanding immediately prior to the First Closing, and 25,000,000
shares of Preferred Stock, of which 10,500,000 are designated Series A Preferred
Stock, 600,000 are designated Series B Preferred Stock, and 800,000 are
designated Series C Preferred Stock, none of which will be issued and
outstanding immediately prior to the First Closing. No other shares of capital
stock or other securities of the Company are outstanding. All such issued and
outstanding shares have been duly authorized and validly issued and are fully
paid and nonassessable and have been offered, issued, sold and delivered by the
Company in compliance with applicable federal and state securities laws. The
Shares have the rights, preferences and privileges set forth in the Restated
Certificate, and all such rights, preferences and privileges are valid, binding
and enforceable in accordance with all applicable laws. The stockholders of
record and holders of subscriptions, warrants, options, convertible securities
and other rights to purchase or otherwise acquire equity securities of the
Company, and the number of shares of Common Stock and the number of such
subscriptions, warrants, options, convertible securities, and other such rights
held by each are as set forth in Exhibit B. All of the outstanding shares of
stock held by each such holder are subject to vesting as described in Exhibit B,
and the Company has the right to repurchase unvested shares upon the termination
of such holder's employment or other business relationship with the Company at
the original purchase price per share paid to the Company by such holder. The
Company has reserved 1,000,000 shares of its Common Stock (the "Reserved
Shares") for issuance pursuant to the Company's 1996 Stock Plan. Except for the
transactions contemplated in the Agreements, the conversion privileges of the
Company's
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Series A, Series B and Series C Preferred Stock specified in the Restated
Certificate, and as set forth in Exhibit B, there are no options, warrants,
conversion privileges or other rights or agreements presently outstanding to
purchase or otherwise acquire any authorized but unissued shares of the
Company's capital stock or other securities of the Company and there is no
commitment by the Company to issue shares, options, warrants, convertible
securities or other rights to purchase or otherwise acquire shares of the
Company's capital stock or other securities of the Company. Except as set forth
in Section 45 of the Company's Bylaws and as contemplated by the Agreements or
as provided for in Exhibit B, to the best of the Company's knowledge, there are
no voting trusts or agreements, stockholders' agreements, pledge agreements,
buy-sell agreements, rights of first refusal, preemptive rights or proxies
relating to securities of the Company (whether or not the Company is a party
thereto). The Company has no obligation (contingent or other) to purchase,
redeem or otherwise acquire any of its equity securities.
2.5 AUTHORIZATION. All corporate action on the part of the Company, its
directors and shareholders necessary for the authorization, execution, delivery
and performance of the Agreements by the Company, the authorization, sale,
issuance and delivery of the Shares (and the Common Stock issuable upon
conversion of the Shares) and the performance of the Company's obligations under
the Agreements has been taken or will be taken prior to the First Closing. The
Agreements, when executed and delivered by the Company, will constitute valid
and binding obligations of the Company enforceable in accordance with their
terms, subject to laws of general application relating to bankruptcy,
insolvency, the relief of debtors, general equity principles and limitations
upon rights to indemnity. This Agreement has been duly executed and delivered by
the Company. The Shares, when issued in compliance with the provisions of this
Agreement, will be duly and validly issued, fully paid and nonassessable and
will be free and clear of all liens, encumbrances or restrictions imposed by or
through the Company. The Common Stock issuable upon conversion of the Shares has
been duly and validly reserved and, when issued in compliance with the
provisions of the Restated Certificate, will be duly and validly issued, fully
paid and nonassessable and will be free and clear of all liens, encumbrances or
restrictions imposed by or through the Company. The issuance of the Shares (and
the Common Stock issuable upon conversion of the Shares) is not subject to any
preemptive rights, rights of first refusal or similar rights that have not been
waived; provided, however, that the Shares (and the Common Stock issuable upon
conversion of the Shares) are subject to a right of first refusal as set forth
in Section 45 of the Company's Bylaws, and may be subject to restrictions on
transfer under state and/or federal securities laws as set forth herein.
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2.6 CONTRACTS AND OTHER COMMITMENTS. The Company does not have any
contract, agreement, lease, commitment, or proposed transaction, written or
oral, absolute or contingent, other than contracts for the purchase of supplies
and services that were entered into in the ordinary course of business and that
do not involve more than $25,000 individually or $50,000 in the aggregate. For
the purpose of this paragraph, employment and consulting contracts (including
any severance arrangements), license agreements and any other agreements
relating to the acquisition or disposition of the Company's technology (other
than pursuant to the Company's standard form of Proprietary Information and
Inventions Agreement (the "PROPRIETARY INFORMATION AGREEMENT")) shall not be
considered to be contracts entered into in the ordinary course of business. The
Company is not a party to or bound by any judgment, order, writ or decree
restricting or affecting the development, manufacture or distribution of the
Company's products or services or proposed products or services or limiting or
restricting the Company's right to compete with any person in any respect.
2.7 COMPLIANCE WITH OTHER INSTRUMENTS, ETC. The Company is not, and will
not by virtue of entering into and performing the Agreements and the
transactions contemplated thereunder be, in violation (with or without the
passage of time or giving of notice or both) of any term of the Restated
Certificate or its Bylaws or any term or provision of any material mortgage,
indenture, contract, agreement, instrument, judgment or decree to which it is a
party or by which it is bound, and is not, and will not by virtue of entering
into and performing the Agreements and the transactions contemplated thereunder
be, in violation of any material order, statute, rule or regulation applicable
to the Company, other than any of the foregoing such violations that do not
impair the Company's ability to enter into or perform its obligations under the
Agreements or which, either individually or in the aggregate, do not have a
Material Adverse Effect. Entering into and performing the Agreements and the
transactions contemplated thereunder by the Company will not result in the
creation of any mortgage, pledge, lien, encumbrance or charge upon any of the
properties or assets of the Company or the suspension, revocation, impairment,
forfeiture or nonrenewal of any permit, license, authorization or approval
applicable to the Company or its properties or business.
2.8 LITIGATION, ETC. There is neither pending nor, to the Company's
knowledge and belief, threatened any action, suit, proceeding, investigation,
governmental inquiry, or claim, or any basis therefor or threat thereof, whether
or not purportedly on behalf of the Company, to which the Company is or may be
named as a party or its property is or may be subject or, to the Company's
knowledge, to which any officer, key employee, key consultant, or principal
shareholder of the Company is subject; and the Company has no knowledge (i) of
any unasserted claim, the assertion of which is likely and which, if asserted,
will seek damages, an injunction or other legal, equitable, monetary or
nonmonetary relief, which claim individually or collectively with other such
unasserted claims if granted would have a Material Adverse Effect, or (ii) that
there exists, or there is
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pending or planned, any patent, trademark, tradename, invention, device,
application or principle, or any statute, rule, law, regulation, standard or
code which would result in a Material Adverse Effect. There is no pending or, to
the Company's knowledge and belief, threatened claim or litigation against or
affecting the Company contesting, or which if adversely determined might
materially impair, its right to produce, manufacture, sell or use any product,
process, method, substance, part or other material presently produced,
manufactured, sold or used or planned to be produced, manufactured, sold or used
by the Company in connection with the operations of the Company. The Company has
no current plans to initiate any action, suit or proceeding.
2.9 REGISTRATION RIGHTS. Except as set forth in the Investors' Rights
Agreement, the Company is not under any obligation to register (as defined in
the Investors' Rights Agreement), and has not granted any rights to register,
any of its presently outstanding securities or any of its securities that may
hereafter be issued.
2.10 PERMITS. The Company has all franchises, permits, licenses, and
any similar authority necessary for the conduct of its business as now being
conducted by it and as proposed to be conducted, the lack of which would have a
Material Adverse Effect. The Company is not in default or violation in any
material respect under any of such franchises, permits, licenses, or other
similar authority, and the execution and delivery of the Agreements will not
result in any such default or violation, with or without the passage of time or
giving of notice or both.
2.11 GOVERNMENTAL CONSENT, ETC. No consent, approval or authorization
of or designation, declaration or filing with any governmental authority on the
part of the Company is required in connection with the valid execution and
delivery of the Agreements, or the offer, sale or issuance of the Shares (and
the Common Stock issuable upon conversion of the Shares) or the consummation of
any other transaction contemplated thereby, except the filing of the Restated
Certificate in the Office of the Secretary of State of the State of Delaware and
the qualification (or taking such action as may be necessary to secure an
exemption from qualification, if available) of the offer and sale of the Shares
(and the Common Stock issuable upon conversion of the Shares) under the
California Corporate Securities Law, which filing and qualification, if
required, will be accomplished in a timely manner prior to or promptly upon
completion of the First Closing.
2.12 DISCLOSURE. The Company has provided each Purchaser with all the
information reasonably available to it without undue expense that such Purchaser
has requested or could reasonably be expected to be material in deciding whether
to purchase the Shares. The Agreements and the Exhibits thereto as well as any
other document, certificate, schedule, financial, business or other statement
furnished to such Purchaser by or on behalf of the Company in connection with
the transactions contemplated hereby,
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including, without limitation, the Business Plan dated January 8, 1996, do not
contain any untrue statement of a material fact and do not omit to state a
material fact necessary in order to make the statements contained herein or
therein not misleading; provided, however, that with respect to any projections,
expressions of opinion, forecasts, predictions or the like (collectively,
"Projections") contained in such Business Plan, the Company represents only that
such Projections were made in good faith and that the Company believes there is
a reasonable basis therefor.
2.13 OFFERING. Subject to the accuracy of the representations set forth in
Section 3 hereof, the offer, sale and issuance of the Shares pursuant to this
Agreement and the issuance of the Common Stock to be issued upon conversion of
the Shares constitute transactions exempt from the registration requirements of
Section 5 of the Securities Act of 1933, as amended (the "SECURITIES ACT"), and
neither the Company nor any authorized agent acting on its behalf will take any
action hereafter that would cause the loss of such exemption.
2.14 LIABILITIES. The Company has no indebtedness for borrowed money that
the Company has directly or indirectly created, incurred, assumed, or
guaranteed, or with respect to which the Company has otherwise become directly
or indirectly liable, other than obligations not in excess of $25,000
individually or in the aggregate. The Company has not assumed, guaranteed,
endorsed or otherwise become directly or contingently liable on any indebtedness
of any other person (including, without limitation, liability by way of
agreement, contingent or otherwise, to purchase, to provide funds for payment,
to supply funds to or otherwise invest in the debtor, or otherwise to assure the
creditor against loss), except for guaranties by endorsement of negotiable
instruments for deposit or collection in the ordinary course of business.
2.15 CHANGES. Since December 31, 1995, there has not been:
(a) any change in the assets, liabilities, financial condition, or
operating results of the Company except changes in the ordinary course of
business that have not been, in the aggregate, materially adverse;
(b) any damage, destruction or loss, whether or not covered by
insurance, materially and adversely affecting the business, properties,
prospects, or financial condition of the Company (as such business is presently
conducted and as it is proposed to be conducted);
(c) any waiver or compromise by the Company of a valuable right or of a
material debt owed to it;
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(d) any satisfaction or discharge of any lien, claim, or encumbrance or
payment of any obligation by the Company, except in the ordinary course of
business and that is not material to the business, properties, prospects, or
financial condition of the Company (as such business is presently conducted and
as it is proposed to be conducted);
(e) to the best of the Company's knowledge, any material change to a
material contract or arrangement by which the Company or any of its assets is
bound or subject;
(f) any material change in any compensation arrangement or agreement
with any employee, consultant, officer, director or shareholder;
(g) any sale, assignment, license or transfer of any patents,
trademarks, copyrights, trade secrets, Proprietary Information (as defined
herein) or other intangible assets;
(h) any resignation or termination of employment of any key officer of
the Company or termination of engagement of any key consultant of the Company;
and the Company, to the best of its knowledge, does not know of the impending
resignation or termination of employment of any such officer or termination of
engagement of any such consultant;
(i) receipt of notice that there has been a loss of, or material order
cancellation by, any major customer of the Company;
(j) any mortgage, pledge, transfer of a security interest in, or lien
created by the Company, with respect to any of its material properties or
assets, except liens for taxes not yet due or payable;
(k) any loans or guarantees made by the Company to or for the benefit
of any person, other than travel advances to employees and/or consultants and
other advances to employees and/or consultants made in the ordinary course of
its business;
(l) to the best of the Company's knowledge, any other event or
condition of any character that might, individually or in the aggregate,
materially and adversely affect the business, properties, prospects, or
financial condition of the Company (as such business is presently conducted and
as it is proposed to be conducted);
(m) any amount borrowed or any liability (absolute, accrued or
contingent) incurred, or to which the Company has become subject, except
liabilities not in excess of $25,000 individually or $50,000 in the aggregate
and except current liabilities incurred
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and liabilities under contracts entered into in the ordinary course of business
which have not been, individually or in the aggregate materially adverse;
(n) any transaction except in the ordinary course of business or as
otherwise contemplated hereby; or
(o) any agreement or commitment by the Company to do any of the things
described in this paragraph 2.15.
2.16 TITLE TO PROPERTIES AND ASSETS; LIENS, LEASES, ETC. The Company has
good and marketable title to its properties and assets and has good title to all
of its leasehold interests, in each case subject to no mortgage, pledge, lien,
lease, encumbrance or charge, other than (i) the lien of current taxes not yet
due and payable, and (ii) possible minor liens and encumbrances that do not in
any case materially detract from the value of the property subject thereto or
materially impair the operations of the Company and which have not arisen
otherwise than in the ordinary course of business.
Set forth on Exhibit B is a correct and complete list (including the
amount of rents called for and a description of the leased property) of all
material leases (involving more than $25,000 either individually or in the
aggregate if such leases are of a similar nature or with the same lessor) under
which the Company is a lessee. The Company enjoys peaceful and undisturbed
possession under all such leases, all of such leases are valid and subsisting
and, except as would not result in a Material Adverse Effect, the Company and,
to the Company's knowledge, each other party to such leases is not in default
thereunder.
2.17 PATENTS AND TRADEMARKS. The Company has sufficient title and
ownership of all patents, trademarks, service marks, applications for each of
the foregoing, trade names, copyrights, trade secrets, information, proprietary
rights and processes (collectively "PROPRIETARY INFORMATION"), or has, or
believes to the best of its knowledge that it has the ability to acquire on
comercially reasonable terms, valid licenses to such Proprietary Information (as
described further on Exhibit B), as necessary for its business as now conducted
and as proposed to be conducted without any conflict with or infringement of the
rights of others. The Schedule of Exceptions contains a complete list of patents
and pending patent applications of the Company or of which the Company is a
licensee. There are no outstanding options, licenses, or agreements of any kind
relating to Proprietary Information owned by the Company, nor is the Company
bound by or a party to any options, licenses or agreements of any kind with
respect to the patents, trademarks, service marks, applications for each of the
foregoing, trade names, copyrights, trade secrets, licenses, information,
proprietary rights and processes of any other person or entity. The Company is
not aware of any impropriety with regard to the granting of any licenses of
Proprietary Information to or from the Company, and no claim is pending or, to
the Company's knowledge, threatened to the effect that any such Property
Information owned or licensed by the Company, or which the Company otherwise has
the right to use, is
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invalid or unenforceable by the Company (and to the Company's knowledge, there
is no basis for any such claim). Neither the Company nor, to the Company's
knowledge, any of its employees or consultants has received any written
communications alleging, nor does the Company know of any grounds for any claims
or allegations now or in the future, that the Company or its employees or
consultants has violated or infringed or that the Company or its employees or
consultants would, by conducting its business as proposed, violate or infringe
any of the patents, trademarks, service marks, applications for each of the
foregoing, trade names, copyrights or trade secrets or other proprietary rights
of any other person or entity. The Company is not aware that any of its
employees or consultants is obligated under any contract (including licenses,
covenants, or commitments of any nature) or other agreement, or subject to any
judgment, decree, or order of any court or administrative agency, that would, in
the case of employees, interfere with the use of such employee's best efforts to
promote the interests of the Company or that would conflict with the Company's
business as proposed to be conducted or, in the case of consultants, which would
conflict with their obligations in serving as consultants to the Company. No
third party, including the employers or former employers of the Company's
employees and consultants, has asserted any rights or claims to the Proprietary
Information or any inventions used or proposed to be used in the Company's
business, and the Company does not believe that any such third party has a right
to assert any such rights or claims, except to the extent that such Proprietary
Information or such inventions are licensed to or from such third party. Except
pursuant to the terms of the Proprietary Information Agreements, there are no
agreements, understandings, instruments, or contracts to which the Company is a
party or by which it is bound that involve the license of any patent, copyright,
trade secret or other similar proprietary right to or from the Company.
2.18 TAX RETURNS; TAXES. The Company has accurately prepared and timely
filed all federal, state and other tax returns which are required to be filed
and has timely paid all taxes covered by such returns which have become due and
payable. The Company has not been advised that any of its returns, federal,
state or other, have been or are being audited as of the date hereof. The
Company is not delinquent in taxes or assessments and has no tax deficiency
proposed or assessed and has made no waiver of the statute of limitations
regarding assessments or collections. All taxes, if any, imposed by law in
connection with the issuance, sale and delivery of the Shares shall have been
paid, and all laws imposing such taxes shall have been fully complied with,
prior to the First Closing. Neither the Company nor any of its present or former
stockholders has ever filed an election pursuant to Section 1362 of the Internal
Revenue Code of 1986, as amended (the "Code"), that the Company be taxed as an S
corporation.
2.19 EMPLOYEES. None of the Company's employees belongs to any union or
collective bargaining unit. To the best of its knowledge, the Company has
complied in all material respects with all applicable state and federal equal
opportunity and other laws related to employment. To the best of the Company's
knowledge, no employee of or
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consultant to the Company is or will be in violation of any judgment, decree, or
order, or any term of any employment contract, patent disclosure agreement,
proprietary information and inventions agreement, or any restrictive covenant,
or any other common law obligation to a former employer, or any other contract
or agreement relating to the relationship of any such person with the Company,
or any other party, or to the use of trade secrets or proprietary information of
others, because of the nature of the business conducted or to be conducted by
the Company or the use by any such employee of his best efforts with respect to
such business or the performance by any such consultant of his obligations to
the Company. To the knowledge of the Company, no third party has claimed or has
reason to claim that any employee of or consultant to the Company has disclosed
or may be disclosing or utilized or may be utilizing any trade secret or
proprietary information or documentation of such third party, or interfered or
may be interfering in the employment relationship between such third party and
any of its present or former employees and, to the Company's knowledge, no such
person proposes to do any of such things. The Company is not a party to or bound
by any currently effective employment contract, deferred compensation agreement,
bonus plan, incentive plan, profit sharing plan, retirement agreement, or other
employee compensation agreement, other than with respect to the Company's 1996
Stock Plan, a true and correct copy of which has been provided to each
Purchaser. The Company is not aware that any officer, key employee or key
consultant, or that any group of key employees or key consultants, intends to
terminate their employment or consultancy with the Company, nor does the Company
have a present intention to terminate the employment or engagement as a
consultant of any of the foregoing. Subject to general principles related to
wrongful termination of employees, the employment of each officer and employee
of the Company is terminable at the will of the Company. The Company has
delivered to counsel for the Purchasers a copy of each consulting agreement to
which it is a party.
2.20 NO DEFAULTS. The Company has, in all material respects, performed all
material obligations required to be performed by it to date and is not in
default under any of the contracts, loans, notes, mortgages, indentures,
licenses, security agreements, agreements, leases, documents, commitments or
other arrangements to which it is a party or by which it is otherwise bound,
except for such defaults which in the aggregate would not have a Material
Adverse Effect, and no event or condition has occurred which, with the lapse of
time or the giving of notice, or both, would constitute such a default.
2.21 INSURANCE. The Company maintains adequate insurance on its properties
of a character and in such amounts and on such terms usually insured by
corporations engaged in the same or a similar business against loss or damage
resulting from fire or other risks insured against by such corporations, and
maintains in full force and effect public liability insurance against claims for
personal injury, death or property damage occurring upon, in, about or in
connection with the use of any of its properties, products
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or services and maintains such other insurance as may be required by law or
other agreement to which the Company is a party.
2.22 BROKERS OR FINDERS. The Company has not incurred, and will not incur,
any liability for brokerage or finders' fees or agents' commissions or any
similar charges in connection with the Agreements.
2.23 ENVIRONMENTAL AND SAFETY LAWS. To the best of its knowledge, the
Company is not in violation of any applicable statute, law or regulation
relating to the environment or occupational health and safety, and to the best
of its knowledge, no material expenditures are or will be required in order to
comply with any such existing statute, law or regulation.
2.24 NO DIVIDENDS. The Company has never made any declaration, setting
aside for payment or other distribution in respect of any of the Company's
capital stock or any direct or indirect redemption, repurchase or other
acquisition of any of such stock.
2.25 EMPLOYEE BENEFIT PLAN OBLIGATIONS. The Company does not maintain or
have any obligations with respect to any employee benefit plan (within the
meaning of Section 3(3) of the Employee Retirement Income Security Act of 1974
("ERISA")). The Company is not, nor was it at any time, obligated to contribute
to any employee pension benefit plan which is or was a multi-employer plan
within the meaning of Section 3(37) of ERISA.
2.26 QUALIFICATION AS A QUALIFIED SMALL BUSINESS. The Company is a
"qualified small business," as defined in Section 1202(b) of the Internal
Revenue Code (the "Code") and the Shares constitute "qualified small business
stock" as defined in Section 1202(c) of the Code. The Company covenants and
agrees to comply with the reporting and recordkeeping requirements of Section
1202 of the Code and any regulations promulgated thereunder and to execute and
deliver to the Purchasers and the Internal Revenue Service, from time to time,
such forms, documents, schedules and other instruments as may be reasonably
requested thereby to cause the Shares and the shares of Common Stock issuable
upon conversion of the Shares to qualify as a "qualified small business stock,"
as defined in Section 1202(c) of the Code.
2.27 FINANCIAL STATEMENTS. The Company has furnished to the Purchasers the
unaudited balance sheet of the Company as of January 31, 1996 and the related
unaudited statement of income for the period from the Company's inception
through January 31, 1996. All such financial statements fairly present the
financial position of the Company as of January 31, 1996, and the results of
operations during such period.
2.28 TRANSACTIONS WITH AFFILIATES. No director or officer or, to the
Company's knowledge, employee or stockholder of the Company, or, to the
Company's knowledge,
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member of the family of any such person, or, to the Company's knowledge, any
corporation, partnership, trust or other entity in which any such person, or any
member of the family of any such person, has a substantial interest or is an
officer, director, trustee, partner or holder of more than 5% of the outstanding
capital stock thereof, is a party to any material transaction with the Company,
including any contract, agreement or other arrangement providing for the
employment of, furnishing of services by, rental of real or personal property
from or otherwise requiring payments to any such person or firm, other than
employment-at-will arrangements in the ordinary course of business.
2.29 PROPRIETARY INFORMATION AND INVENTIONS AGREEMENTS. Each of the
officers of the Company, each key employee and each other employee now employed
by the Company who has access to confidential information of the Company has
executed the Proprietary Information Agreement substantially in the form of
Exhibit F (collectively, the "Proprietary Information Agreements"), and such
agreements are in full force and effect. The Company is not aware that any of
such persons is in violation of any such agreement.
2.30 U.S. REAL PROPERTY HOLDING CORPORATION. The Company is not now and
has never been a "United States real property holding corporation," as defined
in Section 897(c)(2) of the Code and Section 1.897-2(b) of the Regulations
promulgated by the Internal Revenue Service, and the Company has filed with the
Internal Revenue Service all statements, if any, with its United States income
tax returns which are required under Section 1.897-2(h) of such Regulations.
SECTION 3
INVESTMENT REPRESENTATIONS
Each Purchaser, severally and not jointly, hereby represents and warrants
to the Company as follows:
3.1 POWER AND AUTHORITY. Such Purchaser has the requisite power and
authority to enter into this Agreement, to purchase the Shares hereunder, to
convert the Shares into Common Stock, and to carry out and perform its
obligations under the terms of this Agreement.
3.2 DUE EXECUTION. This Agreement has been duly authorized, executed and
delivered by such Purchaser, and, upon due execution and delivery by the
Company, this Agreement will be a valid and binding agreement of such Purchaser,
subject to laws of general application relating to bankruptcy, insolvency, the
relief of debtors and general equity principles.
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3.3 EXPERIENCE; ACCREDITED INVESTOR. Such Purchaser has, from time to
time, evaluated investments in start-up companies and has, either individually
or through the personal experience of one or more of its current officers or
partners, experience in evaluating and investing in start-up companies. Such
Purchaser is an "accredited investor" as defined in Regulation D promulgated
under the Securities Act.
3.4 INVESTMENT. Such Purchaser is acquiring the Shares (and any Common
Stock issuable upon conversion of the Shares) for investment for its own account
and not with the view to, or for resale in connection with, any distribution
thereof. Such Purchaser understands that the Shares (and any Common Stock
issuable upon conversion of the Shares) to be purchased have not been registered
under the Securities Act by reason of a specific exemption from the registration
provisions of the Securities Act which depends upon, among other things, the
bona fide nature of the investment intent as expressed herein.
3.5 RULE 144. Such Purchaser acknowledges that the Shares must be held
indefinitely unless subsequently registered under the Securities Act or an
exemption from such registration is available. Such Purchaser is aware of the
provisions of Rule 144 promulgated under the Securities Act which permits
limited resale of shares purchased in a private placement subject to the
satisfaction of certain conditions, including, among other things the existence
of a public market for the shares, the availability of certain current public
information about the Company, the resale occurring not less than two years
after a party has purchased and paid for the securities to be sold, the sale
being through a "BROKER'S TRANSACTION" or in transactions directly with a
"MARKET MAKER" (as provided by Rule 144(f)) and the number of shares being sold
during any three-month period not exceeding specified limitations. Such
Purchaser is aware that the conditions for resale set forth in Rule 144 have not
been satisfied and that the Company has no plan to satisfy these conditions in
the foreseeable future.
3.6 NO PUBLIC MARKET. Such Purchaser understands that no public market now
exists for the Shares and that a public market may never exist for the Shares.
3.7 DISCLOSURE OF INFORMATION. Such Purchaser believes it has received all
the information it considers necessary or appropriate for deciding whether to
purchase the Shares. Such Purchaser further represents that it has had an
opportunity to ask questions and receive answers from the Company regarding the
terms and conditions of the offering of the Shares.
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SECTION 4
CONDITIONS OF THE PURCHASER'S OBLIGATIONS AT CLOSING
Each Purchaser's obligation to purchase the Shares at each Closing, as
applicable, is subject to the fulfillment on or prior to such Closing of the
following conditions:
4.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties of
the Company contained in Section 2 shall be true when made and on and as of the
date of such Closing with the same effect as though such representations and
warranties had been made on and as of the date of such Closing.
4.2 COVENANTS. All covenants, agreements and conditions contained in this
Agreement to be performed by the Company on or prior to such Closing shall have
been performed or complied with in all material respects.
4.3 NO MATERIAL ADVERSE CHANGE. There shall have been no material adverse
change in the Company's business or financial condition or affairs between the
date of this Agreement and the date of such Closing, if different.
4.4 SECURITIES LAWS. The Company shall have obtained all necessary permits
and qualifications, or secured exemptions therefrom, required under the
Securities Act or by any state for the offer and sale of the Shares and Common
Stock issuable upon conversion of the Shares.
4.5 COMPLIANCE CERTIFICATE. The Company shall have delivered on the date
of such Closing a certificate signed by the President and Chief Financial
Officer of the Company certifying that the conditions specified in Sections 4.1,
4.2, 4.3, 4.7, 4.9, 4.10, 4.11, 4.12, 4.13, 4.14, 4.15, 4.16 and 4.17 have been
fulfilled.
4.6 OPINION OF COUNSEL. The Purchasers purchasing shares in such Closing
shall have received from Cooley Godward Castro Huddleson & Tatum, counsel for
the Company, an opinion dated as of such Closing in substantially the form
attached hereto as Exhibit G.
4.7 INVESTORS' RIGHTS AGREEMENT. The Company shall have executed and
delivered the Investors' Rights Agreement.
4.8 PROCEEDINGS AND DOCUMENTS. All corporate and other proceedings in
connection with the transactions contemplated at such Closing and all documents
incident thereto shall be reasonably satisfactory in form and substance to the
Purchasers' counsel,
15
<PAGE> 123
which shall have received all such counterpart original and certified or other
copies of such documents as it may reasonably request.
4.9 SUPPORTING DOCUMENTS. The Purchasers purchasing shares in such Closing
and their counsel shall have received copies of the following documents:
(i) (A) the Certificate of Incorporation of the Company,
certified as of a recent date by the Secretary of State of the State of
Delaware and (B) a certificate of said Secretary dated as of a recent
date as to the due incorporation and good standing of the Company, the
payment of all excise taxes by the Company and listing all documents of
the Company on file with said Secretary.
(ii) a certificate of the Secretary or an Assistant Secretary
of the Company dated the date of such Closing and certifying: (A) that
attached thereto is a true and complete copy of the Bylaws of the
Company as in effect on the date of such certification; (B) that
attached thereto is a true and complete copy of all resolutions adopted
by the Board of Directors or the stockholders of the Company
authorizing the execution, delivery and performance of the Agreements,
the issuance, sale and delivery of the Shares, and the reservation,
issuance and delivery of the shares of Common Stock issuable upon
conversion of the Shares, and that all such resolutions are in full
force and effect and are all the resolutions adopted in connection with
the transactions contemplated by the Agreements; (C) that the
Certificate of Incorporation has not been amended since the date of the
last amendment referred to in the certificate delivered pursuant to
clause (i)(B) above, except for the filing of the Restated Certificate;
and (D) to the incumbency and specimen signature of each officer of the
Company executing the Agreements, the stock certificates representing
the Shares and any certificate or instrument furnished pursuant hereto,
and a certification by another officer of the Company as to the
incumbency and signature of the officer signing the certificate
referred to in this clause (ii); and
(iii) such additional supporting documents and other
information with respect to the operations and affairs of the Company
as the Purchasers or their counsel reasonably may request.
4.10 MANAGEMENT RIGHTS AGREEMENTS. The Company shall have executed and
delivered the Management Rights Agreements to those Purchasers participating in
such Closing who have made a request to the Company therefor and are subject in
any manner with respect to their investment in the Company to ERISA.
4.11 VOTING AGREEMENT. The Company and the other parties thereto shall
have executed and delivered the Voting Agreement.
16
<PAGE> 124
4.12 AMENDMENT TO EMPLOYMENT AGREEMENT. Timothy J. Rink and the Company
shall have entered into an amendment (the "EMPLOYMENT AMENDMENT") to the terms
of his employment arrangements with the Company in a form satisfactory to Dr.
Rink, the Purchasers and their counsel, and a copy thereof shall have been
delivered to counsel for the Purchasers.
4.13 CHARTER. The Certificate of Incorporation of the Company shall read
in its entirety as set forth in Exhibit A.
4.14 BYLAWS. The Company's Bylaws shall have been amended, if necessary,
to provide that (i) any three directors shall have the right to call a meeting
of the Board of Directors and (ii) the number of directors fixed in accordance
therewith shall in no event conflict with any of the terms or provisions of the
Series A Preferred Stock. Series B Preferred Stock and Series C Preferred Stock
as set forth in the Restated Certificate.
4.15 PROPRIETARY INFORMATION AGREEMENTS. Copies of the Proprietary
Information Agreements shall have been delivered to counsel for the Purchasers.
4.16 ELECTION OF DIRECTORS. The number of directors constituting the
entire Board of Directors shall have been fixed at seven (7) and the following
persons shall have been elected as the directors and shall each hold such
position as of the First Closing: Timothy J. Rink and Lubert Stryer, as the
directors elected solely by the holders of the Common Stock, and Kevin J.
Kinsella, Timothy J. Wollaeger, Stephen Bunting, James C. Blair and Hugh Y.
Rienhoff, Jr., as the directors elected solely by the holders of the Series A
Preferred Stock, the Series B Preferred Stock and the Series C Preferred Stock.
4.17 CERTIFICATE AS TO DISQUALIFIED PERSONS. The Company shall have
executed and delivered to New Enterprise Associates VI, Limited Partnership
("NEA VI") a Certificate as to Disqualified Persons, as requested by NEA VI,
dated the Closing Date, in form and substance satisfactory to NEA VI.
4.18 FEES OF PURCHASERS' COUNSEL. The Company shall have paid in
accordance with Section 6.5 the reasonable fees and disbursements of Testa,
Hurwitz and Thibeault in connection with this Agreement and related transactions
as specified on a reasonably detailed invoice, detailing all time entries and
costs, submitted to counsel to the Company a reasonable time in advance of such
Closing.
17
<PAGE> 125
SECTION 5
CONDITIONS OF THE COMPANY'S OBLIGATIONS AT CLOSING
The Company's obligation to issue and sell the Shares at each Closing
is subject to the fulfillment on or prior to such Closing of the following
conditions:
5.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties
of the Purchasers contained in Section 3 shall be true when made and on and as
of the date of such Closing with the same effect as though such representations
and warranties had been made on and as of the date of such Closing.
5.2 COVENANTS. All covenants, agreements and conditions contained in
this Agreement to be performed by the Purchasers on or prior to the date of such
Closing shall have been performed or complied with in all respects.
SECTION 6
MISCELLANEOUS
6.1 GOVERNING LAW. This Agreement shall be governed by the laws of the
State of California as applicable to contracts entered into and performed
entirely within the State of California by residents of California.
6.2 SUCCESSORS AND ASSIGNS. Except as otherwise provided herein, the
provisions hereof shall inure to the benefit of, and be binding upon, the
successors, assigns, heirs, executors and administrators of the parties hereto;
provided, however, that the rights of the Purchasers to purchase the Shares
shall not be assignable (other than to a corporation a majority of whose
outstanding voting shares are owned or controlled, directly or indirectly, by
the Purchaser) without the consent of the Company, and the Company's obligations
hereunder shall not be assignable without the consent of the Purchasers.
6.3 ENTIRE AGREEMENT. This Agreement, its Exhibits, and the other
documents delivered pursuant hereto constitute the full and entire understanding
and agreement between the parties with regard to the subjects hereof and
thereof.
6.4 NOTICES, ETC. All notices and other communications required or
permitted hereunder shall be in writing and shall be sent by facsimile or mailed
by registered or
18
<PAGE> 126
certified mail, postage prepaid, or otherwise delivered by hand or by messenger,
addressed (a) if to a Purchaser, to the address set forth on Schedule A hereto,
or at such other address as shall have been furnished to the Company in writing
by such Purchaser, or (b) if to the Company, one copy to its address set forth
above and addressed to the attention of the President, or at such other address
or addresses as the Company shall have furnished in writing to the Purchasers,
and one copy to Cooley Godward Castro Huddleson & Tatum, 4365 Executive Drive,
Suite 1100, San Diego, CA 92121, Attn: Thomas A. Coll, Esq. All notices and
other communications pursuant to the provisions of this Section 6.4 shall be
deemed delivered when mailed or sent by facsimile or delivered by hand or
messenger. Notwithstanding the foregoing, any notice or communication to an
address outside the United States shall be sent by facsimile and confirmed in
writing contemporaneously sent by two-day guaranteed international courier.
6.5 EXPENSES. Each party to this Agreement shall bear its own expenses
and legal fees incurred by it with respect to this Agreement and all related
transactions; provided, however, that the Company shall pay the reasonable fees
and expenses of the Purchasers' special counsel, Testa, Hurwitz and Thibeault,
in connection with this Agreement and such transactions and any subsequent
amendment, waiver, consent or enforcement thereof.
6.6 COUNTERPARTS. This Agreement may be executed in counterparts, each
of which shall be enforceable against the party actually executing such
counterpart, and which together shall constitute one instrument.
6.7 SEVERABILITY. In the event that any provision of this Agreement
becomes or is declared by a court of competent jurisdiction to be illegal,
unenforceable or void, this Agreement shall continue in full force and effect
without said provision; provided that no such severability shall be effective if
it materially changes the economic benefit of this Agreement to any party.
6.8 SURVIVAL OF AGREEMENTS. All covenants, agreements, representations
and warranties made herein or in the other Agreements, or any certificate or
instrument delivered to the Purchasers pursuant to or in connection with the
Agreements, shall survive the execution and delivery of the Agreements, the
issuance, sale and delivery of the Shares, and the issuance and delivery of the
shares of Common Stock issuable upon conversion of the Shares, and all
statements contained in any certificate or other instrument delivered by the
Company hereunder or thereunder or in connection herewith or therewith shall be
deemed to constitute representations and warranties made by the Company.
6.9 BROKERAGE. Each party hereto will indemnify and hold harmless the
others against and in respect of any claim for brokerage or other commissions
relative to this
19
<PAGE> 127
Agreement or to the transactions contemplated hereby, based in any way on
agreements, arrangements or understandings made or claimed to have been made by
such party with any third party.
6.10 AMENDMENTS. This Agreement may not be amended or modified, and no
provisions hereof may be waived, without the written consent of the Company and
the holders of at least two-thirds of the shares of Common Stock issued or
issuable upon conversion of the Shares.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
20
<PAGE> 128
The foregoing Preferred Stock Purchase Agreement is hereby executed as
of the date first above written.
THE COMPANY:
AURORA BIOSCIENCES CORPORATION
By: __________________________
Title: _______________________
THE PURCHASERS:
AVALON MEDICAL PARTNERS, L.P.
By: __________________________
Title: _______________________
AVALON BIOVENTURES II, L.P.
By: __________________________
Title: _______________________
21
<PAGE> 129
KINGSBURY CAPITAL PARTNERS, L.P. II
By: Kingsbury Associates, L.P.
By: __________________________
Title: General Partner
ABINGWORTH BIOVENTURES SICAV
By: __________________________
Title: _______________________
NEW ENTERPRISES ASSOCIATES VI, LIMITED PARTNERSHIP
By: NEA Partners VI, Limited Partnership,
its General Partner
By: __________________________
Title: General Partner
NEA VENTURES 1996, L.P.
By: __________________________
Title: Authorized Signatory
22
<PAGE> 130
DP III ASSOCIATES, L.P.
By: One Palmer Square Associates III, L.P.,
its General Partner
By: __________________________
General Partner
DOMAIN PARTNERS III, L.P.
By: One Palmer Square Associates III, L.P.,
its General Partner
By: __________________________
General Partner
BIOTECHNOLOGY INVESTMENTS LIMITED
By: Old Court Limited
By: __________________________
Attorney - in - Fact
PACKARD INSTRUMENT COMPANY, INC.
By: __________________________
Title: _______________________
[SIGNATURE PAGE FOR PREFERRED STOCK PURCHASE AGREEMENT]
23
<PAGE> 131
SEQUANA THERAPEUTICS, INC.
By: __________________________
Title: _______________________
GC&H INVESTMENTS
By: __________________________
Title: _______________________
______________________________
KEVIN J. KINSELLA
______________________________
ROGER Y. TSIEN
______________________________
THERESA E. GLOBE
______________________________
CHARLES S. ZUKER
24
<PAGE> 132
______________________________
MICHAEL G. ROSENFELD
______________________________
JOHN A. PORCO, JR.
______________________________
LUBERT STRYER
______________________________
ANDREA S. STRYER
______________________________
WALTER LUETOLF
FOR ADRIAN J.R. LANGINGER
______________________________
NORMAND F. SMITH
______________________________
HUGH Y. RIENHOFF, JR.
______________________________
JANICE THOMPSON
25
<PAGE> 133
THE GREENE FAMILY TRUST
By: __________________________
HOWARD E. GREENE, JR., TRUSTEE
By: __________________________
ARLINE GREENE, TRUSTEE
______________________________
TIMOTHY J. RINK
HAMBRECHT & QUIST GROUP
By: __________________________
Dennis J. Purcell
Title: _______________________
26
<PAGE> 134
SCHEDULE A
PURCHASERS OF PREFERRED STOCK
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
AMOUNT OF SHARES PRICE PER METHOD OF
SHAREHOLDER INVESTMENT PURCHASED CLASS SHARE PAYMENT(1)
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
AVALON MEDICAL PARTNERS L.P. $424,998.84 319,548 Ser A $1.33 CD
1020 Prospect Street, Suite 405
La Jolla, CA 92037
Fax: (619) 454-5329
- ---------------------------------------------------------------------------------------------------------------------------------
AVALON BIOVENTURES II L.P. 499,998.87 375,939 Ser A $1.33 CD
1020 Prospect Street, Suite 405
La Jolla, CA 92037
Fax: (619) 454-5329
- ---------------------------------------------------------------------------------------------------------------------------------
KINGSBURY CAPITAL PARTNERS, L.P. II 999,999.07 751,879 Ser A $1.33 C/W
3655 Nobel Drive, Suite 490
San Diego, CA 92122
Fax: (619) 677-0800
- ---------------------------------------------------------------------------------------------------------------------------------
ABINGWORTH BIOVENTURES SICAV 3,499,998.74 2,631,578 Ser A $1.33 C/W
c/o Sanne & Cie
Boite Postale 566
L-2015 Luxemberg
Attn: Karl Sanne
Fax: 352-43-54-10
with a copy to:
Stephen Bunting
Abingworth Management Ltd.
26 St. James Street
London SW1A1HA
Fax: 44-171-930-1891
Daniel P. Finkelman
Testa Hurwitz & Thibeault
125 High Street
Boston, MA 02110
Fax: (617) 248-7100
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 135
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
AMOUNT OF SHARES PRICE PER METHOD OF
SHAREHOLDER INVESTMENT PURCHASED CLASS SHARE PAYMENT(1)
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NEW ENTERPRISE ASSOCIATES VI 2,749,999.77 2,067,669 Ser A $1.33 C/W
LIMITED PARTNERSHIP
1119 St. Paul Street
Baltimore, MD 21202
Fax: (410) 752-7721
- ---------------------------------------------------------------------------------------------------------------------------------
NEA VENTURES 1996, L.P. 9,998.94 7,518 Ser A $1.33 C/W
1119 St. Paul Street
Baltimore, MD 21202
Fax: (410) 752-7721
- ---------------------------------------------------------------------------------------------------------------------------------
DP III ASSOCIATES, L.P. 95,301.15 71,655 Ser A $1.33 C/W
One Palmer Square, Suite 515
Princeton, NJ 08542
Fax: (609) 683-9789
- ---------------------------------------------------------------------------------------------------------------------------------
DOMAIN PARTNERS III., L.P. 2,754,698.66 2,071,202 Ser A $1.33 C/W
One Palmer Square, Suite 515
Princeton, NJ 08542
Fax: (609) 683-9789
- ---------------------------------------------------------------------------------------------------------------------------------
BIOTECHNOLOGY INVESTMENTS LIMITED 1,899,999.43 1,428,571 Ser A $1.33 C/W
One Palmer Square, Suite 515
Princeton, NJ 08542
Fax: (609)683-9789
- ---------------------------------------------------------------------------------------------------------------------------------
KEVIN J. KINSELLA 49,998.69 37,593 Ser A $1.33 C/W
Avalon Ventures
1020 Prospect Street, Suite 405
La Jolla, CA 92037
Fax: (619) 454-5329
- ---------------------------------------------------------------------------------------------------------------------------------
ROGER Y. TSIEN 199,500.00 150,000 Ser A $1.33 C/W
8535 Nottingham Place
La Jolla, CA 92037
Fax: (619) 534-5270
- ---------------------------------------------------------------------------------------------------------------------------------
THERESA E. GLOBE 50,540.00 38,000 Ser A $1.33 C/W
142 Bessborough Drive
Toronto, Ontario M4G3J6
Fax: (416) 864-3361
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 136
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
AMOUNT OF SHARES PRICE PER METHOD OF
SHAREHOLDER INVESTMENT PURCHASED CLASS SHARE PAYMENT(1)
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
CHARLES S. ZUKER 79,800.00 60,000 Ser A $1.33 C/W
UCSD
Cellular & Molecular Medicine West
La Jolla, CA 92037
Fax: (619) 534-8510
- ---------------------------------------------------------------------------------------------------------------------------------
MICHAEL G. ROSENFELD 29,999.48 22,556 Ser A $1.33 C/W
UCSD
Eukaryotic Regulatory Biology Program
Room 345 C.M.M.
9500 Gilman Drive
La Jolla, CA 92093
Fax: (619) 534-8180
- ---------------------------------------------------------------------------------------------------------------------------------
JOHN A. PORCO, JR. 4,999.47 3,759 Ser A $1.33 C/W
Argonaut Technologies, Inc.
887-G Industrial Rd., Ste. G
San Carlos, CA 94070-3305
Fax: (415) 598-1359
- ---------------------------------------------------------------------------------------------------------------------------------
LUBERT STRYER 37,499.35 28,195 Ser A $1.33 C/W
843 Sonoma Terrace
Stanford, CA 94305
Fax: (415) 498-5351
- ---------------------------------------------------------------------------------------------------------------------------------
ANDREA S. STRYER 37,499.35 28,195 Ser A $1.33 C/W
843 Sonoma Terrace
Stanford, CA 94305
Fax: (415) 498-5351
- ---------------------------------------------------------------------------------------------------------------------------------
ADRIAN J.R. LANGINGER 53,200.00 40,000 Ser A $1.33 C/W
c/o WALTER LUTOLF
ATAG Vermogensverwaltung AG
8022 Zurich
Bleicherweg 21
Postfach 5272
Fax: 01-202 33 49
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 137
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
AMOUNT OF SHARES PRICE PER METHOD OF
SHAREHOLDER INVESTMENT PURCHASED CLASS SHARE PAYMENT(1)
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
GC&H INVESTMENTS 49,998.69 37,593 Ser A $1.33 C/W
Cooley Godward Castro Huddleson & Tatum
4365 Executive Drive, Suite 1100
San Diego, CA 92121
Fax: (619) 453-3555
- ---------------------------------------------------------------------------------------------------------------------------------
NORMAND F. SMITH 24,998.68 18,796 Ser A $1.33 C/W
Perkins, Smith & Cohen
One Beacon Street
Boston, MA 02108-3106
Fax: (617) 854-4040
- ---------------------------------------------------------------------------------------------------------------------------------
HUGH Y. RIENHOFF, JR. 4,999.47 3,759 Ser A $1.33 C/W
New Enterprise Associates
1119 St. Paul Street
Baltimore, MD 21202
Fax: (410) 752-7721
- ---------------------------------------------------------------------------------------------------------------------------------
JANICE THOMPSON 9,998.94 7,518 Ser A $1.33 C/W
P.O. Box 3471
16360 La Gracia
Rancho Santa Fe, CA 92067
Fax: (619) 756-4320
- ---------------------------------------------------------------------------------------------------------------------------------
THE GREENE FAMILY TRUST 24,998.68 18,796 Ser A $1.33 C/W
C/O HOWARD E. GREENE, JR.
9373 Towne Centre Drive
San Diego, CA 92121
Fax: (619) 552-2212
- ---------------------------------------------------------------------------------------------------------------------------------
TIMOTHY J. RINK 24,998.68 18,796 Ser A $1.33 C/W
5666 La Jolla Boulevard, #5
La Jolla, CA 92037
Fax: (619) 454-5329
- ---------------------------------------------------------------------------------------------------------------------------------
PACKARD INSTRUMENT COMPANY, INC. 999,999.00 555,555 Ser B $1.80 C/W
800 Research Parkway
Meriden, CT 06450
Fax: (203) 235-1347
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 138
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
AMOUNT OF SHARES PRICE PER METHOD OF
SHAREHOLDER INVESTMENT PURCHASED CLASS SHARE PAYMENT(1)
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SEQUANA THERAPEUTICS, INC. 1,500,000.00 750,000 Ser C $2.00 C/W
11099 North Torrey Pines Rd., Ste. 160
La Jolla, CA 92037
Fax: (619) 452-6653
- ---------------------------------------------------------------------------------------------------------------------------------
HAMBRECHT & QUIST GROUP 499,998.60 277,777 Ser B $1.80 C/W
230 Park Ave., 21st Fl.
New York, NY 10169
Attn: Dennis J. Purcell
Fax: (212) 207-1519
- ---------------------------------------------------------------------------------------------------------------------------------
TOTALS $16,618,020.55 11,822,447
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
1 "C/W" indicates check or wire transfer; "CD" indicates cancellation of
indebtedness.
<PAGE> 139
EXHIBIT A
RESTATED CERTIFICATE OF INCORPORATION
<PAGE> 140
EXHIBIT B
SCHEDULE OF EXCEPTIONS
<PAGE> 141
EXHIBIT C
INVESTORS' RIGHTS AGREEMENT
<PAGE> 142
EXHIBIT D
FORM OF MANAGEMENT RIGHTS LETTER
<PAGE> 143
EXHIBIT E
FORM OF VOTING AGREEMENT
<PAGE> 144
EXHIBIT F
FORM OF PROPRIETARY INFORMATION AND INVENTIONS AGREEMENT
<PAGE> 145
EXHIBIT G
FORM OF LEGAL OPINION OF COMPANY COUNSEL
<PAGE> 1
Certain confidential portions of this Exhibit were omitted by means of blackout
of the text (the "Mark"). This Exhibit has been filed separately with the
Secretary of the Commission without the Mark pursuant to the Company's
Application Requesting Confidential Treatment under Rule 406 under the
Securities Act.
EXHIBIT 10.22
COLLABORATIVE RESEARCH
AND LICENSE AGREEMENT
between
BRISTOL-MYERS SQUIBB PHARMACEUTICAL RESEARCH INSTITUTE
and
AURORA BIOSCIENCES CORPORATION
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
1.0 DEFINITIONS 1
2.0 COLLABORATIVE RESEARCH AND TECHNOLOGY TRANSFER 8
2.1 UHTSS Development 9
3.0 EXCLUSIVE AND NONEXCLUSIVE SCREENING PROGRAMS 27
3.1 Exclusive Screening Program 27
3.2 Nonexclusive Screening Payments 33
3.3 Ownership of Data 35
3.4 Development of Products 35
3.5 Laboratory Facilities and Personnel 36
3.6 Payments to Third Parties by Aurora. 36
4.0 SERVICE AND SUPPORT 37
4.1 Service and Support 37
5.0 INTELLECTUAL PROPERTY RIGHTS 37
5.1 License Rights. 37
5.2 Ownership Rights. 39
5.3 Sublicensing. 40
5.4 Software. 40
6.0 PAYMENTS OF ROYALTIES, ACCOUNTING FOR ROYALTIES, RECORDS 41
6.1 Payment Term. 41
6.2 Payment Dates. 41
6.3 Accounting. 41
6.4 Records. 41
6.5 Withholding Required by Law. 41
7.0 INFRINGEMENT BY THIRD PARTIES 42
7.1 Actual or Threatened Infringement of BMS Materials
and Products. 42
7.2 Actual or Threatened Infringement of Aurora Patent
Rights 42
8.0 DEFENSE OF INFRINGEMENT CLAIMS 43
8.1 Defense of Infringement Claims Pertaining to Lead
Compounds, Approved PLP Compounds, and Products. 43
8.2 Defense of Infringement Claims Pertaining to Patent
Rights Owned or Controlled by Aurora 44
9.0 TREATMENT OF CONFIDENTIAL INFORMATION; PUBLICITY, AND
CHANGE OF CONTROL 44
9.1 Confidentiality 44
9.2 Publication of Results. 46
9.3 Publicity. 46
</TABLE>
<PAGE> 3
<TABLE>
<S> <C> <C>
9.4 Change in Control 46
10.0 PROVISIONS CONCERNING THE FILING, PROSECUTION AND
MAINTENANCE OF PATENT RIGHTS; COPYRIGHTS 47
10.1 Sole Inventions 47
10.2 Joint Inventions 48
10.3 Exclusive Screens 48
10.4 Copyrights 49
11.0 REPRESENTATIONS, WARRANTIES AND COVENANTS 49
11.1 Mutual Representations and Warranties. 49
11.2 Aurora Technology Representations and Warranties. 50
11.3 Aurora Indemnification. 52
11.4 BMS Product Indemnification. 53
11.5 Enforcement of Aurora-Third Party Contracts 54
12.0 TERM AND TERMINATION 54
12.1 Term. 54
12.2 Termination By Mutual Agreement. 54
12.3 Termination for Cause. 54
12.4 Effect of Bankruptcy. 56
12.5 Effect of Expiration or Termination. 56
13.0 DISPUTE RESOLUTION 57
13.1 Disputes. 57
13.2 Dispute Resolution Procedures. 57
14.0 MISCELLANEOUS 58
14.1 Assignment. 58
14.2 Binding Effect. 59
14.3 Force Majeure. 59
14.4 Notices. 59
14.5 Governing Law. 60
14.6 Waiver. 60
14.7 Severability. 60
14.8 Independent Contractors. 60
14.9 Counterparts. 60
14.10 Entire Agreement. 60
14.11 No Third Party Beneficiaries. 61
14.12 Construction. 61
</TABLE>
<PAGE> 4
COLLABORATIVE RESEARCH AND LICENSE AGREEMENT
THIS AGREEMENT is entered into as of the Effective Date (as defined
below) by and between BRISTOL-MYERS SQUIBB PHARMACEUTICAL RESEARCH INSTITUTE, a
division of E.R. Squibb & Sons, Inc., a Delaware corporation, having offices at
Route 206 at Province Line Road, P.O. Box 4000, Princeton, New Jersey
08543-4000 ("BMS"), and between AURORA BIOSCIENCES CORPORATION, a Delaware
corporation having offices at 11149 North Torrey Pines Road, La Jolla,
California 92037 ("Aurora").
RECITALS
WHEREAS, Aurora has expertise in the development of automated
ultra-high throughput screening systems and screening biologies/chemistries
used therein; and
WHEREAS, Aurora has the scientific expertise and capacity to undertake
the alliance activities described below; and
WHEREAS, BMS has the capability to undertake screening and development
of drug products for the prevention, treatment and diagnosis of diseases and
disorders.
NOW, THEREFORE, in consideration of the foregoing premises and of the
covenants, representations and agreements set forth below, the parties agree as
follows:
1.0 DEFINITIONS
As used herein, the following terms shall have the following meanings:
"Acceptance" has the meaning set forth in section 2.1.3.
"Activity" means, with ***
"Affiliate" means, with respect to any Person, any other Person which
directly or indirectly controls, is controlled by, or is under common control
with, such Person. A Person shall be regarded as in control of another Person
if it/he/she owns, or directly or indirectly controls, more than fifty percent
(50%) of the voting securities (or comparable equity interests) or other
ownership interests of the other Person, or if it/he/she directly or indirectly
possesses the power to direct or cause the direction of the management or
policies of the other Person, whether through the ownership of voting
securities, by contract or any other means whatsoever.
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"Agreement" means this agreement, together with all appendices,
exhibits and schedules hereto, and as the same may be amended or supplemented
from time to time hereafter by a written agreement duly executed by authorized
representatives of each party hereto.
"Analog" of a compound shall mean any other compound created by or for
BMS in which ***
"Aurora Copyrights" means all copyright rights ***
"Aurora Patent Rights" means the Aurora Reporter System Patent Rights
and the Aurora UHTSS Patent Rights.
"Aurora Reporter System Technology" means all Technology ***
"Aurora Reporter System Patent Rights" means all Patent Rights which
are owned by or come under the Control of Aurora or its Affiliates during the
term of this Agreement which relate to the Reporter System or to the full
exercise of the rights and benefits accorded BMS under this Agreement
pertaining to the Reporter System.
"Aurora Technology" means the Aurora Reporter System Technology and
the Aurora UHTSS Technology.
"Aurora UHTSS Patent Rights" means all Patent Rights ***
"Aurora UHTSS Technology" means all Technology under the Control of
Aurora or any of its Affiliates during the term of this Agreement which relates
to the UHTSS or to the full exercise of the rights and benefits accorded BMS
under this Agreement pertaining to the UHTSS.
"BMS Materials Library" means the ***
"BMS Test Materials" means samples selected by BMS from its Materials
Library.
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"Confidential Information" means all information, compounds, data, and
materials received by either party from the other party pursuant to this
Agreement and all information, compounds, data, and materials developed in the
course of the Collaboration, including, without limitation, Know-How and
Technology of each party, subject to the exceptions set forth in Article 9.1.
"Contract Term" means the period beginning on the Effective Date and
ending on the date on which this Agreement terminates.
"Control" means possession by a party or its Affiliates of the ability
to grant a license or sublicense or to provide Materials or Technology in
accordance with the terms of this Agreement, and without violating the terms of
any agreement by such party with any Third Party.
"Covered Product" means a Product approved for marketing in a country
for the diagnosis, treatment or prevention of human disease indications, other
than a Product:
***
"Deliverables" has the meaning set forth in section 2.1.2.1 hereof.
"Development Phases" has the meaning set forth in section 2.1.2.1
hereof.
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"Drug Development Program" means that program conducted by BMS at its
cost and in the exercise of its sole and absolute discretion pertaining to the
pre-clinical and clinical development, regulatory filings, and
commercialization of a Lead Compound.
"Effective Date" means the date that this Agreement is executed by the
last party to so execute.
"Exclusive Screening Program" or "ESP" and "Exclusive Screen" shall
have the meanings set forth in section 3.1.
"FDA" shall mean the United States Food and Drug Administration, or
any successor agency having regulatory jurisdiction over the manufacture,
distribution and sale of drugs in the United States, and its counterpart(s) in
other countries of the world.
"Field" means the use of a compound, Material, or Product by BMS ***
"First Commercial Sale" of a Covered Product shall mean the first
commercial sale for use or consumption of such Covered Product in a country
after required marketing and, if applicable, pricing approval has been granted
by the applicable regulatory authority(ies) of such country.
"Hit" means any BMS Test Material:
***
"IND" means an Investigational New Drug application filed with the
United States Food and Drug Administration ("FDA") or its equivalent, and any
corresponding application filed in any country other than the United States.
"Invention" means any new and useful process, machine, manufacture, or
composition of matter, or improvement thereto, whether or not patentable.
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"Know-How" means all information and data which is not generally known
to the public, including without limitation, information or data either
pertaining to or comprising: materials and chemicals, Inventions, designs,
concepts, algorithms, formulae, software in any stage of development, supplies,
techniques, practices, machinery and equipment, reagents, processes, methods,
knowledge, know-how, skill, experience and expertise, data (including
preclinical, clinical, technical, analytical, and quality control data),
technical information, patent application data or descriptions, and marketing,
sales and manufacturing data.
"Lead Compound" means a Hit approved by BMS for development in a Lead
Compound Development Program or an Analog of such Lead Compound.
"Lead Compound Development Program" means that program, conducted by
or through BMS for the further characterization and pre-clinical development of
a Lead Compound ***
"Manufacturing Cost" shall mean ***
"Materials" shall mean any material having a biological or chemical
activity, including, but not limited to, reagents, probes, structural genes,
genetic sequences, promoters, enhancers, probes, linkage probes, vectors,
plasmids, transformed cell lines, transgenic animals, proteins and fragments
thereof, peptides, biological modifiers, antigens, antibodies, cell lines,
antagonists, agonists, inhibitors, chemicals, compounds, and other biologically
or chemically active materials or substances.
"NDA" means a New Drug Application or Product License Application, as
appropriate, and all supplements filed pursuant to the requirements of the FDA,
including all documents, data and other information concerning Covered Products
which are necessary for full FDA approval to market a Covered Product, or the
equivalent in any other country.
"Net Sales" of a Covered Product shall mean ***
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***
"Nonexclusive Screening Program", "NSP", and "Nonexclusive Screen"
have the meanings set forth in section 3.2 hereof.
*** CONFIDENTIAL TREATMENT REQUESTED
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"Patent Rights" means all U.S. or foreign (including regional
authorities such as the European Patent Office) regular or provisional patent
applications, including any continuation, continuation-in-part, or division
thereof or any substitute application therefor or equivalent thereof, and any
patent issuing thereon, including any reissue, reexamination or extension
thereof and any confirmation patent or registration patent or patent of
additions based on any such patent, containing one or more claims to an
Invention (and in the case of an issued patent, containing one or more Valid
Claims), and which a party hereto owns or Controls, individually or jointly,
any title thereto or rights thereunder.
"Person" shall mean an individual, corporation, partnership, limited
liability company, trust, business trust, association, joint stock company,
joint venture, pool, syndicate, sole proprietorship, unincorporated
organization, governmental authority, or any other form of entity not
specifically listed herein.
"PLP" means ***
"Product" means any final form or dosage of any drug product that
incorporates a Lead Compound and that will be sold or used within the Field.
"Reporter System" mean a ***
"Royalty Term" means, in the case of any Covered Product ***
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***
"Software" has the meaning set forth in Exhibit 4.1.
"Specifications" of the UHTSS shall have the meaning set forth in
section 2.1 hereof.
"Technology" means and includes all inventions, equipment, supplies,
materials (including Materials), software in any stage of development,
technology, Know-How, and trade secrets.
"Territory" means all countries of the world.
"Third Party" means any entity other than (i) Aurora and any of its
Affiliates, and (ii) BMS and any of its Affiliates.
"Third Party Contractee" and "Aurora-Third Party Contracts" have the
meanings set forth in section 11.2.6.
"*** License" means Exclusive License Agreement for *** between Aurora
*** *** (as the same may be amended or supplemented hereafter).
"UHTSS" means the *** .
"UHTSS Target Delivery Date" has the meaning set forth in section
2.1.2.1 hereof.
"Valid Claim" means: (a) an issued claim under an issued patent
within the Patent Rights, which has not (i) expired or been canceled, (ii) been
declared invalid by an unreversed and unappealable decision of a court or other
appropriate body of competent jurisdiction, (iii) been admitted to be invalid
or unenforceable through reissue, disclaimer or otherwise, and/or (iv) been
abandoned in accordance with or as permitted by the terms of this Agreement or
by mutual written agreement; or (b) a claim included in a pending patent
application within the Patent Rights that is being actively prosecuted in
accordance with this Agreement and which has not been (v) canceled, (vi)
withdrawn from consideration, (vii) finally determined to be unallowable by the
applicable governmental authority for whatever reason (and from which no appeal
is or can be taken), and/or (viii) abandoned in accordance with or as permitted
by the terms of this Agreement or by mutual written consent.
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2.0 COLLABORATIVE RESEARCH AND TECHNOLOGY TRANSFER
Aurora and BMS shall collaborate on the development of the UHTSS and
the transfer of the Aurora Technology to BMS, as follows:
2.1 UHTSS Development. Aurora will develop the UHTSS in
collaboration with BMS and in accordance with the terms of this Agreement
(including the work plan and Specifications set forth in Exhibit 1.1 attached
hereto and the development phases set forth below). Aurora will be
responsible for the design, development, manufacture, supply, delivery and
installation of the UHTSS, and will use its best efforts to complete same
within the time frames for each Development Phase set forth below. The
Specifications for the Deliverables to be provided by Aurora, as customized for
BMS, are set forth in Exhibit 1.1 hereto, and may be changed or supplemented
hereafter by mutual written agreement. The parties agree to diligently review
such Specifications from time to time in order to ensure that the
Specifications for the UHTSS will meet the reasonable needs of commercial users
and the specific customizations required by BMS.
2.1.1 Project Management. Each party will designate an employee who
will serve as the principal contact point for such party in order to
ensure due coordination of the effort in the development,
installation, training, and use of the UHTSS. The parties will meet
and confer as needed, but in any event not less frequently than
quarterly, at a location to be chosen by each party alternately to
discuss the development of the UHTSS and resolution of any ongoing
issues. Aurora shall also submit progress reports at such time(s) as
BMS may reasonably request, but in any event will provide a quarterly
written update of its work on the development of the UHTSS (including
discussion of any significant problems encountered and significant
changes in strategy or design). If requested by BMS, such
progress/update reports will detail work performed to date and
estimated time to complete a Development Phase. The parties will
also consult with each other as needed to evaluate and recommend
scientific criteria to be implemented within the UHTSS and the
Exclusive Screening Program.
From time to time during the term of this Agreement, BMS
representatives shall have the right, upon reasonable advance notice
to Aurora and its contractors, to visit the facilities where the UHTSS
development is being performed in order to verify the stage of
completion of the work performed under a schedule and audit compliance
with the terms of this Agreement.
Individuals assigned by Aurora to perform work hereunder at BMS'
premises shall observe the business hours, policies, security rules
and holiday schedule of BMS while working on its premises. Adherence
to BMS' business hours and holiday schedules shall not constitute
justification for the failure to deliver conforming Deliverables
within the applicable time frames.
2.1.2 Development Phases; Priority; Delivery.
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<PAGE> 13
2.1.2.1 Development Phases. Aurora will design and develop
the UHTSS in accordance with the following development phases
("Development Phases"), as more fully described in Exhibit 1.1
hereto. Aurora will develop and install the deliverables
("Deliverables") contemplated by each such Development Phase
(all such Deliverables for a Development Phase comprising a
"Module") not later than the dates set forth below (each such
date referred to as a "UHTSS Target Delivery Date"):
i) ***
ii) ***
iii) ***
It is understood and agreed that BMS' input on the
design and use of such Modules is an essential element of this
collaboration, and the parties will cooperate to ensure that
such input is solicited and provided on a timely basis. The
parties will cooperate in integrating such Modules and the
Deliverables developed under each Development Phase into the
then current BMS high throughput screening environment until
such time as the UHTSS is fully completed and installed at
BMS, and Aurora will provide BMS with assistance and support
in the use and maintenance of such Modules and Deliverables in
such environment without additional charge (other than the
payments otherwise due under this Agreement).
Aurora will further provide onsite transfer of the Aurora
UHTSS Technology to BMS personnel during the installation and
Acceptance Testing of each Module to be delivered hereunder to
assure BMS' ability to fully operate and maintain the UHTSS
and such Modules. In addition, within a reasonable time
after the Effective Date, Aurora will schedule training
classes, including course materials, for BMS personnel with
respect to the use of the Aurora UHTSS Technology. The number
of such individuals as shall be jointly determined by BMS and
Aurora, but shall be a number sufficient to allow for BMS to
effect rapid scale-up in its use of the Aurora UHTSS
Technology. If more individuals need to be trained than can
be reasonably accommodated in the first training session, the
parties will jointly schedule additional sessions as
reasonably necessary. Each party will bear its own costs in
connection with such training sessions.
All such Modules and other Deliverables to be sold by Aurora
and purchased by BMS hereunder shall be subject to the terms
and conditions of this Agreement, and the parties hereby agree
that the terms and conditions of this Agreement shall
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<PAGE> 14
supersede and control any conflicting terms in any purchase
order, acknowledgment, invoice, shipping document, or other
preprinted form issued by either party relating to the
purchase and sale of the Modules and any other Deliverables
hereunder.
2.1.2.2 Priority. In allocating its internal resources,
Aurora agrees that BMS will be entitled to priority status
over any Third Party with regard to the development,
manufacture, delivery and installation of the UHTSS.
2.1.2.3 Shipment, Delivery and Installation. Aurora shall be
responsible at its expense for appropriately packaging and
transporting all Deliverables to BMS, all of which shall be
delivered F.O.B. the BMS facility designated by BMS at time of
shipment. All risk of damage or loss to any Deliverable for
whatever reason shall rest with Aurora until such item is
safely set upon the loading dock at BMS's installation site,
at which time it shall pass to BMS. Aurora will give BMS not
less than *** days' written notice of any proposed shipment.
Aurora will be responsible for installing all Deliverables,
unless otherwise mutually agreed to in writing. Aurora will
begin such installation within *** working days of delivery and
will use all reasonable efforts to complete same as promptly as
possible thereafter. *** BMS may also elect that the
Deliverables to be provided under the Development Phase for any
Module (and any additional Module ordered by BMS pursuant to
section 2.1.3.2) shall be held by Aurora until such time as BMS
is prepared to receive the applicable Module (in which event
the Acceptance testing for such Module(s) will be conducted at
Aurora in accordance with section 2.1.3.1 hereof and BMS will
pay for the Module(s) that are Accepted by it); ***. The
parties do not expect that any delay in delivery requested by
BMS for the Deliverables relating to a Module should delay
delivery of any Deliverables to be provided for any future
Module to be provided in a subsequent Development Phase;
provided, however, that where Aurora can demonstrate that any
such delay in such delivery requested by BMS will adversely
affect Aurora's ability to meet any such future time line(s)
set forth in sections 2.1.2.1 and 2.1.5.6 hereof, the pertinent
time line(s) shall be extended by the period of delay
demonstrated by Aurora as is reasonably occasioned by BMS'
request to delay delivery.
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<PAGE> 15
*** Once all such approvals and permits are received, BMS'
right to delay delivery as provided above shall cease, and any
Modules previously Accepted by BMS that are then being held by
Aurora shall be shipped to BMS.
2.1.3 Acceptance Testing.
2.1.3.1 All Deliverables shall be subject to acceptance
testing by BMS to verify whether such Deliverables meet in all
material respects the Specifications for such Deliverables in
Exhibit 1.1 hereto, as the same may be amended or supplemented
in writing by the parties from time to time hereafter. Aurora
representatives shall have the right to be present at any such
acceptance testing conducted by BMS. BMS will consult with
Aurora regarding the acceptance testing, although the nature
and number of the actual tests to be conducted shall be
determined by BMS. If, *** , (i) Aurora is unable to install
at BMS all of the Deliverables required by a Development Phase
(or is unable to install same at Aurora, where BMS has elected
to test the Deliverables relating to a Module at Aurora as
opposed to conducting such tests following installation at BMS)
and (ii) such Deliverables, if installed, do not meet in all
material respects the Specifications for such Deliverables,
then BMS shall be entitled at any time thereafter to withdraw
from further development of the UHTSS at any time thereafter
without liability or penalty therefor (other than any payments
required by section 2.1.8), and such withdrawal shall be deemed
to be one made for good cause by BMS.
Acceptance testing shall commence by BMS, using such
acceptance tests as BMS considers necessary, to determine
whether the corrected Deliverables meet in all material
respects the Specifications for such Deliverables, as soon as
practicable following installation by Aurora of all
Deliverables to be provided by Aurora for a Module in a
Development Phase (and delivery of written certification by
Aurora to BMS that such Deliverables are ready for testing),
and shall continue for such period of time as may be
reasonably required by BMS for it to determine whether all
such Deliverables meet in all material respects the
Specifications for such Deliverables; provided, however, that
the acceptance testing following installation of all
Deliverables to be provided for a given Module shall not
exceed *** ***; and provided, further, that BMS may elect, on
written notice setting forth the specific and reasonable basis
for same, to extend the acceptance testing required for the
Deliverables for Module Two and/or Module Three by up to an
additional *** ***, in which event the time periods in section
2.1.5.6 shall be
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extended by the same amount of additional time requested by
BMS for such acceptance testing.
If any Deliverable does not conform in all material respects
to Specifications for such Deliverables, BMS shall so inform
Aurora in writing promptly and cooperate with Aurora in
identifying in what respects the Deliverable(s) have failed to
conform to the Specifications. Aurora will use its best
efforts to promptly correct any deficiencies which prevent
such Deliverable(s) from so conforming to the Specifications.
Upon completion of the corrective action and installation by
Aurora of the revised Deliverable(s), BMS will again conduct
such acceptance tests as BMS considers necessary to determine
whether the corrected Deliverables has successfully conformed
in all material respects to the Specifications for such
Deliverables, and BMS shall be entitled to use the same amount
of time to test such corrected Deliverable as it was entitled
to use with respect to the previous nonconforming
Deliverables.
When BMS has determined that all Deliverables for a Module
have successfully conformed to or satisfied the Specifications
in all material respects (and regardless of whether such
acceptance testing is conducted at BMS or at Aurora), BMS
shall give Aurora written notice thereof ("Acceptance"), in
which event BMS shall become obligated to pay such amounts as
may be triggered under this Agreement as a result thereof.
Upon receipt of payment by BMS, Aurora shall issue a bill of
sale to BMS, the terms of which shall be consistent with the
terms of this Agreement (including without limitation Article
5 hereof), confirming transfer of title to BMS of the Module
and any other Deliverables so purchased by BMS.
2.1.3.2 Upon payment by BMS for the first Module Two to be
installed hereunder, Aurora shall be obligated to sell and
supply to BMS, and BMS will be deemed to have firm ordered, an
identical Module Two to the first one so purchased and accepted
by BMS. Aurora agrees to manufacture and install such second
Module Two at BMS ***. BMS shall have *** to accept or reject
such Module Two, using the same Specifications and Acceptance
procedures as applied to its testing of the initial Module Two
(except that the acceptance tests must be completed within ***,
and that BMS shall have only *** to run such tests again if
such Module Two fails to meet the Specifications therefor
during the initial acceptance testing). Upon Acceptance by BMS
of such second Module Two, BMS shall pay to Aurora *** as the
purchase price therefor within *** days thereafter; provided,
however, that if Aurora shall have failed to install a Second
Module Two that meets the Specifications therefor by not later
than *** following payment by BMS of such initial Module Two
(without regard to any event or circumstance otherwise
entitling Aurora to delay performance under section 14.3), then
BMS shall be entitled to cancel its purchase order for such
second Module Two at any time thereafter prior to installation
of such second Module Two at BMS and BMS shall not be obligated
to purchase and take delivery of such second Module Two and
shall not be liable or responsible for the purchase price
therefor or for any costs incurred to manufacture same. ***
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The second Module Two shall be shipped F.O.B. the BMS facility
designated by BMS. Upon receipt of payment by BMS, Aurora
shall issue a bill of sale to BMS, the terms of which shall be
consistent with the terms of this Agreement (including without
limitation Article 5 hereof), confirming transfer of title to
BMS of the Second Module Two so purchased by BMS.
2.1.4 Force Majeure Deadline Limitation. Notwithstanding section
14.3, in no event shall any time frame, due date, or deadline arising
under this Agreement with respect to the development, manufacture,
delivery, installation or acceptance of any Module, Deliverable,
Reporter System component, or Exclusive Screen be extended by Aurora,
by reason of an event or circumstance entitling Aurora otherwise to
extend same under section 14.3, beyond the date that is *** following
the applicable time frame, due date, or deadline.
2.1.5 Payments Relating to Development of the UHTSS. BMS will make
the following payments to Aurora in consideration of the development,
completion, purchase, and installation of the UHTSS:
2.1.5.1 A payment of *** shall be made *** in consideration
of the design and development of the UHTSS by Aurora hereunder.
2.1.5.2 A payment of *** shall be made ***
2.1.5.3 A payment of *** shall be made ***
2.1.5.4 A payment of *** shall be made ***
2.1.5.5 In consideration of the design, development,
manufacture, installation and support of the UHTSS, payments of
*** *** shall be made, the first payment to be made ***
occurring after the Effective Date and *** which payments
shall *** provided, however, that:
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2.1.5.5.1 If BMS shall have *** under the
preceding sentence and a fully operational and
complete UHTSS has not then been installed and
accepted by BMS, Aurora shall continue to develop an
acceptable UHTSS unless and until BMS withdraws from
further development upon written notice to Aurora as
herein provided, and no further payments shall be due
or payable by BMS under this Agreement *** in respect
of such development, supply, and installation of an
acceptable UHTSS and its use by BMS in accordance with
this Agreement.
2.1.5.5.2 If BMS shall have accepted a fully
operational, complete UHTSS ***, BMS shall pay to
Aurora ***.
2.1.5.5.3 If BMS shall have withdrawn from
development of the UHTSS pursuant to section *** or
*** hereof, any payments to be made thereafter
pursuant to *** shall be governed by the terms of
sections ***.
2.1.5.6 In addition to any payments to be made under sections
2.1.5.1-2.1.5.5, the following payments shall be made ***:
2.1.5.6.1 *** BMS will pay *** to Aurora ***.
2.1.5.6.2 ***, BMS will pay *** to Aurora ***.
2.1.5.6.3 ***.
2.1.5.6.4 The time periods set forth in
sections 2.1.5.6.1-2.1.5.6.3 shall not be extended by
reason of any event of force majeure referred to in
section 14.3.
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2.1.6 Liquidated Damages for Late Delivery UHTSS. If acceptance is
delayed more than *** following the Effective Date, then as liquidated
damages to BMS for such delay and not in penalty therefore (the parties
agreeing that it shall be impracticable, if not impossible, in such
case to accurately or fairly determine the amount of any damages due
to such delay), Aurora will pay to BMS *** following the date that is
*** after the Effective Date until acceptance occurs (if at all);
provided, that such payments shall not in any case exceed ***. Any
payments due under this Section 2.1.6 shall be made monthly by Aurora
to BMS at its address first set forth above.
2.1.7 Withdrawal by BMS From UHTSS Development Without Cause. BMS
may elect at any time prior to Acceptance to cease further
participation in the development of the UHTSS for any reason without
good cause ("good cause" being defined in section 2.1.8), effective
upon written notice of same to Aurora. In such event:
2.1.7.1 Aurora shall be free to continue further development
of the UHTSS at its discretion and expense, and to change the
design or specifications therefor as Aurora shall determine.
2.1.7.2 ***, BMS shall pay to Aurora the sum of *** and
shall not be required to make any further payments under ***;
otherwise, BMS shall pay to Aurora *** so that BMS will have
***.
2.1.7.3 BMS shall pay to Aurora an amount equal to *** of the
milestone payment that would next have been made under section
***. Except for such payment (and any payments not
previously made that were then due and owing under any of ***
as of the date of BMS' withdrawal), no further payments under
any of sections *** shall be due or made.
2.1.7.4 *** provided, however, that
2.1.7.4.1 BMS may, for *** following such
withdrawal, continue to make and use any one or more
Nonexclusive
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Screen(s) and to use any Aurora Patent Rights and
Copyright rights necessary therefor and any Reporters
provided by Aurora in connection therewith, so long as
BMS gives written notice to Aurora, *** following any
such withdrawal as to the Nonexclusive Screen(s) so
elected for such continued use by BMS and pays Aurora
*** for each such Nonexclusive Screen so elected. No
withdrawal under this section 2.1.7.4 shall affect or
relieve BMS of *** or, to the extent elected by BMS
herein, following such withdrawal; and
2.1.7.4.2 BMS shall be entitled to use
thereafter in internal research (including screening
and drug development) those Accepted components of the
UHTSS as to which BMS has made the payments required
under *** hereof and to exercise a nonexclusive,
irrevocable, and fully paid-up right and license under
any Aurora UHTSS Patent Rights and Aurora UHTSS
Copyrights existing as of the date of such BMS
withdrawal that are needed in connection therewith,
for so long as BMS may conduct such internal research;
and such withdrawal; and
2.1.7.4.3 No such withdrawal shall affect BMS'
right to continue to make and use thereafter in
internal research (including screening and drug
development) any Exclusive Screen as was developed
prior to the date of such withdrawal or which the
parties may develop thereafter based on any agreement
to develop same that was agreed upon prior to the date
of such withdrawal or otherwise (and to continue to
use any Aurora Patent Rights and Copyrights covering
the manufacture and use of such Exclusive Screen(s)
that are needed for such purpose), for so long as BMS
may conduct such internal research; provided, that any
*** payments that BMS would otherwise be obligated to
make *** shall not be affected thereby and shall
continue to be made by BMS; and provided, further,
that no such withdrawal shall affect either party's
obligations and rights under (including without
limitation Aurora's obligation to develop and supply
and BMS' right to use thereafter any Exclusive Screen
developed under) any ESP Work Plan entered into prior
to the date of such withdrawal; and
2.1.7.4.4 No such withdrawal shall limit or
restrict BMS and its Affiliates in any way from
continuing to research, develop, manufacture, use and
sell Hits identified prior to such withdrawal or
which are identified thereafter in accordance with
the rights retained by BMS under this section 2.1.7.4
(and any Lead Compounds, Approved PLP Compounds, and
Products derived from such Hits), and to use any
Aurora
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Patent Rights and Copyrights as may be needed to
make, use and sell same, provided that BMS shall
remain obligated to pay Aurora ***
2.1.7.4.5 In the event such withdrawal occurs
after BMS has ordered, but not yet accepted, the
second Module Two under paragraph 2.1.3.2 hereof,
then the parties shall continue to fulfill their
obligations under such paragraph without regard to
such withdrawal. If accepted, BMS shall be entitled
to use thereafter in internal research (including
screening and drug development) such second Module
Two so long as BMS shall have made the payment *** of
and to exercise a nonexclusive, irrevocable, and
fully paid-up right and license under any Aurora
UHTSS Patent Rights and Aurora UHTSS Copyrights
existing as of the date of delivery of such second
Module Two that are needed in connection therewith,
for so long as BMS may conduct such internal
research.
2.1.7.5 Nothing in this section 2.1.7 is intended to prevent
or restrict, or shall be construed as preventing or
restricting, BMS and its Affiliates from using in any internal
research (including drug development): (i) any Reporters
supplied to BMS by Aurora prior to such withdrawal, or (ii)
any Aurora Technology disclosed to it by Aurora prior to such
withdrawal to the extent that the manufacture, use or sale of
such Aurora Technology is not covered by a Valid Claim under
the Aurora Patent Rights or the Aurora Copyrights; provided,
however, that notwithstanding the foregoing, BMS may not use
in its internal research thereafter any tangible embodiments
of Aurora's Confidential Information pertaining to the Aurora
Reporter System Technology. It is further understood that
nothing in this section 2.1.7 alters any confidentiality
obligations of the parties under this Agreement with respect
to disclosures to Third Parties.
2.1.8 Withdrawal by BMS From UHTSS Development With Cause. In the
event that BMS elects prior to Acceptance to cease further
participation in the development of the UHTSS for good cause (as
defined below), it shall give written notice of same to Aurora. In
such event:
2.1.8.1 Aurora shall be free to continue further development
of the UHTSS and to change the design or specifications
therefor as Aurora shall determine.
2.1.8.2 BMS shall have no obligation to make any remaining
payments (other than payments already due and owing as of the
date of BMS' withdrawal) under *** .
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2.1.8.3 No further payments under any of sections *** -
*** shall be due or made, other than any payments not
previously made that were then due and owing under such
section(s) as of the date of BMS' withdrawal.
2.1.8.4 All Aurora Patent Rights licensed to BMS under
Article 5 hereof shall terminate (other than such Aurora
Patent Rights and Copyright rights as are necessary to allow
BMS to effectuate its rights under sections
2.1.8.4.1-2.1.8.4.5 below), and BMS shall cease thereafter
development of any new Nonexclusive Screens for which the
manufacture or use of same is covered by such Aurora Patent
Rights or Copyrights; provided, however, that
2.1.8.4.1 BMS shall be entitled without
additional charge therefor to continue to make and
use thereafter in its internal research (including
screening and drug development), and to use any
Aurora Patent Rights and Copyright rights needed to
make and use same, any Nonexclusive Screens
incorporating any Reporters provided by Aurora
and/or that covered by any Aurora Patent Rights or
Copyrights where such Nonexclusive Screens were
developed by BMS prior to such withdrawal date, for
so long as BMS may conduct such internal research.
No good cause withdrawal under this section 2.1.8.4
shall affect or relieve BMS of *** or as permitted
hereunder thereafter following such withdrawal; and
2.1.8.4.2. BMS shall be entitled to use
thereafter in internal research (including screening
and drug development) those Accepted components of the
UHTSS as to which BMS has made the payments required
*** and to exercise a nonexclusive, irrevocable, and
fully paid-up right and license under any Aurora UHTSS
Patent Rights and Aurora UHTSS Copyrights existing as
of the date of such BMS withdrawal that are needed in
connection therewith, for so long as BMS may conduct
such internal research; and
2.1.8.4.3 No such withdrawal shall affect BMS'
right to continue to make and use thereafter in
internal research (including screening and drug
development) any Exclusive Screen as was developed
prior to the date of such withdrawal or which the
parties may develop thereafter based on any agreement
to develop same that was agreed upon prior to the
date of such withdrawal or otherwise (and to continue
to use any Aurora Patent Rights and Copyrights
covering the manufacture and use of such Exclusive
Screen(s) for such purpose), for so long as BMS may
conduct such internal research; provided, that any
*** payments that BMS would otherwise be obligated
to make ***
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shall not be affected thereby and shall continue to
be made by BMS; and provided, further, that no such
withdrawal shall affect either party's obligations
and rights under (including without limitation
Aurora's obligation to develop and supply and BMS'
right to use thereafter any Exclusive Screen
developed under) any ESP Work Plan entered into prior
to the date of such withdrawal; and
2.1.8.4.4 No such withdrawal shall limit or
restrict BMS and its Affiliates in any way from
continuing to research, develop, manufacture, use and
sell Hits identified prior to such withdrawal or
which are identified thereafter in accordance with
the rights retained by BMS under this section 2.1.8.4
(and any Lead Compounds, Approved PLP Compounds, and
Products derived from such Hits), and to use any
Aurora Patent Rights and Copyrights as may be needed
to make, use and sell same; provided, that BMS shall
remain obligated to pay Aurora ***
2.1.8.4.5 In the event such withdrawal occurs
after BMS has ordered, but not yet accepted, the
second Module Two under paragraph 2.1.3.2 hereof,
then the parties shall continue to fulfill their
obligations under such paragraph without regard to
such withdrawal. If accepted, BMS shall be entitled
to use thereafter in internal research (including
screening and drug development) such second Module
Two so long as BMS shall have made the payment
*** and to exercise a nonexclusive, irrevocable, and
fully paid-up right and license under any Aurora UHTSS
Patent Rights and Aurora UHTSS Copyrights existing as
of the date of delivery of such second Module Two that
are needed in connection therewith, for so long as BMS
may conduct such internal research.
2.1.8.5 Nothing in this section 2.1.8 is intended to prevent
or restrict, or shall be construed as preventing or
restricting, BMS and its Affiliates from using for any
internal research (including screening and drug development)
purpose, following any such withdrawal with good cause: (i)
any Reporters supplied to it by Aurora prior to the withdrawal
date or (ii) any Aurora Technology disclosed to it by Aurora
prior to the withdrawal date where the manufacture, use or
sale of such Aurora Technology is not covered by a Valid Claim
under the Aurora Patent Rights or Aurora Copyrights. It is
further understood that nothing in this section 2.1.8 alters
any confidentiality obligations of the parties under this
Agreement with respect to disclosures to Third Parties.
2.1.8.6 For purposes of this Agreement, "good cause"
withdrawal by BMS of its participation in the UHTSS program
shall mean withdrawal as a result of any of the following:
2.1.8.6.1 a decision to cease participation in
further development of the UHTSS in accordance with
Section 2.1.3; or
2.1.8.6.2 a material breach of this Agreement
by Aurora that is not cured within 90 days after
receipt of written notice by BMS describing such
breach; or
2.1.8.6.3 discovery by BMS that Aurora has made
an untrue statement with respect to any
representation, or materially breached any warranty
contained in this Agreement; or
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***
2.1.8.6.5 as provided in Section 9.4.
2.1.9 Syndicate Formation and Limitations. It is anticipated that
Aurora may seek to collaborate with, develop and supply to, and/or
grant certain license rights to Third Parties with respect to the
development, use and/or supply of a UHTSS to such Third Party.
Notwithstanding the foregoing, Aurora covenants and agrees that, so
long as BMS is not in default of any payment obligation hereunder and
has not terminated its participation in the development of the UHTSS,
then, until the date that is *** following the date that BMS
shall have accepted a fully operational, complete UHTSS pursuant to
section 2.1.3., Aurora will not, without BMS' prior written consent,
(A) enter into agreements with more than *** Third Parties (i)
under which Aurora grant a license rights to such Third Party to use
the Aurora UHTSS Patent Rights or Copyrights or Aurora UHTSS
Technology rights so that such Third Party may make or use any ultra-
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high throughput screening system similar to the UHTSS, and/or (ii)
under which Aurora will develop, sell (whether by purchase, financial
lease, lease with option to purchase, or otherwise), and/or supply,
whether (or not) in collaboration with such Third Party or otherwise,
any ultra-high throughput screening system similar to the UHTSS to
such Third Party, and (B) enter into any operating lease for a UHTSS
with a Third Party or license any Aurora UHTSS Technology or Aurora
UHTSS Patent Rights to a Third Party in order to allow such Third
Party to build its own UHTSS without infringing such rights.
Subject to section 2.1.10 (where applicable), nothing in this section
2.1.9 is intended to limit or restrict:
- the number of parties to whom Aurora may supply or grant
licenses with respect to any Reporters, the Aurora Reporter
System Patent Rights, or the Aurora Reporter System
Technology, and/or
- Aurora's ability to provide screening services using the
Aurora Patent Rights and Aurora Technology to Third Parties,
provided that such screening services do not involve a screen
that is exclusive to BMS under section 3.1.2 hereof or
otherwise conflict with any provisions of this Agreement.
***
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***
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<PAGE> 27
***
2.1.10.3 In the event of any dispute between BMS and
Aurora under this section 2.1.10 as to any financial issue or
determination, the parties agree to use non-binding
arbitration first in an effort to resolve any such dispute, as
follows: Aurora shall select a independent accountant
reasonably acceptable to BMS (who is neither Aurora's nor BMS'
normal independent accountant) who will review the facts and
circumstances surrounding the dispute and render an opinion on
such matter. The parties will reasonably cooperate with such
independent accountant's efforts, and will evenly share the
fees and expenses of such independent accountant during the
pendency of such proceedings, with the loser to be responsible
for all such fees and expenses and to reimburse the winner for
its share paid. The independent accountant will execute a
confidentiality agreement with each party prior to obtaining
each party's relevant confidential information and which will
only be used for the purpose of rendering such accountant's
opinion. Neither party shall have any obligation to provide
any information, however, which would effect a waiver of any
privileges available to either party.
2.1.11 Supply of Reporters and Related Reagents/Tools. So long as BMS
has made payments in accordance with section 2.1.12 hereof, then, at
BMS' request, Aurora will supply to BMS, and will use reasonable
efforts to supply same within 30 days after receipt of a written
purchase order therefor, such Reporters then available to Aurora and
other reagents/tools pertaining thereto (e.g., plasmids) as BMS may
require in order to use the Reporter System in a Nonexclusive Screening
Program conducted by BMS. BMS will be charged for all supplies so
delivered at *** . BMS will pay for all supplies so ordered within
*** days after delivery and acceptance by BMS. All such supplies shall
be delivered F.O.B. the destination point designated by BMS. Any
supplies that BMS receives that are damaged, defective or inactive
shall be returned by BMS (or destroyed if so designated by Aurora), and
an appropriate exchange of, or credit or refund for, same shall be made
by Aurora, as BMS may elect.
2.1.12 Payments in Consideration of the Use of the Aurora Reporter
System Technology and Reporter System Patent Rights.
2.1.12.1 Until such time as BMS shall have accepted, if at all,
a fully operational, complete UHTSS in accordance with the provisions
of this Agreement, BMS' right to continue to use any Reporters supplied
by Aurora and to continue to use the Aurora Reporter System Patent
Rights licensed to BMS hereunder shall be conditioned upon the payment
by BMS, at BMS' election annually, to Aurora of *** . If BMS elects to
continue such rights, such amount
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<PAGE> 28
shall be paid *** during each such calendar year. If BMS
affirmatively notifies Aurora that BMS no longer will exercise
such rights or if it fails to make a payment, then BMS' right
to use the Aurora Reporter System Patent Rights licensed to BMS
hereunder shall terminate; provided, that before any such
termination for nonpayment shall be effective, Aurora shall
have first notified BMS in writing of such failure to pay, and
BMS fails within *** days thereafter to pay the amount required
to maintain such rights.
If and once BMS has accepted a fully operational, complete
UHTSS in accordance with the provisions of this Agreement, BMS'
right to continue to use any Reporters supplied by Aurora and
to continue to use the Aurora Reporter System Patent Rights
licensed to BMS hereunder shall be conditioned upon the payment
by BMS, at BMS' election annually, to Aurora of ***. If
BMS so elects to continue such rights, such amount shall be
paid *** during each such calendar year. If BMS affirmatively
notifies that it no longer will exercise such rights or if it
fails to make a payment, then BMS' right to use the Aurora
Reporter System Patent Rights licensed to BMS hereunder shall
terminate; provided, that before any such termination for
nonpayment shall be effective, Aurora shall have first notified
BMS in writing of such failure to pay, and BMS shall have
failed within *** days thereafter to pay the amount required to
maintain such rights.
2.1.12.2 Nothing in this section 2.1.12 is intended to
prevent or restrict, or shall be construed as preventing or
restricting, BMS and its Affiliates from using for any
internal research (including drug development) purpose,
following any termination of rights pursuant to this section
2.1.12: (i) any Reporters supplied to BMS by Aurora prior to
the applicable termination date or (i) any Aurora Technology
disclosed to it by Aurora prior to the applicable termination
date where the manufacture, use or sale of such Aurora
Technology is not covered by a Valid Claim under the Aurora
Patent Rights or by any Aurora Copyrights. It is further
understood that nothing in this section 2.1.12 alters any
confidentiality obligations of the parties under this
Agreement with respect to disclosures to Third Parties.
2.1.13 Option to Purchase Additional UHTSS Components. BMS and its
Affiliates shall have the right to purchase one or more additional
UHTSS's (or any of the components comprising same) from Aurora, and
Aurora agrees to manufacture and supply same, upon issuance of a firm
purchase order to Aurora for same, subject to the following terms and
conditions:
2.1.13.1 Such option may be exercised by BMS for one
or more additional UHTSS's (or any of the components
comprising same) at any time after payment for the first UHTSS
(or the payment for the components comprising same) under
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<PAGE> 29
section 2.1.5 and prior to the date that is ***.
2.1.13.2 The price of each such additional UHTSS (or
component) shall be ***. In the event that the applicable price
is determined by reference to (C)(i) above, Aurora shall
provide reasonable substantiation of such costs to BMS. BMS
will reimburse Aurora for any reasonable shipping, packaging
and insurance costs as are not included within the foregoing
pricing. The UHTSS (and any such components) shall be shipped
F.O.B. such BMS facility as is designated by BMS and shall be
subject to the terms of the purchase order and to the same
terms and conditions, including Acceptance, as are set forth
herein for the initial UHTSS.
2.1.13.3 BMS will pay to Aurora *** of the estimated
purchase price within *** after *** by Aurora, with another ***
to be paid within *** following *** (or applicable components)
covered by the purchase order, and the balance to be paid
within *** by BMS. Upon receipt of payment by BMS, Aurora
shall issue a bill of sale to BMS, the terms of which shall be
consistent with the terms of this Agreement (including without
limitation Article 5 hereof), confirming transfer of title to
BMS of any such UHTSS component so purchased by BMS
2.1.13.4 All items so ordered by BMS shall be
manufactured by Aurora and delivered to BMS not later than
*** following receipt of the purchase order for same from BMS;
provided, that the delivery date for such additional UHTSS's or
components so ordered by BMS may not be earlier than ***
following the applicable UHTSS Target Delivery Date
corresponding to same.
2.1.13.5 All items so purchased by BMS under this
section 2.1.13 shall be eligible for maintenance service under
the same terms as apply to the purchase of the UHTSS
components hereunder. Such maintenance shall be provided
*** following acceptance of such item by BMS, and thereafter,
may be purchased by BMS at its election *** of such item.
3.0 EXCLUSIVE AND NONEXCLUSIVE SCREENING PROGRAMS
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3.1 Exclusive Screening Program. The parties will collaborate in
developing and conducting an Exclusive Screening Program (ESP), as follows:
3.1.1 Scope. Under the ESP, BMS and Aurora will collaborate, using
the Aurora Screening Technology, to develop high throughput and/or
ultra high throughput screens for BMS' use in accordance with this
Agreement and which will be manufactured by Aurora and delivered to BMS
on *** selected by BMS (which targets must be reasonably acceptable to
Aurora, such consent not to be unreasonably withheld). The parties
will collaborate on the specifications for, and development of, the
particular screens (each screen, together with all of the reagents and
any other materials to be delivered by Aurora in connection therewith,
is referred to hereinafter as an "ESP Screen"), which shall be
manufactured by Aurora and delivered to BMS (the "ESP Collaborative
Activities"). BMS will propose the targets and the parties will use
all reasonable efforts to select two targets within *** following the
Effective Date, and the remaining target within *** after the Effective
Date; provided, however, that BMS shall not be obligated to propose (i)
more than *** targets with respect to the *** targets to be agreed upon
during said *** (and if the parties are unable to agree upon ***
targets from ***, this section 3.1.1 shall apply only to the ***, on
which the parties have been able to agree), and (ii) more than *** with
respect to the *** target to be agreed upon within said *** period (and
if the parties are unable to agree upon such *** target, neither party
shall be under any obligation with respect to the joint development of
an ESP Screen for such *** target).
Promptly following mutual agreement on the selection of each target,
the parties will jointly prepare an "ESP Work Plan", which shall set
forth in detail the respective responsibilities of the parties in the
development of each ESP Screen, and which must be executed by both
parties to be effective. Each such ESP Work Plan will contain, where
applicable, a description of the tasks to be performed by each party,
location, the specific deliverables (including number of reagents and
any other materials to be provided for each ESP Screen and any
specifications therefor) and documentation to be produced by Aurora,
acceptance criteria for each ESP Screen, any warranty periods, a
schedule of performance, fees (as determined in accordance with this
section 3.1.1), a schedule of payments, and any other relevant work
specifications (including the "closely-related target" definition
contemplated by section 3.1.2).
Promptly following the execution of each ESP Work Plan, the parties
will commence their respective duties under the ESP Work Plan for the
development, manufacture, and delivery of the applicable ESP Screen.
All work under an ESP Work Plan shall be performed in accordance with
the provisions of this Agreement, and each party will use its
reasonable best efforts to complete its obligations under the ESP Work
Plan as expeditiously as practicable. If any provisions of any such
ESP Work Plan should conflict with any provisions set forth in this
Agreement, the provisions of this Agreement shall take precedence,
unless such ESP Work Plan expressly refers to the specific
provision(s) of this Agreement that it is intended to replace or
modify (and which shall be
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limited in force and effect to such ESP Work Plan only). During the
development of an ESP Screen, Aurora will update BMS *** in
reasonable detail in writing with respect to its development
activities with respect to each such ESP Screen and will update BMS
verbally at more frequent intervals.
In developing each ESP Work Plan, the parties will jointly determine
and agree upon the fee to be paid by BMS to Aurora for development,
manufacture and delivery of an ESP Screen acceptable to BMS for the
target in question. The parties understand and agree that the total
fee for such effort ***. The *** shall be paid within *** following
execution of the ESP Work Plan, the *** shall be reimbursed to Aurora
by BMS monthly in arrears ***, and *** shall be paid *** following
***.
In the event that BMS pays, in whole or in part, for any work to be
performed and materials to be delivered as part of an ESP Work Plan,
and Aurora is unable to deliver an ESP Screen and related reagents and
other materials acceptable to BMS for the target in question by the
date called for in the ESP Work Plan ***, then BMS may elect in its
sole discretion either:
(i) to extend the delivery date (but only a writing signed by
an officer of BMS shall be sufficient);
(ii) not to continue further development of that target or a
substitute target, in which event the parties will be deemed
to have fulfilled their obligation to develop ***; or
(iii) to propose an additional target in substitution of such
target for which an acceptable ESP Screen could not be
developed (which target shall be reasonably
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acceptable to Aurora), in which event, in determining the fee
to be paid by BMS for such ESP Work Plan, Aurora shall not be
entitled to ***, and BMS shall be entitled to *** of such
unusable ESP Screen against the *** to be charged BMS under
such substitute ESP Work Plan developed for any such other
target.
All Materials provided by BMS in furtherance of a ESP Work Plan shall
be used in accordance with Exhibit 3.1.1 attached hereto.
3.1.2 Exclusivity. Following selection by BMS and Aurora of a
target for an ESP Work Plan and until the date that is ***
following the date that an ESP Screen for such target is delivered to
and accepted by BMS, Aurora agrees that it and its Affiliates will not
provide to any Third Party or use for the benefit of any Third Party,
and will not collaborate or contract with any Third Party on the
development of, any screens for the same target or any target that is
"closely-related" to the target so selected, nor grant license rights
to any Third Party that would conflict with the foregoing by allowing
such Third Party to use any Aurora Patent Rights, Copyrights or Aurora
Technology to make or use any such screen. Notwithstanding anything
that the preceding sentence might imply to the contrary, BMS does not
waive or relinquish any cause of action it may have relating to
infringement of, nor shall the foregoing be construed to imply or
create in any way any rights in Aurora following such *** period
under, any patent rights that may be owned or Controlled by BMS and
its Affiliates pertaining to the manufacture, use or sale of any such
ESP Screen, to any BMS Materials or other substances contained therein
or used to make such ESP Screen, or to any processes used to make
such ESP Screen.
It is understood that, to the extent that Aurora has granted a Third
Party a license to use the Aurora Reporter System Technology and
Aurora Reporter System Patent Rights on an unrestricted basis, Aurora
cannot guarantee or warrant that such Third Party's will not use such
rights in accordance with such grant to develop and use a screen that
competes with an ESP Screen developed by Aurora for BMS hereunder;
provided, that where Aurora and BMS are contemplating or performing an
ESP Work Plan for an ESP Screen that Aurora is aware is also under
development by a Third Party to whom Aurora has licensed unrestricted
rights that allow such Third Party to develop same or with whom Aurora
is then collaborating on the development thereof, Aurora will inform
BMS of such competitive development (but shall not be required to
identify the Third Party) so that BMS may decide whether to pursue
another ESP Screen or to enter into or continue the ESP Work Plan for
such ESP Screen anyway.
For purposes of this section 3.1.2, "closely-related" shall be
determined by ***
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3.1.3 Acceptance of Screen. Promptly following receipt of each such
ESP Screen, BMS will test same for acceptability to BMS in terms of
effectiveness, accuracy, reliability, and conformity to specifications
as set forth in the ESP Work Plan. BMS shall notify Aurora in writing
as to whether BMS accepts each such ESP Screen based on the foregoing
criteria *** (and if not, BMS will provide Aurora with a list of the
deficiencies found by BMS so that Aurora may develop an acceptable ESP
Screen). Aurora will promptly remedy such deficiencies and provide an
acceptable ESP Screen within a reasonable time *** thereafter.
If at any time during the Contract Term an ESP Screen for whatever
reason loses its effectiveness or efficacy or is no longer
biologically active, Aurora will replace same as promptly as
practicable at no additional cost to BMS (unless the replacement is
required as a result of negligence on the part of BMS, in which event
BMS will reimburse Aurora ***).
3.1.4 Improvements. Improvements to an ESP Screen that may be made
by Aurora during the Contract Term following delivery to and acceptance
by BMS of such Screen shall be made available to BMS, upon written
request from BMS, for a fee equal to *** incurred by Aurora to
improve and optimize same, plus ***. At BMS' request, and prior to
commencing such work, Aurora will provide BMS with a firm estimate ***
Payment shall be made by BMS following acceptance of same, using the
same acceptance procedure as set forth in section 3.1.3 for the
initial ESP Screen.
3.1.5 Deployment of Screen by BMS. BMS will employ each such
accepted ESP Screen to screen such BMS Test Materials as BMS deems
appropriate for such purpose in the exercise of its sole and absolute
discretion.
3.1.6 Additional Screens. Subject to the same terms and conditions
as are set forth in this section 3.1 (e.g., mutual acceptability of the
target, exclusivity, development of a mutually acceptable ESP Work Plan
for same, etc.), BMS may elect that the number of ESP Screens on which
BMS and Aurora shall collaborate to develop and deliver to BMS be
increased to *** *** during each year of this Agreement until the
date that BMS accepts a complete, fully operational UHTSS pursuant to
section 2.1.3 or the date that is *** following the Effective Date,
whichever is the later date.
3.1.7 Rights in BMS Compounds. All right, title and interest in any
Inventions relating in any way to any BMS Test Materials and any BMS
Hits or Lead Compounds which arise out of, or are conceived or reduced
to practice as a result of, the development or use of an ESP Screen by
or for BMS shall be owned solely by BMS, and to the extent that Aurora
or any of its employees or contractors might be considered a
co-inventor of any such Invention, Aurora hereby assigns to BMS all
rights, title and interest in and to any such Invention made by it,
its employees or contractors. Aurora agrees to execute any
instruments or other documents, at BMS' reasonable request and
expense, to confirm and
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vest same, and agrees to maintain appropriate contractual arrangements
with its employees and contractors to effectuate same.
3.1.8 Payments to Aurora. In addition to such payments as are made
by BMS to Aurora pursuant to section 3.1.1 hereof, the following
payments shall be made to Aurora with respect to the delivery and use
of the ESP Screens by BMS:
3.1.8.1 Milestones. BMS will pay to Aurora:
3.1.8.1.1 Where BMS has determined that a Hit identified
in an ESP Screen should become a Lead Compound and enter a
Lead Compound Development Program conducted by BMS, BMS
will promptly notify Aurora in writing of same and will pay
to Aurora *** for each such Lead Compound. Payments shall
be wired to a bank account specified by Aurora within ***
following such notification from BMS.
3.1.8.1.2 BMS will promptly notify Aurora in writing of
each Approved PLP Compound approved by the BMSPGOC. BMS
will pay Aurora *** for each Approved PLP Compound so
approved for further development by the BMSPGOC; provided,
that if a Hit under section 3.1.8.1.1 should be approved as
an Approved PLP Compound without first having been approved
to enter a Lead Compound Development Program (such that
Aurora did not receive any payment under section
3.1.8.1.1), then BMS shall pay Aurora *** upon any such Hit
so approved for further development as an Approved PLP
Compound by the BMSPGOC. Payments shall be wired to a
bank account specified by Aurora within *** following such
notification from BMS.
3.1.8.1.3 If an Approved PLP Compound should reach the
following milestones, BMS will promptly notify Aurora of
same and will pay the following amounts to Aurora:
Event Payment (US$)
***
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***
provided, however, that if a Hit identified using a
particular ESP Screen and on which milestones payment(s)
above have been made should be dropped from further
development by BMS, for whatever reason, then no more
milestone payments shall be due with respect to any
subsequent Hit so identified in the same ESP Screen, unless
and until such subsequent Hit reaches the milestone next
following the last milestone on which a payment was made
for the abandoned compound. Payments shall be wired to a
bank account specified by Aurora within *** days following
the date that any such milestone is reached.
3.1.8.2 Royalties. With respect to each Covered Product
identified as a Hit in a Exclusive Screen, BMS shall pay a
royalty on Net Sales of such Covered Product during the Royalty
Term for such Covered Product, as follows *** ***
***
; provided, however, that where the potential use or
application for a disease indication of any compound or Analog
thereof (or the active substance therein) was identified
(whether in laboratory notebooks, patent application(s), or
otherwise) by BMS prior to the date that such compound, Analog
or active substance was identified as a Hit hereunder, then no
royalty shall be due on a Covered Product incorporating same
to the extent sold for the treatment or prevention of diseases
or conditions for which such compound, Analog or Product is
being sold, being developed, or planned for development by BMS
at the time of such identification.
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Royalties for Net Sales of any Covered Product in any given
country shall be due and payable only during the Royalty Term
for such Covered Product in such country; thereafter, BMS
shall be entitled to continue to sell such Covered Product in
such country without further compensation to Aurora.
3.2 Nonexclusive Screening Payments. As part of the rights
licensed under section 5.1.1 hereof, BMS and its Affiliates shall be entitled
to use and practice the Aurora Reporter System Technology and Aurora Reporter
System Patent Rights and Copyrights licensed to it under section 5.1.1 hereof
and to use any Reporters or other reagents/tools covered thereby that are
supplied to BMS by Aurora pursuant to this Agreement for internal research and
drug development, including to develop, make and use in internal research and
drug development any high throughput and ultra high throughput screens
targeting any targets as BMS in its discretion may select (collectively, such
activities referred to as the "Nonexclusive Screening Program" or "NSP", and
any such screen, the manufacture or use of which is covered by the Aurora
Patent Rights or Copyrights or in which the Reporters supplied by Aurora are
used, referred to as a "Nonexclusive Screen"). BMS shall be entitled to
conduct any internal research, development and commercialization thereafter of
any Hits arising out of any such NSP activities as BMS in its discretion may
elect to conduct.
Promptly following the Effective Date, Aurora will commence training
of BMS personnel at Aurora in the use and application of the Aurora Reporter
System Technology and any Reporters or other reagents/tools to be supplied to
BMS by Aurora pursuant to this Agreement so that BMS may develop, make and use
Nonexclusive Screens for use by BMS in accordance with this Agreement. The
number of such individuals shall be jointly determined by BMS and Aurora but
shall be a number sufficient to allow for BMS to effect rapid scale-up in its
use of the Aurora Reporter System Technology. If more individuals need to be
trained than can be reasonably accommodated in the first training session, the
parties will jointly schedule additional sessions as reasonably necessary.
Each party will bear its own costs in connection with such training sessions.
Subject to section 3.2.4 below, BMS shall make milestone payments to
Aurora with respect to such Hits as arise out of any use of a Nonexclusive
Screen by BMS or its Affiliates, as follows:
3.2.1 Where BMS has determined that a Hit identified through the use
of any such Nonexclusive Screen should become a Lead Compound and enter
a Lead Compound Development Program conducted by BMS, BMS will promptly
notify Aurora of same and will pay to Aurora *** for each such Lead
Compound. Payments shall be wired to a bank account specified by
Aurora within *** following such notification from BMS.
3.2.2 BMS will promptly notify Aurora of each Lead Compound arising
out of section 3.2.1 that becomes an Approved PLP Compound, and will
pay Aurora *** for each Approved PLP Compound so approved for further
development by the BMSPGOC; provided, that if a Hit under section 3.2.1
should be approved as an Approved PLP Compound without first having
been approved to enter a
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Lead Compound Development Program (such that Aurora did not receive any
payment under section 3.2.1), then BMS shall pay Aurora *** upon any
such Hit so approved for further development as an Approved PLP
Compound by the BMSPGOC. Payments shall be wired to a bank account
specified by Aurora within *** following such notification from BMS.
3.2.3 If an Approved PLP Compound in section 3.2.2 should reach the
following milestones, BMS will promptly notify Aurora of same and will
pay the following amounts to Aurora:
Event Payment
(US$)
***
; provided, however, that if a Hit identified using a particular
Nonexclusive Screen and on which milestones payment(s) above have been
made should be dropped from further development by BMS, for whatever
reason, then no more milestone payments shall be due with respect to
any subsequent Hit so identified in the same Nonexclusive Screen,
unless and until such subsequent Hit reaches the milestone next
following the last milestone on which a payment was made for the
abandoned compound. Payments shall be wired to a bank account
specified by Aurora within *** following the date that any such
milestone is reached.
3.2.4 The milestone payments in this section 3.2 shall apply only to
Hits obtained prior to the delivery of the complete, fully operational
UHTSS to BMS and only with respect to such Hits as are obtained in the
*** Nonexclusive Screens developed by BMS; provided, however, that
if BMS enters into an agreement with Aurora to develop more than ***
ESP Screens under section 3.1 hereof, then each such additional ESP
Screen in excess of *** shall reduce, by the same excess number, the
number of Nonexclusive Screens under this section 3.2 for which
payments might otherwise be required to be made under sections ***
above. For example, if BMS enters into
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ESP Work Plans for *** ESP Screens, then the milestone payments under
Sections *** shall apply only to a Hit (that is subsequently approved
as a Lead Compound and that occurs prior to the date that a complete,
fully operational UHTSS is delivered to BMS) in the *** Nonexclusive
Screens developed by BMS.
3.2.5 All right, title and interest in any Inventions relating in
any way to any BMS Test Materials and any Hits or Lead Compounds which
arise out of, or are conceived or reduced to practice as a result of,
the development or use of an Nonexclusive Screen by or for BMS shall
be owned solely by BMS, and to the extent that Aurora or any of its
employees or contractors might be considered a co-inventor of any
such Invention, Aurora hereby assigns to BMS all rights, title and
interest in and to any such Invention made by it, its employees or
contractors. Aurora agrees to execute any instruments or other
documents, at BMS' reasonable request and expense, to confirm and vest
same, and agrees to maintain appropriate contractual arrangements with
its employees and contractors to effectuate same.
3.3 Ownership of Data. All results and data generated by BMS, its
Affiliates and its and their contractors arising out of the use by any of them
of the UHTSS and any ESP Screen or Nonexclusive Screen, the use of any of the
rights licensed under article 5 hereof, or otherwise arising out of this
Agreement with respect to any Hits, Lead Compounds and Approved PLP Compounds
(and Analogs of any of the foregoing made or obtained by BMS) or otherwise out
of the internal research and development conducted by or for BMS and its
Affiliates shall be owned exclusively by BMS and shall be treated as BMS
Confidential Information hereunder.
3.4 Development of Products. BMS will in its sole and absolute
discretion determine which, if any, such Hit(s) will be approved as Lead
Compounds and developed further in a Lead Compound Development Program
conducted by BMS. BMS shall be responsible for all pre-clinical (including
medicinal chemistry) activities during the course of the Lead Compound
Development Program for such Lead Compound, as well as following any approval
of an Approved PLP Compound. The conduct of the Lead Compound Development
Program shall be solely within the control and discretion of BMS, and BMS may
in its discretion suspend or terminate, in whole or in part, the Lead Compound
Development Program for a Lead Compound at any time.
BMS will be responsible for all pre-clinical and clinical development,
including all regulatory filings, of Hits, Lead Compounds, and Approved PLP
Compounds arising out of this Agreement. BMS shall have sole and absolute
discretion and control over the conduct of, and all activities associated with,
the development or abandonment of any Hit or Lead Compound, the approval of a
Lead Compound as an Approved PLP Compound, the development or abandonment of
any Approved PLP Compound, all regulatory activities relating to the
manufacture, use or sale of any Approved PLP Compound or Product, and the
commercialization and marketing of any Product in any country. All INDs, NDAs
and other regulatory filings made or filed by BMS for any Approved PLP Compound
or Product shall be owned solely by BMS. BMS will provide summary annual
reports to Aurora on the development status of any Approved PLP Compound then
in development arising out of the ESP Screening Program and which shall
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<PAGE> 39
be treated as BMS Confidential Information hereunder. Other than royalty
reports required hereunder, no reports shall be required of BMS with respect to
any activities connected with the commercialization of any Product approved for
marketing in any country.
3.5 Laboratory Facilities and Personnel. Aurora and BMS shall
each, at their respective cost and expense, provide suitable and sufficient
laboratory facilities and equipment, and will devote sufficient, experienced
personnel, as is needed to carry out their respective obligations under this
Agreement.
3.6 Payments to Third Parties by Aurora. Aurora shall be solely
responsible for the performance by, and any payments of any nature whatsoever
due to, Third Parties relating to the following:
3.6.1 The use by Aurora and by BMS (where used by BMS in accordance
with this Agreement) of any patent rights, copyrights, Know-How or
other intellectual property rights owned or controlled by such Third
Party that are licensed to Aurora and which are included within the
Aurora Patent Rights and Aurora Technology that are sublicensed to BMS
hereunder; and
3.6.2 Any Third Party used by Aurora to provide goods or services to
make, have made, sell, deliver, install and/or provide maintenance for
the UHTSS and any UHTSS components supplied hereunder; and
3.6.3 Any Third Party used by Aurora to provide goods or services in
connection with the preparation, manufacture, use, sale, and delivery
of an applicable ESP Screen or any Reporters hereunder.
4.0 SERVICE AND SUPPORT
4.1 Service and Support. For a period until (i) *** after
Acceptance of a complete, fully operational UHTSS pursuant to section 2.1.3.1
(including during the period prior to Acceptance of same during which Modules
One and Two of such UHTSS are being installed and used) , (ii) *** after
Acceptance of the Second Module Two pursuant to section 2.1.3.2 (or until
expiration of the *** in (i), whichever is the later), and (iii) for *** after
Acceptance of each additional UHTSS or component thereof as may be ordered by
BMS pursuant to section 2.1.13, Aurora will provide, ***, service and support
for the applicable system and all system components, as such service and support
is more fully described on Exhibit 4.1 attached hereto ("Service and Support").
Aurora will be responsible for providing and paying for this Service and
Support, whether provided by Aurora itself or through third party contractors
(including those providing any UHTSS components to Aurora). Aurora will
designate an appropriate Aurora employee to coordinate such Service and Support.
Following the applicable period pertaining to (i)-(iii) under the
preceding paragraph, BMS may elect to purchase Service and Support annually for
up to *** thereafter (or
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<PAGE> 40
such longer period as the parties may mutually agree upon in writing) for such
UHTSS's (or components thereof) for a fee that is *** Maintenance payments
shall be payable in ***. Alternatively, BMS may utilize its own designated
internal resources for some or all of such components, in combination with
additional support provided directly by Aurora and/or Aurora's technology
partners, at Aurora and such partners' then prevailing rates, in which event the
annual maintenance fee shall be equitably prorated for the items still subject
to maintenance. Following such *** period, BMS may purchase maintenance at ***.
5.0 INTELLECTUAL PROPERTY RIGHTS
5.1 License Rights.
5.1.1 Aurora grants to BMS ***
(i) to conduct internal research and development (including
without limitation drug discovery, screening and drug
development), including without limitation
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*** (ii) to the extent covered thereby to make, have made, use, sell,
import and offer for sale any Hits, Lead Compounds, Approved PLP
Compounds, Products, and substances identified as having Activity using
such licensed rights, all in accordance with the terms and conditions
of this Agreement.
Subject to sections 2.1.9, 3.1.2, and 3.1.7 hereof, the rights granted
under this section 5.1.1 shall be non-exclusive and Aurora shall be
entitled to grant licenses to such rights to Third Parties upon such
terms as Aurora shall determine and/or to use such rights for the
benefit of itself or any Third Party. The rights granted hereunder
shall be subject to any and all payments required in articles 2 and 3
hereof, and shall continue until, and to the extent, terminated in
accordance with the provisions of this Agreement.
5.1.2 Notwithstanding section 5.1.1, the rights granted thereunder
do not include:
5.1.2.1 Improvements to the Aurora Reporter System Technology
developed after the date that is the later of *** other than
those improvements that represent incremental improvements to
the existing Aurora Reporter System Technology developed after
such date (for example, a novel Reporter developed after such
date would not fall within the improvements licensed to BMS
after such date); and
5.1.2.2 Inventions pertaining to the Aurora Reporter System
Technology that are made after the date that is *** ;
provided, that the foregoing shall not apply to Inventions that
constitute incremental improvements under section 5.1.2.1; and
provided, further, that any Inventions made after such date
that are embodied in a division or substitute application for
an Invention made prior to such date shall be included within
the rights licensed to BMS hereunder.
5.1.2.3 The right to use any Reporter as a drug or tool as
part of any commercial contract service or bureau to treat or
diagnose diseases or conditions or to detect analytes as part
of a diagnostic program for Third Parties; however, the right
to use any Reporter for research (including screening and drug
development) purposes, including as a drug or tool to detect
analytes for research purposes, shall not be limited or
restricted in any way by the foregoing.
5.2 Ownership Rights.
5.2.1 Except as otherwise expressly provided in this Agreement,
nothing in this Agreement is intended to convey or transfer ownership
by one party to the other of any
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rights, title or interest in any Confidential Information, Technology,
or patent rights owned or Controlled by a party. Except as expressly
provided for in this Agreement, nothing in this Agreement shall be
construed as a license or sublicense by one party to the other of any
rights in any Biological Materials, Technology, Copyrights, or Patent
Rights owned or Controlled by a party or its Affiliates.
5.2.2 BMS shall own all Inventions and other Technology made solely
by its employees and agents, and all patent applications and patents
claiming such Inventions. Subject to section 3.1.7, 3.2.5, and 5.2.3,
Aurora shall own all Inventions and other Technology made solely by
its employees and agents, and all patent applications and patents
claiming such Inventions. Subject to Sections 3.1.7, 3.2.5, and
5.2.3, all Inventions and other Technology made jointly by employees
or agents of BMS and employees or agents of Aurora shall be owned
jointly by BMS and Aurora. Subject to the terms of this Agreement,
all joint Inventions (and all patent rights obtained thereon) and all
Technology jointly developed by Aurora and BMS during the Research
Term may be freely exploited by either party without further
obligation to the other. Determinations of inventorship shall be made
in accordance with U.S. patent law.
5.2.3 All rights, title and interests owned or Controlled by Aurora
or its Affiliates in any Inventions and Technology pertaining to any
indication or use of any Hit, Lead Compound, Approved PLP Compound or
Covered Product (or of Analogs of the class of compounds to which the
same may pertain) that may be conceived or reduced to practice at any
time during the Contract Term solely by Aurora employees or by a Third
Party under contract with Aurora, or jointly by any of them with
others, in connection with the activities conducted by Aurora under
this Agreement, and all rights, title and interest Aurora may have in
any Patent Rights that may be obtained on any of the foregoing
(collectively, "Product Invention Rights"), shall be owned exclusively
by BMS, and shall be deemed to be and have been automatically assigned
to BMS by reason of Aurora's execution of this Agreement. Aurora
shall promptly report any such Invention to BMS in sufficient detail
to enable BMS to assess whether a patent application should be filed.
If BMS desires to file patent applications on any such Invention, it
will do so at its option and expense, and Aurora will provide
reasonable cooperation as BMS may request (with BMS reimbursing Aurora
for any out-of-pocket costs so incurred) in obtaining and filing for
any patent protection thereon in BMS' name and will execute any
documents or other instruments as may be reasonably requested by BMS
to fully vest exclusive ownership of such Product Invention Rights in
BMS. BMS shall be under no obligation, express or implied, to
develop, market, or otherwise utilize any such Product Invention
Rights.
5.3 Sublicensing. BMS shall have the right to sublicense any of
the rights licensed to it by Aurora hereunder to any Affiliate of BMS, provided
that such Affiliate is bound by all pertinent terms and conditions of this
Agreement and provided that BMS shall not be relieved of any of its obligations
under this Agreement.
Nothing in this section 5.3 or otherwise in this Agreement shall
restrict, or is intended to restrict, BMS in any way from collaborating with a
Third Party on the development,
39
<PAGE> 43
manufacture, or use of any Non-Exclusive Screen (or with respect to the use of
an Exclusive Screen at BMS); provided, that such Third Party shall have
executed an appropriate confidentiality agreement with BMS to keep in
confidence any disclosures of Aurora Confidential Information that BMS may need
to make in connection therewith, and provided that such Third Party shall have
agreed that the use by such Third Party of any such Aurora Confidential
Information or rights licensed to BMS hereunder is limited solely to
developing, making, supplying, or using any such Non-Exclusive Screens (and
using any such Exclusive Screens) solely in furtherance of BMS' research and
drug development activities or of such collaboration as BMS may have with such
Third Party; and provided, further, that BMS may not provide any Reporters to
any such Third Party without Aurora's prior written consent, and may not
disclose any Confidential Information pertaining to any Aurora Reporter System
Technology to any such Third Party, other than to consultants and contractors
working at BMS facilities who have reason to know same and in accordance with
article 9.
5.4 Software. Aurora shall provide to BMS a copy of the source
code and object code for any Software provided with the UHTSS (or any Module or
other component) to the extent available to and under the Control of Aurora,
and, if such source or object code is licensed to Aurora from a third party,
upon the same terms as apply to Aurora's use of such source or object code.
BMS may, in its discretion, adapt, reproduce, and modify such software and
prepare derivative works based upon the software, as well as enhance or improve
functionality of the software through new modules or subroutines developed by
BMS for use with the software (all of the foregoing collectively,
"Modifications"), all of which, as well as any rights (including copyright
rights therein) shall be owned by BMS. Aurora shall have no ownership interest
in, nor any right to license, use or disclose, or any obligation to support,
any such Modifications developed by BMS, all of which (and the title and rights
therein) shall be owned by BMS; provided, however, that BMS shall not acquire
by reason of the foregoing ownership of any portions of the software code
provided by Aurora or any interest in any copyright owned or held by Aurora or
its licensors therein.
6.0 PAYMENTS OF ROYALTIES, ACCOUNTING FOR ROYALTIES, RECORDS
6.1 Payment Term. All royalties required to be paid by BMS
hereunder shall be paid with respect to each country of the world from ***
6.2 Payment Dates. Royalties shall be paid by BMS on Net Sales
within *** *** Such payments shall be accompanied by a statement showing all
relevant sales information including the information employed to calculate Net
Sales of each Covered Product in each country, and the calculation of the amount
of royalty due.
6.3 Accounting. The Net Sales used for computing the royalties
payable to Aurora by BMS shall be computed in U.S. dollars and paid by wire
transfer or other mutually acceptable
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means. For purposes of determining the amount of royalties due, the amount of
Net Sales in any foreign currency shall be computed by converting such amount
into dollars ***
6.4 Records. BMS shall keep for *** complete and accurate records
of sales and all other information necessary to calculate Net Sales of each
Covered Product in sufficient detail to allow the accrued royalties to be
determined accurately. Aurora shall have the right to cause an independent,
certified public accountant (who has executed a confidentiality agreement with
BMS reasonably acceptable to BMS) to audit such records at the place or places
of business where such records are customarily kept in order to verify the
accuracy of the reports of Net Sales and royalty payments for the preceding two
years. Such audits may be exercised during normal business hours *** . Aurora
shall bear the full cost of such audit unless such audit discloses a variance of
*** from the amount of the royalties due under this Agreement, in which event,
*** . Aurora agrees not to disclose confidential information concerning royalty
payments and reports, and all information learned in the course of any audit or
inspection, except to the extent necessary for Aurora to reveal such information
in order to enforce its rights under this Agreement or if disclosure is required
by law.
6.5 Withholding Required by Law. If provision is made in law or
regulation for taxes to be withheld by BMS, such tax shall be deducted from the
royalty or other payment to be made by BMS hereunder and shall be remitted to
the proper taxing authority. Payment of the royalty or other payment due to
Aurora shall be net of such withholding. BMS and Aurora agree to assist the
other party in claiming any exemption available from such deduction or
withholdings under any double taxation or similar agreement or treaty from time
to time in force.
7.0 INFRINGEMENT BY THIRD PARTIES
7.1 Actual or Threatened Infringement of BMS Materials and
Products. If information comes to the attention of BMS or Aurora to the effect
that any patent rights owned or Controlled by BMS or its Affiliates relating to
a BMS Material, Hit, Lead Compound, Approved PLP Compound or Product are being,
have been or are threatened to be infringed by a Third Party not Affiliated
with BMS, BMS shall have the sole right, *** ,to take and control
all action as BMS may deem necessary or appropriate to prosecute or prevent
such unlawful infringement, including the right to bring, defend, settle,
compromise, or appeal any suit, action or proceeding involving any such
infringement. If BMS determines that it is necessary or desirable to bring an
infringement action and for Aurora to join any such suit, action or proceeding,
Aurora shall, *** , execute all papers, provide full cooperation
and assistance to BMS in connection with such proceeding, and, if necessary,
take such other actions as may be reasonably required to permit BMS to act in
Aurora's name (including the furnishing of a power of attorney), and *** ;
provided, however, that BMS may not settle any patent infringement
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litigation under this Section 7.1 in a manner that adversely affects the scope
or enforceability of Aurora's Patent Rights or that would constitute an
amendment of this Agreement without Aurora's written consent (not to be
unreasonably withheld or delayed). ***
7.2 Actual or Threatened Infringement of Aurora Patent Rights.
7.2.1 BMS and Aurora shall promptly notify the other in writing of
any alleged or threatened infringement of any Aurora Patent Rights
licensed to BMS under this Agreement of which either becomes aware.
Both parties shall use reasonable efforts in cooperating with each
other to terminate such infringement without litigation. Aurora shall
have the first right to bring and control any action or proceeding with
respect to such infringement *** and by counsel of its own choice as to
any such Aurora Patent Rights, and BMS shall have the right, *** to be
represented in any action involving any such Aurora Patent Rights using
counsel of its own choice.
7.2.2 If Aurora fails to bring an action or proceeding within (i) ***
following receipt of written notice from BMS with respect to an alleged
infringement of any Aurora UHTSS Patent Rights or of any Aurora
Reporter System Patent Rights used in an Exclusive Screen hereunder, or
(ii) *** , set forth in the appropriate laws and regulations for the
filing of such actions, whichever comes first, with respect to such
Aurora UHTSS Patent Rights or any such Aurora Reporter System Patent
Rights used in an Exclusive Screen hereunder, BMS shall have the right
to bring and control any such action *** and by counsel of its own
choice, and Aurora shall have the right, *** to be represented in any
such action by counsel of its own choice.
7.2.3 In the event a party brings an infringement action under this
section 7.2, the other party shall provide all reasonable cooperation,
including if required to bring such action, the furnishing of a power
of attorney. Neither party shall have the right to settle any
proceedings under this Section 7.2 in a manner that diminishes the
rights licensed to the other party hereunder or which would constitute
an amendment of this Agreement, without the consent of such other party
(not to be unreasonably withheld or delayed). Except as otherwise
agreed to by the parties as part of a cost sharing arrangement ***
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***
7.2.4 The parties acknowledge that Aurora's ability to comply with
section 7.2.1-7.2.3 above may be subject to rights and obligations
under Third Party Contracts as of the Effective Date that have
provided patent right, copyrights and Know-How that are included
within the Aurora Patent Rights and Aurora Technology licensed to BMS
hereunder. Such Third Party Contracts and the provisions therein
containing such restrictions are set forth in Exhibit 7.2.4, and
Aurora represents and warrants as of the Effective Date that there are
no other restrictions under any such Third Party Contracts not set
forth on such Exhibit that would affect its ability to perform
sections 7.2.1-7.2.3 hereof and that it will not agree to any changes
to such restrictions hereafter without the prior written consent of
BMS (except where such changes eliminate same or make such
restrictions less restrictive).
8.0 DEFENSE OF INFRINGEMENT CLAIMS
8.1 Defense of Infringement Claims Pertaining to Lead Compounds,
Approved PLP Compounds, and Products. Subject to section 11.4 (to the extent
applicable), Aurora will cooperate with BMS, *** , in the defense
of any suit, action or proceeding against Aurora, BMS, any BMS Affiliate, or
any licensee of BMS alleging the infringement of the intellectual property
rights of a Third Party by reason of the manufacture, use or sale of a BMS
Material, Hit, Lead Compound, Approved PLP Compound, or Product. Aurora shall
give to BMS all authority (including the right to exclusive control of the
defense of any such suit, action or proceeding and the exclusive right to
compromise, litigate, settle or otherwise dispose of any such suit, action or
proceeding), information and assistance necessary to defend or settle any such
suit, action or proceeding; provided, however, BMS shall obtain Aurora's prior
written consent (not to be unreasonably withheld) if any part of any proposed
settlement would have an adverse effect on the scope or enforceability of the
Aurora Patent Rights; ***
8.2 Defense of Infringement Claims Pertaining to Patent Rights
Owned or Controlled by Aurora. Subject to section 11.3 (to the extent
applicable), BMS will cooperate with Aurora, *** , in the
defense of any suit, action or proceeding against Aurora, any Aurora Affiliate,
BMS, any BMS Affiliate, or any licensee of BMS alleging the infringement of the
intellectual property rights of a Third Party by reason of the use of the
UHTSS, the Exclusive or Non-Exclusive Screens or of any Aurora Patent Rights
and Aurora Technology licensed to BMS under this Agreement. Aurora shall give
BMS prompt written notice of the commencement of
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any such suit, action, proceeding or claim of infringement and will furnish BMS
a copy of each communication relating to the alleged infringement. BMS shall
give to Aurora all authority (including the right to exclusive control of the
defense of any such suit, action or proceeding and the exclusive right, after
consultation with BMS, to compromise, litigate, settle or otherwise dispose of
any such suit, action or proceeding), information and assistance necessary to
defend or settle any such suit, action or proceeding; provided, however, Aurora
shall obtain BMS's prior written consent to all or such part of any settlement
which requires payment or other action by BMS, its Affiliates, or licensees, or
which would conflict with or have an adverse effect on the continuing use of
such Screens or the rights granted hereunder to BMS, its Affiliates or
licensees. ***
9.0 TREATMENT OF CONFIDENTIAL INFORMATION; PUBLICITY, AND CHANGE OF
CONTROL
9.1 Confidentiality
9.1.1 Subject to the terms and conditions of this Agreement, BMS and
Aurora each agree that, during the term of this Agreement and for five
(5) years thereafter, each will use all reasonable efforts to keep
confidential, and will cause its Affiliates to use reasonable efforts
to keep confidential, all Aurora Confidential Information or BMS
Confidential Information, as the case may be, that is disclosed to it
or to any of its Affiliates by the other party in connection with the
performance of this Agreement. Neither BMS nor Aurora nor any of
their respective Affiliates shall use the other party's Confidential
Information except as expressly permitted in this Agreement.
9.1.2 BMS and Aurora each agree that any disclosure of the other's
Confidential Information to any officer, employee, contractor,
consultant, sublicensee, or agent of the other party or of any of its
Affiliates shall be made only if and to the extent necessary to carry
out its responsibilities under this Agreement and to exercise the
rights granted to it hereunder, shall be limited to the extent
consistent with such responsibilities and rights, and shall be
provided only to such persons or entities who are bound to maintain
same in confidence in a like manner as the party receiving same
hereunder is so required. Each party shall use reasonable efforts to
take such action, and to cause its Affiliates to take such action, to
preserve the confidentiality of each other's Confidential Information,
including not less than such efforts as it would customarily take to
preserve the confidentiality of its own Confidential Information.
Each party, upon the other's request, will return all the Confidential
Information disclosed to the other party pursuant to this Agreement,
including all copies and extracts of documents, within sixty (60) days
of the request of the other party following any termination of this
Agreement, except for one (1)
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copy which may be kept for the purpose of ascertaining and complying
with continuing confidentiality obligations under this Agreement, and
except for such copies as a party may retain in order to continue to
exercise its rights hereunder (for example, under sections 2.1.7.4,
2.1.7.5, 2.1.8.4, 2.1.8.5, 2.1.12.2, 12.5.2, or 12.5.3) following
termination of this Agreement.
9.1.3 Confidential Information shall not include any information
which the receiving party can prove by competent evidence:
i) is now, or hereafter becomes, through no act
or failure to act on the part of the receiving party,
generally known or available;
ii) is known by the receiving party at the time
of receiving such information, as evidence by its records;
iii) is hereafter furnished to the receiving party
without restriction as to disclosure or use by a Third
Party lawfully entitled to so furnish same;
iv) is independently developed by the employees,
agents or contractors of the receiving party without the
aid, application or use of the disclosing party's
Confidential Information; or
v) is the subject of a written permission to
disclose provided by the disclosing party; or
vi) is provided by the disclosing party to a
Third Party without restriction as to confidentiality.
A party may also disclose Confidential Information of the other where
required to do so by law or legal process, provided that, in such
event, the party required to so disclose shall give maximum practical
advance notice of same to the other party and will cooperate with the
other party's efforts to seek, at the request and expense of the other
party, all confidential treatment and protection for such disclosure
as is permitted by applicable law.
The parties agree that the material financial terms of this Agreement
will be considered Confidential Information of both parties.
Notwithstanding the foregoing, either party may disclose such terms in
legal proceedings or as are required to be disclosed in its financial
statements, by law, or under strictures of confidentiality to bona
fide potential sublicensees. Either party shall have the further
right to disclose the material financial terms of this Agreement under
strictures of confidentiality to any potential acquiror, merger
partner, bank, venture capital firm, or other financial institution to
obtain financing, or other bona fide potential strategic partner or
collaborator.
9.2 Publication of Results. Notwithstanding any term in this
Agreement that may state or imply to the contrary, but subject to section 9.1
hereof, results and data obtained by BMS in
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the course of the Exclusive and Nonexclusive Screening Programs or through the
use of the Reporters or the UHTSS may be submitted for publication in
accordance with BMS' customary practices.
9.3 Publicity. Except as required by law and as provided in this
article 9, neither party may make any public announcement or otherwise disclose
the terms of this Agreement without the prior written consent of the other
party, which consent shall not be unreasonably withheld.
9.4 Change in Control. If, prior to the Acceptance of the first
complete, fully operational UHTSS:
(i) Aurora merges or consolidates with a Third Party, or
(ii) Twenty percent (20%) or more of Aurora's outstanding voting
stock or equity interests at any time is held, owned or
controlled by a Third Party, or
(iii) Aurora should sell or otherwise transfer all or substantially
all of its assets that are the subject of this Agreement to a
Third Party,
which Third Party, in the good faith determination of BMS, is, or is an
Affiliate of, a substantial competitor of BMS in the manufacture, use or sale
of drugs to prevent or treat diseases in human beings, BMS may elect as
follows:
9.4.1 BMS may elect to treat such event as an event entitling BMS to
withdraw from further development of the UHTSS for good cause; or
9.4.2 BMS may, without affecting or altering Aurora's or BMS'
continuing obligations under this Agreement, elect to require that
Aurora provide, and Aurora agrees in such event to provide, reasonable
assurances that it will continue, and will devote the necessary
resources and efforts to ensure, the conduct of the research
activities contemplated by this Agreement, that Aurora will adopt
appropriate measures to ensure that Confidential Information of BMS is
not disclosed to the acquiring or merging entity (or its Affiliates),
and that, if necessary and appropriate to ensure the due performance
of its obligations under the Research Plan and this Agreement, Aurora
will take such steps and measures as may be reasonably be required to
segregate its business operations and assets to which this Agreement
pertains from the activities to be conducted by it in the future for
the benefit of such acquiring or merging entity. BMS shall also be
entitled to cease the provision of any and all reports thereafter to
Aurora with respect to BMS' ESP and NSP activities and BMS research
and development activities as to any Hit, Lead Compound, Approved PLP
Compound, or Product, except for milestone payments and royalty
reports required hereunder and such other reports as Aurora may
reasonably request for purposes of ascertaining whether any events
have occurred that would require BMS to make any other payment
required of it hereunder.
***CONFIDENTIAL TREATMENT REQUESTED
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10.0 PROVISIONS CONCERNING THE FILING, PROSECUTION AND MAINTENANCE OF
PATENT RIGHTS; COPYRIGHTS
10.1 Sole Inventions. For Inventions made solely by a party, such
party shall, subject to Sections 3.1.7, 3.2.5, and 5.2.3, be solely responsible
at its expense for making decisions regarding the scope and content of
application(s) to be filed and the prosecution thereof, as well as in what
country(ies) such applications should be filed, prosecuted, and maintained.
With respect to any Aurora Patent Rights licensed to BMS hereunder, Aurora
shall provide to BMS copies of all patent applications, (including any
continuations, continuations- in-part or divisions thereof or any substitute
applications therefor or equivalents thereof) relating thereto, and, shall also
provide to BMS copies of all documents and correspondence received or proposed
to be filed in connection with the filing and prosecution of all such Aurora
Patent Rights in a timely manner. Aurora shall also provide a report every six
(6) months detailing their status.
With respect to any Aurora UHTSS Patent Rights:
10.1.1 Aurora shall provide to BMS' patent counsel any patent
applications pertaining to such Patent Rights and any papers or other
documents pertaining thereto (such as responses to office action,
requests for terminal disclaimer, and requests for reissue or
reexamination of any patent issuing from such application) that Aurora
proposes to file sufficiently in advance of filing for the purpose of
obtaining substantive comment of BMS' patent counsel and shall
consider in good faith the requests and suggestions of BMS with
respect to strategies for filing and prosecuting such patent
applications; and
10.1.2 If Aurora decides not to pursue filing or prosecution of any
Invention conceived or made solely by it pertaining to such Patent
Rights in a given country, it shall give BMS reasonable notice to this
effect, and thereafter BMS may, at its discretion and expense, file,
prosecute, maintain and enforce in Aurora's name a patent application
or patent covering such Invention in such country.
Each party shall fully cooperate with the other party controlling such
filing, prosecution and maintenance, and will execute such documents or other
instruments as may be requested by the controlling party in order to fully vest
the rights associated with any such Invention as set forth herein. The
controlling party will reimburse the other party for any out-of-pocket costs
incurred by the other party in connection therewith.
10.2 Joint Inventions. Subject to sections 3.1.7, 3.2.5, 5.2.3,
and 10.3, for Inventions conceived or made jointly by BMS and Aurora in the
performance of this Agreement, the parties agree to meet and confer in order to
discuss whether, and in what countries, patent rights claiming such Joint
Inventions should be filed and which party(ies) should bear the cost of filing,
prosecuting and maintaining same. With respect to any patent rights filed,
prosecuted or maintained under this section 10.2, each patent application,
office action, response to office action, request for terminal disclaimer,
request for reissue or reexamination of any patent issuing from such
application, and any other papers or documents received or proposed to be filed
in connection therewith shall be provided by the party responsible for the
filing, request or response
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to the other party sufficiently prior to the filing of such application,
response or request to allow for review and comment by the other party. The
parties shall discuss patent filing, prosecution, defense and maintenance costs
from time to time and shall agree in advance before the expenditure of monies
for special transactions (such as the cost of interference, litigation and
appeals).
10.3 Exclusive Screens. It is understood and agreed that all
receptors and other targets provided by BMS to Aurora for use in developing an
Exclusive Screen, and title and all intellectual property rights and interests
in and to such receptors and other targets, shall remain the exclusive property
of BMS. All such Exclusive Screens shall be treated as BMS Confidential
Information hereunder, and Aurora may not transfer such Exclusive Screen to any
Third party or use such Exclusive Screen for the benefit of itself or any Third
Party, without the prior written consent of BMS. Regardless of which party
shall be considered an inventor under applicable patent law of any inventions
pertaining to any such Exclusive Screen, the parties agree to cooperate to file
such patent protection on any such Exclusive Screen on such countries as BMS
may request (in the names of either BMS or Aurora, or jointly, as the parties
respective patent counsel jointly agree is appropriate, or, if no agreement is
reached, then in the names of both parties). For countries that BMS requests
patent applications be filed, BMS will be responsible for, and for the cost of,
filing, prosecuting and maintaining same. With respect to any patent rights
filed, prosecuted or maintained under this section 10.3, each patent
application, office action, response to office action, request for terminal
disclaimer, request for reissue or reexamination of any patent issuing from
such application, and any other papers or documents received or proposed to be
filed in connection therewith shall be provided by the party responsible for
the filing, request or response to the other party sufficiently prior to the
filing of such application, response or request to allow for review and comment
by the other party. Where BMS has not requested a patent application to be
filed in a give country, the parties shall discuss patent filing, prosecution,
defense and maintenance costs from time to time and shall agree in advance
before the expenditure of monies for special transactions (such as the cost of
interference, litigation and appeals).
10.4 Copyrights. For purposes of Articles 5, 7, 8, and 10 hereof,
the parties agree to treat and handle, to the maximum practical extent, any
copyrights owned or Controlled by a party in the same manner as Patent Rights
owned or Controlled by such party.
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11.0 REPRESENTATIONS, WARRANTIES AND COVENANTS
11.1 Mutual Representations and Warranties. The parties make the
following representations and warranties to each other:
11.1.1 Corporate Power. Each party hereby represents and
warrants that such party (a) is duly organized and validly existing
under the laws of the state of its incorporation and has full
corporate power and authority to enter into this Agreement and to
carry out the provisions hereof; (b) has the requisite power and
authority and the legal right to own and operate its property and
assets, to lease the property and assets it operates under lease, and
to carry on its business as it is now being conducted; and (c) is in
compliance with all requirements of applicable law, except to the
extent that any noncompliance would not have a material adverse effect
on the properties, business, financial or other condition of it and
would not materially adversely affect its ability to perform its
obligations under the Agreement.
11.1.2 Due Authorization. Each party hereby represents and
warrants that such party (a) has the requisite power and authority and
the legal right to enter into the Agreement and to perform its
obligations and grant the rights extended by it hereunder; and (b) has
taken all necessary action on its part to authorize the execution and
delivery of the Agreement and to authorize the performance of its
obligations hereunder and the grant of rights extended by it
hereunder.
11.1.3 Binding Agreement. Each party hereby represents and
warrants to the other that: (a) this Agreement has been duly executed
and delivered on its behalf and is a legal and valid obligation
binding upon it and is enforceable in accordance with its terms; (b)
the execution, delivery and performance of this Agreement by such
party does not conflict with any agreement, instrument or
understanding, oral or written, to which it is a party or by which it
may be bound, nor violate any law or regulation of any court,
governmental body or administrative or other agency having authority
over it; and (c) all necessary consents, approvals and authorizations
of all governmental authorities and other persons required to be
obtained by it in connection with the Agreement have been obtained.
11.2 Aurora Technology Representations and Warranties. Aurora
represents and warrants to BMS as of the Effective Date the following:
11.2.1 The Patent Rights and Copyrights listed on Exhibit 11.2.1 list
all Aurora Patent Rights and registered Copyrights owned or Controlled
by Aurora, and such Exhibits specify the jurisdiction(s) by or in
which each such right has been issued or registered or in which an
application for such issuance or registration has been filed,
including respective registration or application numbers. To the best
knowledge of the current officers and directors of Aurora, the issued
claims under any issued Patent Rights are valid and in full force and
effect.
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11.2.2 Except as disclosed on Exhibit 11.2.1, (i) to the best
knowledge of Aurora's current officers and directors, the use of the
Aurora Technology and any Aurora Patent Rights and Copyrights in the
exercise by BMS of the rights granted to it hereunder will not
infringe upon any patent rights, copyrights or other proprietary
rights of any Affiliate of Aurora or of any Third Party; (ii) Aurora
has no knowledge of any infringement by any Third Party of any of the
Aurora Patent Rights or Copyrights; and (iii) Aurora and each of its
Affiliates are not subject to any outstanding order, judgment or
decree of any court or administrative agency, and each has not entered
into any stipulation or agreement, restricting (A) its use of the
Aurora Patent Rights, Aurora Technology or Copyrights in connection
with the manufacture, development, use, or licensing of the UHTSS, the
Reporter System or any Reporters, any Exclusive Screens, or any
Nonexclusive Screen as contemplated by this Agreement, provided,
however, that the foregoing shall not be construed as encompassing any
representation or warranty either that the receptors or other targets
selected by BMS for use in an Exclusive or Nonexclusive Screen will or
will not infringe the rights of any Third Party pertaining to such
receptors or that assay systems and screening systems components and
methods, instruments, equipment, software, reagents, and other
components (but excluding Reporters covered by Aurora's Patent Rights
or Aurora's Technology) provided by BMS for use in conjunction with
the UHTSS, any Exclusive Screen, or any Nonexclusive Screen will or
will not infringe the rights of any Third Party, or (B) Aurora's
ability to perform its obligations or to grant rights in accordance
with this Agreement.
11.2.3 There is no action, suit or proceeding pending or, to the
knowledge of its current officers and directors, that has been
threatened in writing by any Third Party against Aurora or its
Affiliates which, if adversely determined, would have a material
adverse effect upon Aurora's ability to grant to BMS, or upon the
ability of BMS to fully utilize or exercise, the Aurora Patent Rights,
Copyrights, or Technology licensed or sublicensed to BMS hereunder.
To the knowledge of Aurora's current officers and directors, there is
no action, suit or proceeding pending or that has been threatened in
writing by any Third Party against a Third Party Licensor which, if
adversely determined, would have a material adverse effect upon
Aurora's ability to grant to BMS, or upon the ability of BMS to fully
utilize or exercise, the Aurora Patent Rights, Copyrights, or
Technology licensed or sublicensed to BMS hereunder.
11.2.4 The Aurora Technology and Aurora Patent Rights and Copyrights
licensed or sublicensed by Aurora to BMS pursuant to this Agreement
have not been obtained by Aurora or its Affiliates in violation of any
contractual or fiduciary obligation to which Aurora or any of its
Affiliates or any of its or their employees or, to the best knowledge
of the current officers and directors of Aurora, its or their
contractors or predecessors-in-interest (and the employees of such
contractors or predecessors-in-interests), is or was a party, or by
misappropriation of the trade secrets of any Third Party, and the
exercise by BMS or its Affiliates of the rights licensed or
sublicensed by Aurora to it hereunder will not violate any such
contractual or fiduciary obligation owed by any of the foregoing
persons or entities to any such Third Party or render BMS liable for
the payment of any
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royalty attributable to or arising out of any such contractual or
fiduciary obligation or any such misappropriation.
11.2.5 Aurora has not (i) licensed to any Third Party any Aurora
Technology or Aurora Patent Rights to allow such Third Party to make
or use, nor agreed to supply to a Third Party or otherwise permit a
Third Party to use, any Reporters in substantially the same manner as
BMS is entitled is to use such Reporters hereunder, and (ii) has not
entered into any agreement with a Third Party, which, if such
agreement were entered into after this Agreement is signed, would be
an agreement falling within the scope of section 2.1.10.
11.2.6 Exhibit 11.2.6 lists all agreements as of the Effective Date
between Aurora and a Third Party involving the license to Aurora of
any inventions, patent rights, copyrights, Reporters, tangible
materials, UHTSS components, or Technology to Aurora that are included
within the Aurora Patent Rights, Copyrights and Technology, or that
will be used or incorporated in the development and/or supply of any
Reporters or any UHTSS components, the termination or breach of which
would have a material adverse effect upon (i) Aurora's ability to
grant to BMS, or upon BMS' ability to fully utilize or exercise, in
accordance with this Agreement the Aurora Patent Rights, Copyrights,
or Technology licensed or sublicensed to BMS hereunder or (ii)
Aurora's ability to develop, make or supply, or upon the ability of
BMS to obtain or fully utilize, the UHTSS (or its material components)
or the Reporters in accordance with the terms of this Agreement, or
(iii) Aurora's ability to develop and supply to BMS any Exclusive
Screen or BMS' ability to develop, make and use any Nonexclusive
Screen and to conduct NSP activities in accordance with this Agreement
(all such agreements, referred to collectively, as the "Aurora-Third
Party Contracts" and all such Third Parties referred to as
"Aurora-Third Party Contractees"); provided, however, that the
foregoing shall not be construed as encompassing any representation or
warranty that the receptors or other targets selected by BMS for use
in an Exclusive or Nonexclusive Screen will infringe the rights of any
Third Party pertaining to such receptors or other targets or that
assay systems and screening systems components and methods,
instruments, equipment, software, reagents, and other components (but
excluding Reporters covered by Aurora's Patent Rights or Aurora's
Technology) provided by BMS for use in conjunction with the UHTSS, any
Exclusive Screen, or any Nonexclusive Screen will or will not infringe
the rights of any Third Party.
11.2.7 Except as disclosed on Exhibit 11.2.6: (i) to the best
knowledge of Aurora, each of the Aurora-Third Party Contracts is valid
and enforceable by Aurora in accordance with its terms, except where
(A) such enforcement may be subject to bankruptcy, insolvency,
reorganization, moratorium, or other similar laws now or hereafter in
effect relating to creditors' rights generally, and (B) the remedy of
specific performance and other forms of equitable relief may be
subject to equitable defenses and to the discretion of the court or
arbitrator before which any proceeding therefor may be brought; (ii)
neither Aurora nor, to the best knowledge of Aurora any such Third
Party Contractee, is in default in the performance, observance, or
fulfillment of any material obligation,
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covenant or condition contained therein, and (iii) to the best
knowledge of Aurora, no event has occurred which (with or without the
giving of notice or lapse of time or both) would constitute a default
thereunder entitling such Third Party to terminate same.
11.3 Aurora Indemnification. Aurora hereby agrees to indemnify,
defend and hold BMS and its Affiliates, and their respective officers,
directors, employees, consultants, contractors, sublicensees (where approved by
Aurora), and agents (collectively, the "BMS Indemnitees") harmless from and
against any and all damages or other amounts payable to a Third Party, as well
as any reasonable attorneys' fees and costs of litigation incurred by such
Indemnitee as to such Claim until Aurora has acknowledged that it will provide
indemnification hereunder with respect to such Claim as provided below,
(collectively, "Damages") resulting from claims, suits, proceedings or causes
of action ("Claims") brought by a Third Party directed to: *** except to the
extent such Damages are attributable to: (i) a violation of law, regulation or
court order by any BMS Indemnitee, (ii) a violation of any contractual or
fiduciary duty owed by any BMS indemnittee to a Third Party, (iii) the
misappropriation by any such BMS Indemnitee of the trade secrets of any Third
Party, (iv) any negligent act or omission or intentional misconduct of any BMS
Indemnitee, (v) any breach of this Agreement or misrepresentation contained
herein by a BMS Indemnitee, (vi) *** (vii) ***
***CONFIDENTIAL TREATMENT REQUESTED
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***
It shall be a condition precedent to a BMS Indemnitee's right to seek
indemnification under this Section 11.3 that it shall inform Aurora of a Claim
as soon as reasonably practicable after it receives notice of the Claim; shall,
if Aurora acknowledges that such Claim falls within the scope of its
indemnification obligations hereunder, permit Aurora to assume direction and
control of the defense, litigation, settlement, appeal or other disposition of
the Claim (including the right to settle the claim solely for monetary
consideration), provided that Aurora shall seek the prior written consent (not
to be unreasonably withheld or delayed) of any such BMS Indemnitee as to any
settlement which would restrict any such BMS Indemnitee's continuing business
operations or reduce the scope of or adversely affect the rights licensed or
sublicensed to BMS under this Agreement; and shall provide reasonable
cooperation (including without limitation providing access to and copies of
pertinent records and making available for testimony relevant individuals
subject to its control) as requested by Aurora in the defense of the Claim.
Subject to the foregoing, Aurora shall provide attorneys reasonably acceptable
to each BMS Indemnitee to defend against any such Claim and will reimburse BMS
for out-of-pocket costs incurred by it at Aurora's request. Subject to the
foregoing, a BMS Indemnitee may participate in any proceedings involving such
Claim using attorneys of its/his/her choice and at its/his/her expense.
11.4 BMS Product Indemnification. BMS agrees to indemnify, defend
and hold Aurora, its Affiliates, and its and their officers, directors,
employees, consultants, contractors, and agents (collectively, the "Aurora
Indemnitees") harmless from and against any and all damages or other amounts
payable to a Third Party, as well as any reasonable attorneys' fees and costs of
litigation incurred by such Aurora Indemnitee as to such Claim until BMS has
acknowledged that it will provide indemnification hereunder with respect to such
Claim as provided below, (collectively, "Damages") resulting from claims, suits,
proceedings or causes of action ("Claims") brought by such Third Party based on
any *** except to the extent such Damages are attributable to: (i) a violation
of law by any Aurora Indemnitee, (ii) a violation of any contractual or
fiduciary duty owed by any Aurora Indemnitee to a Third Party, (iii) the
misappropriation by any such Aurora Indemnitee of the trade secrets of any Third
Party, (iv) any negligent or wrongful act or omission of any Aurora Indemnitee,
(v) *** or (vi) any breach of this Agreement by an Aurora Indemnitee or
misrepresentation contained herein.
It shall be a condition precedent to an Aurora Indemnitee's right to
seek indemnification under this Section 11.4 that it shall inform BMS of a Claim
as soon as reasonably practicable after it receives notice of the Claim; shall,
if BMS acknowledges that such Claim falls within the scope of its
indemnification obligations hereunder, permit BMS to assume direction and
control of the defense, litigation, settlement, appeal or other disposition of
the Claim (including the right to settle the claim solely for monetary
consideration), and provided that BMS shall seek the prior written consent (not
to be unreasonably withheld or delayed) of any such Aurora Indemnitee as to any
settlement which would restrict such Aurora's Indemnitee's continuing business
operations or reduce the scope of or adversely affect the Aurora Patent Rights
licensed or sublicensed to BMS under this Agreement; and shall fully cooperate
(including providing access to and copies of pertinent records and making
available for testimony relevant individuals subject to its control) as
requested by, and at the expense of, BMS in the defense of the Claim. Subject to
the foregoing, BMS shall provide attorneys reasonably acceptable to Aurora to
defend against any such Claim for which BMS has acknowledged its indemnification
obligation hereunder. Subject to the foregoing, an Aurora Indemnitee may
participate in any proceedings involving such Claim using attorneys of
its/his/her choice and at its/his/her expense.
11.5 Enforcement of Aurora-Third Party Contracts. Aurora agrees
that it will not breach, will make all required payments, and will use all
reasonable efforts to maintain and keep in force and effect, all Aurora Third
Party Contracts (including exclusive license rights under the UC License)
*** CONFIDENTIAL TREATMENT REQUESTED
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as the same may exist from time to time during the term of this Agreement.
Notwithstanding the foregoing, Aurora may, following consultation with BMS and
giving due consideration to any comments provided by BMS, terminate any such
Aurora Third Party Contracts where the termination of same would not have a
material adverse effect upon (i) the grant to BMS of, or upon BMS' ability to
fully utilize or exercise, in accordance with this Agreement the Aurora Patent
Rights, Copyrights, or Technology then licensed or sublicensed to BMS hereunder,
or (ii) Aurora's ability to develop, make or supply, or upon the ability of BMS
to obtain or fully utilize, the UHTSS (or its material components) or the
Reporters in accordance with the terms of this Agreement, or (iii) Aurora's
ability to develop and supply to BMS any Exclusive Screen or BMS' ability to
develop, make and use any Nonexclusive Screen, to use any Exclusive Screen, and
to conduct ESP and NSP activities in accordance with this Agreement.
12.0 TERM AND TERMINATION
12.1 Term. The term of this Agreement will begin on the Effective
Date and shall continue until terminated in accordance with the provisions of
Sections 12.2-12.4 hereof.
12.2 Termination By Mutual Agreement. The parties may at any time
terminate this Agreement, in whole or in part, by written agreement executed by
both Aurora and BMS. In such event, the document effecting such termination
shall specify the continuation or termination of any license rights granted
hereunder, as well as any other terms agreed to by both parties.
12.3 Termination for Cause.
12.3.1 Termination by BMS. In the event that Aurora materially
breaches any of the rights granted to it, or any of the duties or
obligations imposed on Aurora, under this Agreement, and such breach
is not cured within 90 days following receipt of written notice from
BMS to Aurora specifying such breach, then:
12.3.1.1 BMS may terminate this Agreement and/or seek
any damages and remedies available to it at law or in
equity, or
12.3.1.2 BMS may seek any damages and remedies
available to it at law or in equity, and/or may, without
affecting or altering Aurora's continuing obligations under
this Agreement and without affecting or altering any rights
granted to or remedies available to BMS under this Agreement:
12.3.1.2.1 terminate any rights licensed by BMS to
Aurora under this Agreement, in whole or in part,
and/or
12.3.1.2.2 if BMS desires that Aurora cease further
development of the UHTSS, terminate all remaining payments
(other than payments already due and owing as of the date
of termination) under section 2.1.5, except that all bonus
payments that BMS might otherwise be required to make to
Aurora under section 2.1.5.6 shall be void and of no
effect.
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12.3.2 Termination by Aurora. In the event that BMS materially
breaches any of the rights granted to it, or any of the material
duties and obligations imposed on it, under this Agreement, and such
breach is not cured within 90 days following receipt of written notice
from Aurora to BMS specifying such breach, then, subject to sections
12.3.2.3 and 12.3.3, Aurora may:
12.3.2.1 pursue any remedies and damages available to
it at law or in equity and/or
12.3.2.2 terminate this Agreement and/or any rights
licensed or sublicensed to BMS hereunder; provided, that in
such event:
12.3.2.2.1 BMS shall not be required to make any further
payments under any provision of this Agreement, other than
those payments that had accrued as of the date of such
termination or which are payable under section 12.3.2.2.2
below; and
12.3.2.2.2 such termination shall not restrict or
preclude BMS and its Affiliates in any way from continuing
to research, develop, manufacture, use and commercialize
any Hits, Lead Compounds, Approved PLP Compounds, Covered
Products and products, provided, that no such termination
shall relieve BMS of, and BMS shall remain obligated to
pay to Aurora, such milestone payments and royalties as
BMS would otherwise have paid to Aurora under article 3
hereof with respect to Hits and Lead Compounds identified
prior to the date of termination; and
12.3.2.2.3 BMS may exercise the same rights as it would
be entitled to exercise under sections 2.1.7.4 and 2.1.7.5
as would apply if BMS had withdrawn from development of
the UHTSS without cause.
12.3.2.3 Notwithstanding the foregoing, where a breach
by BMS entitling Aurora to terminate under this section 12.3.2
involves a breach pertaining to (i) the use of the Reporters,
a Nonexclusive Screen or Exclusive Screen by BMS or the Aurora
Reporter System Patent Rights or Aurora Reporter System
Technology rights licensed or sublicensed to BMS hereunder for
use in connection therewith, but not a breach by BMS involving
(ii) the use or development of the UHTSS or the Aurora UHTSS
Patent Rights or Aurora UHTSS Technology licensed or
sublicensed to BMS hereunder, or vice-versa as the case may
be, then termination of this Agreement and any rights
hereunder shall be limited to those rights granted by Aurora
under this Agreement that pertain to (i) or (ii), as the case
may be, that pertain to such breach but not the rights and
obligations of the parties under (i) or (ii), as the case may
be, that do not pertain to such breach.
12.3.3 In the event that the breach by BMS involves a milestone
payment or royalty payment under any of sections 3.1.8 or 3.2 hereof,
Aurora shall not be entitled to terminate this Agreement or any rights
licensed or sublicensed to BMS hereunder with
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respect thereto pursuant to section 12.3.2.2 or otherwise, but shall
be entitled to exercise any and all other rights that it may exercise
under article 12.3.2.1.
12.4 Effect of Bankruptcy. If a party becomes insolvent or admits
in writing its inability to pay its debts as they mature or applies for or
consents to the appointment of a receiver or trustee for any of its properties;
or a receiver or trustee is appointed for such party or a substantial portion
of its properties and is not discharged within ninety (90) days; or any
bankruptcy, reorganization, debt arrangement, dissolution, liquidation or other
proceeding under any bankruptcy or insolvency law is instituted by or against
such party and, if instituted against such party, it is consented to by such
party or remains undismissed for ninety (90) days, then
12.4.1 Notwithstanding any such event, such party shall remain
obligated to fulfill its obligations and covenants hereunder, and any
failure to do so or other breach hereunder shall entitle the other
party to terminate this Agreement in accordance with section 12.3
hereof; and
12.4.2 It is the parties desire that, if any such receiver, trustee,
judge, arbitrator or other adjudicator conducting or controlling such
proceedings on behalf of a party should hold that any obligations,
covenants or duties of such party hereunder should be suspended or
declared unenforceable, in whole or in part, then the rights and
benefits granted to the other party hereunder shall remain in full
force and effect, and that any such obligations, covenants or duties
shall be reformed by such receiver, trustee, judge, arbitrator or
other adjudicator so as to be enforceable to the maximum extent
permitted by applicable law and to permit any suspension to be lifted
at the earliest practicable time.
12.5 Effect of Expiration or Termination.
12.5.1 Expiration or termination of this Agreement shall not relieve
the parties of any obligation accruing prior to such expiration or
termination. The obligations and rights of the parties under sections
and articles 2.1.7, 2.1.8, 2.1.12.2, 3.1.7, 3.2.5, 3.3, 3.4, 5.2, 6.4,
7, 8, 9.1, 9.2, 9.3, 10, 11.3, 11.4, 12.5.2, 12.5.3, 13. and 14
hereof, as well as any provisions, which, by their intent or meaning
are intended to so survive, shall survive termination or expiration of
this Agreement. Except as otherwise expressly provided in this
Agreement, the rights and obligations of the parties under sections
5.1 and 5.3 hereof shall terminate and be of no further force or
effect whatsoever upon any termination of this Agreement.
12.5.2 Nothing in this Agreement (including this article 12) is
intended to prevent or restrict, or shall be construed as preventing
or restricting, BMS and its Affiliates from using, following any
termination of this Agreement pursuant to this Article 12, for any
internal research and drug development purpose (i) any Reporters or
other reagents supplied to BMS by Aurora prior to the applicable
termination date or (ii) any Aurora Technology disclosed to it by
Aurora prior to the applicable termination date where the manufacture
or use of such Technology is not covered by a Valid Claim under the
Aurora Patent Rights or by any Aurora Copyrights. It is further
understood that nothing in this
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section 12.5.2 alters any confidentiality obligations of the parties
under this Agreement with respect to disclosure to Third Parties.
12.5.3 Nothing in this Agreement is intended to prevent or restrict,
or shall be construed as preventing or restricting, BMS and its
Affiliates from researching, developing, making, using or selling any
compound, drug or other product for the prevention, diagnosis or
treatment of diseases and disorders following any termination of this
Agreement, where the research, development, manufacture, use or sale
of such compound, drug or other product is not covered by a Valid
Claim under the Aurora Patent Rights and/or restricted by section
2.1.7.5 hereof.
13.0 DISPUTE RESOLUTION
13.1 Disputes. The parties recognize that disputes as to certain
matters may from time to time arise during the term of this Agreement which
relate to either party's rights and/or obligations hereunder or thereunder. It
is the objective of the parties to establish procedures to facilitate the
resolution of disputes arising under or in connection with this Agreement,
including without limitation all financial disputes and any disputes as to the
validity, construction, performance, default, or breach hereof, in an expedient
manner by mutual cooperation and without resort to litigation. To accomplish
this objective, but subject to section 13.2.3 below, the parties agree to
follow the procedures set forth in this Article 13 if and when such disputes
arise under or in connection with this Agreement between the parties.
13.2 Dispute Resolution Procedures.
13.2.1 If the parties cannot resolve the dispute within 30 days of
formal request by either party to the other, any party may, by written
notice to the other, have such dispute referred to their respective
officers designated below or their successors, for attempted
resolution by good faith negotiations within 30 days after such notice
is received. Said designated officers are as follows:
For BMS: President of the BMS Pharmaceutical Research Institute
For Aurora: President
13.2.2 Any such dispute arising out of or relating to this Agreement
which is not resolved between the parties or the designated officers
of the parties pursuant to section 13.2.1 shall be resolved by final
and binding arbitration conducted in Wilmington, Delaware under the
then current Licensing Agreement Arbitration Rules of the American
Arbitration Association ("AAA"). The arbitration shall be conducted
by one arbitrator who is knowledgeable in the subject matter which is
at issue in the dispute and who is selected by mutual agreement of the
parties or, failing such agreement, shall be selected according to the
AAA rules. In conducting the arbitration, the arbitrator shall
determine what discovery will be permitted, consistent with the goal
of limiting the cost and time which the parties must expend for
discovery (and provided that the arbitrators shall
57
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permit such discovery he/she/they deem necessary to permit an
equitable resolution of the dispute), and shall be able to decree any
and all relief of an equitable nature, including but not limited to
such relief as a temporary restraining order, a preliminary
injunction, a permanent injunction, or replevin of property. The
arbitrator shall also be able to award actual, general or
consequential damages, but shall not award any other form of damage
(e.g., punitive or exemplary damages). The parties shall share
equally the arbitrator's fees and expenses pending the resolution of
the arbitration unless the arbitrator, pursuant to its right but not
its obligations, requires the non-prevailing party to bear all or any
portion of the costs of the prevailing party. The decision of the
arbitrator shall be final and may be sued on or enforced by the party
in whose favor it runs in any court of competent jurisdiction at the
option of such party.
13.2.3 Notwithstanding anything to the contrary in this Article 13,
either party may seek immediate injunctive or other interim relief
from any court of competent jurisdiction with respect to any breach of
articles 5 or 9 hereof, or otherwise to enforce and protect the patent
rights, copyrights, trademarks, or other intellectual property rights
owned or controlled by a party or its Affiliates.
14.0 MISCELLANEOUS
14.1 Assignment. Notwithstanding any provision of this Agreement
to the contrary, either party may assign any of its rights or obligations under
this Agreement in any country to any Affiliates; provided, however, that such
assignment shall not relieve the assigning party of its responsibilities for
performance of its obligations under this Agreement.
Subject to section 9.4, either party may also assign its rights or
obligations under this Agreement in connection with the sale of all or
substantially all of its assets, or may otherwise assign its rights or
obligations under this Agreement with the prior written consent of the other
party. Subject to Section 9.4, this Agreement shall survive any merger or
consolidation of either party with or into another party and no consent for any
such merger, consolidation or similar reorganization shall be required
hereunder; provided, that in the event of such merger, consolidation or similar
reorganization or in the event of a sale of substantially all of the assets of
a party, no intellectual property rights of the acquiring or merging
corporation shall be included in the technology licensed hereunder.
14.2 Binding Effect. This Agreement shall be binding upon and
inure to the benefit of the successors and permitted assigns of the parties.
Any assignment not in accordance with this Agreement shall be void.
14.3 Force Majeure. Subject to section 2.1.4 or as otherwise
expressly provided in a section hereunder, neither party shall lose any rights
hereunder or be liable to the other party for damages or losses on account of
failure of performance by the defaulting party if the failure is occasioned by
war, fire, explosion, flood, strike, lockout, embargo, act of God, or any other
similar cause beyond the control of the defaulting party, provided that the
party claiming force majeure has exerted all reasonable efforts to avoid or
remedy such force majeure and thereafter
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takes all reasonable steps to mitigate any such delay in performance hereunder
and any damages that may be incurred by the other party thereby.
14.4 Notices. Any notices or communications provided for in this
Agreement to be made by either of the parties to the other shall be in writing,
in English, and shall be made by prepaid air mail with return receipt addressed
to the other at its address set forth below. Any such notice or communication
may also be given by hand, or facsimile to the appropriate designation.
Notices shall be sent:
If to BMS, to: Bristol-Myers Squibb Pharmaceutical
Research Institute
P.O. Box 4000
Route 206 & Province Line Road
Princeton, NJ 08543-4000
Attention: Senior Vice President, Exploratory
Research & Drug Discovery
If to Aurora, to: Aurora Biosciences Corporation
11149 No. Torrey Pines Road
La Jolla, CA 92037
Attention: President
provided that if such notice or communication relates to an amendment
to this Agreement or to any notice pursuant to section 12 hereof, a
copy shall also be sent to:
If to BMS, to the attention of the Vice President & Senior
Counsel, Pharmaceutical Research Institute and Worldwide
Strategic Business Planning, at the address set forth above
for BMS.
If to Aurora, to the attention of ___________________________
Either party may by like notice specify or change an address to which
notices and communications shall thereafter be sent. Notices sent by mail,
facsimile or cable shall be effective upon receipt and notices given by hand
shall be effective when delivered.
14.5 Governing Law. This Agreement shall be governed by the laws
of the State of Delaware, as such laws are applied to contracts entered into
and to be performed within such state.
14.6 Waiver. Except as specifically provided for herein, the
waiver from time to time by either of the parties of any of their rights or
their failure to exercise any remedy shall not operate or be construed as a
continuing waiver of same or of any other of such party's rights or remedies
provided in this Agreement.
14.7 Severability. If any term, covenant or condition of this
Agreement or the application thereof to any party or circumstance shall, to any
extent, be held to be invalid or
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unenforceable, then the remainder of this Agreement, or the application of such
term, covenant or condition to parties or circumstances other than those as to
which it is held invalid or unenforceable, shall not be affected thereby and
each term, covenant or condition of this Agreement shall be valid and be
enforced to the fullest extent permitted by law; and the parties hereto
covenant and agree to renegotiate any such term, covenant or application
thereof in good faith in order to provide a reasonably acceptable alternative
to the term, covenant or condition of this Agreement or the application thereof
that is invalid or unenforceable, it being the intent of the parties that the
basic purposes of this Agreement are to be effectuated.
14.8 Independent Contractors. It is expressly agreed that Aurora
and BMS shall be independent contractors and that the relationship between the
two parties shall not constitute a partnership, joint venture relationship, or
agency of any kind. Neither Aurora nor BMS shall have the authority to make
any statements, representations or commitments of any kind, or to take any
action, which shall be binding on the other, without the prior written
authorization of the party to do so.
14.9 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.
14.10 Entire Agreement. This Agreement between the parties of even
date herewith set forth all of the covenants, promises, agreements, warranties,
representations, conditions and understandings between the parties hereto, and
supersede and terminate all prior agreements and understanding between the
parties, with respect to the subject matter hereof. There are no covenants,
promises, agreements, warranties, representations conditions or understandings,
either oral or written, between the parties other than as set forth herein and
therein. No subsequent alteration, amendment, change or addition to this
Agreement shall be binding upon the parties hereto unless reduced to writing
and signed by the respective authorized officers of the parties. This
Agreement shall not be strictly construed against either party hereto. Any
conflict between the terms set forth in the text of this Agreement and the
terms of any Exhibit hereto shall be resolved in favor of the text of this
Agreement.
14.11 No Third Party Beneficiaries. No third party including any
employee of any party to this Agreement, shall have or acquire any rights by
reason of this Agreement.
14.12 Construction. References to Articles or Sections hereunder
shall be deemed to include the sections and subsections thereunder. The use of
the word "including" shall be deemed to mean "including but not limited to".
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their duly authorized representatives.
BRISTOL-MYERS SQUIBB AURORA BIOSCIENCES
PHARMACEUTICAL RESEARCH CORPORATION
60
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INSTITUTE
By: By:
------------------------------- ------------------------------------
Title: Title:
---------------------------- ---------------------------------
Date: November ___, 1996 Date: November ___, 1996
----------------------------- ----------------------------------
61
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LIST OF EXHIBITS
Exhibit 1.1 - UHTSS Description and Specifications
Exhibit 1.2 - Description of Existing Reporters
Exhibit 3.1.1 - Terms and Conditions Pertaining to Use of BMS
Materials in the Development of ESP Screens
Exhibit 4.1 - Service and Support
Exhibit 7.2.4 - ***
Exhibit 11.2.1 - List of Aurora Patent Rights and ***
Exhibit 11.2.6 - List of Material Third Party Licensor Agreements
*** CONFIDENTIAL TREATMENT REQUESTED
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<PAGE> 66
EXHIBIT 1.1
* * *
PROPOSED PERFORMANCE SPECIFICATIONS
*** CONFIDENTIAL TREATMENT REQUESTED
<PAGE> 67
Exhibit 1.2
DESCRIPTION OF EXISTING REPORTERS
***
***CONFIDENTIAL TREATMENT REQUESTED
<PAGE> 68
***
***CONFIDENTIAL TREATMENT REQUESTED
<PAGE> 69
***
*** CONFIDENTIAL TREATMENT REQUESTED
<PAGE> 70
***
*** CONFIDENTIAL TREATMENT REQUESTED
<PAGE> 71
***
***CONFIDENTIAL TREATMENT REQUESTED
<PAGE> 72
***
***CONFIDENTIAL TREATMENT REQUESTED
<PAGE> 73
EXHIBIT 7.2.4
***
*** CONFIDENTIAL TREATMENT REQUESTED
<PAGE> 74
EXHIBIT 11.2.1
***
*** CONFIDENTIAL TREATMENT REQUESTED
<PAGE> 75
EXHIBIT 11.2.6
***
*** CONFIDENTIAL TREATMENT REQUESTED
<PAGE> 1
Certain confidential portions of this Exhibit were omitted by means of blackout
of the text (the "Mark"). This Exhibit has been filed separately with the
Secretary of the Commission without the Mark pursuant to the Company's
Application Requesting Confidential Treatment under Rule 406 under the
Securities Act.
EXHIBIT 10.23
COLLABORATIVE RESEARCH AND LICENSE AGREEMENT
BETWEEN
ELI LILLY AND COMPANY
AND
AURORA BIOSCIENCES CORPORATION
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
1. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2. LILLYUHTSS DEVELOPMENT AND DELIVERY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
2.1. LILLYUHTSS Development. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
3. COLLABORATIVE SCREENING PROGRAMS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
3.1. Collaborative Screening Program . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
3.2. Lilly Screening Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
3.3. Ownership of Data. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
3.4. Development of Products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
3.5. Laboratory Facilities and Personnel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
4. SERVICE AND SUPPORT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
4.1. Service and Support . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
5. INTELLECTUAL PROPERTY RIGHTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
5.1. Grant of Rights from Aurora to Lilly . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
5.2. Grant of Rights from Lilly to Aurora. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
5.3. Ownership of Intellectual Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
6. PAYMENTS OF ROYALTIES, ACCOUNTING FOR ROYALTIES, AND RECORDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
6.1. Payment and Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
6.2. Payment Dates. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
6.3. Accounting. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
6.4. Records. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
7. INTELLECTUAL PROPERTY ENFORCEMENT AND DEFENSE OF INFRINGEMENT CLAIMS . . . . . . . . . . . . . . . . . . . . . . . . . . 34
7.1. Intellectual Property Enforcement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
7.2. Defense of Infringement Claims Pertaining to Lilly Hits, Approved PTAC Compounds, and Covered Products. . . . . . . 34
7.3. Defense of Infringement Claims Pertaining to Aurora Technology and Aurora Patent Rights . . . . . . . . . . . . . . 35
8. TREATMENT OF CONFIDENTIAL INFORMATION; PUBLICITY, AND CHANGE OF CONTROL . . . . . . . . . . . . . . . . . . . . . . . . 35
</TABLE>
2
<PAGE> 3
<TABLE>
<S> <C>
8.1. Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
8.2. Publication of Results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
8.3. Publicity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
9. PATENT PROSECUTION AND COPYRIGHTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
9.1. Patents. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
9.2. Copyrights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
</TABLE>
TABLE OF CONTENTS, CONTINUED
<TABLE>
<S> <C>
10. WARRANTIES AND INDEMNIFICATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
10.1. Mutual Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
10.2. Warranties and Aurora Technology. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
10.3. Aurora Indemnification. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
10.4. Warranties and Lilly Technology. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
10.5. Lilly Indemnification. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
11. TERM, PARTIAL PERFORMANCE AND TERMINATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
11.1. Term. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
11.2. Termination By Mutual Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
11.3. Termination Without Cause by Lilly. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
11.4. Partial Performance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
11.5. Termination for Cause. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
11.6. Effect of Bankruptcy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
11.7. Effect of Expiration or Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
12. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
12.1. Assignment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
12.2. Binding Effect. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
12.3. Force Majeure. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
12.4. Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
12.5. Governing Law and Jurisdiction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
12.6. Waiver. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
12.7. Severability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
12.8. Independent Contractors. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
12.9. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
12.10. Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
12.11. No Third Party Beneficiaries. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
12.12. Construction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
12.13. Dispute Resolution. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
</TABLE>
3
<PAGE> 4
4
<PAGE> 5
COLLABORATIVE RESEARCH AND LICENSE AGREEMENT
THIS AGREEMENT is entered into as of the Effective Date (as defined below) by
and between ELI LILLY AND COMPANY, an Indiana corporation, having offices at
Lilly Corporate Center, Indianapolis, Indiana 46285 ("Lilly"), and between
AURORA BIOSCIENCES CORPORATION, a Delaware corporation having offices at 11149
North Torrey Pines Road, La Jolla, California 92037 ("Aurora").
RECITALS
WHEREAS, Aurora has expertise in the development of automated ultra-high
throughput screening systems and screening biologies/chemistries used therein;
and
WHEREAS, Aurora has the scientific expertise and capacity to undertake the
alliance activities described below; and
WHEREAS, Lilly has the capability to undertake screening and development of
drug products for the prevention, treatment and diagnosis of diseases and
disorders.
NOW, THEREFORE, in consideration of the foregoing premises and of the
covenants, representations and agreements set forth below, the parties agree as
follows:
1. DEFINITIONS
As used herein, the following terms shall have the following meanings:
"Activity" means a ***.
"Affiliate" means, with respect to any Person, any other Person which directly
or indirectly controls, is controlled by, or is under common control with, such
Person. A Person shall be regarded as in control of another Person if
it/he/she owns, or directly or indirectly controls, more than fifty percent
(50%) of the voting securities (or comparable equity interests) or other
ownership interests of the other Person, or if it/he/she directly or indirectly
possesses the power to direct or cause the direction of the management or
policies of the other Person, whether through the ownership of voting
securities, by contract or any other means whatsoever.
"Agreement" means this agreement, together with all appendices, exhibits and
schedules hereto, and as the same may be amended or supplemented from time to
time hereafter by a written agreement duly executed by authorized
representatives of each party hereto.
*** CONFIDENTIAL TREATMENT REQUESTED
5
<PAGE> 6
"Approved PTAC Compound" means a ***
"Aurora Copyrights" means all copyrights throughout ***
"Aurora Patent Rights" means the Aurora Reporter System Patent Rights and the
Aurora UHTSS Patent Rights.
"Aurora Reporter" means *** The Aurora Reporters available as of the
Effective Date are described on Exhibit 1.2 attached hereto.
"Aurora Reporter System Technology" means all Technology owned or Controlled by
Aurora or its Affiliates that relates to the Aurora Reporter Systems.
"Aurora Reporter System Patent Rights" means all Patent Rights owned or
Controlled by Aurora or its Affiliates which relate to the Aurora Reporter
Systems.
"Aurora Technology" means the Aurora Reporter System Technology and the Aurora
UHTSS Technology.
"Aurora UHTSS Patent Rights" means all Patent Rights ***
"Aurora UHTSS Technology" means all Technology ***
"Collaborative Screening Program" and "Collaborative Screen" shall have the
meanings set forth in Section 3.1.
"Completion" or "Completed" has the meaning set forth in Section 2.1.3.
***CONFIDENTIAL TREATMENT REQUESTED
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"Confidential Information" means all information, compounds, data, and
materials received by either party from the other party pursuant to this
Agreement and all information, compounds, data, and materials developed in the
course of the collaboration, including, without limitation, Technology of each
party, subject to the exceptions set forth in Sections 8.1.
"Control" or "Controlled" means possession by a party or its Affiliates of the
ability to grant a license or sublicense in accordance with the terms of this
Agreement, and without violating the terms of any agreement by such party with
any Third Party.
"Covered Product" means ***
"CSP Steering Committee" shall have the meaning set forth in Section 3.1.1.
"Deliverables" has the meaning set forth in Section 2.1.2.1 hereof.
"Derivative" means ***
"Development Phases" has the meaning set forth in Section 2.1.2.1 hereof.
"Effective Date" means the date that this Agreement is executed by the last
party to so execute.
"FDA" shall mean the United States Food and Drug Administration, or any
successor agency having regulatory jurisdiction over the manufacture,
distribution and sale of drugs in the United States and equivalent in any other
jurisdiction.
"First Commercial Sale" of a Covered Product shall mean the first commercial
sale for use or consumption of such Covered Product in a country after required
marketing and, if applicable, pricing approval has been granted by the
applicable regulatory authority(ies) of such country.
"Hit" means *** ;
***
***CONFIDENTIAL TREATMENT REQUESTED
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***
"IND" means an Investigational New Drug application filed with and accepted by
the FDA and any corresponding application filed in any country other than the
United States.
"Internal Research" means any ***
"Invention" means any new and useful process, machine, manufacture, or
composition of matter, or improvement thereto, whether or not patentable.
"Know-How" means information and data which is not generally known to the
public, comprising: Inventions, designs, concepts, algorithms, formulae,
software, supplies, techniques, practices, processes, methods, knowledge,
skill, experience, expertise and technical information.
"Lilly Patent Rights" means Patent Rights owned or Controlled by Lilly and
relating to the Collaborative Screening Program or Aurora Reporter Systems.
"Lilly Screening Program," "LSP" or "Lilly Screen" have the meanings set forth
in Section 3.2 hereof.
"Lilly Technology" means Technology owned or Controlled by Lilly and relating
to the Collaborative Screening Program.
"Lilly Test Materials" means ***
"LILLYUHTSS" means the ***
*** CONFIDENTIAL TREATMENT REQUESTED
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***
"LILLYUHTSS Steering Committee" shall have the meaning set forth in Section
2.1.1.
"LILLYUHTSS Target Delivery Date" has the meaning set forth in Section 2.1.2.1
hereof.
Manufacturing Cost" ***
"Materials" means any reagents, probes, genetic sequences, promoters,
enhancers, probes, linkage probes, vectors, plasmids, proteins and fragments
thereof, peptides, biological modifiers, antigens, antibodies, antagonists,
agonists, inhibitors, chemicals, and compounds.
"Module One" has the meaning set forth in Section 2.1.2.1 (i) hereof.
"Module Two" has the meaning set forth in Section 2.1.2.1 (ii) hereof.
"Module Three" has the meaning set forth in Section 2.1.2.1 (iii) hereof.
"NDA" means a New Drug Application or Product License Application, as
appropriate, and all supplements pursuant to the requirements of the FDA,
including all documents, data and other information concerning Covered Products
which are necessary for full FDA approval to market a Covered Product, or the
equivalent in any other country.
"Net Sales" shall mean, with respect to Covered Product(s), *** ***
*** CONFIDENTIAL TREATMENT REQUESTED
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***
***
Such amounts shall be determined from the books and records of Lilly maintained
in accordance with generally accepted accounting principles ("GAAP")
consistently applied.
***
"Patent Rights" means all U.S. or foreign (including regional authorities such
as the European Patent Office) regular or provisional patent applications,
including any continuation, continuation-in-part, or division thereof or any
substitute application therefor or equivalent thereof, and any patent issuing
thereon, including any reissue, reexamination or extension thereof and any
confirmation patent or registration patent or patent of additions based on any
such patent, containing one or more claims to an Invention (and in the case of
an issued patent, containing one or more Valid Claims), and which a party
hereto owns or Controls, individually or jointly, any title thereto or rights
thereunder.
"Person" shall mean an individual, corporation, partnership, limited liability
company, trust, business trust, association, joint stock company, joint
venture, pool, syndicate, sole
*** CONFIDENTIAL TREATMENT REQUESTED
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proprietorship, unincorporated organization, governmental authority, or any
other form of entity not specifically listed herein.
"Phase III Clinical Trial" means that portion of a clinical development program
which provides for the trial of an Approved PTAC Compound on sufficient numbers
of patients and which is designed to establish the safety and efficacy of such
a product in order to support an NDA.
"PTAC" means *** or its equivalent.
"Product" means any ***
"Royalty Term" means ***
"Specifications" of the LILLYUHTSS shall have the meaning set forth in Section
2.1 hereof.
"Technology" means Materials and Know-How.
"Term" means the period beginning on the Effective Date and terminating in
accordance with this Agreement, as in Section 11.
"Territory" means all countries of the world.
"Third Party" means any entity other than (i) Aurora and any of its Affiliates,
and (ii) Lilly and any of its Affiliates.
"Valid Claim" means: (a) an issued claim under an issued patent within the
Patent Rights, which has not (i) expired or been canceled, (ii) been declared
invalid by an unreversed and unappealable decision of a court or other
appropriate body of competent jurisdiction, (iii) been admitted to be invalid
or unenforceable through reissue, disclaimer or otherwise, and/or (iv) been
abandoned; or (b) a claim included in a pending patent application within the
Patent Rights that is being actively prosecuted in accordance with this
Agreement and which has not been (v) canceled, (vi) withdrawn from
consideration, (vii) finally determined to be unallowable by the applicable
governmental authority for whatever reason (and from which no appeal is or can
be taken), and/or (viii) abandoned.
*** CONFIDENTIAL TREATMENT REQUESTED
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"Validation" has the meaning set forth in Section 2.1.3.
2. LILLYUHTSS DEVELOPMENT AND DELIVERY
2.1. LILLYUHTSS Development.
Aurora will be responsible for the design, development, manufacture,
supply, delivery and installation of the LILLYUHTSS, and will use its
best efforts to complete same within the time frames for each
Development Phase set forth below. The Specifications for the
Deliverables to be provided by Aurora, as customized for Lilly, are
set forth in Exhibit 1.1 hereto ("Specifications").
12
<PAGE> 13
2.1.1. Project Management.
The parties shall establish a committee that will use
reasonable efforts to coordinate the development, training,
completion, and validation of the LILLYUHTSS (the "LILLYUHTSS
Steering Committee"). The LILLYUHTSS Steering Committee will
be established not later than thirty (30) days after the
Effective Date. The LILLYUHTSS Steering Committee shall
consist of three (3) representatives designated by Lilly and
three (3) representatives designated by Aurora. Each
representative will have one vote and each party will have
exactly three votes. The LILLYUHTSS Steering Committee will
meet at least three times per year at mutually agreed upon
times and locations using mutually agreed upon meeting
formats, including tele- and video- conferencing.
A material change in the Specifications will be approved by
simple majority vote of the LILLYUHTSS Steering Committee. In
the event of a deadlock by the LILLYUHTSS Steering Committee
on the approval of a material change in the Specifications
proposed by Lilly, Aurora shall have the right to approve such
material change to the Specifications. In the event of a
deadlock by the LILLYUHTSS Steering Committee on the approval
of a material change in the Specifications proposed by Aurora,
Lilly shall have the right to approve such material change to
the Specifications. The Validation or Completion of the
LILLYUHTSS will be approved by simple majority vote of the
LILLYUHTSS Steering Committee. In the event of a deadlock by
the LILLYUHTSS Steering Committee of the approval of the
Validation or Completion of the LILLYUHTSS, Lilly's Vice
President of Research Technologies and Proteins and Aurora's
president will meet in person or by video-conferencing to
resolve the approval of the Validation or Completion of the
LILLYUHTSS.
Aurora shall also submit progress reports to the LILLYUHTSS
Steering Committee at such time(s) as Lilly may reasonably
request, but in any event will provide a written update of its
work on the development of the LILLYUHTSS (including
discussion of any significant problems encountered and
significant changes in strategy or design) every six (6)
months.
From time to time during the term of this Agreement, Lilly
representatives shall have the right, upon reasonable advance
written notice to Aurora, to
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<PAGE> 14
visit the facilities where the LILLYUHTSS development is being performed.
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<PAGE> 15
2.1.2. Development Phases; Delivery.
2.1.2.1. Development Phases.
Aurora will design and develop the LILLYUHTSS in
accordance with the following development phases
("Development Phases"), as more fully described in
Exhibit 1.1 hereto. Aurora will develop and install
the deliverables for the LILLYUHTSS ("Deliverables")
contemplated by each such Development Phase (all such
Deliverables for a Development Phase comprising a
"Module") not later than the dates set forth below
(each such date referred to as a "LILLYUHTSS Target
Delivery Date"):
i) Module One - Automated Storage and Retrieval
- ***; and
ii) Module Two - Liquid handling, Screening
Formats, Detection and Screen Development
Stage - ***; and
iii) Module Three - Informatics and Integration
("Module Three"), and Installation of a Fully
Operational, Complete LILLYUHTSS System - ***
2.1.2.2. Shipment, and Installation.
Aurora shall be responsible for the appropriate
packaging of all Deliverables to be delivered to
Lilly. Lilly will be responsible for associated
delivery charges. Aurora will be responsible for
installing all Deliverables, unless otherwise
mutually agreed to in writing. Aurora will begin
such installation within 15 working days of delivery
to Lilly and will use its best efforts to complete
the same as promptly as possible thereafter and Lilly
will use best efforts to prepare in advance for such
installation and to facilitate such installation
after delivery.
*** CONFIDENTIAL TREATMENT REQUESTED
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<PAGE> 16
2.1.3. Validation and Completion Testing.
All Deliverables shall be subject to testing by or for Aurora
prior to delivery to Lilly. When all Deliverables for a
Module have successfully conformed to or satisfied the
Specifications for such Deliverables ("Validation") in
Exhibits 1.1 hereto, or as the same may be amended or
supplemented in writing by mutual agreement of the parties
from time to time hereafter, Aurora shall give Lilly written
notice.
Upon installation by Aurora of all Deliverables for a
particular Development Phase at Lilly, additional testing
shall commence by Aurora and Lilly and shall continue for such
period of time as may be reasonably required to verify in the
opinion of the LILLYUHTSS Steering Committee whether all such
Deliverables meet the Specifications for such Deliverables
("Completion") in Exhibits 1.1 hereto, or as the same may be
amended or supplemented in writing by the parties from time to
time hereafter therefor. Upon Completion of all Deliverables
for a Module at Lilly, Aurora shall give Lilly written notice
thereof, in which event Lilly shall become obligated to pay
such amounts provided in Section 2.1.4. Upon the payment by
Lilly of such amounts, Lilly will take ownership the
associated Deliverable.
2.1.4. Payments Relating to Development of the LILLYUHTSS.
Lilly will make the following payments to Aurora in
consideration of the design, development, delivery,
manufacture, support, Validation and Completion of the
LILLYUHTSS and its modules:
2.1.4.1. A payment *** shall be made within fifteen
(15) business days after the Effective Date
in consideration for the design and
development of the LILLYUHTSS by Aurora
hereunder.
2.1.4.2. Module One: A *** shall be made within
thirty (30) days following Completion of
all Deliverables required by Section
2.1.2.1 (i).
*** CONFIDENTIAL TREATMENT REQUESTED
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<PAGE> 17
2.1.4.3. Module Two: *** shall be made within
thirty (30) days following Completion of
all Deliverables required by Section
2.1.2.1 (ii).
2.1.4.4. Module Three: *** *** shall be within
thirty (30) days following Completion of
all Deliverables required by Section
2.1.2.1 (iii).
2.1.4.5. Ongoing payments of *** shall be made for
the design and development of the
LILLYUHTSS, the first payment to be made on
or before January 15, April 15, July 15 or
October 15 occurring after the Effective
Date and then every three months
thereafter, which payments shall cease upon
the first to occur of *** provided,
however, that if ***
2.1.4.6. In addition to any payments to be made
under Sections 2.1.4.1-2.1.4.5, the
following payments shall be made depending
upon the date of Completion of Module
Three of the LILLYUHTSS pursuant to
Section 2.1.3:
2.1.4.6.1. ***
***CONFIDENTIAL TREATMENT REQUESTED
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<PAGE> 18
2.1.4.6.2. ***
2.1.4.6.3. ***
2.1.5. Penalty for Late Completion of LILLYUHTSS.
If Completion of the LILLYUHTSS under Section 2.1.2.1 (iii)
occurs more than *** following the Effective Date, then as
penalty therefor, Aurora will pay to Lilly *** for ***
following the date that is *** after the Effective Date until
such Completion occurs (if at all); provided, that such
payments shall not in any case exceed *** .
***
***CONFIDENTIAL TREATMENT REQUESTED
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<PAGE> 19
***
2.1.6.2. Syndicate Formation and Limitations.
It is understood that Aurora is seeking to
collaborate with, and supply to, and grant certain
license rights to Third Parties with respect to the
use and supply of a system similar to the LILLYUHTSS
to such Third Party. Notwithstanding the foregoing,
Aurora covenants and agrees that, so long as Lilly is
not in default of any payment obligation hereunder
and has not
***CONFIDENTIAL TREATMENT REQUESTED
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<PAGE> 20
terminated its participation in the development of the
LILLYUHTSS, then, until the date that is *** following the
date of Completion by Aurora of the fully operational
LILLYUHTSS pursuant to Section 2.1.3, Aurora will not, without
Lilly's prior written consent, provide more than *** Parties
with license rights to the Aurora UHTSS Patent Rights or Aurora
Copyrights or Aurora UHTSS Technology to use any ultra-high
throughput screening system made by Aurora that is similar to
the LILLYUHTSS and the right to purchase such ultra-high
throughput screening system.
2.1.7. Supply of Reporters.
Aurora shall deliver all of the Aurora Reporters listed in
Exhibit 1.2 to Lilly within *** of the Effective Date. So long
as Lilly has made payments in accordance with Section 2.1.8
hereof, then, at Lilly's request, Aurora will use reasonable
efforts to supply within *** after receipt of a written
purchase order therefor, reagents/tools pertaining to the
Aurora Reporter Systems as Lilly may require in order to use
the Aurora Reporter Systems in a Lilly Screening Program
conducted by Lilly. Lilly will be charged for all supplies so
delivered *** . Lilly will pay for all supplies so ordered
within *** after delivery to Lilly.
2.1.8. Payments in Consideration of the Use of the Aurora
Reporter System Technology and Aurora Reporter
System Patent Rights.
Lilly's right to use Aurora Reporters requires that Lilly pay
to Aurora *** ). Half of *** will be made within ten (10)
business days of the Effective Date and the second half of ***
shall be made *** after the Effective Date. All other *** for
Aurora Reporters will be distributed as a ***
Three years after the Effective Date, Lilly may elect to renew
its yearly license for Aurora Reporters for an *** and for
consecutive one
***CONFIDENTIAL TREATMENT REQUESTED
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<PAGE> 21
year periods thereafter. Lilly will provide Aurora with sixty
(60) days written notice of Lilly's intent to renew or not renew
its yearly license. *** after the Effective Date, *** for
Aurora Reporters will be distributed as ***.
2.1.8.1. Option to Additional Aurora Reporters.
So long as Lilly satisfies its payment obligations
under Section 2.1.8 for Aurora Reporters, Aurora
agrees to negotiate in good faith with Lilly to use
additional reporters, which are not listed in Exhibit
1.2 and developed by Aurora, for Lilly's Internal
Research for terms comparable to those offered by
Aurora to a Third Party.
3. COLLABORATIVE SCREENING PROGRAMS
3.1. Collaborative Screening Program
The parties will collaborate in developing and validating
Collaborative Screens as part of a Collaborative Screening Program
(CSP), as follows:
3.1.1. Collaborative Screen Program Management.
Under the CSP, Lilly and Aurora will collaborate to develop
high throughput and/or ultra high throughput screens for
Lilly's use in accordance with this Agreement. Lilly shall
propose *** targets, one molecular target at a time, and
Aurora may, within thirty (30) days of such proposal, choose to
select such molecular target. Lilly shall continue to propose
molecular targets until Aurora has selected a total of ***
targets for screen development. The *** molecular targets
proposed by Lilly shall be targets that Lilly reasonably
believes to be amenable for the development of a high
throughput screen using Aurora Technology. The parties will
use reasonable efforts to select *** following the Effective
Date, and the remaining target *** after the Effective Date.
No later that thirty (30) days after the Effective Date, the
parties shall establish a CSP Steering Committee (the "CSP
Steering Committee"). The CSP Steering Committee shall
consist of three (3) representatives designated by Lilly and
three (3) representatives designated by Aurora.
***CONFIDENTIAL TREATMENT REQUESTED
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Each representative will have one vote and each party will
have exactly three votes. The CSP Steering Committee will
meet at least three times per year at mutually agreed upon
times and locations using mutually agreed upon meeting
formats, including tele- and video-conferencing.
The CSP Steering Committee will coordinate screen development
(including the formation and management of a CSP Work Plan for
each CSP Screen within thirty (30) days of Aurora choosing to
accept a Lilly proposed molecular target), and approve the
validation of each CSP screen. Each screen, together with all
of the reagents to be delivered by Aurora in connection
therewith, is referred to hereinafter as a "CSP Screen", which
shall be manufactured by Aurora and delivered to Lilly. The
validation of each CSP Screen at Aurora will be approved by a
simple majority vote of the CSP Steering Committee. In the
event of a deadlock by the CSP Steering Committee of the
approval of the validation of a CSP Screen, Lilly shall have
the right to approve the validation of the CSP Screen.
Promptly following mutual agreement on the selection of each
target, the CSP Steering Committee will jointly prepare an
"CSP Work Plan", which shall set forth the respective
responsibilities of the in the development of each CSP Screen,
and which must be approved by the CSP Steering Committee.
Each such CSP Work Plan will contain, where applicable, a
description of the tasks to be performed by each party,
location, the specific deliverables and documentation to be
produced by Aurora, validation criteria for each CSP Screen, a
schedule of performance, fees (as determined in accordance
with this Section 3.1.1), a schedule of payments, and any
other relevant work specifications.
Promptly following the approval of each CSP Work Plan, the
parties will commence their respective duties under the CSP
Work Plan for the development of the applicable CSP Screen.
All work under a CSP Work Plan shall be performed in
accordance with the provisions of this Agreement, and each
party will use reasonable efforts to complete its obligations
under the CSP Work Plan as expeditiously as practicable.
In developing each CSP Work Plan, the CSP Steering Committee
will determine and agree upon the fee to be paid by Lilly to
Aurora for development, manufacture and delivery of an CSP
Screen to Lilly for the target in question. The parties
understand and agree that the exact fee per target will be
determined as the sum of the following: ***
***CONFIDENTIAL TREATMENT REQUESTED
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<PAGE> 23
*** In the event of a deadlock by the CSP Steering Committee
of the approval of the CSP Work Plan, Lilly shall have the
right to approve the validation of the CSP Screen.
Alternatively, Aurora may elect to accept to undertake the
development of such CSP Screen for *** . The *** (i) shall be
reimbursed to Aurora by Lilly monthly in arrears *** an *** by
*** , and the *** shall be paid within thirty (30) days
following *** ***. If Aurora elects to undertake the CSP for
*** , such payment shall be paid within thirty (30) days
following the delivery of a validated Collaborative Screen as
per the CSP Work Plan.
If the expenses for an approved CSP Work Plan exceed the
amount approved for such CSP Screen, then a simple majority
vote of the CSP Steering Committee will approve additional
funds for such CSP Work Plan and require Lilly to provide the
same. If the CSP Steering Committee does not approve
additional funds in excess of the amount approved for such CSP
Screen for such CSP Work Plan, then Lilly will notify Aurora
in writing of one of the following options within ten (10)
days:
i) Lilly can elect to not pursue such
Collaborative Screen and Aurora can optionally a)
complete such Collaborative Screen and submit it for
validation to the CSP Steering Committee or b) Aurora
can abandon the Collaborative Screen, in either case
such Collaborative Screen will count as one of the
Collaborative Screens of the CSP,
ii) Lilly can elect to pursue such Collaborative
Screen as a Lilly Screen, provided, however that
Aurora can optionally a) continue to develop such
Collaborative Screen for no more than an additional
three months and submit it for validation to the CSP
Steering Committee or b) Aurora can abandon the
Collaborative
***CONFIDENTIAL TREATMENT REQUESTED
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<PAGE> 24
Screen (in all such cases under 3.1.1 (ii) such
Collaborative Screen will count as one of the
Collaborative Screens of the CSP), or
iii) Lilly can elect to complete such
Collaborative Screen, Aurora will transfer all
Materials developed by Aurora pursuant to the CSP
Work Plan for such Collaborative Screen, and upon
completion will then be submitted to the CSP Steering
Committee for validation, and such Collaborative
Screen will count as one of the Collaborative Screens
of the CSP.
If at any time during the Term a CSP Screen for whatever
reason loses its effectiveness or efficacy or is no longer
biologically active, Aurora will replace same as promptly as
practicable, in which event Lilly will reimburse Aurora for
*** .
3.1.2. Deployment of Screen by Lilly.
Lilly will use reasonable efforts to employ each such accepted
CSP Screen to screen Lilly Test Materials, using Lilly's then
current screening practices.
3.1.3. Additional Screens.
Subject to the same terms and conditions as are set forth in
this Section 3.1, Lilly may elect that the number of CSP
Screens on which Lilly and Aurora shall collaborate to develop
and deliver to Lilly be increased *** .
3.1.4. Rights in Lilly Compounds.
All right, title and interest in any Inventions relating in
any way to any Lilly compounds or any Lilly Test Materials and
which arise out of, or are conceived or reduced to practice as
a result of, the development or use of an CSP Screen by or for
Lilly shall be owned solely by Lilly.
***CONFIDENTIAL TREATMENT REQUESTED
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3.1.5. Payments to Aurora.
In addition to such payments as are made by Lilly to Aurora
pursuant to Section 3.1.1 hereof, the following payments shall
be made to Aurora with respect to the delivery and use of the
CSP Screens by Lilly:
3.1.5.1. Milestones.
Lilly will pay to Aurora:
3.1.5.1.1. ***
3.1.5.1.2. For each Approved PTAC Compound
identified in a CSP Screen that
achieves the following
milestones, Lilly will promptly
notify Aurora of same and will
pay the following amounts to
Aurora:
*** CONFIDIENTIAL TREATMENT REQUESTED
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<PAGE> 26
<TABLE>
<CAPTION>
Event Payment (US$)
----- ----------------
<S> <C>
*** ***
***
***
***
</TABLE>
provided, however, that for a given milestone, Lilly will only
make one such payment per CSP Screen. All payments
shall be paid to Aurora within thirty (30) days following such
notification from Lilly.
3.1.5.2. Royalties.
With respect to each Covered Product based on a
Collaborative Screen Lilly shall pay a royalty on Net
Sales of such Covered Product during the Royalty Term
for such Covered Product, as follows, the sum of the
worldwide Net Sales ***); provided, however, that
cumulative royalties paid for a Covered Product will
not exceed ***.
3.2. Lilly Screening Payments
As part of the rights licensed under Section 5.1.1 hereof, Lilly and
its Affiliates shall have a license and right to use the Aurora
Reporter System Technology and Aurora Reporter System Patent Rights
licensed to it under Section 5.1.1 hereof, and to use any Aurora
Reporters or other reagents/tools supplied to Lilly by Aurora pursuant
to Section 2.1.7, to develop, make and use in Internal Research
targeting any targets as Lilly in its discretion may select
(collectively, such activities referred to as the "Lilly Screening
Program" or "LSP", and any such screen, the manufacture or use of
which is covered by the Aurora Reporter System
*** CONFIDENTIAL TREATMENT REQUESTED
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<PAGE> 27
Technology and the Aurora Reporter System Patent Rights or in which
the Reporters supplied by Aurora are used, referred to as a "Lilly
Screen"). Lilly may further conduct any Internal Research,
development and commercialization thereafter of any Hits arising out
of any such LSP activities, or Derivatives of such Hits, as Lilly in
its discretion may elect to conduct. Subject to Section 3.2.3 below,
Lilly shall make milestone payments to Aurora with respect to such
Hits as arise out of any use of a Lilly Screen by Lilly or its
Affiliates, as follows:
3.2.1. Subject to Section 3.2.3, for *** , Lilly shall
promptly notify Aurora of such PTAC approval and
will pay Aurora *** . Payment shall be paid
to Aurora within thirty (30) days following such
notification from Lilly.
3.2.2. If an Approved PTAC Compound for which Lilly has made
a payment to Aurora under Section 3.2.1 reaches the
following milestones, Lilly will promptly notify
Aurora of same and will pay the following amounts to
Aurora:
<TABLE>
<CAPTION>
Event Payment (US$)
----- ----------------
<S> <C>
*** ***
***
***
</TABLE>
Payments shall be made to Aurora within sixty (60) days
following such notification from Lilly.
*** CONFIDENTIAL TREATMENT REQUESTED
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<PAGE> 28
3.2.2.1 Royalties.
With respect to each Covered Product based on a Hit
or Derivative identified through the use of any Lilly
Screen and where the development, manufacture, or use
the Lilly Screen is covered by a Valid Claim of the
patent application listed in Exhibit 5.2, Lilly shall
pay a royalty on Net Sales of such Covered Product
during the Royalty Term for such Covered Product, as
follows, ***
3.2.3.
If Lilly enters into an agreement with Aurora to
develop *** CSP Screens under Section 3.1 hereof,
then each such additional CSP Screen in excess of ***
shall reduce the number of Lilly Screens under this
Section 3.2 for which payments may need to be made
under Sections 3.2.1 above. For example, if Lilly
enters into CSP Work Plans for *** *** CSP Screens,
then the milestone payments under Section 3.2.1 shall
apply only to *** PTAC Approved Compounds
identified through the use of any Lilly Screen.
3.3. Ownership of Data.
All results and data solely with respect to any Hits and Approved PTAC
Compounds (and Derivatives of any of the foregoing made or obtained
by Lilly) generated by Lilly, its Affiliates and its and their
contractors arising out of the use by any of them of the LILLYUHTSS
and any CSP Screen or Lilly Screen, the use of any of the rights
licensed under Section 5 hereof, or otherwise arising out of this
Agreement shall be owned exclusively by Lilly and shall be treated as
Lilly Confidential Information hereunder.
3.4. Development of Products
Lilly will in its discretion determine which, if any, such Hit(s), or
Derivative(s) of Hit(s), will be approved as an Approved PTAC
Compound.
Lilly will be responsible for all pre-clinical and clinical
development, including all regulatory filings, of Hits and Approved
PTAC Compounds arising out of this Agreement. Lilly shall have
discretion and control over the conduct of, and all activities
associated with, the development or abandonment of any Approved
*** CONFIDENTIAL TREATMENT REQUESTED
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PTAC Compound, all regulatory activities relating to the manufacture,
use or sale of any Approved PTAC Compound or Product, and the
commercialization and marketing of any Product in any country. All
INDs, NDAs and other regulatory filings made or filed by Lilly for any
Approved PTAC Compound or Product shall be owned solely by Lilly.
Lilly will provide, at a minimum, written notification to Aurora once
every six (6) months on the development status of any Approved PTAC
Compound then in development arising out of any CSP Screening Program
or Lilly Screens that may be subject to milestones or royalties and
which shall be treated as Lilly Confidential Information hereunder.
Other than royalty reports required hereunder, no reports shall be
required of Lilly with respect to any activities connected with the
commercialization of any Covered Product approved for marketing in any
country.
3.5. Laboratory Facilities and Personnel
Aurora and Lilly shall each, at their respective cost and expense,
provide suitable and sufficient laboratory facilities and equipment,
and will devote sufficient, experienced personnel, as is needed to
carry out their respective obligations under this Agreement.
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4. SERVICE AND SUPPORT
4.1. Service and Support
For a period of twelve (12) months after Completion of a complete,
fully operational LILLYUHTSS pursuant to Section 2.1.3, Aurora will
provide, without additional charge to Lilly, service and support for
the applicable system and all system components, as such service and
support is more fully described on Exhibit 4.1 attached hereto
("Service and Support"). Aurora will be responsible for providing and
paying for this Service and Support, whether provided by Aurora itself
or through third party contractors (including those providing any
LILLYUHTSS components to Aurora). Aurora will designate an
appropriate Aurora employee to coordinate such Service and Support.
Following the applicable twelve (12) month period, Lilly may elect to
purchase Service and Support annually thereafter for such LILLYUHTSS
(or component thereof) for fee of *** . This purchased annual
Service and Support will be available to Lilly until *** pursuant to
Section 2.1.3, after which period Lilly and Aurora will negotiate in
good faith for further Service and Support.
5. INTELLECTUAL PROPERTY RIGHTS.
5.1. Grant of Rights from Aurora to Lilly
*** CONFIDENTIAL TREATMENT REQUESTED
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5.1.1. Aurora grants to Lilly *** to (i) develop, use and
make Collaborative Screens with Aurora Reporters for
Internal Research, and (ii) develop, use and make
Lilly Screens with Aurora Reporters for Internal
Research, and (iii) use the LILLYUHTSS for Internal
Research. The grant of rights *** does not include
the right to sublicense. The rights granted
hereunder shall be subject to any and all payments
required in Sections 2 and 3 hereof, and shall
continue until terminated in accordance with the
provisions of this Agreement. The rights granted
hereunder shall be subject to any third party
obligations.
5.2. Grant of Rights from Lilly to Aurora.
5.2.1. Lilly grants to Aurora and its Affiliates a
nonexclusive, worldwide license, without the right to
sublicense, under Lilly Patent Rights and Lilly
Technology to perform its obligations under this
Agreement relating to the Collaborative Screens.
Lilly also grants to Aurora and its Affiliates a
nonexclusive, worldwide license, with the right to
sublicense, under Lilly Patent Rights that are filed
as patent applications or are conceived as inventions
during any given year for which Lilly has made an
annual payment for Aurora Reporters as set forth in
Section 2.1.8, to make, use or sell Aurora Reporters
in any other reporter assays. The rights granted
hereunder shall continue until terminated in
accordance with the provisions of this Agreement.
5.3. Ownership of Intellectual Property
*** CONFIDENTIAL TREATMENT REQUESTED
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5.3.1. Except as otherwise expressly provided in this
Agreement, nothing in this Agreement is intended to
convey or transfer ownership by one party to the
other of any rights, title or interest in any
Confidential Information, Technology, copyrights or
Patent Rights owned or Controlled by a party. Except
as expressly provided for in this Agreement, nothing
in this Agreement shall be construed as a license or
sublicense by one party to the other of any rights in
any Technology, copyrights, or Patent Rights owned or
Controlled by a party or its Affiliates.
5.3.2. Lilly shall own all Inventions and other Technology
made solely by its employees and agents, and all
patent applications and patents claiming such
Inventions. Aurora shall own all Inventions and
other Technology made solely by its employees and
agents, and all patent applications and patents
claiming such Inventions. All Inventions and other
Technology made jointly by employees or agents of
Lilly and employees or agents of Aurora shall be
owned jointly by Lilly and Aurora, provided, however,
that all patentable Inventions shall be owned in
accordance with U.S. patent law.
6. PAYMENTS OF ROYALTIES, ACCOUNTING FOR ROYALTIES, AND RECORDS
6.1. Payment and Term
In consideration of the rights granted herein to Lilly by Aurora and
services provided to Lilly by Aurora relating to the Collaborative
Screening Program, Lilly agrees to pay Aurora as set forth in Section
3.0 and as follows in Section 6.0. All royalties required to be paid
by Lilly in this Agreement shall be paid ***; thereafter, Lilly shall
be entitled to continue to sell such Covered Product in such country
without further compensation to Aurora hereunder.
If Lilly is required by the United States government or other
authorities to withhold any tax on the amounts payable to Aurora under
this agreement, Lilly shall be allowed to do so, and shall in such
case remit royalty payments to Aurora net of such withheld amount,
provided that Lilly furnishes Aurora with proof of payment of such
withholdings as soon as practicable after such withholding in order
that Aurora may use the withholding tax paid as a tax credit.
*** CONFIDENTIAL TREATMENT REQUESTED
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6.2. Payment Dates.
Royalties shall be paid by Lilly on Net Sales within sixty (60) days
after the end of each calendar quarter in which such Net Sales are
made. Such payments shall be accompanied by a statement showing all
relevant sales information, including the information employed to
calculate Net Sales of each Covered Product in each country, and the
calculation of the amount of royalty due.
6.3. Accounting.
The Net Sales used for computing the royalties payable to Aurora by
Lilly shall be paid in U.S. dollars by wire transfer or other mutually
acceptable means. Lilly's current standard exchange rate methodology
will be employed for the translation of foreign currency sales into
United States dollars. This methodology is used by Lilly in the
translation of its foreign currency operating results for external
reporting, is consistent with generally acceptable accounting
principles, and is approved and reviewed by Lilly's independent
certified public accountants.
To enable Lilly to comply with applicable tax laws and regulation,
Aurora shall provide to Lilly a report, within 60 days following the
close of each calendar year, detailing the dollar amount of the funds
that were expended on CSP research activities during the year for
which the report is made.
6.4. Records.
During the Royalty Term and for one (1) year from the date of each
payment of royalties, Lilly shall keep complete and accurate records of
sales and all other information necessary to calculate Net Sales of
each Covered Product in sufficient detail to allow the accrued
royalties to be determined accurately. Aurora, with reasonable written
notice to Lilly, shall have the right to cause Lilly's independent,
certified public accountant to audit such records at the place or
places of business where such records are customarily kept in order to
verify the accuracy of the reports of Net Sales and royalty payments.
Aurora shall bear the full cost of such audit unless such audit
discloses a variance of *** from the amount of the royalties due under
this Agreement, in which event, Lilly shall bear the full cost of such
audit. Aurora agrees not to disclose confidential information
concerning royalty payments and reports, and all information learned in
the course of any audit or inspection, except to the extent necessary
for Aurora to reveal such information in order to enforce its rights
under this Agreement or if disclosure is required by law. Upon
reasonable request of Aurora and at a minimum once every six (6)
months, Lilly shall provide Aurora
***CONFIDENTIAL TREATMENT REQUESTED
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with a summary of, Approved PTAC Compounds and Covered Products that
are required to calculate Royalties or Milestones.
7. INTELLECTUAL PROPERTY ENFORCEMENT AND DEFENSE OF INFRINGEMENT CLAIMS
7.1. Intellectual Property Enforcement.
Lilly and Aurora shall have the right, but not the obligation, to
bring proceedings against any Third Party for the inappropriate use,
including patent infringement, of Technology or Patent Rights solely
owned or Controlled by it, and at its own risk and expense. Such
party shall be entitled to retain any and all awards or damages
obtained in any such proceeding. At the request and expense of either
party, the other party shall give the requesting party all reasonable
assistance required to file and conduct any such proceeding. For
jointly owned Technology or Patent Rights, Lilly and Aurora shall use
their best efforts to coordinate pursuing a commercially reasonable
action to address inappropriate use, including patent infringement, by
Third Parties of such Technology and Patent Rights and to determine
how expenses and any recovery from such action shall be allocated
between the parties. Lilly, as a non-exclusive licensee, will make
reasonable efforts to provide Aurora with any information known to
Lilly relating to the suspected or actual inappropriate use, including
patent infringement, of Aurora Technology and Aurora Patent Rights.
7.2. Defense of Infringement Claims Pertaining to Lilly Hits,
Approved PTAC Compounds, and Covered Products.
Aurora will cooperate with Lilly, at Lilly's expense, in the defense
of any suit, action or proceeding against Aurora and its Affiliates,
or Lilly and its Affiliates alleging the infringement of the
intellectual property rights of a Third Party by reason of the
manufacture, use or sale of a Covered Product by Lilly. Lilly shall
give Aurora prompt written notice of the commencement of any such
suit, action, proceeding or claim of infringement. Aurora shall give
to Lilly all authority, information and assistance necessary to defend
or settle any such suit, action or proceeding; provided, however, that
if Aurora or its Affiliates or licensees should join in any such suit,
action or proceeding pursuant to this Section 7.2 and at the request
of Lilly, Lilly shall hold Aurora or any such Aurora Affiliate or
licensee, as applicable, free, clear and harmless from any and all
costs and expenses of such litigation, including reasonable attorneys'
fees, and Aurora shall execute all documents, provide pertinent
records, and take all other actions, including
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requiring persons within its control to give testimony, which may be
reasonably required in connection with such litigation.
7.3. Defense of Infringement Claims Pertaining to Aurora Technology
and Aurora Patent Rights
Lilly will cooperate with Aurora, at Aurora's expense, in the defense
of any suit, action or proceeding against Aurora or Aurora Affiliate
alleging the infringement of the intellectual property rights of a
Third Party by reason of Aurora's use any of Aurora Patent Rights and
Aurora Technology licensed to Lilly under this Agreement. Aurora
shall give Lilly prompt written notice of the commencement of any such
suit, action, proceeding or claim of infringement. Lilly shall give
to Aurora all authority, information and assistance necessary to
defend or settle any such suit, action or proceeding; provided,
however, that if Lilly or its Affiliates or licensees should join in
any such suit, action or proceeding pursuant to this Section 7.3 and
at the request of Aurora, Aurora shall hold Lilly, or any such Lilly
Affiliate, free, clear and harmless from any and all costs and
expenses of such litigation, including reasonable attorneys' fees, and
Aurora shall execute all documents, provide pertinent records, and
take all other actions, including requiring persons within its control
to give testimony, which may be reasonably required in connection with
such litigation.
8. TREATMENT OF CONFIDENTIAL INFORMATION; PUBLICITY, AND CHANGE OF
CONTROL
8.1. Confidentiality
8.1.1. Subject to the terms and conditions of this
Agreement, Lilly and Aurora each agree that, during
the term of this Agreement and for five (5) years
thereafter, it will use all reasonable efforts to
keep confidential, and will cause its Affiliates to
use reasonable efforts to keep confidential, all
Aurora Confidential Information or Lilly Confidential
Information, as the case may be, that is disclosed to
it or to any of its Affiliates by the other party in
connection with the performance of this Agreement.
Neither Lilly nor Aurora nor any of their respective
Affiliates shall use the other party's Confidential
Information except as expressly permitted in this
Agreement.
8.1.2. Lilly and Aurora each agree that any disclosure of
the other's Confidential Information to any officer,
employee, contractor,
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consultant, sublicensee, or agent of the other party
or of any of its Affiliates shall be made only if and
to the extent necessary to carry out its
responsibilities under this Agreement and to exercise
the rights granted to it hereunder, shall be limited
to the extent consistent with such responsibilities
and rights, and shall be provided only to such
persons or entities who are bound to maintain same in
confidence in a like manner as the party receiving
same hereunder is so required. Each party shall use
reasonable efforts to take such action, and to cause
its Affiliates to take such action, to preserve the
confidentiality of each other's Confidential
Information, including not less than such efforts as
it would customarily take to preserve the
confidentiality of its own Confidential Information.
Lilly Confidential Information shall not be
disclosed, without Lilly's written consent, in a
patent application filed by Aurora or an Aurora
Affiliate. Aurora Confidential Information shall not
be disclosed, without Aurora's written consent, in a
patent application filed by Lilly or a Lilly
Affiliate. Each party, upon the other's request,
will return all the Confidential Information
disclosed to the other party pursuant to this
Agreement, including all copies and extracts of
documents, within sixty (60) days of the request of
the other party following any termination of this
Agreement, except for one (1) copy which may be kept
for the purpose of ascertaining and complying with
continuing confidentiality obligations under this
Agreement.
8.1.3. Confidential Information shall not include any
information which the receiving party can prove by
competent evidence:
i) is now, or hereafter becomes, through no act
or failure to act on the part of the receiving party,
generally known or available;
ii) is known by the receiving party at the
time of receiving such information, as evidenced
by its records;
iii) is hereafter furnished to the receiving party
without restriction as to disclosure or use by a
Third Party lawfully entitled to so furnish same;
iv) is independently developed by the employees,
agents or contractors of the receiving party without
the aid, application or use of the disclosing party's
Confidential Information; or
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v) is the subject of a written permission to
disclose provided by the disclosing party; or
vi) is provided by the disclosing party to a
Third Party without restriction as to
confidentiality.
A party may also disclose Confidential Information of
the other where required to do so by law or legal
process, provided that, in such event, the party
required to so disclose shall give maximum practical
advance written notice of same to the other party and
will cooperate with the other party's efforts to
seek, at the request and expense of the other party,
all confidential treatment and protection for such
disclosure as is permitted by applicable law.
The parties agree that the material financial terms
of this Agreement will be considered Confidential
Information of both parties. Notwithstanding the
foregoing, either party may disclose such terms in
legal proceedings or as are required to be disclosed
in its financial statements, by law, or under
strictures of confidentiality to bona fide potential
sublicensees. Either party shall have the further
right to disclose the material financial terms of
this Agreement under strictures of confidentiality to
any potential acquirer, merger partner, bank, venture
capital firm, or other financial institution to
obtain financing; provided, further, that either
party shall have the right to disclose the material
financial terms of this Agreement under strictures of
confidentiality to any bona fide potential strategic
partner or collaborator with the prior written notice
of the other.
8.2. Publication of Results
Notwithstanding any term in this Agreement that may state or imply to
the contrary, but subject to Section 8.1 hereof, results and data
obtained by Lilly in the course of the Collaborative Screening Program
and Lilly Screen Program or through Lilly's use of the Aurora
Reporters or the LILLYUHTSS may be submitted for publication in
accordance with Lilly's customary practices, provided, however, that
Lilly credit Aurora in such publication as the provider of the
technology that produced, in part, the published results or data.
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8.3. Publicity
Except as required by law and as provided in this Section 8, neither
party may make any public announcement or otherwise disclose the terms
of this Agreement without the prior written consent of the other
party, which consent shall not be unreasonably withheld.
9. PATENT PROSECUTION AND COPYRIGHTS
9.1. Patents.
The control and expense of the filing, prosecution (including an
opposition or interference) and maintenance of applications claiming
jointly owned Inventions will be equally shared by Lilly and Aurora.
Both Aurora and Lilly will use their best efforts to coordinate the
filing prosecution and maintenance of applications claiming jointly
owned Inventions. Should one party elect not to share in the control,
filing, prosecution or maintenance of such applications, the other
party with thirty (30) days written notice may elect to gain sole
control of the filing, prosecution or maintenance of such application
or applications and have sole responsibility for prosecution or
maintenance expenses. The control and expense of the filing,
prosecution (including an opposition or interference) and maintenance
of applications claiming solely owned Inventions will be at the
discretion of the owner. At Lilly's reasonable request, not to exceed
more than one request every three months, Aurora shall timely provide
to Lilly updates regarding the patent applications related to Aurora
Patent Rights licensed under Section 5.1.
9.2. Copyrights
The parties agree to treat and handle, to the maximum practical
extent, any copyrights owned or Controlled by a party in the same
manner as Patent Rights owned or Controlled by such party.
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10. WARRANTIES AND INDEMNIFICATION.
10.1. Mutual Representations and Warranties
The parties make the following representations and warranties to each
other:
10.1.1. Corporate Power.
Each party hereby represents and warrants that such party (a)
is duly organized and validly existing under the laws of the
state of its incorporation and has full corporate power and
authority to enter into this Agreement and to carry out the
provisions hereof; (b) has the requisite power and authority
and the legal right to own and operate its property and
assets, to lease the property and assets it operates under
lease, and to carry on its business as it is now being
conducted; and (c) is in compliance with all requirements of
applicable law, except to the extent that any noncompliance
would not have a material adverse effect on the properties,
business, financial or other condition of it and would not
materially adversely affect its ability to perform its
obligations under the Agreement.
10.1.2. Due Authorization.
Each party hereby represents and warrants that such party (a)
has the requisite power and authority and the legal right to
enter into the Agreement and to perform its obligations and
grant the rights extended by it hereunder; and (b) has taken
all necessary action on its part to authorize the execution
and delivery of the Agreement and to authorize the performance
of its obligations hereunder and the grant of rights extended
by it hereunder.
10.1.3. Binding Agreement.
Each party hereby represents and warrants to the other that:
(a) this Agreement has been duly executed and delivered on its
behalf and is a legal and valid obligation binding upon it and
is enforceable in accordance with its terms; (b) the
execution, delivery and performance of this Agreement by such
party does not conflict with any agreement, instrument
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<PAGE> 40
or understanding, oral or written, to which it is a party or
by which it may be bound, nor violate any law or regulation of
any court, governmental body or administrative or other agency
having authority over it; and (c) all necessary consents,
approvals and authorizations of all governmental authorities
and other persons required to be obtained by it in connection
with the Agreement have been obtained.
10.2 Warranties and Aurora Technology.
Aurora warrants to Lilly as of the Effective Date the following:
10.2.1. To the best knowledge of Aurora ***
10.2.2. Except as set forth in Section 10.2.1 above,
Sections 3.1 and 3.2 relating to
Collaborative Screening Programs and Lilly
Screening Programs and Section 2 relating to
LILLYUHTSS, Aurora (including its officers,
employees and agents) expressly disclaim any
representations and warranties, whether
express or implied, relating to Aurora Patent
Rights and Aurora Technology. Aurora further
disclaims i) any express or implied warranty
of merchantability or fitness for a
particular purpose of Aurora Technology
except as set forth in Sections 2 and 3 to
Collaborative Screening Programs and
LILLYUHTSS, ii) practice of Aurora
Technology or Aurora Patent Rights will not
infringe a patent, copyright, trademark or
other right of a Third Party, and iii) the
patentability of any Aurora Technology,
including Aurora Technology claimed in patent
applications as part of Aurora Patent Rights.
10.3. Aurora Indemnification.
*** CONFIDENTIAL TREATMENT REQUESTED
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Aurora hereby agrees to indemnify, defend and hold Lilly and its
Affiliates, and their respective officers, directors, employees, and
agents (collectively, the "Lilly Indemnitees") harmless from and
against all damages or other amounts payable to a Third Party,
including reasonable attorneys' fees and costs of litigation, resulting
from a suit brought by a Third Party against a Lilly Indemnitee for (i)
*** except to the extent such damages or other amounts payable are
attributable to: (i) a violation of law, regulation or court order by
any Lilly Indemnitee, (ii) a violation of any contractual or fiduciary
duty owned by any Lilly Indemnitee to a Third Party, (iii) the
misappropriation by any such Lilly Indemnitee of the trade secrets of
any Third Party, (iv) any negligent or wrongful act or omission of any
Lilly Indemnitee, (v) any *** or (vi) any breach of this Agreement by a
Lilly Indemnitee or misrepresentation contained herein. In no event
shall Aurora be liable for any incidental or consequential damages
resulting from the exercise of any rights granted in accordance with
this Agreement.
10.4. Warranties and Lilly Technology.
----------------------------------------
Lilly warrants to Aurora as of the Effective Date the following:
10.4.1. To the best knowledge of Lilly as of the Effective
Date, Lilly has the lawful right to license to Aurora
in accordance with this Agreement Lilly Patent Rights
To the best knowledge of Lilly as of the Effective
Date, Lilly Patent Rights were properly filed and
prosecuted and no Third Party suit
exists relating to Lilly Patent Rights.
10.4.2. Except as set forth in Section 10.4.1 above, Sections
3.1 and 3.2 relating to Collaborative Screening
Programs and Lilly Screening Programs and Section 2
relating to LILLYUHTSS, Lilly (including its
officers, employees and agents) expressly disclaim
any representations and warranties, whether express
or implied, relating to Lilly Patent Rights and Lilly
Technology. Lilly further disclaims i) any express or
implied warranty of merchantability or fitness for a
particular purpose of Lilly Technology except as set
forth in Sections 2 and 3 relating to Collaborative
Screening Programs and LILLYUHTSS, ii) practice of
Lilly Technology or
*** CONFIDENTIAL TREATMENT REQUESTED
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Lilly Patent Rights will not infringe a patent,
copyright, trademark or other right of a Third Party,
and iii) the patentability of any Lilly Technology,
including Lilly Technology claimed in patent
applications as part of Lilly Patent Rights.
10.5. Lilly Indemnification.
Lilly hereby agrees to indemnify, defend and hold Aurora and
its Affiliates, and their respective officers, directors,
employees, and agents (collectively, the "Aurora Indemnitees")
harmless from and against all damages or other amounts payable
to a Third Party, including reasonable attorneys' fees and
costs of litigation, resulting from a suit brought by a Third
Party against a Aurora Indemnitee ***; except to the extent
such damages or other amounts payable are attributable to: (i)
a violation of law, regulation or court order by any Aurora
Indemnitee, (ii) a violation of any contractual or fiduciary
duty owed by any Aurora Indemnitee to a Third Party, (iii) the
misappropriation by any such Aurora Indemnitee of the trade
secrets of any Third Party, (iv) any negligent or wrongful act
or omission of any Aurora Indemnitee, (v) any infringement of
any third party intellectual property rights by Aurora or any
Aurora Affiliate, or (vi) any breach of this Agreement by an
Aurora Indemnitee or misrepresentation contained herein. In no
event shall Lilly be liable for any incidental or consequential
damages resulting from the exercise of any rights granted in
accordance with this Agreement.
11. TERM, PARTIAL PERFORMANCE AND TERMINATION.
11.1. Term.
The term of this Agreement will begin on the Effective Date and shall
continue, unless terminated in accordance with the provisions of
Sections 11.2-11.4 hereof, until the later of: (i) the last to expire
Royalty Term; or (ii) Lilly is no longer making payment for Aurora
Reporters under Section 2.1.8.
*** CONFIDENTIAL TREATMENT REQUESTED
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11.2. Termination By Mutual Agreement.
----------------------------------------
The parties may at any time terminate this Agreement, in whole or in
part, by written agreement executed by both Aurora and Lilly. In such
event, the document effecting such termination shall specify the
continuation or termination of any license rights granted hereunder,
as well as any other terms agreed to by both parties.
11.3. Termination Without Cause by Lilly.
-------------------------------------------
Lilly may elect at any time set forth in accordance with this
Agreement to terminate this Agreement for any reason without cause,
provided, however, that Lilly provide Aurora with written notice at
least forty-five (45) days prior to such termination. In the event of
termination without cause by Lilly:
11.3.1. Lilly shall either: (i) pay to Aurora within thirty
days of such notice an amount equal to *** ***
***; or (ii) pay to Aurora within thirty days of such
notice an amount equal to the ***
*** CONFIDENTIAL TREATMENT REQUESTED
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*** . In addition to payments made under Section
11.3.1 (i) and Section 11.3.1 (ii), Lilly shall also
pay to Aurora within thirty days of such notice ***
11.3.2. Upon termination of this Agreement without cause by
Lilly, all licenses and sublicenses granted in
accordance with this Agreement shall be terminated
and all Materials transferred in accordance with this
Agreement shall be returned to Aurora or destroyed at
the discretion of Aurora by Lilly; provided, however,
Lilly shall be entitled i) to use thereafter in
Internal Research Completed components of the
LILLYUHTSS that (a) Lilly has determined to be
Completed for at least 60 days prior to written
notice of such termination and to which Lilly has
made the payments required under Section 2 and (b)
to which Lilly has made payments required under
Section 11.3.1 (ii) hereof and ii) to exercise a
nonexclusive, irrevocable, and fully paid-up right
and license under any Aurora UHTSS Patent Rights and
Aurora UHTSS Copyrights existing as of the date of
such written notification of Lilly's termination
without cause or provided under Section 11.3.1 (ii).
11.4. Partial Performance.
----------------------------
Lilly and Aurora agree that Aurora may, under certain circumstances,
partially perform under this Agreement, without terminating the
Agreement, as set forth below:
11.4.1. In the event that Aurora is i) unable to deliver to
Lilly the LILLYUHTSS by the Target Delivery Date as
specified in Section 2.1.2.1 or ii) Aurora is unable
to Complete a Module as specified in Section 2.1.3,
Aurora shall permit Lilly to continue to use the
rights granted in accordance with this Agreement to
conduct the Collaborative Screening Program and the
Lilly Screening Program, so long as Lilly has no
outstanding payments to Aurora, and Lilly continues
to permit Aurora to cure the delivery of the
LILLYUHTSS by the Target Delivery Date as specified
in Section 2.1.2.1 or the Completion of a Module as
specified in Section 2.1.3 and Lilly notifies in
writing Aurora within 30 days of such partial
*** CONFIDENTIAL TREATMENT REQUESTED
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performance that it desires Aurora to cure under this
Section 12.2.3.
11.5. Termination for Cause.
Either party shall have the right to terminate this Agreement at any
time for a material breach of this Agreement by the other party,
provided that the non-breaching party shall have given the breaching
party (90) days written notice of the breach and intention to
terminate this Agreement in the absence of a cure within ninety (90)
days of receipt of such notice by the beaching party. Upon
termination of this Agreement for cause, all licenses and sublicenses
granted in accordance with this Agreement shall be terminated and all
Materials transferred in accordance with this Agreement shall be
returned to the supplying party or destroyed at the discretion of such
party. The non-breaching party, upon termination of this Agreement
may seek actual or general damages and remedies available to it at law
or in equity.
11.6. Effect of Bankruptcy
If a party becomes insolvent or admits in writing its inability to pay
its debts as they mature or applies for or consents to the appointment
of a receiver or trustee for any of its properties; or a receiver or
trustee is appointed for such party or a substantial portion of its
properties and is not discharged within ninety (90) days; or any
bankruptcy, reorganization, debt arrangement, dissolution, liquidation
or other proceeding under any bankruptcy or insolvency law is
instituted by or against such party and, if instituted against such
party, it is consented to by such party or remains undismissed for
ninety (90) days, then
11.6.1. Notwithstanding any such event, such party shall
remain obligated to fulfill its obligations and
covenants hereunder, and any failure to do so or
other breach hereunder shall entitle the other party
to terminate this Agreement in accordance with
Section 12.3 hereof; and
11.6.2. It is the parties desire that, if any such receiver,
trustee, judge, arbitrator or other adjudicator
conducting or controlling such proceedings on behalf
of a party should hold that any obligations,
covenants or duties of such party hereunder should be
suspended or declared unenforceable, in whole or in
part, then the rights and benefits granted to the
other party hereunder shall remain in full force and
effect, and that any such obligations, covenants or
duties
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shall be reformed by such receiver, trustee, judge,
arbitrator or other adjudicator so as to be
enforceable to the maximum extent permitted by
applicable law and to permit any suspension to be
lifted at the earliest practicable time.
11.7. Effect of Expiration or Termination
11.7.1. Expiration or termination of this Agreement shall not
relieve the parties of any obligation accruing prior
to such expiration or termination. The obligations
and rights of the parties under Sections 3.1.5 to
3.2.3, 6.0, 8.0, 9.0, 12.0, and 13.0 thereof, as well
as any provisions, which, by their intent or meaning
are intended to so survive, shall survive termination
or expiration of this Agreement. Except as otherwise
expressly provided in this Agreement, the rights and
obligations of the parties under Sections 5.1, and
5.2 hereof shall terminate and be of no further force
or effect whatsoever upon any termination of this
Agreement.
12. MISCELLANEOUS
12.1. Assignment.
Notwithstanding any provision of this Agreement to the contrary,
either party may assign any of its rights or obligations under this
Agreement in any country to any Affiliates; provided, however, that
such assignment shall not relieve the assigning party of its
responsibilities for performance of its obligations under this
Agreement.
Either party may also assign its rights or obligations under this
Agreement in connection with the sale of all or substantially all of
its assets, or may otherwise assign its rights or obligations under
this Agreement with the prior written consent of the other party.
This Agreement shall survive any merger or consolidation of either
party with or into another party and no consent for any such merger,
consolidation or similar reorganization shall be required hereunder;
provided, that in the event of such merger, consolidation or similar
reorganization or in the event of a sale of all assets, no
intellectual property rights of the acquiring corporation shall be
included in the technology licensed hereunder.
12.2. Binding Effect.
46
<PAGE> 47
This Agreement shall be binding upon and inure to the benefit of the
successors and permitted assigns of the parties. Any assignment not
in accordance with this Agreement shall be void.
12.3. Force Majeure.
Neither party shall lose any rights hereunder or be liable to the
other party for damages or losses on account of failure of performance
by the defaulting party if the failure is occasioned by war, fire,
explosion, flood, strike, lockout, embargo, act of God, or any other
similar cause beyond the control of the defaulting party, provided
that the party claiming force majeure has exerted all reasonable
efforts to avoid or remedy such force majeure and thereafter takes all
reasonable steps to mitigate any such delay in performance hereunder
and any damages that may be incurred by the other party thereby.
12.4. Notices.
Any notices or communications provided for in this Agreement to be
made by either of the parties to the other shall be in writing, in
English, and shall be made by prepaid air mail with return receipt
addressed to the other at its address set forth below. Any such
notice or communication may also be given by hand, or
47
<PAGE> 48
facsimile to the appropriate designation. Notices shall be sent:
<TABLE>
<S> <C>
If to Lilly, to: Eli Lilly and Company
Lilly Corporate Center
Indianapolis, Indiana 46285
Attention: Vice President of Research Technologies and Proteins
Copy: General Patent Counsel
If to Aurora, to: Aurora Biosciences Corporation.
11149 N. Torrey Pines Road
La Jolla, CA 92037
Attention: Timothy J. Rink, M.D., Sc.D.
Chairman, CEO, and President
Copy: Paul Grayson
Director, Business Development
</TABLE>
provided that if such notice or communication relates to an amendment
to this Agreement or to any notice pursuant to Section 11 hereof, a
copy shall also be sent to:
<TABLE>
<S> <C>
If to Lilly, to: Eli Lilly and Company
Lilly Corporate Center
Indianapolis, Indiana 46285
Attention: Executive Vice President, Science and Technology
Copy: General Patent Counsel
If to Aurora, to: Timothy J. Rink, M.D., Sc.D.
Chairman, CEO, and President
Copy: Paul Grayson
Director, Business Development
</TABLE>
Either party may by like notice specify or change an address to which
notices and communications shall thereafter be sent. Notices sent by
mail, facsimile or cable shall be effective upon receipt and notices
given by hand shall be effective when delivered.
12.5. Governing Law and Jurisdiction.
This Agreement shall be governed by the laws of the State of
California, as such laws are applied to contracts entered into and to
be performed within such state.
48
<PAGE> 49
Any dispute arising from this Agreement, including non-binding
arbitration or litigation, shall be resolved in Denver, Colorado.
12.6. Waiver.
Except as specifically provided for herein, the waiver from time to
time by either of the parties of any of their rights or their failure
to exercise any remedy shall not operate or be construed as a
continuing waiver of same or any of other of such party's rights or
remedies provided in this Agreement.
12.7. Severability.
If any term, covenant or condition of this Agreement or the
application thereof to any party or circumstance shall, to any extent,
be held to be invalid or unenforceable, then the remainder of this
Agreement, or the application of such term, covenant or condition to
parties or circumstances other than those as to which it is held
invalid or unenforceable, shall not be affected thereby and each term,
covenant or condition of this Agreement shall be valid and be enforced
to the fullest extent permitted by law; and the parties hereto
covenant and agree to renegotiate any such term, covenant or
application thereof in good faith in order to provide a reasonably
acceptable alternative to the term, covenant or condition of this
Agreement or the application thereof that is invalid or unenforceable,
it being the intent of the parties that the basic purposes of this
Agreement are to effectuated.
12.8. Independent Contractors.
It is expressly agreed that Aurora and Lilly shall be independent
contractors and that the relationship between the two parties shall
not constitute a partnership or agency of any kind. Neither Aurora
nor Lilly shall have the authority to make any statements,
representations or commitments of any kind, or to take any action,
which shall be binding on the other, without the prior written
authorization of the party to do so.
12.9. Counterparts
This Agreement shall be executed in two (2) counterparts, each of
which shall be deemed an original, but both of which together shall
constitute one and the same instrument.
49
<PAGE> 50
12.10. Entire Agreement
This Agreement between the parties of even date herewith set forth all
of the covenants, promises, agreements, warranties, representations,
conditions and understandings between the parties hereto, and
supersede and terminate all prior agreements and understanding between
the parties, with respect to the subject matter hereof. There are no
covenants, promises, agreements, warranties, representations
conditions or understandings, either oral or written, between the
parties other than as set forth herein and therein. No subsequent
alteration, amendment, change or addition to this Agreement shall be
binding upon the parties hereto unless reduced to writing and signed
by the respective authorized officers of the parties. This Agreement
shall not be strictly construed against either party hereto. Any
conflict between the terms set forth in the text of this Agreement and
the terms of any Exhibit hereto shall be resolved in favor of the text
of this Agreement.
12.11. No Third Party Beneficiaries.
No third party, including any employee of any party to this Agreement,
shall have or acquire any rights by reason of this Agreement. Nothing
contained in this Agreement shall be deemed to constitute the parties
partners with each other or any third party.
12.12. Construction.
The term "Section" can refer to any single paragraph level found
herein or any collection of multiple paragraphs.
12.13. Dispute Resolution.
The parties recognize that disputes as to certain matters may from
time to time arise during the term of this Agreement which relate to
either party's rights and/or obligations hereunder. It is the
objective of the parties to establish procedures to facilitate the
resolution of disputes arising under this Agreement in an expedient
manner by mutual cooperation and without resort to litigation or
arbitration. The parties agree that prior to any litigation or
arbitration concerning this Agreement, Lilly's Executive Vice
President of Science and Technology and Aurora's
50
<PAGE> 51
president will meet in person or by video-conferencing in a good faith
effort to resolve any disputes concerning this Agreement.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by
their duly authorized representatives.
<TABLE>
<S> <C>
ELI LILLY AND COMPANY AURORA BIOSCIENCES
CORPORATION
By: By:
---------------------------------------- ----------------------------------------
Title: Title:
------------------------------------- -------------------------------------
Date: Date:
-------------------------------------- --------------------------------------
</TABLE>
51
<PAGE> 52
LIST OF EXHIBITS
EXHIBIT 1.0: PROJECT TEAM APPROVAL COMMITTEE (PTAC) INFORMATION
EXHIBIT 1.1: PERFORMANCE SPECIFICATIONS
EXHIBIT 1.2: EXHIBIT OF REPORTERS
EXHIBIT 4.1: SERVICE AND SUPPORT
EXHIBIT 5.1: LIST OF AURORA PATENT RIGHTS
EXHIBIT 5.2: OTHER AURORA PATENT RIGHTS
52
<PAGE> 53
EXHIBIT 1.0
PROJECT TEAM APPROVAL COMMITTEE (PTAC) INFORMATION
I. ***
II. ***
PROJECT TEAM APPROVAL COMMITTEE (PTAC) INFORMATION
I. ***
II. ***
III. ***
IV. ***
V. ***
*** CONFIDENTIAL TREATMENT REQUESTED
53
<PAGE> 54
EXHIBIT 1.1 - PAGE 1
PERFORMANCE SPECIFICATIONS
MODULE 1 AUTOMATED SAMPLE PRESENTATION SYSTEM (ASPS)
***
*** CONFIDENTIAL TREATMENT REQUESTED
54
<PAGE> 55
EXHIBIT 1.1 - PAGE 2
PERFORMANCE SPECIFICATIONS
MODULE 2
MICROFLUIDICS
***
*** CONFIDENTIAL TREATMENT REQUESTED
55
<PAGE> 56
***
*** CONFIDENTIAL TREATMENT REQUESTED
56
<PAGE> 57
EXHIBIT 1.1 - PAGE 3
PERFORMANCE SPECIFICATIONS
MODULE 2
DETECTOR (CONTINUED)
***
UHTSS ASSAY TYPES
***
SCREEN DEVELOPMENT STAGE ("SDS")
***
*** CONFIDENTIAL TREATMENT REQUESTED
57
<PAGE> 58
EXHIBIT 1.1 - PAGE 4
PERFORMANCE SPECIFICATIONS
MODULE 3 (INTEGRATION, INFORMATICS AND CONTROL SYSTEMS)
***
***CONFIDENTIAL TREATMENT REQUESTED
59
<PAGE> 59
EXHIBIT 1.2
DESCRIPTION OF REPORTERS
***
***CONFIDENTIAL TREATMENT REQUESTED
60
<PAGE> 60
EXHIBIT 4.1
SERVICE AND SUPPORT
***
*** CONFIDENTIAL TREATMENT REQUESTED
61
<PAGE> 61
***
*** CONFIDENTIAL TREATMENT REQUESTED
62
<PAGE> 62
***
*** CONFIDENTIAL TREATMENT REQUESTED
63
<PAGE> 63
***
*** CONFIDENTIAL TREATMENT REQUESTED
64
<PAGE> 64
EXHIBIT 5.1
LIST OF AURORA PATENT RIGHTS
***
*** CONFIDENTIAL TREATMENT REQUESTED
65
<PAGE> 65
EXHIBIT 5.2
OTHER AURORA PATENT RIGHTS
***
*** CONFIDENTIAL TREATMENT REQUESTED
66
<PAGE> 1
Certain confidential portions of this Exhibit were omitted by means of blackout
of the text (the "Mark"). This Exhibit has been filed separately with the
Secretary of the Commission without the Mark pursuant to the Company's
Application Requesting Confidential Treatment under Rule 406 under the
Securities Act.
EXHIBIT 10.24
COLLABORATION AGREEMENT
BETWEEN
ALLELIX BIOPHARMACEUTICALS INC.
AND
AURORA BIOSCIENCES CORPORATION
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE 1. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
ARTICLE 2. SCREEN DEVELOPMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.1 Collaboration Committee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.1.1 Responsibilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.1.2 Membership. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.1.3 Meetings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
2.1.4 CC Decisions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
2.2 Screen Development. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
2.2.1 Screen Selection. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
2.2.2 Screen Development Plans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
2.2.3 Screen Development Reports. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
2.2.4 Screen Validation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
2.3 Payments for Screen Development. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
2.3.1 Funding for Two (2) Screens. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
2.3.2 Funding for Additional Screens. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
ARTICLE 3. SCREENING PROGRAM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.1 Screening Program. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.1.1 Screening by Aurora. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.1.2 Compound Supply. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.1.3 Screening Program Reports. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.2 Screening Supplies for Lead Optimization. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
3.2.1 Supplies from Aurora. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
3.2.2 Shipping. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
3.2.3 Limited Use. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
3.3 Screening Payments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
3.3.1 Base Screening Fee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
ARTICLE 4. DEVELOPMENT AND COMMERCIALIZATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
ARTICLE 5. LICENSES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
5.1 License to Allelix. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
5.2 License to Aurora. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
5.3 No Implied Licenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
5.4 Covenant Not to Assert. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
ARTICLE 6. MILESTONES AND ROYALTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
6.1 Milestone Payments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
6.2 Royalties to Aurora. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
6.2.1 Sales by Licensees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
6.2.2 Sales by Allelix or its Affiliates. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
6.2.3 Trade Secret Royalty. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
6.2.4 Royalty Term. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
</TABLE>
ALLELIX.AURORA COLLABORATION AGREEMENT
JANUARY 21, 1996
-2-
<PAGE> 3
<TABLE>
<S> <C> <C>
6.2.5 Other Revenues. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
ARTICLE 7. PAYMENTS; BOOKS AND RECORDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
7.1 Royalty Reports. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
7.2 Screen Development and Screening Payments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
7.3 Payment Method. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
7.4 Currency Conversion. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
7.5 Records; Inspection. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
7.6 Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
7.7 Refunds or Credits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
ARTICLE 8. INTELLECTUAL PROPERTY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
8.1 Ownership. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
8.1.1 Sole Ownership. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
8.1.2 Joint Technology. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
8.1.3 U.S. Law. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
8.1.4 Retained Rights. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
8.2 Patent Filing and Prosecution. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
8.2.1 Cooperation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
8.2.2 Failure to Prosecute. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
8.3 Enforcement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
8.4 Defense of Infringement Claims. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
8.4.1 Claims Relating to Agreement Compounds and Products. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
8.4.2 Claims Relating to Aurora Technology. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
ARTICLE 9. CONFIDENTIALITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
9.1 Confidential Information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
9.2 Permitted Use and Disclosures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
9.3 Nondisclosure of Terms. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
ARTICLE 10. REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
10.1 Allelix. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
10.2 Aurora. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
10.3 Disclaimer. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
ARTICLE 11. INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
11.1 Allelix. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
11.2 Aurora. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
11.3 Procedure. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
ARTICLE 12. TERM AND TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
12.1 Term. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
12.2 Termination for Cause. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
12.3 Termination for Insolvency. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
12.4 Permissive Termination. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
12.5 Effect of Breach or Termination. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
12.5.1 Accrued Obligations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
12.5.2 Return of Confidential Information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
</TABLE>
ALLELIX.AURORA COLLABORATION AGREEMENT
JANUARY 21, 1996
-3-
<PAGE> 4
<TABLE>
<S> <C> <C>
12.5.3 Licenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
12.6 Survival. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
ARTICLE 13. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
13.1 Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
13.2 Dispute Resolution. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
13.2.1 Mediation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
13.2.2 Arbitration. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
13.3 Assignment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
13.4 Independent Contractors. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
13.5 Compliance with Laws. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
13.6 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
13.7 Severability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
13.8 Waiver. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
13.9 Force Majeure. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
13.10 Advice of Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
13.11 No Consequential Damages. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
13.12 Complete Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
13.13 Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
</TABLE>
ALLELIX.AURORA COLLABORATION AGREEMENT
JANUARY 21, 1996
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<PAGE> 5
COLLABORATION AGREEMENT
This COLLABORATION AGREEMENT (the "Agreement"), effective as of January 21,
1997, (the "Effective Date"), is made by and between Aurora Biosciences
Corporation, a Delaware corporation, having a principal place of business at
11149 North Torrey Pines Road, La Jolla, California 92037, United States
("Aurora"), and Allelix Biopharmaceuticals Inc., a corporation organized under
the laws of Canada and having a principal place of business at 6850 Goreway
Drive, Mississauga, Ontario, Canada L4V 1V7 ("Allelix").
BACKGROUND
WHEREAS, Aurora designs, develops, and manufactures proprietary fluorescent
bioassay technologies and chemistries used therein for screening systems,
useful for the acceleration of novel drug discovery and to increase the
productivity of drug discovery programs;
WHEREAS, Aurora and Allelix desire to enter into a collaborative research and
development program to develop screens against agreed targets, and use such
screens to identify compounds having activity against one or more of such
targets;
WHEREAS, Allelix will then proceed with a medicinal chemistry program to
develop drug candidates from which pharmaceutical products may be derived, all
in accordance with the terms and conditions set forth below.
NOW, THEREFORE, Aurora and Allelix agree as follows:
ARTICLE 1. DEFINITIONS
The following terms shall have the meanings provided below when used herein:
1.1 "Affiliate" shall mean a person or entity, other than an
entity jointly owned or controlled by the parties, that directly or indirectly
controls, is controlled by, or is under common control with the person or
entity specified. For purposes of this definition, "control" means the direct
or indirect ownership of greater than fifty percent (50%) of the outstanding
shares or other voting rights of the specified entity to elect directors or
other management authority, or if not meeting the preceding, that level of
control which is the maximum ownership right permitted in the jurisdiction
where such entity exists.
1.2 "Agency" shall mean the U.S. Food and Drug Administration
("FDA") or its successor, or an agency of any other government of another
country having jurisdiction over the development, manufacturing, and/or
marketing of pharmaceutical products.
ALLELIX.AURORA COLLABORATION AGREEMENT
JANUARY 21, 1996
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<PAGE> 6
1.3 "Agreement Compound" shall mean any Hit or Derivative.
1.4 "Allelix Technology" shall mean Allelix Patent Rights and
Allelix Know-How.
1.5 "Allelix Patent Rights" shall mean Patent Rights owned,
licensed or Controlled by Allelix (including its Affliates, Licensors or its
Licensees) which relate to Compounds, Agreement Compounds, Aurora Technology,
Derivatives, Hits, Products or Screens.
1.6 "Allelix Know-How" shall mean ***
1.7 "Aurora Technology" shall mean Aurora Reporter Patents and
Aurora Reporter Know-How.
1.8 "Aurora Reporter Patents" shall mean Patent Rights owned or
Controlled by Aurora relating to fluorescent reporters.
1.9 "Aurora Reporter Know-How" shall mean ***
1.10 "Collaboration Committee" or "CC" shall have the meaning set
forth in Section 2.1.
1.11 "Collaboration Period" shall begin on the Effective Date and
last until the third anniversary of the Effective Date, and can extended by
mutual agreement of the parties.
1.12 "Compound" shall mean ***
1.13 "Confidential Information" shall mean information or material
disclosed hereunder by one party (the "Disclosing Party") to the other party
(the "Receiving Party") and as further defined in Section 9.1.
1.14 "Control" or "Controlled" shall mean possession by a party or
its Affiliates of the ability to grant a license or sublicense in accordance
with the terms of this Agreement, and without violating the terms of any
agreement by such party with a Third Party.
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JANUARY 21, 1996
*** CONFIDENTIAL TREAMENT REQUESTED
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<PAGE> 7
1.15 "CPI" shall mean the Consumer Price Index, All Urban
Consumers, as published by the U.S. Bureau of Labor Statistics.
1.16 "Derivative" shall mean *** . It is understood that
"Derivative" shall include any compound derived from another Derivative.
1.17 "Development Candidate" shall mean ***
1.18 "Full Time Equivalent" or "FTE" shall mean the full time
equivalent of one (1) Aurora researcher, based on a minimum of one thousand
seven hundred sixty (1,760) hours per year.
1.19 "Hit" shall mean ***
1.20 "Joint Technology" shall have the meaning set forth in Section
8.1.2.
1.21 "Licensee" shall mean any Third Party (other than an Affiliate
of Allelix) to whom Allelix grants a license, sublicense or other right to
manufacture, use, sell, offer for sale, distribute and/or import one or more
Products or Agreement Compounds.
1.22 "Licensor" shall mean any Third Party that grants Allelix a
license, sublicense or other right to manufacture, use, sell, offer for sale,
distribute and/or import one or more Products or Compounds.
1.23 "Manufacturing Cost" shall mean ***
1.24 "NDA" shall mean a New Drug Application ("NDA") or Product
License Application
ALLELIX.AURORA COLLABORATION AGREEMENT
JANUARY 21, 1996
***CONFIDENTIAL TREATMENT REQUESTED
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<PAGE> 8
("PLA"), as defined in the U.S. Food, Drug, and Cosmetic Act and the
regulations promulgated thereunder, or any equivalent foreign application.
1.25 "Net Royalty Revenue" shall mean all consideration, including
without limitation, royalties, profit sharing, or other payments of any nature,
whether such consideration is in cash, payment in kind, exchange or another
form, received by Allelix, from a Third Party, Licensor, or Licensee in respect
of the sale or other distribution of any Product.
1.26 "Net Sales" shall mean ***
Net Sales shall also include ***
1.27 "Patent Rights" shall mean all U.S. or foreign jurisdiction
(including the European Patent Convention) patent applications, including any
regular, or provisional applications and any continuation (in whole or in
part), division, or substitute thereof, or any equivalent of any of the
foregoing, and any patent issuing thereon, including any reissue,
re-examination, or extension thereof.
1.28 "Phase I," "Phase II," and "Phase III" shall mean Phase I,
Phase II, or Phase III clinical trials, respectively, in each case as
customarily related to applicable FDA Investigational New Drug ("IND")
regulations, or any corresponding foreign statutes, rules, or regulations.
1.29 "Product" shall mean ***
1.30 "Screen" shall mean ***
1.31 "Screen Development Plan" shall have the meaning set forth
in Section 2.2.2.
1.31 "Screening Program" shall have the meaning set forth in
Section 3.1.1.
ALLELIX.AURORA COLLABORATION AGREEMENT
JANUARY 21, 1996
*** CONFIDENTIAL TREATMENT REQUESTED
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<PAGE> 9
1.32 "Screening Supplies" shall have the meaning set forth in
Section 3.2.1.
1.33 "Term" shall have the meaning set forth in Section 12.1.
1.34 "Third Party" shall mean any person or entity other than (i)
Aurora and any of its Affiliates, and (ii) Allelix and any of its Affiliates.
1.35 "Valid Claim" shall mean (a) an issued claim under an issued
patent within the Patent Rights, which has not (i) expired or been canceled,
(ii) been declared invalid by an unreversed and unappealable decision of a
court or other appropriate body of competent jurisdiction, (iii) been admitted
to be invalid or unenforceable through reissue, disclaimer or otherwise, and/or
(iv) been abandoned; or (b) a claim included in a pending patent application
within the Patent Rights that is being actively prosecuted in accordance with
this Agreement and which has not been (i) canceled, (ii) withdrawn from
consideration, (iii) finally determined to be unallowable by the applicable
governmental authority for whatever reason (and from which no appeal is or can
be taken), and/or (iv) abandoned.
1.36 "Validation Criteria" shall mean criteria established pursuant
to Section 2.2.2 for a particular Screen for the assessment of whether such
Screen is suitable for specifically identifying Hits.
ARTICLE 2. SCREEN DEVELOPMENT
2.1 Collaboration Committee.
2.1.1 Responsibilities.
Within thirty (30) days after the Effective Date, Aurora and
Allelix shall establish a committee (the "Collaboration
Committee" or "CC"), to review and coordinate the design and
development of Screens pursuant to Article 2 and the conduct
of Screening Programs pursuant to Article 3.
2.1.2 Membership.
The CC shall be comprised of two (2) representatives from
Allelix and two (2) representatives from Aurora. Each party
may select and replace its CC representatives at any time,
with written notice to the other party. Each party shall each
appoint one of its CC representatives to be responsible for
coordinating
ALLELIX.AURORA COLLABORATION AGREEMENT
JANUARY 21, 1996
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<PAGE> 10
communications between the parties.
2.1.3 Meetings.
During the Collaboration Period, the CC shall meet at least
quarterly, or more often as mutually agreed, in person, by
telephone or televideo conference. Each party shall pay its
own expenses incurred in connection with participation at CC
meetings. With the consent of the parties, other
representatives of Allelix and/or Aurora may attend CC
meetings as nonvoting observers. On an alternating basis, one
party shall promptly prepare and deliver to the members of the
CC minutes in respect thereof, for review and approval by both
parties.
2.1.4 CC Decisions.
Decisions of the CC shall be made by simple majority approval.
In the event that approval is not obtained within the CC, the
undecided matter will be referred to a Business Development
officer of each party, who shall promptly meet in person or by
telephone or by televideo conference to endeavor to resolve
the dispute. In the event such individuals are unable to
resolve such dispute within thirty (30) days, the matter shall
be referred to the Chief Executive Officers or equivalent of
the parties, who shall promptly meet in person or by televideo
conference to endeavor to resolve the dispute. If such
officers are unable to resolve the dispute in a timely manner,
at the request of either party, it shall be settled by binding
arbitration pursuant to Section 13.2 below, or as otherwise
mutually agreed in writing.
2.2 Screen Development.
2.2.1 Screen Selection.
(i) Target Proposals. Within thirty (30) days of
the Effective Date, Allelix will propose in
writing to Aurora at least one molecular
target for a Screen. During each year of the
Collaboration Period, Allelix will propose in
writing to Aurora additional molecular
targets for a total of ***
Screens per year and possibly ***
Screens per year if expanded pursuant to
Section 2.2.1 (ii). For each proposed
molecular target, Allelix will provide Aurora
with a written proposal describing such
target, and a listing of all Patent Rights
identified by Allelix using its reasonable
efforts, relating to such target. Within
ALLELIX.AURORA COLLABORATION AGREEMENT
JANUARY 21, 1996
*** CONFIDENTIAL TREATMENT REQUESTED
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<PAGE> 11
thirty (30) days of receiving such
information, and further information as
Aurora may reasonably request regarding a
proposed molecular target, Aurora shall
notify Allelix in writing whether Aurora
reasonably believes that the development of a
Screen based on the proposed molecular target
is consistent with Aurora's Third Party
obligations and if it is legally feasible
(e.g., infringement of Third Party patent
rights).
(ii) Number of Screens. Each year, during the
Collaboration Period, Aurora shall use
reasonable efforts to develop *** ) Screens
for Allelix, pursuant to the terms and
conditions herein. During the Collaboration
Period, Allelix may, with notice, request
that *** ) Screens be developed by
Aurora per year pursuant to this Agreement,
and with the agreement of the parties Aurora
shall develop such additional Screens.
2.2.2 Screen Development Plans.
(i) Within thirty (30) days of the date of
notification by Aurora to Allelix that a
molecular target is acceptable to Aurora in
accordance with Section 2.2.1 (i), the CC
will meet to review whether the CC reasonably
believes that it is financially and/or
technically feasible to develop a Screen
based on the proposed molecular target. If
the CC determines that it is not feasible to
develop a Screen based on such proposed
target, it shall notify Allelix in writing
thereof, and in such case Aurora shall have
no obligation to develop a Screen based on
such proposed target. If the CC determines
that it is feasible to develop a Screen based
on such proposed target, the CC will develop
a written research and development program,
and schedule for the Screen (in each case, a
"Screen Development Plan"). Each Screen
Development Plan shall also contain the
validation criteria ("Validation Criteria")
and the Hit rate criteria for each Screen.
(ii) Promptly after development of a Screen
Development Plan, the parties will
collaborate and use reasonable efforts to
develop and validate the Screen relating
thereto within the schedule provided in the
Screen Development Plan. Each party agrees
to conduct its respective activities in a
prudent and skillful manner.
ALLELIX.AURORA COLLABORATION AGREEMENT
JANUARY 21, 1996
***CONFIDENTIAL TREATMENT REQUESTED
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<PAGE> 12
2.2.3 Screen Development Reports.
During the course of the development of each Screen,
individuals from Allelix and Aurora, to be appointed by the
CC, will discuss and review monthly, if not more frequently,
the progress of and any issues relating to the development of
each Screen. During the Collaboration Period, the CC will
review and, if necessary, prepare quarterly reports for each
Screen in progress at that time. Each progress report shall
provide a written update of work performed, results achieved
in respect of the Screen development activities, and any other
information desired by the CC.
2.2.4 Screen Validation.
When Aurora completes the development of a Screen which meets
the applicable Validation Criteria, it shall provide the CC
with a written report describing the Screen and the data
demonstrating compliance with the Screen Development Plan and
applicable Validation Criteria and Aurora will submit to
Allelix an invoice for *** ). Within thirty (30) days of
receipt of such invoice, provided that Aurora has satisfied its
obligations under this Section 2.2, Allelix will pay Aurora
*** ).
2.3 Payments for Screen Development.
2.3.1 Funding for Two (2) Screens.
In consideration for Aurora's development of *** Screens each
year during the Collaboration Period, Allelix shall pay to
Aurora *** , in *** installments. The first payment shall
be made on the Effective Date, and subsequent payments shall be
paid to Aurora no later than *** to which such payment
pertains.
2.3.2 Funding for Additional Screens.
If Aurora determines that the expenses which would be incurred
by Aurora with respect to the development of *** ) or more
Screens in any year in the Collaboration Period would exceed
*** ), it shall notify Allelix, and in such event the parties
shall in good faith determine the amount of additional funding
to be provided to Aurora by Allelix for the applicable Screen
development activities. Such additional funding shall be
calculated based on *** and ***
ALLELIX.AURORA COLLABORATION AGREEMENT
JANUARY 21, 1996
***CONFIDENTIAL TREATMENT REQUESTED
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<PAGE> 13
*** Such amount shall be ***
ARTICLE 3. SCREENING PROGRAM
3.1 Screening Program.
3.1.1 Screening by Aurora.
During the Collaboration Period, Aurora shall use each Screen
validated pursuant to Section 2.2.2 to test the activity of
Compounds provided by Allelix or agreed by the parties
pursuant to Section 3.1.2. Aurora shall, with regard to each
such Screen, screen Compounds as determined by the CC and
provide retests of Compounds or putative Hits, and
determination of crude IC50's as determined by the CC (the
"Screening Program").
3.1.2 Compound Supply.
Allelix shall, at its expense, supply to Aurora Compounds
selected by Allelix for a Screening Program. In the event
Allelix desires to have Aurora test in a Screening Program a
Compound (including a library of compounds) owned, accessed or
Controlled by Aurora, the parties agree to negotiate in good
faith the terms and conditions under which such compound may
be screened. Any compounds supplied by Allelix for use in a
Screening Program will be provided to Aurora in 96-well
microtiter plates, in the quantities, form and format as
agreed by the CC. Aurora agrees not to transfer any compounds
received from Allelix for use in connection with the Screening
Program to any Third Party or to use such compounds for
purposes not contemplated herein without Allelix's prior
written consent.
3.1.3 Screening Program Reports.
During the course of each Screening Program, individuals from
Allelix and Aurora, appointed by the CC, will discuss and
review monthly, if not more frequently, the progress and any
issues relating to each Screening Program. During the
Collaboration Period, the CC will review and prepare quarterly
reports for each Screening Program in progress at that time.
Each progress report shall provide a
ALLELIX.AURORA COLLABORATION AGREEMENT
JANUARY 21, 1996
*** CONFIDENTIAL TREATMENT REQUESTED
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<PAGE> 14
written update of work performed, any Hits identified, and all
available supporting data.
3.2 Screening Supplies for Lead Optimization.
3.2.1 Supplies from Aurora.
Upon demonstrating compliance with the Screen Development Plan
and applicable Validation Criteria for a Screen and Aurora
receiving the payment provided for under Section 2.2.4 for such
Screen, Aurora will ship the Screen to Allelix, including
biological materials and samples of reagents required for
Allelix to begin lead optimization or characterization of Hits
identified by Aurora in a Screening Program ("Screening
Supplies"). Allelix may request that Aurora supply Allelix
with additional biological materials and reagents required to
conduct lead optimization or characterization of Hits
identified by Aurora in a Screening Program and within thirty
(30) days of receipt of a written purchase order from Allelix
therefor, Aurora will supply to Allelix agreed quantities of
any biological materials and reagents required to conduct such
lead optimization and Hit characterization. Allelix will pay
Aurora for any such additional Screen Supplies based on a ***
***. Such *** *** shall be consistently calculated in
relation to *** for similar quantities and periods of time.
3.2.2 Shipping.
All Screening Supplies delivered pursuant to the terms of this
Agreement shall be suitably packed for surface or air
shipment, in Allelix's discretion, in Aurora's standard
shipping cartons, and delivered to Allelix or its carrier
agent F.O.B. at a shipping location designated by Aurora and
agreed to by Allelix, at which location risk of loss shall
pass to Allelix. All freight, insurance, and other shipping
expenses, and all applicable taxes, duties and similar
charges, as well as any special packing expenses incurred by
Aurora at the request of Allelix shall be paid by Allelix.
3.2.3 Limited Use.
Allelix may use any Screening Supplies provided hereunder for
use with the Screens solely to conduct lead optimization or
characterization of Hits identified by Aurora in a Screening
Program, subject to the terms and conditions herein; provided,
however,
ALLELIX.AURORA COLLABORATION AGREEMENT
JANUARY 21, 1996
*** CONFIDENTIAL TREATMENT REQUESTED
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<PAGE> 15
that in no event shall Allelix use any Screen or Screening
Supplies on behalf of a Third Party without the prior written
consent of Aurora.
3.3 Screening Payments.
3.3.1 Base Screening Fee.
In partial consideration for Aurora's performance of the
Screening Program in accordance with Article 3, Allelix will
pay to Aurora *** per Screening Program within thirty (30) days
of receipt of an invoice from Aurora. Upon receipt of such
payment, Aurora will proceed with testing Compounds in such
Screening Program pursuant to Section 3.1. Such amount shall
be ***. If such Screening Program exceeds thirty (30) days
***, provided, however, that Aurora notifies Allelix in writing
of the same and Allelix consents in writing to the same. In
the event Allelix does not agree to allow Aurora to continue
the Screen beyond such thirty (30) day period, it shall so
notify Aurora within seven (7) days of the date it receives
the foregoing notice from Aurora. Allelix will be deemed to
have agreed to allow Aurora to continue the Screen beyond the
thirty (30) day period if it fails to provide notice to Aurora
of its decision with respect thereto within the seven (7) day
period. If such Screening Program is completed prior to thirty
(30) days, ***.
Alternatively, Allelix may request in writing to Aurora that
the CC develop and approve an additional screening plan or
lead optimization plan that includes the appropriate amount of
FTE funding for such additional screening or characterization
of Hits. Such request shall be made within seven (7) days of
Aurora's above notification to Allelix.
ARTICLE 4. DEVELOPMENT AND COMMERCIALIZATION
The selection of Hit(s), Derivative(s), Development Candidate(s), and
Product(s) for development and commercialization will be at the discretion of
Allelix. Allelix will, at no expense to Aurora, be responsible for conducting
or arranging all development and commercialization of Product(s).
ALLELIX.AURORA COLLABORATION AGREEMENT
JANUARY 21, 1996
*** CONFIDENTIAL TREATMENT REQUESTED
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<PAGE> 16
Allelix will use reasonable efforts to commercialize Products as expeditiously
as practicable and take such other actions as is necessary and to obtain
government approvals to market the Product(s) in significant markets throughout
the world selected by Allelix, and thereafter to promote or have promoted such
Product(s) and meet the market demand therefor. Allelix will promptly notify
Aurora at such time as any Agreement Compound becomes a Development Candidate,
or otherwise achieves any milestone for which Allelix will owe Aurora a
milestone payment pursuant to Section 6.1. During the period in which an
Agreement Compound or a Product is under development by Allelix (or its
designee), within thirty (30) days of the end of a calendar quarter, or within
fifteen (15) days of receipt of such information from a Third Party, Allelix
agrees to provide Aurora with a written summary of the development progress
made in respect of an Agreement Compound or a Product during such calendar
quarter.
ARTICLE 5. LICENSES
5.1 License to Allelix.
Subject to the terms and conditions of this Agreement, Aurora grants to
Allelix on a Screen-by-Screen basis a world-wide, non-transferable,
non-exclusive license, without the right to grant sublicenses, under
Aurora Technology to make and use any Screen and use any Secreening
Supplies paid for by Allelix under Sections 2.24 and 3.21 for the Term
of this Agreement in such Screen.
5.2 License to Aurora.
Subject to the terms and conditions of this Agreement, Allelix grants
to Aurora, on a Screen-by-Screen basis, a world-wide, non-
transferable, nonexclusive, license under Allelix Technology, without
the right to grant sublicenses, to make and use for Allelix any Screen
under Article 2 or 3 and for the Term of Aurora's performance under
Article 2 or 3.
5.3 No Implied Licenses.
Only those licenses expressly granted in Sections 5.1 and 5.2 shall be
of any force and effect. No license or other right in the Aurora
Technology or Allelix Technology shall be created hereunder by
implication, estoppel, or otherwise.
ALLELIX.AURORA COLLABORATION AGREEMENT
JANUARY 21, 1996
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<PAGE> 17
5.4 Covenant Not to Assert.
***
ARTICLE 6. MILESTONES AND ROYALTIES
6.1 Milestone Payments.
Allelix will pay to Aurora the following amounts upon achievement of
each of the following milestones by Allelix, its Affiliates, its
Licensors, its Licensees, or any party designated by Allelix to
develop Agreement Compounds with respect to the first Hit, Development
Candidate, or Derivative identified through the use of a particular
Screen to reach such milestone:
<TABLE>
<CAPTION>
Milestone Per Screen Payment
-------------------- -------
<S> <C>
*** ***
*** ***
*** ***
*** ***
*** ***
</TABLE>
Allelix will notify Aurora in writing within fifteen (15) days of the
achievement of, or within fifteen (15) days of Allelix receiving
notification from a Third Party of the achievement of any milestones
with respect to which a payment is due to Aurora pursuant to this
Section 6.1. All payments made by Allelix pursuant to this Section
6.1 shall be made within thirty (30) days after achievement of the
applicable milestone. If in the course of compound
ALLELIX.AURORA COLLABORATION AGREEMENT
JANUARY 21, 1996
*** CONFIDENTIAL TREATMENT REQUESTED
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<PAGE> 18
development any of the above Phases are combined, Aurora will receive
the above milestone payments as if each Phase were initiated
separately.
6.2 Royalties to Aurora.
6.2.1 Sales by Licensees.
With respect to Product(s) sold or otherwise distributed by or
on behalf of a Licensee, or a Licensor, Allelix shall pay
Aurora *** of the Net Royalty Revenue received by Allelix from
the Licensee or Licensor in respect of Net Sales; provided,
however, that such amount payable to Aurora pursuant to this
Section 6.2.1 ***
6.2.2 Sales by Allelix or its Affiliates.
Allelix shall pay to Aurora a royalty equal to *** of Net Sales
of Product(s) by Allelix or its Affiliates.
6.2.3 Trade Secret Royalty.
The parties acknowledge that the principal value contributed
by Aurora under this Agreement is the enhanced probability of
identifying leads for human pharmaceutical products (or other
products having commercial value) and the potential to
generate multiple leads, either or both of which the parties
reasonably believe will lessen the time required to bring
pharmaceutical products to market and increase the efficiency
of drug discovery and development processes and technologies.
Additionally, the parties acknowledge that Aurora may not own
or control patent applications or patents covering the
manufacture, sale, use, or importation of a particular
Agreement Compound or Product. Allelix acknowledges and
agrees that the value it receives hereunder is in the access
and use of the Screens and the Aurora Technology.
Accordingly, Allelix agrees to pay those royalties and other
amounts at the applicable rate specified in this Section 6.2,
regardless of whether a Product is covered by a patent
application or patent within the Aurora Technology.
6.2.4 Royalty Term.
Allelix's obligation to pay royalties to Aurora pursuant to
this Section 6.2 shall continue on a Product-by-Product and
country-by-country basis until ***
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***
6.2.5 Other Revenues.
In the event that Allelix or an Allelix Affiliate receives an
up front payment from a Third Party for any rights (including
intellectual property or marketing rights) for Product(s) or
Agreement Compound(s), Aurora may elect one of the following
payment schedules:
(i) Aurora will receive the milestone payments, as
those milestones are satisfied according to
Section 6.1; or
(ii) Aurora will receive *** of any up front payment
(including cash, payment in kind, equity in such
Third Party, premium on equity purchased by such
Third Party or any other form) by a Third Party to
Allelix or an Allelix Affiliate for any rights
(including intellectual property or marketing
rights) for Product(s) or Agreement Compound(s).
Provided, however, Allelix shall not be obligated
to pay Aurora any portion of any up front payment
paid to Allelix or an Allelix Affiliate by a Third
Party specifically allocated to the future
research and development of such Product(s) or
Agreement Compound(s); provided, further, that
Allelix shall not be obligated to pay Aurora any
milestone payment under Section 6.1 that is due
after the date Aurora receives such up front
payment under this Section 6.2.5 (ii) and that any
milestone payments paid by Allelix to Aurora for
such Product(s) or Agreement Compound(s) under
Section 6.1 prior to Aurora receiving such up
front payment under this Section 6.2.5 (ii) shall
be deducted from such up front payment to be paid
by Allelix to Aurora.
Allelix will report in writing to Aurora the amount of any
such up front payment within fifteen (15) days of receiving
such payment. After receipt of such report, Aurora will
notify Allelix in writing of its election under this Section
6.2.5 within fifteen (15) days.
ARTICLE 7. PAYMENTS; BOOKS AND RECORDS
7.1 Royalty Reports.
After the first commercial sale of a Product on which royalties are
payable hereunder to
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Aurora by Allelix, Allelix shall make quarterly written reports to
Aurora within thirty (30) days after the end of each calendar quarter
or fifteen (15) days from the receipt of such information from a Third
Party, stating in each such report, on a country-by-country basis, the
number, description, and aggregate Net Sales of each Product sold in a
country during the calendar quarter upon which a royalty is payable
under Section 6.2 above.
7.2 Screen Development and Screening Payments.
Any payments due pursuant to Sections 2.2.4, 3.2.1, 3.3.1, 6.1, or 6.2
shall be paid within thirty (30) days of receipt of an invoice
therefor.
7.3 Payment Method.
All payments due under this Agreement shall be made by bank wire
transfer when due in immediately available funds to an account
designated by Aurora. Any payments that are not paid on the date such
payments are due under this Agreement shall bear interest to the
extent permitted by applicable law at the prime rate as reported by
the Bank of America, San Francisco, on the date such payment is due,
plus an additional two percent (2%) per annum, calculated on the
number of days such payment is delinquent.
7.4 Currency Conversion.
All payments outlined in this Agreement are in U.S. Dollars. If any
currency conversion shall be required in connection with the
calculation of royalties or any other payments hereunder, such
conversion shall be made using the selling exchange rate for
conversion of the foreign currency into U.S. Dollars, quoted for
current transactions as reported in The Wall Street Journal for the
last reported day of the calendar quarter to which such payment
pertains.
7.5 Records; Inspection.
Allelix and its Affiliates shall keep complete, true, and accurate
books of account and records for the purpose of determining the royalty
amounts payable under this Agreement. Such books and records shall be
kept at the principal place of business of such party for at least
three (3) years following the end of the calendar quarter to which they
pertain. Such records will be open for inspection during such three
(3) year period by an accounting firm appointed by Aurora. Such
inspections may be made no more than once each calendar year, at
reasonable times and on reasonable notice. Inspections conducted under
this Section 7.5 shall be at the expense of Aurora, unless a variation
or error producing *** of the amount stated for any period covered by
the inspection is established in the course of any such inspection,
whereupon all costs relating to the inspection for such period and any
unpaid amounts that are discovered will be paid promptly by Allelix,
together
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with interest thereon from the date such payments were due at the
prime rate as reported by the Bank of America, San Francisco,
California, plus an additional two percent (2%) per annum.
7.6 Tax Matters.
All royalty amounts required to be paid to Aurora pursuant to this
Agreement shall be paid without deduction for withholding for or on
account of any taxes, including any sales, use, value added, or
transfer tax, or similar governmental charge imposed by a jurisdiction
other than the United States. Payment of any such tax or similar
governmental charge, including any due in connection with the transfer
of the Screens hereunder, shall be the sole responsibility of Allelix.
In the event that Aurora is required to pay any such tax or other
similar charge, Allelix shall promptly reimburse Aurora for payment of
such amounts.
7.7 Refunds or Credits.
Any payment made to Aurora pursuant to this Agreement shall be
non-refundable and shall be creditable only against another payment
payable hereunder in the case of early completion of a Screening
Program as outlined in Section 3.3.1.
ARTICLE 8. INTELLECTUAL PROPERTY
8.1 Ownership.
8.1.1 Sole Ownership.
Allelix shall be the sole owner of all intellectual property
conceived and reduced to practice or otherwise developed
solely by its employees and agents, and all patent
applications and patents claiming such intellectual property;
provided, however, that intellectual property relating to
improvements to Aurora Technology will be assigned by Allelix
to Aurora. Aurora shall be the sole owner of any intellectual
property conceived and reduced to practice or otherwise
developed solely by its employees and agents and all patent
applications and patents claiming such intellectual property;
provided, however, that intellectual property derived from
Compounds provided by Allelix, including but not limited to
information contained in the quarterly reports prepared by the
CC provided for in Section 3.1.3, and relating to the use of
Agreement Compounds and Products will be assigned by Aurora to
Allelix.
8.1.2 Joint Technology.
If, during the Collaboration Period, one or more employees or
consultants of Aurora,
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together with one or more employees or consultants of Allelix,
jointly conceive any intellectual property (the "Joint
Technology"), each of the parties shall own an undivided
one-half interest in the Joint Technology; provided, however,
that Joint Technology relating to Aurora Technology will be
assigned by Allelix to Aurora; provided, further, that
intellectual property derived from Compounds provided by
Allelix and relating to the use of Agreement Compounds and
Products will be assigned by Aurora to Allelix.
8.1.3 U.S. Law.
Inventorship and rights of ownership with respect to Aurora
Technology, Allelix Technology, and Joint Technology shall be
determined in accordance with the patent laws of the United
States.
8.1.4 Retained Rights.
Except as otherwise expressly provided in this Agreement,
nothing in this Agreement is intended to convey or transfer
ownership by one party to the other of any rights, title or
interest in any Confidential Information, technology or
Patents Rights owned or Controlled by a party. Except as
expressly provided for in this Agreement, nothing in this
Agreement shall be construed as a license or sublicense by one
party to the other of any rights in any technology or Patent
Rights owned or Controlled by a party or its Affiliates.
8.2 Patent Filing and Prosecution.
8.2.1 Cooperation.
Allelix and Aurora shall consult together upon all matters
relating to the filing, prosecution, and maintenance of
patents within Joint Technology. This shall include giving
the other party the opportunity to review and comment upon the
text of any priority application before filing; consultation
about the decision whether or not to foreign file, and if so,
in which countries; and giving the other party the
opportunity, as far in advance of filing dates as feasible, to
fully review and comment on the basic foreign filing text.
Each party shall provide to the other copies of any search
reports and official actions, including notice of all
interferences, reissues, re-examinations, and oppositions
received from the relevant patent offices promptly after
receipt. Each party shall reasonably cooperate with and
assist the other in connection with activities subject to this
Section 8.2.1, at the other's request. Each party shall
execute and procure that its employee inventors shall execute
all documents reasonably required in connection with the
filing, prosecution, or maintenance of patents within the
Joint
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Technology. Patent counsel designated by each party will meet
in person or by telephone or video conference at least on a
semi-annual basis during (i) the Collaboration Period, and
(ii) the pendency of any of the patent applications within the
scope of this Section 8.2.1 to coordinate, discuss, review,
and implement patent filing and prosecution strategy.
8.2.2 Failure to Prosecute.
Either party may elect upon sixty (60) days prior notice to
discontinue prosecution or maintenance of any patent within
Joint Technology in any or all countries. In such case, the
other party shall have the right to prosecute and maintain
such patent applications and patents in such countries it
deems appropriate, at its sole expense.
8.3 Enforcement.
Allelix and Aurora shall separately have the right, but not the
obligation, to bring proceedings against any Third Party for the
inappropriate use, including patent infringement, of technology, trade
secrets or Patent Rights solely owned or Controlled by it, and at its
own risk and expense. Such party shall be entitled to retain any and
all awards or damages obtained in any such proceeding. At the request
and expense of either party, the other party shall give the requesting
party all reasonable assistance required to file and conduct any such
proceeding. For Joint Technology, Allelix and Aurora shall use their
best efforts to coordinate pursuing a commercially reasonable action
to address inappropriate use, including patent infringement, by third
parties of such Joint Technology and to determine how expenses and any
recovery from such action shall be allocated between the parties.
Allelix, as a non-exclusive licensee, will make reasonable efforts to
provide Aurora with any information known to Allelix relating to the
suspected or actual inappropriate use, including patent infringement,
of the Aurora Technology.
8.4 Defense of Infringement Claims.
8.4.1 Claims Relating to Agreement Compounds and Products.
Aurora will cooperate with Allelix, at Allelix's expense, in
the defense of any suit, action or proceeding against Aurora
and its Affiliates, or Allelix and its Affiliates, Licensees
or Licensors alleging the infringement of the intellectual
property rights of a Third Party by reason of the manufacture,
use or sale of a Product by Allelix. Allelix shall give
Aurora prompt written notice of the commencement of any such
suit, action, proceeding or claim of infringement. Aurora
shall give to Allelix all authority, information and
assistance necessary to defend or settle any such suit, action
or proceeding; provided, however, that if Aurora or its
Affiliates or licensees should join in any such suit, action
or proceeding pursuant to this Section 8.4.1 and at
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the request of Allelix but subject to Section 11.2, Allelix
shall hold Aurora or any such Affiliate or licensee, as
applicable, free, clear and harmless from any and all costs
and expenses of such litigation, including reasonable
attorneys' fees. Allelix shall have the right to control the
conduct and settlement of any such litigation; provided,
however, that (i) Allelix shall not enter into any settlement
of such claim, suit, or proceeding which admits or concedes
that any aspect of the Aurora Technology or Joint Technology
is invalid or unenforceable without the prior written consent
of Aurora.
8.4.2 Claims Relating to Aurora Technology.
Allelix will cooperate with Aurora, at Aurora's expense, in
the defense of any suit, action or proceeding against Aurora
or its Affiliates alleging the infringement of the
intellectual property rights of a Third Party by reason of
Aurora's use of any Aurora Patent Rights and Aurora Technology
in performing its obligations to Allelix under this Agreement.
Aurora shall give Allelix prompt written notice of the
commencement of any such suit, action, proceeding or claim of
infringement. Allelix shall give to Aurora all authority,
information and assistance necessary to defend or settle any
such suit, action or proceeding; provided, however, that if
Allelix should join in any such suit, action or proceeding
pursuant to this Section 8.4.2 and at the request of Aurora,
but subject to Section 11.1, Aurora shall hold Allelix free,
clear and harmless from any and all costs and expenses of such
litigation, including reasonable attorneys' fees.
ARTICLE 9. CONFIDENTIALITY
9.1 Confidential Information.
Except as expressly provided herein, the parties agree that, for the
Term of this Agreement and for five (5) years thereafter, the
Receiving Party, except as expressly provided in this Article 9, shall
not disclose to any Third Party or use for any purpose any
Confidential Information of the Disclosing Party, except to the extent
that it can be established by the Receiving Party by competent proof
that such information:
(i) was already known to the Receiving
Party, other than under an
obligation of confidentiality, at
the time of disclosure;
(ii) was generally available to the
public or otherwise part of the
public domain at the time of its
disclosure to the Receiving Party;
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(iii) became generally available to the
public or otherwise part of the
public domain after its disclosure
and other than through any act or
omission of the Receiving Party in
breach of this Agreement;
(iv) was independently developed by the
Receiving Party;
(v) was, subsequently, lawfully
disclosed to the Receiving Party by
a person other than the Disclosing
Party; or
(vi) was approved in writing by the
Disclosing Party for public
disclosure by the Receiving Party.
9.2 Permitted Use and Disclosures.
Each party hereto may use or disclose Confidential Information
disclosed to it by the other party to the extent such information is
included in the Aurora Technology, Allelix Technology or Joint
Technology, and to the extent such use or disclosure is reasonably
necessary and permitted in the exercise of the rights granted
hereunder in filing or prosecuting patent applications, prosecuting or
defending litigation, complying with applicable governmental
regulations, or court orders or otherwise submitting information to
tax or other governmental authorities, conducting clinical trials, or
making a permitted sublicense or otherwise exercising license rights
expressly granted to the other party pursuant to the terms of this
Agreement, provided that if a party is required to make any such
disclosure of the other party's Confidential Information, other than
pursuant to a confidentiality agreement, it will give reasonable
advance notice of such disclosure to the other party and, save to the
extent inappropriate in the case of patent applications, will use its
reasonable efforts to secure confidential treatment of such
Confidential Information in consultation with the other party prior to
such disclosure (whether through protective orders or otherwise) and
disclose only the minimum necessary to comply with such requirements.
9.3 Nondisclosure of Terms.
Each of the parties hereto agrees not to disclose to any Third Party
the terms of this Agreement without the prior written consent of the
other party hereto, except to such party's attorneys, advisors,
investors, and others on a need-to-know basis under circumstances that
reasonably ensure the confidentiality thereof, or to the extent
required by law. Notwithstanding the foregoing, the parties shall
agree upon a press release to announce the execution of this
Agreement. Thereafter, Aurora and Allelix may each disclose to Third
Parties the information contained in such press release without the
need for further approval
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by the other. In addition, Aurora may (i) make public statements
regarding Development Candidates or Products by announcing the
achievement of milestones and fees therefor, following consultation
with Allelix and with the written consent of Allelix to the form and
content of the public statement, and (ii) without the prior consent of
Allelix, make public statements regarding the overall success rate(s)
achieved by and/or for its customers with the use of Aurora
Technology, and Allelix Technology, provided it may not disclose any
Screens or Allelix's identity. Allelix shall be free to make public
statements, press releases, and the like with respect to Agreement
Compounds, Development Candidates, and Products.
ARTICLE 10. REPRESENTATIONS AND WARRANTIES
10.1 Allelix.
As of the Effective Date, Allelix warrants and represents on its own
behalf and on behalf of its Affiliates that: (i) it has the legal
power, authority and right to enter into this Agreement, and to
perform all of its obligations hereunder; (ii) it has the legal right
and power to extend to Aurora the rights granted in this Agreement;
and (iii) to the best of its knowledge as of the Effective Date, there
are no existing or threatened actions, suits, or claims pending
against it with respect to the Allelix Technology.
10.2 Aurora.
As of the Effective Date, Aurora represents and warrants that: (i) it
has the full legal power, authority, and right to enter into this
Agreement, and to perform all of its obligations hereunder; (ii) it
has the legal right and power to extend the rights to Allelix granted
in this Agreement; and (iii) to the best of its knowledge as of the
Effective Date, there are no existing or threatened actions, suits, or
claims pending against it with respect to the Aurora Technology.
10.3 Disclaimer.
EXCEPT AS OTHERWISE EXPRESSLY SET FORTH IN THIS AGREEMENT, AURORA AND
ALLELIX MAKE NO REPRESENTATIONS AND EXTEND NO WARRANTIES OR CONDITIONS
OF ANY KIND, EITHER EXPRESS OR IMPLIED, STATUTORY OR OTHERWISE, WITH
RESPECT TO AURORA TECHNOLOGY, ALLELIX TECHNOLOGY, SCREENS, COMPOUNDS,
AGENTS, DEVELOPMENT CANDIDATES, DERIVATIVES, PRODUCTS, OR INFORMATION
DISCLOSED INCLUDING, BUT NOT LIMITED TO, WARRANTIES OF
MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, VALIDITY OF ANY
AURORA TECHNOLOGY OR ALLELIX TECHNOLOGY, PATENTED OR UNPATENTED, OR
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NONINFRINGEMENT OF THE INTELLECTUAL PROPERTY RIGHTS OF THIRD PARTIES.
ARTICLE 11. INDEMNIFICATION
11.1 Allelix.
Allelix agrees to indemnify, defend, and hold Aurora, its Affiliates,
and the directors, officers, employees, and agents of each of them
(the "Aurora Indemnitees") harmless from and against any losses,
costs, claims, damages, liabilities or expenses (including reasonable
attorneys' and professional fees and court and other expenses of
litigation) (collectively, "Liabilities") arising out of or in
connection with Third Party claims relating to (i) any Agreement
Compounds or Products developed, manufactured, used, sold, or
otherwise distributed by or on behalf of Allelix, its Affiliates,
Licensors, Licensees, or other designees (including, without
limitation, product liability claims), (ii) the possession and/or use
by Aurora of any Compounds or Compound libraries provided by Allelix
to Aurora hereunder; (iii) the performance (by any party other than
Aurora) of Screens by or on behalf of Allelix; or (iv) any breach by
Allelix of its obligations under or the representations and warranties
made in this Agreement, except, in each case, to the extent such
Liabilities result from the negligence or intentional misconduct of
Aurora.
11.2 Aurora.
Aurora agrees to indemnify, defend, and hold Allelix, its Affiliates,
Licensors and Licensees, and the directors, officers, employees, and
agents of each of them (the "Allelix Indemnitees") harmless from and
against any Liabilities arising out of or in connection with Third
Party claims relating to ***
11.3 Procedure.
In the event that any Indemnitee intends to claim indemnification
under this Article 11, it shall promptly notify the other party in
writing of such alleged Liability. The indemnifying party shall have
the right to control the defense thereof using counsel of its choice;
provided,
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however, that any Indemnitee shall have the right to retain its own
counsel at its own expense, for any reason, including if
representation of any Indemnitee by the counsel retained by the
indemnifying party would be inappropriate due to actual or potential
differing interests between such Indemnitee and any other party
reasonably represented by such counsel in such proceeding. The
affected Indemnitees shall cooperate with the indemnifying party and
its legal representatives in the investigation of any action, claim,
or liability covered by this Article 11. The indemnified party shall
not, except at its own cost, voluntarily make any payment or incur any
expense with respect to any claim or suit without the prior written
consent of the indemnifying party, which such party shall not be
required to give.
ARTICLE 12. TERM AND TERMINATION
12.1 Term.
The term of this Agreement shall begin as of the Effective Date and,
unless terminated earlier as provided in this Article 12, continue in
full force and effect until the expiration of the royalty payments due
under this Agreement (the "Term").
12.2 Termination for Cause.
Either party hereto may terminate this Agreement in the event the
other party has materially breached or defaulted in the performance of
any of its material obligations hereunder, and such default shall have
continued for thirty (30) days after written notice thereof was
provided to the breaching party by the nonbreaching party. Any
termination shall become effective at the end of such thirty (30) day
period, unless the breaching party has cured any such breach or
default prior to the expiration of the thirty (30) day cure period or
has provided a written plan to cure any such breach or default that is
acceptable to the other party.
12.3 Termination for Insolvency.
If voluntary or involuntary proceedings by or against a party are
instituted in bankruptcy under any insolvency law, or a receiver or
custodian is appointed for such party, or proceedings are instituted
by or against such party for corporate reorganization or the
dissolution of such party, which proceedings, if involuntary, shall
not have been dismissed within sixty (60) days after the date of
filing, or if such party makes an assignment for the benefit of
creditors, or substantially all of the assets of such party are seized
or attached and not released within sixty (60) days thereafter, the
other party may immediately terminate this
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Agreement effective upon giving notice of such termination to such
party.
12.4 Permissive Termination.
During the Collaboration Period, Allelix shall have the right to
terminate this Agreement with six (6) months written notice. Upon
such notice, Aurora's obligations to provide screen development and
screening services will be fulfilled, and all Screen Development Plans
and Screening Programs in progress shall terminate.
12.5 Effect of Breach or Termination.
12.5.1 Accrued Obligations.
Termination of this Agreement for any reason shall not release
any party hereto from any liability which, at the time of such
termination, has already accrued to the other party or which
is attributable to a period prior to such termination nor
preclude either party from pursuing all rights and remedies it
may have hereunder or at law or in equity with respect to any
breach of this Agreement.
12.5.2 Return of Confidential Information.
In the event of termination, but not expiration, of this
Agreement, Aurora and Allelix shall promptly return to the
other party all Confidential Information received from the
other party (except one (1) copy of which may be retained for
archival purposes), and neither party shall be entitled to use
any Confidential Information of the other party for any
purpose during the Term such Confidential Information is to
remain confidential, as provided in Section 9.1. Upon any
such termination all materials provided by Allelix to Aurora,
including but not limited to Compounds, shall be returned to
Allelix or destroyed at the discretion of Allelix. For any
termination by Aurora for cause, all materials provided by
Aurora to Allelix shall be returned to Aurora or destroyed at
the discretion of Aurora.
12.5.3 Licenses.
The licenses granted to Allelix and Aurora hereunder shall
terminate in the event of termination of this Agreement;
provided, however, that in the event that Allelix shall
terminate with cause under Section12.2 or permissive
termination under Section 12.4, the licenses granted by Aurora
to Allelix under Section 5.1 shall remain in effect.
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12.6 Survival.
Sections 5.3, 5.4, 10.3, 12.5 and 12.6, and Articles 1, 6, 7, 8, 9, 11
and 13 shall survive expiration or termination of this Agreement for
any reason.
ARTICLE 13. MISCELLANEOUS
13.1 Governing Law.
This Agreement and any dispute arising from the construction,
performance, or breach hereof shall be governed by, construed, and
enforced in accordance with the laws of the State of Colorado, without
reference to conflicts of laws principles.
13.2 Dispute Resolution.
13.2.1 Mediation.
In the event of any dispute or claim arising out of or related
to this Agreement, the parties will attempt in good faith to
resolve such dispute or claim by mediation in Denver,
Colorado, in accordance with the American Arbitration
Association Commercial Mediation Rules. Nothing herein,
however, shall prohibit either party from initiating
arbitration proceedings pursuant to Section 13.2.2, if such
party would be substantially prejudiced by a failure to act
during the time that such good faith efforts are being made to
resolve the dispute or claim through negotiation or mediation.
The costs of mediation shall be shared equally by the parties
to the mediation.
13.2.2 Arbitration.
Any dispute or claim arising out of or related to this
Agreement, or the interpretation, making, performance, breach,
validity, or termination hereof, which has not been resolved
by negotiation or mediation as set forth above, shall be
finally settled by binding arbitration in Denver, Colorado
under the Commercial Arbitration Rules and the Supplementary
Procedures for Large Complex Disputes of the American
Arbitration Association (together the "AAA Rules") by one
arbitrator appointed in accordance with the AAA Rules. The
arbitration proceedings shall be governed procedurally by
federal arbitration law and by the AAA Rules, without
reference to
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state arbitration law, and at the request of either party, the
arbitrator will enter an appropriate protective order to
maintain the confidentiality of information produced or
exchanged in the course of the arbitration proceedings. The
judgment of the arbitrator shall be in the form of a reasoned,
written opinion, and shall be issued within sixty (60) days of
the conclusion of the arbitration proceeding. Judgment on the
award rendered by the arbitrator may be entered in any court
of competent jurisdiction. The parties may apply to any court
of competent jurisdiction for a temporary restraining order,
preliminary injunction, or other interim relief, as necessary,
without breach of this arbitration provision and without any
abridgment of the powers of the arbitrator. The arbitrator
may award to the prevailing party, if any, as determined by
the arbitrator, its costs and fees, including, without
limitation, AAA administrative fees, arbitrator fees, travel
expenses, out-of-pocket expenses, witness fees, and
reasonable attorneys' fees.
13.3 Assignment.
This Agreement shall not be assignable by either party to any Third
Party without the written consent of the other party hereto; provided,
however, that either party may assign this Agreement, without the
other's consent, to an entity that acquires all or substantially all
of the business or assets of such party to which this Agreement
pertains, whether by merger, reorganization, operation of law,
acquisition, sale, or otherwise. In the event that Aurora assigns
this Agreement, without Allelix's consent, to an entity that acquires
all or substantially all of the business or assets of Aurora, whether
by merger, reorganization, operation of law, acquisition, sale or
otherwise, Allelix may terminate this Agreement immediately by notice
in writing to Aurora. This Agreement shall be binding upon and inure
to the benefit of any permitted assignee or other transferee, and any
such party shall agree to perform the obligations of the assignor or
transferor.
13.4 Independent Contractors.
The relationship of the parties hereto is that of independent
contractors. Neither party hereto is to be deemed to be an agent,
partner, or joint venturer of the other party for any purpose as a
result of this Agreement or the transactions contemplated thereby.
13.5 Compliance with Laws.
In exercising their rights under this Agreement, the parties shall
fully comply in all material respects with the requirements of any and
all applicable laws, regulations, rules, and orders of any
governmental body having jurisdiction over the exercise of rights
under this Agreement,
ALLELIX.AURORA COLLABORATION AGREEMENT
JANUARY 21, 1996
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<PAGE> 32
including, without limitation, those applicable to the discovery,
development, manufacture, distribution, import and export, and sale of
pharmaceutical products.
13.6 Notices.
Legal notices, requests, and other communications hereunder shall be
in writing and shall be delivered personally or by registered or
certified mail, return receipt requested, postage prepaid, in each
case to the respective address specified below or such other address
as may be specified in writing to the other party hereto, and shall be
deemed to have been given upon receipt:
If to Aurora: Aurora Biosciences Corporation
11149 North Torrey Pines Road
La Jolla, CA 92037 U.S.A.
Attn.: President and CEO
CC: Legal and Business Development
If to Allelix: Allelix Biopharmaceuticals Inc.
6850 Goreway Drive
Mississauga, Ontario L4V 1V7 Canada
Attn.: President and CEO
13.7 Severability.
In the event that any provision of this Agreement becomes or is
declared by a court of competent jurisdiction to be illegal,
unenforceable or void, this Agreement shall continue in full force and
effect to the fullest extent permitted by law without said provision,
and the parties shall amend the Agreement to the extent feasible to
lawfully include the substance of the excluded term to as fully as
possible realize the intent of the parties and their commercial
bargain.
13.8 Waiver.
It is agreed that no waiver by either party hereto of any breach or
default of any of the covenants or agreements herein set forth shall
be deemed a waiver as to any subsequent and/or similar breach or
default. No waiver shall be effective unless in a writing signed by
the party having the waived right.
ALLELIX.AURORA COLLABORATION AGREEMENT
JANUARY 21, 1996
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<PAGE> 33
13.9 Force Majeure.
Nonperformance of any party shall be excused to the extent that
performance is rendered impossible by strike, fire, earthquake, flood,
governmental acts or orders or restrictions, failure of suppliers, or
any other reason where failure to perform is beyond the reasonable
control and not caused by the negligence or intentional conduct or
misconduct of the nonperforming party, provided such party uses its
best efforts to resume performance as promptly as possible.
13.10 Advice of Counsel.
This Agreement has been negotiated by the parties and their respective
counsel and shall be fairly interpreted in accordance with its terms
and without any rules of construction relating to which party drafted
the Agreement being applied in favor or against either party.
13.11 No Consequential Damages.
IN NO EVENT SHALL EITHER PARTY TO THIS AGREEMENT HAVE ANY LIABILITY TO
THE OTHER FOR ANY SPECIAL, CONSEQUENTIAL, OR INCIDENTAL DAMAGES
ARISING UNDER THIS AGREEMENT UNDER ANY THEORY OF LIABILITY.
13.12 Complete Agreement.
This Agreement, constitutes the entire agreement, both written and
oral, between the parties with respect to the subject matter hereof,
and all prior agreements respecting the subject matter hereof, either
written or oral, expressed or implied, shall be abrogated, canceled,
and are null and void and of no effect. No amendment or change hereof
or addition hereto shall be effective or binding on either of the
parties unless reduced to writing and executed by a duly authorized
representative of each of Aurora and Allelix.
13.13 Counterparts.
This Agreement may be executed in counterparts, each of which shall be
deemed to be an original and all of which together shall be deemed to
be one and the same agreement.
ALLELIX.AURORA COLLABORATION AGREEMENT
JANUARY 21, 1996
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<PAGE> 34
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed by their authorized representatives and delivered in duplicate
originals as of the Effective Date.
AURORA BIOSCIENCES CORPORATION ALLELIX BIOPHARMACEUTICALS INC.
By: By:
---------------------- --------------------------
Name: J. Gordon Foulkes Name: Graham Strachan
Title: Chief Technical Officer Title: President and CEO
ALLELIX.AURORA COLLABORATION AGREEMENT
JANUARY 21, 1996
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<PAGE> 1
EXHIBIT 23.1
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the reference to our firm under the captions "Selected
Financial Data" and "Experts" and to the use of our report dated April 7, 1997
(except Note 11, as to which the date is April 25, 1997), in Amendment No. 2 to
the Registration Statement (Form S-1 No. 333-23407) and related Prospectus of
Aurora Biosciences Corporation for the registration of 3,450,000 shares of its
common stock.
ERNST & YOUNG LLP
San Diego, California
May 23, 1997
