<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED June 30, 1998
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File Number: 0-22669
---------
AURORA BIOSCIENCES CORPORATION
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 33-0669859
- --------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
11010 Torreyana Road, San Diego, CA 92121
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip code)
(619) 452-5000
- --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days. Yes [X] No [ ]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Outstanding at
Class July 31, 1998
----- -------------
Common Stock, $.001 par value 16,964,627
<PAGE> 2
AURORA BIOSCIENCES CORPORATION
FORM 10-Q
INDEX
<TABLE>
<CAPTION>
Page No.
--------
<S> <C>
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
Balance Sheets - June 30, 1998 (Unaudited) and December 31, 1997......................................................3
Statements of Operations (Unaudited) - Three and six months ended June 30, 1998 and 1997..............................4
Statements of Cash Flows (Unaudited) - Six months ended June 30, 1998 and 1997........................................5
Notes to Financial Statements (Unaudited).............................................................................6
ITEM 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.....................................................................................8
PART II. OTHER INFORMATION
ITEM 2. Changes in Securities and Use of Proceeds.......................................................................12
ITEM 4. Submission of Matters to a Vote of Security Holders.............................................................12
ITEM 5. Other Information...............................................................................................13
ITEM 6. Exhibits and Reports on Form 8-K................................................................................13
SIGNATURE.....................................................................................................................14
</TABLE>
2
<PAGE> 3
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
AURORA BIOSCIENCES CORPORATION
BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
------------ ------------
(Unaudited) (Note)
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 8,558,723 $ 23,168,690
Investment securities, available-for-sale 30,847,228 25,737,734
Accounts receivable under collaborative agreements 1,851,916 3,207,166
Prepaid expenses 962,079 563,017
Other current assets 1,356,532 763,330
------------ ------------
Total current assets 43,576,478 53,439,937
Equipment, furniture and leaseholds, net 9,166,699 6,691,939
Notes receivable from officers and employees 290,000 290,000
Restricted cash 1,064,534 1,311,923
Other assets 2,246,400 1,302,033
------------ ------------
$ 56,344,111 $ 63,035,832
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 2,850,638 $ 1,111,946
Accrued compensation 404,164 278,852
Other current liabilities 71,334 227,778
Unearned revenue 1,639,126 2,324,001
Capital lease obligations, current portion 1,555,597 1,153,185
------------ ------------
Total current liabilities 6,520,859 5,095,762
Capital lease obligations, less current portion 4,264,540 3,421,652
Other noncurrent liabilities 155,528 154,346
Stockholders' equity:
Common stock, $.001 par value, 50,000,000 shares authorized, 16,976,685 and
17,032,885 shares issued and outstanding at June 30, 1998 and December
31, 1997, respectively 16,977 17,033
Additional paid-in capital 61,232,192 60,497,472
Deferred compensation (2,551,396) (3,072,560)
Accumulated deficit (13,294,589) (3,077,873)
------------ ------------
Total stockholders' equity 45,403,184 54,364,072
------------ ------------
$ 56,344,111 $ 63,035,832
============ ============
</TABLE>
Note: The balance sheet at December 31, 1997 has been derived from the
audited financial statements at that date but does not include all of
the information and footnotes required by generally accepted accounting
principles for complete financial statements.
See accompanying notes.
3
<PAGE> 4
AURORA BIOSCIENCES CORPORATION
STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
1998 1997 1998 1997
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Revenue:
Screening systems $ 2,477,500 $ 598,000 $ 3,540,000 $ 1,248,000
Screening services 1,158,639 942,500 2,481,360 1,347,500
License fees 1,762,500 487,500 3,025,000 975,000
------------ ------------ ------------ ------------
Total revenue 5,398,639 2,028,000 9,046,360 3,570,500
Operating expenses:
Cost of screening systems 4,276,648 1,578,871 7,481,452 2,266,483
Cost of screening services 746,886 519,321 1,495,795 806,761
Research and development 6,210,560 932,241 8,952,079 1,843,070
Selling, general and administrative 1,238,537 752,213 2,436,354 1,394,381
------------ ------------ ------------ ------------
Total operating expenses 12,472,631 3,782,646 20,365,680 6,310,695
------------ ------------ ------------ ------------
Loss from operations (7,073,992) (1,754,646) (11,319,320) (2,740,195)
Interest income 674,671 228,659 1,416,029 431,842
Interest expense (162,649) (76,559) (313,425) (135,821)
------------ ------------ ------------ ------------
Net loss $ (6,561,970) $ (1,602,546) $(10,216,716) $ (2,444,174)
============ ============ ============ ============
Basic and diluted loss per share $ (0.40) $ (0.50) $ (0.63) $ (1.10)
============ ============ ============ ============
Shares used in computing basic and diluted loss per
share 16,224,464 3,206,709 16,120,264 2,227,420
============ ============ ============ ============
</TABLE>
See accompanying notes.
4
<PAGE> 5
AURORA BIOSCIENCES CORPORATION
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended June 30,
1998 1997
------------ ------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net loss $(10,216,716) $ (2,444,174)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization 1,012,313 346,601
Amortization of deferred compensation 521,164 332,167
Changes in operating assets and liabilities:
Accounts receivable under collaborative agreements 1,355,250 368,523
Prepaid expenses and other current assets (992,264) (764,700)
Accounts payable and accrued compensation 1,864,004 311,810
Other current liabilities (156,444) --
Unearned revenue (684,875) 387,500
Other noncurrent liabilities 1,182 --
------------ ------------
Net cash used in operating activities (7,296,386) (1,462,273)
INVESTING ACTIVITIES:
Purchases of investment securities (18,359,494) (1,485,021)
Sales and maturities of investment securities 13,250,000 5,721,273
Purchases of equipment, furniture and leaseholds (1,560,151) (107,384)
Notes receivable from officers and employees -- (77,000)
Restricted cash 247,389 --
Other assets (944,367) (384,460)
------------ ------------
Net cash (used in) provided by investing activities (7,366,623) 3,667,408
FINANCING ACTIVITIES:
Cost of convertible preferred stock, net -- (36,528)
Issuance of common stock, net 734,664 36,934,306
Principal payments on capital lease obligations (681,622) (255,420)
------------ ------------
Net cash provided by financing activities 53,042 36,642,358
------------ ------------
Net (decrease) increase in cash and cash equivalents (14,609,967) 38,847,493
Cash and cash equivalents at beginning of period 23,168,690 3,914,038
------------ ------------
Cash and cash equivalents at end of period $ 8,558,723 $ 42,761,531
============ ============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid $ 313,425 $ 135,821
============ ============
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND
FINANCING ACTIVITIES:
Property and equipment acquired under capital leases $ 1,926,922 $ 1,370,839
============ ============
</TABLE>
See accompanying notes.
5
<PAGE> 6
AURORA BIOSCIENCES CORPORATION
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1998
(UNAUDITED)
1. BASIS OF PRESENTATION
The accompanying unaudited financial statements of Aurora Biosciences
Corporation ("Aurora" or the "Company") have been prepared in accordance
with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information
and footnotes required by generally accepted accounting principles for
complete financial statements. In the opinion of management, all
adjustments, consisting of normal recurring adjustments, considered
necessary for a fair presentation have been included. Interim results are
not necessarily indicative of results for a full year. These financial
statements should be read in conjunction with the audited financial
statements and footnotes thereto included in the Company's Annual Report
on Form 10-K for the year ended December 31, 1997, as filed with the
Securities and Exchange Commission ("SEC").
2. LOSS PER SHARE
Recent interpretations by the SEC have altered the treatment of
convertible preferred stock previously included in computing certain loss
per share data. For periods prior to the Company's initial public
offering ("IPO") in June 1997, the Company previously considered
convertible preferred stock, which converted into common stock upon
completion of the IPO, as outstanding from the original date of issuance
("as-if converted method") in computing loss per share. To conform to the
recent interpretations, the Company has revised its calculation of loss
per share for all pre-IPO periods presented on the Statements of
Operations to exclude the impact of convertible preferred shares. For
comparative purposes, the schedule below presents loss per share (basic
and diluted) for the three and six month periods ended June 30, 1998 and
1997, under the as-if converted method.
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
1998 1997 1998 1997
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Numerator:
Net loss $ (6,561,970) $ (1,602,546) $(10,216,716) $ (2,444,174)
------------ ------------ ------------ ------------
Numerator - income available to common
stockholders $ (6,561,970) $ (1,602,546) $(10,216,716) $ (2,444,174)
============ ============ ============ ============
Denominator:
Weighted average common shares 16,224,464 3,206,709 16,120,264 2,227,420
Adjustment to reflect the effect of
assumed conversion of convertible
preferred stock to common stock from
the date of issuance -- 8,608,372 -- 9,258,560
------------ ------------ ------------ ------------
Denominator - adjusted weighted average
common shares 16,224,464 11,815,081 16,120,264 11,485,980
============ ============ ============ ============
Basic and diluted loss per share
under the as-if converted method $ (0.40) $ (0.14) $ (0.63) $ (0.21)
============ ============ ============ ============
</TABLE>
6
<PAGE> 7
AURORA BIOSCIENCES CORPORATION
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1998
(UNAUDITED)
3. NEW ACCOUNTING STANDARDS
Effective January 1, 1998, the Company adopted the Financial Accounting
Standards Board's Statement of Financial Accounting Standards No. 130,
Reporting Comprehensive Income ("SFAS 130") and Statement of Financial
Accounting Standards No. 131, Disclosures about Segments of an Enterprise
and Related Information ("SFAS 131"). SFAS 130 requires that all
components of comprehensive income, including net income, be reported in
the financial statements in the period in which they are recognized.
Comprehensive income is defined as the change in equity during a period
from transactions and other events and circumstances from non-owner
sources. Net income and other comprehensive income, including foreign
currency translation adjustments, minimum pension accrual, and unrealized
gains and losses on investments, shall be reported, net of their related
tax effect, to arrive at comprehensive income. The adoption of SFAS 130
did not affect the results of operations or financial position because
the Company's only component of comprehensive income is unrealized gains
and losses on investments, which is not significant. SFAS 131 establishes
standards for the way that public business enterprises report information
about operating segments in annual financial statements and requires that
those enterprises report selected information about operating segments in
interim financial reports. SFAS 131 also establishes standards for
related disclosures about products and services, geographic areas and
major customers. The adoption of SFAS 131 did not affect the results of
operations or financial position, and did not affect the disclosure of
segment information because the Company operates in only one operating
segment.
7
<PAGE> 8
AURORA BIOSCIENCES CORPORATION
JUNE 30, 1998
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
This Form 10-Q contains certain statements of a forward-looking nature relating
to future events or the future financial performance of the Company. Such
statements are only predictions and actual events or results may differ
materially. Factors that could cause or contribute to such differences include,
without limitation, those discussed in this Item 2 as well as those discussed in
the Company's Annual Report on Form 10-K for the year ended December 31, 1997,
and Form 10-Q for the quarter ended March 31, 1998, as filed with the Securities
and Exchange Commission.
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 principally on the development of an integrated technology platform
comprised of a portfolio of proprietary fluorescent assay technologies and its
Ultra-high Throughput Screening System ("UHTSS(TM)") designed to allow assay
miniaturization and automation with the potential to help change the paradigm of
drug discovery.
The Company had an accumulated deficit of $13.3 million as of June 30, 1998. The
$10.2 million net loss in the first six months of 1998 primarily reflects the
Company's substantial expenditures to accelerate the development and
implementation of its UHTSS technology. The Company's ability to achieve
profitability in the future will depend in part on its ability to successfully
develop and achieve acceptable performance specifications for the UHTSS, provide
screen development and screening services to pharmaceutical and biotechnology
companies 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. Royalties
or other revenue from commercial sales of products developed from any compounds
identified by using the Company's technologies are not expected for at least
several years, if at all. Payments under collaborative agreements and revenue
recognition thereof will be subject to significant fluctuation in both timing
and amount. Furthermore, the Company will continue to follow a strategy of
investing in new technologies to expand its technology platform as well as
support existing technology alliances. Accordingly, the Company's results of
operations for any period may not be comparable to the results of operations for
any other period.
RESULTS OF OPERATIONS FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 1998 AND 1997
Total revenue increased 166% from the three months ended June 30, 1997 to the
three months ended June 30, 1998 (the "three-month period") and increased 153%
from the six months ended June 30, 1997 to the six months ended June 30, 1998
(the "six-month period"). The increases in revenue for the three-month and
six-month periods resulted primarily from the Company's collaborative agreements
with Warner-Lambert Company ("Warner-Lambert") and Merck & Co., Inc. ("Merck"),
which were executed in the second half of 1997. Screening systems, screening
services and license fees revenue under these collaborative agreements were
recorded in the three-month and six-month periods ended June 30, 1998 while no
such revenue was recorded in the three-month and six-month periods ended June
30, 1997. Screening systems, screening services and license fees revenue under
the Company's collaborative
8
<PAGE> 9
AURORA BIOSCIENCES CORPORATION
JUNE 30, 1998
agreements with Bristol-Myers Squibb Pharmaceutical Research Institute ("BMS")
and Eli Lilly and Company ("Lilly") were recorded in both the 1998 and 1997
three-month and six-month periods.
Total operating expenses increased 230% for the three-month period and 223% for
the six-month period. The increases in operating expenses resulted primarily
from the growth of the Company and its research and development programs. This
growth is reflected by the increase to 130 employees at June 30, 1998 from 62 at
June 30, 1997 and expansion of the Company's facilities in October 1997 to
81,000 square feet from 22,000 square feet.
Cost of screening systems increased 171% for the three-month period and 230% for
the six-month period. In addition to the factors noted above, the increases were
attributable to increased purchases of materials and increased technology
development expenses related to the development of the UHTSS for the Company's
collaborators. Production costs for screening subsystems delivered to certain of
the Company's collaborators in the quarter ended June 30, 1998 also contributed
to the increases.
Cost of screening services increased 44% for the three-month period and 85% for
the six-month period. In addition to the factors noted above, the increases
resulted from development of screening assays for Warner-Lambert and Merck under
collaborative agreements executed in the second half of 1997 and expanded
development of screening assays for BMS and Lilly.
Research and development expenses increased 566% for the three-month period and
386% for the six-month period. In addition to the factors noted above, the
increases were primarily due to licensing of technology from OSI
Pharmaceuticals, Inc. and Xenometrix, Inc. and the costs of initiating a
collaboration with SIDDCO, Inc. to produce a large library of compounds for
Aurora's UHTSS. In addition, the expansion of the Company's human cell
functional genomics program and ongoing development of its own UHTSS contributed
to the increases.
Selling, general and administrative expenses increased 65% for the three-month
period and 75% for the six-month period with the overall expansion of the
Company's operations as noted above.
Net interest income increased 237% for the three-month period and 272% for the
six-month period. The increases reflected interest income from increased cash
and investment balances resulting from receipts under collaborative agreements
and the Company's initial public offering in June 1997. The increased interest
income was partially offset by increased interest expense incurred on capital
lease obligations entered into during the last six months of 1997 and the first
six months of 1998.
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 1998, Aurora held cash, cash equivalents and investment securities
available-for-sale of $39.4 million and working capital of $37.1 million. The
Company has funded its operations through June 30, 1998 primarily through the
issuance of equity securities with aggregate net proceeds of $57.5 million,
receipts from corporate collaborations and strategic technology alliances of
$26.0 million, capital equipment lease financing of $7.3 million and interest
income of $3.8 million.
The Company's facility lease agreements are secured by letters of credit, which
are secured by certificates of deposit recorded as restricted cash. At June 30,
1998, such restricted cash totaled $1.1 million. The letters of credit will be
released over the next three years on a predetermined schedule.
9
<PAGE> 10
AURORA BIOSCIENCES CORPORATION
JUNE 30, 1998
The Company has entered into certain contractual commitments, subject to
satisfactory performance by third parties, which total approximately $13.8
million over the next three years.
The Company expects its cash requirements to increase through the remainder of
1998 as it continues its development of screening technology and seeks access to
new technologies to expand its technology platform through investments,
licensing agreements, research and development alliances or acquisitions.
To date, all revenue received by the Company has been from collaborations,
interest earned on cash and investment balances and technology alliances. The
Company expects that substantially all revenue for the foreseeable future will
come from collaborators and interest income.
The Company's strategy for the development of the UHTSS includes the
establishment of a syndicate of collaborators to provide the Company with
funding for development, technology and personnel resources and payments for
system validation. The Company's UHTSS co-development syndicate currently
includes BMS, Lilly, Warner-Lambert and Merck. In addition, the Company has
entered into collaborations with Roche Bioscience Corporation and Allelix
Biopharmaceuticals, Inc. for screening services and SIDDCO, Inc. for
combinatorial chemistry. In July 1998, the Company entered into a collaboration
with Cytovia, Inc. for screening services.
The Company's ability to achieve sustained profitability will be dependent upon
its ability to enter into additional corporate collaborations. Although the
Company is actively seeking to enter into additional collaborations, there can
be no assurance that the Company will be able to negotiate additional
collaborative agreements on acceptable terms, if at all. The Company's current
collaborative agreements provide that the agreements generally may be terminated
by the collaborator without cause upon short notice, which would result in loss
of anticipated revenue. Although the Company's collaborators would be required
to pay certain penalties in the event they terminate their agreements without
cause, there can be no assurance that any one or more of the Company's
collaborators will not elect to terminate their agreements with the Company. 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, that the Company will derive any
additional revenue from such agreements or that such current or future
collaborative agreements will be successful and provide the Company with
expected benefits. Termination of the Company's existing or future collaborative
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 may be required to raise additional capital over a period of several
years in order to conduct or expand its operations or acquire new technology.
Such capital may be raised through additional public or private equity
financings, borrowings and other available sources. 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 or
sustain profitable operations. There can be no assurance that the Company will
continue to receive funding under its existing collaborative agreements or that
the Company's existing or potential future agreements will be adequate to fund
the Company's operations. If additional funding becomes necessary, there can be
no assurance that additional funds 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
others that may have a material adverse effect on the Company's business,
financial condition and results of operations.
10
<PAGE> 11
AURORA BIOSCIENCES CORPORATION
JUNE 30, 1998
IMPACT OF YEAR 2000
The Company recognizes the need to ensure its operations will not be adversely
impacted by the inability of the Company's computer systems to process data
having dates on or after January 1, 2000 (the "Year 2000" issue). While the
Company believes its planning efforts are adequate to address its Year 2000
concerns, there can be no assurance that the systems of other companies on which
the Company's systems and operations rely will not have a material adverse
effect on the Company. In addition, the potential impact of the Year 2000 issue
on significant suppliers, financial institutions and others with whom the
Company does business cannot be reasonably estimated at this time. The cost of
the Year 2000 initiatives to be executed by the Company is not expected to be
material to the Company's results of operations or financial position.
11
<PAGE> 12
AURORA BIOSCIENCES CORPORATION
JUNE 30, 1998
PART II - OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
(c) In May 1998, the Company issued 75,000 shares of Common Stock to OSI
Pharmaceuticals, Inc. in connection with the execution of a license
agreement. The Company issued such shares in reliance upon the exemption
provided by Section 4(a) under the Securities Act of 1933, as amended.
(d) Net offering proceeds to the Company from its initial public offering in
June 1997 and partial exercise of an over-allotment option granted to the
underwriters totaled $37.7 million. Through June 30, 1998, approximately
$19.3 million was used for general corporate purposes, approximately $8.8
million was used for enhancement of internal research and development
capabilities and the acquisition of chemical libraries and approximately
$3.6 million was used for facilities expansion and improvements. No
payments were made to directors, officers or affiliates of the Company or
10% owners of any class of equity securities of the Company, other than
compensation payments to officers of the Company. Approximately $6.0
million of the net offering proceeds remain as working capital, held as
temporary investments.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Annual Meeting of Stockholders of the Company was held on April 21, 1998.
The following actions were taken at the Annual Meeting:
(a) The following Directors were elected for a one-year term expiring at the
1999 annual meeting:
<TABLE>
<CAPTION>
Name Shares Voted For Shares Withheld
---- ---------------- ---------------
<S> <C> <C>
Timothy J. Rink, M.D., Sc.D. 13,552,597 3,771
J. Gordon Foulkes, Ph.D. 13,215,975 340,393
James C. Blair, Ph.D. 13,552,597 3,771
Kevin J. Kinsella 13,552,597 3,771
Hugh Y. Rienhoff, Jr., M.D. 13,552,597 3,771
Lubert Stryer, M.D. 13,552,597 3,771
Roy A. Whitfield 13,552,597 3,771
Timothy J. Wollaeger 13,552,597 3,771
</TABLE>
(b) A proposal to amend the Company's 1996 Stock Plan to increase the
aggregate number of shares of Common Stock authorized for issuance under
such plan by 2,000,000 shares was approved.
<TABLE>
<S> <C>
Shares Voted For 11,649,840
Shares Voted Against 100,119
Shares Withheld 8,905
Broker non-votes 1,797,504
</TABLE>
(c) The selection of Ernst & Young LLP as independent auditors for the
Company for the fiscal year ending December 31, 1998 was ratified.
<TABLE>
<S> <C>
Shares Voted For 13,551,208
Shares Voted Against 600
Shares Withheld 4,560
</TABLE>
12
<PAGE> 13
AURORA BIOSCIENCES CORPORATION
JUNE 30, 1998
ITEM 5. OTHER INFORMATION
Pursuant to the Company's bylaws, stockholders who wish to bring matters or
propose nominees for director at the Company's 1999 annual meeting of
stockholders must provide specified information to the Company no later than
November 27, 1998 (unless such matters are included in the Company's proxy
statement pursuant to Rule 14a-8 under the Securities Exchange Act of 1934, as
amended).
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
10.34* Combinatorial Chemistry Agreement dated April 25, 1998 between the
Registrant and SIDDCO, Inc.
10.35* Agreement dated June 11, 1998 between the Registrant and J. Gordon
Foulkes.
10.36 Agreement dated July 16, 1998 between the Registrant and Deborah
J. Tower.
27.1 Financial Data Schedule related to the Financial Statements for
the period ended June 30, 1998.
- ----------
* The Company has requested confidential treatment with respect to
certain portions of this exhibit. Omitted portions have been filed
separately with the Securities and Exchange Commission.
(b) Reports on Form 8-K:
No reports on Form 8-K were filed during the quarter ended June 30, 1998
13
<PAGE> 14
AURORA BIOSCIENCES CORPORATION
JUNE 30, 1998
SIGNATURE
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed in its behalf by the
undersigned thereunto duly authorized.
Aurora Biosciences Corporation
Date: August 13, 1998 By: /s/ JOHN PASHKOWSKY
---------------------
John Pashkowsky
Director of Finance and Treasurer
(on behalf of the Registrant and as Registrant's
Principal Financial and Accounting Officer)
14
<PAGE> 1
EXHIBIT 10.34
CONFIDENTIAL TREATMENT REQUESTED UNDER 17 C.F.R. SECTIONS 200.80(B)(4), 200.83
AND 240.24B-2. "***" INDICATES OMITTED MATERIAL THAT IS THE SUBJECT OF A
CONFIDENTIAL TREATMENT REQUEST THAT HAS BEEN FILED SEPARATELY WITH THE SECRETARY
OF THE COMMISSION.
COMBINATORIAL CHEMISTRY AGREEMENT
BETWEEN
SIDDCO INC.
AND
AURORA BIOSCIENCES CORPORATION
***Confidential Information Requested
<PAGE> 2
COMBINATORIAL CHEMISTRY AGREEMENT
BETWEEN
SIDDCO INC.
AND
AURORA BIOSCIENCES CORPORATION
This COMBINATORIAL CHEMISTRY AGREEMENT (the "Agreement") is effective April 25,
1998 (the "Effective Date"), by and between Systems Integration Drug Discovery
Company, Inc., doing business as SIDDCO, an Arizona corporation with a place of
business at 9040 South Rita Road, Suite 2338, Tucson, Arizona 85747 ("SIDDCO"
hereinafter), and Aurora Biosciences Corporation, a Delaware corporation with a
place of business at 11010 Torreyanna Road, San Diego, CA 92121 ("AURORA"
hereinafter).
RECITALS
WHEREAS, AURORA is a screening technology company which designs and
develops proprietary drug discovery systems, services and technologies to
accelerate and enhance the discovery of new medicines; and
WHEREAS, SIDDCO is a pharmaceutical company which develops technology
relating to combinatorial chemistry and applies this technology to discover and
optimize the properties of chemical entities useful as therapeutic agents; and
WHEREAS, AURORA desires to enter into a research collaboration with
SIDDCO during which SIDDCO will synthesize combinatorial chemistry libraries and
chemical compounds for AURORA; and
WHEREAS, AURORA may request that SIDDCO provide assistance to AURORA
for the re-synthesis and scale-up synthesis of Hit Compounds identified by
AURORA; and
WHEREAS, AURORA desires to obtain a license to certain SIDDCO
intellectual property and SIDDCO desires to grant to AURORA such license to
certain SIDDCO intellectual property, under the terms of this Agreement; and
***Confidential Information Requested 2
<PAGE> 3
WHEREAS, in consideration for the foregoing AURORA is willing to
make certain payments to SIDDCO and to have the option to make additional
milestone and royalty payments under the conditions specified herein;
NOW THEREFORE, in consideration of the mutual covenants and
agreements hereafter set forth, the parties hereto agree as follows:
SECTION 1
DEFINITIONS
The terms defined in this Section 1 shall, for all purposes of this Agreement,
have the following meanings, and the singular shall include the plural and vice
versa as the context requires:
1.1 "Affiliate" means any company or other entity that, directly or indirectly,
controls, is controlled by, or is under common control with the designated party
but only for so long as such relationship exists. For purposes of this Section
1.1, controls, controlled and common control mean the possession of the power to
direct or cause the direction of the management and the policies of an entity,
whether through ownership directly or indirectly of at least 50 percent of the
shares of stock entitled to vote by contract or otherwise in the case of a
corporation and at least 50 percent of the interests in profits in the case of a
business entity other than a corporation.
1.2 "AURORA Building Blocks" means ***.
1.3 ***.
***Confidential Information Requested 3
<PAGE> 4
1.4 ***.
1.5 "AURORA Dedicated Team Manager" means the SIDDCO employee, to be designated
by SIDDCO with notice to and approval by AURORA, to be SIDDCO's authorized
representative with respect to the matters contemplated in this Agreement for
decision and performance by the AURORA Dedicated Project Team.
1.6 "AURORA Library" means ***
1.7 ***
1.8 ***.
1.9 "AURORA Dedicated Team Consultant" means an AURORA consultant, to be
designated by AURORA with notice to SIDDCO, who is an expert in chemical
synthesis, to be AURORA's authorized representative to consult with the AURORA
Dedicated Project Team.
1.10 ***.
1.11 ***.
1.12 ***
***Confidential Information Requested 4
<PAGE> 5
1.13 Combinatorial Library(ies)" means ***
1.14 "Confidential Information" shall have the meaning set forth in Section
12.1.
1.15 ***
1.16 "***
1.17 "Consortium Executive Committee" has the meaning set forth in Addendum A.
1.18 "Consortium Research Management Team" has the meaning set forth in Addendum
A.
1.19 "Control" or "Controlled" means, in the context of intellectual property,
possession by a party 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.
1.20 "Director of Consortium Chemistry" means the SIDDCO chemist designated by
SIDDCO with the scientific leadership of the collaboration defined in this
Agreement, and with other SIDDCO Consortium Partners and the activities and
productivity of the Consortium Development Team and each Dedicated Project Team.
1.21 "Effective Date" is ***.
***Confidential Information Requested 5
<PAGE> 6
1.21 "First Commercial Sale" means the first commercial sale of a Royalty
Bearing Product by any of AURORA, an AURORA Affiliate, Third Party Client, or
AURORA licensee or sublicensee after government regulatory approval for
marketing such product.
1.22 "Format" is defined in Appendix I.
1.23 "Full Time Equivalent," herein also referred to as "FTE," means the
equivalent man-hours and effort supplied by a year-long effort ***of a single
full-time ***employee, such as a professional employee of ***or an employee of a
subcontractor of ***with substantially equivalent qualifications, skill and
experience to enable them to perform their assigned task and as further defined
in Section 3.1.
1.24 ***
1.25 "Intellectual Property Rights" means all existing Patents and all patents
hereinafter issuing, both United States and foreign (including any additions,
divisions, continuations, continuations-in-part, substitutions, extensions,
renewals, utility models and certificates of invention or reissues thereof or
therefor), all copyrights, trademark rights, and other property rights and
interests of every nature (to the extent that such property rights and interests
are of such legal status and nature as to permit the same to be lawfully
licensed, specifically including, but not limited to, unpublished patent
applications, unpatented inventions, ideas, data, Know-how, biological material,
chemical compounds, reagents and trade secrets of any kind) and all
registrations and applications therefor.
1.26 "Know-how" means ***
1.27 "Losses" shall have the meaning set forth in Section 10.1.
1.28 "Major Market Country" means Australia, Canada, China, France, Germany,
Italy, Spain, Japan, Russia, and the United Kingdom.
1.29 "Net Sales" means the gross amounts actually received ***for sales of
Royalty Bearing Product(s) whether invoiced or not, less: trade, quantity and
cash discounts allowed; discounts, refunds, rebates, chargebacks, retroactive
price adjustments, and any other allowances which effectively reduce the net
selling price and are appropriately deducted from sales under generally accepted
accounting principles; Royalty Bearing Product returns and allowances; that
portion of the sales value associated with drug delivery systems; and any tax
imposed on the Royalty Bearing Product that is
***Confidential Information Requested 6
<PAGE> 7
appropriately deducted from sales under generally accepted accounting principles
("GAAP"). Such amounts shall be determined from the books and records
***maintained in GAAP consistently applied***.
1.30 ***
1.31 ***
1.32 "Patent(s)" means (a) valid and enforceable United States patents,
including reexaminations, reissues, extensions, term restorations and foreign
counterparts thereof, including supplementary protection certificates and other
administrative protections, and (b) pending applications, divisional
applications and foreign counterparts thereof.
1.33 ***
1.34 ***
***Confidential Information Requested 7
<PAGE> 8
1.35 "Royalty Bearing Product" means a therapeutic, prophylactic or diagnostic
product that is approved for human use by the United States Food and Drug
Administration or an equivalent foreign authority, in which an Optimized
Compound is an active ingredient.
1.36 "Royalty Bearing Sales" means, with respect to each Royalty Bearing
Product, Net Sales of such Royalty Bearing Product
1.37 "Royalty Term" means, on a country by country basis, the later of 1*** from
the first commercial sale of a Royalty Bearing Product or 2) *** the Royalty
Bearing Product, ***
1.38 "SIDDCO Combinatorial Chemistry Technology" means ***
1.39 SIDDCO Combinatorial Library" means ***
1.40 "SIDDCO Consortium Partner" means ***
1.41 "SIDDCO/AURORA Combinatorial Chemistry Technology" means ***
***Confidential Information Requested 8
<PAGE> 9
1.42 "Specifications" are defined in Appendix I.
1.43 ***
1.44 ***.
1.45 "Target Assay" means ***.
1.46 "Term" of the Agreement has the meaning set forth in Section 7.
1.47 "Third Party" means any entity other than a party or any Affiliate of a
party to this Agreement.
1.48 "Third Party Client" means any Third Party ***.
1.49 ***.
1.50 "Work Plan" means the ***
SECTION 2
OPERATIONS
2.1 Establishment and Management ***
(a) Appointments: Upon execution of this Agreement, AURORA shall
promptly designate its representatives to the (i) Consortium Executive Committee
and the (ii) Consortium Research Management Team.
(b) Management: The Combinatorial Chemistry Consortium shall be
organized and managed in accordance with Addendum A attached hereto and made
part
***Confidential Information Requested 9
<PAGE> 10
hereof, as the same may be amended from time to time by written agreement of
AURORA, SIDDCO, and all of the other SIDDCO Consortium Partners.
2.2 AURORA/SIDDCO Executive Management Team.
(a) Upon execution of this Agreement, SIDDCO and AURORA shall
promptly designate their respective representatives to the AURORA/SIDDCO
Executive Management Team. The responsibilities of the AURORA/SIDDCO Executive
Management Team will be to review the progress of the AURORA Dedicated Project
Team in executing the Work Plan (Appendix I) and assuring the quality and
productivity of its interactions with AURORA and the Consortium Development
Team, to address any AURORA/SIDDCO collaborative issues, and to generally manage
the scientific and interrelationship dynamics of the AURORA/SIDDCO collaboration
described in this Agreement. Any member of the AURORA/SIDDCO Executive
Management Team may be replaced from time to time by notice from the party
originally designating such member to the other party. The discussions and
decisions of this team will be held under mutual confidentiality. The
AURORA/SIDDCO Executive Management Team may establish such subcommittees, task
forces, or other committees, and delegate its authority thereto, as it deems
appropriate.
(b) The AURORA/SIDDCO Executive Management Team shall meet
alternately at their own expense, at SIDDCO or AURORA or an agreed upon site by
video or telephone conference as often as necessary and mutually agreed upon,
but at least twice a year. The AURORA/SIDDCO Executive Management Team shall
conference (by video or phone) at least two weeks before the semi-annual meeting
of the Consortium Executive Committee to address specific AURORA and SIDDCO
collaboration issues, identifying those issues to be placed on the Consortium
Executive Committee agenda pursuant to Addendum A.
***.
***Confidential Information Requested 10
<PAGE> 11
2.4 ***.
2.5 Creation of the ***.
(a) During the Term of this Agreement, SIDDCO shall collaborate
confidentially with AURORA in the application of ***.
***Confidential Information Requested 11
<PAGE> 12
SIDDCO agrees to conduct confidential research, through the efforts
of the AURORA Dedicated Project Team. SIDDCO will complete the Work Plan (see
attached Appendix I for initial Work Plan) and such Work Plans may be amended
from time to time by mutual written agreement of the parties. The AURORA
Dedicated Team Manager *** from which the AURORA Dedicated Team Consultant can
select for synthesis by the AURORA Dedicated Project Team; provided, however,
AURORA shall select a ***. The AURORA Dedicated Team Consultant may confer with
the AURORA Dedicated Project Team and the Consortium Development Team to suggest
***of the AURORA Dedicated Project Team. SIDDCO will ***, provided, however,
that SIDDCO will not be required ***. AURORA and SIDDCO shall cooperate in
establishing that all of the research payments made by AURORA to SIDDCO are
contract research expenses as defined under Section 41 of the Internal Revenue
Code and SIDDCO shall report to AURORA on the amount of said research which is
conducted in the United States.
(b) Consortium-Exclusive Collaboration. During the Term of this
Agreement, SIDDCO ***, including AURORA, in the development and ***. SIDDCO
agrees that it will ***, through the efforts of the Consortium Development Team,
as requested and directed by the Director of Consortium Chemistry, the
Consortium Management Team, and the Consortium Executive Committee.
SECTION 3
***
3.1 ***.
(a) SIDDCO will provide AURORA with ***
***
***
***Confidential Information Requested 12
<PAGE> 13
***
***Confidential Information Requested 13
<PAGE> 14
3.2 Options to Modify Scope of Relationship.
(a) At AURORA's sole option, it may elect the following:
(i) Extension of Project Term. After *** under the terms of this
Agreement, but in any event no later than ***, AURORA may ***in a different or
similar second ***for additional payments ***), such amount may be adjusted
based on the amount of the proportional average cost increase or decrease of the
first *** and excluded from the average calculation. If AURORA elects to
exercise this option, ***of the total payment will be due upon the exercise of
the option, ***upon delivery of first ***of the ***, and the remainder of the
payment, will be due within *** the total of ***within ***of AURORA's exercise
of this option. AURORA may also exercise an identical option, before ***, for an
additional *** in a third ***and adjusted as above. Such option will be subject
to the same terms and conditions of this Agreement, with respect to ***. SIDDCO
and AURORA agree that if, calculated in accordance with GAAP, SIDDCO has ***.
***Confidential Information Requested 14
<PAGE> 15
(ii) ***:
1) SIDDCO shall provide, upon AURORA's demand, ***
***Confidential Information Requested 15
<PAGE> 16
2) ***
3) ***.
4) SIDDCO shall ***.
5) ***.
***Confidential Information Requested 16
<PAGE> 17
(iii) ***. AURORA shall have the option ***to section 4.1 by *** or
receive ***, by providing ***set forth in Section 3.2a(ii) if the total ***.
SECTION 4
PAYMENT FOR AGREEMENT RESEARCH
4.1 ***.
In consideration of a license fee for the use of ***, a license fee for
the use of ***, a license fee for the use of the ***, and a license fee for the
use *** in the development of the necessary *** ("SIDDCO Technology License")
and SIDDCO making and delivering to ***, AURORA agrees to pay to *** as set
forth below:
(a) ***, for the SIDDCO Technology License.;
(b) *** for the SIDDCO Technology License within ***of the delivery to
AURORA under Section 3.1(a) of ***of the ***and the associated ****** for the
materials and handling of ***;
(c) *** for the SIDDCO Technology License within ***of the delivery to
AURORA under Section 3.1(a) of ***of the ***and the associated ****** for the
materials and handling of ***;.
***Confidential Information Requested 17
<PAGE> 18
(d) *** for the SIDDCO Technology License within ***of the delivery to AURORA
under Section 3.1(a) of ***of the ***and the associated ****** for the materials
and handling of ***;.
(e) *** for the SIDDCO Technology License within ***of the delivery to AURORA
under Section 3.1(a) of ***of the ***and the associated ****** for the materials
and handling of ***;.
(f) *** for the SIDDCO Technology License within ***of the delivery to AURORA
under Section 3.1(a) of ***of the ***and the associated ****** for the materials
and handling of ***;.
(g) *** for the SIDDCO Technology License within ***of the delivery to AURORA
under Section 3.1(a) of ***of the ***and the associated ****** for the materials
and handling of ***;.
(h) *** for the SIDDCO Technology License within ***of the delivery to AURORA
under Section 3.1(a) of ***of the ***and the associated ****** for the materials
and handling of ***;.
(i) *** for the SIDDCO Technology License within ***of the delivery to AURORA
under Section 3.1(a) of ***of the ***and the associated ****** for the materials
and handling of ***;.
***Confidential Information Requested 18
<PAGE> 19
The parties agree that after ***, SIDDCO may ***for the first
delivery, so long as ***. If SIDDCO delivers early, AURORA may begin ***early as
set forth in Section 3.1(a) and will pay SIDDCO within ***of such delivery,
unless the ***by AURORA. In addition, SIDDCO may not deliver the first delivery
of compounds due on ***before ***to AURORA. Each subsequent delivery as set
forth in Section 3.1(a) can not be delivered to AURORA ***earlier than the
delivery date set forth in Section 3. Further, AURORA will only be obligated to
pay for a delivery that ***AURORA as set forth in Section 3. ***.
The parties agree that after ***, SIDDCO may ***, so long ***. If SIDDCO
delivers early, ***as set forth in Section 3 and will pay SIDDCO within ***of
such delivery, unless the ***by AURORA***.
If after ***the first delivery is ***then AURORA reserves the right
to ***this Agreement arising before such date. ***.
***Confidential Information Requested 19
<PAGE> 20
***
***
4.2 ***. In consideration of SIDDCO making and *** to AURORA as set forth in
Section 3.1 (b), AURORA agrees to pay SIDDCO ***to perform the planning and
synthesis at a rate of
***Confidential Information Requested 20
<PAGE> 21
***, within ***of the delivery of each compound and a payment invoice, in the
case where the ***involves up to ***. In the case *** involves more than ***,
SIDDCO shall provide additional ***, subject to AURORA's written approval, which
involve ***for a minimum ***of the delivery of each compound or library of
compounds together with a payment invoice. Except in the case of the last FTE
payment in any calendar year is made less than three (3) months before the end
of the Calendar year. In this case AURORA shall pay a pro-rated amount for the
remaining one (1) or two (2) months of that calendar year, and pay the remaining
balance January 2 of the succeeding calendar year.
4.3 ***. In consideration of SIDDCO making and *** to AURORA, its Affiliate, or
a Third Party Client who separately contracts with ***, and in the absence of
any specific or negotiated ***, AURORA or the Third Party Client agrees to pay
SIDDCO for the FTE employed to perform the planning and ***, and for the cost of
***of the delivery of each compound or library of compounds with a payment
invoice. In the event that SIDDCO shall provide ***FTE's for a minimum ***,
AURORA or the Third Party Client shall pay SIDDCO FTE costs *** of the delivery
of each compound or library of compounds together with a payment invoice. Except
in the case of the last FTE payment in any calendar year is made less than three
(3) months before the end of the Calendar year. In this case AURORA shall pay a
pro-rated amount for the remaining one (1) or two (2) months of that calendar
year, and pay the remaining balance January 2 of the succeeding calendar year.
4.4 ***. For the first ***below achieved by an ***for a *** provided any ***as
set forth in Section 3.2 (a) (ii), AURORA, or a Third Party Client who
separately contracts with SIDDCO in accordance with the terms set forth in
Section 3.2 (a) (ii***within ***following the ***:
***Confidential Information Requested 21
<PAGE> 22
(a) In Vivo Testing. A fee of ***upon initiation of in vivo testing for
good laboratory practice toxicology.
(b) Acceptance of IND or Foreign Equivalent. A fee ***upon notification
to AURORA of the acceptance of the first IND (Investigational New Drug
Application), or an equivalent foreign filing in a Major Market Country.
c) Initiation of Phase II Trials. A fee *** upon initiation of Phase II
Clinical Trials.
(d) Initiation of Phase III Trials. A fee ***upon initiation of Phase III
Clinical Trials.
(e) NDA Approval. A fee of ***upon approval by the United States Food and
Drug Administration of a New Drug Application required for purposes of
authorizing the intrastate marketing and sale in the United States, or an
equivalent approval in a Major Market Country.
4.5 Milestone Payments for ***. For the first occurrence of a milestone below
achieved by an *** where ***leading to in vivo testing as set forth in Section
3.2 (a) (ii) and not subject to Section 4.4, AURORA, or a Third Party Client who
separately contracts with SIDDCO in accordance with the terms set forth in
Section 3.2 (a) (ii), ***the amounts set forth below within ***days following
***:
(a) In Vivo Testing. A fee of ***upon initiation of in vivo testing for
good laboratory practice toxicology.
(b) Acceptance of IND or Foreign Equivalent. A fee *** upon notification
to AURORA of the acceptance of the first IND, or an equivalent foreign
filing in a Major Market Country.
(c) Initiation of Phase II Trials. A fee *** upon initiation of Phase II
Clinical Trials.
(d) Initiation of Phase III Trials. A fee of ***upon initiation of Phase
III Clinical Trials.
***Confidential Information Requested 22
<PAGE> 23
(e) NDA Approval. A fee of ***upon approval by the United States Food
and Drug Administration of a New Drug Application required for
purposes of authorizing the intrastate marketing and sale in the
United States, or an equivalent approval in a Major Market Country.
4.6 ***.
4.7 Sales by Licensees or Sublicensees. In the event that AURORA grants licenses
or sublicenses to others to ***, such licenses or sublicenses shall include an
obligation for the licensee or sublicensee to account for and report its
milestone-bearing progress and Royalty Bearing Sales of such Optimized
Compounds, or Royalty Bearing Products on the same basis as if such milestones
were achieved by AURORA or such sales were Royalty Bearing Sales by
***Confidential Information Requested 23
<PAGE> 24
*** achieved by the sublicensee were achieved by AURORA or the Royalty Bearing
Sales of the sublicensee were Royalty Bearing Sales of AURORA.
4.8 Royalty Payments and Reports. A report summarizing the Royalty Bearing Sales
of any Royalty Bearing Products during the relevant quarter shall be delivered
to SIDDCO within thirty (30) days following the end of each calendar quarter and
sixty (60) days following the end of each calendar year for which royalties are
due from AURORA. Royalty payments under this Agreement shall be made to SIDDCO
or its designee quarterly within thirty (30) days following the due date for the
report described in the first sentence of this Section 4.8.
4.9 Taxes. SIDDCO shall pay any and all taxes levied on account of milestones
and royalties it receives under this Agreement. If laws or regulations require
that taxes be withheld, AURORA will (i) deduct those taxes from the remittable
milestone or royalty, (ii) timely pay the taxes to the proper taxing authority,
and (iii) send proof of payment to SIDDCO within thirty (30) days following that
payment.
4.10 Payments. All payments under this Agreement shall be made directly to
SIDDCO in United States Dollars by wire transfer to the following account.
Payments made pursuant to this Agreement shall be sufficiently made or given on
the date of Electronic Funds Transfer (EFT) to:
***
4.12. If AURORA makes any deduction or withholding payment hereunder required by
law, it shall pay the full amount to be deducted or withheld to the relevant
taxation or other authority within the time allowed for such payment under
applicable law and promptly thereafter shall furnish SIDDCO an original or
certified copy of a receipt evidencing payment thereof together with such other
information and documents as SIDDCO may reasonably request.
4.13 SIDDCO and AURORA agree that SIDDCO will earn the revenue under this
contract on an as paid basis in regards to the technology use license fee and
FTE payments for AURORA contract options, and on a delivery basis in regards to
compound use license fees and compound delivery payments. Payment reductions to
AURORA as a result of
***Confidential Information Requested 24
<PAGE> 25
***, if any, apply when recognized by ***
4.14 As part of this Agreement, as separately contracted, AURORA agrees to
purchase SIDDCO Stock pursuant to a Stock Purchase Agreement.
SECTION 5
***
5.1 AURORA will ***.
5.2 AURORA will ***.
5.3 All SIDDCO ***
5.4 All SIDDCO/AURORA ***
5.5 All AURORA ***.
5.6 ***.
5.7 Without limiting the foregoing (Sections 5.1, 5.2, 5.3, 5.4, 5.5, and 5.6),
*** reserves the right to ***, for the ***for itself and ***. The parties agree
that nothing in Section 5.7 precludes ***to satisfy its obligations under this
Agreement.
***Confidential Information Requested 25
<PAGE> 26
5.8 The ***
5.9 Subject to the confidentiality provisions herein, each party shall make
available to the other all information in its possession necessary or expedient
for the filing of patent applications arising out of the collaboration in all
countries of the world and shall be obligated to make assignment of patent
rights to perfect ownership as set forth herein. The costs of prosecution,
enforcement and maintenance of Patents shall be born by the party applying
therefor or the party demanding enforcement.
SECTION 6
LICENSES
6.1 Rights and Licenses Granted by SIDDCO to AURORA. SIDDCO hereby grants to
AURORA and its Affiliates the following rights and licenses:
***
***Confidential Information Requested 26
<PAGE> 27
6.2 Licenses Granted by AURORA to SIDDCO. AURORA hereby grants to SIDDCO and its
Affiliates the following rights and licenses:
***
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, or
Intellectual Property 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
Confidential Information, or Intellectual Property Rights owned or Controlled by
a party. Rights not expressly licensed in this Agreement are retained by party
granting a license.
SECTION 7
TERM AND TERMINATION
7.1 Term. The provisions of Sections 2 and 3 obligating ***and other obligations
herein, and provide services, to AURORA shall begin upon the Effective Date of
this Agreement and shall continue for the initial Term of this Agreement which,
unless terminated earlier as provided in this Section 7, shall be until ***.
Except in the case of early
***Confidential Information Requested 27
<PAGE> 28
termination as provided in Section 7 in this Agreement, SIDDCO shall be
obligated to continue to perform the research and development services described
in Sections 2 and 3 of this Agreement for an additional period(s) at the option
of AURORA as provided in Section 3, given reasonable prior notice before ***.
7.2 ***. In the event that SIDDCO shall deliver the ***that is the subject of
this Agreement to AURORA ***, as set forth in the Work Plan (Appendix I attached
hereto), this Agreement shall terminate, survived only by the provisions
provided for in Sections 3, 5, 6 and 7.1.
7.3 Remedies in the Event of Material Breach. In the event that either party
commits a material default under this Agreement and fails to cure such default
*** after written notice specifying the default, the non-defaulting party may
terminate this Agreement, provided that if the defaulting party is using its
good faith efforts to cure the default, the right to cure shall continue for the
duration of such efforts not to exceed ***. The parties shall have the right to
arbitrate any disputes regarding this Section 7.3 in accordance with Section 10.
7.4 Survival of Rights and Licenses. ***.
(b) The rights granted to ***under this Agreement under ARTICLE 6 herein
shall ***. Licenses and Intellectual Property Rights regarding the parties will
survive as set forth in Sections 5 and 6.
7.5 ***
***Confidential Information Requested 28
<PAGE> 29
SECTION 8
LIMITATION OF ASSIGNMENT
8.1 Assignment.
(a) 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.
(b) Either Party to this Agreement may assign its rights or
obligations under this Agreement in connection with a merger or
similar reorganization or the sale of all or substantially all of its
assets, or otherwise with the prior written consent of the other
Party. This Agreement shall survive any such merger or reorganization
of either Party with or into, or such sale of assets to, another
party and no consent for such merger, reorganization or sale shall be
required hereunder; provided, that in the event of such merger,
reorganization or sale, no intellectual property rights of the
acquiring corporation shall be included in the technology licensed
hereunder.
(c) 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.
(d) This Agreement is personal in nature and neither of the parties
hereto shall, without the consent of the other, assign or transfer
its rights or obligations under this Agreement to another company or
person, except as herein expressly provided or permitted or except to
a successor of substantially the whole of its business relating to
the subject matter of this Agreement and then only subject to the
terms and provisions hereof, and as specifically described in Section
8.1, except that either party may, with the consent of the other
party, which consent shall not be unreasonably withheld, extend or
transfer all or any portion of its rights hereunder to any of its
Affiliates that shall agree to be bound by the provisions hereof
relating to the assigned rights with the same effect as if it were
named herein but the assignor shall continue to be responsible for
performance by
***Confidential Information Requested 29
<PAGE> 30
such Affiliate of its obligations hereunder. Subject to the
provisions of Section 9 and Section 13, this Agreement shall be
binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns. SIDDCO shall have the right to
subcontract its obligations hereunder to a Third Party, reasonably
acceptable to AURORA whose consent will not to be unreasonably
withheld, provided that SIDDCO shall remain primarily liable to
AURORA for its obligations hereunder and SIDDCO notifies AURORA of
such subcontractor.
8.2 Assignment of Payments. Notwithstanding the above limitations on assignment,
SIDDCO may, at its sole option, without the written consent of AURORA, assign
its right to receive payments due hereunder to a lender making a loan to SIDDCO
for the purchase of scientific equipment or research facilities. The assignment
of such right by SIDDCO shall in no way relieve SIDDCO of any of its obligations
and duties hereunder and AURORA's payment obligations hereunder shall continue
to be contingent on SIDDCO's performance of such obligations and duties. SIDDCO
hereby releases AURORA from all claims and liabilities which arise or result
from AURORA's payment to a third party under this provision.
SECTION 9
ARBITRATION
9.1 Arbitration. 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 arbitration. The parties agree that prior to any arbitration concerning this
Agreement, SIDDCO's CEO and AURORA's president will meet in person or by
video-conferencing in a good faith effort to resolve any disputes concerning
this Agreement. Within thirty (30) days of a 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 or their successors, for
attempted resolution by good faith negotiations, such good faith negotiations to
begin within thirty (30) days after such notice is received. Except as otherwise
provided specifically herein, any controversy or claim under this Agreement
shall be solely settled by arbitration by one arbitrator pursuant to the
Commercial Arbitration Rules of the American Arbitration Association (the
"Association"); provided that the parties shall first use their best efforts to
resolve such dispute by negotiation. ***. 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
***Confidential Information Requested 30
<PAGE> 31
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.
SECTION 10
INDEMNIFICATION
10.1 Indemnification. AURORA hereby agrees to indemnify, defend and hold
SIDDCO, and its respective officers, directors, employees, and agents
(collectively, the "SIDDCO Indemnitees") harmless from and against all
damages or other amounts payable to a Third Party, including reasonable
attorneys' fees and costs of litigation, ***; except to the extent such
damages or other amounts payable are attributable to: (i***wrongful act
or omission of any SIDDCO Indemnitee, or (iv) any breach of this
Agreement by an SIDDCO Indemnitee or misrepresentation contained herein.
10.2 SIDDCO hereby agrees to indemnify, defend and hold AURORA, and its
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, ***except to the extent such damages or other
amounts payable are attributable to: (i***
***Confidential Information Requested 31
<PAGE> 32
wrongful act or omission of any AURORA Indemnitee, or (iv) any breach
of this Agreement by an AURORA Indemnitee or misrepresentation
contained herein.
10.3 Notice of Claim. In the event that any Party receives a notice of a claim
with respect to a AURORA Library or other compound synthesized by SIDDCO such
Party shall inform the other Party as soon as reasonably practical. The Parties
shall confer on how to respond to the claim and on how to handle the claim in an
efficient manner.
SECTION 11
INFRINGEMENT
11.1 Cooperation in Enforcement. At the sole expense of AURORA, SIDDCO shall
cooperate with AURORA in the patent prosecution and enforcement of AURORA's
rights to AURORA Hit Compounds against a Third Party SIDDCO shall not be
obligated to initiate any such action against a Third Party.
11.2 Third Party Infringement. In the event that the rights of AURORA under any
SIDDCO patent shall be infringed by a third party, SIDDCO shall cooperate with
AURORA in the enforcement of AURORA's rights to use the *** against such third
party at the sole expense of AURORA. SIDDCO shall not be obligated to initiate
any such action against a third party. In the case *** shall be entitled to
receive a share of the net recovery from such action regarding SIDDCO
Combinatorial Chemistry Technology in proportion to the number of ***, after all
expenses of litigation are paid. In the event SIDDCO elects to initiate or
participate in such action, AURORA shall cooperate with SIDDCO at SIDDCO's
expense.
SECTION 12
CONFIDENTIAL INFORMATION; PUBLICATIONS
12.1 Any non-public information provided by either Party to the other pursuant
to this Agreement shall be considered confidential information and shall not be
used or disclosed for any purpose, except as provided herein, for the Term of
this Agreement and for five (5) years thereafter. This obligation shall not
apply to information which:
***Confidential Information Requested 32
<PAGE> 33
(a) Was already known to the receiving Party, as evidenced by
written records, other than under an obligation of confidentiality at
the time of disclosure by the other Party;
(b) Was generally available to the public or otherwise part of the
public domain at the time of its disclosure to the receiving Party;
(c) Was received from a third Party without obligation of
confidentiality and without breach of an obligation of
confidentiality;
(d) Was independently developed by the receiving Party without
breach of the provisions of this Agreement as evidenced by written
records; or
(e) Was disclosed by order of a court or regulatory authority,
provided that the disclosing party shall be given prompt notice of such
order and a reasonable opportunity to minimize and otherwise protect
such disclosure, with the reasonable cooperation of the receiving
party.
12.2 Authorized Disclosure. Each Party may disclose Confidential Information
hereunder to the extent such disclosure is reasonably necessary in (i) filing or
prosecuting patent applications, (ii) prosecuting or defending litigation, (iii)
complying with applicable laws or regulations or (iv) conducting preclinical or
clinical trials, provided that if a Party is required by law or regulation to
make any such disclosure of the other Party's Confidential Information it will,
except where impractical for necessary disclosures (e.g., in the event of
medical emergency), give reasonable advance notice to the other Party of such
disclosure requirement and, except to the extent inappropriate in the case of
patent applications, will use its reasonable efforts to secure confidential
treatment of such Confidential Information required to be disclosed. Nothing in
this Section 12 shall restrict any Party from using for any purpose consistent
with the terms of this Agreement any information developed by it during the term
of this Agreement. When a Party makes a disclosure of the other Party's
Confidential Information to any of its employees, the Party making such
disclosure shall ensure that such employees are bound by written confidentiality
agreements having substantially the same terms as this Section 12.
12.3 Disclosure of the Agreement. The Parties agree that neither Party shall
disclose to any Third Party the material terms of this Agreement, including
without limitation the number of compounds to be delivered by SIDDCO to AURORA,
the milestone events, milestone payments and royalty rates set forth in Section
4, and the method of calculating royalties hereunder without the prior written
consent of the other Party, except as required for either Party to comply with
applicable state and federal securities laws or except as
***Confidential Information Requested 33
<PAGE> 34
expressly authorized by the other Party pursuant to Section 4 or as set forth in
a press release.
12.4 Survival. This Section 12 shall survive the termination or expiration of
this Agreement for a period of five (5) years following the termination or
expiration of this Agreement.
12.5 Press Release. SIDDCO and AURORA each agree to prepare and issue a press
release concerning the execution of this Agreement, provided that each such
press release shall be subject to the prior review and written consent of the
other Party. Any subsequent press release by either Party related to a change in
the status of this Agreement shall also be subject to the prior review and
consent of the other Party. Not withstanding the foregoing, neither Party shall
have an obligation to the other to obtain the prior review and consent of the
other with respect to documents referring to this Agreement or the business
relationship between the Parties filed with the Securities and Exchange
Commission, any stock exchange on which either Party's securities are listed or
may be listed in the future, or any other governmental agency, department,
bureau or administrative unit.
12.6 Publication of Scientific Advances. It is the intent of the Parties to
permit the publication of scientific advances during the Term of this Agreement
in order to further the development of science and the credibility of AURORA and
SIDDCO in the scientific, business, and financial community. Publication shall
be delayed as necessary to permit the filing of patent applications or to
maintain trade secrets within the Combinatorial Chemistry Consortium, or as
otherwise directed by the Consortium Research Management Team or the
AURORA/SIDDCO Executive Management Team. Nothing in this Section 12 shall
authorize either party to publish the confidential information of the other
party.
12.7 Employee Confidentiality Agreements. (a) Each party shall have a written
agreement with each of its employees, subcontractors or consultants having
access to confidential information of the other party reflecting the obligations
set forth in this Section 12.
(b) AURORA shall have a written agreement with its ***and Team
Consultant, and its other representatives appointed to the various teams
and committees described herein, and SIDDCO shall have a written
agreement with its AURORA Dedicated Project Team members, Consortium
Development Team members, and its representatives to the various teams
and committees described herein, and each Consortium Partner shall have
a written agreement with its ***, Visiting Scientists, and
representatives to the various teams and committees described herein
that any non-public information provided by any party to the other,
whether advertently or
***Confidential Information Requested 34
<PAGE> 35
inadvertently, pursuant to biological active compounds of another SIDDCO
collaborator during the pursuit of this collaboration, shall be
considered confidential information and shall not be used or disclosed
for any purpose, except as provided herein, for the Term of this
Agreement and for ***thereafter. This obligation shall not apply to
information which is expressly excluded pursuant to paragraphs 12.1 (a)
through 12.1 (e).
12.8 Exports. The parties agree that each shall not knowingly export or
re-export, directly or indirectly, any information, technical data,
samples or equipment received or generated thereunder in violation of
any applicable United States government regulations, including but not
limited to the United States Department of Commerce Export Control
Regulations regarding exports, re-exports and activities, Code of
Federal Regulations, Volume 15, Sections 730-772.
12.9 Government Regulations. SIDDCO shall not knowingly transfer to
AURORA any AURORA Library which represent a violation of applicable
United States government regulations or the license terms.
12.10 Employee Invention Agreement. AURORA shall have a written invention
assignment agreement with its AURORA Dedicated Project Team Leader, AURORA
Dedicated Team Consultant and its other representatives, and SIDDCO shall have a
written invention assignment agreement with its AURORA Dedicated Team Manager,
AURORA Dedicated Project Team members, Consortium Development Team members, and
its representatives, that any inventions shall be assigned, with the payment of
$1.00, to their respective company of employment, as such inventions pertain to
the subject of this Agreement, to be in effect for the Term of this Agreement
and for five (5) years thereafter.
SECTION 13
REPRESENTATIONS AND WARRANTIES
13.1 Each party hereby represents and warrants:
Corporate Power. Such party is duly organized and validly
existing and in good standing under the laws of the state of its
incorporation and has all requisite corporate power and
authority to enter into this Agreement and to carry out the
provisions hereof.
Due Authorization. Such party is duly authorized to execute and
deliver this Agreement and to perform its obligations hereunder.
***Confidential Information Requested 35
<PAGE> 36
Binding Agreement. This Agreement is a legal and valid
obligation binding upon it and enforceable in accordance with
its terms. 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 jurisdiction over it.
13.2 SIDDCO represents and warrants it owns or Controls under valid licenses***
13.3 SIDDCO represents and warrants that the ***is, and will be, only accessible
to the ***and that only the ***will only be accessible to the ***.
13.3 SIDDCO does not guarantee the validity of any future patent rights licensed
hereunder and makes no representation with regard to the scope or patentability
of the ***or that such patent rights may be exploited by AURORA or an Affiliate
without infringing other Patents.
13.4 AURORA does not guarantee the validity of any future patent rights licensed
hereunder or that such patent rights may be exploited by SIDDCO or an Affiliate,
or ***, without infringing other Patents.
13.5 Except as expressly provided herein, neither party makes any representation
or warranty to the other as to merchantability or fitness for a particular
purpose, or any other warranty of any kind whatsoever as to any product,
technology, or service to be provided thereunder.
SECTION 14
MISCELLANEOUS
***Confidential Information Requested 36
<PAGE> 37
14.1 Notices. All required or permitted notices to either Party to this
Agreement shall be in writing and shall be deemed given or served if delivered
personally or by facsimile transmission (receipt verified), telexed, mailed by
registered or certified mail (return receipt requested), postage prepaid, or
sent by express courier service to such Party addressed to it at the following
addresses or to such other address or call number as it shall designate by
written notice given to the other Party, provided that notices of a change of
address shall be effective only upon receipt thereof:
TO SIDDCO:
SIDDCO, INC.
9040 South Rita Road, Suite 2338
Tucson, Arizona 85747
Attention: Colin Dalton, Executive Vice President
With a copy to:
Bryan E. Daum, Attorney at Law
1760 East River Road, Suite 115
Tucson, Arizona 85718
TO AURORA:
AURORA Biosciences Corporation
11010 Torreyana Road
San Diego, CA 92121
Attention: Paul A. Grayson
Sr. Vice President, Corporate Development
With a copy to:
John D. Mendlein, Ph.D., J.D.
Vice President Intellectual Property and
Senior Legal Counsel
14.2 Consents Not Unreasonably Withheld. Whenever provision is made in this
Agreement for either Party to secure the consent or approval of the other Party,
that consent or approval shall not be unreasonably withheld, and whenever in
this Agreement provision is made for either Party to object to or disapprove a
matter, such objection or disapproval shall not unreasonably be exercised.
14.3 Force Majeure. Neither Party shall be held liable for any failure or delay
in performance which is the result of fire, flood, earthquake, embargo,
government regulation, governmental action prohibition or intervention, act of
war (whether declared or not), strike, lockout, or act of God, providing that
the Party claiming force majeure has
***Confidential Information Requested 37
<PAGE> 38
made all reasonable efforts to avoid or remedy such force majeure and that
neither Party shall be required to settle any labor dispute.
14.4 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
such rights or remedies provided for in this Agreement.
14.5 Severability. In the event that any provision of this Agreement is held to
be invalid or unenforceable in any jurisdiction, such provision shall be deemed
stricken in such jurisdiction, and the remainder of this Agreement shall be
given full force and effect consistent with the intent of the Parties.
14.6 Ambiguities. Ambiguities, if any, in this Agreement shall not be construed
against any Party, irrespective of which Party may be deemed to have drafted the
ambiguous provision.
14.7 Entire Agreement. This agreement sets forth all the covenants, promises,
agreements, warranties, representations, conditions and understandings between
the Parities hereto and supersedes and terminates all prior agreements and
understandings between the Parties. 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 modification or amendment to this Agreement shall be valid or binding upon
the Parties hereto unless reduced to writing and signed by their respective duly
authorized officers.
14.8 Governing Law. This Agreement shall be construed in accordance with, and
governed by, the laws of the State of California, excluding choice of laws.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed effective the day and year first above written.
SIDDCO, Inc. Aurora Biosciences Corporation
9040 S. Rita Road, Suite 2338 11010 Torreyana Road
Tucson, AZ 85747 San Diego, CA 92121
By: /s/ BRUCE E. SELIGMANN By: /s/ TIMOTHY J. RINK
------------------------------- ----------------------------------
Bruce E. Seligmann, Ph.D. Timothy J. Rink, M.A., M.D., Sc.D.
President and CEO President and CEO
Date: April 23, 1998 Date: April 23, 1998
----------------------------- -------------------------------
***Confidential Information Requested 38
<PAGE> 39
ADDENDUM A
***
***Confidential Information Requested 39
<PAGE> 40
APPENDIX I
(b) ***.
***Confidential Information Requested 40
<PAGE> 41
APPENDIX II
***
***Confidential Information Requested 41
<PAGE> 1
EXHIBIT 10.35
CONFIDENTIAL TREATMENT REQUESTED UNDER 17 C.F.R. SECTIONS 200.80(B)(4), 200.83
AND 240.24B-2. "*" INDICATES OMITTED MATERIAL THAT IS THE SUBJECT OF A
CONFIDENTIAL TREATMENT REQUEST THAT HAS BEEN FILED SEPARATELY WITH THE SECRETARY
OF THE COMMISSION.
June 11, 1998
J. Gordon Foulkes
1220 Rancho Encinitas Drive
Encinitas, California 92024
Dear Gordon:
This letter sets forth the terms and conditions of our agreement (the
"Agreement") regarding the termination of your employment with Aurora
Biosciences Corporation (the "Company"). This Agreement shall become effective
upon the "Effective Date," as that term is defined in paragraph 16 below. You
and the Company hereby agree as follows:
1. The Company accepts your resignation as Chief Technical Officer of the
Company and as a member of the Company's Board of Directors, effective as of
June 11, 1998 (the "Separation Date").
2. The Company agrees that it will pay you all accrued salary, and all accrued
and unused vacation benefits earned through the Separation Date, if any, subject
to standard payroll deductions, withholding taxes and other obligations. You are
entitled to this payment regardless of whether or not you sign this Agreement.
3. In exchange for the promises and covenants set forth herein, and in
consideration thereof, the Company will ***.
4. For valuable consideration received by you and identified herein, you agree
to provide, commencing as of the Effective Date, such occasional consulting
services as may be reasonably requested by the Company upon reasonable notice
and at such times as are mutually convenient for you and the Company. Such
consulting services ***. You understand that you shall be responsible for the
payment of any and all applicable state and federal taxes ***. Your services as
a consultant to the Company may be terminated at any time, and for any reason
(i) by the Company upon three (3) month's written notice to you or (ii) by you
upon one (1) month's written notice to the Company. You acknowledge and agree
that in no event shall the provisions of this paragraph 4 be construed as
allowing or causing the continued vesting of shares of Common Stock under any
stock option held by you or under the Restricted Stock Purchase Agreement dated
September 3, 1996 between the Company and you. The Company agrees that neither
the termination of the aforesaid consulting arrangement nor any act or omission
relating
* CONFIDENTIAL TREATMENT REQUESTED
<PAGE> 2
thereto shall affect your right to any compensation or benefit under any
paragraph of this Agreement other than this paragraph 4.
5. To assist you in your employment transition, the Company will ***.
6. To the extent provided by the federal COBRA law or, if applicable, state
insurance laws, and by the Company's current group health insurance policies,
you will be eligible to continue your health insurance benefits. If you elect
such COBRA coverage, the Company will pay the costs thereof for the shorter of
eighteen (18) months from the Separation Date or until you become eligible for
group coverage with another employer, after which such coverage will be at your
own expense. Later, you may be able to convert to an individual policy through
the provider of the Company's health insurance, if you wish. You will be
provided with a separate notice of your COBRA rights.
7. Pursuant to Section 3 of the Restricted Stock Purchase Agreement dated
September 3, 1996 between the Company and you, the Company will exercise its
option to repurchase from you *** shares of Common Stock of the Company
(representing your unvested shares as of July 11, 1998). In connection with this
repurchase, the Company will deliver to you separately in due course the
following: (i) Copy of canceled stock certificate number ***, representing the
*** shares of the Company's Common Stock remaining from the shares you purchased
on September 3, 1996; (ii) a copy of an executed Assignment Separate from
Certificate dated June 11, 1998, transferring the unvested shares to the Company
(the "Assignment"); and (iii) a check payable to you in the amount of ***,
representing payment for the unvested shares repurchased by the Company. A
certificate representing the balance of your shares not repurchased hereunder
will be delivered to you directly from the Company's Transfer Agent as soon as
practicable hereafter.
8. The terms and conditions of your Incentive Stock Option dated February 18,
1997 covering 32,000 shares (on a post-split basis) with an exercise price of
$1.50 per share (on a post-split basis) will remain unchanged. As of June 11,
1998, a total of 10,000 shares are vested pursuant to such Option. Please note
that, should you choose to exercise such Option to purchase vested shares, you
must do so within three months of the Separation Date, after which such Option
will terminate.
9. You hereby acknowledge and agree that except as expressly provided herein,
you will not receive (nor are you entitled to) any additional compensation,
severance, benefits, shares of stock or stock options, notwithstanding any prior
agreement to the contrary, after the Separation Date.
10. You agree that, within ten (10) days of the Separation Date, you will submit
your final documented expense reimbursement statement reflecting all business
expenses you incurred through the Separation Date, if any, for which you seek
reimbursement. The Company will reimburse you for these expenses pursuant to its
regular business practice. You further agree that you will not be entitled to
reimbursement of expenses incurred after the Separation Date unless such
expenses are approved in writing by an officer of the Company.
* CONFIDENTIAL TREATMENT REQUESTED
<PAGE> 3
11. Upon the Separation Date, you agree to return to the Company all Company
documents (and all copies thereof) and other Company property in your possession
or your control, including, but not limited to, Company files, notes, samples,
sales notebooks, drawings, specifications, calculations, sequences, data,
computer-recorded information, tangible property, including, but not limited to,
computers, credit cards, entry cards, keys and any other materials of any nature
pertaining to your work with the Company, and any documents or data of any
description (or any reproduction of any documents or data) containing or
pertaining to any proprietary or confidential material of the Company.
12. You acknowledge your continuing obligations under your Proprietary
Information and Inventions Agreement not to use or disclose any confidential of
proprietary information of the Company without prior written authorization from
a duly authorized representative of the Company. A copy of your Proprietary
Information and Inventions Agreement is attached hereto as Exhibit A.
13. You acknowledge your obligations under that certain Loan Agreement dated as
of November 7, 1996 between the Company and you (the "Loan Agreement") and agree
that, pursuant to the Loan Agreement, you will repay the outstanding principal
amount of the Loan (as defined in the Loan Agreement) no later than the earlier
to occur of (i) the sale or other transfer of any interest in the Property (as
defined in the Loan Agreement) or (ii) June 11, 1999. A copy of the Loan
Agreement is attached hereto as Exhibit B. Notwithstanding the foregoing or any
contrary provision of the Loan Agreement, if your obligations under the Loan
Agreement do not become payable in accordance with the foregoing clause (i),
upon written notice to the Company you may elect to extend the repayment date
for such obligations until June 11, 2000 with interest payable monthly during
the period from June 11, 1999 through June 11, 2000 at an annual rate of ***.
14. You and the Company agree that neither party will at any time disparage the
other party, or the other party's officers, directors, employees, stockholders
and agents, in any manner likely to be harmful to them or their business,
business reputation or personal reputation; provided that each party shall
respond accurately and fully to any questions, inquiry or request for
information when required by legal process.
15. The provisions of this Agreement shall be held in strictest confidence by
you and the Company and shall not be publicized or disclosed in any manner
whatsoever; provided, however, that: (a) you may disclose this Agreement, in
confidence, to your immediate family; (b) the parties may disclose this
Agreement in confidence to their respective attorneys, accountants, auditors,
tax preparers, and financial advisors; (c) the Company may disclose this
Agreement as necessary to fulfill standard or legally required corporate
reporting or disclosure requirements; and (d) the parties may disclose this
Agreement insofar as such disclosure may be necessary to enforce its terms or as
otherwise required by law.
16. In exchange for the promises and covenants set forth herein, you hereby
release, acquit, and forever discharge the Company, its parents and
subsidiaries, and their officers, directors,
* CONFIDENTIAL TREATMENT REQUESTED
<PAGE> 4
agents, servants, employees, attorneys, stockholders, partners, successors,
assigns, affiliates, customers, and clients of and from any and all claims
liabilities, demands, causes of action, costs, expenses, attorneys' fees,
damages, indemnities and obligations of every kind and nature, in law, equity,
or otherwise, known and unknown, suspected and unsuspected, disclosed and
undisclosed, arising out of or in any way related to agreements, acts or conduct
at any time prior to the Separation Date, including, but not limited to: all
such claims and demands directly or indirectly arising out of or in any way
connected with the Company's employment of you, your termination of that
employment and the Company's performance of its obligations as your former
employer; claims or demands related to salary, bonuses, commissions, stock,
stock options, or any other ownership interests in the Company, vacation pay,
fringe benefits, expense reimbursements, severance pay, or any form of
compensation; claims pursuant to any federal, state or local law or cause of
action including, but not limited to, the California Fair Employment and Housing
Act, the federal Civil Rights Act of 1964, as amended; the federal Age
Discrimination in Employment Act of 1967, as amended; the federal Americans With
Disabilities Act; tort law; contract law; wrongful discharge; discrimination;
harassment; fraud; defamation; emotional distress; and breach of the implied
covenant of good faith and fair dealing; provided that the foregoing shall not
release the Company from its obligations under this Agreement. In addition, the
foregoing is not intended to and shall not diminish any indemnification or
similar rights that you may have pursuant to the Company's Certificate of
Incorporation or Bylaws or any coverage that may be applicable to you under the
Company's directors and officers insurance policies.
You further acknowledge that you are knowingly and voluntarily waiving and
releasing any rights you may have under the Age Discrimination in Employment Act
of 1967 ("ADEA"). You also acknowledge that the consideration given for the
waiver and release in the preceding paragraphs hereof is in addition to anything
of value to which you were already entitled. You hereby provide the further
acknowledgment that you are advised by this writing, as required by the Older
Workers Benefit Protection Act, that: (a) your waiver and release do not apply
to any rights or claims that may arise after the Effective Date of this release;
(b) you have the right to consult with an attorney prior to executing this
release (although you may voluntarily choose not to do so); (c) you may have at
least twenty-one (21) days to consider this Agreement (although you may by your
own choice execute this Agreement earlier); (d) you have seven (7) days
following the execution of this Agreement to revoke this Agreement; and (e) this
Agreement shall not be effective until the date upon which the revocation period
has expired, therefore making the effective date the eighth day after this
release is signed by you (the "Effective Date").
***
17. *** warrants and represents that there are no liens or claims of lien or
assignments in law or equity or otherwise of or against any of the claims or
causes of action released herein. You further represent and warrant that you are
fully entitled and duly authorized to give your complete and final general
release and discharge of the Company. In giving the releases set forth in
paragraph 16, which include claims which may be unknown to the parties at
present, *** you
* CONFIDENTIAL TREATMENT REQUESTED
<PAGE> 5
hereby acknowledge that each has read and understands Section 1542 of the
Civil Code of the State of California, which reads as follows:
A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES
NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING
THE RELEASE, WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS
SETTLEMENT WITH THE DEBTOR.
*** you hereby expressly waive and relinquish all rights and benefits under this
section and any law or legal principle of similar effect in any jurisdiction
with respect to claims released hereby.
18. The parties hereto hereby acknowledge that this is a compromise settlement
of various matters, and that the promised payments in consideration of this
Agreement shall not be construed to be an admission of any liability or
obligation by either party to the other party or to any other person whomsoever.
19. This Agreement, including Exhibit A and B attached hereto, constitutes the
complete, final and exclusive embodiment of the entire agreement between you and
the Company with regard to the subject matter hereof, and supersedes all prior
agreements and/or understandings regarding the same, including without
limitation that certain letter agreement between the Company and you dated
August 6, 1996 and signed by you on August 14, 1996. This Agreement is entered
into without reliance on any promise or representation, written or oral, other
than those expressly contained herein. It may not be modified except in a
writing signed by you and a duly authorized officer of the Company. Each party
has carefully read this Agreement, has been afforded the opportunity to be
advised of its meaning and consequences by his or its respective attorneys, and
signed the same of his or its free will.
20. This Agreement shall be deemed to have been entered into and shall be
construed and enforced in accordance with the laws of the State of California as
applied to contracts made and to be performed entirely within California.
21. If a court of competent jurisdiction determines that any term or provision
of this Agreement is invalid or unenforceable, in whole or in part, then the
remaining terms and provisions hereof shall be unimpaired. Such court will have
the authority to modify or replace the invalid or unenforceable term or
provision with a valid and enforceable term or provision that most accurately
represents the parties' intention with respect to the invalid or unenforceable
term or provision.
22. This Agreement may be executed in two counterparts, each of which shall be
deemed an original, all of which together shall constitute one and the same
instrument.
* CONFIDENTIAL TREATMENT REQUESTED
<PAGE> 6
Please confirm your assent to the foregoing terms and conditions of our
Agreement by signing and returning a copy of this letter to me on or before July
2, 1998.
Sincerely,
AURORA BIOSCIENCES CORPORATION
By: /s/ TIMOTHY J. RINK
----------------------------------------
Timothy J. Rink
Chairman of the Board, President
and Chief Executive Officer
HAVING READ AND REVIEWED THE FOREGOING, I HEREBY AGREE TO AND ACCEPT THE TERMS
AND CONDITIONS AS STATED ABOVE.
Dated: June 11, 1998 /s/ J. GORDON FOULKES
-------------------------------
J. Gordon Foulkes
* CONFIDENTIAL TREATMENT REQUESTED
<PAGE> 1
EXHIBIT 10.36
[AURORA BIOSCIENCES CORPORATION LETTERHEAD]
July 16, 1998 CONFIDENTIAL
Ms. Deborah J. Tower
10785 Birch Bluff Avenue
San Diego, CA 92131
Dear Deborah:
Thank you for your letter of June 19 notifying me of your resignation effective
Friday, July 17.
This letter is to confirm your appointment as a consultant to Aurora in the
areas of financial analysis, planning and strategy, facilities matters, and
related business areas, effective July 20, 1998. The compensation terms will be
as set forth in the enclosed Terms of Consultancy Agreement. To avoid
misunderstanding, it is agreed that for the consultancy period, you will
continue to vest common stock at the rate of 733.33 shares per month until the
earlier of the termination of your Consulting Agreement or the fourth
anniversary of the relevant stock purchase grant date. Your stock options
numbers 157 and 222 will cease vesting on July 17, 1998. The COBRA payments will
cover your and your family's costs, but will not be "grossed up." You agree
during the period of your consultancy to be bound by the terms of your
Proprietary Information and Invention Agreement with the company.
As we discussed, in addition to me, each of John Pashkowsky, Tom Klopack, and
Paul Grayson, have been authorized to request and sign off on your consulting
time, and you will manage calls upon your time to avoid exceeding the agreed
times in the Consulting Agreement. Under this Agreement, you will be an
independent contractor and, as such, will not have authority to bind the
company. You agree that no amount will be withheld from your compensation for
payment of any federal or local taxes and that you have the responsibility to
pay such taxes, if any.
Thank you so much for all you have done for Aurora, and we appreciate your
willingness to continue to support the company in a consulting capacity.
Yours sincerely, Agreed and Accepted:
/s/ TIMOTHY J. RINK /s/ DEBORAH J. TOWER
Timothy J. Rink, M.D., Sc.D. -----------------------------------
Chairman, President and CEO Deborah J. Tower
July 17, 1998
TJR/jkc -----------------------------------
Date
Enc.
Cc: Pam Fritz, w/terms
John Pashkowsky, w/terms
Paul Grayson
Tom Klopack
<PAGE> 2
TERMS OF CONSULTANCY AGREEMENT
Non-Refundable Monthly Retainer: $4,000.00(1) payable in advance beginning
7/20/98
(1) Provides for telephonic consultation and off-premises review of documents of
up to 20 hours per month and guarantee of availability for on-premises
consulting of 15 hours per week (no more than 4 hours per day unless
specifically agreed to in advance) at the hourly consulting rate specified
below.
Hourly Consulting Rate: $125.00(1)
(1) Actual consulting performed in person either at Aurora's facilities or any
other location designated including travel time, plus reimbursement of any
reasonable expenses, will be invoiced at this rate and payable within 10 days of
receipt of invoice.
Stock: Restricted stock purchase representing 35,200 shares of
Aurora common stock will continue to vest throughout the
term of the Consulting Agreement.
Medical/Dental: COBRA continuation of medical and dental benefits will
continue at Aurora's cost for the longer of six months or
the term of the Consulting Agreement.
Term: Minimum of four months then cancelable at any time upon
thirty days written notice. If Agreement is terminated prior
to expiration of minimum term, other than for just cause,
all terms of the Agreement will remain in effect for the
minimum term. If written notice is not received thirty days
prior to expiration of minimum term, the Agreement will be
considered to be in effect until proper notice of
cancellation is received.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEET AT JUNE 30, 1998 (UNAUDITED) AND THE STATEMENT OF OPERATIONS FOR THE SIX
MONTHS ENDED JUNE 30, 19998 (UNAUDITED) AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FORM 10-Q FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1998.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 8,558,723
<SECURITIES> 30,847,228
<RECEIVABLES> 1,851,916
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 43,576,478
<PP&E> 11,285,659
<DEPRECIATION> 2,118,960
<TOTAL-ASSETS> 56,344,111
<CURRENT-LIABILITIES> 6,520,859
<BONDS> 0
0
0
<COMMON> 16,977
<OTHER-SE> 45,386,207
<TOTAL-LIABILITY-AND-EQUITY> 56,344,111
<SALES> 0
<TOTAL-REVENUES> 9,046,360
<CGS> 0
<TOTAL-COSTS> 8,977,247
<OTHER-EXPENSES> 11,388,433
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 313,425
<INCOME-PRETAX> (10,216,716)
<INCOME-TAX> 0
<INCOME-CONTINUING> (10,216,716)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (10,216,716)
<EPS-PRIMARY> (0.63)
<EPS-DILUTED> (0.63)
</TABLE>
