<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 September 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 October 31, 1998
----- ----------------
Common Stock, $.001 par value 16,972,577
<PAGE> 2
AURORA BIOSCIENCES CORPORATION
FORM 10-Q
INDEX
Page No.
--------
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
Balance Sheets - September 30, 1998 (Unaudited) and December 31, 1997......3
Statements of Operations (Unaudited) - Three and nine months ended
September 30, 1998 and 1997................................................4
Statements of Cash Flows (Unaudited) - Nine months ended
September 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..........................13
ITEM 6. Exhibits and Reports on Form 8-K...................................13
SIGNATURE.....................................................................14
<PAGE> 3
PART I - FINANCIAL INFORMATION
ITEM 1. Financial Statements.
AURORA BIOSCIENCES CORPORATION
BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997
------------- -------------
(Unaudited) (Note)
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 8,660,411 $ 23,168,690
Investment securities, available-for-sale 23,161,905 25,737,734
Accounts receivable under collaborative agreements 4,558,618 3,207,166
Prepaid expenses 881,171 563,017
Other current assets 1,165,367 763,330
------------- -------------
Total current assets 38,427,472 53,439,937
Equipment, furniture and leaseholds, net 10,933,727 6,691,939
Notes receivable from officers and employees 260,000 290,000
Restricted cash 1,080,284 1,311,923
Other assets 5,162,803 1,302,033
------------- -------------
$ 55,864,286 $ 63,035,832
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 4,107,260 $ 1,111,946
Accrued compensation 449,416 278,852
Other current liabilities -- 227,778
Unearned revenue 2,923,333 2,324,001
Capital lease obligations, current portion 1,726,681 1,153,185
------------- -------------
Total current liabilities 9,206,690 5,095,762
Capital lease obligations, less current portion 4,425,435 3,421,652
Other noncurrent liabilities 155,528 154,346
Stockholders' equity:
Common stock, $.001 par value, 50,000,000 shares
authorized, 16,972,427 and 17,032,885 shares issued
and outstanding at September 30, 1998 (unaudited) and
December 31, 1997, respectively 16,972 17,033
Additional paid-in capital 61,045,809 60,497,472
Deferred compensation (2,190,507) (3,072,560)
Accumulated deficit (16,795,641) (3,077,873)
------------- -------------
Total stockholders' equity 42,076,633 54,364,072
------------- -------------
$ 55,864,286 $ 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.
<PAGE> 4
AURORA BIOSCIENCES CORPORATION
STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1998 1997 1998 1997
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Revenue:
Screening systems $ 6,343,341 $ 2,604,056 $ 9,883,341 $ 3,852,056
Screening services 1,539,995 922,907 4,021,355 2,270,407
License fees 1,262,501 487,500 4,287,501 1,462,500
------------ ------------ ------------ ------------
Total revenue 9,145,837 4,014,463 18,192,197 7,584,963
Operating expenses:
Cost of screening systems 6,586,720 996,771 14,068,172 3,263,254
Cost of screening services 522,205 567,437 2,018,000 1,374,198
Research and development 4,053,497 1,289,841 13,005,576 3,132,912
Selling, general and administrative 1,871,001 829,440 4,307,355 2,223,820
------------ ------------ ------------ ------------
Total operating expenses 13,033,423 3,683,489 33,399,103 9,994,184
------------ ------------ ------------ ------------
Loss from operations (3,887,586) 330,974 (15,206,906) (2,409,221)
Interest income 554,552 666,338 1,970,581 1,098,180
Interest expense (168,018) (100,553) (481,443) (236,374)
------------ ------------ ------------ ------------
Net income(loss) $ (3,501,052) $ 896,759 $ (13,717,768) $ (1,547,415)
============ ============ ============ ============
Basic net income (loss) per share $ (0.21) $ 0.06 $ (0.85) $ (0.23)
============ ============ ============ ============
Diluted net income (loss) per share $ (0.21) $ 0.05 $ (0.85) $ (0.23)
============ ============ ============ ============
Shares used in computing:
Basic net income (loss) per share 16,417,747 15,597,573 16,219,425 6,684,138
============ ============ ============ ============
Diluted net income (loss) per share 16,417,747 17,514,030 16,219,425 6,684,138
============ ============ ============ ============
</TABLE>
See accompanying notes.
<PAGE> 5
AURORA BIOSCIENCES CORPORATION
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Ended September 30,
1998 1997
-------------- --------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net loss $ (13,717,768) $ (1,547,415)
Adjustments to reconcile net loss to net cash used in operating
activities:
Depreciation and amortization 1,669,409 616,977
Amortization of deferred compensation 613,703 572,493
Changes in operating assets and liabilities:
Accounts receivable under collaborative agreements (1,351,452) (1,499,171)
Prepaid expenses and other current assets (720,191) (3,130,170)
Accounts payable and accrued compensation 3,165,878 429,945
Other current liabilities (227,778) --
Unearned revenue 599,332 177,501
Other noncurrent liabilities 1,182 --
-------------- --------------
Net cash used in operating activities (9,967,685) (4,379,840)
INVESTING ACTIVITIES:
Purchases of investment securities (23,629,171) (14,472,855)
Sales and maturities of investment securities 26,205,000 7,470,381
Purchases of equipment, furniture and leaseholds (3,310,599) (382,867)
Notes receivable from officers and employees 30,000 (90,000)
Restricted cash 231,639 --
Other assets (3,860,770) (296,240)
-------------- --------------
Net cash used in investing activities (4,333,901) (7,771,581)
FINANCING ACTIVITIES:
Cost of convertible preferred stock, net -- (36,528)
Issuance of common stock, net 816,626 38,068,997
Principal payments on capital lease obligations (1,023,319) (448,761)
-------------- --------------
Net cash (used in) provided by financing activities (206,693) 37,583,708
-------------- --------------
Net (decrease) increase in cash and cash equivalents (14,508,279) 25,432,287
Cash and cash equivalents at beginning of period 23,168,690 3,914,038
-------------- --------------
Cash and cash equivalents at end of period $ 8,660,411 $ 29,346,325
============== ==============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid $ 481,443 $ 236,374
============== ==============
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND
FINANCING ACTIVITIES:
Property and equipment acquired under capital leases $ 2,600,598 $ 2,126,383
============== ==============
</TABLE>
See accompanying notes.
<PAGE> 6
AURORA BIOSCIENCES CORPORATION
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 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. INCOME (LOSS) PER SHARE
Recent interpretations by the SEC have altered the treatment of convertible pre
ferred stock previously included in computing certain income (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 income
(loss) per share. To conform to the recent interpretations, the Company has
revised its calculation of income (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 income
(loss) per share (basic and diluted) for the three and nine month periods
ended September 30, 1998 and 1997, under the as-if converted method.
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1998 1997 1998 1997
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Numerator:
Net income (loss) $ (3,501,052) $ 896,759 $(13,717,768) $ (1,547,415)
------------ ------------ ------------ ------------
Numerator - income available to
common stockholders $ (3,501,052) $ 896,759 $(13,717,768) $ (1,547,415)
============ ============ ============ ============
Denominator:
Weighted average common shares 16,417,747 15,597,573 16,219,425 6,684,138
Adjustment to reflect the effect
of assumed conversion of convertible
preferred stock to common stock
from the date of issuance -- -- -- 6,138,459
</TABLE>
<PAGE> 7
AURORA BIOSCIENCES CORPORATION
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1998 1997 1998 1997
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Effect of diluted securities:
Nonvested common stock -- 1,394,543 -- --
Common stock options -- 521,914 -- --
------------ ------------ ------------ ------------
Dilutive securities subtotal -- 1,916,457 -- --
------------ ------------ ------------ ------------
Denominator - adjusted weighted
average common shares 16,417,747 17,514,030 16,219,425 12,822,597
============ ============ ============ ============
Basic net income (loss) per share
under the as-if converted method $ (0.21) $ 0.06 $ (0.85) $ (0.12)
============ ============ ============ ============
Diluted net income (loss) per share
under the as-if converted method $ (0.21) $ 0.05 $ (0.85) $ (0.12)
============ ============ ============ ============
</TABLE>
For the nine months ended September 30, 1997, the basic and diluted net loss
per share without an adjustment for convertible preferred stock is $(0.23),
computed using 6,684,138 weighted average common shares, as stated on the
Statement of Operations.
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.
<PAGE> 8
AURORA BIOSCIENCES CORPORATION
SEPTEMBER 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 Forms 10-Q for the quarters ended March 31, 1998 and June 30, 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 intended
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 an Ultra-high Throughput Screening System
("UHTSS (Trademark)") 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 $16.8 million as of September 30,
1998. The $13.7 million net loss in the first nine 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 NINE MONTHS ENDED SEPTEMBER 30, 1998
AND 1997
Total revenue increased 128% from the three months ended September 30, 1997 to
the three months ended September 30, 1998 (the "three-month period") and
increased 140% from the nine months ended September 30, 1997 to the nine months
ended September 30, 1998 (the "nine-month period"). The increases in revenue
for the three-month and nine-month periods resulted primarily from the
<PAGE> 9
AURORA BIOSCIENCES CORPORATION
SEPTEMBER 30, 1998
Company's collaborative agreements with Warner-Lambert Company ("Warner-
Lambert") and Merck & Co., Inc. ("Merck"), which were executed in September
1997 and December 1997, respectively. Under these collaborative agreements,
screening systems, screening services and license fees revenue were recorded
in the three months and nine months ended September 30, 1998 while only
screening systems revenue was recorded in the three months and nine months
ended September 30, 1997. In addition, revenue from an agreement executed
in August 1998 with Warner-Lambert to develop an automated master compound
storage ("AMCS(Trademark)") system contributed to the increases in revenue
for the three-month and nine-month periods. Screening systems, screening
services and license fees revenue under the Company's collaborative agreements
with Bristol-Myers Squibb Pharmaceutical Research Institute ("BMS") and Eli
Lilly and Company ("Lilly") were recorded in the three months and nine months
ended September 30, 1998 and 1997.
Total operating expenses increased 254% for the three-month period and 234%
for the nine-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 144 employees at
September 30, 1998 from 71 at September 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 561% for the three-month period and 331%
for the nine-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 and
AMCS system for the Company's collaborators. Production costs for screening
subsystems delivered to certain of the Company's collaborators in the quarter
ended September 30, 1998 also contributed to the increases.
Cost of screening services decreased 8% for the three-month period and
increased 47% for the nine-month period. The slight decrease in the three-month
period is attributable to variations in the activity level of development
of screening assays for collaborators. In addition to the factors noted above,
the increase in the nine-month period resulted from development of screening
assays for Warner-Lambert and Merck under collaborative agreements executed
in the second half of 1997.
Research and development expenses increased 214% for the three-month period
and 315% for the nine-month period. In addition to the factors noted above,
the increases were primarily due to ongoing development of Aurora's own UHTSS
and the expansion of the Company's human cell functional genomics program. In
addition, 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 contributed
to the increases.
Selling, general and administrative expenses increased 126% for the three-month
period and 94% for the nine-month period with the overall expansion of the
Company's operations as noted above.
<PAGE> 10
AURORA BIOSCIENCES CORPORATION
SEPTEMBER 30, 1998
Net interest income decreased 32% for the three-month period and increased 73%
for the nine-month period. The decrease in the three-month period reflected
decreased interest income from lower average cash and investment balances in
the 1998 three-month period as the 1997 three-month period included proceeds
from the Company's initial public offering in June 1997. The increase in the
nine-month period reflected increased interest income from higher average cash
and investment balances in the 1998 nine-month period, partially offset by
increased interest expense incurred on capital lease obligations entered into
during the last three months of 1997 and the first nine months of 1998.
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 1998, Aurora held cash, cash equivalents and investment
securities available-for-sale of $31.8 million and working capital of $29.2
million. The Company has funded its operations through September 30, 1998
primarily through the issuance of equity securities with aggregate net proceeds
of $57.6 million, receipts from corporate collaborations and strategic
technology alliances of $33.5 million, capital equipment lease financing of
$8.0 million and interest income of $4.3 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
September 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.
The Company has entered into certain contractual commitments, subject to
satisfactory performance by third parties, which total approximately $6.0
million over the next three years.
The Company expects significant cash expenditures to continue into 1999
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, Allelix
Biopharmaceuticals, Inc. and Cytovia, Inc. to provide screening services.
The Company has also entered into an agreement with Warner-Lambert to develop
an AMCS system. Other collaborations include a combinatorial chemsistry
agreement with SIDDCO, Inc. for synthesis of chemical compounds.
<PAGE> 11
AURORA BIOSCIENCES CORPORATION
SEPTEMBER 30, 1998
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.
IMPACT OF YEAR 2000
The Company recognizes the need to ensure its operations will not be adversely
impacted by the inability of computer systems to process data having dates on
or after January 1, 2000 (the "Year 2000" issue). The Company is completing an
assessment of whether it will have to modify or replace portions of its
software and certain hardware so that its systems will function properly with
respect to dates in the year 2000 and thereafter. This assessment is
substantially complete and no significant modifications or conversions of
existing software and certain hardware have been required to date. The
assessment is expected to be completed no later than December 31, 1998 and all
required modifications and conversions of existing software and certain
<PAGE> 12
AURORA BIOSCIENCES CORPORATION
SEPTEMBER 30, 1998
hardware are expected to be completed by March 31, 1999, which is prior to any
anticipated impact on the Company's systems. The Company believes that, with
modifications and conversions of existing software and certain hardware, the
Year 2000 issue will not pose significant operational problems for its systems.
However, if such modifications and conversions are not made, or are not
completed timely, the Year 2000 issue could have a material impact on the
operations of the Company.
The Company has gathered information about its significant suppliers, financial
institutions and others with whom the Company does business to determine the
extent to which the Company's systems are vulnerable to those third parties'
failure to remediate their own Year 2000 issues. The Company continues to
monitor the Year 2000 compliance status of such third parties and no
significant issues with third parties' systems have been identified to date.
While the Company has no material systems that interface directly with those
of third parties, there can be no assurance that the systems of third parties
will not have a material impact on the operations of the Company.
The Company does not expect purchases of new or upgraded software and hardware
required for Year 2000 compliance to be significant. In addition, the Company
does not expect to utilize significant external resources to assess, test,
modify or replace existing software and hardware for Year 2000 issues.
Accordingly, the total Year 2000 issue cost to the Company is not expected
to be material.
The costs of the project and the date on which the Company believes it will
complete the modifications necessary to resolve the Year 2000 Issue are based
on management's best estimates, which were derived utilizing numerous
assumptions of future events, including the continued availability of certain
resources and other factors. However, there can be no assurance that these
estimates will be achieved and actual results could differ materially from
those anticipated. Specific factors that might cause such material differences
include, but are not limited to, the availability and cost of personnel trained
in this area, the ability to locate and correct all relevant computer codes,
and similar uncertainties.
The Company currently has no contingency plans in place in the event it does not
complete all phases of the Year 2000 program. The Company plans to evaluate the
status of completion in March 1999 and determine whether such plans are
necessary.
<PAGE> 13
AURORA BIOSCIENCES CORPORATION
SEPTEMBER 30, 1998
PART II - OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
(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 September 30, 1998, approximately
$21.0 million was used for general corporate purposes, approximately $11.9
million was used for enhancement of internal research and development
capabilities and the acquisition of chemical libraries and approximately $4.8
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 directors and officers of the Company. As of September 30, 1998, the total
net offering proceeds of $37.7 million have been used.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
10.36(1) Agreement dated July 16, 1998 between the Registrant and
Deborah J. Tower.
10.37* Collaborative Research Agreement dated July 16, 1998 between
the Registrant and Cytovia, Inc.
10.38* AMCS Development Agreement dated August 21, 1998 between the
Registrant and Warner-Lambert Company.
27.1 Financial Data Schedule related to the Financial Statements
for the period ended September 30, 1998.
- --------------
(1) Previously filed as exhibit of the same number with the
Registrant's Form 10-Q for the quarter ended June 30, 1998
(No. 0-22669) and incorporated herein by reference.
* 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
September 30, 1998
<PAGE> 14
AURORA BIOSCIENCES CORPORATION
SEPTEMBER 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: NOVEMBER 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)
<PAGE> 1 EXHIBIT 10.37
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.
COLLABORATION AGREEMENT
BETWEEN
CYTOVIA, INC.
AND
AURORA BIOSCIENCES CORPORATION
***Confidential Information Requested 1
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COLLABORATION AGREEMENT
This COLLABORATION AGREEMENT (the "Agreement"), is entered into as of the
Effective Date (defined below), by and between Aurora Biosciences Corporation,
a Delaware corporation, having a principal place of business at 11010 Torreyana
Road, San Diego, California 92121 ("Aurora"), and Cytovia, Inc., having a
principal place of business at 201 Technology Drive, Irvine CA 92616
"Cytovia").
BACKGROUND
WHEREAS, Aurora designs, develops, and manufactures automation, instruments and
fluorescent assay technologies which it may use for accelerated drug discovery;
WHEREAS, Cytovia develops cellular assays using its proprietary fluorogenic
substrates for the discovery of drugs to be developed by Cytovia,
WHEREAS, Aurora and Cytovia desire to enter into a collaborative research and
development program to develop screens and use such screens to identify
compounds having biological activity; all in accordance with the terms and
conditions set forth below.
NOW, THEREFORE, Aurora and Cytovia agree as follows:
ARTICLE 1. DEFINITIONS
The following terms shall have the meanings provided below when used herein:
1.1 "Affiliate" shall mean a person or entity, other than an entity
jointly owned or controlled by the parties, that directly or indirectly
controls, is controlled by, or is under common control with the person or
entity specified. For purposes of this definition, "control" means the
direct or indirect ownership of greater than fifty percent (50%) of the
outstanding shares or other voting rights of the specified entity to elect
directors or other management authority, or if not meeting the preceding,
that level of control which is the maximum ownership right permitted in
the jurisdiction where such entity exists.
1.2 "Agency" shall mean the U.S. Food and Drug Administration ("FDA") or
its successor, or an equivalent agency of any other government of another
country having jurisdiction over the development, manufacturing, and/or
marketing of pharmaceutical products.
1.3 "Agreement Compound" shall mean ***.
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1.4 "Annual Screening Program" shall have the meaning set forth in
Section 2.4.2.
1.5 "Aurora Compound" shall mean ***
1.6 "Aurora Know-How" shall mean ***.
1.7 "Aurora Patents" shall mean Patent Rights owned, licensed or
Controlled by Aurora (including its Affiliates, Licensors or its
Licensees) which relate to Compounds, Agreement Compounds, Products or
Screens ***.
1.8 "Aurora Technology" shall mean Aurora Patents and Aurora Know-How.
1.9 "Collaboration Committee" or "CC" shall have the meaning set forth
in Section 2.1.
1.10 "Collaboration Period" shall begin on the Effective Date and ***.
1.11 "Compound" shall mean ***.
1.12 "Compound Library and Database Program" or ("CLDP") and ***is
defined in Exhibit B.
1.13 "Confidential Information" shall mean information or material
disclosed hereunder by one party (the "Disclosing Party") to the other
party (the "Receiving Party") and as further defined in Section 9.1.
1.14 "Control" or "Controlled" shall mean, with respect to Intellectual
Property, possession by a party or its Affiliates of the ability to grant
a license or sublicense in accordance with the terms of this Agreement,
and without violating the terms of any agreement by such party with a
Third Party.
1.15 "CPI" shall mean the Consumer Price Index, All Urban Consumers, as
published by the U.S. Bureau of Labor Statistics.
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1.16 "Cytovia Collaborator" shall mean ***.
1.17 "Cytovia Compound" shall mean ***.
1.18 "Cytovia Know-How" shall mean ***.
1.19 "Cytovia Patent Rights" shall mean Patent Rights owned, licensed or
Controlled by Cytovia (including its Affiliates, Licensors or its
Licensees)***.
1.20 "Cytovia Technology" shall mean ***.
1.21 "***
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1.22 "Development Candidate" shall mean a ***.
1.23 "Excluded Compound" shall mean ***.
1.24 "Full Time Equivalent" or "FTE" shall mean the full time equivalent
of one (1) Aurora researcher, based on a minimum of one thousand seven
hundred sixty (1,760) hours per year.
1.25 "Hit" shall ***.
1.26 "Intellectual Property" means any a) information or data,
techniques, methods, trade secrets, results, tangible or intangible know-
how, or chemical, biological or physical materials that is not generally
known to the public, b) world-wide copyrights, and c) patent rights.
1.27 "Joint Technology" shall have the meaning set forth in Section 8.3.
1.28 "Licensee" shall mean any Third Party (other than an Affiliate of
Cytovia or Aurora) which is granted a license, sublicense or other right
to manufacture, use, sell, offer for sale, distribute and/or import one or
more Products or Agreement Compounds.
1.29 "Licensor" shall mean any Third Party that grants a license,
sublicense or other right to manufacture, use, sell, offer for sale,
distribute and/or import one or more Products or Compounds.
1.30 "NDA" shall mean a New Drug Application ("NDA"), Biologics License
Application ("BLA") or Product License Application ("PLA"), as defined in
the U.S. Food, Drug, and Cosmetic Act and the regulations promulgated
thereunder, or any equivalent foreign application.
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1.31 "Net Royalty" shall mean all consideration, including without
limitation, ***, received by Cytovia, from an Affiliate, a Third Party,
Cytovia Collaborator, or Licensee in respect of the sale or other
distribution of any Product. Net Royalty excludes milestone payments or
any amounts received by Cytovia which do not accrue upon the sale or
distribution of any Product, such as a loan, purchase of equity, or
support for research and development activity for such Product.
1.32 "Net Sales" shall mean the invoice price of Products, as the case
may be, sold by Cytovia or its Affiliates, Cytovia Collaborators, or
Licensees to bona fide independent Third Parties in arm's length
transactions, less, to the extent included in such invoice price the total
of: (i) ordinary and customary trade discounts actually allowed; (ii)
credits, rebates and returns(including, but not limited to, wholesaler and
retailer returns); (iii) freight, postage and duties paid for and
separately identified on the invoice or other documentation maintained in
the ordinary course of business, and (iv) excise taxes, other consumption
taxes, customs duties and compulsory payments to governmental authorities
actually paid and separately identified on the invoice or other
documentation maintained in the ordinary course of business. Net Sales
shall also include the amount or fair market value of all other
consideration received by Cytovia or its Affiliates, Cytovia
Collaborators, or Licensees which accrues upon the sale or other
distribution of Products, as the case may be, whether such consideration
is in cash, payment in kind, exchange or another form.
1.33 "Non-exclusive Compounds" means a single set of ***by Aurora
during the Collaboration Period wherein each compound in such set ***.
1.34 "Patent Rights" shall mean all U.S. or foreign jurisdiction
(including the European Patent Convention) patent applications, including
any regular, or provisional applications and any continuation (in whole or
in part), division, or substitute thereof, and any patent issuing thereon,
including any reissue, re-examination, or extension thereof or any
equivalent of any of the foregoing.
1.35 "Phase I," "Phase II," and "Phase III" shall mean Phase I, Phase II,
or Phase III human clinical trials of a pharmaceutical product,
respectively, in each case as customarily related to applicable FDA
Investigational New Drug ("IND") regulations, or any equivalent or
corresponding foreign statutes, rules, or regulations.
1.36 "Product" shall mean ***.
1.37 "Screen" shall mean an ***.
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1.38 ***
1.39 ***
1.40 "Term" shall have the meaning set forth in Section 12.1.
1.41 "Third Party" shall mean any person or entity other than (i) Aurora
and any of its Affiliates, and (ii) Cytovia and any of its Affiliates.
1.42 "Tracking Records" shall have the meaning set forth in Section
5.2.5.
1.43 "Valid Claim" shall mean (a) an issued claim under an issued patent
within the Patent Rights, which has not (i) expired or been canceled, (ii)
been declared invalid by an unreversed and unappealable decision of a
court or other appropriate body of competent jurisdiction, (iii) been
admitted to be invalid or unenforceable through reissue, disclaimer or
otherwise, and/or (iv) been abandoned; or (b) a claim included in a
pending patent application within the Patent Rights that is being actively
prosecuted in accordance with this Agreement and which has not been (i)
canceled, (ii) withdrawn from consideration, (iii) finally determined to
be unallowable by the applicable governmental authority for whatever
reason (and from which no appeal is or can be taken), and/or (iv)
abandoned.
1.44 ***
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ARTICLE 2. SCREENING PROGRAM
2.1 Collaboration Committee.
2.1.1 Responsibilities. Within thirty (30) days after the Effective
Date, Aurora and Cytovia shall establish a committee (the "Collaboration
Committee" or "CC"), to review and coordinate the Screening Programs
pursuant to Article 2.
2.1.2 Membership. The CC shall be comprised of ***from Cytovia and ***
from Aurora. Each party may select and replace its CC representatives at
any time, with written notice to the other party. Each party shall each
appoint one of its CC representatives to be responsible for coordinating
communications between the parties.
2.1.3 Meetings. During the Collaboration Period, the CC shall meet at
least quarterly, or more often as mutually agreed, in person, by telephone
or televideo conference. Each party shall pay its own expenses incurred
in connection with participation at CC meetings. With the consent of the
parties, other representatives of Cytovia and/or Aurora may attend CC
meetings as nonvoting observers. On an alternating basis, one party shall
promptly prepare and deliver to the members of the CC minutes in respect
thereof, for review and approval by both parties.
2.1.4 CC Decisions. Decisions of the CC shall be made by simple
majority approval of all CC members. In the event that approval is not
obtained within the CC, the undecided matter will be referred to a
Business Development officer of each party, who shall promptly meet in
person or by telephone or by televideo conference to endeavor to resolve
the dispute. In the event such individuals are unable to resolve such
dispute within thirty (30) days, the matter shall be referred to the Chief
Executive Officers or equivalent of the parties, who shall promptly meet
in person or by televideo conference within thirty (30) days after such
dispute is submitted to such officer, to endeavor to resolve the dispute.
If such officers are unable to resolve the dispute in a timely manner, at
the request of either party, it shall be settled by binding arbitration
pursuant to Section 13.2 below, or as otherwise mutually agreed in writing.
2.2 Screen Proposals and Selection. During ***the Collaboration Period, ***,
as defined Section 2.4. ***, Cytovia will ***identified by Cytovia relating to
such Screen. In performing its obligations under the foregoing sentence***.
Within thirty (30) days of receiving such information, and further information
as Aurora may reasonably request regarding a proposed Screen, (i) the CC will
meet to review whether the CC reasonably believes that it is ***feasible to use
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<PAGE> 9
the Screen in an Annual Screening Program and (ii) Aurora shall notify Cytovia
in writing whether Aurora reasonably believes that Aurora is ***feasible to
work with such Screen. Aurora may determine that performing a Screen may not be
legally feasible for *** Aurora being subject to conflicting obligations under
this Agreement and another then existing agreement with a Third Party. If the
CC determines that it is feasible to use a Screen developed by Cytovia, ***,
the CC will develop a written plan for such Screen ("Screen Work Plan")
containing a complete description of the Screen, delivery schedule, screening
plan, and the screening schedule. If the CC does not determine that it is
feasible to use the Screen, it shall notify Cytovia in writing thereof, and in
such case Aurora shall have no obligation to use such Screen.
2.3 Screen Delivery and Cytovia ***. Promptly after development of a
Screen Work Plan, Cytovia will deliver to Aurora such Screen as set forth in
the appropriate Screen Work Plan. Such Screen will be delivered with a
written summary describing the Screen and data indicating that such Screen
satisfies the Screen Specifications and the applicable provisions of the Screen
Work Plan.
2.4 Screening Services and Aurora ***
2.4.1 ***
2.4.2 ***
2.4.3 ***
2.4.4 CLDP Selection and Upgrade. At least thirty (30) days prior to
commencement of the Annual Screening Program, Cytovia shall notify Aurora
in writing of the CLDP Cytovia has selected for use in the Annual
Screening Program for a particular Screen. Following commencement of the
Annual Screening Program, the CLDP for the Annual Screening Program may be
upgraded as follows.
(i) ***
(ii) ***
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Requests for such CLDP upgrades shall be submitted in writing by Cytovia
to Aurora. With respect to the payments in Section 5.2.1, the terms and
conditions for the highest CLDP level selected for an Annual Screening
Program shall apply to all Aurora Compounds used in such Annual Screening
Program.
2.4.5 Screening Program Reports. During the course of the Annual
Screening Program, individuals from Cytovia and Aurora, appointed by the
CC, will discuss and review monthly, if not more frequently, the progress
and any issues relating to the Annual Screening Program. During the
Collaboration Period, the CC will review and prepare quarterly reports for
the Annual Screening Program in progress at that time. Each progress
report shall provide a written update of work performed, any Hits
identified, and all available supporting data.
2.4.6 Screening Database Access and Maintenance. For a period of
***following completion of each Annual Screening Program, Aurora will
maintain all data generated in such Annual Screening Program and Cytovia
may have access to such data subject to the terms of the CLDP selected for
such Annual Screening Program. All data provided by Aurora to Cytovia will
be transferred electronically.
2.4.7 Optional Screening Services. During the Collaboration Period,
Cytovia may purchase from Aurora optional screening services to provide
(i) additional data points from the Screen used in the Annual Screening
Program, (ii) screening services for additional screens, or (iii)
development services beyond those included in the Annual Screening
Program. The fees for such optional screening services will be negotiated
in good faith by the parties.
2.4.8 Credit for Unused Screening Services. If during the course of an
Annual Screening Program, Cytovia elects to end the screening process
before ***. Unless mutually agreed to in writing by the parties, ***.
2.4.9 Exclusion of Aurora Compounds. The use of an Aurora Compound
and data associated with such Aurora Compound may ***.
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2.4.10 Designation of Excluded Compounds. At least ***days prior to
commencement of each Annual Screening Program, Cytovia ***
2.5 Payments for Screening Services.
2.5.1 Funding for Annual Screening Program. In consideration for the ***.
The first payment shall be made within ***of the Effective Date, and
subsequent payments shall be paid to Aurora no later than the first day of
the second month of the calendar quarter to which such payment pertains.
Cytovia will have responsibility for paying for any associated sales, use,
value added, or transfer tax, or similar governmental charge if any, but
not taxes based on net income or profit.
2.5.2 Funding for Additional Screens. If Aurora determines, in good
faith, that the expenses that would be incurred by Aurora ***for an Annual
Screening Program, ***, and in such event the parties shall in good faith
determine the *** for the applicable screening and development activities.
*** shall be calculated based on the number of additional FTEs required to
complete the Annual Screening Program, and the duration of the additional
FTEs' participation in such activities. The fully burdened FTE rate for
each Aurora scientist shall be ***per FTE per year. Such amount shall be
***. In addition, Aurora reserves the right ***.
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ARTICLE 3. DEVELOPMENT AND COMMERCIALIZATION
The selection of Agreement Compound(s), Development Candidate(s), and
Product(s) for development and commercialization will be at the discretion of
Cytovia. Cytovia will, at no expense to Aurora, be responsible for conducting
or arranging all development and commercialization of such selected Agreement
Compound(s) Development Candidate(s) and Product(s)that Cytovia, at its
discretion, chooses to develop and commercialize. Cytovia, its Affiliates,
Cytovia Collaborators or Licensees will ***, or have its Affiliates, Cytovia
Collaborators or its Licensees *** meet the market demand therefor. Cytovia
will promptly notify Aurora at such time as any Agreement Compound becomes a
Development Candidate, or otherwise achieves any milestone for which Cytovia
will owe Aurora a milestone payment pursuant to Section 5.1. Cytovia agrees to
provide Aurora with a written summary of the development progress made in
respect of an Agreement Compound(s), Development Candidate(s), and Product(s)
within thirty (30) days of the end of each calendar quarter during the period
in which an Agreement Compound(s), Development Candidate(s), and Product(s) is
under development by Cytovia (or its designee).
ARTICLE 4. LICENSES
4.1 License to Aurora. Cytovia hereby grants to Aurora, ***.
4.2 No Implied Licenses and Grant Backs. Only those licenses expressly granted
in Section 4.1 and Article 8 shall be of any force and effect. No license or
other right in the Aurora Technology or Cytovia Technology shall be created
hereunder by implication, estoppel, or otherwise.
ARTICLE 5. MILESTONES AND ROYALTIES
5.1 Milestone Payments. Cytovia will pay to Aurora the following amounts
upon achievement of each of the following milestone events by Cytovia,
***Screen to have ***.
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Milestone Events Per Screen: Payment
*** ***
Milestone Events Per Compound:
*** ***
*** ***
*** ***
*** ***
Cytovia will notify Aurora in writing and pay Aurora the appropriate amounts
set forth in this Section 5.1, within ***of the achievement of a milestone, or,
in the case of a Third Party achieving a milestone, within the earlier of a)
***of Cytovia receiving notification from a Third Party of the achievement of a
milestone set forth in this Section 5.1 or b) ***of Cytovia receiving payment
from a Third Party for the achievement of such milestone. If in the course of
compound development any of the above milestones are combined or skipped,
Aurora will receive the above milestone payments as if each milestone were
initiated separately or completed separately.
5.2 Royalties to Aurora. ***, Cytovia shall pay Aurora a royalty ***. Sales of
any products that contain Excluded Compounds and do not contain any Products
shall ***.
5.2.1 Sales of Products derived from Aurora Compounds. With respect to
Product(s) containing Aurora Compounds or Derivatives thereof pursuant to
the Compound Library Database Program selected in accordance with Section
2.4.3, Cytovia shall pay Aurora an amount equal to
(i) ***,
(ii) ***, and
(iii) ***.
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5.2.2. Sales of Products ***. With respect to Product(s) ***Compounds or
Derivatives thereof, Cytovia shall pay Aurora an amount equal to ***of
such Products if the Product is marketed by ***if the Product is marketed
by an ***; provided, however, that such amount payable to Aurora pursuant
to this Section 5.2.2 shall not be less *** of such Product(s).
5.2.3 Trade Secret Royalty. The parties acknowledge that the principal
value contributed by Aurora under this Agreement is the enhanced
probability of identifying leads for human pharmaceutical products (or
other products having commercial value) and the potential to generate
multiple leads, either or both of which the parties reasonably believe
will lessen the time required to bring pharmaceutical products to market
and increase the efficiency of drug discovery and development processes
and technologies. Additionally, the parties acknowledge that Aurora may
not own or control Patent Rights covering the manufacture, sale, use, or
importation of a particular Agreement Compound or Product. Cytovia
acknowledges and agrees that the value it receives hereunder is primarily
in the access and use of the Aurora Compounds and the Aurora Technology.
Accordingly, Cytovia agrees to pay those royalties and other amounts at
the applicable rate specified in this Section 5.2, regardless of whether
a Product is covered by Patent Rights within the Aurora Technology.
5.2.4 Royalty Term. Cytovia's obligation to pay royalties to Aurora
pursuant to this Section 5.2 shall continue on a Product-by-Product and
country-by-country basis until *** after the date of the first commercial
sale of such Product in a particular country by Cytovia, its Affiliates,
designees, Cytovia Collaborators or Licensees.
5.2.5 Tracking Records for Royalty Obligations. Records of any Hits or any
Compound subject to additional screening will be stored by Cytovia in a
computer searchable file or database that may be separate from other
Cytovia data not related to Screens. Such records or information from a
Screen will be recorded and stored by Cytovia using its customary means
and in a computer searchable database on a storage device. The information
stored will include ***tested, and date of testing. Upon written request
by Aurora, Cytovia will create an annual written report of Hits or
Derivatives subjected to additional screening, in vivo testing, computer
modeling, medicinal chemistry or an Investigational New Drug application
or foreign equivalent to date to be accessible by an independent
consultant of Aurora. All the records described in this Section 5.2.5 are
collectively referred to as tracking records (the "Tracking Records").
Cytovia will permit a Third Party appointed by Aurora and Cytovia, and
subject to a confidential relationship with Cytovia, to inspect the
Tracking Records once per year or upon reasonable request for the sole
purpose of determining the attainment of a milestone or royalty under this
Agreement. The Tracking Records shall be securely retained for no less
than ***from the last use of a Screen. When a compound, such as a Hit or
Derivative is selected for ***, Cytovia will disclose this compound to
Aurora and such information shall be Cytovia's Confidential Information
for the purpose of Article 9. In addition, Cytovia will make reasonable
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efforts to obligate its Affiliates, designees, Cytovia Collaborators or
Licensees to a provision substantially the same as this provision in this
Section 5.2.5 with respect to Cytovia and wherein such party will grant
access to Aurora in event Cytovia is unable to access such Tracking
Records. Upon reasonable request by Aurora and at a minimum once per year,
Cytovia will provide Aurora with a summary of the status of Agreement
Compounds and Products that may be used to calculate royalties or
milestones.
5.2.6 Payment of Royalties. Cytovia will notify Aurora in writing and pay
Aurora the appropriate amounts set forth in this Section 5.2, (a) within
***of receipt of ***by Cytovia, (b) within ***of Cytovia receiving
royalties from a Third Party for the of receipt of ***, or (c) if Cytovia
is not due any royalties, within ***of Cytovia receiving notification from
a Third Party of the receipt of ***.
5.3 Payment of Milestones and Royalties in the Event of Bankruptcy. Cytovia
shall contractually obligate its Affiliates, designees, Cytovia Collaborators
or Licensees so that in the event of bankruptcy by Cytovia such parties will
either a) pay milestones directly to Aurora pursuant to Section 5.1 and pay
royalties directly to Aurora pursuant to Section 5.2 or b) terminate all rights
and activities under any agreement relating to the development and
commercialization of Agreement Compounds or Products as permitted under this
Agreement.
5.4 Exemptions from Milestones and Royalties. Notwithstanding any other
provision of this Agreement, Cytovia shall not be obligated to make any
milestone payment or royalty payment with respect to products ***.
ARTICLE 6. INVESTMENT AND SCREENING REFERRALS
6.1 Aurora Contribution. Within ***of the Effective Date, Aurora will ***.
6.2 Screening Referrals. For a period of ***following the Effective Date,
Cytovia will grant Aurora a ***
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ARTICLE 7. PAYMENTS; BOOKS AND RECORDS
7.1 Royalty Reports. After the first commercial sale of a Product on which
royalties are payable hereunder to Aurora by Cytovia, Cytovia shall make
quarterly written reports to Aurora within *** after the end of each calendar
quarter or ***from the receipt of such information from a Third Party, stating
in each such report, on a country-by-country basis, the number, description,
and *** of each Product sold in a country during the calendar quarter upon
which a royalty is payable under Section 5.2 above.
7.2 Screen Development and Screening Payments. Any payments due pursuant to
Section 2.5 shall be paid within thirty (30) days of receipt of an invoice
therefor. Any payments due pursuant to Section 5.1 shall be paid as provided in
that Section 5.1. Any payments due pursuant to Section 5.2 shall be paid as
provided in that Section 5.2.
7.3 Payment Method. All payments due under this Agreement shall be made by
bank wire transfer when due in immediately available funds to an account
designated by Aurora. Any payments that are not paid on the date such payments
are due under this Agreement shall bear interest to the extent permitted by
applicable law at the lesser of the prime rate as reported by the ***, on the
date such payment is due, plus an additional *** per annum, or the maximum rate
allowed by law, calculated on the number of days such payment is delinquent.
7.4 Currency Conversion. All payments outlined in this Agreement are in U.S.
Dollars. If any currency conversion shall be required in connection with the
calculation of royalties or any other payments hereunder, such conversion shall
be made using the selling exchange rate for conversion of the foreign currency
into U.S. Dollars, quoted for current transactions as reported in The Wall
Street Journal for the last reported day of the calendar quarter to which such
payment pertains.
7.5 Records; Inspection. Cytovia and its Affiliates shall keep complete,
true, and accurate books of account and records for the purpose of determining
the royalty amounts payable under this Agreement. Such books and records shall
be kept at the principal place of business of such party for at least
***following the end of the calendar quarter to which they pertain. Such
records will be open for inspection during such ***period by an accounting firm
appointed by Aurora that is reasonably acceptable to Cytovia or its Affiliates.
Such inspections may be made no more than once each calendar year, at
reasonable times and on reasonable notice. Inspections conducted under this
Section 7.5 shall be at the expense of Aurora, unless a variation or error
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producing an increase exceeding ***of the amount stated for any period covered
by the inspection is established in the course of any such inspection,
whereupon all costs relating to the inspection for such period and any unpaid
amounts that are discovered will be paid promptly by Cytovia, together with
interest thereon from the date such payments were due at the lesser of the
prime rate as reported by the ***, plus an additional ***per annum, or the
maximum allowed by law.
7.6 Tax Matters. All royalty amounts required to be paid to Aurora pursuant
to this Agreement shall be paid without deduction for withholding for or on
account of any taxes, including any sales, use, value added, or transfer tax,
or similar governmental charge imposed by a jurisdiction other than the United
States but exclusive of taxes based on net income or profits. Payment of any
such tax or similar governmental charge, including any due in connection with
the transfer of the Screens hereunder, shall be the sole responsibility of
Cytovia. In the event that Aurora is required to pay any such tax or other
similar charge, Cytovia shall promptly reimburse Aurora for payment of such
amounts.
ARTICLE 8. INTELLECTUAL PROPERTY
8.1 Cytovia Sole Ownership. Cytovia shall be the sole owner of any
Intellectual Property conceived and reduced to practice or otherwise developed
solely by its employees, consultants and agents, and all patent applications
and patents claiming such Intellectual Property; provided, however, that
Intellectual Property that covers *** will be assigned by Cytovia to Aurora***
8.2 Aurora Sole Ownership. Aurora shall be the sole owner of any Intellectual
Property conceived and reduced to practice or otherwise developed solely by its
employees, consultants and agents and all patent applications and patents
claiming such Intellectual Property; provided, however, that Intellectual
Property that ***
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8.3 Joint Technology.
8.3.1 Joint Ownership. If, during the Collaboration Period, one or
more employees or consultants of Aurora, together with one or more
employees or consultants of Cytovia, jointly conceive or reduce to
practice any Intellectual Property, (the "Joint Technology"), each
of the parties shall ***the Joint Technology, except as set forth
herein.
8.3.2 Joint Technology Assigned to Aurora. Cytovia will assign to
Aurora Cytovia's interest in all Joint Technology *** provided,
however, that Cytovia shall retain thereto a non-exclusive,
worldwide, royalty-free license, without the right to grant
sublicenses, to such Intellectual Property ***.
8.3.3 Joint Technology Assigned to Cytovia. Aurora will assign to
Cytovia Aurora's interest in all Joint Technology ***; provided,
however, that Aurora shall retain thereto a non-exclusive,
worldwide, royalty-free license, without the right to grant
sublicenses, to such Intellectual Property ***.
8.4 Additional Licenses. The parties recognize and agree, that (i) in some
instances the practice of Joint Technology licensed in either Section 8.3.2 or
8.3.3, may require additional license(s) under Aurora Technology or Cytovia
Technology, respectively, such as for Technology that was developed outside the
scope of this Agreement; and (ii) in some instances that the practice of non-
exclusively licensed Technology in Sections 8.1 and 8.2 may require additional
license(s) under Aurora Technology or Cytovia Technology, respectively, such as
for Technology that was developed outside the scope of this Agreement.
8.5 U.S. Law. Inventorship and rights of ownership with respect to Aurora
Technology, Cytovia Technology, and Joint Technology shall be determined in
accordance with the intellectual property and patent laws of the United States.
8.6 Retained Rights. Except as otherwise expressly provided in this
Agreement, nothing in this Agreement is intended to convey or transfer
ownership by one party to the other of any rights, title or interest in any
Confidential Information, technology or Patents Rights owned or Controlled by
a party. Except as expressly provided for in this Agreement, nothing in this
Agreement shall be construed as a license or sublicense by one party to the
other of any rights in any technology or Patent Rights owned or Controlled by
a party or its Affiliates.
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<PAGE> 19
8.7 Patent Filing and Prosecution.
8.7.1 Cooperation. Cytovia and Aurora shall cooperate with each other on
all matters relating to the filing, prosecution, and maintenance of patent
applications and patents specifically related to this Agreement that are
included within Joint Technology that is jointly owned. Each party shall
have the right but not the obligation, to file, prosecute, and maintain
(including conducting interference and opposition proceedings) all patent
applications and patents that are solely owned or Controlled by such party
or assigned to such party pursuant to this Agreement that claim inventions
arising out of the parties' performance under this Agreement. In regard to
jointly owned Patent Rights, the party filing, prosecuting or maintaining
a patent application or patent hereunder shall provide to the other party
the opportunity to review and comment upon the text of any priority
application before filing; consulting about the decision whether or not to
foreign file an application, and if so, in which countries such filings
will be made; and giving the other party the opportunity, as far in
advance of filing dates as feasible, to fully review and comment on the
basic foreign filing text; provided, however that if a party chooses not
to share in the cost and attorneys for such activities such party will
lose its rights to such Patent Rights, each party shall provide to the
other copies of any search reports and official actions relating to
jointly owned Patent Rights, including notice of all interferences,
reissues, re-examinations, and oppositions received from the relevant
patent offices promptly after receipt of any such action. With respect to
Patent Rights owned or Controlled by a single party to this Agreement,
each party shall reasonably cooperate with and assist the other in
connection with activities described in this Section 8.7.1 in regard to
jointly owned Patent Rights, at the request of the Party owning or
Controlling such Patent Rights. Each party shall execute and require that
its employee, agent or consultant inventors to execute all documents
reasonably required in connection with the filing, prosecution, or
maintenance of patent applications or patents within respect to the
foregoing.
8.7.2 Failure to Prosecute. Either party may elect upon ***prior notice
to discontinue prosecution or maintenance of any patent within Joint
Technology in any or all countries. In such case, the other party shall
have the right to prosecute and maintain such patent applications and
patents in such countries it deems appropriate, at its sole expense.
8.8 Enforcement. Cytovia and Aurora shall ***, to bring proceedings against
any Third Party for the inappropriate use, including patent infringement, of
technology, trade secrets or Patent Rights solely owned or Controlled by it,
and *** risk and expense. ***retain any and all awards or damages obtained in
any such proceeding. At the request and expense of either party, the other
party shall give the requesting party all reasonable assistance required to
file and conduct any such proceeding. For jointly owned Joint Technology,
Cytovia and Aurora shall use their best efforts to coordinate pursuing a
commercially reasonable action to address inappropriate use, including patent
***Confidential Treatment Requested 19
<PAGE> 20
infringement, by third parties of such Joint Technology and to determine how
expenses and any recovery from such action shall be allocated between the
parties. Cytovia, as a non-exclusive licensee, ***to provide Aurora with any
information known to Cytovia relating to the suspected or actual inappropriate
use, including patent infringement, of the Aurora Technology.
ARTICLE 9. CONFIDENTIALITY
9.1 Confidential Information. Except as expressly provided herein, the
parties agree that, for the Term of this Agreement and for five (5) years
thereafter, the Receiving Party, except as expressly provided in this Article
9, shall not disclose to any Third Party or use for any purpose other than as
permitted under this Agreement any Confidential Information of the Disclosing
Party, except to the extent that it can be established by the Receiving Party
by competent written proof that such information:
(i ) was already known to the Receiving Party, other than under an
obligation of confidentiality, at the time of disclosure;
(ii) was generally available to the public or otherwise part of the
public domain at the time of its disclosure to the Receiving
Party;
(iii) became generally available to the public or otherwise part of
the public domain after its disclosure and other than through
any act or omission of the Receiving Party in breach of this
Agreement;
(iv) was independently developed by the Receiving Party;
(v) was, subsequently, lawfully disclosed to the Receiving Party
by a person other than the Disclosing Party; or
(vi) was approved in writing by the Disclosing Party for public
disclosure by the Receiving Party.
9.2 Permitted Use and Disclosures. Each party hereto may use or disclose
Confidential Information disclosed to it by the other party to the extent such
information is included in the Aurora Technology, Cytovia Technology or Joint
Technology, and to the extent such use or disclosure is reasonably necessary
and permitted in the exercise of the rights granted hereunder in filing or
prosecuting patent applications, prosecuting or defending litigation, complying
with applicable governmental regulations, or court orders or otherwise
submitting information to tax or other governmental authorities, conducting
clinical trials, or making a permitted sublicense or otherwise exercising
license rights expressly granted to the other party pursuant to the terms of
this Agreement, provided that if a party is required to make any such
disclosure of the other party's Confidential Information, other than pursuant
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<PAGE> 21
to a confidentiality agreement, it will give reasonable advance notice of such
disclosure to the other party where reasonably possible and, save to the extent
inappropriate in the case of patent applications, will use its reasonable
efforts to secure confidential treatment of such Confidential Information in
consultation with the other party prior to such disclosure (whether through
protective orders or otherwise) and disclose only the minimum necessary to
comply with such requirements.
9.3 Nondisclosure of Terms. Each of the parties hereto agrees not to
disclose to any Third Party the terms of this Agreement without the prior
written consent of the other party hereto, except to such party's attorneys,
advisors, investors, and others on a need-to-know basis under circumstances
that reasonably ensure the confidentiality thereof, or to potential investors
or corporate partners under an obligation of confidentiality, or to the extent
required by law. Notwithstanding the foregoing, the parties shall agree upon
a press release to announce the execution of this Agreement. Thereafter,
Aurora and Cytovia may each disclose to Third Parties the information
contained in such press release without the need for further approval by the
other.
9.4 Use of Data for Promotional Purposes. Either party may (i) make public
statements regarding Development Candidates or Products by announcing the
achievement of milestones and fees therefor, following consultation with the
other party and with the written consent of the other party to the form and
content of the public statement, and (ii) without the prior consent of the
other party, make public statements regarding the overall success rate(s)
achieved by and/or for its customers with the use of Aurora Technology, and
Cytovia Technology, provided it may not disclose any Compound structures,
Screens or the other party's identity.
ARTICLE 10. REPRESENTATIONS AND WARRANTIES
10.1 Cytovia. As of the Effective Date, Cytovia warrants and represents that:
(i) it has the legal power, authority and right to enter into
this Agreement, and to perform all of its obligations
hereunder;
(ii) to the best of its knowledge it has the legal right and power
to extend to Aurora the rights granted in this Agreement; and
(iii) to the best of its knowledge, there are no existing or
threatened actions, suits, or claims pending against it with
respect to the Cytovia Technology.
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<PAGE> 22
10.2 Aurora. As of the Effective Date, Aurora represents and warrants that:
(i) it has the full legal power, authority, and right to enter
into this Agreement, and to perform all of its obligations
hereunder;
(ii) to the best of its knowledge it has the legal right and power
to extend the rights to Cytovia granted in this Agreement;
(iii) to the best of its knowledge there are no existing or
threatened actions, suits, or claims pending against it with
respect to the Aurora Technology; and
(iv) to the best of its knowledge and without performing any
special investigation, ***.
10.3 Disclaimer. EXCEPT AS OTHERWISE EXPRESSLY SET FORTH IN THIS AGREEMENT,
AURORA AND CYTOVIA MAKE NO REPRESENTATIONS AND EXTEND NO WARRANTIES OR
CONDITIONS OF ANY KIND, EITHER EXPRESS OR IMPLIED, STATUTORY OR OTHERWISE, WITH
RESPECT TO AURORA TECHNOLOGY, CYTOVIA TECHNOLOGY, SCREENS, COMPOUNDS, AGENTS,
DEVELOPMENT CANDIDATES, DERIVATIVES, PRODUCTS, OR INFORMATION DISCLOSED
INCLUDING, BUT NOT LIMITED TO, WARRANTIES OF MERCHANTABILITY, FITNESS FOR A
PARTICULAR PURPOSE, VALIDITY OF ANY AURORA TECHNOLOGY OR CYTOVIA TECHNOLOGY,
PATENTED OR UNPATENTED, OR NONINFRINGEMENT OF THE INTELLECTUAL PROPERTY RIGHTS
OF THIRD PARTIES.
ARTICLE 11. INDEMNIFICATION
11.1 Cytovia. Cytovia agrees to indemnify, defend, and hold Aurora, its
Affiliates, and the directors, officers, employees, and agents of each of them
(the "Aurora Indemnitees") harmless from and against any losses, costs, claims,
damages, liabilities or expenses (including reasonable attorneys' and
professional fees and court and other expenses of litigation) (collectively,
"Liabilities") arising out of or in connection with Third Party claims relating
to
(i) ***
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<PAGE> 23
11.2 Aurora. Aurora agrees to indemnify, defend, and hold Cytovia, its
Affiliates, Cytovia Collaborators and Licensees, and the directors, officers,
employees, and agents of each of them (the "Cytovia Indemnitees") harmless from
and against any Liabilities arising out of or in connection with Third Party
claims relating to
(i) ***
11.3 Procedure. In the event that any Indemnitee intends to claim
indemnification under this Article 11, it shall promptly notify the other party
in writing of such alleged Liability. The indemnifying party shall have the
right to control the defense or settlement thereof using counsel of its choice
that is reasonably acceptable to the Indemnitees; provided, however, that any
Indemnitee shall have the right to retain its own counsel at its own expense,
for any reason, including if representation of any Indemnitee by the counsel
retained by the indemnifying party would be inappropriate due to actual or
potential differing interests between such Indemnitee and any other party
reasonably represented by such counsel in such proceeding. The affected
Indemnitees shall cooperate with the indemnifying party and its legal
representatives in the investigation of any action, claim, or liability covered
by this Article 11. The indemnified party shall not voluntarily make any
payment or incur any expense with respect to any claim or suit without the
prior written consent of the indemnifying party, which such party shall not be
required to give.
ARTICLE 12. TERM AND TERMINATION
12.1 Term. The term of this Agreement shall begin as of the Effective Date
and, unless terminated earlier as provided in this Article 12, continue in full
force and effect until the *** (the "Term").
12.2 Termination for Cause. Either party hereto may terminate this Agreement
in the event the other party has materially breached or defaulted in the
performance of any of its material obligations hereunder, and such default
shall have continued for ***after written notice thereof was provided to the
breaching party by the nonbreaching party. Any termination shall become
effective at the end of such *** period, unless the breaching party has cured
any such breach or default prior to the expiration of the *** cure period or
has provided a written plan to cure any such breach or default that is
acceptable to the other party.
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<PAGE> 24
12.3 Termination for Insolvency. If voluntary or involuntary proceedings by or
against a party are instituted in bankruptcy under any insolvency law, or a
receiver or custodian is appointed for such party, or proceedings are
instituted by or against such party for corporate reorganization or the
dissolution of such party, which proceedings, if involuntary, shall not have
been dismissed within ***after the date of filing, or if such party makes an
assignment for the benefit of creditors, or substantially all of the assets of
such party are seized or attached and not released within *** thereafter, the
other party may immediately terminate this Agreement effective upon giving
notice of such termination to such party.
12.4 Effect of Breach or Termination.
12.4.1 Accrued Obligations. Termination of this Agreement for any reason
shall not release any party hereto from any liability which, at the time
of such termination, has already accrued to the other party or which is
attributable to a period prior to such termination nor preclude either
party from pursuing all rights and remedies it may have hereunder or at
law or in equity with respect to any breach of this Agreement.
12.4.2 Return of Confidential Information. In the event of termination,
but not expiration, of this Agreement, Aurora and Cytovia shall promptly
return to the other party all Confidential Information received from the
other party (except one (1) copy of which may be retained for archival
purposes), and neither party shall be entitled to use any Confidential
Information of the other party for any purpose during the Term such
Confidential Information is to remain confidential, as provided in Section
9.1, provided, however, that if this Agreement terminates prior to its
expiration pursuant to Section 12.1 for breach of this Agreement by
Aurora, Cytovia may continue to use the Confidential Information
pertaining to Aurora Compounds, Cytovia Compounds, Screens and data from
Screens for the purposes permitted in this Agreement, including without
limitation for purposes set forth in Section 2.4.3. Upon any such
termination all materials provided by Cytovia to Aurora, including but not
limited to Compounds, shall be returned to Cytovia or destroyed at the
discretion of Cytovia. For any termination by Aurora for cause, all
materials provided by Aurora to Cytovia shall be returned to Aurora or
destroyed at the discretion of Aurora.
12.4.3 Licenses. The licenses granted to Aurora hereunder shall terminate
in the event of termination of this Agreement.
12.5 Survival. Articles 1, 3, 5, 7, 8, 9, 11,12 and 13 shall survive
expiration or termination of this Agreement for any reason.
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ARTICLE 13. MISCELLANEOUS
13.1 Governing Law. This Agreement and any dispute arising from the
construction, performance, or breach hereof shall be governed by, construed,
and enforced in accordance with the laws of the State of California, without
reference to conflicts of laws principles.
13.2 Dispute Resolution.
13.2.1 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 utual cooperation and without resort to arbitration. The
parties agree that prior to any arbitration concerning this Agreement,
Cytovia's president or CEO and Aurora's president or CEO will meet in
person in a good faith effort to resolve any disputes concerning this
Agreement as set forth in Section 2.1.4. Any dispute arising out of or
relating to this Agreement which is not resolved between the parties or
the designated officers of the parties as set forth in Section 2.1.4 shall
be resolved by final and binding arbitration conducted in San Diego,
California (unless the parties mutually agree to another location) under
the then current Licensing Agreement Arbitration Rules of the American
Arbitration Association ("AAA"). The arbitration shall be conducted by
three (3) arbitrators who are knowledgeable in the subject matter which
is at issue in the dispute. One arbitrator is selected by Cytovia and one
arbitrator is selected Aurora and the third arbitrator is appointed by
the AAA. In conducting the arbitration, the arbitrators shall determine
what discovery will be permitted, consistent with the goal of limiting
the cost and time which the parties must expend for discovery (and
provided that the arbitrators shall permit such discovery they deem
necessary to permit an equitable resolution of the dispute), ensure that
the total time of the arbitration from filing to a final decision or
executed settlement agreement is less than six months, and be able to
decree any and all relief of an equitable nature, including but not
limited to such relief as a temporary restraining order, a preliminary
injunction, a permanent injunction, specific performance or repletion of
property. Discovery shall be permitted as set forth in the Federal Rules
of Civil Procedure with respect to the performance by the parties of
their obligations under this Agreement and such other matters as the
arbiters may determine (it being the intent of the parties that full
discovery occur with respect to salient facts). The arbitrators shall
also be able to award actual or general damages, but shall not award any
other form of damage (e.g., consequential, punitive or exemplary
damages). The parties shall share equally the arbitrator's fees and
expenses pending the resolution of the arbitration unless the arbitrator,
pursuant to its right but not its obligations, requires the non-
prevailing party to bear all or any portion of the costs of the
prevailing party. The decision of the arbitrator shall be final and may
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<PAGE> 26
be sued on or enforced by the party in whose favor it runs in any court
of competent jurisdiction at the option of such party. Notwithstanding
anything to the contrary in this Section 13, either party may seek
immediate injunctive or other interim relief from any court of competent
jurisdiction to enforce and protect the patent rights, copyrights,
trademarks, or other intellectual property rights owned or Controlled by
such party. In no event shall a demand for arbitration be made after the
date when the institution of a legal or equitable proceeding based on
such claim, dispute or other matter in question would be barred by the
applicable statute. Notwithstanding any other provisions of this
Agreement, all disputes regarding the validity, scope or enforceability
of patents shall be submitted to a court of competent jurisdiction in the
country where such patent has issued.
13.3 Assignment. This Agreement shall not be assignable by either party,
without the written consent of the other party, provided, however, that either
party may assign this Agreement without the written consent of the other party
in the event a merger, reorganization, operation of law, acquisition, or sale
of all or substantially all of the business or assets of such party relating
to the subject matter hereof. This Agreement shall be binding upon and inure to
the benefit of any permitted assignee or other transferee, and any such party
shall agree to perform the obligations of the assignor or transferor.
13.4 Independent Contractors. The relationship of the parties hereto is that
of independent contractors. Neither party hereto is to be deemed to be an
agent, partner, or joint venturer of the other party for any purpose as a
result of this Agreement or the transactions contemplated thereby.
13.5 Compliance with Laws. In exercising their rights under this Agreement, the
parties shall fully comply in all material respects with the requirements of
any and all applicable laws, regulations, rules, and orders of any governmental
body having jurisdiction over the exercise of rights under this Agreement,
including, without limitation, those applicable to the discovery, development,
manufacture, distribution, import and export, and sale of pharmaceutical
products.
13.6 Notices. Legal notices, requests, and other communications hereunder shall
be in writing and shall be delivered personally or by registered or certified
mail, return receipt requested, postage prepaid, in each case to the respective
address specified below or such other address as may be specified in writing to
the other party hereto, and shall be deemed to have been given upon receipt, or
if transmitted by fax, upon electronic confirmation of receipt:
If to Aurora: Aurora Biosciences Corporation
11010 Torreyana Road
San Diego, CA 92121 U.S.A.
Attn.: President and CEO
CC: Legal and Business Development
Fax: (619) 452-5723
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<PAGE> 27
If to Cytovia: Cytovia, Inc.
201 Technology Drive
Irvine CA 92616 U.S.A.
Attn.: President and CEO
CC. Business Development
Fax: (949) 753-6109
13.7 Severability. In the event that any provision of this Agreement becomes or
is declared by a court of competent jurisdiction to be illegal, unenforceable
or void, this Agreement shall continue in full force and effect to the fullest
extent permitted by law without said provision, and the parties shall amend the
Agreement to the extent feasible to lawfully include the substance of the
excluded term to as fully as possible realize the intent of the parties and
their commercial bargain.
13.8 Waiver. It is agreed that no waiver by either party hereto of any breach
or default of any of the covenants or agreements herein set forth shall be
deemed a waiver as to any subsequent and/or similar breach or default. No
waiver shall be effective unless in writing signed by the party having the
waived right.
13.9 Force Majeure. Nonperformance or delayed performance of any party shall
be excused to the extent that performance is rendered impossible or untimely
by strike, fire, earthquake, flood, governmental acts or orders or
restrictions, failure of suppliers, or any other reason where such failure to
perform or delay in performance is beyond the reasonable control and not caused
by the negligence or intentional conduct or misconduct of the nonperforming
party, provided such party uses its *** to resume performance as promptly as
possible.
13.10 Advice of Counsel. This Agreement has been negotiated by the parties and
their respective counsel and shall be fairly interpreted in accordance with its
terms and without application of any rules of construction relating to which
party drafted the Agreement being applied in favor or against either party.
13.11 No Consequential Damages. IN NO EVENT SHALL EITHER PARTY TO THIS
AGREEMENT HAVE ANY LIABILITY TO THE OTHER FOR ANY SPECIAL, CONSEQUENTIAL, OR
INCIDENTAL DAMAGES ARISING UNDER THIS AGREEMENT UNDER ANY THEORY OF LIABILITY,
REGARDLESS OF WHETHER A PARTY HAS NOTICE OF THE POSSIBILITY OF SUCH DAMAGES.
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<PAGE> 28
13.12 Complete Agreement. This Agreement, constitutes the entire agreement,
both written and oral, between the parties with respect to the subject matter
hereof, and all prior agreements respecting the subject matter hereof, either
written or oral, expressed or implied, shall be abrogated, canceled, and are
null and void and of no effect. No amendment or change hereof or addition
hereto shall be effective or binding on either of the parties unless reduced
to writing and executed by a duly authorized representative of each of Aurora
and Cytovia.
13.13 Counterparts. This Agreement may be executed in counterparts, each of
which shall be deemed to be an original and all of which together shall be
deemed to be one and the same agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed by their authorized representatives and delivered in duplicate
originals as of the Effective Date.
AURORA BIOSCIENCES CORPORATION CYTOVIA INC.
By: /s/ Timothy J. Rink By: /s/ Eckard Weber
--------------------- --------------------
Date: July 16, 1998 Date: July 16, 1998
--------------------- --------------------
Name: Timothy Rink Name: Eckard Weber
--------------------- --------------------
Title: President and CEO Title: President and CEO
--------------------- --------------------
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<PAGE> 29
EXHIBIT A
***
EXHIBIT B
***
***Confidential Treatment Requested 29
<PAGE> 1 EXHIBIT 10.38
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.
AMCS DEVELOPMENT AGREEMENT
BETWEEN
WARNER-LAMBERT COMPANY
AND
AURORA BIOSCIENCES CORPORATION
***Confidential Information Requested 1
<PAGE> 2
AMCS DEVELOPMENT AGREEMENT
THIS AGREEMENT is entered into as of the Effective Date (as defined below) by
and between WARNER-LAMBERT COMPANY, a Delaware corporation, having offices at
2800 Plymouth Road Ann Arbor, Michigan, 48105 ("PD"), and AURORA BIOSCIENCES
CORPORATION, a Delaware corporation having offices at 11010 Torreyana Road
San Diego, California 92121 ("Aurora").
RECITALS
WHEREAS, Aurora has expertise in the design and development of automated
systems for the storage of chemical and biological compounds; and
WHEREAS, PD desires to acquire and Aurora desires to develop and supply PD
with an automated system for the storage and retrieval of chemical and
biological compounds.
NOW, THEREFORE, in consideration of the foregoing premises and of the
covenants, representations and agreements set forth below, the parties agree
as follows:
1. DEFINITIONS
As used herein, the following terms shall have the following meanings:
"Affiliate" means any corporation, association or other entity which directly
or indirectly controls, is controlled by or is under common control with the
party in question. As used herein, the term control shall mean direct or
indirect beneficial ownership of more than 50% of the voting or income
interest in such corporation or other business entity.
"Agreement" means this agreement, together with all appendices, exhibits and
schedules hereto, and as the same may be amended or supplemented from time to
time hereafter by a written agreement duly executed by authorized
representatives of each party hereto.
"Approved Engineering Change Order" shall have the meaning set forth in
Section 2.9 hereof.
"Aurora Copyrights" means all ***.
"Aurora Patent Rights" means ***.
"Aurora System Technology" means all ***.
"Confidential Information" means all confidential information, data, and
materials received by either party from the other party pursuant to this
Agreement which if in writing is marked confidential, and all information,
data and materials, developed pursuant to this Agreement, including, without
limitation, Technology of each party, subject to the exceptions set forth in
Section 6.2.
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<PAGE> 3
"Control" or "Controlled" means 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.
"Copyrights" means copyrights throughout the world which a party hereto owns
or Controls, individually or jointly, any title thereto or rights thereunder.
"CPI" shall have the meaning set forth in Section 3.2 hereof.
"Effective Date" means the date that this Agreement is executed by the last
party to so execute.
"Engineering Change Order" has the meaning set forth in Section 2.9 hereof.
"First Milestone" has the meaning set forth in Section 2.8.2 hereof.
"Invention" means any new and useful process, machine, method, technique or
composition of matter, or improvement thereto, whether or not patentable.
"Initial Support Period" shall have the meaning set forth in Section 3.1
hereof.
"Know-How" means information and data which is not generally known to the
public, comprising: Inventions, designs, concepts, algorithms, formulae,
software, techniques, practices, processes, methods, knowledge, skill,
experience, expertise and technical information.
"Patent Rights" means all U.S. or foreign (including regional authorities
such as the European Patent Office) regular or provisional patent
applications, including any continuation, continuation-in-part, or division
thereof or any substitute application therefor or equivalent thereof, and any
patent issuing thereon, including any reissue, reexamination or extension
thereof and any confirmation patent or registration patent or patent of
additions based on any such patent, containing one or more claims to an
Invention, and which a party hereto owns or Controls, individually or jointly,
any title thereto or rights thereunder.
"Person" shall mean an individual, corporation, partnership, limited
liability company, trust, business trust, association, joint stock company,
joint venture, pool, syndicate, sole proprietorship, unincorporated
organization, governmental authority or any other form of entity not
specifically listed herein.
***
"Service and Support" shall have the meaning set forth in Section 3.1 hereof.
***.
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<PAGE> 4
"***.
"System Steering Committee" shall have the meaning set forth in Section 2.2
hereof.
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<PAGE> 5
***
"Technology" means Know-How, Copyrights and Patent Rights.
"Term" means the period beginning on the Effective Date and terminating in
accordance with Section 11 hereof.
"Third Party" means any Person other than Aurora or PD.
***
"Validation" has the meaning set forth in Section 2.7 hereof.
2. SYSTEM DEVELOPMENT, ACCEPTANCE AND DELIVERY
2.1. System Development.
On the Effective Date, Aurora will initiate the design, development and
plans for supply and installation of the System by the System Target
Acceptance Date. Both parties will act within the presently estimated
time periods and in accordance with the terms hereof and in accordance
with U.S. laws, rules and regulations applicable to the design,
development, manufacture, supply, and installation of instrumentation.
***.
2.2. System Steering Committee.
Aurora and PD shall establish a committee (the "System Steering
Committee") to oversee the development of the System and formally
review, the status of such development, including project timelines, the
System Specifications, coordination of the review of the ***. For the
first ***following the Effective Date, the System Steering Committee
shall meet on a monthly basis, and on a quarterly basis thereafter, at
mutually agreed upon times and locations using mutually agreed upon
meeting formats, including tele- and video-conferencing. On an
alternating basis, one party shall promptly prepare and deliver to the
members of the System Steering Committee minutes in respect thereof, for
review and approval by both parties. The System Steering Committee will
be established not later than ***after the Effective Date. The System
Steering Committee will consist of ***representatives designated by PD
and ***representatives designated by Aurora. Each representative will
have one ***
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<PAGE> 6
***. Either party may, upon reasonable written notice, require up to
two(2) special meetings of the System Steering Committee per year, at
mutually agreed upon times and locations using mutually agreed upon
meeting formats, including tele- and video-conferencing; provided,
however, that such meeting shall occur within ***of written notice of
such meeting.
2.3. Audits.
From time to time during the term of this Agreement, PD representatives
shall have the right, upon reasonable advance written notice to Aurora,
to visit the facilities where the System is being developed to verify
the information in the progress reports submitted to the System Steering
Committee and to confirm Aurora's compliance with the terms hereof.
2.4. Shipment, and Installation.
***
2.5. Aurora Employees.
All Aurora employees or independent contractors will be informed by PD
of PD's security and work rules and will be required to comply with such
security and work rules. Aurora will be responsible for its employees or
contractors performing such installation, including salaries, benefits
and workers compensation. Such personnel shall be and remain employees or
independent contractors of Aurora and Aurora shall require all such
employees to adhere to all PD work policies and procedures while on PD
premises and shall indemnify and hold PD harmless from and against any
and all liability, costs, damages and expenses arising out of claims by
such employees or independent contractors of Aurora relating to the
presence of such employees or independent contractors on PD's premises;
provided, however, that Aurora shall not indemnify and hold harmless PD
or any such claim arising from PD's negligence or willful or reckless
misconduct.
2.6. Employment Relationship.
All persons assigned by Aurora to perform work on its behalf are and
shall remain its employees or independent contractors and Aurora shall
be solely responsible for complying with all United States federal,
state and municipal laws, rules and regulations, including, without
***Confidential Treatment Requested 6
<PAGE> 7
limitation, reporting and payment of the entire compensation (including
all fringe benefits) of each person, withholding of federal income taxes,
state income taxes, FICA and FUTA taxes and other payroll deductions, and
all premiums or payments made for workmen's compensation coverage, made
for or on behalf of Aurora employees or independent contractors. Aurora
acknowledges that none of its employees are employees of PD and that no
such employees are eligible to participate in any employee benefit plans
of PD. Aurora further acknowledges that no such individuals are
eligible to participate in any such benefit plans even if it is later
determined that any of its employees' status during the period of this
Agreement was that of an employee of PD. In addition, Aurora waives
any claims that it may have under the terms of any such benefit plans
or under any law for participation in or benefits under any of PD's
benefit plans.
2.7. ***.
***
2.8. Payments Relating to Development of the System.
PD will make the following payments to Aurora in consideration of the
development, delivery and Validation of the System:
***
***Confidential Treatment Requested 7
<PAGE> 8
***
***
***
***
3. SERVICE AND SUPPORT
3.1. Initial Service Period.
*** (the "Initial Support Period"), Aurora will provide service and
support for the System, ***. The service and support is more fully
described on Exhibit 3 attached hereto ("Service and Support***. Aurora
will designate an appropriate Aurora employee to act as its primary
contact with PD to coordinate such Service and Support and Aurora shall
notify PD of the identity of such Person.
3.2. Future Service and Support.
***. This purchased annual Service and Support will be available to PD
until ***, after which period PD and Aurora may at their discretion
negotiate in good faith for further Service and Support. Following the
Initial Support Period, Aurora and PD may also, at their discretion,
negotiate in good faith the terms and conditions for alternative service
and support to be provided by Aurora, including more limited service and
support for System components or software.
***Confidential Treatment Requested 8
<PAGE> 9
4. INTELLECTUAL PROPERTY RIGHTS
4.1. Grant of Rights from Aurora to PD.
***
4.2. Ownership of Intellectual Property and Property
4.2.1. No Implied License. Except as otherwise expressly provided
in this Agreement, nothing in this Agreement is intended to convey
or transfer ownership by one party to the other of any rights, title
or interest in any Confidential Information, Technology, Copyrights
or Patent Rights owned or Controlled by a party. Except as
expressly provided for in this Agreement, nothing in this Agreement
shall be construed as a license or sublicense by one party to the
other of any rights in any Technology, Copyrights, or Patent Rights
owned or Controlled by a party.
4.2.2. Inventions By PD. ***
***Confidential Treatment Requested 9
<PAGE> 10
***
4.2.3. Inventions By Aurora. Aurora shall own such Inventions and
other Technology made solely by its employees and agents, and all
patent applications and patents claiming such Inventions and other
Technology.
4.2.4. ***
4.2.5. No Implied License. The parties recognize and agree, that
in some instances the practice of Technology conceived or made
jointly by employees or agents of PD and employees or agents of
Aurora and owned jointly pursuant to Section 4.2.4 may require
additional license(s) under Aurora System Technology, Aurora's
Copyrights and Aurora's Patent Rights.
4.2.6. Inventorship. PD and Aurora agree, for the purpose of this
Section 4, inventorship of patentable Inventions shall be determined
in accordance with U.S. patent law.
5. INTELLECTUAL PROPERTY ENFORCEMENT AND DEFENSE OF INFRINGEMENT CLAIMS
5.1. Intellectual Property Enforcement.
PD and Aurora shall *** bring proceedings against any Third Party for
the inappropriate use, including patent infringement, of Technology or
Patent Rights ***Controlled by it, and ***party shall be entitled to
retain any and all awards or damages obtained in any such proceeding.
At the request and expense ***shall give ***all reasonable assistance
required to file and conduct any such proceeding. For jointly owned
Technology or Patent Rights, PD and Aurora shall use their best efforts
***Confidential Treatment Requested 10
<PAGE> 11
to coordinate pursuing a commercially reasonable action to address
inappropriate use, including patent infringement, by Third Parties of
such Technology and Patent Rights and to determine how expenses and any
recovery from such action shall be allocated between the parties.
***
5.2. Defense of Infringement Claims Pertaining to Aurora Technology
and Aurora Patent Rights.
PD will cooperate with Aurora, at Aurora's expense, in the defense of
any suit, action or proceeding against Aurora alleging the
infringement of the intellectual property rights of a Third Party by
reason of Aurora's use of any Aurora Patent Rights and Aurora System
Technology licensed to PD under this Agreement. ***.
6. TREATMENT OF CONFIDENTIAL INFORMATION; PUBLICITY
6.1. Confidentiality Obligation.
Subject to the terms and conditions of this Agreement, PD and Aurora each
agree that, during the term of this Agreement and for ***thereafter, it
will keep confidential all Confidential Information (including, without
limitation, not to disclose such Confidential Information in patent
applications). Neither PD nor Aurora shall use the other party's
Confidential Information except as expressly permitted in this Agreement;
provided, however, Aurora shall be able to disclose that Confidential
Information which specifically describes the components of the System,
including hardware and software components, to potential Third Party
collaborators.
PD and Aurora each agree that any disclosure of the other's Confidential
Information to any officer, employee, contractor, consultant, sublicensee
or agent of the other party or any of the other party's Affiliates may
be made only if and to the extent necessary to carry out its
responsibilities under this Agreement and to exercise the rights granted
to it hereunder, shall be limited to the extent consistent with such
responsibilities and rights, and shall be provided only to such persons
or entities who are bound to maintain same in confidence in a like manner
as the party receiving same hereunder is so required. Each party, upon
the other's request, will return all the Confidential Information
received from the other party pursuant to this Agreement, including all
copies and extracts of documents, ***of the request of the other party
following any termination of this Agreement, except for one (1) copy
which may be kept for the purpose of ascertaining and complying with
continuing confidentiality obligations under this Agreement.
***Confidential Treatment Requested 11
<PAGE> 12
6.2. Exceptions to Confidential Information.
Confidential Information shall not include any information which the
receiving party can prove by competent evidence:
i) is now, or hereafter becomes, through no act or failure to
act on the part of the receiving party, generally known or
available;
ii) is known by the receiving party or any of its Affiliates at
the time of receiving such information, as evidenced by its
records;
iii) is hereafter furnished to the receiving party or any of its
Affiliates without restriction as to disclosure or use by a
Third Party lawfully entitled to so furnish same;
iv) is independently developed by the employees, agents or
contractors of the receiving party or any of its Affiliates
without the aid, application or use of the disclosing
party's Confidential Information;
v) is the subject of a written permission to disclose provided
by the disclosing party; or
vi) is provided by the disclosing party to a Third Party without
restriction as to confidentiality.
A party may also disclose Confidential Information of the other where
required to do so by law or legal process, provided that, in such event,
the party required to so disclose shall give maximum practical advance
written notice of same to the other party and will cooperate with the
other party's efforts to seek, at the request and expense of the other
party, all confidential treatment and protection for such disclosure
as is permitted by applicable law.
6.3. Confidentiality of Agreement Terms.
The parties agree that the material financial terms of this Agreement
will be considered Confidential Information of both parties.
Notwithstanding the foregoing, either party may disclose such terms in
legal proceedings or as are required to be disclosed in its financial
statements, by law. Either party shall have the further right to
disclose the material financial terms of this Agreement under
strictures of confidentiality to any of its Affiliates and to any
potential acquirer, merger partner, bank, venture capital firm, or
other financial institution to obtain financing.
***Confidential Treatment Requested 12
<PAGE> 13
6.4. Publicity.
Except as required by law and as provided in this Article 6, neither
party may make any public announcement or otherwise disclose the terms
of this Agreement without the prior written consent of the other party,
which consent shall not be unreasonably withheld.
7. PATENT PROSECUTION AND COPYRIGHTS
7.1. Patents.
***
The control and expense of the filing, prosecution (including an
opposition or interference) and maintenance of applications claiming
solely owned Inventions will be at the discretion of the owner. At PD's
reasonable request, ***.
7.2. Copyrights.
The parties agree to treat and handle, to the maximum practical extent,
any Copyrights owned or Controlled by a party in the same manner as
Patent Rights owned or Controlled by such party.
8. WARRANTIES AND INDEMNIFICATION
8.1. Mutual Representations and Warranties.
The parties make the following representations and warranties to each
other:
8.1.1. Corporate Power. Each party hereby represents and warrants
that such party (a) is duly organized and validly existing under
the laws of the state of its incorporation and has full corporate
power and authority to enter into this Agreement and to carry out
the provisions hereof; (b) has the requisite power and authority
and the legal right to own and operate its property and assets,
to lease the property and assets it operates under lease, and to
carry on its business as it is now being conducted; and (c) is in
compliance with all requirements of applicable law, except to the
extent that any noncompliance would not have a material adverse
effect on the properties, business, financial or other condition
of it and would not materially adversely affect its ability to
perform its obligations under the Agreement.
8.1.2. Due Authorization. Each party hereby represents and
warrants that such party (a) has the requisite power and
authority and the legal right to enter into the Agreement and to
perform its obligations hereunder; and (b) has taken all necessary
action on its part to authorize the execution and delivery of the
Agreement and to authorize the performance of its obligations
hereunder and the grant of rights extended by it hereunder.
***Confidential Treatment Requested 13
<PAGE> 14
8.1.3. Binding Agreement. Each party hereby represents and
warrants to the other that: (a) this Agreement has been duly
executed and delivered on its behalf and is a legal and valid
obligation binding upon it and is enforceable in accordance with
its terms; (b) the execution, delivery and performance of this
Agreement by such party does not conflict with any agreement,
instrument or understanding, oral or written, to which it is a
party or by which it may be bound, nor violate any law or
regulation of any court, governmental body or administrative or
other agency having authority over it; and (c) all necessary
consents, approvals and authorizations of all governmental
authorities and other persons required to be obtained by it in
connection with the Agreement have been obtained.
8.2. Warranties and Aurora Technology.
Aurora represents and warrants to PD as of the Effective Date the
following:
8.2.1. ***
8.2.2. EXCEPT AS SET FORTH IN SECTION 8.2.1 ABOVE, AURORA
(INCLUDING ITS OFFICERS, EMPLOYEES AND AGENTS) EXPRESSLY
DISCLAIMS ANY REPRESENTATIONS AND WARRANTIES, WHETHER EXPRESS OR
IMPLIED, RELATING TO THE SYSTEM, AURORA PATENT RIGHTS, AURORA
COPYRIGHTS AND AURORA SYSTEM TECHNOLOGY. AURORA FURTHER
DISCLAIMS I) ANY EXPRESS OR IMPLIED WARRANTY OF MERCHANTABILITY
OR FITNESS FOR A PARTICULAR PURPOSE OF THE SYSTEM, AURORA SYSTEM
TECHNOLOGY AND AURORA PATENT RIGHTS, II) ANY EXPRESS OR IMPLIED
WARRANTY THAT THE SYSTEM, PRACTICE OF AURORA COPYRIGHTS, AURORA
SYSTEM TECHNOLOGY OR AURORA PATENT RIGHTS WILL NOT INFRINGE A
PATENT, COPYRIGHT, TRADEMARK OR OTHER RIGHT OF A THIRD PARTY, AND
III) ANY EXPRESS OR IMPLIED WARRANTY REGARDING THE PATENTABILITY
OF ANY AURORA SYSTEM TECHNOLOGY, INCLUDING THE SYSTEM, AURORA
SYSTEM TECHNOLOGY CLAIMED IN PATENT APPLICATIONS AS PART OF
AURORA PATENT RIGHTS.
***Confidential Treatment Requested 14
<PAGE> 15
8.3. Aurora Indemnification.
***
IN NO EVENT SHALL AURORA BE LIABLE FOR ANY INCIDENTAL OR CONSEQUENTIAL
DAMAGES SUFFERED BY PD RESULTING FROM THE EXERCISE OF ANY RIGHTS GRANTED
IN ACCORDANCE WITH THIS AGREEMENT.
8.4. PD Indemnification.
***
IN NO EVENT SHALL PD BE LIABLE FOR ANY INCIDENTAL OR CONSEQUENTIAL
DAMAGES SUFFERED BY AURORA RESULTING FROM THE EXERCISE OF ANY RIGHTS
GRANTED IN ACCORDANCE WITH THIS AGREEMENT.
9. TERM AND TERMINATION
***
***Confidential Treatment Requested 15
<PAGE> 16
9.2 Termination By Mutual Agreement.
***
9.3 Termination for Cause.
Either party shall have the right to terminate this Agreement at any time
for a material breach of this Agreement by the other party, provided
that the non-breaching party shall have given the breaching party ***of
the breach and intention to terminate this Agreement in the absence of a
cure*** of receipt of such notice by the beaching party. Upon
termination of this Agreement for cause by Aurora, all licenses and
sublicenses granted in accordance with this Agreement shall be
terminated. The non-breaching party, upon termination of this
Agreement may seek actual or general damages, but not consequential
damages, and remedies available to it at law or in equity.
***
9.5 Effect of Expiration or Termination.
The obligations and rights of the parties under Sections 3.1 and 4.1,
4.2, 6, 7, 8.1 and 8.2 thereof, as well as any provisions, which, by
their intent or meaning are intended to so survive, shall survive
termination or expiration of this Agreement.
10. MISCELLANEOUS
10.1. Assignment.
***
***Confidential Treatment Request 16
<PAGE> 17
***
10.2. Binding Effect.
This Agreement shall be binding upon and inure to the benefit of the
successors and permitted assigns of the parties. Any assignment not in
accordance with this Agreement shall be void.
10.3. Force Majeure.
Neither party shall lose any rights hereunder or be liable to the other
party for damages or losses on account of failure of performance by the
defaulting party if the failure is occasioned by war, fire, explosion,
floods (including but not limited to floods caused by El Nino),
earthquake, strike, lockout, embargo, act of God, or any other similar
cause beyond the control of the defaulting party, provided that the party
claiming force majeure has exerted all reasonable efforts to avoid or
remedy such force majeure and thereafter takes all reasonable steps to
mitigate any such delay in performance hereunder and any damages that
may be incurred by the other party thereby.
10.4. Notices.
Any notices or communications provided for in this Agreement to be made
by either of the parties to the other shall be in writing, in English,
and shall be made by prepaid air mail or overnight carrier with return
receipt addressed to the other at its address set forth below. Any such
notice or communication may also be given by hand, or facsimile to the
appropriate designation. Notices shall be sent:
If to PD, to: Warner-Lambert Company
2800 Plymouth Road
Ann Arbor, Michigan, 48105
Facsimile number: (734) 622-1553
Attention: Dr. Ronald Cresswell
Vice President and Chairman
Parke-Davis Research Division
Copy: Warner-Lambert Company
201 Tabor Road
Morris Plains, NJ 07950
Attn: Vice President and General Counsel
Facsimile number: (973) 540-3117
***Confidential Treatment Requested 17
<PAGE> 18
If to Aurora, to: Aurora Biosciences Corporation
11010 Torreyana Road
San Diego, CA 92121
Facsimile number: (619) 452-5723
Attention: Timothy J. Rink, M.D., Sc.D.
Chairman, CEO, and President
Copy: Paul Grayson
Senior Vice President, Corporate Development
provided that if such notice or communication relates to an amendment to
this Agreement or to any notice pursuant to Article 11 hereof, a copy
shall also be sent to:
If to PD, to: Jeffery M. Brinza
Assistant General Counsel
Pharmaceutical Research Division
Warner-Lambert Company
2800 Plymouth Road
Ann Arbor, MI 48105
Fax: 734-622-1553
If to Aurora, to: John D. Mendlein
Senior Legal Counsel
Aurora Biosciences Corporation
11010 Torreyana Road
San Diego, California 92121
Fax: 619-973-6748
Either party may by like notice specify or change an address to which
notices and communications shall thereafter be sent. Notices sent by
mail, facsimile or cable shall be effective upon receipt and notices
given by hand shall be effective when delivered.
10.5. Governing Law and Jurisdiction.
This Agreement shall be governed by the laws of the State of California,
as such laws are applied to contracts entered into and to be performed
within such state. Any dispute arising out of or relating to this
Agreement ***
10.6 Waiver.
Except as specifically provided for herein, the waiver from time to time
by either of the parties of any of their rights or their failure to
exercise any remedy shall not operate or be construed as a continuing
waiver of same or any of the other of such party's rights or remedies
provided in this Agreement.
***Confidential Treatment Request 18
<PAGE> 19
10.7. Severability.
If any term, covenant or condition of this Agreement or the application
thereof to any party or circumstance shall, to any extent, be held to be
invalid or unenforceable, then the remainder of this Agreement, or the
application of such term, covenant or condition to the parties or
circumstances other than those as to which it is held invalid or
unenforceable, shall not be affected thereby and each term, covenant or
condition of this Agreement shall be valid and be enforced to the
fullest extent permitted by law; and the parties hereto covenant and
agree to renegotiate any such term, covenant or application thereof in
good faith in order to provide a reasonably acceptable alternative to
the term, covenant or condition of this Agreement or the application
thereof that is invalid or unenforceable, it being the intent of the
parties that the basic purposes of this Agreement are to be effectuated.
10.8. Independent Contractors.
It is expressly agreed that Aurora and PD shall be independent
contractors and that the relationship between the two parties shall not
constitute a partnership or agency of any kind. Neither Aurora nor PD
shall have the authority to make any statements, representations or
commitments of any kind, or to take any action, which shall be binding on
the other, without the prior written authorization of the other party to
do so.
10.9. Counterparts.
This Agreement may be executed in two (2) or more counterparts, each of
which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
10.10. Entire Agreement.
This Agreement between the parties of even date herewith sets forth all
of the covenants, promises, agreements, warranties, representations,
conditions and understandings between the parties hereto, and supersedes
and terminates all prior agreements and understanding between the
parties, with respect to the subject matter hereof. There are no
covenants, promises, agreements, warranties, representations conditions
or understandings, either oral or written, between the parties other
than as set forth herein and therein. No subsequent alteration,
amendment, change or addition to this Agreement shall be binding upon
the parties hereto unless reduced to writing and signed by the
respective authorized officers of the parties. This Agreement shall
not be strictly construed against either party hereto. Any conflict
between the terms set forth in the text of this Agreement and the
terms of any Exhibit hereto shall be resolved in favor of the text of
this Agreement.
***Confidential Treatment Requested 19
<PAGE> 20
10.11. No Third Party Beneficiaries.
No third party, including any employee of any party this Agreement, shall
have or acquire any rights by reason of this Agreement. Nothing
contained in this Agreement shall be deemed to constitute the parties
partners with each other or any third party.
10.12. Construction.
The term "Section" can refer to any single paragraph level found herein
or any collection of multiple paragraphs thereunder.
10.13. Dispute Resolution.
The parties recognize that disputes as to certain matters may from time
to time arise during the term of this Agreement which relate to either
party's rights and/or obligations hereunder. It is the objective of the
parties to establish procedures to facilitate the resolution of disputes
arising under this Agreement in an expedient manner by mutual
cooperation and without resort to litigation or arbitration. The
parties agree that prior to any litigation or arbitration concerning this
Agreement, PD's president and Aurora's president will meet in person or
by video-conferencing in a good faith effort to resolve any disputes
concerning this Agreement. ***.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
by their duly authorized representatives.
WARNER-LAMBERT COMPANY AURORA BIOSCIENCES CORPORATION
By: /s/ Ronald M. Cresswell By: /s/ Timothy J. Rink
------------------------- -------------------------
Name: Prof. Ronald M. Cresswell Name: Dr. Timothy J. Rink
------------------------- -------------------------
Title: Vice President and Chairman Title: President, CEO and Chairman
------------------------- ---------------------------
Date: August 21, 1998 Date: August 4, 1998
------------------------- -------------------------
***Confidential Treatment Requested 20
<PAGE> 21
LIST OF EXHIBITS
***
EXHIBIT 1 - PAGE 1
***
EXHIBIT 2 - PAGE 1
***
***Confidential Treatment Requested 21
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANICAL INFORMATION EXTRACTED FROM THE BALANCE
SHEET AT SEPTEMBER 30, 1998 (UNAUDITED) AND THE STATEMENT OF OPERATIONS FOR THE
NINE MONTHS ENDED SEPTEMER 30, 1998 (UNAUDITED) AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FORM 10-Q FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30,
1998.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 8,660,441
<SECURITIES> 23,161,905
<RECEIVABLES> 4,558,618
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 38,427,472
<PP&E> 13,709,781
<DEPRECIATION> 2,776,054
<TOTAL-ASSETS> 55,864,286
<CURRENT-LIABILITIES> 9,206,690
<BONDS> 0
0
0
<COMMON> 16,972
<OTHER-SE> 42,059,661
<TOTAL-LIABILITY-AND-EQUITY> 55,864,286
<SALES> 0
<TOTAL-REVENUES> 18,192,197
<CGS> 0
<TOTAL-COSTS> 16,086,172
<OTHER-EXPENSES> 17,312,931
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 481,443
<INCOME-PRETAX> (13,717,768)
<INCOME-TAX> 0
<INCOME-CONTINUING> (13,717,768)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (13,717,768)
<EPS-PRIMARY> (0.85)
<EPS-DILUTED> (0.85)
</TABLE>
