<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1998.
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to .
Commission file number 0-15190
OSI Pharmaceuticals, Inc.
(Exact name of registrant as specified in its charter)
Delaware 13-3159796
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
106 Charles Lindbergh Boulevard, Uniondale, New York 11553
(Address of principal executive offices) (Zip Code)
516-222-0023
(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 for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
APPLICABLE ONLY TO CORPORATE ISSUERS:
At July 31, 1998 the registrant had outstanding 21,382,668 shares of common
stock $.01 par value.
<PAGE> 2
OSI PHARMACEUTICALS, INC. AND SUBSIDIARIES
CONTENTS
Page No.
PART I - FINANCIAL INFORMATION............................................. 3
Item 1. Financial Statements
Consolidated Balance Sheets
- June 30, 1998 and September 30, 1997.......................... 3
Consolidated Statements of Operations
- Three months ended June 30, 1998 and 1997..................... 5
Consolidated Statements of Operations
- Nine months ended June 30, 1998 and 1997...................... 6
Consolidated Statements of Cash Flows
- Nine months ended June 30, 1998 and 1997...................... 7
Notes to Consolidated Financial Statements...................... 9
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations............................. 10
Item 3. Quantitative and Qualitative Disclosures about Market Risk...... 13
PART II - OTHER INFORMATION................................................ 14
Item 1. Legal Proceedings............................................... 14
Item 2. Changes in Securities........................................... 14
Item 3. Defaults Upon Senior Securities................................. 14
Item 4. Submission of Matters to a Vote of Security Holders............. 14
Item 5. Other Information............................................... 14
Item 6. Exhibits and Reports on Form 8-K................................ 15
SIGNATURES................................................................. 17
EXHIBIT INDEX.............................................................. 18
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
OSI PHARMACEUTICALS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, September 30,
Assets 1998 1997
- ------ ----------- ------------
(unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $10,151,173 $ 8,636,634
Short-term investments 14,725,153 23,198,035
Receivables, including
trade receivables of $344,473 and
$350,100 at June 30,1998 and
September 30, 1997, respectively 2,234,328 1,215,672
Interest receivable 337,753 475,800
Grants receivable 318,898 179,740
Prepaid expenses and other 988,696 820,151
----------- -----------
Total current assets 28,756,001 34,526,032
----------- -----------
Property, equipment and leasehold
improvements - net 7,915,832 7,752,286
Compound library assets - net 5,946,305 6,800,406
Loans to officers and employees 9,317 34,317
Other assets 2,254,022 1,287,782
Intangible assets - net 8,089,186 9,184,742
----------- -----------
$52,970,663 $59,585,565
=========== ===========
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable and accrued expenses $ 3,138,247 $ 4,180,039
Current portion of unearned revenue 1,677,306 733,377
----------- -----------
Total current liabilities 4,815,553 4,913,416
----------- -----------
Other liabilities:
Loan payable 69,175 151,985
Deferred acquisition costs 660,886 630,796
Accrued postretirement benefits cost 1,095,596 944,500
----------- -----------
Total liabilities 6,641,210 6,640,697
----------- -----------
</TABLE>
(continued)
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<PAGE> 4
OSI PHARMACEUTICALS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (CONTINUED)
<TABLE>
<CAPTION>
June 30, September 30,
Liabilities and Stockholders' Equity (cont'd) 1998 1997
- ------------------------------------ ------------ -------------
(unaudited)
<S> <C> <C>
Stockholders' equity:
Common stock, $.01 par value;
50,000,000 shares authorized,
22,277,256 and 22,262,220
issued and outstanding at
June 30, 1998 and
September 30, 1997, respectively 222,773 222,622
Additional paid-in capital 104,933,063 104,864,056
Treasury stock, at cost 897,838 shares at
June 30, 1998 and September 30, 1997 (6,284,866) (6,284,866)
Accumulated deficit (52,409,897) (45,657,713)
Cumulative translation adjustments (61,320) (101,531)
Unrealized holding loss on
short-term investments (70,300) (97,700)
------------- -------------
Total stockholders' equity 46,329,453 52,944,868
------------- -------------
Commitments and contingencies
$ 52,970,663 $ 59,585,565
============= =============
</TABLE>
See accompanying notes to consolidated financial statements.
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<PAGE> 5
OSI PHARMACEUTICALS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
June 30,
----------------------
1998 1997
----------- ------------
<S> <C> <C>
Revenues:
Collaborative program revenues,
principally from related parties $ 3,958,441 $ 2,867,641
Sales 362,839 221,506
Other research revenue 318,897 494,294
License revenues 702,422 0
------------ ------------
5,342,599 3,583,441
------------ ------------
Expenses:
Research and development 5,546,401 4,430,170
Selling, general and administrative 1,952,975 1,849,149
Amortization of intangibles 365,185 365,188
------------ ------------
7,864,561 6,644,507
------------ ------------
Loss from operations (2,521,962) (3,061,066)
Other income (expense):
Net investment income 346,246 480,520
Other (23,881) (24,140)
------------ ------------
Net loss $ (2,199,597) $ (2,604,686)
============ ============
Weighted average number of shares
of common stock outstanding 21,373,522 21,299,407
============ ============
Basic net loss per share $ (.10) $ (.12)
============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
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<PAGE> 6
OSI PHARMACEUTICALS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Ended
June 30,
------------------
1998 1997
------------ -----------
<S> <C> <C>
Revenues:
Collaborative program revenues,
principally from related parties $ 11,401,317 $ 9,239,373
Sales 796,903 825,542
Other research revenue 1,058,705 1,000,770
License revenues 702,422 0
------------ ------------
13,959,347 11,065,685
------------ ------------
Expenses:
Research and development 15,084,796 12,374,413
Selling, general and administrative 5,475,129 5,435,527
Amortization of intangibles 1,095,555 1,095,554
------------ ------------
21,655,480 18,905,494
------------ ------------
Loss from operations (7,696,133) (7,839,809)
Other income (expense):
Net investment income 1,132,853 1,617,505
Other (188,904) (67,521)
------------ ------------
Net loss $ (6,752,184) $ (6,289,825)
============ ============
Weighted average number of shares
of common stock outstanding 21,369,805 21,699,641
============ ============
Basic net loss per share $ (.32) $ (.29)
============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
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<PAGE> 7
OSI PHARMACEUTICALS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Ended
June 30,
------------------
1998 1997
------------- -------------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (6,752,184) $ (6,289,825)
Adjustments to reconcile net loss
to net cash used by operating activities:
Gain (loss) on sale of investments (5,310) 16,775
Depreciation and amortization 1,379,586 1,116,742
Amortization of library assets 1,352,216 826,132
Amortization of intangibles 1,095,556 1,095,554
Amortization of warrants 30,090 30,091
Foreign exchange (gain) loss 40,211 (27,500)
Changes in assets and liabilities:
Receivables (1,018,656) 977,523
Interest receivable (139,158) 40,486
Grants receivable 138,047 52,896
Prepaid expenses and other (168,545) (677,112)
Other assets (966,240) (644,022)
Accounts payable
and accrued expenses (1,041,792) (188,336)
Unearned revenue 943,929 457,875
Accrued postretirement
benefits cost 151,096 112,896
------------ ------------
Net cash used by
operating activities $ (4,961,154) $ (3,099,825)
------------ ------------
Cash flows from investing activities:
Additions to short-term investments $ (2,742,898) $ (3,942,582)
Maturities and sales of short-term investments 11,248,490 10,870,979
Additions to library assets (498,115) (99,624)
Additions to property, equipment and
leasehold improvements (1,543,132) (1,992,422)
Net change in loans to officers and employees 25,000 2,683
------------ ------------
Net cash provided by investing activities $ 6,489,345 $ 4,839,034
------------ ------------
</TABLE>
(continued)
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<PAGE> 8
OSI PHARMACEUTICALS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Ended
June 30,
-----------------------
1998 1997
------------- --------------
<S> <C> <C>
Cash flows from financing activities:
Proceeds from exercise of stock options
and employee stock purchase plan 69,158 200,880
Net change in loans payable (82,810) 98,243
Purchase of treasury stock 0 (8,750,000)
------------ ------------
Net cash used by financing activities $ (13,652) $ (8,450,877)
------------ ------------
Net (decrease) increase in cash
and cash equivalents 1,514,539 (6,711,668)
Cash and cash equivalents at
beginning of period 8,636,634 13,409,866
------------ ------------
Cash and cash equivalents at end of period $ 10,151,173 $ 6,698,198
============ ============
Issuance of treasury stock for
acquisition of license to the Dow
Compound Library 0 $ 2,500,000
============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
-8-
<PAGE> 9
OSI PHARMACEUTICALS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(1) Basis of Presentation
In the opinion of management, the accompanying unaudited consolidated financial
statements contain all adjustments (consisting of only normal recurring
accruals) necessary to present fairly the financial position of OSI
Pharmaceuticals, Inc. and its subsidiaries (the "Company") as of June 30, 1998
and September 30, 1997, its results of operations for the three and nine months
ended June 30, 1998 and 1997 and its cash flows for the nine months ended June
30, 1998 and 1997. Certain reclassifications have been made to the prior period
financial statements to conform them to the current presentation.
It is recommended that these consolidated financial statements be read in
conjunction with the consolidated financial statements and notes thereto in the
Company's 1997 Annual Report on Form 10-K.
Results for interim periods are not necessarily indicative of results for the
entire year.
Net loss per share of common stock outstanding is based on the weighted average
number of shares outstanding. Common share equivalents (stock options) are not
included in the computation for the three months and nine months ended June 30,
1998 and 1997 since their inclusion would be anti-dilutive.
(2) License Agreement with Aurora Biosciences Corporation
Pursuant to a License Agreement effective May 26, 1998, the Company granted to
Aurora Biosciences Corporation ("Aurora") a non-exclusive worldwide license to
practice the technology under the Company's patent for live cell gene
transcription assays utilizing a reporter gene. The Company also granted Aurora
an option to obtain a non-exclusive license to practice the technology under the
Company's patent concerning methods of transcription modulation. The duration of
each license is to be coextensive with the life of the last to expire of the
underlying patents. Aurora has the right to grant sublicenses. The Company
received 75,000 shares of Aurora's common stock with an estimated fair market
value of $400,000 and a license fee of $300,000 upon execution of the agreement.
In addition, Aurora will pay the Company milestone payments and royalties on
sales of products derived from the licensed patents, if any. The Company has
exclusive control over prosecution, maintenance and enforcement of the patents
subject to the agreement.
(3) Research Agreements
(a) Modification of Co-Venture with Sepracor, Inc.
Pursuant to an Amendatory and Collaborative Agreement dated April 1, 1998, the
Company and Sepracor, Inc. ("Sepracor") amended their Collaborative Research
Development and Commercialization Agreement dated March 7, 1997, terminating
certain provisions contained therein, including, without limitation, provisions
establishing the research program. Each party will be free to independently
pursue the discovery of new compounds in the anti-infective area without
incurring any responsibility to the other party. To the extent Sepracor
commercializes certain compounds arising out of the joint venture, however, it
will pay royalties to the Company. The Company will provide discovery biology
and certain other services to Sepracor until September 1, 1998, in exchange for
fees from Sepracor subject to extension on a quarterly basis.
(b) Collaboration with Fujirebio, Inc.
The Company, through its wholly-owned subsidiary, Oncogene Science Diagnostics,
Inc., entered into a Research Collaboration and License Agreement with
Fujirebio, Inc. ("Fujirebio") effective April 1, 1998, creating a collaborative
program focused on discovering and developing certain proprietary cancer assays
and commercializing cancer diagnostic products. Under the agreement, Fujirebio
is to fund the Company's research and development of cancer assays over a
four-year term. The Company is to provide Fujirebio with antibodies, antigens
and other substances necessary to manufacture the diagnostic products derived
from the collaboration. Further, the Company has granted to Fujirebio a
non-exclusive license to, among other things, develop, manufacture and sell the
products developed pursuant to the collaboration in Japan in exchange for
license fees and royalties on product sales. The duration of the license is to
be coextensive with the lives of the patents related to the licensed products.
Each of the parties has rights and obligations to prosecute and maintain patent
rights related to specified areas of the research under the agreement. The
agreement is subject to early termination by either party in the event of
certain defaults.
(c) Alliance with Vanderbilt University
Effective as of April 28, 1998, the Company entered into a Collaborative
Research, Option and Alliance Agreement with Vanderbilt University
("Vanderbilt") to conduct a collaborative research program and seek a corporate
partner to fund a technology collaboration for the discovery and development of
drugs to treat diabetes. The collaborative research is funded by the Company in
exchange for which the Company has the option to negotiate a commercially
reasonable, worldwide, exclusive license from Vanderbilt to develop, make, use,
and sell, products derived from the research program. The Company and Vanderbilt
will commit equal resources to the program, including, among other things,
access to all their respective laboratory facilities and dedicated teams of
research scientists. The Company has certain rights and obligations to prosecute
and maintain patent rights related to specified areas of the research under the
agreement. The agreement is for a term of one year, but shall be automatically
extended upon the execution of a third-party research collaboration agreement
for the term of such collaboration. Each party is prohibited from entering, on
its own without the other party, into a funded collaboration agreement with a
third party for drug discovery in the area of diabetes using certain targets
which are the subject of the collaboration.
(4) Recombinant TGF-Beta 3 Collaboration
In May 1998, Novartis Pharma AG ("Novartis"), the Company's collaborative
partner in the development of TGF-Beta 3 for wound healing and oral mucositis
indications, found that patients treated with TGF-Beta 3 in its Phase II
clinical trials for both indications showed no statistical improvement with
regard to primary clinical end points (e.g., wound closure) compared to patients
treated with placebos. The Company and Novartis are in discussions regarding the
development of TGF-Beta 3 for other indications.
-9-
<PAGE> 10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
THREE AND NINE MONTHS ENDED JUNE 30, 1998 AND 1997
REVENUES
Revenues for the three and nine months ended June 30, 1998 were approximately
$5.3 million and $14.0 million, respectively, representing an increase of $1.8
million or 49%, and an increase of $2.9 million or 26%, respectively, compared
to revenues of $3.6 million and $11.1 million, respectively, reported for the
three and nine months ended June 30, 1997. Collaborative program revenues
increased approximately $1.1 million or 38% and increased approximately $2.2
million or 23%, respectively. The three month increase is primarily due to the
commencement on October 1, 1997 of the funded phase of the collaborative
research and license agreement among the Company, Anaderm Research Corp.
("Anaderm") and Pfizer Inc. ("Pfizer"), as well as an increased level of
research in the collaborative program with Sankyo Company, Ltd. ("Sankyo") to
discover and develop novel pharmaceutical products to treat influenza. The nine
month increase is primarily due to the Anaderm and Sankyo programs and was
partially offset by a decrease in revenues related to the Company's
collaborative program with Hoechst Marion Roussel, Inc. ("HMRI") to discover and
develop small molecules that induce gene expression of the protein
erythropoietin. This decrease in revenues resulted from the Company's
receipt of a $1 million initiation fee from HMRI in the erythopoletin program in
the second quarter of 1997 and reduced funding in connection with the extension
of the first phase of this pragram in April 1998. The nine month increase in
revenue was also offset by the completion, on December 31, 1996, of the funded
discovery phase of the Company's collaborative program with Wyeth-Ayerst
Laboratories relating to the discovery and development of drugs for the
treatment of diabetes and osteoporosis. Sales revenue, representing primarily
service revenue from the pharmaceutical division of the Company's Aston
Molecules Ltd. ("Aston") subsidiary, which the Company acquired in September
1996, increased approximately $141,000 or 64% compared to the prior three-month
period and decreased $29,000 or 3% compared to the prior nine-month period. The
decrease was primarily due to the Company's decision to devote certain of
Aston's resources to internal programs as opposed to sales outside the Company.
Other research revenues, representing primarily government grants and other
research grants, decreased approximately $175,000 or 35%, and increased
approximately $58,000 or 6%, respectively, for the three and nine months ended
June 30, 1998 compared to the three and nine months ended June 30, 1997. The
Company recognized license revenue of approximately $700,000 for the three and
nine months ended June 30, 1998 from the signing of a license agreement on May
26, 1998 with Aurora Biosciences Corporation ("Aurora") covering the Company's
gene transcription patent estate. Under the terms of the agreement, the Company
received 75,000 shares of Aurora common stock with a fair market value of
approximately $400,000 and $300,000 in cash for Aurora's non-exclusive license
and certain sub-licensing rights to the Company's reporter gene patent, and
options to the Company's methods of modulation patent. The Company anticipates
entering into additional licensing agreements for these patents in the future.
EXPENSES
The Company's operating expenses increased by approximately $1.2 and $2.7
million or 18% and 15%, respectively, for the three
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<PAGE> 11
and nine months ended June 30, 1998 compared to the three and nine months ended
June 30, 1997. Research and development expenses increased approximately $1.1
and $2.7 million, or 25% and 22%, respectively. The increase was due to: (1) the
expansion of the Company's joint venture with Anaderm for the discovery and
development of novel compounds to treat pigmentation disorders, wrinkles and
baldness; (2) the joint venture with Sepracor, Inc. ("Sepracor") for the
discovery of certain anti-infective and anti-inflammatory agents, which
commenced in March 1997; and (3) the collaborative agreement with Sankyo for the
discovery and development of novel pharmaceutical products to treat influenza,
which commenced in February 1997. Also contributing to the increase in expenses
were costs associated with the expansion of the Company's natural products
discovery and medicinal chemistry operations at its MYCOsearch, Inc.
("MYCOsearch") and Aston subsidiaries.
OTHER INCOME AND EXPENSE
Investment income decreased approximately $134,000 and $485,000 or 28% and 30%,
respectively, for the three and nine months ended June 30, 1998 compared to the
three and nine months ended June 30, 1997. This decrease relates to the decrease
in the principal balance invested.
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 1998, working capital (representing primarily cash, cash equivalents
and short-term investments) aggregated approximately $23.9 million. The Company
is dependent upon collaborative research revenues, government research grants,
interest income and cash balances, and will remain so until products developed
from its technology are successfully commercialized.
In connection with the formation of Helicon Therapeutics, Inc. ("Helicon") in
July 1997, the Company agreed to perform $1 million of molecular screening
services for Helicon through approximately July 1998 (and grant to Helicon a
non-exclusive license with respect to certain screening technology) in exchange
for its shares of Helicon's capital stock. Helicon is to provide research
funding to the Company for the second and third years of the initial three-year
term of this program. In addition, pursuant to its agreement with Pfizer and
Anaderm, the Company will contribute approximately $800,000 in drug discovery
resources (including assay biology, high throughput screening, lead optimization
and chemistry) to Anaderm in fiscal 1998 and, assuming Anaderm achieves certain
milestones, approximately an additional $1 million in such resources through
fiscal 1999.
The Company believes that with the funding from its collaborative research
programs, government research grants, interest income, and cash balances, its
financial resources are adequate for its operations for approximately the next
three to four years based on its current business plan even if no milestone
payments or royalties are received during this period. However, the Company's
capital requirements may vary as a result of a number of factors, including, but
not limited to, competitive and technological developments, funds required for
further expansion or enhancement of the Company's technology platform (including
possible
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<PAGE> 12
additional joint ventures, collaborations and acquisitions), potential milestone
payments, and the time and expense required to obtain governmental approval of
products, some of which factors are beyond the Company's control.
One of the Company's strategic objectives is to manage its financial resources
and the growth of its drug discovery and development programs so as to balance
its proprietary efforts and co-ventures with its funded collaborations. In
pursuing this objective, the Company has expanded the scope of its discovery and
development activities without significantly increasing its rate of cash
consumption. The Company expects to continue its current level of
expenditures and capital investment over the next several years to enhance its
drug discovery technologies, pursue internal proprietary drug discovery
programs, and to commit resources to co-ventures with pharmaceutical companies.
Examples of the Company's co-ventures with pharmaceutical companies include the
formation of Helicon in July 1997 with Cold Spring Harbor Laboratory and
Hoffman-La Roche Inc., and the formation of Anaderm in April 1996 with Pfizer
and New York University. Generally the Company expects to commit greater
resources to such programs in exchange for greater commercialization rights, as
compared to its traditional collaborative research programs in which the Company
receives research funding and royalties on sales of commercialized products. If
the developmental activities on which one or more of these ventures are focused
are successful, then the Company will be required to make substantial additional
capital investment in such venture(s) in order to maintain its percentage
participation.
There can be no assurance that scheduled payments will be made by third parties,
that current agreements will not be canceled, that government research grants
will continue to be received at current levels, that milestone payments will be
made, or that unanticipated events requiring the expenditure of funds will not
occur. Further, there can be no assurance that the Company will be able to
obtain any additional required funds on acceptable terms, if at all. Failure to
obtain additional funds when required would have a material adverse effect on
the Company's business, financial condition and results of operations.
YEAR 2000 COMPLIANCE
The Company is currently working to resolve the potential impact of the Year
2000 problem on the processing of date-sensitive information by the Company's
computerized information systems. The Year 2000 problem is the result of
computer programs being written using two digits (rather than four) to define an
applicable year. Substantially all of the Company's biology and chemistry
databases are stored on Oracle tables and ISIS chemical structure databases,
which are Year 2000 compliant, as are its Novell network servers. The Company
currently plans to convert its financial records to an Oracle based system and
is in the process of implementing a new planning and budgeting package, both of
which are Year 2000 compliant. The Company expects these systems to be
operational by December 31, 1999. Based on current
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<PAGE> 13
information, the cost of addressing remaining potential Year 2000 problems
associated with the Company's internal systems and operations are not expected
to have a material adverse impact to the Company's financial position, results
of operations, or cash flows in future periods.
The Company has not conducted an evaluation of the extent to which the
operations of the material third parties with whom it regularly deals may be
disrupted by any Year 2000 non-compliance of any of their systems. These third
parties include the Company's collaborative partners and co-venturers, and its
suppliers and vendors. Disruption of the operations of any of its partners or
co-venturers could delay or halt important research and development programs,
cause the loss of data or have other unforeseen consequences. Year 2000
problems experienced by the Company's suppliers and vendors could cause a
disruption of the Company's operations. The Company currently is unable to
estimate the likelihood of any of these risks being realized, or if realized,
the impact they may have on the Company. Any such occurrence could have a
material adverse effect on the Company's business, financial condition and
results of operations.
NEW ACCOUNTING PRONOUNCEMENTS
In 1997, the Financial Accounting Standards Board issued Statement of Financial
Accounting Standards ("SFAS") No. 130, "Reporting Comprehensive Income," SFAS
No. 131, "Disclosures about Segments of an Enterprise and Related Information,"
and SFAS No. 132, "Employers' Disclosures about Pensions and Other
Postretirement Benefits." SFAS No. 130 establishes standards for reporting and
display of comprehensive income and its components. SFAS No. 131 establishes
standards for reporting information about operating segments and related
disclosures about products and services, geographic areas and major customers.
SFAS No. 132 revises current disclosure requirements for employers' pensions and
other retiree benefits. These standards are effective for years beginning after
December 15, 1997. These standards expand or modify current disclosures and,
accordingly, will have no impact on the Company's reported financial position,
results of operations and cash flows.
FORWARD LOOKING STATEMENTS
Certain of the matters and subject areas discussed in this report that are not
statements of current or historical fact are "forward-looking statements" that
convey information about potential future circumstances and developments. These
forward-looking statements are necessarily based on various assumptions, involve
known and unknown risks and generally are subject to the inherent risks and
uncertainties surrounding expectations regarding future occurrences. As a
result, the Company's actual future experience may differ materially from the
results, achievements or performance described or implied in such statements.
Factors that might cause the Company's actual future experience to differ
materially from the forward-looking statements include, but are not limited to,
(i) the Company's absence of commercialized drug products, (ii) the Company's
dependence on third parties for clinical development and commercialization of
potential products, (iii) the potential failure of the Company's lead compound
currently in clinical trials to progress successfully through clinical
development, (iv) the potential failure of any drug candidates that emerge from
the Company's discovery operations to progress successfully to or through
clinical development, (v) competition, (vi) government regulation, (vii)
pharmaceutical pricing and (viii) the effect of any internal or external Year
2000 problems. Certain of these and additional factors that may cause the
Company's actual future experience to differ materially from the forward-looking
statements contained in this report are discussed in Exhibit 99 to the Company's
annual report on Form 10-K for the fiscal year ended September 30, 1997.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
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PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Not applicable.
ITEM 2. CHANGES IN SECURITIES
Not applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
ITEM 5. OTHER INFORMATION
MODIFICATION OF CO-VENTURE WITH SEPRACOR, INC.
Pursuant to an Amendatory and Collaborative Agreement dated April 1,
1998, the Company and Sepracor, Inc. ("Sepracor") amended their Collaborative
Research Development and Commercialization Agreement dated March 7, 1997,
terminating certain provisions contained therein, including, without limitation,
provisions establishing the research program. Each party will be free to
independently pursue the discovery of new compounds in the anti-infective area
without incurring any responsibility to the other party. To the extent Sepracor
commercializes certain compounds arising out of the joint venture, however, it
will pay royalties to the Company. The Company will provide discovery biology
and certain other services to Sepracor until September 1, 1998, in exchange for
fees from Sepracor subject to extension on a quarterly basis.
COLLABORATION WITH FUJIREBIO, INC.
The Company, through its wholly-owned subsidiary, Oncogene Science
Diagnostics, Inc., entered into a Research Collaboration and License Agreement
with Fujirebio, Inc. ("Fujirebio") effective April 1, 1998, creating a
collaborative program focused on discovering and developing certain proprietary
cancer assays and commercializing cancer diagnostic products. Under the
agreement, Fujirebio is to fund the Company's research and development of cancer
assays over a four-year term. The Company is to provide Fujirebio with
antibodies, antigens and other substances necessary to manufacture the
diagnostic products derived from the collaboration. Further, the Company has
granted to Fujirebio a non-exclusive license to, among other things, develop,
manufacture and sell the products developed pursuant to the collaboration in
Japan in exchange for license fees and royalties on product sales. The duration
of the license
-14-
<PAGE> 15
is to be coextensive with the lives of the patents related to the licensed
products. Each of the parties has rights and obligations to prosecute and
maintain patent rights related to specified areas of the research under the
agreement. The agreement is subject to early termination by either party in the
event of certain defaults.
LICENSE TO AURORA BIOSCIENCES CORPORATION
Pursuant to a License Agreement effective May 26, 1998, the Company
granted to Aurora Biosciences Corporation ("Aurora") a non-exclusive worldwide
license to practice the technology under the Company's patent for live cell gene
transcription assays utilizing a reporter gene. The Company also granted Aurora
an option to obtain a non-exclusive license to practice the technology under the
Company's patent concerning methods of transcription modulation. The duration of
each license is to be coextensive with the life of the last to expire of the
underlying patents. Aurora has the right to grant sublicenses. The Company
received 75,000 shares of Aurora's common stock with an estimated fair market
value of $400,000 and a license fee of $300,000 upon execution of the agreement.
In addition, Aurora will pay the Company milestone payments and royalties on
sales of products derived from the licensed patents, if any. The Company has
exclusive control over prosecution, maintenance and enforcement of the patents
subject to the agreement.
ALLIANCE WITH VANDERBILT UNIVERSITY
Effective as of April 28, 1998, the Company entered into a
Collaborative Research, Option and Alliance Agreement with Vanderbilt University
("Vanderbilt") to conduct a collaborative research program and seek a corporate
partner to fund a technology collaboration for the discovery and development of
drugs to treat diabetes. The collaborative research is funded by the Company in
exchange for which the Company has the option to negotiate a commercially
reasonable, worldwide, exclusive license from Vanderbilt to develop, make, use,
and sell, products derived from the research program. The Company and Vanderbilt
will commit equal resources to the program, including, among other things,
access to all their respective laboratory facilities and dedicated teams of
research scientists. The Company has certain rights and obligations to prosecute
and maintain patent rights related to specified areas of the research under the
agreement. The agreement is for a term of one year, but shall be automatically
extended upon the execution of a third-party research collaboration agreement
for the term of such collaboration. Each party is prohibited from entering, on
its own without the other party, into a funded collaboration agreement with a
third party for drug discovery in the area of diabetes using certain targets
which are the subject of the collaboration.
RECOMBINANT TGF-BETA 3 COLLABORATION
In May 1998, Novartis Pharma AG ("Novartis"), the Company's
collaborative partner in the development of TGF-Beta 3 for wound healing and
oral mucositis indications, found that patients treated with TGF-Beta 3 in its
Phase II clinical trials for both indications showed no statistical improvement
with regard to primary clinical end points (e.g., wound closure) compared to
patients treated with placebos. The Company and Novartis are in discussions
regarding the development of TGF-Beta 3 for other indications.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
3.1 Certificate of Incorporation, as amended (1)
3.2 By-Laws, as amended (2)
-15-
<PAGE> 16
10.1 Employment Agreement, dated April 30, 1998, between
the Company and Colin Goddard, Ph.D.
*10.2 Amendatory and Collaborative Agreement, dated as of
March 31, 1998, by and between the Company and
Sepracor, Inc.
*10.3 Research Collaboration and License Agreement, dated
as of April 1, 1998, by and among the Company,
Oncogene Science Diagnostics, Inc. and Fujirebio,
Inc.
*10.4 License Agreement, dated as of May 26, 1998, by and
between the Company and Aurora Biosciences
Corporation.
27 Financial Data Schedule
---------------
(1) Included as an exhibit to the Company's quarterly
report on Form 10-Q for the quarter ended December
31, 1997, filed on February 17, 1998, and
incorporated herein by reference.
(2) Included as an exhibit to the Company's registration
statement on Form S-3 (File No. 333-937) initially
filed on February 14, 1996, and incorporated herein
by reference.
* Portions of this exhibit have been redacted and are
the subject of a confidential treatment request filed
with the Secretary of the Securities and Exchange
Commission pursuant to Rule 24b-2 under the
Securities Exchange Act of 1934, as amended.
(b) REPORTS ON FORM 8-K
None.
-16-
<PAGE> 17
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
OSI PHARMACEUTICALS, INC.
-------------------------
(Registrant)
Date: August 14, 1998 /s/ Gary E. Frashier
-----------------------------
Gary E. Frashier
Chief Executive Officer
Date: August 14, 1998 /s/ Robert L. Van Nostrand
-----------------------------------
Robert L. Van Nostrand
Vice President and Chief Financial Officer
(Principal Financial Officer)
-17-
<PAGE> 18
EXHIBIT INDEX
Exhibit No. Description
3.1 Certificate of Incorporation, as amended (1)
3.2 By-Laws, as amended (2)
10.1 Employment Agreement, dated April 30, 1998, between the
Company and Colin Goddard, Ph.D.
*10.2 Amendatory and Collaborative Agreement, dated as of March 31,
1998, by and between the Company and Sepracor, Inc.
*10.3 Research Collaboration and License Agreement, dated as of
April 1, 1998, by and among the Company, Oncogene Science
Diagnostics, Inc. and Fujirebio, Inc.
*10.4 License Agreement, dated as of May 26, 1998, by and between
the Company and Aurora Biosciences Corporation.
27 Financial Data Schedule
-------------------
(1) Included as an exhibit to the Company's quarterly report on
Form 10-Q for the quarter ended December 31, 1997, filed on
February 17, 1998, and incorporated herein by reference.
(2) Included as an exhibit to the Company's registration statement
on Form S-3 (File No. 333-937) initially filed on February 14,
1996, and incorporated herein by reference.
* Portions of this exhibit have been redacted and are the
subject of a confidential treatment request filed with the
Secretary of the Securities and Exchange Commission pursuant
to Rule 24b-2 under the Securities Exchange Act of 1934, as
amended.
-18-
<PAGE> 1
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT, dated as of April 30,1998, between OSI
PHARMACEUTICALS, INC., a Delaware corporation having a place of business at 106
Charles Lindbergh Blvd., Uniondale, NY 11553 (the "Company"), and Colin Goddard,
Ph.D., who resides at 10 Ashley Loop, Fort Salonga, NY 11768 ("Executive").
WITNESSETH:
WHEREAS, the Company desires to engage Executive to perform services
for the Company and any subsidiary or affiliate of the Company, and Executive
desires to perform such services, on the terms and conditions hereinafter set
forth; and
WHEREAS, the Company and Executive have determined to terminate their
prior employment agreement dated April 28, 1993 and enter into this agreement;
NOW, THEREFORE, the Company and Executive, in consideration of the
mutual promises contained herein and other good and valuable consideration, the
receipt, adequacy and sufficiency of which are hereby acknowledged, hereby agree
as follows:
1. Term. The Company hereby employs Executive, and Executive
hereby accepts such employment, upon the terms and conditions hereinafter set
forth. Executive shall perform the duties required of him hereunder during the
period commencing on May 1, 1998 and ending on April 30, 2001; provided,
however, that on April 30, 2001, and on each April 30 thereafter, such period
shall be automatically extended by one additional year unless at least 60 days
prior to any such April 30 either party shall deliver to the other written
notice that such period will not be extended, in which case this Agreement will
terminate upon the expiration of this then existing term of this Agreement,
including any previous extension. The
<PAGE> 2
period during which Executive shall perform the services required of him
hereunder (as same may be extended as provided in this Section 1 or reduced as
hereinafter provided) is hereinafter referred to as the "Employment Period."
2. Duties.
(a) Executive shall serve, at the pleasure of the Board
of Directors of the Company, as President of the Company. In his capacities as
President shall perform for the Company, and any subsidiary or affiliate of the
Company, such duties generally associated with such position as well as such
other duties consistent with such position as may be prescribed from time to
time by the Board of Directors.
(b) Executive agrees to devote his full time, labor,
energies and attention to the performance of his duties hereunder, subject to
the provisions of Paragraph 10(a) hereof.
(c) Executive agrees not to become involved in any
personal investment or business matters which may detract from the performance
of his duties or otherwise adversely affect the Company or any subsidiary or
affiliate of the Company.
3. Place of Performance. In connection with his employment by the
Company, Executive shall be based at the principal executive offices of the
Company, but shall be available to travel at such times and to such places as
may be reasonably necessary in connection with the performance of his duties
hereunder.
4. Compensation.
(a) Base Salary. During the Employment Period, Executive
shall receive a minimum base salary at the annual rate of $192,000, plus such
other amounts, if any, as the Board of Directors of the Company, in its sole
discretion, may from time to time determine.
2
<PAGE> 3
Executive's base salary shall be reviewed annually; provided, however, that in
no event shall Executive's base salary be reduced below an annual rate of
$192,000. Executive's salary shall be payable in bi-weekly installments or at
such other frequency as the Company may from time to time determine.
(b) Incentive Bonus Opportunity. In addition to his base
salary, Executive may receive incentive bonus compensation in respect of each
fiscal year ending during the Employment Period. The amount, if any, of each
such Annual Award shall be determined by the Board of Directors of the Company
in its sole discretion. Executive shall not receive any Annual Award unless he
is employed by the Company at the end of the fiscal year to which such Annual
Award relates. Any Annual Award will be paid to Executive within 120 days
following the end of the fiscal year to which such Annual Award relates.
5. Stock Options. Executive shall be eligible to receive stock
options as the Board of Directors of the Company shall determine in its sole
discretion and in accord with established Company policy and incentive goals.
6. Expenses.
(a) During the Employment Period, Executive shall be
entitled to reimbursement for all reasonable out-of-pocket expenses necessarily
incurred in performing services hereunder within the limits of authority which
may be established from time to time by the Board of Directors, provided that
Executive properly accounts for such expenses in accordance with Company policy.
3
<PAGE> 4
7. Employee Benefits.
(a) Use of Automobile. The Company shall provide
Executive with the use of an automobile during the Employment Period and shall
reimburse Executive for his reasonable and necessary expenses in connection with
the use of such vehicle in furtherance of the business of the Company, provided
that Executive properly accounts for such expenses in accordance with Company
policy.
(b) Vacation. Executive shall be entitled to one month
paid vacation per calendar year which may be taken at such time or times as
Executive may elect, subject to the needs of the Company's business. Executive
shall also be entitled to all paid holidays given by the Company to its senior
executive officers.
(c) Other Benefits. Executive shall be entitled to
participate in such term life insurance, basic medical, major medical, dental
and other employee benefit plans established by the Company from time to time
and generally made available to employees at levels similar to Executive's for
which he meets the eligibility requirements.
8. Termination.
(a) The Company may terminate this Agreement at any time
after the first anniversary of the date of commencement of the Employment
Period, and for any reason whatsoever (or for no reason), by giving not less
than 30 days' prior written notice to Executive. In the event this Agreement is
terminated by the Company other than for a reason set forth in Paragraph 8(b)
hereof, (i) Executive shall be entitled to receive his base salary at the rate
in effect on the date notice of termination is given through the effective date
of such termination and any Annual Award granted through such date which has not
yet been paid;
4
<PAGE> 5
and (ii) Executive shall continue to receive his base salary at the rate in
effect on the date notice of termination is given for the twelve months
immediately succeeding the effective date of such termination.
(b) Notwithstanding anything herein contained to the
contrary, if after the date hereof and prior to the end of the Employment
Period, (i) either (A) Executive shall be physically or mentally incapacitated
or disabled or otherwise unable fully to discharge his duties hereunder
("Disabled") for a period of 90 consecutive days or for an aggregate of 90 days
within any period of twelve consecutive months, (B) Executive shall be convicted
of a felony or other crime involving moral turpitude, (C) Executive shall commit
any act or omit to take any action in bad faith and to the detriment of the
Company or any subsidiary or affiliate of the Company, or (D) Executive shall
breach any material term of this Agreement and fail to correct such breach
within 10 days after receiving notice of the same, then, and in each such case,
the Company shall have the right to give notice of termination of Executive's
services hereunder as of a date to be specified in such notice (which date may
be the date such notice is given), and this Agreement shall terminate on the
date so specified; or (ii) Executive shall die, then this Agreement shall
terminate the date of Executive's death.
If this Agreement is terminated by the Company for any of the reasons
set forth in this Paragraph 8(b), Executive or his estate, as the case may be,
shall be entitled to receive his base salary at the rate in effect on the date
notice of termination is given or the date of Executive's death, as the case may
be, to the date on which termination shall take effect and any Annual Award
granted through such date which has not been paid; provided, however that if
Executive is Disabled, the amount payable to Executive pursuant to this
Paragraph 8(b) shall
5
<PAGE> 6
be reduced by an amount equal to the amounts, if any, to which he is entitled
with respect to such period pursuant to any insurance or other plan established
by the Company in which he is a participant.
(c) Termination by the Employee. The Executive may terminate this
agreement after the date herein if in the event of a change of control of the
Company or for any other reason his title, responsibilities or salary are
reduced from those in effect at the time and he shall be entitled to full
payment for the remaining term of this Agreement. However, the payment shall not
be less than nine months pay in any event. Upon such termination, all
outstanding stock options granted to the Executive shall become fully vested.
(d) Executive may terminate this agreement if, within one year of
the effective date, the Board of Directors does not nominate the Executive for
election as Chief Executive Officer and as a director of the Company. Executive
shall continue to receive his base salary at the rate in effect on the date of
notice of termination for the 12 months succeeding such notice.
9. Confidentiality.
(a) Executive shall continue to treat as confidential any
proprietary, confidential or secret information relating to the business or
interests of the Company or any subsidiary or affiliate of the Company,
including, without limitation, the organizational structure, operations,
business plans or technical projects of the Company or any subsidiary or
affiliate of the Company, and any research datum or result, invention, trade
secret, customer list, process or other work product developed by or for the
Company or any subsidiary or affiliate of the Company, whether on the premises
of the Company or elsewhere ("Confidential
6
<PAGE> 7
Information"). Beginning on the date hereof, and at any time hereafter,
Executive shall not disclose, utilize or make accessible in any manner or in any
form any Confidential Information other than in connection with performing the
services required of him under this Agreement, without the prior written consent
of the Company. Notwithstanding the foregoing, the provisions of this Paragraph
9(a) shall not apply to any proprietary, confidential or secret information or
other research datum or result, invention, trade secret, customer list or work
product which is, at the commencement of this Agreement or at some later date,
publicly known under circumstances involving no breach of this Agreement or is
lawfully and in good faith made available to Executive by a third party under no
obligation of confidentiality with respect thereto.
(b) Executive hereby agrees that any and all information,
inventions and discoveries, whether or not patentable, that he conceives and/or
creates during the Employment Period and any extensions thereof, and which are a
direct or indirect result of work performed hereunder, shall be the sole and
exclusive property of the Company. Executive hereby assigns to the Company any
and all right, title and interest which he has or may acquire in the same.
Executive further agrees that he will promptly execute any and all applications,
assignments or other instruments which an officer of the Company or the Board of
Directors of the Company shall deem necessary or useful in order to apply for
and obtain Letters Patent in the United States and all foreign countries for
said information, inventions and discoveries and in order to assign and convey
to the Company the sole and exclusive right, title and interest in and to said
information, inventions, discoveries, patent applications and patents thereon.
The Company will bear the cost of preparation of all such patent applications
7
<PAGE> 8
and assignments, and the cost of prosecution of all such patent applications in
the United States Patent Office and in the patent offices of foreign countries.
(c) All documents, records, apparatus, equipment and
other physical property furnished to Executive by the Company or produced by
Executive or others in connection with his employment shall be and remain the
sole property of the Company. Executive will return and deliver such property to
the Company as and when requested by the Company.
(d) Executive agrees that the provisions of this
Paragraph 9 shall survive the termination of his employment and of this
Agreement.
10. Non-Competition.
(a) Executive agrees that, during the period he is
employed by the Company or any subsidiary or affiliate of the Company, under
this Agreement or otherwise, he will not engage in, or otherwise directly or
indirectly be employed by, or act as a consultant, advisor or lender to, or be a
director, officer, employee, stockholder, owner or partner of, any other
business or organization, whether or not such business or organization now is or
shall then be competing with the Company or any parent, subsidiary or affiliate
of the Company; provided, however, that Executive shall not be prohibited either
from managing his own personal investments on his own personal time or from
serving on up to three outside boards of directors or advisory boards, so long
as such activities do not (i) involve a business or organization which competes
with the Company or any subsidiary or affiliate of the Company, (ii) interfere
or conflict with the performance of his duties as an employee of the Company or
any subsidiary or affiliate of the Company, (iii) otherwise result in a breach
of any of the
8
<PAGE> 9
provisions of this Agreement, or (iv) in the case of serving as a director or
advisory board member of other companies, such activities for all such companies
do not require, in the aggregate, more than 15 days per year, including travel
time.
Executive further agrees that (y) if his employment with the Company is
terminated by the Company pursuant to Paragraphs 8(a) or 8(b)(i) hereof, or (z)
if he resigns or otherwise fails or refuses to perform the services required of
him under this Agreement other than as a result of a breach of this Agreement by
the Company (which breach is not cured within 30 days after receiving notice
thereof), then during the two-year period commencing on the date he ceases to be
employed by any of the Company or any subsidiary or affiliate of the Company,
under this Agreement or otherwise, Executive shall not directly or indirectly
compete with or be engaged in the same business as the Company or any subsidiary
or affiliate of the Company, or be employed by, or act as consultant, advisor or
lender to, or be a director, officer, employee, stockholder, owner or partner
of, any business or organization which, at the time of such cessation, directly
or indirectly competes with or is engaged in the same business as the Company or
any subsidiary or affiliate of the Company; provided, however, that if
Executive's employment with the Company is terminated pursuant to Paragraphs
8(a) or 8(b)(i)(A) hereof, Executive's obligations pursuant to this sentence
shall continue only so long as the Company pays Executive compensation at the
same rate compensation was being paid to him pursuant to Paragraph 4 of this
Agreement at the time of such termination (subject, in the case of termination
pursuant to Paragraphs 8(a). Notwithstanding anything contained herein to the
contrary, the provisions of this Paragraph 10(a) will not be deemed breached
merely because Executive owns not more than 1% of the
9
<PAGE> 10
outstanding common stock of a corporation if, at the time of its acquisition by
Executive, such stock is listed on a national securities exchange, is reported
on NASDAQ, or is regularly traded in the over-the-counter market by a member of
a national securities exchange.
(b) Executive agrees that for a period of three years
from the termination of this Agreement he will not, directly or indirectly,
employ or solicit the employment or engagement by others of any employees of, or
consultants hired by, the Company, or any subsidiary or affiliate of the
Company, without the prior written consent of the Company.
(c) The obligations of Executive pursuant to this
Paragraph 10 shall survive the termination of this Agreement.
11. Equitable Relief. Executive acknowledges that the restrictions
contained in Paragraphs 9 and 10 of this Agreement are reasonable in view of the
nature of the business in which the Company is engaged and the knowledge he will
obtain concerning the Company's business (and the business of any subsidiary or
affiliate of the Company), and that any breach of his obligations under
Paragraphs 9 and 10 hereof will cause the Company irreparable harm for which the
Company will have no adequate remedy at law. As a result, the Company shall be
entitled to the issuance by a court of competent jurisdiction of an injunction,
restraining order or other equitable relief in favor of itself restraining
Executive from committing or continuing any such violation, and Executive
consents to such an injunction, restraining order or other equitable relief. Any
right to obtain an injunction, restraining order or other equitable relief
hereunder will not be deemed a waiver of any right to assert any other remedy
the Company may have under this Agreement or otherwise at law or in equity.
10
<PAGE> 11
12. Representations and Warranties. Executive represents and
warrants to the Company that (i) Executive is under no contractual or other
restriction or obligation which is inconsistent with the execution of this
Agreement, the performance of his duties hereunder or the other rights of the
Company and any subsidiary or affiliate of the Company hereunder, and (ii)
Executive is under no physical or mental disability that would hinder the
performance by him of his duties under this Agreement.
13. Assignment. Under no circumstances shall Executive assign,
pledge or otherwise dispose of any of his rights or obligations under this
Agreement, and any such attempted assignment, pledge or disposition shall be
void and shall, at the Company's option, relieve the Company of all its
obligations under this Agreement. The Company may assign any of its rights or
obligations under this Agreement to any parent, subsidiary, affiliate or
successor.
14. Entire Agreement. This Agreement and the stock option
agreements referred to in Paragraph 5 hereof represent the entire agreement
between the Company and Executive with respect to the subject matter hereof and
there have been no oral or other agreements of any kind whatsoever as a
condition precedent or inducement to the signing of this Agreement or otherwise
concerning this Agreement or the subject matter hereof.
15. Waivers. Any waiver of any breach of any terms or conditions
of this Agreement shall not operate as a waiver of any other breach of such
terms or conditions or any other term or condition, nor shall any failure to
enforce any provision hereof on any one occasion operate as a waiver of such
provision or of any other provision hereof or a waiver of the right to enforce
such provision or any other provision on any subsequent occasion.
11
<PAGE> 12
16. Amendments. This Agreement may not be amended, nor shall any
waiver, change, modification, consent or discharge be effected, except by an
instrument in writing executed by or on behalf of the party against whom
enforcement of any such amendment, waiver, change, modification, consent or
discharge is sought.
17. Severability.
(a) If any provision of this Agreement shall be held or
deemed to be invalid, inoperative or unenforceable as written, it shall be
construed, to the greatest extent possible, in a manner which shall render it
valid and enforceable and any limitation on the scope or duration of any such
provision necessary to make it valid and enforceable shall be deemed to be part
thereof.
(b) If any provision of this Agreement shall be held or
deemed to be invalid, inoperative or unenforceable as applied to any particular
case in any jurisdiction or jurisdictions, or in all jurisdictions or in all
cases, because of the conflict or any provision with any constitution or statute
or rule of public policy or for any other reason, such circumstance shall not
have the effect of rendering the provision or provisions in question invalid,
inoperative or unenforceable in any other jurisdiction or in any other case or
circumstance or of rendering any other provision or provisions herein contained
invalid, inoperative or unenforceable to the extent that such other provisions
are not themselves actually in conflict with such constitution, statute or rule
of public policy, but this Agreement shall be reformed and construed in any such
jurisdiction or case as if such invalid, inoperative or unenforceable provision
had never been contained herein, and such provision reformed so that it would be
12
<PAGE> 13
valid, operative and enforceable to the maximum extent permitted in such
jurisdiction or in such case.
18. Governing Law. This Agreement shall be governed by and
construed and enforced in accordance with the laws of the State of New York
without giving effect to rules governing conflict of laws.
19. Courts. Any action to enforce any of the provisions of this
Agreement may be brought in the courts of the State of New York. The parties
hereby consent to the jurisdiction of the courts of the State of New York.
20. Notices. Any notice or other communication required or
permitted by this Agreement shall be in writing and personally delivered or
mailed by certified mail, return receipt requested, addressed to the parties at
their addresses set forth above, or to such other addresses as one party may
specify to the other party, from time to time, in writing. Any notice or other
communication given by certified mail shall be deemed given at the time of
certification thereof, except for a notice changing a party's address which
shall be deemed given at the time of receipt thereof.
21. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
13
<PAGE> 14
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date and
year first above written.
OSI PHARMACEUTICALS, INC.
By: /s/ Gary E. Frashier Date: June 29, 1998
------------------------ -----------------
Gary E. Frashier
Chairman and Chief Executive Officer
/s/ Colin Goddard, Ph.D. Date: June 29, 1998
------------------------ -----------------
Colin Goddard, Ph.D.
14
<PAGE> 1
Portions of this Exhibit 10.2 have been redacted and are the subject of
a confidential treatment request filed with the Secretary of the Securities and
Exchange Commission.
<PAGE> 2
AMENDATORY AND COLLABORATIVE AGREEMENT
Amendatory and Collaborative Agreement (this "Agreement") dated as of
March 31, 1998, between OSI Pharmaceuticals, Inc. (formerly named Oncogene
Science, Inc.), a Delaware corporation having its principal place of business at
106 Charles Lindbergh Boulevard, Uniondale, New York 11553 ("OSI"), and
Sepracor, Inc., a Delaware corporation having its principal place of business at
111 Locke Drive, Marlborough, Massachusetts ("Sepracor").
WHEREAS Sepracor and OSI are parties to a collaborative research,
development and commercialization agreement (the "Joint Venture Agreement")
dated as of March 7, 1997 which is attached hereto as Exhibit A; and
WHEREAS, Sepracor and OSI intend by this Agreement to change the
relationship between them provided for in the Joint Venture Agreement and to
terminate many of the provisions of the Joint Venture Agreement; and
WHEREAS, commencing as of April 1, 1998, (the "Amendatory Effective
Date") the new arrangement between OSI and Sepracor will be effective.
NOW, THEREFORE, the Parties agree as follows:
ARTICLE 1
INTERPRETATION AND AMENDMENTS
1.1 DEFINED TERMS. In this Agreement, unless the context or
subject matter is inconsistent therewith, the following terms and expressions
shall have the following meanings:
<PAGE> 3
(a) "Affiliate" shall mean, with respect to any Person
(including a Party), any other Person which directly or indirectly controls or
is controlled by, or is under direct or indirect common control with, such first
mentioned Person or any Person which is directly or indirectly controlled by a
Person which controls the first mentioned Person; for the purpose of this
definition, "control" shall mean, with respect to any Person (including any
Party), the ownership of more than 50% of the voting shares or other voting
equity of that Person. This definition notwithstanding, neither Versicor nor
BioSepra shall be considered to be affiliates of Sepracor for the purposes of
this Agreement.
(b) "Agreement" shall mean this Amendatory and
Collaborative Agreement and all instruments supplemental hereto or in amendment
or in confirmation hereof; "herein", "hereof", "hereto", "hereunder" and similar
expressions mean and refer to this Agreement and not to any particular article,
section, subsection or other subdivision; "article", "section", "subsection" or
other subdivision of this Agreement shall mean and refers to the specific
article, section, subsection or other said subdivision of this Agreement.
(c) "Amendatory Effective Date" shall mean April 1, 1998.
(d) "Confidential Information" shall mean Sepracor
Confidential Information or OSI Confidential Information, as the case may be.
(e) "FDA" shall mean the United States Food and Drug
Administration.
-2-
<PAGE> 4
(f) "Field" shall mean research, development, marketing,
distribution, and sale of ** including, without limitation, ** which were
designated by the Joint Steering Committee under the Joint Venture Agreement and
research, development, marketing, distribution, and sale of ** also as
designated by the Joint Steering Committee under the Joint Venture Agreement.
(g) "Independent Third Party" shall mean any Person other
than Sepracor, OSI and/or any of their respective Affiliates.
(h) "Joint Development Committee" shall mean the
development committee established under Section 2.5.1 of the Joint Venture
Agreement.
(i) "Joint Steering Committee" or "JSC" shall mean the
steering committee established under Section 2.4.1 of the Joint Venture
Agreement.
(j) "Joint Technology" shall mean and include all
technology and information, including all inventions, chemical structures and
methods for synthesis, structure-activity relationships, assay methodology,
methods, processes, formulae, plans, specifications, characteristics, equipment
and equipment designs, know how, trade secrets, discoveries, formulations and
biological, toxicological and clinical data, that were conceived jointly by
employees or agents of, or consultants to, Sepracor and OSI, or licensed in the
Field jointly by the Parties or on behalf of the Parties during the term of the
Joint Venture Agreement, such that Sepracor and OSI each own an undivided
interest therein.
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(k) "NDA" means a new drug application filed with the FDA
with respect to a Product.
(l) "OSI Confidential Information" shall mean all
confidential information disclosed to Sepracor orally and subsequently confirmed
in writing as "confidential" or designated as "confidential" by OSI or its
Affiliates at the time of disclosure to Sepracor, to the extent that such
information as of the date of disclosure to Sepracor is not (i) demonstrably
known to Sepracor other than by virtue of a prior confidential disclosure to
Sepracor by OSI or its Affiliates, or (ii) disclosed in the published literature
or otherwise to the public through no fault of Sepracor, its Affiliates,
employees or consultants, or (iii) obtained from an Independent Third Party
having no obligation of confidentiality to OSI or its Affiliates with respect to
such information.
(m) "OSI Technology" shall mean and include all
technology and technical information relating to a Compound, including all
inventions, chemical structures and methods for synthesis, structure-activity
relationships, assay methodology, methods, processes, formulae, plans,
specifications, characteristics, equipment and equipment designs, know how,
trade secrets, discoveries, results, formulations and biological, toxicological
and clinical data and physical, chemical or biological material, that is
conceived solely by employees or agents of, or consultants to, OSI and/or its
Affiliates, prior to or during the term of the Joint Venture Agreement or
acquired by purchase, license, assignment or other means from third parties
prior to or during the term of the Joint Venture Agreement that is not Joint
Technology, but only to the
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extent that OSI or its Affiliates is legally entitled to disclose such
Technology and technical information and use it in connection with the
performance by it of its obligations hereunder.
(n) "Patent Rights" shall mean all patents and patent
applications, including any divisional, continuation, continuation-in-part,
reissue, renewal or extension thereof, or substitute therefor, any registration
or confirmation thereof, relating to any Technology, Compounds or Products,
their methods of manufacture or uses of intermediates therefor, or formulations
thereof. "OSI Patent Rights" shall mean Patent Rights claiming inventions that
are conceived solely by employees or consultants of OSI or its Affiliates.
"Joint Patent Rights" shall mean Patent Rights claiming inventions that are
conceived jointly by employees, agents, or consultants of OSI and employees or
consultants of Sepracor and of their respective Affiliates. "Sepracor Patent
Rights" shall mean Patent Rights claiming inventions that are conceived solely
by employees, agents, or consultants of Sepracor or its Affiliates.
(o) "Person" shall mean any individual, corporation,
company, cooperative, partnership, trust, unincorporated association or any
other entity which possesses a juridical personality, including any governmental
authorities or body of competent jurisdiction; and pronouns when referring to a
Person, shall have a similar extended meaning.
(p) "Products" shall have the meaning set forth in
Section 4.1 hereof.
(q) "Research Program" shall mean the written research
plan annexed to the Joint Venture Agreement as Schedule A, as subsequently
revised or replaced by the Joint Steering Committee, which plan described the
research and other obligations to be carried out by each of Sepracor and OSI and
their Affiliates.
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(r) "Sepracor Compounds" shall mean any Compounds
contributed under the Joint Venture Agreement by Sepracor and any analogs
thereof which fall into the following chemical classes: ** .
(s) "Sepracor Technology" shall mean and include all
technology and technical information relating to a Compound, including all
inventions, chemical structures and methods for synthesis, structure activity
relationships, assay methodology, methods, processes, formulae, plans,
specifications, characteristics, equipment and equipment designs, know how,
trade secrets, discoveries, results, formulations and biological, toxicological
and clinical data and physical, chemical or biological material, that is
conceived solely by employees or agents of, or consultants to, Sepracor and/or
its Affiliates, prior to or during the term of the Joint Venture Agreement or
acquired by purchase, license, assignment or other means from third parties
prior to or during the term of the Joint Venture Agreement that is not Joint
Technology, but only to the extent that Sepracor or its Affiliates is legally
entitled to disclose such Technology and technical information and use it in
connection with the performance by it of its obligations hereunder.
(t) Any capitalized terms used but not defined herein
shall have the same meanings as in the Joint Venture Agreement.
1.2 TERMINATION OF RESEARCH PROGRAM. On the Amendatory Effective
Date, the Research Program, and the functions of the Joint Steering Committee
and the Joint Development Committee shall cease and neither OSI nor its
Affiliates nor Sepracor nor its Affiliates shall have
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any further obligations thereunder except as provided in this Agreement. Each
Party confirms that the other Party and its Affiliates shall, on and after the
Amendatory Effective Date, be free to conduct research activities within the
Field including but not limited to activities involving ** ; provided however,
that Sepracor and its Affiliates shall be responsible at their sole expense and
discretion for the development of existing pre-clinical candidates arising under
the Joint Venture Agreement and analogs thereof versus ** (subject to obtaining
OSI's assistance on the fee for service basis as hereinafter provided for) and
that Sepracor shall have the royalty obligations to OSI with respect thereto as
hereinafter provided for.
1.3 SETTLEMENT OF EXPENSES. The Parties acknowledge that, as of
the Amendatory Effective Date, they have settled any expense obligations
contemplated to be reimbursed by Section 3.1 of the Joint Venture Agreement and
that Section 3.1 of the Joint Venture Agreement shall be of no further force and
effect.
1.4 SECRET INFORMATION. Sections 4.1, 4.2 and 4.3 of the Joint
Venture Agreement shall remain in full force and effect. Section 4.4 of the
Joint Venture Agreement shall be of no further force or effect after the
Amendatory Effective Date.
1.5 INTELLECTUAL PROPERTY. Sections 5.1 and 5.2 of the Joint
Venture Agreement shall remain in full force and effect, subject to the royalty
obligations set forth hereinafter in this Agreement. All rights to the Sepracor
Compounds shall, as between OSI and Sepracor, be solely owned by Sepracor and
hereafter shall be further developed by Sepracor at its sole expense and
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discretion. Accordingly, after the Amendatory Effective Date OSI shall not be
bound by Section 5.3 or Section 5.4 of the Joint Venture Agreement, nor shall
the Parties have the obligations to each other contemplated by 5.5, 5.6, 5.7,
5.8 or 5.9 of the Joint Venture Agreement. Sepracor shall be responsible for all
costs associated with or arising out of the patenting of the pre-clinical
candidates identified under the Joint Venture Agreement and Sepracor's patent
maintenance and indemnification obligations in connection therewith. Section
5.10 shall remain in full force and effect. Nothing herein shall be deemed to
confer upon Sepracor any rights in or to OSI Technology or OSI Patents.
1.6 DEVELOPMENT AND COMMERCIALIZATION. Article 6 and Article 7 of
the Joint Venture Agreement shall be of no further force or effect after the
Amendatory Effective Date.
1.7 TERMINATION. Except as otherwise provided herein, the Joint
Venture Agreement (including the Initial Term) shall terminate on March 31, 1998
and neither Party shall have any rights of renewal or other rights thereunder
except as provided in this Agreement. Accordingly, after the Amendatory
Effective Date, Article 8 and Section 9.2 of the Joint Venture Agreement shall
be of no further force or effect.
1.8 CONFIDENTIAL INFORMATION. The obligations of the Parties with
respect to Confidential Information set forth in Section 9.3 of the Joint
Venture Agreement shall remain in full force and effect after the Amendatory
Effective Date.
1.9 REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Sepracor and OSI set forth in Article 10 are reaffirmed with
respect to this Agreement (but not the Research Program being terminated hereby)
as if fully set forth herein.
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1.10 AFFIRMATIVE COVENANTS. Throughout the term of this Agreement,
each of Sepracor and OSI shall comply in all material respects with the
requirements of all applicable laws, rules, regulations and orders of any
government authority to the extent necessary to carry out its obligations under
this Agreement.
1.11 DISPUTE RESOLUTION; MISCELLANEOUS. After the Amendatory
Effective Date, Articles 12, 13 and 14 of the Joint Venture Agreement shall be
of no further force or effect.
ARTICLE 2
RESPONSIBILITIES WITH RESPECT TO
SEPRACOR COMPOUNDS IN THE RESEARCH PROGRAM
2.1 Any Sepracor Compounds demonstrated in the Research Program to
show efficacy during the Joint Venture Agreement shall be owned (as between OSI
and Sepracor) by Sepracor and Sepracor shall be responsible for all further
development at its sole expense and discretion. Accordingly, Sepracor will have
full responsibility for all further developments of pre-clinical candidates
versus ** . Each Party shall have full rights and shall be free to independently
pursue the discovery of new compounds ** without incurring any responsibility to
the other Party thereby, provided that the resultant new compounds are not
direct structural analogs of the Sepracor Compounds.
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ARTICLE 3
FEE FOR SERVICES SUPPORT
3.1 OSI shall provide to Sepracor discovery biology and ADME
support on a fee for services basis to Sepracor as hereinafter provided.
3.2 For a six-month period commencing on the Amendatory Effective
Date, Sepracor shall provide funding to OSI in an amount equal to the equivalent
of ** full time employees at the rate of ** per employee per year, for a total
cost of ** for such six-month period. Such funding shall be split between
microbiology support for OSI's North Carolina facility and ADME and PK support
for OSI's Aston facility according to needs as directed by Dr. ** , or his
nominee, and as administered at OSI by Dr. ** or his nominee. Thereafter, as
mutually agreed, Sepracor will commit to a support level on a quarterly basis
six weeks prior to the beginning of any given quarter.
3.3 The Parties acknowledge that the costs referred to above in
this Article 3 do not include the costs of sub-contracting certain aspects of
the animal work. Up to $100,000 of such costs will be reimbursed by Sepracor.
Any such cost shall be subject to prior approval by Sepracor and shall be
charged by OSI at cost.
3.4 If the Parties have not agreed to an alternative arrangement
or to an extension of the arrangements described in this Article 3 on or before
September 1, 1998, the fee for service arrangements hereinabove provided for
shall terminate on September 1, 1998.
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ARTICLE 4
ROYALTIES
4.1 If Sepracor or its Affiliates (other than a collaborative
partner or sublicensee which collaborative or sublicense arrangement is
hereinafter separately provided for) markets a product labeled for use in the
Field and containing a Sepracor Compound (a "Product"), Sepracor shall pay to
OSI royalties equal to the greater of (a) ** and (b) ** of the Net Sales of the
Product. ** All costs will be determined in conformity with generally accepted
accounting principles.
4.2 If Sepracor enters into a collaborative or sublicense
arrangement with a Third Party with respect to a Product prior to the marketing
of such Product, OSI shall receive the following percentages of any revenue
(including royalties and milestones, success fees and similar items) received by
Sepracor and/or its Affiliates with respect to the Product; provided, however,
that with regard to any royalties received by Sepracor and/or its Affiliates, in
no event shall the amounts received by OSI be less than ** of the net sales of
such Product as "net sales" is defined in the relevant third party agreement:
(a) If partnered prior to completion of FDA Phase I
clinical trials: ** ;
(b) If partnered after completion of Phase I clinical
trials but prior to the completion of FDA Phase II clinical trials: ** ;
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(c) If partnered after completion of Phase II clinical
trials but prior to the completion of FDA Phase III clinical trials: ** ;
(d) If partnered after completion of Phase III clinical
trials: ** .
Any non-cash consideration received by Sepracor and/or its Affiliates will be
valued at fair market value by the Parties in good faith at the time of receipt
and the Parties shall negotiate in good faith a split of such non-cash
consideration.
4.3 "Net Sales" shall mean the gross revenues received from the
first sale of a Product by a Party, and/or its Affiliates to an independent
third party, less deductions for:
(a) standard transportation charges, including insurance,
consistent with custom in the industry;
(b) import, export, sales, use and excise taxes, tariffs
and duties paid or allowed by a selling party and any other governmental charges
imposed upon the production, importation, use or sale of a Product;
(c) quantity discounts (including volume or formulary or
other positioning discounts paid or credited to any wholesaler, purchaser or
third party payor or other contractee as a result of a contractual arrangement
specific to a Product), cash discounts (including discounts for prompt payment),
customary trade promotional allowances and credits, in the ordinary course of
business, and rebates and charge backs as contractually committed;
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(d) discounts (including retroactive price reductions or
a statutorily required reimbursement) mandated by or granted in response to
state, provincial or federal law or regulation; and
(e) allowances or credits to customers on account of
recalls, rejection or return (including for spoiled, damaged and outdated goods)
in the ordinary course of business.
4.4 Royalties shall be paid by Sepracor on Net Sales within 60
days after the end of each calendar quarter in which such Net Sales are made.
Such payments shall be accompanied by a statement showing the Net Sales of each
Product in each country and a calculation of the amount of royalty due. The
amount shall be paid net of any withholding or other taxes required.
4.5 The Net Sales used for computing the royalties payable to OSI
by Sepracor shall be computed, and the royalties shall be paid, in U.S. Dollars.
For purposes of determining the amount of royalties due with respect to Net
Sales in any foreign currency, the amount shall be computed generally by
converting the foreign currency amount into U.S. Dollars using for each month's
calculation the average of the foreign currency exchange rates during the
preceding month reported in the National Edition of the Wall Street Journal.
4.6 Sepracor shall keep for two years from the date of each
payment of royalties complete and accurate records of Net Sales of each Product
by it and its Affiliates in sufficient detail to allow the accruing royalties to
be determined accurately. Sepracor shall make its records available for
inspection by OSI's independent certified public accountant during regular
business hours at such place or places where such records are customarily kept,
upon reasonable notice from OSI, to the extent reasonably necessary to verify
the accuracy of the reports and
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payments and at the expense of OSI unless any such investigation or audit
reveals an underpayment of royalties of 5% or more, in which case the expense of
such investigation or audit shall be borne by Sepracor. Such inspection right
shall not be exercised more than once in any calendar year nor more than once
with respect to sales in any given period. Such independent certified public
accountant shall report to OSI only as to the accuracy of the Net Sales
computation and royalty payments. OSI agrees to hold in strict confidence all
information concerning royalty payments and reports, and all information learned
in the course of any audit or inspection, except to the extent necessary for OSI
to reveal such information in order to enforce its rights under this Agreement
or disclosure is required by law. The failure of OSI to request verification of
any report or statement during the two year period shall be considered
acceptance of the accuracy of such report, and Sepracor shall have no obligation
to maintain records pertaining to such report or statement beyond the two year
period. The results of the inspection shall be reviewed with and verified by
Sepracor's independent auditors and any disputes with regard thereto shall be
resolved by a third, independent accounting firm mutually chosen by the parties,
whose fees shall be split equally between the parties and whose results shall be
binding.
4.7 All amounts owing to OSI as specified in this Agreement shall
be paid net of all applicable taxes, fees, and other charges excluding only
taxes on the income of Sepracor. The Parties will cooperate with each other in
minimizing the withholding tax applicable to any payment made by Sepracor
hereunder and in claiming tax refunds. Upon refund of such taxes, if by
Sepracor, these funds will be forwarded to OSI within sixty days.
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4.8 If Sepracor receives compensation from sales of Products which
includes lump sum payments or payments in a manner other than one for which
royalties based on Net Sales would be the appropriate measure (other than
through a collaborative arrangement which is hereinabove provided) such as
compensation through a co-marketing arrangement, the Parties will negotiate in
good faith an appropriate compensation arrangement by which OSI will be
remunerated for its contributions.
4.9 PROTECTION OF RIGHTS.
(a) Each Party shall promptly notify the other Party in
writing of any alleged or threatened infringement of Patent Rights or of any
alleged or threatened unlawful disclosure of Confidential Information of which
it becomes aware. Sepracor shall have the right but not the obligation to bring,
at its own expense and in its sole control, an appropriate action against any
person or entity infringing Patent Rights or making unlawful disclosure of
Confidential Information. Sepracor shall notify OSI promptly of the commencement
of any such suit, action or proceeding. If Sepracor determines that it is
necessary or desirable for OSI to join any such suit, action, or proceeding, OSI
shall execute all papers and perform such other acts as may be reasonably
required to permit Sepracor to act in OSI's name. In the event that Sepracor
brings a suit, it shall have the right first to reimburse itself out of any sums
recovered in such suit or in its settlement for all reasonable costs and
expenses involved in the prosecution of any suit. If Sepracor lacks standing to
bring any such suit, action, or proceeding, then OSI shall do so at the request
of Sepracor and at Sepracor's expense and control.
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(b) With respect to OSI and Patent Rights, and Joint
Patent Rights, if within 120 days after notice has been given pursuant to
Section 4.10, Sepracor does not notify OSI of Sepracor's intent to bring suit
against any infringer, OSI shall have the right to bring suit for such alleged
infringement, but it shall not be obligated to do so, and may cause Sepracor to
be joined as a party plaintiff, if appropriate, in which event OSI shall hold
Sepracor free, clear, and harmless from any and all costs and expenses of such
litigation, including attorney's fees, and any sums recovered in any such suit
or in its settlement shall belong to OSI. Each Party shall always have the right
to be represented by counsel of its own selection and at its own expense in any
suit instituted by the other for infringement, under the terms of this
paragraph, and shall fully cooperate with the other in prosecuting the action.
(c) If Sepracor obtains a license under a third party
patent that in Sepracor's judgment would be infringed by manufacturer, use or
sale of the product, then ** percent ** of any payments made by Sepracor to such
third party shall be deductible from royalty payments due from Sepracor to OSI;
provided, however, that in no event shall royalties payable to OSI be reduced **
as a result of all such deductions. All such computations, payments, and
adjustments shall be on a country by country and patent by patent basis.
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ARTICLE 5
NOTICES
All notices shall be faxed, or mailed via certified mail, return
receipt requested, or courier addressed as follows, or to such other address as
may be designated from time to time:
If to OSI: At its address as set forth at the beginning of
this Agreement
Attn.: Colin Goddard, Ph.D.
Fax : 516-745-6429
If to Sepracor: At its address as set forth at the beginning of
this Agreement
Attn.: Chief Executive Officer
Fax : 508-460-8118
Notices shall be deemed given as of the date of receipt.
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ARTICLE 6
MISCELLANEOUS
6.1 BINDING EFFECT. This Agreement shall be binding upon and inure
to the benefit of the Parties hereto and their respective legal representatives,
successors and permitted assigns.
6.2 HEADINGS. The headings contained in this Agreement are for
convenience of reference only and do not form a part of this Agreement, and no
construction or inference shall be derived therefrom.
6.3 ENTIRE AGREEMENT . This Agreement and the documents and other
agreements referred to herein or signed concurrently herewith set forth the
entire agreement and understanding of the Parties.
6.4 SEVERABILITY. In the event that any provision of this
Agreement is held by a court of competent jurisdiction to be unenforceable
because it is invalid or in conflict with any law of any relevant jurisdiction,
the validity of the remaining provisions shall be construed and enforced as if
the Agreement did not contain the particular provisions held to be
unenforceable.
6.5 COUNTERPARTS. This Agreement may be executed simultaneously in
two or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
6.6 AMENDMENT. WAIVER, ETC. This Agreement may be amended,
modified, superseded or canceled, and any of the terms hereof may be waived,
only by a written instrument executed by each Party hereto or, in the case of
waiver, by the Party or Parties waiving compliance. The delay or failure of any
Party at any time or times to require performance of any
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provision hereof shall in no manner affect the rights at a later time to enforce
the same. No waiver by any Party of any condition or of the breach of any term
contained in this Agreement, whether by conduct or otherwise, in any one or more
instance, shall be deemed to be, or construed as, a further or continuing waiver
of any such condition or of the breach of such term or any other term of this
Agreement.
6.7 ASSIGNMENT AND SUCCESSORS. This Agreement and the rights and
interests hereunder may not be assigned by either Party in whole or in part
except to an Affiliate, a purchaser of all or substantially all of the assets of
a Party or to any successor corporation resulting from any merger or
consolidation of either Party with or into such corporation.
6.8 GOVERNING LAW. This Agreement shall be construed and
interpreted in accordance with the laws of the State of New York.
IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be
executed as a sealed instrument in their names by their properly and duly
authorized representatives as of the date first written above.
SEPRACOR, INC.
By: /s/ Timothy J.
-----------------------------
Name: Timothy J. Barberich
Title: President and CEO
OSI PHARMACEUTICALS, INC.
By: /s/ Colin Goddard
----------------------------
Name: Colin Goddard
Title: President
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EXHIBIT A
Collaborative Research, Development and
Commercialization Agreement
dated as of March 7, 1997
[PREVIOUSLY FILED WITH THE SECURITIES AND EXCHANGE COMMISSION
ON MAY 15, 1997 WITH THE FORM 10-Q FOR THE QUARTER ENDED
MARCH 31, 1997 OF OSI PHARMACEUTICALS, INC.]
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Portions of this Exhibit 10.3 have been redacted and are the subject of
a confidential treatment request filed with the Secretary of the Securities and
Exchange Commission.
<PAGE> 2
RESEARCH COLLABORATION AND LICENSE AGREEMENT
This RESEARCH COLLABORATION AND LICENSE AGREEMENT, dated as of
April 1st 1998, is entered by and between FUJIREBIO, INC., a company duly
organized and existing under the laws of Japan with its principal place of
business at 2-62-5, Nihonbashi, Hamacho, Chuo-ku, Tokyo 103, Japan ("FRI"), and
ONCOGENE SCIENCE DIAGNOSTICS, INC., a company duly organized and existing under
the laws of Delaware with its principal place of business at 80 Rogers Street,
Cambridge, Massachusetts 02142 ("OSD") and OSI PHARMACEUTICALS INC., a company
duly organized and existing under the laws of Delaware with its principal place
of business at 106 Charles Lindbergh Boulevard, Uniondale, NY 11553-3649
("OSIP", together with OSD, collectively "OSI".)
WHEREAS, OSI was organized to develop, produce and market
diagnostic products for, among other things, the early detection, monitoring and
treatment of human disease, particularly cancer;
WHEREAS, OSD is a wholly owned subsidiary (and a former
division) of OSIP engaged principally in the development of novel cancer
diagnostic assays;
WHEREAS, FRI has the capability to develop, format,
manufacture, attain regulatory approvals for, market and distribute diagnostic
products and instrumentation systems in Japan;
WHEREAS, FRI desires to commercialize certain of OSI's
proprietary cancer assays for use in connection with the Clinical Diagnostic
Product (as defined herein) for sales and marketing in Japan;
WHEREAS, FRI wishes to provide funding in support of OSI's
research and further development of certain proprietary cancer assays; and
WHEREAS, OSI and FRI understand that, pursuant to OSI's
research and development agreement with Bayer Corporation ("Bayer"), OSI shall
collaborate with Bayer in the research and further development of such
proprietary cancer assays.
NOW, THEREFORE, in consideration of the premises and promises
contained herein, the parties agree as follows:
1. Definitions
Whenever used in this Agreement, the terms defined in this Section 1
shall have the meanings specified.
1.1. "Affiliates" of a party means any corporation, partnership or
other entity directly or indirectly owned by, owning, or under
common ownership with such party of
<PAGE> 3
at least fifty percent (50%) of its stock and having the power
to vote for the election of directors, such corporation,
partnership or other entity to be deemed an Affiliate only so
long as such ownership of voting stock continues.
1.2. "Clinical Diagnostic Product" means any version, successor or
application of FRI's Lumipulse system now in existence or
hereafter devised, which is sold to medical centers, reference
laboratories, cancer centers, clinicians, pathologists,
oncologists and others that typically utilize diagnostic kits
and automated systems to provide clinical information to
assist in the diagnosis, prognosis, monitoring or screening of
cancer or potential cancer patients.
1.3. "FRI Technology" means all Technology that was:
(a) developed by employees of, or consultants to, FRI
alone or jointly with Third Persons on or prior to
the Effective Date.
(b) acquired by purchase, license, assignment or other
means from Third Persons by FRI on or prior to the
Effective Date.
FRI Technology shall be owned by FRI.
1.4. "Licensed Product" means any Clinical Diagnostic Product that
incorporates the Proprietary Assays and/or that employs OSI
Technology in its manufacture, use or sale.
1.5. "Net Sales" means the gross amount received by FRI for arm's
lengths sales to a Third Person of Licensed Products,
respectively, after deducting, where applicable the following:
(a) normal and customary trade discounts actually allowed
and taken;
(b) returns and credits;
(c) taxes (the legal incidence of which is on the
purchaser and separately shown on the shipping
invoice); and,
(d) transportation, insurance and postage charges (if
prepaid and invoiced as a separate item).
1.6. "OSI Patent Rights" means all Patent Rights comprised in OSI
Technology. OSI Patent Rights shall be owned by OSI subject to
the rights granted to FRI under this Agreement and shall
include the ones attached hereto as Exhibit C.
1.7. "OSI Product" means ELISA kits for certain cancer markers
developed and manufactured by OSI and listed in Exhibit B.
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1.8. "OSI Technology" means all Technology relating to the
Proprietary Assays used in connection with the development of
a Clinical Diagnostic Product that was:
(a) developed by employees of, or consultants to, OSI
alone or jointly with third persons (including Bayer)
on or prior to the Effective Date, which OSI
determines in its discretion to contribute to the
research program as outlined in the OSI/FRI Annual
Operating Plan; or
(b) acquired by purchase, license, assignment or other
means from third persons (including Bayer) by OSI on
or prior to the Effective Date, which OSI determines
in its discretion to contribute to the research
program; or,
(c) developed by employees of, or consultants to, OSI
alone or jointly with third persons (including Bayer)
on or after the Effective Date pursuant to, or in
connection with, the OSI/FRI Annual Operating Plan
OSI Technology shall be owned by OSI subject to the
rights granted to FRI under this Agreement.
1.9. "OSI/FRI Annual Operating Plan" means the written plan
describing the research to be carried out on the Proprietary
Assays for each Research Year excluding FRI's activity on the
development of Licensed Products.
1.10. "Patent Rights" means all patentable inventions, including all
applications for patents, whether domestic or foreign,
disclosing or claiming such inventions, all continuations,
continuations-in-part, divisions, renewals and patents of
addition thereof, all patents granted thereon, whether
domestic or foreign, and all reissued or reexamined patents
based thereon.
1.11. "Proprietary Assays" mean the nine (9) proprietary cancer
assays owned by OSI set forth in Exhibit A and
attached hereto.
1.12. "Research Year" means each twelve (12) month period outlined
in Exhibit A attached hereto.
1.13. "Technology" means Patent Rights and all know-how, trade
secrets and confidential technical information and material,
including, without limitation, all laboratory notebooks,
research plans, inventions, genes and gene fragments and other
sequences, cell lines, hybridomas, monoclonal and polyclonal
antibodies, proteins and protein fragments, assay methodology,
processes, materials and methods for production, formulae,
plans, specifications, characteristics, marketing surveys and
plans and business plans.
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1.14. "Third Person" means a person other than OSI or FRI, or other
than any employee of, or consultant to OSI or FRI.
1.15. "Materials" mean antibodies, antigens, and other substances
relating to Proprietary Assays, which are in use of FRI for
the development and manufacturing of Licensed Products.
2. Licenses.
2.1. License granted to FRI. During the term of this Agreement and
subject to the terms and conditions herein appearing, OSI
hereby grants to FRI a non-exclusive right and license under
the OSI Patents Rights and the OSI Technology to develop,
manufacture, and sell Licensed Products in Japan. FRI shall
use its best efforts to commercialize the Proprietary Assays
set forth in the OSI/FRI Annual Operating Plan and should FRI
fail to commercialize any such Proprietary Assay within the
five (5) years immediately following the effective date of the
OSI/FRI Annual Operating Plan in which such Proprietary Assay
appears, FRI shall forfeit to OSI all rights in and to such
Proprietary Assay licensed in this Section;
2.2. Up-front Payment. In consideration of the right granted
pursuant to Section 2.1 above, FRI shall pay to OSI a
non-refundable sum of ** on a date not later than fifteen (15)
days prior to June 15 in each applicable Research Year,
provided that the first such payment shall be paid on or
before May 30, 1998.
2.3. Royalties. FRI shall pay to OSI a royalty of ** percent ** of
Net Sales of any Licensed Product hereunder from the first
sale of a Licensed Product until the event with the later to
occur of (i) the date ten (10) years after the date of such
first sale or (ii) the expiration of the last to expire of any
OSI Patent Rights underlying any Licensed Product sold by FRI
hereunder.
2.4. Payment Dates. Within sixty (60) days following the close of
each calendar quarter (or any part in the first or last
calendar quarter) of this Agreement, FRI shall deliver to OSI
a true and accurate report, stating for each Licensed Product,
for said calendar quarter (a) Net Sales, (b) the royalties
payable thereon, and (c) the amount of any credit taken
against royalties payable pursuant hereto. Except as otherwise
provided, simultaneously with the delivery of each report, FRI
shall pay to OSI the amount, if any, due for the period of
such report.
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2.5. Accounting. All amounts payable hereunder shall be payable in
US Dollars (to OSD or OSIP as designated by notice to FRI);
provided, however, that if any payment of Net sales by FRI or
its Affiliates is received in Japanese yen, such amount shall
be converted into US dollars at the bank selling rate for
Japanese yen into US dollars on the last day of quarterly
reporting period (as outlined in Section 2.4), quoted by
authorized foreign exchange bank in Tokyo.
2.6. Records. During term of this Agreement, FRI shall keep
complete and accurate records of Net Sales in sufficient
detail to enable OSI to determine payments owed to it under
this Agreement for a period of three (3) years after such
payments are due. FRI shall permit an independent certified
public account, acceptable to FRI (a list of independent
public accountants selected by OSI and acceptable to FRI is
attached as Exhibit E hereto) and appointed by OSI and at
OSI's expense, to examine its books, ledgers and records
covering Net Sales during regular business hours for the
purpose of verifying, and only to the extent necessary to
verify, the amount of royalties due and payable but in no
event more than once per calendar year. The accountant shall
maintain all information received during such examination in
confidence, and shall report to OSI only with respect to the
accuracy of any report. Any report not examined within three
(3) years of its having been made shall be deemed true and
accurate. In the event the records examined reveal that FRI
has paid less than ninety-five percent (95%) of the amount due
to OSI, FRI shall pay the costs of the audit and shall pay the
additional amount due plus accrued interest at the rate of ten
percent (10%) per annum.
2.7. Tax. In the event that withholding taxes or other similar
taxes be levied by any taxing authority in connection with
accrual or payment to OSI pursuant to this Article 2, FRI
shall pay such taxes to the local authorities on behalf of
OSI, and the payment to OSI of the net amount due after
reduction by the amount of such taxes shall fully satisfy OSI'
obligations under this Agreement.
2.8. Option. OSI hereby agrees to negotiate with FRI or its
Affiliates in respect of a non-exclusive right to market and
commercialize OSI Products in Japan without additional upfront
payments. The term for the marketing agreement shall be
negotiated and agreed separately between parties.
2.9. Patentable Technology. In the event that FRI develops any
patentable Technology based upon OSI Technology for the
Proprietary Assays in connection with development of Licensed
Products, OSI agrees that FRI has the right to apply for
patents in any countries with its own name and at its expense.
FRI and OSI further agrees that FRI license a world-wide
non-exclusive right for such patents to OSI (with sublicensing
right) with the condition of royalty from OSI
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and its sublicensees to FRI, at a pre-agree royalty rate equal
to ** of net sales or in the event that OSI sublicensees such
rights, the lesser of ** and ** of the royalty rate received
by OSI from its sublicensee.
2.10. Supply of Materials.
(a) For research and development efforts as well as for
FRI's commercialization of Proprietary Assays, OSI
shall supply the Materials to FRI at OSI's
manufacturing cost (including overhead cost directly
related to manufacturing, which overhead cost shall
include general and administrative charges
customarily and consistently applied by OSIP to OSD's
manufacturing) plus ** mark-up thereon.
(b) OSI and FRI hereby agree to negotiate and execute in
good faith a mutually satisfactory supply agreement
of Materials for FRI's manufacturing of Licensed
Product based on the above condition. OSI shall
represents and warrants to FRI that all of Materials
delivered pursuant to this Agreement or supply
agreement, shall confirm to the specifications to be
agreed in the supply agreement between OSI and FRI in
accordance with applicable regulatory requirements.
(c) OSI shall use its commercially reasonable efforts to
supply for the Materials to FRI during the term of
this Agreement in accordance with the terms of the
supply agreement to be negotiated by the parties.
(d) OSI agrees to defend, protect, indemnify, and hold
harmless FRI from and against any liability, claim,
loss, cost or expense arising from any claim for
product liability based on OSI's quality of the
Materials to be used in the Licensed Product except
to the extent such liability, claim, loss or expense
also results from the negligence or willful
misconduct of FRI, its employees and agents.
3. Collaborative Research
3.1. Research Projects. FRI and OSI hereby agree, subject to the
terms and conditions of this Agreement, to undertake four (4)
collaborative research projects stated in Exhibit A attached
hereto in respect of the Proprietary Assays for four Research
Years as set forth in four (4) OSI/FRI Annual Operating Plans.
OSI shall provide technical information related to the
Proprietary Assays in accordance with agreed upon objectives
set forth in an OSI/FRI Annual Operating Plan.
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3.2. Research Funding. FRI shall pay to OSI a sum of** (** as last
payment) as the research funding fee on a date not later than
fifteen (15) days prior to June 15 in each applicable Research
Year, provided that the first such payment shall be paid on or
before May 30, 1998.
3.3. Termination of Research Projects by FRI. FRI may terminate
further collaborative research pursuant to the terms hereof
only (i) upon not less than twelve (12) months advance written
notice provided to OSI on or prior to the first day (June 15)
of any applicable Research Year (provided, however, that FRI
shall have no such termination right in respect of research to
be conducted in the second Research Year), and (ii) upon
payment of all sums due pursuant to Section 2.2 and 3.2 hereof
in respect of the upcoming Research Year (for example, FRI
must (i) provide notice on or before June 15, 1999 and (ii)
pay the ** , when due, in respect of the Second Research Year
(1999-2000) in order to terminate research to be conducted in
the Third Research Year(2000-2001)). In the event that FRI
terminate further collaborative research pursuant hereto, the
license to commercialize the Proprietary Assays granted to
FRI hereunder shall be limited to those assays listed in
Exhibit A attached hereto under Research Years in respect of
which FRI provided both an up-front fee and research funding
under Sections 2.2 and 3.2 hereof. Upon termination of further
collaborative research in accordance with the terms of further
collaborative research in accordance with the terms of this
Section 3.3, FRI shall not be required to make additional or
further payments to OSI pursuant to Sections 2.2 and 3.2
hereof.
3.4. CSI/FRI Annual Operating Plan. The OSI/FRI Annual Operating
Plan for the initial Research Year is set forth in Exhibit D
attached hereto. For each year after the initial Research
Year, the CSI/FRI Annual Operating Plan shall be prepared by
the Research Committee no later than ninety (90) days before
the end of the prior Research Year and approved by FRI and OSI
no later than thirty (30) days before the end of the prior
Research Year. The OSI/FRI Annual Operating Plan for each
Research Year shall be appended to and made part of this
Agreement.
3.5. Research Committee.
3.5.1. Purpose. The Research Committee shall:
(a) Prepare the OSI/FRI Annual Operating Plan for each
year;
(b) Review, evaluate progress under and modify the
OSI/FRI Annual Operating Plan for each year;
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** This portion has been redacted pursuant to a request for confidential
treatment.
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(c) With respect to each Licensed Product prior to
commercialization, whether (a) license(s) need(s) to
be obtained from a third person(s) in order to make,
use or sell such Licensed Product; and,
(d) Determine priority of the Proprietary Assays to be
commercialized by FRI.
3.5.2. Membership. FRI and OSI each shall appoint, in its
sole discretion, two (2) members to the Research
Committee. Substitutes may be appointed at any time
upon written notice .
The members initially shall be:
Appointees:
For FRI: For OSI:
** **
3.5.3. Chairman. The Research Committee shall be chaired by
** . Should the Chairman of the Research Committee
need to be changed for any reason, OSI shall
recommend a person with a comparable knowledge and
experience in the cancer diagnostic field as the
predecessor and shall obtain consent from FRI within
30 days before the change is planned to be
implemented, which such acceptance shall not be
unreasonably withheld.
3.5.4. Meetings. The Research Committee shall meet at least
one time per calendar year at mutually agreeable
dates and places. Representatives of FRI may visit
OSI on an as needed basis to obtain technical help
with its commercialization of Proprietary Assays.
3.5.5. Minutes. The Research Committee shall keep accurate
minutes which record all proposed decisions and all
actions recommended or taken. The minutes shall be
delivered to all Research Committee members within
ten (10) business days after each meeting. OSI shall
be responsible for the preparation of the minutes.
3.5.6. Expenses. FRI and OSI shall each bear all expenses of
their respective members related to the participation
of the Research Committee.
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** This portion has been redacted pursuant to a request for confidential
treatment.
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3.6. Reports.
OSI shall submit to FRI a report indicating the final results
for each of the research projects within thirty (30) days
after the end of each Research Year describing in detail the
work accomplished by it under the OSI/FRI Annual Operating
Plan. OSI further shall submit to FRI summary reports within
thirty (30) days after the end of each four-month period,
commencing with the period ending 15th of October, 1998,
describing its progress under the OSI/FRI Annual Operating
Plan.
3.7. Laboratory Facilities and Personnel. OSI shall provide
suitable laboratory facilities, equipment and personnel for
the work to be done in carrying out the OSI/FRI Annual
Operating Plan.
3.8. Diligent Efforts. FRI and OSI each shall use reasonably
diligent efforts to achieve the objectives of the OSI/FRI
Annual Operating Plan. Specifically, OSI and FRI shall use
diligent efforts to allocate those resources necessary (i.e.,
manpower, facilities, equipment) to meet the objectives of the
OSI/FRI Annual Operating Plan. FRI shall use its best efforts
to commercialize the Proprietary Assays.
3.9. Extension. OSI (in advance of the expiration of the last
Research Year hereunder) agrees to negotiate in good faith
with FRI, on a non-exclusive basis and subject to the prior
commitments of OSI, to extend the collaborative research
program, upon mutually agreeable terms and conditions, upon
nine (9) months' prior written notice from FRI to OSI of FRI's
intent to negotiate therefore. The foregoing commitment to
negotiate shall terminate sixty (60) days after the date on
which FRI provides to CSI of its intent to negotiate pursuant
to this Section 3.9.
3.10. For avoidance of doubt, OSI and FRI acknowledge and agree that
any result, data and technical knowledge resulting from the
collaborative research projects shall be included in OSI
Technology. If OSI applies for the patent under certain
technical knowledge resulting from the research projects in
any countries with its own name and at its own expense, OSI
agrees to add such patents or patent applications to OSI
Patent Rights in this Agreement upon the Research Committee's
conclusion .
3.11. Further Collaboration. During the period of Research Years,
OSI may disclose to FRI, subject to OSI's obligations to Third
Parson (including, but not limited to, confidentiality
obligations), information concerning technical progress made
by OSI in connection with new assay development. If, upon such
disclosure by OSI, FRI wishes to enter into a similar research
collaboration and license agreement in respect of such now
assays, OSI may propose to FRI the terms of such an agreement.
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4. Treatment of Confidential Matter.
4.1. Confidentiality.
During the term of this Agreement and for a period of five
years following the termination of this Agreement, each party
shall continue to keep all information disclosed to the other
pursuant hereto strictly confidential and neither party shall
disclose such information to any third party (including Bayer)
nor use such information for any purposes other than the
purpose specified herein. The confidentiality obligations of
this Agreement shall not apply to:
(a) information and materials which at the time of
disclosure are in the public domain; or
(b) information which after disclosure becomes part of
public domain by publication or otherwise, except by
breach of this Agreement; or
(c) information which the receiving party can demonstrate
it independently developed prior to the disclosure;
or
(d) information disclosed to the receiving party by a
third party who has the right to make such
disclosure.
4.2. Restrictions on Transferring Materials. FRI and OSI recognize
that the biological, chemical and biochemical materials which
are part of the OSI Technology and FRI Technology represent
valuable commercial assets. Accordingly, nothing containing
herein shall be construed to permit either party to transfer
to any third person (including Bayer) any such material which
constitutes Technology owned by the other party. Additionally,
subject to FRI's rights as set forth herein, throughout the
term hereof and thereafter, FRI agrees not to transfer to any
third person any biological, chemical or biochemical materials
which are part of OSI Technology and which comprise, consist
of or are useful in the manufacture of any Licensed Product or
OSI Product, unless prior consent for any such transfer is
obtained from OSI.
4.3. Notwithstanding Sections 4.1 and 4.2 above, OSI may disclose
the Technology not related to the Clinical Diagnostic Product
and /or a Licensed Product, (which do not include the FRI
Technology), to Bayer based on OSI's agreement with Bayer.
5. Patent Infringement and Hold Harmless.
5.1. Actual or Threatened Infringement by Third Persons. If
information comes to the attention of FRI or OSI to the effect
that any OSI Patent Rights relating to a Licensed Product have
been or are threatened or infringed, OSI shall have
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<PAGE> 12
the right, at its expense, to take such action as it may deem
necessary to prosecute or prevent such infringement, including
the right to bring or defend any suit, action or proceeding
involving any such infringement. FRI or OSI shall notify the
other promptly of the receipt of any such information and OSI
shall notify FRI promptly of its commencement of any such
suit, action or proceeding. If OSI determines, and FRI agrees
that it is necessary or desirable for FRI to join any such
suit, action or proceeding, FRI shall execute all papers and
perform such other acts as may be reasonably required to
permit OSI to act in FRI's name, In the event that OSI brings
a suit, it shall be entitled to all sums recovered in such
suit or in its settlement. FRI always have the right to be
represented by counsel of its own selection and at its own
expense in any suit instituted by OSI for infringement, under
the terms of this Section. If OSI lacks standing to bring any
such suit, action or proceeding, then FRI shall have a right
to do so at the request of OSI and, with respect to expenses
approved in advance by OSI, at OSI's expense.
5.2. Infringement Claims Against the Parties. OSI hereby warrants
that the use of OSI Patent Rights or OSI Technology in the
manufacture, use or sale of a Licensed Product by FRI in Japan
will not constitute any infringement of any patent owned by
any third party. If FRI or OSI is sued by a Third Party for
infringement of a patent based upon the research, development,
manufacture, sale or use of a Licensed Product, the party sued
shall notify the other promptly of the commencement of any
such suit.
(a) If the alleged infringement is due to the use of OSI
Technology or OSI Patent Rights, FRI shall give OSI
all authority (including the right to exclusive
control of the defense of any such suit, action or
proceeding and the exclusive right to compromise,
litigate, settle, or otherwise dispose of any such
suit, action or proceeding), information and
assistance necessary to defend or settle any such
suit, action or proceeding OSI shall bear all of the
expenses incurred in connection with such suit,
action or proceeding, and OSI shall indemnify and
hold FRI harmless from and against all liabilities,
losses, expenses (including reasonable legal
expenses) and damages arising from such patent
infringement.
(b) If the alleged infringement is due to the use of FRI
Technology, OSI shall give FRI all authority
(including the right to exclusive control of the
defense of any such suit, action or proceeding and
the exclusive right to compromise, litigate, settle,
or otherwise dispose of any such suit, action or
proceeding), information and assistance necessary to
defend or settle any such suit, action or proceeding,
FRI shall bear all of the expenses incurred in
connection with such suit, action or proceeding, and
FRI shall indemnify and hold OSI harmless from and
against liabilities, losses, expenses (including
reasonable legal expenses) and damages arising from
such patent infringement.
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5.3. Hold Harmless for Product Liability. FRI agrees to defend,
protect, indemnify, and hold harmless OSI from and against any
liability, claim, loss, cost or expense arising from any claim
for product liability based upon FRI's manufacture, use, or
sale of any Licensed Product except to the extent such
liability, claim, loss or expense also results from the
negligence or willful misconduct of OSI, its employees and
agents.
6. Term and Termination.
6.1. Term. Subject to Section 6.4 hereof, this Agreement shall come
into force on the date first above written and shall, unless
sooner terminated pursuant to any provision of this Agreement,
be in full force until the expiration date of the last
to-expire OSI Patent Rights in Japan or for a period of ten
(10) years counting from the date of the first commercial sale
by FRI of a Licensed Product, whichever is longer.
6.2. Event(s) of Termination. The following events shall constitute
Events of Termination under this agreement.
(a) Any representation or warranty by FRI or OSI, or any
of their officers, under or in connection with this
Agreement shall prove to have been incorrect in any
material respect when made; or
(b) FRI or OSI shall fail in any material respect to
perform or observe any term, covenant or
understanding contained in this Agreement (including
OSI's inability to perform the collaborative research
in accordance with the terms of the Agreement due to
the departure of Walter P. Carney, Ph.D. from OSI) or
in any of the other documents or instruments
delivered pursuant to, or concurrently with, this
Agreement, and any such failure shall remain
unremediated for thirty (30) days after FRI's or
OSI's written notice to the other thereof.
(c) Either party hereto shall have become insolvent or
bankrupt, or shall have made an assignment for the
benefit of its creditors, or that there shall have
been an appointed trustee or receiver of the other
party hereto for all or a substantial part of its
property, or that any case or proceeding shall have
been commenced or other action taken by or against
the other party in bankruptcy or seeking
reorganization, liquidation, dissolution, winding-up,
arrangement, composition or readjustment of its debts
or any other relief under any bankruptcy, insolvency,
reorganization or other similar act or law of any
jurisdiction now or hereafter in effect, or that
there shall have been issued a warrant of attachment,
execution, distraint or similar process against any
substantial part of the property of the other party
hereto, and
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any such event shall have continued for sixty (60)
days undismissed, unbounded and undischarged.
6.3. Termination. Upon the occurrence of any of such Events of
Termination as specified in (a) through (c) of Section 6.2
hereof, FRI or OSI shall have the right, by written notice to
the other, to immediately terminate this Agreement. Upon any
such termination, OSI shall not be obligated to return to FRI
any amounts then previously paid to OSI hereunder. Upon any
such termination, the licenses granted to FRI hereunder shall
remain in effect only in respect of those Proprietary Assays
for which FRI has provided Research Funding pursuant to
Section 3.2 and only to the extent that FRI meets its
obligations to pay royalties in respect thereof throughout the
period specified in Section 6.1.
6.4. Survival. Without limitation, the rights and obligations
arising from the following provisions shall survive any
expiration or termination of this Agreement: Articles 1, 2,4,
5, 6, 7 and 9-12.
7. Representations and Warranties. OSI and FRI each represent and warrant
as follows:
7.1. It is a corporation duly organized, validly existing and in
good standing (if applicable) under the laws of the
jurisdiction of its incorporation. It is qualified to do
business and is in good standing (if applicable) as a foreign
corporation in each jurisdiction in which the conduct of its
business or the ownership of its properties requires such
qualification. It has all requisite power and authority,
corporate or otherwise, to conduct its business as now being
conducted, to own, lease and operate its properties and to
execute, deliver and perform this Agreement.
7.2. The execution, delivery and performance by it of this
Agreement has been fully authorized by all necessary corporate
action and does not and will not (a) require the consent or
approval of its stockholders, (b) violate any provision of any
law, rule, regulation, order, write, judgment, injunction,
decree, determination or award presently in effect having
applicability to it or any provision of its charter or by-laws
or (c) result in a breach of or constitute a default under any
material agreement, mortgage, lease, license, permit or other
instrument or obligation to which it is a party or by which it
or its properties may be bound or affected.
7.3. This Agreement is a legal, valid and binding obligation of it
enforceable against it in accordance with its terms and
conditions, except as such enforceability may be limited by
applicable bankruptcy, insolvency, moratorium, reorganization
or similar laws, from time to time in effect, affecting
creditors' rights generally.
7.4. It is not under any obligation to any person, contractual or
otherwise, that is conflicting or inconsistent in any respect
with the terms of this Agreement or that would impede the
diligent and complete fulfillment of its obligations
hereunder.
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OSI further represents and warrants to FRI that OSI's
relationship with Bayer does not prohibit OSI's diligent and
complete fulfillment of its obligations hereunder.
7.5. It has good and marketable title to or valid leases or
licenses for, all of its properties, rights and assets
necessary for the fulfillment of its responsibilities under
this Agreement, subject to no claim of any third person other
than the relevant lessors or licensers.
8. Covenants of OSI and FRI. Throughout the term of the Agreement, each of
OSI and FRI shall:
(a) Maintain and preserve its corporate existence,
rights, franchises and privileges in the jurisdiction
of its incorporation, and qualify and remain
qualified as a foreign corporation in good standing
(if applicable) in each jurisdiction in which such
qualification is from time to time necessary or
desirable in view of its business and operations or
the ownership of its properties; and
(b) Comply in all material respects with the requirements
of all applicable laws, rules, regulations and orders
of any government authority to the extent necessary
to conduct the OSI/FRI Annual Operating Plan.
9. Dispute Resolution. Any disputes, controversies, or difficulties which
may arise out of or in relation to this Agreement shall be settled
amicably between the parties. In the event the parties fail to do so,
such dispute, controversy or difficulty shall be finally settled by
arbitration at the place of the defendant's principal place of business
(as set forth herein) by the International Chamber of Commerce ("ICC")
pursuant to the arbitration rules of the ICC and by arbitrators of be
appointed according to said rules. The award in the said arbitration
shall be final and binding, and may include the reasonable legal fees
of the prevailing party.
10. Notices. All notices shall be mailed via certified mail, return receipt
requested, or courier, addressed as follows, or to such other address
as may be designated from time to time:
For FRI: To FRI at its address as set forth at
the beginning of this Agreement,
Attention: CEO of Fujirebio Inc. (Koichiro FUJITA, M.D.)
with a copy to: Manager of Legal Department, Fujirebio Inc.
For OSI: To OSD and OSIP at its address as set forth at
the beginning of this Agreement,
Attention(OSD): Walter P. Carney, Ph.D., President
Attention(OSIP): Robert L. Van Nostrand, CFO
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Notices shall be deemed given as of the date of receipt.
11. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York, without regard to
its conflicts of laws principles.
12. Miscellaneous.
12.1. Binding Effect. This Agreement shall be binding upon and inure
to the benefit of the parties and their respective legal
representatives, successors and permitted assigns.
12.2. Headings. Paragraph headings are inserted for convenience of
reference only and do not form part of this Agreement.
12.3. Counterparts. This Agreement may be executed simultaneously in
two or more counterparts, each of which shall be deemed an
original.
12.4. Amendment, Waiver, etc. This Agreement may be amended,
modified, superseded or canceled, and any of the terms may be
waived, only by a written instrument executed by each party
or, in the case of waiver, by the party or parties waving
compliance. The delay or failure of any party at any time or
times to require performance of any provision shall in no
manner affect the rights at a later time to enforce the same.
12.5. No Third Party Beneficiaries. No Person not a party to this
Agreement, including any employee of any party to this
Agreement, shall have or acquire any right s by reason of this
Agreement. Neither party shall enter in to or incur, or hold
itself out to third parties as having authority to enter into
or incur on behalf of the other party, any contractual
obligation, expense, or liability whatsoever. The performance
of each party hereunder is undertaken as an independent
contractor, and nothing contained in this Agreement shall be
deemed to constitute the parties partners with each other or
any Person.
12.6. Assignment and Successors. This Agreement may not be assigned
by either party, except that either party may assign this
Agreement and the rights and interests of such party to an
Affiliate, or a purchaser of substantially all of the assets
of such party's business to which this Agreement pertains,
upon notice to the other party.
12.7. Severability. If performance of this Agreement or any part
hereof by either party shall be rendered unenforceable or
impossible under, or in conflict with any law, regulation, or
official action by any government agency having jurisdiction
over such party, then such party shall not be considered in
default by reason of failure to perform and the validity of
all remaining provisions hereof shall not be affected by such
result.
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12.8. Unforeseen Circumstances. Neither party shall be liable in
damages for, nor shall the Contract Period be terminated by
reason of, any delay or default in any such party's
performance hereunder if such default or delay is caused by
events beyond such party's reasonable control including,
without limitations, acts of God, regulation or law or other
action of any government or agency thereof, war or
insurrection, civil commotion, destruction of production
facilities or materials by earthquake, fire, flood or storm,
labor disturbances, epidemic, or failure of suppliers, public
utilities or common carriers. Each party agrees to endeavor to
resume its performance hereunder if such performance is
delayed or interrupted by reason of such forces majeure as
listed above.
12.9. Integration. This writing constitutes the entire agreement
between the parties relating to the subject matter hereof.
There are no understandings, representations, or warranties of
any kind except as expressly set forth herein.
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<PAGE> 18
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their duly authorized representatives.
FUJIREBIO INC.
By: /s/ Koichiro FUJITA, M.D.
--------------------------------
Koichiro FUJITA, M.D.
Title: President and CEO
ONCOGENE SCIENCE DIAGNOSTICS, INC.
By: /s/ Walter P. Carney, Ph.D.
--------------------------------
Walter P. Carney, Ph.D.
Title: President
OSI PHARMACEUTICALS, INC.
By: /s/ Robert L. Van Nostrand
--------------------------------
Robert L. Van Nostrand
Title: CFO
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<PAGE> 19
Exhibit A: Proprietary Assays and Collaborative Research Projects
Research Year(Period) Proprietary Assays Projects
1st Year: 15 JUN 1998 - 14 JUN 1999 ** (i)
2nd Year: 15 JUN 1999 - 14 JUN 2000 ** (ii)
3rd Year: 15 JUN 2000 - 14 JUN 2001 ** (iii)
4th Year: 15 JUN 2001 - 14 JUN 2002 ** (iv)
(Collaborative Research Projects)
(i) **
(ii) **
(iii) **
(iv) **
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treatment.
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<PAGE> 20
Exhibit B: OSI Products(ELISA format)
OSD Product #
** **
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** This portion has been redacted pursuant to a request for confidential
treatment.
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<PAGE> 21
Exhibit C: OSI Patent Lists
**
1 **
2. **
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** This portion has been redacted pursuant to a request for confidential
treatment.
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<PAGE> 22
Exhibit D: OSI/FRI Annual Operating Plan
**
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** This portion has been redacted pursuant to a request for confidential
treatment.
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<PAGE> 23
Exhibit-E. A list of independent public accountants
1. KPMG Peat Marwick (in Japan)
Address:
Tel No.:
Fax No:
FRI will confirm to OSI that the above one is acceptable or not by the
launch of Licensed Products, which such acceptance shall not be
unreasonably withheld.
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<PAGE> 1
Portions of this Exhibit 10.4 have been redacted and are the subject of
a confidential treatment request filed with the Secretary of the Securities and
Exchange Commission.
<PAGE> 2
LICENSE AGREEMENT
This Agreement is made this 26th day of May 1998 (the "Effective Date"), by and
between the OSI Pharmaceuticals, Inc. ("OSI"), a Delaware corporation with
principal offices at 106 Charles Lindbergh Blvd., Uniondale, New York 11553-3649
and Aurora Biosciences Corporation ("ABSC"), a Delaware corporation with
principal offices at 11010 Torreyana Road, San Diego, California 92121.
RECITALS
WHEREAS, OSI is the owner of the Assay Patents defined herein, and the Method of
Modulation Patents defined herein; and is willing to grant a license under such
patents to ABSC; and
WHEREAS, ABSC wishes to obtain a license under the Assay Patents and an option
to obtain a license under the Method of Modulation Patents, according to the
terms contained herein;
Now, therefore, in consideration of the covenants and premises contained herein,
the parties agree as follows:
1. DEFINITIONS
1.1. "Act" is defined in Section 3.1.1.
1.2. "Affiliate" means any corporation or other business entity
controlled by or under common control with, a party to this
Agreement or a Third Party. Control, as used in the context of
a business entity, means the ownership, directly or
indirectly, of fifty percent (50%), or greater, or the maximum
interest permitted by local law of the voting securities of
the corporation or other entity or a fifty percent (50%) or
greater interest in the income of such corporation or other
entity or the ability otherwise to manage the affairs of such
corporation or other entity.
1.3. "Assay Patents" means the U.S. patents and patent applications
listed on Exhibit A hereto, any patent applications filed
prior or subsequent to the Effective Date that claim the
benefit of the filing date of any patent application listed in
Exhibit A and any reissues, extensions, substitutions,
confirmations, re-registrations, re-examinations,
continuations, divisionals or continuations-in-part of the
foregoing patents and patent applications, as well as all
foreign counterparts thereof, to the extent that such patents
and patent applications are not Method of Modulation Patents.
1.4. "Aurora Assay" means ** .
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treatment.
<PAGE> 3
1.5. "Aurora Technology" means all Technology owned or controlled
by ABSC which is not an Aurora Assay.
1.6. "Confidential Information" means all information received by
either party from the other party pursuant to this Agreement,
which is deemed confidential by the disclosing party and is
designated confidential at the time the information is
disclosed, subject to the exceptions set forth in Section 8.1.
1.7. "Cosmeceuticals" means compounds, or assays for discovering
compounds, useful for (a) stimulation or control of hair
growth, (b) prevention or reversal of wrinkling of the skin,
or (c) alteration of skin or hair pigmentation, in each case
in human subjects.
1.8. "FDA" means the United States Food and Drug Administration, or
any successor agency having regulatory jurisdiction over the
manufacture, distribution and sale of drugs in the United
States or the equivalent agency in any other country.
1.9. "IND" means an Investigational New Drug application in the
United States or the equivalent application in any other
country.
1.10. "Intellectual Property" means any information and data which
is not generally known to the public, any new and useful
process, machine, manufacture, or composition of matter, or
improvement thereto, whether or not patentable, designs,
concepts, algorithms, formulae, software, techniques,
practices, processes, methods, knowledge, skill, experience,
expertise and technical information; copyrights; trade
secrets; or patent rights (including pending and issued patent
rights anywhere in the world).
1.11. "Materials" means any biological or chemical entity for
screening or assays, including reagents, cells, promoters,
enhancers, vectors, plasmids, proteins and fragments thereof,
peptides, antigens, antibodies, antagonists, agonists,
inhibitors, and chemicals.
1.12. "Method of Modulation Patents" means the U.S. patents and
patent applications listed on Exhibit A hereto, any patent
applications filed prior or subsequent to the Effective Date
that claim the benefit of the filing date of any patent
application listed in Exhibit A, and any reissues, extensions,
substitutions, confirmations, re-registrations,
re-examinations, continuations, divisionals or
continuations-in-part of the foregoing patents and patent
applications, as well as all foreign counterparts thereof, to
the extent such patents and patent applications claim an in
vivo method of modulation of a gene of interest or a
composition useful in such a method.
1.13. "NDA" means a New Drug Application or Product License
Application, as appropriate in the United States or the
equivalent application in any other country.
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<PAGE> 4
1.14. "Net Sales" means the gross amounts actually received by ABSC
and its Affiliate and Sublicensees and their Affiliates from
arms' length sales of Product(s) to Third Parties whether
invoiced or not, less:
(i) Trade, quantity and cash discounts allowed;
(ii) Refunds, rebates, chargebacks, retroactive price
adjustments, and any other allowances which
effectively reduce the net selling price and are
appropriately deducted from sales under generally
accepted accounting principles;
(iii) Product returns and allowances;
(iv) Any tax imposed on the Product that is appropriately
deducted from sales under generally accepted
accounting principles;
(v) That portion of the amount received associated with
mechanical drug delivery devices; and
(vi) Allowance for distribution expenses.
Such amounts shall be determined from the books and records of
ABSC and its Affiliates and Sublicensees and their Affiliates,
as appropriate, maintained in accordance with generally
accepted accounting principles ("GAAP"), consistently applied.
In the event a Product is sold in combination with another
product(s), the Net Sales from the combination product, for
the purposes of determining royalty payments, shall be
determined by multiplying the Net Sales of the combination
product by the fraction, A/(A+B) where A is the average sale
price of the Product when sold separately and B is the average
sale price of the other product(s) when sold separately in
finished form. In the event that such average sale price
cannot be determined for either the Product or other
product(s) in such combination product, Net Sales for purposes
of determining royalty payments shall be calculated by
multiplying the Net Sales of the combination product by the
fraction C/(C+D) where C is the cost of manufacturing the
Product and D is the cost of manufacturing the other
product(s), determined in accordance with GAAP, consistently
applied.
1.15. "Product" means any human pharmaceutical product sold by ABSC
and/or an Affiliate of ABSC to a Third Party, the manufacture,
use, importation or sale of which in a specific country would
in the absence of this Agreement infringe an issued or granted
claim in a Method of Modulation Patent in such country and
which was discovered or developed by an activity which in the
absence of a license would infringe an issued or granted claim
in an Assay Patent.
1.16. "Shares" is defined in Section 3.1.1.
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<PAGE> 5
1.17. "Sublicensee" means a Third Party and its Affiliates (if any)
that obtain a sublicense from ABSC under the Assay Patents or
the Method of Modulation Patents, or both.
1.18. "Target" means a specific gene.
1.19. "Technology" means Materials, Intellectual Property, or both.
1.20. "Term" has the meaning set forth in Section 9.1.1.
1.21. "Third Party" means any entity other than (i) ABSC and any of
its Affiliates and (ii) OSI and any of its Affiliates.
2. LICENSES
2.1. Licenses Under the Assay Patents.
2.1.1. OSI hereby grants to ABSC and its Affiliates**
2.1.2. OSI hereby grants to ABSC and its Affiliates**
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** This portion has been redacted pursuant to a request
for confidential treatment.
4
<PAGE> 6
2.1.3. Within 30 days after the end of each calendar quarter
so long as this Agreement is in effect, ABSC shall
provide to OSI for such calendar quarter a written
quarterly report which indicates the following: (i)**
(ii) the date of **; and (iii) **.
2.1.4. OSI agrees **.
2.2. Right to Grant Sublicenses Under the Assay Patents.
2.2.1. OSI hereby grants to ABSC **.
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** This portion has been redacted pursuant to a request for confidential
treatment.
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<PAGE> 7
2.2.2. Sublicenses under Section 2.2.1 may be granted by
ABSC**
2.2.3. Commencing on the Effective Date, sublicenses under
Section 2.2.1. may be granted by ABSC**
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treatment.
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<PAGE> 8
2.2.4. Within 30 days after the Effective Date ABSC**
2.2.5. ABSC shall within 30 days after entering into any
sublicense provide to OSI a copy thereof; provided,
however**
2.3. Option to Obtain A License Under the Methods of Modulation
Patents.
2.3.1. Subject to Section 5, OSI hereby grants to ABSC and
its Affiliates**
2.3.2. ABSC may**
2.3.3. If ABSC**
2.3.4. To the extent that OSI has** Exhibit C within 12
months of the Effective Date Exhibit C will be
limited to the lesser
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treatment.
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<PAGE> 9
number** so listed; provided, however, that
if ABSC grants a sub-license**
2.3.5. With respect to any Target listed on Exhibit C which
OSI licenses to a Third Party on at least a
coexclusive basis OSI will notify ABSC within 30 days
of granting such license that such Target is no
longer available for licensing to ABSC or any other
Third Party.
2.3.6. If prior to OSI's granting at least a coexclusive
license to a Third Party under the Method of
Modulation Patents with respect to any Target listed
on Exhibit C, ABSC notifies OSI that ABSC wishes to
obtain a license with respect to such Target, OSI
agrees to negotiate with ABSC using good faith
efforts the terms of a nonexclusive license with
respect to such Target.
2.4. Right To Grant Sublicenses Under The Method of Modulation
Patents.
2.4.1. Subject to Section 5, OSI hereby grants ABSC**
2.4.2. Sublicenses under Section 2.4.1. may be granted by
ABSC**
2.4.3. ABSC shall within 30 days after entering into any
sublicense under the Method of Modulation Patents
provide to OSI a copy thereof.
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** This portion has been redacted pursuant to a request for confidential
treatment.
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<PAGE> 10
2.5. Right To Require OSI To Grant Direct Licenses Under Method of
Modulation Patents.
2.5.1. Subject to Section 5, OSI hereby agrees**
2.5.2. OSI will grant direct licenses pursuant to Section
2.5.1. to any Third Party to which ABSC has granted a
sublicense under the Assay Patents pursuant to
Section 2.2.1. for (i) the specific Target which was
the subject of a sublicense under the Assay Patents
limited to a specific Target or (ii) any specific
Target if such sublicense under the Assay Patents was
unlimited as to the number of Targets; provided such
Third Party accepts and signs such direct license
prior to the date on which such Third Party commences
good laboratory practice preclinical development of a
compound which affects such specific Target and which
has resulted from such Third Party's use of Aurora
Technology or an Aurora Assay.
2.5.3. In addition to those Third Parties to which OSI will
grant direct licenses as provided in Section 2.5.2.,
OSI will grant direct licenses for a specific target
pursuant to Section 2.5.1. to any Third Party for
whose benefit ABSC or an Affiliate of ABSC uses, but
to whom ABSC and Affiliates of ABSC do not transfer,
an Aurora Assay for such specific Target; provided
such Third Party accepts and signs such direct
license prior to the date on which such Third Party
commences good laboratory practice preclinical
development of a compound which affects such specific
Target and which has resulted from use of Aurora
Technology or an Aurora Assay by ABSC or an Affiliate
of ABSC.
2.5.4. The financial terms of any direct license granted to
such Third Party pursuant to Section 2.5.1. shall be
the same and the nonfinancial terms thereof shall be
substantially the same as those of a sublicense
authorized pursuant to Section 2.4.1.
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confidential treatment.
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<PAGE> 11
2.5.5. If a Third Party otherwise eligible to receive a
direct license from OSI pursuant to Section 2.5.1.
fails to accept and sign such a direct license with
respect to any Target within the time period provided
under Section 2.5.2. or 2.5.3., the obligation of OSI
to grant such a direct license shall expire with
respect to such Target.
2.5.6. If prior to OSI's granting at least a coexclusive
license to a Third Party under the Method of
Modulation Patents with respect to any Target listed
on Exhibit C, ABSC notifies OSI that ABSC wishes OSI
to grant a direct license with respect to such Target
to a Third Party to which ABSC has granted a
sublicense under the Assay Patents for such Target,
OSI agrees to negotiate with such Third Party using
good faith efforts the terms of a nonexclusive
license with respect to such Target.
2.6. Right To Require OSI To Grant Direct Licenses Under Assay
Patents
2.6.1. OSI hereby agrees **
2.6.2. OSI will grant such direct licenses to any Third
Party and its Affiliates to which ABSC may grant a
sublicense subject to the applicable time limit and
in accordance with the terms of ABSC's right to grant
sublicenses under the Assay Patent pursuant to
Section 2.2. Compensation to OSI will be the same as
set forth in Section 3.2; provided, however that ABSC
will not receive or owe any payment for direct
licenses granted by OSI.
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treatment.
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<PAGE> 12
3. COMPENSATION
3.1. Compensation for the License Under the Assay Patents.
3.1.1. As full consideration for the license granted to ABSC
pursuant to Section 2.1.1. herein, ABSC shall on the
Effective Date a) pay to OSI a non-refundable payment
of $50,000 and b) irrevocably issue to OSI an
aggregate of seventy five thousand (75,000) shares of
ABSC's common stock (the "Shares"). Such Shares will
be tradeable one year from the Effective Date,
subject to applicable securities laws. All
certificates representing the Shares shall have
endorsed thereon legends in substantially the
following forms: (i) the securities represented by
this certificate have not been registered under the
Securities Act of 1933, as amended (the "Act") and
they may not be sold or offered for sale or otherwise
distributed unless the securities are registered
under the Act or an exemption therefrom is available
and (ii) any other legend required to be placed
thereon by applicable state, federal or foreign
securities laws. OSI acknowledges that it is aware
that the Shares have not been registered under the
Act and that the Shares are deemed to constitute
"restricted securities" under Rule 144 under the Act.
No royalties or milestones or additional target fees
will be due pursuant to the license under Section
2.1.1. except as provided therein.
3.1.2. As full consideration for (i) ABSC's option under
Section 2.3., (ii) ABSC's right to grant sublicenses
under Section 2.4., and (iii) ABSC's right to require
OSI to grant direct licenses under Section 2.5., ABSC
will pay to OSI a payment of two hundred and fifty
thousand dollars ($250,000) within thirty (30) days
of the Effective Date and annual payments of **, each
such annual payment being due on each anniversary of
the Effective Date. The initial $250,000 payment made
under this Section 3.1.2. shall be creditable against
the first $250,000 which ABSC is obligated to pay OSI
pursuant to Sections 3.2. and 3.4.
3.2. Compensation for Sublicenses Under The Assay Patents.
3.2.1. For each sublicense granted by ABSC under Section
2.2., for a specific Target, ABSC will pay to OSI
each year commencing on the effective date of such
sublicense and on each anniversary date thereafter
that such sublicense is in effect, the greater of **
or ** of all sublicense income received by ABSC
pursuant to Section 3 of such sublicense. OSI agrees
and acknowledges that ABSC shall retain for itself
the remainder of the sublicense income, either ** or
** of such sublicense income each year.
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3.2.2. For each sublicense granted by ABSC under Section
2.2. for an unlimited number of Targets, ABSC will
pay to OSI each year commencing on the effective date
of such sublicense and on each anniversary date
thereafter that such sublicense is in effect, the
greater of (i) ** or (ii) ** of all sublicense income
received by ABSC pursuant to Section 3 of such
sublicense. OSI agrees and acknowledges that ABSC
shall retain for itself the remainder of the
sublicense income, either ** or ** of such sublicense
income each year.
3.3. Compensation for Licenses Under the Method of Modulation
Patents.
3.3.1. For each license granted to ABSC pursuant to Section
2.3., ABSC will pay OSI each year commencing on the
effective date of such license and on each
anniversary date thereafter that such license is in
effect, an annual license fee of ** on a Target by
Target basis.
3.3.2. For the first Product directed against each such
Target that reaches the following milestone events
and for which ABSC has a license pursuant to Section
2.3., ABSC will pay OSI within 30 days of such
milestone event the following amounts:
Milestone Event Payment (US$)
i) Upon filing an IND with the FDA **
ii) Upon acceptance of the filing of
an NDA by the FDA **
3.3.3. For each Target for which ABSC is granted a license
pursuant to Section 2.3. only one payment will be
required for each such milestone event regardless of
the number of Products directed against such Target
for which ABSC achieves such milestone events.
3.3.4. For each Product directed against each Target for
which ABSC has been granted a license pursuant to
Section 2.3., ABSC will also pay to OSI a royalty of
** of Net Sales of all such Products sold by ABSC and
its Affiliates on a country by country basis. If a
human pharmaceutical product is made, used and sold
in a country where no Method of Modulation Patent
exists, it is not a Product for purposes of this
agreement and no royalty is due on its sale.
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3.4. Compensation for Sublicenses Under the Method of Modulation
Patents.
3.4.1. For each sublicense granted by ABSC pursuant to
Section 2.4.1., ABSC will pay to OSI each year
commencing on the effective date of such sublicense
and on each anniversary date thereafter that such
sublicense is in effect, for each specific Target for
which a sublicense is granted the greater of (i) **
or (ii) ** of the sublicense fees received by ABSC
pursuant to Section 3 of each such sublicense. OSI
agrees and acknowledges that ABSC shall retain for
itself the remainder of the sublicense fees, either
** or ** of such sublicense fees each year.
3.4.2. For the first Product directed against each such
Target that reaches the following milestone events
and for which ABSC has granted a sublicensee pursuant
to Section 2.4., ABSC will also pay OSI within 30
days of such milestone event the following amounts:
Milestone Event Payment (US$)
i) Upon filing an IND with the FDA **
ii) Upon acceptance of the filing of
an NDA by the FDA **
3.4.3. For each Target for which a sublicense is granted to
a specific Third Party as Sublicensee pursuant to
Section 2.4., only one payment will be required for
each such milestone event, regardless of the number
of Products directed against such Target for which
such Sublicensee achieves such milestone events.
3.4.4. For each Product directed against each Target for
which ABSC has granted a sublicense pursuant to
Section 2.4., ABSC will also pay to OSI a royalty of
** of Net Sales of all such Products sold by each
such Sublicensee and its Affiliates on a country by
country basis. If a human pharmaceutical product is
made, used and sold in a country where no Method of
Modulation Patent exists, it is not a Product for
purposes of this agreement and no royalty is due on
its sale.
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3.4.5. OSI agrees and acknowledges that ABSC shall retain
for itself any amounts paid to it by a Sublicensee in
excess of the amounts that it is required to pay OSI
pursuant to this Section 3.4.
4. ROYALTY PAYMENTS
4.1. Royalties payments due from ABSC to OSI shall be paid within
sixty (60) days after the end of each calendar quarter during
which the royalty payment accrued. Each such payment shall be
accompanied by a statement certified by an officer of ABSC
with respect to each country indicating the amount of the
payment, the total Net Sales of each Product sold in the
country and the amount of royalty due.
4.2. To the extent that it is lawful and practicable to do so, ABSC
shall make all royalty payments required under this Agreement
in the United States of America in U.S. Dollars. The royalty
payments due on each sale made outside the United States in a
currency other than U.S. Dollars shall be translated at the
rate of exchange at which U.S. Dollars are legally obtainable
at Citibank, N.A. in New York, New York, United States of
America, for the currency of the country in which the royalty
payment is accrued on the last business day of the calendar
month in which the sale was made. ABSC shall not be required
to make any royalty payment in contravention of the laws of
any country, nor shall ABSC be required to make the royalty
payment in the United States of America if ABSC is unable to
recoup the amount of such royalty or sublicense payment
directly or indirectly from the country in which the sales on
which such payment is based are made. In each country where
the local currency is blocked and cannot be removed from the
country, ABSC shall, at OSI's request, pay the royalty payment
accrued in each such country to OSI in local currency by
deposit to OSI's account at a local bank designated by OSI.
4.3. ABSC shall keep full and true books of account and records of
all sales of Product and Net Sales attributable to sales by
ABSC and its Affiliates. OSI shall have the right, at OSI's
expense, through an independent accountant reasonably approved
by ABSC to examine such books and records at any reasonable
time during business hours after notifying ABSC of its desire
to do so. Such examination shall be conducted no more often
than once each year and shall cover no more than the 3
preceding years. Such independent accountant shall report only
on the accuracy of such books and records and the reports
based thereon and shall not disclose specific entries to OSI.
5. RENEGOTIATION OF TERMS FOR FUTURE LICENSES AND SUBLICENSES UNDER THE
METHOD OF MODULATION PATENTS.
5.1. Commencing with the ** of the Effective Date ABSC's rights to
(i) exercise the option provided in Section 2.3., (ii) grant
sublicenses in accordance
______________
** This portion has been redacted pursuant to a request for confidential
treatment.
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with Section 2.4., or (iii) require OSI to grant direct
licenses in accordance with Section 2.5. shall renew
thereafter as set forth below. So long as OSI has not granted
any naked, nonexclusive license under the Method of Modulation
Patents to a Third Party, ABSC's foregoing rights shall renew
on the same Terms as set forth in Sections 2.3., 2.4. and 2.5.
If prior to the ** of the Effective Date OSI has granted at
least one naked, nonexclusive license under the Method of
Modulation Patents to a Third Party, without or without a
right to grant further sublicenses, OSI shall 60 days prior to
such ** notify ABSC in writing as to the terms of whichever
such license are least favorable to OSI. ABSC shall thereafter
have the option, by notifying OSI in writing within 60 days of
receiving OSI's notification of such terms, to either
substitute such terms for those set forth herein for new
licenses or terminate its rights under Sections 2.3., 2.4. and
2.5. So long as ABSC does not terminate its rights under
Sections 2.3., 2.4. and 2.5. as of the ** or any subsequent
anniversary of the Effective Date, OSI 60 days prior to each
subsequent anniversary shall notify ABSC in writing as to the
terms of whichever then-existing, naked nonexclusive
sublicense under the Method of Modulation Patents is least
favorable to OSI. ABSC shall thereafter have the option, by
notifying OSI in writing within 60 days of receiving OSI's
notification of such terms, to either substitute such terms
for those set forth herein for new licenses or to terminate
its rights under Sections 2.3., 2.4 and 2.5. For purposes of
this Section 5.1., "naked, nonexclusive license" means a
license granted by OSI under the Method of Modulation Patents
in a transaction which only involves financial consideration
for such license. As such a naked, nonexclusive license
excludes transactions involving research, development, or
marketing collaborations as well as those involving
consideration in the form of non-publicly traded equity. OSI
and ABSC each acknowledge that the terms applicable to
Sections 2.3., 2.4. and 2.5. after the ** of the Effective
Date may be greater than, the same as, or less than, those set
forth in this Agreement as of the Effective Date.
5.2. OSI and ABSC agree that all licenses and sublicenses granted
before ABSC notifies OSI that it is exercising its option to
substitute other terms for those then applicable shall
continue to be subject to the terms under which such licenses
or sublicenses were granted. Such other terms shall apply only
to licenses and sublicenses granted subsequent to such
notification by ABSC.
5.3. ABSC shall have the right, at ABSC's expense, through an
independent accountant reasonably approved by OSI to examine
all naked, nonexclusive licenses granted by OSI under the
Method of Modulation Patents at any reasonable time during
business hours after notifying OSI of its desire to do so for
the sole purpose of verifying that OSI has notified ABSC
pursuant to Section 5.1. as to the terms of whichever such
license are least favorable to OSI. Such examination shall be
conducted no more often than once each year. Such independent
accountant shall only verify that OSI has notified ABSC as to
the
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confidential treatment.
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terms of whichever such license are least favorable to OSI but
shall not disclose other specific details of such licenses to
ABSC.
6. PROTECTION AND MAINTENANCE OF PATENT RIGHTS
6.1. OSI shall have complete control, at its expense and within its
sole discretion, over the prosecution, maintenance and
enforcement of the Assay Patents and the Method of Modulation
Patents. OSI will provide ABSC and any Sub-Licensee of ABSC
with written updates on the status of the prosecution of the
Assay Patents and the Method of Modulation Patents at least
once per year.
7. REPRESENTATIONS AND WARRANTIES
7.1. Representations and Warranties of ABSC and OSI.
As of the Effective Date each party hereby represents and
warrants:
Corporate Power. Such party is duly organized and validly
existing and in good standing under the laws of the state of
its incorporation and has all requisite corporate power and
authority to enter into this Agreement and to carry out the
provisions hereof.
Due Authorization. Such party is duly authorized to execute
and deliver this Agreement and to perform its obligations
hereunder.
Binding Agreement. This Agreement is a legal and valid
obligation binding upon it and enforceable in accordance with
its terms. The execution, delivery and performance of this
Agreement by such party does not conflict with any agreement,
instrument or understanding, oral or written, to which it is a
party or by which it may be bound, nor violate any law or
regulation of any court, governmental body or administrative
or other agency having jurisdiction over it.
Patents. Each party acknowledges and agrees that nothing in
this Agreement shall be construed as a warranty or
representation (i) as to the validity of any claim of an Assay
Patent or Method of Modulation Patent or (ii) that any Product
is, or will be, free from infringement of patents of Third
Parties.
7.2. Representations and Warranties of ABSC.
As of the Effective Date ABSC further represents and warrants
to OSI:
Authorization. All corporate action on the part of ABSC, its
officers, directors and stockholders necessary for the
authorization, issuance and delivery of the Shares pursuant to
Section 3 of this Agreement has been taken.
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<PAGE> 18
Valid Issuance of the Stock. The Shares, when delivered in
accordance with the terms herein, will be duly and validly
issued, fully paid and non-assessable, and will be free of any
liens and encumbrances.
7.3. Representations and Warranties of OSI.
As of the Effective Date OSI further represents and warrants
to ABSC:
Right to License or Sublicense. It owns all right, title and
interest in and to the Assay Patents and the Method of
Modulation Patents licensed or subject to being licensed or
sublicensed hereunder.
Patents. It has provided to ABSC a copy of each of the Assay
Patents and the Method of Modulation Patents issued or
pending. It has not granted, and during the term of this
Agreement will not grant, any right or interest in the Assay
Patents and the Method of Modulation Patents that is
inconsistent with the rights granted, or subject to being
granted, to ABSC or a Sublicensee herein. There are no
threatened or pending suits, claims, or proceedings including
interferences or opposition proceedings relating to the Assay
Patents and the Method of Modulation Patents, other than
normal patent prosecution proceedings. It does not own or hold
license rights to any patent or patent application not
included in Assay Patent and Method of Modulation Patents
which claims the same subject matter as that claimed therein.
Stock. OSI is obtaining the Shares for OSI's own account. OSI
has no present intention of distributing or selling said
Shares except as permitted under the Act. OSI is an
"accredited investor" as such term is defined in Rule 501
under the Act. OSI acknowledges and agrees the Shares may not
be sold, offered for sale, pledged, hypothecated or otherwise
transferred in the absence of an effective registration
statement under the Act with respect to such Shares or an
opinion of counsel reasonably acceptable to the Company that
such registration is not required.
7.4. Covenant Of OSI.
7.4.1. OSI covenants not to sue ABSC and its Affiliates for
infringement of a claim of a Method of Modulation
Patent based upon any activity by ABSC or its
Affiliates prior to the date on which ABSC or an
Affiliate of ABSC commences good laboratory practice
preclinical development of a compound which affects a
Target; provided that ABSC and its Affiliates prior
to such date exercise the option pursuant to Section
2.3.1. and take a license under the Method of
Modulation Patents or discontinue all activity, in
either instance with respect to such Target.
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<PAGE> 19
7.4.2. OSI covenants not to sue any Third Party to which
ABSC transfers Aurora Technology or an Aurora Assay
for infringement of a claim of an Assay Patent based
upon any activity by such Third Party with respect to
a Target prior to the date 60 days after such Third
Party commences a use of such Aurora Technology or
Aurora Assay which in the absence of a license under
the Assay Patent would constitute an infringement
thereof; provided that such Third Party prior to such
date obtains a license under the Assay Patents or
discontinues all otherwise infringing activity, in
each case with respect to such Target.
7.4.3. OSI covenants not to sue any Third Party to which
ABSC has granted a sublicense under the Assay Patents
with respect to a Target pursuant to Section 2.2. for
infringement of a claim of a Method of Modulation
Patent based upon any activity by such Third Party
the date on which such Third Party commences good
laboratory practice preclinical development of a
compound which affects such Target; provided that
such Third Party prior to such date obtains a license
under the Method of Modulation Patents or
discontinues all activity, in either instance with
respect to such Target.
7.4.4. If OSI should in the future acquire rights to any
patent which claims the same subject matter as that
claimed in the Assay Patents and the Method of
Modulation Patents, OSI covenants not to sue ABSC and
its Affiliates and Sublicensees for infringement of
such patent; provided that the licenses and
sublicenses granted pursuant to this Agreement are
then, and remain thereafter, in full force and
effect.
8. CONFIDENTIALITY
8.1. Confidential Information. Except as expressly provided herein,
the parties agree that, for the Term and five (5) years
thereafter, the receiving party shall keep completely
confidential and shall not publish or otherwise disclose to
another party and shall not use for any purpose other than to
perform the purposes contemplated by this Agreement any
Confidential Information furnished to it by the disclosing
party hereto pursuant to this Agreement, except to the extent
that it can be established by the receiving party by competent
proof that such Confidential 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;
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(iv) was lawfully disclosed to the receiving party by a
person other than a party hereto, or
(v) was independently developed by the receiving party.
8.2. Permitted Use and Disclosures. Each party hereto may use or
disclose Confidential Information disclosed to it by the other
party to the extent such use or disclosure is reasonably
necessary in filing or prosecuting patent applications,
prosecuting or defending litigation, complying with applicable
law, governmental regulation or court order, submitting
information to tax or other governmental authorities, making a
permitted sublicense or otherwise exercising its rights
hereunder, provided that if a party is required to make any
such disclosure of another party's Confidential Information,
it will give reasonable advance notice to the latter party of
such disclosure and, save to the extent inappropriate in the
case of patent applications, will use reasonable efforts to
secure confidential treatment of such information prior to its
disclosure (whether through protective orders or otherwise).
8.3. Confidential Terms. Except as expressly provided herein, each
party agrees not to disclose any terms of this Agreement to
another party without the consent of the other party;
provided, however, each party reserves the right to make
reasonable disclosures as required by securities or other
applicable laws, or to actual or prospective investors or
corporate partners, or to accountants, attorneys and other
professional advisors on a need-to-know basis under
circumstances that reasonably ensure the confidentiality
thereof, or to the extent required by law. If such
Confidential Information is to become public information by
such disclosure the disclosing party must obtain the written
consent of the non-disclosing party in order to obtain
protection of the Confidential Information if necessary. The
parties agree that the terms of any sub-license for the Assay
Patents or The Methods of Modulation Patents to which ABSC is
a party shall be Confidential Information and shall not be
disclosed to any Third Party without the prior written consent
of ABSC, such consent not to be unreasonably withheld.
8.4. Press Release. Notwithstanding the foregoing, the parties
shall agree upon a press release to announce the execution of
this Agreement as set forth in Exhibit E. Thereafter, OSI and
ABSC may each disclose to Third Parties the information
contained in such press release without the need for further
approval by the other.
9. TERM AND TERMINATION
9.1. This Agreement is effective as of the Effective Date and shall
continue in full force and effect on a country by country
basis until the last expiration date of all patents
encompassed within Assay Patents and Method of Modulation
Patents. ("Term").
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9.2. 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 nonbreaching party shall have
first given ninety (90) days prior written notice to the
breaching party describing such breach and stating the
nonbreaching party's intention to terminate this Agreement if
such breach remains uncured, and the breaching party
thereafter fails to cure such breach within such 90 days.
9.3. ABSC's obligation to make annual payments to OSI pursuant to
Section 3.1.2. shall continue until the expiration date of the
last Method of Modulation Patent to expire; provided that if
ABSC terminates its rights under Sections 2.3., 2.4. and 2.5.
pursuant to Section 5.1. ABSC's obligations to make such
payments shall cease following the date of any such
termination of rights by ABSC.
9.4. ABSC's obligation to make payments to OSI pursuant to Section
3.2. for each such sublicense shall commence upon the grant of
each sublicense granted under the Assay Patents to a Third
Party and shall continue until the earlier of the expiration
date of the last Assay Patent to expire or the termination of
such sublicense.
9.5. ABSC's obligation to make payments to OSI pursuant to Section
3.3., for each license granted pursuant to Section 2.3., shall
commence upon the grant of each such license granted to ABSC
for a specific Target under the Method of Modulation Patents
and shall continue until the expiration date of the last
Method of Modulation Patent to expire; provided that if ABSC
shall have terminated such license by giving OSI six months'
notice of termination and shall have discontinued all activity
with respect to such Target ABSC obligation to make payments
to OSI pursuant to Section 3.3. shall thereafter cease.
9.6. ABSC's obligation to make payments to OSI pursuant to Section
3.4., for each sublicense granted pursuant to Section 2.4.,
shall commence upon the grant of each such sublicense granted
by ABSC to a Sublicensee for a specific Target under the
Method of Modulation Patents and shall continue until the
earlier of the expiration date of the last Method of
Modulation Patent to expire or the termination of such
sublicense.
9.7. Termination of this Agreement shall not terminate either
party's obligations under Section 8, ABSC's obligations to pay
fees, royalties and sublicensing income that have accrued
prior to such termination or ABSC's obligations under Sections
4 and 10.3.
10. MISCELLANEOUS
10.1. Binding Effect; Assignment. This Agreement shall be binding
upon the parties' respective successors and permitted assigns.
Neither party may assign this Agreement or any of its rights
or obligations hereunder without the prior written
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<PAGE> 22
consent of the other party (not to be unreasonably withheld)
except that either party may assign this Agreement as part of
a merger or consolidation in which the surviving entity
assumes all of the party's rights and obligations hereunder or
a sale of substantially all of the assets of such party to
which this Agreement relates.
10.2. Effect of Waiver. No waiver of any default, condition,
provisions or breach of this Agreement shall be deemed to
imply or constitute a waiver of any other default, condition,
provision or breach of this Agreement.
10.3. Indemnification. Each of OSI and ABSC shall indemnify and hold
the other harmless with respect to any injury, loss or cost
resulting from the breach of any representation or warranty
provided pursuant to Section 7.0. Further, ABSC shall
indemnify and hold OSI harmless with respect to any injury,
loss or cost resulting from the clinical testing of compounds
and the manufacture, use or sale of Products by ABSC and its
Affiliates.
10.4. Force Majeure. Neither party shall lose any rights hereunder
or be liable to the other party for damages or losses (except
for payment obligations) on account of failure of performance
by the defaulting party if the failure is occasioned by war,
strike, fire, acts of God, earthquake, flood, lockout,
embargo, governmental acts or orders or restrictions, failure
of suppliers, or any other reason where failure to perform is
beyond the reasonable control and not caused by the negligence
or intentional conduct or misconduct of the nonperforming
party, and such party has exerted all reasonable efforts to
avoid or remedy such force majeure; provided, however, that in
no event shall a party be required to settle any labor dispute
or disturbance.
10.5. Amendment. No modification, supplement to or waiver of this
Agreement or any Addendum hereto or any of their provisions
shall be binding upon a party hereto unless made in writing
and duty signed by an authorized representative of both OSI
and ABSC.
10.6. Entire Agreement. This Agreement, including the Exhibits
attached hereto, sets forth the entire understanding and
agreement of the parties as to the subject matter hereof, and
there are no other understandings, representations or
promises, written or verbal, not set forth herein on which
either party has relied.
10.7. Notices. All Notices under this Agreement shall be given in
writing and shall be addressed to the parties at the following
addresses:
For OSI: OSI Pharmaceuticals, Inc.
106 Charles Lindbergh Blvd.
Uniondale, New York 11553
Attn: President
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For ABSC: Aurora Biosciences Corporation
11010 Torreyana Road
San Diego, California 92121
Attn: President
Notices shall be in writing and shall be deemed delivered when
received, if delivered by a courier, or on the second business
day following mailing, if sent by first-class certified or
registered mail, postage prepaid, and return receipt
requested.
10.8. Arbitration. The parties recognize that disputes as to certain
matters may from time to time arise during the term of this
Agreement which relate to either party's rights and/or
obligations hereunder. It is the objective of the parties to
establish procedures to facilitate the resolution of disputes
arising under this Agreement in an expedient manner by mutual
cooperation without resort to arbitration. The parties agree
that prior to any arbitration concerning this Agreement, OSI's
CEO and ABSC's CEO will meet in person or by
video-conferencing in a good faith effort to resolve any
disputes concerning this Agreement, such meeting to be held
within 30 days after notice is received by one party from the
other requesting such a meeting. Except as otherwise provided
specifically herein, any controversy or claim under this
Agreement except a claim as to the scope, validity or
enforcement of a claim of an Assay Patent or a Method of
Modulation Patent shall be settled solely by arbitration by
one arbitrator pursuant to the Commercial Arbitration Rules of
the American Arbitration Association (the "Association");
provided that the parties shall first have used their best
efforts to resolve such dispute by negotiation as set forth
above. ** The arbitrator shall be selected by the joint
agreement of the parties, but if they do not so agree within
twenty (20) days of the date of a request for arbitration, the
selection shall be made pursuant to the rules of the
Association. The decision reached by the arbitrator shall be
conclusive and binding upon the parties hereto and may be
filed with the clerk of any court of competent jurisdiction,
and a judgment confirming such decision may, if desired by any
party to the arbitration, be entered in such court. Each of
the parties shall pay its own expenses of arbitration and the
expenses of the arbitrator(s) shall be equally shared;
provided, however, that if in the opinion of the arbitrator(s)
any claim hereunder or any defense or objection thereto was
unreasonable, the arbitrator(s) may assess, as part of the
award, all or any part of the arbitration expenses (including
reasonable attorneys' fees) against the party raising such
unreasonable claim, defense or objection. Nothing herein set
forth shall prevent the parties from settling any dispute by
mutual agreement at any time.
10.9. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New
York, applicable to agreements
__________
** This portion has been redacted pursuant to a request for confidential
treatment.
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made in New York without regard, or giving effect, to its
principles of conflict of laws.
10.10. Severability. This Agreement is intended to be severable. If
any provision(s) of this Agreement are or become invalid, are
ruled illegal by a court of competent jurisdiction or are
deemed unenforceable under the current applicable law from
time to time in effect during the term hereof, it is the
intention of the parties that the remainder of the Agreement
shall not be affected thereby and shall continue to be
construed to the maximum extent permitted by law at such time.
It is further the intention of the parties that in lieu of
each such provision which is invalid, illegal, or
unenforceable, there shall be substituted or added as part of
this Agreement by such court of competent jurisdiction a
provision which shall be as similar as possible in terms of
the economic and business objectives intended by the parties,
to such invalid, illegal or unenforceable provision, but shall
be valid, legal and enforceable.
10.11. Independent Contractors. The parties hereto are acting as
independent contractors and shall not be considered partners,
joint venturers or agents of the other. Except as expressly
provided herein, neither party shall have the right to act on
behalf of, or to bind, the other.
10.12. Headings. Captions and paragraph headings are for convenience
only and shall not form an interpretative part of this
Agreement. This Agreement shall not be strictly construed
against either party hereto and may be executed in two or more
counterparts, each of which will be deemed an original.
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IN WITNESS WHEREOF, the parties have executed this Agreement.
By: /s/ Colin Goddard, Ph.D. Date: 22- May-98
--------------------------- -----------------
Colin Goddard, Ph.D.
President
For OSI Pharmaceuticals, Inc.
By: /s/ Paul A. Grayson Date: 22 - May - 98
--------------------------- -----------------
Paul A. Grayson
Senior Vice President/Corporate Development
For Aurora Biosciences Corporation
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Exhibit A
U.S. Serial No. Status Patent No. If Applicable
** ** **
- ------------------
** This portion has been redacted pursuant to a request for confidential
treatment.
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EXHIBIT B
ASSAY PATENTS
SUBLICENSE AGREEMENT
This Agreement is made this _______ day of _______ (the "Effective Date"), by
and between Aurora Biosciences Corporation ("ABSC"), a Delaware corporation with
principal offices at 11010 Torreyana Road, San Diego, California 92121 and
___________________ ("Sublicensee"), a ________ corporation with principal
offices at__________________________________.
RECITALS
WHEREAS, ABSC is a licensee under the Assay Patents defined herein, pursuant to
a License Agreement dated May ___, 1998 with OSI Pharmaceuticals, Inc. ("OSI"),
the assignee of the Assay Patents; and is willing to grant a sublicense under
such patents to Sublicensee; and
WHEREAS, Sublicensee wishes to obtain a sublicense from ABSC under the Assay
Patents, according to the terms contained herein;
Now, therefore, in consideration of the covenants and premises contained herein,
the parties agree as follows:
1. DEFINITIONS
1.1. "Affiliate" means any corporation or other business entity
controlled by or under common control with, a party to this
Agreement. Control, as used in the context of a business
entity, means the ownership, directly or indirectly, of fifty
percent (50%), or greater, or the maximum interest permitted
by local law of the voting securities of the corporation or
other entity or a fifty percent (50%) or greater interest in
the income of such corporation or other entity or the ability
otherwise to manage the affairs of such corporation or other
entity.
1.2. "Assay Patents" means the U.S. patents and patent applications
listed on Exhibit A hereto, any patent applications filed
prior or subsequent to the Effective Date that claim the
benefit of the filing date of any patent application listed in
Exhibit A and any reissues, extensions, substitutions,
confirmations, re-registrations, re-examinations,
continuations, divisionals or continuations-in-part of the
foregoing patents and patent applications, as well as all
foreign counterparts thereof, to the extent that such patents
and patent applications are not Method of Modulation Patents.
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1.3. "Aurora Assay" means ** .
1.4. "Aurora Technology" means all Technology owned or controlled
by ABSC which is not an Aurora Assay.
1.5. "Confidential Information" means all information received by
either party from the other party pursuant to this Agreement,
which is deemed confidential by the disclosing party and is
designated confidential at the time the information is
disclosed, subject to the exceptions set forth in Section 6.
1.
1.6. "Cosmeceuticals" means compounds, or assays for discovering
compounds, useful for (a) stimulation or control of hair
growth, (b) prevention or reversal of wrinkling of the skin,
or (c) alteration of skin or hair pigmentation, in each case
in human subjects.
1.7. "Intellectual Property" means any information and data which
is not generally known to the public, any new and useful
process, machine, manufacture, or composition of matter, or
improvement thereto, whether or not patentable, designs,
concepts, algorithms, formulae, software, techniques,
practices, processes, methods, knowledge, skill, experience,
expertise and technical information; copyrights; trade
secrets; or patent rights (including pending and issued patent
rights anywhere in the world).
1.8. "Materials" means any biological or chemical entity for
screening or assays, including reagents, cells, promoters,
enhancers, vectors, plasmids, proteins and fragments thereof,
peptides, antigens, antibodies, antagonists, agonists,
inhibitors, and chemicals.
1.9. "Method of Modulation Patents" means the U.S. patents and
patent applications listed on Exhibit A hereto, any patent
applications filed prior or subsequent to the Effective Date
that claim the benefit of the filing date of any patent
application listed in Exhibit A, and any reissues, extensions,
substitutions, confirmations, re-registrations,
re-examinations, continuations, divisionals or
continuations-in-part of the foregoing patents and patent
applications, as well as all foreign counterparts thereof, to
the extent such patents and patent applications claim an in
vivo method of modulation of a gene of interest or a
composition useful in such a method.
1.10. "Sub-Licensee" means the party so identified and first above
named.
1.11. "Target" means a specific gene.
1.12. "Technology" means Materials, Intellectual Property, or both.
- -----------------
** This portion has been redacted pursuant to a request for confidential
treatment.
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1.13. "Term" has the meaning set forth in Section 7.1.1.
1.14. "Third Party" means any entity other than (i) ABSC and any of
its Affiliates and (ii) Sub-Licensee and any of its
Affiliates.
2. SUBLICENSE
2.1. Sublicense Under the Assay Patents.
2.1.1. Subject to any limitations as to the number and
identity of Targets pursuant to Section 2.1.2., ABSC
hereby grants to Sublicensee and its Affiliates, for
all fields except the field of specifically
discovering or developing Cosmeceuticals, a
nonexclusive, worldwide sublicense, without the right
to grant subsublicenses, under the Assay Patents (i)
to make or use any method, device or composition of
matter encompassed within, using or incorporating,
Aurora Technology or an Aurora Assay and (ii) to
make, use, have made, sell, offer for sale, import,
export, or otherwise exploit any compound which
results from the use of Aurora Technology or an
Aurora Assay by Sublicensee or an Affiliate of
Sublicensee; provided that such making, using, having
made, selling, offering for sale, importing,
exporting, or otherwise exploiting such compound
resulting from the use by Sublicensee or an Affiliate
of Sublicensee of Aurora Technology or an Aurora
Assay does not require a license under the Method of
Modulation Patents in which event a separate license
or sub-license under the Method of Modulation Patents
is required for which compensation will be due
pursuant to the terms of such separate license or
sub-license.
(ABSC MAY DELETE SECTION 2.1.2. IF NOT APPLICABLE ie.
WHEN THE SUB-LICENSE IS FOR AN UNLIMITED NUMBER OF
TARGETS)
2.1.2. Sublicensee's sublicense granted pursuant to Section
2.1.1. shall be limited to the specific Target or
Targets set forth on Exhibit B hereto, which Targets
may be identified by code numbers.
2.1.3. ABSC agrees that if in the future ABSC obtains rights
in the field of Cosmeceuticals because the field of
Cosmeceuticals ceases to be the subject of an
exclusive license grant by OSI to the Third Party
licensed as of the Effective Date of the License
Agreement between OSI and ABSC, the scope of
Sublicensee's nonexclusive sublicense under Section
2.1.1 shall be expanded to include Cosmeceuticals
without any additional consideration being provided
to ABSC by Sublicensee other than that already
provided for herein.
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2.1.4. ABSC shall within 30 days after entering into this
Agreement provide to OSI a copy thereof, provided,
however, that the specific Target(s) to which this
Agreement relates may be identified by code numbers
if the Sublicensee so desires.
3. COMPENSATION
3.1. Compensation for Sublicense Under the Assay Patents.
(ABSC MAY DELETE WHICHEVER VERSION OF SECTION 3.1.1. IS NOT
APPLICABLE. MOREOVER, IN ADDITION TO THE PAYMENT SPECIFICALLY
PROVIDED FOR IN SECTION 3.1.1 ABSC MAY INCLUDE A PROVISION IN
THIS SECTION 3 FOR AN UPFRONT SUB-LICENSING FEE.)
3.1.1. For each specific Target for which a sublicense is
granted by ABSC pursuant to Section 2.1.1. for the
limited number of Targets which are identified on
Exhibit B hereto, Sublicensee will pay to ABSC each
year commencing on the Effective Date of this
Agreement and on each anniversary date thereafter
that this Agreement is in effect, _________ Dollars
($____________) per Target.
3.1.1 For each sublicense granted by ABSC under Section
2.1.1. for an unlimited number of Targets,
Sublicensee will pay to ABSC each year commencing on
the Effective Date of this Agreement, and on each
anniversary date thereafter that this Agreement is in
effect, _________ Dollars ($____________) per Target.
4. PROTECTION AND MAINTENANCE OF PATENT RIGHTS
4.1. Sublicensee acknowledges and agrees that OSI shall have
complete control, at its expense and within its sole
discretion, over the prosecution, maintenance and enforcement
of the Assay Patents. ABSC directly or through OSI, will
provide Sublicensee with written updates on the status of the
prosecution of the Assay Patents at least once per year
5. REPRESENTATIONS AND WARRANTIES
5.1. Representations and Warranties of ABSC and Sublicensee
As of the Effective Date each party hereby represents and
warrants:
Corporate Power. Such party is duly organized and validly
existing and in good standing under the laws of the state of
its incorporation and has all requisite
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corporate power and authority to enter into this Agreement and
to carry out the provisions hereof.
Due Authorization. Such party is duly authorized to execute
and deliver this Agreement and to perform its obligations
hereunder.
Binding Agreement. This Agreement is a legal and valid
obligation binding upon it and enforceable in accordance with
its terms. The execution, delivery and performance of this
Agreement by such party does not conflict with any agreement,
instrument or understanding, oral or written, to which it is a
party or by which it may be bound, nor violate any law or
regulation of any court, governmental body or administrative
or other agency having jurisdiction over it.
Patents. Each party acknowledges and agrees that nothing in
this Agreement shall be construed as a warranty or
representation (i) as to the validity of any claim of an Assay
Patent or (ii) that any activity by Sublicensee is, or will
be, free from infringement of patents of Third Parties.
5.2. Representations and Warranties of ABSC.
As of the Effective Date ABSC further represents and warrants
to Sublicensee that it has a license under the Assay Patents
and the right to grant the Sublicense being granted hereunder,
subject to Sublicensee's representations and warranties in
Section 5.3 being correct and valid.
5.3. Representations and Warranties of Sublicensee.
As of the Effective Date Sublicensee further represents and
warrants to ABSC and to OSI that neither Sublicensee nor any
Affiliate of Sublicensee commenced, more than 90 days prior to
the Effective Date of this Agreement, any use of Aurora
Technology or an Aurora Assay which, in the absence of this
Agreement, would have constituted an infringement of a claim
of an Assay Patent.
6. CONFIDENTIALITY
6.1. Confidential Information. Except as expressly provided herein,
the parties agree that, for the Term and five (5) years
thereafter, the receiving party shall keep completely
confidential and shall not publish or otherwise disclose to
another party and shall not use for any purpose other than to
perform the purposes contemplated by this Agreement any
Confidential Information furnished to it by the disclosing
party hereto pursuant to this Agreement, except to the extent
that it can be established by the receiving party by competent
proof that such Confidential Information:
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(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 lawfully disclosed to the receiving party by a
person other than a party hereto, or
(v) was independently developed by the receiving party.
6.2. Permitted Use and Disclosures. Each party hereto may use or
disclose Confidential Information disclosed to it by the other
party to the extent such use or disclosure is reasonably
necessary in filing or prosecuting patent applications,
prosecuting or defending litigation, complying with applicable
law, governmental regulation or court order, submitting
information to tax or other governmental authorities, making a
permitted sublicense or otherwise exercising its rights
hereunder, provided that if a party is required to make any
such disclosure of another party's Confidential Information,
it will give reasonable advance notice to the latter party of
such disclosure and, save to the extent inappropriate in the
case of patent applications, will use reasonable efforts to
secure confidential treatment of such information prior to its
disclosure (whether through protective orders or otherwise).
6.3. Confidential Terms. Except as expressly provided herein, each
party agrees not to disclose any terms of this Agreement to
another party other than OSI without the consent of the other
party; provided, however, each party reserves the right to
make reasonable disclosures as required by securities or other
applicable laws, or to actual or prospective investors or
corporate partners, or to accountants, attorneys and other
professional advisors on a need-to-know basis under
circumstances that reasonably ensure the confidentiality
thereof, or to the extent required by law. If such
Confidential Information is to become public information by
such disclosure the disclosing party must obtain the written
consent of the non-disclosing party in order to obtain
protection of the Confidential Information if necessary.
7. TERM AND TERMINATION
7.1. Unless terminated earlier, this Agreement and Sublicensee's
obligations to make payments to ABSC pursuant to Section 3.1.
is effective as of the Effective Date and shall continue in
full force and effect on a country by country basis until the
last expiration date of all patents encompassed within the
Assay Patents ("Term").
7.2. 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
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<PAGE> 33
nonbreaching party shall have first given ninety (90) days
prior written notice to the breaching party describing such
breach and stating the nonbreaching party's intention to
terminate this Agreement if such breach remains uncured, and
the breaching party thereafter fails to cure such breach
within such 90 days.
7.3. Sublicensee may terminate this Agreement by giving ABSC six
months' prior written notice of termination; provided that
Sublicensee shall not thereafter continue to develop, make,
use, have made, sell, offer for sale, import, export or
otherwise exploit any compound which results from a use of
Aurora Technology or an Aurora Assay by or on behalf of
Sublicensee or an Affiliate of Sublicensee and which is
directed against any Target embodied in such Aurora Technology
or Aurora Assay, if such use would in the absence of this
Agreement have constituted an infringement of a claim of an
Assay Patent. However, Sublicensee may independently develop
the same compound for a different Target.
7.4. Termination of this Agreement shall not terminate either
party's obligations under Section 6, Sublicensee's obligations
to pay fees under Section 3 that have accrued prior to such
termination or Sublicensee's obligations under Section 8.3.
8. MISCELLANEOUS
8.1. Binding Effect: Assignment. This Agreement shall be binding
upon the parties' respective successors and permitted assigns.
Neither party may assign this Agreement or any of its rights
or obligations hereunder without the prior written consent of
the other party (not to be unreasonably withheld) except that
either party may assign this Agreement as part of a merger or
consolidation in which the surviving entity assumes all of the
party's rights and obligations hereunder or a sale of
substantially all of the assets of such party to which this
Agreement relates.
8.2. Effect of Waiver. No waiver of any default, condition,
provisions or breach of this Agreement shall be deemed to
imply or constitute a waiver of any other default, condition,
provision or breach of this Agreement.
8.3. Indemnification. Each of ABSC and Sublicensee shall indemnify
and hold the other and OSI harmless with respect to any
injury, loss or cost resulting from the breach of any
representation or warranty provided pursuant to Section 5.0.
Further, Sublicensee shall indemnify and hold ABSC and OSI
harmless with respect to any injury, loss or cost resulting
from the clinical testing of compounds, the manufacture, use
or sale of products by Sublicensee and its Affiliates, and any
other activity carried out pursuant to the right license
herein.
8.4. Force Majeure. Neither party shall lose any rights hereunder
nor be liable to the other party for damages or losses (except
for payment obligations) on account of failure of performance
by the defaulting party if the failure is occasioned by war,
strike, fire, acts of God, earthquake, flood, lockout,
embargo, governmental acts
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<PAGE> 34
or orders or restrictions, failure of suppliers, or any other
reason where failure to perform is beyond the reasonable
control and not caused by the negligence or intentional
conduct or misconduct of the nonperforming party, and such
party has exerted all reasonable efforts to avoid or remedy
such force majeure; provided, however, that in no event shall
a party be required to settle any labor dispute or
disturbance.
8.5. Amendment. No modification, supplement to or waiver of this
Agreement or any Addendum hereto or any of their provisions
shall be binding upon a party hereto unless (i) made in
writing, (ii) duly signed by an authorized representative of
both ABSC and Sublicensee, and (iii) consented to by OSI, such
consent not to be unreasonably withheld.
8.6. Entire Agreement. This Agreement, including the Exhibits
attached hereto, sets forth the entire understanding and
agreement of the parties as to the subject matter hereof, and
there are no other understandings, representations, or
promises, written or verbal, not set forth herein or on which
either party has relied.
8.7. Notices. All notices under this Agreement shall be given in
writing and shall be addressed to the parties at the following
addresses:
For Sublicensee:
For ABSC: Aurora Biosciences Corporation
11010 Torreyana Road
San Diego, California 92121
Attn: President
Copies of all notices shall be sent to OSI at the following
address:
OSI Pharmaceuticals, Inc.
106 Charles Lindbergh Blvd.
Uniondale, New York 1 1553
Attn: President
Notices shall be in writing and shall be deemed delivered when
received, if delivered by a courier, or on the second business
day following mailing, if sent by first-class certified or
registered mail, postage prepaid, and return receipt
requested.
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8.8. Arbitration. The parties recognize that disputes as to certain
matters may from time to time arise during the term of this
Agreement which relate to either party's rights and/or
obligations hereunder. It is the objective of the parties to
establish procedures to facilitate the resolution of disputes
arising under this Agreement in an expedient manner by mutual
cooperation without resort to arbitration. The parties agree
that prior to any arbitration concerning this Agreement,
ABSC's CEO and Sublicensees's CEO will meet in person or by
video-conferencing in a good faith effort to resolve any
disputes concerning this Agreement, such meeting to be held
within 30 days after notice is received by one party from the
other requesting such a meeting. Except as otherwise provided
specifically herein, any controversy or claim under this
Agreement except a claim as to the scope, validity or
enforcement of a claim of an Assay Patent or a Method of
Modulation Patent shall be settled solely by arbitration by
one arbitrator pursuant to the Commercial Arbitration Rules of
the American Arbitration Association (the "Association");
provided that the parties shall first have used their best
efforts to resolve such dispute by negotiation as set forth
above. The arbitration shall be conducted in **. The
arbitrator shall be selected by the joint agreement of the
parties, but if they do not so agree within twenty (20) days
of the date of a request for arbitration, the selection shall
be made pursuant to the rules of the Association. The decision
reached by the arbitrator shall be conclusive and binding upon
the parties hereto and may be filed with the clerk of any
court of competent jurisdiction, and a judgment confirming
such decision may, if desired by any party to the arbitration,
be entered in such court. Each of the parties shall pay its
own expenses of arbitration and the expenses of the
arbitrator(s) shall be equally shared, provided, however, that
if in the opinion of the arbitrator(s) any claim hereunder or
any defense or objection thereto was unreasonable, the
arbitrator(s) may assess, as part of the award, all or any
part of the arbitration expenses (including reasonable
attorneys' fees) against the party raising such unreasonable
claim, defense or objection. Nothing herein set forth shall
prevent the parties from settling any dispute by mutual
agreement at any time.
8.9. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New
York, applicable to agreements made in New York without
regard, or giving effect, to its principles of conflict of
laws.
8.10. Severability. This Agreement is intended to be severable. If
any provision(s) of this Agreement are or become invalid, are
ruled illegal by a court of competent jurisdiction or are
deemed unenforceable under the current applicable law from
time to time in effect during the term hereof, it is the
intention of the parties that the remainder of the Agreement
shall not be affected thereby and shall continue to be
construed to the maximum extent permitted by law at such time.
It is further the intention of the parties that in lieu of
each such provision which is invalid, illegal, or
unenforceable, there shall be substituted or added as part of
this Agreement by such court of competent jurisdiction a
provision which shall be as
__________
** This portion has been redacted pursuant to a request for confidential
treatment.
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<PAGE> 36
similar as possible in terms of the economic and business
objectives intended by the parties, to such invalid, illegal
or unenforceable provision, but shall be valid, legal and
enforceable.
8.11. Independent Contractors. The parties hereto are acting as
independent contractors and shall not be considered partners,
joint venturers or agents of the other. Neither party shall
have the right to act on behalf of, or to bind, the other.
8.12. Headings. Captions and paragraph headings are for convenience
only and shall not form an interpretative part of this
Agreement. This Agreement shall not be strictly construed
against either party hereto and may be executed in two or more
counterparts, each of which will be deemed an original.
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IN WITNESS WHEREOF, the parties have executed this Agreement.
By: Date:
------------------------------- --------------------
Name:
Title:
For Sublicensee
By: Date:
------------------------------- --------------------
Timothy J. Rink M.D., Sc.D.
President, CEO and Chairman
For Aurora Biosciences Corporation
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<PAGE> 38
EXHIBIT C
EXCLUDED OSI TARGETS
**
- ------------------
** This portion has been redacted pursuant to a request for confidential
treatment.
1
<PAGE> 39
EXHIBIT D
METHOD OF MODULATION PATENTS
SUBLICENSE AGREEMENT
This Agreement is made this ______ day of _________ (the "Effective Date"), by
and between Aurora Biosciences Corporation ("ABSC"), a Delaware corporation with
principal offices at 11010 Torreyana Road, San Diego, California 92121 and
____________________ ("Sublicensee"), a _______ corporation with principal
offices at ____________________________.
RECITALS
WHEREAS, ABSC is a licensee under the Method of Modulation Patents defined
herein, pursuant to a License Agreement dated May _, 1998 with OSI
Pharmaceuticals, Inc. ("OSI"), the assignee of the Method of Modulation Patents;
and is willing to grant a sublicense under such patents to Sublicensee; and
WHEREAS, Sublicensee wishes to obtain a sublicense from ABSC under the Method of
Modulation Patents, according to the terms contained herein;
Now, therefore, in consideration of the covenants and premises contained herein,
the parties agree as follows:
1. DEFINITIONS
1.1. "Affiliate" means any corporation or other business entity
controlled by or under common control with, a party to this
Agreement. Control, as used in the context of a business
entity, means the ownership, directly or indirectly, of fifty
percent (50%), or greater, or the maximum interest permitted
by local law of the voting securities of the corporation or
other entity or a fifty percent (50%) or greater interest in
the income of such corporation or other entity or the ability
otherwise to manage the affairs of such corporation or other
entity.
1.2. "Assay Patents" means the U.S. patents and patent applications
listed on Exhibit A hereto, any patent applications filed
prior or subsequent to the Effective Date that claim the
benefit of the filing date of any patent application listed in
Exhibit A and any reissues, extensions, substitutions,
confirmations, re-registrations, re-examinations,
continuations, divisionals or continuations-in-part of the
foregoing patents and patent applications, as well as all
foreign counterparts thereof, to the extent that such patents
and patent applications are not Method of Modulation Patents.
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1.3. "Aurora Assay" means ** .
1.4. "Aurora Technology" means all Technology owned or controlled
by ABSC which is not an Aurora Assay.
1.5. "Confidential Information" means all information received by
either party from the other party pursuant to this Agreement,
which is deemed confidential by the disclosing party and is
designated confidential at the time the information is
disclosed, subject to the exceptions set forth in Section 7.1.
1.6. "Cosmeceuticals" means compounds, or assays for discovering
compounds, useful for (a) stimulation or control of hair
growth, (b) prevention or reversal of wrinkling of the skin,
or (c) alteration of skin or hair pigmentation, in each case
in human subjects.
1.7. "FDA" means the United States Food and Drug Administration, or
any successor agency having regulatory jurisdiction over the
manufacture, distribution and sale of drugs in the United
States or the equivalent agency in any other country.
1.8. "IND" means an Investigational New Drug application in the
United States or the equivalent application in any other
country.
1.9. "Intellectual Property" means any information and data which
is not generally known to the public, any new and useful
process, machine, manufacture, or composition of matter, or
improvement thereto, whether or not patentable, designs,
concepts, algorithms, formulae, software, techniques,
practices, processes, methods, knowledge, skill, experience,
expertise and technical information; copyrights; trade
secrets; or patent rights (including pending and issued patent
rights anywhere in the world).
1.10. "Materials" means any biological or chemical entity for
screening or assays, including reagents, cells, promoters,
enhancers, vectors, plasmids, proteins and fragments thereof,
peptides, antigens, antibodies, antagonists, agonists,
inhibitors, and chemicals.
1.11. "Method of Modulation Patents" means the U.S. patents and
patent applications listed on Exhibit A hereto, any patent
applications filed prior or subsequent to the Effective Date
that claim the benefit of the filing date of any patent
application listed in Exhibit A, and any reissues, extensions,
substitutions, confirmations, re-registrations,
re-examinations, continuations, divisionals or
continuations-in-part of the foregoing patents and patent
applications, as well as all foreign counterparts thereof, to
the extent such patents and patent applications claim an in
vivo method of modulation of a gene of interest or a
composition useful in such a method.
- ------------------
** This portion has been redacted pursuant to a request for confidential
treatment.
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1.12. "NDA" means a New Drug Application or Product License
Application, as appropriate, in the United States or the
equivalent application in any other country.
1.13. "Net Sales" means the gross amounts actually received by
Sublicensee and its Affiliates and subsublicensees from arms'
length sales of Product(s) to Third Parties whether invoiced
or not, less:
(i) Trade, quantity and cash discounts allowed;
(ii) Refunds, rebates, chargebacks, retroactive price
adjustments, and any other allowances which
effectively reduce the net selling price and are
appropriately deducted from sales under generally
accepted accounting principles;
(iii) Product returns and allowances;
(iv) Any tax imposed on the Product that is appropriately
deducted from sales under generally accepted
accounting principles;
(v) That portion of the amount received associated with
mechanical drug delivery devices; and
(vi) Allowance for distribution expenses.
Such amounts shall be determined from the books and records of
Sublicensee and its Affiliates and subsublicensees, as
appropriate, maintained in accordance with generally accepted
accounting principles ("GAAP"), consistently applied.
In the event a Product is sold in combination with another
product(s), the Net Sales from the combination product, for
the purposes of determining royalty payments, shall be
determined by multiplying the Net Sales of the combination
product by the fraction, A/(A+B) where A is the average sale
price of the Product when sold separately and B is the average
sale price of the other product(s) when sold separately in
finished form. In the event that such average sale price
cannot be determined for either the Product or other
product(s) in such combination product, Net Sales for purposes
of determining royalty payments shall be calculated by
multiplying the Net Sales of the combination product by the
fraction C/(C+D) where C is the cost of manufacturing the
Product and D is the cost of manufacturing the other
product(s), determined in accordance with GAAP, consistently
applied.
1.14. "Product" means any human pharmaceutical product sold by
Sub-Licensees and/or its Affiliate and/or sub-sub-licensees to
a Third Party, the manufacture, use, importation or sale of
which in a specific country would in the absence of this
Agreement infringe an issued or granted claim in a Method of
Modulation Patent in such country and which was discovered or
developed by an activity which in
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<PAGE> 42
the absence of a license would infringe an issued or granted
claim in an Assay Patent.
1.15. "Sub-Licensee" means the party so identified and so above
named.
1.16. "Target" means a specific gene.
1.17. "Technology" means Materials, Intellectual Property, or both.
1.18. "Term" has the meaning set forth in Section 8.1.1.
1.19. "Third Party" means any entity other than (i) ABSC and any of
its Affiliates and (ii) Sublicensee and any of its Affiliates.
2. SUBLICENSE
2.1. Sublicense Under the Methods of Modulation Patents.
2.1.1. ABSC hereby grants to Sublicensee and its Affiliates,
for the specific Target listed in Exhibit B which is
neither (i) a Target for use in the field of
Cosmeceuticals which is excluded nor (ii) a Target
listed in Exhibit C, either as of the Effective Date
or within 12 months of the Effective Date, which also
is excluded, a non-exclusive, royalty-bearing,
worldwide license under the Method of Modulation
Patents to conduct research and development
concerning (but not to commercialize) one or more
compounds which are prospective Products directed
against such specific Target, and to make, use, have
made, sell, offer for sale, import, export, or
otherwise exploit any Product directed against such
specific Target, including treatment of humans with,
and in vivo administration for good laboratory
practice, preclinical development of, such
Products.
2.1.2. ABSC shall within 30 days after entering into this
Agreement provide to OSI a copy thereof.
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2.2. Right To Grant Subsublicenses Under The Method of Modulation
Patents.
2.2.1. ABSC hereby grants Sublicensee the right to grant to
certain Third Parties and their Affiliates, for the
specific Target listed in Exhibit B a subsublicensee
under the Method of Modulation Patents to make, use,
have made, sell, offer for sale, import, export, or
otherwise exploit any Product directed against such
specific Target, including treatment of humans with,
and in vivo administration for good laboratory
practice pre-clinical development of, such products.
2.2.2. Subsublicenses under Section 2.2.1. may be granted by
Sublicensee to any Third Party to which Sublicensee
has licensed or otherwise transferred its rights to
develop a Product directed against a specific Target
for which Sublicensee has a sublicense pursuant to
Section 2.1.1.; provided that Sublicensee's
obligations under this Agreement, including its
obligations under Section 3 shall continue and that
Sublicensee shall guarantee the performance by its
subsublicensee of all of subsublicensee's obligations
under any such subsublicense.
2.2.3. Sublicensee shall within 30 days after entering into
any subsublicense under the Method of Modulation
Patents provide to ABSC and to OSI a copy thereof.
3. COMPENSATION
(ABSC, IN ADDITION TO THE PAYMENT SPECIFICALLY PROVIDED FOR IN THIS
SECTION 3.1. MAY INCLUDE IN THIS SECTION 3 A PROVISION FOR AN UPFRONT
SUB-LICENSING FEE.)
3.1. Compensation for Sublicenses Under the Method of Modulation
Patents.
3.1.1. For the sublicenses granted to Sublicensee pursuant
to Section 2.1.1. for the specific Target listed in
Exhibit B Sublicensee will pay ABSC each year
commencing on the Effective Date of this Agreement
and on each anniversary date thereafter that such
sublicense is in effect, an annual license fee of
________________ dollars ($_____ ).
3.1.2. For the first Product directed against such Target
that reaches the following milestone events
Sublicensee will also pay ABSC within 30 days of such
milestone event the following amounts:
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Milestone Event Payment (US$)
--------------- ------- -----
i) Upon filing an IND with the FDA ________
ii) Upon acceptance of the filing of
an NDA by the FDA ________
3.1.3. For such Target only one payment will be required for
each such milestone event regardless of the number of
Products directed against such Target for which
Sublicensee achieves such milestone events.
3.1.4. For each Product directed against such Target
Sublicensee will also pay to ABSC a royalty of _____
percent (_%) of Net Sales of all such Products sold
by Sublicensee and its Affiliates and subsublicensees
on a country by country basis.
4. ROYALTY PAYMENTS
4.1. Royalties payments due from Sublicensee to ABSC shall be paid
within sixty (60) days after the end of each calendar quarter
during which the royalty payment accrued. Each such payment
shall be accompanied by a statement certified by an officer of
Sublicensee with respect to each country indicating the amount
of the payment, the total Net Sales of each Product sold in
the country and the amount of royalty due.
4.2. To the extent that it is lawful and practicable to do so,
Sublicensee shall make all royalty payments required under
this Agreement in the United States of America in U.S.
Dollars. The royalty payments due on each sale made outside
the United States in a currency other than U.S. Dollars shall
be translated at the rate of exchange at which U.S. Dollars
are legally obtainable at Citibank, N.A. in New York, New
York, United States of America, for the currency of the
country in which the royalty payment is accrued on the last
business day of the calendar month in which the sale was made.
Sublicensee shall not be required to make any royalty payment
in contravention of the laws of any country, nor shall
Sublicensee be required to make the royalty payment in the
United States of America if Sublicensee is unable to recoup
the amount of such royalty or sublicense payment directly or
indirectly from the country in which the sales on which such
payment is based are made. In each country where the local
currency is blocked and cannot be removed from the country,
Sublicensee shall, at ABSC's request, pay the royalty payment
accrued in each such country to ABSC in local currency by
deposit to ABSC's account at a local bank designated by ABSC.
4.3. Sublicensee shall keep full and true books of account and
records of all sales of Product and Net Sales attributable to
sales by Sublicensee and its Affiliates and subsublicensees.
ABSC shall have the right, at ABSC's expense, through an
independent accountant reasonably approved by Sublicensee to
examine such
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books and records at any reasonable time during business hours
after notifying Sublicensee of its desire to do so. Such
examination shall be conducted no more often than once each
year and shall cover no more than the 3 preceding years. Such
independent accountant shall report only on the accuracy of
such books and records and the reports based thereon and shall
not disclose specific entries to ABSC.
5. PROTECTION AND MAINTENANCE OF PATENT RIGHTS
5.1. Sublicensee acknowledges and agrees that OSI shall have
complete control, at its expense and within its sole
discretion, over the prosecution, maintenance and enforcement
of the Assay Patents and the Method of Modulation Patents.
ABSC directly, or through OSI, will provide Sublicensee with
written updates on the status of the prosecution of the Method
of Modulation Patents at least once per year.
6. REPRESENTATIONS AND WARRANTIES
6.1. Representations and Warranties of ABSC and Sublicensee.
As of the Effective Date each party hereby represents and
warrants:
Corporate Power. Such party is duly organized and validly
existing and in good standing under the laws of the state of
its incorporation and has all requisite corporate power and
authority to enter into this Agreement and to carry out the
provisions hereof.
Due Authorization. Such party is duly authorized to execute
and deliver this Agreement and to perform its obligations
hereunder.
Binding Agreement. This Agreement is a legal and valid
obligation binding upon it and enforceable in accordance with
its terms. The execution, delivery and performance of this
Agreement by such party does not conflict with any agreement,
instrument or understanding, oral or written, to which it is a
party or by which it may be bound, nor violate any law or
regulation of any court, governmental body or administrative
or other agency having jurisdiction over it.
Patents. Each party acknowledges and agrees that nothing in
this Agreement shall be construed as a warranty or
representation (i) as to the validity of any claim of a Method
of Modulation Patent or (ii) that any activity by Sublicensee
including the manufacture, use or sale of Product is, or will
be, free from infringement of patents of Third Parties.
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6.2. Representations and Warranties of ABSC.
As of the Effective Date ABSC further represents and warrants
to Sublicensee that it has a license under the Method of
Modulation Patents and the right to grant the sublicense being
granted hereunder, subject to sub-licensees, representations
and warranties in Section 6.3 being correct and valid.
6.3. Representations and Warranties of Sublicensee.
As of the Effective Date Sublicensee further represents and
warrants to ABSC and to OSI that neither Sublicensee nor any
Affiliate of Sublicensee, prior to the Effective Date,
commenced good laboratory practice preclinical development of
a compound directed against such specific Target and which has
resulted from use of Aurora Technology or an Aurora Assay by
Sublicensee or an Affiliate of Sublicensee.
7. CONFIDENTIALITY
7.1. Confidential Information. Except as expressly provided herein,
the parties agree that, for the Term and five (5) years
thereafter, the receiving party shall keep completely
confidential and shall not publish or otherwise disclose to
another party and shall not use for any purpose other than to
perform the purposes contemplated by this Agreement any
Confidential Information furnished to it by the disclosing
party hereto pursuant to this Agreement, except to the extent
that it can be established by the receiving party by competent
proof that such Confidential 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 lawfully disclosed to the receiving party by a
person other than a party hereto, or
(v) was independently developed by the receiving party.
7.2. Permitted Use and Disclosures. Each party hereto may use or
disclose Confidential Information disclosed to it by the other
party to the extent such use or disclosure is reasonably
necessary in filing or prosecuting patent applications,
prosecuting or defending litigation, complying with applicable
law, governmental regulation or court order, submitting
information to tax or other governmental authorities, making a
permitted sublicense or otherwise exercising its rights
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<PAGE> 47
hereunder, provided that if a party is required to make any
such disclosure of another party's Confidential Information,
it will give reasonable advance notice to the latter party of
such disclosure and, save to the extent inappropriate in the
case of patent applications, will use reasonable efforts to
secure confidential treatment of such information prior to its
disclosure (whether through protective orders or otherwise).
7.3. Confidential Terms. Except as expressly provided herein, each
party agrees not to disclose any terms of this Agreement to
another party other than OSI without the consent of the other
party; provided, however, each party reserves the right to
make reasonable disclosures as required by securities or other
applicable laws, or to actual or prospective investors or
corporate partners, or to accountants, attorneys and other
professional advisors on a need-to-know basis under
circumstances that reasonably ensure the confidentiality
thereof, or to the extent required by law. If such
Confidential information is to become public information by
such disclosure the disclosing party must obtain the written
consent of the non-disclosing party in order to obtain
protection of the Confidential Information if necessary.
8. TERM AND TERMINATION
8.1.1. Unless terminated earlier, this Agreement and Sublicensee's
obligations to make payments to ABSC pursuant to Section 3.1.
is effective as of the Effective Date and shall continue in
full force and effect on a country by country basis until the
last expiration date of all patents encompassed within the
Method of Modulation Patents. ("Term").
8.1.2. 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 nonbreaching party shall have
first given ninety (90) days prior written notice to the
breaching party describing such breach and stating the
nonbreaching party's intention to terminate this Agreement if
such breach remains uncured, and the breaching party
thereafter fails to cure such breach within such (90) days.
8.1.3. Sublicensee may terminate this Agreement by giving ABSC six
months' prior written notice of termination.
8.1.4. Termination of this Agreement shall not terminate either
party's obligations under Section 7, Sublicensee's obligations
to pay fees and royalties that have accrued under Section 3
prior to such termination or Sublicensee's obligations under
Section 9.3.
9
<PAGE> 48
9. MISCELLANEOUS
9.1. Binding Effect: Assignment. This Agreement shall be binding
upon the parties' respective successors and permitted assigns.
Neither party may assign this Agreement or any of its rights
or obligations hereunder without the prior written consent of
the other party (not to be unreasonably withheld) except that
either party may assign this Agreement as part of a merger or
consolidation in which the surviving entity assumes all of the
party's rights and obligations hereunder or a sale of
substantially all of the assets of such party to which this
Agreement relates.
9.2. Effect of Waiver. No waiver of any default, condition,
provisions or breach of this Agreement shall be deemed to
imply or constitute a waiver of any other default, condition,
provision or breach of this Agreement.
9.3. Indemnification. Each of ABSC and Sublicensee shall indemnify
and hold the other harmless with respect to any injury, loss
or cost resulting from the breach of any representation or
warranty provided pursuant to Section 6. Further, Sublicensee
shall indemnify and hold ABSC and OSI harmless with respect to
any injury, loss or cost resulting from the clinical testing
of compounds, the manufacture, use or sale of Products by
Sublicensee and its Affiliates and subsublicensees, and any
other activity carried out pursuant to the rights licensed
herein.
9.4. Force Majeure. Neither party shall lose any rights hereunder
or be liable to the other party for damages or losses (except
for payment obligations) on account of failure of performance
by the defaulting party if the failure is occasioned by war,
strike, fire, acts of God, earthquake, flood, lockout,
embargo, governmental acts or orders or restrictions, failure
of suppliers, or any other reason where failure to perform is
beyond the reasonable control and not caused by the negligence
or intentional conduct or misconduct of the nonperforming
party, and such party has exerted all reasonable efforts to
avoid or remedy such force majeure; provided, however, that in
no event shall a party be required to settle any labor dispute
or disturbance.
9.5. Amendment. No modification, supplement to or waiver of this
Agreement or any Addendum hereto or any of their provisions
shall be binding upon a party hereto unless (i) made in
writing, (ii) duly signed by an authorized representative of
both ABSC and Sublicensee, and (iii) consented to by OSI, such
consent not to be unreasonably withheld.
9.6. Entire Agreement. This Agreement, including the Exhibits
attached hereto, sets forth the entire understanding and
agreement of the parties as to the subject matter hereof, and
there are no other understandings, representations or
promises, written or verbal, not set forth herein or on which
either party has relied.
10
<PAGE> 49
9.7. Notices. All notices under this Agreement shall be given in
writing and shall be addressed to
the parties at the following addresses:
For Sublicensee:
For OSI: OSI Pharmaceuticals, Inc.
106 Charles Lindbergh Blvd.
Uniondale, New York 11553
Attn: President
For ABSC: Aurora Biosciences Corporation
11010 Torreyana Road
San Diego, California 92121
Attn: President
Copies of all notices sent by ABSC or Sublicensee shall be
sent to OSI.
Notices shall be in writing and shall be deemed delivered when
received, if delivered by a courier, or on the second business
day following mailing, if sent by first-class certified or
registered mail, postage prepaid, and return receipt
requested.
9.8. Arbitration. The parties recognize that disputes as to certain
matters may from time to time arise during the term of this
Agreement which relate to either party's rights and/or
obligations hereunder. It is the objective of the parties to
establish procedures to facilitate the resolution of disputes
arising under this Agreement in an expedient manner by mutual
cooperation without resort to arbitration. The parties agree
that prior to any arbitration concerning this Agreement,
ABSC's CEO and Sublicensee's CEO will meet in person or by
video-conferencing in a good faith effort to resolve any
disputes concerning this Agreement, such meeting to be held
within 30 days after notice is received by one party from the
other requesting such a meeting. Except as otherwise provided
specifically herein, any controversy or claim under this
Agreement except a claim as to the scope, validity or
enforcement of a claim of an Assay Patent or a Method of
Modulation Patent shall be settled solely by arbitration by
one arbitrator pursuant to the Commercial Arbitration Rules of
the American Arbitration Association (the "Association");
provided that the parties shall first have used their best
efforts to resolve such dispute by negotiation as set forth
above. The arbitration shall be conducted in ** The arbitrator
shall be selected by the joint agreement of the parties, but
if they do not so agree within twenty (20) days of the date of
a request for arbitration, the selection shall be made
pursuant to the rules of the Association. The decision reached
by the arbitrator shall be conclusive and binding upon the
parties hereto and may be filed with the clerk of any court of
__________
** This portion has been redacted pursuant to a request for confidential
treatment.
11
<PAGE> 50
competent jurisdiction, and a judgment confirming such
decision may, if desired by any party to the arbitration, be
entered in such court. Each of the parties shall pay its own
expenses of arbitration and the expenses of the arbitrator(s)
shall be equally shared; provided, however, that if in the
opinion of the arbitrator(s) any claim hereunder or any
defense or objection thereto was unreasonable, the
arbitrator(s) may assess, as part of the award, all or any
part of the arbitration expenses (including reasonable
attorneys' fees) against the party raising such unreasonable
claim, defense or objection. Nothing herein set forth shall
prevent the parties from settling any dispute by mutual
agreement at any time.
9.9. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New
York, applicable to agreements made in New York without
regard, or giving effect, to its principles of conflict of
laws.
9.10. Severability. This Agreement is intended to be severable. If
any provision(s) of this Agreement are or become invalid, are
ruled illegal by a court of competent jurisdiction or are
deemed unenforceable under the current applicable law from
time to time in effect during the term hereof, it is the
intention of the parties that the remainder of the Agreement
shall not be affected thereby and shall continue to be
construed to the maximum extent permitted by law at such time.
It is further the intention of the parties that in lieu of
each such provision which is invalid, illegal, or
unenforceable, there shall be substituted or added as part of
this Agreement by such court of competent jurisdiction a
provision which shall be as similar as possible in terms of
the economic and business objectives intended by the parties,
to such invalid, illegal or unenforceable provision, but shall
be valid, legal and enforceable.
9.11. Independent Contractors. The parties hereto are acting as
independent contractors and shall not be considered partners,
joint venturers or agents of the other. Neither party shall
have the right to act on behalf of, or to bind, the other.
9.12. Headings. Captions and paragraph headings are for convenience
only and shall not form an interpretative part of this
Agreement. This Agreement shall not be strictly construed
against either party hereto and maybe executed in two or more
counterparts, each of which will be deemed an original.
12
<PAGE> 51
IN WITNESS WHEREOF, the parties have executed this Agreement.
By: Date:
--------------------------------- -----------------------
Name:
Title:
For Sublicensee
By: Date:
--------------------------------- -----------------------
Timothy J. Rink M.D., Sc.D.
President, CEO and Chairman
For Aurora Biosciences Corporation
13
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