<PAGE> 1
1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(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, 1999
-------------------------------------------------
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
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
106 Charles Lindbergh Boulevard, Uniondale, New York 11553
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(Address of principal executive offices) (Zip Code)
516-222-0023
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(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, 1999 the registrant had outstanding 21,503,007 shares of common
stock, $.01 par value.
<PAGE> 2
OSI PHARMACEUTICALS, INC. AND SUBSIDIARIES
CONTENTS
PART I. FINANCIAL INFORMATION............................................1
Item 1. Financial Statements.............................................1
Consolidated Balance Sheets
- June 30,1999 and September 30, 1998............................1
Consolidated Statements of Operations
-Three months ended June 30, 1999 and 1998.......................2
Consolidated Statements of Operations
-Nine months ended June 30, 1999 and 1998........................3
Consolidated Statements of Cash Flows
-Nine months ended June 30, 1999 and 1998........................4
Notes to Consolidated Financial Statements.......................5
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations...........................................12
Item 3. Quantitative and Qualitative Disclosures about Market Risk......16
PART II. OTHER INFORMATION...............................................17
Item 1. Legal Proceedings...............................................17
Item 2. Changes in Securities...........................................17
Item 3. Defaults Upon Senior Securities.................................17
Item 4. Submission of Matters to a Vote of Security Holders.............17
Item 5. Other Information...............................................17
Item 6. Exhibits and Reports on Form 8-K................................21
SIGNATURES..................................................................23
EXHIBIT INDEX...............................................................24
i
<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 1999 1998
------------- -------------
(unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 10,497,363 $ 11,315,166
Short-term investments 10,589,676 13,103,115
Receivables, including trade receivables of
$252,485 and $258,905 at June 30, 1999
and September 30, 1998, respectively 2,300,993 1,720,737
Interest receivable 142,997 283,908
Grants receivable 234,850 406,149
Prepaid expenses and other 889,883 788,496
------------- -------------
Total current assets 24,655,762 27,617,571
------------- -------------
Property, equipment and leasehold improvements - net 7,499,727 7,996,555
Compound library assets - net 4,313,901 5,515,517
Loans to officers and employees 6,433 6,433
Other assets 1,345,079 1,557,903
Intangible assets - net 6,628,446 7,724,001
------------- -------------
$ 44,449,348 $ 50,417,980
============= =============
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable and accrued expenses $ 3,605,902 $ 4,232,540
Unearned revenue - current 982,196 1,116,685
Loans payable - current 166,656 --
------------- -------------
Total current liabilities 4,754,754 5,349,225
------------- -------------
Other liabilities:
Unearned revenue - long term 428,571 --
Loans payable - long term 319,140 49,326
Deferred acquisition costs 701,007 670,916
Accrued postretirement benefits cost 1,499,267 1,289,267
------------- -------------
Total liabilities 7,702,739 7,358,734
------------- -------------
Stockholders' equity:
Preferred stock, $.01 par value; 5,000,000 shares
authorized; no shares issued at June 30, 1999
and September 30, 1998, respectively -- --
Common stock, $.01 par value; 50,000,000 shares
authorized; 22,368,393 shares and 22,288,583 shares
issued at June 30, 1999 and September 30, 1998,
respectively 223,684 222,886
Additional paid-in capital 105,049,815 104,963,082
Accumulated deficit (62,202,589) (55,842,181)
Accumulated other comprehensive (loss) income (266,599) 325
Less: treasury stock, at cost; 865,386 shares at
June 30, 1999 and 897,838 shares at
September 30, 1998 (6,057,702) (6,284,866)
------------- -------------
Total stockholders' equity 36,746,609 43,059,246
------------- -------------
Commitments and contingencies
$ 44,449,348 $ 50,417,980
============= =============
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 4
OSI PHARMACEUTICALS, INC., AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
June 30,
----------------------------
1999 1998
------------ ------------
<S> <C> <C>
Revenues:
Collaborative program revenues,
principally from related parties $ 4,559,455 $ 3,958,441
Other research revenue 234,849 318,897
License revenue 121,016 702,422
Sales 317,191 362,839
------------ ------------
5,232,511 5,342,599
------------ ------------
Expenses:
Research and development 5,376,848 4,907,561
Production and service costs 388,293 356,088
Selling, general and administrative 2,337,306 2,235,727
Amortization of intangibles 365,185 365,185
------------ ------------
8,467,632 7,864,561
------------ ------------
Loss from operations (3,235,121) (2,521,962)
Other income (expense):
Net investment income 210,645 346,246
Other expense - net (21,326) (23,881)
------------ ------------
Net loss $ (3,045,802) $ (2,199,597)
============ ============
Weighted average number of shares
of common stock outstanding 21,470,797 21,373,522
============ ============
Basic and diluted loss per weighted average share
of common stock outstanding $ (.14) $ (.10)
============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
2
<PAGE> 5
OSI PHARMACEUTICALS, INC., AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Ended
June 30,
-----------------
1999 1998
------------ ------------
<S> <C> <C>
Revenues:
Collaborative program revenues,
principally from related parties $ 12,600,139 $ 11,401,317
Other research revenue 814,203 1,058,705
License revenue 2,171,016 702,422
Sales 915,608 796,903
------------ ------------
16,500,966 13,959,347
------------ ------------
Expenses:
Research and development 14,765,720 13,526,684
Production and service costs 1,239,443 720,497
Selling, general and administrative 6,363,907 6,312,744
Amortization of intangibles 1,095,555 1,095,555
------------ ------------
23,464,625 21,655,480
------------ ------------
Loss from operations (6,963,659) (7,696,133)
Other income (expense):
Net investment income 657,311 1,132,853
Other expense - net (54,060) (188,904)
------------ ------------
Net loss $ (6,360,408) $ (6,752,184)
============ ============
Weighted average number of shares
of common stock outstanding 21,430,958 21,369,805
============ ============
Basic and diluted loss per weighted average share
of common stock outstanding $ (.30) $ (.32)
============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE> 6
OSI PHARMACEUTICALS, INC., AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Ended
June 30,
-----------------
1999 1998
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (6,360,408) $ (6,752,184)
Adjustments to reconcile net loss
to net cash used in operating activities:
Depreciation and amortization 1,496,530 1,379,586
Amortization of library assets 1,201,616 1,352,216
Amortization of intangibles assets 1,095,555 1,095,556
Amortization of deferred acquisition costs 30,091 30,090
Issuance of treasury stock in connection
with services rendered 227,164 --
Changes in assets and liabilities:
Receivables (592,129) (1,018,656)
Interest receivable 140,911 (139,158)
Grants receivable 171,299 138,047
Prepaid expenses and other (117,191) (168,545)
Other assets 212,824 (941,240)
Accounts payable and accrued expenses (580,907) (1,041,792)
Unearned revenue 295,297 943,929
Accrued postretirement benefits cost 210,000 151,096
------------ ------------
Net cash used in operating activities (2,569,348) (4,971,055)
------------ ------------
Cash flows from investing activities:
Additions to short-term investments (9,632,191) (2,748,208)
Maturities and sales of short-term investments 12,122,970 11,248,490
Additions to library assets -- (498,115)
Additions to property, equipment
and leasehold improvements (1,180,244) (1,543,132)
------------ ------------
Net cash provided by investing activities 1,310,535 6,459,035
------------ ------------
Cash flows from financing activities:
Proceeds from exercise of stock options
and employee stock purchase plan 87,531 69,158
Proceeds from borrowing 500,000 --
Repayment of borrowing (61,528) (82,810)
------------ ------------
Net cash provided by (used in) financing activities 526,003 (13,652)
------------ ------------
Net (decrease) increase in cash and cash
equivalents (732,810) 1,474,328
Effect of exchange rate changes on cash and
cash equivalents (84,993) 40,211
Cash and cash equivalents at beginning of period 11,315,166 8,636,634
------------ ------------
Cash and cash equivalents at end of period $ 10,497,363 $ 10,151,173
============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE> 7
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, 1999
and September 30, 1998, its results of operations for the three and nine months
ended June 30, 1999 and 1998 and its cash flows for the nine months ended June
30, 1999 and 1998. Certain reclassifications have been made to the prior period
consolidated 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 annual report on Form 10-K for the fiscal year ended September 30,
1998.
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 computations for the three and nine months ended June 30, 1999
and 1998 since their inclusion would be anti-dilutive.
(2) Comprehensive Income (Loss)
In October 1998, the Company adopted Statement of Financial Accounting Standards
No. 130, "Reporting Comprehensive Income" ("SFAS 130"). SFAS 130 establishes new
rules for the reporting and display of comprehensive income and its components;
however, the adoption of SFAS 130 had no impact on the Company's net loss or
total stockholders' equity. SFAS 130 requires unrealized gains or losses on the
Company's available-for-sale securities (referred to as short-term investments
on the accompanying consolidated balance sheets) and foreign currency
translation adjustments, which prior to adoption were reported separately in
stockholders' equity, to be included in other comprehensive income (loss).
Components of comprehensive loss for the three and nine months ended June 30,
1999 and 1998 are as follows:
5
<PAGE> 8
OSI PHARMACEUTICALS, INC., AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
(Unaudited)
For the three months ended
June 30, June 30,
1999 1998
---- ----
Net loss $(3,045,802) $(2,199,597)
Other comprehensive income (loss):
Foreign currency translation adjustments (76,494) (18,331)
Unrealized holding gains arising
during period 78,090 2,300
----------- -----------
1,596 (16,031)
Total comprehensive loss $(3,044,206) $(2,215,628)
=========== ===========
For the nine months ended
June 30, June 30,
1999 1998
---- ----
Net loss $(6,360,408) $(6,752,184)
Other comprehensive (loss) income:
Foreign currency translation adjustments (244,264) 40,211
Unrealized holding (losses) gains arising
during period (22,660) 27,400
----------- -----------
(266,924) 67,611
Total comprehensive loss $(6,627,332) $(6,684,573)
=========== ===========
The components of accumulated other comprehensive (loss) income are as follows:
June 30, September 30,
1999 1998
--------- ---------
Cumulative foreign currency translation adjustment $(263,019) $ (18,755)
Unrealized (loss) gain on short-term investments (3,580) 19,080
--------- ---------
Accumulated other comprehensive (loss) income $(266,599) $ 325
========= =========
6
<PAGE> 9
OSI PHARMACEUTICALS, INC., AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
(Unaudited)
(3) Amendments to the Agreements Related to Anaderm Research Corp.
In 1996, the Company entered into a joint venture with Pfizer Inc. ("Pfizer")
and New York University ("NYU") to form Anaderm Research Corp. ("Anaderm"), a
company dedicated to the discovery and development of safe, effective,
pharmacologically active agents for certain cosmetic and quality-of-life
indications, such as skin pigmentation, hair loss and wrinkling. On April 23,
1996, in connection with the formation of Anaderm, the Company, Pfizer, and
Anaderm, entered into a Collaborative Research Agreement (the "1996 Research
Agreement") for the discovery and development of novel compounds to treat the
conditions to which Anaderm was dedicated. The Company also entered into a
Stockholders' Agreement (the "1996 Stockholders' Agreement") with Pfizer,
Anaderm, NYU and certain NYU faculty members (the "Faculty Members"). Under the
1996 Stockholders' Agreement, Anaderm issued common stock to Pfizer and the
Company and options to purchase common stock to NYU and the Faculty Members (who
have exercised their options fully). Pfizer holds 82%, the Company holds 14% and
NYU and the Faculty Members collectively hold 4% of Anaderm's common stock. In
exchange for its 14% of Anaderm's common stock, the Company provided formatting
for high throughput screens and conducted compound screening at its own expense
under the 1996 Research Agreement.
On April 23, 1999, the Company entered into an Amended and Restated
Collaborative Research Agreement (the "1999 Research Agreement") with Pfizer and
Anaderm to expand the collaborative program begun by the 1996 Research Agreement
and an Amended and Restated Stockholders' Agreement (the "1999 Stockholders'
Agreement") with Pfizer, Anaderm, NYU and the Faculty Members. The 1999 Research
Agreement is for a term of three years. Pfizer may terminate the 1999 Research
Agreement, however, after the first or second year of the term in its sole
discretion after consultation with Anaderm and the Company to determine whether
satisfactory progress had been made in the research program during the previous
year. The 1999 Research Agreement provides for funding by Pfizer of up to $35
million in total payments to Anaderm to fund the Company's research and
development activities during the three-year term and up to $15 million in
phase-down funding following expiration of the three-year term or earlier
termination by Pfizer. In the expanded program, the Company will continue to
provide a full range of capabilities including assay biology, high throughput
screening, compound libraries, combinatorial, medicinal, and natural product
chemistry, as well as pharmaceutics, pharmacokinetics and molecular biology. The
Company anticipates a significant increase in its staffing of the program to
conduct its drug discovery efforts during the term of the 1999 Research
Agreement. Anaderm or Pfizer will pay royalties to the Company on the sales of
products resulting from the collaboration.
A significant change to the 1996 Stockholders' Agreement by the 1999
Stockholders' Agreement is the addition of a right on the part of each of the
Company, NYU and each of the Faculty Members, exercisable at any time prior to
December 31, 1999, to require Anaderm or
7
<PAGE> 10
OSI PHARMACEUTICALS, INC., AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
(Unaudited)
Pfizer to purchase all, but not less than all, of the shares of common stock of
Anaderm held by each such stockholder for a fixed price based upon a formula as
set forth in the 1999 Stockholders' Agreement. The stockholders, including the
Company, also continue to have the right, exercisable at any time subsequent to
April 23, 2000, to require Anaderm or Pfizer to purchase all, but not less than
all, of the shares of common stock of Anaderm held by each such stockholder at
the "Fair Value" (as such term is defined in the 1999 Stockholders' Agreement)
of such shares. In addition, Anaderm or Pfizer has the right, exercisable at any
time subsequent to April 23, 2002, to require the Company, NYU or any Faculty
Member to sell to Anaderm all, but not less than all, of the shares of common
stock of Anaderm held by such stockholder at the Fair Value of such shares. In
the 1996 Stockholders' Agreement, this call right was exercisable by Anaderm
only with respect to the shares owned by NYU and the Faculty Members. Copies of
the 1999 Research Agreement and 1999 Stockholders' Agreement are attached hereto
as Exhibits 10.1 and 10.2 and are incorporated herein by reference.
(4) Development Agreement with Pfizer Inc.
Effective as of April 1, 1999, the Company entered into a Development Agreement
(the "Agreement") with Pfizer for the development of certain compounds derived
from the Collaborative Research Agreement, dated as of April 1, 1996, between
Pfizer and the Company. Under the Agreement, the Company will conduct a
development program formulated by the Company and Pfizer which includes
pre-clinical and clinical research through and including Phase II clinical
trials for compounds to assess their safety and efficacy to be developed as
therapeutic agents for the treatment of psoriasis and other related dermal
pathologies. Pursuant to the terms of the Agreement, Pfizer has granted to the
Company an exclusive, with the exception of Pfizer, license to make and use the
compounds for all research purposes in the development program other than the
sale or manufacture for sale of products or processes. At the end of the
development program, Pfizer must notify the Company of its intention to continue
development and commercialization of a compound within three (3) months
following receipt of the data package from the clinical studies. If Pfizer does
so notify the Company of such intention, it will have an exclusive, world-wide
license, with the right to grant sublicenses, to make, use, sell, offer for sale
and import products developed in the course of the development program. If
Pfizer fails to notify the Company of such intention, the Company will receive
an exclusive, world-wide, royalty-bearing license, including the right to grant
sublicenses, to manufacture, use, sell, offer for sale and import products
developed in the course of the development program. The Company, however, has
the right to refuse to accept this license. The party receiving the license must
pay milestone and royalty payments as consideration therefor. The duration of
the licenses is coextensive with the lives of patents related to the licensed
compounds. 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 in the event of certain
defaults by the parties. A copy of the Agreement is attached hereto as Exhibit
10.3 and is incorporated herein by reference.
8
<PAGE> 11
OSI PHARMACEUTICALS, INC., AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
(Unaudited)
(5) Amendments to the Collaborative Agreement with Novartis Pharma AG
During the quarter ended June 30, 1999, the Company entered into Amendment
Nos. 1 and 2, dated April 13, 1999 and May 31, 1999, respectively, to its
Collaborative Agreement, dated April 19, 1995 (the "1995 Agreement") with
Novartis Pharma AG ("Novartis"). Pursuant to the 1995 Agreement, the Company
granted to Novartis an exclusive license with the right to grant sublicenses to
manufacture, have manufactured, use and sell products containing TGF-Beta 3 for
certain indications, referred to as Licensed Indications. The Company also
granted to Novartis an option (originally to expire in April 1999) to acquire
from the Company a license to manufacture, use and sell products containing
TGF-Beta 3 and other TGF-Betas for all other indications not included in the
Licensed Indications. The four year time limit to exercise the option was
extended until May 31, 1999 by Amendment No. 1 to the 1995 Agreement.
Amendment No. 2 changed certain terms of the 1995 Agreement including the
definition of Licensed Indications, the supply of TGF-Betas, the amount of
royalty payments, and the schedules of the Company's patents and applications
and Novartis' patents. Specifically, oral mucositis and the healing of soft
wound tissue were removed from the Licensed Indications. Novartis acknowledged
in Amendment No. 2 that it has discontinued development of products for the
indications of oral mucositis and healing of soft wound tissue. The parties
agreed that all licenses theretofore granted to Novartis with respect to such
discontinued indications are terminated and that the Company is free to continue
development work and to grant licenses to third parties with respect to such
discontinued indications. The Company is also free to use the results of any
development work with respect to the discontinued indications carried out by
Novartis prior to the date of Amendment No. 2 provided that the Company pays to
Novartis royalties and/or certain other agreed-upon amounts with respect to
sales of products resulting from any such continued development work by the
Company or a licensee thereof. Under Amendment No. 2, the new Licensed
Indications are bone, cartilage and tendon repair. Novartis' option was changed
in Amendment No. 2 from an option to include in the definition of Licensed
Indications all indications not already included to (a) an exclusive option to
include in Licensed Indications the treatment of transplant patients (e.g.,
graft protection), the treatment of ischemia (e.g., angina pectoris and
peripheral vascular disease), the treatment of stroke patients, and the
treatment of inflammatory bowel disease, and (b) a non-exclusive option to
include any other additional indications relating to TGF-Betas (other than the
discontinued indications). The payment terms for the option were also amended
and the time period to exercise the option was extended until May 31, 2003.
Copies of Amendment Nos. 1 and 2 are attached hereto as Exhibits 10.4 and 10.5
and are incorporated herein by reference.
(6) Asset Purchase Agreement with Cadus Pharmaceutical Corporation
On July 30, 1999, the Company acquired certain assets from Cadus Pharmaceutical
Corporation, a Delaware corporation ("Cadus"), pursuant to the terms of an Asset
Purchase
9
<PAGE> 12
OSI PHARMACEUTICALS, INC., AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
(Unaudited)
Agreement (the "Asset Purchase Agreement") dated the same date. The assets
purchased (the "Assets") include (a) certain assets associated with certain of
Cadus' research programs (including the GPCR Directed Chemistry Program and a
collaboration with Solvay Pharmaceuticals B.V.), (b) Cadus' compound library,
(c) the purchase or license of certain intellectual property rights, and (d)
certain furniture, equipment, inventory, and supplies. Several assets were
retained by Cadus, including (a) monies in escrow in connection with the
judgment of SIBIA Neurosciences, Inc. against Cadus, (b) cash and accounts
receivable, (c) Cadus' Living Chip Technology, (d) Cadus' Functional Genomics
Program, and (e) Cadus' Research Collaboration and License Agreement with
SmithKline Beecham Corporation (the "SmithKline Research Agreement").
Forty-seven Cadus employees, consisting of thirty-six employed in science and
eleven employed in administration and support, were hired by the Company. The
Company intends to continue to utilize some of the Assets in the GPCR Directed
Chemistry Program and the collaboration with Solvay Pharmaceuticals B.V., but
expects to deploy the balance of the Assets in other research areas.
The purchase price for the Assets was $1.5 million in cash plus $74,096 in cash
for certain prepaid expenses plus the assumption of certain liabilities,
including liabilities under Cadus' facility lease (the "Facility Lease") in
Tarrytown, New York (approximately 45,569 square feet) as of July 1, 1999
(approximately $898,249 in rental payments per annum through December 31, 2002)
and an equipment lease with GECC Capital Corporation (approximately $361,485 in
rental payments through December 31, 1999, and $861,730 and $439,850 for the
years 2000 and 2001, respectively). The source of the cash portion of the
purchase price was the Company's existing cash resources. Liabilities assumed
will be paid from such cash resources and working capital.
In connection with the acquisition, the Company entered into the following
additional agreements with Cadus: (a) a Patent License Agreement, (b) a
Technology License Agreement, and (c) a Software License Agreement, pursuant to
which the Company obtained non-exclusive licenses for the use and practice of
certain of Cadus' patents, Cadus' technology and Cadus' software programs,
respectively. The Company and Cadus also entered into another Patent License
Agreement, under which the Company will license back to Cadus on a non-exclusive
basis certain of the patents which were assigned to the Company as part of the
acquisition.
In connection with the acquisition, the Company adopted a Non-Qualified Stock
Option Plan for Former Employees of Cadus (the "Cadus Stock Plan") to induce
certain former employees of Cadus to accept employment with the Company. The
Company granted options to purchase an aggregate of 415,000 shares of common
stock of the Company at a purchase price of $5.00 per share. These options
become exercisable on July 30, 2000. The Asset Purchase Agreement and the Cadus
Stock Plan are attached hereto as Exhibits 2.1 and 2.2, and are incorporated
herein by reference.
10
<PAGE> 13
OSI PHARMACEUTICALS, INC., AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
(Unaudited)
(7) Changes in Securities
On January 6, 1999, the Board of Directors of the Company adopted, subject to
stockholder approval, certain amendments to the Company's Certificate of
Incorporation. At the Annual Meeting of Stockholders held on March 24, 1999, the
amendments were approved. The Certificate of Incorporation amendments (1)
authorize 5,000,000 shares of preferred stock, par value $.01 per share, with
such designations, preferences, privileges, and restrictions as may be
determined from time to time by the Company's Board of Directors (see Article IV
of the Certificate of Incorporation, as amended), and (2) require that all
actions taken by stockholders must be taken at an annual or special meeting and
may not be taken by written consent (see Article VII of the Certificate of
Incorporation, as amended). The full text of the Certificate of Incorporation,
as amended, which was effective as of April 13, 1999, was filed with the
Company's quarterly report on Form 10-Q for the quarter ended March 31, 1999 and
is incorporated herein by reference.
11
<PAGE> 14
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
THREE AND NINE MONTHS ENDED JUNE 30, 1999 AND 1998
OSI Pharmaceuticals, Inc. (the "Company") is committed to the discovery and
development of novel, small-molecule pharmaceutical products for
commercialization by the pharmaceutical industry. The Company is exploiting its
full range of discovery and development capabilities by building and sustaining
a pipeline of pharmaceutical product opportunities in selected disease areas.
Revenues
Revenues for the three and nine months ended June 30, 1999 were approximately
$5.2 million and $16.5 million, respectively, representing a decrease of
$110,000 or 2% and an increase of $2.5 million or 18%, respectively, compared to
revenues of $5.3 million and $14.0 million reported for the three and nine
months ended June 30, 1998, respectively. Collaborative research and development
agreements with Pfizer Inc. ("Pfizer"), Anaderm Research Corp. ("Anaderm"),
Hoechst Marion Roussel, Inc. ("HMRI"), Sankyo Company Ltd., Bayer Corporation,
Fujirebio, Inc., and Helicon Therapeutics, Inc. ("Helicon") accounted for
substantially all of the Company's collaborative program revenues for the three
and nine-month periods ended June 30, 1999 and 1998. Total collaborative
revenues of $4.6 million and $12.6 million for the three and nine-month periods
increased approximately $601,000 and $1.2 million, respectively. The three-month
increase was principally due to increased funding from Pfizer and Anaderm for
the discovery and development of novel cosmeceutical compounds. The nine-month
increase was primarily due to the expansion of the Anaderm program, as well as
increased funding for the program with Helicon. The increase in revenues was
partially offset by the conclusion in September 1998 of one of the Company's
funded collaborative programs with HMRI relating to the discovery and
development of orally active drugs for the treatment of chronic anemia.
Other research revenues, representing primarily government grants and other
research grants, decreased by $84,000 and $245,000, for the three and nine-month
periods ended June 30, 1999, respectively. The changes were due to timing and
awarding of grant funding. License revenues of $2,000,000, in the second quarter
of fiscal 1999, were recorded pursuant to a license agreement entered into in
March 1999 with BioChem Pharma Inc., which replaces an earlier co-venture
program, focused on anti-viral drug discovery. During the third quarter of
fiscal 1998, the Company recognized license revenue of approximately $700,000
from the signing of a license agreement with Aurora Biosciences Corporation
covering the Company's gene transcription patent estate. Sales revenues derived
from the pharmaceutic services of the Company's Aston Molecules Ltd. ("Aston")
subsidiary and from diagnostic sales of the Company's Oncogene Science
Diagnostics Inc. ("OSDI") subsidiary, decreased by $46,000 and increased by
$119,000 for the three and nine-month periods ended June 30, 1999, respectively.
12
<PAGE> 15
Expenses
The Company's operating expenses increased by approximately $603,000 and $1.8
million or 8% and 8%, respectively, for the three and nine months ended June 30,
1999 compared to the three and nine months ended June 30, 1998. Research and
development spending for the current three and nine-month periods increased
$470,000 and $1.2 million, respectively, from the prior year periods generally
due to costs associated with increasing average staff levels and increasing
expenses related to: (1) the continued expansion in the discovery and
development of novel cosmeceutical compounds; (2) the joint venture with Helicon
for the discovery of novel drugs for the treatment of long-term memory
disorders; (3) certain other of the Company's proprietary programs; and (4) the
expansion of the Company's medicinal chemistry operations at its Aston
subsidiary.
The Company's production and service costs increased by approximately $32,000
and $519,000 for the three and nine-month periods ended June 30, 1999,
respectively. The increase was primarily related to costs associated with OSDI
as it expands its manufacturing capacity. Selling, general and administrative
costs for the current three and nine-month periods ended June 30, 1999 increased
by $102,000 and $51,000, respectively, from the prior year periods.
Other Income and Expense
Investment income decreased approximately $136,000 and $476,000 or 39% and 42%,
respectively, for the three and nine months ended June 30, 1999 compared to the
three and nine months ended June 30, 1998. This decrease relates to the decrease
in the principal balance of cash invested.
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 1999, working capital (representing primarily cash, cash equivalents
and short-term investments) aggregated approximately $19.9 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. 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. The Company's capital requirements, however, 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 additional
collaborations, acquisitions and joint ventures), 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.
An additional factor which may cause the Company's capital requirements to vary
is the acquisition by the Company, on July 30, 1999, of certain assets from
Cadus Pharmaceutical Corporation ("Cadus") pursuant to the terms of an Asset
Purchase Agreement dated the same
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<PAGE> 16
date. The assets include certain of Cadus' ongoing research programs, Cadus'
compound library, certain intellectual property rights, Cadus' facility lease in
Tarrytown, New York and certain of Cadus' equipment leases as well as other
fixed assets. The Company intends to maintain Cadus' former facility for at
least one year, but is considering subletting a portion of it. In addition to
the acquisition of the assets, the Company hired forty-seven former Cadus
employees. The Company expects to employ the former Cadus employees in ongoing
and expanding programs at both Cadus' former facility and the Company's
headquarters in Uniondale, New York. The Company, however, expects its cash burn
to remain at similar levels to its current annual burn, despite the acquisition
and additional operations. This will be due, in part, to absorbing some of the
acquired resources into an ongoing funded collaboration with Solvay
Pharmaceuticals B.V. that was purchased from Cadus, expanding the Company's
current programs such as in Anaderm, and entering into potentially new funded
programs. The Company is also considering the buyout of certain operating leases
for research equipment assumed from Cadus.
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 investments with its funded collaborations. 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 aware of the challenges associated with the inability of certain
systems to properly format information after December 31, 1999 (the "Year 2000
problem"). The Year 2000 problem is the result of computer programs being
written using two digits (rather than four) to define an applicable year. 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. 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 has essentially completed the conversion of its financial records to an
Oracle based system which is Year 2000 compliant. The Company does not
anticipate any material disruption in its operations as the result of any
failure of its internal Year 2000 compliance. Through the current period, the
Company has not incurred any significant costs in addressing the Year 2000
problem. Based on current information, any additional costs 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 is in the process of conducting an evaluation of the extent to which
the operations of the material third parties with whom it regularly deals may be
disrupted by any
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<PAGE> 17
Year 2000 noncompliance of any of their systems. These third parties include the
Company's collaborative partners and its suppliers and vendors. Disruption of
the operations of any of its partners could delay or halt important research and
development programs, cause the loss of data, or have other unforeseen
consequences. The Company is currently contacting all significant collaborators,
suppliers, vendors and financial institutions in order to identify potential
areas of concern. The Company will finalize this inquiry during the fourth
quarter of fiscal 1999. 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.
If necessary, the Company intends to create a remediation and contingency plan
to identify and document potential business disruptions and continuity planning
procedures. The focus of this activity would be on potential failures of
external systems required to carry out normal business operations including
services provided by the public infrastructure such as, but not limited to,
power, electric, transportation and telecommunications. The Company expects this
activity to continue through the remainder of fiscal 1999.
NEW ACCOUNTING PRONOUNCEMENT
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities" ("SFAS 133"), which is effective for all quarters of
fiscal year beginning after June 15, 2000. SFAS 133 establishes accounting and
reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts, and for hedging activities. In
accordance with SFAS 133, an entity is required to recognize all derivatives as
either assets or liabilities in the statement of financial position and measure
those instruments at fair value. SFAS 133 requires that changes in the
derivative's fair value be recognized currently in earnings unless specific
hedge accounting criteria are met. Special accounting for qualifying hedges
allows a derivative's gain and losses to offset related results on the hedged
item in the income statement and requires that a company formally document,
designate and assess the effectiveness of transactions that receive hedge
accounting. The Company does not believe that the implementation of SFAS 133
will have a material effect on its results of operations and financial position.
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
15
<PAGE> 18
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 the
Company's annual report on Form 10-K for the fiscal year ended September 30,
1998.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
The Company's cash flow and earnings are subject to fluctuations due to changes
in interest rates in its investment portfolio of debt securities, the fair value
of equity instruments held, and foreign currency exchange rates. The Company
maintains an investment portfolio of various issuers, types and maturities.
These securities are classified as available-for-sale and, consequently, are
recorded on the balance sheet at fair value with unrealized gains or losses
reported as a component of accumulated comprehensive income (loss). The
Company's investments in certain biotechnology companies are carried on either
the equity method of accounting or at cost for equity securities that do not
have readily determinable fair values. Other-than-temporary losses are recorded
against earnings in the same period the loss was deemed to have occurred. The
Company does not currently hedge this exposure and there can be no assurance
that other-than-temporary losses will not have a material adverse impact on the
Company's results of operations in the future.
16
<PAGE> 19
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
Amendments to the Agreements Related to Anaderm Research Corp.
In 1996, the Company entered into a joint venture with Pfizer Inc.
("Pfizer") and New York University ("NYU") to form Anaderm Research Corp.
("Anaderm"), a company dedicated to the discovery and development of safe,
effective, pharmacologically active agents for certain cosmetic and
quality-of-life indications, such as skin pigmentation, hair loss and wrinkling.
On April 23, 1996, in connection with the formation of Anaderm, the Company,
Pfizer, and Anaderm, entered into a Collaborative Research Agreement (the "1996
Research Agreement") for the discovery and development of novel compounds to
treat the conditions to which Anaderm was dedicated. The Company also entered
into a Stockholders' Agreement (the "1996 Stockholders' Agreement") with Pfizer,
Anaderm, NYU and certain NYU faculty members (the "Faculty Members"). Under the
1996 Stockholders' Agreement, Anaderm issued common stock to Pfizer and the
Company and options to purchase common stock to NYU and the Faculty Members (who
have exercised their options fully). Pfizer holds 82%, the Company holds 14% and
NYU and the Faculty Members collectively hold 4% of Anaderm's common stock. In
exchange for its 14% of Anaderm's common stock, the Company provided formatting
for high throughput screens and conducted compound screening at its own expense
under the 1996 Research Agreement.
On April 23, 1999, the Company entered into an Amended and Restated
Collaborative Research Agreement (the "1999 Research Agreement") with Pfizer and
Anaderm to expand the collaborative program begun by the 1996 Research Agreement
and an Amended and Restated Stockholders' Agreement (the "1999 Stockholders'
Agreement") with Pfizer, Anaderm, NYU and the Faculty Members. The 1999 Research
Agreement is for a term of three years. Pfizer may terminate the 1999 Research
Agreement, however, after the first or second year of the term in its sole
discretion after consultation with Anaderm and the Company
17
<PAGE> 20
to determine whether satisfactory progress has been made in the research program
during the previous year. The 1999 Research Agreement provides for funding by
Pfizer of up to $35 million in total payments to Anaderm to fund the Company's
research and development activities during the three-year term and up to $15
million in phase-down funding following expiration of the three-year term or
earlier termination by Pfizer. In the expanded program, the Company will
continue to provide a full range of capabilities including assay biology, high
throughput screening, compound libraries, combinatorial, medicinal, and natural
product chemistry, as well as pharmaceutics, pharmacokinetics and molecular
biology. The Company anticipates a significant increase in its staffing of the
program to conduct its drug discovery efforts during the term of the 1999
Research Agreement. Anaderm or Pfizer will pay royalties to the Company on the
sales of products resulting from the collaboration.
A significant change to the 1996 Stockholders' Agreement by the 1999
Stockholders' Agreement is the addition of a right on the part of each of the
Company, NYU and each of the Faculty Members, exercisable at any time prior to
December 31, 1999, to require Anaderm or Pfizer to purchase all, but not less
than all, of the shares of common stock of Anaderm held by each such
stockholder for a fixed price based upon a formula as set forth in the 1999
Stockholders' Agreement. The stockholders, including the Company, also continue
to have the right, exercisable at any time subsequent to April 23, 2000, to
require Anaderm or Pfizer to purchase, all but not less than all, of the shares
of common stock of Anaderm held by each such stockholder at the "Fair Value" (as
such term is defined in the 1999 Stockholders' Agreement) of such shares. In
addition, Anaderm or Pfizer has the right, exercisable at any time subsequent to
April 23, 2002, to require the Company, NYU or any Faculty Member to sell to
Anaderm all, but not less than all, of the shares of common stock of Anaderm
held by such stockholder at the Fair Value of such shares. In the 1996
Stockholders' Agreement, this call right was exercisable by Anaderm only with
respect to the shares owned by NYU and the Faculty Members. Copies of the 1999
Research Agreement and 1999 Stockholders' Agreement are attached hereto as
Exhibits 10.1 and 10.2 and are incorporated herein by reference.
Development Agreement with Pfizer Inc.
Effective as of April 1, 1999, the Company entered into a
Development Agreement (the "Agreement") with Pfizer for the development of
certain compounds derived from the Collaborative Research Agreement, dated as of
April 1, 1996, between Pfizer and the Company. Under the Agreement, the Company
will conduct a development program formulated by the Company and Pfizer which
includes pre-clinical and clinical research through and including Phase II
clinical trials for compounds to assess their safety and efficacy to be
developed as therapeutic agents for the treatment of psoriasis and other related
dermal pathologies. Pursuant to the terms of the Agreement, Pfizer has granted
to the Company an exclusive, with the exception of Pfizer, license to make and
use the compounds for all research purposes in the development program other
than the sale or manufacture for sale of products or processes. At the end of
the development program, Pfizer must notify the Company of its intention to
continue development and commercialization of a compound within three (3) months
following receipt of the data package from the clinical studies. If Pfizer does
so notify the Company of such intention, it will have an exclusive, world-wide
license, with the right to grant sublicenses, to make, use, sell, offer for sale
and import products developed in the
18
<PAGE> 21
course of the development program. If Pfizer fails to notify the Company of such
intention, the Company will receive an exclusive, world-wide, royalty-bearing
license, including the right to grant sublicenses, to manufacture, use, sell,
offer for sale and import products developed in the course of the development
program. The Company, however, has the right to refuse to accept this license.
The party receiving the license must pay milestone and royalty payments as
consideration therefor. The duration of the licenses is coextensive with the
lives of patents related to the licensed compounds. 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 in the event of certain defaults by the parties. A copy of the
Agreement is attached hereto as Exhibit 10.3 and is incorporated herein by
reference.
Amendment to the Collaborative Agreement with Novartis Pharma AG
During the quarter ended June 30, 1999, the Company entered into
Amendment Nos. 1 and 2, dated April 13, 1999 and May 31, 1999, respectively, to
its Collaborative Agreement, dated April 19, 1995 (the "1995 Agreement") with
Novartis Pharma AG ("Novartis"). Pursuant to the 1995 Agreement, the Company
granted to Novartis an exclusive license with the right to grant sublicenses to
manufacture, have manufactured, use and sell products containing TGF-Beta 3 for
certain indications, referred to as Licensed Indications. The Company also
granted to Novartis an option (originally to expire in April 1999) to acquire
from the Company a license to manufacture, use and sell products containing
TGF-Beta 3 and other TGF-Betas for all other indications not included in the
Licensed Indications. The four year time limit to exercise the option was
extended until May 31, 1999 by Amendment No. 1 to the 1995 Agreement.
Amendment No. 2 changed certain terms of the 1995 Agreement
including the definition of Licensed Indications, the supply of TGF-Betas, the
amount of royalty payments, and the schedules of the Company's patents and
applications and Novartis' patents. Specifically, oral mucositis and the healing
of soft wound tissue were removed from the Licensed Indications. Novartis
acknowledged in Amendment No. 2 that it has discontinued development of products
for the indications of oral mucositis and healing of soft wound tissue. The
parties agreed that all licenses theretofore granted to Novartis with respect to
such discontinued indications are terminated and that the Company is free to
continue development work and to grant licenses to third parties with respect to
such discontinued indications. The Company is also free to use the results of
any development work with respect to the discontinued indications carried out by
Novartis prior to the date of Amendment No. 2 provided that the Company pays to
Novartis royalties and/or certain other agreed-upon amounts with respect to
sales of products resulting from any such continued development work by the
Company or a licensee thereof. Under Amendment No. 2, the new Licensed
Indications are bone, cartilage and tendon repair. Novartis' option was changed
in Amendment No. 2 from an option to include in the definition of Licensed
Indications all indications not already included to (a) an exclusive option to
include in Licensed Indications the treatment of transplant patients (e.g.,
graft protection), the treatment of ischemia (e.g., angina pectoris and
peripheral vascular disease), the treatment of stroke patients, and the
treatment of inflammatory bowel disease, and (b) a non-exclusive option to
include any other additional indications relating to TGF-Betas (other than the
discontinued indications). The payment terms
19
<PAGE> 22
for the option were also amended and the time period to exercise the option
was extended until May 31, 2003. Copies of Amendment Nos. 1 and 2 are attached
hereto as Exhibits 10.4 and 10.5 and are incorporated herein by reference.
Asset Purchase Agreement with Cadus Pharmaceutical Corporation
On July 30, 1999, the Company acquired certain assets from Cadus
Pharmaceutical Corporation, a Delaware corporation ("Cadus"), pursuant to the
terms of an Asset Purchase Agreement (the "Asset Purchase Agreement") dated the
same date. The assets purchased (the "Assets") include (a) certain assets
associated with certain of Cadus' research programs (including the GPCR Directed
Chemistry Program and a collaboration with Solvay Pharmaceuticals B.V.), (b)
Cadus' compound library, (c) the purchase or license of certain intellectual
property rights, and (d) certain furniture, equipment, inventory, and supplies.
Several assets were retained by Cadus, including (a) monies in escrow in
connection with the judgment of SIBIA Neurosciences, Inc. against Cadus, (b)
cash and accounts receivable, (c) Cadus' Living Chip Technology, (d) Cadus'
Functional Genomics Program, and (e) Cadus' Research Collaboration and License
Agreement with SmithKline Beecham Corporation (the "SmithKline Research
Agreement"). Forty-seven Cadus employees, consisting of thirty-six employed in
science and eleven employed in administration and support, were hired by the
Company. The Company intends to continue to utilize some of the Assets in the
GPCR Directed Chemistry Program and the collaboration with Solvay
Pharmaceuticals B.V., but expects to deploy the balance of the Assets in other
research areas.
The purchase price for the Assets was $1.5 million in cash plus
$74,096 in cash for certain prepaid expenses plus the assumption of certain
liabilities, including liabilities under Cadus' facility lease (the "Facility
Lease") in Tarrytown, New York (approximately 45,569 square feet) as of July 1,
1999 (approximately $898,249 in rental payments per annum through December 31,
2002) and an equipment lease with GECC Capital Corporation (approximately
$361,485 in rental payments through December 31, 1999, and $861,730 and $439,850
for the years 2000 and 2001, respectively). The source of the cash portion of
the purchase price was the Company's existing cash resources. Liabilities
assumed will be paid from such cash resources and working capital.
In connection with the acquisition, the Company entered into the
following additional agreements with Cadus: (a) a Patent License Agreement, (b)
a Technology License Agreement, and (c) a Software License Agreement, pursuant
to which the Company obtained non-exclusive licenses for the use and practice of
certain of Cadus' patents, Cadus' technology and Cadus' software programs,
respectively. The Company and Cadus also entered into another Patent License
Agreement under which the Company will license back to Cadus on a non-exclusive
basis certain of the patents which were assigned to the Company as part of the
acquisition.
In connection with the acquisition, the Company adopted a
Non-Qualified Stock Option Plan for Former Employees of Cadus (the "Cadus Stock
Plan") to induce certain former employees of Cadus to accept employment with the
Company. The Company granted options to purchase an aggregate of 415,000 shares
of common stock of the Company at a purchase price of $5.00 per share. These
options become exercisable on July 30, 2000. The
20
<PAGE> 23
Asset Purchase Agreement and the Cadus Stock Plan are attached hereto as
Exhibits 2.1 and 2.2, and are incorporated herein by reference.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
2.1+* Asset Purchase Agreement, dated July 30, 1999, by and between
Cadus Pharmaceutical Corporation and the Company.
2.2 OSI Pharmaceuticals, Inc. Non-Qualified Stock Option Plan for
Former Employees of Cadus Pharmaceutical Corporation.
3.1 Certificate of Incorporation, as amended. (1)
3.2 Amended and Restated By-Laws. (2)
10.1* Collaborative Research Agreement, dated as of April 23, 1999,
by and among Pfizer Inc., the Company and Anaderm Research
Corp.
10.2* Anaderm Research Corp. Amended and Restated Stockholders'
Agreement, dated April 23, 1999.
10.3* Development Agreement, dated as of April 1, 1999, by and
between Pfizer Inc. and the Company.
10.4 Amendment No. 1, dated as of May 31, 1999, by and between
Novartis Pharma AG and the Company.
10.5* Amendment No. 2, dated as of April 13, 1999, by and between
Novartis Pharma AG and the Company.
27 Financial Data Schedule.
----------
+ The Schedules to the Asset Purchase Agreement have been
omitted pursuant to Item 601(b)(2) of Regulation S-K
under the Securities Exchange Act of 1934, as amended.
The omitted schedules from this filing will be provided
upon request.
* 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.
(1) Included as an exhibit to the Company's quarterly report
on Form 10-Q, filed on May 14, 1999, and incorporated
herein by reference.
(2) Included as an exhibit to the Company's current report
on Form 8-K, filed on January 8, 1999, and incorporated
herein by reference.
21
<PAGE> 24
(b) Reports on Form 8-K
The Company filed a current report on Form 8-K on June 28,
1999 with the Securities and Exchange Commission via EDGAR,
pertaining to the adoption of a new Shareholders Rights Plan,
redemption of rights under the Company's old Shareholders
Rights Plan and termination of the Company's old Shareholders
Rights Plan by the Board of Directors. The earliest event
covered by the report occurred on June 23, 1999.
22
<PAGE> 25
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 16, 1999 /s/ Colin Goddard, PhD.
-------------------------------------
Colin Goddard, Ph.D.
President and Chief Executive Officer
Date: August 16, 1999 /s/ Robert L. Van Nostrand
-------------------------------------
Robert L. Van Nostrand
Vice President and Chief Financial
Officer (Principal Financial Officer)
23
<PAGE> 26
EXHIBIT INDEX
Exhibit No. Description
2.1+* Asset Purchase Agreement, dated July 30, 1999, by and between Cadus
Pharmaceutical Corporation and the Company.
2.2 OSI Pharmaceuticals, Inc. Non-Qualified Stock Option Plan for Former
Employees of Cadus Pharmaceutical Corporation.
3.1 Certificate of Incorporation, as amended. (1)
3.2 Amended and Restated By-Laws. (2)
10.1* Collaborative Research Agreement, dated as of April 23, 1999, by and
among Pfizer Inc., the Company and Anaderm Research Corp.
10.2* Anaderm Research Corp. Amended and Restated Stockholders' Agreement,
dated April 23, 1999.
10.3* Development Agreement, dated as of April 1, 1999, by and between
Pfizer Inc. and the Company.
10.4 Amendment No. 1, dated as of May 31, 1999, by and between Novartis
Pharma AG and the Company.
10.5* Amendment No. 2, dated as of April 13, 1999, by and between Novartis
Pharma AG and the Company.
27 Financial Data Schedule.
- ----------
+ The Schedules to the Asset Purchase Agreement have been omitted pursuant
to Item 601(b)(2) of Regulation S-K under the Securities Exchange Act of
1934, as amended. The omitted schedules from this filing will be provided
upon request.
* 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.
(1) Included as an exhibit to the Company's quarterly report on Form 10-Q,
filed on May 14, 1999, and incorporated herein by reference.
(2) Included as an exhibit to the Company's current report on Form 8-K, filed
on January 8, 1999, and incorporated herein by reference.
24
<PAGE> 1
Portions of Exhibit 2.1 have been redacted and are the subject of a
confidential treatment request filed with the Secretary of the Securities and
Exchange Commission.
<PAGE> 2
ASSET PURCHASE AGREEMENT
between
CADUS PHARMACEUTICAL CORPORATION
and
OSI PHARMACEUTICALS, INC.
-------------
July 30, 1999
-------------
<PAGE> 3
ASSET PURCHASE AGREEMENT
ASSET PURCHASE AGREEMENT made as of the 30th day of July 1999, by and
between CADUS PHARMACEUTICAL CORPORATION, a Delaware corporation ("Seller"), and
OSI PHARMACEUTICALS, INC., a Delaware corporation ("Buyer").
W I T N E S S E T H:
WHEREAS, upon the terms and conditions set forth herein, Seller desires to
sell and Buyer desires to purchase certain assets and to assume certain of the
liabilities of Seller; and
WHEREAS, certain terms used in this Agreement are defined in Section 9.10
hereof.
NOW, THEREFORE, in consideration of the mutual promises, covenants and
agreements contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
hereby agree as follows:
1. Purchase and Sale of Assets.
1.1. Purchase and Sale of Assets. Upon the terms and subject to the
conditions set forth in this Agreement, on the date hereof, Seller shall sell,
transfer, convey, assign and deliver to Buyer, and Buyer shall purchase and
acquire from Seller, free and clear of any and all Liens (other than Permitted
Liens) the assets of Seller described below (collectively, the "Assets"):
(a) Fixtures, Furniture, Equipment, etc. The fixtures, furniture,
furnishings, machinery, accessories, computers and peripheral devices,
laboratory, office and other equipment, appliances and vehicles and any
replacement and spare parts for any such assets set forth on Schedule 1.1(a)
hereto (the "Fixed Assets");
(b) Inventory and Supplies. The laboratory and office supplies,
wherever located, set forth on Schedule 1.1(b) hereto (collectively, the
"Inventory");
<PAGE> 4
(c) Leases. All of Seller's rights under the Leases set forth on
Schedule 5.6 hereto;
(d) Contracts and Agreements, etc. All of Seller's rights under the
contracts and agreements (the "Purchased Contracts") set forth on Schedule
1.1(d) hereto;
(e) Security Deposits and Claims Against Third Parties. The security
deposits with third parties set forth on Schedule 1.1(e) hereto and all claims
against third parties relating to items included in the Assets;
(f) Prepaid Expenses, etc. The prepaid expenses set forth on
Schedule 1.1(f);
(g) Intellectual Property. All the Intellectual Property relating to
the Compounds being sold to Buyer hereunder and all other Intellectual Property
set forth on Schedule 1.1(g);
(h) Know-How and Technical Information. All lab journals and
notebooks, inventions, trade secrets, know-how (including, without limitation,
proprietary know-how and use of application know-how), product designs,
manufacturing, bio-engineering and other drawings, technical information, safety
information, bio-engineering data and design and bio-engineering specifications,
research records, similar data and formulas and processes existing on the date
hereof and owned by Seller covering the Assets;
(i) Permits. All of Seller's rights under the Permits set forth on
Schedule 1.1(i);
(j) Compound Library. All of Seller's rights, including, without
limitation, all Patent Rights, in its library of Compounds, including, without
limitation, all Compounds whose biological activity was identified by Seller
prior to the date hereof under Seller's GPCR Directed Chemistry Program;
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(k) GPCR Directed Chemistry Program. All of Seller's rights
including, without limitation, all Patent Rights, in the GPCR Directed Chemistry
Program and the materials listed on Schedule 1.1(k);
(l) Addresses. All business post office boxes and business telephone
numbers for the Leased Property;
(m) Insurance Proceeds. All insurance proceeds arising out of or
related to damage, destruction or loss of any of the Assets to the extent of any
damage or destruction that remains unrepaired, or to the extent any Asset
remains unreplaced as of the date hereof;
(n) Other Assets. All other intangible and tangible assets related
to the Assets, including, without limitation: (i) all supplier information and
correspondence relating to the Purchased Contracts;(ii) all research,
statistical, records, files, reports and other documents and data; (iii) all
research results and other know-how; and (iv) all other materials, books,
records, files and data, in whatever form contained, relating to the Assumed
Liabilities.
1.2. Excluded Assets. Notwithstanding any other provision of this
Agreement, Seller shall not sell, assign or transfer to Buyer, and Buyer shall
not purchase from Seller, any of the following assets (collectively, the
"Excluded Assets"):
(a) Corporate Records. (i) All books, records and other assets of
Seller relating solely to corporate level activities, including, without
limitation, corporate minute books, stock ledgers, tax records, financial and
employment records and other corporate books and records of Seller, and (ii) all
books and records of Seller which are not related to the Assets or Assumed
Liabilities;
(b) Corporate Name. All rights in and to the corporate name of
Seller;
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(c) SIBIA Judgment. All monies in escrow in connection with the
judgment of SIBIA Neurosciences, Inc. ("SIBIA") against Seller;
(d) Cash. All of Seller's cash and cash equivalents and accounts and
notes receivable (including an account receivable of $18,005.38 from Solvay
Pharmaceuticals B.V.);
(e) Stock or Other Interests. All of the shares or other equity
interests of any corporation or other entity and any partnership or joint
venture owned, directly or indirectly, by Seller;
(f) Living Chip Technology. All rights in the Living Chip
Technology;
(g) Software. All rights in the Software owned by the Seller (with
respect to certain of which Buyer is obtaining a license);
(h) Functional Genomics Program. All of Seller's rights in the
Functional Genomics Program;
(i) Excluded Fixed Assets. The fixed assets set forth on Schedule
1.2(i);
(j) Excluded Inventory. The laboratory and office supplies and
similar materials set forth on Schedule 1.2(j) (the "Excluded Inventory");
(k) Excluded Contracts. All of Seller's rights under the contracts
and agreements set forth on Schedule 1.2(k) (the "Excluded Contracts");
(l) Excluded Security Deposits. The security deposits with third
parties set forth on Schedule 1.2(l);
(m) Excluded Prepaid Expenses. The prepaid expenses set forth on
Schedule 1.2(m);
(n) Excluded Intellectual Property. All Intellectual Property being
licensed to Buyer pursuant to the Technology License Agreement and the Patent
License Agreement (with
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respect to which Buyer shall herewith license from Seller the rights therein
provided), and the Intellectual Property set forth on Schedule 1.2(n);
2. Assumption of Liabilities.
2.1. Assumption of Liabilities by Buyer. Buyer shall assume and thereafter
pay, perform, satisfy and discharge only the following obligations and
liabilities of Seller to the extent that they are to be performed on or after
the date hereof (collectively, the "Assumed Liabilities"):
(a) Obligations Under Certain Agreements. The liabilities and
obligations of Seller under the Leases and the Purchased Contracts, in each
case, only to the extent that such Leases and Purchased Contracts have been
validly assigned to Buyer hereunder (excluding any liability or obligation for
breaches thereof arising out of or related to events or occurrences prior to the
date hereof) and, in addition, Buyer shall assume payment obligations under the
Facility Lease which have accrued since July 1, 1999 which amount to $133,223.08
as of the date hereof;
(b) Employee Obligations. The liabilities and obligations of Seller
with respect to Transferred Employees as listed on Schedule 7.2(a) hereto
including, without limitation, certain obligations with respect to COBRA as
described in Section 7.2(e);
(c) Future Liabilities. All liabilities and obligations arising out
of the operation by Buyer of the Assets after the date hereof.
2.2. Excluded Liabilities. Buyer is not assuming or agreeing to pay,
perform, assume or discharge, or otherwise be responsible for, any liabilities
of Seller, fixed or contingent, known or unknown, other than the Assumed
Liabilities, whether arising before or after the date hereof (collectively, the
"Excluded Liabilities"), including, without limitation, any of the following
items to the extent they are not Assumed Liabilities:
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(a) Costs. Obligations in respect of costs or expenses incurred by
Seller in connection with the transactions contemplated hereby;
(b) Payables. Obligations for any accounts payable except as set
forth in Section 2.1(a);
(c) Affiliate Obligations. Obligations of Seller with respect to any
balance due from Seller to any Affiliate of Seller;
(d) Contractual Obligations. Obligations under any agreement to
which Seller is a party to the extent that the benefits of such agreement are
not assigned to Buyer;
(e) Tax Liabilities. Any liabilities of Seller for any Taxes with
respect to any Tax period ending on or prior to the date hereof (or for any Tax
period ending after the date hereof to the extent allocable (determined in a
manner consistent with Section 7.6 hereof) to the portion of such period
beginning before and ending on the date hereof);
(f) Severance Obligations. Any liability of Seller with respect to
severance obligations for employees whose employment terminated on or prior to
the date hereof; and
(g) Other Liabilities. Any liability or obligation of Seller,
whether absolute or contingent, due or to become due, not expressly assumed by
Buyer herein.
3. Consideration for Transfer of the Assets.
3.1. Purchase Price. In consideration for the sale and transfer of the
Assets, on the terms and subject to the conditions set forth in this Agreement,
Buyer agrees to (i) pay in cash by wire transfer of immediately available funds
the sum of $1,500,000 plus prepaid expenses and deposits of $74,096, and (ii)
assume the Assumed Liabilities (collectively, the "Purchase Price").
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3.2. Allocation of Purchase Price. The parties to this Agreement agree to
allocate the Purchase Price as adjusted hereunder for all purposes (including
financial, accounting and tax purposes) in accordance with the allocation
schedule attached hereto as Schedule 3.2. Seller and Buyer shall jointly
complete and separately file Form 8594 with their respective federal income tax
returns for the current tax year in accordance with such allocation schedule.
Neither Seller nor Buyer shall take a position on any tax return or before any
governmental agency charged with the collection of any such tax that is any
manner inconsistent with the terms of such allocation unless compelled to take
an inconsistent position by such governmental agency.
4. Additional Documents.
4.1. Deliveries by Seller. Concurrently with the execution of this
Agreement, Seller shall deliver to Buyer:
(a) a duly executed Bill of Sale;
(b) a duly executed Assignment of Patents;
(c) a duly executed Assignment and Assumption of Contracts;
(d) duly executed consents to assignment and assignments of the
contracts and leases set forth on Schedule 5.3 hereof, including, without
limitation, the consent to assignment and assignment of the Solvay Agreement,
the GECC Lease and the Facility Lease;
(e) a duly executed waiver of the default under the GECC Lease;
(f) an opinion of Morrison Cohen Singer & Weinstein, LLP in form and
substance satisfactory to Buyer;
(g) an opinion of Richards, Layton & Finger, in the form and
substance satisfactory to Buyer;
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(h) a duly executed non-exclusive license to use certain
Intellectual Property of Seller to fulfill its obligations under the Solvay
Agreement in form and substance satisfactory to Buyer (the "Technology License
Agreement");
(i) a duly executed software license to use certain software owned
by Seller in form and substance satisfactory to Buyer (the "Software License
Agreement");
(j) a duly executed license relating to certain patent applications
(the "Patent License Agreement"); and
(k) an opinion of Lahive & Cockfield, patent counsel to Seller, in
form and substance satisfactory to Buyer.
4.2. Deliveries by Buyer. Concurrently with the execution of this
Agreement, Buyer shall deliver to Seller:
(a) a duly executed Assumption Agreement and Assignment and
Assumption Agreements of the GECC Lease, the Facility Lease and the Solvay
Agreement;
(b) a wire transfer to such account(s) as shall be designated in
writing by Seller in an amount equal to $1,508,819.08, representing the
$1,500,000 Purchase Price plus (i) prepaid expenses and deposits of $74,096,
(ii) July rent under the Facility Lease of $133,223.08 paid by Seller on behalf
of Buyer, and (iii) the maintenance fee under the Technology License Agreement
of $28,500, and minus $227,000 due to Buyer under the research agreement
described below;
(c) an opinion of Squadron, Ellenoff, Plesent & Sheinfeld, LLP in
form and substance satisfactory to Seller;
(d) a duly executed research agreement in form and substance
acceptable to Seller pursuant to which Seller shall pay Buyer $227,000 on the
date hereof; and
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(e) a non-exclusive license from Seller to Buyer relating to certain
patents sold to Buyer hereunder.
5. Representations and Warranties of Seller.
Seller hereby represents and warrants to Buyer as follows:
5.1. Seller's Organization and Authority; No Subsidiaries. Seller is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware and has all requisite corporate power and lawful
authority to carry on its business as is currently being conducted and has all
necessary licenses and permits material to such business as it is currently
being conducted, and to own, operate and lease the Assets. Seller is duly
qualified or licensed to do business as a foreign corporation and is in good
standing as a foreign corporation in each jurisdiction in which the ownership,
operation or lease of the Assets or the conduct of its business or location of
its properties requires qualification or licensing to do business as a foreign
corporation and in which the failure to qualify could have a material adverse
effect on the Assets. Seller has heretofore made available to Buyer complete and
correct copies of its Certificate of Incorporation and By-laws. Seller has no
subsidiaries.
5.2. Authorization. Seller has all requisite corporate power and authority
to execute and deliver this Agreement, to consummate the transactions
contemplated hereby and to perform fully its obligations hereunder. The
execution, delivery and performance of this Agreement by Seller and the
consummation by Seller of the transactions contemplated hereby have been duly
authorized by all necessary corporate action of Seller. This Agreement
constitutes, and each document and instrument contemplated by this Agreement to
be executed by Seller when executed and delivered in accordance with the
provisions hereof shall constitute, the valid and legally binding obligation of
Seller, enforceable against Seller in
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accordance with its terms, subject to (i) bankruptcy, insolvency,
reorganization, fraudulent conveyance or transfer, moratorium or similar laws
affecting creditors' rights generally; and (ii) general principles of equity
(regardless of whether such enforceability is considered in a proceeding at law
or in equity).
5.3. Freedom to Contract. Subject to receipt of the consents and approvals
described on Schedule 5.3 hereof, the execution, delivery and performance of
this Agreement by Seller and the consummation of the transactions contemplated
hereby will not: (i) violate or conflict with any provision of the certificate
of incorporation or by-laws or other charter documents of Seller, each as
amended, (ii) violate any of the terms, conditions or provisions of any law,
rule, statute, regulation, order, writ, injunction, judgment or decree of any
court, Governmental Entity or regulatory agency to which Seller may be subject,
or (iii) conflict with or result in a violation or breach of, or constitute
(with or without due notice or lapse of time or both) a default (or give rise to
any right of termination, cancellation or acceleration) under, any of the terms,
conditions or provisions of any material note, bond, indenture, debenture,
security agreement, trust agreement, lien, mortgage, lease, agreement, license,
franchise, permit, guaranty, joint venture agreement or other agreement,
instrument or obligation, oral or written, to which Seller is a party (whether
as an original party or as an assignee or successor) or by which Seller or any
of its respective properties are bound. Except as set forth on Schedule 5.3
hereof and such reports under and such other compliance with the Securities
Exchange Act of 1934 (the "Exchange Act") and the rules and regulations
thereunder as may be required in connection with this Agreement and the
transactions contemplated thereby, no authorization, approval, order, license,
permit, franchise or third party consent, and no registration, declaration or
filing with any court or Governmental Entity, is required in
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connection with Seller's execution, delivery and performance of this Agreement
or the consummation of the transactions contemplated hereby.
5.4. SEC Documents; Financial Statements; Prepaid Expenses; Prepayments.
Seller has made available to Buyer a true and complete copy of its Annual Report
on Form 10-K and Amendment No. 1 to Form 10-K for the year ended December 31,
1998 and Quarterly Report on Form 10-Q for the quarter ended March 31, 1999 (the
"Seller SEC Documents"). As of their respective dates, none of the Seller SEC
Documents contained any untrue statement of a material fact or omitted to state
a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading except in the case of any Seller SEC Document, any statement or
omission therein that has been corrected or otherwise disclosed or updated on a
subsequent Seller SEC Document. The financial statements of the Seller included
in the Seller SEC Documents complied as to form in all material respects with
the published rules and regulations of the SEC with respect thereto, were
prepared in accordance with generally accepted accounting principles ("GAAP")
applied on a consistent basis during the periods involved (except as may be
indicated in the notes thereto or, in the case of the unaudited statements, as
permitted by Rule 10-01 of Regulation S-X of the SEC) and fairly present in
accordance with applicable requirements of GAAP (subject to, in the case of the
unaudited statements, year-end audit adjustments and any other adjustments
described therein, which will not be material, either individually or in the
aggregate) the financial position of Seller as of their respective dates and the
results of operations and the cash flows of Seller for the periods presented
therein. As of the date hereof, Seller has not received any prepayments or
advance payments under the
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Solvay Agreement or any other Purchased Contract for work which has not been
substantially performed as of the date hereof.
5.5. No Material Adverse Change. Except as set forth on Schedule 5.5
hereto, since March 31, 1999, there has not been any change which would
materially impair the ability of Seller to perform its obligations under this
Agreement or which would have a material adverse effect on the Assets.
5.6. Real Estate; Leases. Seller does not own any real property. Schedule
5.6 hereto sets forth a list and summary description of all real property and
personal property leased or used by Seller in connection with its business (the
"Leased Property"). Schedule 5.6 also sets forth a list of each contract
pursuant to which Seller has leased any Leased Property (the "Leases"). Seller
has heretofore delivered to Buyer true and correct copies of all such Leases.
Each of the Leases is valid and effective in accordance with its terms, and
there is not, under any of the Leases, any existing default by Seller, or to
Seller's knowledge, by any other party, or, to Seller's knowledge, any event
with notice, lapse of time, or both, which would constitute a default which in
any case or in the aggregate could have a material adverse effect on the Assets,
except as set forth on Schedule 5.6.
5.7. Title to and Condition of Assets; Encumbrances, etc. Seller has and
will convey to Buyer, good and marketable title to all of the Assets, free and
clear of any mortgage, pledge, security interest, title defect or objection,
lien, charge, claim, restriction, option, commitment or encumbrance of any kind
(collectively, "Liens"), except for Permitted Liens and Liens set forth on
Schedule 5.7 hereto. The assets contained in the Assets being conveyed
hereunder, other than the Excluded Assets, together with the license agreements
described in Sections 4.1(h), (i) and (j), respectively, constitute all of the
rights, properties and assets
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necessary to permit Buyer to effectively utilize and exploit the Assets. All of
the Assets owned, leased or used by Seller are in good operating condition and
repair (except for normal wear and tear), and are suitable for the purposes
used. Schedule 5.7(a) hereof sets forth a true and complete listing of each of
the Fixed Assets having a net book value, as of March 31, 1999, in excess of
$5,000. Schedule 5.7(b) hereof sets forth a true and complete listing of each of
the Fixed Assets which are not being conveyed to Buyer by Seller. Except as set
forth on Schedule 5.7 hereto, no third party has any rights to purchase any of
the Assets, or any interest therein or portion thereof, including rights of
first offer or first refusal.
5.8. Material Contracts. Seller has heretofore made available to Buyer (i)
true and complete copies of all written contracts, agreements, commitments,
arrangements, leases (including with respect to personal property), policies and
other instruments to which it is a party or by which it is bound which (A)
require payments to be made in excess of $25,000 per year, (B) is a Purchased
Contract, or (C) is necessary for the proper use of the Assets (collectively,
"Material Contracts"), and (ii) a written description of each Material Contract
of which Seller is aware that has not been reduced to writing. Each of the
Material Contracts is listed on Schedule 5.8. None of the Material Transfer
Agreements listed as an Excluded Contract on Schedule 1.2(k) through which
Seller has received materials relates to the GPCR Directed Chemistry Program or
Seller's performance under the Solvay Agreement except, for the Material
Transfer Agreements with Yale University and Albert Einstein College of Medicine
of Yeshiva University. Seller is not, or has not received any written notice
that any other party is, in default in any respect under any Purchased Contract,
except as listed on Schedule 5.8 and except for those defaults which would not,
either individually or in the aggregate, have a material adverse effect with
respect to Seller; and, to Seller's knowledge,
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there has not occurred any event or events that with the lapse of time or the
giving of notice or both would constitute such a material default, except as
listed on Schedule 5.8 and except for those defaults which would not, either
individually or in the aggregate, have a material adverse effect with respect to
Seller. Seller has not received notice of or has knowledge of any termination or
threatened termination of a Purchased Contract, except as set forth on Schedule
5.8.
5.9. Permits. Schedule 5.9 hereto lists all currently existing licenses,
permits, certificates, franchises and other authorizations or inspections
(collectively, "Permits") of any Governmental Entity which, to Seller's
knowledge, are necessary to the ownership or use of the Assets, all of which
Permits are possessed by or granted to Seller. Except as disclosed on Schedule
5.9, all the Permits are in full force and effect and no proceeding is pending
or, to Seller's knowledge, threatened seeking the revocation or limitation of
any such Permits.
5.10. Employee Matters.
(a) (i) Except as set forth on Part I of Schedule 5.10(a) hereof,
Seller does not or has not, within the last two years, for the benefit of
current or former employees, maintain, administer or contribute to any "employee
benefit plans" ("Benefit Plans") within the meaning of Section 3(3) of ERISA.
(ii) Except as set forth on Part II of Schedule 5.10(a) hereof,
Seller does not have any: (A) employment contracts (or any related agreements);
(B) severance arrangements, (C) bonus or other incentive compensation
arrangements; (D) fringe benefit or perquisite plans or arrangements; (E)
deferred compensation arrangements; (F) non-competition arrangements; or (G)
other material remunerative arrangements ("Employee Arrangements").
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(iii) Seller has provided Buyer copies or descriptions of such
plans, contracts and arrangements set forth on Schedule 5.10(a). All Benefit
Plans and other plans, contracts and arrangements set forth on Schedule 5.10(a)
are and have been maintained in material compliance with their terms and all
requirements of applicable law.
(iv) Part III of Schedule 5.10(a) sets forth all of the
outstanding options granted by Seller (the "Options") to Transferred Employees
and the exercise prices thereof;
(b) There are no collective bargaining or other agreements between
Seller and any union or other employee organizations relating to employees of
Seller whether such agreements are with Seller, or with any independent
contractor or management company providing employees to Seller.
(c) Except as set forth on Schedule 5.10(c) hereof, neither Seller
nor any member of Seller's Group has, within the preceding six years,
contributed to, or had an obligation to contribute to, any "employee pension
benefit plan" within the meaning of Section 3(2) of ERISA which is subject to
Title IV of ERISA. As used in the preceding sentence, "Seller's Group" includes
any person who is, or was at the relevant time, a member of the same "controlled
group of corporations" as Seller (within the meaning of Section 414(b) of the
Code), or under "common control" with Seller (within the meaning of Section
414(c) of the Code). Seller has not, within the preceding six years, maintained
or contributed to a multiemployer pension plan, as defined in Section 3(37) of
ERISA, is not liable for any withdrawal or partial withdrawal liability with
respect to any multiemployer or pension plan and neither Seller nor Buyer will
become liable therefor as a result of the transactions contemplated hereby.
(d) (i) There are no material controversies pending or, to Seller's
knowledge, threatened, between Seller and any of the Transferred Employees,
prospective employees, former
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employees or retirees; and (ii) Seller has paid in full all wages, salaries,
commissions, bonuses, benefits and other compensation due and payable to its
Transferred Employees, including those arising under any policy, practice,
agreement, program, statute or other law.
(e) Schedule 5.10(e) hereof contains a correct and complete list of
(i) the names and current annual compensation rates of all Transferred Employees
and consultants; (ii) the names and amounts, if any, paid, accrued or to be paid
to all Transferred Employees or former employees under any severance, bonus,
incentive or similar plans; and (iii) all vacation and sick pay accrued or
anticipated to be accrued in respect of Transferred Employees.
5.11. Litigation. Except as set forth on Schedule 5.11 hereof, there is no
action, suit, inquiry, litigation, proceeding or investigation by or before any
referee, mediator or arbitrator, or any court or governmental or other
regulatory or administrative agency or commission, pending or, to Seller's
knowledge, threatened, against or involving Seller in respect of the Assets or
Seller's business. Except as set forth on Schedule 5.11 hereof, Seller is not
subject to any judgment, order or decree entered in any lawsuit or proceeding
that might adversely affect Buyer's rights in the Assets or Buyer's ability to
effectively utilize and exploit the Assets after the date hereof.
5.12. Compliance with Law.
(a) Except as described on Schedule 5.12 hereof, Seller has complied
in all material respects with, and is not in violation of any, law, ordinance or
governmental rule or regulation (including, without limitation, any applicable
business and zoning ordinances) to which the Assets are subject; and
(b) Except as set forth on Schedule 5.12 hereof, Seller has not
received any claim or notice of any violation of any building, zoning, fire,
health, employment or
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environmental laws, codes, ordinances, rules or regulations relating to Seller's
properties, premises, business or employees.
5.13. Intellectual Property. Schedule 5.13 sets forth an accurate and
complete list (showing in each case the registered or other owner, registration
number, and registration or other expiration date, if any) of all Patent Rights
protecting the Assets (the "Intellectual Property"). With respect to the
Intellectual Property:
(i) Except as set forth on Part I of Schedule 5.13 (which Schedule
sets forth the nature of Seller's rights (or grant of rights), or any
limitations thereon, the owner of such rights (or the licensee or grantee of
such rights and the nature of such grant), and listing the relevant agreement(s)
pursuant to which Seller obtained (or granted) such rights), Seller has sole and
exclusive right, title and interest in and to the Intellectual Property or the
sole and exclusive right to use the Intellectual Property.
(ii) Except as set forth on Part I of Schedule 5.13, Seller's rights
in the Intellectual Property are free and clear of any Liens and there are no
agreements or arrangements in effect with respect to the marketing,
distribution, licensing, sale, resale or promotion of the Intellectual Property
between Seller and any other person.
(iii) Except as set forth on Part II of Schedule 5.13, with respect to
the Intellectual Property (i) no action, suit, proceeding or investigation is
pending or threatened; (ii) to Seller's knowledge, none of the Intellectual
Property owned or used by Seller, and none of the Intellectual Property owned by
third parties and used by Seller, interferes with, infringes upon, conflicts
with or otherwise violates the rights of others or is being interfered with or
infringed upon by others, and none is subject to any outstanding order, decree,
judgment, stipulation or charge; (iii) no royalty, commission or similar
arrangements require any further payment by
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Seller, (iv) Seller has not agreed to indemnify any person for or against any
infringement of or by the Intellectual Property; (v) to Seller's knowledge,
there is no patent, invention or application therefor or similar property which
would infringe upon any of the Intellectual Property; and (vi) all registrations
of items of Intellectual Property owned by Seller registered under applicable
law are valid and in force, and in the case of applications, all patent
applications with respect to Patent Rights are pending and in good standing,
without challenge of any kind.
(iv) Except as set forth on Part III of Schedule 5.13, none of the
Intellectual Property, including any agreements or arrangements pursuant to
which Seller has rights in third party Intellectual Property, is subject to any
extensions, renewals, taxes or fees due within 90 days after the date hereof.
(v) Except as set forth on Schedule 5.13, Seller is not subject to
any judgment, order, writ, injunction or decree of any court or any Federal,
state, local or other governmental agency or instrumentality, domestic or
foreign, or any arbitrator, nor is a party to any contract which restricts or
impairs the use of any Intellectual Property.
(vi) During the preceding five years, Seller has not been known by or
done business under any other name not listed on Schedule 5.13.
5.14. Trade Secrets. Seller has provided Buyer access to all information
with respect to the Assets in the nature of confidential ideas, know-how, trade
secrets or proprietary information that may provide Seller with an advantage
over competitors who do not know or use it, including formulae, patterns,
inventions, processes, designs, devices, compilations of information and/or
data, copyrightable material and technical information and other proprietary
information of Seller with respect to the Assets (the "Technical Information").
With respect to the Technical Information: (i) it is owned solely and
exclusively by Seller and Seller is solely
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responsible for its development; (ii) it has been maintained and protected with
appropriate proprietary notices (including without limitation, notice of
ownership), confidentiality and non-disclosure agreements and such other
measures as necessary to properly protect and prevent disclosure to unauthorized
parties of the proprietary, trade secret and/or confidential information
contained therein; (iii) all Technical Information and any copies thereof shall
be delivered to Buyer on the date hereof; and (iv) Seller has no knowledge of
any violation of any trade secret rights or other Intellectual Property rights
with respect to such Technical Information.
5.15. Software and Information Systems. Schedule 5.15 sets forth an
accurate and complete list of all computer software programs and other
information systems, in any media, including, without limitation, all program
specifications, charts, procedures, input data, databases, compilations,
routines, tool sets, compilers, higher level or "proprietary" languages, report
layouts and formats, record file layouts, diagrams, functional specifications
and narrative descriptions, flow charts and related documentation and materials,
whether in source code, object code or human readable form, and all other
related material used by Seller (the "Software") and identifies (i) Software
that is owned by Seller, and (ii) Software that is licensed to Seller, the
licensor of the licensed Software, and, if different, the owner thereof, any
other Software in which Seller has any right of use, possessory or proprietary
rights, and the manner in which Seller acquired rights and the owner of the
Software. With respect to the Software:
(a) Except as set forth on Schedule 5.15, the Software owned by
Seller is not subject to any transfer, assignment, source code escrow agreement
or reversion; the Software licensed to Seller is not subject to any contractual
site, equipment, or other operational limitations;
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Software developed by Seller internally or acquired by Seller has been developed
without the aid or use of any consultants, agents, independent contractors or
persons (other than employees of Seller) who did not assign all ownership to
Seller; and Software commissioned for development by Seller has been developed
subject to written agreements whereby the ownership of the software vested
immediately in Seller and to the extent that vesting did not occur, the
developer is required to assign all ownership to Seller without further
consideration.
(b) Except as set forth on Schedule 5.15 Seller's rights in the
Software owned by Seller are free and clear of any Liens.
(c) Seller has received no notice of any violation of patent, trade
secret rights, copyrights or other proprietary rights with respect to any
Software and knows of no basis therefor.
(d) The Software owned by Seller and related systems in their
current form are Year 2000 Compliant. "Year 2000 Compliant" means that the
Software owned by Seller and the hardware systems used or relied on in Seller's
business is designed to be used prior to, during and after the calendar year
2000 A.D., and Software owned by Seller will accurately receive, provide and
process data/time data (including, without limitation, calculating, comparing
and sequencing) from, into and between the 20th and 21st centuries, including
the years 1999 and 2000, and leap year calculations and will not malfunction,
cease to function, or provide invalid or incorrect results as a result of
data/time data, to the extent that other information technology used in
combination with Software owned by Seller, properly exchanges date/time data
with it.
(e) To Seller's knowledge, the Software contains no timer, virus,
copy protection device, disabling code, clock, counter or other limiting design
or routine that causes the Software (or any operation thereof) to become erased,
inoperable, impaired, or otherwise incapable of being used in the full manner
for which it was contemplated for use under this
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Agreement to such an extent that such erasure, inoperability, impairment or
incapability of use would result in a material adverse effect.
5.16. Tax Matters.
(a) Seller has duly and timely filed or caused to be filed (or, if
not filed, has obtained valid extensions to file) all material Federal, state,
local and foreign income, franchise, excise, payroll, sales and use, property
and withholding tax returns, reports, estimates and information and other
statements or returns (collectively, "Tax Returns") required to be filed by or
on behalf of it pursuant to any applicable Federal, state, local or foreign tax
laws for all years and periods for which such Tax Returns have become due. All
such Tax Returns were correct in all material respects as filed and correctly
reflect in all material respects the Federal, state, local and foreign income,
franchise, excise, payroll, sales and use, property, withholding and other
taxes, duties, imposts and governmental charges (and charges in lieu of any
thereof), together with interest, additions to tax and penalties (collectively,
"Taxes") required to be paid or collected by (or allocable to) the Seller.
(b) There are no Liens for Taxes upon any property of Seller except
for Permitted Liens. All amounts required to be withheld by Seller from its
employees for income taxes, social security and other payroll Taxes have been
collected and withheld, and paid to the respective governmental agencies, or set
aside in accounts for such purpose, or accrued, reserved against and entered
upon Seller's books and records.
(c) No written currently unresolved claim has ever been made by a
taxing authority in a jurisdiction where Seller does not file Tax Returns that
Seller is or may be subject to Taxes assessed by such jurisdiction.
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(d) Seller (i) has paid or caused to be paid all material Taxes
required to be paid by it through the date hereof and (ii) has properly and
fully accrued on its financial statements referred to in Section 5.4 above, all
material Taxes for any period from the date of the last reporting period covered
by any Tax Returns up to and including the date hereof.
(e) There is no pending or potential audit, dispute or claim
concerning any Tax Return or Tax liability of Seller now in progress or, to the
Seller's best knowledge, threatened against Seller.
(f) Seller is not and has not been a party to any Tax sharing
agreement.
(g) Seller has never been included in a consolidated, unitary,
combined or other such Tax Return with another entity. Seller has no liability
for the Taxes of any other person (other than Seller) under Treasury Regulation
Section 1.1502-6 (or any similar provision of state, local or foreign law) as a
transferee or successor by contract or otherwise.
5.17. Insurance. Seller has not made any claims under any insurance
policies for loss or damages to any of the Assets prior to the date hereof.
5.18. Environmental Matters.
(a) Seller is in material compliance with all Environmental Laws
applicable to Seller's business. There are no Environmental Claims relating to
the Assets pending or, to Seller's knowledge, threatened against or involving
Seller.
(b) Except as set forth on Schedule 5.18 hereof, (i) no underground
tank or other underground storage receptacle for Hazardous Substances is
currently located at any Leased Property and there have been no releases of any
Hazardous Substances at any Leased Property. True and correct copies of all
Environmental Reports have been made available to Buyer.
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5.19. Broker's Fees. Except as set forth on Schedule 5.19 hereto, the
Seller has no liability or obligation to pay any fees or commissions to any
broker, finder or agent with respect to the transactions contemplated by this
Agreement.
6. Representations and Warranties of Buyer.
Buyer represents and warrants to, and covenants and agrees with, Seller as
follows:
6.1. Organization and Authority. Buyer is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware
and has the full corporate power and lawful authority to execute and deliver
this Agreement, to consummate the transactions contemplated hereby, and to
perform its obligations under this Agreement.
6.2. Authorization of Agreement. The execution, delivery and performance
of this Agreement by Buyer and the consummation by Buyer of the transactions
contemplated hereby have been duly authorized by all necessary corporate action
of Buyer. This Agreement constitutes, and each document and instrument
contemplated by this Agreement to be executed by Buyer, when executed and
delivered in accordance with the provisions hereof shall be, the valid and
legally binding obligation of Buyer, enforceable against Buyer in accordance
with its terms, subject to (i) bankruptcy, insolvency, reorganization,
fraudulent conveyance or transfer, moratorium or similar laws affecting
creditors' rights generally; and (ii) general principles of equity (regardless
of whether such enforceability is considered in a proceeding at law or in
equity).
6.3. Freedom to Contract. The execution, delivery and performance of this
Agreement by Buyer and the consummation by Buyer of the transactions
contemplated hereby will not (i) violate or conflict with any provisions of the
certificate of incorporation or by-laws, each as amended, of Buyer, (ii) violate
any of the terms, conditions or provisions of any law,
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rule, statute, regulation, order, writ, injunction, judgment or decree of any
court, Governmental Entity or regulatory agency, or (iii) conflict with or
result in a violation or breach of, or constitute (with or without due notice or
lapse of time or both) a default (or give rise to any right of termination,
cancellation or acceleration) under, any of the terms, conditions or provisions
of any note, bond, indenture, debenture, security agreement, trust agreement,
lien, mortgage, lease, agreement, license, franchise, permit, guaranty, joint
venture agreement or other agreement, instrument or obligation, oral or written,
to which Buyer is a party (whether as an original party or as an assignee or
successor) or by which any of its properties is bound. Except as set forth on
Schedule 6.3 hereof, no authorization, approval, order, license, permit,
franchise or consent, and no registration, declaration or filing with any court
or Governmental Entity is required in connection with Buyer's execution,
delivery and performance of this Agreement and the consummation of the
transactions contemplated hereby.
6.4. Litigation. There are no actions, suits, proceedings or
investigations pending, or, to the knowledge of Buyer, threatened, nor has
notice of any such items been received by Buyer, in any court or before any
Governmental Entity, against or affecting Buyer which could have a material
adverse effect on the financial condition or business of Buyer or could restrict
or limit Buyer's ability to execute and deliver this Agreement and perform its
obligations hereunder.
6.5. SEC Documents. Buyer has previously furnished to Seller an Annual
Report on Form 10-K for the fiscal year ended September 30, 1998, and the
Quarterly Reports on Form 10-Q as filed with the SEC for the quarters ended
December 31, 1998 and March 31, 1999 (collectively, the "Buyer SEC Documents").
As of their respective dates, the Buyer SEC
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Documents (including all documents incorporated by reference therein) did not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading, except in
the case of any Buyer SEC Document, any statement or omission therein that has
been corrected or otherwise disclosed or updated in a subsequent Buyer SEC
Document.
6.6. Assays. Buyer represents and warrants that it does not intend to use
any assays to be acquired or licensed from Seller, including those assays that
are part of the GPCR Directed Chemistry Program, in a method to identify and
select compounds infringing any of the claims of United States Patent No.
5,401,629, so long as such claim(s) remain outstanding and in effect.
7. Additional Agreements between the Parties.
7.1. Fees and Expenses.
(a) Except as otherwise provided in this Section 7.1 and except with
respect to claims for damages incurred as a result of the material breach of
this Agreement, all costs and expenses incurred in connection with this
Agreement and the transactions contemplated hereby shall be paid by the party
incurring such expense.
(b) The prevailing party in any legal action undertaken to enforce
this Agreement or any provision hereof shall be entitled to recover from the
other party the costs and expenses (including attorney's and expert witness fees
and expenses) incurred in connection with such action.
(c) Seller shall pay any and all fees in connection with obtaining
the consent to assignment of the GECC Lease.
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7.2. Employment Matters.
(a) Buyer (hereafter sometimes referred to as "Employer") shall, at
annual salaries comparable to their current salaries, offer employment to each
of Seller's employees (the "Employees") listed on Schedule 7.2(a) hereto
together with benefits currently provided by Buyer to comparable employees of
Buyer (but excluding any severance benefits). Those Employees accepting an offer
and commencing employment with Employer are herein referred to as "Transferred
Employees." Seller will render reasonable assistance and provide reasonable
information to assist Employer in including Transferred Employees on Employer's
payroll. Seller shall provide to Buyer copies of all employment records covering
the Transferred Employees.
(b) Seller shall assign to Buyer, effective as of the date hereof,
all insurance policies, and related agreements with respect to welfare plans (as
such term is defined under ERISA) of Seller and Seller shall obtain all
necessary consents to such assignments. Seller shall assume, retain
responsibility for and continue to pay, in accordance with the terms of the
applicable employer benefit plans, any hospital, medical or other health care,
life insurance, short and long-term disability, travel accident or other plan
benefits and expenses for each Employee or former employee of Seller (including
each Transferred Employee) with respect to claims incurred by each such employee
or his or her covered dependents prior to or on the date hereof or other costs
in respect of any such plan coverage for periods prior to or on the date hereof.
For purposes of this Section 7.2, any hospital, medical, dental or other health
care claim will be deemed incurred when the services giving rise to the claim
are performed and any other claim will be deemed incurred when the event that is
the basis of the claim first occurred.
(c) Seller shall be liable for any amounts to which any Employee or
former Employee becomes entitled under any severance or bonus policy, plan,
agreement, arrangement
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or program (whether or not covered by ERISA) maintained by Seller which exists
or arises or may be deemed to exist or arise under the terms thereof or any
applicable law, including, but not limited to those provided for in severance
agreements for certain employees of Seller.
(d) Buyer shall be liable for the amount of any vacation, sick or
other compensatory pay owed or which might be owed to any Transferred Employees
as of the date hereof, without taking into account the transaction contemplated
by this Agreement.
(e) Buyer shall provide COBRA continuation coverage (as required
under IRC Section 4980B(f) and ERISA Sections 601 through 609) for all
Employees, including, without limitation, the non-Transferred Employees provided
they are listed in Schedule 7.2(e). Seller shall reimburse Buyer for the costs
of the COBRA continuation coverage provided to certain non-Transferred Employees
at no charge (and Seller shall specify to Buyer which employees are to receive
such no charge COBRA continuation coverage and the number of months of such
coverage). The costs of such coverage shall equal the dollar value of the claims
incurred (as defined in Section 7.2(b) hereof), administrative charges with
respect thereto and the cost of stop-loss coverage or similar insurance with
respect to such coverage.
7.3. Post-Closing Obligations and Further Assurances. From and after the
date hereof, Seller, on the one hand, and Buyer, on the other hand, agree to
execute and deliver such further documents and instruments and to do such other
acts and things as Buyer or Seller, as the case may be, may reasonably request
in order to effectuate the transactions contemplated by this Agreement.
Immediately following the date hereof, the Seller shall fully cooperate and act
in good faith to effectively transfer the Assets to the Buyer as expeditiously
as possible. Seller shall use its commercially reasonable efforts to remove the
Excluded Assets from the Leased Property as soon as practicable after the date
hereof, and in any event, not
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later than the close of business on August 26, 1999 (the "Transition Period").
During such Transition Period, certain non-Transferred Employees (who remain
employees of Seller) may remain on the Leased Property to effect the transition
and to perform Seller's responsibilities under the Research Agreement. In
connection with such transfer, the parties acknowledge that the Schedules to
this Agreement may be amended by the parties hereto after the date hereof to
clarify or supplement the content of such Schedules. Following the date hereof,
the parties will cooperate with each other in connection with any tax audits and
in the defense of any legal proceedings relating to Seller's business or the
Assets to the extent such cooperation does not cause unreasonable expense,
unless such expense is borne by the requesting party.
7.4. Consents. Seller and Buyer shall use reasonable best efforts to
obtain at the earliest practicable date, by instruments in form and substance
reasonably satisfactory to Buyer, all consents and approvals referred to in
Schedule 5.3 hereof. If any consent is not obtained prior to the date hereof,
Seller shall, to the extent reasonably possible, keep the agreement in effect
and shall give Buyer the benefit of the agreement following the date hereof to
the same extent as if Seller had not been prevented from assigning such
agreement to Buyer, including enforcement for the benefit of Buyer of any and
all rights of Seller against any third party arising out of breach or
cancellation by such third party, provided that Buyer will bear all costs and
expenses of any such enforcement proceeding, and Buyer shall perform the
obligations and assume the liabilities under the agreement relating to the
benefit obtained by Buyer. Nothing in this Agreement shall be construed as an
attempt to assign any agreement or other instrument that is by its terms not
assignable without the consent of the other party and such consent is not
obtained.
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7.5. Public Announcements. Each party to this Agreement shall consult with
each other before issuing any press release or otherwise making any public
statements with respect to this Agreement or any transaction contemplated hereby
and shall not issue any such press release or make any such public statement
without the prior consent of the other party (unless required by law), which
consent shall not be unreasonably withheld. The parties hereto further agree to
issue a joint press release on the date hereof in the form annexed hereto as
Exhibit A.
7.6. Tax Matters. Notwithstanding anything else to the contrary in this
Agreement:
(a) Seller agrees to retain responsibility for, and agrees to pay
when due (except while and to the extent being contested in good faith), any and
all Taxes of every nature and description of Seller or otherwise relating to the
Assets for any taxable period or portion of a taxable period, which period or
portion ends on or prior to the date hereof. Buyer agrees to retain
responsibility for, and agrees to pay when due (except while and to the extent
being contested in good faith), any and all Taxes of every nature and
description of Buyer or otherwise relating to the Assets for any taxable period
or portion of a taxable period, which portion or period begins after the date
hereof. Any Taxes which are imposed on the Assets (including personal property
taxes) or which are otherwise imposed on a periodic basis relating to any Tax
period which begins before and ends after the date hereof shall be allocated
between the parties on a pro-rata basis over the period for which such Taxes are
levied, or if it cannot be determined over what period such taxes are being
levied, over the fiscal period of the relevant taxing authority, in each case
irrespective of the lien or assessment date of such Taxes. As promptly as
practicable after the date hereof, each party shall present to the other a
calculation as to the amount of such Taxes paid by such party and the pro-rata
portion owed by the other, which shall be paid within ten (10) days.
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(b) All sales, tax, use tax, compensating use tax and transfer tax
(including any penalties and interest) incurred in connection with this
Agreement and the consummation of the transaction contemplated hereby shall be
paid by Buyer when due.
(c) Each of the parties will, at its own expense, file all necessary
Tax Returns and other documentation with respect to those Taxes for which it is
responsible hereunder and, if required by law, the other party will join in the
execution of any such Tax Return and other documentation.
7.7. Living Chip Technology Equipment. Simultaneously with the purchase by
Buyer of all equipment leased under the GECC Lease, Seller shall purchase the
equipment used in connection with the Living Chip Technology set forth on
Schedule 7.7 hereto for a purchase price equal to 11% of the purchase price paid
by Buyer to GECC for all the equipment. Prior to such purchase, Seller shall pay
11% of the payments under the GECC Lease paid by Buyer to GECC.
7.8. Royalties and Milestone Payments. Seller shall pay to Buyer (a)
milestone payments of up to $3 million in the aggregate with respect to the
first pharmaceutical product developed by Buyer under the GPCR Directed
Chemistry Program (the "Initial GPCR Product") and under the Solvay Agreement
(the "Initial Solvay Product"), and (b) royalties on either the Initial GPCR
Product or the Initial Solvay Product, whichever is commercialized first. The
following milestones shall be paid upon the occurrence, if ever, of the
following events: (A) $1 million upon Buyer's execution of an agreement with a
third party collaborator for the development and commercialization of the
Initial GPCR Product (the "First GPCR Event"), (B) $2 million upon commencement
of Phase III clinical trials of the Initial GPCR Product, (C) $1 million upon
commencement of Phase III clinical trials of the Initial Solvay
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Product (the "First Solvay Event"), and (D) $2 million upon the first sale of
the Initial Solvay Product in any of United States, Canada, Great Britain,
Japan, France, Germany, Italy and others; provided, however, in no event shall
Seller be entitled to more than $3 million in the aggregate in milestone
payments. For example, if Seller has received the $1 million upon the First GPCR
Event and $1 million upon the First Solvay Event, then upon the next milestone
to occur, Seller shall only be entitled to a payment of $1 million. In addition
to the milestone payments, Seller shall be entitled to a ** royalty on net sales
(as such term is defined in the applicable agreement or as otherwise negotiated
in good faith by Buyer or a licensee thereof) of either the Initial GPCR Product
or the Initial Solvay Product, whichever is first commercialized. Any royalty
payments due from Buyer to Seller shall be paid within 60 days after the end of
each calendar quarter during which the royalty payment accrued. Each such
payment shall be accompanied by a statement indicating the net sales during such
quarterly period and the amount of royalty due. Seller shall have the right,
through an independent accountant, to examine books and records relating to or
relevant to the computations of net sales at any reasonable time during business
hours after notifying Buyer of its desire to do so. Such examination shall be
conducted no more often than once each year.
8. Indemnification.
8.1. Survival of Representations and Warranties. All representations and
warranties of the parties hereto shall survive the execution and delivery of
this Agreement, and shall thereafter expire on the date which is eighteen (18)
months after the date hereof, provided that
- ----------
** This portion has been redacted pursuant to a request for confidential
treatment.
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such expiration shall not affect any claims for indemnification made prior to
the date which is eighteen (18) months after the date hereof; and provided,
further, that all representations and warranties contained in Section 5.16 shall
survive for the applicable statute of limitations.
8.2. Indemnification by Seller. Seller shall indemnify Buyer and hold it
harmless at all times from and after the date hereof against and in respect to
any and all actions, suits, proceedings, claims, demands, assessments,
judgments, costs, damages, losses, liabilities, taxes and deficiencies and
penalties and interest thereon and costs and expenses, including reasonable
attorneys' fees and expenses (collectively, "Losses") resulting from (a) any
misrepresentation, breach of warranty, or nonfulfillment of any covenant or
agreement of Seller in this Agreement, (b) the Excluded Liabilities, (c) any
claim arising from or relating to the operation of Seller's business prior to
the date hereof (to the extent that the foregoing have not been expressly
assumed by Buyer hereunder), and (d) any Losses suffered or incurred in
enforcing this indemnity, provided that it is ultimately determined that Buyer
is entitled to such indemnity.
8.3. Indemnification by Buyer. Buyer indemnifies Seller and holds it
harmless at all times from and after the date hereof against and in respect to
any and all Losses resulting from (a) any misrepresentation, breach of warranty
or nonfulfillment of any covenant or agreement of Buyer in this Agreement, (b)
the Assumed Liabilities, (c) any Losses suffered or incurred in enforcing this
indemnity, provided that it is ultimately determined that Seller is entitled to
such indemnity, and (d) any failure on its part to pay the Taxes described in
Section 7.6(b) hereof.
8.4. Notice to the Indemnitor. Promptly after the assertion of any claim
by a third party or occurrence of any event which may give rise to a claim for
indemnification from an indemnitor (the "Indemnitor") under this Section, an
indemnified party (the "Indemnified
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Party") shall notify the Indemnitor in writing of such claim (the "Claims
Notice"). The Claims Notice shall describe the asserted liability in reasonable
detail, and shall indicate the amount (estimated, if necessary and to the extent
feasible) of the Loss that has been or may be suffered by the Indemnified Party.
Failure by the Indemnified Party to give a Claims Notice to the Indemnitor in
accordance with the provisions of this Section 8.4 shall not relieve the
Indemnitor of its obligations hereunder except to the extent that the Indemnitor
has been actually prejudiced by such failure.
8.5. Rights of Parties to Settle or Defend. The Indemnitor may elect to
compromise or defend, at its own expense, by its own counsel and to the extent
an election with respect to such compromise or defense is available to the
Indemnified Party, any asserted liability. If the Indemnitor elects to
compromise or defend such asserted liability, it shall within thirty (30)
calendar days (or sooner, if the nature of the asserted liability so requires)
notify the Indemnified Party of its intent to do so, and the Indemnified Party
shall cooperate, at the expense of the Indemnitor, in the compromise of, or
defense against, such asserted liability. If the Indemnitor elects to defend any
claim, the Indemnified Party shall make available to the Indemnitor any books,
records or other documents within its control that are necessary or appropriate
for such defense. If the Indemnitor elects not to compromise or defend the
asserted liability, fails to notify the Indemnified Party of its election as
herein provided or contests its obligation to indemnify under this Agreement,
the Indemnified Party may pay, compromise or defend (at the expense of the
Indemnitor) such asserted liability as the Indemnified Party considers
appropriate. The parties agree to cooperate fully with one another in the
defense, settlement or comprise of any asserted liability. Notwithstanding the
foregoing, neither the Indemnitor nor the Indemnified Party may settle or
compromise any claim over the
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objection of the other; provided that consent to settlement or compromise shall
not be unreasonably withheld. In any event, the Indemnified Party and the
Indemnitor may participate, at their own expense, in the defense of such
asserted liability.
8.6. Limitations on Indemnification.
(a) The indemnification obligations of the Indemnitor pursuant to
Sections 8.2 or 8.3 (other than Section 8.3(d)) hereof shall not be effective
until the aggregate dollar amount of all Claims which would otherwise be
indemnifiable by such Indemnitor pursuant to this Agreement exceeds $15,000 (the
"Indemnitor's Threshold Amount"). The indemnification obligations of the
Indemnitor pursuant to this Agreement (other than those arising under Section
8.3(d) hereof) shall be effective only with respect to Claims in excess of the
Indemnitor's Threshold Amount and only until the dollar amount paid in respect
of the Claims indemnified against under or related to this Agreement aggregates
to an amount equal to $1,500,000.
(b) Payments by the Indemnitor shall be limited to the amount of any
Losses that remain after deducting therefrom (i) any Tax benefit to the
Indemnified Party or any affiliate thereof that results in a cash benefit in the
Tax year that the Loss is deducted; and (ii) any insurance proceeds and any
indemnity, contribution or other similar payment recoverable by the Indemnified
Party or any of its affiliates from any third party with respect thereto.
9. Miscellaneous.
9.1. Entire Agreement. This Agreement (together with the Schedules hereto
and the other agreements contemplated by this Agreement in Section 4 hereof) and
the Confidentiality Agreement contain, and are intended as, a complete statement
of all of the terms of the
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arrangements between the parties with respect to the matters provided for, and
supersedes any previous agreements and understandings between the parties with
respect to those matters.
9.2. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND
ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
9.3. Headings. The section headings of this Agreement are for reference
purposes only and are to be given no effect in the construction or
interpretation of this Agreement.
9.4. Notices. All notices and other communications under this Agreement
shall be in writing and shall be deemed given when delivered personally, mailed
by registered mail, return receipt requested, sent by recognized overnight
delivery service or, to the extent receipt is confirmed, by telecopy, telefax,
or other electronic transmission service to the parties at the following
addresses (or to such other address as a party may have specified by notice
given to the other party pursuant to this provision):
If to Seller, to:
Cadus Pharmaceutical Corporation
Attention: President
c/o Icahn Associates
767 Fifth Avenue
New York, New York 10153
with copies to:
Morrison Cohen Singer & Weinstein, LLP
750 Lexington Avenue
New York, New York 10022
Attention: Salomon R. Sassoon, Esq.
Telecopy No.: (212) 735-8708
Telephone No.: (212) 735-8600
If to Buyer, to:
OSI Pharmaceuticals, Inc.
106 Charles Lindbergh Boulevard
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Uniondale, New York 11533
Attention: President
Telecopy No.: (516) 222-0114
Telephone No.: (516) 222-0023
with copies to:
Squadron, Ellenoff, Plesent & Sheinfeld, LLP
551 Fifth Avenue
New York, New York 10176
Attention: Joel I. Papernik, Esq.
Telecopy No.: (212) 697-6686
Confirmation No.: (212) 661-6500
9.5. Separability. If at any time any of the covenants or the provisions
contained herein shall be deemed invalid or unenforceable by the laws of the
jurisdiction wherein it is to be enforced, by reason of being vague or
unreasonable as to duration, geographic scope, scope of activities restricted or
for any other reason, such covenants or provisions shall be considered divisible
as to such portion and such covenants or provisions shall become and be
immediately amended and reformed to include only such covenants or provisions as
are enforceable by the court or other body having jurisdiction of this
Agreement; and the parties agree that such covenants or provisions, as so
amended and reformed, shall be valid and binding as though the invalid or
unenforceable portion had not been included herein.
9.6. Amendment; Waiver. No provision of this Agreement may be amended or
modified except by an instrument or instruments in writing signed by the parties
hereto. No waiver of any provision hereof shall be construed as a waiver of any
other provision. Any waiver must be in writing.
9.7. Assignment and Binding Effect. Neither of the parties hereto may
assign any of its rights or delegate any of its duties under this Agreement
without the prior written consent of
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<PAGE> 39
the other. All of the terms and provisions of this Agreement shall be binding
on, and shall inure to the benefit of, the respective successors and permitted
assigns of the parties.
9.8. No Benefit to Others. The representations, warranties, covenants and
agreements contained in this Agreement are for the sole benefit of the parties
hereto and their respective successors and assigns and they shall not be
construed as conferring and are not intended to confer any rights on any other
persons.
9.9. Counterparts. This Agreement may be executed in counterparts, each of
which shall be deemed an original, and each party may become a party hereto by
executing a counterpart hereof. This Agreement and any counterpart so executed
shall be deemed to be one and the same instrument.
9.10. Certain Definitions. The following terms, as used herein, have the
following meanings:
"Affiliate" means with respect to any person or entity, means any
person or entity directly or indirectly controlling, controlled by or under
common control with such person or entity.
"Balance Sheet" shall mean the Balance Sheet of Seller at March 31,
1999 from Seller's Quarterly Report on Form 10-Q for the quarter ended March 31,
1999.
"Business Day" means any day excluding Saturday, Sunday and any day
which is a legal holiday under the laws of the State of New York on which
banking institutions located in such state are closed.
"Compounds" means any compound, or derivative or synthesis thereof
owned by Seller.
38
<PAGE> 40
"Copyrights" means United States and foreign copyrights,
copyrightable works, and mask works, whether registered or unregistered, and
pending applications to register the same and all agreements, contracts,
licenses, sublicenses, assignments and indemnities that relate or pertain to any
of the forgoing.
"Environmental Claims" means all accusations, allegations, notices
of violation, Liens, claims, demands, suits, or causes of action for any damage,
including, without limitation, personal injury, property damage (including,
without limitation, any depreciation or diminution of property values), lost use
of property or consequential damages, based upon Environmental Laws or
principles of common law relating to pollution or exposure to Hazardous
Substances. By way of example only (and not by way of limitation), Environmental
Claims include (i) actions alleging actual or threatened damages to natural
resources and seeking recovery pursuant to Environmental Laws, (ii) claims for
nuisance or its statutory equivalent, (iii) claims for the recovery of response
costs, or administrative or judicial orders directly related to the performance
of investigations, responses or remedial actions under any Environmental Law,
(iv) requirements to implement "corrective action" pursuant to any order or
permit issued pursuant to the Resource Conservation and Recovery Act, as
amended, or similar provisions of applicable state law, (v) claims based upon
Environmental Laws or principles of common law relating to pollution or exposure
to Hazardous Substances for restitution, contribution, or indemnity, (vi) fines,
penalties or liens of any kind against property based upon Environmental Laws or
principles of common law relating to pollution or exposure to Hazardous
Substances, (vii) claims based upon Environmental Laws or principles of common
law relating to pollution or exposure to Hazardous Substances for injunctive
relief or other orders or notices of violation from federal, state or local
agencies or courts and (viii) with regard to any present or former employees,
claims relating to
39
<PAGE> 41
exposure to or injury from Hazardous Substances based upon principles of common
law relating to pollution or exposure to Hazardous Substances.
"Environmental Laws" means all applicable federal, state, district
and local laws, all rules or regulations promulgated thereunder, and all orders,
consent orders or judgments issued, promulgated or entered pursuant thereto,
relating to pollution or protection of the environment (including, without
limitation, ambient air, surface water, ground water, land surface, or
subsurface strata), including, without limitation, (i) laws relating to
emissions, discharges, releases or threatened releases of pollutants,
contaminants, chemicals, industrial materials, wastes or other hazardous or
toxic substances into the environment and (ii) laws relating to the
identification, generation, manufacture, processing, distribution, use,
treatment, storage, disposal, recovery, transport or other handling of
pollutants, contaminants, chemicals, industrial materials, wastes or other
hazardous or toxic substances. Environmental Laws shall include, without
limitation, the Comprehensive Environmental Response, Compensation and Liability
Act of 1980, as amended ("CERCLA"), the Toxic Substances Control Act, as
amended, the Hazardous Materials Transportation Act, as amended, the Resource
Conservation and Recovery Act, as amended ("RCRA"), the Clean Water Act, as
amended, the Safe Drinking Water Act, as amended, the Clean Air Act, as amended,
the Atomic Energy Act of 1954, as amended, the Occupational Safety and Health
Act, as amended, and all analogous laws promulgated or issued by any state or
other Governmental Entity.
"Environmental Reports" means any and all written analyses,
summaries or explanations, in the possession or control of Seller, of (a) the
condition of the environment on or about the Leased Property or (b) Seller's
compliance with Environmental Laws.
40
<PAGE> 42
"ERISA" means the Employee Retirement and Income Security Act of
1974, as amended.
"Facility Lease" means the lease of the premises at 777 Old Saw Mill
River Road, Tarrytown, New York, between Keren Limited Partnership and Seller
dated June 20, 1995, as amended.
"Functional Genomics Program" means all rights related to the
activities conducted by Seller in collaboration with Genome Therapeutics
Corporation, including, but not limited to, the putative G protein-coupled
receptors identified (in whole or in part) within the collaboration and the
laboratory and bioinformatics technology owned or licensed by Seller to perform
such identification. The Functional Genomics Program explicitly includes all the
proprietary software created by Seller in Java and Perl and the contents of any
proprietary collection of information that the software accesses, except the
information (and programs designed to access such information) related to
Seller's Compounds or the results of screening Seller's Compounds. The
Functional Genomics Program further includes all the intellectual property owned
or licensed by Seller related to methods and compositions used to identify
surrogate or natural ligands to molecular targets, where the natural ligand to
such target is unknown.
"GECC Lease" means the Master Lease Agreement dated November 14,
1997 between Seller and General Electric Capital Corporation.
"Governmental Entity" means any domestic or foreign administrative
agency, bureau, board, commission, officer, authority, department or other
governmental body or agency.
"GPCR Directed Chemistry Program" means **
- ----------
** This portion has been redacted pursuant to a request for confidential
treatment.
41
<PAGE> 43
"Hazardous Substances" means all pollutants, contaminants,
chemicals, wastes, and any other carcinogenic, ignitable, corrosive, reactive,
toxic or otherwise hazardous substances or materials (whether solids, liquids or
gases) subject to regulation, control or remediation under Environmental Laws.
By way of example only, the term Hazardous Substances includes petroleum, urea
formaldehyde, flammable, explosive and radioactive materials, PCBs, pesticides,
herbicides, asbestos, sludge, slag, acids, metals, solvents and waste waters.
"Living Chip Technology" means all rights related to the license
agreement and sponsored research agreements between Seller and the Massachusetts
Institute of Technology involving the laboratory of Professor Ian Hunter,
including, but not limited to, the grant application to the National Institute
of Standards and Technology for the Advanced Technology Program and the work
product of Seller's employees and consultants related to such license agreement
and sponsored research agreements.
"Patent Rights" means United States and foreign patents, patent
applications, continuations, continuations-in-part, divisions, reissues, patent
disclosures, inventions (whether or not patented) or improvements thereto, and
all agreements, contracts, licenses, sublicenses, assignments and indemnities
that relate or pertain to any of the foregoing.
"Permitted Liens" means liens or other encumbrances securing taxes,
assessments, governmental charges or levies, or the claims of materialmen,
carriers, landlords and like persons, all of which are not yet due and payable
or are being contested in good faith.
"SEC" shall mean the U.S. Securities and Exchange Commission.
"Seller's knowledge" means the best knowledge of the executive
employees of Seller after due inquiry, which shall include making reasonable
inquiries of Seller's employees, but shall not require the executive employees
to actively seek out information from third parties.
42
<PAGE> 44
"Solvay Agreement" means the Research Collaboration and License
Agreement dated as of November 1, 1995 between Seller and Solvay Duphar B.V.
"Taxes" shall mean all foreign, federal, state and local income,
profits, franchise, gross receipts, payroll, sales, employment, use, property,
transfer, excise, estimated, stamp, alternative or add-on minimum,
environmental, withholding and any other taxes, duties, assessments,
governmental charges or levies, together with all interest, penalties and other
additions imposed with respect to such amounts.
"Tax Return" shall mean any return, declaration, report, claim for
refund or information return or statement relating to Taxes, including any
schedule or attachment thereto, and including any amendment thereof.
9.11. Capitalized Terms. The following capitalized terms are defined in
the following sections of this Agreement:
Term Section
- ---- -------
Affiliate 9.10
Assets 1.1
Assumed Liabilities 2.1
Balance Sheet 12.10
Benefit Plans 5.10(a)
Business Day 9.10
Buyer Preamble
Buyer SEC Documents 6.6
CERCLA 9.10
Claims Notice 8.4
Copyrights 9.10
Employee Arrangements 5.10(a)
Employer 7.2(a)
Environmental Claims 9.10
Environmental Laws 9.10
43
<PAGE> 45
Environmental Reports 9.10
ERISA 9.10
Exchange Act 5.3
Excluded Assets 1.2
Excluded Contracts 1.2(k)
Excluded Inventory 1.2(j)
Excluded Liabilities 2.2
First GPCR Event 7.8
First Solvay Event 7.8
Fixed Assets 1.1(a)
Functional Genomics Program 9.10
GAAP 5.4
GPCR Directed Chemistry Program 9.10
Governmental Entity 9.10
Hazardous Substances 9.10
Indemnified Party 8.4
Indemnitor 8.4
Indemnitor's Threshold Amount 8.6
Initial GPCR Product 7.8
Initial Solvay Product 7.8
Intellectual Property 5.13
Inventory 1.1(b)
Leased Property 5.6
Leases 5.6
Liabilities 5.6
Liens 5.7
Living Chip Technology 9.10
Losses 8.2
Material Contracts 5.18
Option 5.10(a)
44
<PAGE> 46
Patent License Agreement 4(j)
Patent Rights 9.10
Permits 5.9
Permitted Liens 9.10
Purchased Contracts 1.1(d)
Purchase Price 3.1
RCRA 9.10
Seller Preamble
Securities Act 5.4
Seller's Group 5.10(c)
Seller SEC Documents 5.4
SIBIA 1.2(c)
Software 5.15
Software License Agreement 4.1(i)
Taxes 5.16
Tax Return 5.16
Technical Information 5.14
Technology License Agreement 4.1(h)
Trademarks 9.10
Transferred Employees 7.8
Transition Period 7.3
Year 2000 Compliant 5.15
9.12. Interpretation. Article titles, headings to sections and any table
of contents are inserted for convenience of reference only and are not intended
to be a part of or to affect the meaning or interpretation hereof. The Schedules
and Exhibits referred to herein shall be construed with and as an integral part
of this Agreement to the same extent as if they were set forth verbatim herein.
As used herein, "include", "includes" and "including" are deemed to be followed
by "without limitation" whether or not they are in fact followed by such words
or
45
<PAGE> 47
words of like import; the singular includes the plural and vice versa;
references to any agreement or other document are to such agreement or document
as amended and supplemented from time to time.
IN WITNESS WHEREOF, the undersigned have executed this Asset Purchase
Agreement as of the date first above written.
CADUS PHARMACEUTICAL CORPORATION
By: /s/
----------------------------------
Name:
Title:
OSI PHARMACEUTICALS, INC.
By: /s/
----------------------------------
Name:
Title:
46
<PAGE> 48
List of Schedules
Schedule 1.1(a) Fixed Assets
Schedule 1.1(b) Inventory
Schedule 1.1(d) Purchased Contracts
Schedule 1.1(e) Security Deposits
Schedule 1.1(f) Prepaid Expenses
Schedule 1.1(g) Intellectual Property
Schedule 1.1(i) Permits
Schedule 1.1(k) GPCR Directed Chemistry Program
Schedule 1.2(i) Excluded Fixed Assets
Schedule 1.2(j) Excluded Inventory
Schedule 1.2(k) Excluded Contracts
Schedule 1.2(l) Excluded Security Deposits
Schedule 1.2(m) Excluded Prepaid Expenses
Schedule 1.2(n) Excluded Intellectual Property
Schedule 3.2 Allocation of Purchase Price
Schedule 5.3 Consents and Approvals
Schedule 5.5 Material Adverse Change
Schedule 5.6 Material Liabilities
Schedule 5.7(a) Liens, Fixed Assets
Schedule 5.7(b) Excluded Fixed Assets
Schedule 5.8 Material Contracts
Schedule 5.9 Licenses and Permits
Schedule 5.10(a) Benefit Plans and Employee Arrangements
Schedule 5.10(c) Pension Plans
Schedule 5.10(e) Employee Salaries, Bonuses & Vacation
Pay
Schedule 5.11 Litigation
Schedule 5.12 Compliance with Law
Schedule 5.13 Intellectual Property
Schedule 5.15 Software and Information Systems
<PAGE> 49
Schedule 5.18 Environmental Matters
Schedule 5.19 Broker's Fees
Schedule 6.3 Consents and Approvals
Schedule 7.2(a) Employment Matters
48
<PAGE> 1
OSI PHARMACEUTICALS, INC.
NON-QUALIFIED STOCK OPTION PLAN FOR
FORMER EMPLOYEES OF
CADUS PHARMACEUTICAL CORP.
1. Purpose
OSI Pharmaceuticals, Inc. (the "Company") has acquired certain of
the assets of Cadus Pharmaceutical Corp. ("Cadus"). In connection
therewith, the Company has adopted this Non-Qualified Stock Option Plan
for Former Employees of Cadus Pharmaceutical Corp. (the "Plan") as an
incentive to induce [certain] former employees of Cadus to accept
employment with, or become associated with, the Company or a parent or
subsidiary of the Company, and to encourage them to acquire a proprietary
interest in the Company through the ownership of common stock, par value
$.01 per share (the "Common Stock"), of the Company. Such ownership will
provide them with a more direct stake in the future welfare of the
Company. No option granted under the Plan shall be considered an
"incentive stock option" as defined in Section 422 of the Internal Revenue
Code of 1986, as amended (the "Code").
As used herein, the term "parent" or "subsidiary" shall mean any
present or future corporation which is or would be a "parent corporation"
or "subsidiary corporation" of the Company as the term is defined in
Section 424 of the Code (determined as if the Company were the employer
corporation).
2. Administration of the Plan
The Plan shall be administered by a committee (the "Committee") as
appointed from time to time by the Board of Directors of the Company,
which may be the Compensation Committee of the Board of Directors. Except
as otherwise specifically provided herein, no person, other than members
of the Committee, shall have any discretion as to decisions regarding the
Plan. The Company may engage a third party to administer routine matters
under the Plan, such as establishing and maintaining accounts for Plan
participants and facilitating transactions by participants pursuant to the
Plan.
In administering the Plan, the Committee may adopt rules and
regulations for carrying out the Plan. The interpretations and decisions
made by the Committee with regard to any question arising under the Plan
shall be final and conclusive on all persons participating or eligible to
participate in the Plan. Subject to the provisions of the Plan, the
Committee shall determine the terms of all options granted pursuant to the
Plan, including, but not limited to, the persons to whom, and the time or
times at which, grants shall be made, the number of shares to be covered
by each option, the duration of options, the exercisability of options,
and the option price.
<PAGE> 2
3. Shares of Stock Subject to the Plan
Except as provided in paragraphs 6(h), 6(i) and 7 hereof, the number
of shares that may be issued or transferred pursuant to the exercise of
options granted under the Plan shall not exceed 415,000 shares of Common
Stock. Such shares may be authorized and unissued shares or previously
issued shares acquired or to be acquired by the Company and held in
treasury.
4. Eligibility
Options may be granted only to directors, officer, employees and
consultants who are former employees of Cadus.
5. Granting of options
No options pursuant to this Plan may be granted after ten years from
the date of the closing of the Asset Purchase Agreement by and between the
Company and Cadus. The date of the grant of any option shall be the date
on which the Committee authorizes the grant of such option.
6. Options
Options shall be evidenced by stock option agreements in such form,
consistent with the Plan, as the Committee shall approve from time to
time, which agreements need not be identical and shall be subject to the
following terms and conditions:
(a) Option Price. The purchase price under each option shall
be specified by the Committee, but shall in no case be less than the
greater of 50% of the Fair Market Value of the Common Stock at the
time the option is granted and the par value of such Common Stock.
(b) Medium and Time of Payment. Stock purchased pursuant to
the exercise of an option shall at the time of purchase be paid for
in full in cash, or, upon conditions established by the Committee,
by delivery of shares of Common Stock owned by the recipient. If
payment is made by the delivery of shares, the value of the shares
delivered shall be the Fair Market Value of such shares on the date
of exercise of the option. In addition, unless otherwise provided by
the Committee, an "in the money" option may be exercised on a
"cashless" basis in exchange for the issuance to the optionee (or
other person entitled to exercise the option) of the largest whole
number of shares having an aggregate value equal to the value of
such option on the date of exercise. For this purpose, the value of
the shares delivered by the Company and the value of the option
being exercised shall be determined based on the Fair Market Value
of the Common Stock on the date of exercise of the option. Upon
receipt of payment and such documentation as the
2
<PAGE> 3
Company may deem necessary to establish compliance with the
Securities Act of 1933, as amended (the "Securities Act"), the
Company shall, without stock transfer tax to the optionee or other
person entitled to exercise the option, deliver to the person
exercising the option a certificate or certificates for such shares.
It shall be a condition to the performance of the Company's
obligation to issue or transfer Common Stock upon exercise of an
option or options that the optionee pay, or make provision
satisfactory to the Company for the payment of, any taxes (other
than stock transfer taxes) the Company is obligated to collect with
respect to the issue or transfer of Common Stock upon such exercise,
including any federal, state, or local withholding taxes.
(c) Waiting Period. The waiting period and time for exercising
an option shall be prescribed by the Committee in each particular
case; provided, however, that no option may be exercised after 10
years from the date it is granted.
(d) Rights as a Stockholder. A recipient of options shall have
no rights as a stockholder with respect to any shares issuable or
transferable upon exercise thereof until the date a stock
certificate is issued to him for such shares. Except as otherwise
expressly provided in the Plan, no adjustment shall be made for
dividends or other rights for which the record date is prior to the
date such stock certificate is issued.
(e) Non-Assignability of Options. Except as may otherwise be
specifically provided by the Committee, no option shall be
assignable or transferable by the recipient except by will or by the
laws of descent and distribution. During the lifetime of a
recipient, except as may otherwise be specifically provided by the
Committee, options shall be exercisable only by such recipient. If
the Committee approves provisions in any particular case allowing
for assignment or transfer of an option, then such option will
nonetheless be subject to a six-month holding period commencing on
the date of grant during which period the recipient will not be
permitted to assign or transfer such option, unless the Committee
further specifically provides for the assignability or
transferability of such option during this period. See paragraph 8
hereof for restrictions on sale of shares.
(f) Effect of Termination of Employment. If a recipient's
employment (or service as an officer, director or consultant) shall
terminate for any reason, other than death or Retirement (as defined
below), the right of the recipient to exercise any option otherwise
exercisable on the date of such termination shall expire unless such
right is exercised within a period of 90 days after the date of such
termination. The term "Retirement" shall mean the voluntary
termination of employment (or service as an officer, director or
consultant) by a recipient who has attained the age of 55 and who
has completed at least five years of service
3
<PAGE> 4
with the Company. If a recipient's employment (or service as an
officer, director or consultant) shall terminate because of death or
Retirement, the right of the recipient to exercise any option
otherwise exercisable on the date of such termination shall be
unaffected by such termination and shall continue until the normal
expiration of such option. Option rights shall not be affected by
any change of employment as long as the recipient continues to be
employed by either the Company or a parent or subsidiary of the
Company. In no event, however, shall an option be exercisable after
the expiration of its original term as determined by the Committee
pursuant to subparagraph 6(c) above. The Committee may, if it
determines that to do so would be in the Company's best interests,
provide in a specific case or cases for the exercise of options
which would otherwise terminate upon termination of employment with
the Company for any reason, upon such terms and conditions as the
Committee determines to be appropriate. Nothing in the Plan or in
any option agreement shall confer any right to continue in the
employ of the Company or any parent or subsidiary of the Company or
interfere in any way with the right of the Company or any parent or
subsidiary of the Company to terminate the employment of a recipient
at any time.
(g) Leave of Absence. In the case of a recipient on an
approved leave of absence, the Committee may, if it determines that
to do so would be in the best interests of the Company, provide in a
specific case for continuation of options during such leave of
absence, such continuation to be on such terms and conditions as the
Committee determines to be appropriate, except that in no event
shall an option be exercisable after 10 years from the date it is
granted.
(h) Recapitalization. In the event that dividends payable in
Common Stock during any fiscal year of the Company exceed in the
aggregate five percent of the Common Stock issued and outstanding at
the beginning of the year, or in the event there is during any
fiscal year of the Company one or more splits, subdivisions, or
combinations of shares of Common Stock resulting in an increase or
decrease by more than five percent of the shares outstanding at the
beginning of the year, the number of shares available under the Plan
shall be increased or decreased proportionately, as the case may be,
and the number of shares deliverable upon the exercise thereafter of
any options theretofore granted shall be increased or decreased
proportionately, as the case may be, without change in the aggregate
purchase price. Common Stock dividends, splits, subdivisions, or
combinations during any fiscal year that do not exceed in the
aggregate five percent of the Common Stock issued and outstanding at
the beginning of such year shall be ignored for purposes of the
Plan. All adjustments shall be made as of the day such action
necessitating such adjustment becomes effective.
(i) Sale or Reorganization. In case the Company is merged or
consolidated with another corporation, or in case the property or
stock of the Company is acquired by another corporation, or in case
of a separation,
4
<PAGE> 5
reorganization, or liquidation of the Company, the Board of
Directors of the Company, or the board of directors of any
corporation assuming the obligations of the Company hereunder, shall
either (i) make appropriate provisions for the protection of any
outstanding options by the substitution on an equitable basis of
appropriate stock of the Company, or appropriate stock or options of
the merged, consolidated, or otherwise reorganized corporation, or
(ii) give written notice to optionees that their options, which will
become immediately exercisable notwithstanding any waiting period
otherwise prescribed by the Committee, must be exercised within 30
days of the date of such notice or they will be terminated.
(j) General Restrictions. Each option granted under the Plan
shall be subject to the requirement that, if at any time the Board
of Directors shall determine, in its discretion, that the listing,
registration, or qualification of the shares issuable or
transferable upon exercise thereof upon any securities exchange or
under any state or federal law, or the consent or approval of any
governmental regulatory body is necessary or desirable as a
condition of, or in connection with, the granting of such option or
the issue, transfer, or purchase of shares thereunder, such option
may not be exercised in whole or in part unless such listing,
registration, qualification, consent, or approval shall have been
effected or obtained free of any conditions not acceptable to the
Board of Directors.
The Company shall not be obligated to sell or issue any shares
of Common Stock in any manner in contravention of the Securities
Act, the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), the rules and regulations of the Securities and Exchange
Commission, any state securities law, the rules and regulations
promulgated thereunder or the rules and regulations of any
securities exchange or over the counter market on which the Common
Stock is listed or in which it is included for quotation. The Board
of Directors may, in connection with the granting of each option,
require the individual to whom the option is to be granted to enter
into an agreement with the Company stating that as a condition
precedent to each exercise of the option, in whole or in part, he
shall, if then required by the Company, represent to the Company in
writing that such exercise is for investment only and not with a
view to distribution, and also setting forth such other terms and
conditions as the Committee may prescribe. Such agreements may also,
in the discretion of the Committee, contain provisions requiring the
forfeiture of any options granted and/or Common Stock held, in the
event of the termination of employment or association, as the case
may be, of the optionee with the Company. Upon any forfeiture of
Common Stock pursuant to an agreement authorized by the preceding
sentence, the Company shall pay consideration for such Common Stock
to the optionee, pursuant to any such agreement, without interest
thereon.
(k) "Fair Market Value." Fair Market Value for all purposes
under the Plan shall mean the closing price of shares of Common
Stock, as reported in
5
<PAGE> 6
The Wall Street Journal, in the NASDAQ National Market Issues or
similar successor consolidated transactions reports (or a similar
consolidated transactions report for the exchange on which the
shares of Common Stock are then trading) for the relevant date, or
if no sales of shares of Common Stock were made on such date, the
average of the high and low sale prices of shares as reported in
such composite transaction report for the preceding day on which
sales of shares were made. If the shares are not listed on a
national securities exchange or included for quotation in the NASDAQ
National Market System at the time Fair Market Value is to be
determined, then Fair Market Value shall be determined by the
Committee in good faith pursuant to such method as to the Committee
deems appropriate and equitable. Under no circumstances shall the
Fair Market Value of a share of Common Stock be less than its par
value.
7. Termination and Amendment of the Plan
The Board of Directors or the Committee shall have the right to
amend, suspend, or terminate the Plan at any time; provided, however, that
no such action shall affect or in any way impair the rights of a recipient
under any option right theretofore granted under the Plan; and, provided,
further, that unless first duly approved by the stockholders of the
Company entitled to vote thereon at a meeting (which may be the annual
meeting) duly called and held for such purpose, except as provided in
subparagraphs 6(h) and 6(i), no amendment or change shall be made in the
Plan increasing the total number of shares which may be issued or
transferred under the Plan, materially increasing the benefits to Plan
participants or modifying the requirements as to eligibility for
participation in the Plan.
8. Restriction on Sale of Shares
No stock acquired by an optionee upon exercise of an option granted
hereunder may be disposed of by the optionee (or other person eligible to
exercise the option) within six months from the date such option was
granted, unless otherwise provided by the Committee.
9. Effective Date of the Plan
This Plan shall become effective upon the closing of the Asset
Purchase Agreement by and between the Company and Cadus. The Plan shall
terminate after ten years from the date of the closing of the Asset
Purchase Agreement by and between the Company and Cadus, or on such
earlier date as the Board of Directors or the Committee may determine. Any
option outstanding at the termination date shall remain outstanding until
it has either expired or has been exercised.
6
<PAGE> 7
10. Compliance with Rule 16b-3
With respect to persons subject to Section 16 of the Exchange Act,
transactions under this Plan are intended to comply with all applicable
conditions of Rule 16b-3 or its successors. To the extent any provision of
the Plan or action by the Committee (or any other person on behalf of the
Committee or the Company) fails to so comply, it shall be deemed null and
void, to the extent permitted by law and deemed advisable by the
Committee.
7
<PAGE> 1
Portions of this Exhibit 10.1 have been redacted and are the subject of a
confidential treatment request filed with the Secretary of the Securities and
Exchange Commission.
<PAGE> 2
COLLABORATIVE RESEARCH AGREEMENT
This amended and restated COLLABORATIVE RESEARCH AGREEMENT (this
"Agreement") is entered into as of April 23, 1999, by and among PFIZER INC
("Pfizer"), a Delaware corporation, having its principal place of business at
235 East 42nd Street, New York, New York 10017, OSI PHARMACEUTICALS, INC.,
formerly known as ONCOGENE SCIENCE, INC. ("OSI"), a Delaware corporation, having
its principal place of business at 106 Charles Lindbergh Blvd., Uniondale, New
York 11553, and ANADERM RESEARCH CORP. ("Anaderm"), a Delaware corporation,
having its principal place of business at 235 East 42nd Street, New York, New
York 10017.
W I T N E S S E T H:
WHEREAS, Anaderm was organized to discover, produce, purchase and market
new compounds or new uses for known compounds for use in humans for the
prevention or treatment of baldness and wrinkles and for the control of skin and
hair pigmentation;
WHEREAS, OSI has developed proprietary gene transcription and gene
expression modulation technology and high throughput screening systems which may
be used to identify and develop novel drugs, and is contributing chemical
capabilities to synthesize analogs and make bulk compounds for exploratory
purposes;
WHEREAS, Pfizer has the capacity to undertake research for the discovery
and evaluation of compounds for use in humans for the prevention or treatment of
baldness and wrinkles and for the control of hair and skin pigmentation, and
also has the capability for clinical evaluation, manufacturing and marketing of
such compounds;
<PAGE> 3
WHEREAS, Anaderm, OSI and Pfizer wish to enter into a research
collaboration to identify and develop compounds for use in humans for the
prevention or treatment of baldness and wrinkles and for the control of hair and
skin pigmentation; and
WHEREAS, Pfizer, OSI and Anaderm entered into a Collaborative Research
Agreement dated as of April 23, 1996 (the "1996 Agreement"), which they now wish
to be amended and restated by this Agreement.
NOW, THEREFORE, the parties agree as follows:
ARTICLE 1 - DEFINITIONS
Whenever used in this Agreement, the terms defined in this article
(ARTICLE 1) shall have the meanings specified.
1.1. "Affiliate" means any corporation or other legal entity owning,
directly or indirectly, 50% or more of the voting capital shares or similar
voting securities of Anaderm, OSI or Pfizer; or any corporation or other legal
entity 50% or more of the voting capital shares or similar voting rights of
which is owned, directly or indirectly, by Anaderm, OSI or Pfizer. However, a
foreign corporation or other legal entity shall be considered an Affiliate of
Anaderm, OSI or Pfizer, if Anaderm, OSI or Pfizer, respectively, owns the
maximum amount of voting securities of such corporation or entity that a U.S.
company is permitted to own under the laws of the applicable foreign country and
such maximum amount is at least forty percent.
1.2. "Anaderm Confidential Information" means all information about any
element of Anaderm Technology which is disclosed by Anaderm to OSI or Pfizer,
orally or in writing, and designated "Confidential" in writing by Anaderm no
later than 30 days after the time of disclosure to OSI or Pfizer, to the extent
that such information as of the date of disclosure to
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OSI or Pfizer is not (i) known to the recipient (i.e., OSI or Pfizer) other than
by virtue of a prior confidential disclosure to the recipient by Anaderm, or
(ii) disclosed in the published literature, or otherwise generally known to the
public, or (iii) obtained by the recipient from a Third Party free from any
obligation of secrecy to Anaderm. "Anaderm Confidential Information" shall
include, without limitation and subject to the foregoing exceptions (i) through
(iii), any agreements between Anaderm and Third Parties and any information
contained in such agreements that Anaderm provides to OSI or Pfizer.
1.3. "Anaderm Patent Rights" means Anaderm's rights in all Inventions
within Anaderm Technology, including the worldwide rights in all applications
for letters patent on Inventions that are encompassed within Anaderm Technology,
including all continuations, continuations-in-part, divisionals, renewals and
patents of addition thereof, all letters patent granted thereon, and all
reissues, Supplementary Protection Certificates and extensions thereof. "Anaderm
Patent Rights" includes any rights in Inventions that are acquired by Anaderm
pursuant to Article 7 of this Agreement.
1.4. "Anaderm Technology" means all Technology that pertains to the Field
or to the Dermatology Indications, that is or was developed or created by
employees of, or consultants to Anaderm, alone or jointly with one or more Third
Parties or with Pfizer or OSI, or that is or was acquired by Anaderm by
purchase, license, assignment or other means from one or more Third Parties or
from Pfizer or OSI.
1.5. An "Analog" of a compound refers to a compound which is selected to
be screened for activity in modulating a certain biological mechanism or
response, based on its structural similarity to a compound which was found to
exhibit activity in modulating the same biological mechanism or response.
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<PAGE> 5
1.6. An "Analog" of an OSI compound refers to a compound which is selected
to be screened for activity in modulating a certain biological mechanism or
response, based on its structural similarity to a compound Owned By OSI, where
ownership of the compound is determined as set forth in Section 1.33 below,
where the OSI compound was found to exhibit activity in modulating the same
biological mechanism or response.
1.7. An "Analog" of a Pfizer compound refers to a compound which is
selected to be screened for activity in modulating a certain biological
mechanism or response, based on its structural similarity to a compound Owned By
Pfizer where ownership of the compound is determined as set forth in Section
1.33 below, where the Pfizer compound was found to exhibit activity in
modulating the same biological mechanism or response.
1.8. An "Analog" of a compound from a Pfizer Selected Library refers to a
compound which is selected to be screened for activity in modulating a certain
biological mechanism or response, based on its structural similarity to a
compound from a Pfizer Selected Library where such compound from the Pfizer
Selected Library was found to exhibit activity in modulating the same biological
mechanism or response.
1.9. "Class 1 Compound" means, in each case pertaining to the Field or the
Dermatology Indications, any compound that is invented, or for which a New Use
is invented, or an Analog of a Class 3 Compound made, by one or more persons in
the course of participating in the Research Program as an employee or otherwise
on behalf of (e.g., as a consultant for or student of) Anaderm, Pfizer, OSI or
NYU, as to which no Third Party other than NYU is entitled to royalties from
Anaderm upon commercialization.
1.10. "Class 2 Compound" means, in each case pertaining to the Field or
the Dermatology Indications, any compound that is invented, or for which a New
Use is invented,
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<PAGE> 6
or an Analog of a Class 3 Compound made, by one or more persons in the course of
participating in the Research Program as an employee or otherwise on behalf of
(eg., as a consultant for or a student of) Anaderm, Pfizer, NYU or OSI, and in
which an entity other than Anaderm, Pfizer, OSI or NYU has the right to receive
a royalty from Anaderm if such compound or New Use is commercialized, such as,
for example, a New Use for a compound that is discovered using screens owned by
an entity other than Anaderm, Pfizer, OSI or NYU.
1.11. "Class 3 Compound" means any compound pertaining to the Field or the
Dermatology Indications, that is invented or for which a New Use is invented by
an entity other than Anaderm, Pfizer, OSI or NYU, and of which Anaderm becomes
aware. Class 3 Compounds also include compounds invented by Third Parties
outside the Research Program and licensed to Anaderm or Pfizer, compounds
invented by a business acquired by Pfizer or an Affiliate of Pfizer after the
Effective Date, and compounds pertaining to the Field or the Dermatology
Indications (which may or may not have utility outside of the Field and outside
such subject areas) that are invented, developed or discovered by Pfizer in the
course of research conducted by Pfizer, solely or jointly with a Third Party,
outside of the Field and outside of the Research Program, but shall not include
Analogs of Class 3 Compounds that are made during the course of the Research
Program.
1.12. "Contract Period" means the period beginning on the Effective Date
and ending three years from the Effective Date.
1.13. "Dermatology Indications" means proliferative and inflammatory
disorders of the skin such as acne, psoriasis, dandruff, itching and eczema.
1.14. "Effective Date" means April 23, 1999.
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1.15. "Field" means the (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. Technology, as defined
herein, shall be considered to "pertain to the Field" if either: (a) it is a
compound having activity within the Field; (b) it is a New Use for a compound
having activity within the Field; or (c) it is useful for discovering compounds
within the Field.
1.16. "Human Therapeutic Product" means any Rx or OTC Drug Product for an
indication within the Field or the Dermatology Indications. "Drug Product", as
used herein, means a product that contains one or more therapeutically active
compounds or that relates to a method of administering or using one or more.
therapeutically active compounds. "Human Therapeutic Product" does not include
Rx veterinary or OTC veterinary Drug Products.
1.17. "Human Therapeutic Product based on a Class 1 Compound" means a
Human Therapeutic Product that contains or relates to a method of administering
or using a Class 1 Compound.
1.18. A Human Therapeutic Product is considered to be "based on" a Class 1
Compound that is identified by screening a Pfizer Selected Library if the Human
Therapeutic Product contains, or relates to a method of administering or using,
a Class 1 Compound identified by screening, and is part of, a Pfizer Selected
Library, or by screening Analogs of a compound from a Pfizer Selected Library.
1.19. "Human Therapeutic Product based on a Class 2 Compound" means a
Human Therapeutic Product that contains or relates to a method of administering
or using a Class 2 Compound.
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<PAGE> 8
1.20. A Human Therapeutic Product is considered to be "based on" a Class 2
Compound that is identified by screening a Pfizer Selected Library if the Human
Therapeutic Product contains, or relates to a method of administering or using,
a Class 2 Compound identified by screening, and is part of, a Pfizer Selected
Library, or by screening Analogs of a compound from a Pfizer Selected Library.
1.21. "Human Therapeutic Product based on a Class 3 Compound" means a
Human Therapeutic Product that contains or relates to a method of administering
or using a Class 3 Compound.
1.22. "Invention" means an invention (i.e., a conception and actual or
constructive reduction to practice of an idea) that is deemed patentable by a
party to this Agreement.
1.23. "Lead Compound" means a Class 1 or Class 2 Compound that has been
preliminarily assessed by Anaderm to be effective or potentially effective, or
to be a compound for which a New Use is effective or potentially effective, in
treating an indication within the Field or the Dermatology Indications.
1.24. "Net Sales" means the gross sales by Anaderm or Pfizer or an
Affiliate or Co-developer of Anaderm or Pfizer, or by a licensee or sublicensee
of Pfizer, for arm's-length sales to a Third Party or Third Parties, excluding
NYU, of Human Therapeutic Products, less transportation expenses, normal returns
and allowances (actually paid or allowed), rebates, customary discounts and
sales or other taxes based on the sales prices, but not including taxes assessed
against income derived from such sales. The term "Co-developer" refers to a
Person that, pursuant to an agreement with Pfizer or Anaderm, shares with Pfizer
or Anaderm, respectively, the right to market a Human Therapeutic Product based
on a Class 1 or Class 2 Compound.
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<PAGE> 9
1.25. "New Use", as used throughout this Agreement, means new therapeutic
indications for known compounds, new compositions containing known compounds and
new methods of administering known compounds, and includes, e.g., combination
therapies involving the administration of two or more known therapeutically
active compounds or new compositions containing one or more known
therapeutically active compounds.
1.26. "NYU" means New York University, having a principal place of
business at 550 First Avenue, New York, New York 10016.
1.27. "NYU Agreement" means the Research and Licensing Agreement between
Anaderm, NYU and Pfizer having an effective date of April 23, 1999.
1.28. "OSI Compound File" means compounds maintained by OSI, including
compounds from the library licensed to OSI by The Dow Chemical Company (Midland,
Michigan) that OSI has the right to use for screening in the Research Program.
1.29. "OSI Confidential Information" means all information about any
element of OSI Technology which is disclosed by OSI to Anaderm or Pfizer, orally
or in writing, and designated "Confidential" in writing by OSI no later than 30
days after the time of disclosure to Anaderm or Pfizer to the extent that such
information as of the date of disclosure to Anaderm or Pfizer is not (i) known
to the recipient (i.e., Anaderm or Pfizer) other than by virtue of a prior
confidential disclosure to the recipient by OSI, or (ii) disclosed in the
published literature, or otherwise generally known to the public, or (iii)
obtained by the recipient from a Third Party free from any obligation of secrecy
to OSI.
1.30. "OSI Patent Rights" means OSI's rights in all Inventions within OSI
Technology, including the worldwide rights in all applications for letters
patent on Inventions that are encompassed within OSI Technology, including all
continuations, continuations-in-
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<PAGE> 10
part, divisionals, renewals and patents of addition thereof, all letters patent
granted thereon, and all reissues, Supplementary Protection Certificates and
extensions thereof. "OSI Patent Rights" includes any rights in Inventions that
are acquired by OSI pursuant to Article 7 of this Agreement.
1.31. "OSI Technology" means all Technology that pertains to the Field or
to the Dermatology Indications, including Technology that relates to high
throughput screening or to transcriptional modulation of gene expression of the
gene encoding a target, including all improvements thereto and the use of such
Technology to develop transcription-based drugs, that is or was developed or
created by employees of or consultants to OSI, or an OSI Affiliate, alone or
jointly with one or more Third Parties or with Anaderm or Pfizer, or that is or
was acquired by OSI by purchase, license, assignment or other means from one or
more Third Parties or from Anaderm or Pfizer.
1.32. "OTC" means drugs sold over-the-counter without prescription.
1.33. A compound shall be considered to be "Owned By" Pfizer, Anaderm or
OSI, throughout this Agreement, if such compound was provided to a participant
in the Research Program by Pfizer, Anaderm or OSI, respectively, for use in
conducting the Research Program, or if Pfizer, Anaderm or OSI, respectively, has
rights in such compound in the United States under the patent laws (i.e., if
such compound is an Invention that is owned, in whole or in part, by such party)
or is claimed in a patent application or patent that is owned, in whole or in
part, by such party) or the laws governing the protection of trade secrets and
confidential business information. For purposes of this Agreement, compounds in
the Pfizer Compound file shall be considered to be Owned By Pfizer and, with the
following exception, compounds in the OSI Compound File shall be considered to
be Owned By OSI. A compound
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<PAGE> 11
shall be considered to be "Owned By" Pfizer, but not "Owned By" OSI, if the
compound is part of both the Pfizer Compound File and the OSI Compound File.
1.34. "Person" means any individual, estate, trust, partnership, joint
venture, association, firm, corporation, company, or other entity.
1.35. "Pfizer Compound File" means the compounds maintained by Pfizer's
Central Research Division.
1.36. "Pfizer Confidential Information" means all information about any
element of Pfizer Technology which is disclosed by Pfizer to OSI or Anaderm,
orally or in writing, and designated "Confidential" in writing by Pfizer no
later than 30 days after the time of disclosure to OSI or Anaderm to the extent
that such information as of the date of disclosure to OSI or Anaderm is not (i)
known to the recipient (i.e., OSI or Anaderm) other than by virtue of a prior
confidential disclosure to the recipient by Pfizer, or (ii) disclosed in the
published literature, or otherwise generally known to the public, or (iii)
obtained by the recipient from a Third Party free from any obligation of secrecy
to Pfizer. "Pfizer Confidential Information" shall include, without limitation
and subject to the foregoing exceptions (i) through (iii), any agreements
between Pfizer and Third Parties and any information contained in such
agreements that Pfizer provides to OSI or Anaderm.
1.37. "Pfizer Patent Rights" means the rights of Pfizer and its Affiliates
other than Anaderm in all Inventions within Pfizer Technology, including
worldwide rights in all applications for letters patent on Inventions that are
encompassed within Pfizer Technology, including all continuations,
continuations-in-part, divisionals, renewals and patents of addition thereof,
all letters patent granted thereon, and all reissues, Supplementary Protection
Certificates, and extensions thereof. "Pfizer Patent Rights" includes any rights
in Inventions
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that are acquired by Pfizer or any of its Affiliates other than Anaderm pursuant
to Article 7 of this Agreement.
1.38. "Pfizer's Rights of First Refusal" means "Pfizer's Right of First
Refusal for Initial Development" and "Pfizer's Right of First Refusal for
Further Development", as these terms are defined in Article VII of the
Stockholders' Agreement.
1.39. "Pfizer Selected Library" means a Selected Library within the Pfizer
Compound File.
1.40. "Pfizer Technology" means all Technology that pertains to the Field
that is or was developed or created by employees of, or consultants to Pfizer,
alone or jointly with one or more Third Parties or with OSI or Anaderm, or that
is or was acquired by Pfizer by purchase, license, assignment or other means
from one or more Third Parties or from OSI or Anaderm, excluding Technology
acquired by Pfizer pursuant to its acquisition of an entity or business that
relates to, in whole or in part, or incorporates the discovery, development,
purchase or marketing of one or more Drug Products for an indication within the
Field or the Dermatology Indications.
1.41. "Research Program" means research conducted in the Field or
Dermatology Indications by OSI, Pfizer, NYU or Anaderm, or any Affiliates
thereof, as determined and overseen by a joint management team from Pfizer and
OSI, during the Contract Period pursuant to this Agreement and the Stockholders'
Agreement, with the exception of research conducted by Pfizer pursuant to
Section 3.2.3 or Section 3.4.2 of this Agreement.
1.42. "Rights in an Invention" or "rights in an Invention" means all
proprietary rights in an Invention worldwide, including the worldwide rights in
all patent applications for letters patent on such Invention, including all
continuations, continuations-in-part, divisionals,
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renewals and patents of addition thereof and all letters patent granted thereon
and all reissues, Supplementary Protection Certificates, and extensions thereof.
1.43. "Rx" means a prescription drug.
1.44. "Selected Library" means a set of compounds selected based on their
known ability to modulate or utility in modulating, or a reasonable expectation
of their ability to modulate or utility in modulating, a particular biological
mechanism or response. For purposes of this definition, the ability to modulate
or utility in modulating a biological mechanism or response refers to any type
of modulation of the biological mechanism or response, including, e.g., the
ability to act as an agonist, partial agonist, reverse agonist, inhibitor, or
antagonist of the biological mechanism or response. Thus, compounds grouped
within the same Selected Library need not all have the same effect on the
biological mechanism or response. For example, some compounds within the
Selected Library may agonize, whereas other compounds within the same Selected
Library may antagonize, the same biological mechanism or response.
1.45. The "Stockholders' Agreement" means the Amended and Restated
Stockholders Agreement among Anaderm, Pfizer, OSI, NYU, ** , having an effective
date of April 23, 1999.
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** This portion has been redacted pursuant to a request for confidential
treatment.
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1.46. "Technology" means and includes all technology and technical
information that pertains to the discovery or development of pharmacologically
active compounds or Rx and OTC products for use in humans, including all
laboratory notebooks, research plans, inventions, cultures, strains, vectors,
genes and gene fragments and their sequences, cell lines, hybridoma cell lines,
monoclonal and polyclonal antibodies, proteins and protein fragments,
non-protein chemical structures and methods for synthesis, structure-activity
relationships, computer models of chemical structures, computer software, assay
methodology, processes, materials and methods for production, recovery and
purification of natural products, formulas, plans, specifications,
characteristics and equipment designs, but does not mean and does not include
nontechnical information such as marketing plans that relate solely to marketing
or finance.
1.47. "Territory" means all the countries of the world.
1.48. "Therapeutically Active Compound" means a compound that exhibits a
biological or pharmacological activity.
1.49. "Third Party" means a party other than Pfizer, Anaderm or OSI.
1.50. "Valid Claim" means a claim of an issued patent within OSI Patent
Rights, Pfizer Patent Rights or Anaderm Patent Rights, including patents in
which OSI, Pfizer or Anaderm, respectively, has rights as a licensee pursuant to
Article 7 of the Agreement, so long as such claim shall not have been disclaimed
by the owner or owners of such patent, and shall not have been held invalid in a
final decision rendered by a tribunal of competent jurisdiction from which no
appeal has been or can be taken.
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ARTICLE 2 - AMENDMENT AND RESTATEMENT OF THE 1996 AGREEMENT
Each of Pfizer, OSI and Anaderm hereby agrees that the 1996 Agreement, all
prior Amendments thereto, and all prior funding commitments made by any of the
parties in relation thereto, in their entirety, are hereby amended and restated
by this Agreement which shall apply in substitution therefor.
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3. ARTICLE 3 - RIGHTS AND RESTRICTIONS OF PARTIES
3.1. Rights of Anaderm.
3.1.1. Class 1 and Class 2 Compounds. Subject to Pfizer's Rights of
First Refusal, as set forth in Article VII of the Stockholders' Agreement, and
to any rights of Third Parties, as referred to in Section 1.10 of this
Agreement, Anaderm shall have the right to develop and market Class 1 and Class
2 Compounds or New Uses independently within the Territory, or to enter into
licensing, joint venture, or other arrangements with Third Parties, as set forth
in Section 7.4 of the Stockholders' Agreement for indications in the Field.
3.1.2. Certain Discoveries Outside the Field. Subject to Pfizer's
Rights of First Refusal, as set forth in Article VII of the Stockholders'
Agreement, and to any rights of Third Parties, as referred to in Section 1.10 of
this Agreement, Anaderm shall have the right to develop and market Class 1 and
Class 2 Compounds or New Uses independently within the Territory, or to enter
into licensing, joint venture, or other arrangements with Third Parties, as set
forth in Section 7.4 of the Stockholders' Agreement for the following
indications outside the Field: proliferative and inflammatory disorders of the
skin such as acne, psoriasis, dandruff, itching and eczema (the "Dermatology
Indications").
3.1.3. Class 3 Compounds. Anaderm shall have the right to bring to
the attention of Pfizer opportunities to license in rights in Human Therapeutic
Products that are based on Class 3 Compounds. If Anaderm is able to demonstrate
to Pfizer the commercial value of any such products, Anaderm may negotiate a
compensation arrangement with Pfizer. Anaderm shall not license in rights in a
Human Therapeutic Product based on a Class 3 Compound without Pfizer's written
approval.
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3.2. Restrictions as to OSI and Anaderm.
3.2.1. During the Contract Period, OSI shall not conduct drug
discovery research itself or sponsor any research other than research conducted
pursuant to the Research Program, as defined in this Agreement, if such research
pertains to the Field or to the Dermatology Indications; provided, however, that
OSI may sponsor or engage in such research with the written consent of a
majority of the members of the Board of Directors of Anaderm. Research conducted
by OSI outside of the Field and outside the Dermatology Indications, which
results in a serendipitous discovery of a compound or New Use within the Field
or the Dermatology Indications, shall not be considered a breach of this
exclusivity provision. OSI may, however, conduct its own research in all areas
outside the Field and outside the Dermatology Indications without restriction,
including research with respect to compounds from the OSI compound file which
OSI has made available to the Research Program and any Analogs of such
compounds, unless any such compound or Analog has been shown to be a
Therapeutically Active Compound in the Field or the Dermatology Indications.
However, OSI may conduct its own research outside the Field and outside the
Dermatology Indications with respect to a compound that has been shown to be a
Therapeutically Active Compound in the Field or the Dermatology Indications with
the written consent of a majority of the members of the Board of Directors of
Anaderm.
3.2.2. Other Cosmeceutical Business Of Anaderm. In the event that
Anaderm participates in, either through equity ownership, collaborative
arrangement, license or otherwise, or financially benefits from, through
royalties, finder's fees or otherwise, any acquisition by Pfizer during the
Contract Period of an entity or business that relates to, in whole or in part,
or incorporates the discovery, development, purchase or marketing of one or
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more Drug Products for indications within the Field or the Dermatology
Indications, OSI shall not receive royalties from the sales of any Human
Therapeutic Product that was developed by such entity or business or any Human
Therapeutic Product that contains or relates to a method of administering or
using a compound that was invented or developed, or for which a New Use was
invented or developed by such entity or business.
3.2.3. Pfizer Discoveries Outside the Field and Outside the Research
Program. Pfizer shall have the sole rights to any compounds, Technologies or
Inventions pertaining to the Field (which may or may not also be used to treat
indications outside of the Field) that are invented, developed or discovered by
Pfizer, solely or jointly with a Third Party, in the course of its research or
other activities outside the Field and outside the Research Program. Such
compounds, Technologies and Inventions may be developed and exploited by Pfizer
in its sole discretion without the need for permission by Anaderm and without
benefit to Anaderm. ** .
3.3. Restrictions as to Pfizer. Subject to Section 3.4.3 below, during the
Contract Period, ** .
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** This portion has been redacted pursuant to a request for confidential
treatment.
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3.4. Rights of Pfizer.
3.4.1. Inventions Based on Pfizer Compounds. As provided for more
specifically in Article 7 of this Agreement, Pfizer shall own all Inventions
made in the course of conducting the Research Program that are either compounds
Owned By Pfizer, or compositions containing one or more such compounds, or
methods of administering, making or using one or more such compounds.
3.4.2. Pfizer's Right to Conduct Research in the Dermatology
Indications. Pfizer shall have the right during the Contract Period to perform
or sponsor research in the area of the Dermatology Indications that is
independent of any research conducted by Anaderm, Pfizer, OSI or NYU pursuant to
this Agreement and the Stockholders' Agreement.
3.4.3. Non-interference With Other Pfizer Business. This Agreement
shall in no way restrict the operations of, interfere with, impede or otherwise
adversely influence Pfizer's current business, including, without limitation,
the operations of its divisions, subsidiaries and Affiliates other than Anaderm,
or any business or operations acquired or undertaken by Pfizer during the
Contract Period.
3.5. Inventions Based on OSI Compounds. OSI shall own all Inventions made
in the course of conducting the Research Program that are either: (i) compounds
from the OSI Compound File which compounds are not also present in the Pfizer
Compound File; or (ii) compositions containing one or more such compounds; or
(iii) methods of administering, making or using one or more such compounds.
3.6. Best Efforts. Anaderm or Pfizer shall use its reasonable best
efforts, within the confines of their respective corporate policies and
commercial interests, to commercialize any
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Human Therapeutic Product based on a Class 1 or Class 2 Compound for which
Anaderm or Pfizer, respectively, has the exclusive right to develop.
3.7. Status Reports. Anaderm or Pfizer, depending on which party is
developing a particular Lead Compound or Human Therapeutic Product pursuant to
this Agreement and the Stockholders' Agreement, shall, upon request, provide OSI
with a written report of the status of the development of such Lead Compound or
Human Therapeutic Product annually, beginning one year after the filing of an
IND application for such Lead Compound or Human Therapeutic Product and
continuing until either development of such Lead Compound or Human Therapeutic
Product has been discontinued or there has been a commercial sale of such Human
Therapeutic Product in the United States. Anaderm or Pfizer, respectively, shall
also notify OSI in writing within sixty (60) days of abandoning development of
any such Lead Compound or Human Therapeutic Product.
ARTICLE 4 - FUNDING OF RESEARCH
4.1. OSI Staffing of Anaderm-Sponsored Research. OSI agrees to use its
reasonable best efforts to employ and allocate at least the number of full-time
research scientists to conduct its drug discovery efforts under the Research
Program during each of the three years of the Contract Period, as set forth in
Appendix A. Thus, OSI agrees to use its reasonable best efforts to employ and
allocate an annual average of at least ** full-time research scientists to
conduct its drug discovery efforts under the Research Program during the first
year of the
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** This portion has been redacted pursuant to a request for confidential
treatment.
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Contract Period; to employ an annual average of at least ** full-time research
scientists to conduct its drug discovery efforts under the Research Program
during the second year of the Contract Period; and to employ an annual average
of at least ** full-time research scientists to conduct its drug discovery
efforts under the Research Program during the third year of the Contract Period.
At least 25% of the full-time research scientists employed and allocated to the
Research Program in each of the three years of the Contract Period will be Ph.D.
research scientists.
4.2. Funding of OSI's Drug Discovery Efforts Under The Research Program.
Subject to the provisions of Sections 4.3 and 4.4 and the termination provisions
of Article 9, below, and in consideration for OSI's staffing of its drug
discovery efforts under the Research Program, as set forth in Section 4.1 above,
Anaderm agrees to provide funding to OSI to support OSI's conducting of its drug
discovery efforts under the Research Program, as defined in this Agreement.
Thus, Anaderm agrees to pay OSI ** for the first year of the Contract Period; **
for the second year of the Contract Period; and ** for the third year of the
Contract Period. Such payments shall be made in quarterly installments and shall
be due and payable to OSI within thirty days of the first day of each quarter.
In the event that this Agreement is terminated at any time during the first year
of the Contract Period under Section 9.2(ii) below as a result of Anaderm having
discontinued its business or having become insolvent or bankrupt during that
time period, Pfizer shall be obligated to pay the balance of funds, if any, owed
to OSI under this Section (Section 4.2) to cover the remainder of the first
year, but only the first year, of the Contract Period.
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** This portion has been redacted pursuant to a request for confidential
treatment.
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4.3. Right Of Pfizer To Terminate Funding. The obligation to continue
funding OSI's drug discovery efforts in the second and third years of the
Contract Period under Section 4.2 above shall remain solely within the
discretion of Pfizer which, in consultation with Anaderm and OSI, will determine
at the end of the first and second years of the Contract Period whether
satisfactory progress has been made by Anaderm and OSI in the Research Program
during the past year. If Pfizer determines at the end of the first or second
year that satisfactory progress has not been made by Anaderm or OSI in the
Research Program during the past year, and decides to terminate funding of OSI's
drug discovery efforts under the Research Program, then Pfizer will provide,
within thirty (30) days of the end of the first and second years, respectively,
(i.e., within 30 days following each of April 23, 2000 and April 23, 2001),
30-day prior written notification to both OSI and Anaderm of the decision to
terminate such funding, and this Agreement will be terminated pursuant to the
termination provisions of Sections 9.2 and 9.4 below. Upon termination on the
thirtieth (30th) day following the written notification referred to above, no
further obligation by Pfizer or Anaderm will exist to make any additional
payments to OSI under Section 4.2 above; provided, however, that Pfizer or
Anaderm shall be subject to the obligations set forth in Section 9.4 below. If
Pfizer determines at the end of the first and second years of the Contract
Period that satisfactory progress has been made by Anaderm and OSI in the
Research Program during the past year, or if Pfizer fails to make a
determination under this Section (Section 4.3) by the end of such 30-day period,
then the Contract Period will continue. All payments previously made by Anaderm
or Pfizer to OSI under Section 4.2 above, at the time of termination under this
Section (Section 4.3), covering periods beyond the termination date will be
deducted from payments made to OSI under Section 9.4 below.
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4.4. OSI Failure to Satisfy Staffing Requirements. Notwithstanding the
provisions of Section 4.2 above, if OSI fails to employ or allocate at least the
annual average number of full-time research scientists to conduct its drug
discovery efforts under the Research Program during any of the three years of
the Contract Period as set forth in Appendix A, then the funding owed to OSI by
Anaderm for that year under the terms of Section 4.2 will be proportionately
reduced, and such reduction will be subtracted from the amount due and payable
to OSI in the following year under Section 4.2 or Section 9.4, as appropriate,
or shall otherwise be refunded by OSI to Anaderm or Pfizer. For example, in the
first year of the Contract Period, if the annual average number of full-time
research scientists employed and allocated by OSI to its drug discovery efforts
under the Research Program is ** , rather than ** as set forth in Appendix A,
then the amount of funding actually owed to OSI by Anaderm during the first year
shall be equal to ** (i.e., ** ), and the amount of the reduction from ** shall
be deducted from the amount due and payable to OSI for the second year of
funding under the terms of Section 4.2 above or under Section 9.4, as
appropriate. OSI shall give Anaderm and Pfizer a right of access to its books,
records and personnel for three years from the date of each payment made to OSI
under Section 4.2 above, upon notice, during regular business hours and to the
extent reasonably necessary, to allow an accurate determination of the annual
average number of full-time research scientists actually employed or allocated
by OSI to conduct its drug discovery efforts under the Research Program during
any of the three years of the Contract Period.
- ----------
** This portion has been redacted pursuant to a request for confidential
treatment.
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4.5. During the Contract Period, OSI shall provide Anaderm and Pfizer,
upon request, with quarterly written reports describing OSI's employment and
allocation of research scientists during the previous quarter to conduct its
drug discovery efforts under the Research Program. Such written reports shall
provide sufficient detail to allow Anaderm or Pfizer to determine whether OSI's
staffing obligations under this Agreement, as set forth in Appendix A, are being
satisfied.
ARTICLE 5 - ROYALTIES
5.1. Amount Of OSI Royalties
5.1.1. OSI Royalty Rate For Sale Of A Human Therapeutic Product
Based On A Class 1 Compound. Subject to the provisions of Section 5.1.2 below,
in consideration for OSI fulfilling its obligations under this Agreement,
Anaderm or Pfizer shall pay to OSI a royalty of ** percent ** of Net Sales (the
"OSI Royalty") of any Human Therapeutic Product based on a Class 1 Compound or,
subject to the provisions of Section 5.1.3 of this Agreement, a Class 2
Compound, that is marketed by Anaderm, Pfizer, an Affiliate or Co-developer of
Anaderm or Pfizer or a licensee or sublicensee of Pfizer, respectively, pursuant
to Article VII of the Stockholders' Agreement. The OSI Royalty shall be paid to
OSI on a product by product, country by country basis, notwithstanding the
termination provisions of Article 9 of this Agreement, for a period of ten years
beginning with the first commercial sale of any such Human Therapeutic Product
in a particular country, unless at the end of such ten year period there exists
in that country a Valid Claim to either such Human Therapeutic
- ----------
** This portion has been redacted pursuant to a request for confidential
treatment.
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Product or a compound or composition contained in it, or a method or process
employed in making it, or to a method of use for which such Human Therapeutic
Product is being marketed in that country, in which case the OSI Royalty shall
continue to be paid during the period in which any such Valid Claim exists in
that country.
5.1.2. Limitation Based On Use Of A Pfizer Selected Library.
Notwithstanding the terms of Section 5.1.1 above, the OSI Royalty, as defined in
that section, shall be ** of Net Sales of any Human Therapeutic Product based on
a Class 1 Compound, rather than the ** set forth in that section, when such
Class 1 Compound was identified by screening, and is part of, a Pfizer Selected
Library, or by screening Analogs of a compound from a Pfizer Selected Library.
5.1.3. OSI Royalty Rate For Sale Of A Human Therapeutic Product
Based On A Class 2 Compound. Subject to the provisions of Section 5.1.4 below,
in the event that Anaderm, Pfizer, an Affiliate or Co-developer of Anaderm or
Pfizer, or a licensee or sublicensee of Pfizer markets a Human Therapeutic
Product based on a Class 2 Compound, and such compound is subject to a royalty
encumbrance with respect to a Third Party other than NYU, the OSI Royalty, in
lieu of the ** referred to in Section 5.1.1 above, shall be equal to ** percent
** of Net Sales of the Human Therapeutic Products based on such Class 2
Compound, where ** and ** is equal to the total percentage of Net Sales that is
owed to one or more such Third Parties (i.e., the total royalty encumbrance).
- ----------
** This portion has been redacted pursuant to a request for confidential
treatment.
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5.1.4. Limitation Based On Use Of A Pfizer Selected Library.
Notwithstanding the terms of Section 5.1.3 above, the OSI Royalty, as defined in
that section, shall be equal to ** percent ** of Net Sales of a Human
Therapeutic Product based on a Class 2 Compound, where ** , and ** is as defined
in Section 4.1.3 above, rather than ** , as set forth in that section, when such
Class 2 Compound was identified by screening, and is part of, a Pfizer Selected
Library, or by screening Analogs of a compound from a Pfizer Selected Library.
5.1.5. Deduction From OSI Royalty Where A Flat Fee Payment Has Been
Made To A Third Party. In cases where a Third Party has received a flat fee
payment from Anaderm for intellectual property rights purchased to support the
development of a Class 1 or Class 2 Compound, or a Human Therapeutic Product
based on a Class 1 or Class 2 Compound, or a New Use, where such payment is
independent of the funding of OSI's drug discovery efforts under the Research
Program pursuant to Section 4.2 above, ** percent ** of any royalty owed to OSI
under Sections 5.1.1 - 5.1.4 above, for the sale or licensing of such Class 1 or
Class 2 Compound, or Human Therapeutic Product based on such Class 1 or Class 2
Compound, or New Use thereof, shall be deducted by Anaderm from the royalty
otherwise owed to OSI under those sections, but only until the total amount
deducted by Anaderm equals ** of the total of the flat fee payment made to such
Third Party, after which the royalty owed to OSI will return to the full amount
defined in those sections, as appropriate.
- ----------
** This portion has been redacted pursuant to a request for confidential
treatment.
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5.1.6. Licensing by Anaderm. Subject to the provisions of Section
5.1.7 below, in the event that Pfizer elects not to exercise Pfizer's Rights of
First Refusal and Anaderm determines to license a Class 1 or Class 2 Compound to
a Third Party other than NYU rather than exploit it, OSI shall receive ** of any
payments received by Anaderm under such license arrangements in lieu of the OSI
Royalty.
5.1.7. Limitation Based On Use Of A Pfizer Selected Library.
Notwithstanding the terms of Section 5.1.6 above, when Anaderm licenses a Class
1 or Class 2 Compound to a Third Party pursuant to that section, the payments
owed by Anaderm to OSI shall be ** of any payments received by Anaderm under
such license arrangements, rather than the ** set forth in that section, when
such Class 1 or Class 2 Compound was identified by screening, and is part of, a
Pfizer Selected Library, or by screening Analogs of a compound from a Pfizer
Selected Library.
5.1.8. Licensing by Pfizer. If Pfizer decides to negotiate an
agreement with a Third Party pursuant to which Pfizer would grant such Third
Party a license under Pfizer's rights in a Lead Compound or Human Therapeutic
Product, which rights Pfizer acquired from Anaderm pursuant to its Rights of
First Refusal, for the purposes of developing a Lead Compound and developing and
marketing a Human Therapeutic Product, and Pfizer determines that payment of the
OSI Royalty, as defined in Sections 5.1.1 through 5.1.4 of this Agreement, would
render the proposed licensing arrangement commercially unfeasible to Pfizer,
then Pfizer shall negotiate with OSI in good faith to determine the amount of
royalties or other compensation that OSI will receive from such arrangement.
- ----------
** This portion has been redacted pursuant to a request for confidential
treatment.
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5.2. Notification to OSI of Third Party Licenses. Anaderm or Pfizer shall
notify OSI in writing of the following within sixty (60) days of the granting by
Anaderm or Pfizer or any of their Affiliates, respectively, of a license to a
Third Party (including but not limited to a Co-developer) under Anaderm's,
Pfizer's or such Affiliate's rights in a Lead Compound or Human Therapeutic
Product: (a) the name of the party or Affiliate that has granted the license;
(b) the name of the licensee or Co-developer (or sublicensee, as the case may
be); (c) the names of any Lead Compounds and Human Therapeutic Products in which
rights were licensed; and (d) the royalty to be paid pursuant to the license.
Anaderm or Pfizer will provide OSI, upon request, with a copy of any such
license agreement.
5.3. OSI Royalty Exclusion. OSI shall not receive any royalty from sales
of Human Therapeutic Products based on Class 3 Compounds.
5.4. Payment Dates. Royalties due to OSI shall be paid by Anaderm or
Pfizer on Net Sales within sixty 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 Human Therapeutic Product on which such payment is
based and a calculation of the amount of royalties due. Payments due to OSI
pursuant to Section 5.1.6 or 5.1.7 of this Agreement shall be paid by Anaderm
within sixty (60) days after receipt by Anaderm of the payment from a Third
Party upon which the payment due OSI is based. Anaderm and Pfizer shall use
their reasonable best efforts to obtain royalty payments due to them or their
Affiliates based on Net Sales of Human Therapeutic Products by their
Co-developers (and, in the case of Pfizer, its licensees and sublicensees).
5.5. Accounting. No royalties on Net Sales shall be payable on sales
transactions between or among Anaderm and its Affiliates or Pfizer and its
Affiliates; the final vendee sale
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to a Third Party (other than NYU) alone shall be used for the purpose of
determining the royalty payments due hereunder. The Human Therapeutic Product
subject to royalty payment shall be deemed sold when invoiced, or if not
invoiced, when the same shall be shipped or delivered to the Third Party. All
taxes, assessments and fees of any nature levied or incurred on account of any
payments accruing under this Agreement, by national, state or local governments,
will be assumed and paid by Anaderm or Pfizer, depending on which party is
marketing the Human Therapeutic Product, and, in the case of payments accruing
under Section 5.1.6 or 5.1.7 of this Agreement, by Anaderm, except taxes levied
thereon as income to OSI, and, if such taxes are required to be withheld by
Anaderm or Pfizer, they will be deducted from such payments due to OSI and will
be paid by Anaderm or Pfizer, respectively, for the account of OSI, and a
receipt therefor secured and sent to OSI.
5.6. Records. Anaderm or Pfizer, depending on which party is marketing the
Human Therapeutic Product, shall keep for three years from the date of each
payment of royalties complete and accurate records of sales by Anaderm or Pfizer
or an Affiliate of Anaderm or Pfizer, respectively, of each Human Therapeutic
Product in sufficient detail to allow the accruing royalties to be determined
accurately. OSI shall have the right, for a period of three years after
receiving any report or statement with respect to royalties due and payable, to
appoint, at its expense, an independent certified public accountant reasonably
acceptable to Anaderm or Pfizer, respectively, to inspect the relevant records
of Anaderm or Pfizer, respectively, to verify such report or statement. Any of
the "Big 6" accounting firms are hereby deemed to be acceptable. Anaderm or
Pfizer, respectively, shall make its records available for inspection by such
independent certified public accountant during regular business hours at such
place or places where such records are customarily kept, upon reasonable notice
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from OSI, to the extent reasonably necessary to verify the accuracy of the
reports and payments. With respect to each of Anaderm, Pfizer and OSI, 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. Anaderm or Pfizer,
respectively, shall use its reasonable best efforts to make available to OSI the
information, records and reports referred to in this section (Section 5.6) that
relate to sales by a licensee, sublicensee or Co-developer of such party. 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 it is necessary for OSI to reveal such
information in order to enforce its rights under this Agreement or if disclosure
is required by law. The failure of OSI to request verification of any report or
statement during said three-year period shall be considered acceptance of the
accuracy of such report, and Anaderm or Pfizer, respectively, shall have no
obligation to maintain records pertaining to such report or statement beyond
said three-year period. The results of the inspection shall be provided in a
written report by the independent certified public accountant to Anaderm or
Pfizer setting forth the basis for its conclusions, and shall be binding on all
parties; except that where Anaderm or Pfizer can show that the conclusions of
the report are erroneous as based on a material error occurring during the
inspection or otherwise committed during the preparation of the report by the
independent certified public accountant, then upon Anaderm or Pfizer bringing
such material error to the attention of OSI, OSI shall request the independent
certified public accountant to re-evaluate the report and modify it accordingly.
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ARTICLE 6 - TREATMENT OF CONFIDENTIAL INFORMATION
6.1. Confidentiality.
6.1.1. Each of Pfizer, OSI and Anaderm recognizes that the other
parties' Confidential Information (i.e., Anaderm Confidential Information, OSI
Confidential Information, and Pfizer Confidential Information) constitutes
highly valuable proprietary, confidential information. Each of Pfizer, OSI and
Anaderm agrees that during the Contract Period and for five years thereafter,
they and their Affiliates will keep confidential all Confidential Information
that is disclosed to them or to their Affiliates pursuant to this Agreement, and
that neither they nor any of their Affiliates will disclose the others'
Confidential Information to any Third Party during that time, except as
permitted below. Each of Pfizer, OSI and Anaderm agree that any disclosure of
the others' Confidential Information to any officer, employee or agent of the
others, or of any of their respective Affiliates, shall be made only to the
extent necessary to carry out their respective responsibilities under this
Agreement and shall be limited to the maximum extent possible that is consistent
with such responsibilities. Each party shall take such action, and shall cause
its Affiliates to take such action, to preserve the confidentiality of the
others' Confidential Information as it would customarily take to preserve the
confidentiality of its own Confidential Information.
6.1.2. Neither Pfizer, OSI, Anaderm, nor any of their Affiliates,
shall use the Confidential Information of any of the other parties during the
Contract Period and for five years thereafter, under any circumstances without
written permission of such other parties, and in any manner or for any purpose
other than as necessary to fulfill their responsibilities under this Agreement.
Pfizer and Anaderm may, however, disclose such Confidential Information to
government agencies to the extent necessary or desirable to secure governmental
approval for
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development, clinical testing or marketing of Lead Compounds or Human
Therapeutic Products based on Class 1 or Class 2 Compounds, and, with respect to
clinical testing of the same, to preclinical and clinical investigators where
necessary or desirable to the extent normal and usual in the custom of the trade
and under a secrecy agreement with essentially the same confidentiality
provisions as those contained herein. In addition, Pfizer or Anaderm may
disclose Confidential Information that relates to an Invention within the Field
or the Dermatology Indications made by Pfizer, Anaderm, or OSI during the course
of the Research Program on which Anaderm chooses to file a patent application
pursuant to Section 7.6.1 of this Agreement, where such Confidential Information
is disclosed to the United States Patent and Trademark Office or any of the
other patent offices worldwide in the course of filing, prosecuting and
maintaining such patent application and any resulting patents in any patent
office proceeding (e.g., in response to an office action, or in an appeal,
reissue, reexamination, interference, opposition, or prior use proceedings,
among others), where Anaderm deems the disclosure of such Confidential
Information necessary to support patentability of the disclosed invention. Each
party, upon the written request of any other party, will return all the
Confidential Information disclosed to it or any of its Affiliates by the
requesting party pursuant to this Agreement, including all copies and extracts
of documents, within 60 days of such a request made after the termination of
this Agreement.
6.1.3. Each of Pfizer, OSI and Anaderm represents that all of their
respective employees, the employees of their Affiliates, and all other persons
(e.g., consultants) participating in the Research Program on their respective
behalves who will have access to Pfizer Confidential Information, OSI
Confidential Information or Anaderm Confidential Information will be bound, for
a period beginning not later than commencement of their
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participation in the Research Program and ending five (5) years after
termination of the Contract Period, by agreements to maintain such information
in confidence.
6.2. Publication. Except as required to pursue patent protection, the
parties hereto agree not to publish the results obtained in the course of the
Research Program without the prior written approval of Anaderm. After receipt of
any proposed publication by Anaderm, written approval or disapproval shall be
provided within thirty (30) days for a manuscript, an abstract for presentation
at, or inclusion in the proceedings of a scientific meeting, or a transcript of
an oral presentation to be given at a scientific meeting. Approval decisions
shall be made in accordance with Pfizer's corporate policy regarding
publications, and approval shall not be unreasonably withheld.
6.3. Disclosure of Inventions. Each party shall promptly inform the others
about any Invention within the Field or the Dermatology Indications that is
conceived or reduced to practice, in whole or in part, in the course of carrying
out the Research Program by their respective employees, Affiliates, or other
parties participating in the Research Program on their respective behalves. Each
party shall also promptly inform Pfizer or OSI about any Invention outside the
Field and outside the Dermatology Indications, if such Invention is based on a
compound owned by Pfizer or OSI, respectively, or an Analog of such a compound
(i.e., any Invention that relates to such a compound or Analog of such a
compound, or to a composition containing such a compound or Analog of such a
compound, or to a method of making, administering or using such a compound or
Analog of such a compound). This Agreement shall not be construed to obligate
any party to disclose to the other parties any other Inventions outside the
Field and outside the Dermatology Indications.
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ARTICLE 7 - INTELLECTUAL PROPERTY RIGHTS
7.1. Grant of Technology Licenses. All grants of licenses in Technology
under this section (Section 7.1) are subject to the provisions of Sections 7.2
and 7.3 of this Agreement, which relate to the transfer of rights in Inventions.
7.1.1. License in OSI Technology. OSI grants Anaderm, NYU and Pfizer
and its Affiliates an exclusive license in the Territory, during the Contract
Period and without the right to sublicense, under OSI's rights in OSI
Technology, including that which is acquired by OSI from Third Parties during
the Contract Period. This exclusive license is solely for the purpose of
conducting the Research Program in the Field in accordance with the terms of
this Agreement, and is subject to OSI's retention of rights of equivalent scope
for itself during the Contract Period solely for use in conducting the Research
Program. Upon expiration of the Contract Period, the exclusive license in the
Field will become non-exclusive and solely for the purpose of developing and
marketing Lead Compounds and Human Therapeutic Products. OSI further grants
Anaderm, NYU and Pfizer and its Affiliates a non-exclusive license in the
Territory, during the Contract Period and without right to sublicense, under
OSI's rights in OSI Technology, including that which is acquired by OSI from
Third Parties during the Contract Period, solely for the purpose of conducting
the Research Program in the Dermatology Indications in accordance with the terms
of this Agreement. The non-exclusive licenses in the Field and in the
Dermatology Indications referred to in this Section (Section 7.1.1) shall not
expire in any country, notwithstanding the termination provisions of Article 9
of this Agreement, prior to 10 years from the date of the first commercial sale
in that country of a Human Therapeutic Product the manufacture, use or sale of
which by a Third Party would infringe a Valid Claim to any Invention within
Anaderm Patent Rights or Pfizer Patent Rights,
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and, if at the end of such ten year period a Valid Claim to any such Invention
exists in such country, the term of the license shall continue until no such
Valid Claim exists in that country.
7.1.2. License in Anaderm Technology. Anaderm grants OSI and Pfizer
and their Affiliates an exclusive license in the Territory, during the Contract
Period and without the right to sublicense, under Anaderm's rights in Anaderm
Technology, including that which is acquired by Anaderm from Third Parties
during the Contract Period. This license is solely for the purpose of conducting
the Research Program in accordance with the terms of this Agreement and is
subject to Anaderm's retention of rights of equivalent scope for itself during
the Contract Period solely for use in conducting the Research Program, as well
as Anaderm's retention of the right to send compounds to Third Parties for the
purpose of screening, formulating or testing said compounds such as, e.g., by
conducting efficacy or toxicity studies, in support of the Research Program.
Upon expiration of the Contract Period, such license, as to Pfizer and its
Affiliates, will become non-exclusive and solely for the purposes of developing
and marketing Lead Compounds and Human Therapeutic Products, and shall not
expire in any country, notwithstanding the termination provisions of Article 9
of this Agreement, prior to 10 years from the date of the first commercial sale
in that country of a Human Therapeutic Product the manufacture, use or sale of
which by a Third Party would infringe a Valid Claim to an Invention within
Pfizer Patent Rights or Anaderm Patent Rights, and, if at the end of such ten
year period a Valid Claim to such Invention exists in such country, the term of
the license shall continue until no such Valid Claim exists in that country.
7.1.3. License in Pfizer Compounds. Pfizer grants Anaderm and OSI an
exclusive license, under its rights, without the right to sublicense, in the
Territory, during the Contract Period, to use, solely for the purpose of
screening such compounds for indications
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within the Field in the course of conducting the Research Program, any compounds
that Pfizer makes available for use in the Research Program pursuant to Section
II of the Stockholders' Agreement. Pfizer grants Anaderm and OSI a non-exclusive
license, under its rights, without the right to sublicense, in the Territory,
during the Contract Period, to use any such Pfizer compounds solely for the
purpose of screening such compounds for indications within the Dermatology
Indications, and synthesizing and screening Analogs of such compounds, in the
course of conducting the Research Program.
7.1.4. License in OSI Compounds. OSI grants Anaderm and Pfizer an
exclusive license, under its rights, without the right to sublicense, in the
Territory, during the Contract Period, to use, solely for the purpose of
screening such compounds for indications within the Field in the course of
conducting the Research Program, any compounds that OSI makes available for use
in the Research Program pursuant to Section II of the Stockholders' Agreement.
No Third Parties shall be allowed to screen OSI compounds or Analogs of OSI
compounds without the prior written consent of OSI. OSI grants Anaderm and
Pfizer a non-exclusive license, under its rights, without the right to
sublicense, in the Territory, during the Contract Period, to use any such OSI
compounds solely for the purpose of screening such compounds for indications
within the Dermatology Indications, and synthesizing and screening Analogs of
such compounds, in the course of conducting the Research Program.
7.2. Rights in Inventions Within the Field or The Dermatology Indications.
7.2.1. Subject only to the provisions of Sections 7.2.2 and 7.2.3
below, OSI shall assign to Anaderm its worldwide rights in any Invention within
the Field or the Dermatology Indications that is made in the course of its
participation in the Research Program and that relates to a Therapeutically
Active Compound, a composition containing a
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Therapeutically Active Compound, or a New Use for a Therapeutically Active
Compound, except with respect to Inventions based on compounds Owned By OSI or
Analogs of compounds Owned By OSI. Pfizer shall do the same, except with respect
to Inventions based on compounds Owned By Pfizer or Analogs of compounds Owned
By Pfizer. OSI and Pfizer grant Anaderm an exclusive license in the Territory,
including the right to sublicense, under their rights in all Inventions within
the Field or the Dermatology Indications, that are made in the course of their
participation in the Research Program and that do not relate to a
Therapeutically Active Compound, a composition containing a Therapeutically
Active Compound or a New Use for a Therapeutically Active Compound, to use such
Inventions for the purposes of conducting the Research Program and developing
and marketing Lead Compounds and Human Therapeutic Products. The term of such
exclusive licenses shall not expire in any country, with respect to any
particular Invention, notwithstanding the termination provisions of Article 9 of
this Agreement, prior to 10 years from the date of the first commercial sale in
that country of a Human Therapeutic Product the manufacture, use or sale of
which by a Third Party would infringe a Valid Claim to such Invention, and, if
at the end of such ten year period a Valid Claim to such Invention exists in
such country, the term of the license shall continue until no such Valid Claim
exists in that country. The foregoing grants of exclusive licenses to Anaderm by
OSI and Pfizer are also subject, during the Contract Period, to OSI's and
Pfizer's retention of rights of equivalent scope for themselves, for use solely
in conducting the Research Program.
7.2.2. OSI shall assign to Pfizer its worldwide rights in any
Invention that is made in the course of its participation in the Research
Program and that relates to a compound Owned By Pfizer or an Analog of such a
compound, a composition containing such a
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compound or Analog, or a New Use for such a compound or Analog. Pfizer grants
Anaderm an exclusive license in the Territory, including the right to sublicense
without restriction, under its rights in any Inventions pertaining to the Field
or the Dermatology Indications that are assigned to it pursuant to this section
(Section 7.2), for the purposes of conducting the Research Program and
developing and marketing Lead Compounds and Human Therapeutic Products. Such
exclusive license is subject, during the Contract Period, to Pfizer's retention
of rights of equivalent scope, solely for the purpose of conducting the Research
Program. The term of such exclusive license shall not expire in any country,
notwithstanding the termination provisions of Article 9 of this Agreement, prior
to 10 years from the date of the first commercial sale in that country of a
Human Therapeutic Product the manufacture, use or sale of which by a Third Party
would infringe a Valid Claim to any such Invention, and, if at the end of such
ten year period a Valid Claim to such Invention exists in such country, the term
of the exclusive license shall continue until no such Valid Claim exists in that
country.
7.2.3. OSI grants Anaderm an exclusive license in the Territory,
including the right to sublicense without restriction, under its rights in any
Inventions pertaining to the Field or the Dermatology Indications that relate to
a compound Owned By OSI or an Analog of such a compound, a composition
containing such a compound or Analog of such a compound, or a New Use for such a
compound or an Analog of such a compound, for the purposes of conducting the
Research Program and developing and marketing Lead Compounds and Human
Therapeutic Products. Such exclusive license is subject, during the Contract
Period, to OSI's retention of rights of equivalent scope, solely for the purpose
of conducting the Research Program. The term of such exclusive license shall not
expire in any country, notwithstanding the termination provisions of Article 9
of this Agreement, prior to 10 years from the date of
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the first commercial sale in that country of a Human Therapeutic Product the
manufacture, use or sale of which by a Third Party would infringe a Valid Claim
to any such Invention, and, if at the end of such ten year period a Valid Claim
to such Invention exists in such country, the term of the exclusive license
shall continue until no such Valid Claim exists in that country.
7.3. Rights in Inventions Outside the Field and The Dermatology
Indications. Neither OSI, Anaderm nor Pfizer shall be obligated to assign or
license their rights in any Invention made in the course of conducting the
Research Program, where such Invention does not relate to the Field or to the
Dermatology Indications, or to a compound owned by Pfizer, OSI or Anaderm, or an
Analog of such a compound, a composition containing such a compound or Analog,
or a method of making, using or administering such a compound or Analog.
7.4. Actual or Threatened Infringement.
7.4.1. When information comes to the attention of OSI, Anaderm or
Pfizer, or any of their Affiliates, to the effect that any patent in which a
party to this Agreement owns rights (either pursuant to this Agreement or
otherwise) and which claims either (a) a Human Therapeutic Product based on a
Class 1 or Class 2 Compound that is being developed or marketed by Anaderm or
Pfizer or an Affiliate of Pfizer (excluding Anaderm), or (b) a compound or
composition contained in such a Human Therapeutic Product, or (c) a Class 1 or
Class 2 compound being developed by Anaderm or Pfizer or an Affiliate of Pfizer
as a Lead Compound pursuant to Article VII of the Stockholders' Agreement or for
which a New Use, as defined in Section 1.25 of this Agreement, is being
developed by Anaderm or Pfizer or an Affiliate of Pfizer (excluding Anaderm),
has been or is threatened to be unlawfully infringed, the party or Affiliate
thereof that becomes aware of such information shall promptly bring it to
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the attention of the other parties to this Agreement. Pfizer, or an Affiliate of
Pfizer (excluding Anaderm), within 90 days after all parties have been made
aware of such information, regardless of which party is developing or marketing
the compound or product to which the allegedly infringed patent relates, shall
have the right, but not the obligation, at its own risk and expense and using
counsel of its choice, to take such action as it may deem necessary to prosecute
or prevent such unlawful infringement and to notify the parties to this
Agreement of the commencement of any suit, action, proceeding or assertion of
infringement that it initiates. Neither Pfizer nor any of its Affiliates,
however, shall be obligated to inform OSI or Anaderm prior to taking any such
action if such action would thereby be delayed and prejudice its right to obtain
the relief sought, for example, where such action is a motion for a temporary
restraining order or a claim of patent infringement based on the filing of an
ANDA by a generic drug company. If Pfizer decides not to take action, it shall
notify Anaderm and OSI in a timely fashion so as to allow either of these
parties to take such action if they choose to do so. Pfizer shall furnish
Anaderm and OSI, upon request, with a copy of each nonprivileged material
communication relating to the alleged infringement. If Pfizer or the relevant
Affiliate of Pfizer, as the case may be, determines that it is necessary or
desirable for either Anaderm or OSI to join any such suit, action or proceeding,
then Anaderm or OSI shall, at Pfizer's expense, execute all papers and perform
such other acts as may be reasonably required to permit Pfizer or the relevant
Affiliate of Pfizer to act in their respective names, or to join them,
respectively, as parties, if required by law, in which event Pfizer shall hold
the party or parties requested to be joined free, clear and harmless from any
and all costs and expenses of such suit, action or proceeding, including
attorney's fees. If Pfizer or any of its Affiliates other than Anaderm brings a
suit in accordance with the above terms, it shall have the right
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<PAGE> 41
first to reimburse itself out of any sums recovered in such suit or in its
settlement for all reasonable costs and expenses of every kind and character,
including reasonable attorney's fees, involved in the prosecution of any suit,
and fifty percent (50%) of any funds that shall remain from said recovery shall
be distributed to the parties receiving royalties on the Net Sales of the Human
Therapeutic Product to which the infringed claim or claims relate, in amounts
proportional to the relative amounts of their respective royalties, and the
remaining fifty (50%) percent shall belong, respectively, to Pfizer or the
Affiliate of Pfizer that brought the suit.
7.4.2. If, within ninety (90) days after Pfizer or an Affiliate of
Pfizer other than Anaderm gives notice to Anaderm or OSI of the information
relating to the alleged infringement or receiving notice of such information
from Anaderm or OSI, or an Affiliate thereof, neither Pfizer nor any of its
Affiliates notifies Anaderm and OSI of its intent to bring suit or take other
action against the alleged infringer, Anaderm shall have the right, but not the
obligation, to bring suit or take other action against such alleged infringer,
and may through joinder add Pfizer, an Affiliate of Pfizer or OSI as a party, if
appropriate, in which case Anaderm shall hold the party or parties so joined
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 Anaderm; provided, however, that fifty percent (50%)
of any such sums recovered in such suit or settlement, after deduction of the
costs and expenses of litigation, including attorney's fees paid, shall be
distributed to the parties receiving royalties on the Net Sales of the Human
Therapeutic Product to which the allegedly infringed claim or claims relate, in
amounts proportional to the relative amounts of their respective royalties, and
the remaining fifty percent (50%) shall belong to Anaderm.
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7.4.3. All parties to this Agreement agree to cooperate with and
lend assistance, as appropriately requested or required by law, to any of the
other parties that initiate a lawsuit or other action against an alleged
infringer pursuant to this section (Section 7.4). Each party shall have the
right to be represented by counsel of its own selection and at its own expense
in any suit instituted by the other under the terms of this section. If either
Anaderm or Pfizer lacks standing to bring any such suit, action or proceeding,
then the other shall do so at the request and expense of the requesting party.
The obligations of all parties under this section shall remain in effect,
notwithstanding the termination provisions of Article 9 of this Agreement, until
the statute of limitations applicable to every action that could be taken
pursuant to this section to hold the allegedly infringing party accountable
under the law has expired and until every such pending action has been resolved
by a decision rendered by a tribunal of competent jurisdiction from which no
appeal has been or can be taken.
7.5. Response to Infringement Claims. The parties to this Agreement agree
that they and their Affiliates will cooperate with any one or both of the other
such parties in defense of any suit, action or proceeding against any such party
or any Affiliate or sublicensee of any such party alleging the infringement of
the intellectual property rights of a Third Party other than NYU by reason of
the manufacture, use or sale of a Human Therapeutic Product based on a Class 1
or Class 2 compound. The cooperation and involvement of all three parties, and
their Affiliates, in defense of any such lawsuit shall be at the expense of the
party that is developing and/or marketing the Human Therapeutic Product or
compound the manufacture, use or sale of which gave rise to the claim of
infringement (the "developing/marketing party"). However, the
developing/marketing party shall not be responsible for paying any costs or fees
or expenses associated with the involvement of another party or Affiliate
thereof in any such
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lawsuit if the allegedly infringing activities that gave rise to the lawsuit
resulted from the negligence or breach of a warranty in this Agreement or the
Stockholders' Agreement of such other party or Affiliate. Any party to this
Agreement against which such a lawsuit, action, proceeding or claim of
infringement is brought shall give the other parties prompt written notice of it
and shall furnish the other parties with a copy of each nonprivileged material
communication relating to the alleged infringement. In consideration of the
developing/marketing party's provision of costs, fees and expenses for the
defense of any other party or Affiliate thereof joined in such a lawsuit or
other legal proceeding, and the developing/marketing party's agreement which it
hereby gives to the other parties and their Affiliates to indemnify and hold
them and their directors, officers, employees and agents harmless with respect
to all damages assessed against them and arising out of such action, all parties
hereby grant to Pfizer or Anaderm, whichever is the developing/marketing party,
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), and agree
to provide Pfizer or Anaderm, respectively, with all information and assistance
necessary to defend or settle any such suit, action or proceeding, except that
any such compromise, litigation, settlement, or other disposition shall not
require an admission of fault on the part of any such other party or Affiliate
thereof, or require any such other party or Affiliate to incur any obligation or
liability or take or refrain from taking any action except as otherwise
obligated hereunder without such party's advance written consent. The
obligations of all parties under this section shall remain in effect,
notwithstanding the termination provisions of Article 9 of this Agreement, until
the statute of limitations applicable to every action that could be taken
pursuant to this section to hold the
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allegedly infringing party accountable under the law has expired and until every
such pending action has been resolved by a decision rendered by a tribunal of
competent jurisdiction from which no appeal has been or can be taken.
7.6. Filing, Prosecution and Maintenance of Patent Rights.
7.6.1. Anaderm shall have the right, at its expense and using
counsel of its choice, to prepare, file and prosecute patent applications and to
maintain and apply for extensions, Supplementary Protection Certificates and
reissues of patents worldwide on Inventions within the Field or the Dermatology
Indications, that were made by any of the parties in the course of their
participation in the Research Program and that relate to either a
Therapeutically Active Compound, a composition containing a Therapeutically
Active Compound or a New Use for a Therapeutically Active Compound, as well as
on any Inventions in which it has rights as an owner/assignee pursuant to this
article (Article 7). Pfizer and OSI hereby grant Anaderm the authority to
perform the above patent-related tasks, at Anaderm's expense, with respect to
such Inventions in which they, respectively, have rights as an owner/assignee
pursuant to this article and agree to execute any and all forms required to be
submitted in the various patent offices worldwide to render such transfer of
authority effective in all countries in which patent protection will be sought.
7.6.2. Anaderm shall diligently perform, or have diligently
performed on its behalf, the patent-related tasks referred to under Section
7.6.1 above, and shall provide copies of any documents related to the
performance of such tasks to any other party to this Agreement that requests
them.
7.6.3. The rights and obligations under this section (Section 7.6)
shall not expire, notwithstanding the termination provisions of Article 9 of
this Agreement, with respect
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to a particular Invention, until all licenses of rights in such Invention
pursuant to this Agreement have expired.
ARTICLE 8 - ACQUISITION OF RIGHTS FROM THIRD PARTIES.
During the Contract Period, each of OSI, Pfizer and Anaderm shall promptly
notify the others in writing of any and all opportunities of which it is aware
to acquire in any manner from Third Parties, Technology or patents which may be
useful in, or may relate to, the Research Program. Anaderm shall decide if such
rights shall be acquired. Anaderm shall use its best efforts to locate, and
acquire rights to, Technology within the Field.
ARTICLE 9 - TERMINATION
9.1. Term. This Agreement shall have a term of three years from the
Effective Date, and shall terminate on that date unless renewed by written
agreement of all of the parties.
9.2. Termination for Cause. At any time prior to expiration of this
Agreement, any party may terminate this Agreement forthwith for cause, as
"cause" is described below, by giving written notice to the other parties, such
termination to be effective thirty (30) days after the giving of such notice.
Cause for termination by a party to this Agreement shall be deemed to exist: (i)
if any other party materially breaches or defaults in the performance or
observance of any of the provisions of this Agreement and such material breach
or default is not cured within sixty (60) days after the giving of notice by the
party specifying such material breach or default; or (ii) if either OSI, Pfizer
or Anaderm discontinues its business or becomes insolvent or bankrupt; or (iii)
if any representation or warranty by any other party or any of their officers,
under or in connection with this Agreement, shall prove to have been incorrect
in any
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<PAGE> 46
material respect when made; or (iv) with respect to the right of Pfizer to
terminate under Section 4.3 above, if Pfizer decides to terminate funding; or
(v) with respect to the rights of Pfizer and Anaderm to terminate, if there is a
Change Of Control Of OSI (as defined in Section 9.3 below).
9.3. For purposes of this Agreement, a "Change Of Control Of OSI" shall be
deemed to have taken place: (i) if a Third Party becomes the beneficial owner of
shares having fifty percent (50%) or more of the total number of votes that may
be cast for the election of directors of OSI; or (ii) if, as the result of, or
in connection with, any cash tender or exchange offer, merger or other business
combination, sale of assets or contested election, or any combination of the
foregoing transactions (a) the persons who were directors of OSI before the
transaction shall cease to constitute a majority of the Board of Directors of
OSI or any successor of OSI, or (b) there is a sale, exchange or other
disposition of all or substantially all of OSI's assets to a Third Party. Within
thirty (30) days following the Change Of Control Of OSI, OSI shall provide
notice thereof to the other parties to this Agreement.
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9.4. Phase Out of OSI Funding Upon Termination. In the event of expiration
of this Agreement pursuant to Section 9.1 above, or a termination by Pfizer
pursuant to Section 9.2(iv) or by OSI pursuant to Section 9.2 above, OSI shall
be funded to conduct research for three additional years pursuant to a research
program approved either by Anaderm or Pfizer that does not conflict with any
other then-existing obligations of OSI, and on the basis hereinafter provided.
For the first 12 months following the date of termination, Anaderm or Pfizer
shall fund OSI's research cost at the rate of the lesser of: (a) ** of the
actual amount funded by Anaderm during the 12 months prior to such termination,
adjusted for inflation; or (b) ** . For the second year following the date of
termination, Anaderm or Pfizer shall fund OSI's research cost at the rate of the
lesser of: (a) ** of the actual amount funded by Anaderm during the 12 months
prior to such termination, adjusted for inflation; or (b) ** . For the third
year following the date of termination, Anaderm or Pfizer shall fund OSI's
research cost at the rate of the lesser of: (a) ** of the actual amount funded
by Anaderm during the 12 months prior to such termination, adjusted for
inflation; or (b) ** . In consideration for this funding, OSI, during the first,
second and third years of the phase out period, shall commit a number of
man-hours to conducting research pursuant to the approved research program
previously referred to in this Section (Section 9.4), which number of man-hours
is at least ** (first year post-termination), ** (second year post-termination),
and **
- ----------
** This portion has been redacted pursuant to a request for confidential
treatment.
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<PAGE> 48
(third year post-termination), respectively, of the number of OSI man-hours
spent participating in the Research Program pursuant to this Agreement during
the last twelve (12) months prior to termination, or to an amount mutually
agreed to by the parties.
9.5. Provisions that Survive Termination. The following provisions of this
Agreement will survive termination pursuant to this article and will remain in
force for the period specified in the sections of the Agreement in which they
appear:
(a) the obligations of Pfizer and Anaderm to provide notices or
status reports to OSI pursuant to Section 3.7;
(b) all of Article 5, relating to the payment of royalties;
(c) the confidentiality obligations set forth in Sections 6.1.1 -
6.1.3;
(d) the grant of exclusive and nonexclusive licenses pursuant to
Article 7;
(e) the obligations of all parties with respect to patent
infringement matters pursuant to Sections 7.4 and 7.5;
(f) the rights and obligations of all parties with respect to the
filing, prosecution and maintenance of patent rights pursuant to Section 7.6;
(g) the phase out of OSI funding pursuant to Section 9.4;
(h) the indemnification provisions of Article 10; and
(i) the choice of governing law pursuant to Section 12.2.
ARTICLE 10 - INDEMNIFICATION BY ANADERM OR PFIZER
**
- ----------
** This portion has been redacted pursuant to a request for confidential
treatment.
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ARTICLE 11 - REPRESENTATIONS, WARRANTIES AND COVENANTS
OSI, Pfizer and Anaderm each represents, warrants and covenants as
follows:
11.1. It is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation and is
qualified to do business and is in good standing as a foreign corporation in
each jurisdiction in which the conduct of its business or the ownership of its
properties requires such qualification and 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.
11.2. The execution, delivery and performance by it of this Agreement have
been duly authorized by all necessary corporate action and do not and will not
(a) require any consent or approval of its stockholders, (b) violate any
provision of any law, rule, regulation, order, writ, judgment, injunction,
decree, determination or award presently in effect having applicability to it or
any provision of its charter or bylaws 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.
11.3. This Agreement is a legal, valid and binding obligation of it and is
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 creditor's rights generally.
11.4. It is not presently under and it will not incur in the future 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 under this
Agreement.
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11.5. 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 and the Research Program, subject to no claim of any Third
Party other than the relevant lessors or licensors.
11.6. It shall use its diligent efforts to perform its obligations under
this Agreement.
11.7. OSI, Pfizer and Anaderm represent that their respective employees,
and those of their Affiliates, that will participate in the Research Program and
all other parties that will participate in the Research Program on their behalf
pursuant to this Agreement will have a contractual obligation throughout the
course of their participation in the Research Program to assign to OSI, Pfizer,
or Anaderm, respectively, their rights in any Inventions made in the course of
their participation in the Research Program.
11.8. OSI represents that it has exclusive rights, including the right to
sublicense, to use the compounds within the OSI Compound File that are from the
library licensed to OSI by The Dow Chemical Company, and Analogs thereof, to
make, have made, use, evaluate, screen, sell, and have sold Human Therapeutic
Products in the Field and in the Dermatology Indications.
ARTICLE 12 - MISCELLANEOUS
12.1. 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:
If to Pfizer: To Pfizer at its address as set forth at the beginning
of this Agreement
Attention: Paul S. Miller, Esq.
Senior Vice President and
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General Counsel, Pfizer Inc.
235 East 42nd Street, 21st Fl.
New York, N.Y. 10017-5755
If to OSI: To OSI at its address as set forth at the beginning of
this Agreement
Attention: Colin Goddard
Chief Executive Officer,
OSI Pharmaceuticals, Inc.,
106 Charles Lindergh Blvd.,
Uniondale, New York 11553
If to Anaderm: To Anaderm at its address as set forth at the beginning
of this Agreement
Attention: **
President, Anaderm Research Corp.
235 East 42nd Street., 13th Fl.
New York, N.Y. 10017-5755
cc: Paul S. Miller, Esq.
Senior Vice President and
General Counsel, Pfizer Inc.
235 East 42nd Street, 21st Fl.
New York, N.Y. 10017-5755
Notices shall be deemed given as of the date of receipt.
12.2. Governing Law. This Agreement shall be construed in accordance with
the laws of the State of New York.
- ----------
** This portion has been redacted pursuant to a request for confidential
treatment.
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12.3. 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.
12.4. Publicity. Except as required by law, no party hereto may disclose
the existence of this Agreement or any of Anaderm's activities without the prior
written approval of Anaderm.
12.5. Headings. Paragraph headings are inserted for convenience of
reference only and do not form a part of this Agreement.
12.6. Counterparts. This Agreement may be executed simultaneously in two
or more counterparts, each of which shall be deemed an original.
12.7. 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 waiving compliance. The delay or failure of any party at any time or
times to require performance of any provision, except as otherwise specifically
provided in this Agreement, shall in no manner affect its rights at a later time
to enforce the same.
12.8. Third Party Beneficiaries. NYU is an intended third party
beneficiary to this Agreement solely to the extent that it is granted certain
rights in intellectual property pursuant to Article 7. No other Person not a
party to this Agreement, including any employee of any party to this Agreement,
or of any Affiliate thereof, shall have or acquire any rights by reason of this
Agreement. Nothing contained in this Agreement shall be deemed to constitute the
parties as partners with each other or any Person.
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12.9. Assignment and Successors. This Agreement may not be assigned by any
party, in whole or in part, except to a purchaser of all or substantially all of
its assets or to any successor corporation resulting from any merger or
consolidation with or into such corporation.
12.10. Force Majeure. The parties to this Agreement shall be excused from
any required performance to the extent that, and for so long as, such
performance is rendered impossible or unfeasible due to any catastrophes or
other major event beyond their reasonable control, including, without
limitation, war, riot, insurrection, laws, proclamations, edicts, ordinances,
regulations, strikes, lock-outs, other serious labor disputes, floods, fires,
explosions or other natural disasters. When such events have abated, the
parties' respective obligations and rights shall resume.
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<PAGE> 54
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
by their duly authorized representatives.
ANADERM RESEARCH CORP.
By /s/
------------------------------------------
Title: President and Chief Executive Officer
OSI PHARMACEUTICALS, INC.
By /s/
------------------------------------------
Title: President and Chief Executive Officer
PFIZER INC
By /s/
------------------------------------------
Title Executive Vice President
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APPENDIX A
**
- ----------
** This portion has been redacted pursuant to a request for confidential
treatment.
<PAGE> 1
Portions of 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
ANADERM RESEARCH CORP.
Amended and Restated Stockholders' Agreement
dated April 23, 1999
(in substitution for the Stockholders' Agreement
dated April 23, 1996, as amended on September 10, 1998)
<PAGE> 3
TABLE OF CONTENTS
ARTICLE I - DEFINITIONS........................................................2
ARTICLE II - CAPITAL CONTRIBUTIONS.............................................5
2.1. Capital Contributions.............................................5
2.2. Non Disclosure....................................................7
ARTICLE III - APPLICABILITY; RESTRICTIONS ON TRANSFER OF SHARES................7
3.1. Amendment and Restatement of Original Stockholders' Agreement.....7
3.2. Shares Subject to Agreement.......................................7
3.3. General Restriction on Transfer...................................7
3.4. Permitted Transfers...............................................8
ARTICLE IV - CORPORATE GOVERNANCE..............................................8
4.1. Board of Directors................................................8
4.2. Nomination and Election of Directors..............................9
4.3. Board of Directors................................................9
4.4. Officers of the Company...........................................9
4.5. Quorum of the Board..............................................10
4.6. Action by the Board of Directors.................................10
4.7. Quorum of Stockholders...........................................11
4.8. Action by Stockholder............................................11
ARTICLE V - DISPOSITION OF SHARES.............................................12
5.1. Right of First Refusal...........................................12
5.2. Involuntary Transfers............................................15
5.3. Put and Call Rights..............................................16
5.4. Fair Value.......................................................18
5.5. Tag Along Rights.................................................20
5.6. Take Along Right.................................................22
5.7. Stock Purchase Assignment........................................23
ARTICLE VI - PREEMPTIVE RIGHTS................................................23
6.1. Preemptive Rights................................................23
ARTICLE VII - DEVELOPMENT OF A LEAD COMPOUND..................................24
7.1. Pfizer's Right of First Refusal for Initial Development..........24
7.2. Pfizer's Right of First Refusal for Further Development..........26
7.3. Development by Pfizer............................................26
7.4. Development by the Company.......................................28
7.5. Analog Manufacture...............................................29
7.6. Approval of Analog Production and Screening......................29
7.7. Assignment of Analog Rights......................................29
i
<PAGE> 4
7.8. Development of Lead Compound for Different Indications...........29
7.9. Request to Cease Lead Compound Development.......................30
ARTICLE VIII - LEGENDING OF SECURITIES........................................30
8.1. Legends..........................................................30
ARTICLE IX - TERMINATION AND SURVIVAL OF PROVISIONS...........................31
9.1. Termination......................................................31
9.2. Survival.........................................................31
ARTICLE X - REPRESENTATIONS AND WARRANTIES OF STOCKHOLDERS....................31
10.1. Representations and Warranties of Each Stockholder...............31
ARTICLE XI - INSUFFICIENT SURPLUS AND INSOLVENCY..............................33
ARTICLE XII - MISCELLANEOUS...................................................34
12.1. Notices..........................................................34
12.2. Entire Agreement.................................................37
12.3. Governing Law....................................................38
APPENDIX A....................................................................40
ii
<PAGE> 5
ANADERM RESTATED AND AMENDED STOCKHOLDERS' AGREEMENT
THIS RESTATED AND AMENDED STOCKHOLDERS'AGREEMENT ("Agreement") is made as
of the 23rd day of April 1999, among ANADERM RESEARCH CORP., a Delaware
corporation, having its principal place of business at 235 East 42nd Street, New
York, New York 10017 (the "Company"), PFIZER INC., a Delaware corporation,
having its principal place of business at 235 East 42nd Street, New York, New
York 10017 ("Pfizer"), OSI PHARMACEUTICALS, INC., a Delaware corporation,
formerly known as Oncogene Science, Inc., having its principal place of business
at 106 Charles Lindbergh Boulevard, Uniondale, New York 11553 ("OSI"), NEW YORK
UNIVERSITY, a New York corporation, having a principal place of business at 550
First Avenue, New York, New York 10016 ("NYU"), ** , each having a business
address at New York University Medical Center, 550 First Avenue, New York, New
York 10016 ** collectively referred to herein as the "NYU Faculty Members").
Pfizer, OSI, NYU and the NYU Faculty Members shall collectively be referred to
herein as the "Stockholders".
WHEREAS, the Company was organized to discover, develop and market
pharmaceutical products for the prevention or treatment of baldness and
wrinkles, and for the control of skin and hair pigmentation; and
- ----------
** This portion has been redacted pursuant to a request for confidential
treatment.
<PAGE> 6
WHEREAS, the Stockholders entered into a Stockholders' Agreement dated
April 23, 1996 as amended by the Amendment to the Stockholders' Agreement dated
September 10, 1998 (together the "Original Stockholders' Agreement") which they
now wish to be amended and restated by this Agreement;
WHEREAS, the NYU Faculty Members have exercised their options under the
Stock Option Agreement defined in the Original Stockholders' Agreement;
WHEREAS, the Stockholders have entered into a subscription agreement dated
February 27, 1998 (the "Subscription Agreement") which provided for additional
Stockholder capital contributions to the Company by certain of the Stockholders
in exchange for shares in the Company; and
WHEREAS, the parties to this Agreement believe it is in their mutual best
interest to provide for continuity and harmony in the management and the
policies of the Company and therefore the parties hereto wish to amend and
restate the Original Stockholders' Agreement as set out below.
NOW, THEREFORE, in consideration of the agreements and covenants contained
herein and for other valuable consideration, receipt of which is hereby
acknowledged, it is mutually agreed and covenanted by and among the parties to
this Agreement as follows:
ARTICLE I - DEFINITIONS
As used in this Agreement or any of the Schedules or Exhibits hereto, the
following terms have the meanings indicated. All capitalized terms used but not
defined herein shall have the same meanings ascribed to them, respectively, in
the Research Agreements (as defined in this Article 1), as such may be amended
from time to time.
2
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1.1 "Affiliate" means any corporation or other legal entity owning,
directly or indirectly, 50% or more of the voting capital shares or similar
voting securities of the Company, OSI or Pfizer, or any corporation or other
legal entity 50% or more of the voting capital shares or similar voting rights
of which is owned, directly or indirectly, by the Company, OSI or Pfizer.
However, a foreign corporation or other legal entity shall be considered an
Affiliate of the Company, OSI or Pfizer, if the Company, OSI or Pfizer,
respectively, owns the maximum amount of voting securities of such corporation
or entity that a U. S. company is permitted to own under the laws of the
applicable foreign country and such maximum amount is at least 40%.
1.2 "Anaderm Royalty" shall have the meaning given to such term in Section
7.3 hereof.
1.3 "Common Stock" shall mean the common stock of the Company, but unless
otherwise indicated, any reference to shares of Common Stock outstanding shall
not include shares of Common Stock underlying unexercised options, warrants,
rights or convertible securities of the Company (unless such reference states
that such amount is determined after giving effect to such exercise or
conversion, until such options, warrants or rights have been duly exercised or
convertible securities duly converted.).
1.4 "Drug Product" means a product that contains one or more
therapeutically active compounds or that relates to a method of administering or
using one or more therapeutically active compounds.
1.5 "Fair Value" means the price per share of Common Stock determined in
accordance with Section 5.4.
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1.6 "Field" means the (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 "Involuntary Transfer" means any involuntary sale, transfer,
encumbrance or other disposition by, or in which, any Stockholder is deprived or
divested of any right, title or interest in or to its shares of Common Stock,
including, without limitation, any transfer in connection with a divorce, death,
bankruptcy (whether voluntary or involuntary), reorganization, insolvency or
similar proceeding, distraint, levy, attachment, execution or other involuntary
event of any nature whatsoever.
1.8 "NYU Research Agreement" means the Research and Licensing Agreement
dated as of April 23, 1999 among the Company, NYU and Pfizer.
1.9 "OSI Compound File" means compounds maintained by OSI.
1.10 "OSI Research Agreement" means the Collaborative Research Agreement
dated as of April 23, 1999, among the Company, OSI and Pfizer.
1.11 "Permitted Transferee" shall have the meaning given to such term in
Section 3.4.
1.12 "Pfizer Compound File" means the compounds maintained by Pfizer's
Central Research Division.
1.13 "Pfizer Selected Library" means a Selected Library within the Pfizer
Compound File.
1.14 "Research Agreements" means the OSI Research Agreement and the NYU
Research Agreement.
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1.15 "Third Party" means a party other than Pfizer, Anaderm, OSI, NYU or
an Affiliate of Pfizer, OSI or Anaderm.
1.16 "Transferred Shares" shall have the meaning set out in Section 5.2.
1.17 "Valid Claim" shall have the meaning given to such term in either of
the Research Agreements, as applicable.
1.18 For purposes of this Agreement, a Human Therapeutic Product is
considered to be "based on" a Lead Compound which is identified by screening a
Pfizer Selected Library if the Human Therapeutic Product contains, or relates to
a method of administering or using a Lead Compound identified by screening, and
is part of, a Pfizer Selected Library or by screening Analogs of a compound from
a Pfizer Selected Library.
ARTICLE II - CAPITAL CONTRIBUTIONS
2.1. Capital Contributions.
(a) As of the date of this Agreement, the capital structure of the
Company is:
SHARES OF
COMMON STOCK OWNERSHIP INTEREST
** ** **
TOTAL ISSUED SHARES ** **
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** This portion has been redacted pursuant to a request for confidential
treatment.
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(b) Capital Contribution. In order to provide additional funding for
the Company, Pfizer shall have the right (but not the obligation) to subscribe
in cash from time to time for additional shares of Common Stock at the price of
** per share, up to a maximum of ** shares of Common Stock and the Company shall
issue such additional shares as subscribed by Pfizer. Any share subscription by
Pfizer under this section shall not be subject to the provisions of Article 6
herein, which the parties hereto hereby waive on behalf of themselves and their
successors and assigns in accordance with this Agreement.
(c) Other Capital Contributions. In addition to the capital
contributions provided for in this section, additional contributions may be made
to the capital of the Company in accordance with the General Corporation Law of
the State of Delaware, subject to the provisions of Section 6.1 hereof.
(d) The Pfizer Compound File and Other Support by Pfizer for the
Company. To support the Company's research activities and subject as set out
below, Pfizer may from time to time at its discretion permit the Company to use
certain compounds from the Pfizer Compound File as it exists from time to time,
solely for screening purposes in connection with the Research Program provided
that the selection of compounds for use in screening satisfies the Company's
research goals and is consistent with Pfizer corporate policy. Prior to
implementing any screens, the Company will propose screens to Pfizer and Pfizer
shall have the right to approve such screens. At any time after Pfizer has made
available to the
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** This portion has been redacted pursuant to a request for confidential
treatment.
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Company a compound for screening under this Section 2.1(d), Pfizer may require
that the Company immediately return such compound if Pfizer has designated it as
a clinical candidate or a backup to a clinical candidate and the Company shall,
if requested in writing by Pfizer, forthwith cease all development of such
compound and return the same to Pfizer.
(e) The OSI Compound File. To support the Company's research
activities, OSI may from time to time at its discretion permit the Company to
use certain compounds from the OSI Compound File as it exists from time to time,
solely for screening purposes in connection with the Research Program, provided
that the selection of compounds for use in screening satisfies the Company's
research goals and is consistent with OSI corporate policy.
2.2. Non Disclosure. Pfizer shall not be obliged to disclose information
relating to a Pfizer compound or Pfizer Selected Library, including but not
limited to chemical structures, methods of synthesis, structure-activity
relationships, materials and methods for production, recovery and purification.
ARTICLE III - APPLICABILITY; RESTRICTIONS ON TRANSFER OF SHARES
3.1. Amendment and Restatement of Original Stockholders' Agreement. Each
of the Stockholders hereby acknowledges and agrees that the Original
Stockholders' Agreement in its entirety is hereby amended and restated by this
Agreement which shall apply in substitution therefor.
3.2. Shares Subject to Agreement. Each of the Stockholders hereby agrees
that all shares of Common Stock held on the date hereof or acquired at any time
hereafter by such Stockholder shall be subject to the provisions set forth in
this Agreement.
3.3. General Restriction on Transfer. Each Stockholder hereby agrees not
to sell, assign, hypothecate, transfer, pledge, encumber, give away, or
otherwise dispose of any shares
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of Common Stock that such Stockholder holds on the date hereof or acquires at
any time hereafter except pursuant to and in compliance with the terms and
conditions of this Agreement. The Company hereby agrees that it will not
transfer or recognize any transfer of Common Stock except in compliance with the
terms of this Agreement. All certificates representing shares of Common Stock of
the Company shall be legended in accordance with Article VIII hereof.
3.4. Permitted Transfers. Notwithstanding any provision to the contrary in
this Article III, any Stockholder may, upon prior notice thereof to the Company,
transfer title to its shares of Common Stock to (i) a trust established by such
Stockholder, if the sole beneficiaries of such trust are the Stockholder, the
Stockholder's spouse or the Stockholder's children, (ii) an Affiliate of such
Stockholder or, (iii) in the case of any transfer of shares of Common Stock
pursuant to Article 5 to Pfizer (each a "Permitted Transferee"), provided that
in the case of each of the foregoing, such Permitted Transferee executes an
instrument satisfactory to the Company agreeing to be bound by the terms and
provisions of this Agreement.
ARTICLE IV - CORPORATE GOVERNANCE
4.1. Board of Directors. In accordance with the By-Laws of the Company and
Section 141 of the General Corporation Law of the State of Delaware, the Board
of Directors shall be responsible for the governance of the Company. On the date
hereof the Board of Directors consists of ** persons as provided in Section 4.3.
At any time after the date hereof, the number of directors may be increased or
decreased as provided in the Company By-Laws.
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** This portion has been redacted pursuant to a request for confidential
treatment.
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4.2. Nomination and Election of Directors. As long as Pfizer owns a
majority of the outstanding shares of Common Stock, the Stockholders agree that
Pfizer shall have the right to nominate and appoint all members of the Board of
Directors save, for so long as OSI remains a Stockholder, one, who shall be
nominated by OSI. Pfizer and OSI each hereby agree to vote their respective
shares of Common Stock for the election of the nominees of Pfizer and (if
applicable) OSI in accordance with this Section 4.2. Should OSI cease to be a
Stockholder, it shall promptly obtain the resignation of its nominated director
and tender such resignation to the Company.
4.3. Board of Directors. The Stockholders hereby agree that on the date
hereof the Board of Directors of the Company shall consist of the following five
persons, each of whom is nominated by the Stockholder set forth opposite such
directors name:
Name of Director Nominated by:
---------------- -------------
** **
4.4. Officers of the Company. The Stockholders acknowledge that the Board
of Directors of the Company has elected, in accordance with the By-Laws, the
following persons as officers of the Company in the positions set forth opposite
their respective names:
Name Office
---- ------
** **
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** This portion has been redacted pursuant to a request for confidential
treatment.
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4.5. Quorum of the Board. No action shall be taken at any meeting of the
Board of Directors of the Company, unless at least a majority of the entire
Board shall be present. For purposes of a quorum, any director may be present at
any meeting in person, by means of telephone or similar communications equipment
by means of which each person participating in the meeting can hear and speak to
each other or, to the extent permitted by applicable law, by proxy.
4.6. Action by the Board of Directors. If a quorum exists, any action
taken by the Board of Directors shall be authorized by the affirmative vote of a
majority of those members of Board of Directors present at the meeting;
provided, however, that: (a) with respect to action taken by the Board of
Directors pursuant to Section 3.3 of the OSI Research Agreement concerning
restrictions as to other research conducted by Pfizer in the Field, any such
action shall require authorization by all of the members of the Board of
Directors, and (b) the affirmative vote of ** members of the Board of Directors
is required to take the following actions (unless, in the case of (vii) and
(viii) such expenditures are provided for in the annual budget):
(i) to authorize, issue or enter into any agreement providing
for the issuance (contingent or otherwise) of any equity securities or any notes
or debt securities containing equity features (including, without limitation,
any notes or debt securities convertible into or exchangeable for equity
securities) save that this sub-paragraph (i) shall not apply to any issue or
agreement to issue additional shares of Common Stock to Pfizer under Section
2.1(b) of this Agreement;
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** This portion has been redacted pursuant to a request for confidential
treatment.
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(ii) to directly or indirectly redeem, purchase or otherwise
acquire, any of the Company's equity securities;
(iii) to make any amendments, modifications or changes to the
Certificate of Incorporation or By-Laws of the Company, the OSI Research
Agreement or the NYU Research Agreement;
(iv) to hire, fire and determine the amount of compensation
paid to Officers of the Company;
(v) to sell, lease or otherwise dispose of more than 25% of
the Company's assets in any transaction or series of transactions;
(vi) to merge or consolidate with any person or entity;
(vii) to create, incur, assume or suffer to exist any
indebtedness exceeding in the aggregate $10,000 outstanding at any time other
than in the ordinary course of business; or
(viii) to make any capital expenditures exceeding $10,000 with
respect to any single capital expenditure or $250,000 in the aggregate during
any twelve-month period.
4.7. Quorum of Stockholders. No action shall be taken at any meeting of
stockholders of the Company unless at least a majority of the holders of the
outstanding shares of Common Stock entitled to vote are present in person or by
proxy.
4.8. Action by Stockholder. If a quorum exists, any corporate action taken
at a meeting of the stockholders, except as otherwise set forth herein and
except as may be required by law, shall be authorized by the affirmative vote of
a majority of the votes cast at a meeting of stockholders by the holders of
shares of Common Stock entitled to vote thereon.
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ARTICLE V - DISPOSITION OF SHARES
5.1. Right of First Refusal
(a) If NYU or any NYU Faculty Member (the "NYU Seller") desires to
sell, transfer or otherwise dispose of any or all of his or its shares of Common
Stock, such NYU Seller may offer to sell such shares (the "Offered Shares") to
an unaffiliated Third Party for all cash payable at the closing of such sale,
subject to the Company's rights as hereinafter set forth, or offer to sell such
Offered Shares to the Company directly. The NYU Seller shall give written notice
thereof (an "Offering Notice") to the Company, with a copy to each of the other
Stockholders, which Offering Notice shall state or contain (i) the name of such
NYU Stockholder, (ii) the number of Offered Shares, (iii) the name, address and
the amount of cash proposed to be paid by a prospective purchaser pursuant to a
bona fide offer (the "Offer Price"), if any, and all the other terms and
conditions relating to such bona fide offer. The delivery by any NYU Seller of
an Offering Notice shall constitute a binding offer by the NYU Seller to sell to
the Company, and the Company shall thereupon have the right, but not the
obligation, to purchase any or all, of the Offered Shares at the Offer Price
(the applicable price being herein referred to as the "Purchase Price");
provided, however, that such Purchase Price shall be paid in accordance with
Section 5.1(g) hereof. Within thirty (30) days after the Company's receipt of
the Offering Notice, the Company shall notify the NYU Seller in writing of its
acceptance or rejection of the offer to purchase the Offered Shares.
(b) In the event that the Company elects to purchase all of the
Offered Shares, the closing shall take place in accordance with Section 5.1(g)
hereof.
(c) In the event that the Company rejects the offer to purchase the
Offered Shares from the NYU Seller or elects to purchase fewer than all of the
Offered Shares, the
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NYU Seller shall deliver written notice thereof (the "Second Notice") to each of
the other Stockholders with a copy to the Company, within ten (10) days after
the NYU Seller's receipt of the Company's response to its offer. The Second
Notice shall state or contain (i) the number of Offered Shares, (ii) the number
of Offered Shares which the Company has agreed to purchase, if any, (iii) the
number of Offered Shares available for sale to the other Stockholders, and (iv)
the name, address and the Offer Price proposed to be paid by the prospective
purchaser. The delivery by any NYU Seller of a Second Notice shall constitute a
binding offer by the NYU Seller to sell to the Company and the other
Stockholders, and the Company and the other Stockholders shall thereupon have
the right, but not the obligation, to purchase in the aggregate, all, but not
less than all, of the Offered Shares at the Purchase Price; provided, however
that such Purchase Price shall be paid in accordance with Section 5.1(g) hereof.
(d) Any Stockholder (other than the NYU Seller) electing to purchase
Offered Shares shall deliver to the NYU Seller, with a copy to the Company,
within twenty (20) days after the Second Notice is sent to the Stockholders (the
"Acceptance Period"), a notice (an "Acceptance Notice") of such Stockholder's
election stating the maximum number of Offered Shares which such Stockholder
desires to purchase (such Stockholder's "Elected Share Number"). The giving of
such Acceptance Notice shall irrevocably commit the Stockholder giving such
notice (an "Electing Stockholder") to purchase the Elected Share Number (or any
lesser number thereof as may be determined as hereinafter provided).
(e) In the event the Company, together with the Electing
Stockholders, have not elected to purchase, in the aggregate, all of the Offered
Shares, then the NYU Seller may sell the Offered Shares to the prospective
purchaser at the Offer Price for cash consideration
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payable at closing and on the other terms and conditions specified in the
Offering Notice, and such sale shall take place within sixty (60) days after the
expiration of the Acceptance Period; provided, however that such prospective
purchaser shall execute an instrument satisfactory to the Company agreeing to be
bound by the terms and provisions of this Agreement (including this Article 5).
References herein to Stockholders and to shares of Common Stock held or owned by
any Stockholder shall be deemed to include any such prospective purchaser that
purchases Common Stock hereunder and such shares held or owned by such
prospective purchaser, respectively. If such sale has not taken place within
sixty (60) days following the expiration of the Acceptance Period, all the
provisions contained in this Agreement shall again be in effect with respect to
such Offered Shares.
(f) If all of the Offered Shares offered to the Stockholders have
been fully subscribed for by the Company and the Electing Stockholders pursuant
to Section 5.1(e), then the Company shall send to the NYU Seller, within five
days after the expiration of the Acceptance Period, a written notice to such
effect and shall include in such notice the name of each Electing Stockholder,
the number of such Offered Shares allocated to such Electing Stockholder and the
Company for purchase and the closing date of the purchase and sale of the
Offered Shares. In the event the Offered Shares available to the Electing
Stockholders are oversubscribed for, the number of Offered Shares each Electing
Stockholder shall be allocated shall be determined pro rata based on the
percentage that each Electing Stockholder's shares of Common Stock bears to the
total outstanding shares of Common Stock.
(g) In the event that the Company and/or the Electing Stockholders,
as the case may be, elect to purchase all of the Offered Shares under this
Section 5.1, the closing of the purchase and sale of the Offered Shares shall
take place at the principal executive offices of
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the Company within thirty (30) days following the date the notice to such effect
is given by the Company to the NYU Seller pursuant to Sections 5.1(a), 5.1(c) or
5.1(f) (whichever is applicable), or at such other place, on such other date, or
both, as the NYU Seller, the Company and the Electing Stockholders, as
applicable, may agree upon in writing. The Purchase Price payable by the
Electing Stockholders and/or the Company hereunder shall be paid either (i) in
full by cash or certified check at the closing of such purchase, or (ii)
one-third of the Purchase Price shall be paid in cash or by certified check at
the closing; and the balance of the Offer Price shall be payable on the first
and second anniversaries of such closing in two equal annual installments,
together with interest from the closing calculated on the amount of such
installment at the prime rate, as in effect from time to time during the period
prior to the payment of such installment, as published by Citibank N.A.
5.2. Involuntary Transfers
If any Involuntary Transfer of Common Stock takes place, the following
procedures shall apply:
(a) Any Stockholder deprived or divested of any shares of Common
Stock by Involuntary Transfer (the "Transferor") shall promptly give written
notice thereof in reasonable detail to the Company. Any person or entity that
takes or proposes to take any ownership interest in such shares of Common Stock
(the "Transferred Shares") as a result of such Involuntary Transfer (the
"Transferee") shall hold such interest subject to the rights of the Company as
set forth in Section 5.2(b).
(b) For a period of 180 days following the earlier to occur of
receipt of the notice referred to in Section 5.2(a) or discovery of any
Involuntary Transfer, the Company may purchase the Transferred Shares in
accordance with Section 5.2(c), subject to the terms
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set forth herein. If the Company elects to purchase the Transferred Shares, the
Company shall notify the Transferee of its rights hereunder and specify the
number of Transferred Shares to be purchased.
(c) The closing for any sale of Transferred Shares to the Company
shall take place at the Company's principal executive office not later than
sixty (60) days after the Transferee receives the notice referred to in Section
5.2(b) or 14 days after the determination of Fair Value, whichever is later. The
purchase price payable by the Company for any Transferred Shares purchased
hereunder shall be the Fair Value of such Transferred Shares.
(d) In the event that the Company does not purchase all or any of
the Transferred Shares pursuant to Section 5.2, the Transferee shall take and
hold all rights and interests in any Transferred Shares that are not so
purchased subject to the terms of this Agreement.
5.3. Put and Call Rights
(a) On the terms and subject to the conditions set forth in Section
5.3, from the date of this Agreement until December 31, 1999, any of OSI, NYU
and each of the NYU Faculty Members separately may require the Company or Pfizer
to purchase all but not less than all of the shares of Common Stock held by each
such Stockholder at the price set forth immediately below which is based on the
formula attached hereto as Appendix A and agreed to by all of the Stockholders
(the "Fixed Put Right"). The formula attached hereto as Appendix A was
negotiated among OSI, Pfizer and the Company and thus it and the resulting Fixed
Put Right Prices do not necessarily reflect the fair market value of the Company
or the Common Stock as they might be determined pursuant to Section 5.4 or
otherwise. Upon the exercise of the Fixed Put Right by each of OSI, NYU and/or
each of the NYU Faculty, each exercising
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Stockholder agrees to acknowledge in writing that it has been provided access to
and has obtained all of the information that it has requested from Pfizer and
the Company in connection with its negotiation of such formula and the resulting
Fixed Put Right Prices.
Fixed Put Right Prices
** **
(b) On the terms and subject to the conditions set forth in Section
5.3, at any time subsequent to April 23, 2000, any of OSI, NYU and each of the
NYU Faculty Members may require the Company or Pfizer to purchase all but not
less than all of the shares of Common Stock held by each such Stockholder at a
price equal to the Fair Value of such shares (the "Put Right"), subject to the
limitations set forth in Section 11.1.
(c) On the terms and subject to the conditions set forth in this
Section 5.3, at any time subsequent to April 23, 2002, the Company, or Pfizer,
as the case may be, may require OSI, NYU or any NYU Faculty Member to sell to
the Company all but not less than all of the shares of Common Stock held by such
Stockholder at a price equal to the Fair Value of such shares (the "Call
Right").
(d) Any of OSI, NYU or any NYU Faculty Member may exercise the Fixed
Put Right or the Put Right, as the case may be, by delivering to the Company, or
Pfizer, as the case may be, with a copy to Pfizer, (if applicable), written
notice setting forth the number of shares of Common Stock held by such
Stockholder. The Company may exercise the Call Right with respect to OSI, NYU or
any NYU Faculty Member by delivering to such Stockholder written notice setting
forth the terms of the proposed purchase of Common Stock.
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** This portion has been redacted pursuant to a request for confidential
treatment.
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(e) Unless otherwise agreed to by the Company, or Pfizer, as the
case may be, and the selling Stockholder(s), the closing of any purchase of
Common Stock pursuant to the exercise of any Fixed Put Right, Put Right or any
Call Right hereunder shall take place at the principal executive offices of the
Company within sixty (60) days after the delivery of the notice referred to in
Section 5.3(d) or, where applicable, 14 days after determination of Fair Value,
whichever is later. With respect to the Put Right or Call Right, the Company or
Pfizer, as the case may be, shall pay the Fair Value of such shares either (i)
in full by cash or certified check at the closing, or (ii) one-third of the
total amount due shall be paid in cash or by certified check at the closing, and
the balance of the amount due shall be payable on the first and second
anniversaries of such closing in two equal installments, together with interest
on the amount of such installments from the date of closing calculated at the
prime rate, as in effect from time to time during the period prior to the
payment of such installment, as published by Citibank, N.A. If the Company or
Pfizer elects to pay in installments under (ii) herein, the Company or Pfizer,
as the case may be, shall execute a promissory note for the benefit of the
Stockholders exercising their put and call rights concerning the first and
second anniversary payments. In the case of an exercise of any Fixed Put Right,
the Company or Pfizer (if applicable), shall pay the applicable price of such
shares set forth in Section 5.3(a) in full by cash or certified check at the
closing.
5.4. Fair Value
Fair Value shall be calculated as follows:
(a) During a 15 day period following the date on which a Put or Call
Right is exercised under Section 5.3, the party or parties exercising such
option ("Exerciser) (or its or their personal representative) and the Board of
Directors of the Company and/or the
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receiving party of the exercise notice, as the case may require, shall each
submit to the other party or parties a proposal as to the fair market value of
each share of Common Stock. If the differential between the highest proposal and
the lowest proposal is not more than 10%, then the Fair Value shall be equal to
the average of such proposals; or
(b) In the event that the differential between the highest and
lowest proposals under clause (a) above is more than 10% or if only one or no
proposal is submitted under clause (a) above, then within ten business days
after the submission of such proposals, the Board of Directors shall select and
retain a qualified independent appraiser of closely held businesses (the
"Appraiser). If the Exerciser, or, if the Exerciser is the Company, the
receiving party does not submit written notice contesting the selection of the
qualified independent appraiser within ten business days of being so informed of
such selection, then the Board of Director's selection shall be final. If the
Exerciser or, if the Exerciser is the Company, the receiving party timely
submits such notice, then the Board of Directors shall request the American
Arbitration Association in the City of New York to appoint promptly the
Appraiser. The Exerciser(s) (or his or their personal representative), on the
one hand, and the Board of Directors of the Company and/or the receiving party
or parties of the exercise notice, as the case may require, on the other hand,
shall each submit to the Appraiser such party's respective proposal as to the
Fair Value (which proposal shall be the same proposal, if any, submitted under
clause (a) above), together with such supporting data as such party deems
relevant. The Appraiser shall then conduct its own evaluation of such opinions
and such data, and shall conduct such independent procedures and investigation
as the Appraiser shall deem necessary in order to form an opinion as to the fair
market value of each share of Common Stock. In determining fair market value,
the Appraiser shall assume that (i) the Company is
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sold as a going concern in an organized auction, (ii) there is no discount for
minority ownership, and (iii) there is a market for shares of the Company. The
Appraiser shall within 30 days of receipt of the relevant parties' proposals,
determine the Fair Value, which shall be within the range proposed by the
Exerciser and the Board of Directors and/or receiving party. The Appraiser shall
forthwith upon determination of Fair Value, give written notice of its
determination to the Exerciser (or its personal representative), the receiving
party and the Company. Unless the Board of Directors of the Company otherwise
decides, the fees and expenses of the Appraiser shall be paid equally by the
Exerciser (or its personal representative) and the Company.
(c) If Fair Value is being calculated on Transferred Shares pursuant
to an involuntary transfer under Section 5.2, the 15-day period referred to in
(a) above starts on the day after the Company gives notice to the Transferee of
its intention to purchase such Transferred Shares. The Transferee shall act as
the Exerciser and submit a Fair Value proposal.
5.5. Tag Along Rights
(a) In the event that one or more Stockholders propose to sell or
otherwise dispose of shares representing more than fifty percent of the
outstanding shares of Common Stock then outstanding (the "Majority
Stockholders") in one or a series of transactions to any Third Party (other than
a Permitted Transferee), such Majority Stockholders shall not consummate or
enter into any agreement to consummate such sale unless such Third Party
purchaser offers to purchase from each other Stockholder the number of shares of
such other Stockholder's Common Stock as determined in accordance with Section
5.5(b) at the same price and on the same other terms as such purchaser offered
to purchase such shares from the
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Majority Stockholders ("Tag Along Rights"). Any Stockholder proposing to sell or
otherwise dispose of its Common Stock to a Third Party purchaser pursuant to
Section 5.5 shall agree, and be able, to transfer to such purchaser good and
marketable title to the shares that such Stockholder proposes to sell, free and
clear of all liens, claims and encumbrances.
(b) The maximum number of shares of Common Stock that any
Stockholder may require any Third Party to purchase pursuant to Section 5.5(a)
shall be the total number of shares of Common Stock owned by each such
Stockholder multiplied by the percentage that the total number of shares of
Common Stock to be purchased by the Third Party bears to the total number of
outstanding shares of Common Stock.
(c) Prior to any sale under Section 5.5(a), the Majority
Stockholders shall notify the Company and each of the other Stockholders in
writing of such proposed sale, setting forth (i) the number of shares of Common
Stock that such Stockholder proposes to sell, (ii) the name and address of the
Third Party purchaser; and (iii) the amount of consideration (including the
value of any non-cash consideration) offered by the Third Party purchaser.
Within ten (10) days after receiving the foregoing notice, any Stockholder may
elect to exercise its Tag Along Rights by delivering written notice to the
Majority Stockholders of such Stockholder's election to sell the shares of
Common Stock offered for sale pursuant to Section 5.5. If none of the
Stockholders so notifies the Majority Stockholders within the foregoing ten (10)
day period, then the Majority Stockholders shall have the right to effect the
proposed sale of such shares for a period of sixty (60) days thereafter on
substantially the same terms and conditions as such shares were offered to the
other Stockholders.
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5.6. Take Along Right
(a) If Pfizer, and for so long as OSI's percentage ownership of
Common Stock outstanding is greater than ten percent, OSI (the "Control Group")
approve any sale of the Company by merger, consolidation, sale of the Company's
assets, sale of Common Stock or otherwise, to any person other than a member of
the Control Group or an Affiliate of a member of the Control Group, each of the
other Stockholders hereby agree to consent to, vote for and raise no objections
against, such sale. If such sale is structured as a sale of all of the
outstanding Common Stock, each other Stockholder hereby agrees to sell all of
its shares of Common Stock on the terms approved by the Control Group and to
take all reasonable actions requested by the Control Group or the purchaser in
connection with the consummation of any such sale ("Take Along Right"). As
consideration for the sale of such Stockholders' shares of Common Stock, each
Stockholder will receive for each share of Common Stock cash and the fair market
value of any non-cash consideration in the same amount as the Control Group
receives for the sale of each share of Common Stock.
(b) If the closing of any sale of Common Stock pursuant to Section
5.6(a) has not been effected within 180 days after the Control Group first
approves of such sale, the obligation of any Stockholder to participate in such
sale shall terminate and the provisions of Section 5.6 shall be reinstated.
(c) Nothing contained in Section 5.6 shall obligate the Control
Group to consummate any sale or the Company hereunder, and the Control Group may
abandon any such sale at any time. If any such proposed sale is abandoned, the
Control Group shall promptly send written notice thereof to each of the other
Stockholders.
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<PAGE> 27
5.7. Stock Purchase Assignment.
Any right or obligation of the Company under Article 5 of this
Agreement to purchase Common Stock of a Stockholder may be assigned by the
Company to Pfizer. Pfizer shall not be under any legal obligation to accept such
assignment unless it so agrees in writing.
ARTICLE VI - PREEMPTIVE RIGHTS
6.1. Preemptive Rights.
(a) Except as permitted by Section 2.1(b) herein, after the date
hereof, the Company shall not issue any additional shares of Common Stock ("New
Shares") to any person or entity (the "New Stockholder") unless the Company
grants to all Stockholders the right to subscribe for and purchase the same
aggregate number of additional shares of Common Stock (the "Preemptive Shares")
as the number of New Shares, at the same price and upon the same terms as the
New Shares are being offered. The Company shall determine the number of
Preemptive Shares to be offered to each Stockholder by multiplying the total
number of Preemptive Shares by the percentage that each such Stockholder's
shares of Common Stock bears to the total number of shares of Common Stock
outstanding immediately prior to the issuance of New Shares and Preemptive
Shares hereunder. Notwithstanding the foregoing, there shall be no preemptive
rights by reason of any underwritten public offering.
(b) Prior to the issuance of any New Shares pursuant to Section 6.1,
the Company shall give each Stockholder written notice setting forth the terms
upon which such Stockholder may purchase Preemptive Shares hereunder.
(c) After receiving the notice described in Section 6.1(b), any
Stockholder may exercise its preemptive rights hereunder by replying in writing
within twenty (20) days
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<PAGE> 28
after the date of such notice that such Stockholder agrees to purchase the
Preemptive Shares offered pursuant to Section 6.1. Each Stockholder may exercise
preemptive rights with respect to all, but not less than all, of the Preemptive
Shares that such Stockholder has the right to purchase pursuant to Section 6. 1.
(d) If any Stockholder fails to reply in accordance with Section
6.1(c), the Company shall have ninety (90) days thereafter to consummate the
sale of Common Stock to a New Stockholder pursuant to Section 6. 1. If the
Company has not consummated such sale within such ninety (90) day period, the
Company may not sell shares of common stock subsequently to any New Stockholder
without first offering the Stockholders preemptive rights with respect to such
shares in the manner provided for in Section 6.1.
(e) If the offering price for any New Shares consists of any
consideration other than cash, then the price at which the Stockholders shall be
offered preemptive rights hereunder with respect to any Preemptive Shares shall
be determined by an independent appraiser selected by the Company. Any
Stockholder purchasing Preemptive Shares hereunder shall pay the purchase price
therefor to the Company in cash; provided, however, that after obtaining the
consent of the Board of Directors of the Company, OSI may give consideration
other than cash if the value of such non-cash consideration is determined by
such independent appraiser to be at least equal to the amount of consideration
proposed to be paid by the New Stockholder for the New Shares hereunder.
ARTICLE VII - DEVELOPMENT OF A LEAD COMPOUND
7.1. Pfizer's Right of First Refusal for Initial Development.
(a) If the Company makes a preliminary assessment that any compound
that was invented, or for which a New Use was invented, by any person in the
course of such
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<PAGE> 29
person's participation in the Research Program is or may be effective in
treating any indication in the Field or the Dermatology Indications, such
compound shall be considered a Lead Compound and the Company shall promptly
present such compound or New Use to Pfizer. Within sixty (60) days of such
presentation, Pfizer may notify the Company in writing of Pfizer's election to
(i) make an additional capital contribution to the Company to enable the Company
to further develop such Lead Compound or New Use, or (ii) negotiate the terms
pursuant to which Pfizer may collaborate with the Company in the development of
such Lead Compound or New Use, or acquire all of the Company's rights and
interests in such Lead Compound or New Use. Any rights acquired by Pfizer from
the Company hereunder with respect to any Lead Compound are subject to the
royalty fees payable to OSI and NYU under the Research Agreements and the
royalty fees payable to the Company under Section 7.3 hereof.
(b) If Pfizer makes any additional capital contribution to the
Company pursuant to Section 7.1(a)(i), any additional shares of Common Stock
issued in exchange therefor are subject to the preemptive rights provisions of
Section 6.1.
(c) If Pfizer elects not to exercise its right of first refusal
pursuant to Section 7.1(a), or if Pfizer fails to pursue diligently the
development of any Lead Compound or New Use with respect to which it has
obtained rights under Section 7.1(a)(ii), which determination shall be made by
the Board of Directors of the Company, then the Company may further develop and
market such Lead Compound or New Use independently, or the Company may enter
into licensing, joint venture or other arrangements with third parties to
facilitate such development.
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7.2. Pfizer's Right of First Refusal for Further Development.
(a) If any Lead Compound or New Use developed by the Company with
respect to which Pfizer has made a capital contribution pursuant to Section
7.1(a)(i) reaches the stage where the Company has decided to submit an
application to the Food and Drug Administration for designation of such Lead
Compound or New Use as an Investigational New Drug, or to pursue clinical
testing of such Lead Compound or New Use in humans, the Company shall present
such Lead Compound or New Use to Pfizer. Within sixty (60) days of such
presentation, Pfizer shall notify the Company in writing if Pfizer elects to
negotiate the terms under which it may acquire the Company's rights and interest
in such Lead Compound or New Use. Any such rights acquired by Pfizer are subject
to the royalty fees payable to OSI and NYU under the Research Agreements and the
royalty fees payable to the Company under Article 7.3 hereof.
(b) If Pfizer elects not to exercise its right of first refusal
pursuant to Section 7.2(a), then the Company may further develop and market such
Lead Compound or New Use independently, or by entering into licensing, joint
venture or other arrangements with third parties to facilitate such development.
7.3. Development by Pfizer.
(a) If Pfizer acquires rights in any Lead Compound pursuant to
Section 7.1 or 7.2 hereof, Pfizer shall pay to the Company a royalty equal to:
(i) ** of the Net Sales of any Human Therapeutic Product based on such Lead
Compound; or (ii) ** of the Net Sales of any Human Therapeutic Product where the
Lead Compound has been identified by screening
- ----------
** This portion has been redacted pursuant to a request for confidential
treatment.
26
<PAGE> 31
and is part of a Pfizer Selected Library or by screening of Analogs of a
compound from a Pfizer Selected Library (the "Anaderm Royalty".) The Anaderm
Royalty shall be in addition to, and not in lieu of, any royalties or other
payments that may be due to NYU or OSI under the Research Agreements. The
Anaderm Royalty shall be paid to the Company, notwithstanding the termination
provisions of Article 9 of this Agreement, for a period of ten years beginning
with the first commercial sale of such Human Therapeutic Product in any country,
unless at the end of such ten year period there exists in that country a Valid
Claim of an issued patent to such Human Therapeutic Product, a compound or
composition contained therein, a method or process employed in making such Human
Therapeutic Product, or a method of use for which such Human Therapeutic Product
is being marketed in that country, in which case Pfizer shall continue to pay
the Anaderm Royalty to the Company on Net Sales of such Human Therapeutic
Compound in such country during the period in which such Valid Claim exists in
that country.
(b) If Pfizer decides to negotiate an agreement with a Third Party
pursuant to which Pfizer would grant such Third Party a license under Pfizer's
rights in any Lead Compound or Human Therapeutic Product, which rights Pfizer
acquired from the Company pursuant to its Rights of First Refusal under Section
7.1 or 7.2 hereof, and Pfizer determines that payment of the Anaderm Royalty
would render the proposed licensing arrangement commercially unfeasible to
Pfizer, then Pfizer may negotiate with the Company in good faith to determine
the amount of royalties or other compensation that the Company will receive in
lieu of the Anaderm Royalty from such arrangement.
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<PAGE> 32
7.4. Development by the Company.
(a) Subject to the provisions of section 7.4 (b) and 7.4(c) below,
in the event that Pfizer elects not to exercise its Rights of First Refusal with
respect to any Lead Compound or New Use pursuant to Section 7.1 or 7.2 hereof
and the Company decides to license such Lead Compound or New Use to a Third
Party, any payments received in connection with such license arrangement, less
any associated expenses, shall be paid as follows: ** to the Company, ** to OSI
under the OSI Research Agreement, ** to NYU under the NYU Research Agreement,
and ** to Pfizer.
(b) Notwithstanding the provisions of Section 7.4(a) above, and
subject to the provisions of Section 7.4(c) below, in cases where the Lead
Compound or New Use that is licensed to a Third Party was identified (i) by
screening a Pfizer Selected Library and the Lead Compound is part of the Pfizer
Selected Library or the New Use is based on a Lead Compound that is part of the
Pfizer Selected Library, or (ii) by screening Analogs of a compound from a
Pfizer Selected Library, any payments received in connection with such license
arrangement, less any associated expenses, shall be paid as follows: ** to the
Company, ** to OSI; ** to NYU; and ** to Pfizer.
(c) Notwithstanding the provisions of Sections 7.4(a) and (b) above,
no royalties shall be owed to NYU under this Section 7.4 unless NYU or any of
the NYU Principal Investigators or other employees or students of NYU
participating in the Research Program pursuant to the NYU Research Agreement has
made an Inventive Contribution during the course of participating in
- ----------
** This portion has been redacted pursuant to a request for confidential
treatment.
28
<PAGE> 33
the Research Program with respect to the Lead Compound or New Use licensed to
the Third Party. **
7.5. Analog Manufacture. The Company may make or have made Analogs of
compounds provided to it in a Pfizer Scientific Library or as part of the Pfizer
Compound File, and, as between Pfizer and the Company, the Company shall own all
such Analogs not already owned by Pfizer. The Company shall make all such
Analogs and mixtures of such Analogs available to Pfizer for screening and
analoging.
7.6. Approval of Analog Production and Screening. Pfizer shall have the
right to approve the choice of any Third Party selected by the Company to
produce and screen Analogs of Pfizer compounds. No Third Parties shall be
allowed to screen OSI Compounds or Analogs of OSI Compounds without the prior
written consent of OSI.
7.7. Assignment of Analog Rights. If Pfizer elects to develop and market a
Human Therapeutic Product outside the Field that contains an Analog of a Pfizer
compound that was made by or on behalf of the Company pursuant to Section 7.5 of
this Agreement, and is not contained in a Human Therapeutic Product that is
being marketed by the Company or a Third Party licensee of the Company, the
Company shall assign its rights in such Analog to Pfizer for royalties and/or
other compensation negotiated in good faith.
7.8. Development of Lead Compound for Different Indications. If Pfizer and
the Company express interest in developing the same Lead Compound for different
indications, Pfizer shall have the right, subject to certain restrictions
referred to in Section 7.9 of this
- ----------
** This portion has been redacted pursuant to a request for confidential
treatment.
29
<PAGE> 34
Agreement, to request in writing that the Company cease all development of said
Lead Compound, and the Company shall forthwith comply with such written request.
7.9. Request to Cease Lead Compound Development. The right of Pfizer to
request that the Company cease development of any Lead Compound will terminate
three (3) months after the date on which Pfizer is informed, pursuant to Section
7.2(a) of the Agreement, of the Company's decision to apply to the FDA for
designation of said Lead Compound as an Investigational New Drug.
ARTICLE VIII - LEGENDING OF SECURITIES
8.1. Legends. Each certificate representing shares of Common Stock issued
after the date hereof shall bear a legend in substantially the form set forth
below:
"THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933 AND MAY NOT BE SOLD OR TRANSFERRED IN THE
ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM. THE
SECURITIES REPRESENTED HEREBY ARE SUBJECT TO THE TERMS AND
CONDITIONS OF A RESTATED AND AMENDED STOCKHOLDERS AGREEMENT, DATED
APRIL 23, 1999, AMONG THE COMPANY AND THE STOCKHOLDERS OF THE
COMPANY SPECIFIED THEREIN, A COPY OF WHICH AGREEMENT IS ON FILE AT
THE PRINCIPAL EXECUTIVE OFFICE OF THE COMPANY. THE SALE, TRANSFER OR
OTHER DISPOSITION OF THESE SECURITIES IS SUBJECT TO THE TERMS OF
SUCH AGREEMENT. SUCH AGREEMENT ALSO CONTAINS PROVISIONS RELATING TO
THE COMPOSITION OF THE BOARD OF DIRECTORS OF THE COMPANY AND THE
EXERCISE OF VOTING RIGHTS OF THE HOLDERS OF THE SECURITIES
REPRESENTED HEREBY."
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ARTICLE IX - TERMINATION AND SURVIVAL OF PROVISIONS
9.1. Termination.
This Agreement shall terminate (a) as to any party when such party
ceases to be a Stockholder, or (b) upon the earlier to occur of (i) the date
upon which the parties then bound by this Agreement consent in writing to
terminate this Agreement; (ii) the date as of which there remains only one
Stockholder of the Company; and (iii) the dissolution or liquidation of the
Company.
9.2. Survival.
Notwithstanding the termination of the Agreement under 9.1, the
royalty provisions, if applicable, contained in Article 7 and Sections 2.1(d),
2.1(e) and 2.2 herein, shall survive with respect to any and all parties
terminated.
ARTICLE X - REPRESENTATIONS AND WARRANTIES OF STOCKHOLDERS
10.1. Representations and Warranties of Each Stockholder.
Each Stockholder represents and warrants to the other parties,
solely with respect to itself, that:
(a) If such Stockholder is a corporation, partnership or trust, (i)
such party is duly organized, validly existing and in good standing under the
laws of the jurisdiction of its organization; (ii) such party has all requisite
corporate, partnership or trust power and authority to execute, deliver and
perform this Agreement; and (iii) such party has taken all corporate,
partnership or trust action required to duly authorize such execution, delivery
and performance.
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<PAGE> 36
(b) If such Stockholder is a natural person, he or she has full
legal capacity, right, power and authority to execute, deliver and perform this
Agreement.
(c) This Agreement has been duly executed and delivered by such
Stockholder and constitutes a binding obligation of such Stockholder enforceable
in accordance with its terms, except insofar as enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting creditor's rights generally, or by principles governing the
availability of equitable remedies.
(d) Neither the execution, delivery or performance by such
Stockholder of this Agreement, nor the consummation by such Stockholder of the
transactions contemplated hereby, does or will (with the giving of notice or the
passage of time or both) conflict in any material respect with, or constitute a
material default under, (i) if such party is a corporation, partnership or other
entity, the Certificate of Incorporation, Bylaws, partnership agreement or other
organizational or governing documents of such party, (ii) any judgment to or by
which such party is or may be subject, bound or affected, or (iii) any
applicable law or obligation to which such Stockholder is bound.
(e) No judgment has been issued, and no action or proceeding has
been instituted or, to the knowledge of such Stockholder, threatened, against or
otherwise involving such Stockholder, (i) to set aside or modify any
authorization of the execution, delivery and performance by such Stockholder of
this Agreement, (ii) to enjoin or prevent the execution, delivery or performance
by such Stockholder of this Agreement, or (iii) seeking damages in connection
with the execution, delivery or performance by such Stockholder of this
Agreement.
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ARTICLE XI - INSUFFICIENT SURPLUS AND INSOLVENCY
11.1 Notwithstanding anything contained herein to the contrary, the
Company shall not be obligated to purchase, redeem, receive, take or otherwise
acquire shares of Common Stock of a selling Stockholder if the capital of the
Company is impaired or would become impaired thereby. If the Company's capital
is or would become impaired by purchasing the Common Stock of the selling
Stockholder, the Company shall notify all of the Stockholders in writing of such
impairment, and indicate that the Company is precluded from making such
purchase. Upon receiving such notices, the Company's remaining Stockholders
shall be deemed to have been offered the shares of the selling Stockholder on
the same terms as such shares would have been offered to the Company. The
Company shall determine the number of shares deemed to have been offered to each
Stockholder by multiplying the total number of shares by the percentage that
each such remaining Stockholder's shares of Common Stock bears to the total
number of shares of Common Stock held by the non-selling Stockholders at the
date of the notice. The price of which such Stockholders would pay for such
shares shall be Fair Value in the case of a sale or transfer pursuant to Section
5.2 or 5.3, or, in the case of a sale pursuant to Section 5.1, the purchase
price provided for in such section. Any Stockholder may purchase such shares by
paying the purchase price therefor within sixty (60) days after delivery of the
notice from the Company ("Closing"). The purchasing Stockholder shall pay the
Fair Value of such shares or purchase price referred to in Section 5.1 either
(i) in full by cash or certified check at the Closing, or (ii) one-third of the
total amount due shall be paid in cash or certified check at the Closing, and
the balance of the amount due shall be payable on the first and second
anniversaries of such closing in two equal installments, together with interest
on the amount of such installments from the date of Closing calculated at
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<PAGE> 38
the prime rate, as in effect from time to time during the period prior to the
payment of such installment, as published by Citibank, N.A. The selling
Stockholder shall retain all right, title and interest in and to any shares of
Common Stock that are not purchased by the other Stockholders.
ARTICLE XII - MISCELLANEOUS
12.1. Notices. All notices, requests, consents, demands, elections and
other communications required or permitted hereunder shall be in writing and
shall be given to the intended recipient at the following address:
if to the Company:
Anaderm Research Corp.
235 East 42nd Street
New York, NY 10017-5755
Att: **
Tel: 212-573-3770
Fax: 212-808-6495
with copies to:
Pfizer Inc.
235 East 42nd Street
New York, NY 10017-5755
Att: Office of General Counsel
Tel: 212-573-3637
Fax: 212-573-1445
Squadron, Ellenoff, Plesent & Sheinfeld
551 Fifth Avenue
New York, NY 10176
Att: Joel I. Papernik, Esq.
Tel: 212-476-8364
Fax: 212-697-6686
- ----------
** This portion has been redacted pursuant to a request for confidential
treatment.
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<PAGE> 39
If to Pfizer:
Pfizer Inc.
235 East 42nd Street
New York, NY 10017-5755
Att: Office of General Counsel
Tel: 212-573-3637
Fax: 212-573-1445
If to OSI:
OSI Pharmaceuticals, Inc.
106 Charles Lindbergh Blvd.
Uniondale, NY 11553
Att: Gary E. Frashier
Tel: 516-222-0023
Fax: 516-745-6429
If to NYU:
NYU Medical Center
550 First Avenue
New York, NY 10016
Att: **
Tel: 212-263-8191
Fax: 212-263-8189
with a copy to:
**
NYU Medical Center
550 First Avenue, MSB 153
New York, NY 10016
Tel: 212-263-7921
Fax: 212-545-8846
- ----------
** This portion has been redacted pursuant to a request for confidential
treatment.
35
<PAGE> 40
If to ** :
**
c/o NYU Medical Center
550 First Avenue
New York, NY 10016
Tel: 212-263-8191
Fax: 212-263-8189
If to ** :
**
c/o NYU Medical Center
550 First Avenue
New York, NY 10016
Tel: 212-263-8191
Fax: 212-263-8189
If to ** :
**
c/o NYU Medical Center
550 First Avenue
New York, NY 10016
Tel: 212-263-8191
Fax: 212-263-8189
If to ** :
**
c/o NYU Medical Center
550 First Avenue
New York, NY 10016
Tel: 212-263-8191
Fax: 212-263-8189
Any such notice, request, consent, demand, election or other communication
shall be deemed to have been duly given if personally delivered or sent by
registered or certified mail,
- ----------
** This portion has been redacted pursuant to a request for confidential
treatment.
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<PAGE> 41
return receipt requested, by Federal Express, Express Mail or similar overnight
delivery service or by telegram, telex or facsimile transmission confirmed by
letter, and will be deemed given, unless earlier received (i) if sent by
certified or registered mail, return receipt requested, five calendar days after
being deposited in the United States mail, postage prepaid; (ii) if sent by
overnight delivery service for next business day delivery, the next business day
after being entrusted to such service, with delivery charges prepaid or charged
to the sender's account; (iii) if sent by telegram or telex or facsimile
transmission, on the date sent, provided confirmatory notice is sent by any
other method specified in clause (i), (ii) or (iv); and (iv) if delivered by
hand, on the date of delivery.
12.2. Entire Agreement. This Agreement, together with the Appendices
hereto and the Research Agreements, constitute the entire understanding among
the parties hereto relating to the subject matter hereof. This Agreement may not
be amended except by a writing signed by all parties hereto. No discharge, or
waiver, in whole or in part, of any of its provisions shall be valid, unless in
writing, signed by the party against whom the same is sought to be enforced.
This Agreement shall be binding upon and shall inure to the benefit of the
parties hereto and their legal successors, the latter being deemed to include,
without limitation, all executors, administrators, receivers, committees, other
personal representatives, transferees of interest pursuant hereto, and all other
legal successors, and shall, in addition, be binding upon all persons who,
whether in breach of this Agreement or otherwise, have or claim an interest in
the shares of the Company or are in possession of a certificate representing
shares in the Company, or any other evidence of an interest in the shares of the
Company.
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12.3. Governing Law. This Agreement shall be governed by, and interpreted
and construed in accordance with, the laws of the State of New York, without
regard to its conflict of law provisions.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement
the day and year first above written.
ANADERM RESEARCH CORP.
By: /s/
------------------------------------------
Name: **
Title: President and CEO
PFIZER INC.
By: /s/
------------------------------------------
Name: Paul S. Miller
Title: Executive Vice President
And General Counsel
OSI PHARMACEUTICALS, INC.
By: /s/
------------------------------------------
Name: Colin Goddard, Ph.D.
Title: President and CEO
NEW YORK UNIVERSITY
By: /s/
------------------------------------------
Name: **
Title: **
----------------------------------------------
**
----------------------------------------------
**
----------------------------------------------
**
----------------------------------------------
**
- ----------
** This portion has been redacted pursuant to a request for confidential
treatment.
<PAGE> 44
APPENDIX A
As used in Section 5.3(a) of the Agreement, the formula to calculate the
Fixed Put Right for each Stockholder is ** through and including April 23, 1999.
- ----------
** This portion has been redacted pursuant to a request for confidential
treatment.
<PAGE> 1
Portions of 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
DEVELOPMENT AGREEMENT
This DEVELOPMENT AGREEMENT is entered into as of April 1, 1999 (the
"Effective Date") by and between PFIZER INC, a Delaware corporation, having an
office at 235 East 42nd Street, New York, New York 10017 and its Affiliates
("Pfizer"), and OSI PHARMACEUTICALS, INC., a Delaware corporation, having an
office at 106 Charles Lindbergh Blvd., Uniondale, New York 11553-3649 and its
Affiliates ("OSI Pharmaceuticals");
WHEREAS, OSI Pharmaceuticals desires to develop compounds derived from the
Collaborative Research Agreement between Pfizer and OSI Pharmaceuticals, dated
April 1, 1996, under Pfizer's and OSI Pharmaceutical's right, title and interest
in the patent rights of the compounds listed in Exhibit A ("Compounds"), so that
OSI Pharmaceuticals can conduct preclinical research and clinical trials, for
such compounds to assess the treatment of psoriasis and related dermal
pathology; and
WHEREAS, Pfizer is willing to grant a license;
Therefore, in consideration of the mutual covenants and promises set forth
in this Agreement, the parties agree as follows:
1. Definitions.
The capitalized terms used in this Agreement shall have the meanings
specified for such terms in this Section 1.
1.1 "1996 Agreement" means the Collaborative Research Agreement between
Pfizer and OSI Pharmaceuticals effective April 1, 1996 and the letter amendments
to such Agreement including the letter amendments dated July 25, 1997 and
November 3, 1997.
1.2 "Net Sales" means the gross amount invoiced by Pfizer or OSI
Pharmaceuticals, their respective Affiliates, or any sublicensee of Pfizer of
OSI Pharmaceuticals for sales to a third party or parties of Products, less
normal and customary trade discounts actually allowed, rebates, returns,
credits, taxes the legal incidence of which is on the purchaser and separately
shown on Pfizer's or OSI Pharmaceuticals' or any sublicensee of either party's
invoices and
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<PAGE> 3
transportation, insurance and postage charges, if prepaid by Pfizer or OSI
Pharmaceuticals or any sublicensee of either party and billed on Pfizer's or OSI
Pharmaceuticals' or any sublicensee of either party's invoices as a separate
item.
1.3 "Product" means any pharmaceutical product developed in the course of
the Development Program, the manufacture, use, sale, offer for sale or import of
which would infringe any Valid Claim within the Patent Rights in the absence of
a license.
1.4 "Sublicensee" shall mean a third party who has been granted a
sublicense to make, use, sell, offer for sale or import Products.
1.5 "Area" shall mean the development of Compounds directed to the
treatment or prevention of psoriasis and related dermal pathologies such as
eczema.
1.6 "Affiliate" means any corporation or other legal entity owning,
directly or indirectly, fifty percent (50%) or more of the voting capital shares
or similar voting securities of Pfizer or OSI Pharmaceuticals; any corporation
or other legal entity fifty percent (50%) or more of the voting capital shares
or similar voting rights of which is owned, directly or indirectly, by Pfizer or
OSI Pharmaceuticals or any corporation or other legal entity fifty percent (50%)
or more of the voting capital shares or similar voting rights of which is owned,
directly or indirectly, by a corporation or other legal entity which owns,
directly or indirectly, fifty percent (50%) or more of the voting capital shares
or similar voting securities of Pfizer or OSI Pharmaceuticals.
1.7 "Development Program" is the preclinical and clinical program in the
Area conducted by OSI Pharmaceuticals pursuant to this Agreement, attached as
Exhibit B.
1.8 "Effective Date" is April 1, 1999.
1.9 "Technology" means and includes all materials, technology, technical
information, know-how, expertise and trade secrets within the Area.
1.10 "Program Technology" means Technology that is or was developed by
employees of or consultants to Pfizer or OSI Pharmaceuticals solely or jointly
with each other in the course of performing research and fulfilling their
respective obligations to this Agreement.
1.11 "Confidential Information" means all information about any element of
the Development Program or Program Technology which is disclosed by OSI
Pharmaceuticals or Pfizer to the other and designated "Confidential" in writing
by at the time of disclosure or within thirty (30) days following disclosure, to
the extent that such information as of the date of disclosure to the receiving
party is not (i) known other than by virtue of a prior confidential
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<PAGE> 4
disclosure to the receiving party by OSI Pharmaceuticals or Pfizer; or (ii)
disclosed in published literature, or otherwise generally known to the public
through no fault or omission of the receiving party; or (iii) obtained from a
third party free from any obligation of confidentiality to the disclosing party.
1.12 "Valid Claim" means a claim within Patent Rights so long as such
claim shall not have been disclaimed and shall not have been held invalid in a
final decision rendered by a tribunal of competent jurisdiction from which no
appeal has been or can be taken.
1.13 "Patent Rights" shall mean all patent rights in and to inventions
within Program Technology including all the Valid Claims of patent applications,
whether domestic or foreign, claiming such patentable inventions, including all
continuations, continuations-in-part, divisions, and renewals, all letters
patent granted thereon, and all reissues, reexaminations and extensions thereof.
1.14 "Developing Party" shall mean the party granted a license in Section
3.2 or 3.3 as the case may be.
1.15 "Licensor" shall mean the party granting the license in Section 3.2
or 3.3, as the case may be.
2. Development Program.
2.1 Purpose. OSI Pharmaceuticals shall conduct a Development Program,
which is attached as Exhibit B. The Development Program shall include
preclinical and clinical research, through and including Phase II clinical
trials, on the Compounds to assess their safety and efficacy to be developed as
therapeutic agents for the treatment of psoriasis and other related dermal
pathologies.
3. Grant of Licenses, Term, Rights and Obligations.
3.1 License granted to OSI Pharmaceuticals for the Development Program.
Pfizer grants to OSI Pharmaceuticals an exclusive, except for Pfizer, license to
make and use the Compounds for all research purposes for the performance of the
Development Program other than the sale or manufacture for sale of products or
processes.
3.2 License granted to Pfizer under the Patents and Program Technology. At
the end of the Development Program, Pfizer will have three (3) months from the
receipt of the data
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<PAGE> 5
package from the clinical studies, described in Exhibit B, delivered by OSI
Pharmaceuticals to Pfizer, to notify OSI Pharmaceuticals of Pfizer's intention
to continue development and commercialization of each Compound. If Pfizer
notifies OSI Pharmaceuticals of its intention to continue development and
commercialization of one or more of such Compounds, Pfizer shall have an
exclusive, world-wide license, with the right to grant sublicenses, to make,
use, sell, offer for sale and import Products under all of OSI Pharmaceuticals'
right, title and interest in the Patent Rights and Program Technology with
respect to such Compounds subject to the terms and conditions of this Agreement.
3.3. License granted to OSI Pharmaceuticals under the Patents and Program
Technology. If Pfizer fails to notify OSI Pharmaceuticals that it intends to
develop and commercialize any such Compound, such failure shall serve to grant
to OSI Pharmaceuticals an exclusive, world-wide, royalty-bearing license,
including the right to grant sublicenses, to manufacture, use, sell, offer for
sale and import Products under all Pfizer's right, title and interest in the
Patent Rights in such Compounds, subject to the terms and conditions of this
Agreement; provided, however, that OSI Pharmaceuticals may, within three (3)
months of the expiration of the three (3) month period described in Section 3.2,
refuse to accept any or all such licenses in which case the parties shall have
the rights and duties with respect to such Patent Rights set forth in the 1996
Agreement.
3.4 Term of Licenses. The term of the grant set forth in Section 3.1 shall
commence on the Effective Date and shall terminate in each country on the date
of the last to expire of the Patent Rights in that country. The term of the
grant set forth in Section 3.2 and 3.3 shall begin when accepted in Section 3.2,
or at the end of the refusal period in Section 3.3 and shall terminate in each
country on the date of the last to expire of the Patent Rights in that country.
4. Milestone Payments, Royalties, Payments of Royalties, Accounting for
Royalties, Records.
4.1.1 The Developing Party shall pay to the Licensor a royalty based
on the Net Sales of each Product. Such royalty shall be paid with respect to
each country of the world from the date of the first commercial sale (the date
of the invoice of the Developing Party or any sublicensee of the Developing
Party with respect to such sale) of such Product in each such country until the
expiration of the last Patent Right to expire with respect to each such country
and each such Product.
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<PAGE> 6
4.1.2 If the manufacture and sale of a Product takes place in
countries which there are no Patent Rights, the Developing Party will pay to the
Licensor a royalty based on the Net Sales of each Product in each such country
for ten (10) years after the first commercial sale of such Product in such
country.
4.2 Royalty Rates.
4.2.1 If Pfizer is the Developing Party, the royalty paid by Pfizer,
to OSI Pharmaceuticals shall be ** percent ** of the Net Sales of each Product.
It is understood that the royalty rate specified in this Section 4.2.1 is
subject to reduction as provided in Sections 4.4 and 4.8 below. Those sections
of this Agreement or any other sections to the contrary notwithstanding, the
royalty paid to OSI Pharmaceuticals with respect to Net Sales of a Product shall
not be reduced to less than ** percent ** of such Net Sales; provided, however,
that if a Product is made and sold, in a country in which there are no Patent
Rights, then the royalty paid by Pfizer to OSI Pharmaceuticals shall be **
percent ** of the Net Sales with respect to such Products, according to the term
described in Section 4.1.2, and no reductions of royalties pursuant to Section
4.8 shall be made.
4.2.2 If OSI Pharmaceuticals is the Developing Party, the royalty paid by
OSI Pharmaceuticals to Pfizer shall be ** percent ** of the Net Sales of each
Product. If a Product is made or sold, in a country in which there are no Patent
Rights, then the royalty paid by OSI Pharmaceuticals to Pfizer shall be **
percent ** of the Net Sales with respect to such Products, according to the term
described in Section 4.1.2.
4.4 Renegotiation of Royalty Rates.
The parties acknowledge that the royalty rates set forth in Section
4.1 are based on the expectation that Products will be administered to human
patients. If Pfizer identifies or develops for animal patients with respect to a
Product or Products which represents a commercial opportunity for Pfizer in the
area of animal health, the parties may negotiate a new royalty rate for such
Product to account for development costs and changes in the cost of goods,
selling price and projected annual Net Sales.
- ----------
** This portion has been redacted pursuant to a request for confidential
treatment.
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<PAGE> 7
4.5 Payment Dates.
Royalties shall be paid on Net Sales within sixty (60) days after
the end of each calendar quarter in which such Net Sales are made. Such payments
shall be accompanied by a statement showing the Net Sales of each Product by the
Developing Party or any sublicensee of such in each country, the applicable
royalty rate for such Product, and a calculation of the amount of royalty due,
including any offsets.
4.6 Accounting.
The Net Sales used for computing the royalties payable to the
Licensor by the Developing Party, shall be computed and paid in US dollars by
wire transfer in immediately available funds to a U.S. account designated by the
receiving party, or by other mutually acceptable means. For purposes of
determining the amount of royalties due, the amount of Net Sales in any foreign
currency shall be computed by (a) converting such amount into U.S. dollars at
the prevailing commercial rate of exchange for purchasing dollars with such
foreign currency as published in the Wall Street Journal for the close of the
last business day of the calendar quarter for which the relevant royalty payment
is to be made by the payor and (b) deducting the amount of any governmental tax,
duty, charge, or other fee actually paid in respect of such conversion into, and
remittance of U.S. dollars.
4.7 Records.
The party that is paying such royalties shall keep for three (3)
years from the date of each payment of royalties complete and accurate records
of sales by such party of each Product in sufficient detail to allow the
accruing royalties to be determined accurately. The receiving party shall have
the right for a period of three (3) years after receiving any report or
statement with respect to royalties due and payable to appoint at its expense an
independent certified public accountant reasonably acceptable to the payor to
inspect the relevant records of the payor to verify such report or statement.
The payor shall make its records available for inspection by such independent
certified public accountant during regular business hours at such place or
places where such records are customarily kept, upon reasonable notice from the
recipient of royalties, to the extent reasonably necessary, to verify the
accuracy of the reports and payments. 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. Both parties agree to hold in strict confidence all
information concerning royalty payments and reports, and all information learned
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<PAGE> 8
in the course of any audit or inspection, except to the extent necessary for the
payee to reveal such information in order to enforce its rights under this
Agreement or if disclosure is required by law. The failure of the payee to
request verification of any report or statement during said three-year period
shall be considered acceptance of the accuracy of such report, and the payor
shall have no obligation to maintain records pertaining to such report or
statement beyond said three-year period. The results of each inspection, if any,
shall be binding on both parties.
4.8 Milestone Payments. If Pfizer is the Developing Party, then Pfizer
shall pay to OSI Pharmaceuticals, within sixty (60) days of the completion of
each event set forth below ("Event"), the payment listed opposite that Event.
Payments shall be made in US dollars by wire transfer in immediately available
funds to a U.S. bank account designated by OSI Pharmaceuticals, or other
mutually acceptable means. Pfizer shall be obligated to make each payment only
once with respect to each Compound. All payments made by Pfizer pursuant to this
Section 4.8 with respect to a Product are non-refundable but shall be credited
against all sums due to OSI Pharmaceuticals pursuant to Section 4.2.1 of this
Agreement with respect to Net Sales of such Product; provided, however, that the
sums due pursuant to Section 4.2.1 in any calendar year with respect to such
Product shall not be reduced by virtue of this credit by more than ** percent
**:
<TABLE>
<CAPTION>
Event Amount
----- ------
<S> <C> <C>
1. Notification by Pfizer to OSI Pharmaceuticals
of intent to develop and commercialize
Product **
2. NDA/PLA Submission in any country **
3. NDA/PLA Approval in any country **
</TABLE>
- ----------
** This portion has been redacted pursuant to a request for confidential
treatment.
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<PAGE> 9
For the purposes of the foregoing, "NDA/PLA" shall mean a New Drug
Application or Product License Application or other application for authority to
market a Product filed with the U.S. FDA or a counterpart health regulatory
agency in another country.
4.9 Development Costs. Upon written notification by Pfizer to OSI
Pharmaceuticals of Pfizer's intent to develop and commercialize any Product,
Pfizer shall reimburse to OSI Pharmaceuticals all reasonable costs associated
with Phase I and Phase II clinical trials pursuant to the Development Program
within sixty (60) days.
5. Legal Action.
5.1 Actual or Threatened Disclosure or Infringement.
When information comes to the attention of the Developing Party to
the effect that any Patent Rights relating to a Product have been or are
threatened to be unlawfully infringed, the Developing Party shall have the right
at its expense to take such action as it may deem necessary to prosecute or
prevent such unlawful infringement, including the right to bring or defend any
suit, action or proceeding involving any such infringement. The Developing Party
shall notify the Licensor promptly of the receipt of any such information and of
the commencement of any such suit, action or proceeding. If the Developing Party
determines that it is necessary or desirable for the Licensor to join any such
suit, action or proceeding, the Licensor shall, at the Developing Party's
expense, execute all papers and perform such other acts as may be reasonably
required to permit the Developing Party to commence such action, suit or
proceeding in which case the Developing Party shall hold Licensor free,
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<PAGE> 10
clear and harmless from any and all costs and expenses of litigation, including
attorneys fees. If the Developing Party 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 costs and expenses, including attorney's fees, related to
such suit or settlement, and twenty-five percent (25%) of any funds that shall
remain from said recovery shall be paid to Licensor and the balance of such
funds shall be retained by the Developing Party. If the Developing Party does
not, within one hundred twenty (120) days after giving notice to the Licensor of
the above-described information, notify the Licensor of the Developing Party's
intent to bring suit against any infringer, the Licensor shall have the right to
bring suit for such alleged infringement, but it shall not be obligated to do
so, and may join the Developing Party as party plaintiff, if appropriate, in
which event the Licensor shall hold the Developing Party 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 the Licensor. However, twenty-five percent (25%) of any such
sums received by the Licensor, after deduction of all costs and expenses related
to such suit or settlement, including attorney's fees paid, shall be paid to the
Developing Party. 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 Section. If the Developing
Party lacks standing and the Licensor has standing to bring any such suit,
action or proceeding, then the Licensor shall do so at the request of the
Developing Party and at the Developing Party's expense.
5.2 Defense of Infringement Claims.
The Licensor will cooperate with the Developing Party at the
Developing Party's expense in the defense of any suit, action or proceeding
against the Developing Party or any sublicensee of the Developing Party alleging
the infringement of the intellectual property rights of a third party by reason
of the use of Patent Rights in the manufacture, use or sale of a Product. The
Developing Party shall give the Licensor prompt written notice of the
commencement of any such suit, action or proceeding or claim of infringement and
will furnish the Licensor a copy of each communication relating to the alleged
infringement. The Licensor shall give to the Developing Party all authority
(including the right to exclusive control of the defense of any such suit,
action or proceeding and the exclusive right after consultation with the
Licensor, to compromise, litigate, settle or otherwise dispose of any such suit,
action or proceeding), at the Developing Party's expense, and shall provide all
information and assistance necessary to defend or settle any such suit, action
or proceeding; provided, however, the Developing Party shall obtain the
Licensor's prior consent to such part of any settlement which contemplates
payment or other action by the Licensor or has a material adverse effect on the
Licensor's business. If the parties agree that the Licensor should institute or
join any suit, action or proceeding pursuant to this Section, the Developing
Party may, at the Developing Party's expense, join the Licensor as a defendant
if necessary or desirable, and the Licensor shall execute all documents and take
all other actions, including giving testimony, which may reasonably be required
in connection with the prosecution of such suit, action or proceeding.
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<PAGE> 11
5.3 Hold Harmless.
The Licensor agrees to defend, protect, indemnify and hold harmless
the Developing Party and any sublicensee of the Developing Party, from and
against any loss or expense arising from any proven claim of a third party that
it has been granted rights by the Licensor that the Developing Party or any
sublicensee of the Developing Party in exercising their rights granted to the
Developing Party by the Licensor pursuant to this Agreement, has infringed upon
such rights granted to such third party by the Licensor.
5.4 Third Party Licenses.
If the manufacture, use or sale by the Developing Party of a Product
in any country would, in the opinion of both the Developing Party and the
Licensor, infringe a patent owned by a third party, the Developing Party and the
Licensor, upon mutual consent, shall attempt to obtain a license under such
patent at the Developing Party's expense. If such license is obtained under such
patent, fifty percent (50%) of any payments made by the Developing Party to such
third party shall be deductible from royalty payments due from the Developing
Party to the Licensor pursuant to this Agreement; provided, however, that in no
event shall royalties payable to the Licensor be lower than ** percent ** of Net
Sales 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.
6. Representation and Warranty. The Developing Party and the Licensor represent
and warrant to each other that it has the right to grant the licenses granted
pursuant to this Agreement, and that the licenses so granted do not conflict
with or violate the terms of any other agreements between the Licensor, or the
Developing Party and any other third party.
- ----------
** This portion has been redacted pursuant to a request for confidential
treatment.
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7. Treatment of Confidential Information.
7.1 Confidentiality.
7.1.1 Pfizer and OSI Pharmaceuticals each recognize that the other's
Confidential Information constitutes highly valuable, confidential information.
Subject to each party's rights and obligations pursuant to this Agreement,
Pfizer and OSI Pharmaceuticals each agree that during the term of the
Development Agreement and for five (5) years thereafter, it will keep
confidential, and will cause its Affiliates or Sublicensees to keep
confidential, all OSI Pharmaceuticals Confidential Information or Pfizer
Confidential Information, as the case may be, that is disclosed to it or to any
of its Affiliates pursuant to this Agreement. Neither Pfizer, its Affiliates nor
OSI Pharmaceuticals shall use Confidential Information of the other party except
as expressly permitted under this Agreement. For all purposes of this Section 7,
it is understood that Program Technology shall be deemed Confidential
Information of both parties.
7.1.2 Subject to Pfizer's rights and obligations pursuant to this
Agreement, Pfizer and OSI Pharmaceuticals each agree that any disclosure of the
other's Confidential Information to any officer, employee or agent of the other
party or of any of its Affiliates shall be made only if and to the extent
necessary to carry out its responsibilities under this Agreement and shall be
limited to the maximum extent possible consistent with such responsibilities.
Subject to each party's rights and obligations pursuant to this Agreement,
Pfizer and OSI Pharmaceuticals each agree not to disclose the other's
Confidential Information to any third parties under any circumstance without
written permission from the other party. Each party shall take such action, and
shall cause its Affiliates or Sublicensees to take such action, to preserve the
confidentiality of each other's Confidential Information as it would customarily
take to preserve the confidentiality of its own Confidential Information. Each
party, upon the other's request, will return all the Confidential Information
disclosed to it by the other party pursuant to this Agreement, including all
copies and extracts of documents, within sixty (60) days of the request upon the
termination of this Agreement except for one (1) copy which may be kept for the
purpose of complying with continuing obligations under this Agreement.
7.2 Publicity. Except as required by law, neither party may disclose
the terms of this Agreement without the written consent of the other party,
which consent shall not be unreasonably withheld.
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7.3 Disclosure Required By Law. If either party is requested to disclose
Confidential Information in connection with a legal or administrative proceeding
or is otherwise required by law to disclose Confidential Information, such party
will give the other party prompt notice of such request. The disclosing party
may seek an appropriate protective order or other remedy or waive compliance
with the provisions of this Agreement. If such party seeks a protective order or
other remedy, the other party will cooperate. If such party fails to obtain a
protective order or waive compliance with the relevant provisions of this
Agreement, the other party will disclose only that portion of Confidential
Information which its legal counsel determines it is required to disclose.
7.4 Disclosure of Inventions. Each party shall promptly inform the other
about all inventions in the Area that are conceived, made or developed in the
course of carrying out the Development Program by employees of, consultants to,
either of them solely, or jointly with employees of, or consultants to the
other.
7.5 Acquisition of Rights from Third Parties. During the Development
Program, OSI Pharmaceuticals and Pfizer shall each promptly notify each other of
any and all opportunities to acquire in any manner from third parties,
technology or patents or information which may be useful in or relate to the
Development Program. In each case, Pfizer and OSI Pharmaceuticals shall decide
if such rights should be acquired in connection with the Development Program
and, if so, whether by OSI Pharmaceuticals, Pfizer or both. If acquired such
rights shall become part of the Confidential Information, Program Technology or
Patent Rights, whichever is appropriate, of the acquiring party. Pfizer shall
pay all costs of acquiring and maintaining rights to such intellectual property,
at Pfizer's sole discretion, provided that OSI Pharmaceuticals shall have no
obligation or liability hereunder with respect to such rights in the event
Pfizer shall elect not to acquire such rights.
8. Provisions Concerning Filing, Prosecution and Maintenance of Patent Rights.
The following provisions relate to the filing, prosecution and maintenance of
Patent Rights during the Development Program:
8.1 Filing, Prosecution and Maintenance by OSI Pharmaceuticals. With
respect to Patent Rights in which OSI Pharmaceuticals employees or consultants,
alone or together with Pfizer
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employees, or consultants are named as inventors, OSI Pharmaceuticals shall have
the exclusive right and obligation:
(a) to file applications for letters patent on patentable inventions
included in Patent Rights; provided, however, that OSI Pharmaceuticals shall
consult with Pfizer regarding countries in which such patent applications should
be filed and shall file patent applications in those countries where Pfizer
requests that OSI Pharmaceuticals file such applications; and, further provided,
that OSI Pharmaceuticals, at its option and expense, may file in countries where
Pfizer does not request that OSI Pharmaceuticals file such applications;
(b) to take all reasonable steps to prosecute all pending and new
patent applications included within Patent Rights;
(c) to respond to oppositions, nullity actions, re-examinations,
revocation actions and similar proceedings filed by third parties against the
grant of letters patent for such applications;
(d) to maintain in force any letters patent included in Patent
Rights by duly filing all necessary papers and paying any fees required by the
patent laws of the particular country in which such letters patent were granted;
and
OSI Pharmaceuticals shall notify Pfizer in a timely manner of any
decision to abandon a pending patent application or an issued patent included in
Patent Rights. Thereafter, Pfizer shall have the option, at its expense, of
continuing to prosecute any such pending patent application or of keeping the
issued patent in force.
8.1.1 Copies of Documents. OSI Pharmaceuticals and Pfizer shall
provide to each other copies of all patent applications that are part of Patent
Rights prior to filing, for the purpose of obtaining substantive comment of the
other party's patent counsel. OSI Pharmaceuticals and Pfizer shall also provide
to the other copies of all documents relating to prosecution of all such patent
applications in a timely manner and shall provide to the other every six (6)
months a report detailing the status of all patent applications that are a part
of Patent Rights.
8.1.2 Reimbursement of Costs for Filing Prosecuting and Maintaining
Patent Rights. Within thirty (30) days of receipt of invoices from OSI
Pharmaceuticals, Pfizer shall reimburse OSI Pharmaceuticals for all the costs of
filing, prosecuting, responding to opposition and maintaining patent
applications and patents in countries where Pfizer requests that patent
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<PAGE> 15
applications be filed, prosecuted and maintained. Such reimbursement shall be in
addition to other funding payments under this Agreement and shall include such
costs of all activities described in 8.1 (a)-(e) above. However, Pfizer may,
upon sixty (60) days notice, request that OSI Pharmaceuticals discontinue filing
or prosecution of patent applications in any country and discontinue reimbursing
OSI Pharmaceuticals for the costs of filing, prosecuting, responding to
opposition or maintaining such patent application or patent in any country. OSI
Pharmaceuticals shall pay all costs in those countries in which Pfizer requests
that OSI Pharmaceuticals not file, prosecute or maintain patent applications and
patents, but in which OSI Pharmaceuticals, at its option, elects to do so.
8.1.3 The Developing Party shall have the right to file on behalf of
and as an agent for the Licensor all applications for, and take all actions
necessary to obtain patent extensions pursuant to 35 USC Section 156 and foreign
counterparts with respect to the Patent Rights to the extent that such
extensions are available by reason of a Product under this Agreement during the
period the Agreement is in effect. The Licensor shall have the obligation to
sign, such further documents and take such further actions as may be requested
by the Developing Party in this regard, at the Developing Party's expense
8.2 Filing, Prosecution and Maintenance by Pfizer. During the term of the
Development Program, with respect to Patent Rights in which Pfizer employees or
consultants alone are named as inventors, Pfizer shall have those rights and
duties ascribed to OSI Pharmaceuticals in Section 8.1, except that Pfizer will
bear all related expenses.
8.3 Filing, Prosecution and Maintenance by the Developing Party. During
the term of the grant described in Section 3.2 and 3.3, the Developing Party
shall have those rights and duties ascribed to OSI Pharmaceuticals in Section
8.1, and will bear all related expenses.
8.4 Neither party may disclaim a Valid Claim within Patent Rights without
the consent of the other.
9. Other Agreements.
This Agreement, and the 1996 Research Agreement are the sole agreements
with respect to the subject matter and supersede all other agreements and
understanding between the parties with respect to same.
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10. Termination and Disengagement.
10.1 Events of Termination. The following events shall constitute events
of termination ("Events of Termination"):
(a) Any written representation or warranty by OSI Pharmaceuticals or
Pfizer, or any of its officers, made under or in connection with this Agreement
shall prove to have been incorrect in any material respect when made;
(b) OSI Pharmaceuticals or Pfizer shall fail in any material respect
to perform or observe any term, covenant or understanding contained in this
Agreement or in any of the other documents or instruments delivered pursuant to,
or concurrently with, this Agreement, and any such failure shall remain
unremedied for thirty (30) days after written notice to the failing party.
10.2 Termination. Upon the occurrence of any Event of Termination, the
party not responsible may, by notice to the other party, terminate this
Agreement.
10.3 Upon the occurrence of any Event of Termination, if the Licensor
terminates this Agreement, the license granted to the Developing Party will
terminate.
10.4 Termination of this Agreement for any reason shall be without
prejudice to:
(a) the rights and obligations of the parties provided in all
Sections
(b) the Licensor's right to receive all royalty payments accrued
hereunder; or
(c) any other remedies which either party may otherwise have.
11. Indemnification.
Pfizer and OSI Pharmaceuticals will indemnify each other for damages,
settlements, costs, legal fees and other expenses incurred in connection with a
claim by a third party against either party based on any action or omission of
the indemnifying party's agents, employees, or officers related to its
obligations under this Agreement; provided, however, that the foregoing shall
not apply (i) if the claim is found to be based upon the negligence,
recklessness or willful misconduct of the party seeking indemnification; or (ii)
if such party fails to give the other party prompt notice of any claim it
receives and such failure materially prejudices the other party with respect to
any claim or action to which its obligation pursuant to this Section applies.
Notwithstanding the foregoing, Pfizer shall not indemnify OSI Pharmaceuticals
for claims arising from the clinical trials performed by OSI Pharmaceuticals
pursuant to this Development
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Agreement and further, the Licensor shall not indemnify the Developing Party for
claims arising from the sale of Products or the License Agreement (including
without limitation product liability claims) and the Developing Party shall
indemnify the Licensor with respect to such claims and to claims arising from
Patent Rights and Program Technology. Each party, in its sole discretion, shall
choose legal counsel, shall control the defense of such claim or action and
shall have the right to settle same on such terms and conditions it deems
advisable; provided however, it shall obtain the other party's prior consent to
such part of any settlement which requires payment or other action by the other
party or is likely to have a material adverse effect on the other party's
business.
12. Notices and Reports.
12.1 All notices shall be in writing mailed via certified mail, return
receipt requested, courier, or facsimile transmission addressed as follows, or
to such other address as may be designated from time to time:
If to Pfizer: Pfizer Inc
235 East 42nd Street
New York, NY 10017
Attention: President, Central Research
with copy to: General Counsel
If to OSI Pharmaceuticals: OSI Pharmaceuticals Inc.
106 Charles Lindbergh Blvd.
Uniondale, New York 11553-3649
Attention: Dr. Colin Goddard
Notices shall be deemed given as of the date sent.
12.2 Reports. The Developing Party agrees to keep the Licensor informed
with respect to activities and progress toward further research, development and
commercialization of Products. The Developing Party agrees to provide to the
Licensor every six months a summary
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of such activities and progress. In addition, the Developing Party will provide
to the Licensor copies of any data regarding the Products together with copies
of any reports or summaries of such data. The Licensor agrees that all such
information will be deemed Confidential Information belonging to the Developing
Party.
13. Governing Law.
This Agreement shall be governed by and construed in accordance with the
laws of the State of New York.
14. Miscellaneous.
14.1 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.
14.2 Headings. Paragraph headings are inserted for convenience of
reference only and do not form a part of this Agreement.
14.3 Counterparts. This Agreement may be executed simultaneously in two or
more counterparts, each of which shall be deemed an original.
14.4 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 waiving compliance. The delay or failure of any party at any time or
times to require performance of any provisions 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 instances, shall be deemed to be, or
considered as, a further or continuing waiver of any such condition or of the
breach of such term or any other term of this Agreement.
14.5 No Third Party Beneficiaries. No third party including any employee
of any party to this Agreement, shall have or acquire any rights by reason of
this Agreement. Nothing contained in this Agreement shall be deemed to
constitute the parties partners with each other or any third party.
14.6 Assignment and Successors. This Agreement may not be assigned by
either party, except that each party may assign this Agreement and the rights
and interests of such
17
<PAGE> 19
party, in whole or in part, to any of its Affiliates, any purchaser of all or
substantially all of its assets or to any successor corporation resulting from
any merger or consolidation of such party with or into such corporations.
14.7 Force Majeure. Neither Pfizer nor OSI Pharmaceuticals shall be liable
for failure of or delay in performing obligations set forth in this Agreement,
and neither shall be deemed in breach of its obligations, if such failure or
delay is due to natural disasters or any causes reasonably beyond the control of
Pfizer or OSI Pharmaceuticals.
14.8 Severability. If any provision of this Agreement is or becomes
invalid or is ruled invalid by any court of competent jurisdiction or is deemed
unenforceable, it is the intention of the parties that the remainder of the
Agreement shall not be affected.
18
<PAGE> 20
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
by their duly authorized representatives.
PFIZER INC OSI PHARMACEUTICALS, INC.
By: /s/ By: /s/
--------------------------- ----------------------------------------
Title: Vice President Title: President and Chief Executive Officer
cc: Pfizer Inc, Legal Division, Groton, CT 06340
19
<PAGE> 21
Exhibit A
**
- ----------
** This portion has been redacted pursuant to a request for confidential
treatment.
20
<PAGE> 22
Exhibit B
**
- ----------
** This portion has been redacted pursuant to a request for confidential
treatment.
21
<PAGE> 1
AMENDMENT NO. 1
to the Collaborative Agreement
dated as of April 19, 1995
between Novartis Pharma AG and
OSI Pharmaceuticals, Inc.
Novartis Pharma AG of Lichtstrasse 35, CH-4002 Basel, Switzerland and OSI
Pharmaceuticals, Inc., of 106 Charles Lindbergh Boulevard, Uniondale, New York
11553-3649, USA agree to amend the above mentioned agreement (hereinafter
referred to as "1995 Agreement") as follows:
The four year time limit to exercise the option set forth in Section 5.7 of the
1995 Agreement will be extended until the end of May and such option right will
therefore not expire until May 31, 1999.
BASEL April 13, 1999 UNIONDALE April 13, 1999
------------------------- ------------------------------
Novartis Pharma AG OSI Pharmaceuticals, Inc.
/s/ /s/ /s/
Dr. I. Csendes G. Schelling Dr. C. Goddard
Head Licensing Drug Delivery Legal Counsel Vice President,
& Out-Licensing Business Development
<PAGE> 1
Portions of Exhibit 10.5 have been redacted and are the subject of a
confidential treatment request filed with the Secretary of the Securities and
Exchange Commission.
<PAGE> 2
May 31, 1999
OSI PHARMACEUTICALS, INC.
and
NOVARTIS PHARMA AG
AMENDMENT NO. 2 TO COLLABORATIVE AGREEMENT
<PAGE> 3
Amendment No. 2
THIS AMENDMENT is made as of the 31st day of May, 1999 between NOVARTIS
PHARMA AG, successor-in-interest to the pharmaceutical business of CIBA-GEIGY
LIMITED, of Lichtstrasse 35, CH-4002 Basel, Switzerland (hereinafter referred to
as "NOVARTIS") and OSI PHARMACEUTICALS, INC., formerly known as ONCOGENE
SCIENCE, INC., of 106 Charles Lindbergh Boulevard, Uniondale, New York
11553-3649, USA (hereinafter referred to as "OSI").
WHEREAS, NOVARTIS and OSI are partners in a Collaborative Agreement dated
as of April 19, 1995 (the "1995 Agreement"), pursuant to which OSI granted to
NOVARTIS an exclusive license with the right to grant sublicenses to
manufacture, have manufactured, use and sell products containing the Compound
(as defined in Clause 1.3 of the 1995 Agreement) for the Licensed Indications
(as defined in Clause 1.5 of the 1995 Agreement) (all capitalized items used
herein but not defined shall have the meanings described thereto in the 1995
Agreement); and
WHEREAS, pursuant to the 1995 Agreement, OSI also granted to NOVARTIS an
option to acquire from OSI a license to manufacture, use and sell products
containing TGF-(beta)3 and other TGF-(beta)s for all other indications not now
included in the Licensed Indications; and
WHEREAS, the four year time limit to exercise the option was extended
until May 31, 1999 by an amendment to the 1995 Agreement ("Amendment 1") dated
April 13, 1999; and
WHEREAS, OSI and NOVARTIS hereby wish to amend certain terms of the 1995
Agreement.
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
1. References. All references in the 1995 Agreement to "CIBA-GEIGY" or "CG"
shall be deemed to be references to "NOVARTIS". All references in the 1995
Agreement to "ONCOGENE SCIENCE" shall be deemed to be references to "OSI".
2. Recitals. The recital (F) in the 1995 Agreement shall be deleted in its
entirety and replaced with the following:
"NOVARTIS also wishes to have the opportunity to acquire from OSI a
license to manufacture, use and sell products containing TGF-(beta)3 and
other TGF-(beta)s for certain other indications not now included in the
Licensed Indications".
<PAGE> 4
3. Definitions.
(a) Section 1.5 of the 1995 Agreement shall be deleted in its entirety and
replaced with the following:
"1.5 "Licensed Indications" shall mean: (i) bone, cartilage and
tendon repair, and (ii) additional indications deemed to be
included in the Licensed Indications pursuant to Clause 5.7
and Clause 5.8, as amended."
(b) Section 1.7 of the 1995 Agreement shall be amended so that the
language immediately following subsection (v) shall be as follows:
"all to the extent actually allowed, accrued or taken, and as
determined in accordance with the standard accounting
procedures of the party (i.e., NOVARTIS or OSI) making the Net
Sales."
(c) Section 1.11 of the 1995 Agreement shall be amended as follows:
"1.11 "Products" shall mean pharmaceutical preparations containing
the Compound designed for administration to human beings and
animals which fall within the scope of the claims of the OSI
Patents."
4. Supply of TGF-(beta)s.
(a) The second sentence of Section 3.3(d) of the 1995 Agreement shall be
deleted and replaced with the following:
"3.3(d) It is understood that NOVARTIS (i) shall not be obliged to
scale up its manufacturing process solely to meet the
requirements of OSI and OSI's licensees for research and
development purposes and clinical trials, and (ii) shall only
be obliged to supply Compound to OSI and OSI's licensees for
such purposes as long as it has sufficient Compound for its
own consumption. Provided NOVARTIS decides to initiate full
development of a Product in the Licensed Indications, it is
the intention of NOVARTIS to scale up such process to meet its
estimated future requirements. NOVARTIS will use commercially
reasonable efforts in designing its processing capacity so
that it is adequate to also meet all of OSI's requirements and
that of OSI's licensees for commercial quantities of the
Compound foreseen at the time of such scale up. If such
processing capacity proves to be adequate, NOVARTIS shall use
reasonable efforts to also supply OSI and the licensees of
OSI."
(b) The third sentence of Section 3.3(d) of the 1995 Agreement shall be
deleted and replaced with the following:
<PAGE> 5
"3.3(d) Should NOVARTIS fail to do so, or if processing capacity
should prove to be inadequate to meet all OSI actual
requirements and NOVARTIS should be unwilling to invest in
additional capacity, or if NOVARTIS decides not to initiate
full development of a Product, it agrees if so requested to
grant a license to OSI under the NOVARTIS Patents and NOVARTIS
Know-How to produce the Compound on terms to be negotiated in
good faith, the financial terms to be reasonable having regard
to the cost of supplies of the Compound as at the date of the
license negotiations, the cost to OSI of procuring the grant
of licenses for any parts of the process covered by Third
Party Patents, and the estimated production costs of OSI."
(c) At the end of Section 3.3(e) of the 1995 Agreement the following
language shall be added:
"3.3(e) The parties furthermore agree that in case NOVARTIS decides
not to continue the development of the Compound in the
Licensed Indications NOVARTIS shall, upon the request of OSI,
make available its remaining stock of Compound in accordance
with the arrangements hereinafter, whereupon NOVARTIS shall no
longer be required to produce further Compound for supply to
OSI and OSI's licensees."
(d) The second sentence of Section 3.3(f) of the 1995 Agreement shall be
deleted and replaced with the following:
"3.3(f) Except during the 36-month notification periods or in case of
the discontinuance of the development of the Compound in the
Licensed Indications as set forth in Sections 3.3(b) and
3.3(e), NOVARTIS shall, in the event that it is unable to
supply the Compound to OSI for a period of 90 days by reason
of force majeure or otherwise, use commercially reasonable
endeavours to have an alternative plant for the production of
the Compound validated within one year from the date of
cessation of supply."
5. Development.
(a) Section 4.1 of the 1995 Agreement (including subsections 4.1.1, 4.1.2,
4.1.3 and 4.1.4) shall be deleted in its entirety and replaced with the
following:
"4.1 NOVARTIS shall be solely responsible, at its own expense, for
the development of the Products for the Licensed Indications.
NOVARTIS shall use reasonable diligence to take all steps
necessary for the development of such Products."
<PAGE> 6
(b) The following language shall be added after Section 4.3 of the 1995
Agreement, Section 4.3 then becoming Section 4.3.1:
4.3.2 NOVARTIS hereby acknowledges and notifies OSI that as of May
31, 1999 (the "Discontinuance Date"), NOVARTIS has
discontinued development of Products for the indications of
oral mucositis and healing of soft tissue wound, including
prevention of scarring and fibrosis (such indications being
hereinafter referred to as the "Discontinued Indications").
NOVARTIS and OSI agree that all licenses heretofore granted to
NOVARTIS with respect to the Discontinued Indications are
terminated. With respect to the Discontinued Indications, upon
and following the Discontinuance Date, NOVARTIS shall make
available to OSI, as more specifically described below, for
use by OSI and its licensees, the results of development work
carried out up to the Discontinuance Date, including, without
limitation, access to NOVARTIS' Investigational New Drug
("IND") filing made with the United States Food and Drug
Administration and any equivalent filings made in countries
other than the United States. It is understood that results
relating to formulation of the Compound and analytical methods
developed by NOVARTIS up to the Discontinuance Date shall be
excluded from such transfer. NOVARTIS shall make a good faith
effort to make available the results of NOVARTIS' development
work by delivery of all written materials to OSI within 45
days following the Discontinuance Date and by meeting for one
day with representatives of OSI and OSI's licensees at a place
and on a date mutually convenient within 45 days following the
receipt by NOVARTIS of an agenda of outstanding issues
necessary for OSI and/or OSI's licensees to continue work in
the Discontinued Indication. NOVARTIS hereby acknowledges and
agrees that OSI and/or OSI's licensees may use any of the
foregoing results for the purpose of continuing development
for indications other than the Licensed Indications subject to
the following terms and conditions:
(a) with respect to development and sales of a Product for
oral mucositis by OSI or a licensee of OSI, OSI shall pay to
NOVARTIS (i) ** of any Net Sales made directly by OSI, and/or
(ii) ** of any revenue received by OSI from its licensee(s)
including, without limitation, revenue generated by licensing
fees, milestone payments or royalties;
- ----------
** This portion has been redacted pursuant to a request for confidential
treatment.
<PAGE> 7
(b) with respect to development and sales of a Product for any
indications other than oral mucositis or other than any
indication included within the Licensed Indications, OSI shall
pay to NOVARTIS (i) ** of any Net Sales made directly by OSI,
and/or (ii) ** of any revenue received by OSI from its
licensee(s), including, without limitation, revenue generated
by licensing fees, milestone payments or royalties; and
(c) with respect to any indications other than oral mucositis
or other than any indication included within the Licensed
Indications, if OSI or its licensee(s) completes Phase II
clinical trials with respect to a Product and, at such point,
seeks a licensee to complete development of the Product and to
commercialize the Product, OSI hereby grants to NOVARTIS a
right of first negotiation with respect to such a license. OSI
and NOVARTIS shall negotiate such a license in good faith
taking into consideration the contributions of the parties up
to the Discontinuance Date. If the parties fail to enter into
such a license, OSI or its licensee may enter into such a
license with a third party, provided that OSI or its licensee
may not offer more favorable terms to a third party without
first offering such favorable terms to NOVARTIS.
(d) For the purpose of calculating the royalties Sections 5.2
and 5.3 shall be applicable and Sections 5.4, 5.5 and 5.6
shall apply to all payments made by OSI hereunder."
(c) Section 4.5 of the 1995 Agreement shall be deleted in its entirety.
6. Payment of Royalties and for Rights Granted.
(a) Section 5.2 of the 1995 Agreement shall be deleted in its entirety and
replaced with the following:
"5.2 NOVARTIS agrees to pay OSI a royalty of ** of Net Sales of the
Products in the Licensed Indications made by NOVARTIS or its
sub-licensees during the royalty period. OSI agrees to pay
NOVARTIS a royalty of ** of Net Sales made directly by OSI of
the Products outside the Licensed Indications in accordance
with Section 4.3.2 during the royalty period. The royalty
period shall be calculated on a country-by-country basis and
shall commence on the date of the commercial launch of any of
the Products either by NOVARTIS and/or OSI, as applicable, and
shall end on the date of expiry of the Patents in the
country."
- ----------
** This portion has been redacted pursuant to a request for confidential
treatment.
<PAGE> 8
(b) Section 5.3 of the 1995 Agreement shall be deleted in its entirety and
replaced with the following:
"5.3 If OSI shall not have applied for any Patent in a particular
country or if patent protection for a Product sold either by
NOVARTIS and/or OSI, as applicable, is refused or revoked, the
rate of royalty payable on Net Sales in that country shall be
reduced **. Royalties under this Section 5.3 shall be payable
for a period of ten years from the date of commercial launch
in the country in question."
(c) Section 5.4 of the 1995 Agreement shall be deleted in its entirety and
replaced with the following:
"5.4 No later than 60 days after the end of each Half Year NOVARTIS
and/or OSI shall deliver to the other party a statement
showing its and its (sub)licencees' Net Sales of Products
invoiced during such Half Year, and in the case of OSI also
any revenue from its licencee(s) and shall pay to the other
party the amount due on such Net Sales and/or revenue, as
applicable."
(d) Section 5.5 of the 1995 Agreement shall be deleted in its entirety and
replaced with the following:
"5.5 NOVARTIS and OSI shall keep accurate records in sufficient
detail to enable the amount of payments due hereunder to be
calculated and shall maintain such records for a period of two
Years after the end of the period to which they relate.
NOVARTIS and OSI shall be entitled to have such records
examined during normal working hours by an independent firm of
accountants to which the other party has no reasonable
objection so as to verify the correctness of any payment
PROVIDED HOWEVER that such firm of accountants shall only
report to the other party the correct amount of Net Sales and
the amount of royalty due and in the case of OSI any revenue
from licencee(s), and shall keep confidential all other
information acquired in the course of such examination."
- ----------
** This portion has been redacted pursuant to a request for confidential
treatment.
<PAGE> 9
(e) Section 5.6 of the 1995 Agreement shall be deleted in its entirety and
replaced with the following:
"5.6 (a) Royalties and any other payments due hereunder shall be
made in US Dollars into such accounts as shall be nominated by
the receiving party for that purpose. In the case of NOVARTIS
Net Sales in currencies other than in US Dollars, such Net
Sales shall first be calculated in the foreign currency, then
converted to Swiss Francs and then converted to US Dollars, in
each case using a ** exchange rate calculated on the basis of
NOVARTIS' ** average exchange rates. NOVARTIS' monthly average
exchange rates are currently calculated using the average of
Reuters Daily Rates between 09:14 a.m. and 10:00 a.m. on the
one hand and the official Frankfurt fixing of the German
National Bank rates in the afternoon on the other hand. In the
case of OSI Net Sales or revenue in currencies other than US
Dollars, royalties and any other payments shall first be
calculated in the foreign currency and then converted to US
Dollars, in each case using for ** calculation the foreign
currency exchange rate published in The Wall Street Journal on
the last day of the preceding month.
(b) If NOVARTIS or OSI are obliged to deduct withholding tax
on any payments to be made hereunder, the payment shall be
made net of withholding tax. NOVARTIS and OSI, as applicable,
will deliver to the other party receipts or other evidence of
payment issued by the relevant tax authorities to enable it to
claim any available double taxation relief."
(f) The second sentence of Section 5.7 of the 1995 Agreement shall be
deleted in its entirety and replaced with the following:
"5.7 NOVARTIS is hereby granted an exclusive option to include the
treatment of transplant patients (e.g. graft protection), the
treatment of ischemia (e.g., angina pectoris and peripheral
vascular disease), the treatment of stroke patients, and the
treatment of inflammatory bowel disease as additional
indications and a nonexclusive option to include any other
additional indications relating to the Compound (other than
the Discontinued Indications and Licensed Indications) upon
making the milestone payment or stock purchase set forth in
Section 5.8, as amended, such option to be exercised, if at
all, within sixty (60) days of the decision by NOVARTIS to
initiate full development of the Product (i.e., Phase IIB or
Phase III clinical trials for bone, cartilage or tendon
repair, which decision shall be communicated promptly to OSI
in writing) or by May 31, 2003, whichever is earlier."
- ----------
** This portion has been redacted pursuant to a request for confidential
treatment.
<PAGE> 10
(g) Section 5.8 of the 1995 Agreement shall be deleted in its entirety and
replaced with the following:
"5.8 Within sixty (60) days after the earlier of: (a) the date of
the decision by NOVARTIS to initiate full development (as
defined in Section 5.7) of a Product for bone, cartilage or
tendon repair, or (b) the exercise of the option set out in
Section 5.7, NOVARTIS agrees to either make a milestone
payment of ** in cash to OSI or to purchase ** of OSI common
stock at a per share price equal to ** of the average closing
price for the 30-day period ending on the date of purchase.
Upon making this milestone payment or completion of the stock
purchase, such additional indications relating to the Compound
shall be deemed to be included in the Licensed Indications.
The retention of the rights to such other indications shall be
subject to the provisions of the Stock Purchase Agreement."
7. Termination.
Section 9.4 of the 1995 Agreement shall be deleted in its entirety and
replaced with the following:
"9.4 Termination or expiry of this Agreement shall not affect the
rights of any party against the other party in respect of any
antecedent breach of the terms hereof, nor the rights or
obligations of any party pursuant to the provisions of Clauses
4 and 5 with regard to, in each instance, royalty obligations
in respect of the Net Sales and/or revenue from licensees up
to the date of termination or expiry, Clause 7 in respect of
confidentiality and Clause 10 in respect of indemnities."
8. Schedules.
Schedules 1 and 2 of the 1995 Agreement shall be deleted in their entirety
and replaced with the Schedules attached hereto.
9. Miscellaneous.
(a) Except as amended hereby, all terms and conditions of the 1995
Agreement shall remain in full force and effect.
- ----------
** This portion has been redacted pursuant to a request for confidential
treatment.
<PAGE> 11
(b) This Amendment shall be construed and applied in accordance with the
laws of the State of New York.
(c) This Amendment shall be binding upon and shall inure to the benefit of
the parties hereto and their respective legal representatives, successors and
permitted assigns.
(d) This Amendment may be executed in two counterparts, each of which
shall be deemed an original, but all of which together shall constitute one and
the same instrument.
<PAGE> 12
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed as of the date first above written.
OSI PHARMACEUTICALS, INC.
By: /s/
--------------------------------------------
Colin Goddard, Ph.D.
President & Chief Executive Officer
NOVARTIS PHARMA AG
By: /s/
--------------------------------------------
Gisela Schelling
Legal Counsel
Ivan Csendes, Ph.D.
Head Licensing Drug-Delivery & Out-Licensing
Business Development & Licensing
<PAGE> 13
SCHEDULE 1
List of OSI Patents/Applications
<TABLE>
<CAPTION>
Country Application/Patent No. Filing Date Expiry Date
- ------- ---------------------- ----------- -----------
<S> <C> <C> <C>
Australia 600230 21.04.1986 21.04.2002
Australia 620795 19.10.1987 19.10.2003
Australia 668072 17.05.1990 17.05.2006
Australia 659415 25.06.1991 25.06.2007
Australia 657913 25.06.1991 25.06.2007
Australia 51628/93 21.09.1993 21.19.2009
Austria E83152 15.04.1986 15.04.2006
Austria 384494 (E) 20.10.1987 20.10.2007
Austria 536275 (E) 25.06.1991 25.06.2011
Belgium 200090 (E) 15.04.1986 15.04.2006
Belgium 384494 (E) 20.10.1987 20.10.2007
Belgium 536275 (E) 25.06.1991 25.06.2011
Canada 1274471 18.04.1986 18.04.2006
Canada 549582-2 20.10.1987 20.10.2007
Canada 2084510 25.06.1991 25.06.2011
Denmark 536275 (E) 25.06.1991 25.06.2011
EPO 200090 (E) 15.04.1986 15.04.2006
EPO 95109866.4 20.10.1987 20.10.2007
EPO 536275 (E) 25.06.1991 25.06.2011
France 200090 (E) 15.04.1986 15.04.2006
France 384494 (E) 20.10.1987 20.10.2007
France 536275 (E) 25.06.1991 25.06.2011
Germany P3637241.5-08 15.04.1986 15.04.2006
Germany 384494 (E) 20.10.1987 20.10.2007
Germany 536275 (E) 25.06.1991 25.06.2011
Greece 384494 (E) 20.10.1987 20.10.2007
Greece 536275 (E) 25.06.1991 25.06.2011
Ireland 60059 14.04.1986 14.04.2006
Ireland 2809/87 19.10.1987 19.10.2007
Israel 78546 20.04.1986 20.04.2006
Israel 84211 19.10.1987 19.10.2007
Israel (Div.) 103617 20.04.1986 20.04.2006
Italy 20732BE/93 15.04.1986 15.04.2006
Italy 384494 (E) 20.10.1987 20.10.2007
Italy 536275 (E) 25.06.1991 25.06.2011
Japan 2065324 18.04.1986
Japan 265201/87 20.10.1987
Japan 513051/91 25.06.1991
Liechtenstein 200090 (E) 15.04.1986 15.04.2006
Liechtenstein 384494 (E) 20.10.1987 20.10.2007
Liechtenstein 536275 (E) 25.06.1991 25.06.2011
Luxemborg 200090 (E) 15.04.1986 15.04.2006
</TABLE>
<PAGE> 14
<TABLE>
<CAPTION>
Country Application/Patent No. Filing Date Expiry Date
- ------- ---------------------- ----------- -----------
<S> <C> <C> <C>
Luxemborg 384494 (E) 20.10.1987 20.10.2007
Luxemborg 536275 (E) 25.06.1991 25.06.2001
Netherlands 200090 (E) 15.04.1986 15.04.2006
Netherlands 384494 (E) 20.10.1987 20.10.2007
Netherlands 536275 (E) 25.06.1991 25.06.2011
New Zealand 215887 18.04.1986 18.04.2002
New Zealand 222168 14.10.1987 14.10.2003
Spain 554177 18.04.1986 18.04.2006
Spain 8702981 19.10.1987 19.10.2007
Spain 536275 (E) 25.06.1991 25.06.2011
Sweden 384494 (E) 20.10.1987 20.10.2007
Sweden 536275 (E) 25.06.1991 25.06.2011
Switzerland 200090 (E) 15.04.1986 15.04.2006
Switzerland 384494 (E) 20.10.1987 20.10.2007
Switzerland 536275 (E) 25.06.1991 25.06.2011
United Kingdom 200090 (E) 15.04.1986 15.04.2006
United Kingdom 384494 (E) 20.10.1987 20.10.1987
United Kingdom 536275 (E) 25.06.1991 25.06.2011
USA 5262319 25.06.1990 16.11.2010
USA 08/118197 19.04.1985*
USA 08/2940641 19.04.1985*
USA 5817625 21.09.1992 06.10.2015
USA 5635489 21.09.1992 03.06.2014
USA 5821297 21.09.1992 20.10.2015
USA 5871724 21.09.1992 16.02.2016
USA 08/457097 19.04.1985
</TABLE>
* Effective filing date
<PAGE> 15
SCHEDULE 2
List of Novartis Patents
A. Case 4-17861
<TABLE>
<CAPTION>
Country Application/Patent No. Filing Date Expiry Date
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Australia 638075 27.11.1990 27.11.2006
Austria 433225 (EP) 27.11.1990 27.11.2010
Belgium 433225 (EP) 27.11.1990 27.11.2010
Canada 2031430 04.12.1990 04.12.2010
Denmark 433225 (EP) 27.11.1990 27.11.2010
Finland 905956 03.12.1990 03.12.2010
France 433225 (EP) 27.11.1990 27.11.2010
Germany 433225 (EP) 27.11.1990 27.11.2010
Great Britain 89275465 06.12.1989 (priority
application;
now lapsed)
Great Britain 433225 (EP) 27.11.1990 27.11.2010
Greece 433225 (EP) 27.11.1990 27.11.2010
Hungary 8084/1990 05.12.1990 05.12.2010
Ireland 4386/90 05.12.1990 05.12.2010
Israel 96549 05.12.1990 05.12.2010
Italy 433225 (EP) 27.11.1990 27.11.2010
Japan 330871/90 30.11.1990
Korea 9881/90 05.12.1990
Luxembourg 433225 (EP) 27.11.1990 27.11.2010
Mexico 172600 04.12.1990 04.12.2010
Netherlands 433225 (EP) 27.11.1990 27.11.2010
New Zealand 236333 04.12.1990 04.12.1990
Norway 301768 05.12.1990 05.12.2010
Pakistan 132484 10.11.1990 06.12.2005
Philippines 41681 05.12.1990
Philippines 47025 05.12.1990
Philippines 48001 05.12.1990
Portugal 96068 04.12.1990
South Africa 9762/90 05.12.1990 05.12.2010
Spain 433225 (EP) 27.11.1990 27.11.2010
Sweden 433225 (EP) 27.11.1990 27.11.2010
Switzerland 433225 (EP) 27.11.1990 27.11.2010
Taiwan 56999NI 13.11.1990 11.06.2007
USA 621502/07 03.12.1990
USA 960309/07 (Cont.) 13.10.1992
USA 201703/08 (Cont. 2) 25.02.1994
USA 5650494 (Cont. 3) 07.06.1995 22.07.2014
USA 789588/08 (Cont. 3/Div) 24.01.1997
</TABLE>
<PAGE> 16
SCHEDULE 2 continued
B. Case 4-20038
<TABLE>
<CAPTION>
Country Application/Patent No. Filing Date Expiry Date
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Australia 690311 12.07.1995 12.07.2015
Austria 95926857.4 (EP) 12.07.1995 12.07.2015
Belgium 95926857.4 (EP) 12.07.1995 12.07.2015
Canada 2194582 12.07.1995 12.07.2015
Denmark 95926857.4 (EP) 12.07.1995 12.07.2015
Europe 95926857.4 (EP) 12.07.1995 12.07.2015
Europe 94810438.5 (EP) 25.07.1994 (priority
application;
lapsed)
Finland 970229 12.07.1995 12.07.2015
France 95926857.4 (EP) 12.07.1995 12.07.2015
Germany 95926857.4 (EP) 12.07.1995 12.07.2015
Great Britain 95926857.4 (EP) 12.07.1995 12.07.2015
Greece 95926857.4 (EP) 12.07.1995 12.07.2015
Hungary P9700210 12.07.1995 12.07.2015
Ireland 95926857.4 (EP) 12.07.1995 12.07.2015
Israel 114701 24.07.1995 24.07.2015
Italy 95926857.4 (EP) 12.07.1995 12.07.2015
Japan 505400/96 12.07.1995 12.07.2015
Korea-South 700476/97 12.07.1995 12.07.2015
Luxembourg 95926857.4 (EP) 12.07.1995 12.07.2015
Mexico 970656 12.07.1995 12.07.2015
Monaco 95926857.4 (EP) 12.07.1995 12.07.2015
Netherlands 95926857.4 (EP) 12.07.1995 12.07.2015
New Zealand 290373 12.07.1995 12.07.2015
Norway P970325 12.07.1995 12.07.2015
Pakistan 395/95 23.07.1995 23.07.2011
Philippines 50939 18.07.1995
Portugal 95926857.4 (EP) 12.07.1995 12.07.2015
Singapore 37588 12.07.1995 12.07.2015
South Africa 6138/95 24.07.1995 24.07.2015
Spain 95926857.4 (EP) 12.07.1995 12.07.2015
Sweden 95926857.4 (EP) 12.07.1995 12.07.2015
Switzerland 95926857.4 (EP) 12.07.1995 12.07.2015
Taiwan 84107188 11.07.1995 11.07.2015
USA 08/776445 12.07.1995 12.07.2015
USA 09/123233 (Cont.) 28.07.1998 24.01.2017
</TABLE>
<PAGE> 17
SCHEDULE 2 continued
C. Case 4-20039
<TABLE>
<CAPTION>
Country Application/Patent No. Filing Date Expiry Date
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Australia 699879 12.07.1995 12.07.2015
Austria 95926858.2 12.07.1995 12.07. 2015
Belgium 95926858.2 12.07.1995 12.07. 2015
Canada 2194578 12.07.1995 12.07. 2015
Denmark 95926858.2 12.07.1995 12.07. 2015
Europe 95926858.2 12.07.1995 12.07. 2015
Europe 94810439.3 25.07.1994 (priority
application;
lapsed)
Finland 970258 12.07.1995 12.07.2015
France 95926858.2 12.07.1995 12.07.2015
Germany 95926858.2 12.07.1995 12.07.2015
Great Britain 95926858.2 12.07.1995 12.07.2015
Greece 95926858.2 12.07.1995 12.07.2015
Hungary P9700211 12.07.1995 12.07.2015
Ireland 95926858.2 12.07.1995 12.07.2015
Israel 114702 24.07.1995 24.07.2015
Italy 95926858.2 12.07.1995 12.07.2015
Japan 505401/96 12.07.1995 12.07.2015
Korea-South 700477/97 12.07.1995 12.07.2015
Luxembourg 95926858.2 12.07.1995 12.07.2015
Mexico 970657 12.07.1995 12.07.2015
Monaco 95926858.2 12.07.1995 12.07.2015
Netherlands 95926858.2 12.07.1995 12.07.2015
New Zealand 290374 12.07.1995 12.07.2015
Norway P970326 12.07.1995 12.07.2015
Pakistan 396/95 23.07.1995 23.07.2011
Philippines 50956 19.07.1995
Portugal 95926858.2 12.07.1995 12.07.2015
Singapore 36546 12.07.1995 12.07.2015
South Africa 6139/95 24.07.1995 24.07.2015
Spain 95926858.2 12.07.1995 12.07.2015
Sweden 95926858.2 12.07.1995 12.07.2015
Switzerland 95926858.2 12.07.1995 12.07.2015
Taiwan 84107189 11.07.1995 11.07.2015
USA 08/776444 12.07.1995 12.07.2015
</TABLE>
<TABLE> <S> <C>
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<S> <C>
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