<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended June 30, 1997
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 0-19125
ISIS PHARMACEUTICALS, INC.
(Exact name of registrant as specified in its charter)
Delaware 33-0336973
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
2292 Faraday Avenue, Carlsbad, CA 92008
(Address of principal executive offices, including zip code)
(760) 931-9200
(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.
(1) Yes X No __ (2) Yes X No __
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
Common stock $.001 par value 26,487,113 shares
(Class) (Outstanding at July 30, 1997)
EXHIBIT INDEX: Located at page number 12.
1
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ISIS PHARMACEUTICALS, INC.
FORM 10-Q
INDEX
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PART I FINANCIAL INFORMATION
ITEM 1: Financial Statements
Condensed Balance Sheets as of June 30, 1997 and December 31, 1996 3
Condensed Statements of Operations for the three months
and six months ended June 30, 1997 and 1996 4
Condensed Statements of Cash Flows for the six months
ended June 30, 1997 and 1996 5
Notes to Financial Statements 6
ITEM 2: Management's Discussion and Analysis of Financial Condition
and Results of Operations
Results of Operations 7
Liquidity and Capital Resources 8
PART II OTHER INFORMATION
ITEM 1: Legal Proceedings 9
ITEM 2: Changes in Securities 9
ITEM 3: Default upon Senior Securities 9
ITEM 4: Submission of Matters to a Vote of Security Holders 9
ITEM 5: Other Information 9
ITEM 6: Exhibits and Reports on Form 8-K 9-10
SIGNATURES 11
</TABLE>
2
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ISIS PHARMACEUTICALS, INC.
CONDENSED BALANCE SHEETS
(in thousands, except share data)
<TABLE>
<CAPTION>
ASSETS
June 30, December 31,
1997 1996
------------ ------------
(Unaudited) (Note)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 35,851 $ 37,082
Short-term investments 34,745 40,542
Prepaid expenses and other current assets 1,975 1,732
------------ ------------
Total current assets 72,571 79,356
Property, plant and equipment, net 18,485 15,334
Patent costs, net 6,974 6,157
Deposits and other assets 1,027 458
------------ ------------
$ 99,057 $ 101,305
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 1,381 $ 2,362
Accrued payroll and related expenses 1,251 1,489
Accrued liabilities 3,588 2,763
Deferred contract revenues 15,658 10,204
Current portion of long term debt and capital lease obligations 1,605 6,238
------------ ------------
Total current liabilities 23,483 23,056
Long-term debt and capital lease obligations, less current portion 33,526 19,864
Stockholders' equity:
Common stock, $.001 par value; 50,000,000 shares authorized, 26,446,000
shares and 26,201,000 shares issued and outstanding at June 30, 1997
and December 31, 1996,
respectively 26 26
Additional paid-in capital 182,907 181,248
Unrealized gain on investments 162 178
Accumulated deficit (141,047) (123,067)
------------ ------------
Total stockholders' equity 42,048 58,385
------------ ------------
$ 99,057 $ 101,305
============ ============
</TABLE>
Note: The balance sheet at December 31, 1996 has been derived from the audited
financial statements at that date.
See accompanying notes.
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ISIS PHARMACEUTICALS, INC.
CONDENSED STATEMENTS OF OPERATIONS
(in thousands, except for per share amounts)
(UNAUDITED)
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30, June 30,
---------------------- ----------------------
1997 1996 1997 1996
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenues:
Research and development
revenue under collaborative
agreements $ 5,793 $ 4,719 $ 10,419 $ 10,078
Interest income 766 1,011 1,713 2,061
-------- -------- -------- --------
6,559 5,730 12,132 12,139
Expenses:
Research and development 13,374 11,212 25,160 21,028
General and administrative 2,054 1,601 3,761 2,999
Interest expense 557 238 1,191 486
-------- -------- -------- --------
15,985 13,051 30,112 24,513
-------- -------- -------- --------
Net loss $ (9,426) $ (7,321) $(17,980) $(12,374)
======== ======== ======== ========
Net loss per share $ (.36) $ (.29) $ (.68) $ (.49)
======== ======== ======== ========
Weighted average common shares 26,381 25,459 26,330 25,404
======== ======== ======== ========
</TABLE>
See accompanying notes.
4
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ISIS PHARMACEUTICALS, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(in thousands)
(UNAUDITED)
<TABLE>
<CAPTION>
Six months ended
June 30,
----------------------
1997 1996
-------- --------
<S> <C> <C>
Cash used in operations: $(11,698) $ (9,172)
Investing activities:
Short-term investments 5,797 (12,107)
Property and equipment (3,856) (802)
Other assets (1,492) (18)
-------- --------
Net cash provided from (used in) investing activities 449 (12,927)
-------- --------
Financing activities:
Net proceeds from issuance of common stock 1,659 2,316
Proceeds from long-term borrowings 11,378 --
Principal payments on debt and capital lease obligations (3,019) (1,160)
-------- --------
Net cash provided from financing activities 10,018 1,156
-------- --------
Net decrease in cash and cash equivalents (1,231) (20,943)
Cash and cash equivalents at beginning of period 37,082 46,463
-------- --------
Cash and cash equivalents at end of period $ 35,851 $ 25,520
======== ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Interest paid $ 1,080 $ 486
SUPPLEMENTAL DISCLOSURES OF NON-CASH INVESTING AND FINANCING ACTIVITIES
Additions to capital lease obligations for acquisitions of property,
plant and equipment $ 670 $ 1,294
</TABLE>
See accompanying notes.
5
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ISIS PHARMACEUTICALS, INC.
NOTES TO FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The unaudited interim financial statements for the three and six month
periods ended June 30, 1997 and 1996 have been prepared on the same basis as the
Company's audited financial statements for the year ended December 31, 1996. The
financial statements include all adjustments (consisting only of normal
recurring adjustments) which the Company considers necessary for a fair
presentation of the financial position at such dates and the operating results
and cash flows for those periods. Results for the interim periods are not
necessarily indicative of the results for the entire year. For more complete
financial information, these financial statements, and notes thereto, should be
read in conjunction with the audited financial statements for the year ended
December 31, 1996 included in the Company's Annual Report on Form 10-K filed
with the Securities and Exchange Commission.
2. ACCOUNTING STANDARD ON EARNINGS PER SHARE
In February 1997, the Financial Accounting Standards Board issued
Statement No. 128, "Earnings per Share", which is required to be adopted on
December 31, 1997. At that time, the Company will be required to change the
method currently used to compute earnings per share and to restate all prior
periods. Under the new requirements for calculating primary earnings per share,
the dilutive effect of stock options will be excluded. The impact of Statement
128 on the calculation of earnings per share is not expected to be material.
3. SUBSEQUENT EVENT
In July 1997, the Company entered into an agreement with CIBA Vision
Corporation (a Novartis company) granting CIBA Vision exclusive worldwide
distribution rights for fomivirsen (ISIS 2922). Under the terms of the
agreement, the Company will receive $20 million in a pre-commercial fee and
milestones through the time of regulatory approval in the U.S. and Europe. In
the third quarter of 1997, $5 million of the pre-commercial fees and milestones
will be received and recognized as revenue under collaborative agreements. The
Company will manufacture and sell fomivirsen to CIBA Vision at a price that will
allow the Company and CIBA Vision to share the commercial value of the product.
CIBA Vision will market and sell fomivirsen worldwide and will be responsible
for regulatory approvals outside of the U.S. and Europe. Once regulatory
approvals are obtained, CIBA Vision will hold the registrations. Additionally,
CIBA Vision receives the option to acquire the exclusive license to market and
distribute a second generation antisense compound to treat CMV retinitis (ISIS
13312) which is currently in preclinical development by the Company.
6
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
In addition to historical information contained in this Report, this
Report contains forward-looking statements regarding the Company's business and
products and their projected prospects and qualities, and the Company's
relationships with its corporate partners. Such statements are subject to
certain risks and uncertainties, particularly those inherent in both the process
of discovering, developing and commercializing safe and effective drugs, and the
endeavor of building a business around such potential products. Actual results
could differ materially from those projected in this Form 10-Q. As a result, the
reader is cautioned not to place undue reliance on these forward-looking
statements. Factors that could cause or contribute to such differences include,
but are not limited to, those discussed in Isis' Annual Report on Form 10-K for
the year ended December 31, 1996 which is on file with the U.S. Securities and
Exchange Commission, a copy of which is available from the Company.
Since its inception in January 1989, the Company has devoted
substantially all of its resources to its research, drug discovery and drug
development programs. The Company has been unprofitable since its inception and
expects to incur additional operating losses for the next several years. The
Company has entered into collaborative research and development agreements with
pharmaceutical companies that generate revenue to augment the level of research
and development activity and to offset portions of its research and development
costs. To date, the Company has not received any significant revenue from the
sale of products.
RESULTS OF OPERATIONS
The Company had contract revenue of $5.8 million for the second quarter
and $10.4 million for the six month period ended June 30, 1997, compared with
$4.7 million and $10.1 million, respectively, for the same periods in 1996. The
revenue increase was primarily due to the growing scope of activities related to
collaborative agreements with Novartis Pharma AG (formally Ciba-Geigy Limited)
and Boehringer Ingelheim International GmbH. The Company also had interest
income totaling $0.8 million for the quarter and $1.7 million for the six month
period compared with $1.0 million and $2.1 million for the same periods in 1996.
This decrease in interest income was primarily due to lower investment balances
in the quarter ended June 30, 1997.
Research and development expenses increased to $13.4 million for the
three months and $25.2 million for the six months ended June 30, 1997 from $11.2
million and $21.0 million for the same periods in 1996. This increase was
attributable to an increase in preclinical and clinical development activities
including compounds advancing into more expensive stages of clinical
development. The Company expects that its development expenses will continue to
increase as its current preclinical and clinical compounds advance and
preclinical and clinical studies on additional compounds are undertaken.
General and administrative expenses increased to $2.1 million for the
quarter and $3.8 million for the six months ended June 30, 1997, from $1.6
million and $3.0 million for the same periods in 1996. The Company expects that
its general and administrative expenses will increase in the future in support
of its expanding operations.
During the quarter ended June 30, 1997, the Company recorded a net loss
of $9.4 million, or $0.36 per share, compared with $7.3 million, or $0.29 per
share, for the same period in 1996. During the six-month period ended June 30,
1997, the Company's net loss amounted to $18.0 million, or $0.68 per share,
compared to $12.4 million, or $0.49 per share for the same period in 1996. The
Company expects that its operating losses will increase for the remainder of the
fiscal year and beyond as its activities grow, and may fluctuate from quarter to
quarter as a result of differences in the timing and composition of revenue
earned and expenses incurred.
The Company believes that inflation and changing prices have not had a
material effect on its ongoing operations to date.
7
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LIQUIDITY AND CAPITAL RESOURCES
Since its inception, the Company has financed its operations primarily
through the sale of equity securities, raising net proceeds aggregating
approximately $180 million, as of June 30, 1997, from the private and public
sale of such securities. The Company has also financed a portion of its
operations through contract research and development revenue, portions of which
were paid in advance of work being performed, offsetting the Company's cash
usage for operations.
As of June 30, 1997, the Company had cash, cash equivalents and
short-term investments totaling $70.6 million and working capital of $49.1
million. In comparison, the Company had cash, cash equivalents and short-term
investments of $77.6 million and working capital of $56.3 million as of December
31, 1996. The decreases in cash and working capital resulted from the funding of
operating losses, investments in capital equipment and principal payments on
debt and capital lease obligations, offset in part, by an additional $6.4
million advance under a line of credit made available to the Company by
Boehringer Ingelheim.
The Company had long-term debt and capital lease obligations at June 30,
1997 totaling $35.1 million, versus $26.1 million at December 31, 1996. This
increase, which was partially offset by principal repayments on existing
obligations, was due to additional capital lease financing and a $6.4 million
borrowing under a line of credit with Boehringer Ingelheim. In addition, two new
term loans totaling $9.7 million were obtained from a bank to refinance $6.5
million in existing notes secured by real property, and to fund facilities
expansion. The Company expects that its capital lease obligations will increase
over time to fund capital equipment acquisitions required for its expanding
business. Lease lines will continue to be used by the Company to the extent that
terms thereof remain commercially attractive.
The Company expects to incur substantial additional research and
development costs, including costs related to clinical trials, manufacturing,
marketing and distribution and other capital expansion, and expects losses to
continue to increase as the Company's preclinical testing and clinical trial
efforts expand. It is the Company's intention to seek additional collaborative
research and development relationships with suitable potential corporate
partners. There can be no assurance that any agreements resulting from these
discussions will successfully reduce the Company's funding requirements, and
arrangements with collaborative partners or others may require the Company to
relinquish rights to certain of its technologies, product candidates or
products. Additional equity or debt financings will be required, and there can
be no assurance that these funds will be available on favorable terms, if at
all. If additional funds are raised by issuing equity securities, further
dilution to then existing stockholders may result.
The Company anticipates that its existing available cash, cash
equivalents and short-term investments, combined with anticipated interest
income and contract revenues, will be adequate to satisfy its anticipated
capital requirements for approximately two years. The Company's future capital
requirements will depend on many factors, including continued scientific
progress in its research, drug discovery and development programs; the magnitude
of these programs and progress with preclinical and clinical trials; the time
and costs involved in obtaining regulatory approvals; the costs involved in
filing, prosecuting and enforcing patent claims; competing technological and
market developments; changes in the existing collaborative research and
development relationships and the ability of the Company to establish additional
research and development arrangements; and the cost of manufacturing scale-up
and effective commercialization activities and arrangements. If adequate funds
are not available, the Company may be required to significantly curtail one or
more of its research, drug discovery or development programs.
Uncertainties associated with the length and expense of preclinical and
clinical testing of any of the Company's products could greatly increase the
cost of development of such product and affect the timing of anticipated revenue
from product sales, and failure by the Company to obtain regulatory approval for
any product will preclude its commercialization. In addition, the failure by the
Company to obtain patent protection for its products may make certain of its
products commercially unattractive.
8
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PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is not party to any legal proceedings.
ITEM 2. CHANGES IN SECURITIES
Not applicable.
ITEM 3. DEFAULT UPON SENIOR SECURITIES
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) The Company held its Annual Meeting of Stockholders on June 6,
1997.
(b) Christopher F. O. Gabrieli, Alan C. Mendelson, J.D. and
William R. Miller were elected to serve as directors for a three-
year term and until their successors are duly elected and
qualified.
<TABLE>
<CAPTION>
Votes in Favor Votes Withheld
-------------- --------------
<S> <C> <C>
Christopher F.O. Gabrieli 24,625,756 71,699
Alan C. Mendelson 24,624,244 73,211
William R. Miller 24,627,598 69,857
</TABLE>
Other directors whose terms of office continued after the Annual
Meeting were as follows: Stanley T. Crooke, M.D., Ph.D., Daniel L.
Kisner, M.D., Mark B. Skaletsky, Larry Soll, Ph.D., Joseph H. Wender
and Burkhard Blank, M.D.
(c) The following item was approved at the Annual Meeting:
The selection of Ernst & Young LLP as independent auditors of
the Company for its fiscal year ending December 31, 1997.
Votes in favor: 24,632,561
Votes withheld: 37,868
Abstentions: 27,026
ITEM 5. OTHER INFORMATION
Not applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits
The following documents are exhibits to this 10-Q:
10.1 Revised form of Supplemental Stock Option Agreement
under Registrant's 1992 Non-Employee Directors' Stock
Option Plan.
10.2 Agreement between the Registrant and CIBA Vision
Corporation dated July 10, 1997 (with certain
confidential information deleted).
9
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10.3 Imperial Bank Note Secured by Deed of Trust dated March
24, 1997 in the amount of $6,000,000; together with the
related Deed of Trust and Assignment of Rents dated
March 24, 1997.
10.4 Imperial Bank Note Secured by Deed of Trust dated March
24, 1997 in the amount of $3,706,620; together with the
related Deed of Trust and Assignment of Rents dated
March 24, 1997.
b. Reports on Form 8-K
The Company filed no reports on Form 8-K the quarter ended June 30,
1997.
10
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ISIS PHARMACEUTICALS, INC.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ISIS PHARMACEUTICALS, INC.
(Registrant)
Date: August 12, 1997 By: /S/ STANLEY T. CROOKE
------------------------ ---------------------------
Stanley T. Crooke, M.D., Ph.D.
Chairman of the Board and Chief
Executive Officer
(Principal Executive Officer)
Date: August 12, 1997 By: /S/ B. LYNNE PARSHALL
------------------------ ---------------------------
B. Lynne Parshall
Executive Vice President and Chief
Financial Officer
(Principal Financial Officer)
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ISIS PHARMACEUTICALS, INC.
FORM 10-Q
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit
Number Description Page
- ------ ----------- ----
<S> <C> <C>
10.1 Revised form of Supplemental Stock Option Agreement under 13
Registrant's 1992 Non-Employee Directors' Stock Option Plan.
10.2 Agreement between Registrant and CIBA Vision Corporation dated 18
July 10, 1997 (with certain confidential information deleted)
10.3 Imperial Bank Note Secured by Deed of Trust dated March 24, 75
1997 in the amount of $6,000,000; together with the related
Deed of Trust and Assignment of Rents dated March 24, 1997.
10.4 Imperial Bank Note Secured by Deed of Trust dated March 24, 90
1997 in the amount of $3,706,620; together with the related
Deed of Trust and Assignment of Rents dated March 24, 1997.
</TABLE>
12
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EXHIBIT 10.1
Revised form of Supplemental Stock Option Agreement under Registrant's
1992 Non-Employee Directors' Stock Option Plan
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Optionee: ________________________ Date: ________________________
ISIS PHARMACEUTICALS, INC.
SUPPLEMENTAL STOCK OPTION AGREEMENT
Isis Pharmaceuticals, Inc. (the "Company"), pursuant to its 1992 Non-Employee
Directors' Stock Option Plan (the "Plan") has this day granted to the
undersigned optionee, an option to purchase shares of the common stock of the
Company ("Common Stock") as described herein. This option is not intended to
qualify and will not be treated as an "incentive stock option" within the
meaning of Section 422 of the Internal Revenue Code of 1986, as amended from
time to time (the "Code"). This option is subject to all of the terms and
conditions as set forth herein and on Attachment I hereto, which is incorporated
herein in its entirety.
Number of Shares Subject to Option: ________
VESTING SCHEDULE:
Number of Shares (installment) Date of Earliest Exercise (vesting)
___________________ ____________________
___________________ ____________________
___________________ ____________________
___________________ ____________________
Exercise Price Per Share: ________ 1 Expiration Date: ________ 2
Isis Pharmaceuticals, Inc.
By: Optionee:
------------------------------- --------------------------
Duly authorized on behalf of
the Board of Directors Address:
OPTIONEE:
Acknowledges receipt of the option as described herein and the attachments
referenced therein and understands that all rights and liabilities with respect
to this option are set forth in the option and the Plan; and acknowledges that
as of the date of grant of this option, it sets forth the entire understanding
between the optionee and the Company regarding the acquisition of stock in the
Company and supersedes all prior oral and written agreements on that subject.
1 Not less than 100% of the fair market value of the Common Stock on the date
of grant of this option.
2 Less than 10 years from the date of grant of this option.
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ATTACHMENT I
TERMS OF SUPPLEMENTAL STOCK OPTION
The details of your option are as follows:
1. The total number of shares of Common Stock subject to this option is set
forth on the first page of the Supplemental Stock Option Agreement. Subject to
the limitations contained herein, this option shall be exercisable with respect
to each installment indicated in the Vesting Schedule set forth on the first
page of the Supplemental Stock Option Agreement on or after the date of vesting
applicable to such installment.
2. (i) The Exercise Price of this option is set forth on the first page
of Supplemental Stock Option Agreement.
(ii) Upon exercise of all or any part of each installment which has
become exercisable by you, payment of the exercise price per share is due, in
full, either (a) in cash (including check), or (b) by delivery of shares of
Common Stock that have been held for the requisite period necessary to avoid a
charge to the Company's reported earnings and valued at the fair market value on
the date of exercise, or (c) by a combination of such methods of payment.
3. The minimum number of shares with respect to which this option may be
exercised at any one time is 1,000, unless the number of shares available for
exercise (that is, the remaining vested shares pursuant to paragraph 1) equals
less than 1,000 shares, in which case the minimum number of shares exercised
must equal the number of shares then vested.
4. Notwithstanding anything to the contrary contained herein, this option
may not be exercised unless the shares issuable upon exercise of this option are
then registered under the Securities Act of 1933, as amended (the "Act"), or, if
such shares are not then so registered, the Company has determined that such
exercise and issuance would be exempt from the registration requirements of the
Act.
5. The term of this option commences on the date hereof and terminates on
the Expiration Date (which date shall be no more than 10 years from the date
this option is granted). This option will terminate prior to the expiration of
its term as follows: 3 months after the termination of your service as a
director with the Company or an affiliate of the Company (as defined in the
Plan) for any reason or for no reason unless:
(a) such termination of service is due to your permanent and total
disability (within the meaning of Section 422(c)(6) of the Code), in which event
the option will terminate on the earlier of the Expiration Date or 1 year
following such termination of service; or
(b) such termination of service is due to your death, in which event
the option will terminate on the earlier of the Expiration Date or 18 months
after your death; or
15
<PAGE> 4
(c) during any part of such 3 month period the option is not
exercisable solely because of the condition set forth in paragraph 4 above, in
which event the option will not terminate until the earlier of the Expiration
Date or until it will have been exercisable for an aggregate period of 3 months
after the termination of service; or
(d) exercise of the option within 3 months after termination of your
service with the Company or an affiliate would result in liability under Section
16(b) of the Securities Exchange Act of 1934, in which case the option will
terminate on the earlier of the Expiration Date, the 10th day after the last
date upon which exercise would result in such liability or 6 months and 10 days
after the termination of your service to the Company or an affiliate.
However, this option may be exercised following termination of your service
as a non-employee director to the Company or an affiliate of the Company (as
defined in the Plan) only as to that number of shares as to which it was
exercisable on the date of termination under the provisions of paragraph 1 of
this option.
6. (i) This option may be exercised, to the extent specified above, by
delivering a notice of exercise (in a form designated by the Company) together
with the exercise price to the Secretary of the Company, or to such other person
as the Company may designate, during regular business hours, together with such
additional documents as the Company may then require pursuant to subparagraph
6(f) of the Plan.
(ii) By exercising this option you agree that the Company may require
you to enter an arrangement providing for the cash payment by you to the Company
of any tax withholding obligation of the Company arising by reason of: the
exercise of this option; the lapse of any substantial risk of forfeiture to
which the shares are subject at the time of exercise; or the disposition of
shares acquired upon such exercise.
7. This option is not transferable except by will or by the laws of descent
and distribution, and is exercisable during your lifetime only by you;
notwithstanding the foregoing, you may transfer part or all of this option to
any of the following:
(i) your spouse, children (by birth or adoption), stepchildren,
grandchildren, or parents;
(ii) a trust or other entity established solely for your benefit or
the benefit of your spouse, children (by birth or adoption), stepchildren,
grandchildren, or parents for estate planning purposes; or,
(iii) an organization which is exempt from taxation under Section
501(c)(3) of the Code or to which tax-deductible charitable contributions may be
made under Section 170 of the Code.
Furthermore, you may, by delivering written notice to the Company, in a
form satisfactory to the Company, designate a third party who, in the event of
your death, will thereafter be entitled to exercise the option.
8. This option is not an employment contract and nothing in this option
shall be deemed to create in any way whatsoever any obligation on your part to
continue as a director of the Company.
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<PAGE> 5
9. Any notices provided for in this option or the Plan shall be given in
writing and shall be deemed effectively given upon receipt or, in the case of
notices delivered by the Company to you, 5 days after deposit in the United
States mail, postage prepaid, addressed to you at the address specified below or
at such other address as you hereafter designate by written notice to the
Company.
10. This option is subject to all the provisions of the Plan, a copy of
which is attached hereto and its provisions are hereby made a part of this
option, including without limitation the provisions of paragraph 6 of the Plan
relating to option provisions, and is further subject to all interpretations,
amendments, rules and regulations which may from time to time be promulgated and
adopted pursuant to the Plan. In the event of any conflict between the
provisions of this option and those of the Plan, the provisions of the Plan
shall control.
Attachments:
1992 Non-Employee Directors' Stock Option Plan
Notice of Exercise
17
<PAGE> 1
EXHIBIT 10.2
Agreement between Registrant and CIBA Vision Corporation dated July 10, 1997
(with certain confidential information deleted).
18
<PAGE> 2
CONFIDENTIAL TREATMENT REQUESTED UNDER 17 C.F.R. SECTIONS 200.80(b)(4), 200.83
AND 240.24b-2. * INDICATES OMITTED MATERIAL THAT IS THE SUBJECT OF A
CONFIDENTIAL TREATMENT REQUEST THAT IS FILED SEPARATELY WITH THE COMMISSION.
AGREEMENT
Between
ISIS PHARMACEUTICALS, INC.
and
CIBA VISION CORPORATION
JULY 10, 1997
19
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AGREEMENT
TABLE OF CONTENTS
<TABLE>
<CAPTION>
SECTION PAGE NO.
- ------- --------
<S> <C>
1. Definitions....................................................................2
2. Grant of Rights................................................................7
3. Product Development and Regulatory Approvals...................................9
4. Payments......................................................................12
5. Marketing.....................................................................14
6. Supply........................................................................16
7. Forecast/Orders/Invoices......................................................17
8. Isis' Supply Price to CV......................................................19
9. Quality ......................................................................24
10. Release of Product............................................................28
11. Labeling and Packaging........................................................29
12. Second Source and Supply Failure..............................................29
13. Manufacturing and Product Warranty............................................32
14. Post-Marketing Regulatory Matters.............................................32
15. Patents.......................................................................35
16. Infringement of Patent Rights.................................................36
17. Third Party Rights............................................................39
18. Patent Term Extension.........................................................41
19. License Agreements............................................................41
20. Warranties....................................................................42
21. Compliance with Law...........................................................43
22. Indemnification...............................................................43
23. Scientific Publications.......................................................45
24. Proprietary Information and Announcements.....................................46
25. Term and Termination..........................................................47
26. Force Majeure.................................................................49
27. Miscellaneous.................................................................50
</TABLE>
20
<PAGE> 4
AGREEMENT
THIS AGREEMENT made effective as of July 10, 1997, by and between Isis
Pharmaceuticals, Inc., a Delaware corporation having its principal offices at
2292 Faraday Avenue, Carlsbad, California 92008 ("Isis") and CIBA Vision
Corporation, a Delaware corporation having its principal offices at 11460 Johns
Creek Parkway, Duluth, Georgia 30097 ("CV").
WHEREAS, Isis is developing an ophthalmic product containing fomivirsen
sodium, and has the rights to certain related compounds; and
WHEREAS, CV desires to obtain, and Isis is willing to grant to CV, the
exclusive worldwide right to market, sell and distribute such product and
certain rights with respect to the related compounds, subject to and in
accordance with the terms and conditions hereinafter set forth; and
WHEREAS, CV desires to obtain a supply of such product from Isis.
NOW THEREFORE, in consideration of the mutual covenants and obligations set
forth herein, the parties hereto agree as follows:
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<PAGE> 5
1. Definitions
The following terms as used in this Agreement will have the meanings set
forth in this Section:
1.1 "API" means the active pharmaceutical ingredient of the Product (as
defined herein).
1.2 "Affiliate" will mean any person or entity that directly or indirectly
controls or is controlled by or is under common control of a party to
this Agreement. For purposes of this Agreement, "control" will be
presumed where, directly or indirectly, a person or entity owns at
least 50% of the common stock or voting ownership interests of the
entity in question. For purposes of this Agreement, any reference to a
party or to any Affiliate of a party will also include its employees,
officers, agents and consultants.
1.3 "Agreement Period" will mean the period referred to in Section 25.1
hereof, and any mutually agreed upon extensions thereto.
1.4 "Effective Date" will mean the date first above written.
1.5 "European Approval" or "European Registration" will mean the approval
of the Product (as hereinafter defined) for marketing by the European
Commission
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<PAGE> 6
("EC"), or if the parties agree to seek approval through the mutual
recognition process, then: (i) for purposes of Section 4 hereof,
European Approval will mean approval by the Ministry of Health in
Germany, France, or the UK; and (ii) for purposes of Section 3 hereof,
European Approval will mean approval by the applicable governmental
authority in Germany, France, the UK, Spain, Italy, the Netherlands
and Portugal.
1.6 "FDCA" will mean the Federal Food, Drug and Cosmetics Act and all
regulations and rules promulgated thereunder.
1.7 "FDA" will mean the United States Food and Drug Administration, and
any successor entity thereto.
1.8 "Fill Facility" will mean the pharmaceutical production facility of [
* ] located in [ * ], or, if another production site is used, the
facility where the API is processed into Product and filled into
vials.
1.9 "IND" will be the Investigational New Drug application, as defined by
the FDCA, covering the Product.
1.10 "GMPs" will mean current good manufacturing practices as defined from
time to
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<PAGE> 7
time in regulations promulgated under the FDCA or any successor laws
or regulations governing the manufacture of the Product.
1.11 "Know-How" will mean any technology, formulae, trade secrets,
technical data, pre-clinical and clinical data, and any other
information or experience owned, controlled or possessed by Isis
relating to, or useful in connection with, the development,
manufacture, use or sale of the Product as well as any improvements or
modifications to the Know-How developed by or for Isis during the
Agreement Period.
1.12 "Net Average Sales Price" or "NASP" will mean [ * ].
1.13 "1984 Act" will mean the United States Drug Price Competition and
Patent Term Restoration Act of 1984 (as amended), including 21 USC
355, 35 USC 155-156, 35 USC 271 and applicable regulations promulgated
thereunder.
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<PAGE> 8
1.14 "Non-Commercial Product" will mean Product ordered by CV for use as
samples, in clinical trials, and for compassionate use, for which
Product CV does not receive any compensation.
1.15 "Patents" will mean (i) United States Patent No. [ * ] and U.S. Patent
No. [ * ]; (ii) any patents claiming priority to [ * ]; and (iii) any
continuations, continuations-in-part, divisions, reexaminations,
re-issues, extensions, or foreign equivalents of (i) or (ii) hereof,
as of the Effective Date or arising during the Agreement Period. The
foregoing definition is limited to claims of the Patents that read on
the Product or on a method of using the Product.
1.16 "NDA" will mean the New Drug Application, as defined by the FDCA,
covering the Product.
1.17 "Planned Indication" will be the indication for the Product for which
FDA approval and European Approval is currently being sought, namely
the treatment of "cytomegalovirus-related ("CMV") retinitis in
patients with AIDS", without any proviso that the Product be used only
after one or more other therapies have been utilized.
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<PAGE> 9
1.18 "Product" will mean any ophthalmic product containing fomivirsen
sodium (formerly known as the compound ISIS 2922) as an API.
1.19 "Project Team" will mean the Isis team responsible for overseeing the
clinical development of the Product.
1.20 "Specifications" will mean the master formula, test methods/protocols,
and other data and requirements used to manufacture, test, measure
stability and store the Product, copies of which Specifications are
attached as Exhibit A and which may be amended from time to time by
the parties in accordance with the terms of this Agreement, or as
required by the FDA.
1.21 "Territory" will mean all the countries in the world.
1.22 "Third Party Distributors" will mean any person or entity with whom CV
or a CV Affiliate contracts to be responsible, in place of CV or such
Affiliate, for the registration, marketing, selling and distribution
of the Product.
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<PAGE> 10
2. Grant of Rights.
2.1 Product Rights. Isis hereby grants to CV the exclusive worldwide right
to market, sell and distribute the Product, and CV accepts such rights
subject to the terms and conditions set forth herein.
2.2 Patent License. Subject to the terms and conditions of this Agreement
and during the Agreement Period, Isis hereby grants to CV a worldwide,
royalty-free, exclusive license under the Patents to make, have made,
use and sell the Product and practice the Know-How, but only insofar
as necessary to allow CV to take advantage of the provisions of
Sections 12 and 16 hereof (the "License"). This License does not
include the right to sublicense, unless necessary for the foregoing
purpose. For any country in which CV has transferred its rights to the
Product to Isis pursuant to Section 5.4, this License will then revert
to Isis for such country.
2.3 Option for ISIS 13312. Isis hereby grants to CV an option to acquire
an exclusive worldwide license to manufacture, have manufactured, use,
distribute and sell ISIS 13312 on the following basic terms and
conditions:
(a) The option must be exercised by [ * ], whichever
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<PAGE> 11
is later. Isis will have given CV access to all information
related to such compound during the period between the execution
of this Agreement and the completion of such initial clinical
trial as may be reasonably necessary for CV to review in order to
decide whether to exercise the option.
(b) If CV elects to exercise the option, the parties will negotiate
in good faith for a period of at least three months, if
necessary, to conclude a definitive agreement which will include
provisions, inter alia, for [ * ], but will not include [ * ],
except that CV's share of such [ * ]. If the parties cannot reach
a good-faith agreement based on the foregoing within three
months, Isis will thereafter be entitled to negotiate and enter
into such an agreement with a third party, but not on terms more
favorable to the third party than those last offered to CV.
2.4 Right of First Offer to Other Compounds. Isis hereby grants to CV a
right of first offer to acquire the exclusive worldwide license (to
the extent Isis has the right to grant such license) or right to
manufacture, have manufactured, market, distribute and sell any
antisense compound other than ISIS 13312 for the treatment of CMV
retinitis, on terms to be negotiated in good faith by the parties.
Isis will keep CV informed about the status of development of, and any
significant information
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<PAGE> 12
relating to, such related compounds. CV may notify Isis of its
interest in acquiring rights to any of such compounds by written
notice within ninety (90) days after written notice by Isis that such
compound has been identified by Isis for development and for the
initiation of pre-IND toxicology studies. The parties will thereafter
negotiate in good faith for a period of at least three months, if
necessary, to conclude a definitive exclusive distribution or license
agreement with respect to such compound. If the parties cannot reach a
good-faith agreement within three months, Isis will thereafter be
entitled to negotiate and enter into such an agreement with a third
party, but not on terms more favorable to the third party than those
last offered by CV.
3. Product Development and Regulatory Approvals
3.1 U.S. and Europe. Isis will diligently pursue completion of the
clinical development of the Product for the Planned Indication,
including obtaining FDA approval of the NDA and European Approval.
Isis will bear the cost of all studies and user fees required to
obtain such approvals, including any studies required to be performed
post-approval by the applicable regulatory agency as a condition of
initial approval, and including the cost of fulfilling any obligations
to provide post-study drugs to study participants; provided that, if
mutual recognition approval is sought in Europe, Isis' financial
responsibility with respect to filing and user fees will be limited to
the cost of a central EC filing at the time of submission in the first
country. Clinical studies will be conducted in accordance with the
protocols
29
<PAGE> 13
therefor and all applicable rules and regulations. CV will be kept
informed of the status of the development, and will be invited to
participate in all Project Team meetings. Isis will provide CV with
all information concerning communications with the FDA or the relevant
European regulatory agency, including, but not limited to, copies of
correspondence, minutes of meetings, and teleconference reports. Isis
will invite CV to participate in all meetings with the FDA and the
European Regulatory authorities. While Isis will bear the primary
responsibility for preparing and making the submissions for regulatory
approvals in the United States and Europe, CV will (i) provide input
into the regulatory strategy and (ii) will review drafts of all
regulatory submissions as such drafts are prepared. Specifically, CV
will have two weeks from receipt of a draft submission section to
comment thereon, except that ,with respect to the clinical trials
section, CV agrees to review the draft of such section on-site at
Isis' facility simultaneously with Isis' review thereof. The parties
will endeavor to come to mutual agreement on the final submission. If
Isis and CV are unable to reach agreement, Isis will make the final
determination with respect to any such issues. In the event the
parties agree that it is desirable or required that the application
for European Approval be submitted and held in CV's name, the parties
will cooperate to do so.
3.2 Registration Outside U.S. and Europe. CV will make commercially
reasonable efforts, at its expense, to obtain regulatory approval to
market the Product in jurisdictions other than the United States and
Europe. Isis will reasonably cooperate and provide CV with all
Know-How, copies of regulatory submissions,
30
<PAGE> 14
and other information necessary to assist CV in obtaining such
approval; provided, any additional studies required will be conducted
at CV's expense. CV will reimburse Isis for any out-of-pocket expenses
related to Isis' assistance in obtaining such regulatory approvals.
3.3 Phase IV Studies and Supplemental Indications. CV will be responsible
for conducting and bearing the cost of any studies or filings
following regulatory approval in the United States and Europe for the
Product for the Planned Indication, except for studies required to be
performed post-approval in order to obtain the initial approval. In
addition, CV will be responsible for the conduct and cost of
additional studies required to support expanded labeling outside the
indication or dosage administration instructions in the initial
approved prescribing information. Isis will assist CV as reasonably
requested in performing such studies, and CV will pay Isis'
out-of-pocket expenses for such assistance. CV will be responsible for
the cost of any change in presentation or packaging of the Product.
3.4 Site Approval. As part of obtaining regulatory approval to market the
Product in the U.S. and in Europe, Isis will simultaneously be
responsible for obtaining approval of its facility and the Fill
Facility for the production of the Product for marketing. CV will have
the option, but not the obligation, to participate in such site
approval process at CV's expense.
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<PAGE> 15
3.5 Launch Promotional Materials. CV will consult with Isis during CV's
preparation of the launch promotional materials for the Product. CV
will make the final determination as to any issues regarding such
materials. Six weeks prior to the anticipated FDA approval of the
registration of the Product, Isis will submit such materials to the
FDA for approval. CV will have provided such materials to Isis at
least two weeks prior to such FDA submission.
3.6 Transfer of Registrations. Within ten (10) days of obtaining U.S.
and/or European Approval, Isis will request transfer of such
registrations to CV including the IND and its European equivalents
(unless, with respect to Europe, the registrations were submitted in
CV's name). After transfer, CV will be responsible, and will bear the
cost of, maintaining the registrations for the Product in the U.S. and
Europe during the Agreement Period in compliance with all applicable
laws, rules and regulations.
4. Payments
4.1 Payments. In consideration of the rights granted in Section 2 hereof,
CV will pay Isis:
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<PAGE> 16
(a) Within ten (10) days of signing this Agreement, a non-refundable
payment of [ * ] in consideration of the patent license granted
in Section 2.2 and the Option for a license granted in Section
2.3 hereof (all "dollars" in this Agreement are U.S. dollars).
(b) [ * ] within ten (10) days of [ * ].
(c) [ * ] within ten (10) days of [ * ].
(d) [ * ] within ten (10) days of [ * ].
4.2 Termination Option.
(a) In the event Isis has not obtained such approval of the NDA in
the United States by at least [ * ], then CV may, at its option,
terminate the Agreement by giving written notice to Isis no later
than [ * ]. In the event of such termination: (i) Isis will repay
to CV [ * ]; (ii) Isis will refund to CV any payments CV has made
to Isis for Product ordered; and (iii) CV will return to Isis any
inventory of Product which it has at the time of termination.
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<PAGE> 17
(b) If European Approval is not obtained by [ * ], then CV may, at
its option terminate the Agreement with respect to Europe by
giving written notice to Isis no later than [ * ]. In the event
of such termination, Isis will refund any payments CV has made to
Isis for Product ordered for Europe, unless such Product is
reasonably saleable elsewhere, and CV will return to Isis any
such Product which it has at the time of termination.
(c) If the Agreement terminates pursuant to Section 4.2(a), then all
of CV's rights under this Agreement will revert to Isis pursuant
to Section 25.6 hereof. If the Agreement terminates with respect
to Europe pursuant to Section 4.2(b), then CV's rights under this
Agreement for Europe will revert to Isis pursuant to Section 25.6
hereof.
5. Marketing
5.1 CV Responsibilities. CV and its Affiliates will use commercially
reasonable efforts to market, distribute and sell the Product
worldwide, provided that, on a country-by-country basis, the Product
has been granted a commercially reasonable regulatory approval (i.e.,
reasonable labeling or reasonable price in jurisdictions where price
is set by regulatory authority). CV will provide Isis with a copy of
its
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<PAGE> 18
proposed marketing plans for the Product. Isis will be entitled to
provide input to the marketing plans and the parties will endeavor to
reach mutual agreement on such plans. If CV and Isis are unable to
reach agreement, CV will make the final determination with respect to
any marketing plan issues.
5.2 Compliance with Marketing Regulations. CV will comply with all
applicable laws, rules and regulations with respect to its promotion
of the Product. CV will provide Isis with post-launch promotional
materials containing substantially new material for Isis' review and
comment prior to finalizing such materials. CV will provide Isis with
copies of all other promotional materials for the Product in North
America and Europe. CV will also insure that any and all Third Party
Distributors in North America and Europe comply with the material
provisions of this Agreement, as well as with all applicable laws,
rules and regulations with respect to the promotion of the Product,
including but not limited to all applicable import/export laws and the
U.S. Foreign Corrupt Practices Act. CV will also insure that all Third
Party Distributors in North America and Europe have implemented a
sales tracking system which could be relied upon in the unlikely event
of a Product recall or need for patient notification.
5.3 Trademarks. The Product will be marketed by CV under a trademark
chosen, owned and maintained by CV (the "Trademark"); provided such
Trademark will be one to which Isis has no reasonable objection. If
Isis has already registered a
35
<PAGE> 19
trademark for the Product, or has submitted a trademark for the
Product to the FDA, Isis will assign such trademark to CV at CV's
request.
5.4 Return of Rights. For any country in which CV, an Affiliate or Third
Party Distributor: (i) fails to use commercially reasonable efforts to
obtain regulatory approval; (ii) ceases to market the Product; (iii)
fails to commercially reasonably market the Product where it has
obtained a commercially reasonable regulatory approval; or (iv)
substantially fails to market the Product in accordance with a
commercially reasonable marketing plan, and the events in (i), (ii)
(iii) and (iv) continue for a period of eighteen months if such events
are due to a force majeure, then for such countries, CV will transfer
the rights granted to it in Section 2 hereof and any applicable
Product registration, filing and Know-How to Isis, and the parties
will negotiate in good faith with respect to the transfer of the
Trademark in such country.
6. Supply
6.1 During the Agreement Period, Isis will manufacture, or have
manufactured, and supply to CV, subject to the terms and conditions
hereinafter set forth, such amounts of bulk filled vials of the
Product as CV may order, including performing the stability and
release testing of the Product. (CV will be responsible for the
labeling and packaging of the Product.) CV will be required to
purchase its requirements of the Product from Isis during the
Agreement Period, so long as Isis
36
<PAGE> 20
is able to supply such Product to CV in compliance with the terms and
conditions set forth herein.
7. Forecasts/Orders/Invoices
7.1 API. Isis will manufacture and test the API for the Product in
accordance with the Specifications therefor and all applicable laws,
rules and regulations, including current GMPs. Isis will maintain an
inventory of API equal to the greater of 0.25 kg or the amount
necessary to supply the next nine months of forecasted Product sales
as set forth in the rolling forecast submitted to Isis pursuant to
Section 7.2 hereof.
7.2 Rolling Forecast. Beginning in January, 1998, on or before the tenth
day of each month during the Agreement Period, CV will provide Isis,
with a copy to the Fill Facility, with a written eighteen month
rolling forecast of the quantities of Product which CV expects to
purchase during each of the next eighteen months. The forecast will be
non-binding and for planning purposes only.
7.3 Purchase Orders. For deliveries to be made in 1998 and 1999, CV will
provide Isis with purchase orders ("PO") at least nine (9) months in
advance of the delivery
37
<PAGE> 21
date set forth on the PO. Thereafter, orders will be placed six (6)
months in advance of their requested delivery date. Orders will be for
[ * ]; provided CV may, at its option, order [ * ] at an additional
cost of [ * ] for the first two [ * ], and an additional [ * ] for any
further [ * ]. Orders of [ * ] will be placed no more than twice in
one calendar year. If demand exceeds expectations, Isis will make
reasonable commercial efforts to supply additional Product within
shorter lead times. All POs will set forth the quantity and delivery
date. Within ten (10) days of receipt of a PO, Isis will return an
acknowledgment copy of the PO either confirming the PO or stating any
mutually agreed-upon changes to the PO.
7.4 Payment. For orders placed during 1997, 1998 and 1999, Isis will
invoice CV for [ * ] upon acknowledging the order pursuant to Section
7.3 hereof. The remaining [ * ], will be invoiced simultaneously with
such release. After January 1, 2000, CV will pay [ * ] upon placing
the order, and the remaining [ * ], similarly adjusted, upon release
thereof. Payment of undisputed invoiced amounts will be made within
thirty (30) days of the date of the invoice.
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7.5 Launch Inventory. In the event CV obtains inventory in anticipation of
a launch and such launch is delayed through no fault of CV, CV may
return to Isis, for a full credit, any unsold units of such inventory
when such units' shelf life has been reduced to eight (8) months.
8. Isis' Supply Price to CV
8.1 Definitions. As used in this Section:
(a) The "Supply Price" will mean Isis' price to CV for the Product,
except for Non-Commercial Product, [ * ]. The Supply Price for a
particular order will be [ * ].
(b) A "Delay" will be any time period equal to or exceeding one month
in length, determined in rolling one-month intervals starting
with the first full calendar month of delay.
(c) "FDA Delay" will mean a Delay in the approval of the Product past
[ * ], but will not include a Delay caused by an Isis Delay.
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<PAGE> 23
(d) "Isis Delay" will mean: (i) Isis' failure to file a complete NDA
acceptable for filing by [ * ]; (ii) Isis' failure to timely
respond to FDA inquiries and requests; or failure to supply
Product for Launch in accordance with the terms of this
Agreement, in the absence of a Force Majeure.
(e) "CV Delay" will mean CV's failure to Launch the Product within [
* ] in the absence of any Isis Delay or Force Majeure.
(f) "Launch" will mean the date on which CV makes its first shipment
of Product to a third party customer.
8.2 Supply Price. The Supply Price for the [ * ] except as follows:
(a) If FDA approval occurs [ * ] due to an FDA Delay, then for each
month of such FDA Delay, there will be a corresponding [ * ]
during the last of the [ * ] during which the Supply Price will
be [ * ] instead of [ * ] (for example, a two-month FDA Delay
would result in the Supply Price being [ * ] for [ * ] after the
launch, and [ * ] for the next two months.)
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<PAGE> 24
(b) If there is an FDA Delay and also a CV Delay, then for each month
of CV Delay, one month which would have been a [ * ] will be a [
* ].
(c) If FDA approval occurs after [ * ], or Launch occurs after [ * ]
due to an Isis Delay, then for each month of such Isis Delay, one
month which would have been a [ * ] month will be a [ * ] month
(for example, if there is an Isis Delay for one month, there will
be [ * ] and [ * ]. If there is an FDA Delay of one month and
Isis Delay of one month, then there will be [ * ], [ * ] and [ *
].
(d) [ * ].
8.3 Subsequent Price. For [ * ] after the expiration of the [ * ], with
the adjustments in Section 8.2 above, the Supply Price will be [ * ] .
Thereafter, the Supply Price will be [ * ].
8.4 Non-Commercial Product. Isis will provide CV, at its request as
specified on purchase orders, with [ * ] units of Non-Commercial
Product free of charge. The Supply Price for additional units of
Non-Commercial Product will be [ * ].
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<PAGE> 25
8.5 Annual Adjustment.
(a) For purposes of calculating the Supply Price to be paid for the
initial order, CV will reasonably estimate its likely NASP for
the Launch of the Product no later than ten (10) months prior to
the expected Launch of the Product. Such estimate of the NASP
shall be used for purposes of calculating payments due for
Product until the end of the calendar year during which the
Product is launched, subject to adjustment after the end of such
year. Within forty-five (45) days of the end of such year and
each calendar year thereafter, CV will prepare an accounting of:
(i) the actual Supply Price for the Product based on the actual
NASP during such year; (ii) the number of units used as
Non-Commercial Product during such year; and (iii) the number of
unsaleable units returned from customers during such year. CV
will forward such accounting to Isis together with: (i) an
additional payment if the initial Supply Price was less than such
actual Supply Price or an invoice to Isis if the initial Supply
Price was greater than the actual Supply Price; and (ii) an
invoice for the difference between [ * ] and the actual Supply
Price for such year times the number of Non-Commercial units used
during such year in excess of such units which were provided to
CV free of charge pursuant to Section 8.4 hereof. Payment will be
made in U.S. dollars. At the same time, Isis will grant CV a
credit
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<PAGE> 26
for the unsaleable returns, to be applied to CV's next order, for
up to one per cent of the total units sold during such year. The
credit for each unit shall be equal to the actual Supply Price
for such year less [ * ]. For each calendar year after the first
year during which Product is sold, the Supply Price for the
Product will be the actual Supply Price for the preceding
calendar year, subject to adjustment on the same basis as the
first initial Supply Price was adjusted under this Section 8.5.
8.6 Audits. CV will permit Isis, at Isis' expense, to have its books and
records reflecting its calculation of: (i) the NASP for the Product;
(ii) the number of units used as Non-Commercial Product; and (iii)
unsaleable returns, examined by an independent certified public
accountant retained by Isis and reasonably acceptable to CV during
regular business hours, on reasonable advance notice. Such independent
accountant will keep confidential any information obtained during such
examination and will report to Isis only its opinion as to whether and
by how much the NASP was miscalculated. If thereafter CV and Isis
cannot agree on the appropriate NASP, they will retain a second
independent public accountant whose decision will be binding upon both
parties. If CV's reported actual payments due Isis for the year
("Reported Payments") were incorrect by more than seven (7%), then CV
will bear the expense of such second audit, if CV's Reported Payments
were incorrect by less than two (2%) per cent, Isis will bear the
expenses of such second audit, otherwise the parties will share such
audit expenses equally.
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9. Quality
9.1 Compliance. The Product will be manufactured and tested by or for Isis
in compliance with the NDA and foreign approvals, Specifications
therefor, and all applicable federal, foreign, state and local laws,
rules and regulations.
9.2 Testing. For each batch of Product manufactured, retention and
stability samples will be drawn as required by the NDA and applicable
laws and regulations. Isis will conduct, or have conducted, such other
quality assurance tests and functions as may be required by the
Specifications or applicable laws or regulations. Isis will retain, or
will cause the Fill Facility to retain, all batch records for a period
of one year after the expiration date of the applicable batch. CV will
have access to all production and testing records related to the
Product after release or rejection by Isis, including copies thereof,
and any lot samples within seventy-two (72) hours of its request
therefor. Isis will notify CV immediately of any media or sterility
failures or problems related to the Product. Isis will provide CV with
copies of annual stability data, stability reports and interim
stability data. CV reserves the right to inspect and test any and all
Product and batch records for Product shipped to CV hereunder. If CV
rejects Product based on CV's own testing or inspection and the
parties cannot agree on the disposition of such Product, they will
retain a mutually agreeable third party to test such Product and will
share the cost therefor. The decision of such party will be binding.
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9.3 Inspections. CV and its authorized representatives will have the right
to inspect the production and quality assurance facilities where the
API and the Product are produced, as well as the records related to
such production, during normal business hours with reasonable advance
notice. Isis will promptly notify CV of any governmental inspection of
the facility, and, if possible, permit CV representatives to be
present at the inspection, and will provide CV with copies of any FDA
483 or any similar reports related to the Product, the Fill Facility
or the Isis facility where the active ingredient is produced.
9.4 Production Problems. Isis will promptly notify CV of any problems or
unusual production situations which have the potential to adversely
affect the production of the Product or its timely delivery to CV and
will allow CV to participate in the resolution of any such problem or
production situation.
9.5 Changes to Manufacturing Process and Specifications. As used in this
Section 9.5, "Product Process" will mean the manufacturing process by
which the API is made into finished Product and filled into vials, and
"API Process" will mean the manufacturing process for producing bulk
API. Either party may request changes to the manufacturing process or
to the Specifications.
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(a) Before Approval. Prior to FDA approval, Isis will not make any
substantive changes to the Product Process or to Specifications
until CV has had five business days from receipt of notification
in writing thereof from Isis to object to such change. If CV
fails to respond within such time period, CV will be deemed to
have acquiesced to such change and Isis may proceed with the
implementation of such change. In the event that CV does timely
object to the change and the parties cannot reach mutual
agreement, Isis will make the final determination as to such
change. Non-substantive changes to the Specifications or to the
Product Process, and changes to the API Process, may be
implemented by Isis upon sending written notice to CV.
(b) After Approval. After FDA approval, no substantive change to the
Product Process or to the Specifications will be implemented by
either party, whether requested by a party or requested or
required by a governmental agency until the other party has had
at least five business days from notice of such proposed change
to object to the change or state that it believes prior FDA
approval is required. If such party fails to respond within such
time period, it will be deemed to have acquiesced to the change
without FDA prior approval and the party responsible for the
implementation of such change may proceed with such
implementation. CV shall make the final determination after
discussion by the parties, as to whether to go forward with any
such change and as to whether to seek
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prior FDA approval. With respect to substantive changes to the
API Process, Isis will give CV at least five business days prior
written notice of such change so that CV can make a
determination, after consultation with Isis, as to whether prior
FDA approval should be sought for such change. Isis will make the
final determination as to whether or not to make any change in
the API Process itself. Non-substantive changes to the Product
Process, the API Process or to Specifications may be implemented
by either party (where applicable) upon sending written notice of
such change to the other party.
9.6 Costs of Changes. The cost associated with any changes made to the
manufacturing process or the Specifications which are requested by
Isis or required by any governmental agency in the U.S. or Europe will
be borne by Isis. With respect to changes required by any governmental
agency outside of the U.S. and Europe, the parties will mutually agree
on how to respond to such requirement and on the allocation of the
cost thereof. The costs associated with any change to the
Specifications which are requested by CV will be borne by CV.
9.7 FDA Prior Approval. In the event Isis treats as non-substantive a
change for which CV should have obtained FDA prior approval, and CV
suffers damages or costs arising therefrom, Isis will indemnify CV for
such losses and costs. In the event CV decides not to seek FDA prior
approval for a change, and the FDA later
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disagrees with that decision, CV will indemnify Isis from any damages
or costs Isis sustains arising therefrom.
9.8 Alternative Fill Facility. In the event the parties agree to utilize a
Fill Facility other than [ * ], the parties will share equally the
cost and the benefits of moving to such new Fill Facility.
10. Release of Product
10.1 Upon determination by Isis that the Product meets the Specifications
therefor, Isis will notify CV by facsimile that Product is ready for
release, along with a Certificate of Analysis and the Certificate of
Release. Any objections by CV to the release of Product will be made
within three (3) business days of receipt of the certificate of
analysis and certificate of release, unless CV decides to test or
inspect the batch records for such Product, in which case CV will make
any objections within two (2) business days of receiving copies of the
batch records or the results of the tests. If Isis disagrees with CV,
the issue will be resolved by a third party in the same manner as set
forth in Section 9.2 hereof.
*CONFIDENTIAL TREATMENT REQUESTED
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11. Labeling and Packaging
11.1 Artwork Approval. CV will supply Isis with the artwork for the initial
labeling and packaging of the Product in sufficient time to allow Isis
to have ten (10) business days to review and comment on the artwork
prior to its submission to the FDA. Isis will submit the initial
labeling and packaging to the FDA and other governmental agencies, as
necessary, for approval. All necessary translations of the labeling
and packaging will be the sole responsibility of CV.
11.2 Changes. The parties will cooperate and consult with each other with
respect to any future labeling or packaging changes whether requested
by one of the parties or by the FDA, but, as between the parties, CV
will have the final responsibility for the decisions with respect to
labeling and packaging. CV will bear the cost of any such changes,
except that Isis will bear the cost of changes requested by Isis.
12. Second Source and Supply Failure
12.1 Optional Second Source. Upon mutual agreement, the parties will
cooperate to qualify a second source to produce the API (if possible)
and the finished Product, and will share equally the costs and
benefits thereof. If Isis does not agree to qualify a second source,
then CV may do so at its own expense and Isis will
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provide CV with all manufacturing processes and Know-How with respect
to production of the Product.
12.2 Lost Profits Credit. In the event the Product is on backorder (CV
cannot fill customers' orders) for a period of at least two months due
to Isis' failure to supply Product in accordance with Section 7 hereof
for reasons other than a Force Majeure, and provided CV had maintained
at least three months' inventory prior to such supply failure, CV will
be entitled to a credit for lost profits for such unfilled orders,
which credit will be applied against future orders.
12.3 Supply Failure/Second Source.
(a) Intentional Failure. In the event Isis, or any successor to Isis,
intentionally ceases to supply API or Product in breach of this
Agreement, Isis will: (i) transfer its reserves of active
ingredient to CV; (ii) acknowledge CV's license to the Patents
and Know-How granted under Section 2.2 hereof; and (iii) assist
CV in obtaining an NIH license required for the production of the
API, all at Isis' cost, in order that CV will be able to qualify
a second source for the production of the API and/or the Product.
Thereafter, CV shall pay to Isis a royalty equal to the amount [
* ], or Isis will pay CV the amount [ * ]; provided CV has
*CONFIDENTIAL TREATMENT REQUESTED
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made reasonable commercial efforts to obtain a competitive third
party supply price. Isis will be responsible for the costs of
qualifying such second source or sources.
(b) Unintentional Failure. In the event Isis ceases to supply API or
Product by reason of its own negligence or a Force Majeure, Isis
and CV will share the costs and benefits of qualifying a second
source, and Isis will continue to supply Product to CV pursuant
to this Agreement.
12.4 Supply Failure/Second Source Not Available.
(a) Intentional Failure. In the event Isis intentionally ceases to
supply the Product and the parties are unable, after good faith
efforts, to secure a source for the Product within eighteen (18)
months after such supply failure, then CV may terminate this
Agreement and Isis will refund the payments made under Sections
4(b) through (d) less the amount of net profits, calculated in
accordance with CV's standard accounting practices, earned by CV
up to the time that CV is unable to obtain Product from Isis (the
"Break-Even Amount").
(b) Unintentional Failure. If no second source can be secured after
good faith efforts in such eighteen (18) months, and the failure
to supply is due to a Force Majeure or Isis' negligence, or the
Product is withdrawn from the
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market through no fault of Isis, then CV may terminate this
Agreement and Isis will refund one-half the Break-Even Amount to
CV.
(c) Termination. In the event of termination under this Section 12.4,
CV will transfer all Product registrations to Isis, and the
rights granted to CV under this Agreement will revert to Isis.
13. Manufacturing and Product Warranty
13.1 With respect to Product supplied to CV hereunder, Isis hereby warrants
that the Product: (i) will have been manufactured in accordance and
will be in compliance with the Specifications therefor and with all
applicable requirements of the FDCA, similar foreign laws and
regulations promulgated thereunder including, but not limited to,
current GMPs, continuing compliance with stability requirements and
any other applicable federal, foreign, state or local laws, rules or
regulations; (ii) will not be adulterated or misbranded within the
meaning of the FDCA or any applicable similar state, foreign or local
laws in which the definition of adulteration or misbranding is
substantially the same as in the FDCA; and (iii) will have at least
twenty-one (21) months shelf-life remaining.
14. Post-Marketing Regulatory Matters
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14.1 Maintenance of Registrations. Isis will maintain the Product's
registrations until such registrations are officially held by CV.
Thereafter, CV will be responsible for maintaining such registrations.
14.2 Adverse Drug Reactions. ("ADRs"). CV will be responsible for the
timely completion and submission of all ADR reports to the FDA and for
communications with all ADR complainants. Isis will summarize and
forward to CV any adverse reaction reports ("ADR") received by Isis
within five (5) business days of receipt; provided Isis will forward
any such complaints which involve death or life-threatening incidents
to CV within twenty-four (24) hours of receipt. CV will investigate
all ADRs; provided, Isis will be responsible for all analytical
testing of Product required by the investigation.
14.3 Technical Complaints. Physical or technical complaints relating to the
Product which are received by CV or Isis will be investigated by Isis.
CV will forward any Product sample to Isis for testing. Isis will
promptly inform CV of any such test results. CV will be responsible
for communicating with all such complainants and for all FDA
notification and contact with respect to such complaints, but will
keep Isis informed of such FDA contacts.
14.4 Field Alerts. The parties will exchange any information received by
either party which may meet Field Alert Report criteria (21 CFR
314.81b1). Wherever possible the parties will discuss the necessity of
filing a field alert report and collaborate in the submission thereof.
CV will forward a copy of any such report
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to Isis and the parties will continue to discuss follow-up action on
such field alert report after submission.
14.5 Product Recalls. The parties will immediately contact each other in
the event that either party has any reason to believe that a recall of
Product may be necessary. CV will, in consultation with Isis, resolve
any issues with respect to the recall of any such Product including
without limitation, the necessity of declaring the recall, the manner
in which the recall should be conducted and the duration of the
recall. Isis and CV will cooperate fully with respect to any such
recall.
14.6 Other Information. Isis will cooperate and provide timely information
to CV in order for CV to comply with any other regulatory
requirements. With respect to annual reports, Isis will provide the
required information to CV by the anniversary date of FDA approval
each year.
14.7 Information Exchange. All information exchanged by the parties under
this Section 14 will be forwarded to:
For CV in U.S.: Lawrence D. Mandt
Director, Regulatory & Medical Affairs
CIBA Vision Corporation
11460 Johns Creek Parkway
Duluth, Georgia 30155
For CV in Europe and rest of world:
Richard Bergstrom
Head, Central Drug Regulatory Affairs
CIBA Vision, A.G. Hettlingen
10 Grenstrasse
Buelach, SWITZERLAND
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For Isis: Mark W. Lotz
Executive Director, Regulatory Affairs
Isis Pharmaceuticals, Inc.
2292 Faraday Avenue
Carlsbad, California 92008
15. Patents
15.1 Prosecution and Maintenance.
(a) Isis will undertake, diligently pursue, and bear all costs of the
prosecution and maintenance of U.S. Patent No. [ * ] and the
foreign equivalents thereof in the countries listed on Exhibit B
hereto, and U.S. Patent No. [ * ] in the U.S. Isis will keep CV
fully and timely informed with respect to the course and conduct
of patent application prosecution matters related to such
Patents. CV will have the right but not the obligation to consult
with Isis regarding such prosecution.
(b) With respect to all Patents other than the U.S. Patents and the
foreign equivalents [ * ] referred to in 15.1 (a) above, Isis
will not terminate prosecution or maintenance of any Patent or
claim which reads on the Product, or on a method of using the
Product, without first giving CV forty-five (45) days prior
written notice of its intention to do so. If CV
*CONFIDENTIAL TREATMENT REQUESTED
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does not wish Isis to terminate such Patent or claim, Isis will,
at its option, transfer and assign such Patent or Patent
application to CV, or allow CV to reimburse Isis for the cost of
the further prosecution and maintenance of such Patent or Patent
application.
15.2 Additional Filings. CV will have the right to request that Isis file,
prosecute and maintain patents in jurisdictions other than those
listed on Exhibit B. Upon CV's request, Isis will file, prosecute, and
maintain such patents provided CV will be consulted with respect to
the preparation and filing of such patents and will share the expenses
therefor with CV paying [ * ] and Isis paying [ * ]. As used in this
subsection, expenses will include outside consultant fees (i.e.,
legal) translation fees, and filing fees but will not include the
internal costs of Isis or CV. Each party will bear its own internal
costs with respect to the filing of the patents in such additional
jurisdictions.
16. Infringement of Patent Rights
16.1 Notification. If either party will become aware of any infringement or
threatened infringement of any Patents, including that contained in a
notice provided under the 1984 Act by a party filing an ANDA or Paper
NDA for this Product, or an equivalent action in any other country,
then the party having such knowledge will
*CONFIDENTIAL TREATMENT REQUESTED
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give notice to the other within ten (10) days of becoming aware of
such infringement or threatened infringement.
16.2 Action by Isis. Isis will have the right, but not the obligation, to
take such action as it deems appropriate, whether by action, suit,
proceeding or otherwise, at its own expense to prevent or eliminate
the infringement of the Patents by others in the countries listed on
Exhibit B and to collect damages. CV agrees to cooperate with Isis in
any reasonable manner including, but not limited to, being named as a
co-plaintiff in an action brought by Isis. Isis agrees to pay all
reasonable out-of-pocket expense incurred by CV in the prosecution of
any such action, suit or proceeding for infringement.
16.3 Action by CV. In the event that Isis does not take action for patent
infringement to prevent or eliminate the infringement of Patents
within one hundred twenty (120) days of receipt of notice of the
infringement or threatened infringement thereof (or within thirty (30)
days in the event such infringement is by Notice Under the 1984 Act),
then within said one hundred twenty (120) days (or within said thirty
(30) days if such infringement is under the 1984 Act) CV may, at its
option, give notice to Isis that unless Isis undertakes such action,
CV will commence an action to terminate such infringement. If Isis
fails to take such action within said one hundred twenty (120) days
(or said thirty (30) days in the event such infringement is by Notice
Under the 1984 Act) then Isis will grant CV an exclusive license to
the applicable Patents so that CV will be able to take such
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action as it deems appropriate against any infringer of same. Such
action by CV may be undertaken in the name of Isis, if necessary, and
Isis agrees to cooperate with CV, and execute any necessary documents
relating to such action.
16.4 Apportionment of Damages and Expenses. Any damages recovered by the
party bringing the action for patent infringement will be used first
to compensate that party for its out-of-pocket expenses in the
prosecution of any such action, suit or proceeding for infringement.
Any remaining damages recovered by that party will be apportioned
between CV and Isis in proportion to the damage incurred by each party
as a result of the infringement [ * ]. With respect to an action
brought under the 1984 Act, the parties will share the expenses
equally, except that if CV brings such an action after Isis has
declined to do so, and CV loses such action, CV will bear [ * ] of the
expenses and Isis will bear [ * ].
16.5 Invalidity. In the event the claims reading on the Product contained
in the Patents are declared invalid or unenforceable by a judgment,
decree or decision of a court, tribunal or other authority of
competent jurisdiction such that patent protection in the U.S. or
Europe is thereby vitiated and a competitive product enters the
market, the applicable Supply Price of the Product set forth in
Section 8 hereof shall be reduced as follows:
*CONFIDENTIAL TREATMENT REQUESTED
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(a) If patent protection in both the U.S. and Europe is vitiated
within the first seven years after Launch (as defined in Section
8) of the Product, the Supply Price shall be reduced by [ * ]
until the end of the third year after Launch, by [ * ] for the
fourth and fifth year and by [ * ] for the sixth and seventh
year. Thereafter, there will be no Supply Price reduction under
this Section 16.5.
(b) If patent protection is vitiated only in the U.S., then the
provisions of subsection (a) above will apply except that the
Supply Price reduction will be [ * ].
(c) If patent protection is vitiated only in Europe, then the
provisions of subsection (a) above will apply except that the
Supply Price reduction will be [ * ].
17. Third Party Rights
17.1 Notification. If either party will become aware of any action, or
suit, or threat of action or suit, by a third party alleging that the
manufacture, use or sale or offer for sale of the Product or the
practice of Know-How infringes a patent, or violates any other
proprietary rights of any third party, the party aware will promptly
notify the other party of the same and fully disclose the basis
therefor.
*CONFIDENTIAL TREATMENT REQUESTED
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17.2 Isis Obligations. Isis agrees to use diligent efforts to defend any
such action. Isis agrees to cooperate and consult with CV during the
course of such defense and to keep CV fully informed with respect to
all significant aspects of such action. CV agrees to assist Isis by
providing information in the possession and control of CV and to
provide such fact witnesses as may be reasonably necessary to such
defense.
17.3 Third Party License. If, by the terms of any settlement or if by a
judgment, decree or decision of a court, tribunal or other authority
of competent jurisdiction, CV is required to obtain a license from a
third party in order to market, sell and distribute Product
(hereinafter "Third Party License") and/or to compensate or pay
damages to such third party and/or pay royalties under such a license,
then, (i) in the US and Europe, Isis will pay all such damages or
royalties, and (ii) in the rest of the world, the parties will share [
* ] the payment of such damages or royalties in the country to which
such settlement, judgment, decree or decision directly relates, so
long as the reason for such settlement, etc. does not arise from (i)
CV's failure to appropriately acquire regulatory approval in such
jurisdiction or from (ii) any other action or inaction on the part of
CV, its Affiliates or Third Party Distributor in such jurisdiction.
17.4 Injunction. If, by the terms of any settlement or of a judgment,
decree or decision of a court, tribunal or other authority of
competent jurisdiction, CV is enjoined
*CONFIDENTIAL TREATMENT REQUESTED
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entirely from selling the Product in the U.S. and Europe, Isis will
immediately reimburse CV for one-half of the amounts paid to Isis
under Section 4 hereof, less net profits already earned by CV from
sales of the Product. In addition, Isis will indemnify CV for any
direct or consequential damages and costs that are payable as the
result of any such settlement or judgment.
18. Patent Term Extension
18.1 Within sixty (60) days after approval of an NDA for the Product, and
at CV's request, Isis will file and prosecute, at its own cost and
expense, an application for an extension of the Patent. Isis will also
file any similar applications in Europe. CV will also list the
appropriate Patents in the "Orange Book".
19. License Agreements
19.1 Isis will maintain its license from [ * ] for so long as such license
is required to manufacture, use or sell the Product. Isis will
maintain its license agreement with [ * ] so long as such license is
required to manufacture, use or sell the Product. Isis will be
responsible for paying all royalties owed to [ * ] or any other third
party in connection with the manufacture, use or sale of the Product.
*CONFIDENTIAL TREATMENT REQUESTED
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20. Warranties
20.1 Isis Warranties. In addition to the Warranty set forth in Section 13
hereof, Isis warrants and represents that: (a) it is the owner of the
Patents and Know-How and has the right to grant the rights granted to
CV under Section 2 hereof free and clear of any encumbrance; (b) it
has not assigned or conveyed any interest in the Patents or Know-How
which may be inconsistent with the rights granted to CV hereunder; (c)
to the best of its knowledge and after a diligent search, the practice
of the Patents and Know-How in the United States and Europe does not
infringe any rights of third parties; (d) it is not aware of any third
party infringing the Patents in the Territory; (e) it has prosecuted
all patent applications within the Patents in good faith and has no
reason to believe any patent included in the Patents would be invalid
or would be held to be unenforceable by a court of competent
jurisdiction; and (f) it is a corporation duly incorporated and in
good standing in its state of incorporation and has all requisite
power to enter into and perform this Agreement, and, upon execution by
the parties hereto, this Agreement will constitute a valid and
legally-binding obligation of Isis enforceable in accordance with its
terms.
20.2 CV Warranties. CV warrants and represents that it is a corporation
duly incorporated and in good standing in its state of incorporation
and has all requisite power to enter into and perform this Agreement,
and, upon execution by the
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parties hereto, this Agreement will constitute a valid and legally
binding obligation of CV, enforceable in accordance with its terms.
21. Compliance with Law
The parties, their Affiliates, and Third Party Distributors will at all
times comply with any and all applicable federal, foreign, state and local
laws and regulations with respect to their obligations and activities under
this Agreement. In the event a governmental agency forces the cessation of
the manufacture or distribution of the Product due to any actual or alleged
violation or acts of non-compliance with laws or regulations by Isis, Isis
will use its best efforts to resume operations as soon as possible. It is
expressly understood that such governmental action will not be considered
an event of force majeure under Section 26 hereof.
22. Indemnification
22.1 Isis to CV. Isis will indemnify and hold harmless CV, its Affiliates
and their officers, agents and employees against any claim, loss,
damage, penalty, assessment, or expense including reasonable
attorneys' fees and the cost of any recall ("Claim") arising directly
or indirectly from any breach of any of Isis' warranties under
Sections 13 or 20 hereof, or breach of the other obligations or
covenants under this Agreement, or for any governmental action taken
as a result of any such breach.
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22.2 CV to Isis. CV will indemnify and hold harmless Isis, its Affiliates
and their officers, directors, agents and employees against any Claim
arising directly or indirectly from (a) any breach by CV, its
Affiliates, or Third Party Distributors of (i) the warranty under
Section 20 hereof or (ii) the other obligations or covenants under
this Agreement, or (b) any negligence, omission, or intentional
wrongdoing by CV, its Affiliates or Third Party Distributors in
connection with the sale and distribution of the Product, or (c) for
any governmental action taken as a result of any such breach or any
such act of negligence, omission or intentional wrongdoing.
22.3 Procedure. In the event that an indemnified party receives notice of,
or becomes aware of, a Claim in respect of which indemnity may be
sought hereunder, and the indemnified party intends to seek indemnity
hereunder, the indemnified party will promptly provide the
indemnifying party with notice of such Claim and the intention to seek
indemnity. The indemnifying party will have the right, at its option
and its own expense, to be represented by counsel of its own choice
and to defend against, negotiate, settle or otherwise deal with any
such Claim, provided that the indemnifying party will not enter into
any settlement or compromise of any such Claim which could lead to
liability or create any financial or other obligation on the part of
the indemnified party without the indemnified party's prior written
consent. The indemnified party may participate in the defense of any
Claim with counsel of its own choice and at its own expense. The
parties agree to cooperate fully with each other in connection with
the defense, negotiation or settlement of
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any such Claims. In the event that the indemnifying party does not
undertake the defense, compromise or settlement of a Claim the
indemnified party will have the right to control the defense or
settlement of such Claim with counsel of its choosing provided,
however, that the indemnified party will not settle or compromise any
such claim without the indemnifying party's prior written consent,
which consent will not be unreasonably withheld.
23. Scientific Publications.
23.1 Submission and Approval. Any scientific publication or presentation by
either party with respect to the Product, including publications
relating to clinical studies, will be approved by the other party
prior to publication or presentation, such approval not to be
unreasonably delayed or withheld. Due regard will be given to each
party's legitimate interests, i.e., protection of confidential
information, commercialization of the Product, etc. Any proposed
publications which are to make public any findings, data or results of
the studies relating to the Product will be provided to the other
party at least thirty (30) days prior to submission for publication
for the other party's approval, except that abstracts may be provided
seven (7) days prior to submission for publication.
23.2 Patent Considerations. If a party, in its reasonable judgment, needs
additional time to seek patent or other appropriate protection (the
"Patenting Party") for any of the information to be published or
presented by the other party (the "Publishing
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Party"), the Patenting Party will promptly notify the Publishing Party
of such need in writing, and the Publishing Party will defer such
publication or presentation until such time as the Publishing Party is
notified by the Patenting Party that such patent or other appropriate
protection has been applied for.
24. Proprietary Information and Announcements
24.1 "Proprietary Information." As used herein, "Proprietary Information"
will mean all technical, sales or other confidential business
information, including the Know-How, related to the subject matter of
this Agreement disclosed by one party to the other at any time prior
to or during the Agreement Period and identified as confidential,
together with all records generated or maintained Isis relating to
Product produced for CV. Proprietary Information will not include
information which, as demonstrated by competent evidence: (i) was
known to the receiving party prior to the disclosure; (ii) was
generally available to the public at the time of disclosure or becomes
available to the public after disclosure other than through any act or
omission of the receiving party in breach of this Agreement; (iii)
becomes known to the receiving party as the result of disclosure from
a third party under no obligation of secrecy to the other party; or
(iv) is required to be disclosed by law or pursuant to the disclosure
requirements of a governmental agency, provided that the party ordered
to disclose the Proprietary Information notifies the party which owns
or supplied the Proprietary Information sought to be disclosed
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pursuant to such request, requirement or order in sufficient time to
allow the owner/supplying party to oppose such request, requirement or
order.
24.2 Confidentiality Obligations. During the Agreement Period and for a
period of five (5) years after the expiration or earlier termination
of this Agreement, neither party will: (i) disclose, publish or make
available any Proprietary Information disclosed to it by the other
party: (a) to any third party, except to Affiliates which will be
bound by the same obligation of confidentiality; or (b) to any
employees who do not need to know or have access to such Proprietary
Information; or (ii) sell, transfer or otherwise use, except for the
purposes herein, any such Proprietary Information. After expiration or
earlier termination of this Agreement, each party will return the
Proprietary Information of the other party and will destroy all copies
thereof, other than records which must be retained as a matter of law.
24.3 Publicity. During the Agreement Period, neither party will make any
press release or other public announcement relating to this Agreement,
or otherwise disclose the terms of this Agreement to any third party
other than an Affiliate, without the prior written consent of the
other party except as required by a court of competent jurisdiction or
pursuant to the disclosure requirements of a governmental agency.
25. Term and Termination
25.1 Agreement Period. The term of this Agreement will commence as of the
Effective Date and will expire fifteen (15) years thereafter, unless
previously terminated and notwithstanding any suspension due to a
force majeure event under Section 26 hereof. If, at the time of such
expiration, CV is continuing to make commercially
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reasonable efforts to market the Product, it may extend the Agreement
for an additional five years, on six months' prior written notice,
unless Isis has a reasonable objection thereto.
25.2 Material Breach. This Agreement may by canceled by either party upon
written notice in the event the other party fails to perform a
material obligation under this Agreement within thirty (30) days after
receiving notice of such failure. If the nature of the failure is such
that it cannot be cured within the thirty-day period, no termination
will occur provided the defaulting party will have commenced to cure
such breach within thirty days and thereafter diligently proceeds to
effect and complete such cure within ninety (90) days from the date of
the original notice.
25.3 CV's Option. This Agreement may be terminated by CV pursuant to the
provisions of Section 4.2 hereof.
25.4 Bankruptcy. Either party may terminate this Agreement upon written
notice in the event that the other party will file for protection in
bankruptcy or will be adjudicated as bankrupt or will make an
assignment for the benefit of creditors or will have a receiver,
whether appointed by private instrument or court offices, appointed
for its property.
25.5 Survival. Termination or expiration of this Agreement will not relieve
either party from the liabilities and obligations approved prior to
the Effective Date of
68
<PAGE> 52
termination or expiration, and the provisions of Sections 13, 17, 20,
22 and 24 hereof will survive any termination or expiration of this
Agreement.
25.6 Post-Termination. All rights to the Patents, Know-How, Product
Registrations, and Isis trademarks granted to CV under this Agreement
will revert to Isis upon expiration or termination of this Agreement.
After the expiration or termination of this Agreement, so long as the
termination of the Agreement is not the result of a material breach on
the part of CV, its Affiliates and Third Party Distributors, then CV,
its Affiliates and Third Party Distributors will have the right to
sell all Products released for distribution before such date as well
as the right to sell all such Products in the process of manufacture
on such date, provided that CV will pay the applicable Supply Price
and render reports to Isis with respect to such Product in the manner
required hereunder.
26. Force Majeure
26.1 Neither party will be liable to the other for loss or damages, or,
except as expressly provided in this Agreement, have any right to
terminate this Agreement for any default or delay attributable to any
cause beyond the reasonable control of that party, including but not
limited to, an act of God, flood, fire, explosion, strike, lockout,
earthquake, labor dispute, war, revolution, civil commotion, act of a
public enemy, blockade, embargo, or governmental action other than one
resulting from the act, omission or negligence of a party. In the
event such a default or
69
<PAGE> 53
delay occurs, the party affected will notify the other party and will
exercise diligent efforts to resume performance of its obligations as
soon as possible.
27. Miscellaneous
27.1 No Waiver. Failure of either party to insist upon strict observance of
or compliance with any of the terms of this Agreement in one or more
instances will not be deemed to be a waiver of its right to insist
upon such observance or compliance with those or other terms of this
Agreement with respect to subsequent breaches of any of the terms of
this Agreement.
27.2 Notices. All notices and demands required or permitted hereunder will
be in writing and given by certified or registered mail, postage
prepaid or by a nationally recognized express mail service, or hand
delivered at the following addresses:
If to CV: CIBA Vision Corporation, U.S. Ophthalmics
11460 Johns Creek Parkway
Duluth, Georgia 30155
Attn: President
cc: General Counsel
CIBA Vision Corporation
11460 Johns Creek Parkway
Duluth, Georgia 30155
If to Isis: Isis Pharmaceuticals, Inc.
2292 Faraday Avenue
Carlsbad, California 92008
Attn: President
cc: General Counsel
Isis Pharmaceuticals, Inc.
2292 Faraday Avenue
Carlsbad, California 92008
70
<PAGE> 54
or to such other address as to which either party may notify the
other. Notice will be deemed to be effective three (3) days after
mailing, or upon receipt if hand delivered or sent by express mail
service.
27.3 Assignment. This Agreement will be binding upon and inure to the
benefit of the parties, their successors and permitted assigns.
Neither party may assign this Agreement without the prior written
consent of the non-assigning party, which consent will not be
unreasonably withheld.
27.4 Governing Law. This Agreement is governed by the laws of the State of
New York that are applicable to contracts negotiated, executed and
performed within that state.
27.5 Severability. In the event any one or more of the provisions of this
Agreement should for any reason be held by any court of authority
having jurisdiction over either the parties or this Agreement to be
invalid, illegal or unenforceable, such provision or provisions will
be validly reformed so as to nearly approximate the intent of the
parties as possible or, if unreformable, will be divisible and deleted
in such jurisdiction; otherwise, this Agreement will continue in full
force effect.
27.6 Independent Contractors. Nothing in this Agreement is intended or will
be deemed to constitute a partnership, agency, employer-employee or
joint venture relationship between the parties. All activities by the
parties hereunder will be
71
<PAGE> 55
performed by them as independent contractors. Neither party will incur
any debts or make any commitments for the other party, except to the
extent specifically provided herein.
27.7 Entire Agreement/Modification. The terms of this Agreement represent
the entire agreement of the parties with respect to the subject matter
herein and will not be modified or supplemented except in a written
document duly executed by the parties, which document will state that
it is an amendment of modification to this Agreement. This Agreement
will prevail in the event of any inconsistencies between it and the
terms of any purchase order, acknowledgment, invoice or other form
utilized by the parties.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
by their duly authorized representatives as of the day and year indicated below.
CIBA VISION CORPORATION ISIS PHARMACEUTICALS, INC.
By: Stephen M. Martin By: B. Lynne Parshall
Title: President Title: Executive Vice President
Date: July 10, 1997 Date: July 10, 1997
72
<PAGE> 56
Attachment for Ciba Vision - Isis Agreement
Exhibit A
[*CONFIDENTIAL TREATMENT REQUESTED FOR
ENTIRE CONTENTS OF EXHIBIT A]
73
<PAGE> 57
Exhibit B
[*CONFIDENTIAL TREATMENT REQUESTED FOR
ENTIRE CONTENTS OF EXHIBIT B]
74
<PAGE> 1
EXHIBIT 10.3
Imperial Bank Note Secured By Deed of Trust dated March 24, 1997
in the amount of $6,000,000; Deed of Trust and Assignment of Rents
dated March 24, 1997.
75
<PAGE> 2
DO NOT DESTROY THIS NOTE:
WHEN PAID, THIS NOTE, WITH THE DEED OF TRUST SECURING SAME, MUST BE SURRENDERED
TO THE TRUSTEE FOR CANCELLATION BEFORE RECONVEYANCE WILL BE MADE.
[LOGO]
IMPERIAL BANK
Member FDIC
NOTE SECURED BY DEED OF TRUST
$6,000,000.00 Menlo Park, California, MARCH 24, 1997
On JULY 1, 2002, and as hereinafter provided, for value received, the
undersigned promises to pay to IMPERIAL BANK ("Bank"), a California banking
corporation, or order, at its Special Markets Group office, the principal sum of
$ SIX MILLION AND NO/100 or such sums up to the maximum if so stated, as the
Bank may now or hereafter advance to or for the benefit of the undersigned in
accordance with the terms hereof, together with interest from date of
disbursement or n/a, whichever is later, on the unpaid principal balance [ ] at
the rate of % per year [X] at the rate of .50% per year in excess of the
rate of interest which Bank has announced as its prime lending rate (the "Prime
Rate"), which shall vary concurrently with any change in such Prime Rate, or
$250.00, whichever is greater. Interest shall be computed at the above rate on
the basis of the actual number of days during which the principal balance is
outstanding, divided by 360, which shall, for interest computation purposes, be
considered one year.
Interest shall be payable [X] monthly [ ] quarterly [ ] included with principal
[X] in addition to principal [ ] beginning MAY 1, 1997, and if not so paid shall
become a part of the principal. All payments shall be applied first to interest,
and the remainder, if any, on principal. [X] (If checked), Principal shall be
payable in installments of $*, or more, each installment on the day of
each , beginning .
Any partial prepayment shall be applied to the installments, if any, in
inverse order of maturity. Should default be made in the payment of principal or
interest when due, or in the performance or observance, when due, of any item,
covenant or condition of any deed of trust, security agreement or other
agreement (including amendments or extensions thereof) securing or pertaining to
this note, at the option of the holder hereof and without notice or demand, the
entire balance of principal and accrued interest then remaining unpaid shall (a)
become immediately due and payable, and (b) thereafter bear interest, until paid
in full, at the increased rate of 5% per year in excess of the rate provided for
above, as it may vary from time to time.
Defaults shall include, but not be limited to, the failure of the
maker(s) to pay principal or interest when due; the filing as to each person
obligated hereon, whether as maker, co-maker, endorser or guarantor
(individually or collectively referred to as the "Obligor") of a voluntary or
involuntary petition under the provisions of the Federal Bankruptcy Act; the
issuance of any attachment or execution against any asset of any Obligor; the
death of any Obligor; or any deterioration of the financial condition of any
Obligor which results in the holder hereof considering itself, in good faith,
insecure.
[X] If any installment payment or principal balance payment due hereunder is
delinquent ten or more days, Obligor agrees to pay a late charge in the amount
of 5% of the payment so due and unpaid, in addition to the payment; but nothing
in this paragraph is to be construed as any obligation on the part of the holder
of this note to accept payment of any installment past due or less than the
total unpaid principal balance after maturity.
If this note is not paid when due, each Obligor promises to pay all
costs and expenses of collection and reasonable attorney's fees incurred by the
holder hereof on account of such collection, plus interest at the rate
applicable to principal, whether or not suit is filed hereon. Each Obligor shall
be jointly and severally liable hereon and consents to renewals, replacements
and extensions of time for payment hereof, before, at, or after maturity;
consents to the acceptance, release or substitution of security for this note;
and waives demand and protest and the right to assert any statute of
limitations. Any married person who signs this note agrees that recourse may be
had against separate property for any obligations hereunder. The Indebtedness
evidenced hereby shall be payable in lawful money of the United States. In any
action brought under or arising out of this note, each Obligor, including
successor(s) or assign(s) hereby consents to the application of California law,
to the jurisdiction of any competent court within the State of California, and
to service of process by any means authorized by California law.
This note is secured by a deed of trust, dated MARCH 24, 1997, to
IMPERIAL BANCORP as Trustee which contains the following provisions: "In the
event the herein described property or any part thereof, or any interest therein
is sold, agreed to be sold, conveyed, transferred, disposed of, further
encumbered, or alienated by trustor or by the operation of law or otherwise,
without the written consent of beneficiary first obtained, all obligations
secured by this instrument, irrespective of the maturity dates expressed
therein, at the option of the holder beneficiary, and without demand or notice
shall immediately become due and payable. Consent to one such transaction shall
not be deemed to be a waiver of the right to require such consent to future or
successive transactions."
No single or partial exercise of any power hereunder, or under any deed
of trust, security agreement or other agreement in connection herewith shall
preclude other or further exercises thereof or the exercise of any other such
power. The holder hereof shall at all times have the right to proceed against
any portion of the security for this note in such order and in such manner as
such holder may consider appropriate, without waiving any rights with respect to
any of the security. Any delay or omission on the part of the holder hereof in
exercising any right hereunder, or under any deed of trust, security agreement
or other agreement, shall not operate as a waiver of such right, or of any other
right, under this note or any deed of trust, security agreement or other
agreement in connection herewith.
* See Addendum attached hereto and made a part hereof by this reference.
ISIS PHARMACEUTICALS, INC.,
- --------------------------- -------------------------
a Delaware corporation
- --------------------------- -------------------------
By: /s/ GARY J. G. ATKINSON
- --------------------------- -------------------------
Vice President, Finance
<PAGE> 3
ADDENDUM ATTACHED TO THAT CERTAIN NOTE SECURED BY DEED OF TRUST DATED MARCH
24,1997 EXECUTED BY ISIS PHARMACEUTICALS, INC.
ADDENDUM
1. Advances under the note shall be available through December 31, 1997. On
June 30, 1997, the outstanding balance of the advances under the Note shall be
converted to an amortizing loan payable in 60 equal monthly payments of
principal plus accrued interest commencing August 1, 1997.
All principal and accrued but unpaid interest shall in any event be due and
payable on July 1, 2002.
2. The following Reference Provision is by this reference incorporated in the
Note:
REFERENCE PROVISION
1. Other than (i) non-judicial foreclosure and all matters in connection
therewith regarding security interests in real or personal property; or (ii) the
appointment of a receiver, or the exercise of other provisional remedies (any
and all of which may be initiated pursuant to applicable law), each controversy,
dispute or claim between the parties arising out of or relating to this Note
"Agreement"), which controversy, dispute or claim is not settled in writing
within thirty (30) days after the "Claim Date" (defined as the date on which a
party subject to the Agreement gives written notice to all other parties that a
controversy, dispute or claim exists), will be settled by a reference proceeding
in California in accordance with the provisions of Section 638 et seq. of the
California Code of Civil Procedure ("CCP"), or their successor section, which
shall constitute the exclusive remedy for the settlement of any controversy,
dispute or claim concerning this Agreement, including whether such controversy,
dispute or claim is subject to the reference proceeding and except as set forth
above, the parties waive their rights to initiate any legal proceedings against
each other in any court or jurisdiction other than the Superior Court in the
County where the Real Property, if any, is located or Los Angeles County if none
(the "Court"). The referee shall be a retired Judge of the Court selected by
mutual agreement of the parties, and if they cannot so agree within forty-five
(45) days after the Claim Date, the referee shall be promptly selected by the
Presiding Judge of the Court (or his representative). The referee shall be
appointed to sit as a temporary judge, with all of the powers of a temporary
judge, as authorized by law, and upon selection should take and subscribe to the
oath of office as provided for in Rule 244 of the California Rules of Court (or
any subsequently enacted Rule). Each party shall have one peremptory challenge
pursuant to CCP Section 170.6. The referee shall (a) be requested to set the
matter for hearing within sixty (60) days after the Claim Date and (b) try any
and all issues of law or fact and report a statement of decision upon them, if
possible, within ninety (90) days of the Claim Date. Any decision rendered by
the referee will be final, binding and conclusive and
-3
<PAGE> 4
judgment shall be entered pursuant to CCP Section 644 in any court in the State
of California having jurisdiction. Any party may apply for a reference
proceeding at any time after thirty (30) days following the notice to any other
party of the nature of the controversy, dispute or claim, by filing a petition
for a hearing and/or trial. All discovery permitted by this Agreement shall be
completed no later than fifteen (15) days before the first hearing date
established by the referee. The referee may extend such period in the event of a
party's refusal to provide requested discovery for any reason whatsoever,
including, without limitation, legal objections raised to such discovery or
unavailability of a witness due to absence or illness. No party shall be
entitled to "priority" in conducting discovery. Depositions may be taken by
either party upon seven (7) days written notice, and request for production or
inspection of documents shall be responded to within ten (10) days after
service. All disputes relating to discovery which cannot be resolved by the
parties shall be submitted to the referee whose decision shall be final and
binding upon the parties. Pending appointment of the referee as provided herein,
the Court is empowered to issue temporary and/or provisional remedies, as
appropriate.
2. Except as expressly set forth in this Agreement, the referee shall
determine the manner in which the reference proceeding is conducted including
the time and place of all hearings, the order of presentation of evidence, and
all other questions that arise with respect to the course of the reference
proceeding. All proceedings and hearings conducted before the referee, except
for trial, shall be conducted without a court reporter, except that when any
party so requests, a court reporter will be used at any hearing conducted before
the referee. The party making such a request shall have the obligation to
arrange for and pay for the court reporter. The costs of the court reporter at
the trial shall be borne equally by the parties.
3. The referee shall be required to determine all issues in accordance with
existing case law and the statutory laws of the State of California. The rules
of evidence applicable to proceedings at law in the State of California will be
applicable to the reference proceeding. The referee shall be empowered to enter
equitable as well as legal relief, to provide all temporary and/or provisional
remedies and to enter equitable orders that will be binding upon the parties.
The referee shall issue a single judgment at the close of the reference
proceeding which shall dispose of all of the claims of the parties that are the
subject of the reference. The parties hereto expressly reserve the right to
contest or appeal from the final judgment or any appealable order or appealable
judgment entered by the referee. The parties hereto expressly reserve the right
to findings of fact, conclusions of law, a written statement of decision, and
the right to move for a new trial or a different judgment, which new trial, if
granted, is also to be a reference proceeding under this provision.
4. In the event that the enabling legislation which provides for appointment
of a referee is repealed (and no successor statute is enacted), any dispute
between the parties that would otherwise be determined by the reference
procedure herein described will be resolved and determined by arbitration. The
arbitration will be conducted by a retired judge of the Court, in accordance
with the California Arbitration Act, Section 1280 through Section 1294.2 of the
CCP as amended from time to time. The limitations with respect to discovery as
set forth hereinabove shall apply to any such arbitration proceeding.
<PAGE> 5
RECORDING REQUESTED BY
IMPERIAL BANK
WHEN RECORDED MAIL TO
IMPERIAL BANK
9920 SO LA CIENEGA BLVD
INGLEWOOD CA 90301
Attn Lending Services INDEX AS DEED OF TRUST AND ASSIGNMENT OF RENTS
SPACE ABOVE THIS LINE FOR RECORDER'S USE
- --------------------------------------------------------------------------------
Real Estate Loan
DEED OF TRUST AND ASSIGNMENT OF RENTS Short Form
BY THIS DEED OF TRUST, made on MARCH 24, 1997
<TABLE>
<S> <C>
by ISIS PHARMACEUTICALS, INC., a Delaware corporation (herein called "Trustor"),
whose address is 2280 Faraday Drive
---------------------------
(Number and Street)
Carlsbad California 92008
-------- ---------- ---------
(City) (State) (zip code)
</TABLE>
to IMPERIAL BANCORP, a California corporation as Trustee, for the benefit of
IMPERIAL BANK, a California corporation, as Beneficiary, Trustor irrevocably
GRANTS, TRANSFERS AND ASSIGNS TO TRUSTEE IN TRUST, WITH POWER OF SALE, all that
property in the City of Carlsbad, County of San Diego, State of California,
described as:
SEE EXHIBIT "A" ATTACHED HERETO AND MADE A PART HEREOF BY THIS REFERENCE
SEE EXHIBIT "B" FOR HAZARDOUS MATERIALS PROVISIONS AND CROSS DEFAULT PROVISIONS
ATTACHED HERETO AND MADE A PART HEREOF BY THIS REFERENCE
and commonly known as 2280, 2282 and 2292 Faraday Avenue, Carlsbad, California
92008
INCLUDING (a) all appurtenances and easements and rights of way used in
connection therewith or as a means of access thereto; (b) all buildings,
improvements and fixtures now or hereafter placed thereon, it being understood
and agreed that all classes of property attached or unattached used in
connection therewith shall be deemed fixtures; and (c) any water rights and/or
the stock of any water company which rights and/or stock are appurtenant or
pertain to said property.
TOGETHER WITH the rents, issues and profits thereof, SUBJECT, HOWEVER, to the
right, power and authority hereinafter given to and conferred upon Trustor to
collect and retain such rents, issues and profits prior to any default
hereunder.
FOR THE PURPOSE OF SECURING: (1) Payment of the indebtedness with interest
thereon evidenced by two Promissory Notes in the principal sum of (i)
$6,000,000.00 and (ii) $3,706,620.00, both executed by Trustor, both dated March
24, 1997, both payable to Beneficiary or order, and all modifications,
extensions or renewals thereof; (2) Payment of such additional sums with
interest thereon as the then record owner of said property may hereafter borrow
from Beneficiary, when evidenced by a note (or notes) or any agreement reciting
that it is so secured; (3) Performance of each agreement of Trustor and Borrower
incorporated herein by reference or contained herein; and (4) Performance of
each agreement of Trustor contained in any and all agreements executed by
Trustor for the purpose of further securing any obligations secured hereby.
In the event the herein described property, or any part thereof, or any interest
therein, is sold, agreed to be sold, conveyed, transferred, disposed of, further
encumbered, or alienated by Trustor or by the operation of law or otherwise
without the
Page 1 of 3
<PAGE> 6
written consent of beneficiary first obtained, all obligations secured by this
instrument, irrespective of the maturity dates expressed therein, at the option
of the holder beneficiary, and without demand or notice, shall immediately
become due and payable. Consent to one such transaction shall not be deemed to
be a waiver of the right to require such consent to future or successive
transactions.
TO PROTECT THE SECURITY OF THIS DEED OF TRUST, TRUSTOR AGREES: By the execution
and delivery of this Deed of Trust and the obligation(s) secured hereby, that
provisions (1) to (30), inclusive, of the Fictitious Deed of Trust recorded in
Los Angeles, Riverside, San Francisco, Solano, Sonoma, Monterey, Contra Costa,
San Bernardino, San Diego, Ventura, Santa Clara, Sacramento, Marin and Alameda
Counties February 29, 1980, and in Orange, San Mateo and Santa Barbara Counties
March 4, 1980, in the Book and at the Page or as the document number of Official
Records in the office of the County Recorder of the County where said property
is located as set forth and noted below opposite the name of such County, viz:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
COUNTY COUNTY
Los Angeles Document 80-206967 San Bernardino Document 80-052391
Orange Book 13522 Page 522 San Diego Book 1980 Page 80-070516
Riverside Book 1980 Page 40216 Ventura Book 5605 Page 585
San Francisco Book C953 Page 187 Santa Clara F 168 Page 720
San Mateo Reel 7942 Image 117 Sacramento Book 8002-29 Page 3
Solano Book 1980 Page 15924 Santa Barbara Document 80-8831
Sonoma Document 80-11977 Marin Book 3684 Page 09
Monterey Reel 1392 Page 1128 Alameda Document 80-036324
Contra Costa Book 9752 Page 322
</TABLE>
hereby are adopted and incorporated herein and made a part hereof as fully as
though set forth herein at length; that Trustor will observe said provisions;
and that the references to property, obligations, and parties in said provisions
shall be construed to refer to the property, obligations, and parties set forth
in this Deed of Trust.
TRUSTOR REQUESTS that a copy of any notice of default and of any notice of sale
hereunder shall be mailed to Trustor at the address hereinabove set forth.
The following portions of provisions (1) to (30) of the Fictitious Deed of Trust
incorporated into this Deed of Trust are amended as follows:
a) In paragraphs 7, 15 and 21, wherever "Prime Rate charged by Imperial Bank"
appears, "Default rate as charged by Imperial Bank as set forth in the
obligation secured hereby" is hereby substituted. b) The first two full
sentences in paragraph 20 are deleted in their entirety and are replaced by the
following provisions; Trustor hereby absolutely and unconditionally assigns and
transfers to Beneficiary all the leases (including all security deposits,
guarantees and other security at any time given as security for the performance
of the obligations of the tenants thereunder), income, rents, issues, deposits,
profits and proceeds of the property to which Trustor may be entitled, whether
now due, past due or to become due, and hereby gives to and confers upon
Beneficiary the right, power and authority to collect such income, rents,
issues, deposits, profits and proceeds. This assignment of the leases, income,
rents, issues, deposits, profits and proceeds constitutes an irrevocable
direction and authorization of all tenants under the leases to pay all rent,
income and profits to Beneficiary upon demand and without further consent or
other action by Trustor. This is an absolute assignment, not an assignment for
security only, and Beneficiary's right to rents, issues and profits is not
contingent on Beneficiary's possession of all or any portion of the property.
Trustor irrevocably appoints Beneficiary its true and lawful attorney-in-fact,
at the option of Beneficiary at any time, to demand, receive and enforce
payment, to give receipts, releases and satisfactions, and to sue, either in the
name of Trustor or in the name of the Beneficiary, for all such income, rents,
issues, deposits, profits and proceeds and apply the same to the indebtedness
secured hereby. It is understood and agreed that neither the foregoing
assignment of leases, income, rents, issues, deposits, profits and proceeds to
Beneficiary nor the exercise by Beneficiary of any of its rights or remedies
under this Section or under any similar provision of the Deed of Trust shall be
deemed to make Beneficiary a "mortgagee-in-possession" or otherwise obligated,
responsible or liable in any manner with respect to the property or the use,
occupancy, enjoyment or operation of all or any portion thereof. Notwithstanding
anything to the contrary contained herein or in the obligation secured hereby,
so long as no event which is, or with notice or passage of time or both would
constitute, an event of default shall have occurred, Trustor shall have a
license to collect all income, rents, issues, profits and proceeds from the
property as trustee for the benefit of Beneficiary and Trustor, and Trustor
shall apply the funds so collected first to the payment of the indebtedness
secured hereby which are then due and payable in such manner as Beneficiary
elects and thereafter to the account of Trustor, Upon the occurrence of such
event, such license shall be deemed revoked and any rents received thereafter by
Trustor shall be held by Trustor in trust for the benefit of Beneficiary and
shall be delivered in kind to Beneficiary immediately upon receipt thereof by
Trustor. Upon the occurrence of such event, Trustor agrees to deliver the
original copies of all leases to Beneficiary. Trustor hereby irrevocably
constitutes and appoints Beneficiary its true and lawful attorney-in-fact to
enforce, in Trustor's name or
Page 2 of 3
<PAGE> 7
in Beneficiary's name or otherwise, all rights of Trustor in the instruments,
including without limitation, checks and money orders, tendered as payments of
rents and to do any and all things necessary and proper to carry out the
purposes hereof.
SIGNATURE Of TRUSTOR
ISIS PHARMACEUTICALS, INC., a Delaware
------------------------------------------
corporation
By: /s/ GARY J.G. ATKINSON
---------------------------------------
VICE PRESIDENT, FINANCE
SIGNATURES MUST BE ACKNOWLEDGED BEFORE A NOTARY PUBLIC
- --------------------------------------------------------------------------------
REQUEST FOR FULL RECONVEYANCE
To Be Used Only When Note Has Been Paid
A reconveyance will be issued upon presentation to Imperial Bancorp of this
request properly signed and accompanied by the reconveyance fee, the Deed of
Trust, the original note or notes secured by said Deed of Trust and any receipt
or document evidencing any other indebtedness secured thereby.
To IMPERIAL BANCORP, Trustee Dated:
-----------------------------
The undersigned is the legal owner of the note or notes and of all other
indebtedness secured by the within Deed of Trust. Said note or notes, together
with all other indebtedness secured by said Deed of Trust, have been fully paid
and satisfied and you are hereby requested and directed on payment to you of any
sums owing to you under the terms of said Deed of Trust to cancel said note or
notes and all other evidences of indebtedness delivered to you herewith and said
Deed of Trust and to reconvey without warranty to the parties designated by the
terms of said Deed of Trust all the estate now held by you thereunder.
- -------------------------------------
- ------------------------------------- -------------------------------------
- ------------------------------------- -------------------------------------
- ------------------------------------- -------------------------------------
- ------------------------------------- -------------------------------------
- -------------------------------------
Do not lose or destroy this Deed of Trust OR THE NOTE which it secures. Both
must be delivered to the Trustee for cancellation before reconveyance will be
made.
Page 3 of 3
<PAGE> 8
State of California )
) SS
County of San Diego )
On May 5, 1997, before me, the undersigned, Notary Public in and for said State,
personally appeared Gary Atkinson, personally known to me (or proved to me on
the basis of satisfactory evidence) to be the person(s) whose name(s) is/are
subscribed to the within instrument and acknowledged to me that he/she/they
executed the same in his/her/their authorized capacity(ies), and that by
his/her/their signature(s) on the instrument the person(s), or the entity upon
behalf of which the person(s) acted, executed this instrument.
WITNESS my hand and official seal.
ANGIE STROOT
COMM. #1080447
NOTARY PUBLIC-CALIFORNIA
SAN DIEGO COUNTY
COMM. EXP. DEC. 11, 1999
/S/ ANGIE STROOT Notary Seal
State of California )
) SS
County of )
On ________________________, before me, the undersigned, Notary Public in and
for said State, personally appeared __________________________________________,
personally known to me (or proved to me on the basis of satisfactory evidence)
to be the person(s) whose name(s) is/are subscribed to the within instrument and
acknowledged to me that he/she/they executed the same in his/her/their
authorized capacity(ies), and that by his/her/their signature(s) on the
instrument the person(s), or the entity upon behalf of which the person(s)
acted, executed this instrument.
WITNESS my hand and official seal.
- ---------------------------------------
Notary Seal
<PAGE> 9
EXHIBIT "A" ATTACHED TO THAT CERTAIN DEED OF TRUST AND ASSIGNMENT OF RENTS DATED
MARCH 24,1997 EXECUTED BY ISIS PHARMACEUTICALS, INC.
EXHIBIT "A"
LEGAL DESCRIPTION:
PARCEL A:
LOTS 5, 6 AND 7 OF CARLSBAD TRACT NO. 84-9, IN THE CITY OF CARLSBAD, COUNTY OF
SAN DIEGO, STATE OF CALIFORNIA, ACCORDING TO MAP THEREOF NO. 11230, FILED IN THE
OFFICE OF THE COUNTY RECORDER OF SAN DIEGO COUNTY, MAY 10, 1985.
PARCEL B:
A NON-EXCLUSIVE EASEMENT ON, OVER AND UNDER THE COMMON AREA AS DEFINED AND SHOWN
ON THOSE CERTAIN AMENDED AND RESTATED DECLARATION OF ESTABLISHMENT OF COVENANTS,
CONDITIONS AND RESTRICTIONS, AND RESERVATION OF EASEMENTS (THE "DECLARATIONS"),
DATED JUNE 28,1988 AND RECORDED AUGUST 8,1988 AS FILE 88-387705 OF OFFICIAL
RECORDS, FOR THE PURPOSES OF INGRESS AND EGRESS, PARKING, THE CONSTRUCTION,
INSTALLATION, MAINTENANCE, REMOVAL, REPLACEMENTS, OPERATION AND USE OF
UTILITIES, INCLUDING BUT NOT LIMITED TO SEWERS, WATER AND GAS PIPES, DRAINAGE
LINES AND SYSTEMS, ELECTRIC POWER, CONDUIT LINES AND WIRING, TELEPHONE,
CONDUITS, LINES AND WIRES AND OTHER UTILITIES, PUBLIC OR PRIVATE, BENEATH THE
GROUND SURFACE (EXCEPT VAULTS, VENTS, ACCESS, STRUCTURES AND OTHER FACILITIES
REQUIRED TO BE ABOVE GROUND), SUBJECT TO THE TERMS, AS MORE PARTICULARLY SET
FORTH IN THE DECLARATION.
A.P.N.'s: 212-061-31-00 and 2l2-061-32-00 and 2l2-061-33-00
Properties also known as: 2292 Faraday Avenue (Lot 5), 2280 Faraday Avenue
(Lot 6) and 2282 Faraday Avenue (Lot 7), Carlsbad, California 92008
<PAGE> 10
EXHIBIT 'B' ATTACHED TO THAT CERTAIN DEED OF TRUST AND ASSIGNMENT OF RENTS
EXECUTED BY ISIS PHARMACEUTICALS, INC., DATED MARCH 24, 1997
HAZARDOUS MATERIALS INDEMINTY AGREEMENT
1. Trustor hereby represents to Beneficiary that neither Trustor nor, to the
best of its knowledge, after having made reasonable and appropriate inquiry, any
current or previous owner, tenant, occupant or user of the real property secured
hereby ("Property"), has used, generated, released, discharged, stored,
installed or disposed of any Hazardous Material (as defined below) on, under,
in, about or near the Property, nor have any of them transported Hazardous
Material to, from or across the Property. In addition, Trustor covenants as
follows:
(a) Trustor will not, nor will Trustor permit or suffer any of its
partners, officers, employees, agents, tenants, or any other licensee or invitee
or trespasser to cause or permit any Hazardous Materials to be brought upon,
kept, or used or disposed of on, under, in or about the Property, except for
Hazardous Materials used in the normal course of Trustor's business, provided
that Trustor complies with all city, county, federal and all other regulations,
laws and restrictions relating to Hazardous Materials.
(b) If Trustor breaches the representations, covenants, or
obligations stated in this paragraph 1, or if by any other cause whatsoever the
presence of Hazardous Materials on, under, in, about or near the Property
results in the contamination of the Property or other properties by Hazardous
Materials, then, in addition to other remedies available to Beneficiary, Trustor
shall, at its sole cost and expense, indemnify, defend and hold Beneficiary and
its officers, employees, agents, affiliates and successors-in-interest harmless
from any and all losses, obligations, claims, judgements, damages, penalties,
fines, costs, liabilities, expenses, including actual attorneys' fees and costs,
and the costs of any clean-up, and any other losses which may arise at any time
as a result of such contamination, or allegation thereof by a governmental
agency, or the determination by any court or governmental agency, or by
Beneficiary or its successor-in-interest, that the uses of the Property must be
limited or that the Hazardous Materials should be removed and the damage to the
Property and its environs restored.
(c) The indemnifications of Beneficiary, and its officers, employees,
agents, affiliates and successors-in-interest by Trustor contained in this
paragraph 1 includes, without limitations costs incurred in connection with
any investigation of site conditions, or any cleanup, remedial removal or
restoration where required by any Federal, state or local governmental agency or
political subdivision, or by any insurance company, or by Beneficiary or its
successor-in-interest in the exercise of its reasonable discretion, because of
Hazardous Material present in the soil, ground, water, air, any improvements
("Improvements") located on the Property, or otherwise in, on, under, about or
near the Property.
<PAGE> 11
Exhibit "B" to Deed of Trust
ISIS PHARMACEUTICALS, INC.
Page 2
(d) Without limiting the foregoing, if the presence of any
Hazardous Material in, on, under, about or near the Property is caused or
permitted by Trustor, its tenants, or either of their successors-in-interest,
officers, employees, agents, licensees or invitees, or by trespassers, and
results in any contamination of the Property or other properties, Trustor shall
take all actions at its sole cost and expense as are necessary to return the
Property to the condition existing prior to the introduction of any such
Hazardous Materials to the Property; provided that the Beneficiary's approval of
such an action shall be first obtained, which approval shall not be unreasonably
withheld as long as such actions would not potentially have an adverse material
long-term or short-term effect on the Property.
(e) The foregoing clean-up and indemnification obligations shall
survive the reconveyance or foreclosure of this Deed of Trust securing Trustor's
obligations under the Loan.
(f) Trustor also agrees: (i) to provide Beneficiary with copies of
any communications outside the normal course of Trustor's business, between
Trustor, or its tenant, officers, employees, agents or predecessors or
successors-in-interest, licensees or invitees and any third parties, including
but not limited to, governmental authorities relative to any Hazardous Material
on, under, in, about or near or affecting the Property; and (ii) that
nondisclosure of any such communication prior to recordation of this Deed of
Trust shall be deemed an affirmative representation that no such communication
has been received by or is known to Trustor, its officers, employees or agents;
and (iii) the Beneficiary is hereby granted the right (but not the obligation)
to participate in any proceeding with any governmental agency or court relative
to any Hazardous Materials on, in, under, about, near or affecting the Property.
(g) As used herein the term "Hazardous Materials" means any
hazardous, toxic or infectious substance, material, gas or waste which is or
becomes regulated by any governmental authority, or the United States
Government, or any of their agencies, or which has been identified as a toxic,
cancer causing or otherwise hazardous substance. The term "Hazardous Materials"
includes, without limitation, any material or substance which is: (i) defined as
a "hazardous waste," "extremely hazardous waste" or "restricted hazardous waste"
under Sections 25115, 25117 or 25122.7, or is listed pursuant to Section 25140,
of the California Health and Safety Code, Division 20, Chapter 6.5, as it may
from time to time be amended (the "Hazardous Waste Control Law"); (ii) defined
as a "hazardous substance" under Section 25316 of the California Health and
Safety Code, Division 20, Chapter 6.8 as now existing or hereinafter amended
(the "Carpenter-Presley-Tanner Hazardous Substance Account Act"); (iii) defined
as a "hazardous material," "hazardous substance" or "hazardous waste" under
Section 25501 of the California Health and Safety Code, Division 20, Chapter
6.95 as presently existing or hereinafter amended (the "Hazardous Materials
Release Response Plans and Inventory"); (iv) defined as a "hazardous substance"
under Section 25281 of the California Health and Safety Code, Division 20,
Chapter 6.7 as presently existing or hereinafter amended (the "Underground
Storage of Hazardous Substances Act"), (v) petroleum; (vi) polychlorinated
biphenyls (PCB); (vii) asbestos; (viii) listed under Article 9 or defined as
"hazardous" or "extremely hazardous" pursuant to Article 11 of Title 22 of the
California Administrative Code, Division 4, Chapter 20, as now existing or
hereinafter amended; (ix) designated as a "hazardous substance" pursuant to
Section 307 of the Federal Water Pollution Control Act (33 U.S.C. 1317), as
presently existing or
<PAGE> 12
Exhibit "B" to Deed of Trust
ISIS PHARMACEUTICALS, INC.
Page 3
hereinafter amended or designated as a "hazardous substance" pursuant to Section
311 of the Clean Water Act, 33 U.S.C. 1251 et seq. (33 U.S.C. 1321); (x)
defined as a "hazardous waste" pursuant to Section 1004 of the Federal Resource
Conservation and Recovery Act, 42 U.S.C. 69012 et seq. (42 U.S.C. 6903), as
presently existing or hereinafter amended; or (xi) defined as a "hazardous
substance" pursuant to Section 101 of the Comprehensive Environmental Response,
Compensation and Liability Act, 42 U.S.C. 9601 et seq. (42 U.S.C. 9601), as
presently existing or hereafter amended.
(h) Trustor also represents that the Property is not a "hazardous
waste property" or within a "border zone" as defined in California Health and
Safety Code 25117.3 and 25117.4 nor is the Property subject to the requirements
for notice to the California Department of Health Services, as such notice
requirement is defined in California Health and Safety Code 25221(a) as
presently existing.
(i) Trustor also represents that the Property and its intended use
complies with all applicable laws and governmental regulation including, without
limitation, all applicable Federal, state and local laws pertaining to air and
water quality, waste disposal and other environmental matters, including but not
limited to, the clean water, clean air, federal water pollution control, solid
waste disposal, resource conservation recovery and comprehensive environmental
response compensation and liability acts enacted by the U.S. Congress, and the
California Environmental Quality Act and all regulations adopted by the State of
California pursuant thereto, and the rules and regulations and ordinances of the
County of San Diego and the City of Carlsbad, concerning air and water quality,
waste disposal and other environmental matters, and the rules and regulations of
the California Department of Health Services, the regional Water Quality Control
Board, the regional Air Quality Management District, the California State Water
Resources Control Board, the U.S. Environmental Protection Agency, and all other
applicable Federal, state and local agencies and bureaus.
(j) Trustor acknowledges that this is an environmental provision
as described in California Code of Civil Procedure, Section 736.
The breach by Trustor of any representation or covenant contained
in this paragraph 1 shall constitute an immediate event of default hereunder,
affording to Beneficiary any and all remedies for said default available
hereunder or under applicable law.
2. Upon a default hereunder by Trustor, Beneficiary shall have each of the
following remedies, in addition to any other remedies, hereunder or under
applicable law, which Beneficiary may otherwise have for said default:
(a) Beneficiary or its employees, acting by themselves or
through a court-appointed receiver, may: (i) enter upon, possess, manage,
operate, dispose of, and contract to dispose of the Property or any part
thereof; (ii) take custody of all accounts; (iii) negotiate with governmental
authorities with respect to the Property's environmental compliance and remedial
measures; (iv) take any action necessary to enforce compliance with
environmental provisions,
<PAGE> 13
Exhibit "B" to Deed of Trust
ISIS PHARMACEUTICALS, INC.
Page 4
including but not limited to spending rents to abate the problem; (v) make,
terminate, enforce or modify leases of the Property upon such terms and
conditions as Beneficiary deems proper; (vi) contract for goods and services,
hire agents, employees, and counsel, make repairs, alterations, and improvements
to the Property necessary, in Beneficiary's judgement, to protect or enhance the
security hereof; (vii) incur the risks and obligations ordinarily incurred by
owners of property (without any personal obligation on the part of the
receiver); and/or (viii) take any and all other actions which may be necessary
or desirable to comply with Trustor's obligations hereunder and under any other
documents (collectively "Loan Documents") executed by Trustor in connection
therewith. All sums realized by Beneficiary under this subparagraph, less all
costs and expenses incurred by it under this subparagraph including attorney
fees, and less such sums as Beneficiary deems appropriate as a reserve to meet
future expenses under this subparagraph, shall be applied on any indebtedness
secured hereby in such order as Beneficiary shall determine. Neither application
of said sums to said indebtedness, nor any other action taken by Beneficiary
under this subparagraph shall cure or waive any event of default or notice of
default hereunder, or nullify the effect of any such notice of default.
Beneficiary, or any employee or agent of Beneficiary, or a receiver appointed by
a court of competent jurisdiction, may take any action or proceeding hereunder
without regard to: (A) the adequacy of the security for the indebtedness secured
hereunder; (B) the existence of a declaration that the indebtedness secured
hereby has been declared immediately due and payable; or (C) the filing of a
notice of default.
(b) With or without notice, and without releasing Trustor from
any obligation hereunder, to cure any default of Trustor and, in connection
therewith, Beneficiary or its agents, acting by themselves or through a court
appointed receiver, may enter upon the Property or any part thereof and perform
such acts and things as Beneficiary deems necessary or desirable to inspect,
investigate, assess, and protect the security hereof, including without
limitation of any of its other rights: (i) to obtain a court order to enforce
Beneficiary's right to enter and inspect the Property under California Civil
Code Section 2929.5, to which the decision of Beneficiary as to whether there
exists a release or threatened release of a Hazardous Material onto the Property
shall be deemed reasonable and conclusive as between the parties hereto; and
(ii) to have a receiver appointed under California Code of Civil Procedure
Section 564 to enforce Beneficiary's right to enter and inspect the Property for
Hazardous Materials. All costs and expenses incurred by Beneficiary with respect
to the audits, tests, inspections, and examinations which Beneficiary or its
agents or employees may conduct, including the fees of the engineers,
laboratories, contractors, consultants, and attorneys, shall be paid by Trustor
immediately upon demand by Beneficiary. All costs and expenses incurred by
Trustee and Beneficiary pursuant to this subparagraph (including without
limitation court costs, consultant fees and attorney fees, whether incurred in
litigation or not and whether before or after judgement) shall bear interest at
the default rate of interest ("Default Rate") set forth in the promissory note
("Note") secured hereby, from the date they are incurred until said sums have
been paid.
(c) To seek a judgement that Trustor has breached its covenants,
representations and/or warranties with respect to the Hazardous Materials, as
set forth in paragraph I above, by commencing and maintaining an action or
actions in any court of competent jurisdiction for breach of contract pursuant
to California Code of Civil Procedure
<PAGE> 14
Exhibit "B" to Deed of Trust
ISIS PHARMACEUTICALS, INC.
Page 5
Section 736, whether commenced prior to foreclosure of the Property or after
foreclosure of the Property, and to seek the recovery of any and all costs,
damages, expenses, fees, penalties, fines, judgements, indemnification payments
to third parties, and other out-of-pocket costs or expenses actually incurred by
Beneficiary (collectively, the "Environmental Costs") incurred or advanced by
Beneficiary relating to the cleanup, remediation or other response action
required by applicable law or to which Beneficiary believes necessary to protect
the Property, it being conclusively presumed between Beneficiary and Trustor
that all such Environmental Costs incurred or advanced by Beneficiary relating
to the cleanup, remediation or other response action of or to the Property were
made by Beneficiary in good faith. All Environmental Costs incurred by
Beneficiary under this subparagraph (including without limitation court costs,
consultant fees and attorney fees, whether incurred in litigation or not and
whether before or after judgement) shall bear interest at the Default Rate from
the date of expenditure until said sums have been paid. Beneficiary shall be
entitled to bid, at any foreclosure sale of the Property, the amount of said
costs, expenses and interest in addition to the amount of the other obligations
hereby secured as a credit bid, the equivalent of cash. Trustor acknowledges and
agrees that notwithstanding any term or provision contained herein or in the
Loan Documents: (i) the Environmental Costs shall be exceptions to any
nonrecourse or exculpatory provision of the Loan Documents; (ii) Trustor shall
be fully and personally liable for the Environmental Costs hereunder; (iii) such
liability shall not be limited to the original principal amount of the
obligations secured by this Deed of Trust; and (iv) Trustor's obligations shall
survive the foreclosure, deed in lieu of foreclosure, release, reconveyance, or
any other transfer of the Property or this Deed of Trust. For the purposes of
any action brought under this subparagraph, Trustor hereby waives the defense of
laches, and any applicable statute of limitations.
(d) To waive its lien against the Property or any portion
thereof, whether fixtures or personal property, to the extent such property is
found to be environmentally impaired in accordance with California Code of Civil
Procedure Section 726.5 and to exercise any and all rights and remedies of an
unsecured creditor against Trustor and all of Trustor's assets and property for
the recovery of any deficiency and Environmental Costs, including, but not
limited to, seeking an attachment order under California Code of Civil Procedure
Section 483.010. As between Beneficiary and Trustor, for purposes of California
Code of Civil Procedure Section 726.5, Trustor shall have the burden of proving
that Trustor or any related party (or any affiliate or agent of Trustor or any
related party) was not in any way negligent in permitting the release or
threatening release of the Hazardous Material. Trustor acknowledges and agrees
that notwithstanding any term or provision contained herein or in the Loan
Documents, all judgements and awards entered against Trustor shall be exceptions
to any nonrecourse or exculpatory provision of the Loan Documents, and Trustor
shall be fully and personally liable for all judgements and awards entered
against Trustor hereunder and such liability shall not be limited to the
original principal amount of the obligations secured by this Deed of Trust and
Trustor's obligations shall survive the foreclosure, deed in lieu of
foreclosure, release, reconveyance, or any other transfer of the Property or
this Deed of Trust. For the purpose of any action brought under this
subparagraph, Trustor hereby waives the defense of laches and any applicable
statute of limitations.
<PAGE> 15
Exhibit "B" to Deed of Trust
ISIS PHARMACEUTICALS, INC.
Page 6
(e) All rights and remedies of Beneficiary hereunder are cumulative
and in addition to all rights and remedies provided in the Loan Documents or by
applicable law.
CROSS DEFAULT
Default in the performance or observance of any of the terms and provisions: (i)
of any documents, including without limitation this Deed of Trust, ("Loan
Documents") executed by Trustor or any entity guaranteeing any of Trustor's
obligations to Beneficiary ("Guarantor") in connection with the obligations
secured hereby; or (ii) of any documents executed by Trustor or Guarantor in
connection with any other obligations of Trustor or any Guarantor to
Beneficiary, including but not limited to Beneficiary Loan Number 00700002641
and 00700002724 (collectively, "Other Documents"), shall constitute a default
under the terms of each of the Loan Documents and the Other Documents at
Beneficiary's option, thereby making available to Beneficiary any and all of the
remedies set forth therein.
<PAGE> 1
EXHIBIT 10.4
Imperial Bank Note Secured By Deed of Trust dated March 24, 1997
in the amount of $3,706,620; Deed of Trust and Assignment of Rents
dated March 24, 1997.
90
<PAGE> 2
DO NOT DESTROY THIS NOTE:
WHEN PAID, THIS NOTE, WITH THE DEED OF TRUST SECURING SAME, MUST BE SURRENDERED
TO THE TRUSTEE FOR CANCELLATION BEFORE RECONVEYANCE WILL BE MADE.
[LOGO]
IMPERIAL BANK
Member FDIC
NOTE SECURED BY DEED OF TRUST
$3,706,620.00 San Diego, California, MARCH 24, 1997
On April 1, 2002, and as hereinafter provided, for value received, the
undersigned promises to pay to IMPERIAL BANK ("Bank"), a California banking
corporation, or order, at its San Diego Regional office, the principal sum of
$3,706,620.00 or such sums up to the maximum if so stated, as the Bank may now
or hereafter advance to or for the benefit of the undersigned in accordance with
the terms hereof, together with interest from date of disbursement or n/a,
whichever is later, on the unpaid principal balance [ ] at the rate of n/a% per
year [X] at the rate of 0.50% per year in excess of the rate of interest which
Bank has announced as its prime lending rate (the "Prime Rate"), which shall
vary concurrently with any change in such Prime Rate, or $250.00, whichever is
greater. Interest shall be computed at the above rate on the basis of the actual
number of days during which the principal balance is outstanding, divided by
360, which shall, for interest computation purposes, be considered one year.
Interest shall be payable [X] monthly [ ] quarterly [ ] included with principal
[X] in addition to principal [ ] beginning May 1, 1997, and if not so paid shall
become a part of the principal. All payments shall be applied first to interest,
and the remainder, if any, on principal. [X] (If checked), Principal shall be
payable in installments of $12,433.00, or more, each installment on the 1st day
of each month, beginning May 1, 1997.
Any partial prepayment shall be applied to the installments, if any, in
inverse order of maturity. Should default be made in the payment of principal or
interest when due, or in the performance or observance, when due, of any item,
covenant or condition of any deed of trust, security agreement or other
agreement (including amendments or extensions thereof) securing or pertaining to
this note, at the option of the holder hereof and without notice or demand, the
entire balance of principal and accrued interest then remaining unpaid shall (a)
become immediately due and payable, and (b) thereafter bear interest, until paid
in full, at the increased rate of 5% per year in excess of the rate provided for
above, as it may vary from time to time.
Defaults shall include, but not be limited to, the failure of the
maker(s) to pay principal or interest when due; the filing as to each person
obligated hereon, whether as maker, co-maker, endorser or guarantor
(individually or collectively referred to as the "Obligor") of a voluntary or
involuntary petition under the provisions of the Federal Bankruptcy Act; the
issuance of any attachment or execution against any asset of any Obligor; the
death of any Obligor; or any deterioration of the financial condition of any
Obligor which results in the holder hereof considering itself, in good faith,
insecure.
[X] If any installment payment or principal balance payment due hereunder is
delinquent ten or more days, Obligor agrees to pay a late charge in the amount
of 5% of the payment so due and unpaid, in addition to the payment; but nothing
in this paragraph is to be construed as any obligation on the part of the holder
of this note to accept payment of any installment past due or less than the
total unpaid principal balance after maturity.
If this note is not paid when due, each Obligor promises to pay all
costs and expenses of collection and reasonable attorney's fees incurred by the
holder hereof on account of such collection, plus interest at the rate
applicable to principal, whether or not suit is filed hereon. Each Obligor shall
be jointly and severally liable hereon and consents to renewals, replacements
and extensions of time for payment hereof, before, at, or after maturity;
consents to the acceptance, release or substitution of security for this note;
and waives demand and protest and the right to assert any statute of
limitations. Any married person who signs this note agrees that recourse may be
had against separate property for any obligations hereunder. The indebtedness
evidenced hereby shall be payable in lawful money of the United States. In any
action brought under or arising out of this note, each Obligor, including
successor(s) or assign(s) hereby consents to the application of California law,
to the jurisdiction of any competent court within the State of California, and
to service of process by any means authorized by California law.
This note is secured by a deed of trust, dated MARCH 24, 1997, to
IMPERIAL BANCORP as Trustee which contains the following provisions: "In the
event the herein described property or any part thereof, or any interest therein
is sold, agreed to be sold, conveyed, transferred, disposed of, further
encumbered, or alienated by trustor or by the operation of law or otherwise,
without the written consent of beneficiary first obtained, all obligations
secured by this instrument, irrespective of the maturity dates expressed
therein, at the option of the holder beneficiary, and without demand or notice
shall immediately become due and payable. Consent to one such transaction shall
not be deemed to be a waiver of the right to require such consent to future or
successive transactions."
No single or partial exercise of any power hereunder, or under any deed
of trust, security agreement or other agreement in connection herewith shall
preclude other or further exercises thereof or the exercise of any other such
power. The holder hereof shall at all times have the right to proceed against
any portion of the security for this note in such order and in such manner as
such holder may consider appropriate, without waiving any rights with respect to
any of the security. Any delay or omission on the part of the holder hereof in
exercising any right hereunder, or under any deed of trust, security agreement
or other agreement, shall not operate as a waiver of such right, or of any other
right, under this note or any deed of trust, security agreement or other
agreement in connection herewith.
* See Addendum attached hereto and made a part hereof by this reference.
ISIS PHARMACEUTICALS, INC.
- --------------------------- -------------------------
a Delaware corporation
- --------------------------- -------------------------
By: /s/ GARY J. G. ATKINSON
- --------------------------- -------------------------
Vice President, Finance
<PAGE> 3
ATTACHED TO THAT CERTAIN NOTE SECURED BY DEED OF TRUST DATED MARCH 24, 1997
EXECUTED BY ISIS PHARMACEUTICALS, INC.
ADDENDUM
The following Reference Provision is by this reference incorporated in the Note:
REFERENCE PROVISION
1. Other than (i) non-judicial foreclosure and all matters in connection
therewith regarding security interests in real or personal property; or (ii) the
appointment of a receiver, or the exercise of other provisional remedies (any
and all of which may be initiated pursuant to applicable law), each controversy,
dispute or claim between the parties arising out of or relating to this Note
("Agreement"), which controversy, dispute or claim is not settled in writing
within thirty (30) days after the "Claim Date" (defined as the date on which a
party subject to the Agreement gives written notice to all other parties that a
controversy, dispute or claim exists), will be settled by a reference proceeding
in California in accordance with the provisions of Section 638 et seq. of the
California Code of Civil Procedure ("CCP"), or their successor section, which
shall constitute the exclusive remedy for the settlement of any controversy,
dispute or claim concerning this Agreement, including whether such controversy,
dispute or claim is subject to the reference proceeding and except as set forth
above, the parties waive their rights to initiate any legal proceedings against
each other in any court or jurisdiction other than the Superior Court in the
County where the Real Property, if any, is located or Los Angeles County if none
(the "Court"). The referee shall be a retired Judge of the Court selected by
mutual agreement of the parties, and if they cannot so agree within forty-five
(45) days after the Claim Date, the referee shall be promptly selected by the
Presiding Judge of the Court (or his representative). The referee shall be
appointed to sit as a temporary judge, with all of the powers of a temporary
judge, as authorized by law, and upon selection should take and subscribe to the
oath of office as provided for in Rule 244 of the California Rules of Court (or
any subsequently enacted Rule). Each party shall have one peremptory challenge
pursuant to CCP Section 170.6. The referee shall (a) be requested to set the
matter for hearing within sixty (60) days after the Claim Date and (b) try any
and all issues of law or fact and report a statement of decision upon them, if
possible, within ninety (90) days of the Claim Date. Any decision rendered by
the referee will be final, binding and conclusive and judgment shall be entered
pursuant to CCP Section 644 in any court in the State of California having
jurisdiction. Any party may apply for a reference proceeding at any time after
thirty (30) days following the notice to any other party of the nature of the
controversy, dispute or claim, by filing a petition for a hearing and/or trial.
All discovery permitted by this Agreement shall be completed no later than
fifteen (15)
<PAGE> 4
days before the first hearing date established by the referee. The referee may
extend such period in the event of a party's refusal to provide requested
discovery for any reason whatsoever, including, without limitation, legal
objections raised to such discovery or unavailability of a witness due to
absence or illness. No party shall be entitled to "priority" in conducting
discovery. Depositions may be taken by either party upon seven (7) days written
notice, and request for production or inspection of documents shall be responded
to within ten (10) days after service. All disputes relating to discovery which
cannot be resolved by the parties shall be submitted to the referee whose
decision shall be final and binding upon the parties. Pending appointment of the
referee as provided herein, the Court is empowered to issue temporary and/or
provisional remedies, as appropriate.
2. Except as expressly set forth in this Agreement, the referee shall
determine the manner in which the reference proceeding is conducted including
the time and place of all hearings, the order of presentation of evidence, and
all other questions that arise with respect to the course of the reference
proceeding. All proceedings and hearings conducted before the referee, except
for trial, shall be conducted without a court reporter, except that when any
party so requests, a court reporter will be used at any hearing conducted before
the referee. The party making such a request shall have the obligation to
arrange for and pay for the court reporter. The costs of the court reporter at
the trial shall be borne equally by the parties.
3. The referee shall be required to determine all issues in accordance with
existing case law and the statutory laws of the State of California. The rules
of evidence applicable to proceedings at law in the State of California will be
applicable to the reference proceeding. The referee shall be empowered to enter
equitable as well as legal relief, to provide all temporary and/or provisional
remedies and to enter equitable orders that will be binding upon the parties.
The referee shall issue a single judgment at the close of the reference
proceeding which shall dispose of all of the claims of the parties that are the
subject of the reference. The parties hereto expressly reserve the right to
contest or appeal from the final judgment or any appealable order or appealable
judgment entered by the referee. The parties hereto expressly reserve the right
to findings of fact, conclusions of law, a written statement of decision, and
the right to move for a new trial or a different judgment, which new trial, if
granted, is also to be a reference proceeding under this provision.
4. In the event that the enabling legislation which provides for appointment
of a referee is repealed (and no successor statute is enacted), any dispute
between the parties that would otherwise be determined by the reference
procedure herein described will be resolved and determined by arbitration. The
arbitration will be conducted by a retired judge of the Court, in accordance
with the California Arbitration Act, Section 1280 through Section 1294.2 of the
CCP as amended from time to time. The limitations with respect to discovery as
set forth hereinabove shall apply to any such arbitration proceeding.
<PAGE> 5
RECORDING REQUESTED BY
IMPERIAL BANK
WHEN RECORDED MAIL TO
IMPERIAL BANK
9920 SO LA CIENEGA BLVD
INGLEWOOD CA 90301
Attn Lending Services INDEX AS DEED OF TRUST AND ASSIGNMENT OF RENTS
SPACE ABOVE THIS LINE FOR RECORDER'S USE
- --------------------------------------------------------------------------------
Real Estate Loan
DEED OF TRUST AND ASSIGNMENT OF RENTS Short Form
BY THIS DEED OF TRUST, made on MARCH 24, 1997
by ISIS PHARMACEUTICALS, INC., a Delaware corporation (herein called "Trustor"),
whose address is 2280 Faraday Drive
(Number and Street)
Carlsbad California 92008
(City) (State) (Zip Code)
to IMPERIAL BANCORP, a California corporation as Trustee, for the benefit of
IMPERIAL BANK, a California corporation, as Beneficiary, Trustor irrevocably
GRANTS, TRANSFERS AND ASSIGNS TO TRUSTEE IN TRUST, WITH POWER OF SALE, all that
property in the City of Carlsbad, County of San Diego, State of California,
described as:
SEE EXHIBIT "A" ATTACHED HERETO AND MADE A PART HEREOF BY THIS REFERENCE
SEE EXHIBIT "B" FOR HAZARDOUS MATERIALS PROVISIONS AND CROSS DEFAULT PROVISIONS
ATTACHED HERETO AND MADE A PART HEREOF BY THIS REFERENCE
and commonly known as 2280, 2282 and 2292 Faraday Avenue, Carlsbad, California
92008
INCLUDING (a) all appurtenances and easements and rights of way used in
connection therewith or as a means of access thereto; (b) all buildings,
improvements and fixtures now or hereafter placed thereon, it being understood
and agreed that all classes of property attached or unattached used in
connection therewith shall be deemed fixtures; and (c) any water rights and/or
the stock of any water company which rights and/or stock are appurtenant or
pertain to said property.
TOGETHER WITH the rents, issues and profits thereof, SUBJECT, HOWEVER, to the
right, power and authority hereinafter given to and conferred upon Trustor to
collect and retain such rents, issues and profits prior to any default
hereunder.
FOR THE PURPOSE OF SECURING: (1) Payment of the indebtedness with interest
thereon evidenced by two Promissory Notes in the principal sum of (i)
$6,000,000.00 and (ii) $3,706,620.00, both executed by Trustor, both dated March
24, 1997 both payable to Beneficiary or order, and all modifications, extensions
or renewals thereof; (2) Payment of such additional sums with interest thereon
as the then record owner of said property may hereafter borrow from Beneficiary,
when evidenced by a note (or notes) or any agreement reciting that it is so
secured; (3) Performance of each agreement of Trustor and Borrower incorporated
herein by reference or contained herein; and (4) Performance of each agreement
of Trustor contained in any and all agreements executed by Trustor for the
purpose of further securing any obligations secured hereby.
In the event the herein described property, or any part thereof, or any interest
therein, is sold, agreed to be sold, conveyed, transferred, disposed of, further
encumbered, or alienated by Trustor or by the operation of law or otherwise
without the
Page 1 of 3
<PAGE> 6
written consent of beneficiary first obtained, all obligations secured by this
instrument, irrespective of the maturity dates expressed therein, at the option
of the holder beneficiary, and without demand or notice, shall immediately
become due and payable. Consent to one such transaction shall not be deemed to
be a waiver of the right to require such consent to future or successive
transactions.
TO PROTECT THE SECURITY OF THIS DEED OF TRUST, TRUSTOR AGREES: By the execution
and delivery of this Deed of Trust and the obligation(s) secured hereby, that
provisions (1) to (30), inclusive, of the Fictitious Deed of Trust recorded in
Los Angeles, Riverside, San Francisco, Solano, Sonoma, Monterey, Contra Costa,
San Bernardino, San Diego, Ventura, Santa Clara, Sacramento, Marin and Alameda
Counties February 29, 1980, and in Orange, San Mateo and Santa Barbara Counties
March 4, 1980, in the Book and at the Page or as the document number of Official
Records in the office of the County Recorder of the County where said property
is located as set forth and noted below opposite the name of such County, viz:
<TABLE>
<CAPTION>
COUNTY COUNTY
<S> <C> <C> <C> <C> <C>
Los Angeles Document 80-206967 San Bernardino Document 80-052391
Orange Book 13522 Page 522 San Diego Book 1980 Page 80-070516
Riverside Book 1980 Page 40216 Ventura Book 5605 Page 585
San Francisco Book C953 Page 187 Santa Clara F 168 Page 720
San Mateo Reel 7942 Image 117 Sacramento Book 8002-29 Page 3
Solano Book 1980 Page 15924 Santa Barbara Document 80-8831
Sonoma Document 80-11977 Marin Book 3684 Page 09
Monterey Reel 1392 Page 1128 Alameda Document 80-036324
Contra Costa Book 9752 Page 322
</TABLE>
hereby are adopted and incorporated herein and made a part hereof as fully as
though set forth herein at length; that Trustor will observe said provisions;
and that the references to property, obligations, and parties in said provisions
shall be construed to refer to the property, obligations, and parties set forth
in this Deed of Trust.
TRUSTOR REQUESTS that a copy of any notice of default and of any notice of sale
hereunder shall be mailed to Trustor at the address hereinabove set forth.
The following portions of provisions (1) to (30) of the Fictitious Deed of Trust
incorporated into this Deed of Trust are amended as follows:
a) In paragraphs 7, 15 and 21, wherever "Prime Rate charged by Imperial Bank"
appears, "Default rate as charged by Imperial Bank as set forth in the
obligation secured hereby" is hereby substituted. b) The first two full
sentences in paragraph 20 are deleted in their entirety and are replaced by the
following provisions: Trustor hereby absolutely and unconditionally assigns and
transfers to Beneficiary all the leases (including all security deposits,
guarantees and other security at any time given as security for the performance
of the obligations of the tenants thereunder), income, rents, issues, deposits,
profits and proceeds of the property to which Trustor may be entitled, whether
now due, past due or to become due, and hereby gives to and confers upon
Beneficiary the right, power and authority to collect such income, rents,
issues, deposits, profits and proceeds. This assignment of the leases, income,
rents, issues, deposits, profits and proceeds constitutes an irrevocable
direction and authorization of all tenants under the leases to pay all rent,
income and profits to Beneficiary upon demand and without further consent or
other action by Trustor. This is an absolute assignment, not an assignment for
security only, and Beneficiary's right to rents, issues and profits is not
contingent on Beneficiary's possession of all or any portion of the property.
Trustor irrevocably appoints Beneficiary its true and lawful attorney-in-fact,
at the option of Beneficiary at any time, to demand, receive and enforce
payment, to give receipts, releases and satisfactions, and to sue, either in the
name of Trustor or in the name of the Beneficiary, for all such income, rents,
issues, deposits, profits and proceeds and apply the same to the indebtedness
secured hereby. It is understood and agreed that neither the foregoing
assignment of leases, income, rents, issues, deposits, profits and proceeds to
Beneficiary nor the exercise by Beneficiary of any of its rights or remedies
under this Section or under any similar provision of the Deed of Trust shall be
deemed to make Beneficiary a "mortgagee-in-possession" or otherwise obligated,
responsible or liable in any manner with respect to the property or the use,
occupancy, enjoyment or operation of all or any portion thereof. Notwithstanding
anything to the contrary contained herein or in the obligation secured hereby,
so long as no event which is, or with notice or passage of time or both would
constitute, an event of default shall have occurred, Trustor shall have a
license to collect all income, rents, issues, profits and proceeds from the
property as trustee for the benefit of Beneficiary and Trustor, and Trustor
shall apply the funds so collected first to the payment of the indebtedness
secured hereby which are then due and payable in such manner as Beneficiary
elects and thereafter to the account of Trustor. Upon the occurrence of such
event, such license shall be deemed revoked and any rents received thereafter by
Trustor shall be held by Trustor in trust for the benefit of Beneficiary and
shall be delivered in kind to Beneficiary immediately upon receipt thereof by
Trustor. Upon the occurrence of such event, Trustor agrees to deliver the
original copies of all leases to Beneficiary. Trustor hereby irrevocably
constitutes and appoints Beneficiary its true and lawful attorney-in-fact to
enforce in Trustor's name or
Page 2 of 3
<PAGE> 7
in Beneficiary's name or otherwise, all rights of Trustor in the instruments,
including without limitation, checks and money orders, tendered as payments of
rents and to do any and all things necessary and proper to carry out the
purposes hereof.
SIGNATURE OF TRUSTOR
ISIS PHARMACEUTICALS, INC., a Delaware
corporation
By: /s/ GARY J. G. ATKINSON
------------------------------------------
VICE PRESIDENT, FINANCE
------------------------------------------
------------------------------------------
SIGNATURES MUST BE ACKNOWLEDGED BEFORE A NOTARY PUBLIC
- --------------------------------------------------------------------------------
REQUEST FOR FULL RECONVEYANCE
To Be Used Only When Note Has Been Paid
A reconveyance will be issued upon presentation to Imperial Bancorp of this
request properly signed and accompanied by the reconveyance fee, the Deed of
Trust, the original note or notes secured by said Deed of Trust and any receipt
or document evidencing any other indebtedness secured thereby.
To IMPERIAL BANCORP, Trustee Dated:
------------------------
The undersigned is the legal owner of the note or notes and of all other
indebtedness secured by the within Deed of Trust. Said note or notes, together
with all other indebtedness secured by said Deed of Trust, have been fully paid
and satisfied and you are hereby requested and directed on payment to you of any
sums owing to you under the terms of said Deed of Trust to cancel said note or
notes and all other evidences of indebtedness delivered to you herewith and said
Deed of Trust and to reconvey without warranty to the parties designated by the
terms of said Deed of Trust all the estate now held by you thereunder.
- -------------------------------------
- ------------------------------------- -------------------------------------
- ------------------------------------- -------------------------------------
- ------------------------------------- -------------------------------------
- ------------------------------------- -------------------------------------
- -------------------------------------
Do not lose or destroy this Deed of Trust OR THE NOTE which it secures. Both
must be delivered to the Trustee for cancellation before reconveyance will be
made.
Page 3 of 3
<PAGE> 8
State of California )
)Ss
County of San Diego )
On May 5, 1997, before me, the undersigned, Notary Public in and for said State,
personally appeared Gary Atkinson personally known to me (or proved to me on the
basis of satisfactory evidence) to be the person(s) whose name(s) is/are
subscribed to the within instrument and acknowledged to me that he/she/they
executed the same in his/her/their authorized capacity(ies), and that by
his/her/their signature(s) on the instrument the person(s), or the entity upon
behalf of which the person(s) acted, executed this instrument.
WITNESS my hand and official seal. ANGIE STROOT
Comm. #1080447
NOTARY PUBLIC - CALIFORNIA
SAN DIEGO COUNTY
Comm. Exp. Dec. 11, 1999
/s/ Angie Stroot
- -------------------------------- Notary Seal
State of California )
)Ss
County of )
On , before me, the undersigned, Notary Public in and for
said State, personally appeared ,
personally known to me (or proved to me on the basis of satisfactory evidence)
to be the person(s) whose name(s) is/are subscribed to the within instrument and
acknowledged to me that he/she/they executed the same in his/her/their
authorized capacity(ies), and that by his/her/their signature(s) on the
instrument the person(s), or the entity upon behalf of which the person(s)
acted, executed this instrument.
WITNESS my hand and official seal.
- ----------------------------------------
Notary Seal
<PAGE> 9
EXHIBIT "A" ATTACHED TO THAT CERTAIN DEED OF TRUST AND ASSIGNMENT OF RENTS DATED
MARCH 24, 1997 EXECUTED BY ISIS PHARMACEUTICALS, INC.
EXHIBIT "A"
LEGAL DESCRIPTION:
PARCEL A:
LOTS 5, 6 AND 7 OF CARLSBAD TRACT NO. 84-91 IN THE CITY OF CARLSBAD, COUNTY OF
SAN DIEGO, STATE OF CALIFORNIA, ACCORDING TO MAP THEREOF NO. 11230, FILED IN THE
OFFICE OF THE COUNTY RECORDER OF SAN DIEGO COUNTY, MAY 10, 1985.
PARCEL B:
A NON-EXCLUSIVE EASEMENT ON, OVER AND UNDER THE COMMON AREA AS DEFINED AND SHOWN
ON THOSE CERTAIN AMENDED AND RESTATED DECLARATION OF ESTABLISHMENT OF COVENANTS,
CONDITIONS AND RESTRICTIONS, AND RESERVATION OF EASEMENTS (THE "DECLARATIONS"),
DATED JUNE 28, 1988 AND RECORDED AUGUST 8, 1988 AS FILE 89-387705 OF OFFICIAL
RECORDS, FOR THE PURPOSES OF INGRESS AND EGRESS, PARKING, THE CONSTRUCTION,
INSTALLATION, MAINTENANCE, REMOVAL, REPLACEMENTS, OPERATION AND USE OF
UTILITIES, INCLUDING BUT NOT LIMITED TO SEWERS, WATER AND GAS PIPES, DRAINAGE
LINES AND SYSTEMS, ELECTRIC POWER, CONDUIT LINES AND WIRING, TELEPHONE,
CONDUITS, LINES AND WIRES AND OTHER UTILITIES, PUBLIC OR PRIVATE, BENEATH THE
GROUND SURFACE (EXCEPT VAULTS, VENTS, ACCESS, STRUCTURES AND OTHER FACILITIES
REQUIRED TO BE ABOVE GROUND), SUBJECT TO THE TERMS, AS MORE PARTICULARLY SET
FORTH IN THE DECLARATION.
A.P.N.'s: 212-061-31-00 and 2l2-061-32-00 and 2l2-061-33-00
Properties also known as: 2292 Faraday Avenue (Lot 5), 2280 Faraday Avenue(Lot
6) and 2282 Faraday Avenue(Lot 7), Carlsbad, California 92008
<PAGE> 10
EXHIBIT 'B' ATTACHED TO THAT CERTAIN DEED OF TRUST AND ASSIGNMENT OF RENTS
EXECUTED BY ISIS PHARMACEUTICALS, INC., DATED MARCH 24, 1997
HAZARDOUS MATERIALS INDEMNITY AGREEMENT
1. Trustor hereby represents to Beneficiary that neither Trustor nor, to the
best of its knowledge, after having made reasonable and appropriate inquiry, any
current or previous owner, tenant, occupant or user of the real property secured
hereby ("Property"), has used, generated, released, discharged, stored,
installed or disposed of any Hazardous Material (as defined below) on, under,
in, about or near the Property, nor have any of them transported Hazardous
Material to, from or across the Property. In addition, Trustor covenants as
follows:
(a) Trustor will not, nor will Trustor permit or suffer any of its
partners, officers, employees, agents, tenants, or any other licensee or invitee
or trespasser to cause or permit any Hazardous Materials to be brought upon,
kept, or used or disposed of on, under, in or about the Property, except for
Hazardous Materials used in the normal course of Trustor's business, provided
that Trustor complies with all city, county, federal and all other regulations,
laws and restrictions relating to Hazardous Materials.
(b) If Trustor breaches the representations, covenants, or obligations
stated in this paragraph 1, or if by any other cause whatsoever the presence of
Hazardous Materials on, under, in, about or near the Property results in the
contamination of the Property or other properties by Hazardous Materials, then,
in addition to other remedies available to Beneficiary, Trustor shall, at its
sole cost and expense, indemnify, defend and hold Beneficiary and its officers,
employees, agents, affiliates and successors-in-interest harmless from any and
all losses, obligations, claims, judgments, damages, penalties, fines, costs,
liabilities, expenses, including actual attorneys' fees and costs, and the costs
of any clean-up, and any other losses which may arise at any time as a result of
such contamination, or allegation thereof by a governmental agency, or the
determination by any court or governmental agency, or by Beneficiary or its
successor-in-interest, that the uses of the Property must be limited or that the
Hazardous Materials should be removed and the damage to the Property and its
environs restored.
(c) The indemnifications of Beneficiary, and its officers, employees,
agents, affiliates and successors-in-interest by Trustor contained in this
paragraph I includes, without limitation, costs incurred in connection with any
investigation of site conditions, or any cleanup, remedial removal or
restoration where required by any Federal, state or local governmental agency or
political subdivision, or by any insurance company, or by Beneficiary or its
successor-interest in the exercise of its reasonable discretion because of
Hazardous Material present in the soil, ground, water, air, any improvements
("Improvements") located on the Property, or otherwise in, on, under, about or
near the Property.
<PAGE> 11
Exhibit "B" to Deed of Trust
ISIS PHARMACEUTICALS, INC.
Page 2
(d) Without limiting the foregoing, if the presence of any Hazardous
Material in, on, under, about or near the Property is caused or permitted by
Trustor, its tenants, or either of their successors-in-interest, officers,
employees, agents, licensees or invitees, or by trespassers, and results in any
contamination of the Property or other properties, Trustor shall take all
actions at its sole cost and expense as are necessary to return the Property to
the condition existing prior to the introduction of any such Hazardous Materials
to the Property; provided that the Beneficiary's approval of such an action
shall be first obtained, which approval shall not be unreasonably withheld as
long as such actions would not potentially have an adverse material long-term or
short-term effect on the Property.
(e) The foregoing clean-up and indemnification obligations shall survive
the reconveyance or foreclosure of this Deed of Trust securing Trustor's
obligations under the Loan.
(f) Trustor also agrees: (i) to provide Beneficiary with copies of any
communications outside the normal course of Trustor's business, between Trustor,
or its tenant, officers, employees, agents or predecessors or
successors-in-interest, licensees or invitees and any third parties, including
but not limited to, governmental authorities relative to any Hazardous Material
on, under, in, about or near or affecting the Property; and (ii) that
nondisclosure of any such communication prior to recordation of this Deed of
Trust shall be deemed an affirmative representation that no such communication
has been received by or is known to Trustor, its officers, employees or agents;
and (iii) the Beneficiary is hereby granted the right (but not the obligation)
to participate in any proceeding with any governmental agency or court relative
to any Hazardous Materials on, in, under, about, near or affecting the Property.
(g) As used herein the term "Hazardous Materials" means any hazardous,
toxic or infectious substance, material, gas or waste which is or becomes
regulated by any governmental authority, or the United States Government, or any
of their agencies, or which has been identified as a toxic, cancer causing or
otherwise hazardous substance. The term "Hazardous Materials" includes, without
limitations any material or substance which is: (i) defined as a "hazardous
waste," "extremely hazardous waste" or "restricted hazardous waste" under
Sections 25115, 25117 or 25122.7, or is listed pursuant to Section 25140, of the
California Health and Safety Code, Division 20, Chapter 6.5, as it may from time
to time be amended (the "Hazardous Waste Control Law"); (ii) defined as a
"hazardous substance" under Section 25316 of the California Health and Safety
Code, Division 20, Chapter 6.8 as now existing or hereinafter amended (the
"Carpenter-Presley-Tanner Hazardous Substance Account Act"); (iii) defined as a
"hazardous material," "hazardous substance" or "hazardous waste" under Section
25501 of the California Health and Safety Code, Division 20, Chapter 6.95 as
presently existing or hereinafter amended (the "Hazardous Materials Release
Response Plans and Inventory"); (iv) defined as a "hazardous substance" under
Section 25281 of the California Health and Safety Code, Division 20, Chapter 6.7
as presently existing or hereinafter amended (the "Underground Storage of
Hazardous Substances Act"); (v) petroleum; (vi) polychlorinated biphenyls (PCB);
(vii) asbestos; (viii) listed under Article 9 or defined as "hazardous" or
"extremely hazardous" pursuant to Article 11 of Title 22 of the California
Administrative Code, Division 4, Chapter 20, as now existing or hereinafter
amended; (ix) designated as a "hazardous substance" pursuant to Section 307 of
the Federal Water Pollution Control Act (33 U.S.C. 1317), as presently existing
or
<PAGE> 12
Exhibit "B" to Deed of Trust
ISIS PHARMACEUTICALS, INC.
Page 3
hereinafter amended or designated as a "hazardous substance" pursuant to Section
311 of the Clean Water Act, 33 U.S.C. 1251 et seq. (33 U.S.C. 1321); (x) defined
as a "hazardous waste" pursuant to Section 1004 of the Federal Resource
Conservation and Recovery Act, 42 U.S.C. 69012 et seq. (42 U.S. C. 6903), as
presently existing or hereinafter amended; or (xi) defined as a "hazardous
substance" pursuant to Section 101 of the Comprehensive Environmental Response,
Compensation and Liability Act, 42 U.S.C. 9601 et seq. (42 U.S.C. 9601), as
presently existing or hereafter amended.
(h) Trustor also represents that the Property is not a "hazardous waste
property" or within a "border zone" as defined in California Health and Safety
Code 25117.3 and 25117.4 nor is the Property subject to the requirements for
notice to the California Department of Health Services, as such notice
requirement is defined in California Health and Safety Code 25221(a) as
presently existing.
(i) Trustor also represents that the Property and its intended use complies
with all applicable laws and governmental regulation including, without
limitation, all applicable Federal, state and local laws pertaining to air and
water quality, waste disposal and other environmental matters, including but not
limited to, the clean water, clean air, federal water pollution control, solid
waste disposal, resource conservation recovery and comprehensive environmental
response compensation and liability acts enacted by the U.S. Congress, and the
California Environmental Quality Act and all regulations adopted by the State of
California pursuant thereto, and the rules and regulations and ordinances of the
County of San Diego and the City of Carlsbad, concerning air and water quality,
waste disposal and other environmental matters, and the rules and regulations of
the California Department of Health Services, the regional Water Quality Control
Board, the regional Air Quality Management District, the California State Water
Resources Control Board, the U.S. Environmental Protection Agency, and all other
applicable Federal, state and local agencies and bureaus.
(j) Trustor acknowledges that this is an environmental provision as
described in California Code of Civil Procedure, Section 736.
The breach by Trustor of any representation or covenant contained in
this paragraph 1 shall constitute an immediate event of default hereunder,
affording to Beneficiary any and all remedies for said default available
hereunder or under applicable law.
2. Upon a default hereunder by Trustor, Beneficiary shall have each of the
following remedies, in addition to any other remedies, hereunder or under
applicable law, which Beneficiary may otherwise have for said default:
(a) Beneficiary or its employees, acting by themselves or through a court-
appointed receiver, may: (i) enter upon, possess, manage, operate, dispose of,
and contract to dispose of the Property or any part thereof, (ii) take custody
of all accounts; (iii) negotiate with governmental authorities with respect to
the Property's environmental compliance and remedial measures; (iv) take any
action necessary to enforce compliance with environmental provisions,
<PAGE> 13
Exhibit "B" to Deed of Trust
ISIS PHARMACEUTICALS, INC.
Page 4
including but not limited to spending rents to abate the problem; (v) make,
terminate, enforce or modify leases of the Property upon such terms and
conditions as Beneficiary deems proper; (vi) contract for goods and services,
hire agents, employees, and counsel, make repairs, alterations, and
improvements to the Property necessary, in Beneficiary's judgement, to protect
or enhance the security hereof, (vii) incur the risks and obligations
ordinarily incurred by owners of property (without any personal obligation on
the part of the receiver); and/or (viii) take any and all other actions which
may be necessary or desirable to comply with Trustor's obligations hereunder
and under any other documents (collectively "Loan Documents") executed by
Trustor in connection therewith. All sums realized by Beneficiary under this
subparagraph, less all costs and expenses incurred by it under this
subparagraph, including attorney fees, and less such sums as Beneficiary deems
appropriate as a reserve to meet future expenses under this subparagraph,
shall be applied on any indebtedness secured hereby in such order as
Beneficiary shall determine. Neither application of said sums to said
indebtedness, nor any other action taken by Beneficiary under this
subparagraph shall cure or waive any event of default or notice of default
hereunder, or nullify the effect of any such notice of default. Beneficiary,
or any employee or agent of Beneficiary, or a receiver appointed by a court of
competent jurisdiction, may take any action or proceeding hereunder without
regard to: (A) the adequacy of the security for the indebtedness secured
hereunder; (B) the existence of a declaration that the indebtedness secured
hereby has been declared immediately due and payable; or (C) the filing of a
notice of default.
(b) With or without notice, and without releasing Trustor from any
obligation hereunder, to cure any default of Trustor and, in connection
therewith, Beneficiary or its agents, acting by themselves or through a court
appointed receiver, may enter upon the Property or any part thereof and perform
such acts and things as Beneficiary deems necessary or desirable to inspect,
investigate, assess, and protect the security hereof, including without
limitation of any of its other rights: (i) to obtain a court order to enforce
Beneficiary's right to enter and inspect the Property under California Civil
Code Section 2929.5, to which the decision of Beneficiary as to whether there
exists a release or threatened release of a Hazardous Material onto the Property
shall be deemed reasonable and conclusive as between the parties hereto; and
(ii) to have a receiver appointed under California Code of Civil Procedure
Section 564 to enforce Beneficiary's right to enter and inspect the Property for
Hazardous Materials. All costs and expenses incurred by Beneficiary with respect
to the audits, tests, inspections, and examinations which Beneficiary or its
agents or employees may conduct, including the fees of the engineers,
laboratories, contractors, consultants, and attorneys, shall be paid by Trustor
immediately upon demand by Beneficiary. All costs and expenses incurred by
Trustee and Beneficiary pursuant to this subparagraph (including without
limitation court costs, consultant fees and attorney fees, whether incurred in
litigation or not and whether before or after judgement) shall bear interest at
the default rate of interest ("Default Rate") set forth in the promissory note
("Note") secured hereby, from the date they are incurred until said sums have
been paid.
(c) To seek a judgement that Trustor has breached its covenants,
representations and/or warranties with respect to the Hazardous Materials, as
set forth in paragraph I above, by commencing and maintaining an action or
actions in any court of competent jurisdiction for breach of contract pursuant
to California Code of Civil Procedure
<PAGE> 14
Exhibit "B" to Deed of Trust
ISIS PHARMACEUTICALS, INC.
Page 5
Section 736, whether commenced prior to foreclosure of the Property or after
foreclosure of the Property, and to seek the recovery of any and all costs,
damages, expenses, fees, penalties, fines, judgements, indemnification payments
to third parties, and other out-of-pocket costs or expenses actually incurred by
Beneficiary (collectively, the "Environmental Costs") incurred or advanced by
Beneficiary relating to the cleanup, remediation or other response action
required by applicable law or to which Beneficiary believes necessary to protect
the Property, it being conclusively presumed between Beneficiary and Trustor
that all such Environmental Costs incurred or advanced by Beneficiary relating
to the cleanup, remediation or other response action of or to the Property were
made by Beneficiary in good faith. All Environmental Costs incurred by
Beneficiary under this subparagraph (including without limitation court costs,
consultant fees and attorney fees, whether incurred in litigation or not and
whether before or after judgement) shall bear interest at the Default Rate from
the date of expenditure until said sums have been paid. Beneficiary shall be
entitled to bid, at any foreclosure sale of the Property, the amount of said
costs, expenses and interest in addition to the amount of the other obligations
hereby secured as a credit bid, the equivalent of cash. Trustor acknowledges and
agrees that notwithstanding any term or provision contained herein or in the
Loan Documents: (i) the Environmental Costs shall be exceptions to any
nonrecourse or exculpatory provision of the Loan Documents; (ii) Trustor shall
be fully and personally liable for the Environmental Costs hereunder; (iii) such
liability shall not be limited to the original principal amount of the
obligations secured by this Deed of Trust; and (iv) Trustor's obligations shall
survive the foreclosure, deed in lieu of foreclosure, release, reconveyance, or
any other transfer of the Property or this Deed of Trust. For the purposes of
any, action brought under this subparagraph, Trustor hereby waives the defense
of [aches, and any applicable statute of limitations.
(d) To waive its lien against the Property or any portion thereof, whether
fixtures or personal property, to the extent such property is found to be
environmentally impaired in accordance with California Code of Civil Procedure
Section 726.5 and to exercise any and all rights and remedies of an unsecured
creditor against Trustor and all of Trustor's assets and property for the
recovery of any deficiency and Environmental Costs, including, but not limited
to, seeking an attachment order under California Code of Civil Procedure Section
483.010. As between Beneficiary and Trustor, for purposes of California Code of
Civil Procedure Section 726.5, Trustor shall have the burden of proving that
Trustor or any related party (or any affiliate or agent of Trustor or any
related party) was not in any way negligent in permitting the release or
threatening release of the Hazardous Material. Trustor acknowledges and agrees
that notwithstanding any term or provision contained herein or in the Loan
Documents, all judgements and awards entered against Trustor shall be exceptions
to any nonrecourse or exculpatory provision of the Loan Documents, and Trustor
shall be fully and personally liable for all judgements and awards entered
against Trustor hereunder and such liability shall not be limited to the
original principal amount of the obligations secured by this Deed of Trust and
Trustor's obligations shall survive the foreclosure, deed in lieu of
foreclosure, release, reconveyance, or any other transfer of the Property or
this Deed of Trust. For the purpose of any action brought under this
subparagraph, Trustor hereby waives the defense of laches and any applicable
statute of limitations.
<PAGE> 15
Exhibit "B" to Deed of Trust
ISIS PHARMACEUTICALS, INC.
Page 6
(e) All rights and remedies of Beneficiary hereunder are cumulative and in
addition to all rights and remedies provided in the Loan Documents or by
applicable law.
CROSS DEFAULT
Default in the performance or observance of any of the terms and provisions: (i)
of any documents, including without limitation this Deed of Trust, ("Loan
Documents") executed by Trustor or any entity guaranteeing any of Trustor's
obligations to Beneficiary ("Guarantor") in connection with the obligations
secured hereby; or (ii) of any documents executed by Trustor or Guarantor in
connection with any other obligations of Trustor or any Guarantor to
Beneficiary, including but not limited to Beneficiary Loan Number 00700002641
and 00700002724 (Collectively, "Other Documents"), shall constitute a default
under the terms of each of the Loan Documents and the Other Documents at
Beneficiary's option. thereby making available to Beneficiary any and all of the
remedies set forth therein.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION DERIVED FROM THE COMPANY'S
CONDENSED BALANCE SHEET AS OF JUNE 30, 1997 (UNAUDITED) AND CONDENSED STATEMENTS
OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 1997 (UNAUDITED) AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 35,851
<SECURITIES> 34,745
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 72,571
<PP&E> 18,485
<DEPRECIATION> 0
<TOTAL-ASSETS> 99,057
<CURRENT-LIABILITIES> 23,483
<BONDS> 33,526
<COMMON> 26
0
0
<OTHER-SE> 42,022
<TOTAL-LIABILITY-AND-EQUITY> 99,057
<SALES> 0
<TOTAL-REVENUES> 12,132
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 28,921
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,191
<INCOME-PRETAX> (17,980)
<INCOME-TAX> 0
<INCOME-CONTINUING> (17,980)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (17,980)
<EPS-PRIMARY> (0.68)
<EPS-DILUTED> (0.68)
</TABLE>
