<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 4, 1997
REGISTRATION STATEMENT NO. 333-29091
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
AMENDMENT NO. 6
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------
HYSEQ, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
NEVADA 2835 36-3855489
(STATE OR OTHER JURISDICTION (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
</TABLE>
670 ALMANOR AVENUE, SUNNYVALE, CALIFORNIA 94086 (408) 524-8100
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
LEWIS S. GRUBER
PRESIDENT AND CHIEF EXECUTIVE OFFICER
670 ALMANOR AVENUE, SUNNYVALE, CALIFORNIA 94086 (408) 524-8100
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
COPIES TO:
<TABLE>
<S> <C>
WILLIAM N. WEAVER, JR. DAVID J. SEGRE
SACHNOFF & WEAVER, LTD. WILSON SONSINI GOODRICH & ROSATI
30 S. WACKER DRIVE, 29TH FLOOR 650 PAGE MILL ROAD
CHICAGO, ILLINOIS 60606-7484 PALO ALTO, CALIFORNIA 94304-1050
TELEPHONE NO. (312) 207-1000 TELEPHONE NO. (415) 493-9300
</TABLE>
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the effective date of this Registration Statement.
----------------
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
----------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(a) OF THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THIS
REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION,
ACTING PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the costs and expenses, other than
underwriting discounts and commissions, payable by the Company in connection
with the sale of the Common Stock being registered hereby. All the amounts
shown are estimated, except the SEC registration fee, the NASD filing fee and
the Nasdaq National Market listing fee.
<TABLE>
<S> <C>
SEC registration fee.......................................... $ 13,417
NASD filing fee............................................... 4,928
Nasdaq National Market listing fee............................ 47,819
Blue Sky filing fees and expenses............................. 3,000
Printing expenses............................................. 110,000
Legal fees and expenses....................................... 250,000
Accounting fees and expenses.................................. 150,000
Transfer Agent and Registrar fees and expenses................ 2,500
Miscellaneous expenses........................................ 518,336
----------
Total....................................................... $1,100,000
==========
</TABLE>
- --------
* To be supplied by amendment.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Company is a Nevada corporation, subject to the applicable
indemnification provisions of the Nevada General Corporation Law (the "NGCL").
The NGCL requires the Company to indemnify officers and directors for any
expenses incurred by any officer or director in connection with any actions or
proceedings, whether civil, criminal, administrative, or investigative,
brought against such officer or director because of his or her status as an
officer or director, to the extent that the director or officer has been
successful on the merits or otherwise in defense of the action or proceeding.
The NGCL permits a corporation to indemnify an officer or director, even in
the absence of an agreement to do so, for expenses incurred in connection with
any action or proceeding if such officer of director acted in good faith and
in a manner in which he or she reasonably believed to be in or not opposed to
the best interests of the corporation and such indemnification is authorized
by the stockholders, by a quorum of disinterested directors, by independent
legal counsel in a written opinion authorized by a majority vote of a quorum
of directors consisting of disinterested directors or by independent legal
counsel in a written opinion if a quorum of disinterested directors cannot be
obtained. The NGCL prohibits indemnification of a director or officer if a
final adjudication establishes that the officer's or director's acts or
omissions involved intentional misconduct, fraud or a knowing violation of the
law and were material to the cause of action. Despite the foregoing
limitations on indemnification, the NGCL may permit an officer or director to
apply to the court for approval of indemnification even if the officer or
director is adjudged to have committed intentional misconduct, fraud or a
knowing violation of the law. The NGCL also provides that indemnification of
directors is not permitted for the unlawful payment of distributions, except
for those directors registering their dissent to the payment of the
distribution.
The Company's Amended and Restated Articles of Incorporation, as amended,
and By-Laws eliminate personal liability of directors or officers for any
expenses, claims, damages or liability incurred by reason of their position in
the Company to the fullest extent allowed under the NGCL.
The Company's By-Laws provide that the Company shall indemnify any person
who was or is a party or is threatened to be made a party to any threatened,
pending or completed action, suit or proceeding because he or she was or is a
director, officer, employee or agent of the Company. In addition, the
Company's By-Laws provide that the Company shall indemnify any person who was
or is a party or is threatened to be made a party to any threatened, pending
or completed action or suit by or in the right of the Company because he or
she was or is a director, officer, employee or agent of the Company against
expenses, actually and reasonably incurred if he or
II-1
<PAGE>
she acted in good faith, unless adjudged liable to the Company. Further, the
Company's By-Laws provide that to the extent that a director, officer,
employee or agent of the Company has been successful on the merits or
otherwise, in defense of any action, suit or proceeding referred to above or
in defense of any claim, matter or issue therein, he or she shall be
indemnified against expenses actually and reasonably incurred by him or her in
connection therewith.
The Company has entered into indemnification agreements with each of its
officers and directors in which the Company agrees to indemnify and hold
harmless the officer or director to the fullest extent permitted by applicable
law against any and all reasonable attorneys' fees and all other reasonable
expense, cost, liability and loss (including a mandatory obligation by the
Company to advance reimbursement of legal fees and expenses) paid or
reasonably incurred by such officer or director or on his or her behalf in
connection with any threatened, pending or completed action, suit or
proceeding, or any inquiry or investigation not initiated by the officer or
director that he or she believes in good faith might lead to a proceeding,
inquiry or investigation (a "Proceeding"), because the officer or director is
or was a director, officer, employee or agent of the Company, or is or was
serving at the request of the Company as a director, officer, employee,
trustee, agent or fiduciary of another corporation, partnership, joint
venture, employee benefit plan, trust or other enterprise, or by reason of any
action or inaction by the officer or director in such capacity. However, the
Company's obligation to indemnify the officer or director is subject to a
determination by: (i) the Company's Board of Directors, by vote of the
majority of disinterested directors; (ii) under certain circumstances,
independent legal counsel appointed by the Board of Directors in a written
opinion; (iii) stockholders of the Company; or (iv) a court of competent
jurisdiction in a final, non-appealable adjudication, that the officer or
director acted in good faith and in a manner he or she reasonably believed to
be in or not opposed to the best interests of the Company and, with respect to
any criminal Proceeding, the officer or director acted in good faith and in a
manner he or she reasonably believed to be in or not opposed to the best
interests of the Company, and with respect to any criminal Proceeding, the
officer or director had no reasonable cause to believe that his or her conduct
was unlawful.
The Underwriting Agreement (Exhibit 1.1 hereto) provides for indemnification
by the underwriters of the Company and its directors and executive officers in
the offering of the Common Stock registered hereby, and each person, if any,
who controls the Company, for certain liabilities, including liabilities
arising under the Securities Act.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
Since April 1994, the Company has issued the following securities that were
not registered under the Securities Act:
In an offering that commenced in April 1994, the Company sold 740,962 shares
of Series A Preferred Stock for total consideration of $2,545,681 and issued
warrants to purchase 418,114 shares of Common Stock at an exercise price of
$3.42 per share. In June 1997, the Company issued 194,020 shares of Common
Stock to the holder of a warrant representing 251,873 of the shares underlying
the warrants in satisfaction of the exercise of such warrant.
In June 1994, an officer of the Company was granted an option to purchase
345,600 shares of Common Stock at $1.56 per share in connection with his
employment. In September 1996, the Company issued 19,200 shares of Common
Stock to this officer upon the exercise of a portion of the option at $1.56
per share for total consideration of $30,000. In December 1996, the Company
issued 48,000 shares of Common Stock to this officer upon the exercise of a
portion of this option at $1.56 per share for total consideration of $75,000,
which the officer borrowed from the Company. In March 1997, the Company issued
7,680 shares of Common Stock to this officer upon the exercise of a portion of
the option at $1.56 per share for total consideration of $12,000. In June
1997, the Company issued 2,880 shares of Common Stock to this officer upon
exercise of a portion of the option at $1.56 share for total consideration of
$4,500.
In August 1994, the Company granted options to two officers and one employee
to purchase a total of 278,400 shares of Common Stock at $1.56 in connection
with their employment.
II-2
<PAGE>
In September 1994, the Company issued 1,920 shares of Common Stock to a
member of the Scientific Advisory Board ("SAB") upon the exercise of a portion
of options granted in March 1994 at the exercise price of $0.78 per share for
total consideration of $1,500.
In November 1994, the Company granted options to purchase a total of 34,560
shares of Common Stock at an exercise price of $1.82 per share to two
directors in consideration of their services.
In an offering that commenced in May 1995, the Company sold 2,880,000 shares
of Series A Preferred Stock for total consideration of $12,000,000 and issued
warrants to purchase 202,800 shares at an exercise price of $4.17 per share
and warrants to purchase 206,822 shares of Common Stock at an exercise price
of $4.58 per share. Fahnestock & Co. Inc. acted as placement agent in
connection with this offering. In consideration for placing 2,585,280 shares
of Series A Preferred Stock, it received the aforementioned warrants to
purchase 206,822 shares of Common Stock and a private placement fee equal to
7.0% of the gross proceeds from the sale of such shares. In June 1997, the
Company issued 46,994 shares of Common Stock to the holder of a warrant
representing 65,280 of the shares underlying the warrants in satisfaction of
the exercise of such warrant.
In December 1995, the Company issued 2,688 shares of Common Stock to an SAB
member upon the exercise of a portion of options granted in March 1994 at the
exercise price of $0.78 per share for total consideration of $2,100. In June
1997, the Company issued 2,496 shares of Common Stock to this SAB member upon
the exercise of options granted in March 1994 and June 1996 at $0.78 and
$4.17, respectively, for a total consideration of $5,200.
In September and December 1996, the Company sold a total of 241,920 shares
of Common Stock at $4.17 per share for total consideration of $1,008,000. An
officer of the Company purchased 161,280 of these shares and two directors
purchased a total of 80,640 these shares. The officer borrowed $672,000 from
the Company to pay for his shares.
In October 1996, the Company issued options to purchase 46,080 shares of
Common Stock at an exercise price of $4.17 per share to each of its two new
independent directors under the Directors' Plan.
In December 1996, the Company issued 144,000 shares of Common Stock to an
officer upon the exercise of a warrant granted in 1993 at $2.90 per share for
total consideration of $417,000, which the officer borrowed from the Company
to pay for his shares.
In December 1996, the Company issued a warrant to purchase 9,600 shares of
Common Stock at $5.21 per share to Aberlyn Capital in connection with the
funding of a $750,000 loan to the Company.
In January 1997, the Company issued 76,800 shares of Common Stock at $6.51
per share to Sachnoff & Weaver, Ltd. Sachnoff & Weaver, Ltd. paid $102,415 and
delivered a promissory note to the Company for the balance in the amount of
$397,585 secured by 61,069 shares of Common Stock. The note bears interest at
8.25% per annum and is due on March 18, 2001. As of June 17, 1997, the note
had an outstanding balance of $362,260.
In March 1997, two officers each purchased 179,712 shares of Common Stock at
$6.51 per share for total consideration of $2,340,000. The officers each
borrowed $1,170,000 from the Company to pay for these shares.
In April 1997, the Company granted three directors options to purchase a
total of 2,880 shares of Common Stock at $8.33 per share pursuant to the terms
of the Directors' Plan.
In May and June 1997, the Company issued shares of Series B Preferred Stock
which are convertible into an aggregate of 845,700 shares of Common Stock at a
post-conversion price of $11.70 per share (based on an assumed initial public
offering price of $13.00 per share in this offering) to two collaboration
partners for total consideration of $10,000,000.
In June 1997, the Company issued 241,016 shares of Common Stock upon the
exercise of warrants granted to a stockholder in November 1994 and July 1995
at $3.42 and $4.17 per share, respectively.
II-3
<PAGE>
In June 1997, the Company issued 2,193 shares of Common Stock to a vendor at
$6.51 per share pursuant to an agreement for services completed in January
1997.
Between April 1995 and June 30, 1997, the Company granted options to
purchase an aggregate of 739,515 shares of Common Stock, net of cancelled
options, at exercise prices ranging from $4.17 to $8.33, pursuant to the Stock
Option Plan for the purpose of incentivizing employees and attracting and
retaining executive officers and other key employees, directors and members of
its SAB.
Immediately prior to the closing of this offering, the Company will issue
shares of Common Stock in connection with a 1.92-for-1 stock split.
Except as described above, no underwriters were engaged in connection with
the foregoing sales of securities. Such sales of shares of Common Stock and
Series A Preferred Stock were made in reliance upon the exemption from
registration set forth in Section 4(2) of the Securities Act and Rule 506 of
Regulation D promulgated thereunder for transactions not involving a public
offering and, with the exception of certain persons who purchased shares in
the April 1994 offering, all purchasers were accredited investors as such term
is defined in Rule 501(a) of Regulation D. Issuances of options to the
Company's employees, directors and members of its SAB were made pursuant to
Rule 701 promulgated under the Securities Act.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<C> <S>
1.1 Form of Underwriting Agreement**
3.1(a) Amended and Restated Articles of Incorporation of the Company, as
amended**
3.1(b) Certificate of Designations, Preferences and Rights of Series B
Preferred Stock**
3.2 By-Laws of the Company**
4.1 Specimen Common Stock certificate**
4.2 Form of Registration Rights Agreement**
4.3 Form of Warrant Agreement**
5.1 Opinion of Sachnoff & Weaver, Ltd.**
10.1 Form of Indemnification Agreement between the Company and each of
its directors and officers**
10.2 Stock Option Plan, as amended**#
10.3(a) Employment Agreement between the Company and Dr. Radoje T.
Drmanac**#
10.3(b) Employment Agreement between the Company and Dr. Radomir B.
Crkvenjakov**#
10.4 Non-Employee Director Stock Option Plan**#
10.5 Patent License Agreement between Arch Development Corporation and
Hyseq, Inc. dated June 7, 1994**+
10.6 License Agreement between Hyseq Diagnostics, Inc. and SmithKline
Beecham Clinical Laboratories, Inc. dated September 25, 1995, as
amended+
10.7 Stock Purchase Agreement for Series B Convertible Preferred Stock
dated as of May 28, 1997**
10.8 Collaboration Agreement between Hyseq Inc. and Chiron Corporation
dated as of May 30, 1997**+
</TABLE>
II-4
<PAGE>
<TABLE>
<C> <S>
10.9 Collaboration Agreement between Hyseq Inc. and The Perkin-Elmer
Corporation dated as of May 30, 1997**+
11.1 Statement of Computation of Net Loss Per Share**
21.1 Subsidiaries of Hyseq, Inc.**
23.1 Consent of Ernst & Young LLP, Independent Auditors**
23.2 Consent of Sachnoff & Weaver, Ltd. (included in Exhibit 5.1)**
23.3 Consent of McCutchen, Doyle, Brown & Enersen, LLP**
24.1 Power of Attorney**
27.1 Financial Data Schedule**
</TABLE>
- --------
* To be supplied by amendment.
** Previously filed.
# Denotes compensation plan in which an executive officer or director
participates.
+ Portions have been omitted pursuant to a request for confidential
treatment. Unredacted agreements have been filed with the Commission.
(b) Financial Statement Schedule(s).
None
ITEM 17. UNDERTAKINGS
The undersigned Registrant hereby undertakes as follows:
To provide to the underwriters at the closing specified in the underwriting
agreement certificates in such denominations and registered in such names as
required by the underwriters to permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the Company
pursuant to the provisions described Item 14 above or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
For purposes of determining any liability under the Securities Act, the
information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this registration
statement as of the time it is declared effective.
For the purpose of determining any liability under the Securities Act, each
post-effective amendment that contains a form of prospectus shall be deemed to
be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Company has
duly caused this amendment to the Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of
Sunnyvale, State of California, on the 4th day of August, 1997.
HYSEQ, INC.
By: /s/ Lewis S. Gruber
-----------------------------
LEWIS S. GRUBER
President and Chief Executive
Officer
Pursuant to the requirements of the Securities Act of 1933, as amended, this
amendment to the Registration Statement has been signed by the following
persons in the capacities indicated on the 4th day of August, 1997.
SIGNATURE TITLE
--------- -----
* Chairman of the Board
-------------------------
ROBERT D. WEIST
/s/ Lewis S. Gruber President and Chief Executive
------------------------- Officer, Director (Principal
LEWIS S. GRUBER Executive Officer)
/s/ Christopher R. Wolf Executive Vice President and
------------------------- Chief Financial Officer
CHRISTOPHER R. WOLF (Principal Financial and
Accounting Officer)
* Director
-------------------------
RADOJE T. DRMANAC
* Director
-------------------------
RADOMIR B. CRKVENJAKOV
* Director
-------------------------
RAYMOND F. BADDOUR
* Director
-------------------------
GRETA E. MARSHALL
* Director
-------------------------
THOMAS N. MCCARTER III
* Director
-------------------------
KENNETH D. NOONAN
*By: /s/ Lewis S. Gruber
--------------------------
LEWIS S. GRUBER
Attorney-in-Fact
II-6
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<C> <S>
1.1 Form of Underwriting Agreement**
3.1(a) Amended and Restated Articles of Incorporation of the Company, as
amended**
3.1(b) Certificate of Designations, Preferences and Rights of Series B
Preferred Stock**
3.2 By-Laws of the Company**
4.1 Specimen Common Stock certificate**
4.2 Form of Registration Rights Agreement**
4.3 Form of Warrant Agreement**
5.1 Opinion of Sachnoff & Weaver, Ltd.**
10.1 Form of Indemnification Agreement between the Company and each of
its directors and officers**
10.2 Stock Option Plan, as amended**#
10.3(a) Employment Agreement between the Company and Dr. Radoje T.
Drmanac**#
10.3(b) Employment Agreement between the Company and Dr. Radomir B.
Crkvenjakov**#
10.4 Non-Employee Director Stock Option Plan**#
10.5 Patent License Agreement between Arch Development Corporation and
Hyseq, Inc. dated June 7, 1994**+
10.6 License Agreement between Hyseq Diagnostics, Inc. and SmithKline
Beecham Clinical Laboratories, Inc. dated September 25, 1995, as
amended+
10.7 Stock Purchase Agreement for Series B Convertible Preferred Stock
dated as of May 28, 1997**
10.8 Collaboration Agreement between Hyseq Inc. and Chiron Corporation
dated as of May 30, 1997**+
10.9 Collaboration Agreement between Hyseq Inc. and The Perkin-Elmer
Corporation dated as of May 30, 1997**+
11.1 Statement of Computation of Net Loss Per Share**
21.1 Subsidiaries of Hyseq, Inc.**
23.1 Consent of Ernst & Young LLP, Independent Auditors**
23.2 Consent of Sachnoff & Weaver, Ltd. (included in Exhibit 5.1)**
23.3 Consent of McCutchen, Doyle, Brown & Enersen, LLP**
24.1 Power of Attorney**
27.1 Financial Data Schedule**
</TABLE>
- --------
*To be supplied by amendment.
**Previously filed.
#Denotes compensation plan in which an executive officer or director
participates.
+ Portions have been omitted pursuant to a request for confidential treatment.
Unredacted agreements have been filed with the Commission.
<PAGE>
EXHIBIT 10.6
LICENSE AGREEMENT
-----------------
THIS LICENSE AGREEMENT (the "Agreement") dated September 25, 1995, between
Hyseq Diagnostics Inc., a Nevada corporation with a principal place of business
at 670 Almanor, Sunnyvale, California 94086 ("HDI") and SmithKline Beecham
Clinical Laboratories, Inc., a Delaware corporation with a principal place of
business at 1201 S. Collegeville Road, Collegeville, PA 19426 ("SBCL").
BACKGROUND
----------
1. HDI is a diagnostic company involved in the research and development
of new technologies that has developed certain Technology, as more particularly
described in Appendix A attached hereto and incorporated herein by reference,
and Know-how relating to the Technology.
2. HDI has the right to grant licenses as described herein to use the
Technology.
3. SBCL is a clinical laboratory that performs various laboratory tests
for the purpose of providing information for the diagnosis, prevention and
treatment of disease and the assessment of medical conditions, including testing
samples of human specimens to identify genetic diseases.
4. SBCL desires to obtain a non-exclusive license from HDI in the Field
in the Territory, as defined herein, to use, promote, commercialize, market and
sell the services of performing clinical laboratory tests, using the Technology
and Know-how, to assay patient samples for clinical diagnostic purposes.
5. SBCL also desires that HDI make certain Developments and develop
certain technologies as described herein.
NOW, THEREFORE, in consideration of the mutual covenants and obligations
contained herein and intending to be legally bound, HDI and SBCL agree as
follows:
1.0 DEFINITIONS
-----------
1.1. Wherever the following terms are used in this Agreement, they shall
have the meaning specified below:
a. "Affiliates" shall mean any corporation, firm, partnership or
other entity or person, whether de jure or de facto, which directly or
indirectly owns, is owned by or is under common ownership with a party to this
Agreement to the extent of at least fifty percent (50%) of the equity (or such
lesser percentage which is the maximum allowed to be owned by a foreign
* CERTAIN INFORMATION IN THIS AGREEMENT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION. CONFIDENTIAL TREATMENT HAS
BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
<PAGE>
corporation in a particular jurisdiction) having the power to vote on or direct
the affairs of the entity.
b. "Patents" shall mean any and all patents issued or granted
throughout the Territory which are or become owned by HDI or pursuant to which
HDI otherwise has, now or in the future, the right to grant licenses, which
generically or specifically include within the scope of a claim the Technology
in the Field including components or processes for manufacturing a component
required for carrying out the Technology in the Field. Included within the
definition of Patents are all continuations, continuations-in-part, divisions,
patents of addition, reissues, renewals or extensions thereof and all
Supplementary Protection Certificates where applicable. Also included within the
definition of Patents are any patents which generically or specifically claim
any reagents, processes, improvements or manufacturing processes required for
carrying out the Technology in the Field licensed to SBCL under this Agreement
which are developed by HDI, or which HDI otherwise has the right to grant
licenses, now or in the future, during the term of this Agreement. The current,
attached list of Patents is set forth in Appendix B attached hereto and
incorporated herein by reference which will be updated by HDI as necessary from
time to time.
c. "Know-how" shall mean all present and future proprietary
technical information and know-how owned or controlled by HDI which is required
for the practice of the Technology in the Field in the Territory including,
without limitation, biological, chemical, pharmacological, toxicological,
clinical, assay, control and manufacturing data and any other information
relating to such physical components of the Technology and useful for the
development and commercialization of the Technology.
d. "Technology" shall mean the Format 1 Sequencing by Hybridization
technology described in Appendix A.
e. "Territory" *.
f. "Field" shall mean the service of performing any diagnostic test
by means of Sequencing by Hybridization for use on patient samples in diagnosing
actual human genetic diseases and human predisposition to genetic diseases,
including cancer, wherein labeled nucleic acid probes are applied in solution to
unlabeled patient nucleic acid samples directly bound to a substrate *.
g. "Net Sales" shall mean gross billings from the sale to third
parties of the Services using Technology licensed pursuant to this Agreement (or
the fair market value of any non-monetary consideration which SBCL agrees to
receive in exchange for the Services) by SBCL, or its respective Sublicensees or
Affiliates (provided that, if sales by Sublicensees or Affiliates are included
in gross billings, sales between or among SBCL and its respective Sublicensees
or Affiliates, as applicable, shall be excluded from gross billings), less the
following deductions to the extent such amounts offset amounts included in gross
billings, it being understood that bad debt expense shall be based on an
estimated provision for bad debts determined in accordance with methods
generally used by SBCL to calculate bad debts, and it
2
* CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN
REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
<PAGE>
being further understood that if and to the extent recoveries of bad debt are
made, that the amount of such recoveries will be included in gross billings or
otherwise credited to Net Sales:
(i) all discounts or rebates which are not used to offset other
product or service revenues received by or to promote other products or services
offered by SBCL, its Sublicensees or its Affiliates;
(ii) disallowances by any third party payor which are not part of a
general disallowance or payment for the test or tests of its type;
(iii) all sales adjustments, credits or refunds;
(iv) bad debt expense; and
(v) any sales and/or use taxes and/or duties imposed upon such
sales or billings.
h. "Proof of Concept" shall mean the demonstration of the efficacy
of the Technology, in accordance with the procedures set forth in Appendix C
attached hereto and incorporated herein by reference.
i. "License Fee" shall mean the fee paid by SBCL to HDI for the
license of the Technology, pursuant to Section 3.1.
j. "Proof of Concept Fee" shall mean the non-refundable fee paid by
SBCL to HDI pursuant to Section 3.2, *.
k. "Royalty" shall mean the additional payments set forth in Section
3.3 that SBCL shall pay to HDI for the license and use of the Technology in
accordance with this Agreement.
l. "Developments" shall mean, without limitation, *.
m. "Developments Fee" shall mean *.
n. "Target Date" shall mean *.
o. "Service" shall mean the performance of a particular test or
assay using Technology in the Field in the Territory licensed pursuant to this
Agreement developed by or for SBCL which is used or offered for sale by SBCL or
its respective Sublicensees or Affiliates.
p. "Sublicensees" shall mean those sublicensees of SBCL as permitted
by Section 2.1.
q. *
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r. *
2.0 LICENSE AND APPOINTMENT
-----------------------
2.1 Subject to the provisions of this Agreement, HDI hereby grants to SBCL
a nonexclusive license in the Field in the Territory under Patents and Know-how,
with the right to grant sublicenses as provided below, to use, promote,
commercialize, market and sell Services using the Technology in the Field in the
Territory. SBCL may sublicense its rights under this Agreement only with the
consent of HDI, which consent shall be in the sole discretion of HDI, to
Sublicensees that agree to be bound by the terms of this Agreement by signing a
counterpart agreement with HDI and agreeing to use the Technology and Know-how
for purposes permitted by this Agreement. This license also shall include the
right to make any reagents or use any processes required for carrying out the
Technology in the Field which, but for this license, would infringe an
enforceable claim of the Patents in the Territory.
2.2 The license granted to SBCL by HDI pursuant to this Section 2 permits
SBCL to use, promote and commercialize the Technology in the Field, and to
market and sell Services in the Territory in the Field for use, without
limitation, in clinical laboratories *.
2.3 Subject to the provisions of this Agreement, SBCL and HDI each grants
to the other a royalty-free, non-exclusive license under any patent issuing on
an invention under Section 7.1. and the right to grant sublicenses under such
license. This license shall include the right to make any reagents or use any
processes in carrying out the Technology which, but for this license, would
infringe an enforceable claim of the patent. This license shall remain in effect
until termination of this Agreement. Any benefit, including monetary payments
received by SBCL or HDI from sublicensing any patent owned solely by the other
or equally by SBCL and HDI shall be shared equally between SBCL and HDI;
provided, however, that SBCL shall not be obligated to share any monetary
payments received from sublicensees if SBCL is paying a License Fee or Royalties
to HDI under this Agreement for SBCL's own use of the Technology in the Field in
the Territory.
3.0 LICENSE FEE AND ROYALTY
-----------------------
3.1 In consideration for the license for the rights and privileges under
Section 2 of this Agreement, SBCL shall pay HDI a License Fee in the total
amount of *
a. *
b. *
3.2 *
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3.3 In addition to the License Fee and Proof of Concept Fee, SBCL also
shall pay HDI a Royalty on Net Sales of all Services sold by SBCL, as follows:
a. *
b. *
c. *
*
3.4 a. SBCL, in its discretion, may request that HDI perform the
Developments and, if SBCL does so request and HDI, in its sole discretion
accepts, shall pay to HDI a Developments Fee equal to HDI's cost of
consultation, test construction and development of non-isotopic detection with
supporting informatics for sequence determination, storage and retrieval of
results and comparison of results to a library of known mutations and any other
Developments in the Field as requested by SBCL to tailor the Technology to the
requirements of SBCL. Such Developments shall be based upon a plan and budget
agreed to by the parties. SBCL shall pay HDI *.
b. Notwithstanding the foregoing, nothing herein shall obligate SBCL
to request that HDI perform the Developments or pay HDI any amount of the
Developments Fee if Developments work is not requested. Further, nothing herein
shall obligate HDI to perform Developments work for SBCL beyond the amount of
the Developments Fee.
c. SBCL shall have the right to periodic review of the Developments
work by HDI to ensure progress by HDI on the Developments and confidentiality of
the Developments.
d. SBCL acknowledges that all Developments requested *.
e. *
f. Information and materials concerning the Developments requested
by SBCL and all Developments performed by HDI for SBCL shall be kept
confidential by HDI in accordance with Section 6 of this Agreement.
3.5 HDI shall credit the amount of the paid License Fee and the
Developments Fee against the Royalty.
4.0 COMPULSORY LICENSE; RIGHT OF FIRST REFUSAL
------------------------------------------
4.1 In the event that a governmental agency in any country or territory
grants or compels HDI to grant a license to any third party for the Technology,
SBCL shall have the
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<PAGE>
benefit in such country or territory of the terms granted to such third party to
the extent that such terms are more favorable to the third party than those of
this Agreement.
4.2 HDI agrees that SBCL shall have a right of first refusal with respect
to an exclusive license for all rights to the Technology in the Field in the
Territory. SBCL shall have sixty (60) days after completion of the Proof of
Concept to determine whether it wishes to exercise its right of first refusal.
If SBCL decides to exercise its right, it shall so notify HDI. Unless otherwise
agreed by SBCL and HDI, the right of first refusal shall expire if the principal
terms of the exclusive license are not agreed to in principle within ninety (90)
days after completion of the Proof of Concept.
5.0 STATEMENTS AND REMITTANCES
--------------------------
5.1 Royalties shall be calculated on a quarterly basis. Payment of
Royalties with respect to each calendar quarter shall be due within forty-five
(45) days after the end of each quarter, beginning with the calendar quarter in
which the first sale of a Service occurs. SBCL shall notify HDI promptly, in
writing, of the identity of the Services when they become commercially available
and the date of the first sale of a Service.
5.2 *
5.3 At the same time that it makes payment of Royalties due with respect
to a calendar quarter, SBCL shall deliver to HDI a true and complete accounting
of Net Sales and other dispositions of Services sold by SBCL and receipts from
those Net Sales and other dispositions by SBCL, and its Sublicensees and
Affiliates during the quarter, with a separate accounting of Net Sales and
receipts by country and a calculation of the Royalty due HDI for such calendar
quarter (less the credits allowed by Section 3.5). If no sales of Services were
made in any such quarter then SBCL's statement shall be a statement to such
effect.
5.4 SBCL shall keep, and shall cause its Sublicensees and Affiliates to
keep, accurate books and records in sufficient detail to permit the Royalties
payable under this Agreement to be determined and audited. During the term of
this Agreement and for a period of one year following termination of this
Agreement, SBCL shall permit (and shall cause each of its Sublicensees or
Affiliates to permit), its books and records regarding its sales and other
dispositions of to be examined and copied from time to time, at the request of
HDI, during normal business hours by HDI or any representative of HDI, and shall
require each of its Sublicensees and Affiliates to do the same; provided,
however, that such examination shall not take place more often than once a year
and shall not cover such records for more than the preceding two (2) years. Such
examination shall be made at HDI's expense, except that if such examination
discloses a discrepancy *. In connection with any examination or copying of
books or records in accordance with the preceding sentence, HDI or such
representative of HDI shall examine only such information as is required to
verify compliance by SBCL, its Sublicensees and Affiliates under this Agreement.
This representative shall treat all relevant matters as confidential pursuant to
Section 6 of this Agreement and should be acceptable SBCL. SBCL may require
that this representative be an independent Certified Public Accountant.
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<PAGE>
5.5 In the event of transactions giving rise to an obligation to make a
payment hereunder with respect to which SBCL, or any of its Sublicensees or
Affiliates receives payment in a currency other than currency which is legal
tender in the United States of America, all payments required to be made by SBCL
to HDI shall be converted, prior to payment, into United States dollars at the
applicable rate of exchange of Citibank, N.A., in New York, New York, on the
last day of the quarter in which such transaction occurred.
5.6 Payments due to HDI under this Agreement, if not paid when due under
the terms of this Agreement, shall bear simple interest at the rate of 10% per
annum, calculated on the basis of a 360 day year for the number of days actually
elapsed, beginning on the due date and ending on the day prior to the day on
which payment is made in full. Interest accruing under this section shall be due
to HDI on demand. The accrual or receipt by HDI of interest under this Section
shall not constitute a waiver by HDI of any right it may otherwise have to
declare a default under this Agreement or to terminate this Agreement.
6.0 EXCHANGE OF INFORMATION AND CONFIDENTIALITY
-------------------------------------------
6.1 Promptly after payment of both installments of the License Fee by SBCL
to HDI, HDI shall disclose and supply to SBCL all Know-how required for
performing the Services not already disclosed to SBCL during the negotiations of
this Agreement. Thereafter, HDI shall promptly disclose and supply to SBCL any
further Know-how required for performing the Services developed for SBCL by HDI
which is or may become known to HDI.
6.2 During the term of this Agreement, each party shall promptly inform
the other party of any information that it obtains or develops regarding the
utility and safety of the Technology in the Field. Each party promptly shall
report to the other any information on all serious or unexpected reactions or
side effects related to the utilization of the Technology in the Field.
6.3 Except for documents labeled "Technology Secret" and their content
which SBCL may not disclose to third parties except upon order of a judicial or
administrative body during the term of this Agreement and for five (5) years
thereafter, irrespective of any termination earlier than the expiration of the
term of this Agreement, HDI, Hyseq Inc. ("HI") and SBCL shall not use or reveal
or disclose to third parties any confidential information received from the
other party or otherwise developed by either party in the performance of
activities in furtherance of this Agreement, which information is identified by
either party as confidential, without first obtaining the written consent of the
other party; provided, however, that such confidential information may be
disclosed for securing essential or desirable authorizations, privileges or
rights from governmental agencies, or as required to be disclosed to a
governmental agency or as necessary to file or prosecute Patent applications
concerning the Technology or to carry out any litigation concerning the
Technology; provided, however, that SBCL will consult with HDI prior to such
disclosure. HDI, HI and SBCL shall take reasonable measures to assure that no
unauthorized use or disclosure is made by others to whom access to such
information is granted. This
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<PAGE>
confidentiality obligation shall not apply to such information which is or
becomes a matter of public knowledge, other than through the action or inaction
of the party to be bound, or is already in the possession of the receiving
party, or is disclosed to the receiving party by a third party having the right
to do so, or is subsequently and independently developed by employees of the
receiving party or Affiliates thereof who had no knowledge of the confidential
information disclosed.
6.4 Subject to Section 6.3, nothing herein shall be construed as
preventing either party from disclosing any confidential information received
from the other to an Affiliate or Sublicensee of such party, provided that
disclosure is required for use of the Technology in the Field and such Affiliate
or Sublicensee has undertaken a similar obligation of confidentiality under this
Agreement with respect to the confidential information.
6.5 All confidential information disclosed by one party to the other shall
remain the intellectual property of the disclosing party. In the event that a
court or other legal or administrative tribunal, directly or through an
appointed master, trustee or receiver, assumes partial or complete control over
the assets of a party to this Agreement based on the insolvency or bankruptcy of
such party, the bankrupt or insolvent party shall promptly notify the court or
other tribunal (i) that confidential information received from the other party
under this Agreement remains the property of the other party and (ii) of the
confidentiality obligations under this Agreement. In addition, the bankrupt or
insolvent party shall, to the extent permitted by law, take all steps necessary
or desirable to maintain the confidentiality of the other party's confidential
information and to insure that the court, other tribunal or appointee maintains
such information in confidence in accordance with the terms of this Agreement.
6.6 No public announcement or other disclosure to third parties concerning
the existence of or terms of this Agreement shall be made, either directly or
indirectly, by any party to this Agreement, except as may be legally required or
as may be required for recording purposes, without first obtaining the approval
of the other party and agreement upon the nature and text of such announcement
or disclosure, unless the disclosure does not identify the other party. The
party desiring to make any such public announcement or other disclosure shall
inform the other party of the proposed announcement or disclosure in reasonably
sufficient time prior to public release, and shall provide the other party with
a written copy thereof, in order to allow such other party to comment upon such
announcement or disclosure. If either party believes it needs to disclose any
information to a third party for the purpose of public offering, merger or
acquisition, it shall submit a request for approval from the other party along
with the information it desires to disclose which approval will not unreasonably
be withheld.
6.7 Neither SBCL nor HDI shall submit for written or oral publication any
manuscript, abstract or the like which includes proprietary and confidential
data or information generated and provided by the other party without first
obtaining the prior written consent of the other party, which consent shall not
be unreasonably withheld. The contribution of each party shall be noted in all
publications or presentations by acknowledgment or co-authorship, whichever is
appropriate.
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<PAGE>
7.0 INVENTIONS, PATENT PROSECUTION AND LITIGATION
---------------------------------------------
7.1 Each party shall have and retain sole and exclusive title to all
inventions, discoveries and know-how relating to the Technology which are made,
conceived, reduced to practice or generated solely by its employees, agents, or
other persons acting under its authority in the course of or as a result of the
performance of its obligations under the Agreement. Each party shall own a *.
Except as otherwise provided in the Agreement, each joint owner may make, use,
license and sell such jointly owned inventions, discoveries and know-how without
the consent of and without accounting to the other joint owner.
7.2 Each party shall promptly notify the other upon the making, conceiving
or reducing to practice of any invention or discovery referred to in Section
7.1. With respect to any such invention,
(i) SBCL shall have the sole right to prepare, file, prosecute,
maintain and extend patent applications, except as provided for below,
concerning all inventions and discoveries made under this Section and owned
wholly by SBCL. SBCL shall have the first right, using in-house or outside
legal counsel selected at SBCL's sole discretion, to prepare, file, prosecute,
maintain and extend patent applications and patents concerning all such
inventions and discoveries made under this Section and owned jointly by SBCL and
HDI in countries of SBCL's choice throughout the world with appropriate credit
to HDI representatives, including the naming of such parties as inventors where
appropriate and in accordance with the relevant legal requirements, for which
SBCL shall bear the costs relating to such activities which occur at SBCL's
request or direction.
(ii) HDI shall have the sole right to prepare, file, prosecute,
maintain and extend patent applications, except as provided for below,
concerning all inventions and discoveries made under this Section and owned
wholly by HDI. HDI shall have the first right, using in-house or outside legal
counsel selected at HDI's sole discretion, to prepare, file, prosecute, maintain
and extend patent applications and patents concerning all such inventions and
discoveries made under this Section and owned in whole by HDI in countries of
HDI's choice throughout the world, for which HDI shall bear the costs.
(iii) If SBCL, prior or subsequent to filing certain patent
applications on any inventions or discoveries which are owned in part by HDI and
in part by SBCL, elects not to file, prosecute or maintain such patent
applications or ensuing patents or certain claims encompassed by such patent
applications or ensuing patents in any country of the Territory, SBCL shall give
HDI notice thereof within a reasonable period prior to allowing such patent
applications or patents or such certain claims encompassed by such patent
applications or patents to lapse or become abandoned or otherwise unpatentable
or unenforceable, and HDI shall thereafter have the right, at its sole expense,
to prepare, file, prosecute and maintain patent applications and patents or
divisional applications related to such certain claims encompassed by such
patent applications or patents concerning all such inventions and discoveries in
countries of its choice throughout the world.
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(iv) If HDI, prior or subsequent to filing certain patent
applications on any inventions or discoveries which are owned in part by HDI and
in part by SBCL, elects not to file, prosecute or maintain such patent
applications or ensuing patents or certain claims encompassed by such patent
applications or ensuing patents that relate to the Technology in the Field in
any country of the Territory, HDI shall give SBCL notice thereof within a
reasonable period prior to allowing such patent applications or patents or such
certain claims encompassed by such patent applications or patents to lapse or
become abandoned or unenforceable, and SBCL shall thereafter have the right, at
its sole expense, to prepare, file, prosecute and maintain patent applications
and patents or divisional applications related to such certain claims
encompassed by such patent applications or patents concerning all such
inventions and discoveries in countries of its choice throughout the world.
(v) The party filing patent applications for jointly owned
inventions and discoveries shall do so in the name of and on behalf of both SBCL
and HDI. Each of HDI and SBCL shall hold all information it presently knows or
acquires under this Section 7.2 which is related to all such patents and patent
applications as confidential subject to the provisions of Section 6.
(vi) The party filing a patent application under the provisions
of this Section 7.2 shall promptly notify the other party of such filing.
7.3 HDI shall have the first right, using in-house or outside legal
counsel selected at HDI's sole discretion, to prosecute, maintain and extend
Patents in existence as of the date of mutual execution of the Agreement or
which claim inventions or discoveries in the Field in the Territory which are
not outlined in Section 7.1, for which HDI shall bear all costs. If HDI elects
not to prosecute or maintain such Patents or certain claims encompassed by such
Patents in countries of its choice throughout the world in HDI's name, HDI shall
give SBCL notice thereof within a reasonable period prior to allowing such
patent applications or patents or such certain claims encompassed by such patent
applications or patents to lapse or become abandoned or unenforceable, and SBCL
shall thereafter have the right, at its sole expense, to prosecute and maintain
patent applications and patents or divisional applications related to such
certain claims encompassed by such patent applications or patents concerning all
such inventions and discoveries in countries of its choice throughout the world.
7.4 HDI and HI warrant that they have disclosed to SBCL the complete texts
of all issued patents and published patent applications filed by HDI or HI which
generically or specifically include within the scope of a claim the Technology
in the Field in the Territory as of the date of this Agreement as well as the
accurate and up-to-date schedule set forth in Appendix B which shows the status
of all active patents throughout the Territory which relate to the Technology,
and further that all information known to them or their patent attorneys
concerning the existence of any interference, opposition, reexamination,
reissue, revocation, nullification or any official proceeding involving an
active patent anywhere in the Territory has been disclosed to SBCL on Appendix B
hereto. HDI will disclose to SBCL's patent attorneys unpublished patent
applications of HDI which generically or specifically include within the scope
of a claim the Technology in the Field in the Territory and related information
so that SBCL's attorneys can
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<PAGE>
advise SBCL management of SBCL's rights. Only SBCL's patent attorneys will see
the HDI patent applications until they are published.
7.5 In the event of the institution of any suit by a third party against
HDI, HI, SBCL or their respective Affiliates or Sublicensees for patent
infringement involving the manufacture, use, sale, distribution or marketing of
the Technology in the Field anywhere in the Territory, the party sued shall
promptly notify the other party, including with such notification reasonable
written detail regarding such claim. SBCL and HDI agree to cooperate with each
other in any proceeding under this Section 7.5, and each agree to participate as
a party to any proceeding initiated under this Section 7.5 in order to settle or
defend the claim as each party shall decide. The settlement or satisfaction of
any claim of patent infringement shall be resolved in a manner consistent with
Section 7.6 hereof. Each party shall bear its own expenses.
7.6 In the event that HDI or SBCL becomes aware of actual or threatened
unlicensed infringement of a claim in the Field under a Patent anywhere in the
Territory which potentially affects the rights relating to Technology licensed
to SBCL under this Agreement, that party shall promptly notify the other party
in writing. HDI shall have the first right but not the obligation to bring, at
its own expense, an infringement action against any third party. If HDI does
not commence a particular infringement action within ninety (90) days of notice
of such infringement, SBCL, after notifying HDI in writing, shall be entitled to
bring such infringement action at its own expense. The party commencing such
action shall have full control over its conduct, including settlement thereof,
subject to Sections 7.7 and 7.8. In any event, HDI and SBCL shall assist one
another and cooperate in any such litigation initiated at the other's request,
at the expense of the requesting party.
7.7 HDI and SBCL shall recover their respective actual out-of-pocket
expenses, or equitable proportions thereof, associated with any litigation or
settlement thereof from any recovery made by any party to the litigation. Any
excess amount shall be shared among SBCL and HDI and any other prevailing
parties to the litigation, with SBCL and HDI each receiving its pro rata share
of any excess damages received.
7.8 The parties shall keep one another informed of the status of and of
their respective activities regarding any litigation or settlement thereof
concerning Technology in the Field, provided that no settlement or consent
judgment or other voluntary final disposition of any suit defended or action
brought by one party pursuant to this Section 7 may be entered into without the
consent of the other party if such settlement would require the non-settling
party to be subject to an injunction or to make a monetary payment or would
adversely affect the non-settling party's patent rights or the non-settling
party's other rights under this Agreement.
7.9 SBCL shall have the right but not the obligation to seek extensions of
the terms of Patents. HDI hereby authorizes SBCL to act as HDI's agent for the
purpose of making any application for any extensions of the term of Patents and,
at SBCL's request, HDI shall provide reasonable assistance therefor to SBCL, at
SBCL's expense.
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<PAGE>
8.0 TRADEMARKS AND NON-PROPRIETARY NAMES
------------------------------------
8.1 SBCL, at its expense, shall be responsible for the selection,
registration and maintenance of all trademarks and service marks which it
employs in connection with the Services developed with the Technology in the
Territory and shall own and control such trademarks and service marks. Nothing
in this Agreement shall be construed as a grant of rights, by license or
otherwise, to HDI to use such trademarks or service marks for any purpose.
8.2 SBCL, at its expense, shall be responsible for the selection and
registration of non-proprietary names for Technology in the Territory.
9.0 TERM AND TERMINATION
--------------------
9.1 This Agreement shall commence on the date set forth above and shall
continue until royalty obligations shall expire under Section 9.2, unless sooner
terminated as provided in this Agreement.
9.2 SBCL's royalty obligations under Section 3.3 shall expire (i) in each
country of the Territory in which a Patent is in force during the Term of this
Agreement upon the expiration, lapse or invalidation of the last remaining
Patent in such country which claims the Technology in the Field or the Services
sold or (ii) in each country in which a Patent was not granted, upon the date
that Know-how becomes part of the public domain in such country through action
or disclosure by HDI or its licensees other than SBCL or through independent
development by a third party. SBCL's royalty obligations under Section 3.3 also
shall expire in countries of the Territory on the date such royalty payment is
prohibited by applicable law, rule or regulation.
9.3 Notwithstanding any other provision of this Agreement, the termination
of the Agreement under Section 9.1 shall not preclude SBCL or its Sublicensees
or Affiliates from continuing to market Services and to use Know-how throughout
the Territory in the Field without further royalty payments to HDI under this
Agreement. Upon termination of the Agreement under any provision other than
Section 9.1, all use by SBCL of the Technology shall immediately cease, and all
accrued but unpaid amounts under 3.1 to 3.4, if any, shall be paid within thirty
(30) days of such termination.
9.4 If either party fails or neglects to perform covenants or provisions
of this Agreement and if such default is not corrected within thirty (30) days
after receiving written notice from the other party with respect to such
default, such other party shall have the right to terminate this Agreement by
giving written notice to the party in default, provided the notice of
termination is given within six (6) months of the non-defaulting party's actual
knowledge of the default and prior to correction of the default. With regard to
any non-monetary defaults, a reasonable extension of time may be provided if the
defaulting party is making diligent efforts to cure.
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<PAGE>
9.5 Either party may terminate this Agreement in its entirety if at any
time the other party shall file in any court or agency pursuant to any statute
or regulation of any state or country, a petition in bankruptcy or insolvency or
for reorganization or for an arrangement or for the appointment of a receiver or
trustee of the party or of its assets, or if the other party proposes a written
agreement of composition or extension of its debts, or if the other party shall
be served with an involuntary petition against it, filed in any insolvency
proceeding, and such petition shall not be dismissed with sixty (60) days after
the filing thereof, or if the other party shall propose or be a party to any
dissolution or liquidation, or if the other party shall make an assignment for
the benefit of creditors.
9.6 a. *
b. *
c. *
d. *
9.7 SBCL may immediately terminate this Agreement in its entirety upon
written notice to HDI at any time should the manufacture, use, sale,
distribution or marketing of the Services using the Technology in the Field
anywhere within the Territory infringe any claim of an enforceable patent owned
by a third party, other than patents relating to PCR technology, or be
prohibited by applicable Federal or state laws, rules, or regulations.
9.8 Notwithstanding the bankruptcy of HDI, or the impairment of
performance by HDI of its obligations under this Agreement as a result of
bankruptcy or insolvency of HDI, SBCL shall be entitled to retain the licenses
granted herein, subject to HDI's rights to terminate this Agreement for reasons
other than bankruptcy or insolvency as expressly provided in this Agreement.
9.9 The failure of either party to terminate this Agreement by reason of
the breach of any of its provisions by the other party shall not be construed as
a waiver of the rights or remedies available for such breach or any subsequent
breach of the terms of provisions of this Agreement.
9.10 Any rights or obligations set forth herein, assessed or accrued prior
to the termination of this Agreement, or which by their intent are meant to
survive termination of this Agreement shall survive any termination of this
Agreement, including, without limitation, Sections 3.1 to 3.5 and Sections 6, 7
and 9.3.
10.0 WARRANTIES
----------
10.1 HDI, HI and SBCL each warrants that it has the right to enter into
this Agreement, and that the execution of this Agreement and the performance by
it of its obligations hereunder will not result in any breach or violation or
default under any indenture, lease, license, or other
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<PAGE>
agreement, order or regulation to which it is a party or to which the Technology
might be subject. HI warrants that it will license HDI, with the right to grant
a sublicense to SBCL under this Agreement, any patent in the Territory owned or
controlled by HI which generically or specifically includes within the scope of
a claim the Technology in the Field.
10.2 HDI and HI, including their respective fellows, officers, employees
and agents, makes no representations or warranties that any Patent(s) is or will
be held valid, or that the manufacture, use, sale, or other distribution of any
Service will not infringe upon any patent or other rights not vested in HDI or
HI. HDI and HI do warrant, as of the date of this Agreement, that neither is
aware of any information or knowledge that any Patent is or has been alleged to
be invalid by a third party or that, except for patents covering PCR technology,
third party patents exist or may exist which would be infringed by use of the
Technology in the Field by SBCL. A holding of invalidity or unenforceability of
any Patent, from which no further appeal is or can be taken, shall not affect
any obligation already accrued hereunder, but shall only eliminate Royalties
otherwise due under such Patent from the date such holding becomes final.
10.3 HDI and HI, including their respective fellows, officers, employees
and agents, makes no representations, extends no warranties of any kind, either
express or implied, including but not limited to the implied warranties of
merchantability or fitness for a particular purpose, and assumes no
responsibilities whatever with respect to the use, sale or other disposition by
SBCL or its Affiliates of the Technology.
10.4 The entire risk as to use, offering for sale, sale or other
disposition and performance of the Technology is assumed by SBCL and its
Affiliates. In no event shall HDI, including its fellows, officers, employees
and agents, be responsible or liable for any direct, indirect, special,
incidental, or consequential damages or lost profits to SBCL, its Affiliates or
any other individual or entity regardless of legal theory. The above
limitations on liability apply even though HDI or HI, including their respective
fellows, officers, employees or agents, may have been advised of the possibility
of such damage.
10.5 SBCL shall not, and shall require that its Affiliates do not, make any
statements, representations or warranties or accept any liabilities or
responsibilities whatsoever to or with regard to any person or entity which are
inconsistent with any disclaimer or limitation included in this Section 10.
11.0 LITIGATION
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11.1 HDI shall protect the Technology and the Patents in the Field in the
Territory and SBCL's rights under this Agreement from infringement and shall
prosecute infringers when in HDI's judgment such action shall be reasonable,
proper and justified. In the event of infringement during the period of SBCL's
license, if HDI does not undertake all reasonable steps necessary in the
Territory to protect the Technology in the Field or the Patents or SBCL's use
under this Agreement within sixty (60) days after its receipt of written notice
from SBCL of an alleged infringement, SBCL may, at its option:
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a. Terminate this Agreement in its entirety by giving thirty (30)
days written notice to HDI; or
b. At its discretion and expense, prosecute or defend any litigation
with respect to the use of the Technology by giving thirty (30) days written
notice to HDI; or
c. Continue to provide Services and to use the Technology in the
Field; provided, however, that until such date as (i) alleged infringement by
the third party ceases; or (ii) a final determination by the Court of Appeals
for the Federal Circuit is rendered regarding infringement, whichever is
earlier, HDI shall use fifty percent (50%) of SBCL's Royalty under Section 3.3
solely to undertake all reasonable steps necessary in the Territory to protect
the Technology in the Field or the Patents or SBCL's use under this Agreement;
provided further, however, that before HDI is restricted from use of fifty
percent (50%) of the Royalty in accordance with this Section, SBCL shall first
obtain an opinion of infringement by the third party from an independent patent
attorney agreed to by SBCL and HDI, which opinion shall be made available to
HDI.
HDI hereby authorizes SBCL to use its name in connection with any
litigation commenced pursuant to Section ll.l(b), without expense to HDI. Any
monetary recovery from such litigation shall be used first to compensate the
party assuming the principal burden of the litigation for its damages and the
costs and expenses of the litigation. Any excess amount received shall be
shared between SBCL and HDI on a 50-50 basis.
12.0 MISCELLANEOUS
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12.1 Notice hereunder shall be deemed sufficient if given by registered
mail, postage prepaid, and addressed to the party to receive such notice at the
address given herein, or such other address as may hereinafter be designated by
notice in writing. All such notices shall be considered as given when mailed
aforesaid:
To SBCL: SmithKline Beecham Clinical Laboratories, Inc.
1201 S. Collegeville Road
Collegeville, PA 19426
Attn.: *
With a copy to: SmithKline Beecham Corporation
Corporate Law Department - FP2230
One Franklin Plaza
200 North 16th Street
Philadelphia, PA 19102
Attn.: *
To HDI or HI: Hyseq Diagnostics, Inc.
670 Almanor
Sunnyvale, CA 94086
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Attn.: Lewis S. Gruber
Chief Executive Officer and President
Facsimile: 408-524-8141
With a copy to: Shefsky & Froelich, Ltd.
444 North Michigan Avenue
Suite 2500
Chicago, IL 60611
Attn: Misty Gruber, Esq.
Facsimile: 312-527-3194
12.2 None of the terms of this Agreement may be waived or modified except
by an express agreement in writing signed by the party against whom enforcement
of such waiver or modification is sought. The failure or delay of either party
in enforcing any of its rights under this Agreement shall not be deemed a
continuing waiver or a modification by such party of such right. The exercises
of one remedy by a party shall not preclude such party from exercising
additional remedies. If one or more of the provisions of this Agreement shall
be found to be illegal or invalid by a court of competent jurisdiction, the
parties shall, if possible, agree on a legal, valid and enforceable substitute
provision which is as similar in effect to the deleted provision as possible.
The remaining portion of the Agreement not declared illegal, invalid or
unenforceable shall, in any event, remain valid and effective for the term
remaining; provided, however, that if a party's rights are materially affected
thereby, such party may terminate this Agreement.
12.3 The relationship created by this Agreement shall be that of
independent contractors and neither party shall have the authority to bind or
act as agent for the other party or its employees or agents, for any purpose.
12.4 Except as provided in this paragraph, neither party may assign any
right or obligation hereunder, except to an Affiliate, without the written
consent of the other, which consent shall not be unreasonably withheld. Any
attempted assignment in violation of this paragraph shall be void.
12.5 This Agreement contains the entire understanding of the parties hereto
with respect to the subject matter herein contained and supersedes any previous
agreements on this subject matter executed by these parties. The parties hereto
may, from time to time during the continuance of this Agreement, modify any of
the provisions of this Agreement only by an instrument duly executed in writing
by all parties herein.
12.6 This Agreement shall be construed and enforced in accordance with the
laws of the Commonwealth of Pennsylvania without reference to its choice of law
principles.
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12.7 This Agreement may be executed in one or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
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13. RECORDING
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13.1 SBCL shall have the right, at any time, to record, register, or
otherwise notify this Agreement in appropriate governmental or regulatory
offices anywhere in the Territory, and HDI shall provide reasonable assistance
to SBCL in effecting such recording, registering or notifying.
IN WITNESS WHEREOF, the parties have caused this License Agreement to be
executed by their respective duly authorized representatives on the respective
dates indicated below.
HYSEQ DIAGNOSTICS INC. SMITHKLINE BEECHAM
CLINICAL LABORATORIES, INC.
By: /s/ Lewis S. Gruber By: *
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Name: Lewis S. Gruber Name:
-------------------------------- --------------------------------
Title: Chief Executive Officer Title:
--------------------------------- -------------------------------
Date: Date:
-------------------------------- --------------------------------
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[LETTERHEAD OF HYSEQ INC.]
June 3, 1997
Dr. John B. Okkerse, Ph.D.
President
SmithKline Beecham Clinical Laboratories
1201 South Collegeville Road
Collegeville, PA 19426
Dear John;
As you know, Hyseq made biotechnology history by signing three agreements on
Friday. We wanted, and expected, SBCI, would have been the first agreement to
be signed and implemented. Recognizing the value of Hyseq, our three new
partners moved very quickly to assure their access to our technology.
We remain committed to developing a genetic testing platform for SBCI, using
our proprietary SBH technology. However, we need your assistance to complete
the following open items. This summary of our past few conversations and of
our proposed resolutions should ensure understanding of our mutual desire to
develop a genetic testing platform for SBCI, and of what is needed from both
of us to proceed.
. With reference to our prior mutual agreement to extend to June 6, 1997 the
ability of SmithKline Beecham Clinical Laboratories ("SBCL") in its sole
discretion to terminate, after receipt of our proof of concept, the license
agreement between Hyseq and SBCL, dated September 25, 1995 (the "License
Agreement") without cause, we propose the following: EITHER PARTY SHALL
HAVE THE ABILITY TO TERMINATE THE LICENSE AGREEMENT WITHOUT CAUSE AND
WITHOUT ANY OBLIGATION TO THE OTHER PARTY ON THE EARLIER TO OCCUR OF 90
DAYS AFTER A DRAFT OF A PROPOSED NEW LICENSE AGREEMENT SHALL HAVE BEEN
DELIVERED BY SBCL TO HYSEQ OR OCTOBER 6, 1997. IN THE EVENT OF SUCH
TERMINATION, SBCL SHALL IMMEDIATELY INSTRUCT THE ESCROW AGENT TO RETURN TO
SBCL THE ESCROW FUND IN ACCORDANCE WITH SECTION 3.1 OF THE LICENSE
AGREEMENT. THE PARTIES INTEND THIS LETTER TO SUPERSEDE ANY PROVISION OF THE
LICENSE AGREEMENT TO THE CONTRARY.
. Hyseq has requested a document from SBCL (agreement, term sheet, or letter
of understand) stating what SBCL wants Hyseq to perform with regards to the
test observation requested by Dr. Wecksler. We have had conversations
regarding this additional requirement but we do not have an agreement in
place describing the expected outcome, payment understanding, and
expectations following completion of the new requirements. We have
performed work on the assumed requirements but we need an agreement in
place to complete the requirements for Dr. Wecksler's approval.
. We need to agree on terms and conditions of a new collaborations as
discussed earlier. We would like your comments on our April 30 proposal, or
your term sheet for our comments, so we can reach agreement within the
above extension period.
We are available to conference with you and your colleagues on these issues to
expedite our agreements and to sign the proposed extension. We look forward to
completing these open items with you.
Sincerely,
/s/ Lewis S. Gruber
Lewis S. Gruber
President and CEO
cc: Dr. Wayne Wecksler
Mr. Michael McNulty
Mr. Patrick McKay
<PAGE>
APPENDIX A
TECHNOLOGY
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APPENDIX B
PATENTS
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Patent Number: 5,202,231
Title: Method of Sequencing of Genomes by Hybridization of
Oligonucleotide Probes
Inventors: Radoje T. Drmanac and Radomir B. Crkvenjakov
<PAGE>
APPENDIX C
PROOF OF CONCEPT
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APPENDIX D
TEST DEVELOPMENT MILESTONES
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APPENDIX E
FORM OF ESCROW AGREEMENT
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