<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 7, 1997
REGISTRATION STATEMENT NO. 333-29091
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
AMENDMENT NO. 7
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 7th 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 7th 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 10.5
PATENT LICENSE AGREEMENT
(Sequencing by Hybridization)
---------------------------
Patent License Agreement (this "Agreement"), dated June 7, 1994, between
ARCH DEVELOPMENT CORPORATION, an Illinois not-for-profit corporation ("ARCH"),
and HYSEQ, INC., a Nevada corporation ("Licensee").
PRELIMINARY STATEMENT
---------------------
ARCH holds rights to the Licensed Patent Rights described below.
Licensee wishes to obtain the right to exploit the Licensed Patent Rights
in commercial settings.
Therefore, in consideration of the mutual obligations set forth herein and
other valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, ARCH and Licensee agree as follows.
ARTICLE
1.
DEFINITIONS
-----------
The following capitalized terms are used in this Agreement with the following
meanings:
"Affiliate" means, as to any person or entity, any other person or entity
---------
which directly or indirectly controls, is controlled by, or is under common
control with such person or entity. For purposes of the preceding definition,
"control" means the right to control, or actual control of, the management of
such other entity, whether by ownership of voting securities, by agreement, or
otherwise.
"Combination Product" means any product sold as a single unit but which
-------------------
incorporates both (a) one or more Licensed Products and (b) one or more
products, not themselves Licensed Products, for which a separate market exists
and which are capable of being sold separately from the Combination Product.
"Equity Securities" means those securities of Licensee first issued and
-----------------
sold by Licensee after the date of this Agreement in a single transaction or
series of transactions (excluding the exercise of warrants or options) for an
aggregate price paid by the purchasers in cash of * or more, or if no such
issuance and sale occurs within the first year after execution of this
Agreement, then those securities of Licensee most recently issued and sold by
Licensee prior to the date of this Agreement.
* CERTAIN INFORMATION IN THIS AGREEMENT AND 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>
"Inventions" means the devices, machines, methods, processes, manufactures,
----------
compositions of matter and uses described in U.S. Patent Application Serial No.
*, a copy of a portion of which Licensee has previously received from ARCH, or
described in any of the patents and patent applications that are divisions,
continuations, continuations-in-part, reissues, renewals, reexaminations,
foreign counterparts, substitutions or extensions of or to U.S. Patent
Application Serial No. *.
"Licensed Patent Rights" means (a) the patents and patent applications
----------------------
that may issue on the Inventions, and (b) all patents and patent applications
which are divisions, continuations, continuations-in-part, reissues, renewals,
reexaminations, foreign counterparts, substitutions, or extensions of or to any
patent applications or patents described in clause (a) of this sentence.
"Licensed Products or Processes" means any product or process within the
------------------------------
scope of any Valid Claim within the Licensed Patent Rights, and any product made
by any art, method or process within the scope of any Valid Claim within the
Licensed Patent Rights.
"Net Sales" means
---------
(a) with respect to Licensed Products or Processes, Combination Products
and Resulting Products, the gross sales price actually charged in the sale
of such Licensed Product or Process, Combination Product or Resulting
Product, less:
(i) customary trade, quantity or cash discounts, rebates,
nonaffiliated brokers' or agents' commissions actually allowed and
taken;
(ii) amounts repaid or credited to customers on account of
rejections or returns of specified products subject to royalty
hereunder or on account of retroactive price reductions affecting such
products; and
(iii) freight and other transportation costs, including insurance
charges, and duties, tariffs, sales and excise taxes and other
governmental charges based directly on sales, turnover or delivery of
the specified products and actually paid or allowed by Licensee, an
Affiliate of Licensee or a sublicensee; and
(b) with respect to Resulting Sequences, the gross sales price actually
charged in the sale of such Resulting Sequences.
"Patent Costs" means a person's out-of-pocket expenses incurred in
------------
connection with the preparation, filing, prosecution and maintenance of the
patents under the Licensed Patent Rights, including, among other items, the fees
and expenses of attorneys and patent agents, filing fees and maintenance fees,
but excluding costs involved in any patent infringement claims.
"Resulting Products" means products incorporating, or resulting from the
------------------
application of, Resulting Sequences.
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>
"Resulting Sequences" means nucleotide sequences of genetic material
-------------------
determined by or for the benefit of Licensee or any Affiliate of Licensee with
the use of Licensed Products or Processes; provided that after the date (the
"Cumulative Sales Date") that cumulative Net Sales (plus the fair market value
of other consideration described in Section 3.1(b)(iii), determined by mutual
agreement between the parties or by a mutually acceptable independent appraiser)
equals *, Resulting Sequences shall include only nucleotide sequences of genetic
material determined prior to the date (the "Commercial Availability Date") that
Licensed Products or Processes (other than Resulting Sequences and Resulting
Products) are available to non-Affiliates of Licensee on commercial terms and
Licensee is using its best efforts to meet demand, and provided further that
cumulative Royalties otherwise accruing under Sections 3.1(b) and 3.1(c) after
the Cumulative Sales Date shall be reduced (or an equivalent adjustment shall be
made with respect to non-cash Royalties previously transferred to ARCH) by a
cumulative amount equal to the amount of such Royalties previously paid to ARCH
with respect to Resulting Sequences determined after the Commercial Availability
Date.
"Royalties" means all amounts payable under Sections 3.1(b) and 3.1(c)
----------
of this Agreement.
"Sublicense" means any grant by Licensee of any rights to a sublicensee
----------
under the terms of Section 2.1 of this Agreement.
"Technical Information" means ARCH's rights in any technical information
---------------------
and know-how, if any, in ARCH's possession relating to the Inventions.
"Territory" means all countries of the world.
---------
"Valid Claim" means an issued claim of any unexpired patent, or a claim
-----------
of any pending patent application, which has not been held unenforceable,
unpatentable or invalid by a decision of a court or governmental body of
competent jurisdiction, unappealable or unappealed within the tune allowed for
appeal, which has not been rendered unenforceable through disclaimer or
otherwise, and which has not been lost through an interference proceeding.
Notwithstanding the foregoing to the contrary, a claim of a pending patent
application shall cease to be a Valid Claim if no patent has issued on such
claim on or prior to the fifth (5th) anniversary of the date of filing such
patent application (or in the case of a divisional or continuation application,
the date of the filing of the earliest parent application); provided that such
claim shall once again become a Valid Claim on the issue date of a patent that
subsequently issues and covers such claim.
3
* 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>
ARTICLE
2.
GRANT OF LICENSE
----------------
2.1. Grant. ARCH hereby grants and agrees to grant to Licensee:
-----
(a) an exclusive (except as otherwise specified in Sections 2.2 and 2.3)
license to use the Technical Information, and to make, have made, use and sell
Licensed Products or Processes under the Licensed Patent Rights, within the
Territory; and
(b) the exclusive right and authority to grant Sublicenses of the
licenses granted in clause (a) above, subject to the provisions of this
Agreement.
2.2. Reservations.
------------
(a) The Inventions were developed at Argonne National Laboratory ("ANL"),
which is operated by The University of Chicago (the "University") pursuant to a
contract between the University and the United States Department of Energy
("DOE") (such contract, as it may be amended from time to time, is referred to
as the "Prime Contract"). Pursuant to the Prime Contract, DOE has certain rights
with respect to the Inventions and the Licensed Patent Rights, to all of which
rights the rights granted in Section 2.1 of this Agreement are subject. DOE's
rights include, but are not limited to, (i) a nonexclusive, nontransferable,
irrevocable paid-up license to practice, or have practiced, those Inventions in
which the United States Government has or had rights for or on behalf of the
United States Government throughout the world, and (ii) march-in rights.
(b) ARCH reserves for itself and the University the irrevocable but
nontransferable worldwide right to make and use (but not sell commercially)
Licensed Products or Processes and to use the Licensed Patent Rights and the
Licensed Products or Processes for educational and research purposes only
(excluding improvements invented by or assigned to Licensee). Neither ARCH nor
the University shall have any obligation to pay Licensee a royalty or any other
fee for the rights reserved and granted in this Section.
(c) All rights to any Inventions, Technical Information, Licensed Patent
Rights and Licensed Products or Processes which are not expressly granted to
Licensee hereunder or reserved to third parties are hereby expressly reserved to
ARCH.
(d) Except as otherwise expressly set forth in Section 2.2(b) of this
Agreement, nothing in this Agreement shall be interpreted to grant any express
or implied license in any patent rights of Licensee.
2.3. Other Rights. ARCH has not previously granted licenses or other rights
------------
with respect to the Technical Information, the Inventions or the Licensed Patent
Rights in the Territory.
4
<PAGE>
2.4. Sublicenses. Prior to entering into any Sublicense, Licensee shall
-----------
obtain the approval of ARCH to the terms of the Sublicense, which approval shall
not be unreasonably withheld, provided the terms of any such Sublicense are
consistent with the terms of this Agreement. Upon the termination of this
Agreement for any reason, each Sublicense shall terminate without the necessity
of any notice or other communication from ARCH to the sublicensee. ARCH agrees
to negotiate in good faith for a period of ninety (90) days following the
termination of this Agreement with each sublicensee under any Sublicense which
is by its own terms in force and good standing upon the termination of this
Agreement, for a license from ARCH of those rights subject to the Sublicense, on
terms substantially comparable to those set forth in the Sublicense and this
Agreement, provided that nothing herein shall be deemed to extend any sublicense
beyond its original term unless specifically agreed to by ARCH.
2.5. Technical Information. ARCH agrees to use its good faith efforts to
---------------------
obtain access for Licensee to laboratory notebooks and other technical
information in the possession of ANL related to the Licensed Patent Rights in
connection with Licensee's use of the Licensed Patent Rights.
ARTICLE
3.
PAYMENTS
--------
3.1. Cash Royalties. For the licenses granted in Section 2.1 of this
--------------
Agreement, Licensee shall pay ARCH:
(a) promptly upon execution of this Agreement, a Licensing Fee in the
amount of *, which shall be non-refundable under any and all circumstances; and
(b) (i) a royalty equal to * of Net Sales of Licensed Products or
Processes, other than Licensed Products or Processes sold as an element of a
Combination Product, sold by Licensee or any of its Affiliates in each
jurisdiction in which a patent under the Licensed Patent Rights exists or in
which a patent application under the Licensed Patent Rights is pending; and
(ii) a royalty equal to * of Net Sales of Licensed Products or
Processes sold as an element of a Combination Product sold by Licensee or any of
its Affiliates in each jurisdiction in which a patent under the Licensed Patent
Rights exists or in which a patent application under the Licensed Patent Rights
is pending; and
(iii) a royalty equal to * of Net Sales received by Licensee or any
of its Affiliates with respect to Resulting Sequences and Resulting Products in
each jurisdiction in which a patent under the Licensed Patent Rights exists or
in which a patent application under the Licensed Paten Rights is pending,
provided, however, that if Licensee receives consideration (whether such
consideration is cash, securities, or otherwise) in addition to or in lieu of
Net Sales revenue on Resulting Sequences or Resulting Products, a royalty equal
to * of the aggregate of such consideration, in form and substance the same as
such consideration (e.g., if Licensee
5
* 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>
receives securities as consideration for Resulting Sequences or Resulting
Products, Licensee shall make ARCH the beneficial owner of * of such
securities); and
(c) a royalty equal to the greater of: (i) * of all payments received by
Licensee or any of its Affiliates with respect to any Sublicenses from any
sublicensee other than an Affiliate, regardless of whether such payments-are
denominated as fees, royalties or otherwise; or (ii) * of Net Sales of Licensed
Products or Processes sold by any sublicensee in each jurisdiction in which a
patent under the Licensed Patent Rights exists or in which a patent application
under-the Licensed Patent Rights is pending.
All Royalties paid to ARCH pursuant to this Section 3.1 shall be non-refundable
under any and all circumstances.
3.2. Stock Payment. For the licenses granted in Section 2.1 of this
-------------
Agreement, Licensee shall also pay ARCH the sum of * by issuing to ARCH, without
separate consideration and free and clear of all claims, liens and other
encumbrances, (a) simultaneously with and as a part of the consummation of the
sale by Licensee of Equity Securities, or (b) if Equity Securities are not sold
within one year after execution of this Agreement, on the anniversary of the
execution of this Agreement, * in aggregate purchase price of Equity Securities,
at the same price and otherwise on the same terms as the Equity Securities are
issued and sold, or were last issued and sold, to the other purchasers of such
Equity Securities. ARCH shall have all the same rights and privileges, and shall
be subject to the same obligations and limitations, as a purchaser of Equity
Securities as all other purchasers of Equity Securities. Licensee's obligation
to issue Equity Securities to ARCH under this Section shall be contingent only
on the execution and delivery by ARCH of the same agreements and other documents
required to be executed by all other purchasers of Equity Securities.
3.3. Minimum Royalties. If (i) the total Royalties paid to ARCH pursuant to
-----------------
Sections 3.1(b) and 3.1(c) for the calendar quarters set forth below are less
than the amounts ("Quarterly Targets") set forth next to such periods below and
(ii) Licensee fails to pay to ARCH, in addition to the Royalties paid to ARCH
pursuant to Section 3.1 for that quarter, an amount (the "Minimum Royalty") with
respect to that quarter equal to the difference between the corresponding
Quarterly Target and the Royalty paid to ARCH pursuant to Section 3.1 with
respect to that quarter, then ARCH may terminate this Agreement at any time
after the date that the Royalties and any Minimum Royalty are payable with
respect to that quarter, on thirty (30) days written notice to Licensee.
The Quarterly Targets to which Minimum Royalties apply as set forth in this
Section 3.3 are as follows:
Quarters Beginning Quarterly Target
July 1, 1997 through April 1, 1998 *
July 1, 1998 through April 1, 1999 *
July 1, 1999 and thereafter *
6
* 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>
3.4. Research and Development Expenditure. Licensee agrees to fund, directly
------------------------------------
or indirectly with or through strategic alliances, joint ventures and other
entities, including without limitation application of matching funds or grants
provided by governmental or quasi-governmental agencies or entities, research
and development work; directed to the demonstration and further development of
the Inventions in the following amounts in the following periods:
(a) not less than $250,000.00 not later than June 30, 1995; and
(b) not less than $750,000.00 (including the amounts referred to in
Section 3.4(a)) not later than June 30, 1996; and
(c) not less than $1,500,000.00 (including the amounts referred to in
Sections 3.4(a) and 3.4(b)) not later than June 30, 1997; and
(d) not less than $2,500,000.00 (including the amounts referred to in
Sections 3.4(a), 3.4(b) and 3.4(c)) not later than June 30, 1998.
Licensee agrees to give consideration to the performance of each aspect of the
work described above at ANL, taking into account the resources and capacities of
ANL relevant to the work. Any such work will be performed by ANL pursuant to
agreements to be negotiated in good faith between ANL and Licensee.
3.5. * Licensed Patent Rights. It is understood that during the term of this
------------------------
Agreement Licensee *.
3.6. Reduction in Royalties. Licensee shall have the right to reduce
----------------------
Royalties and Minimum Royalties due under this Agreement by one of two
alternatives: (a) by royalties paid by Licensee to third parties which are not
Affiliates of Licensee for licensing patent claims which may be infringed by a
Licensed Product, up to a maximum reduction of *; or (b) by * Reducing Royalties
and Minimum Royalties due by one of the aforementioned alternatives excludes
reduction of Royalties and Minimum Royalties by the other alternative.
3.7. Calculation of Royalties.
------------------------
(a) Royalties shall be calculated on a calendar quarter basis. Payment of
Royalties (and, if applicable, Minimum Royalties) with respect to each calendar
quarter shall be due within forty-five (45) days after the end of each quarter,
beginning with the earlier of (i) the calendar quarter in which the first
commercial sale of Licensed Products or Processes occurs, and (ii) the quarter
for which Minimum Royalties would be due pursuant to Section 3.3 above.
(b) At the same time that it makes payment of Royalties (and, if
applicable, Minimum Royalties) due with respect to a calendar quarter, Licensee
shall deliver to ARCH a true and complete accounting of sales and other
dispositions of Licensed Products or Processes,
7
* 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>
Resulting Sequences and Resulting Products and receipts from those sales and
other dispositions by Licensee, its Affiliates and its sublicensees during the
quarter, with a separate accounting of sales and receipts by country and a
calculation of the Royalty Payment due ARCH for such calendar quarter. If no
sales of Licensed Products or Processes, or Sublicense payments were made in
such quarter then Licensee's statement shall be a statement to such effect.
3.8. Records. Licensee shall keep, and shall cause its Affiliates and
-------
sublicensees to keep, accurate records in sufficient detail to permit the
Royalties payable under this Agreement to be determined. During the term of this
Agreement and for a period of three years following termination of this
Agreement, Licensee shall permit (and shall cause each of its Affiliates and
sublicensees to permit), its books and records regarding its Patent Costs and
the sale and other dispositions of Licensed Products or Processes, Resulting
Sequences and Resulting Products to be examined and copied from time to time, at
the request of ARCH, during normal business hours by ARCH or any representative
of ARCH, and shall require each of its Affiliates and sublicensees to do the
same. Such examination shall be made at ARCH's expense, except that if such
examination discloses a discrepancy of 5% or more in the amount of Royalties due
ARCH, then Licensee shall reimburse ARCH for the cost of such examination,
including any professional fees incurred by ARCH. In connection with any
examination or copying of books or records in accordance with the preceding
sentence, ARCH or such representative of ARCH shall examine only such
information as is required to verify the Licensee's compliance under this
Agreement.
3.9. Foreign Payments. In the event of transactions giving rise to an
----------------
obligation to make a payment hereunder with respect to which Licensee, any of
its Affiliates or any sublicensee 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 Licensee under Section 3.1 hereof 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.
3.10. Overdue Payments. Payments due to ARCH under this Agreement shall, if
----------------
not paid when due under the terms of this Agreement, bear simple interest at the
lower of 15 % or the highest rate permitted by law, 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 ARCH on demand. The accrual
or receipt by ARCH of interest under this Section shall not constitute a waiver
by ARCH of any right it may otherwise have to declare a default under this
Agreement or to terminate this Agreement.
3.11. Termination Report and Payment. Within sixty (60) days after the date
------------------------------
of termination of this Agreement, Licensee shall make a written report to ARCH
which report shall state the number, description, and amount of Licensed
Products or Processes, Resulting Sequences and Resulting Products sold or
otherwise disposed of by Licensee, its Affiliates or any sublicensee upon which
Royalties are payable hereunder but which were not previously reported to ARCH,
a calculation of the Net Sales of such Licensed Products or Processes, Resulting
Sequences and Resulting Products, and a calculation of this Royalty payment due
ARCH for such Licensed Products or Processes, Resulting Sequences and
8
<PAGE>
Resulting Products. Concurrent with the making of such report, Licensee shall
make the Royalty payment due ARCH for such period.
3.12. Progress Report. On or before January 30 of each year during the term
---------------
of this Agreement, Licensee shall make a written annual report to ARCH, in such
detail as ARCH may reasonably request, covering the preceding year and
describing newly developed Resulting Sequences and Resulting Products, and the
progress of Licensee toward commercialization of Licensed Products or Processes,
Resulting Sequences and Resulting Products.
ARTICLE
4.
NO WARRANTIES: INDEMNIFICATION
------------------------------
4.1. Disclaimer of Warranties. EXCEPT WITH RESPECT TO A MATERIAL
------------------------
MISREPRESENTATION OR FRAUD BY ARCH IN THIS AGREEMENT, ARCH HEREBY EXPRESSLY
DISCLAIMS ANY AND ALL WARRANTIES OF ANY KIND OR NATURE, WHETHER EXPRESS OR
IMPLIED, RELATING TO THE INVENTIONS, THE TECHNICAL INFORMATION, THE LICENSED
PRODUCTS OR PROCESSES, OR LICENSED PATENT RIGHTS. ARCH FURTHER HEREBY EXPRESSLY
DISCLAIMS ANY EXPRESS OR IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE, OR THAT THE PRACTICE OF THE LICENSED PATENT RIGHTS OR THE
NAMING, USING OR SELLING OF LICENSED PRODUCTS OR PROCESSES WILL NOT INFRINGE ANY
PATENT, COPYRIGHT, TRADEMARK, OR OTHER RIGHTS OF THIRD PARTIES. Without limiting
the generality of the foregoing, and except with respect to a material
misrepresentation or fraud by ARCH in this Agreement, ARCH expressly does not
warrant (i) the patentability of any of the Inventions, (ii) the accuracy of any
Technical Information or other information contained in the documents attached
hereto as, or (iii) the accuracy, safety, or usefulness for any purpose, of the
Technical Information, Licensed Patent Rights, Inventions, or Licensed Products
or Processes. Nothing contained in this Agreement shall be construed as either a
warranty or representation by ARCH as to the validity or scope of any Licensed
Patent Rights. ARCH assumes no liability in respect of any infringement of any
patent or other right of third parties due to the activities of Licensee, any of
its Affiliates or any sublicensee under this Agreement. Notwithstanding the
foregoing, ARCH hereby expressly represents and warrants to Licensee that ARCH
has full corporate power and authority to enter into this Agreement and to
perform its obligations in accordance with the terms hereof.
4.2. Indemnification.
---------------
(a) None of the University, DOE, any Affiliate other than ARCH of any of
the foregoing or of ARCH, or any trustee, director, officer, employee, agent or
representative of any of the foregoing or of ARCH, or (except with respect to
claims, demands, losses, damages or penalties arising from a material
misrepresentation or fraud by ARCH in this Agreement) ARCH itself (each an
"Indemnified Person") shall have any liability whatsoever to Licensee, any of
its Affiliates, any sublicensee or any other person for or on account of (and
Licensee agrees and
9
<PAGE>
covenants, and agrees to cause each of its Affiliates and sublicensee to agree
and covenant, not to sue any Indemnified Person in connection with) any injury,
loss, or damage, of any kind or nature, sustained by, or any damage assessed or
asserted against, or any other liability incurred by or imposed upon, Licensee,
any of its Affiliates, any sublicensee or any other person, arising out of or in
connection with or resulting from (i) the production, use or sale of the
Licensed Products or Processes by Licensee, any of its Affiliates or its
sublicensees, (ii) the use of any Technical Information or Invention by
Licensee, any of its Affiliates or its sublicensee, or (iii) any advertising or
other promotional activities with respect to either of the foregoing. Licensee
shall indemnify and hold ARCH harmless against all claims, demands, losses,
damages or penalties (including but not limited to attorney's fees at the
pretrial, trial or appellate level) made against any Indemnified Person with
respect to items (i), (ii) and (iii) above (excluding claims made by any third
party alleging the invalidity or challenging the scope of any patent included in
the Licensed Patent Rights), whether or not such claims are groundless or
without merit or basis.
(b) This Agreement is entered into by ARCH independently from the Prime
Contract between the University and DOE. ARCH is acting independently from DOE
and the Government of the United States of America and its own private capacity
and is not acting on behalf of the U.S. Government, nor as its contractor nor
its agent. Correspondingly, it is understood and agreed that the U.S. Government
is not a party to this Agreement and in no manner shall be liable for nor assume
any responsibility or obligation for any claim, cost or damages arising out of
or resulting from this Agreement, the subject matter licensed, or any action or
lack thereof by ARCH, the University, Licensee or any of Licensee's Affiliates
or with respect thereto.
(c) Licensee agrees to list ARCH, at Licensee's expense, as an additional
insured under each liability insurance policy that Licensee, and each of its
Affiliates and sublicensees obtains that includes any coverage of claims
relating to any of the Inventions, Licensed Patent Rights or Licensed Products
or Processes. At ARCH's request, Licensee will supply ARCH from time to time
with copies of each such policy, and will notify ARCH in writing of any
termination of or change in coverage under any such policies.
(d) Licensee's obligations under this Section 4.2 shall survive the
expiration or earlier termination of all or any part of this Agreement.
ARTICLE
5.
PROSECUTION AND MAINTENANCE OF LICENSED PATENT RIGHTS
-----------------------------------------------------
5.1. Prosecution and Maintenance. During the term of this Agreement, and
---------------------------
subject to the provisions of Section 5.3 below, ARCH shall be responsible for
prosecuting and maintaining patents under the Licensed Patent Rights. Except as
otherwise specified in this Agreement, Licensee shall pay when due, or at ARCH's
option reimburse ARCH for, all Patent Costs previously or hereafter incurred by
ARCH with respect to the Licensed Patent Rights, and any Patent Costs for which
ARCH is obligated to reimburse DOE. At Licensee's request, ARCH will provide
Licensee with copies of all official actions and other communications from the
United
10
<PAGE>
States Patent and Trademark Office or any foreign equivalent, received by ARCH
or its patent counsel with respect to patents under the Licensed Patent Rights
and, copies of all filings and draft filings with governmental agencies from
ARCH or its patent counsel with respect to the Licensed Patent Rights.
5.2. Cooperation. Licensee agrees to cooperate with ARCH in the preparation,
-----------
filing, prosecution and maintenance of patents under the Licensed Patent Rights,
by disclosing such information as may be necessary and by promptly executing
such documents as ARCH may reasonably request to effect such efforts. ARCH will
reimburse Licensee for its reasonable out-of-pocket expenses actually incurred
at ARCH's request connection with its cooperation with ARCH under this Section
5.2, excluding time of Inventors. All patents under the Licensed Patent Rights
shall be filed, prosecuted and maintained in ARCH's name or as ARCH shall
designate.
5.3. Licensee Applications.
---------------------
(a) In the event that Licensee wishes to file a patent application with
respect to any of the Inventions in any jurisdiction in which an application has
not already been filed, Licensee shall identify the jurisdiction in writing to
ARCH, and ARCH shall have ninety (90) days after it receives such written notice
in which to file such a patent application. If ARCH declines or fails to file
such a patent application within ninety (90) days after receiving the written
notice, Licensee may, in Licensee's discretion and at Licensee's sole expense
but in ARCH's name, file and prosecute such patent application.
(b) In the event that ARCH determines to abandon a patent application
previously filed with respect to any of the Inventions, it will give Licensee at
least ninety (90) day's prior written notice of its intention to abandon such
application. Licensee may, by written notice to ARCH, elect to continue the
prosecution of the application at Licensee's sole expense but in ARCH's name.
5.4. Confidentiality.
---------------
(a) Both Licensee and ARCH agree to treat (and, in the case of Licensee,
to cause its Affiliates and sublicensees to treat) as confidential all
proprietary information with respect to the Inventions, the Technical
Information or the Licensed Patent Rights made available by ARCH to Licensee or
by Licensee to ARCH, whether such information is in tangible or intangible form;
provided that all information that is in written form or other tangible medium
shall prior to delivery be marked as "Confidential" or "Proprietary," and all
information disclosed orally or otherwise shall be identified as being
"Confidential" or "Proprietary" by a memorandum delivered to the recipient
within sixty (60) days after the date of disclosure. ARCH acknowledges that
Licensee may find it beneficial to disclose such information provided by ARCH
during the conduct of Licensee's business. Under such circumstances, Licensee
may make such information available to third parties, provided that Licensee
shall first obtain from the recipients a fully-executed confidentiality
agreement which is at least as restrictive as the confidentiality agreement
Licensee employs to protect its own most valuable trade secrets.
11
<PAGE>
(b) Neither Licensee nor ARCH shall be bound by the provisions of Section
5.4 with respect to information which (i) was previously known to the recipient
at the time of disclosure; (ii) is in the public domain at the time of
disclosure; (iii) becomes a part of the public domain after the time of
disclosure, other than through disclosure by the recipient or some other third
party who is under an agreement of confidentiality with respect to the subject
information; or (iv) is required to be disclosed by law.
(c) Notwithstanding the provisions of Section 5.4(a), each of ARCH and
the University shall be entitled to make disclosures of information included in
the Technical Information and the Inventions in scholarly journals and
publications where in its reasonable judgment such disclosure will not
materially compromise any proprietary rights to the Inventions otherwise
licensed under this Agreement.
(d) Licensee and ARCH shall each take such actions as the other party may
reasonably request from time to time to safeguard the confidentiality of any
information subject to the terms of this Section 5.4.
(e) To the extent that United State Export Control Regulations are
applicable, neither Licensee nor ARCH shall, without having first fully complied
with such regulations, (i) knowingly transfer, directly or indirectly, any
unpublished technical data obtained or to be obtained from the other party
hereto to a destination outside the United States, or (ii) knowingly ship,
directly or indirectly, any product produced using such unpublished technical
data to any destination outside the United States.
(f) The obligations of Licensee and ARCH under this Section 5.4 shall
survive the expiration or earlier termination of all or any other part of this
Agreement, but all obligations of ARCH and Licensee under this Section 5.4 shall
terminate five (5) years from the last disclosure of confidential information
under this Agreement.
(g) Licensee and ARCH acknowledge that they have entered into that
certain Confidentiality and Non-Use Agreement ("Confidentiality Agreement") a
copy of which is attached hereto as Addendum A. The parties agree that, to the
extent this Agreement conflicts with the terms of the Confidentiality Agreement,
this Agreement shall be binding with respect to the information covered under
the terms of this Article 5.
ARTICLE
6.
INFRINGEMENT
------------
6.1. Notification. In the event that either ARCH or Licensee becomes aware of
------------
the infringement of any patent under the Licensed Patent Rights, each shall
inform the other in writing of all details available.
12
<PAGE>
6.2. Licensee Right to Prosecute.
---------------------------
(a) In the event of infringement by a third party of any patent under the
Licensed Patent Rights, Licensee may enforce the Licensed Patent Rights against
the infringers by appropriate legal proceedings or otherwise, provided that
Licensee shall employ counsel reasonably satisfactory to ARCH and shall inform
ARCH of all material developments in such proceedings. Licensee shall be
responsible for all costs and expenses of any enforcement activities, including
legal proceedings, against infringers. which Licensee initiates. ARCH agrees to
cooperate with and join in any enforcement proceedings at the request of
Licensee, and at Licensee's expense. ARCH may be represented by ARCH's counsel
in any such legal proceedings, at ARCH's own expense (subject to reimbursement
under Section 6.2(c)), acting in an advisory but nor controlling capacity.
(b) The prosecution, settlement, or abandonment of any proceeding under
Section 6.2(a) shall be at Licensee's reasonable discretion, provided that
Licensee shall not have any right to surrender any of ARCH's rights to the
Licensed Patent Rights without agreement by ARCH or to grant any infringer any
rights to the Licensed Patent Rights other than a sublicense subject to the
conditions which would apply to the grant of any other sublicense.
(c) All recoveries by way of royalties, damages and claims with respect
to infringement actions instituted, and claims made (including penalties and
interest), during the term of this Agreement, excluding any prosecuted by ARCH
under Section 6.3, shall belong to Licensee. To the extent that Licensee's
recoveries with respect to an infringement action or claim exceed Licensee's
reasonable expenses with respect to such action or claim, Licensee shall
reimburse ARCH for ARCH's reasonable expenses for separate representation as
provided in Section 6.2(a) with respect to such action or claim. After deduction
of Licensee's costs and expenses, including reasonable attorneys fees incurred
with respect to such action or claim, any such recoveries shall be considered
Net Sales under this Agreement, giving rise to Royalty obligations under Section
3.1(c).
6.3. ARCH Right to Prosecute. In the event of infringement by a third party
-----------------------
of any Licensed Patent Rights which ARCH wishes to prosecute, ARCH shall first
make a written request that Licensee proceed. In the event that Licensee fails
or declines to proceed within thirty (30) days after receipt of a written
request by ARCH to do so, then, in ARCH's sole discretion, (i) ARCH may
prosecute the infringer in the name of ARCH or Licensee, and (ii) (subject to
Licensee's right to reimburse ARCH for all costs and expenses of the prosecution
then incurred and thereupon to assume such prosecution) the grant of license to
Licensee may become non-exclusive to allow ARCH the right to grant to the
infringer a non-transferable license without right to sublicense. Any actions by
ARCH pursuant to this clause shall be ARCH's own expense, and ARCH may collect
and retain for ARCH's own use any and all recoveries in any proceeding by ARCH
under this Section 6.3. Recoveries collected and retained by ARCH under this
Section 6.3 shall not be considered Net Sales or give rise to royalty
obligations under Article 3. Licensee will cooperate with ARCH and execute any
documents necessary for ARCH to exercise ARCH's rights under this clause. To the
extent that ARCH's recoveries with respect to an infringement action or claim
exceed ARCH's reasonable expenses with respect to such action
13
<PAGE>
or claim, ARCH shall reimburse Licensee for Licensee's reasonable costs in
connection with cooperating with ARCH in the prosecution of such action or
claim.
ARTICLE
7.
TERMINATION
-----------
7.1. ARCH Right to Terminate. ARCH shall have the right (without prejudice
-----------------------
to any of its other fights conferred on it by this Agreement) to terminate this
Agreement if Licensee (or, with respect to Section 7.1(d) below, any of its
Affiliates):
(a) is in default in payment of Royalties or making of reports, and
Licensee fails to remedy any such default within ten (10) days after written
notice thereof by ARCH;
(b) is in breach of any other provision of this Agreement, and Licensee
fails to remedy any such default within thirty (30) days after written notice
thereof by ARCH;
(c) makes any materially false report; or
(d) shall commence a voluntary case as a debtor under the Bankruptcy Code
of the United States or any successor statute (the "Bankruptcy Code"), or if an
involuntary case shall be commenced against Licensee under the Bankruptcy Code
and the petition in such case is not dismissed within 45 days of the
commencement of the case, or if an order for relief shall be entered in such
case, or if the same or any similar circumstance shall occur under the laws of
any foreign jurisdiction.
7.2. Licensee Right to Terminate. Licensee shall have the right (without
---------------------------
prejudice to any of its other rights conferred on it by this Agreement) to
terminate this Agreement at any time by written notice to ARCH, given at least
ninety (90) days prior to the termination date specified in the notice.
7.3. Effect of Termination.
---------------------
(a) In the event of the termination of this Agreement for any reason,
whether by Licensee or ARCH, Licensee shall immediately cease and shall cause
each of its Affiliates to immediately cease using, making, having made and
selling the Inventions, the Technical Information, and any Licensed Products or
Processes derived therefrom, and shall return to ARCH, or deliver as ARCH
directs, the Inventions, the Technical Information. and all such Licensed
Products or Processes then in its possession.
(b) Notwithstanding the termination of this Agreement, the following
provisions of this Agreement shall survive:
(i) Licensee's obligation to pay Royalties accrued or accruable;
14
<PAGE>
(ii) Licensee's obligations under Sections 3.8 through and
including 3.12, Article 4, Sections 5.1, 5.2, 5.4 and, to the extent
proceedings have been initiated, Section 6.2, and this Section 7.3(b),
and the rights granted to ARCH and the University pursuant to Section
2.2(b); and
(iii) any cause of action or claim of Licensee or ARCH, accrued or
to accrue. because of any breach or default by the other party.
7.4. Expiration of Patent Rights. This Agreement shall terminate as to each
---------------------------
jurisdiction, and except as otherwise provided in Section 7.3(b), upon the later
to occur of (a) fifteen years after the date of this Agreement or (b) the
expiration of the last-to-expire patents of the Licensed Patent Rights in that
jurisdiction, provided in either case that ARCH's and Licensee's obligations
under Sections 4.2 and 5.4 shall survive and continue in effect as provided in
such Sections.
ARTICLE
8.
ADVERTISING
-----------
Each party agrees not to use the name of the other party in any product or
service, marketing, advertising or sales brochures except with the prior written
consent of the other party, which such consent may be granted or withheld in
such party's sole and complete discretion. Licensee agrees not to use, and shall
prohibit its Affiliates and sublicensees from using, the name of DOE, the
University, ANL or any of the inventors of the Inventions (unless such inventors
are employees of Licensee at the time of such use or Licensee otherwise has the
consent of such inventor) with regard to the Licensed Patent Rights and
Inventions in any commercial activity, product or service, marketing,
advertising or sales brochures, in each case except as such entity shall
otherwise agree in writing.
ARTICLE
9.
MISCELLANEOUS
-------------
9.1. Assignment.
----------
(a) This Agreement may, at any time and upon sixty (60) days prior notice
to Licensee, be assigned by ARCH without such assignment operating to terminate,
impair or in any way change the obligations or rights which ARCH would have had,
or any of the obligations or rights which Licensee would have had, if such
assignment had not occurred. From and after the making of such assignment, the
assignee shall be substituted for ARCH as a party hereto, and ARCH shall no
longer be bound hereby.
(b) This Agreement shall not be assigned by Licensee without the prior
written consent of ARCH except to a wholly-owned subsidiary of Licensee or to
the successor or assignee of substantially all of its business related to
Licensed Products or Processes.
15
<PAGE>
9.2. Entire Agreement. Amendment and Waiver. This Agreement (including any
--------------------------------------
schedules and exhibits attached) contains the entire understanding of the
parties with respect to the subject matter hereof. This Agreement may be
amended, modified or altered only by an instrument in writing duly executed by
the parties hereto. The waiver of a breach hereunder may be effected only by a
writing signed by the waiving party and shall not constitute a waiver of any
other breach.
9.3. Notices. Any notice or report required or permitted to be given or made
-------
under this Agreement by one of the parties hereto to the other shall be in
writing and shall be given by personal delivery or by United States registered
or certified mail, return receipt requested, addressed as follows:
If to ARCH: ARCH Development Corporation
1101 East 58th Street, Suite 213
Chicago, Illinois 60637
Attention: President
with a copy to:
Thomas M. Fitzpatrick, Esq.
Fitzpatrick Eilenberg & Zivian
20 North Wacker Drive, Suite 2200
Chicago, Illinois 60606
If to Licensee: Hyseq, Inc.
670 Almanor Avenue
Sunnyvale, California 94086
Attention: Lewis S. Gruber, Chief Executive Officer
with a copy to:
Misty S. Gruber, Esq.
Shefsky & Froelich Ltd.
444 North Michigan Avenue, Suite 2500
Chicago, Illinois 60611
or to such other address of which the intended recipient shall have notified the
sender by a written notice given in accordance with the terms of this Section
9.3. Any notice under this Agreement shall be effective when received.
9.4. Severability. In the event that any one or more of the provisions of
------------
this agreement should for any reason be held by any court or authority having
jurisdiction over this Agreement, or either of the parties hereto, to be
invalid, illegal or unenforceable, such provision or provisions shall be
reformed to approximate as nearly as possible the intent of the parties, and the
validity of the remaining provisions shall not be affected.
16
<PAGE>
9.5. Governing Law. The interpretation and performance of this Agreement
-------------
shall be governed by the laws of the State of Illinois in the United States of
America applicable to contracts made and to be performed in that state.
9.6. Marking. Licensee shall place in a conspicuous location on any Licensed
-------
Product (or its packaging where appropriate) made or sold under this Agreement,
a patent entire in accordance with the laws concerning the marking of patented
articles.
9.7. United States Manufacture. Unless DOE shall agree otherwise, Licensee
-------------------------
agrees that Licensed Products or Processes for sale in the United States of
America will be manufactured substantially in the United States of America, and
further agrees that it will not grant any exclusive sublicenses under this
Agreement unless the sublicensee agrees that any Licensed Products or Processes
for sale in the United States of America will be manufactured substantially in
the United States of America.
9.8. Implementation. Each party shall, at the request of the other party,
--------------
execute any document reasonably necessary to supplement the provision of this
Agreement.
9.9. Counterparts. This Agreement may be executed in multiple counterparts,
------------
each of which when taken together shall constitute one and the same instrument.
9.10. Signatures. Facsimile signatures shall be sufficient for purposes of
----------
executing and finalizing this Agreement.
17
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective duly authorized officers or representatives on the
date first above written.
ARCH: ARCH DEVELOPMENT CORPORATION,
an Illinois not-for-profit corporation
By: /s/ Thomas M. Fitzpatrick
----------------------------------------
Thomas M. Fitzpatrick, Secretary and
General Counsel
Licensee: HYSEQ, INC., a Nevada corporation
By: /s/ Lewis S. Gruber
----------------------------------------
Lewis S. Gruber, Chief Executive
Officer and President
18
<PAGE>
[LETTERHEAD OF SMITHKLINE BEECHAM APPEARS HERE]
June 6, 1997
VIA FACSIMILE - 408/524-8141
- -------------
VIA CERTIFIED MAIL
- ------------------
Dr. Louis Gruber
President and Chief Executive Officer
Hyseq Diagnostics, Inc.
670 Almanor Avenue
Sunnyvale, CA 94086
RE: LICENSE AGREEMENT BY AND BETWEEN HYSEQ DIAGNOSTICS, INC. AND
SMITHKLINE BEECHAM CLINICAL LABORATORIES, INC. DATED SEPTEMBER
25, 1995 (THE "AGREEMENT")
Dear Louis:
This letter confirms the discussions we had with your staff earlier
this week in which you advised, on behalf of Hyseq Diagnostics, Inc. ("HDI"),
that HDI has agreed to extend through and including October 7, 1997, the date
by which SmithKline Beecham Clinical Laboratories, Inc. ("SBCL") must notify
HDI whether it has elected to accept the Proof of Concept, as defined in the
Agreement, or terminate the License Agreement in accordance with Section
9.6(a) thereof.
I look forward to continuing our work together.
Very truly yours,
/s/ Michael B. McNulty
--------------------------------
Michael B. McNulty
VP Business Development
cc: Misty Gruber, Esquire (via facsimile - 312/527-3194)
Wayne Wecksler, Ph.D.
Mr. Patrick McKay
John Okkerse Ph.D.
<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" shall mean the United States of America and its
territories and possessions, Canada, Mexico and all of North America.
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. The Field
does not include tests for infectious disease or testing for research purposes
which does not include patient care.
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
<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, consultation, test
construction *, storage and retrieval of results and * and any other work that
SBCL may request of HDI and that HDI may accept to tailor the Technology to the
requirements of SBCL, as provided in Section 3.4, which Developments may be
requested by SBCL in its sole discretion and accepted by HDI in its sole
discretion.
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. "Escrow Agreement" shall mean the Agreement executed by HDI, SBCL
and an escrow agent in the form set forth in Appendix E attached hereto and
incorporated herein.
3
* 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>
r. "Test" shall mean a genetic test for the * as set forth in
Appendix D or any other genetic test developed for SBCL by HDI for the
Development Fee under the terms of this Agreement.
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, hospitals, physicians offices, nursing
homes, long-term care facilities, substance abuse or mental health centers,
publicly funded clinics and other related businesses.
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 *
4
* 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>
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 the Development Fee up to the
amount of * upon achievement of the test development milestones agreed to by the
parties and anticipated to be consistent with the goals set forth in Appendix D
attached hereto and incorporated herein by reference.
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 of HDI by SBCL
to tailor the Technology to the requirements of SBCL and Developments work
performed by HDI for SBCL shall be the property of HDI. SBCL shall have, and HDI
hereby grants to SBCL, a perpetual, royalty-free, non-exclusive license to use
the Developments. HDI shall have the right to license the Developments to third
parties, subject to Section 3.4(e) below. Should HDI grant any license to any
third party for Tests under Section 3.4(e), SBLC shall receive * of any license
fees or royalties received by HDL for the license of the Tests to a third party.
e. Notwithstanding Section 3.4(d), HDI shall not license, sell,
assign or otherwise transfer its rights in a Test, *.
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
5
* 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>
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.
6
* 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>
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
7
<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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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
fifty percent (50%) undivided interest in all such inventions, discoveries and
know-how made, conceived, reduced to practice or generated jointly by employees,
agents, or other persons acting under the authority of both parties in the
course of or as a result of the performance of its obligations under the
Agreement. 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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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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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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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. SBCL, in its sole discretion, may immediately terminate this
Agreement without cause within thirty (30) days after receipt of complete
results of the demonstration of the Proof of Concept. In the event of such
termination, as provided in Section 3.1, *. Upon such termination, SBCL shall
make no further use of the Technology and shall have no further obligation to
make any payments to HDI pursuant to this Agreement, other than accrued but
unpaid amounts under Sections 3.1 to 3.4, which, if any, shall be paid within
thirty (30) days of such termination.
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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* 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>
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
----------
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
-------------
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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<PAGE>
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.
[ Intentionally left blank ]
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13. RECORDING
---------
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: *
--------------------------------- ---------------------------------
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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WITH THE SECURITIES AND EXCHANGE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN
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<PAGE>
APPENDIX B
PATENTS
-------
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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WITH THE SECURITIES AND EXCHANGE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN
REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
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APPENDIX D
TEST DEVELOPMENT MILESTONES
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APPENDIX E
FORM OF ESCROW AGREEMENT
------------------------
<PAGE>
ESCROW AGREEMENT
----------------
THIS ESCROW 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"), SmithKline
Beecham Clinical Laboratories, Inc., a Delaware corporation with a principal
place of business at 1201 S. Collegeville Road, Collegeville, PA 19426
("SBCL") and PNC Bank, National Association, with a principal place of
business at One Oliver Plaza, Pittsburgh, PA 19265 (the "Escrow Agent").
BACKGROUND
----------
1. HDI and SBCL are parties to a License Agreement dated September 25,
1995 (the "License Agreement") pursuant to which SBCL has licensed certain
Technology from HDI.
2. *
3. All terms not otherwise defined herein shall have the meanings
ascribed to them in the License Agreement.
NOW, THEREFORE, the parties to this Agreement, in consideration of the
mutual covenants and obligations contained herein and intending to be legally
bound, agree as follows:
1. * to constitute an escrow fund (the "Escrow Fund") to be governed by
the terms set forth herein.
2. The Escrow Agent shall hold and dispose of the Escrow Fund only in
accordance with the terms of this Agreement. The Escrow Fund shall remain in
existence until * (the "Escrow Period"), subject to the provisions of this
Agreement. The Escrow Agent shall hold and safeguard the Escrow Fund during
the Escrow Period and shall treat such fund as a trust fund in accordance with
the terms hereof.
3. The Escrow Agent hereby agrees to perform those functions specified
herein the duties of the Escrow Agent, but only upon the following conditions:
3.1 SBCL shall pay to the Escrow Agent, upon receipt of
statement, compensation for all services rendered by it hereunder. Payment of
such compensation and expenses shall be the obligation of SBCL.
3.2 The Escrow Agent shall not be liable for any damages, or
have any obligations other than the duties prescribed herein in carrying out
or executing the purposes and intent of this Escrow Agreement; provided,
however, that nothing herein contained shall relieve the Escrow Agent from
liability arising out of its own willful misconduct or gross negligence. The
Escrow Agent's duties and obligations under this Agreement shall be entirely
administrative
* CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN
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<PAGE>
and not discretionary. The Escrow Agent shall not be liable to any party
hereto or to any third party as a result of any action or omission taken or
made by the Escrow Agent in good faith. The parties to this Agreement will
indemnify the Escrow Agent, hold the Escrow Agent harmless, and reimburse the
Escrow Agent from, against and for, any and all liabilities, costs, fees and
expenses (including reasonable attorney's fees) the Escrow Agent may suffer or
incur by reason of its execution and performance of this Agreement. In the
event any legal questions arise concerning the Escrow Agent's duties and
obligations hereunder, the Escrow Agent may consult with its counsel and rely
without liability upon written opinions given to it by such counsel.
The Escrow Agent shall be protected in acting upon any written notice,
request, waiver, consent, authorization, or other paper or document which the
Escrow Agent, in good faith, believes to be genuine and what it purports to
be.
In the event that there shall be any disagreement between any of the
parties to this Agreement, or between them or either of any of them and any
other person, resulting in adverse claims or demands being made in connection
with this Agreement, or in the event that the Escrow Agent, in good faith,
shall be in doubt as to what action it should take hereunder, the Escrow Agent
may, at its option, refuse to comply with any claims or demands on it or
refuse to take any other action hereunder, so long as such disagreement
continues or such doubt exists; and in any such event, the Escrow Agent shall
not be or become liable in any way or to any person for its failure or refusal
to act, and the Escrow Agent shall be entitled to continue to so refrain from
acting until the dispute is resolved by the parties involved.
PNC Bank, National Association, is acting solely as the Escrow Agent
and is not a party to, nor has it reviewed or approved any agreement or matter
of background related to this Escrow Agreement, other than the Escrow
Agreement itself, and has assumed, without investigation, the authority of the
individuals executing this Escrow Agreement to be so authorized on behalf of
the party or parties involved.
4. The Escrow Agent shall perform the following with regard to the
Escrow Fund:
(a) establish and maintain the Escrow Fund defined herein
separate and apart from any other accounts or funds of HDI,
SBCL or the Escrow Agent; and
(b) invest the Escrow Fund only in direct obligations of, or
obligations the principal of and the interest on which are
guaranteed by, the United States of America or any agency or
instrumentality thereof, or in interest-bearing deposits in
any bank, trust company or national banking association
(including the Escrow Agent) having a capital and surplus
aggregating at least one million dollars ($1,000,000), or in
money market funds rated AAA by Standard & Poor's & Aaa by
Moody's Investors Services Inc., which invest exclusively in
such direct obligations of the United States Government
(including the Escrow Agent's); provided further, that no
investments shall be made hereunder which do not mature on or
before the expiration of the Escrow Period. Any obligation
purchased as an investment shall constitute a part of the
Escrow Fund and all interest earned on such investments shall
be deposited to the Escrow Fund by the Escrow Agent.
<PAGE>
5. The Escrow Agent shall maintain an account of all monies and
investments pertaining to the Escrow Fund and shall furnish such information
and reports relating to the Escrow Fund as may reasonably be required by SBCL
or HDI. SBCL and HDI, or any of their duly authorized representatives, shall
have the right at all reasonable times to inspect the accounts and records of
the Escrow Agent relating to the Escrow Fund.
6. Upon receipt by the Escrow Agent on or before the last day of the
Escrow Period of a certificate *
7. The Escrow Agent may resign by an instrument in writing delivered
to HDI and SBCL to take effect not sooner than thirty (30) days following its
delivery, whereupon HDI and SBCL by mutual agreement shall immediately, in
writing, designate a Successor Escrow Agent. Such Successor Escrow Agent shall
be subject to the same duties and obligations and shall have the same rights,
privileges and immunities specified in this Agreement. Any such Successor
Escrow Agent shall file with HDI and SBCL its written acceptance of the duties
specified in this Agreement and its agreement to act in said capacity. In the
event that HDI and SBCL fail to agree on a successor Escrow Agent as specified
herein, either of them may apply to the American Arbitration Association in
Philadelphia, Pennsylvania to designate a Successor Escrow Agent.
8. 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.: *
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<PAGE>
To HDI: Hyseq Diagnostics, Inc.
670 Almanor
Sunnyvale, CA 94086
Attn.: Lewis 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
To Escrow Agent: PNC Bank, N.A.
Corporate Trust Department
One Oliver Plaza
27th Floor
Pittsburg, PA 15265
Attn.: Richard Ranii
Facsimile: 412-762-8226
9. 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.
10. Except as provided in this paragraph, neither party may assign any
right or obligation hereunder, 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.
11. 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. 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.
<PAGE>
13. 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.
IN WITNESS WHEREOF, the parties have caused this Escrow Agreement to
be executed by their respective duly authorized representatives on the
respective dates indicated below.
<TABLE>
HYSEQ DIAGNOSTICS INC. SMITHKLINE BEECHAM
CLINICAL LABORATORIES, INC.
<S> <C>
By: /s/Lewis S. Gruber By: *
----------------------------- -------------------------------
Name: Lewis S. Gruber Name: *
--------------------------- -----------------------------
Title: President & CEO Title: *
-------------------------- ----------------------------
PNC BANK, N.A.
By: /s/ Richard Ranii
-----------------------------
Name: Richard Ranii
---------------------------
Title: Assistant Vice President
---------------------------
</TABLE>
* 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>
EXHIBIT 10.8
COLLABORATION AND LICENSE AGREEMENT
-----------------------------------
This Collaboration and License Agreement, dated as of May 30, 1997
(the "AGREEMENT"), is entered into by and between Chiron Corporation, a Delaware
corporation ("CHIRON"), and Hyseq, Inc., a Nevada corporation ("HYSEQ").
A. Hyseq possesses certain patent rights and associated know-how
related to methods of sequencing DNA by hybridization and other gene discovery
technologies.
B. Chiron and Hyseq mutually desire to enter into a collaboration
(the "COLLABORATION") in which Hyseq will apply its sequencing and other gene
discovery technologies to biological materials provided by Chiron.
C. Chiron will use the results of the Collaboration in the
development and commercialization of diagnostic, therapeutic and vaccine
products directed towards certain human health care indications.
D. Simultaneously with the execution of this Agreement, Chiron and
Hyseq are entering into a stock purchase agreement (the "STOCK PURCHASE
AGREEMENT"), pursuant to which Chiron has agreed to purchase certain equity
securities of Hyseq on the terms and subject to the conditions set forth
therein.
NOW, THEREFORE, in consideration of the mutual agreements provided in
this Agreement and the Stock Purchase Agreement, Hyseq and Chiron agree as
follows:
ARTICLE
1
DEFINITIONS
The following capitalized terms used herein shall have the respective
meanings set forth below.
1.1 "ADR REQUEST" shall have the meaning set forth in Section 10.3.
1.2 "AFFILIATE" means a person or entity that directly or indirectly
controls, is controlled by or is under common control with, a party to this
Agreement. "Control" (and, with correlative meanings, the terms "controlled by"
and "under common control with") means beneficial ownership of fifty percent
(50%) or more of the outstanding shares or securities or the ability otherwise
to elect a majority of the board of directors or other managing authority.
Notwithstanding the foregoing, the Affiliates of Chiron expressly exclude
Novartis AG ("Novartis"), a Swiss corporation, or any wholly owned subsidiary of
Novartis, unless and until such time as Novartis and Chiron may mutually agree
upon the terms and conditions upon which Novartis may be deemed an Affiliate of
Chiron for the purposes of this Agreement.
* 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>
1.3 "ALLOWABLE COSTS" means the fully burdened, fairly allocated internal
costs of a party, on a consolidated basis, including reasonable and customary
allocations of indirect and overhead expense and charges in the nature of
depreciation and amortization of capitalized cost, and out-of-pocket expenses,
to the extent incurred in performing the applicable tasks under this Agreement,
in each case determined in accordance with generally accepted accounting
principles, consistently applied. "Allowable Costs" shall specifically exclude
Excluded Costs.
1.4 "APPLICABLE LAW" means, with respect to a party, any domestic or
foreign, federal, state or local statute, law, ordinance, rule, administrative
interpretation, regulation, order, writ, injunction, directive, judgment, decree
or other requirement of any Governmental Authority applicable to such party or
its properties, business or assets.
1.5 "BANKRUPTCY EVENT" means, with respect to either party, such party
makes an assignment for the benefit of its creditors, files a voluntary petition
under federal or state bankruptcy or insolvency laws, a receiver or custodian is
appointed for such person's business, proceedings are instituted against such
person under federal or state bankruptcy or insolvency laws that have not been
stayed within thirty (30) days, all or substantially all of such person's
business or assets become subject to attachment, garnishment or other process,
or a court or other governmental authority of competent jurisdiction determines
that such person is insolvent.
1.6 "CHIRON DISCOVERIES" means, collectively, all Novel Chiron Results,
all Collaboration Inventions and all Chiron Independent IP.
1.7 "CHIRON INDEPENDENT IP" means any Patent Rights or other intellectual
property that (a) is based on, or is otherwise developed through use of, any
Collaboration Invention and/or any Chiron Results, (b) arises pursuant to the
efforts of Chiron (or by any third parties who convey such rights to Chiron)
outside of the Collaboration, and (c) is not a Collaboration Sequence Patent
Right.
1.8 "CHIRON MATERIALS" means all Libraries and other materials provided by
Chiron to Hyseq pursuant to this Agreement, together with (i) any part, progeny,
mutant or hybrid thereof, (ii) any nucleic acid or other genetic material
therefrom, including any genes, gene sequences and gene sequence information,
(iii) any copy, complement or transcription or expression product thereof, (iv)
any biological or other materials identified in, or derived from, any of the
foregoing, including small molecule targets, antisense and ribozymes, and (v)
any related biological material and associated know-how and data that Chiron
provides to Hyseq.
1.9 "CHIRON PATENT RIGHTS" means all Patent Rights now or hereafter (a)
owned by Chiron, (b) controlled by Chiron or (c) licensed in by Chiron with the
right to sublicense. Chiron Patent Rights shall include, without limitation,
all Downstream Patent Rights.
1.10 "CHIRON RESULTS" means any DNA sequence or other information
generated pursuant to the Collaboration, including without limitation all
Signature Analysis Reports, all
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Sequence Reports, all unpublished patent applications arising therefrom, and all
information included within any of the foregoing.
1.11 "CLAIMS" shall have the meaning set forth in Section 8.1.
1.12 "COLLABORATION INVENTION" means any Invention that is made pursuant
to the efforts of Chiron and/or Hyseq, or any third parties obligated to assign
such Invention to Chiron and/or Hyseq, pursuant to the Collaboration.
"Collaboration Inventions" shall not include any Chiron Independent IP or any
Hyseq Independent IP.
1.13 "COLLABORATION SEQUENCE INVENTIONS" means all Inventions in partial
nucleic acid sequences and encoded polypeptides and/or full length coding
nucleic acid sequences and encoded polypeptides that are (a) made pursuant to
the Collaboration, or (b) based on, or were otherwise made through the use of, a
Collaboration Invention (whether pursuant to, or outside of, the Collaboration).
1.14 "COLLABORATION SEQUENCE PATENT RIGHTS" means all Patent Rights
arising from Collaboration Sequence Inventions. "Collaboration Sequence Patent
Rights" excludes, without limitation, any Downstream Patent Rights.
1.15 "COLLABORATION TERM" has the meaning set forth in Section 9.1.
1.16 "CONFIDENTIAL INFORMATION" has the meaning set forth in Section 7.1.
1.17 "CPR" has the meaning set forth in Section 10.4.
1.18 "DOWNSTREAM PATENT RIGHTS" means all Patent Rights included within
the Chiron Independent IP arising from Inventions further downstream of Hyseq
Sequence Inventions and/or Collaboration Sequence Inventions, including without
limitation Inventions in methods of making or using, modifications and/or
function of any nucleic acid and/or polypeptide product thereof.
1.19 "EXCLUDED COSTS" means (a) allocations of previously expensed
research and development costs and (b) any and all costs and expenses incurred
in defending, settling or otherwise discharging any liability to a third party
(including employees) based upon acts or omissions that are tortious, in breach
of contract, in violation of applicable law or in violation of obligations under
this Agreement.
1.20 "EXCLUSIVE FIELD" means * .
1.21 "FDA" means the United States Food and Drug Administration.
1.22 "FIRST COMMERCIAL SALE" means, with respect to any particular
Licensed Product, the first arms-length sale in any jurisdiction to one or more
Third Parties of such Licensed
3
* 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>
Product following receipt of approval from the applicable regulatory agency in
such jurisdiction to market such Licensed Product.
1.23 "GAAP" means U.S. generally accepted accounting principles,
consistently applied.
1.24 "GOVERNMENTAL AUTHORITY" means any foreign, domestic, federal,
territorial, state or local governmental authority, court, government or self-
regulatory organization, commission, tribunal, organization or any regulatory,
administrative or other agency, or any political or other subdivision,
department, instrumentality or branch of any of the foregoing.
1.25 "HYSEQ DISCOVERIES" means, collectively, all novel Hyseq Results and
all Hyseq Independent IP.
1.26 "HYSEQ INDEPENDENT IP" means any Patent Rights or other intellectual
property that (a) is based on, or is otherwise developed through use of, any
novel Hyseq Results, and/or (b) arises pursuant to the use of Hyseq Research
Technology and/or Hyseq Sequence Patent Rights by or on behalf of Hyseq and/or
any Subsequent Hyseq Partner outside of the Collaboration.
1.27 "HYSEQ PATENT RIGHTS" means all Patent Rights now or hereafter (a)
owned by Hyseq, (b) controlled by Hyseq or (c) licensed in by Hyseq with the
right to sublicense. Hyseq Patent Rights shall include, without limitation, all
Hyseq Sequence Patent Rights and all Collaboration Sequence Patent Rights.
1.28 "HYSEQ PROPRIETARY DATABASE" means Hyseq's proprietary HyGenomics
Database, as presently constituted and including any additional data
subsequently added thereto.
1.29 "HYSEQ RESEARCH TECHNOLOGY" means all Hyseq Patent Rights, together
with any know-how (whether or not patentable) related thereto, to the extent
relevant to the performance by Hyseq of the Research. "Hyseq Research
Technology" shall exclude the Hyseq Sequence Patent Rights.
1.30 "HYSEQ RESTRICTED PRODUCTS" means products based on, incorporating or
otherwise made through the use of any Hyseq Discovery and/or the subject matter
of any Hyseq Sequence Patent Rights.
1.31 "HYSEQ RESULTS" means any DNA sequence or other information generated
through the use of Hyseq Research Technology and/or Hyseq Sequence Patent Rights
by or on behalf of Hyseq and/or any Subsequent Hyseq Partner outside of the
Collaboration.
1.32 "HYSEQ SEQUENCE INVENTIONS" means all Inventions in partial nucleic
acid sequences and encoded polypeptides and/or full length coding nucleic acid
sequences and encoded polypeptides that are based on, or otherwise made through
the use of, information contained in the Hyseq Proprietary Database now or at
any time during the Collaboration Term.
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1.33 "HYSEQ SEQUENCE PATENT RIGHTS" means all Patent Rights arising from
Hyseq Sequence Inventions.
1.34 "IND" means an investigational new drug application filed with the
FDA under the regulations set forth in 21 CFR Part 312 or any successor
regulations.
1.35 "INVENTIONS" has the meaning set forth in Section 6.1(a).
1.36 "LICENSED PRODUCTS" means diagnostic, therapeutic and prophylactic
products (including without limitation recombinant proteins, antibodies,
antisense, ribozymes, small molecules and polynucleotides for gene therapy
applications) arising from Chiron Discoveries and/or the subject matter of the
Hyseq Sequence Patent Rights and/or the Collaboration Sequence Patent Rights.
1.37 "NET SALES" shall mean the amount invoiced for Sales of a Licensed
Product hereunder, less the following deductions:
(a) Discounts, returns, allowances (including reasonable bad debt
allowances), and wholesaler chargebacks allowed and taken, but in any case
only in amounts consistent with reasonable and customary pharmaceutical
industry standards;
(b) Import, export, excise, sales or use taxes, value added taxes, and
other taxes, tariffs or duties;
(c) Freight, handling, transportation and insurance prepaid or
allowed; and
(d) Amounts allowed or credited or retroactive price reductions or
rebates (including Medicaid rebates).
Any refund of any of the foregoing amounts (including any reversal of bad
debt allowances, whether arising from amounts received in settlement of bad
debts or otherwise) previously deducted from Net Sales shall be
appropriately credited upon receipt thereof.
Chiron may, at its option, allocate the above deductions from Sales of
Licensed Products based upon accruals estimated reasonably and consistent
with Chiron's standard business practices. If Chiron elects to utilize such
accruals, actual deductions will be calculated and, if applicable, a "true-
up" made, on an annual basis.
If a Sale of a Licensed Product is to an Affiliate of the seller (or to
Novartis, where Chiron is the seller) and such Affiliate (or, where
applicable, Novartis) is the end user of such Product, then the "amount
invoiced" with respect to such Sale shall, for purposes of calculating "Net
Sales," be the greater of (a) the actual amount invoiced, and (b) the
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<PAGE>
amount which the invoiced amount would have been had such Sale of the
Licensed Product been to a person at arm's length with the seller.
If a Licensed Product is sold in combination with another product or
products, Net Sales under such circumstances shall be calculated by
multiplying Net Sales of the combination by the fraction A/(A+B), in which
A is the invoice price of the Licensed Product when sold separately, and B
is the total invoice price of any other product or products in combination
when sold separately.
1.38 "NOVEL CHIRON RESULTS" means all Chiron Results that were not
previously known to Chiron or the public prior to Chiron's receipt thereof
pursuant to the Collaboration.
1.39 "PATENT PROSECUTION COSTS" means Allowable Costs arising out of
obtaining and maintaining patent coverage on the applicable Inventions,
including but not limited to U.S. and foreign patent preparation, prosecution,
issuance, maintenance, opposition, interference and litigation costs, but shall
exclude costs and expenses incurred in enforcing any Patent Rights against
alleged infringement by third parties.
1.40 "PATENT RIGHTS" shall mean all inventors' certificates, patent
applications and provisional applications throughout the world, including any
renewal, division, continuation or continuation-in-part of any of such
certificates and applications, and any and all patents issuing thereon, and any
and all reissues, extensions, substitutions, confirmations, registrations,
revalidations, revisions, foreign counterparts and additions of or to any of
said patents.
1.41 "SALE" means the sale or other disposition, whether by Chiron or any
of its licensees, of a Licensed Product to a party that is not an Affiliate of
the seller, or to any party that is both an Affiliate of the seller and the end
user of the Licensed Product sold.
1.42 "STOCK PURCHASE AGREEMENT" has the meaning set forth in Recital D
above.
1.43 "SUBSEQUENT COLLABORATION AGREEMENT" means a bona fide collaboration
agreement (i.e., one containing provisions comparable to the provisions of this
Agreement, but not a naked license) entered into by Hyseq and a Subsequent Hyseq
Partner after the date hereof for the purpose of DNA sequencing and gene
discovery.
1.44 "SUBSEQUENT HYSEQ PARTNER" has the meaning set forth in Section 2.9.
1.45 "THIRD PARTY" means any person or entity other than Chiron, Hyseq or
any of their respective Affiliates.
ARTICLE
2
COLLABORATION
6
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2.1 GENE ANALYSIS. During the Collaboration Term, Hyseq will provide gene
analysis ("Gene Analysis") as requested by Chiron on the terms set forth in this
Section 2.1.
(a) SELECTION AND PROVISION OF LIBRARIES. Chiron will have the right
to provide cDNA libraries of its choosing to Hyseq (each a "LIBRARY," and
collectively the "LIBRARIES"). Each Library will comply with the Hyseq
specifications set forth on Exhibit A hereto (the "SPECIFICATIONS"), or as
otherwise mutually agreed.
(b) PRELIMINARY TESTING. Promptly following receipt of each Library,
Hyseq will perform preliminary testing on * clones within the Library to
determine whether the Library complies with the Specifications. In the
event that such testing determines that any Library does not conform with
the Specifications, Hyseq will notify Chiron in writing of such fact as
promptly as possible (a "NONCOMPLIANCE NOTICE"). Any Noncompliance Notice
shall state the particular respects in which the Library does not comply
with the Specifications. If the noncompliance can be corrected by changing
Library conditions, Hyseq will do so as promptly as possible. Whether or
not the Library complies, Hyseq will provide Chiron with the full results
of the preliminary testing (other than Signatures) within thirty (30) days
after receipt of the Library.
(c) SIGNATURE ANALYSIS OF LIBRARIES. * .
(d) SEQUENCING BY HYSEQ.* .
(e) TIMEFRAMES. Hyseq's obligations to perform Gene Analysis in
compliance with the timeframes set forth in Sections 2.1(b), (c) and (d)
above are subject to the following limitations:
(i) The timeframes will apply to Libraries provided to Hyseq on
or after June 15, 1997. For any Library provided prior to that date,
each applicable timeframe will be extended by one day for each day
prior to June 15, 1997 that such Library is provided to Hyseq.
(ii) The timeframes will apply only if the total number of
sequencing reactions requested by Chiron does not exceed (A) * through
August 31, 1997, and (B) * thereafter. Such number of reactions may
be allocated, in any proportions determined by Chiron, between
Research under Section 2.1(c) and Research under Section 2.1(d). In
the event that any such limitation is exceeded, Hyseq shall use
reasonable commercial efforts to complete the excess sequencing as
promptly as is practicable.
(f) SEQUENCING BY CHIRON. In the event that Hyseq is unable to perform
the sequencing of the selected clones from any Library within the
timeframes specified in Section 2.1(d) above, Chiron may, at its option,
perform the sequencing itself and at its own expense. In that event,
Chiron will be entitled to offset against its minimum funding commitment
under Section 2.8 an amount equal to *. The exercise by Chiron of this
option shall be without prejudice to any other remedies available to
Chiron under this Agreement and under Applicable Law.
(g) CAPACITY. During the Collaboration Term, Hyseq will guarantee
Chiron sufficient capacity to perform Gene Analysis on * . Hyseq will use
commercially
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reasonable efforts to make available any additional capacity that may be
requested by Chiron.
(h) LIMITATION ON NUMBER OF LIBRARIES. Unless otherwise agreed by
Hyseq, Chiron may not * .
(i) RETURN OF BIOLOGICAL MATERIALS, ETC. Following the completion of
Gene Analysis on any Library, Hyseq will, within two (2) weeks after a
request from Chiron, return to Chiron all of the Chiron Materials and
derivatives therefrom, including copies of all gel files from ABI
sequencing runs, all picked clones, the Libraries, glycerol freezes from
bacterial cultures and spotted filters used in performing the Research.
Hyseq will be allowed to retain a copy of the picked clones for
verification purposes. If Chiron does not request the return of such
materials, Hyseq will store them and maintain them as Chiron Results
pursuant to Section 2.9 for a period of at least two (2) years after
expiration of the Collaboration Term.
(j) ELECTRONIC REPORTS. The Electronic Signature Analysis Reports and
Electronic Sequence Reports delivered by Hyseq to Chiron shall contain EST
sequences, and shall enable Chiron to correlate * .
2.2 OTHER RESEARCH. If requested by Chiron, Hyseq will provide for Chiron
during the Collaboration Term research work offered by Hyseq from time to time
in the ordinary course of its business other than the Gene Analysis (the "OTHER
RESEARCH" and, collectively with the Gene Analysis, the "RESEARCH"). The Other
Research may include, without limitation, further analysis of Chiron Results.
2.3 TIME IS OF THE ESSENCE. Hyseq acknowledges that the commercial
benefits to Chiron of entering into this Agreement and participating in the
Collaboration depend in substantial part on the ability of Hyseq to perform the
Research within the applicable timeframes identified in this Agreement and that,
accordingly, time is of the essence in the performance of the Research.
2.4 RESEARCH COMMITTEE.
(a) JURISDICTION AND COMPOSITION. All decisions regarding the scope
and content of the Research to be performed by Hyseq pursuant to the
Collaboration shall be conclusively made, subject to the terms of this
Agreement, by a committee (the "RESEARCH COMMITTEE") composed of three (3)
representatives of Chiron and two (2) representatives of Hyseq. One of the
Chiron representatives shall serve as chair of the Research Committee.
Each party shall select its representatives to the Research Committee, and
shall notify the other party in writing of such selections and any
subsequent changes thereto.
(b) ACTIONS. Each representative of Chiron and Hyseq shall have one
vote on the Research Committee. Any approval, determination, decision or
other action by the
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Research Committee shall require the affirmative vote of three (3)
representatives. Representatives of the Research Committee may at any time
vote by proxy.
(c) MEETINGS. The Research Committee shall meet at least once per
calendar quarter, such meetings to alternate between Chiron's offices in
Emeryville, California and Hyseq's offices in Sunnyvale, California. If
approved by a majority of the representatives of the Research Committee,
meetings may be held telephonically.
(d) EXPENSES. Chiron and Hyseq each shall bear all travel, lodging,
meals and other costs and expenses associated with the participation of
their representatives on the Research Committee.
2.5 CHIRON MATERIALS.
(a) OWNERSHIP. Chiron shall solely own all right, title and interest
to and in all Chiron Materials.
(b) USE. Hyseq may use the Chiron Materials only for purposes of
performing the Research, and may not take, send or otherwise provide or
make available any Chiron Materials to any third party without the prior
written approval of Chiron, except to the extent required to enable Hyseq
to satisfy its obligations under Section 6.9.
2.6 HYSEQ PROPRIETARY DATABASE. In performing Research for Chiron
pursuant to this Agreement, Hyseq shall utilize, to the extent relevant, all
information contained in the Hyseq Proprietary Database now or at any time
during the Collaboration Term.
2.7 PERFORMANCE STANDARDS. Hyseq shall perform the Research requested by
Chiron pursuant to this Agreement in a timely and efficient manner, and in
accordance with reasonable and customary commercial and scientific standards.
2.8 RESEARCH FUNDING.
(a) RESEARCH FUNDING. During each year of the Collaboration Term,
Chiron will pay to Hyseq an amount (the "Research Funding") equal to (a)
the Allowable Costs reasonably incurred by Hyseq in performing Research
requested by Chiron pursuant to this Agreement during such year, plus (b) a
margin equal to the Applicable Percentage (as defined below) of such
Allowable Cost. Chiron will pay Hyseq * in Research Funding during the
first year of the Collaboration Term, and * in each of the second and third
years of the Collaboration Term, in each case subject to the performance by
Hyseq of the requisite Research in compliance with the terms of this
Agreement. In the event that, in any given year, Hyseq performs Research
with Chiron that result in Research Funding in excess of the minimum
requirement for that year, the excess (a "CARRYFORWARD AMOUNT") may be
carried forward and applied against the applicable minimums for subsequent
years. In addition, if Chiron elects to extend the Collaboration Term
pursuant to Section 9.1, Chiron shall pay Hyseq a minimum of * in Research
Funding in each year
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of the extension term, which shall be in addition to Research Funding
payable to Hyseq based on the Allowable Costs (plus margin at the
Applicable Percentage) incurred by Hyseq in performing Research during each
such year.
(b) APPLICABLE PERCENTAGE. The "Applicable Percentage" shall be: (i)
for the first year of the Collaboration Term, (A) *, and (B) *; (ii) for
the second and third years of the Collaboration Term, (A) *, and (B) *; and
(iii) if applicable, * for any subsequent years of the Collaboration Term.
2.9 SEGREGATION OF CHIRON RESULTS. It is understood and agreed that Hyseq
contemplates entering into collaborations with other partners outside of the
Exclusive Field ("SUBSEQUENT HYSEQ PARTNERS"), and that such other
collaborations will involve the performance of Gene Analysis and Other Research
for Subsequent Hyseq Partners. It is also understood and agreed that Hyseq
presently owns the Hyseq Proprietary Database and intends to expand that
database, and that Hyseq may in the future engage, whether independently or in
collaboration with third parties, in the research, development and
commercialization of products outside of the Exclusive Field based on
information contained in the Hyseq Proprietary Database. Notwithstanding the
foregoing, Hyseq acknowledges that all Chiron Results are the sole and exclusive
property of Chiron, and Hyseq agrees that it will in no event utilize for
itself, or directly or indirectly make available to any third party, all or any
portion of the Chiron Results, without the express prior written consent of
Chiron. Without limiting the generality of the foregoing, Hyseq will not
perform point mutation analysis, motif searches, further signature analysis or
any other analysis of the Chiron Results, except as requested by Chiron. The
provisions of this Section 2.9 do not apply to any Chiron patent applications
from and after the publication thereof, or to any actions taken by Hyseq to the
extent required to perform its obligations under Section 6.9.
2.10 RECORDS. Hyseq shall maintain records of the Research performed for
Chiron, and the Chiron Results, in sufficient detail and in good scientific
manner appropriate for patent and FDA purposes.
2.11 AVAILABILITY OF EMPLOYEES. Hyseq shall make its employees and
consultants engaged in activities relating to this Agreement available, upon
reasonable notice during normal business hours, to consult with, and provide
customer support to, Chiron on issues related to the Collaboration, but in any
case only to the extent reasonably necessary to enable Chiron to obtain the full
benefit to it of participating in the Collaboration.
2.12 COOPERATION. Each party shall provide any assistance reasonably
requested by the other in connection with the performance of the Research.
2.13 LIAISONS. Throughout the Collaboration Term, Chiron and Hyseq shall
each designate a person to serve as liaison between the parties through whom
communications regarding the Collaboration and the Research to be performed
hereunder shall be coordinated. Such person shall initially be Dr. Jaime
Escobedo for Chiron and Dr. Radomir Crkvenjakov for
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Hyseq. The parties may change their respective designees from time to time
hereunder by written notice to the other party.
ARTICLE
3
LICENSE GRANTS
3.1 LICENSES GRANTED TO CHIRON.
(a) HYSEQ RESEARCH TECHNOLOGY. Hyseq hereby grants to Chiron under
the Hyseq Research Technology an exclusive (as to any and all persons and
entities, including Hyseq, but subject to the reservation of rights under
Section 3.1(c)), worldwide, royalty-bearing license, with the right to
sublicense, to use any and all Chiron Discoveries to develop, make, have
made, use, sell and import Licensed Products directed towards any health
care indication within the Exclusive Field (and, to the limited extent
permitted under Section 4.4(a), outside of the Exclusive Field).
(b) SEQUENCE PATENT RIGHTS. Hyseq hereby grants to Chiron under the
Hyseq Sequence Patent Rights and the Collaboration Sequence Patent Rights
an exclusive (as to any and all persons and entities, including Hyseq, but
subject to the reservation of rights under Section 3.1(c)), worldwide,
royalty-bearing license, with the right to sublicense, to develop, make,
have made, use, sell and import Licensed Products directed towards any
health care indication within the Exclusive Field (and, to the limited
extent permitted under Section 4.4(a), outside of the Exclusive Field).
(c) RESERVATION OF RIGHTS. Hyseq reserves from the licenses granted
under Sections 3.1(a) and 3.1(b) above the right to practice itself (either
alone or in collaboration with third parties), and to enable third parties
to practice, the applicable Hyseq Research Technology, Hyseq Sequence
Patent Rights and/or Collaboration Sequence Patent Rights within the
Exclusive Field, but only to the extent necessary to enable Hyseq or such
third party to commercialize Hyseq Restricted Products within the Exclusive
Field as permitted under Section 4.4(b) below.
(d) SUBLICENSEES. All limitations on the rights of Chiron under this
Agreement shall apply equally to any Chiron sublicensee(s).
3.2 RIGHTS IN BANKRUPTCY. The rights granted to Chiron by Hyseq pursuant
to Section 3.1 constitute "INTELLECTUAL PROPERTY" within the meaning of Sections
101 and 365(n) of the United States Bankruptcy Code.
3.3 INDEPENDENT IP.
(a) CHIRON INDEPENDENT IP. Hyseq acknowledges that (a) Chiron may
develop or acquire Chiron Independent IP, (b) although Chiron has agreed,
pursuant to Section 4.2 and subject to the limited exception in Section
4.4(a), not to commercialize
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any Chiron Independent IP outside of the Exclusive Field, such Chiron
Independent IP may have utility outside of the Exclusive Field, and (c)
Hyseq has no rights through Chiron in any Chiron Independent IP.
(b) HYSEQ INDEPENDENT IP. Chiron acknowledges that (a) Hyseq,
individually or together with Subsequent Hyseq Partners, may develop or
acquire Hyseq Independent IP, (b) such Hyseq Independent IP may have
utility within the Exclusive Field, and (c) except for the Hyseq Sequence
Patent Rights, Hyseq Independent IP is not subject to the licenses granted
in Section 3.1.
3.4 EXPANSION OF EXCLUSIVE FIELD. Chiron shall have the right of first
negotiation to expand the Exclusive Field to include *. Either party shall have
the right to trigger the right of first negotiation by delivery of written
notice to the other party. For a period of ninety (90) days after receipt of
such written notice, the parties shall negotiate exclusively and in good faith
to agree on terms for such expansion of the Exclusive Field. If the parties
have not agreed on terms at the end of such ninety (90) day period, Hyseq shall
submit a final written offer to Chiron. If Chiron does not accept Hyseq's final
offer within five (5) days after receipt thereof, Hyseq may enter an agreement
with a third party regarding * outside of the Exclusive Field; provided,
however, that the terms of that agreement may be no less favorable to Hyseq than
those offered to Chiron in Hyseq's final offer, and provided further, that if
Hyseq has not entered into such an agreement within one hundred eighty (180)
days after submitting its final offer to Chiron, it may not do so without again
complying with this Section 3.4.
ARTICLE
4
EXCLUSIVE COMMERCIALIZATION
4.1 INTENT OF PARTIES. It is the intent of Chiron and Hyseq that, except
in each case as expressly permitted under this Article IV, (a) Chiron and its
licensees shall be entitled to commercialize Licensed Products on an exclusive
basis, but only within the Exclusive Field, and (b) Hyseq shall be entitled to
practice, directly or indirectly, the Collaboration Sequence Patent Rights
outside of the Exclusive Field only in certain limited circumstances specified
in Section 4.3(c). Hyseq acknowledges that the ability to obtain exclusivity
within the Exclusive Field is of critical importance to Chiron, and Chiron
acknowledges that the ability to maintain the option to offer Subsequent Hyseq
Partners exclusivity in fields outside of the Exclusive Field is of critical
importance to Hyseq. Both parties acknowledge that the restrictions contained
in this Article IV are reasonable in light of their respective business
objectives and of the respective benefits to each of them of the transactions
contemplated by this Agreement.
4.2 COVENANT OF CHIRON. In order to give effect to the intent of the
parties specified in Section 4.1, Chiron agrees that it will not commercialize,
directly or indirectly, whether alone or in collaboration with third parties
(including without limitation by licensing any third party to commercialize),
any Licensed Products outside of the Exclusive Field, except (a) to the limited
extent provided in Section 4.4(a) below, (b) for indications where Hyseq has not
previously granted exclusive rights to a Subsequent Hyseq Partner, with the
prior written consent of Hyseq,
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and (c) for indications where Hyseq has previously granted exclusive rights to a
Subsequent Hyseq Partner, with the prior written consent of such Subsequent
Hyseq Partner.
4.3 COVENANTS OF HYSEQ. In order to give effect to the intent of the
parties specified in Section 4.1, Hyseq agrees as follows:
(a) RESTRICTIONS ON CERTAIN GENE ANALYSIS. Hyseq will not directly or
indirectly engage in, whether alone or in collaboration with third parties,
and will not license any third party under any Hyseq Patent Rights to
engage in, Gene Analysis of the type referred to in Section 2.1(c) for
purposes of developing and/or commercializing any diagnostic, therapeutic
or prophylactic products within the Exclusive Field, except (i) to the
limited extent provided in Section 4.4(b) below, or (ii) with the prior
written consent of Chiron.
(b) RESTRICTIONS ON PRACTICE OF COLLABORATION SEQUENCE PATENT RIGHTS.
Hyseq will not practice, directly or indirectly, whether alone or in
collaboration with third parties (including without limitation by licensing
any third party to practice), any of the Collaboration Sequence Patent
Rights outside of the Exclusive Field, except (i) to the limited extent
provided in Section 4.3(c) below, or (ii) with the prior written consent of
Chiron.
(c) LICENSES TO CHIRON; RIGHT OF FIRST NEGOTIATION.
(i) At any time before Hyseq enters a Subsequent Collaboration
Agreement granting a Subsequent Hyseq Partner exclusive rights within
a particular indication, Chiron shall have the option, exercisable by
written notice to Hyseq, to expand the licenses granted in Section 3.1
above to include the practice for the specified indication of any
Collaboration Sequence Patent Rights arising from experiments within
the Exclusive Field. The financial and other terms of such license
shall be * as mutually agreed to by the parties. If Chiron and Hyseq
are unable to agree on the due diligence provisions after having
negotiated in good faith for a period of at least sixty (60) days,
either party shall have the right to submit such disagreement for
binding resolution pursuant to Article X.
(ii) If Chiron subsequently desires to enter into a
collaboration agreement to jointly develop and commercialize products
covered by any license granted pursuant to Section 4.3(c)(i), Chiron
shall so notify Hyseq in writing. Hyseq shall have a period of thirty
(30) days after receipt of such notice to indicate to Chiron in
writing whether Hyseq is interested in participating in such joint
development and collaboration. If Hyseq responds affirmatively, the
parties shall negotiate exclusively and in good faith for a period of
ninety (90) days to agree on terms for such joint development and
commercialization. If the parties have not agreed on terms at the end
of such ninety (90) day period, Chiron shall submit a final written
offer to Hyseq. If Hyseq does not accept Chiron's final offer within
five (5) days after receipt thereof, Chiron may enter an agreement
with a third party; provided, however, that the terms of that
-----------------
agreement may be no less favorable to Chiron than those offered to
Hyseq in Chiron's final offer, and provided further, that if Chiron
----------------
has not entered into such an agreement within one hundred eighty (180)
days after submitting its final offer to Hyseq, it may not do so
without again complying with this Section 4.3(c)(ii).
4.4 IND EXCEPTIONS.
(a) EXCEPTION FOR CHIRON. From and after such time as Chiron
receives approval of an IND to commence a clinical trial of a potential
Licensed Product for an indication within the Exclusive Field, the
restrictions set forth in Section 4.2 above shall no longer apply to such
Licensed Product, *. Any such commercialization pursuant to this Section
4.4(a) shall be subject to the milestone payment and royalty obligations to
Hyseq set forth in Article V. This Section 4.4(a) shall not, expressly or
by implication, grant Chiron any licenses to practice intellectual property
rights of any third party, including without limitation any Subsequent
Hyseq Partner.
(b) EXCEPTION FOR HYSEQ. From and after such time as Hyseq or any
Subsequent Hyseq Partner receives approval of an IND to commence a clinical
trial of a potential Hyseq Restricted Product for an indication outside of
the Exclusive Field, the restrictions set forth in Section 4.3(a) above
shall no longer apply to such Hyseq Restricted Product, *. This Section
4.4(b) shall not, expressly or by implication, grant to Hyseq or any
Subsequent Hyseq Partner any licenses to practice intellectual property
rights of Chiron or of any third party.
4.5 MISCELLANEOUS PROVISIONS.
(a) ENFORCEMENT. It is the understanding of the parties that the
provisions of this Article IV are necessary to protect their respective
rights in connection with the transactions contemplated by this Agreement
and the potential subsequent agreements between Hyseq and Subsequent Hyseq
Partners. It is the intention of Chiron and Hyseq that these covenants be
enforced to the greatest extent (but to no greater extent) in time, area
and degree of participation as is permitted by the law of that jurisdiction
whose law is found to be applicable to any acts in breach of these
covenants.
(b) EQUITABLE RELIEF. Chiron and Hyseq each acknowledge that any
material violation of the provisions of this Article IV may cause
irreparable harm to the other party
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and that damages are not an adequate remedy. Chiron and Hyseq each
therefore agree that the other party shall be entitled to an injunction by
a court of competent jurisdiction, enjoining, prohibiting and restraining
the continuance of any such violation, in addition to any monetary damages
that might occur by reason of the violation of the provisions of this
Article IV. The remedies provided in this Section 4.5(b) are cumulative and
shall not exclude any other remedies to which any party to this Agreement
may be entitled under this Agreement or applicable law, and the exercise of
a remedy shall not be deemed an election excluding any other remedy (any
such claim by any other party to this Agreement being hereby waived).
(c) SEVERABILITY. The covenants and agreements set forth in this
Article IV shall be deemed and shall be construed as separate and
independent covenants and agreements, and, should any part or provision of
such covenants and agreements be held invalid, void or unenforceable by any
court of competent jurisdiction, such invalidity, voidness, or
unenforceability shall in no way render invalid, void or unenforceable any
other part or provision thereof or any separate covenant not declared
invalid, void or unenforceable; and this Article IV shall in that case be
construed as if the void, invalid or unenforceable provisions were omitted.
ARTICLE
5
PAYMENTS, REPORTING, AUDIT RIGHTS
5.1 UP FRONT LICENSE FEE. In consideration of the licenses granted in
Section 3.1 above, Chiron shall pay Hyseq an up front license fee of * upon
execution of this Agreement.
5.2 MILESTONE PAYMENTS. Chiron shall make milestone payments to Hyseq
with respect to each Licensed Product, upon the occurrence of following events
and in the following amounts:
(a) DIAGNOSTIC LICENSED PRODUCTS. The milestone payments for each
diagnostic Licensed Product shall be as follows:
(i) * upon submission of an application to the FDA or equivalent
regulatory agency in any jurisdiction, which application, if approved,
would confer authority to market the applicable diagnostic Licensed
Product in the applicable jurisdiction; and
(ii) * upon the First Commercial Sale of the applicable
diagnostic Licensed Product.
(b) OTHER LICENSED PRODUCTS. The milestone payments for each non-
diagnostic Licensed Product shall be as follows:
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(i) * upon submission of the first IND or equivalent to the FDA
or equivalent regulatory agency in any jurisdiction with respect to
the applicable non-diagnostic Licensed Product;
(ii) * upon submission of the first NDA or equivalent to the FDA
or equivalent regulatory agency in any jurisdiction with respect to
the applicable non-diagnostic Licensed Product; and
(iii) * upon the First Commercial Sale of the applicable non-
diagnostic Licensed Product.
5.3 MILESTONE PAYMENT METHODOLOGY. Each of the foregoing milestone
payments shall be payable separately with respect to each applicable Licensed
Product, but shall be payable only once per applicable Licensed Product. For
purposes of Section 5.2, any products that are based on or incorporate the same
Chiron Discovery, Hyseq Sequence Patent Rights and/or Collaboration Sequence
Patent Rights, as applicable, shall constitute the same Licensed Product (e.g.,
without regard to whether such products target different indications, have
different formulations, are delivered using different delivery technologies,
etc.).
5.4 ROYALTIES.
(a) OBLIGATION TO PAY ROYALTIES. Chiron shall pay Hyseq royalties on
Net Sales of Licensed Products made in any jurisdictions where the
manufacture, use or sale of such Licensed Product is, at the time of Sale,
covered by a valid and enforceable claim of (i) a Chiron Patent Right
directed to (A) a Collaboration Invention or (B) an Invention included
within the Chiron Independent IP, or (ii) a Hyseq Sequence Patent Right
and/or a Collaboration Sequence Patent Right. In addition to the
foregoing, with respect to diagnostic Licensed Products only, the Patent
Rights in a pending patent application shall be deemed to be valid and
enforceable, and royalties shall be payable with respect to diagnostic
Licensed Products covered thereby, for a period beginning on the filing of
any such patent application and ending on the earlier of (x) two (2) years
after such filing and (y) the occurrence of any event that makes it
apparent that claims of the type requiring the payment of royalties under
this Section 5.4(a) will not issue on any such patent applications.
(b) ROYALTY RATES. *.
5.5 *
5.6 REPORTS.
(a) NET SALES REPORTS. Within sixty (60) days after the end of each
fiscal quarter following the First Commercial Sale of any Licensed Product,
Chiron shall provide Hyseq with a written report (a "Sales Report") setting
forth (i) gross Sales of the applicable Licensed Product made during such
quarter, (ii) the deductions taken from
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gross Sales to arrive at Net Sales, and (iii) Net Sales of the applicable
Licensed Product made during such quarter. Each Sales Report shall include
reasonable supporting documentation.
(b) RESEARCH FUNDING REPORTS. Within thirty (30) days after the end
of each month during the Collaboration Term, Hyseq shall provide Chiron
with a written report (an "Research Funding Report") setting forth the
Allowable Costs accrued during such month in connection with the
performance of Research. Each Research Funding Report shall include
reasonable supporting documentation. Hyseq shall use diligent, good faith
efforts to ensure the accuracy of Research Funding Reports; provided,
however, that failure to include any Allowable Cost accrued during a
particular month in the Research Funding Report for such month shall not
prejudice Hyseq's ability to include such Allowable Cost in a subsequent
Research Funding Report given within the same Chiron fiscal year.
5.7 PAYMENT TERMS.
(a) ROYALTY PAYMENTS. Royalties payable under Section 5.4 above shall
be due and payable to Hyseq within sixty (60) days after the end of the
fiscal quarter in which Chiron invoices a customer for the Sale of the
applicable Licensed Product.
(b) RESEARCH FUNDING. Chiron will make Research Funding payments
within thirty (30) days after receipt of each applicable Research Funding
Report.
5.8 ACCOUNTING AND AUDITS.
(a) ROYALTIES. Chiron shall keep and maintain proper and complete
records and books of account documenting gross Sales of Licensed Products,
deductions taken therefrom to arrive at Net Sales of Licensed Products, and
Net Sales of Licensed Products. Chiron shall permit an independent public
accountant designated by Hyseq, except one to which Chiron shall have
reasonable objection, to have access, at Hyseq's own expense (except as to
the fees and expenses of the designated accountants, which shall be borne
as provided below) no more than once in each calendar year during the
License Term and twice during the three (3) calendar years following the
License Term, during regular business hours and upon reasonable notice, to
its records and books for the sole purpose of determining the
appropriateness of any royalty payments made by Chiron to Hyseq hereunder.
If such examination results in a final determination that royalties have
been overstated or understated, the applicable amount shall be refunded or
paid promptly. The fees and expenses of such accountant shall be paid by
Hyseq, unless the audit results in a final determination that royalty
payments have been understated by more than ten percent (10%) for the
period examined, in which case Chiron shall pay the fees and expenses of
such accountant. If Chiron disputes the findings of Hyseq's accountants,
such dispute shall be resolved pursuant to Article X hereof. All Chiron
information obtained by, or provided to, Hyseq and/or its accountants
pursuant to this Section 5.8 shall be subject to the confidentiality
provisions of Article VII hereof.
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(b) RESEARCH FUNDING. Hyseq shall keep and maintain proper and
complete records and books of account documenting Allowable Costs incurred
in performing Research for Chiron. Hyseq shall permit an independent
public accountant designated by Chiron, except one to which Hyseq shall
have reasonable objection, to have access, at Chiron's own expense (except
as to the fees and expenses of the designated accountants, which shall be
borne as provided below) no more than once in each calendar year during the
Collaboration Term and twice during the three (3) calendar years following
the Collaboration Term, during regular business hours and upon reasonable
notice, to its records and books for the sole purpose of determining the
appropriateness of Allowable Costs charged to Chiron hereunder. If such
examination results in a final determination that Allowable Costs have been
overstated or understated, the applicable amount shall be refunded or paid
promptly. The fees and expenses of such accountant shall be paid by
Chiron, unless the audit results in a final determination that Allowable
Costs have been overstated by more than ten percent (10%) for the period
examined, in which case Hyseq shall pay the fees and expenses of such
accountant. If Hyseq disputes the findings of Chiron's accountants, such
dispute shall be resolved pursuant to Article X hereof. All Hyseq
information obtained by, or provided to, Chiron and/or its accountants
pursuant to this Section 5.8 shall be subject to the confidentiality
provisions of Article VII hereof.
5.9 TAXES. Each party shall pay any and all taxes levied on account of
royalties or other payments it receives under this Agreement. If Applicable
Laws require that taxes be withheld, the paying party shall (a) deduct these
taxes from the remittable amount, (b) pay the taxes to the proper taxing
authority, and (c) send proof of payment to the receiving party within forty-
five (45) days following that payment.
5.10 CURRENCY; CONVERSION. All payments made under this Agreement shall
be in U.S. dollars. With respect to any royalty payment based on Net Sales of
Licensed Products made in a currency other than U.S. dollars, Chiron shall
convert such currency to U.S. dollars in accordance with the foreign currency
conversion procedures, as in effect from time to time, then used by it in the
ordinary course of its business.
5.11 BANK ACCOUNTS. All payments by Chiron to Hyseq hereunder shall be
made by wire transfer to such bank account as may be designated in writing from
time to time by Hyseq.
5.12 MOST FAVORED CUSTOMER. In the event that Hyseq enters into any
Subsequent Collaboration Agreement containing terms that, viewed in the
aggregate, are more favorable to the Subsequent Hyseq Partner than are the terms
of this Agreement to Chiron, the terms of this Agreement shall be revised in an
equitable manner so as to provide Chiron with terms that, viewed in the
aggregate, are as equivalent as is practicable to those contained in the
Subsequent Collaboration Agreement. For purposes of this Section 5.12, in any
comparison of the "terms" of this Agreement with the "terms" of any Subsequent
Collaboration Agreement, any differences in the identity of the exclusive fields
of the respective parties shall be disregarded (but the scope of work to be
performed by Hyseq under such agreements shall not be disregarded). Chiron and
Hyseq shall negotiate such revisions diligently and in good faith. If the
parties are unable to agree after sixty (60) days of negotiations, either party
may submit the matter for dispute resolution under Article X.
ARTICLE
6
INVENTIONS AND PATENT RIGHTS
6.1 DISCLOSURE AND OWNERSHIP OF INVENTIONS.
(a) INVENTION DISCLOSURES. Chiron and Hyseq acknowledge that the
conduct of the Collaboration may result in patentable inventions
("INVENTIONS"). Promptly
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following any development in the course of the Collaboration that could
reasonably be expected to give rise to an Invention, the party making such
development shall provide the other party with notice and a full written
description of such development (an "INVENTION DISCLOSURE"). The party
providing an Invention Disclosure shall also provide the other party any
additional information reasonably requested by the other party with respect
thereto.
(b) CHIRON INVENTIONS. Chiron shall solely own all right, title and
interest to and in all Inventions arising from the Collaboration that
relate primarily to any Chiron Materials and/or any Chiron Results, but
excluding Hyseq Sequence Inventions and Collaboration Sequence Inventions
("CHIRON INVENTIONS"). Chiron Inventions shall include, without
limitation, any such Inventions further downstream of Hyseq Sequence
Inventions and Collaboration Sequence Inventions, including without
limitation Inventions in methods of making or using, modifications and/or
function of any nucleic acid or polypeptide product thereof. Hyseq shall
have no right, title or interest to or in any Chiron Inventions except (A)
during the Collaboration Term for purposes of carrying out the
Collaboration, and (B) for the right to receive milestone payments and
royalties pursuant to Article V. Hyseq agrees to assign any Patent Rights
in Chiron Inventions, but excluding Patent Rights in Hyseq Sequence
Inventions and Collaboration Sequence Inventions, to Chiron.
(c) HYSEQ INVENTIONS. Hyseq shall solely own all right, title and
interest to and in all Hyseq Sequence Inventions and Collaboration Sequence
Inventions, and in all Inventions that relate primarily to Hyseq Research
Technology (collectively, "HYSEQ INVENTIONS"). Chiron shall have no right,
title or interest to or in any Hyseq Inventions except (A) during the
Collaboration Term for purposes of carrying out the Collaboration, and (B)
for the license rights pursuant to Section 3.1 and any potential future
license rights pursuant to Section 4.3. Chiron agrees to assign any Patent
Rights in Hyseq Inventions to Hyseq, subject to the terms of Section 6.8
below.
(d) ASSIGNMENT OF INVENTIONS. In the event that, despite the
provisions of Sections 6.1(b) and 6.1(c) above, Chiron obtains rights in
any Hyseq Invention or Hyseq obtains any rights in any Chiron Invention
(except for any such rights to which the parties are entitled as specified
in Sections 6.1(b) and 6.1(c)), the party obtaining such rights agrees to
assign all such rights to the other party. Each party will execute any
documents reasonably requested by the other party in order to fully
implement the provisions of this Section 6.1(d).
(e) EMPLOYEE ASSIGNMENTS. Neither Chiron nor Hyseq will permit any
employees or independent contractors to perform work pursuant to the
Collaboration unless such person is contractually obligated to assign his
or her interest in any Inventions to Chiron or Hyseq, as applicable.
6.2 PROSECUTION AND MAINTENANCE OF COLLABORATION SEQUENCE PATENT RIGHTS.
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(a) CONTROL. Chiron shall control filing, prosecution, maintenance
and defense of all Collaboration Sequence Patent Rights. Chiron shall
provide Hyseq with copies of all patent applications within thirty (30)
days after filing and shall also provide Hyseq copies of all material
documents relating to prosecution of all such patent applications in a
timely manner. Chiron shall notify Hyseq in writing thirty (30) days
before abandoning any Collaboration Sequence Patent Rights or before not
taking a required action such as foreign filing. In such event, Hyseq
shall have the right to assume control of the prosecution, maintenance and
defense of the applicable Collaboration Sequence Patent Rights, at Hyseq's
sole expense, after which time Chiron will have no license or other rights
therein. Chiron shall undertake the above actions in the name of Hyseq.
Hyseq shall execute any and all documents, and take any and all actions,
required to enable Chiron to undertake such actions.
(b) COSTS. Chiron shall bear all Patent Prosecution Costs incurred
pursuant to Section 6.2(a), except that any such costs incurred after any
assumption of prosecution by Hyseq.
6.3 PROSECUTION AND MAINTENANCE OF OTHER HYSEQ PATENT RIGHTS. All
decisions regarding filing, prosecution, maintenance and defense of Hyseq Patent
Rights other than Collaboration Sequence Patent Rights shall be made by Hyseq in
its sole discretion shall be implemented by Hyseq at its sole cost and expense.
Hyseq shall provide Chiron with copies of all patent applications included
within the Hyseq Sequence Patent Rights that are reasonably related to the
Exclusive Field within thirty (30) days after filing and shall also provide
Chiron copies of all material documents relating to prosecution of all such
patent applications in a timely manner. Hyseq shall notify Chiron in writing
thirty (30) days before abandoning any Hyseq Sequence Patent Rights that are
reasonably related to the Exclusive Field, or before not taking a required
action such as foreign filing. In such event, Chiron shall have the right to
assume control of the prosecution, maintenance and defense of the applicable
Hyseq Sequence Patent Rights, at Chiron's sole expense, after which time Hyseq
will assign such Hyseq Sequence Patent Rights to Chiron.
6.4 PROSECUTION AND MAINTENANCE OF CHIRON PATENT RIGHTS. All decisions
regarding filing, prosecution, maintenance and defense of Chiron Patent Rights
shall be made by Chiron in its sole discretion shall be implemented by Chiron at
its sole cost and expense.
6.5 ENFORCEMENT OF SEQUENCE PATENT RIGHTS.
(a) ALLEGED INFRINGEMENT AFFECTING LICENSED PRODUCTS. Chiron shall
have the sole right, at its own expense, to take whatever action it deems
appropriate in its own name or, if required by law, in the name of Hyseq,
to enforce any Hyseq Sequence Patent Rights and Collaboration Sequence
Patent Rights against any alleged infringement that affects Licensed
Products. All monies recovered upon the final judgment or settlement of
any such suit shall be retained by Chiron. Chiron shall keep Hyseq
reasonably apprised of the status of any such enforcement action.
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(b) ALLEGED INFRINGEMENT NOT AFFECTING LICENSED PRODUCTS. Hyseq shall
have the sole right, at its own expense, to take whatever action it deems
appropriate to enforce any Hyseq Sequence Patent Rights against any alleged
infringement that does not affect Licensed Products. All monies recovered
upon the final judgment or settlement of any such suit shall be retained by
Hyseq. Hyseq shall keep Chiron reasonably apprised of the status of any
such enforcement action.
(c) COOPERATION. Each party shall furnish all cooperation reasonably
requested by the other party in connection with the enforcement of Hyseq
Sequence Patent Rights and Collaboration Sequence Patent Rights.
6.6 ENFORCEMENT OF OTHER HYSEQ PATENT RIGHTS. All decisions regarding
enforcement of Hyseq Patent Rights other than Hyseq Sequence Patent Rights and
Collaboration Sequence Patent Rights shall be made by Hyseq in its sole
discretion shall be implemented by Hyseq at its sole cost and expense.
6.7 ENFORCEMENT OF CHIRON PATENT RIGHTS. All decisions regarding
enforcement of Chiron Patent Rights shall be made by Chiron in its sole
discretion shall be implemented by Chiron at its sole cost and expense.
6.8 OPTION FOR ASSIGNMENT OF CERTAIN SEQUENCE PATENT RIGHTS. From and
after the time that Chiron has filed a patent application arising from
Inventions in methods of making or using, modifications and/or function of any
nucleic acid and/or polypeptide product thereof, Chiron shall have the option,
exercisable by written notice to Hyseq, to require Hyseq to assign to Chiron all
Collaboration Sequence Patent Rights in any full length coding nucleic acid
sequences and encoded polypeptides specifically identified in such patent
application. In such event, Chiron and Hyseq will agree upon and execute a
suitable assignment document that preserves, but does not increase, the
respective rights and obligations of Hyseq, Chiron and any Subsequent Hyseq
Partners in the particular Collaboration Sequence Patent Rights being assigned
(the "ASSIGNED PATENT RIGHTS"). Such assignment document will include, without
limitation, provisions prohibiting Chiron from commercializing the Assigned
Patent Rights outside of the Exclusive Field (except as expressly permitted
under Article IV).
6.9 COOPERATION. Each party shall provide any assistance reasonably
requested by the other to determine priority of Inventions arising from the
Collaboration. In addition, at any time that Chiron files a patent application
included within the Collaboration Sequence Patent Rights, Hyseq will notify
Chiron whether any other patent application owned by Hyseq discloses one or more
sequences disclosed in said Chiron patent application. Hyseq will also notify
Chiron if any subsequent patent application owned by Hyseq discloses one or more
sequences disclosed in said Chiron patent application.
ARTICLE
7
CONFIDENTIALITY
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7.1 CONFIDENTIAL INFORMATION. Pursuant to the transactions contemplated
by this Agreement, the parties may provide to one another Invention Disclosures,
confidential information, including but not limited to each party's proprietary
materials and/or technologies, economic information, business or research
strategies, trade secrets and material embodiments thereof. As used herein,
"CONFIDENTIAL INFORMATION" of a party means any such confidential information
disclosed by such party to the other party (i) in written form marked
"confidential," (ii) in oral form if summarized in a writing marked
"confidential" delivered to the receiving party within thirty (30) days after
the oral disclosure, or (iii) if further disclosure of such information could
reasonably be expected to result in competitive harm to the providing party.
7.2 CONFIDENTIALITY AND NON-USE. The recipient shall maintain the
providing party's Confidential Information in confidence, except if and to the
extent that such disclosure is required by Applicable Law and provided that the
providing party has received written notice reasonably far in advance of the
proposed disclosure. The recipient shall use the providing party's Confidential
Information solely to exercise its rights and perform its obligations under this
Agreement, unless otherwise mutually agreed in writing. Upon request by the
providing party, the recipient shall return all tangible materials comprising
Confidential Information of the providing party and return or destroy any notes,
copies, summaries or extracts of the providing party's Confidential Information.
7.3 EXCLUSIONS. Confidential Information shall not include information:
(i) is shown by contemporaneous documentation of the recipient to have been in
its possession prior to receipt from the providing party; (ii) is or becomes,
through no fault of the recipient, publicly known; (iii) is furnished to the
recipient by a third party without breach of a duty to the disclosing party; or
(iv) is independently developed by the recipient without use of the providing
party's Confidential Information. The receiving party will have the burden of
proving the availability of any of the above exemptions.
7.4 TERMINATION. All obligations of confidentiality and non-use imposed
under this Article VII shall expire five (5) years following termination of this
Agreement.
ARTICLE
8
INDEMNIFICATION
8.1 INDEMNIFICATION BY HYSEQ. Hyseq shall indemnify and hold Chiron and
its Affiliates, and their respective directors, officers, employees and agents,
harmless against all claims, damages, liabilities, losses, costs and expenses
(collectively, "CLAIMS") if and to the extent arising from (a) the breach by
Hyseq of any of its representations, warranties and covenants hereunder; and (b)
any negligent or willful acts or omissions of Hyseq or its employees or agents
in connection with the performance of any tasks to be performed by Hyseq under
this Agreement, except in each case to the extent any such Claim is subject to
indemnification by Chiron pursuant to Section 8.2 below. Indirect or
consequential losses or damages are expressly excluded.
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8.2 INDEMNIFICATION BY CHIRON. Chiron shall indemnify and hold Hyseq and
its Affiliates, and their respective directors, officers, employees and agents,
harmless against all Claims if and to the extent arising from (a) the breach by
Chiron of any of its representations, warranties and covenants hereunder; and
(b) any negligent or willful acts or omissions of Chiron or its employees or
agents in connection with the performance of any tasks to be performed by Chiron
under this Agreement, except in each case to the extent any such Claim is
subject to indemnification by Hyseq pursuant to Section 8.1 above. Indirect or
consequential losses or damages are expressly excluded.
8.3 PROCEDURE. The indemnified party shall give prompt written notice to
the indemnifying party of any suits, claims or demands which may give rise to
any loss for which indemnification may be required under this Article VIII;
provided, however, that failure to give such notice shall not impair the
obligation of the indemnifying party to provide indemnification hereunder except
if and to the extent that such failure materially impairs the ability of the
indemnifying party to defend the applicable suit, claim or demand. The
indemnifying party shall be entitled to assume the defense and control of any
suit, claim or demand of any third party at its own cost and expense; provided,
however, that the other party shall have the right to be represented by its own
counsel at its own cost in such matters. In the event that the indemnifying
party shall decline to assume control of any such suit, claim or demand, the
party entitled to indemnification shall be entitled to assume such control,
conduct the defense of, and settle such suit, claim or action, all at the sole
cost and expense of the indemnifying party. The indemnifying party shall not
settle or dispose of any such matter in any manner which would adversely impact
the rights or interests of the indemnified party without the prior written
consent of the indemnified party, which shall not be unreasonably delayed or
withheld.
ARTICLE
9
TERM AND TERMINATION
9.1 COLLABORATION TERM. The term of Collaboration (the "COLLABORATION
TERM") shall begin on the date hereof and terminate three (3) years hereafter,
unless sooner terminated pursuant to Section 9.4 or Section 9.5 below. In
addition, Chiron shall have the option, exercisable by written notice to Hyseq,
to extend the Collaboration Term for up to two (2) additional periods of two (2)
years each.
9.2 LICENSE TERM. The term of the licenses granted in Article III hereof
(the "LICENSE TERM") shall begin on the date hereof and shall expire on the
later of (a) the expiration of the last Patent Right covered by any such
license, or (b) fifteen (15) years after the First Commercial Sale of a Licensed
Product hereunder, unless sooner terminated pursuant to Section 9.4 below.
9.3 EARLY TERMINATION OF AGREEMENT. This Agreement may be terminated as
follows:
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(a) by mutual written agreement of Chiron and Hyseq, effective as of
the time specified in such written agreement; or
(b) by either party,
(i) in the event of a Bankruptcy Event of the other party,
effective immediately upon the occurrence of such Bankruptcy Event; or
(ii) upon any material breach of this Agreement by the other
party; provided, however, that the party alleging such breach must
first give the other party written notice thereof, which notice must
state that nature of the breach in reasonable detail and that the
party giving such notice views such alleged breach as a basis for
terminating this Agreement under this Section 9.3(b)(ii) and the party
receiving such notice must have failed to cure such alleged breach
within sixty (60) days after receipt of such notice; or
9.4 EARLY TERMINATION OF COLLABORATION.
(a) RIGHT TO TERMINATE. Chiron may terminate the Collaboration if
Hyseq fails to perform sequencing within the timeframe specified in Section
2.1(d) hereof on * consecutive Libraries (a "CONSECUTIVE FAILURE"),
effective thirty (30) days after the date of written notice given to Hyseq
by Chiron but provided that Hyseq has not cured such breach by the end of
such thirty (30) day period. Notwithstanding the foregoing, Hyseq will not
be entitled to any cure period for the * Consecutive Failure that occurs in
any given year. Termination of the Collaboration pursuant to this Section
9.4 shall terminate only the provisions of Article II of this Agreement,
and the remaining provisions of this Agreement shall remain in full force
and effect.
(b) TERMINATION FEE. If Chiron terminates the Collaboration pursuant
to Section 9.4(a), Chiron shall pay Hyseq, within thirty (30) days after
the effective date of such termination (the "Effective Date"), a
termination fee equal to: *.
9.5 SURVIVAL OF OBLIGATIONS. The provisions of Sections 2.5, 2.9, 4.3(b),
5.8, 5.9, 5.10, 5.11, 9.5, 9.6 and 9.7 and Articles VI, VII, VIII, X, XI and XX
shall survive any termination of this Agreement. Chiron's obligations to make
payments under Article V for amounts accrued as of the effective date of
termination and with the statements specified in Section 5.6(a) shall also
survive any such termination. In addition, all provisions of this Agreement,
insofar as they relate to Licensed Products that are being sold commercially
upon termination of this Agreement, shall survive for as long as Licensed
Products continue to be sold commercially in any jurisdiction.
9.6 CONTINUING LIABILITY. Termination of this Agreement for any reason
shall not release any party from any liability, obligation or agreement which
has already accrued nor affect the survival of any provision hereof which is
expressly stated to survive such termination. Termination of this Agreement for
any reason shall not constitute a waiver or release of, or otherwise be deemed
to prejudice or adversely affect, any rights, remedies or claims, whether for
damages or otherwise, which a party may have hereunder or which may arise out of
or in connection with such termination.
9.7 RETURN OF CONFIDENTIAL INFORMATION. Upon termination of this
Agreement, each party shall return to the other all Confidential Information of
such other party that remains in its possession, except that each party shall be
entitled to retain one (1) copy of any such information for archival purposes.
ARTICLE
23
* 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>
10
ALTERNATIVE DISPUTE RESOLUTION ("ADR")
10.1 EXCLUSIVE DISPUTE RESOLUTION MECHANISM. The parties agree the
procedures set forth in this Article X shall be the exclusive mechanism for
resolving any bona fide disputes that arise from time to time pursuant to this
Agreement relating to any party's rights and/or obligations hereunder that
cannot be resolved through good faith negotiation between the parties.
10.2 EXECUTIVE MEDIATION. Any such dispute must first be submitted to the
officers designated below or their successors, for attempted resolution by good
faith negotiations for a period of at least thirty (30) days. Said designated
officers are as follows:
For Hyseq - Chief Executive Officer
For Chiron - President, Chiron Technologies
In the event the designated officers are not able to resolve such dispute within
such thirty (30) day period, any party may invoke the provisions below.
10.3 INITIATION OF ADR. If a party intends to begin an ADR to resolve a
dispute, such party shall provide written notice (the "ADR REQUEST") to counsel
for the other party informing such other party of such intention and the issues
to be resolved. From the date of the ADR Request and until such time as any
matter has been finally settled by ADR, the running of the time periods
contained in this Agreement within which party must cure a breach of this
Agreement shall be suspended as to the subject matter of the dispute.
10.4 SELECTION OF NEUTRAL. Within ten (10) business days after the
receipt of the ADR Request, the other party may, by written notice to the
counsel for the party initiating ADR, add additional issues to be resolved.
Within twenty (20) business days following the receipt of the ADR Request a
neutral shall be selected by the then-President of the Center for Public
Resources ("CPR"), 680 Fifth Ave., New York, New York 10019. The neutral shall
be an individual who shall preside in resolution of any disputes between the
parties. The neutral selected shall be a member of the Judicial Panel of the
CPR and shall not be an employee, director or shareholder of any party or of an
Affiliate of either party. Either party shall have ten (10) business days from
the date the neutral is selected to object in good faith to the selection of
that person. If any party makes such an objection, the then-President of the
CPR shall, as soon as possible thereafter, elect another neutral under the same
conditions set forth above. This second selection shall be final.
10.5 HEARING. No later than ninety (90) days after selection, the neutral
shall hold a hearing to resolve each of the issues identified by the parties and
shall render the award as expeditiously thereafter as possible but in no event
more than thirty (30) days after the close of hearings. In making the award the
neutral shall rule on each disputed issue and shall adopt in whole the proposed
ruling of one of the parties on each disputed issue.
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10.6 PROCEDURES. It is the intention of the parties that discovery,
although permitted as described herein, will be extremely limited except in
exceptional circumstances. The neutral shall permit such limited discovery
necessary for an understanding of any legitimate issue raised in the ADR,
including the production of documents. Each party shall be permitted but not
required to take the deposition of not more than five (5) persons, each such
deposition not to exceed six (6) hours in length. If the neutral believes that
exceptional circumstances exist, and additional discovery is necessary for a
full and fair resolution of the issues, he or she may order such additional
discovery as he or she deems necessary. At the hearing the parties may present
testimony (either by live witness or deposition) and documentary evidence. The
hearing shall be held at a location in San Francisco, California selected by the
neutral. The neutral shall have sole discretion with regard to the
admissibility of any evidence and all other matters relating to the conduct of
the hearing. The neutral shall, in rendering his or her decision, apply the
substantive law of California without giving effect to its principles of
conflicts of law, and without giving effect to any rules or laws relating to
arbitration. The decision of the neutral shall be final and not appealable,
except in cases of fraud or bad faith on the part of the neutral or any party to
the ADR proceeding in connection with the conduct of such proceedings.
10.7 PRESENTATIONS. At least thirty (30) days prior to the date set for
the hearing, each party shall submit to the other party and the neutral a list
of all documents on which such party intends to rely in any oral or written
presentation to the neutral and a list of all witnesses, if any, such party
intends to call at such hearing and a brief summary of each witness's testimony.
At least seven (7) days prior to the hearing, each party must submit to the
neutral and serve on the other party a proposed ruling on each issue to be
resolved and pre-hearing briefs. Such pre-hearing briefs shall not be more than
twenty five (25) pages. Not more than seven (7) days following the close of
hearings, the parties may each submit post hearing briefs to the neutral
addressing the evidence and issues to be resolved. Such post hearing briefs
shall not be more than ten (10) pages.
10.8 COSTS AND FEES. The neutral shall determine the proportion in which
the parties shall pay the costs and fees of the ADR. Each party shall pay its
own costs (including, without limitation, attorneys' fees) and expenses in
connection with such ADR.
10.9 CONFIDENTIALITY. The ADR proceeding shall be confidential and the
neutral shall issue appropriate protective orders to safeguard each party's
Confidential Information. Except as required by law, no party shall make (or
instruct the neutral to make) any public announcement with respect to the
proceedings or decision of the neutral without the prior written consent of the
other party. The existence of any dispute submitted to ADR, and the award of
the neutral, shall be kept in confidence by the parties and the neutral, except
as required in connection with the enforcement of such award or as otherwise
required by Applicable Law.
10.10 AWARD. Any judgment upon the award rendered by the neutral may be
entered in any court having jurisdiction thereof.
ARTICLE
11
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REPRESENTATIONS AND WARRANTIES
11.1 MUTUAL REPRESENTATIONS. Each party hereby represents and warrants to
the other as follows:
(a) DUE ORGANIZATION. It is a corporation duly organized, validly
existing and in good standing under the laws of its jurisdiction of
incorporation.
(b) DUE AUTHORITY. It has power and authority to execute and deliver
this Agreement, and to perform its obligations hereunder.
(c) NO CONFLICT. The execution, delivery and performance by it of
this Agreement and its compliance with the terms and provisions hereof does
not and will not conflict with or result in a breach of any of the terms
and provisions of, or constitute a default under or a violation of (i) any
agreement where such conflict, breach or default would impair in any
material respect the ability of such party to perform its obligations
hereunder; (ii) the provisions of its charter document or bylaws; or (iii)
any Applicable Law, but, with respect to this clause (iii), only where such
violation could reasonably be expected to have a material adverse effect on
the ability of such party to perform its obligations hereunder.
(d) BINDING OBLIGATION. This Agreement has been duly authorized,
executed and delivered by it and constitutes its legal, valid and binding
obligation enforceable against it in accordance with its terms subject, as
to enforcement, to bankruptcy, insolvency, reorganization and other laws of
general applicability relating to or affecting creditors' rights and to the
availability of particular remedies under general equitable principles.
(e) COMPLIANCE WITH LAWS. It shall perform all of its obligations
hereunder in compliance with all Applicable Laws the violation of which
could reasonably be expected to have a material adverse effect on such
party's ability to perform its obligations hereunder.
(f) NO ACTIONS. There are no actions, suits or proceedings pending
or, to its knowledge, threatened against it or its Affiliates which affect
its ability to carry out its obligations under this Agreement.
11.2 ADDITIONAL HYSEQ REPRESENTATION. In addition to the foregoing, Hyseq
represents and warrants to Chiron that, to Hyseq's knowledge, the practice of
the Hyseq Research Technology as contemplated by this Agreement will not involve
any infringement or constitute an unauthorized use of any patent, copyright,
trade secret, proprietary information, license or right therein belonging to any
Third Party.
11.3 ADDITIONAL CHIRON REPRESENTATION. In addition to the foregoing,
Chiron represents and warrants to Hyseq that, to Chiron's knowledge, the use by
Hyseq of the Libraries
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in performing the Research as contemplated by this Agreement will not involve
any infringement or constitute an unauthorized use of any patent, copyright,
trade secret, proprietary information, license or right therein belonging to any
Third Party.
11.4 NO FURTHER REPRESENTATIONS OR WARRANTIES. Except as otherwise
expressly provided in this Article XI, neither party makes any representation or
warranty of any kind to the other party, either express or implied.
ARTICLE
12
MISCELLANEOUS
12.1 COMPLIANCE WITH APPLICABLE LAW. Each party shall exercise its
respective rights and perform its respective obligations hereunder in compliance
with Applicable Law.
12.2 RELATIONSHIP OF THE PARTIES. The parties agree that each is acting
as an independent contractor with respect to the other and nothing contained in
this Agreement is intended, or is to be construed, to constitute Chiron and
Hyseq as partners or joint venturers or Chiron or Hyseq as an agent of the
other. Neither party hereto shall have any express or implied right or
authority to assume or create any obligations on behalf of or in the name of the
other party or to bind the other party to any contract, agreement or
undertaking.
12.3 LIMITATION OF LIABILITY. Neither party shall have any liability to
the other party pursuant to this Agreement for any special, indirect or
consequential damages, including but not limited to loss of profits, loss of
business opportunities or loss of business investment.
12.4 NOTICES. Any notice or other communication hereunder shall be in
writing and shall be deemed given when so delivered in person, by overnight
courier (with receipt confirmed) or by facsimile transmission (with receipt
confirmed by telephone or by automatic transmission report) or, if given by
mail, upon receipt, as follows (or to such other persons and/or addresses as may
be specified in writing to the other party hereto):
If to Hyseq, to: Hyseq, Inc.
Almanor Avenue
Sunnyvale, CA 94086
Attention: Chief Executive Officer
Facsimile: (408) 524-8141
With a copy to: Sachnoff & Weaver, Ltd.
South Wacker Drive, 29th Floor
Chicago, IL 60606-7484
Attention: Misty S. Gruber, Esq.
Facsimile: (312) 207-6400
If to Chiron, to: Chiron Corporation
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Horton Street
Emeryville, CA 94608
Attention: President, Chiron Technologies
Facsimile: (510) 923-7460
With a copy to: Chiron Corporation
Horton Street
Emeryville, CA 94608
Attention: General Counsel
Facsimile: (510) 654-5360
12.5 SUCCESSORS AND ASSIGNS. The terms and provisions of this Agreement
shall inure to the benefit of, and be binding upon, Chiron, Hyseq, and their
respective successors and assigns; provided, however, that neither Chiron nor
Hyseq may transfer or assign any of its rights and obligations hereunder without
the prior written consent of the other, except that either party may transfer or
assign any of its rights and obligations hereunder to an Affiliate or a person
that acquires all or substantially all of the business or assets of such party
to which this Agreement relates or pursuant to a merger or consolidation. Each
party shall notify the other promptly following any such transfer, assignment,
merger or consolidation. Any purported assignment in contravention of this
Section 12.5 shall, at the option of the nonassigning party, be null and void
and of no effect.
12.6 AMENDMENTS AND WAIVERS. No amendment, modification, waiver,
termination or discharge of any provision of this Agreement, nor consent to any
departure by Chiron or Hyseq therefrom, shall in any event be effective unless
the same shall be in writing specifically identifying this Agreement and the
provision intended to be amended, modified, waived, terminated or discharged and
signed by the party against whom enforcement of such amendment is sought, and
each amendment, modification, waiver, termination or discharge shall be
effective only in the specific instance and for the specific purpose for which
given. No provision of this Agreement shall be varied, contradicted or
explained by any oral agreement, course of dealing or performance or any other
matter not set forth in an agreement in writing and signed by the party against
whom enforcement of such variance, contradiction or explanation is sought.
12.7 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of California, without regard to its
choice of law principles.
12.8 ATTORNEYS' FEES. Each party shall bear its own legal fees incurred
in connection with the transactions contemplated hereby.
12.9 SEVERABILITY. If any provision hereof should be held invalid,
illegal or unenforceable in any respect in any jurisdiction, then, to the
fullest extent permitted by law, all other provisions hereof shall remain in
full force and effect in such jurisdiction and shall be liberally construed in
order to carry out the intentions of the parties hereto as nearly as may be
possible; provided, however, that nothing herein shall be construed so as to
defeat the overall intention of the parties.
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12.10 USE OF NAMES. Neither party shall use the name, trade name or
trademark of the other party in connection with this Agreement without the
express prior written consent of the other party.
12.11 EXECUTION IN COUNTERPARTS. This Agreement may be executed in any
number of counterparts, each of which counterparts, when so executed and
delivered, shall be deemed to be an original, and all of which counterparts,
taken together, shall constitute one and the same instrument.
12.12 ENTIRE AGREEMENT. This Agreement, together with the Stock Purchase
Agreement and all exhibits and schedules attached hereto or thereto, contains
the entire agreement and understanding of the parties hereto, and supersedes any
prior agreements or understandings between the parties with respect to the
subject matter hereof.
12.13 PUBLICITY.
(a) TERMS OF AGREEMENT. Neither party shall disclose this Agreement
or any of the terms thereof to any Third Party, whether in writing or
orally, without the prior written consent of the other party.
Notwithstanding the foregoing, either party may make any such disclosure if
but only to the extent such disclosure is, on advice of counsel, required
by Applicable Law. The disclosing party shall use all commercially
reasonable efforts to preserve the confidentiality of this Agreement and
the terms thereof notwithstanding any such required disclosure, and will
give the other party written notice of such required disclosure, which
notice shall, to the extent reasonably practicable, be given a reasonable
period of time in advance of such required disclosure. In the event either
party is required to file this Agreement with the Securities and Exchange
Commission, such party shall apply for confidential treatment of this
Agreement to the fullest extent permitted by Applicable Law, shall provide
the other party a copy of the confidential treatment request far enough in
advance of its filing to give the other party a meaningful opportunity to
comment thereon, and shall incorporate in such confidential treatment
request any reasonable comments of the other party.
(b) PRESS RELEASES. The parties will issue a joint press release
following the execution of this Agreement, the form and substance of which
shall be approved by both parties. Any subsequent press releases regarding
the transactions contemplated hereby shall be approved in advance by both
parties, such approval not to be unreasonably withheld or delayed.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above.
CHIRON CORPORATION., a Delaware corporation
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By: *
-------------------
Name: *
---------------
Title: *
----------------
HYSEQ, INC., a Nevada corporation
By: /s/ Lewis S. Gruber
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Name: Lewis S. Gruber
---------------
Title: Chief Executive Officer and President
-------------------------------------
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* 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.
