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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
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FORM 10-Q
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[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ____________ TO ____________.
COMMISSION FILE NUMBER: 0-22788
AXYS PHARMACEUTICALS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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DELAWARE 22-2969941
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(STATE OR OTHER JURISDICTION OF (IRS EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
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180 KIMBALL WAY
SOUTH SAN FRANCISCO, CALIFORNIA 94080
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
(650) 829-1000
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
Indicate by check mark whether the registrant (1) has filed all reports
required by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. [X] Yes [ ] No
The number of outstanding shares of the registrant's Common Stock, $0.001
par value, was 30,138,892 as of July 31, 1998.
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AXYS PHARMACEUTICALS, INC.
INDEX
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PAGE
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PART I: FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited)*
Condensed Consolidated Balance Sheets -- June 30, 1998 and
December 31, 1997........................................... 3
Condensed Consolidated Statements of Operations -- Three and
six months ended June 30, 1998 and 1997..................... 4
Condensed Consolidated Statements of Cash Flows -- Six
months ended June 30, 1998 and 1997......................... 5
Notes to Condensed Consolidated Financial Statements -- June
30, 1998.................................................... 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations................................... 10
Item 3. Quantitative and Qualitative Disclosure About Market Risk... 15
PART II: OTHER INFORMATION
Item 1. Legal Proceedings........................................... 16
Item 2. Changes in Securities....................................... 16
Item 3. Defaults Upon Senior Securities............................. 16
Item 4. Submission of Matters to a Vote of Security Holders......... 16
Item 5. Other Information........................................... 16
Item 6. Exhibits and Reports on Form 8-K............................ 17
Signatures............................................................ 18
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* The financial information contained herein should be read in conjunction with
the consolidated financial statements and notes thereto included in the
Company's Annual Report on Form 10-K for the year ended December 31, 1997,
filed with the Securities and Exchange Commission on March 31, 1998.
2
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AXYS PHARMACEUTICALS, INC.
PART I: FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
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JUNE 30,
1998 DECEMBER 31,
(UNAUDITED) 1997(1)(2)
----------- ------------
(IN THOUSANDS)
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Current assets:
Cash and cash equivalents................................. $ 39,075 $22,398
Short-term marketable investments......................... 42,664 30,470
Prepaid expenses and other current assets................. 5,107 4,103
-------- -------
Total current assets................................... 86,846 57,511
Property and equipment, net................................. 20,824 14,454
Investment in joint venture................................. 3,395 --
Note receivable from officer................................ 605 775
Other assets................................................ 4,784 844
-------- -------
TOTAL ASSETS...................................... $116,454 $73,584
======== =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.......................................... $ 3,787 $ 1,622
Accrued compensation...................................... 2,552 1,793
Other accrued liabilities................................. 2,858 2,148
Current portion of deferred revenue....................... 7,620 5,410
Current portion of capital lease and debt obligations..... 7,318 3,390
-------- -------
Total current liabilities.............................. 24,135 14,363
Deferred revenue, noncurrent................................ -- 726
Capital lease and debt obligations, net of current
portion................................................... 19,681 14,605
Minority interest in Xyris Corporation...................... 500 --
Stockholders' equity:
Preferred stock........................................... -- --
Common stock.............................................. 289,102 117,786
Note receivable from officer.............................. -- (125)
Accumulated deficit....................................... (216,964) (73,771)
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Total stockholders' equity............................. 72,138 43,890
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY........ $116,454 $73,584
======== =======
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(1) The balance sheet at December 31, 1997 has been derived from the audited
financial statement at that date but does not include all of the information
and footnotes required by generally accepted accounting principles for
complete financial statements.
(2) Represents the balances of Arris Pharmaceutical Corporation only.
See accompanying notes to condensed consolidated financial statements.
3
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AXYS PHARMACEUTICALS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
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THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------ --------------------
1998 1997* 1998 1997*
------- ------- --------- -------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Revenues.......................................... $ 9,097 $ 6,176 $ 17,531 $12,865
Operating expenses:
Research and development........................ 13,887 7,467 29,374 15,314
General and administrative...................... 3,690 1,588 7,122 3,203
Acquired in-process research and development.... -- -- 124,888 --
------- ------- --------- -------
Total operating expenses................ 17,577 9,055 161,384 18,517
------- ------- --------- -------
Operating loss.................................... (8,480) (2,879) (143,853) (5,652)
Interest income................................... 1,288 819 2,669 1,768
Interest expense.................................. (539) (159) (1,107) (381)
Equity interest in loss of joint venture.......... (445) (902)
------- ------- --------- -------
Net loss.......................................... $(8,176) $(2,219) $(143,193) $(4,265)
======= ======= ========= =======
Basic and diluted net loss per share.............. $ (0.27) $ (0.15) $ (4.87) $ (0.29)
======= ======= ========= =======
Shares used in computing basic and diluted net
loss per share.................................. 29,999 14,966 29,390 14,932
======= ======= ========= =======
</TABLE>
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* Reflects the results of Arris Pharmaceutical Corporation only.
See accompanying notes to condensed consolidated financial statements.
4
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AXYS PHARMACEUTICALS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
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SIX MONTHS ENDED
JUNE 30,
--------------------
1998 1997*
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(IN THOUSANDS)
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss.................................................... $(143,193) $(4,265)
Adjustments to reconcile net loss to net cash and cash
equivalents used in operating activities:
Depreciation and amortization............................. 4,394 2,112
Equity interest in loss of joint venture.................. 902 --
Forgiveness of note receivable from officer............... 125 --
Acquired in-process research and development.............. 124,888 --
Changes in assets and liabilities:
Prepaid expenses and other current assets.............. 986 (613)
Other assets........................................... (3,357) (63)
Accounts payable, accrued liabilities and deferred
revenue............................................... (8,810) (3,294)
--------- -------
Net cash used in operating activities....................... (24,065) (6,123)
--------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Available-for-sale securities:
Purchases................................................. (19,301) --
Maturities................................................ 49,019 749
Purchase of held-to-maturity security
Purchases................................................. -- (9,683)
Maturities................................................ -- 28,392
Purchase of restricted cash................................. -- (4,000)
Acquisition of Sequana, net of cash......................... 13,270 --
Investment in joint venture................................. (2,000) --
Purchase of property and equipment.......................... (2,332) (4,295)
--------- -------
Net cash provided by investing activities................... 38,656 11,163
--------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from issuance of common stock.................. 1,586 528
Proceeds from notes receivable.............................. 603 --
Proceeds from notes payable and lease financing............. 2,000 4,350
Proceeds from minority interest............................. 500 --
Principal payments on notes payable and capital leases...... (3,143) (1,289)
--------- -------
Net cash provided by financing activities................... 1,546 3,589
--------- -------
Net increase in cash and cash equivalents................... 16,137 8,629
Cash and cash equivalents, beginning of period.............. 22,938 10,822
--------- -------
Cash and cash equivalents, end of period.................... $ 39,075 $19,451
========= =======
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* Reflects the results of Arris Pharmaceutical Corporation only.
See accompanying notes to condensed consolidated financial statements.
5
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AXYS PHARMACEUTICALS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1998
(UNAUDITED)
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
Axys Pharmaceuticals, Inc., a Delaware corporation ("Axys" or the
"Company"), formerly known as Arris Pharmaceutical Corporation ("Arris"), is a
leader in the integration of drug discovery technologies from gene
identification through clinical development. Axys has research collaborations
with world-class pharmaceutical companies that are focused on the discovery of
small molecule therapeutics and cover a broad range of therapeutic areas,
including respiratory, cardiovascular, metabolic and infectious diseases, as
well as oncology and central nervous system disorders.
The consolidated financial statements include the accounts of the Company
and its wholly-owned subsidiaries, Arris Protease, Inc., Arris Pharmaceuticals
Canada, Inc., Sequana Therapeutics, Inc. ("Sequana") (see "Acquisition of
Sequana," Note 2) and its wholly owned subsidiary, NemaPharm, Inc., and a
majority ownership in Xyris Corporation (see "Formation of Xyris Corporation,"
Note 4). All significant intercompany accounts and transactions have been
eliminated.
BASIS OF PRESENTATION
The unaudited consolidated financial statements included herein have been
prepared by the Company according to the rules and regulations of the Securities
and Exchange Commission. Certain information and footnote disclosures normally
included in complete financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted pursuant to such
rules and regulations. The financial statements reflect, in the opinion of
management, all adjustments (which include only normal recurring adjustments)
necessary to state fairly the financial position and results of operations as of
and for the periods indicated. The results of operations for the three and six
month periods ended June 30, 1998 are not necessarily indicative of the results
to be expected for subsequent quarters or the full fiscal year.
These financial statements should be read in conjunction with the audited
financial statements and the notes thereto included in the Company's 1997 Annual
Report on Form 10-K filed with the Securities and Exchange Commission.
2. ACQUISITION OF SEQUANA
On January 8, 1998, the Company acquired all of the outstanding capital
stock of Sequana, a genomics company that uses industrial-scale gene discovery
technology and functional genomics to discover and characterize genes that are
believed to cause certain common diseases. The Company issued 14,618,013 shares
of Axys Common Stock in exchange for all the outstanding common stock of
Sequana, on the basis of 1.35 shares of Axys' common stock for one share of
Sequana common stock. The purchase price of $174.1 million consisted of (i) the
issuance of 14,618,013 shares of Company common stock valued at $168.1 million,
in exchange for all outstanding Sequana capital stock, (ii) the issuance of
Company warrants valued at $1.6 million in exchange for all outstanding Sequana
warrants, (iii) severance costs totaling $1.2 million, and (iv) transaction
costs totaling $3.2 million.
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AXYS PHARMACEUTICALS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1998
(UNAUDITED)
The allocation of the purchase price was determined as follows:
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Net tangible assets acquired........................... $ 45,882,000
Intangible assets acquired:
Workforce............................................ 3,300,000
In-process technology.................................. 124,888,000
------------
Total........................................ $174,070,000
============
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The acquisition has been accounted for as a purchase and accordingly, the
original purchase price was allocated to acquired assets and assumed liabilities
based upon their fair value at the date of acquisition. The purchase price has
been allocated to assets acquired and to in-process research and development
which has been charged as an expense in the Axys consolidated financial
statements for the six months ended June 30, 1998. Intangibles acquired in the
acquisition are being amortized on a straight line basis over 36 months. The
operating results of Sequana from January 1, 1998 to June 30, 1998 have been
included in the Company's consolidated results of operations. The operating
results of Sequana from January 1, 1998 to January 8, 1998 (the date of
acquisition) are considered immaterial.
As part of the Company's acquisition of Sequana, the Company also obtained
50% ownership of Genos Biosciences, Inc. ("Genos") (see "Investment in Joint
Venture," Note 3).
The following unaudited pro forma financial summary is presented as if the
operations of the Company and Sequana were combined as of December 31, 1996. The
unaudited pro forma combined results are not necessarily indicative of the
actual results that would have occurred had the acquisition been consummated at
that date, or of the future operations of the combined entities. Nonrecurring
charges, such as the acquired in-process research and development charge of
$124.9 million are not reflected in the following pro forma financial summary.
PRO FORMA FINANCIAL SUMMARY FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 1997
(UNAUDITED)
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3 MONTHS ENDED 6 MONTHS ENDED
JUNE 30, 1997 JUNE 30, 1997
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Contract Revenues.............................. $12,233 $ 21,431
Net Loss....................................... $(5,786) $(14,781)
Basic and diluted net loss per share........... $ (0.19) $ (0.49)
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3. INVESTMENT IN JOINT VENTURE
In January 1997, Sequana and Memorial Sloan-Kettering Cancer Center
("MSKCC") formed Genos, a joint venture focused on the research and
identification of genes and related genetic information believed to be of value
in the prognosis, diagnosis and positive treatment of certain common cancers.
Sequana and MSKCC each own 50% of Genos and have committed to make capital
contributions of approximately $5 million each to fund its initial operations.
As of June 30, 1998, Sequana had invested $5.2 million in Genos, meeting its
initial commitment. The investment in Genos is accounted for under the equity
method.
Under the terms of the agreement, Sequana licensed certain of its
technology to Genos and has contracted with Genos to conduct research and
provide certain other services to the joint venture. Payments to date for such
research and services have not been material.
In connection with the formation of Genos, Sequana sold a warrant to MSKCC
to purchase 350,000 shares of the Sequana's common stock. That warrant was
assumed by the Company as part of the
7
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AXYS PHARMACEUTICALS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1998
(UNAUDITED)
acquisition of Sequana on January 8, 1998, and was converted to a warrant to
purchase an aggregate of 472,500 shares at a price of $12.87 per share.
4. FORMATION OF XYRIS CORPORATION
In June 1998, in connection with the formation of Xyris Corporation, a
California corporation and majority-owned subsidiary of the Company ("Xyris"),
the Company and Bay City Capital LLC, a San Francisco based private merchant
bank ("BCC"), each received Series A Preferred Stock of Xyris. Xyris was
established in May 1998 to leverage Axys' existing pharmaceutical technology in
the agricultural market. In exchange for 2,950,000 shares of Xyris' Series A
Preferred Stock, representing 82% of the total outstanding shares of Xyris
capital stock, the Company granted to Xyris the right, for a limited period to
negotiate an exclusive license in the field of agriculture to all Axys
technology, including its genomics, combinatorial chemistry and small molecule
drug discovery technology. BCC purchased Xyris Series A Preferred Stock for
cash. In connection with BCC's purchase, the Company issued an option (the "Put
Option") to BCC, granting BCC the right to require the Company to purchase from
BCC all of the 150,000 shares of Series A Preferred Stock of Xyris (the "Xyris
Stock") held by BCC. If the Put Option is exercised, the Company would purchase
the Xyris Stock with shares of the Company's Common Stock, at its then market
price, with an aggregate market value on the date the Put Option is exercised
equal to $499,500, rounded down to the nearest whole number of shares. The Put
Option will terminate upon the earlier of January 5, 1999 or the occurrence of
certain other events, including the execution of an exclusive license in the
field of agriculture to all Axys technology.
5. NOTE PAYABLE
The Company has two lines of credit, one with Sumitomo Bank, Limited
("Sumitomo") and one with Sumitomo and Silicon Valley Bank jointly, to provide
up to $27 million dollars in debt financing. The loans are subject to certain
financial covenants over the course of the agreements. Interest is computed at
various rates based on a Eurodollar rate and the bank's prime rate, and range
from 7.3% to 7.9%, and 8.5%, respectively, at June 30, 1998. Interest and
principal payments are due monthly on $5.7 million of the balance and interest
only payments are due quarterly on $15.8 million of the balance, until September
30, 1998, at which time principal and interest will be payable in 48 monthly
installments under both lines of credit. The Company was in compliance with all
covenants under both lines of credit at June 30, 1998. The balance outstanding
on these loans at June 30, 1998 was $21.9 million.
6. COMPREHENSIVE INCOME
As of January 1, 1998, the Company adopted Financial Accounting Standards
Board's Statement No. 130, "Reporting Comprehensive Income" (Statement 130).
Statement 130 establishes new rules for the reporting and display of
comprehensive income and its components. Accordingly, the adoption of this
statement had no impact on the Company's net income or stockholders' equity.
Comprehensive income is the same as net income, as there are no adjustments
reported in stockholders' equity which are to be included in the computation.
8
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AXYS PHARMACEUTICALS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1998
(UNAUDITED)
7. RECENT ACCOUNTING PRONOUNCEMENTS
As of January 1, 1998, the Company adopted the Financial Accounting
Standards Board's Statement No. 131, "Disclosures about Segments of an
Enterprise and Related Information" (Statement 131). Statement 131 superseded
Statement No. 14, Financial Reporting for Segments of a Business Enterprise.
Statement 131 established standards for the way that public business enterprises
report information about operation segments in annual financial statements and
requires that those enterprises report selected information about operating
segments in interim financial reports. Statement 131 also establishes standards
for related disclosures about products and services, geographic areas, and major
customers. The adoption of Statement 131 did not affect the results of
operations or financial position of the Company, but may affect the disclosure
of the segment information at December 31, 1998.
In March 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 132, "Employers' Disclosures about Pensions
and Other Postretirement Benefits" ("SFAS132"). SFAS 132 does not change the
recognition or measurement of pension or postretirement benefit plans, but
revises and standardizes disclosure requirements for pensions and other
postretirement benefits. The adoption of SFAS 132 has no impact on the Company's
results of operations or financial condition.
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Financial
Instruments and for Hedging Activities" ("SFAS 133") which provides a
comprehensive and consistent standard for the recognition and measurement of
derivatives and hedging activities. SFAS 133 is effective for years beginning
after June 15, 1999 and is not anticipated to have an impact on the Company's
results of operations or financial condition when adopted.
9
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
This Quarterly Report on Form 10-Q contains, in addition to historical
information, forward-looking statements that involve risks and uncertainties.
The Company expressly disclaims any obligation to update this information or
publicly release any revisions or reflect events or circumstances after the date
of this report. The Company's actual results could differ significantly from the
results discussed in the forward-looking statements. Factors that could cause or
contribute to such differences include, but are not limited to, those discussed
below under "Certain Business Risks," as well as elsewhere herein, together with
those discussed in "Item 1. Business" and "Additional Risk Factors" in the
Company's report on Form 10-K for the fiscal year ended December 31, 1997, filed
with the Securities and Exchange Commission on March 31, 1998.
OVERVIEW
Since its inception in April 1989, the Company has devoted substantially
all of its resources to its research and development programs. To date, the
Company's only source of revenue has been its corporate collaborations with
Pharmacia & Upjohn, Inc. and its predecessors ("PNU"), Amgen, Inc. ("Amgen"),
Bayer AG ("Bayer"), SmithKline Beecham Corporation ("SB"), Merck & Co.
("Merck"), Abbott Laboratories ("Abbott"), and Bristol-Myers Squibb ("BMS"). In
addition, through its acquisition of Sequana on January 8, 1998, the following
corporate collaborations are included with the revenue sources listed above,
Boehringer Ingelheim International GmbH ("BI"), Corange International Ltd.
("Corange"), Parke-Davis ("PD"), and Glaxo-Wellcome ("Glaxo"). These
collaborations have taken a variety of forms including, in each case, certain of
the following elements: payments to the Company of an up-front commitment fee
and license fees, purchase of the Company's common stock, research funding
payments, purchase of compounds produced, reimbursement of patient collection
costs, milestone payments when milestones are achieved, and royalties upon the
sale of any resulting products. Where appropriate, the up-front commitment fees
have been recorded as deferred revenue until earned.
In May 1998, the Company and Glaxo announced that following a review of
their relationship, the companies will discontinue their collaboration to
discover genes associated with type 2 diabetes mellitus and obesity. Under the
terms of the dissolution agreement, Axys was granted exclusive rights to all
obesity family samples and data and non-exclusive rights to certain type 2
diabetes samples and data.
In June 1998, in connection with the formation of Xyris Corporation, a
California corporation and majority-owned subsidiary of the Company ("Xyris"),
the Company and Bay City Capital LLC, a San Francisco based private merchant
bank ("BCC"), each received Series A Preferred Stock of Xyris. Xyris was
established in May 1998 to leverage Axys' existing pharmaceutical technology in
the agricultural market. In exchange for 2,950,000 shares of Xyris' Series A
Preferred Stock, representing 82% of the total outstanding shares of Xyris'
capital stock, the Company granted to Xyris the right, for a limited period to
negotiate an exclusive license in the field of agriculture to all Axys
technology, including its genomics, combinatorial chemistry and small molecule
drug discovery technology. BCC purchased Xyris' Series A Preferred Stock for
cash. Also in June 1998, in connection with BCC's purchase of Xyris' Series A
Preferred Stock, the Company issued an option (the "Put Option") granting BCC
the right to require the Company to purchase from BCC all of the 150,000 shares
of Series A Preferred Stock of Xyris (the "Xyris Stock") held by BCC. If the Put
Option is exercised, the Company would purchase the Xyris Stock with shares of
the Company's Common Stock, at its then market price, with an aggregate market
value on the date the Put Option is exercised equal to $499,500, rounded down to
the nearest whole number of shares. The Put Option will terminate upon the
earlier of January 5, 1999 or the occurrence of certain other events, including
the execution of an exclusive license in the field of agriculture to all Axys
technology.
In June 1998, the Company announced an alliance with Roche Bioscience
("RBS") in the area of functional genomics. The alliance will focus on
evaluating the function of genes provided by RBS that
10
<PAGE> 11
may serve as drug targets in the development of therapies for pain and other
conditions involving peripheral nervous system disorders. The alliance provides
for an upfront fee plus research support.
In June 1998, the Company announced an agreement between the Company's
Advanced Technologies Division and Parke-Davis ("PD"), the Pharmaceutical
Research Division of Warner-Lambert, to provide PD with a generic compound
screening library consisting of multiple small molecule synthetic organic
compound libraries created using the Company's combinatorial chemistry
technologies. The agreement consists of the delivery to PD by the Company of
compounds over three years and also calls for Axys to provide PD with the
enabling technologies and protocols for recreating the library and making
directed libraries, as well as other compounds.
In July 1998, the Company announced a collaboration with Signal
Pharmaceuticals, Inc. ("Signal"), for the accelerated discovery of compounds
that interact with specific cell signaling pathways. Signal has developed
proprietary assays for these signaling pathways which Signal will use to screen
small molecules derived from Axys' Advanced Technologies Division's compound
libraries. The agreement provides that Axys will receive an upfront fee, as well
as other payments upon the achievement of certain research and development
milestones.
In July 1998, the Company announced an agreement with Wyeth-Ayerst
Laboratories ("WA"), a division of American Home Products, to conduct a clinical
trial to study the role played by an Axys proprietary gene variant, or
polymorphism, in drug metabolism. The trial is designed to evaluate the effect
of the polymorphism on the metabolism of two classes of marketed drugs to
determine if patients who have the gene variant metabolize the drugs
differently. Under the terms of the agreement, WA will conduct the clinical
study and Axys will provide patient genotyping and certain intellectual
property.
In August 1998, the Company received written notification from Corange
that, due to a change in research priorities following the Roche Group's
acquisition of Corange, Corange was exercising, effective as of mid-February
1999, its contractual right to bring to a conclusion its osteoporosis
collaboration with the Company, including its related research support. Through
mid-February 1999, Corange remains contractually obligated to continue its
research funding and to make milestone-related payments if any milestones are
achieved. After the collaboration is concluded in mid-February 1999, the Company
expects to have the right to use the jointly-developed research results and to
have the right to pursue this osteoporosis research. The Company is currently
considering whether, after mid-February 1999, to continue this research by
itself, to continue this research with a new partner, or to suspend this
research and reallocate the resources currently devoted to it to other research
efforts.
The Company has not been profitable since inception and expects to incur
substantial losses for at least the next several years, primarily due to the
cost of its research and development programs, including preclinical studies and
human clinical trials. The Company expects that losses will fluctuate from
quarter to quarter, that such fluctuations may be substantial, and that results
from prior quarters may not be indicative of future operating results. As of
June 30, 1998, the Company's accumulated deficit was approximately $217 million.
Included in the Company's accumulated deficit at June 30, 1998 was approximately
$147 million of acquired in-process research and development from the
acquisition of Khepri Pharmaceuticals, Inc. in 1995 and the acquisition of
Sequana in January 1998.
11
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RESULTS OF OPERATIONS
The following discussion of results of operations compares the combined pro
forma operating results for the three-and six-months ended June 30, 1997 (see
table below) of the Company and Sequana as if the acquisition had been effective
as of December 31, 1996 and the Company's consolidated operating results for the
three- and six- month periods ended June 30, 1998.
PRO FORMA OPERATING RESULTS FOR THE THREE AND SIX MONTHS ENDED JUNE 30,
1997 (UNAUDITED):
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THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, 1997 JUNE 30, 1997
------------------ ----------------
(IN THOUSANDS)
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Revenues.................................. $12,233 $ 21,431
Operating expenses:
Research and development................ 15,126 30,486
General and administrative.............. 2,893 5,726
------- --------
Total operating expenses.................. 18,019 36,212
------- --------
Operating Loss............................ $(5,786) $(14,781)
======= ========
</TABLE>
REVENUES
The Company's revenues on a pro forma basis decreased to $9.1 million and
$17.5 million for the three and six-month periods ended June 30, 1998,
respectively, compared to $12.2 million and $21.4 million, respectively, for the
comparable periods in 1997. All of the Company's revenues presently are
attributable to the Company's collaborations. Although revenues for the three-
and six-months ended June 30, 1998 were lower than for the same periods in 1997,
revenues for the three- and six-month periods ended June 30, 1998 were
positively affected, primarily due to: (i) the inclusion of the full effects of
the research funding for the collaboration with PD to develop novel therapeutic
products for the treatment of schizophrenia and bipolar disorder; and (ii) the
inclusion of the full effects of the research funding for the collaboration with
BMS to develop small molecule inhibitors of proteases involved in hepatitis C
virus infection. These revenue increases were more than offset by (i) the ending
of the research funded portion of a tryptase inhibitor collaboration with Bayer
during the fourth quarter of 1997; (ii) a planned reduction in research support
with Merck to develop small molecule inhibitors of proteases involved in
osteoporosis; and (iii) an overall reduction (despite record second quarter 1998
revenues) for the six-month period ended June 30, 1998 from the shipments of
small molecule synthetic organic compounds under two of the Company's
combinatorial chemistry collaborations with PNU and PD. The Company started
shipping under the combinatorial collaboration with PD in June 1998. Under the
existing collaboration with PNU, the Company has shipped approximately 109,000
compounds to date (250,000 total compounds are due under the three-year
agreement).
RESEARCH AND DEVELOPMENT
Research and development expenses decreased to $13.9 million and $29.4
million for the three and six-month periods ended June 30, 1998, respectively,
from $15.1 and $30.5 million in the comparable periods in 1997. The expense
reduction for the three- and six-month periods ended June 30, 1998 was primarily
due to reduced chemical consumption used in the production of small molecule
synthetic organic compounds (since fewer compounds were produced in the three-
and six-months ended June 30, 1998 compared to the same period in 1997), as well
as lower outside consulting fees associated with clinical trials in 1997
(calculated on a pro forma basis) as compared to 1998. Research and development
expenses as a percentage of total expenses, without the consideration of
acquired in-process research and development expenses of $124.9 million, has
decreased to approximately 79% of total expenses for the three- and six-months
ended June 30, 1998, compared to 83% for the comparable periods in 1997. The
Company expects that its research and development costs will increase for the
remainder of 1998 in absolute dollars when compared to pro forma amounts in
1997, primarily as a
12
<PAGE> 13
result of further expansion of its proprietary research programs, and the
conduct of preclinical studies and clinical trials.
GENERAL AND ADMINISTRATIVE
The Company's general and administrative expenses increased to $3.7 million
and $7.1 million, respectively, for the three- and six-month periods ended June
30, 1998, from $2.9 and $5.7 million in the comparable periods in 1997. The
increase in expenses was primarily due to transition costs resulting from the
acquisition of Sequana (see "Acquired in-process research and development"
below), and administrative costs of closing down the Cambridge, Massachusetts
operation of Sequana's NemaPharm, Inc. subsidiary and relocating the activities
to South San Francisco, California, as well as an increase in headcount and
facilities required to support additional research programs. Some of the
reoccurring administrative costs common to both companies were eliminated by
combining the two companies. General and administrative expenses as a percentage
of total expenses, without the consideration of acquired in-process research and
development expenses of $124.9 million, represented approximately 21% for the
three- and six-month periods ended June 30, 1998, compared to 16% for the
comparable periods in 1997. The Company expects its general and administrative
costs will increase for the remainder of 1998 in absolute dollars when compared
to pro forma amounts in 1997, in order to provide corporate support for
expanding research and development efforts.
EQUITY INTEREST IN LOSS OF JOINT VENTURE
The equity interest in loss of joint venture at June 30, 1998 represents
the Company's portion of the losses for the three- and six-months ended June 30,
1998 of Genos Biosciences, Inc. ("Genos"). The Company holds a 50% interest in
Genos. Genos expects to incur increased operating losses in future periods as it
expands its research and development activities. Such losses will result in
corresponding changes in the Company's equity in net loss of joint venture.
ACQUIRED IN-PROCESS RESEARCH AND DEVELOPMENT
On January 8, 1998, the Company acquired Sequana, a genomics company based
in La Jolla, California. The acquisition was a tax-free reorganization accounted
for as a purchase. The Company issued approximately 14,620,000 shares of its
common stock in exchange for all the outstanding common stock of Sequana, on the
basis of 1.35 shares of the Company's common stock for one share of Sequana
common stock. The direct transaction costs associated with the acquisition were
approximately $3.2 million. The total purchase price of approximately $174
million was allocated to the assets acquired and liabilities assumed based upon
the fair value on the date of the acquisition. Approximately $125 million of the
purchase price was allocated to in-process research and development and charged
to expense at March 31, 1998.
INTEREST INCOME AND EXPENSE
Interest income increased to $1.3 million and $2.7 million, respectively,
for the three- and six-months period, ended June 30, 1998, compared to $819,000
and $1.8 million, respectively, for the comparable periods in 1997. The
increases were primarily due to the average cash balances between the periods,
resulting from the combination of the Company's cash and Sequana's cash. In
addition, the receipt of proceeds from research funding, collection of revenues
from the shipment of compounds under the collaborations with PNU and PD, and
reimbursement of patient collection fees by the Company's collaborators have
helped to sustain the cash levels. Interest expense increased to $538,000 and
$1.1 million, respectively, for the three- and six-month periods ended June 30,
1998, from $159,000 and $381,000, respectively, for the comparable periods in
1997. The interest expense increases were primarily due to higher debt balances
from the combination of the Company's and Sequana's debt financing. The Company
has primarily drawn down its lines of credit to purchase equipment and make
leasehold improvements. The Company expects interest expense to fluctuate as
financing needs change for future expansion of the Company's facilities and
acquisition of laboratory equipment.
13
<PAGE> 14
LIQUIDITY AND CAPITAL RESOURCES
The Company has financed its operations since inception primarily through
private and public offerings of its capital stock and through corporate
collaborations. As of June 30, 1998, the Company had realized approximately $95
million in net proceeds from offerings of its capital stock. In addition, the
Company had realized $91.7 million since inception from its corporate
collaborations.
The Company's principal sources of liquidity are its cash and marketable
investments, which totaled $81.7 million as of June 30, 1998. The Company has
two lines of credit totaling $27 million in borrowing capacity. As of June 30,
1998, the Company had borrowed a total of $21.7 million and had $4.2 million
remaining available under the agreements. Under the terms of the loan agreement,
the time available to draw down on one of the lines of credit has expired.
Net cash used in operating activities during the six-month period ended
June 30, 1998 was $24.1 million, compared to $6.1 million in the same period in
1997. The increase was primarily due to the increase in net loss for the six
months ended June 30, 1998 and the timing of cash received under the Company's
collaboration agreements. Cash used in operating activities is expected to
fluctuate from quarter to quarter depending, in part, upon the timing and
amounts, if any, of cash received from existing and any new collaboration
agreements.
The Company also spent approximately $2.3 million for the purchase of
property, plant and equipment during the six months ended June 30, 1998.
Additional equipment is expected to be needed as the Company increases its
research and development activities.
The Company's revenues presently are attributable to collaborations with
PNU, Merck, BMS, BI, Corange, PD, Glaxo, and RBS. The research support for the
Factor Xa program with PNU is currently under revision with an effort being made
to repartner this program. The osteoporosis program with Merck extends through
the fourth quarter of 1998. As discussed above, the research support from
Corange for the osteoporosis collaboration with Corange will continue through
mid-February 1999, at which time it will end. The combinatorial chemistry
collaborations with PNU and PD, and all other collaborations, extend beyond the
next 12 months. If the Company is unable to renew or replace any of these
collaborations, such events may have a material adverse effect on the Company's
business, financial condition and results of operations.
The Company expects that its existing capital resources, including research
and development revenues from existing collaborations, will enable the Company
to maintain current and planned operations for at least three years. The Company
will need to raise substantial additional capital to fund its operations beyond
the end of such period. The Company expects that it will seek such additional
funding through new collaborations, through the extension of existing
collaborations or through public or private equity or debt financing.
There can be no assurance that the Company will be able to enter into new
collaborations on acceptable terms, or at all, or that additional financing will
be available to the Company on acceptable terms, or at all. Any additional funds
raised by issuing equity securities may result in further dilution to
stockholders. If adequate funds are not available, the Company may be required
to delay, to reduce the scope of, or to eliminate one or more of its research or
development programs or to obtain funds through arrangements with collaborative
partners or others that may require the Company to relinquish rights to certain
of its technologies or products that the Company would otherwise seek to develop
or commercialize itself.
CERTAIN BUSINESS RISKS
The Company is at an early stage of development. The Company's technologies
are, in many cases, new and all are still under development. All of the
Company's proposed products are in research or development and will require
significant additional research and development efforts prior to any commercial
use, including extensive preclinical and clinical testing, as well as lengthy
regulatory approval. There can be no assurance that the Company's research and
development efforts will be
14
<PAGE> 15
successful, that any of its proposed products will prove to be safe and
efficacious in clinical trials or that any commercially successful products will
ultimately be developed by the Company. In addition, many of the Company's
currently proposed products are subject to development and licensing
arrangements with the Company's collaborators. Therefore, the Company is
dependent on the research and development efforts of these collaborators.
Moreover, the Company is entitled only to a portion of the revenues, if any,
realized from the commercial sale of any of the proposed products covered by the
collaborations. The Company has experienced significant operating losses since
its inception and expects to incur significant operating losses over at least
the next several years. The development of the Company's technology and proposed
products will require a commitment of substantial funds to conduct these costly
and time consuming activities. All of the Company's revenues to date have been
received pursuant to the Company's collaborations. Should the Company or its
collaborators fail to perform in accordance with the terms of their agreements,
any consequent loss of revenue under the agreements could have a material
adverse effect on the Company's business, financial condition and results of
operations. The proposed products under development by the Company have never
been manufactured on a commercial scale and there can be no assurance that such
products can be manufactured at a cost or in quantities necessary to make them
commercially viable. The Company has no sales, marketing or distribution
capability. If any of its proposed products subject to collaborative agreements
are successfully developed, the Company must rely on its collaborators to market
such products.
If the Company develops any products which are not subject to collaborative
agreements, it must either rely on other pharmaceutical companies to market such
products or must develop a marketing and sales force with technical expertise
and supporting distribution capability in order to market such products
directly.
The foregoing risks reflect the Company's early stage of development and
the nature of the Company's industry and products. Also inherent in the
Company's stage of development is a range of additional risks, including
competition, uncertainties regarding protection of patents and proprietary
rights, government regulation and uncertainties related to clinical trials and
regarding health care reform. These risks and uncertainties are discussed
further in "Item 1. -- Business -- Additional Risk Factors" on the Company's
report on Form 10-K for the year ended December 31, 1997, filed by the Company
on March 31, 1998.
IMPACT OF THE YEAR 2000
The Company has initiated modification of its information technology
systems to recognize the year 2000 and has begun converting critical hardware
and data processing systems. The Company expects the project to be substantially
complete by early 1999. The Company does not expect this project to have a
significant effect on operations, and the costs of modification are expected to
be insignificant. The Company is in the process of replacing its finance
information system which will be year 2000 compliant. In addition, the Company
is evaluating significant vendors and other third parties which could have an
effect on the Company's operations to ensure Year 2000 compliance by such
vendors and third parties.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
Not Applicable.
15
<PAGE> 16
PART II: OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None
ITEM 2. CHANGES IN SECURITIES
In June 1998, the Company issued an option (the "Put Option") to Bay City
Capital Fund I ("BCC"), granting BCC the right to require the Company to
purchase from BCC all of the 150,000 shares of Series A Preferred Stock of Xyris
Corporation (the "Xyris Stock") held by BCC. If the Put Option is exercised, the
Company would purchase the Xyris Stock with shares of the Company's Common
Stock, at its then market price, with an aggregate market value on the date the
Put Option is exercised equal to $499,500.00, rounded down to the nearest whole
number of shares. The Put Option was granted in connection with a Series A
Preferred Stock Purchase Agreement between BCC, Xyris Corporation and the
Company, whereby BCC purchased Series A Preferred Stock of Xyris Corporation in
connection with the initial funding of Xyris Corporation as a majority owned
agricultural subsidiary of the Company. The Put Option will terminate upon the
earlier of January 5, 1999 or the occurrence of certain other events, including
the execution of an exclusive license in the field of agriculture to all Axys
Technology.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company's 1998 Annual Meeting of Stockholders was held on May 27, 1998.
Stockholders were asked (i) to elect directors to serve for the ensuing year and
until their successors are elected; and (ii) to ratify the selection of Ernst &
Young LLP as independent auditors of the Company for its fiscal year ending
December 31, 1998.
All of the matters were approved by the stockholders of the Company. The
number of shares voted for, against and withheld for each matter were:
<TABLE>
<CAPTION>
ELECTION OF DIRECTORS: IN FAVOR WITHHELD
---------------------- ---------- --------
<S> <C> <C>
John P. Walker........................................ 22,538,577 152,764
Ann M. Arvin, M.D. ................................... 22,590,203 101,138
Brook H. Byers........................................ 22,521,027 170,314
Anthony B. Evnin, Ph.D. .............................. 22,518,127 173,214
Vaughn M. Kailian..................................... 22,592,672 98,669
Donald Kennedy, Ph.D. ................................ 22,534,922 156,419
Irvin Lerner.......................................... 22,537,643 153,698
J. Leighton Read, M.D. ............................... 22,578,958 112,383
</TABLE>
<TABLE>
<CAPTION>
BROKER
FOR AGAINST ABSTAIN NON-VOTES
---------- ------- ------- ---------
<S> <C> <C> <C> <C>
Selection of Ernst & Young LLP: 22,614,346 58,538 18,457 7,306,844
</TABLE>
ITEM 5. OTHER INFORMATION
Pursuant to the Company's bylaws, stockholders who wish to bring matters or
propose nominees for director at the Company's 1999 annual meeting of
stockholders must provide specified information to the Company between February
26, 1999 and March 28, 1999 (unless such matters are included in the Company's
proxy statement pursuant to Rule 14a-8 under the Securities Exchange Act of
1934, as amended).
16
<PAGE> 17
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENTS
------- ------------------------
<S> <C>
10.4* 1997 Equity Incentive Plan
10.87** Termination of Collaborative Research Agreement between
Sequana and Glaxo Wellcome, Inc., effective February 1,
1998.
10.88** Combinatorial Chemistry Agreement between the Company and
Warner-Lambert Company, dated May 15, 1998.
10.89** Collaboration Agreement by and among the Company and its
subsidiaries, NemaPharm, Inc. and Sequana, and Roche
Bioscience, dated June 1, 1998.
27 Financial Data Schedule
</TABLE>
- ---------------
* Compensatory Benefit Plan.
** Confidential treatment has been requested with respect to certain portions of
this exhibit.
(b) REPORTS ON FORM 8-K
No reports on Form 8-K were filed by the Company during the period covered
by this report.
17
<PAGE> 18
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
AXYS PHARMACEUTICALS, INC.
Date: August 13, 1998 By: /s/ FREDERICK J. RUEGSEGGER
------------------------------------
Frederick J. Ruegsegger
Senior Vice President Finance and
Corporate Development and
Chief Financial Officer
(Principal Financial and Accounting
Officer and Authorized Officer)
18
<PAGE> 19
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENTS
------- ------------------------
<S> <C>
10.4* 1997 Equity Incentive Plan
10.87** Termination of Collaborative Research Agreement between
Sequana and Glaxo Wellcome, Inc., effective February 1,
1998.
10.88** Combinatorial Chemistry Agreement between the Company and
Warner-Lambert Company, dated May 15, 1998.
10.89** Collaboration Agreement by and among the Company and its
subsidiaries, NemaPharm, Inc. and Sequana, and Roche
Bioscience, dated June 1, 1998.
27 Financial Data Schedule
</TABLE>
- ---------------
* Compensatory Benefit Plan.
** Confidential treatment has been requested with respect to certain portions of
this exhibit.
<PAGE> 1
Exhibit 10.4
ARRIS PHARMACEUTICAL CORPORATION
1997 EQUITY INCENTIVE PLAN
ADOPTED NOVEMBER 10, 1997
APPROVED BY STOCKHOLDERS JANUARY 7, 1998
1. PURPOSES.
(a) The purpose of the Plan is to provide a means by which selected
Employees and Directors of and Consultants to the Company and its Affiliates may
be given an opportunity to benefit from increases in value of the common stock
of the Company ("Common Stock") through the granting of (i) Incentive Stock
Options, (ii) Nonstatutory Stock Options, (iii) stock bonuses and (iv) rights to
purchase restricted stock, all as defined below.
(b) The Company, by means of the Plan, seeks to retain the services of
persons who are now Employees, Directors or Consultants, to secure and retain
the services of new Employees, Directors and Consultants, and to provide
incentives for such persons to exert maximum efforts for the success of the
Company and its Affiliates.
(c) The Company intends that the Stock Awards issued under the Plan shall,
in the discretion of the Board or any Committee to which responsibility for
administration of the Plan has been delegated pursuant to subsection 3(c), be
either (i) Options granted pursuant to Section 6 hereof, including Incentive
Stock Options and Nonstatutory Stock Options, or (ii) stock bonuses or rights to
purchase restricted stock granted pursuant to Section 7 hereof. All Options
shall be separately designated Incentive Stock Options or Nonstatutory Stock
Options at the time of grant, and a separate certificate or certificates will be
issued for shares purchased on exercise of each type of Option.
2. DEFINITIONS.
(a) "Affiliate" means any parent corporation or subsidiary corporation,
whether now or hereafter existing, as those terms are defined in Sections 424(e)
and (f) respectively, of the Code, or such other parent corporation or
subsidiary corporation designated by the Board.
(b) "Board" means the Board of Directors of the Company.
(c) "Code" means the Internal Revenue Code of 1986, as amended.
(d) "Committee" means a committee appointed by the Board in accordance with
subsection 3(c) of the Plan.
(e) "Company" means Arris Pharmaceutical Corporation, a Delaware
corporation.
(f) "Consultant" means any person, including an advisor, engaged by the
Company or an Affiliate to render consulting services and who is compensated for
such services, provided that the term "Consultant" shall not include Directors
who are paid only a director's fee by the Company or who are not compensated by
the Company for their services as Directors.
(g) "Continuous Service" means the employment or relationship as a Director
or Consultant is not interrupted or terminated. The Board, in its sole
discretion, may determine whether Continuous Service shall be considered
interrupted in the case of: (i) any leave of absence approved by the Board,
including sick leave, military leave, or any other personal leave; or (ii)
transfers between locations of the Company or between the Company, Affiliates or
their successors.
(h) "Director" means a member of the Board.
(i) "Disability" means total and permanent disability as defined in Section
22(e) of the Code.
E-1
<PAGE> 2
(j) "Employee" means any person, including Officers and Directors, employed
by the Company or any Affiliate of the Company. Neither service as a Director
nor payment of a director's fee by the Company shall be sufficient to constitute
"employment" by the Company.
(k) "Exchange Act" means the Securities Exchange Act of 1934, as amended.
(l) "Fair Market Value" means, as of any date, the value of the Common
Stock of the Company determined as follows:
(1) If the Common Stock is listed on any established stock exchange,
or traded on the Nasdaq National Market or The Nasdaq SmallCap Market, the
Fair Market Value of a share of Common Stock shall be the closing sales
price for such stock (or the closing bid, if no sales were reported) as
quoted on such exchange or market (or the exchange or market with the
greatest volume of trading in Common Stock) on the last market trading day
prior to determination, as reported in The Wall Street Journal or such
other source as the Board deems reliable;
(2) In the absence of such markets for the Common Stock, the Fair
Market Value shall be determined in good faith by the Board.
(m) "Incentive Stock Option" means an Option intended to qualify as an
incentive stock option within the meaning of Section 422 of the Code and the
regulations promulgated thereunder.
(n) "Non-Employee Director" means a Director who either (i) is not a
current Employee or Officer of the Company or its parent or subsidiary, does not
receive compensation (directly or indirectly) from the Company or its parent or
subsidiary for services rendered as a consultant or in any capacity other than
as a Director (except for an amount as to which disclosure would not be required
under Item 404(a) of Regulation S-K promulgated pursuant to the Securities Act
of 1933 ("Regulation S-K"), does not possess an interest in any other
transaction as to which disclosure would be required under Item 404(a) of
Regulation SK, and is not engaged in a business relationship as to which
disclosure would be required under Item 404(b) of Regulation S-K; or (ii) is
otherwise considered a "non-employee director" for purposes of Rule 16b-3.
(o) "Nonstatutory Stock Option" means an Option not intended to qualify as
an Incentive Stock Option.
(p) "Officer" means a person who is an officer of the Company within the
meaning of Section 16 of the Exchange Act and the rules and regulations
promulgated thereunder.
(q) "Option" means a stock option granted pursuant to the Plan.
(r) "Option Agreement" means a written agreement between the Company and an
Optionee evidencing the terms and conditions of an individual Option grant. Each
Option Agreement shall be subject to the terms and conditions of the Plan.
(s) "Optionee" means a person to whom an Option is granted pursuant to the
Plan.
(t) "Outside Director" means a Director who either (i) is not a current
employee of the Company or an "affiliated corporation" (within the meaning of
Treasury regulations promulgated under Section 162(m) of the Code), is not a
former employee of the Company or an "affiliated corporation" receiving
compensation for prior services (other than benefits under a tax qualified
pension plan), was not an officer of the Company or an "affiliated corporation"
at any time, and is not currently receiving direct or indirect remuneration from
the Company or an "affiliated corporation" for services in any capacity other
than as a Director, or (ii) is otherwise considered an "outside director" for
purposes of Section 162(m) of the Code.
(u) "Plan" means this 1997 Equity Incentive Plan.
(v) "Rule 16b-3" means Rule 16b-3 of the Exchange Act or any successor to
Rule 16b-3, as in effect when discretion is being exercised with respect to the
Plan.
(w) "Stock Award" means any right granted under the Plan, including any
Option, any stock bonus, and any right to purchase restricted stock.
E-2
<PAGE> 3
(x) "Stock Award Agreement" means a written agreement between the Company
and a holder of a Stock Award evidencing the terms and conditions of an
individual Stock Award grant. Each Stock Award Agreement shall be subject to the
terms and conditions of the Plan.
3. ADMINISTRATION.
(a) The Plan shall be administered by the Board unless and until the Board
delegates administration to a Committee, as provided in subsection 3(c).
(b) The Board shall have the power, subject to, and within the limitations
of, the express provisions of the Plan:
(1) To determine from time to time which of the persons eligible under
the Plan shall be granted Stock Awards; when and how each Stock Award shall
be granted; whether a Stock Award will be an Incentive Stock Option, a
Nonstatutory Stock Option, a stock bonus, a right to purchase restricted
stock, or a combination of the foregoing; the provisions of each Stock
Award granted (which need not be identical), including the time or times
when a person shall be permitted to receive stock pursuant to a Stock
Award; and the number of shares with respect to which a Stock Award shall
be granted to each such person.
(2) To construe and interpret the Plan and Stock Awards granted under
it, and to establish, amend and revoke rules and regulations for its
administration. The Board, in the exercise of this power, may correct any
defect, omission or inconsistency in the Plan or in any Stock Award
Agreement, in a manner and to the extent it shall deem necessary or
expedient to make the Plan fully effective.
(3) To amend the Plan or a Stock Award as provided in Section 12.
(4) Generally, to exercise such powers and to perform such acts as the
Board deems necessary or expedient to promote the best interests of the
Company which are not in conflict with the provisions of the Plan.
(c) The Board may delegate administration of the Plan to a committee or
committees ("Committee") of two (2) or more members of the Board. In the
discretion of the Board, a Committee may consist solely of two (2) or more
Non-Employee Directors, in accordance with Rule 16b-3, or solely of two (2) or
more Outside Directors, in accordance with Code Section 162(m). If
administration is delegated to a Committee, the Committee shall have, in
connection with the administration of the Plan, the powers theretofore possessed
by the Board (and references in this Plan to the Board shall thereafter be to
the Committee), subject, however, to such resolutions, not inconsistent with the
provisions of the Plan, as may be adopted from time to time by the Board. The
Board may abolish the Committee at any time and revest in the Board the
administration of the Plan. Notwithstanding anything in this Section 3 to the
contrary, the Board or the Committee may delegate to a committee of one or more
members of the Board the authority to grant options to eligible persons who are
not then subject to Section 16 of the Exchange Act and to eligible persons with
respect to whom the Company does not wish to comply with Section 162(m) of the
Code.
4. SHARES SUBJECT TO THE PLAN.
(a) Subject to the provisions of Section 11 relating to adjustments upon
changes in stock, the stock that may be issued pursuant to Stock Awards shall
not exceed in the aggregate two million five hundred thousand (2,500,000) shares
of Common Stock. In the event a Stock Award shall for any reason expire or
otherwise terminate after the date of grant, in whole or in part, without having
been exercised in full (or vested in the case of restricted stock), the stock
not acquired under such Stock Award shall revert to and again become available
for issuance under the Plan.
(b) The stock subject to the Plan may be unissued shares or reacquired
shares, bought on the market or otherwise.
5. ELIGIBILITY.
(a) Incentive Stock Options may be granted only to Employees. Stock Awards
other than Incentive Stock Options may be granted only to Employees, Directors
or Consultants.
E-3
<PAGE> 4
(b) No person shall be eligible for the grant of an Incentive Stock Option
if, at the time of grant, such person owns (or is deemed to own pursuant to
Section 424(d) of the Code) stock possessing more than ten percent (10%) of the
total combined voting power of all classes of stock of the Company or of any of
its Affiliates unless the exercise price of such Option is at least one hundred
ten percent (110%) of the Fair Market Value of such stock at the date of grant
and the Option is not exercisable after the expiration of five (5) years from
the date of grant.
(c) Subject to the provisions of Section 11 relating to adjustments upon
changes in stock, no person shall be eligible to be granted Stock Awards
covering more than five hundred thousand (500,000) shares of Common Stock in any
calendar year.
6. OPTION PROVISIONS.
Each Option shall be in such form and shall contain such terms and
conditions as the Board shall deem appropriate. The provisions of separate
Options need not be identical, but each Option shall include (through
incorporation of provisions hereof by reference in the Option or otherwise) the
substance of each of the following provisions:
(a) Term. No Option shall be exercisable after the expiration of ten (10)
years from the date it was granted.
(b) Price. The exercise price of each Option shall be not less than one
hundred percent (100%) of the Fair Market Value of the stock subject to the
Option on the date of grant. Notwithstanding the foregoing, an Option may be
granted with an exercise price lower than that set forth in the preceding
sentence if such Option is granted pursuant to an assumption or substitution for
another option in a manner satisfying the provisions of Section 424(a) of the
Code.
(c) Consideration. The purchase price of stock acquired pursuant to an
Option shall be paid, to the extent permitted by applicable statutes and
regulations, either (i) in cash at the time the Option is exercised, or (ii) at
the discretion of the Board or Committee, at the time of the grant of the
Option, (A) by delivery to the Company of other Common Stock of the Company, (B)
according to a deferred payment or other arrangement (which may include, without
limiting the generality of the foregoing, the use of other Common Stock of the
Company) with the person to whom the Option is granted or to whom the Option is
transferred pursuant to subsection 6(d), or (C) in any other form of legal
consideration that may be acceptable to the Board. In the case of any deferred
payment arrangement, interest shall be payable at least annually and shall be
charged at the minimum rate of interest necessary to avoid the treatment as
interest, under any applicable provisions of the Code, of any amounts other than
amounts stated to be interest under the deferred payment arrangement.
(d) Transferability. An Incentive Stock Option shall not be transferable
except by will or by the laws of descent and distribution, and shall be
exercisable during the lifetime of the person to whom the Incentive Stock Option
is granted only by such person. A Nonstatutory Stock Option may be transferred
to the extent provided in the Option Agreement; provided that if the Option
Agreement does not expressly permit the transfer of a Nonstatutory Stock Option,
the Nonstatutory Stock Option shall not be transferable except by will, by the
laws of descent and distribution or pursuant to a domestic relations order
satisfying the requirements of Rule 16b-3, and shall be exercisable during the
lifetime of the person to whom the Option is granted only by such person or any
transferee pursuant to a domestic relations order. Notwithstanding the
foregoing, the person to whom the Option is granted may, by delivering written
notice to the Company, in a form satisfactory to the Company, designate a third
party who, in the event of the death of the Optionee, shall thereafter be
entitled to exercise the Option.
(e) Vesting. The total number of shares of stock subject to an Option may,
but need not, be allotted in periodic installments (which may, but need not, be
equal). The Option Agreement may provide that from time to time during each of
such installment periods, the Option may become exercisable ("vest") with
respect to some or all of the shares allotted to that period, and may be
exercised with respect to some or all of the shares allotted to such period
and/or any prior period as to which the Option became vested but was not
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<PAGE> 5
fully exercised. The Option may be subject to such other terms and conditions on
the time or times when it may be exercised (which may be based on performance or
other criteria) as the Board may deem appropriate. The provisions of this
subsection 6(e) are subject to any Option provisions governing the minimum
number of shares as to which an Option may be exercised.
(f) Termination of Continuous Service. In the event an Optionee's
Continuous Service terminates (other than upon the Optionee's death or
disability), the Optionee may exercise his or her Option within such period of
time designated by the Board, which shall in no event be later than the
expiration of the term of the Option as set forth in the Option Agreement (the
"Post-Termination Exercise Period") and only to the extent that the Optionee was
entitled to exercise the Option on the date Optionee's Continuous Service
terminates. In the case of an Incentive Stock Option, the Board shall determine
the Post-Termination Exercise Period at the time the Option is granted, and the
term of such PostTermination Exercise Period shall in no event exceed ninety
(90) days from the date of termination. In addition, the Board may at any time,
with the consent of the Optionee, extend the Post-Termination Exercise Period
and provide for continued vesting; provided however, that any extension of such
period by the Board in excess of ninety (90) days from the date of termination
shall cause an Incentive Stock Option so extended to become a Nonstatutory Stock
Option, effective as of the date of Board action. If, at the date of
termination, the Optionee is not entitled to exercise his or her entire Option,
the shares covered by the unexercisable portion of the Option shall revert to
the Plan. If, after termination, the Optionee does not exercise his or her
Option within the time specified in the Option Agreement or as otherwise
determined above, the Option shall terminate, and the shares covered by such
Option shall revert to the Plan. Notwithstanding the foregoing, the Board shall
have the power to permit an Option to continue to vest during the
Post-Termination Exercise Period.
An Optionee's Option Agreement may also provide that if the exercise of the
Option following the termination of the Optionee's Continuous Service (other
than upon the Optionee's death or disability) would be prohibited at any time
solely because the issuance of Shares would violate the registration
requirements under the Securities Act, then the Option shall terminate on the
earlier of (i) the expiration of the term of the Option set forth in the first
paragraph of this subsection 6(f), or (ii) the expiration of a period of ninety
(90) days after the termination of the Optionee's Continuous Service during
which the exercise of the Option would not be in violation of such registration
requirements.
(g) Disability of Optionee. In the event an Optionee's Continuous Service
terminates as a result of the Optionee's disability, the Optionee may exercise
his or her Option (to the extent that the Optionee was entitled to exercise it
at the date of termination), but only within such period of time ending on the
earlier of (i) the date twelve (12) months following such termination (or such
longer or shorter period specified in the Option Agreement), or (ii) the
expiration of the term of the Option as set forth in the Option Agreement. If,
at the date of termination, the Optionee is not entitled to exercise his or her
entire Option, the shares covered by the unexercisable portion of the Option
shall revert to and again become available for issuance under the Plan. If,
after termination, the Optionee does not exercise his or her Option within the
time specified herein, the Option shall terminate, and the shares covered by
such Option shall revert to and again become available for issuance under the
Plan.
(h) Death of Optionee. In the event of the death of an Optionee during, or
within a ninety (90)-day period after the termination of, the Optionee's
Continuous Service, the Option may be exercised to the extent vested by the
Optionee's estate, by a person who acquired the right to exercise the Option by
bequest or inheritance or by a person designated to exercise the option upon the
Optionee's death pursuant to subsection 6(d), but only within the period ending
on the earlier of (i) the date twelve (12) months following the date of death
(or such longer or shorter period specified in the Option Agreement), or (ii)
the expiration of the term of such Option as set forth in the Option Agreement.
If, at the time of death, the Optionee was not entitled to exercise his or her
entire Option, the shares covered by the unexercisable portion of the Option
shall revert to and again become available for issuance under the Plan. If,
after death, the Option is not exercised within the time specified herein, the
Option shall terminate, and the shares covered by such Option shall revert to
and again become available for issuance under the Plan.
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<PAGE> 6
(i) Early Exercise. The Option may, but need not, include a provision
whereby the Optionee may elect at any time while an Employee, Director or
Consultant to exercise the Option as to any part or all of the shares subject to
the Option prior to the full vesting of the Option. Any unvested shares so
purchased may be subject to a repurchase right in favor of the Company or to any
other restriction the Board determines to be appropriate.
7. TERMS OF STOCK BONUSES AND PURCHASES OF RESTRICTED STOCK.
Each stock bonus or restricted stock purchase agreement shall be in such
form and shall contain such terms and conditions as the Board or Committee shall
deem appropriate. The terms and conditions of stock bonus or restricted stock
purchase agreements may change from time to time, and the terms and conditions
of separate agreements need not be identical, but each stock bonus or restricted
stock purchase agreement shall include (through incorporation of provisions
hereof by reference in the agreement or otherwise) the substance of each of the
following provisions as appropriate:
(a) Purchase Price. The purchase price under each restricted stock purchase
agreement shall be such amount as the Board or Committee shall determine and
designate in such agreement but in no event shall the purchase price be less
than one hundred percent (100%) of the stock's Fair Market Value on the date
such award is made. Notwithstanding the foregoing, the Board or Committee may
determine that eligible participants in the Plan may be awarded stock pursuant
to a stock bonus agreement in consideration for past services actually rendered
to the Company for its benefit.
(b) Transferability. No rights under a stock bonus or restricted stock
purchase agreement shall be transferable except by will or the laws of descent
and distribution or, if the agreement so provides, pursuant to a domestic
relations order satisfying the requirements of Rule 16b-3, so long as stock
awarded under such agreement remains subject to the terms of any restrictive
covenant (such as a repurchase option or reacquisition option) in favor of the
Company.
(c) Consideration. The purchase price of stock acquired pursuant to a stock
purchase agreement shall be paid either: (i) in cash at the time of purchase;
(ii) at the discretion of the Board or Committee, according to a deferred
payment or other arrangement with the person to whom the stock is sold, except
that the stock's "par value" (as defined by the Delaware General Corporation
Law) shall not be paid by deferred payment; or (iii) in any other form of legal
consideration that may be acceptable to the Board or Committee in its
discretion. Notwithstanding the foregoing, the Board or Committee to which
administration of the Plan has been delegated may award stock pursuant to a
stock bonus agreement in consideration for past services actually rendered to
the Company for its benefit.
(d) Vesting. Shares of stock sold or awarded under the Plan may, but need
not, be subject to a repurchase option in favor of the Company in accordance
with a vesting schedule to be determined by the Board or Committee.
(e) Termination of Continuous Service. In the event a Participant's
Continuous Service terminates, the Company may repurchase or otherwise reacquire
any or all of the shares of stock held by that person which have not vested as
of the date of termination under the terms of the stock bonus or restricted
stock purchase agreement between the Company and such person.
8. COVENANTS OF THE COMPANY.
(a) During the terms of the Stock Awards, the Company shall keep available
at all times the number of shares of stock required to satisfy such Stock
Awards.
(b) The Company shall seek to obtain from each regulatory commission or
agency having jurisdiction over the Plan such authority as may be required to
issue and sell shares under Stock Awards; provided, however, that this
undertaking shall not require the Company to register under the Securities Act
of 1933, as amended (the "Securities Act") either the Plan, any Stock Award or
any stock issued or issuable pursuant to any such Stock Award. If, after
reasonable efforts, the Company is unable to obtain from any such regulatory
commission or agency the authority which counsel for the Company deems necessary
for the lawful issuance
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<PAGE> 7
and sale of stock under the Plan, the Company shall be relieved from any
liability for failure to issue and sell stock upon exercise of such Stock Awards
unless and until such authority is obtained.
9. USE OF PROCEEDS FROM STOCK.
Proceeds from the sale of stock pursuant to Stock Awards shall constitute
general funds of the Company.
10. MISCELLANEOUS.
(a) The Board shall have the power to accelerate the time at which a Stock
Award may first be exercised or the time during which a Stock Award or any part
thereof will vest, notwithstanding the provisions in the Stock Award stating the
time at which it may first be exercised or the time during which it will vest.
(b) Neither an Employee, Director nor a Consultant nor any person to whom a
Stock Award is transferred in accordance with the Plan shall be deemed to be the
holder of, or to have any of the rights of a holder with respect to, any shares
subject to such Stock Award unless and until such person has satisfied all
requirements for exercise of the Stock Award pursuant to its terms.
(c) Nothing in the Plan or any instrument executed or Stock Award granted
pursuant thereto shall confer upon any Employee, Consultant or other holder of
Stock Awards any right to continue in the employ of the Company or any
Affiliate, or to continue serving as a Consultant and Director, or shall affect
the right of the Company or any Affiliate to terminate the employment of any
Employee with or without notice and with or without cause, or the right to
terminate the relationship of any Consultant pursuant to the terms of such
Consultant's agreement with the Company or Affiliate or service as a Director
pursuant to the Company's By-Laws.
(d) To the extent that the aggregate Fair Market Value (determined at the
time of grant) of stock with respect to which Incentive Stock Options are
exercisable for the first time by any Optionee during any calendar year under
this Plan and all other plans of the Company and its Affiliates exceeds one
hundred thousand dollars ($100,000), the Options or portions thereof which
exceed such limit (according to the order in which they were granted) shall be
treated as Nonstatutory Stock Options.
(e) The Company may require any person to whom a Stock Award is granted, or
any person to whom a Stock Award is transferred in accordance with the Plan, as
a condition of exercising or acquiring stock under any Stock Award, (1) to give
written assurances satisfactory to the Company as to such person's knowledge and
experience in financial and business matters and/or to employ a purchaser
representative reasonably satisfactory to the Company who is knowledgeable and
experienced in financial and business matters, and that he or she is capable of
evaluating, alone or together with the purchaser representative, the merits and
risks of exercising the Stock Award; and (2) to give written assurances
satisfactory to the Company stating that such person is acquiring the stock
subject to the Stock Award for such person's own account and not with any
present intention of selling or otherwise distributing the stock. The foregoing
requirements, and any assurances given pursuant to such requirements, shall be
inoperative if (i) the issuance of the shares upon the exercise or acquisition
of stock under the Stock Award has been registered under a then currently
effective registration statement under the Securities Act, or (ii) as to any
particular requirement, a determination is made by counsel for the Company that
such requirement need not be met in the circumstances under the then applicable
securities laws. The Company may, upon advice of counsel to the Company, place
legends on stock certificates issued under the Plan as such counsel deems
necessary or appropriate in order to comply with applicable securities laws,
including, but not limited to, legends restricting the transfer of the stock.
(f) To the extent provided by the terms of a Stock Award Agreement, the
person to whom a Stock Award is granted may satisfy any federal, state or local
tax withholding obligation relating to the exercise or acquisition of stock
under a Stock Award by any of the following means or by a combination of such
means: (1) tendering a cash payment; (2) authorizing the Company to withhold
shares from the shares of the Common Stock otherwise issuable to the participant
as a result of the exercise or acquisition of stock under the Stock Award; or
(3) delivering to the Company owned and unencumbered shares of the Common Stock
of the Company.
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<PAGE> 8
11. ADJUSTMENTS UPON CHANGES IN STOCK.
(a) If any change is made in the stock subject to the Plan, or subject to
any Stock Award, without the receipt of consideration by the Company (through
merger, consolidation, reorganization, recapitalization, reincorporation, stock
dividend, dividend in property other than cash, stock split, liquidating
dividend, combination of shares, exchange of shares, change in corporate
structure or other transaction not involving the receipt of consideration by the
Company), the Plan will be appropriately adjusted in the class(es) and maximum
number of shares subject to the Plan and the maximum number of shares subject to
award to any person during any calendar year, and the outstanding Stock Awards
will be appropriately adjusted in the class(es) and number of shares and price
per share of stock subject to such outstanding Stock Awards. Such adjustments
shall be made by the Board or Committee, the determination of which shall be
final, binding and conclusive. (The conversion of any convertible securities of
the Company shall not be treated as a "transaction not involving the receipt of
consideration by the Company.")
(b) In the event of: (1) a dissolution, liquidation or sale of
substantially all of the assets of the Company; (2) a merger or consolidation in
which the Company is not the surviving corporation; (3) a reverse merger in
which the Company is the surviving corporation but the shares of the Common
Stock outstanding immediately preceding the merger are converted by virtue of
the merger into other property, whether in the form of securities, cash or
otherwise; or (4) the acquisition by any person, entity or group within the
meaning of Section 13(d) or 14(d) of the Exchange Act, or any comparable
successor provisions (excluding any employee benefit plan, or related trust,
sponsored or maintained by the Company or any Affiliate of the Company) of the
beneficial ownership (within the meaning of Rule 13d-3 promulgated under the
Exchange Act, or comparable successor rule) of securities of the Company
representing at least fifty percent (50%) of the combined voting power entitled
to vote in the election of directors, then to the extent permitted by applicable
law: (i) any surviving corporation (or an Affiliate thereof) shall assume any
Stock Awards outstanding under the Plan or shall substitute similar Stock Awards
for those outstanding under the Plan, or (ii) such Stock Awards shall continue
in full force and effect. In the event any surviving corporation (or an
Affiliate) refuses to assume or continue such Stock Awards, or to substitute
similar Stock Awards for those outstanding under the Plan, then, with respect to
Stock Awards held by persons then performing services as Employees, Directors or
Consultants, the time during which such Stock Awards may be exercised shall be
accelerated and the Stock Awards terminated if not exercised prior to such
event.
12. AMENDMENT OF THE PLAN AND STOCK AWARDS.
(a) The Board at any time, and from time to time, may amend the Plan.
However, except as provided in Section 11 relating to adjustments upon changes
in stock, no amendment shall be effective unless approved by the stockholders of
the Company to the extent stockholder approval is necessary for the Plan to
satisfy the requirements of Section 422 of the Code, Rule 16b-3 or any Nasdaq or
securities exchange listing requirements.
(b) The Board may in its sole discretion submit any other amendment to the
Plan for stockholder approval, including, but not limited to, amendments to the
Plan intended to satisfy the requirements of Section 162(m) of the Code and the
regulations thereunder regarding the exclusion of performance-based compensation
from the limit on corporate deductibility of compensation paid to certain
executive officers.
(c) It is expressly contemplated that the Board may amend the Plan in any
respect the Board deems necessary or advisable to provide eligible Employees,
Directors or Consultants with the maximum benefits provided or to be provided
under the provisions of the Code and the regulations promulgated thereunder
relating to Incentive Stock Options and/or to bring the Plan and/or Incentive
Stock Options granted under it into compliance therewith.
(d) Rights and obligations under any Stock Award granted before amendment
of the Plan shall not be impaired by any amendment of the Plan unless (i) the
Company requests the consent of the person to whom the Stock Award was granted
and (ii) such person consents in writing.
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<PAGE> 9
(e) The Board at any time, and from time to time, may amend the terms of
any one or more Stock Award; provided, however, that the rights and obligations
under any Stock Award shall not be impaired by any such amendment unless (i) the
Company requests the consent of the person to whom the Stock Award was granted
and (ii) such person consents in writing.
13. TERMINATION OR SUSPENSION OF THE PLAN.
(a) The Board may suspend or terminate the Plan at any time. Unless sooner
terminated, the Plan shall terminate ten (10) years from the date the Plan is
adopted by the Board or approved by the stockholders of the Company, whichever
is earlier. No Stock Awards may be granted under the Plan while the Plan is
suspended or after it is terminated.
(b) Rights and obligations under any Stock Award granted while the Plan is
in effect shall not be impaired by suspension or termination of the Plan, except
with the consent of the person to whom the Stock Award was granted.
14. EFFECTIVE DATE OF PLAN.
This Plan shall become effective on the date of adoption by the Board, but
no Stock Awards granted under the Plan shall be exercised unless and until the
Plan has been approved by the stockholders of the Company, which approval shall
be within twelve (12) months before or after the date the Plan is adopted by the
Board.
E-9
<PAGE> 1
CERTAIN CONFIDENTIAL INFORMATION
CONTAINED IN THE DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE
24b-2 OF THE SECURITIES EXCHANGE ACT OF
1934, AS AMENDED.
Exhibit 10.87
TERMINATION OF COLLABORATIVE RESEARCH AGREEMENT
BETWEEN SEQUANA THERAPEUTICS, INC.
AND
GLAXO WELLCOME INC. (f/k/a GLAXO INC.)
This Termination of Collaborative Research Agreement (the "Termination
Agreement") effective as of February 1, 1998 (the "Effective Date"), by and
between Sequana Therapeutics, Inc., a California corporation ("Sequana") and
Glaxo Wellcome Inc., a North Carolina corporation and successor in interest to
Glaxo Inc. ("Glaxo"), and terminates the Collaborative Research Agreement
entered into as of July 27, 1994, as amended effective February 16, 1996 and
October 2, 1997, by and between Glaxo and Sequana (the "Collaboration
Agreement").
WHEREAS, the Parties desire to terminate the Collaboration Agreement.
NOW, THEREFORE, in consideration of the foregoing premises and of the
mutual promises and covenants set forth below, for other good and valuable
consideration, the receipt and sufficiency of which the Parties acknowledge, the
Parties intending to be legally bound, agree as follows:
1. Unless otherwise defined in this Termination Agreement, capitalized terms
shall have the meanings given to them in the Collaboration Agreement.
2. The Collaboration Agreement is hereby terminated and, except as set forth
herein, shall be of no further force or effect, such termination to be effective
as of the Effective Date. Except as specifically granted herein, all rights,
privileges, obligations and licenses granted under the Collaboration Agreement
are canceled.
3. Sequana shall waive any notice of termination requirements set forth in
Section 8.4 of the Collaboration Agreement with the effect that the termination
shall be effective as of the Effective Date.
4. Sequana shall deliver to Glaxo, within [*] following the Effective Date, all
DNA samples, phenotypes, pedigrees, genotyping results and analyses and all
other chemical and biological samples relating to the NIDDM Database that are
set forth in Appendix A which is attached hereto and incorporated herein by
reference. Such delivery shall be performed in accordance with instructions
provided by Glaxo. Sequana shall not be permitted to use such samples for any
purpose after the Effective Date and prior to delivery to Glaxo.
5. Glaxo shall [*] pursuant to Section 2.3 (iii) of the Collaboration Agreement.
6. The [*] by the Parties for the [*]
* "Certain confidential information contained in the document, marked by
brackets, has been omitted and filed separately with the Securities and
Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of
1934, as amended."
1.
<PAGE> 2
[*] pursuant to Section 2.4 of the Collaboration Agreement shall [*] will be
made by either Party to the other Party pursuant to Section 2.4 of the
Collaboration Agreement.
7. The Parties acknowledge and agree that Article X of the Collaboration
Agreement shall survive termination for a period of [*] commencing on the
Effective Date. The Parties acknowledge and agree that Article IX of the
Collaboration Agreement shall survive termination. The Parties further
acknowledge and agree that all DNA samples, phenotypes, pedigrees, genotyping
results and analyses and all other chemical and biological samples relating to
the NIDDM Database will be deemed Confidential Information whose use and
disclosure is restricted by Article IX of the Collaboration Agreement; provided,
however, that Glaxo shall be permitted to disclose Confidential Information that
is owned by it pursuant to Sections 14 and 17 below; provided, further, that
Sequana shall be permitted to disclose Confidential Information that is covered
by the specific licenses granted to Sequana pursuant to Sections 15, 16 and 17
of this Termination Agreement.
8. The Parties agree that the term "NIDDM Database", as defined in the
Collaboration Agreement, shall include DNA, phenotypes, pedigrees, genotyping
results and analyses and all other chemical and biological samples relating
thereto.
9. Subject to the restrictions set forth herein, each Party is permitted, either
alone or with third parties, to engage in de novo studies in the Field and in
the field of obesity. In the event Sequana should engage in such studies, it may
not use the NIDDM Database unless such access is expressly granted to Sequana
pursuant to this Termination Agreement.
10. Each Party shall be permitted to use its respective Technology and Results,
either alone or with third parties, except with respect to the NIDDM Database.
Neither Party shall be required to disclose its respective Technology or
Results, excluding the NIDDM Database, to the other Party.
11. The Parties agree that no genes have been, or will be designated as Disease
Genes by the JRPC.
12. [*] shall be paid pursuant to the Collaboration Agreement.
13. Further meetings of the JRPC, if any, shall be held for the purpose of
addressing (a) matters with respect to termination of the Collaboration
Agreement or (b) matters specifically set forth herein. Such JRPC meetings, if
any, will be conducted in accordance with the procedural requirements set forth
in Article III of the Collaboration Agreement.
14. Sequana hereby [*]. Sequana represents and warrants that it has made no
assignment of its rights, obligations and interests under the Collaboration
Agreement to a third party which would interfere with its ability to make the
assignment herein.
15. Glaxo hereby grants to Sequana and Sequana hereby accepts a perpetual
* "Certain confidential information contained in the document, marked by
brackets, has been omitted and filed separately with the Securities and
Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of
1934, as amended."
2.
<PAGE> 3
paid-up, non- exclusive, world-wide license (with the right to grant
sublicenses) to use the [*] and [*] contained in the NIDDM Database for any
purpose. Each party will provide the other, within [*] of the Effective Date,
with a detailed inventory of DNA samples with respect to [*]. To the extent
either party possesses [*] of the DNA samples, such party shall deliver to the
other party an amount that would cause each party to have [*] of the DNA
samples. The delivery of DNA samples shall occur within [*] after the inventory
determination described above.
16. Glaxo hereby grants to Sequana and Sequana hereby accepts a perpetual,
paid-up, exclusive (even as to Glaxo), world-wide license (with the right to
grant sublicenses) to use the [*] generated from such studies that are contained
in the NIDDM Database studies for any purpose. Glaxo will provide Sequana,
within thirty (30) days after the Effective Date, with all pedigree, phenotype
and genotype data with respect to the [*] studies that Glaxo has in its
possession. Specifically, Glaxo shall be obligated to deliver (a) genotype data
on [*], pedigree information for [*], qualitative analysis results for [*] and
quantitative analysis results for [*] all with respect to the [*], and (b)
genotype data on [*], pedigree information on [*], phenotypes on [*], and [*]
analyses with respect to the [*] study.
17. (a) Subject to the provisions set forth in Section 17(b)(i) below, Glaxo
hereby grants to Sequana and Sequana hereby accepts a paid-up, non-exclusive,
world-wide license (with the right to grant sublicenses) to use The [*], the [*]
(including DNA, phenotype, pedigree and genotype data) contained in the NIDDM
Database and collected during the term of the collaboration Agreement (the [*]),
for any purpose, subject to the conditions set forth in (b) below.
(b) As a condition to the license granted in (a) above, Sequana agrees that
it shall comply with each of the following conditions.
(i) The license granted in (a) above shall terminate with respect to the
DNA samples on the [*] anniversary of the Effective Date (the "[*] Termination
Date").
(ii) During the [*]-year period following the Effective Date, Sequana
shall supply Glaxo [*] through use of the [*], either alone or with third
parties.
(iii) Sequana shall deliver to Glaxo, within [*] following the [*]
Termination Date, all DNA samples from the [*]. Sequana shall not be permitted
to use such samples for any purpose after the [*] Termination Date and prior to
delivery to Glaxo. Sequana shall be permitted to retain and use any data
generated through use of such samples.
(c) Glaxo hereby grants to Sequana and Sequana hereby accepts a paid-up,
non-exclusive, world-wide license to use (with the right to grant sublicenses)
the [*] (including DNA samples and phenotype data) being collected pursuant to
the ongoing collection of such data and samples by the
* "Certain confidential information contained in the document, marked by
brackets, has been omitted and filed separately with the Securities and
Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of
1934, as amended."
3.
<PAGE> 4
[*] (the "Triad Set"), for any purpose, subject to the conditions set forth in
(d) below.
(d) As a condition to the license granted in (c) above, Sequana agrees that
it shall comply with each of the following conditions:
(i) The Parties obligations set forth herein with respect to the Triad
Set shall terminate on the [*] anniversary of the Effective Date (the "Triad
Termination Date").
(ii) Glaxo shall be responsible for preparing DNA from blood samples
provided by the [*]. DNA, and corresponding phenotypic and pedigree data, will
be prepared and delivered on an ongoing basis and will be divided [*] the [*],
Sequana and Glaxo.
(iii) Sequana agrees to pay Glaxo an amount equal to [*] of the cost of
the Triad Set. Such amount shall be delivered to Anita Baker, Glaxo Wellcome
Inc., Five Moore Drive, P.O. Box 13398, Research Triangle Park, North Carolina
27709-3398 and must be received no later than [*] immediately following the
Effective Date; provided, however, that in the event the cost of the Triad Set
should increase or decrease for any reason, Glaxo or Sequana, respectively, will
reimburse the other party for [*] of the amount of such decrease or increase.
(iv) During the [*] year period following the Effective Date, Sequana
shall supply Glaxo with [*] through use of the Triad Set, either alone or with
third parties.
(v) At the Triad Termination Date, Sequana shall be permitted to retain
and use all genotype, pedigree and phenotype data generated by Sequana through
use of the Triad Set for any purpose.
18. Sequana hereby grants to Glaxo and Glaxo hereby accepts a perpetual,
royalty-free, non-exclusive, world-wide license to use the following software
packages for research purposes only: (a) [*] - algorithm implemented in
the [*] programming language designed to identify genotypes that are involved in
[*] in [*] data; and (b) [*] algorithm-algorithm designed to categorize [*] into
bins based on [*]. Included in the rights granted pursuant to this Paragraph 18
shall be Glaxo's right to all executable codes, source codes and source code
documentation in existence as of the Effective Date with respect to the software
packages. Glaxo shall have [*] any [*] the rights granted in this Paragraph 18
without the prior written consent of Sequana.
19. Neither Party hereto shall issue any press release or other publicity
materials, or make any representation with respect to the existence of the
Termination Agreement or the subject matter hereto without the prior written
consent of the other Party. However, this restriction shall not apply to
disclosures required by law or regulation, except that, in any event, the
Parties shall coordinate to the extent possible with respect to the wording of
any such announcement.
20. Each Party hereby covenants and represents to the other Party that it has
full right and authority to enter into this Termination Agreement.
21. This Termination Agreement shall not be assignable by either Party hereto,
except to an Affiliate, without the prior written consent of the other Party.
* "Certain confidential information contained in the document, marked by
brackets, has been omitted and filed separately with the Securities and
Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of
1934, as amended."
4.
<PAGE> 5
22. This Termination Agreement represents the entire understanding and agreement
between the Parties hereto with respect to the subject matter hereof. This
Termination Agreement may be amended, modified, supplemented or changed only by
an agreement in writing which is signed by each Party.
23. This Termination Agreement shall be governed, construed and enforced in
accordance with the laws of the State of North Carolina, without giving effect
to the principles of conflicts of laws of such state.
24. This Termination Agreement may be executed in counterparts, each of which
shall be deemed an original, but all of which shall constitute one and the same
instrument.
IN WITNESS WHEREOF, the parties hereto cause this Termination Agreement to
be duly executed in its name and on its behalf, as of the Effective Date.
SEQUANA THERAPEUTICS, INC. GLAXO WELLCOME INC.
By: /s/ Daniel H. Petree By: /s/ Lee E. Babiss
------------------------------- --------------------------------------
Name: Daniel H. Petree Name: Lee E. Babiss
----------------------------- ------------------------------------
5.
<PAGE> 6
APPENDIX A
Set forth below is a list of the DNA samples, phenotype, genotype and pedigree
results and analyses and all other chemical and biological samples that Sequana
is obligated to deliver to Glaxo pursuant to the terms and conditions of Section
5 of the Termination Agreement.
1. [*] of the DNA samples and any other chemical or biological samples from the
[*] and the [*], as determined in accordance with the provisions of Section 15
of the Termination Agreement.
2. [*] of the DNA samples and any other chemical or biological samples from the
[*].
3. Updated pedigree and phenotype files with respect to each of the [*], the [*]
and the [*].
4. All DNA, genotyping results, pedigree and phenotypes and analyses from the
[*], the [*] and the [*].
5. All other DNA samples, phenotype, genotype and pedigree results and analyses
and all other chemical and biological samples not specifically set forth herein,
but which Sequana is obligated to deliver pursuant to Section 5 of the
Termination Agreement.
* "Certain confidential information contained in the document, marked by
brackets, has been omitted and filed separately with the Securities and
Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of
1934, as amended."
1.
<PAGE> 1
Exhibit 10.88
CERTAIN CONFIDENTIAL INFORMATION
CONTAINED IN THE DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE
24b-2 OF THE SECURITIES EXCHANGE ACT OF
1934, AS AMENDED.
COMBINATORIAL CHEMISTRY AGREEMENT
BETWEEN
AXYS PHARMACEUTICALS, INC.
AND
WARNER-LAMBERT COMPANY
MAY 15, 1998
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
1. DEFINITIONS..............................................................................................1
1.1 "Affiliate".....................................................................................1
1.2 "Axys Compound".................................................................................1
1.3 "Axys Know-How".................................................................................2
1.4 "Axys Patents"..................................................................................2
1.5 "Axys Restricted Information"...................................................................2
1.6 "Compound"......................................................................................2
1.7 "Compound Patent"...............................................................................2
1.8 "Confidential Information"......................................................................2
1.9 "Controlled"....................................................................................2
1.10 "General Screening".............................................................................2
1.11 "Information"...................................................................................3
1.12 "Library".......................................................................................3
1.13 "Licensed Product"..............................................................................3
1.14 "Protocol"......................................................................................3
1.15 "Scaffold"......................................................................................3
1.16 "Selected Protocol".............................................................................3
1.17 "Software"......................................................................................3
1.18 "Technology Committee"..........................................................................3
1.19 "Warner-Lambert Compound".......................................................................3
2. DEVELOPMENT AND TRANSFER OF LIBRARY......................................................................3
2.1 Library Synthesis...............................................................................3
2.2 Selection of Protocols..........................................................................4
2.3 Delivery of Compounds...........................................................................4
2.4 Technology Committee............................................................................5
2.5 Right to Use Compounds - Warner-Lambert.........................................................5
2.6 Right to Use Compounds - Axys...................................................................6
</TABLE>
<PAGE> 3
<TABLE>
<S> <C> <C>
2.7 Limited Right to Select Compounds to Commercialize..............................................6
2.8 [*] Regarding Protocols.........................................................................7
2.9 Software Modifications..........................................................................7
3. TECHNOLOGY TRANSFER AND LICENSE..........................................................................8
3.1 Transfer of Chemistry Technology................................................................8
3.2 Technology and Library License Rights...........................................................8
3.3 Limited Commercial Licenses.....................................................................9
3.4 License Limitations.............................................................................9
4. PAYMENTS................................................................................................10
4.1 Compound Purchase Prices.......................................................................10
4.2 Royalty on Compounds...........................................................................10
5. INTELLECTUAL PROPERTY MATTERS...........................................................................11
5.1 Ownership......................................................................................11
5.2 Limitation on Patent Applications..............................................................11
5.3 Additional Licenses............................................................................12
5.4 Enforcement of Patents.........................................................................12
5.5 Third Party Patent Rights......................................................................12
6. CONFIDENTIALITY.........................................................................................13
6.1 Confidentiality Obligations....................................................................13
6.2 Press Releases.................................................................................14
6.3 Publications...................................................................................14
7. INDEMNIFICATION.........................................................................................14
7.1 Indemnification by Warner-Lambert..............................................................14
7.2 Indemnification by Axys........................................................................15
8. TERMINATION AND EXPIRATION..............................................................................16
8.1 Term and Termination...........................................................................16
8.2 Termination by Warner-Lambert [*]..............................................................16
</TABLE>
* "Certain confidential information contained in the document, marked by
brackets, has been omitted and filed separately with the Securities and
Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act
of 1934, as amended."
<PAGE> 4
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
8.3 Termination Upon Material Breach...............................................................16
8.4 Consequences of Termination....................................................................17
8.5 Accrued Rights; Surviving Obligations..........................................................18
8.6 Rights in Bankruptcy...........................................................................18
9. MISCELLANEOUS PROVISIONS................................................................................18
9.1 Relationship of the Parties....................................................................18
9.2 Assignments....................................................................................18
9.3 Disclaimer of Warranties.......................................................................19
9.4 Representations and Warranties.................................................................19
9.5 Further Actions................................................................................20
9.6 Force Majeure..................................................................................20
9.7 No Trademark Rights............................................................................21
9.8 Entire Agreement of the Parties; Amendments....................................................21
9.9 Captions.......................................................................................21
9.10 Applicable Law.................................................................................21
9.11 Disputes.......................................................................................21
9.12 Notices and Deliveries.........................................................................21
9.13 No Consequential Damages.......................................................................22
9.14 Waiver.........................................................................................23
9.15 Compliance with Law............................................................................23
9.16 Severability...................................................................................23
9.17 Counterparts...................................................................................23
</TABLE>
<PAGE> 5
COMBINATORIAL CHEMISTRY AGREEMENT
THIS COMBINATORIAL CHEMISTRY AGREEMENT (the "Agreement") is made and
entered into effective as of May 15, 1998 (the "Effective Date"), by and between
AXYS PHARMACEUTICALS, INC., a Delaware corporation having a place of business at
180 Kimball Way, South San Francisco, CA 94080 ("Axys"), and WARNER-LAMBERT
COMPANY, a Delaware corporation having a place of business at 2800 Plymouth
Road, Ann Arbor, Michigan 48105 ("Warner-Lambert"). Axys and Warner-Lambert may
be referred to herein as a "Party" or, collectively, as "Parties."
RECITALS
A. Axys has developed and owns certain technology and intellectual
property rights relating to combinatorial chemistry and the synthesis of diverse
chemistry libraries using combinatorial techniques.
B. Warner-Lambert desires to obtain from Axys a co-exclusive library of
[*] compounds to be synthesized pursuant to protocols developed by Axys and a
license to use the Axys combinatorial chemistry technology and intellectual
property rights for Warner-Lambert' own internal drug discovery and development
programs.
C. Axys is willing to grant such rights to Warner-Lambert and to
synthesize and deliver to Warner-Lambert such compound library pursuant to the
following terms and conditions.
NOW, THEREFORE, the Parties agree as follows:
1. DEFINITIONS
1.1 "AFFILIATE" means, with respect to a Party, any individual or entity
that controls, is controlled by, or is under common control with, such Party.
For this definition, the term "control" shall refer to (a) the ownership,
directly or indirectly, of at least 50% of the voting securities or other
ownership interest of an entity, or (b) the possession, directly or indirectly,
of the power to direct the management or policies of an entity, whether through
the ownership of voting securities, by contract or otherwise.
1.2 "AXYS COMPOUND" means a Compound that has been selected by Axys [*]
(either by Axys or its Affiliate or licensee) and [*], but only for so long as
such Compound is itself the subject of [*], in any form or formulation, by Axys
or its Affiliate or sublicensee.
* "Certain confidential information contained in the document, marked by
brackets, has been omitted and filed separately with the Securities and
Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of
1934, as amended."
1.
<PAGE> 6
1.3 "AXYS KNOW-HOW" means Information Controlled by Axys during the
Agreement that comprises [*] that is necessary to enable Warner-Lambert to [*].
1.4 "AXYS PATENTS" means all patents and patent applications Controlled by
Axys during the Agreement that claim inventions which constitute the Axys
Know-How.
1.5 "AXYS RESTRICTED INFORMATION" means all confidential Information of
Axys, other than Axys Know-How and Axys Patents, that is learned by the
employees of Warner-Lambert who work at Axys as permitted under Section 3.1 at
any time they are at an Axys facility.
1.6 "COMPOUND" means any individual chemical compound within the Library, a
sample of which is provided and the structure of which is disclosed to
Warner-Lambert by Axys.
1.7 "COMPOUND PATENT" means any patent application filed by or on behalf of
Warner-Lambert and/or Axys under Section 5.2(b) that claims an Axys Compound or
a Warner-Lambert Compound and all patents issuing from such applications, and
including any reissues, reexaminations, or extensions of such patents.
1.8 "CONFIDENTIAL INFORMATION" means the Information of a Party that it
considers proprietary and/or confidential, and that, if disclosed under this
Agreement in written, graphic or electronic form, is marked or otherwise
designated as "confidential" or "proprietary" or the equivalent and, if
disclosed orally, is characterized as "confidential" or "proprietary" by the
disclosing Party at the time of such disclosure. In addition, the Axys
Restricted Information shall be deemed to be the Confidential Information of
Axys.
1.9 "CONTROLLED" means, with respect to an item of information or
intellectual property right, possession of the ability to grant access and a
license as provided for herein under such item or right without violating the
terms of any agreement or other arrangements with or rights of any Third Party.
1.10 "GENERAL SCREENING" means use of the Library or any Compounds in the
Library in assays to screen for activity against targets in the pursuit of the
identification of lead compounds or structures in drug discovery and development
programs, where the party conducting such screening is permitted to screen the
Library or any Compounds against [*], unless otherwise agree to in writing by
Axys and Warner-Lambert.
* "Certain confidential information contained in the document, marked by
brackets, has been omitted and filed separately with the Securities and
Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of
1934, as amended."
2.
<PAGE> 7
1.11 "INFORMATION" means information and data of any type and in any
tangible or intangible form, including without limitation inventions, practices,
methods, techniques, specifications, formulations, formulae, knowledge,
know-how, skill, experience, test data, analytical and quality control data,
stability data, results of studies and patent and other legal information or
descriptions.
1.12 "LIBRARY" means the collection of approximately [*] different chemical
compounds to be synthesized by Axys and provided to Warner-Lambert under the
terms of Article 2 of this Agreement.
1.13 "LICENSED PRODUCT" means any product (including any formulation thereof
without regards to method of delivery or administration) that contains a
Warner-Lambert Compound.
1.14 "PROTOCOL" means a detailed set of combinatorial chemistry synthetic
methods and standard operating procedures designed to be used for synthesizing a
set of related compounds using combinatorial chemistry techniques.
1.15 "SCAFFOLD" means the substructure common to a set of compounds related
by the use of a particular Protocol to synthesize such compounds.
1.16 "SELECTED PROTOCOL" means a Protocol that has been selected by the
Technology Committee pursuant to Section 2.2, which Protocol shall contain at a
minimum the enabling information outlined in Exhibit A attached hereto.
1.17 "SOFTWARE" means the proprietary software of Axys [*], in object and
source code form, including improvements thereto made during the Agreement.
1.18 "TECHNOLOGY COMMITTEE" means the committee formed by the Parties under
Section 2.4 of the Agreement.
1.19 "WARNER-LAMBERT COMPOUND" means a Compound that has been selected by
Warner-Lambert for [*] but only for so long as such Compound is itself the
* "Certain confidential information contained in the document, marked by
brackets, has been omitted and filed separately with the Securities and
Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of
1934, as amended."
3.
<PAGE> 8
subject of [*] in any form or formulation, by Warner-Lambert or its Affiliate or
sublicensee.
2. DEVELOPMENT AND TRANSFER OF LIBRARY
2.1 LIBRARY SYNTHESIS. Commencing promptly after the Effective Date, Axys
will use commercially reasonable efforts to synthesize Compounds to be provided
to Warner-Lambert as part of the Library. Such Compounds shall be synthesized
using the Selected Protocols. The Library will contain Compounds based on
between [*] and [*] different Selected Protocols. Axys will use commercially
reasonable efforts to [*] Selected Protocols. Axys will ensure that the Library
[*] using a particular Selected Protocol represented in the Library (as such
number may be adjusted as provided in Section 2.8).
2.2 SELECTION OF PROTOCOLS. During the term of the Agreement,
Warner-Lambert, through the Technology Committee, shall first choose and accept
as Selected Protocols at least [*] out of a total of [*] proposed by Axys. Such
selection shall be made based upon review by Warner-Lambert of the [*]. It is
understood that [*] Protocols exist at Axys as of the Effective Date. Second,
the Technology Committee shall have the responsibility for choosing the
additional Selected Protocols needed to complete the Library, as follows: The
Technology Committee shall diligently review and evaluate in good faith new
proposals and ideas or plans for Scaffolds to be used to create new Protocols
that either Party proposes to be selected for development into Selected
Protocols by Axys. The Technology Committee shall attempt to reach agreement on
whether to select or reject a proposed Scaffold as soon as possible. All such
proposals for Scaffolds that are selected by the Technology Committee shall then
be investigated by Axys to determine if Axys can develop and validate a Protocol
for creating a library of compounds around such Scaffold. If Axys is able to
create and validate a Protocol based on such selected Scaffold, such Protocol
shall be deemed a "Selected Protocol" under the Agreement. If the Technology
Committee cannot reach agreement to select a proposed Scaffold promptly after it
has been proposed, or if after such selection Axys is not able after reasonable
efforts to create and validate a Protocol based on such Scaffold, then such
Scaffolds (and its related Protocol, if any) shall be deemed rejected, and each
Party then will use diligent, good faith efforts to propose to the Technology
Committee different proposals for Scaffolds for review in order for Axys to
prepare and select the additional needed Selected Protocols. The Parties agree
to work cooperatively together to
* "Certain confidential information contained in the document, marked by
brackets, has been omitted and filed separately with the Securities and
Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of
1934, as amended."
4.
<PAGE> 9
select the additional needed Scaffolds for Selected Protocols in a timely
fashion to allow Axys sufficient time to complete delivery of the Library within
the schedule set forth in Section 2.3.
2.3 DELIVERY OF COMPOUNDS. Axys shall use commercially reasonable efforts to
deliver the Compounds in the Library to Warner-Lambert according to the
following schedule: [*] Compounds to be delivered by the end of [*], and the
remainder to be delivered by Axys [*] thereafter at an annual rate of
approximately [*] Compounds per year. If Axys is able to produce and deliver the
Compounds at a faster rate than contemplated above, then, if mutually agreed
with Warner-Lambert, Axys may deliver such Compounds as they become available
for delivery. The Compounds shall be delivered in 96 well plates with an 88 well
array format with approximately [*] (which is approximately[*]) of each Compound
present in the shipment, or in such other reasonable format as is reasonably
requested by Warner-Lambert, provided that any additional cost to Axys required
to prepare or ship such other format shall be paid by Warner-Lambert. Each
shipment shall be accompanied by a confidential description of the identity and
structure of each Compound in such shipment. Accompanying each shipment will be
the results of the analysis of each Compound, performed by Axys according to the
method of analysis set forth in Exhibit B attached hereto.
2.4 TECHNOLOGY COMMITTEE. Within thirty (30) days of the Effective Date,
Axys and Warner-Lambert will form a committee consisting of two (2)
representatives of each Party (the "Technology Committee") and shall conduct the
first meeting of such committee. The Technology Committee shall meet on a
regular basis as agreed upon by the members of the Technology Committee (but no
more than once per quarter), (a) to discuss and implement the means for an
orderly and reasonable transfer of the Axys Know-How, (b) to discuss proposals
for Scaffolds proposed by either Party for selection and to select additional
Selected Protocols for use by Axys in completing the Library, (c) to assess and
approve the diversity of the Compounds to be made under each Selected Protocol
in order to maximize the chemical diversity in the Library, and (d) to discuss
and resolve any other non-business aspects of the relationship of the Parties
under the Agreement that require attention. The Technology Committee shall act
by unanimous consent, and may meet by telephone, videoconference or in
face-to-face meetings, as agreed upon by the members of the committee. A
Chairperson shall be appointed for each meeting of the Technology Committee by
the members of the committee and shall be responsible for issuing an agenda for
the meeting, conducting and chairing the meeting
* "Certain confidential information contained in the document, marked by
brackets, has been omitted and filed separately with the Securities and
Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of
1934, as amended."
5.
<PAGE> 10
and preparing the minutes for the meeting, and such other tasks as assigned by
the committee. Each Party may change its representatives on the Technology
Committee as it deems appropriate, and may send non-voting representatives to
attend committee meetings as observers.
2.5 RIGHT TO USE COMPOUNDS - WARNER-LAMBERT. All intellectual property
rights existing as of the Effective Date and relating to the Library and the
Compounds, and any Information of Axys relating thereto, shall be and remain the
intellectual property of Axys. Subject to the terms of this Agreement,
Warner-Lambert and its Affiliates shall have the right to use the Library and
the Compounds therein solely in Warner-Lambert's and its Affiliates' internal
drug discovery, medicinal chemistry, development and commercialization programs,
and for use in research, development and commercialization programs pursuant to
collaborative research agreements with third parties, provided that, such third
party corporate partners are not permitted to use the Library or Compounds for
General Screening. Warner-Lambert shall be permitted to transfer the Library or
individual Compounds only (a) to Affiliates solely to use in such Affiliate's
internal drug discovery, development and commercialization programs, or (b) to
third party contractors or outside researchers who perform screening in assays
on behalf of Warner-Lambert or its Affiliates solely as part of Warner-Lambert's
or its Affiliates' internal or collaborative drug discovery, development and
commercialization programs as provided above in this Section and provided that
such third party contractors or outside researchers are subject to written
confidentiality agreements at least as restrictive as the provisions of Article
6. Except as expressly permitted in the foregoing or as permitted in Section
6.3, Warner-Lambert covenants that it and its Affiliates shall not transfer or
disclose the Library or Compounds to any third party for any purpose.
Warner-Lambert and its Affiliates may use the Information generated by the uses
of the Library or Compounds permitted above for any purpose subject to and in
compliance with the limitations in this Agreement.
2.6 RIGHT TO USE COMPOUNDS - AXYS. Axys covenants that during the term of
the Agreement, it shall not (a) provide the Library or any significant portion
thereof to any third party pharmaceutical company for use in General Screening,
or (b) provide a library of compounds synthesized using the Selected Protocols
(but not including any Compounds) to more than a total of [*] third party
pharmaceutical companies for use in General Screening. Axys and its Affiliates
shall retain full rights to use the Library and the Compounds for all internal
purposes, including without limitation General Screening, combinatorial
chemistry and medicinal chemistry, and drug discovery, development and
commercialization activities of Axys and its Affiliates. For clarity, it is
understood that
* "Certain confidential information contained in the document, marked by
brackets, has been omitted and filed separately with the Securities and
Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of
1934, as amended."
6
<PAGE> 11
Axys also retains the right to use the Library and the Compounds in screening
for activity in assays for specific targets covered by research, development or
commercialization programs pursuant to collaborative research agreements with
third parties, and to provide the Library or Compounds, or a library of
compounds made using the Selected Protocols, to third party corporate partners
of Axys or its Affiliates for use by such partner in screening for activity in
specific assays for targets covered by the research, development or
commercialization program between such corporate partner and Axys (or its
Affiliate, as applicable), provided that, such third party corporate partner is
not permitted to use the Library or Compounds for General Screening. Axys
covenants that during the term of the Agreement it shall not provide the
structures for the Compounds to any third party other than a third party to whom
Axys has provided Compounds as permitted above.
2.7 LIMITED RIGHT TO SELECT COMPOUNDS TO COMMERCIALIZE. If Warner-Lambert
(or its Affiliate) determines that a particular Compound (but excluding the Axys
Compounds) has potential therapeutic or prophylactic utility sufficient to
select such Compound as a "Lead Candidate" for which Warner-Lambert will
initiate GLP toxicology studies and other significant preclinical testing that
is required to develop the data needed to submit an IND for initiating human
clinical trials on the Compound as a drug candidate, with the intention of
commercializing such Compound as a drug product, then Warner-Lambert may give
Axys notice to that effect, and such Compound shall, unless such Compound is at
the time of such notice an Axys Compound, thereafter be deemed a "Warner-Lambert
Compound" for so long as Warner-Lambert or its Affiliate or sublicensee or
assignee continues ongoing, diligent development efforts on or, if subject to a
regulatory approval, continues commercial sales of such Compound. If such
diligent efforts or such sales cease to continue with respect to a particular
Warner-Lambert Compound, then such Compound shall cease to be a Warner-Lambert
Compound and shall revert to being solely a Compound. If Axys (or its Affiliate
or licensee) determines that a particular Compound (but excluding the
Warner-Lambert Compounds) has potential therapeutic or prophylactic utility
sufficient to select such Compound for GLP toxicology studies and other
significant preclinical testing that is required to develop the data needed to
submit an IND for initiating into human clinical trials on the Compound as a
drug candidate, with the intention of commercializing such Compound as a drug
product, then Axys may give Warner-Lambert notice to that effect, and such
Compound shall, unless such Compound is at the time of such notice a
Warner-Lambert Compound, thereafter be deemed an "Axys Compound" for so long as
Axys or its Affiliate or licensee or assignee continues ongoing, diligent
development efforts on or, if subject to a regulatory approval, continues
commercial sales of such Compound. If such diligent
* "Certain confidential information contained in the document, marked by
brackets, has been omitted and filed separately with the Securities and
Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of
1934, as amended."
7
<PAGE> 12
efforts or such sales cease to continue with respect to a particular Axys
Compound, then such Compound shall cease to be an Axys Compound and shall revert
to being solely a Compound.
2.8 [*] REGARDING PROTOCOLS. Axys covenants that if, during the term of this
Agreement, Axys [*] to this Agreement, at least [*], and such agreement
stipulates that the [*] that Axys is permitted to provide to Warner-Lambert in
the Library under Section 2.1, then if requested by Warner-Lambert, Axys will
[*] Selected Protocol (as set forth in Section 2.1) for the remaining term of
the Agreement to the [*] unless Axys and Warner-Lambert otherwise agree in
writing. This Section 2.8 shall terminate and be of no further force or effect
immediately [*] by Axys.
2.9 SOFTWARE MODIFICATIONS. The Technology Committee shall, on a reasonable
and acceptable time frame, review and discuss the Software to determine if there
are mutually agreeable modifications to the Software that would serve to enhance
the functionality of the Software to both Parties. The Parties may agree to
conduct such modifications cooperatively, under terms to be agreed upon at that
time.
3. TECHNOLOGY TRANSFER AND LICENSE
3.1 TRANSFER OF CHEMISTRY TECHNOLOGY. Commencing promptly after the
Effective Date, Axys will commence the transfer to Warner-Lambert, on an orderly
basis, of the Axys Know-How, copies of the issued Axys Patents, and the
Software. Such transfer will be managed and coordinated by the Technology
Committee, formed as provided in Section 3.4 below. The schedule for such
transfer will be reasonable, provided that Axys will complete transfer of the
Axys Know-How relating directly to a particular Selected Protocol within [*]
days of the date of selection of such Selected Protocol under Section 2.2. In
addition, Warner-Lambert may provide, at its cost and expense, up to [*]
Warner-Lambert scientists to work at Axys during the period of technology
transfer to assist and direct the transfer to Warner-Lambert of the Axys
Know-How; provided that access or exposure to Axys Restricted Information by the
Warner-Lambert scientists shall be subject to the provisions of Article 6, and
that such number of scientists may not exceed an average of [*] per month during
such transfer period. Any such Warner-Lambert scientists that work at Axys under
the terms of this Section 3.1 shall be restricted from access to any Axys
facilities or locations other than
* "Certain confidential information contained in the document, marked by
brackets, has been omitted and filed separately with the Securities and
Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of
1934, as amended."
8
<PAGE> 13
those necessary for completing the transfer of Axys Know-How as provided above.
Further, Axys shall use reasonable efforts to limit and restrict such
Warner-Lambert scientists from access or exposure to any Axys confidential
information that is not Axys Know-How. If Axys makes improvements to the
Software during the Agreement, such improved Software shall be provided to
Warner-Lambert promptly thereafter.
3.2 TECHNOLOGY AND LIBRARY LICENSE RIGHTS.
(a) Subject to the terms of this Agreement, Axys hereby grants
Warner-Lambert the non-exclusive, worldwide, fully paid-up, perpetual (subject
to termination under Article 12) license to use and practice the Axys Know-How
and Axys Patents solely for Warner-Lambert's permitted use of the Library and
Compounds under Section 2.3, and including the right of Warner-Lambert to
synthesize the Compounds for use as permitted in Section 2.3.
(b) Subject to the terms of this Agreement, Axys hereby grants
Warner-Lambert the non-exclusive, worldwide, fully paid-up, perpetual (subject
to termination under Article 12) license to use the Software solely in
conjunction with Warner-Lambert' or its Affiliates' permitted use of the Library
under Section 2.3, and to copy the Software to the extent necessary for
conducting the foregoing permitted use of such Software. The foregoing license
rights may be sublicensed to a third party without the prior written consent of
Axys in conjunction with and in compliance with Warner-Lambert's permitted use
of the Library and Compounds under Section 2.3 and only to the extent needed to
accomplish such permitted purposes, and Warner-Lambert and its Affiliates
covenant that they will not transfer or disclose any such Axys Know-How or
Software to any third party except as part of such permitted sublicenses and
only subject to limitations consistent with the above restrictions.
3.3 LIMITED COMMERCIAL LICENSES.
(a) Subject to the terms of this Agreement, Axys hereby grants
Warner-Lambert the exclusive, worldwide, perpetual (subject to termination under
Article 12), royalty-bearing license, with the right to sublicense, under Axys'
interest in the Compound Patents solely for Warner-Lambert, its Affiliates and
sublicensees to make, have made, import, use, offer for sale and sell Licensed
Products.
(b) Subject to the terms of this Agreement, Warner-Lambert hereby grants
Axys the exclusive, worldwide, perpetual (subject to termination under Article
12),
* "Certain confidential information contained in the document, marked by
brackets, has been omitted and filed separately with the Securities and
Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of
1934, as amended."
9
<PAGE> 14
royalty-free license, with the right to sublicense, under Warner-Lambert'
interest in the Compound Patents solely for Axys, its Affiliates and licensees
to make, have made, import, use, offer for sale and sell products containing the
Axys Compounds. 3.4 LICENSE LIMITATIONS. Warner-Lambert understands and agrees
that its rights granted in Section 3.2 under the Axys Know-How, Axys Patents,
and the Software are non-exclusive, and that Axys retains all its rights to use
all such technology, Information and intellectual property rights for its own
purposes and to license or disclose such technology, Information and
intellectual property rights to third parties without restriction, subject only
to the restrictions, and to the licenses and other rights granted
Warner-Lambert, under this Agreement. Warner-Lambert covenants that it and its
Affiliates shall not use or practice the Axys Know-How, Axys Patents and
Software for any use or purpose except as expressly permitted in Section 3.2 and
3.3(a), that it will not grant any sublicenses to any third party under such
Information or intellectual property rights except as expressly permitted under
Section 3.2 or 3.3(a), and that it will not sell or otherwise commercialize any
Compound unless it has been selected as a Warner-Lambert Compound and is sold as
a Licensed Product, but excluding from the foregoing limitation any Compound
that is discovered or synthesized by Warner-Lambert or its Affiliates completely
independent of any activity permitted under this Agreement and without reliance
on any Axys Know-How, Axys Patents or other Axys Confidential Information
disclosed to Warner-Lambert. Warner-Lambert acknowledges that the source code
for the Software contains the valuable trade secrets of Axys, and Warner-Lambert
covenants that it and its Affiliates shall not distribute the Software to any
third party except to the extent permitted by Axys in writing.
4. PAYMENTS
4.1 COMPOUND PURCHASE PRICES. Warner-Lambert shall pay Axys a purchase price
for each Compound delivered hereunder as provided below:
(a) Warner-Lambert shall pay Axys [*] for each of the first [*]
Compounds delivered to Warner-Lambert by Axys under the terms of Article 2;
(b) Warner-Lambert shall pay Axys [*] for each of the next [*] Compounds
delivered to Warner-Lambert by Axys under the terms of Article 2; and
(c) Warner-Lambert shall pay Axys [*] for each of the remaining [*]
Compounds delivered to Warner-Lambert by Axys.
* "Certain confidential information contained in the document, marked by
brackets, has been omitted and filed separately with the Securities and
Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of
1934, as amended."
10
<PAGE> 15
Such payments shall be made within [*] days of delivery of an invoice from Axys
regarding such delivered Compounds, which invoice shall be submitted promptly
upon delivery of the Compounds by Axys under the terms of Section 2.2.
Warner-Lambert shall be responsible for payment [*] on the sale or transfer of
the Compounds, Axys Know-How, Software or Axys Patents under the terms of this
Agreement, other than [*] based upon [*] of Axys.
4.2 ROYALTY ON COMPOUNDS. Warner-Lambert shall pay Axys a royalty on sales
of Licensed Products equal to [*] of the Net Sales of the Licensed Products by
Warner-Lambert, its Affiliates and sublicensees in countries where the
manufacture, use or sale of such Licensed Product (or the Warner-Lambert
Compound therein) is covered by a claim in an issued patent that claims the
composition of matter of the Compound that is an active ingredient in such
Licensed Product and for which Axys or an Axys employee or contractor is an
inventor, provided that the Compound in the Licensed Product was made using [*]
as provided in Section 2.2. As used herein, "Net Sales" shall mean [*] after
deduction for the following items (i) [*]; (ii) [*]; (iii) [*]; (iv) [*]; (v)
[*]; (vi) [*] and (vii) [*].
5. INTELLECTUAL PROPERTY MATTERS
5.1 OWNERSHIP. All intellectual property rights in and to the Library,
Compounds, Selected Protocols, Axys Know-How, Axys Patents, and the Software
owned or Controlled by Axys as of the Effective Date shall remain exclusively
with Axys, subject only to the license rights granted to Warner-Lambert under
Sections 2.3 and 3.2. Axys shall own the entire right, title and interest in and
to any inventions and
* "Certain confidential information contained in the document, marked by
brackets, has been omitted and filed separately with the Securities and
Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of
1934, as amended."
11
<PAGE> 16
Information, and all intellectual property rights therein, developed solely by
employees or agents of Axys in the course of this Agreement. Warner-Lambert
shall own the entire right, title and interest in and to any inventions and
Information, and all intellectual property rights therein, developed solely by
employees or agents of Warner-Lambert in the course of this Agreement. The
Parties shall own jointly the entire right, title and interest in and to any
inventions and Information, and all intellectual property rights therein,
developed jointly by employees or agents of Axys and employees or agents of
Warner-Lambert in the course of this Agreement. Notwithstanding the foregoing,
Warner-Lambert hereby grants to Axys the right, under any rights Warner-Lambert
may have or obtain in the Selected Protocols and the Scaffolds on which they are
based, if any, to use the Selected Protocols to make, use and sell compounds for
all purposes, subject to the limitations in Section 2.6. Further, it is
understood that Warner-Lambert will own the physical samples of the Compounds
provided by Axys hereunder.
5.2 LIMITATION ON PATENT APPLICATIONS.
(a) The Parties agree that each Party and its Affiliates shall not file
or prosecute any patent applications that specifically claim or otherwise
describe any Compound(s); provided that the foregoing shall not apply with
respect to any Compound(s) that is or are discovered or synthesized by
Warner-Lambert or its Affiliates completely independent of any activity
permitted under this Agreement and without reliance on any Axys Know-How, Axys
Patents or other Axys Confidential Information disclosed to Warner-Lambert. Axys
will not provide the Library to any third party without obtaining the third
party's promise, in writing, not to file or prosecute any patent applications
that specifically claim or otherwise describe any Compound(s) (except for
Compounds independently discovered or synthesized by such party), and to grant
Axys a license under any patent owned by such party that claim (either
specifically or generically) a Compound for Axys and its Affiliates and
sublicensees (including Warner-Lambert) to make, have made, import, use, offer
for sale and sell such Compound (other than patents claiming such independently
discovered Compounds).
(b) Notwithstanding subsection (a) above, a Party may file and prosecute
patent applications that specifically claim or otherwise describe a Compound or
Compounds, but only if (i) the Party has defined a preliminary structural
activity relationship around such Compound(s); (ii) the Party has prepared and
evaluated related compounds outside the Library in support of the structural
activity relationship; and (iii)
* "Certain confidential information contained in the document, marked by
brackets, has been omitted and filed separately with the Securities and
Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of
1934, as amended."
12
<PAGE> 17
the claims to or descriptions of the Compound(s) are essential in order to meet
best mode requirements or to protect preferred embodiments or otherwise to
support claims in such patent application.
5.3 ADDITIONAL LICENSES. Axys hereby grants to Warner-Lambert a
non-exclusive, world-wide, perpetual (subject to termination under Article 12),
fully paid-up license under any issued patents owned by Axys or its Affiliate
that claim (either specifically or generically) a Compound solely for
Warner-Lambert and its Affiliates and permitted sublicensees to make, have made,
import, and use such Compound solely for the purposes permitted in Section 2.5.
Warner-Lambert hereby grants to Axys a non-exclusive, world-wide, perpetual
(subject to termination under Article 12), fully paid-up license, with right to
sublicense, under issued patents owned by Warner-Lambert or its Affiliate that
claim (either specifically or generically) a Compound solely for Axys and its
Affiliates and sublicensees to make, have made, import, use, offer for sale and
sell such Compound as permitted in Section 2.6, but excluding from the foregoing
license any Warner-Lambert patent claiming a Compound that is discovered or
synthesized by Warner-Lambert or its Affiliates completely independent of any
activity permitted under this Agreement and without reliance on any Axys
Know-How, Axys Patents or other Axys Confidential Information disclosed to
Warner-Lambert.
5.4 ENFORCEMENT OF PATENTS. If Warner-Lambert becomes aware of any actions
of a third party that it considers infringing upon any Axys Patent, it shall
notify Axys and provide all evidence of such infringement that is reasonably
available. Axys shall have the sole and exclusive right, at its own expense, to
attempt to terminate such infringement by commercially appropriate steps,
including suit. Warner-Lambert shall provide reasonable assistance to Axys in
enforcing the Axys Patents, at Axys's request and expense, including providing
access to relevant documents and other evidence and making its employees
available. Any amounts recovered by Axys, whether by settlement or judgment,
shall be retained by Axys.
5.5 THIRD PARTY PATENT RIGHTS. If any warning letter or other notice of
infringement is received by a Party, or action, suit or proceeding is brought
against a Party alleging infringement of a patent right of any third party in
the manufacture, use or sale of a Compound or use of the Axys Know-How or Axys
Patents or Software as permitted herein, the Parties shall promptly discuss and
decide the best way to respond.
* "Certain confidential information contained in the document, marked by
brackets, has been omitted and filed separately with the Securities and
Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of
1934, as amended."
13
<PAGE> 18
6. CONFIDENTIALITY
6.1 CONFIDENTIALITY OBLIGATIONS. Each Party agrees that, for the term of
this Agreement and for [*] thereafter, such Party shall keep, and shall ensure
that its officers, directors, employees and agents keep, completely confidential
and shall not publish or otherwise disclose and shall not use for any purpose
except as expressly permitted hereunder any Confidential Information furnished
to it by the other Party pursuant to this Agreement; except that the foregoing
obligations shall not apply to any Information to the extent that it can be
established by such receiving Party that such Information:
(a) was already known to the receiving Party or any of its Affiliates,
other than pursuant to an obligation of confidentiality owed to the disclosing
Party, at the time of disclosure;
(b) was generally available to the public or otherwise part of the
public domain at the time of its disclosure to the receiving Party;
(c) became generally available to the public or otherwise part of the
public domain after its disclosure and other than through any act or omission of
the receiving Party in breach of this Agreement; or
(d) was subsequently lawfully disclosed to the receiving Party or its
Affiliates by a Third Party other than in contravention of a confidentiality
obligation of such Third Party to the disclosing Party; or
(e) was developed or discovered by employees of the receiving Party or
its Affiliates who had no access to the Confidential Information of the
disclosing Party.
Notwithstanding the foregoing, Warner-Lambert shall not use for any purpose
the Axys Restricted Information. Further, each Party may disclose the other's
Confidential Information only to the extent such disclosure is necessary in
prosecuting or defending litigation or complying with applicable governmental
laws or regulations, provided that if a Party is required to make any such
disclosure of the other Party's Confidential Information, it will, whenever
reasonably possible, give advance notice to the latter Party of such disclosure
requirement, will cooperate with the other Party in its efforts to secure
confidential treatment of such Information prior to its disclosure (whether
through protective orders or confidentiality agreements or otherwise), and will
use reasonable efforts to limit the extent of such disclosure and, if requested
by the other Party because of an inability of such other Party to seek
confidential treatment, to secure confidential
* "Certain confidential information contained in the document, marked by
brackets, has been omitted and filed separately with the Securities and
Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of
1934, as amended."
14
<PAGE> 19
treatment of such Information prior to its disclosure (whether through
protective orders or confidentiality agreements or otherwise).
6.2 PRESS RELEASES. Except as required by law or in accordance with Section
6.3, neither Party shall have the right to make any public announcements
concerning this Agreement or the subject matter hereof without the prior written
consent of the other, which shall not be unreasonably withheld. Notwithstanding
the foregoing, the Parties agree that (a) each Party may make public disclosures
regarding Compounds in clinical development or commercialization; and (b) each
Party may desire or be required to issue press releases relating to the
Agreement or activities thereunder, and the Parties agree to consult with each
reasonably and in good faith with respect to the text of such press releases
(under this subsection (b)) prior to the issuance thereof, provided that a Party
may not unreasonably withhold consent to such releases. All such public
disclosures with respect to this Agreement must be accurate and comply with
applicable law and regulations. Except as set forth in Section 6.2(a) hereof, in
the event of a required or desired public announcement, such Party shall provide
the other Party with a reasonable opportunity and the right to approve the
content of such announcement prior to its being made, which approval shall not
be delayed or unreasonably withheld. Each Party agrees that any filings it makes
with the SEC describing the terms of this Agreement shall be consistent with the
prior press releases and other public disclosures of such terms.
6.3 PUBLICATIONS. Notwithstanding the terms of Section 6.2, either Party may
publish Information that such Party discovered or developed in its research,
development or commercialization activities derived from use of the Library or
any Compound without the consent of or notice to the other Party, provided,
however, that no such publication may contain the structure of a Compound or
Information that reasonably may be interpreted to disclose the structure of a
Compound unless:
(a) the publishing Party has [*];
(b) such structure is [*];
(c) such structure was [*]; or
(d) the other Party has consented in writing to such disclosure.
* "Certain confidential information contained in the document, marked by
brackets, has been omitted and filed separately with the Securities and
Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of
1934, as amended."
15
<PAGE> 20
7. INDEMNIFICATION
7.1 INDEMNIFICATION BY WARNER-LAMBERT. Warner-Lambert shall indemnify,
defend and hold Axys and its agents, employees, officers and directors (the
"Axys Indemnitees") harmless from and against any and all liability, damage,
loss, cost or expense (including reasonable attorneys' fees) arising out of
Third Party claims or suits related to (a) Warner-Lambert's or its Affiliate's
negligence, willful misconduct or breach of this Agreement; or (b) the
manufacture, use or sale of Compounds or products containing Compounds or any
compound based upon or derived therefrom by Warner-Lambert and its Affiliates,
sublicensees, distributors and agents, except to the extent such claims or suits
result from the active negligence or willful misconduct of or breach of the
Agreement by any of the Axys Indemnitees or the manufacture, use or sale to
third parties of Compounds or products containing Compounds or any compound
based upon or derived therefrom by Axys and its Affiliates, other licensees
(i.e., excluding Warner-Lambert) distributors or agents. Upon the assertion of
any such claim or suit, the Axys Indemnitees shall promptly notify
Warner-Lambert thereof, and Warner-Lambert shall appoint counsel reasonably
acceptable to the Axys Indemnitees to represent the Axys Indemnitees with
respect to any claim or suit for which indemnification is sought, provided that
Warner-Lambert shall have sole control over the defense and settlement of such
claim or suit. As a condition to obtaining indemnification hereunder, the Axys
Indemnitees shall not settle or attempt to settle or defend or attempt to defend
any such claim or suit without the prior written consent of Warner-Lambert,
unless they shall have first waived their rights to indemnification hereunder;
provided that the foregoing shall in no way limit Axys' right to challenge or
defend against a claim (whether by Warner-Lambert or any third party) that the
claim or suit that is the subject of a claim for indemnification by Axys
hereunder results from the active negligence or willful misconduct of or breach
of the Agreement by any of the Axys Indemnitees.
7.2 INDEMNIFICATION BY AXYS. Axys shall indemnify, defend and hold
Warner-Lambert and its agents, employees, officers and directors (the
"Warner-Lambert Indemnitees") harmless from and against any and all liability,
damage, loss, cost or expense (including reasonable attorney's fees) arising out
of Third Party claims or suits related to (a) Axys's negligence, willful
misconduct or breach of this Agreement, except to the extent that such claims or
suits result from (i) the manufacture, use, or sale or Compound or products
containing Compounds or any compound based upon or derived
* "Certain confidential information contained in the document, marked by
brackets, has been omitted and filed separately with the Securities and
Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of
1934, as amended."
16
<PAGE> 21
therefrom by Warner-Lambert and its Affiliates, sublicensees, distributors and
agents, or (ii) the active negligence or willful misconduct of or breach of this
Agreement by any of the Warner-Lambert Indemnitees; or (b) the manufacture, use
or sale to third parties by Axys, its Affiliates, third party licensees,
distributors or agents of Compounds or products containing Compounds or any
compound based upon or derived therefrom (but excluding from the foregoing
exception any claims or suits that relate to use or sale of the physical samples
of Compounds provided to Warner-Lambert hereunder); or (c) personal or property
damage arising during the course of manufacture of the Compounds by Axys. Upon
the assertion of any such claim or suit, the Warner-Lambert Indemnitees shall
promptly notify Axys thereof, and Axys shall appoint counsel reasonably
acceptable to the Warner-Lambert Indemnitees to represent the Warner-Lambert
Indemnitees with respect to any claim or suit for which indemnification is
sought, provided that Axys shall have sole control over the defense and
settlement of such claim or suit. As a condition to obtaining indemnification
hereunder, the Warner-Lambert Indemnitees shall not settle or attempt to settle
or defend or attempt to defend any such claim or suit without the prior written
consent of Axys, unless they shall have first waived their rights to
indemnification hereunder; provided that the foregoing shall in no way limit
Warner-Lambert's right to challenge or defend against a claim (whether by Axys
or any third party) that the claim or suit that is the subject of a claim for
indemnification by Warner-Lambert hereunder results from the active negligence
or willful misconduct of or breach of the Agreement by any of the Warner-Lambert
Indemnitees.
8. TERMINATION AND EXPIRATION
8.1 TERM AND TERMINATION. This Agreement shall commence upon the Effective
Date and, unless earlier terminated as provided herein, shall expire on the [*]
anniversary of the Effective Date or, if later, upon the completion of delivery
of the Library. The license and other rights granted to Warner-Lambert under
Sections 2.5, 2.7, 3.2, 3.3(a), 3.4 and 5.3 shall survive such expiration,
subject to compliance by Warner-Lambert and its Affiliates with all limitations
on the practice of such license rights set forth in such Sections. The license
rights granted to Axys under Section 3.3(b) shall survive such expiration.
8.2 TERMINATION BY WARNER-LAMBERT FOR [*]. Warner-Lambert shall have the
right, subject to the provisions of Section 9.11, to terminate the Agreement
upon [*] written notice if Axys has materially failed to comply with the [*]
provided that such termination shall not be effective if Axys cures such failure
prior to the end of such [*]
* "Certain confidential information contained in the document, marked by
brackets, has been omitted and filed separately with the Securities and
Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of
1934, as amended."
17
<PAGE> 22
period. The license and other rights granted to Warner-Lambert under Sections
2.5, 2.7, 3.2, 3.3(a), 3.4 and 5.3 shall survive such termination with respect
to the Compounds already delivered and paid for by Warner-Lambert, subject to
compliance by Warner-Lambert and its Affiliates with all limitations on the
practice of such license rights set forth in such Sections. The license rights
granted to Axys under Section 3.3(b) shall survive such termination.
8.3 TERMINATION UPON MATERIAL BREACH.
(a) Failure by a Party to comply with any of its material obligations
contained herein shall entitle the Party not in default to give to the Party in
default notice specifying the nature of the default, requiring it to make good
or otherwise cure such default, and stating its intention to terminate if such
default is not cured. If such default is not cured within [*] after the
date of such notice (or, if such default cannot be cured within such [*]
period, if the Party in default does not commence and diligently continue
actions to cure such default), the Party not in default shall be entitled,
without prejudice to any of its other rights conferred on it by this Agreement,
and in addition to any other remedies available to it by law or in equity, to
terminate this Agreement; provided, however, that such right to terminate shall
be stayed in the event that, during such [*] day period, the Party alleged to
have been in default shall have initiated dispute resolution proceedings in
accordance with Section 9.11 with respect to the alleged default, which stay
shall last so long as the initiating Party diligently and in good faith pursues
the prompt resolution of such proceedings, and provided further that if such
default is by Warner-Lambert and is limited to a default with respect to
obligations as to particular Compounds, then Axys may not terminate the entire
Agreement but may terminate the Agreement, and all the rights of Warner-Lambert,
only with respect to such Compounds.
(b) The right of a Party to terminate this Agreement, as provided above,
shall not be affected in any way by its waiver or failure to take action with
respect to any prior default. A Party may waive its right to terminate this
Agreement with respect to a particular default, provided that any such waiver
shall not constitute a waiver of, and such Party shall retain all rights to
pursue, any and all other remedies it may have at law or in equity of such
default by the other Party.
8.4 CONSEQUENCES OF TERMINATION.
* "Certain confidential information contained in the document, marked by
brackets, has been omitted and filed separately with the Securities and
Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of
1934, as amended."
18
<PAGE> 23
(a) Upon termination of this Agreement by Warner-Lambert pursuant to Section 8.3
for the uncured material breach of Axys, then: (i) the license and other rights
granted under Sections 2.5, 3.2, 3.3(a) and 5.3 shall survive termination
subject to compliance with all limitations in such Sections and in Section 3.4;
(ii) Axys shall promptly return all Confidential Information of Warner-Lambert
in its possession; (iii) all obligations and rights of Axys to provide
additional Compounds shall terminate; (iv) Warner-Lambert shall retain the right
to use the Compounds already delivered and paid for as permitted under the
Agreement; and (v) Warner-Lambert may retain exclusive rights to up to [*],
regardless of whether Warner-Lambert or its Affiliate or sublicensee complies
with the obligations of diligence or continued sales under Section 2.7 to
maintain such Compounds as Warner-Lambert Compounds.
(b) Upon termination of this Agreement by Axys pursuant to Section 8.3,
in its entirety or only as to particular Compounds, as applicable, for the
uncured material breach of Warner-Lambert, then: (i) all licenses and other
rights granted by Axys to Warner-Lambert under the Agreement, or, if applicable,
under the Agreement as to the particular Compounds so terminated, shall
terminate; (ii) Warner-Lambert shall return all existing samples of the
Compounds that are subject to the termination and all rights to use such
Compounds shall terminate and revert to Axys; (iii) if the entire Agreement is
terminated, all obligations of Axys to provide additional Compounds shall
terminate, and (iv) the license rights granted to Axys by Warner-Lambert in
Section 5.3 shall survive termination any such termination. 8.5 ACCRUED RIGHTS;
SURVIVING OBLIGATIONS.
(a) Termination, relinquishment or expiration of this Agreement for any
reason shall be without prejudice to any rights which shall have accrued to the
benefit of a Party prior to such termination, or expiration. Such termination,
relinquishment or expiration shall not relieve a Party from obligations which
are expressly indicated to survive termination or expiration of this Agreement.
(b) Without limiting the foregoing, Sections 5.1, 5.2 and 5.4 and
Articles 1, 6, 7 and 8 of this Agreement shall survive the expiration or
termination of this Agreement.
8.6 RIGHTS IN BANKRUPTCY. All rights and licenses granted under or pursuant
to this Agreement by Warner-Lambert or Axys are, and shall otherwise be deemed
to be, for purposes of Section 365(n) of the U.S. Bankruptcy Code, licenses of
right to "intellectual property" as defined under Section 101 of the U.S.
Bankruptcy Code. The Parties agree
* "Certain confidential information contained in the document, marked by
brackets, has been omitted and filed separately with the Securities and
Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of
1934, as amended."
19
<PAGE> 24
that the Parties, as licensees of such rights under this Agreement, shall retain
and may fully exercise all of their rights and elections under the U.S.
Bankruptcy Code. The Parties further agree that, in the event of the
commencement of a bankruptcy proceeding by or against either Party under the
U.S. Bankruptcy Code, the Party hereto which is not a party to such proceeding
shall be entitled to a complete duplicate of (or complete access to, as
appropriate) any such intellectual property and all embodiments of such
intellectual property, and same, if not already in their possession, shall be
promptly delivered to them (i) upon any such commencement of a bankruptcy
proceeding upon their written request therefor, unless the Party subject to such
proceeding elects to continue to perform all of its obligations under this
Agreement or (ii) if not delivered under (i) above, following the rejection of
this Agreement by or on behalf of the Party subject to such proceeding upon
written request therefor by an non-subject Party.
9. MISCELLANEOUS PROVISIONS
9.1 RELATIONSHIP OF THE PARTIES. Nothing in this Agreement is intended or
shall be deemed to constitute a partnership, agency or employer-employee
relationship between the Parties. Neither Party shall incur any debts or make
any commitments for the other.
9.2 ASSIGNMENTS. Except as expressly provided herein, neither this Agreement
nor any interest hereunder shall be assignable, nor any other obligation
delegable, by a Party without the prior written consent of the other; provided,
however, that a Party may assign this Agreement to any Affiliate or to any
successor in interest by way of merger or sale of all or substantially all of
its assets in a manner such that the assignee shall be liable and responsible
for the performance and observance of all such Party's duties and obligations
hereunder, but provided that if such assignee is an Affiliate of the assigning
Party, such Party shall guarantee the performance by such Affiliate of all its
obligations under the Agreement. This Agreement shall be binding upon the
successors and permitted assigns of the Parties; provided, however, that in the
event that Axys is acquired, the Axys Know-How and the Axys Patents shall not
include any information or intellectual property rights owned by the acquiring
company as of the date of such acquisition, unless previously licensed to Axys.
Any assignment not in accordance with this Section 9.2 shall be void.
9.3 DISCLAIMER OF WARRANTIES. THE PARTIES EXPRESSLY DISCLAIM ALL WARRANTIES,
EXPRESS OR IMPLIED, INCLUDING WITHOUT LIMITATION WARRANTIES OF MERCHANTABILITY,
FITNESS FOR A
* "Certain confidential information contained in the document, marked by
brackets, has been omitted and filed separately with the Securities and
Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of
1934, as amended."
20
<PAGE> 25
PARTICULAR PURPOSE, OR NON-INFRINGEMENT OF THIRD PARTY RIGHTS, UNLESS OTHERWISE
EXPRESSLY PROVIDED IN THIS AGREEMENT.
9.4 REPRESENTATIONS AND WARRANTIES.
(a) Each Party represents and warrants to the other Party that, as of
the date of this Agreement:
(i) such Party is duly organized and validly existing under the laws
of the state of its incorporation and has full corporate power and authority to
enter into this Agreement and to carry out the provisions hereof;
(ii) such Party has taken all corporate action necessary to
authorize the execution and delivery of this Agreement and the performance of
its obligations under this Agreement; and
(iii) this Agreement is a legal and valid obligation of such Party,
binding upon such Party and enforceable against such Party in accordance with
the terms of this Agreement, except as such enforcement may be limited by
applicable bankruptcy, insolvency, reorganization, arrangement, moratorium or
other similar laws affecting creditors' rights, and subject to general equity
principles and to limitations on availability of equitable relief, including
specific performance. All consents, approvals and authorizations from all
governmental authorities or other Third Parties required to be obtained by such
Party in connection with this Agreement have been obtained.
(iv) such Party has obtained written confidentiality agreements from
each of its employees and consultants who have access to the Confidential
Information of the other Party hereunder, whether in the form of general
confidentiality agreements from the employees obtained at the time of
commencement of such employees' employment by such Party or otherwise, which
agreements obligate such persons to maintain as confidential all confidential
information obtained by such Party in confidence from a third party.
(b) Axys represents and warrants to Warner-Lambert that as of the date
of this Agreement:
(i) to Axys' knowledge, the Axys Patents, Axys Know-How and the
Software existing as of the Effective Date are subsisting and are not invalid or
unenforceable, in whole or in part;
* "Certain confidential information contained in the document, marked by
brackets, has been omitted and filed separately with the Securities and
Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of
1934, as amended."
21.
<PAGE> 26
(ii) it has the full right, power and authority to enter into this
Agreement and to grant the licenses granted under Article 3 hereof;
(iii) to Axys' knowledge, the Axys Patents, Axys Know-How and the
Software existing as of the Effective Date practiced as permitted herein do not
infringe on any intellectual property rights owned or controlled by any Third
Party;
(iv) the execution, delivery and performance of this Agreement by
Axys does not constitute a material breach under, and is not precluded by the
terms of, any agreement to which Axys is a party or by which Axys is bound; and
(v) there are no claims, judgments or settlements against or owed by
Axys or pending or threatened claims or litigation relating to the Axys Patents,
Axys Know-How or the Software.
(c) Warner-Lambert represents and warrants to Axys that as of the date
of this Agreement:
(i) it has the full right, power and authority to enter into this
Agreement and to grant the licenses granted under Article 3 hereof;
(ii) the execution, delivery and performance of this Agreement by
Warner-Lambert does not constitute a material breach under, and is not precluded
by the terms of, any agreement to which Warner-Lambert is a party or by which
Warner-Lambert is bound.
9.5 FURTHER ACTIONS. Each Party agrees to execute, acknowledge and deliver
such further instruments and to do all such other acts as may be necessary or
appropriate in order to carry out the purposes and intent of this Agreement.
9.6 FORCE MAJEURE. The failure of a Party to perform any obligation under
this Agreement by reason of acts of God, acts of governments, riots, wars,
strikes, accidents or deficiencies in materials or transportation or other
causes of any nature (whether similar or dissimilar) beyond its control for the
duration thereof and for thirty (30) days thereafter shall not be deemed to be a
breach of this Agreement.
9.7 NO TRADEMARK RIGHTS. No right, express or implied, is granted by this
Agreement to a Party to use in any manner the name or any other trade name or
trademark of a Party in connection with the performance of this Agreement.
* "Certain confidential information contained in the document, marked by
brackets, has been omitted and filed separately with the Securities and
Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of
1934, as amended."
22.
<PAGE> 27
9.8 ENTIRE AGREEMENT OF THE PARTIES; AMENDMENTS. This Agreement constitutes
and contains the entire understanding and agreement of the Parties respecting
the subject matter hereof and cancels and supersedes any and all prior
negotiations, correspondence, understandings and agreements between the Parties,
whether oral or written, regarding such subject matter. No waiver, modification
or amendment of any provision of this Agreement shall be valid or effective
unless made in writing and signed by a duly authorized officer of each Party.
9.9 CAPTIONS. The captions to this Agreement are for convenience only, and
are to be of no force or effect in construing or interpreting any of the
provisions of this Agreement.
9.10 APPLICABLE LAW. This Agreement shall be governed by and interpreted in
accordance with the laws of the State of California, USA, applicable to
contracts entered into and to be performed wholly within the State of
California, excluding conflict of laws principles.
9.11 DISPUTES. In the event of any controversy or claim arising out of,
relating to or in connection with any provision of this Agreement, or the rights
or obligations of the Parties hereunder, the Parties shall try to settle their
differences amicably between themselves by referring the disputed matter to the
Chief Executive Officer of Axys and the President of Warner-Lambert Company's
Pharmaceutical Research Division for discussion and resolution. Either Party may
initiate such informal dispute resolution by sending written notice of the
dispute to the other Party, and within [*] after such notice such
representatives of the Parties shall meet for attempted resolution by good faith
negotiations. If such personnel are unable to resolve such dispute within [*] of
their first meeting of such negotiations, either Party may seek to have such
dispute resolved in any federal or state court in the United States having
jurisdiction over the dispute and the Parties.
9.12 NOTICES AND DELIVERIES. Any notice, request, delivery, approval or
consent required or permitted to be given under this Agreement shall be in
writing and shall be deemed to have been sufficiently given if delivered in
person, transmitted by telecopier (receipt verified) or by express courier
service (signature required) or [*] after it was sent by registered letter,
return receipt requested (or its equivalent), to the Party to which it is
directed at its address shown below or such other address as such party shall
have last given by notice to the other Parties.
* "Certain confidential information contained in the document, marked by
brackets, has been omitted and filed separately with the Securities and
Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of
1934, as amended."
23.
<PAGE> 28
If to Warner-Lambert, addressed to:
Warner-Lambert Company
2800 Plymouth Road
Ann Arbor, Michigan 48105
Attn: Vice President and Chairman
Pharmaceutical Research Division
Telecopier: (__)
With a copy to:
Warner-Lambert Company
201 Tabor Road
Morris Plains, New Jersey 07950
Attn: Vice President and General Counsel
Telecopier: (__)
If to Axys, addressed to:
Axys Pharmaceuticals, Inc.
180 Kimball Way
South San Francisco, CA USA 94080
Telecopier: (650) 829-1067
Attn: CEO
with a copy to:
Cooley Godward LLP
5 Palo Alto Square, 4th Floor
3000 El Camino Real
Palo Alto, CA 94306-2155
Attention: Barclay James Kamb, Esq.
9.13 NO CONSEQUENTIAL DAMAGES. IN NO EVENT SHALL EITHER PARTY OR ANY OF ITS
RESPECTIVE AFFILIATES BE LIABLE TO THE OTHER PARTY OR ANY OF ITS AFFILIATES FOR
SPECIAL, INDIRECT, INCIDENTAL OR CONSEQUENTIAL DAMAGES, WHETHER IN CONTRACT,
WARRANTY, TORT, NEGLIGENCE, STRICT LIABILITY OR OTHERWISE, including, but not
limited to,
24.
<PAGE> 29
loss of profits or revenue, or claims of customers of any of them or other Third
Parties for such or other damages.
9.14 WAIVER. A waiver by either Party of any of the terms and conditions of
this Agreement in any instance shall not be deemed or construed to be a waiver
of such term or condition for the future, or of any subsequent breach hereof.
All rights, remedies, undertakings, obligations and agreements contained in this
Agreement shall be cumulative and none of them shall be in limitation of any
other remedy, right, undertaking, obligation or agreement of either party.
9.15 COMPLIANCE WITH LAW. Nothing in this Agreement shall be deemed to
permit a Party to export, reexport or otherwise transfer any Compound provided
under this Agreement without compliance with applicable laws.
9.16 SEVERABILITY. When possible, each provision of this Agreement will be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Agreement is held to be prohibited by or invalid
under applicable law, such provision will be ineffective only to the extent of
such prohibition or invalidity, without invalidating the remainder of this
Agreement.
9.17 COUNTERPARTS. This Agreement may be executed simultaneously in any
number of counterparts, any one of which need not contain the signature of more
than one Party but all such counterparts taken together shall constitute one and
the same agreement.
25.
<PAGE> 30
IN WITNESS WHEREOF, the Parties have caused this Agreement to be
executed by their respective duly authorized officers as of the day and year
first above written, each copy of which shall for all purposes be deemed to be
an original.
WARNER-LAMBERT COMPANY
By: PROF. RONALD M. CRESSWELL, PhD
--------------------------------------
Title: VP and Chairman Parke-Davis
-----------------------------------
AXYS PHARMACEUTICALS, INC.
By: JOHN WALKER
--------------------------------------
Title: Chairman/CEO
-----------------------------------
26
<PAGE> 31
EXHIBIT A
[*]
* "Certain confidential information contained in the document, marked by
brackets, has been omitted and filed separately with the Securities and
Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of
1934, as amended."
<PAGE> 32
EXHIBIT B
[*]
* "Certain confidential information contained in the document, marked by
brackets, has been omitted and filed separately with the Securities and
Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of
1934, as amended."
<PAGE> 1
CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN
THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN
OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT
TO RULE 24b-2 OF THE SECURITIES EXCHANGE ACT OF
1934, AS AMENDED.
Exhibit 10.89
AXYS PHARMACEUTICALS, INC.
AND
ROCHE BIOSCIENCE
-------------------------------------------------------------
COLLABORATION AGREEMENT
------------------------------------------------------------
JUNE 1, 1998
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
1. DEFINITIONS..........................................................................1
2. MANAGEMENT AND SCOPE OF COLLABORATION................................................8
2.1 Undertaking and Scope.........................................................8
2.2 Limited Use...................................................................8
2.3 Formation of JRPC.............................................................9
2.4 Meetings of JRPC..............................................................9
2.5 JRPC Decision-Making Process..................................................9
2.6 Collaboration Term Extension..................................................9
3. COLLABORATIVE ACTIVITIES............................................................10
3.1 Mutual Responsibilities; Cooperation.........................................10
3.2 Conduct of Research..........................................................10
3.3 Availability of Resources....................................................10
3.4 Transfer of Materials........................................................10
3.5 Disclosure; Reports..........................................................10
3.6 Identification of NemaPharm Targets..........................................11
3.7 Screening of Compounds; Discontinuation of Development.......................11
3.8 Axys Development of Gene Therapy Products and Protein Products...............11
3.9 Facility Visits..............................................................12
4. GRANT OF LICENSES...................................................................12
4.1 Research Licenses............................................................12
4.2 Licenses To Roche Bioscience in the Commercialization Field..................12
4.3 License to Roche Bioscience Outside the Commercialization Field..............14
4.4 Licenses To Axys.............................................................15
4.5 Sublicenses..................................................................16
4.6 Diligence Obligations of Roche Bioscience Related to NemaPharm Targets.......16
4.7 Diligence Obligations of Roche Bioscience With Respect to Development
and Promotion of Roche Bioscience Products...................................17
5. PAYMENT OBLIGATIONS.................................................................18
5.1 Upfront Payment..............................................................18
5.2 Research Funding.............................................................18
</TABLE>
i
<PAGE> 3
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
5.3 Term Extension...............................................................18
5.4 Milestone Payments...........................................................18
5.5 [*]..........................................................................20
5.6 Royalty Payments ............................................................21
5.7 Third Party Royalties........................................................21
6. PAYMENTS; RECORDS; AUDITS...........................................................21
6.1 Payment; Reports.............................................................21
6.2 Exchange Rate; Manner and Place of Payment...................................22
6.3 Late Payments................................................................22
6.4 Records and Audits...........................................................23
6.5 Taxes........................................................................24
6.6 Prohibited Payments..........................................................24
7. PATENT RIGHTS AND INFRINGEMENT......................................................24
7.1 Ownership of Patent Rights...................................................24
7.2 Confidentiality Obligations..................................................24
7.3 Prosecution and Maintenance of Patent Rights.................................24
7.4 Cooperation of the Parties...................................................25
7.5 Infringement by Third Parties................................................26
7.6 Infringement of Third Party Rights...........................................27
8. INDEPENDENT CONTRACTOR..............................................................27
9. CONFIDENTIALITY.....................................................................27
9.1 Nondisclosure................................................................27
9.2 Exceptions...................................................................28
9.3 Publications.................................................................28
10. REPRESENTATIONS, WARRANTIES AND COVENANTS...........................................28
10.1 Corporate Power..............................................................29
10.2 Due Authorization............................................................29
10.3 Binding Agreement............................................................29
10.4 Disclaimer of Warranties.....................................................29
10.5 Mutual Indemnification.......................................................29
</TABLE>
* "Certain confidential information contained in the document, marked by
brackets, has been omitted and filed separately with the Securities and
Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of
1934, as amended."
ii.
<PAGE> 4
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
11. TERM AND TERMINATION................................................................29
11.1 Term.........................................................................30
11.2 Termination for Cause........................................................30
11.3 Effect of Expiration or Termination..........................................30
12. PUBLICITY...........................................................................31
12.1 Publicity Review.............................................................31
12.2 Standards....................................................................31
13. DISPUTE RESOLUTION..................................................................31
13.1 Disputes.....................................................................31
13.2 Procedure....................................................................31
14. MISCELLANEOUS.......................................................................32
14.1 Assignment...................................................................32
14.2 Force Majeure................................................................33
14.3 Payment in U.S. Dollars......................................................33
14.4 Notices......................................................................33
14.5 Governing Law................................................................34
14.6 Waiver.......................................................................34
14.7 Severability.................................................................34
14.8 Entire Agreement.............................................................34
14.9 Counterparts.................................................................35
</TABLE>
iii.
<PAGE> 5
COLLABORATION AGREEMENT
THIS COLLABORATION AGREEMENT (the "Agreement") is made as of June 1,
1998 (the "Effective Date") by and among AXYS PHARMACEUTICALS, INC., a Delaware
corporation with its principal office at 180 Kimball Way, South San Francisco,
California 94080 and its subsidiaries, NemaPharm, Inc. and Sequana Therapeutics,
Inc., ("Axys"), and ROCHE Bioscience, a division of Syntex (U.S.A.) Inc., a
Delaware corporation with its principal office at 3401 Hillview Avenue, Palo
Alto, California, 94304 ("Roche Bioscience") and, for purposes only of Sections
4.1.2, 4.4 and 4.7.2 , both of F. Hoffmann-La Roche, Ltd., a Swiss corporation
located in Basel, Switzerland ("FHLR") and Hoffmann-La Roche Inc., a New Jersey
corporation located in Nutley, New Jersey ("HLR").
RECITALS
WHEREAS, the Parties desire to collaborate to perform functional
analysis of rat or human ESTs provided by Roche Bioscience using their
respective bioinformatics and genomics capabilities;
WHEREAS, the goal of the collaboration is to identify therapeutic,
prophylactic and diagnostic products through such analysis for applications in
Pain, Peripheral Arterial Occlusive Disease and Lower Urinary Tract Disorders as
hereinafter defined in Article 1; and
WHEREAS, the Parties desire to provide for the allocation of rights to
intellectual property, products and services for the prevention, treatment and
diagnosis of Pain, Peripheral Arterial Occlusive Disease and Lower Urinary Tract
Disorders resulting from the collaboration on the terms and subject to the
conditions set forth herein.
NOW, THEREFORE, in consideration of the foregoing recitals and the
mutual covenants and agreements contained herein, the Parties hereto, intending
to be legally bound, do hereby agree as follows:
AGREEMENT
1. DEFINITIONS
1.1 "AFFILIATE" means any person, organization or entity that is, directly
or indirectly, controlling, controlled by, or under common control with Roche
Bioscience or Axys as the case may be. The term "Control" as used in this
section 1.1 (including, with correlative meaning, the terms "controlled by" and
"under common control with"), as used with respect to any person or entity,
means the possession, directly or indirectly, of the power to direct, or cause
the direction of, the management and policies of such person, an organization or
entity, whether through the ownership of
<PAGE> 6
voting securities, or by contract or court order or otherwise. The ownership of
voting securities of a person, organization or entity shall not, in and of
itself, constitute "control" for purposes of this definition, unless said
ownership is of a majority of the outstanding securities entitled to vote of
such a person, organization or entity. For purposes of this Agreement,
Genentech, Inc. shall not be considered to be an Affiliate of Roche Bioscience
unless an authorized officer of Roche Bioscience notifies Axys in writing that
Genentech, Inc. is an Affiliate of Roche Bioscience. Axys Pharmaceuticals, Inc.
shall determine which of its subsidiaries shall be responsible for performing
individual obligations required, or receiving individual benefits or rights, of
Axys pursuant to this Agreement.
1.2 "ANTISENSE PRODUCT" shall mean any product for the prevention, treatment
or diagnosis of any disease or disorder, that contains an antisense product
which consists of any complete, partial, altered or mutated RNA or DNA sequence
complementary to or derived from an RNA or DNA sequence of one or more NemaPharm
Target(s) licensed to Roche Bioscience pursuant to Section 4.2.1(a) or any human
or other animal homolog of that NemaPharm Target(s).
1.3 "AXYS KNOW-HOW" means the Know-How owned or Controlled by Axys, relating
to Axys' activities under the Research Plan necessary or useful to conduct the
Collaboration or to develop, manufacture, commercialize, distribute, import,
export and sell Roche Bioscience Products.
1.4 "AXYS PATENT RIGHTS" means the Patent Rights owned or Controlled by
Axys, relating to Axys' activities under the Research Plan necessary or useful
to conduct the Collaboration or to develop, manufacture, commercialize,
distribute, import, export and sell Roche Bioscience Products, but excluding
Joint Patent Rights.
1.5 "AXYS PRODUCT" means a Gene Therapy Product, a Protein Product or any
other product for the prevention, treatment or diagnosis of any disease or
disorder, which, in each case, is discovered or developed using a NemaPharm
Target; provided, however, that the term "Axys Product" shall not include any
Small Molecule Product, Antisense Product or Diagnostic Product.
1.6 "AXYS TECHNOLOGY" means the Axys Patent Rights and the Axys Know-How.
1.7 "CDNA" means a DNA copy of an mRNA, including, without limitation, all
cDNA clones and cDNA templates derived from a given gene transcript and its
corresponding coding sequence, including the full length sequence.
1.8 "COLLABORATION" means the activities of the Parties carried out in
performance of, and the relationship between the Parties established by, this
Agreement.
2.
<PAGE> 7
1.9 "COLLABORATION TERM" means the period commencing on the Effective Date
and ending on the first to occur of (i) termination of this Agreement according
to Article 11 or (ii) the date that is fifteen (15) months following the
Effective Date, or twenty-four (24) months following the Effective Date if
extended pursuant to Section 2.6.
1.10 "COMBINATION PRODUCT" means a Product containing or using both a
NemaPharm Target and one or more ingredients that are diagnostically useable or
therapeutically active alone or in a combination.
1.11 "COMMERCIALLY REASONABLE EFFORTS" means efforts ordinarily undertaken
by the applicable Party on products of similar scientific and commercial
potential within the relevant product lines of the Parties.
1.12 "COMMERCIALIZATION FIELD" means the development or commercialization of
products or services for the prevention, treatment or diagnosis of Pain,
Peripheral Arterial Occlusive Disease or Lower Urinary Tract Disorders.
1.13 "CONFIDENTIAL INFORMATION" means all information and materials received
by a Party from another Party pursuant to this Agreement and all information and
materials developed in the course of the Collaboration, including, without
limitation, Know-How of such other Party.
1.14 "CONTROL" means possession of the ability to grant a license or
sublicense as provided for herein without violating the terms of any agreement
with or other arrangement with, or the rights of, any Third Party.
1.15 "DIAGNOSTIC PRODUCT" means any product or service or combination
thereof used for the diagnosis, prognosis and/or monitoring of progression of a
disease or disorder or that [*] that is developed utilizing, or is comprised of,
any one or more NemaPharm Target(s) licensed to Roche Bioscience pursuant to
Section 4.2.1(b) or which incorporates any complete, partial, altered or mutated
RNA or DNA sequence corresponding to or complementary to an RNA or DNA sequence
of any such NemaPharm Target(s) or any human or other animal homolog of that
NemaPharm Target(s).
1.16 "EST" or "EXPRESSED SEQUENCE TAG" means a partial or whole sequence of
an expressed gene that comprises fifty (50) or more nucleotides.
1.17 "FDA" means the United States Food and Drug Administration, or the
successor thereto.
* "Certain confidential information contained in the document, marked by
brackets, has been omitted and filed separately with the Securities and
Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of
1934, as amended."
3.
<PAGE> 8
1.18 "Final Axys Report" means a report by Axys detailing all major research
findings, including summaries of relevant data, resulting from the
Collaboration.
1.19 "FIRST COMMERCIAL SALE" of a Roche Bioscience Product means the first
sale for use or consumption of such Roche Bioscience Product in a country after
Regulatory Approval and necessary pricing approval has been granted by the
governing health regulatory authority of such country. Sale to an Affiliate or
sublicensee shall not constitute a First Commercial Sale unless the Affiliate or
sublicensee is the end user of the Roche Bioscience Product.
1.20 "FTE" means [*].
1.21 "GENE PRODUCT" means all partial cDNAs, DNAs, genes, ESTs, full length
cDNAs corresponding thereto, proteins encoded therefrom and corresponding gene
expression levels.
1.22 "GENE THERAPY PRODUCT" means any product for the prevention, treatment
or diagnosis of any disease or disorder through gene therapy that consists of
any complete, partial, altered or mutated RNA or DNA sequence corresponding to
an RNA or DNA sequence of a NemaPharm Target licensed to Roche Bioscience
pursuant to Section 4.2.2 or any human or other animal homolog of that NemaPharm
Target.
1.23 "IND" means an Investigational New Drug Application to the FDA to
commence human clinical testing of a Roche Bioscience Product, as defined by the
FDA, or the equivalent application in any other country or jurisdiction.
1.24 "JOINT PATENT RIGHTS" means the Patent Rights covering any and all
inventions conceived of and reduced to practice jointly by employees or agents
of Roche Bioscience, on the one hand, and employees or agents of Axys, on the
other hand, in the course of the Collaboration.
1.25 "JRPC" means the Joint Research Project Committee established pursuant
to Section 2.3 hereof.
1.26 "KNOW-HOW" means inventions, software, techniques, practices, methods,
protocols, processes, procedures, knowledge, know-how, trade secrets, skill,
experience, data, including pharmacological, toxicological and clinical test
data, analytical and quality control data, materials, samples, chemicals,
compounds, formulations, DNA, RNA, peptides, proteins, cell lines, genes,
transgenic animals and compositions (whether or not patentable).
* "Certain confidential information contained in the document, marked by
brackets, has been omitted and filed separately with the Securities and
Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of
1934, as amended."
4.
<PAGE> 9
1.27 "LOWER URINARY TRACT DISORDERS" means [*].
1.28 "MAJOR EUROPEAN COUNTRIES" means the United Kingdom, France, Germany,
Italy, and/or Spain.
1.29 "NDA" means a New Drug Application or Product License Application (or
Biologics License Application), as appropriate, and all supplements filed
pursuant to the requirements of the FDA, including all documents, data and other
information concerning Roche Bioscience Products that are necessary for or
included in FDA approval to market a Roche Bioscience Product, or the equivalent
application in any other country or jurisdiction.
1.30 "NEMAPHARM TARGET" means a Gene Product that is discovered by a Party
or jointly by the Parties in the course, or as a direct or indirect result, of
the Collaboration through the use of a Roche Bioscience Gene within [*] after
the Effective Date and that, [*] the Roche Bioscience Gene.
1.31 "NET SALES" and the related term "Adjusted Gross Sales" mean:
1.31.1 "ADJUSTED GROSS SALES" means the amount of gross sales invoiced
by Roche Bioscience or Axys or one of their Affiliates, or sublicensees as the
case may be, for a Product (including special license sales of the Product),
whether in active ingredient form or finished product form, to non-affiliated
third party purchasers, less, to the extent such amounts are included in the
amount of gross sales, deductions for [*].
1.31.2 "NET SALES" means the amount calculated by subtracting from the
amount of Adjusted Gross Sales [*] of Adjusted Gross Sales, [*].
1.32. "NOTICE OF ABANDONMENT" shall have the meaning set forth in Section
3.7.
* "Certain confidential information contained in the document, marked by
brackets, has been omitted and filed separately with the Securities and
Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of
1934, as amended."
5.
<PAGE> 10
1.33 "PAIN" means[*].
1.34 "PARTY" or "Parties" means Roche Bioscience or Axys.
1.35 "PATENT RIGHTS" means (i) the patents and the patent applications owned
or Controlled by a Party that are referred to in Schedule 1.35; (ii) any and all
patents arising or resulting from said applications, and all patents and patent
applications based upon or claiming priority to any of the foregoing; (iii) any
and all extensions or other governmental actions with respect to the foregoing
that provide exclusive rights to the patent holder beyond the original patent
expiration date), (iv) any and all substitutions, confirmations, registrations,
revalidations, re-examinations, reissues, additions, continuations,
continuations-in-part, or divisions of or to any of the foregoing and (v) all
rights under foreign and domestic patents that include one or more Valid Claims,
including without limitation any substitution, extension (including supplemental
protection certificate), registration, confirmation, reissue, continuation,
divisional, continuation in part, re-examination, renewal or the like, and
domestic pending applications for patents, including without limitation, any
continuation, division or continuation in part thereof, and any provisional
applications.
1.36 "PERIPHERAL ARTERIAL OCCLUSIVE DISEASE" (PAOD) means [*].
1.37 "PHASE I" means that portion of the clinical development program that
generally provides for the first introduction into humans of a Roche Bioscience
Product with the primary purpose of determining safety, metabolism and
pharmacokinetic properties and clinical pharmacology of the Roche Bioscience
Product, as more specifically defined by the rules and regulations of the FDA
and corresponding rules and regulations in any Major European Country or Japan.
1.38 "PHASE III" means that portion of the clinical development program that
provides for the continued trials of a Roche Bioscience Product on sufficiently
large numbers of patients to confirm the safety and efficacy of a Roche
Bioscience Product for the desired claims and indications, as more specifically
defined by the rules and regulations of the FDA and corresponding rules and
regulations in Major European Countries or Japan.
1.39 "PRODUCT" means a Roche Bioscience Product or an Axys Product.
1.40 "PROTEIN PRODUCT" means any product for the prevention, treatment or
diagnosis of any disease or disorder that incorporates a protein or peptide
encoded by the complete, partial, altered or mutated RNA or DNA sequence
corresponding to an RNA or DNA sequence of one or more NemaPharm Target(s)
licensed to Roche
* "Certain confidential information contained in the document, marked by
brackets, has been omitted and filed separately with the Securities and
Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of
1934, as amended."
6.
<PAGE> 11
Bioscience pursuant to Section 4.2.2 or any human or other animal homolog of
that NemaPharm Target(s).
1.41 "REGULATORY APPROVAL" means (i) approval of an NDA by the FDA
permitting commercial sale of a Product and (ii) any comparable approval
permitting commercial sale of a Product granted by applicable authorities in any
other country or jurisdiction including approval of price and reimbursement.
1.42 "RESEARCH FIELD" means research, discovery and characterization of Gene
Products associated with Pain, Peripheral Arterial Occlusive Disease and Lower
Urinary Tract Disorders through the [*].
1.43 "RESEARCH PLAN" shall have the meaning set forth in Section 2.1.
1.44 "RESULTS" means any and all inventions, discoveries, methods, ideas,
Know-How, data, software, techniques and information, including any gene, genes
and sequence information, whether or not patentable, and all Patent Rights and
other proprietary rights appurtenant thereto, that are conceived, made, created
or reduced to practice by Axys and/or its Affiliates in the course of the
Collaboration, as well as any reports relating to the conduct of the
Collaboration during the Collaboration Term.
1.45 "ROCHE BIOSCIENCE GENE" means any Gene Product owned or Controlled by
Roche Bioscience that is provided by Roche Bioscience to Axys and/or its
Affiliates for purposes of the Collaboration as set out in Exhibit 1.45 as may
be amended from time to time.
1.46 "ROCHE BIOSCIENCE KNOW-HOW" means the Know-How owned or Controlled by
Roche Bioscience or its Affiliates relative to the Roche Bioscience Genes that
is necessary or useful to conduct the Collaboration or to develop, manufacture
and commercialize Products.
1.47 "ROCHE BIOSCIENCE PATENT RIGHTS" means the process Patent Rights owned
or Controlled by Roche Bioscience or an Affiliate, covering a Roche Bioscience
Gene, that are required to conduct the Collaboration or to develop, manufacture,
commercialize, distribute, import, export and sell Products, but excluding Joint
Patent Rights.
1.48 "ROCHE BIOSCIENCE PRODUCT" means a Small Molecule Product, Antisense
Product or Diagnostic Product, or an Axys Product that Roche Bioscience has
licensed upon exercise of its right of first negotiation pursuant to Section
4.2.2.
* "Certain confidential information contained in the document, marked by
brackets, has been omitted and filed separately with the Securities and
Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of
1934, as amended."
7.
<PAGE> 12
1.49 "ROCHE BIOSCIENCE TECHNOLOGY" means the Roche Bioscience Patent Rights
and the Roche Bioscience Know-How.
1.50 "ROYALTY TERM" means, in the case of any Roche Bioscience Product, in
any country, the period of time commencing on the First Commercial Sale and
ending upon the [*].
1.51 "SMALL MOLECULE PRODUCT" means any product for the prevention,
treatment or diagnosis of any disease or disorder, that contains [*] one or more
NemaPharm Target(s) licensed to Roche Bioscience pursuant to Section 4.2.1(a) or
any corresponding human or other animal homolog, and such activity is a primary
mechanism of action of such product, excluding any Antisense Product, Gene
Therapy Product, Diagnostic Product or Protein Product.
1.52 "TERRITORY" means the entire world.
1.53 "THIRD PARTY" means any entity other than Axys or Roche Bioscience or
an Affiliate of Axys or Roche Bioscience.
1.54 "VALID CLAIM" means a claim of an issued patent or pending patent
application which claim has not expired, lapsed, been canceled or become
abandoned and has not been declared invalid by an unreversed and unappealable
decision or judgment of a court or other appropriate body of competent
jurisdiction, and which has not been admitted to be invalid or unenforceable
through reissue or disclaimer or otherwise.
2. MANAGEMENT AND SCOPE OF COLLABORATION
2.1 UNDERTAKING AND SCOPE. The Parties hereby agree to establish and
conduct, during the Collaboration Term, a collaborative research program in
accordance with a plan (the "Research Plan") and the terms of this Agreement
with the goal of developing and commercializing Products. The initial Research
Plan for conducting such research program is attached hereto as Exhibit A.
2.2 LIMITED USE. It is understood and agreed that Axys may use any EST that
it, or a Third Party collaborating with Axys, identifies independently of Roche
Bioscience Know-How, even in each case if such ESTs are the same as, or
substantially similar to, the ESTs provided by Roche Bioscience and/or
corresponding full-length
* "Certain confidential information contained in the document, marked by
brackets, has been omitted and filed separately with the Securities and
Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of
1934, as amended."
8.
<PAGE> 13
clone sequences, provided that for a period of [*] from the Effective Date Axys
will not perform research, primarily utilizing C. elegans technologies, on the
same or substantially similar ESTs as those provided by Roche Bioscience and/or
corresponding full-length clone sequences for itself or any Third Party, in the
field of Pain.
2.3 FORMATION OF JRPC. The conduct of the Collaboration will be managed by
the JRPC, which will be comprised of two (2) representatives appointed by Axys
and two (2) representatives appointed by Roche Bioscience. Either Axys or Roche
Bioscience may appoint substitute or replacement members of the JRPC to serve as
their representatives upon notice to the other Party. The JRPC shall decide on
the principal aspects of the Collaboration during the Collaboration Term. The
JRPC shall have the responsibility and authority to (a) plan and monitor the
conduct of the Collaboration, (b) assign tasks and responsibilities under the
Research Plan to Roche Bioscience or Axys , (c) review and modify the Research
Plan, as it shall deem appropriate to achieve the Parties' objectives under this
Agreement and (d) confirm the achievement of milestones and approve payments
therefor. Notwithstanding the foregoing, Axys will not be obligated under the
Research Plan to the extent that such plan requires Axys to devote more than [*]
to the Collaboration; provided that additional FTEs may be included in the
Research Plan if the addition of such FTEs is approved in writing by the JRPC
and Roche Bioscience increases the research funding payable to Axys pursuant to
Section 5.3.
2.4 MEETINGS OF JRPC. The JRPC will initially meet at least once per quarter
at locations and times to be determined by the JRPC, with the intent of meeting
at alternating locations in South San Francisco and Palo Alto, California, with
each Party to bear all travel and related costs for its representatives. The
hosting Party shall pay for any meeting room and related costs.
2.5 JRPC DECISION-MAKING PROCESS. Each Party shall have one vote on the
JRPC, and all decisions by the JRPC shall be made by unanimous vote. Any
disagreement among members of the JRPC will be resolved within the JRPC based on
the efficient achievement of the objectives of this Agreement. Any disagreement
which cannot be resolved by a unanimous vote of the JRPC shall be referred to
the appropriate officers of Axys and Roche Bioscience for resolution under
Article 13. It is the intent of the Parties to resolve issues through the JRPC
whenever possible and to refer issues to the officers of Axys and Roche
Bioscience only when resolution through the JRPC cannot be achieved.
2.6 COLLABORATION TERM EXTENSION. No later than the date that is [*]
following the Effective Date, Roche Bioscience shall provide written notice to
Axys as to whether it wishes to extend the Collaboration Term for an additional
nine (9) month period. Upon notice from Roche Bioscience to Axys that it desires
to extend the Collaboration Term, the Collaboration Term shall be extended until
the date that is
* "Certain confidential information contained in the document, marked by
brackets, has been omitted and filed separately with the Securities and
Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of
1934, as amended."
9.
<PAGE> 14
twenty-four (24) months following the Effective Date, unless earlier terminated
in accordance with Article 11. If not so extended, the Collaboration Term shall
terminate fifteen months after the Effective Date.
3. COLLABORATIVE ACTIVITIES
3.1 MUTUAL RESPONSIBILITIES; COOPERATION. Each Party shall use Commercially
Reasonable Efforts to perform its responsibilities under the Research Plan.
3.2 CONDUCT OF RESEARCH. During the Collaboration Term, each Party shall use
its Commercially Reasonable Efforts to conduct the Collaboration in accordance
with the then current Research Plan and in a good scientific manner and in
compliance in all material respects with all applicable requirements of
applicable laws and regulations.
3.3 AVAILABILITY OF RESOURCES. Within a reasonable time following the
Effective Date, each Party will maintain laboratories, offices and all other
facilities reasonably necessary to carry out the activities to be performed by
such Party pursuant to the Research Plan. Axys shall devote to the Collaboration
[*] research scientists each of whom is experienced in activities described in
the Research Plan. Axys will provide Roche Bioscience with a report on a
quarterly basis of the number of hours spent by Axys researchers conducting the
Collaboration.
3.4 TRANSFER OF MATERIALS. Commencing promptly after the Effective Date and
from time to time thereafter, Roche Bioscience shall transfer to Axys materials
relating to the Roche Bioscience Genes, i.e., EST sequences and clones and gross
tissue expression profiles, and shall disclose to Axys such information
regarding such Roche Bioscience Genes, as, in each case, is reasonably necessary
to enable Axys to perform its Collaboration activities hereunder in accordance
with the Research Plan.
3.5 DISCLOSURE; REPORTS. Each Party will make available and disclose to the
other Party promptly after the Effective Date all Axys Technology or Roche
Bioscience Technology, as applicable, known by such Party as of the Effective
Date, and will also disclose all Axys Technology or Roche Bioscience Technology,
as applicable, learned, acquired or discovered by such Party at any time prior
to the end of the Collaboration Term, as promptly as is reasonably practicable
after such technology is obtained or learned, in each case, to the extent
necessary to permit the Parties to perform their respective obligations under
this Agreement and otherwise to exercise fully the licenses granted hereunder.
Axys will provide at a minimum quarterly written reports (with copies to the
JRPC) presenting a meaningful summary of the activities conducted by such Party
pursuant to the Research Plan or in furtherance of the Collaboration. In
addition, on reasonable request by a Party, the other Party will make
presentations of its activities under this Agreement to inform such Party of the
details of the work done
* "Certain confidential information contained in the document, marked by
brackets, has been omitted and filed separately with the Securities and
Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of
1934, as amended."
10.
<PAGE> 15
under this Agreement. Know-How and other information regarding the research
disclosed by one Party to the other Party pursuant hereto may be used only in
accordance with the rights granted under this Agreement.
3.6 IDENTIFICATION OF NEMAPHARM TARGETS. In accordance with the Research
Plan, Axys shall use Commercially Reasonable Efforts to identify potential
NemaPharm Targets in the Research Field. Axys shall promptly notify Roche
Bioscience of the discovery at any time during the first [*] after the Effective
Date by Axys of a NemaPharm Target in the Research Field and with sufficient
information including but not limited to, [*] for Roche to assess its interest
in the NemaPharm Target.
3.7 SCREENING OF COMPOUNDS; DISCONTINUATION OF DEVELOPMENT. Upon obtaining a
license with respect to a NemaPharm Target in accordance with Section 4.2, Roche
Bioscience [*] against such NemaPharm Target. Promptly after completing the
screening of compounds against such NemaPharm Target, or at least on a
semi-annual basis, Roche Bioscience shall provide written notice to Axys [*].
Such notice shall include [*]. Roche Bioscience shall, in its sole discretion,
select compounds for further development; provided, however, that in the event
that, having become obligated to pay at least one (1) milestone under this
Agreement (beginning with Section 5.4.2) with respect to a NemaPharm Target,
Roche Bioscience subsequently determines for any reason other than insufficient
efficacy or safety not to pursue further development of any compounds acting
against that NemaPharm Target or that NemaPharm Target, Roche Bioscience shall
provide prompt notice of such intention to Axys (a "Notice of Abandonment"), and
Axys shall have the rights set forth in Section 4.4.3 with respect to such
compound and such NemaPharm Target.
3.8 AXYS DEVELOPMENT OF GENE THERAPY PRODUCTS AND PROTEIN PRODUCTS. In the
event that, in accordance with the license granted to Axys pursuant to Section
4.4.1, Axys determines to begin internal research and/or development efforts
with respect to one or more Gene Therapy Products and/or Protein Products based
on a NemaPharm Target licensed to Roche Bioscience under Section 4.2.1, or to
commence efforts to license its rights for Gene Therapy Products or Protein
Products to one or more Third Parties, Axys shall provide prompt written notice
of such intention to Roche Bioscience, and Roche Bioscience shall thereupon have
the rights set forth in Section 4.2.2.
* "Certain confidential information contained in the document, marked by
brackets, has been omitted and filed separately with the Securities and
Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of
1934, as amended."
11.
<PAGE> 16
3.9 FACILITY VISITS. Members of the JRPC shall have reasonable access to the
facilities of the other Party where research activities pursuant to the Research
Plan under this Agreement are in progress, for the sole purpose of performing
their duties as members of the JRPC, but only during normal business hours and
with reasonable prior notice. Each party shall bear its own expenses in
connection with such visits.
4. GRANT OF LICENSES
4.1 RESEARCH LICENSES.
4.1.1 Subject to the terms and conditions of this Agreement and during
the Collaboration Term, Axys grants to Roche Bioscience a worldwide,
non-exclusive license, including the right to grant sublicenses to Affiliates
only, under the Axys Technology solely to conduct Collaboration activities in
accordance with the Research Plan.
4.1.2 Subject to the terms and conditions of this Agreement and during
the Collaboration Term, Roche Bioscience, HLR and FHLR grant to Axys a
worldwide, non-exclusive license, including the right to grant sublicenses to
Affiliates only, under the Roche Bioscience Patent Rights and the Roche
Bioscience Know-How solely to conduct Collaboration activities in accordance
with the Research Plan. Within thirty (30) days after the end of the
Collaboration Term, Axys shall return to Roche Bioscience all copies of
documentation regarding Roche Bioscience Know-How and shall make no further use
thereof except, in both cases, to the extent required to allow Axys to exercise
the licenses granted to it pursuant to this Agreement. If the JRPC, prior to
identification of a NemaPharm Target relative to a particular Roche Bioscience
Gene, decides to discontinue work on such Roche Bioscience Gene, Axys shall
return to Roche Bioscience all copies of documentation regarding Roche
Bioscience Know-How for that particular Roche Bioscience Gene and shall make no
further use thereof.
4.1.3 For Internal Research Purposes. Axys grants to Roche Bioscience a
worldwide, non-exclusive license, including the right to grant sublicenses to
Affiliates only, to use the Results for its, and, as applicable, its
Affiliates', evaluation of any NemaPharm Target solely for the purpose of
licensing such Results pursuant to this Section 4
4.2 LICENSES TO ROCHE BIOSCIENCE IN THE COMMERCIALIZATION FIELD.
4.2.1 With respect to any NemaPharm Target, Axys hereby grants to Roche
Bioscience and its Affiliates an exclusive and non-transferable option
(exercisable solely during the [*] following written notice of identification of
such NemaPharm Target in accordance with Section 3.6) upon written notice
provided by Roche Bioscience to Axys, which is to be immediately
* "Certain confidential information contained in the document, marked by
brackets, has been omitted and filed separately with the Securities and
Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of
1934, as amended."
12.
<PAGE> 17
acknowledged in writing by Axys, to obtain the following licenses, subject to
the provisions of Article 5:
(a) an exclusive (even as to Axys and its Affiliates) worldwide,
royalty-bearing license, including the right to grant sublicenses to Affiliates
or any Third Party, under the Axys Technology and Axys' interest in the Joint
Patent Rights, to use each such NemaPharm Target with respect to which Roche
Bioscience has exercised its option under this Section 4.2.1(a) to discover,
develop, make, have made, use, sell, offer to sell, have sold and import Small
Molecule Products and Antisense Products in the Commercialization Field;
provided, however, [*] obligations set forth in Section 4.6 with respect to such
NemaPharm Target;
(b) a nonexclusive, worldwide, royalty-bearing license, including
the right to grant sublicenses to Affiliates only, under the Axys Technology and
Axys' respective interests in the Joint Patent Rights, to use each such
NemaPharm Target with respect to which Roche Bioscience has exercised its option
under this Section 4.2.1(b) to discover, develop, make, have made, use, sell,
offer to sell, have sold and import Diagnostic Products in the Commercialization
Field.
(c) In the event that Roche Bioscience does not provide written
notice of its exercise of such option with respect to a NemaPharm Target within
the [*] following notice of identification of such NemaPharm Target in
accordance with Section 3.6 or provides written notice of its intention not to
exercise such option, the license granted by Roche Bioscience to Axys pursuant
to Section 4.4.2 shall become effective and all rights with respect to such
NemaPharm Target shall be retained by Axys.
4.2.2 With respect to any NemaPharm Target licensed to Roche Bioscience,
pursuant to Section 4.2.1, and effective upon the occurrence of the events
described in Section 3.8, Axys hereby grants to Roche Bioscience and its
Affiliates an exclusive and non-transferable right [*] to obtain a license under
the Axys Technology, and Axys' interest in the Joint Patent Rights, including
the right to grant sublicenses as allowed pursuant to this Agreement, to use
such NemaPharm Target to discover, develop, make, have made, use, sell, offer to
sell, have sold and import Gene Therapy Products and Protein Products in the
Commercialization Field. Such right [*] shall be exercisable solely during the
[*] following Roche Bioscience's receipt of written notice from Axys under
Section 3.8. During such [*], Roche Bioscience shall provide written notice to
Axys, which is to be immediately acknowledged in writing by Axys, as to whether
it would like to exercise its right [*] with respect to such NemaPharm Target
pursuant to this Section 4.2.2. If Roche Bioscience does not elect to so
exercise its right [*], or if such written notice from Roche Bioscience is not
received within such [*], Roche Bioscience shall have no further rights under
this Section
* "Certain confidential information contained in the document, marked by
brackets, has been omitted and filed separately with the Securities and
Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of
1934, as amended."
13.
<PAGE> 18
4.2.2 with respect to such NemaPharm Target, and Axys shall be free to proceed
with the discovery, development, manufacture, use and sale of Gene Therapy
Products and Protein Products based thereon in the Commercialization Field
either by itself or with one or more Third Parties. If Roche Bioscience does
elect to exercise its right [*] with respect to such NemaPharm Target pursuant
to this Section 4.2.2, then for a period of up to [*] following written notice
of such election by Roche Bioscience, the Parties shall [*]; provided, however,
that if at the end of such [*], the Parties have not reached mutual agreement
with regard to such terms as evidenced by a written agreement, Roche Bioscience
shall have no further rights with respect to such NemaPharm Target under this
Section 4.2.2, and Axys shall be free to proceed with the discovery,
development, manufacture, use and sale of Gene Therapy Products and Protein
Products based thereon in the Commercialization Field, either by itself or with
one or more Third Parties.
4.3 LICENSE TO ROCHE BIOSCIENCE OUTSIDE THE COMMERCIALIZATION FIELD. With
respect to any NemaPharm Target licensed to Roche Bioscience pursuant to Section
4.2.1(a), Axys hereby grants to Roche Bioscience an exclusive and
non-transferable right of first negotiation to obtain a license under the Axys
Technology, and Axys' respective interests in the Joint Patent Rights, to use
such NemaPharm Target to discover, develop, make, have made, use, sell, offer to
sell, have sold and import Small Molecule Products and Antisense Products for
indications outside the Commercialization Field. Such right of first negotiation
shall be exercisable solely during the [*] following Roche Bioscience's exercise
of its option to license such NemaPharm Target pursuant to Section 4.2.1(a).
During such [*], Roche Bioscience shall provide written notice to Axys, which
shall be acknowledged immediately in writing by Axys, as to whether it would
like to exercise its right of first negotiation with respect to such NemaPharm
Target pursuant to this Section 4.3. If Roche Bioscience does not exercise its
right of first negotiation, or if such written notice from Roche Bioscience is
not received within such [*], Roche Bioscience shall have no further rights
under this Section 4.3 with respect to such NemaPharm Target, and Axys shall be
free to proceed with the use of such NemaPharm Target for the discovery,
development, manufacture, use and sale of Small Molecule Products and Antisense
Products for indications outside the Commercialization Field either by itself or
with one or more Third Parties. If Roche Bioscience does elect to exercise its
right of first negotiation with respect to such NemaPharm Target pursuant to
this Section 4.3, then for a period of up to [*] following written notice of
such election by Roche Bioscience, the Parties shall negotiate in good faith
regarding the terms (including but not limited to royalty rates, scope of
exclusivity and milestone payments) upon which such license would be granted to
Roche Bioscience. If at the end of such [*] period, the Parties have not reached
mutual agreement with regard to such terms as evidenced by a written agreement,
Roche Bioscience shall have no further rights with respect to such
* "Certain confidential information contained in the document, marked by
brackets, has been omitted and filed separately with the Securities and
Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of
1934, as amended."
14.
<PAGE> 19
NemaPharm Target under this Section 4.3, and Axys shall be free to proceed with
the use of such NemaPharm Target for the discovery, development, manufacture,
use and sale of Small Molecule Products and Antisense Products for indications
outside the Commercialization Field, either by itself or with one or more Third
Parties.
4.4 LICENSES TO AXYS
4.4.1 With respect to any NemaPharm Target licensed to Roche
Bioscience pursuant to Section 4.2.1 , Roche Bioscience, HLR and FHLR hereby
grants to Axys an exclusive, worldwide, royalty-free license, with the right to
sublicense, under the Roche Bioscience Technology and Roche Bioscience's
interest in the Joint Patent Rights, to use such NemaPharm Target to discover,
develop, make, have made, use, sell, offer to sell, have sold and import Axys
Products.
4.4.2 Effective upon the earlier of the expiration of Roche
Bioscience's Option pursuant to Section 4.2.1 or the delivery of written notice
to Axys of Roche Bioscience's election not to exercise such option, Roche
Bioscience, HLR and FHLR hereby grant to Axys an exclusive, worldwide,
royalty-free license, with the right to sublicense, under the Roche Bioscience
Technology and Roche Bioscience's interest in the Joint Patent Rights, to use
such NemaPharm Target to discover, develop, make, have made, use, sell, offer to
sell, have sold and import (i) products for the prevention, treatment or
diagnosis of any disease or disorder, that contain an antisense product, which
consists of any complete, partial, altered or mutated RNA or DNA sequence
complementary to or derived from an RNA or DNA sequence of such NemaPharm Target
or any human or other animal homolog of that NemaPharm Target, (ii) products for
the prevention, treatment or diagnosis of any disease or disorder that contain a
small molecule [*] that is biologically active directly or indirectly against
such NemaPharm Target or any corresponding human or other animal homolog, (iii)
products or services or combinations thereof used for the diagnosis, prognosis
and/or monitoring of progression of a disease or disorder or which predict an
individual's response to drugs, including but not limited to, adverse events,
effects and efficacy which are developed utilizing, or are comprised of, such
NemaPharm Target or which incorporate any complete, partial, altered or mutated
RNA or DNA sequence corresponding to or complementary to an RNA or DNA sequence
of such NemaPharm Target or any human or other animal homolog of that NemaPharm
Target and (iv) Axys Products.
4.4.3 With respect to any compound or NemaPharm Target for which
Roche Bioscience delivers to Axys a Notice of Abandonment, Roche Bioscience, HLR
and FHLR hereby grant to Axys an exclusive and non-transferable right of first
negotiation to obtain a license under the Roche Bioscience Technology and Roche
Bioscience's interest in the Joint Patent Rights, to discover, develop, make,
have made, use, sell, offer to sell, have sold and import products incorporating
such compound or
* "Certain confidential information contained in the document, marked by
brackets, has been omitted and filed separately with the Securities and
Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of
1934, as amended."
15.
<PAGE> 20
derivatives thereof or NemaPharm Target. Such right of first negotiation shall
be exercisable solely during the [*] following Axys' receipt of a Notice of
Abandonment from Roche Bioscience with respect to such compound or NemaPharm
Target. During such [*], Axys shall provide written notice to Roche Bioscience
as to whether it would like to exercise its right of first negotiation with
respect to such compound or NemaPharm Target pursuant to this Section 4.4.3 . If
Axys does not exercise its right of first negotiation, or if such written notice
from Axys is not received within such [*], Axys shall have no further rights
under this Section 4.4.3 with respect to such compound or NemaPharm Target, and
Roche Bioscience shall be free to negotiate with Third Parties regarding rights
to such compound or NemaPharm Target. If Axys does exercise its right of first
negotiation with respect to such compound or NemaPharm Target pursuant to this
Section 4.4.3, then for a period of up to [*] following written notice of such
election by Axys, the Parties shall negotiate in good faith regarding the terms
upon which such license would be granted to Axys; provided, however, that if at
the end of such [*], the Parties have not reached mutual agreement with regard
to such terms as evidenced by a written agreement, Axys shall have no further
rights with respect to such compound or NemaPharm Target under this Section
4.4.3, and Roche Bioscience shall be free to negotiate with Third Parties
regarding rights to such compound or NemaPharm Target.
4.4.4 Royalty payments shall be made to the Roche Party designated
by Roche Bioscience according to ownership of the Roche Bioscience Patent Rights
or other Know-How.
4.5 SUBLICENSES. Each Party shall notify any permitted sublicensee hereunder
of all rights and obligations of such Party under this Agreement licensed to
such sublicensee.
4.6 DILIGENCE OBLIGATIONS OF ROCHE BIOSCIENCE RELATED TO NEMAPHARM TARGETS.
The licenses granted to Roche Bioscience with respect to a NemaPharm Target
pursuant to this Article 4 will terminate, on a target-by-target basis, and all
rights to such NemaPharm Target will revert to Axys in the event that Roche
Bioscience does not satisfy the conditions in Sections 4.6.1 and 4.6.2.
4.6.1 For Small Molecule Products, within [*] of licensing such
NemaPharm Target, Roche Bioscience shall have [*] if Roche Bioscience meet the
requirement in Section 4.6.2 [*]; and
4.6.2
(a) Within [*] of licensing such NemaPharm Target, Roche
Bioscience shall have [*] in a screen incorporating a NemaPharm Target at a
* "Certain confidential information contained in the document, marked by
brackets, has been omitted and filed separately with the Securities and
Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of
1934, as amended."
16.
<PAGE> 21
[*]; or, Antisense Product that disrupts the NemaPharm Target in an appropriate
disease model state; or
(b) Within [*] of licensing such NemaPharm Target, Roche
Bioscience shall have [*] Diagnostic Product.
4.6.3 After achievement of the requirement in Section 4.6.2, the
licenses granted to Roche Bioscience with respect to a NemaPharm Target will
also terminate on a target by target basis and all rights to such NemaPharm
Target shall revert to Axys if Roche Bioscience thereafter fails to use
Commercially Reasonable Efforts to [*].
4.7 DILIGENCE OBLIGATIONS OF ROCHE BIOSCIENCE WITH RESPECT TO DEVELOPMENT
AND PROMOTION OF ROCHE BIOSCIENCE PRODUCTS.
4.7.1 REASONABLE EFFORTS. Roche Bioscience shall use Commercially
Reasonable Efforts to [*].
4.7.2 LACK OF DILIGENCE. In the event that Roche Bioscience (i) fails to
use or continue to use Commercially Reasonable Efforts to [*] or (ii) notifies
Axys in writing that it will not conduct further commercialization with respect
to a particular Roche Bioscience Product and in either case [*], Roche
Bioscience, HLR and FHLR will grant Axys an exclusive, non-transferable right of
first negotiation to obtain an exclusive license under the Roche Bioscience
Technology and Roche Bioscience's interest in the Joint Patent Rights for the
Roche Bioscience Product for which Commercially Reasonable Efforts have not been
expended or notice has been given to Axys as described in (ii) above.
4.7.3 MARKETING PARTNER. Roche Bioscience shall notify its Affiliates
that in the event that such Affiliate seeks a marketing partner for a Roche
Bioscience Product in a specific country, such Affiliate should provide prompt
written notice of
* "Certain confidential information contained in the document, marked by
brackets, has been omitted and filed separately with the Securities and
Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of
1934, as amended."
17.
<PAGE> 22
such intention to Axys and give Axys an exclusive and non-transferable right of
first negotiation to become such Affiliate's marketing partner in that country.
Such right of first negotiation shall be exercisable solely during the [*]
following Axys' receipt of written notice from such Affiliate under this Section
4.7.3. If Axys elects to exercise its right of first negotiation then for a
period of [*] thereafter the parties shall negotiate in good faith regarding the
terms of such marketing agreement. So long as Roche Bioscience fulfills its duty
to notify its Affiliates pursuant to the first sentence in this Section 4.7.3,
no breach of this Agreement shall arise from the provisions of this Section.
5. PAYMENT OBLIGATIONS
5.1 UPFRONT PAYMENT. Within ten (10) days after the Effective Date, Roche
Bioscience shall pay to Axys a nonrefundable upfront fee of [*] in partial
consideration of the licenses granted herein.
5.2 RESEARCH FUNDING. During the Collaboration Term, including any extension
thereof, Roche Bioscience agrees to provide Axys with research funding for a
total of [*] at an annual rate of [*] to be used by Axys to pursue the
activities set forth in the Research Plan; provided, however, that, in the event
that the Collaboration Term is extended pursuant to Section 2.5, the annual rate
per FTE will be increased for such extension period by a factor which reflects
the increase, if any, in the U.S. Consumer Price Index, as reported as of the
date that is sixty (60) days prior to the commencement of such extension period
when compared to the comparable statistic for the Effective Date. Such research
funding payments shall be made in accordance with the following schedule:
<TABLE>
<CAPTION>
AMOUNT OF PAYMENT DATE PAYABLE
<S> <C> <C>
[*] [*] after the Effective Date
[*] [*] following the Effective Date
[*] [*] after receipt of Final NemaPharm
Report pursuant to Section 3.5 and statement of account.
</TABLE>
5.3 TERM EXTENSION. In the event that the Collaboration Term is extended
pursuant to Section 2.6, the payment schedule for research funding during such
extended period shall be agreed upon in writing by the Parties. Upon a decision
of the JRPC, the number of FTEs to be supported by Roche Bioscience may be
increased to support Collaboration efforts.
5.4 MILESTONE PAYMENTS. Within [*] after achievement of each of the
milestones set forth below, Roche Bioscience shall pay to Axys the nonrefundable
milestone payment set forth below, on a target-by-target basis:
* "Certain confidential information contained in the document, marked by
brackets, has been omitted and filed separately with the Securities and
Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of
1934, as amended."
18.
<PAGE> 23
5.4.1 [*] Upon [*] with respect to each NemaPharm Target pursuant to
Section 4.2.1 ;
5.4.2 [*] Upon identification by Roche Bioscience of [*]; provided,
however, that this milestone shall be [*];
5.4.3 [*] Upon the [*];
5.4.4 [*] Upon the [*] for a Small Molecule Product or Antisense
Product; provided, however, that this milestone shall be [*];
5.4.5 With respect to a Diagnostic Product:
(a) [*] Upon the occurrence of each of:
(i) the [*] of a Diagnostic Product for which [*] for the first
Diagnostic Product ; and
(ii) the [*] for such Diagnostic Product or the derivative
thereof for the first Diagnostic Product ; or
(b) [*] Upon the [*] for the first Diagnostic Product [*];
5.4.6 [*] upon the [*] for a Small Molecule Product or Antisense Product
[*];
5.4.7 [*] Upon [*] for each Small Molecule Product and each Antisense
Product; provided, however, that this milestone shall [*]
* "Certain confidential information contained in the document, marked by
brackets, has been omitted and filed separately with the Securities and
Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of
1934, as amended."
19.
<PAGE> 24
[*];
5.4.8 [*] Upon [*] for each Diagnostic Product; and
5.4.9 [*] Upon [*] for each Small Molecule Product and each Antisense
Product; provided, however, that this milestone shall [*].
5.5 [*]
5.6 ROYALTY PAYMENTS.
5.6.1 SMALL MOLECULE PRODUCTS. Roche Bioscience shall pay to Axys the
following royalty on Net Sales of each Small Molecule Product:
(a) [*] of Net Sales on the [*];
(b) [*] of Net Sales on the portion of aggregate worldwide Net Sales
between [*] and [*];
(c) [*] of Net Sales on the portion of aggregate worldwide Net Sales
between [*] and [*]; and
(d) [*] of Net Sales on the portion of aggregate worldwide Net Sales
exceeding [*].
5.6.2 Antisense Products. Roche Bioscience shall pay to Axys a royalty
of [*] on Net Sales of each Antisense Product.
5.6.3 DIAGNOSTIC PRODUCTS. Roche Bioscience shall pay to Axys a royalty
of [*] on Net Sales of each Diagnostic Product.
5.6.4 ROYALTY TERM. Royalties for sales of any Roche Bioscience Product
in any given country shall be paid for a period equal to the Royalty Term. In
the event that, in a given country, patents included in the Axys Patent Rights,
the Roche Bioscience Patent Rights, or the Joint Patent Rights covering a Roche
Bioscience Product
* "Certain confidential information contained in the document, marked by
brackets, has been omitted and filed separately with the Securities and
Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of
1934, as amended."
20.
<PAGE> 25
have issued in such country, all such issued patents in that country have
expired and the Royalty Term is still in effect, then the royalties payable
under this Section 5.6 on sales of such Roche Bioscience Product in that country
shall be [*] from and after the date of expiration of the last to expire of such
issued patents unless and until a patent included in the Axys Patent Rights, or
the Joint Patent Rights covering such Roche Bioscience Product thereafter issues
in such country.
5.6.5 COMBINATION PRODUCT. Net Sales on a Combination Product shall be
the [*] by Roche Bioscience, its Affiliates or Sublicensees from a sale of a
Roche Bioscience Product containing only a compound discovered or developed
using the NemaPharm Target (NemaPharm Target Sole Product) as an active
ingredient in an arm's length transaction with an unAffiliated third party. If
the NemaPharm Target Sole Product is not sold separately, the Parties shall [*]
for such NemaPharm Target Sole Product. The Net Sales upon which a royalty is
paid shall then be computed by [*].
5.7 THIRD PARTY ROYALTIES. Roche Bioscience shall be responsible for the
payment of royalties under all Third Party licenses that are payable in
connection with each Roche Bioscience Product's development and
commercialization and that are incurred by Roche Bioscience, the costs of
conducting the clinical trials and the costs associated with Regulatory
Approval. Notwithstanding the foregoing or the provisions of Section 5.6.2,
Roche Bioscience shall be entitled to [*] with respect to sales of such
Antisense Product; provided, however, that in no event will the effect of this
Section 5.7 cause the royalty payable to Axys with respect to such Antisense
Product under Section 5.6.3 to [*] of Net Sales.
Axys will discuss with Roche Bioscience Third Party licenses that it
proposes to enter into after the Effective Date. At the time that Axys obtains a
license under Section 4.4.2 or after Roche Bioscience has elected not to acquire
a license, Axys shall become responsible for payment of royalties that
thereafter accrue under Third Party licenses described above with respect to the
compounds so licensed.
6. PAYMENTS; RECORDS; AUDITS
6.1 PAYMENT; REPORTS. All royalty payments due to Axys under this Agreement
shall be paid within [*] of the end of each calendar quarter, unless otherwise
specifically provided herein. Each payment of royalties shall be accompanied by
a report of Net Sales of Roche Bioscience Products in sufficient detail to
permit confirmation of the accuracy of the royalty payment made.
* "Certain confidential information contained in the document, marked by
brackets, has been omitted and filed separately with the Securities and
Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of
1934, as amended."
21.
<PAGE> 26
6.2 EXCHANGE RATE; MANNER AND PLACE OF PAYMENT. All payments shall be in
United States dollars. Any required conversion of Adjusted Gross Sales, Net
Sales and any milestone or royalty amounts to Untied States dollars shall be
done using the monthly average rate of exchange for the calendar month in which
such Adjusted Gross Sales, Net Sales and any royalty or milestone amounts were
incurred or first determined.
6.2.1 The conversion from a foreign currency to United States dollars
shall be made by using the average of the daily official rates of exchange for
each day in the calendar month, using the rates of exchange as computed in
Roche's central foreign currency exchange data base built from the Reuters
System, or another qualified source that is mutually acceptable to the parties.
Roche shall disclose to Axys the contents of such central foreign currency
exchange data base.
6.2.2 To the extent that free conversion from the local currency to
United States dollars is permitted, payments shall be made in United States
dollars to a bank account designated by the creditor party. If, due to
restrictions or prohibitions imposed by a national or international authority,
payments cannot be made as aforesaid, the parties shall consult with a view to
finding a prompt and acceptable solution, and a party shall, from time to time,
deal with such moneys as the other party(s) may lawfully direct, but at no
additional out-of-pocket expense. Notwithstanding the foregoing, if required
remittances in any country cannot be converted or remitted to a party for any
reason within three (3) months after such remittance is otherwise due, then the
remitting party shall be obligated to deposit the local currency equivalent of
the required United States dollar remittance in a bank account in such country
in the name of the other party(s). If free conversion of such funds to United
States dollars is not possible within twelve (12) months of the original
remittance due date, the remitting party shall pay to the other party(s) at such
time the United States dollar equivalent of such local currency funds (including
any interest earned from the deposit of the local currency) and the local
currency account shall become the property of the remitting party. The
conversion of local currency to United States dollars shall be based on the
monthly average rate of exchange for the calendar month immediately preceding
the month in which such remittance is made, as such average rate of exchange is
computed above.
6.3 LATE PAYMENTS. In the event that any payment, including royalty,
milestone and research payments, due hereunder is not made when due without
Force Majeure pursuant to Section 14.2, the payment shall accrue interest from
the date due at the average one (1) month London Interbank Offered Rates, as
reported by Datastream from time to time, plus one hundred (100) basis points,
per month; provided, however, that in no event shall such rate exceed the
maximum legal annual interest rate. The payment of such interest shall not limit
any Party from exercising any other rights it may have as a consequence of the
lateness of any payment.
22.
<PAGE> 27
6.4 RECORDS AND AUDITS. For a period of [*] after the end of the
calendar year of sale of a Roche Bioscience Product, Roche Bioscience shall
maintain and cause its Affiliates and sublicensees to maintain books of account
and complete and accurate records pertaining to the sale or other disposition of
Roche Bioscience Products and of the royalty and other amounts payable under
this Agreement in sufficient detail to permit Axys to confirm the correctness of
such items. Upon timely request by Axys, Roche Bioscience agrees to instruct its
independent accounting firm to perform, during Roche Bioscience's annual audit,
such additional auditing and accounting procedures as are reasonably necessary
to enable such accounting firm to confirm to Axys the correctness of (i) the
amounts stated in any reports provided by Roche Bioscience; and (ii) to the
extent specifically and reasonably requested, in a timely manner, by Axys, other
relevant details pertaining to the sale or other disposition of Roche Bioscience
Products and of the royalty and other amounts payable or receivable under this
Agreement, including the relevant details of Adjusted Gross Sales and Net Sales;
such additional accounting and auditing procedures need only be performed for
countries specifically requested by the authorized representative of Axys. Such
audit shall be performed no more than once per year and shall occur no more than
once with respect to records covering any specific period of time. All
information, data, documents and abstracts herein referred to shall be used only
for the purpose of verifying royalty statements or compliance with this
Agreement, shall be treated as Roche Bioscience's Confidential Information
subject to the obligations of this Agreement. Axys shall pay for any reasonable
expense over and above Roche's regular audit fee, if any, incurred for such
additional audit work.
The failure of Axys to request verification of any royalty calculation
during the period when records must be maintained shall be considered acceptance
of the accuracy of such reporting. In the event that such audit shall indicate
that in any calendar year, the royalties that should have been paid by Roche
Bioscience are greater that those that were actually paid by Roche Bioscience,
then Roche Bioscience shall promptly pay the underpaid amount to Axys and/or its
Affiliates and in the event that the royalties that should have been paid by
Roche Bioscience are at least [*] than those that were actually paid by Roche
Bioscience, then Roche Bioscience [*], Adjustments in the amounts due
because of an audit shall be settled on or before the next quarterly payment
date. In the event that such audit shall indicate that in any calendar year the
royalties that were actually paid by Roche Bioscience are greater than those
that should have been paid, then such overpayment shall be credited to the next
royalty payment due to Axys if there is to be one within six (6) months;
otherwise Axys shall remit such overpayment to Roche Bioscience within thirty
(30) days after receipt of written notice to that effect. Any payments due
pursuant to the terms of this Section 6.4 that are not paid on or before the
date such payments are due shall bear interest at the rate described in Section
6.3.
* "Certain confidential information contained in the document, marked by
brackets, has been omitted and filed separately with the Securities and
Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of
1934, as amended."
23.
<PAGE> 28
6.5 TAXES. Roche Bioscience shall be entitled to withhold from a royalty or
other payment due Axys, the amount, if any, of any withholding tax assessable to
the party due the payment, provided evidence of payment of any such tax is
promptly provided to the Party for which the tax is withheld. If any taxes
(other than value-added taxes) are imposed on payments of royalties to Axys and
are required to be withheld therefrom, such taxes shall be for the account of
Axys, respectively, and the payments due to the Party for which tax is withheld
shall be reduced accordingly. Roche Bioscience shall advise Axys and provide it
with copies of the tax receipts for all taxes deducted from the payment of
royalties due them.
6.6 PROHIBITED PAYMENTS. Notwithstanding any other provision of this
Agreement, if any Party is prevented from paying any such royalty by virtue of
the statutes, laws, codes or governmental regulations of the country from which
the payment is to be made, then such royalty may be paid by depositing funds in
the currency in which accrued to the other Party's account in a bank acceptable
to the other Party in the country whose currency is involved.
7. PATENT RIGHTS AND INFRINGEMENT
7.1 OWNERSHIP OF PATENT RIGHTS. Roche Bioscience shall own all right, title,
and interest in and to all Roche Bioscience Patent Rights and Roche Bioscience
Know-How and all inventions conceived of and reduced to practice during the
Collaboration Term solely by its employees and agents, and all patent
applications and patents claiming such inventions. Axys shall own all right,
title, and interest in and to all Axys Patent Rights and Axys Know-How and all
inventions conceived of and reduced to practice during the Collaboration Term
solely by its employees and agents, and all patent applications and patents
claiming such inventions. All inventions conceived of and reduced to practice
jointly by employees or agents of Roche Bioscience and/or its Affiliates, on the
one hand, and employees or agents of Axys and/or its Affiliates, on the other
hand, and all Joint Patent Rights claiming such inventions, shall be owned
jointly by Roche Bioscience and/or its Affiliates and Axys and/or its
Affiliates.
7.2 CONFIDENTIALITY OBLIGATIONS. Each Party hereby represents and warrants
that all employees and Persons (Persons shall include individuals and any
business entity) acting on its behalf in performing its obligations under this
Agreement shall be obligated to assign to it, or as it shall direct, all
inventions, ideas, trade secrets, copyrights conceived by such employees or
other Persons and all such employees and other Persons shall be subject to
confidentiality provisions at least as restrictive as those in this Agreement.
7.3 PROSECUTION AND MAINTENANCE OF PATENT RIGHTS.
24.
<PAGE> 29
7.3.1 It is the intention of the Parties to secure broad patent
protection for discoveries and inventions made in connection with the
Collaboration. Roche Bioscience shall be responsible for the filing, prosecution
and maintenance of all Roche Bioscience Patent Rights and all patent
applications and patents covering Roche Bioscience Know-How and any discoveries
and inventions conceived of or reduced to practice by its employees and agents
in the course of the Collaboration. Axys shall be responsible for the filing,
prosecution and maintenance of all Axys Patent Rights and all patent
applications and patents covering the Axys Know-How and any discoveries and
inventions conceived of or reduced to practice by the employees and agents of
Axys and/or its Affiliates in the course of the Collaboration. Each Party shall
consider in good faith the requests and suggestions of the other Party with
respect to strategies for filing and prosecuting such patent applications. The
inventing Party shall keep the other Party informed of progress with regard to
the filing, prosecution, maintenance, enforcement and defense of patents
applications and patents subject to this Section 7.3.1.
7.3.2 [*] shall be responsible for the filing, prosecution, and
maintenance of all Joint Patent Rights, provided that [*] shall have the sole
right to decide to keep an invention as a trade secret instead of filing for
patent protection provided that [*] holds a license to such invention or, if
such invention is related to a NemaPharm Target, has not yet [*]. [*] shall
furnish [*] copies of all relevant documents with respect to preparation,
filing, prosecution and maintenance of such Joint Patent Rights on a regular
basis reasonably in advance of any deadline or action with the U.S. Patent &
Trademark Office or any foreign patent office. [*] shall consult [*] as to the
preparation, filing, prosecution, and maintenance of such Joint Patent Rights on
a regular basis. Selection of outside counsel relative to Joint Patent Rights
shall be with the concurrence of [*] shall not be unreasonably withheld. In the
event that [*] desires to abandon any Joint Patent Right, [*] shall provide
reasonable prior written notice [*] of such intention to abandon, and [*] shall
have the right, at its expense, to prepare, file, prosecute, and maintain any
such Joint Patent Right and in such event [*] shall have no further rights in
relation to such Joint Patent Right. Nothing herein shall negate [*] license or
other rights under the Joint Patent Rights. Except for the abandonment provision
above , reasonable expenses associated with the prosecution and maintenance of
the Joint Patent Rights shall be shared equally between the Parties.
7.4 COOPERATION OF THE PARTIES. Each Party agrees to cooperate fully in the
preparation, filing, and prosecution of any Patent Rights under this Agreement.
Such cooperation includes, but is not limited to:
7.4.1 making, executing and delivering any and all papers and
instruments, or requiring its employees or agents, to execute such papers and
instruments, and performing any and all acts necessary for a Party to prepare,
file,
* "Certain confidential information contained in the document, marked by
brackets, has been omitted and filed separately with the Securities and
Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of
1934, as amended."
25.
<PAGE> 30
prosecute and maintain Patent Rights, or, so as to effectuate the ownership of
Patent Rights set forth in Section 7.1 and to enable the other Party to apply
for and to prosecute and maintain patent applications and patents in any
country; and
7.4.2 promptly informing the other Party of any matters coming to such
party's attention that may affect the preparation, filing, prosecution or
maintenance of any such patent applications and patents.
7.5 INFRINGEMENT BY THIRD PARTIES. Roche Bioscience and Axys shall promptly
notify each other in writing of any alleged or threatened infringement of any
patent included in the Axys Patent Rights, the Roche Bioscience Patent Rights or
the Joint Patent Rights of which it becomes aware. The Parties shall use their
best efforts in cooperating with one another to terminate such infringement
without litigation. Axys shall have the sole right to bring and control any
action or proceeding with respect to infringement of any patent included in the
Axys Patent Rights at its own expense and by counsel of its own choice. Roche
Bioscience shall have the sole right to bring and control any action or
proceeding with respect to infringement of any patent included in the Roche
Bioscience Patent Rights at its own expense and by counsel of its own choice.
Roche Bioscience shall have the first right to bring and control any action or
proceeding with respect to infringement of any patent included in any Joint
Patent Rights at its own expense and by counsel of its own choice, and Axys
shall have the right to be represented in any action involving such Joint Patent
Rights at its own expense and by counsel of its own choice. If Roche Bioscience
fails to bring an action or proceeding with respect to any infringement of any
Joint Patent Rights within (i) [*] following the notice of alleged infringement
or (ii) [*] before the time limit, if any, set forth in the appropriate laws and
regulations for the filing of such actions, whichever comes first, Axys shall
have the right to bring and control any such action at its own expense and by
counsel of its own choice, and Roche Bioscience shall have the right, at its own
expense, to be represented in any such action by counsel of its own choice.
In the event a Party brings an infringement action, the other Parties shall
cooperate fully, including if required to bring such action, the furnishing of a
power of attorney. No Party shall have the right to settle any patent
infringement litigation under this Section 7.5 in a manner that diminishes the
rights or interests of another Party or obligates another Party to make any
payment or take any action without the consent of such other Party. Except as
otherwise agreed to by the Parties as part of a cost sharing arrangement, any
recovery realized as a result of such litigation involving any Joint Patent
Rights, after reimbursement of any reasonable litigation expenses of Roche
Bioscience, and Axys shall belong to the Party who brought the action. With
respect to any recovery net of litigation expenses relative to Joint Patent
Rights received by Roche Bioscience, to the extent compensatory for expected but
lost sales by Roche Bioscience of a Product, such net recovery shall [*]
* "Certain confidential information contained in the document, marked by
brackets, has been omitted and filed separately with the Securities and
Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of
1934, as amended."
26.
<PAGE> 31
[*] of this Agreement, and, to the extent punitive, Roche Bioscience shall [*]
with Axys.
7.6 INFRINGEMENT OF THIRD PARTY RIGHTS. Roche Bioscience and Axys shall
promptly notify one another in writing of any allegation by a Third Party that
the activity of any of the Parties in connection with this Collaboration
infringes or may infringe the intellectual property rights of such Third Party.
Roche Bioscience shall have the first right to control any defense of such claim
at its own expense and by counsel of its own choice, and Axys shall have the
right, at their own expense, to be represented in any such action by counsel of
their own choice. If Roche Bioscience fails to proceed in a timely fashion with
regard to such defense, Axys shall have the right to control any such defense of
such claim at its own expense and by counsel of its own choice, and Roche
Bioscience shall have the right, at its own expense, to be represented in any
such action by counsel of its own choice. No Party shall have the right to
settle any patent infringement litigation under this Section 7.6 in a manner
that diminishes the rights or interests of another Party or obligates another
Party to make any payment or take any action without the consent of such other
Party.
8. INDEPENDENT CONTRACTOR
This Agreement shall not constitute, create, or otherwise imply a joint
venture, pooling arrangement, partnership or formal business organization of any
kind. The parties agree that the obligations and duties of each party arising
under this Agreement regardless of whether shared, identical, or otherwise
similar, are separate and distinct from the obligations and duties of the other
party. Actions or failures to act by one party shall not confer joint and
several liability to the other party. No party shall have the authority to act
on behalf of any other party, or to commit any other party in any manner or
cause whatsoever. No party shall be liable for any act, omission,
representation, obligation, or debt of any other party, even if informed of such
act, omission, representation, obligation or debt.
9. CONFIDENTIALITY
9.1 NONDISCLOSURE. During the longer of the Collaboration Term and the
Royalty Term, and for a period of [*] thereafter, each Party shall maintain all
Confidential Information as confidential and shall not disclose any Confidential
Information to any Third Party or use any Confidential Information for any
purpose except (a) as expressly authorized by this Agreement, (b) as required by
law or court order or (c) to its Affiliates. Each Party may use such
Confidential Information only to the extent required to accomplish the purposes
of this Agreement. Each Party shall use at least the same standard of care as it
uses to protect proprietary or confidential information of its own to ensure
that its Affiliates, employees, agents, consultants and other representatives do
not disclose or make any unauthorized use of the Confidential
* "Certain confidential information contained in the document, marked by
brackets, has been omitted and filed separately with the Securities and
Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of
1934, as amended."
27.
<PAGE> 32
Information. Each Party will promptly notify the others upon discovery of any
unauthorized use or disclosure of the Confidential Information.
9.2 EXCEPTIONS. Confidential Information shall not include any information
which the receiving Party can prove by competent, written evidence:
9.2.1 is now, or hereafter becomes, through no act or failure to act on
the part of the receiving Party, generally publicly known or available;
9.2.2 is known by the receiving Party at the time of receiving such
information, as evidenced by its records;
9.2.3 is hereafter furnished to the receiving Party by a Third Party, as
a matter of right and without restriction on disclosure;
9.2.4 is independently developed by the receiving Party without the aid,
application or use of Confidential Information; or
9.2.5 is the subject of a written permission to disclose provided by the
disclosing Party.
9.3 PUBLICATIONS. Each Party to this Agreement recognizes that the
publication of papers, abstracts, presentations, or other public disclosures
("Publications") regarding results of Collaboration activities hereunder may be
beneficial to both Parties provided such publications are subject to reasonable
controls to protect Confidential Information and Patent Rights. In particular,
it is the intent of the Parties to maintain the confidentiality of any
Confidential Information included in any U.S. or foreign patent application
until such U.S. or foreign patent application has been published. Accordingly,
each Party shall have the right to review, comment upon and approve any proposed
Publication by the other Party that utilizes data generated from the
Collaboration activities and/or includes Confidential Information of the other
Party. Before any such Publication is submitted, the Party proposing the
Publication shall deliver a complete copy to the other Party at least [*] prior
to submitting the proposed Publication to a third party. The receiving Party
shall review any such proposed Publication and give comments to the submitting
Party within [*] of the delivery of such proposed Publication to the receiving
Party. The submitting Party shall comply with the other Party's requests to
delete references to such other Party's Confidential Information in any such
proposed Publication and agrees to withhold Publication of same for an
additional [*] days in order to permit the Parties to obtain patent protection,
if either of the Parties deem it necessary, in accordance with the terms of this
Agreement.
10. REPRESENTATIONS, WARRANTIES AND COVENANTS
* "Certain confidential information contained in the document, marked by
brackets, has been omitted and filed separately with the Securities and
Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange
Act of 1934, as amended."
28.
<PAGE> 33
10.1 CORPORATE POWER. Each Party hereby represents and warrants that such
Party is duly organized and validly existing under the laws of the state of its
incorporation and has full corporate power and authority to enter into this
Agreement and to carry out the provisions hereof.
10.2 DUE AUTHORIZATION. Each Party hereby represents and warrants that such
Party is duly authorized to execute and deliver this Agreement and to perform
its obligations hereunder.
10.3 BINDING AGREEMENT. Each Party hereby represents and warrants that this
Agreement is a legal and valid obligation binding upon it and is enforceable in
accordance with its terms. The execution, delivery and performance of this
Agreement by such Party does not conflict with any agreement, instrument or
understanding, oral or written, to which it is a Party or by which it may be
bound, nor violate any law or regulation of any court, governmental body or
administrative or other agency having authority over it.
10.4 DISCLAIMER OF WARRANTIES. No Party to this Agreement guarantees the
safety or usefulness of any Product. EXCEPT AS EXPRESSLY SET FORTH IN THIS
AGREEMENT, NO PARTY MAKES ANY REPRESENTATION OR WARRANTY TO ANY OTHER PARTY OF
ANY NATURE, EXPRESS OR IMPLIED, INCLUDING, WITHOUT LIMITATION, ANY WARRANTY OF
NONINFRINGEMENT, VALIDITY, MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.
10.5 MUTUAL INDEMNIFICATION. Each Party hereby agrees to save, defend, hold
harmless and indemnify the other Party and its officers, directors, employees,
consultants and agents harmless from and against any and all suits, claims,
actions demands, liabilities, expenses and losses, including reasonable legal
expense and attorneys' fees ("Losses") resulting directly or indirectly from the
manufacture, development, use, handling, storage, sale or other disposition of
chemical agents or Products by such Party, its Affiliates or sublicensees,
except to the extent such Losses result from the gross negligence or willful
misconduct of the Party claiming a right of indemnification under this Section
10.5, provided that Roche Bioscience's indemnification shall not extend to
patent infringement allegations relative to the Joint Patent Rights, Axys Patent
Rights, Axys Know-How, and Axys' obligations shall not extend to allegations of
infringement involving Joint Patent Rights, Roche Bioscience Patent Rights, or
Roche Bioscience Know-How. In the event a Party seeks indemnification under this
Section 10.5, it shall inform the other Party in writing of a claim as soon as
reasonably practicable after it receives notice of the claim, shall permit the
other Party to assume direction and control of the defense of the claim
(including the right to settle the claim solely for monetary consideration), and
shall cooperate as requested (at the expense of the other Party) in the defense
of the claim.
11. TERM AND TERMINATION
29.
<PAGE> 34
11.1 TERM. This Agreement shall commence as of the Effective Date and,
unless sooner terminated as provided herein, the rights and obligations of the
Parties under this Agreement, shall expire on the later of (i) the last day of
the Royalty Term, or (ii) if no NemaPharm Target has been identified, then five
years after the Effective Date.
11.2 TERMINATION FOR CAUSE. Either Party may terminate this Agreement during
the Collaboration Term or during the Royalty Term, as applicable, upon [*]
written notice upon the occurrence of any of the following:
11.2.1 Upon or after the bankruptcy, insolvency, dissolution or winding
up of the other Party (other than dissolution or winding up for the purposes of
reconstruction or amalgamation); or
11.2.2 Upon or after the breach of any material provision of this
Agreement by the other Party if the breaching Party has not cured such breach
(or if such breach is not reasonably capable of being cured within such [*]
period, and the defaulting Party is diligently proceeding to cure such breach)
and the breach could not be settled by arbitration within the [*] period
following written notice of termination by the other Party. As a general rule,
termination shall apply NemaPharm Target by NemaPharm Target, Product by Product
and country by country rather than to the Agreement as a whole.
11.3 EFFECT OF EXPIRATION OR TERMINATION.
11.3.1 Expiration or termination of the Collaboration Term or the
Royalty Term, as applicable, shall not relieve the Parties of any obligation
accruing prior to such expiration or termination. Except as set forth below or
elsewhere in this Agreement, the obligations and rights of the Parties under
Sections 6.4, 7.1, 10.4, 10.5, and 11.3, Articles 9, 13 and 14 shall survive
termination or expiration of both the Collaboration Term and the Royalty Term.
11.3.2 Without limiting any remedies otherwise available to a Party, if
such Party terminates this Agreement for cause pursuant to Section either prior
to the end of the Collaboration Term or prior to the end of the Royalty Term,
(i) all licenses granted by such Party to the other Party hereunder shall
terminate and revert to the non-breaching Party, (ii) the breaching Party shall
return to the non-breaching Party all of the non-breaching party's Confidential
Information (retaining one copy thereof for the breaching party's records), and
(iii) in addition to the survival of certain rights and obligations of the
Parties pursuant to Section 11.4.1 [*] under this Agreement.
* "Certain confidential information contained in the document, marked by
brackets, has been omitted and filed separately with the Securities and
Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of
1934, as amended."
30.
<PAGE> 35
12. PUBLICITY
12.1 PUBLICITY REVIEW. Roche Bioscience and Axys will jointly discuss and
agree, based on the principles of Section 12.2, on any statement to the public
regarding the execution and the subject matter of this Agreement or any other
aspect of this Agreement, except with respect to disclosures required by law or
regulation. Neither Party shall use the name of the other Party, or name(s) of
the other Party's officers, directors, employees, or agents, in any public
statement, prospectus, annual report, or press release without the prior written
approval of the other Party, which may not be unreasonably withheld or delayed;
provided, however, that both Parties shall endeavor in good faith to give the
other Party a minimum of five (5) business days to review such press release,
prospectus, annual report, or other public statement.
12.2 STANDARDS. In the discussion and agreement referred to in Section 12.1,
the principles observed by Roche Bioscience and Axys will be accuracy, the
requirements for confidentiality under Article 9, the advantage a competitor of
Roche Bioscience or Axys may gain from any public or Third Party statements
under Section 12.1, the requirements of disclosure under any securities laws or
regulations of the United States, including those associated with public
offerings, and the standards and customs in the pharmaceutical industry for such
disclosures by companies comparable to Roche Bioscience and Axys.
13. DISPUTE RESOLUTION
13.1 DISPUTES. The Parties recognize that disputes as to certain matters may
from time to time arise which relate to either party's rights and/or obligations
hereunder. It is the objective of the Parties to establish procedures to
facilitate the resolution of such disputes in an expedient manner by mutual
cooperation and without resort to litigation. To accomplish this objective, the
Parties agree to follow the procedures set forth in this Article 13 if and when
such a dispute arises between the Parties.
13.2 PROCEDURE.
13.2.1 If the Parties or the JRPC cannot resolve the dispute within
twenty (20) days of formal request by either Party to the other, either Party
may, by written notice to the other, have such dispute referred to their
respective officers designated below or their successors, for attempted
resolution by good faith negotiations within thirty (30) days after such notice
is received. Said designated officers are as follows:
For Roche Bioscience: President
For Axys: President
31.
<PAGE> 36
13.2.2 Any unresolved disputes arising between the Parties relating to,
arising out of or in any way connected with this Agreement or any term or
condition hereof, or the performance by either Party of its obligations
hereunder, whether before or after termination of this Agreement, shall be
finally resolved by final and binding arbitration. Whenever a Party shall decide
to institute arbitration proceedings, it shall give written notice to that
effect to the other Party. Arbitration shall be held in San Francisco,
California, according to the American Arbitration Association ("AAA") rules. The
arbitration shall be conducted by a single arbitrator mutually chosen by the
Parties. If the Parties cannot agree upon a single arbitrator within fifteen
(15) days after the institution of the arbitration proceeding, then the
arbitration shall be conducted by a single neutral, impartial and independent
arbitrator appointed in accordance with AAA rules. All arbitrator(s) eligible to
conduct the arbitration must agree to render their opinion(s) within thirty (30)
days of the final arbitration hearing. No arbitrator (nor the panel of
arbitrators) shall have the power to award punitive damages under this Agreement
and such award is expressly prohibited. Decisions of the arbitrator(s) shall be
final and binding on all of the Parties. Judgment on the award so rendered may
be entered in any court having jurisdiction thereof. In any arbitration pursuant
to this Agreement, the arbitrators shall apply the laws of the State of
California. Except as required by law, no Party, nor the arbitrator, may
publicly disclose the existence, content, or results of any arbitration
hereunder with the prior written consent of all Parties participating in the
arbitration.
14. MISCELLANEOUS
14.1 ASSIGNMENT.
14.1.1 Notwithstanding any provision of this Agreement to the contrary,
any Party may assign any or all of its rights or obligations under this
Agreement in any country to any Affiliates; provided, however, that such
assignment shall not relieve the assigning Party of its responsibilities for
performance of its obligations under this Agreement.
14.1.2 Any Party may also assign its rights or obligations under this
Agreement with the prior written consent of the other Party. This Agreement
shall survive (i) any merger or reorganization of a Party with or into another
Party, and (ii) any sale of all or substantially all of the assets of a Party to
a Third Party. No consent for such transaction shall be required hereunder;
provided, however, that in the event of such transaction, intellectual property
rights of a Party to such transaction, other than one of the Parties to this
Agreement (the "Acquiring Party"), shall not be included in the technology
licensed hereunder unless shareholders of a Party hereto beneficially own 50% or
more of the total outstanding voting stock or other voting rights of such
Acquiring Party and a majority control of the Board of Directors of the
Acquiring Party immediately following such transaction.
32.
<PAGE> 37
14.1.3 This Agreement shall be binding upon and inure to the benefit of
the successors and permitted assigns of the Parties. Any assignment not in
accordance with this Agreement shall be void.
14.2 FORCE MAJEURE. Neither Party shall lose any rights hereunder or be
liable to the other Party for damages or losses on account of failure of
performance by the defaulting Party if the failure is occasioned by government
action, war, fire, earthquake, explosion, flood, strike, lockout, embargo, act
of God, or any other similar cause beyond the control of the defaulting Party;
provided, however, that the Party claiming force majeure has exerted all
reasonable efforts to avoid or remedy such condition; and provided further, that
the other Party may suspend any payment obligations due under this Agreement
until the defaulting Party resumes its performance if such condition continues
for a period of one hundred eighty (180) days or more.
14.3 PAYMENT IN U.S. DOLLARS. All payments due to a Party under this
Agreement shall be paid in U.S. Dollars.
14.4 NOTICES. Any notices or communications provided for in this Agreement
to be made by any of the Parties to the other shall be in writing, in English,
and shall be deemed to have been duly given upon the date of receipt if
delivered by hand, recognized overnight courier, confirmed facsimile
transmission, or registered or certified mail, return receipt requested, postage
prepaid to the addresses or facsimile numbers below. A Party may by like notice
specify an address to which notices and communications shall thereafter be sent.
If to Roche Bioscience:
Roche Bioscience With a copy to:
3401 Hillview Avenue Roche Bioscience
Palo Alto, CA 94304 A division of Syntex (U.S.A.) Inc.
Attention: Vice President, Neurobiology 3401 Hillview Avenue
Palo Alto, CA 94304
Fax: (650)852-1932 Attn: Vice President, Legal Affairs
Fax: (650) 852-1338
If to Axys:
With a copy to:
Axys Pharmaceuticals, Inc. Axys Pharmaceuticals, Inc.
180 Kimball Way 11099 N. Torrey Pines Road, Suite 160
South San Francisco, CA 94080 La Jolla, CA 92037
Attention: Senior Director, Legal
Attention: President and Chief Operating Officer
33.
<PAGE> 38
Fax: (619) 452-6653 Fax: (619) 452-4378
If to F. Hoffmann-La Roche Ltd. With a copy for both F. Hoffmann-La
Roche Ltd and Hoffmann-La Roche,
Inc. to Roche Bioscience
Vice President, Legal
Affairs at the address above.
F. Hoffmann-La Roche Ltd
Corporate Law, Building 21
H-4070 Basel
Switzerland Fax: 41-61-688-1396
If to Hoffmann-La Roche, Inc.
Hoffmann-La Roche, Inc.
General Counsel
340 Kingsland St
Nutley, New Jersey 07110-1199 Fax: 973-235-3500
14.5 GOVERNING LAW. This Agreement shall be governed by the laws of the
State of California, as such laws are applied to contracts entered into and to
be performed within such state, without regard to the choice of law provisions
of it or any other jurisdiction.
14.6 WAIVER. Except as specifically provided for herein, the waiver from
time to time by the Parties of any of their rights or their failure to exercise
any remedy shall not operate or be construed as a continuing waiver of same or
of any other of such party's rights or remedies provided in this Agreement.
14.7 SEVERABILITY. If any term, covenant or condition of this Agreement or
the application thereof to any Party or circumstance shall, to any extent, be
held to be invalid or unenforceable, then (a) the remainder of this Agreement,
or the application of such term, covenant or condition to Parties or
circumstances other than those as to which it is held invalid or unenforceable,
shall not be affected thereby and each term, covenant or condition of this
Agreement shall be valid and be enforced to the fullest extent permitted by law;
and (b) the Parties hereto covenant and agree to renegotiate any such term,
covenant or application thereof in good faith in order to provide a reasonably
acceptable alter-native to the term, covenant or condition of this Agreement or
the application thereof that is invalid or unenforceable, it being the intent of
the Parties that the basic purposes of this Agreement are to be effectuated.
14.8 ENTIRE AGREEMENT. This Agreement sets forth all of the covenants,
promises, agreements, warranties, representations, conditions and understandings
among the Parties hereto, and supersedes and terminates all prior agreements and
understanding among the Parties with respect to the subject matter hereof. There
are
34.
<PAGE> 39
no covenants, promises, agreements, warranties, representations conditions or
understandings, either oral or written, among the Parties other than as set
forth herein and therein. No subsequent alteration, amendment, change or
addition to this Agreement shall be binding upon the Parties hereto unless
reduced to writing and signed by the respective authorized officers of the
Parties.
14.9 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
35.
<PAGE> 40
IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be
executed in duplicate by their duly authorized officers as of the Effective
Date.
ROCHE BIOSCIENCE, A DIVISION OF AXYS PHARMACEUTICALS, INC.
SYNTEX (U.S.A.) INC.
By: /s/ Roger Whiting By:
--------------------------------- --------------------------------------
Name: Roger Whiting Name:
------------------------------- ------------------------------------
Name: /s/ James N. Woody
-------------------------------
Name: James N. Woody
-------------------------------
NEMAPHARM, INC. SEQUANA THERAPEUTICS, INC.
By: /s/ Daniel H. Petree By: /s/ Daniel H. Petree
--------------------------------- --------------------------------------
Name: Daniel H. Petree Name: Daniel H. Petree
------------------------------- ------------------------------------
Title: Title:
------------------------------- ------------------------------------
For purposes of Sections 4.1.2, 4.4 and 4.7.2 only:
F. HOFFMANN-LA ROCHE LTD. HOFFMANN-LA ROCHE, INC.
By: /s/ Claudius Wamlek By: /s/ Stefan Arnold
--------------------------------- --------------------------------------
Name: Claudius Wamlek Name: Stefan Arnold
------------------------------- ------------------------------------
36.
<PAGE> 41
Title: Title:
------------------------------- ------------------------------------
37.
<PAGE> 42
EXHIBIT 1.45
ROCHE BIOSCIENCE GENES
[*]
* "Certain confidential information contained in the document, marked by
brackets, has been omitted and filed separately with the Securities and
Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of
1934, as amended."
<PAGE> 43
[*]
* "Certain confidential information contained in the document, marked by
brackets, has been omitted and filed separately with the Securities and
Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of
1934, as amended."
2.
<PAGE> 44
[*]
* "Certain confidential information contained in the document, marked by
brackets, has been omitted and filed separately with the Securities and
Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of
1934, as amended."
3.
<PAGE> 45
[*]
* "Certain confidential information contained in the document, marked by
brackets, has been omitted and filed separately with the Securities and
Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of
1934, as amended."
4.
<PAGE> 46
[*]
* "Certain confidential information contained in the document, marked by
brackets, has been omitted and filed separately with the Securities and
Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of
1934, as amended."
5.
<PAGE> 47
[*]
* "Certain confidential information contained in the document, marked by
brackets, has been omitted and filed separately with the Securities and
Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of
1934, as amended."
6.
<PAGE> 48
[*]
* "Certain confidential information contained in the document, marked by
brackets, has been omitted and filed separately with the Securities and
Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of
1934, as amended."
7.
<PAGE> 49
[*]
* "Certain confidential information contained in the document, marked by
brackets, has been omitted and filed separately with the Securities and
Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of
1934, as amended."
8.
<PAGE> 50
EXHIBIT A
RESEARCH PLAN
[*]
* "Certain confidential information contained in the document, marked by
brackets, has been omitted and filed separately with the Securities and
Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of
1934, as amended."
9.
<PAGE> 51
[*]
* "Certain confidential information contained in the document, marked by
brackets, has been omitted and filed separately with the Securities and
Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of
1934, as amended."
10.
<PAGE> 52
[*]
* "Certain confidential information contained in the document, marked by
brackets, has been omitted and filed separately with the Securities and
Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of
1934, as amended."
11.
<PAGE> 53
[*]
* "Certain confidential information contained in the document, marked by
brackets, has been omitted and filed separately with the Securities and
Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of
1934, as amended."
12.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEETS, STATEMENTS OF OPERATIONS AND STATEMENTS OF CASH
FLOWS INCLUDED IN THE COMPANY'S FORM 10-Q FOR THE PERIOD ENDED JUNE 30, 1998,
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS AND
NOTES THERETO.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 39,075
<SECURITIES> 42,664
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 86,846
<PP&E> 45,530
<DEPRECIATION> (24,706)
<TOTAL-ASSETS> 116,454
<CURRENT-LIABILITIES> 24,135
<BONDS> 0
0
0
<COMMON> 29,999
<OTHER-SE> 72,138
<TOTAL-LIABILITY-AND-EQUITY> 116,454
<SALES> 0
<TOTAL-REVENUES> 17,531
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 36,496
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,107
<INCOME-PRETAX> (143,193)
<INCOME-TAX> 0
<INCOME-CONTINUING> (143,193)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (143,193)
<EPS-PRIMARY> (4.87)
<EPS-DILUTED> (4.87)
</TABLE>
